Embassy Bancorp, Inc. (Form: 10-K, Received: 03/12/2021 17:02:17)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year end December 31, 2020

 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 000-53528



Embassy Bancorp, Inc.
(Exact name of registrant as specified in its charter)

Pennsylvania		26-3339011
(State of incorporation)		(I.R.S. Employer Identification No.)

One Hundred Gateway Drive, Suite 100 Bethlehem, PA		18017
(Address of principal executive offices)		(Zip Code)

(610) 882-8800
(Registrant’s Telephone Number) Securities registered under Section 12(b) of the Exchange Act:
None	None		None
(Title of each class)	(Trading symbol)		(Name of each exchange on which registered)
Securities registered under section 12(g) of the Exchange Act:
Common Stock, Par Value $1.00 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [ X ]

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 filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ X ] No [ ]

‎

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer 	Accelerated filer 
Non-accelerated filer 	Smaller reporting company 
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 or the Exchange Act.) Yes  No 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $69,214,460.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:


COMMON STOCK
Number of shares outstanding as of March 5, 2021	($1.00 Par Value)	7,540,976
	(Title Class)	(Outstanding Shares)

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2021 annual meeting of shareholders are incorporated by reference into Part III of this report.

Embassy Bancorp, Inc.



Table of Contents

Part I
	Item 1	Business	4
	Item 1A	Risk Factors	17
	Item 1B	Unresolved Staff Comments	26
	Item 2	Properties	26
	Item 3	Legal Proceedings	26
	Item 4	Mine Safety Disclosures	26

Part II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and	27
		Issuer Purchases of Equity Securities
	Item 6	Selected Financial Data	28
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	50
	Item 8	Financial Statements and Supplementary Data	50
		Management Report on Internal Controls Over Financial Reporting	51
		Report of Independent Registered Public Accounting Firm	52
		Consolidated Balance Sheets	54
		Consolidated Statements of Income	55
		Consolidated Statements of Comprehensive Income	56
		Consolidated Statements of Stockholders’ Equity	57
		Consolidated Statements of Cash Flows	58
		Notes to Financial Statements	60
	Item 9	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	95
	Item 9A	Controls and Procedures	95
	Item 9B	Other Information	95

Part III
	Item 10	Directors, Executive Officers and Corporate Governance	96
	Item 11	ExecutiveCompensation	96
	Item 12	Security Ownership of Certain Beneficial Owners and Management and	96
		Related Stockholder Matters
	Item 13	Certain Relationships and Related Transactions, and Director Independence	96
	Item 14	Principal Accounting Fees and Services	96

Part IV
	Item 15	Exhibits and Financial Statement Schedules	97
	Item 16	Form 10-K Summary	99

		Signatures	100

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Embassy Bancorp, Inc.

PART I

Item 1. BUSINESS.

General

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. The reorganization enabled the Company to better compete and grow in its competitive and rapidly changing marketplace. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow.

The Bank, which is the Company’s principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

Mission

The Company provides a traditional range of financial products and services to meet the depository and credit needs of individual consumers, small and medium sized businesses, and professionals in its market area. As a locally owned and operated community bank, there is a strong focus on service that is highly personalized, efficient, and responsive to local needs. It is the intention of the Company to deliver its products and services with the care and professionalism expected of a community bank and with a special dedication to personalized service. To create this environment, the Company employs an experienced, well-trained, highly motivated staff, with interest in building quality client relationships using state-of-the-art delivery systems and client service facilities. The Company’s senior management has extensive banking experience and establishes the Company’s goal to serve the financial needs of its clients and provide a profitable return to its investors, consistent with safe and sound banking practices. The Company focuses on obtaining and retaining customer relationships by offering a broad range of financial services, competitively priced and delivered in a responsive manner, with emphasis on understanding the financial needs of its customers.

Correspondent relationships are utilized where it is cost beneficial. The specific objectives of the Company are: 1) to provide individuals, professionals and local businesses with the highest standard of relationship banking in the local market; 2) to attract deposits and loans by offering state of the art products and services with competitive pricing; 3) to provide a reasonable return to shareholders on capital invested; and 4) to attract, train and retain a happy, motivated and team-oriented group of banking professionals dedicated to meeting the Company’s objectives.

Market “Niche”

The Company provides the traditional array of commercial banking products and services emphasizing a one-on-one, sit down approach, for the delivery of products and services to consumers and businesses located in Lehigh and Northampton Counties in Pennsylvania. In the Company’s primary market area, which is dominated by offices of large statewide, regional and interstate banking institutions, banking services that are furnished in a friendly and courteous manner with a timely response to customer needs fill a “niche” that arises due to the continued loss of local institutions through merger and acquisitions.

Deposits

In order for the Company to attract and retain stable deposit relationships the Company offers small business cash management services to help local companies better manage their cash flow. The expertise and experience of the Company’s management coupled with the latest technology accessed through third party providers enables the Company to maximize the growth of business-related deposits.

Embassy Bancorp, Inc.

As for consumers, deposit growth is driven by a variety of factors including, but not limited to, population growth, bank and non-bank competition, local bank mergers and consolidations, increase in household income, interest rates, accessibility of location and the sales efforts of Company personnel. Time deposits can be attracted and increased by paying an interest rate higher than that offered by competitors but are the costliest type of deposit. The most profitable type of deposits are non-interest bearing demand (checking) accounts which can be attracted by offering free checking. However, both high interest rates and free checking accounts generate certain expenses for a bank and the desire to increase deposits must be balanced with the need to be profitable and the extent of banking relationships with the customers. The deposit services of the Company are generally comprised of demand deposits, savings deposits, money market deposits, time deposits and Individual Retirement Accounts.

Loans

The loan portfolio of the Company consists primarily of secured fixed and variable rate loans, with a significant concentration in commercial real estate transactions and consumer residential real estate mortgage and home equity loans. While most credit facilities are appropriately collateralized, major emphasis is placed upon the financial condition of the borrower and evaluating the borrower’s cash flow versus debt service requirements. The Company has an experienced lending and private banking team. The Company believes that the familiarity of its experienced management team and members of the Company’s Loan Committee in regard to prospective local borrowers enables the Company to better evaluate the character, integrity, and creditworthiness of the prospective borrowers.

Loan growth is driven by customer demand, which in turn is influenced by individual and business indebtedness and consumer demand for goods. The Company’s loan and private banking officers call upon accountants, financial planners, attorneys, local realtors, and others to generate loans and loan referrals. Again, a balance between growth, credit risk and pricing are required to maintain performing loans for the Company, as lending money will always entail some risk. A performing loan is a loan which is being repaid according to its original terms and is the most desirable type of loan that a bank seeks to make. Without loans a bank cannot generate enough earnings to be profitable. The risk involved in each loan must, therefore, be carefully evaluated before the loan is made. The interest rate at which the loan is made should always reflect the risk factors involved, including the term of the loan, the value of collateral, if any, the reliability of the projected source of repayment and the amount of the loan requested. Credit quality will always be the Company’s most important factor.

The Company does not sell its mortgages into the secondary market, has not been involved in any “sub-prime” mortgage lending, and has not purchased or invested in any securities backed by or which include sub-prime loans.

As further described in Note 2 to the consolidated financial statements, in 2020, as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Company was approved to be a Paycheck Protection Program (“PPP”) lender. The Company had not previously been an approved SBA 7(a) lender. The Company began accepting applications from qualified borrowers on April 3, 2020. On December 27, 2020, the 2021 Consolidated Appropriations Act (“CAA”) was signed into law. The CAA included $284 billion of new PPP funding, and the Company is assisting its customers in applying for such funding.

Commercial Lending

The Company generally targets businesses with annual revenues of less than $10 million, including business owners, legal, and medical professionals. The Company offers responsiveness, flexibility and local decision making for loan applications of small business owners thereby eliminating delays caused by non-local management. The Company participates in local, state, and federal loan programs.

Consumer Lending

The Company offers its retail customer base a product line of consumer loan services including mortgage loans, first time home buyer mortgages, secured home equity loans, lines of credit, auto loans, limited mortgage escrow services, and to a much lesser extent, unsecured personal loans.

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Embassy Bancorp, Inc.

Residential Mortgage Loans

The Company offers a range of specialty home equity and mortgage products at competitive rates, which are retained and serviced by the Company. The Company seeks to capitalize on its policy of closing loans in a time frame that will meet the needs of its borrowers.

Commercial Mortgage/Construction Loans

The Company originates various types of loans secured by real estate, including, to a limited extent, construction loans. Construction loans are generally priced at floating rates tied to current market rates. Upon completion of construction, these loans may be converted into permanent commercial and residential loans. Construction lending is expected to constitute a minor portion of the Company’s loan portfolio.

In some cases, the Company originates loans larger than its lending limit and enters into participation arrangements for those loans with other banks.

As an independent community bank, the Company serves the special needs of legal, medical, accounting, financial service providers and other professionals. Commercial mortgages, lines of credit, term loans and demand loans are tailored to meet the needs of the Company’s customers in the professional community. In addition to the usual criteria for pricing credit-related products, the Company takes into consideration the overall customer relationship to establish credit pricing. Deposit relationships in demand, savings, money market, and certificate accounts are considered in loan pricing along with the credit worthiness of the borrower.

Other Services

To further attract and retain customer relationships, the Company currently provides or expects to provide the standard array of financial services expected of a community bank, which include the following:


ACH Origination	Credit/Debit Card Merchant Processing	Person to Person Payments
ATM and Debit Cards	Direct Deposit/ACH Services	Positive Pay
Automated Teller Machines	Escrow Management Services	Remote Deposit Capture
Bank by Mail	Fraud Detection Services	Safe Deposit Boxes
Bond Coupon Redemptions	Gift Cards	Savings Bond Redemptions
Cash Management Services	Mobile Banking	Treasurer Checks
Certified Checks	Night Depository Services	Wire Transfers
Commercial Credit Cards	On-Line Banking and Bill Pay

Fee Income

Fee income is non-interest related. The Company earns fee income by charging customers for banking services, credit card and merchant processing, treasurer’s checks, overdrafts, wire transfers, check orders, and cash management services, as well as other deposit and loan related fees. Unlike many in the industry, the Company does not sell its mortgages on the secondary market, nor does it offer trust or investment/brokerage services to its customers, all of which would generate additional fee income.

Service/Market Area

The Company is headquartered in Hanover Township, Northampton County, Pennsylvania and draws its primary deposits and business from areas immediately surrounding its principal office and its branch offices in South Whitehall Township, Lower Macungie Township, the City of Bethlehem, Salisbury Township, Lower Saucon Township, Lower Nazareth Township, Borough of Nazareth, and Borough of Macungie, Pennsylvania, as well as the remainder of Lehigh and Northampton Counties in Pennsylvania.

Embassy Bancorp, Inc.

According to Federal Deposit Insurance Corporation (“FDIC”) data, as of June 30, 2020, the Company ranks 5^th in bank market share in Northampton County with four (4) offices, and 6^th in Lehigh County bank market share with five (5) offices, with a combined deposit market share of 7.12% for both counties. The Company believes there is significant room for organic growth in its current market area of Lehigh and Northampton Counties.

The Company continually evaluates strategic locations for branch offices within the Lehigh Valley, which are supplemented by convenient access through electronic banking products and services, for both consumer and commercial customers. The Company currently has nine (9) offices. The Company plans to commence operations of its tenth branch at 2002 West Liberty Street, Allentown, Lehigh County, Pennsylvania in the second quarter of 2021, subject to regulatory approval.

Bank Premises

The Company currently leases eight (8) of its bank operations premises and leases the land only at the Borough of Macungie branch, with the building being owned by the Company. The nine (9) branches are situated at the following locations:


Northampton County:
		Hanover Township (includes administrative offices)
		Lower Saucon Township
		Lower Nazareth Township
		Borough of Nazareth

Lehigh County:
		South Whitehall Township
		Salisbury Township
		Lower Macungie Township
		City of Bethlehem
		Borough of Macungie

As described above, the Company has a future planned branch at 2002 West Liberty Street, Allentown, Lehigh County, Pennsylvania. The Company pays certain additional expenses of occupying these spaces including, but not necessarily limited to, real estate taxes, insurance, utilities, and repairs. The Company is obligated under the leases to maintain the premises in good order, condition, and repair.

Employees

As of December 31, 2020, the Company had a total of 96 full-time equivalent employees.

Competition

The geographic market the Company serves is highly competitive for deposits and loans. The Company competes with local, regional and national traditional banking institutions, as well as non-bank financial service providers such as credit unions, financial technology companies, brokerage firms, insurance companies and mortgage companies. In the Company’s primary market area, major regional and super-regional banks generally hold larger market share positions. By virtue of their larger capital bases, these institutions have significantly larger lending limits, more robust advertising campaigns, significantly larger branch networks, and can invest in technology on a larger scale. The industry, as a whole, competes primarily in the area of interest rates, products offered, customer service and convenience.

The Company believes it is able to compete within its market by offering competitive interest rates and a superior level of customer service, as reflected in our continued growth in market share. The recent consolidation of banks in the Company’s market, due to mergers and acquisitions, has also provided additional opportunities for the Company to build and grow new customer relationships.

Embassy Bancorp, Inc.

Credit unions present a significant competitive challenge to the Company. As credit unions currently enjoy an exemption from income tax, they are able to offer higher deposit rates and lower loan rates than banks can on a comparable basis. Credit unions are also not currently subject to certain regulatory constraints imposed on the banks, such as the Community Reinvestment Act (“CRA”), which require the Company to implement procedures to make and monitor loans throughout the communities served. Adhering to such regulatory requirements raises the Company’s compliance costs associated with lending activities and reduces potential operating profits. Accordingly, the Company competes by focusing on building customer relationships and maintaining the commitment to customer service the community has come to expect.

Segments

The Company acts as an independent community financial services provider and offers traditional banking and related financial services to individual, business and government customers. The Company offers a full array of commercial and retail financial services, including the taking of time, savings, and demand deposits; the making of commercial, consumer, residential mortgage, and home equity loans; and the providing of other financial services.

Management does not separately allocate expenses, including the cost of funding loan demand, between commercial and retail operations of the Company. As such, discrete financial information is not available and segment reporting would not be meaningful.

Seasonality

Management does not feel that the deposits, loans, or the business of the Company are seasonal in nature. Deposit and loan generation may, however, vary with local and national economic and market conditions which should not have a material effect on planning and policy making.

Supervision and Regulation

The Company is subject to extensive regulation under federal and Pennsylvania banking laws, regulations and policies, including prescribed standards relating to capital, earnings, dividends, the repurchase or redemption of shares, loans or extensions of credit to affiliates and insiders, internal controls, information systems, internal audit systems, loan documentation, credit underwriting, asset growth, impaired assets and loan-to-value ratios. The Bank regulatory framework is intended primarily for the protection of depositors, federal deposit insurance funds and the banking systems as a whole, and not for the protection of shareholders.

The following summary sets forth certain of the material elements of the regulatory framework applicable to bank holding companies and their bank subsidiaries and provides certain specific information about the Company and the Bank. It does not describe all of the provisions of the statutes, regulations and policies that are identified. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by express reference to each of the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on the business of the Company.

Dodd-Frank Wall Street Reform and Consumer Protection Act

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which became law on July 21, 2010, there is additional regulatory oversight and supervision of the Company and the Bank. The Dodd-Frank Act significantly changed the regulation of financial institutions and the financial services industry. The Dodd-Frank Act includes provisions affecting large and small financial institutions alike, including several provisions that affect the regulations of community banks and bank holding companies.

The Dodd-Frank Act, among other things, imposed new capital requirements on bank holding companies; changed the base for FDIC insurance assessments to a bank’s average consolidated total assets minus average tangible equity, rather than upon its deposit base; permanently raised the current standard deposit insurance limit to $250,000; and expanded the FDIC’s authority to raise insurance premiums. The legislation also called for the FDIC to raise its ratio

Embassy Bancorp, Inc.

of reserves to deposits from 1.15% to 1.35% for deposit insurance purposes by September 30, 2020 and to “offset the effect” of increased assessments on insured depository institutions with assets of less than $10 billion. On September 30, 2018 the deposit insurance fund reserve ratio reached 1.36%. Because the reserve ratio exceeded the 1.35%, small banks (total consolidated assets of less than $10 billion) were awarded assessment credits for their portion of the assessment that contributed to the growth, to be applied when the reserve ratio was at least 1.38%. As of June 30, 2019, the ratio exceeded 1.38% and the Company received credits of $44 thousand and $206 thousand during the years ending December 31, 2020 and December 31, 2019, respectively.

The Dodd-Frank Act also includes provisions that affect corporate governance and executive compensation at all publicly traded companies and allows financial institutions to pay interest on business checking accounts. The legislation also restricts proprietary trading, places restrictions on the owning or sponsoring of hedge and private equity funds, and regulates the derivatives activities of banks and their affiliates. The Dodd-Frank Act also establishes the Financial Stability Oversight Council to identify threats to the financial stability of the U.S., promote market discipline, and respond to emerging threats to the stability of the U.S. financial system.

Consumer Financial Protection Bureau

Through the Dodd-Frank Act, the Consumer Financial Protection Bureau (the “CFPB”) was established as an independent entity within the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The CFPB has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans, and credit cards. The CFPB’s rules contain provisions on mortgage-related matters such as steering incentives, and determinations as to a borrower’s ability to repay, loan servicing, and prepayment penalties.

On January 10, 2013, the CFPB issued a final regulation defining a “qualified mortgage” for purposes of the Dodd-Frank Act and setting standards for mortgage lenders to determine whether a consumer has the ability to repay the mortgage. This regulation, which became effective on January 10, 2014, also affords safe harbor legal protections for lenders making qualified loans that are not “higher priced.” On January 17, 2013, the CFPB issued a final regulation containing new mortgage servicing rules applicable to our bank subsidiary, which took effect on January 10, 2014. The announced goal of the CFPB is to bring greater consumer protection to the mortgage servicing market. These changes affect notices to be given to consumers in reference to delinquency, foreclosure alternatives, modification applications, interest rate adjustments and options for avoiding “force-placed” insurance. Servicers are also prohibited from processing foreclosures when a loan modification is pending and must wait until a loan is more than 120 days delinquent before initiating a foreclosure action.

Additionally, the servicer must provide direct and ongoing access to its personnel and provide prompt review of any loss mitigation application. Servicers must maintain accurate and accessible mortgage records for the life of a loan and until one year after the loan is paid off or transferred.

Capital Standards

In July 2013, the FDIC and the Federal Reserve Board approved final rules substantially amending the regulatory risk-based capital rules applicable to the Bank and the Company. The final rule implements the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.

The final rule includes new minimum risk-based capital and leverage ratios, which became effective for the Bank and the Company on January 1, 2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. The final rule also established a “capital conservation buffer” of 2.5%, and results in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. In January 2016, the new capital conservation buffer requirement started being phased in at 0.625% of risk-weighted assets and was fully implemented as of January 2019 for the Company. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its

Embassy Bancorp, Inc.

capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

In addition to the risk-based capital guidelines, the federal banking regulators established minimum leverage ratio (Tier 1 capital to total assets) guidelines for bank holding companies. These guidelines provide for a minimum leverage ratio of 3% for those bank holding companies which have the highest regulatory examination ratings and are not contemplating or experiencing significant growth or expansion. All other bank holding companies are required to maintain a leverage ratio of at least 4%.

The capital ratios to be considered “well capitalized” under current capital rules are: common equity of 6.5%, Tier 1 leverage of 5%, Tier 1 risk-based capital of 8%, and Total Risk-Based capital of 10%.

Effective in the third quarter of 2018, the Federal Reserve raised the consolidated asset limit to be considered a small bank holding company from $1 billion to $3 billion. A company that qualifies as a small bank holding company is not subject to the Federal Reserve’s consolidated capital rules, although a company that so qualifies may continue to file reports that include such capital amounts and ratios. The Company elected to continue to report those amounts and ratios.

At December 31, 2020 and December 31, 2019, the Company qualified as “well-capitalized” under the foregoing regulatory capital standards and exceeded the capital conservation buffers. See Note 13 of the Notes to Consolidated Financial Statements included in Item 8 of this Report.

Capital Adequacy and Operations

Enacted in 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) contains provisions limiting activities and business methods of depository institutions. FDICIA required the primary federal banking regulators to promulgate regulations setting forth standards relating to, among other things, internal controls and audit systems; credit underwriting and loan documentation; interest rate exposure and other off-balance sheet assets and liabilities; and compensation of directors and officers. FDICIA also provided for expanded regulation of depository institutions and their affiliates, including parent holding companies, by such institutions’ primary federal banking regulator. Each primary federal banking regulator is required to specify, by regulation, capital standards for measuring the capital adequacy of the depository institutions it supervises and, depending upon the extent to which a depository institution does not meet such capital adequacy measures, the primary federal banking regulator may prohibit such institution from paying dividends or may require such institution to take other steps to become adequately capitalized.

FDICIA established five capital tiers, ranging from “well capitalized” to “critically under-capitalized”. A depository institution is well capitalized if it significantly exceeds the minimum level required by regulation for each relevant capital measure. Under FDICIA, an institution that is not well capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market; in addition, “pass through” insurance coverage may not be available for certain employee benefit accounts. FDICIA also requires an undercapitalized depository institution to submit an acceptable capital restoration plan to the appropriate federal bank regulatory agency. One requisite element of such a plan is that the institution’s parent holding company must guarantee compliance by the institution with the plan, subject to certain limitations. In the event of the parent holding company’s bankruptcy, the guarantee, and any other commitments that the parent holding company has made to federal bank regulators to maintain the capital of its depository institution subsidiaries, would be assumed by the bankruptcy trustee and entitled to priority in payment.

At December 31, 2020, the Bank qualified as “well capitalized” under these regulatory capital standards. See Note 13 of the Notes to Consolidated Financial Statements included at Item 8 of this Report.

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Embassy Bancorp, Inc.

Federal Deposit Insurance (“FDI”) Act and Part 363 of the FDIC Regulations

Section 36 of the FDI Act and Part 363 of the FDIC's regulations require insured depository institutions with at least $500 million in total assets to file a Part 363 Annual Report with the applicable bank regulatory agencies, which, among other things, requires that the Company establish and maintain an effective internal control structure over financial reporting and provide an assessment by management of the institution's compliance with the designated laws and regulations pertaining to insider loans and dividend restrictions.

Bank Holding Company Regulation

As a bank holding company, the Company is subject to regulation and examination by the Pennsylvania Department of Banking and Securities (the “Pennsylvania Department of Banking”) and the Federal Reserve Board. The Company is required to file with the Federal Reserve Board an annual report and such additional information as the Federal Reserve Board may require pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The BHC Act requires each bank holding company to obtain the approval of the Federal Reserve Board before it may acquire substantially all the assets of any bank, or before it may acquire ownership or control of any voting shares of any bank if, after such acquisition, it would own or control, directly or indirectly, more than five percent of the voting shares of such bank. Such a transaction may also require approval of the Pennsylvania Department of Banking. Pennsylvania law permits Pennsylvania bank holding companies to control an unlimited number of banks.

Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, the Company may only engage in or own companies that engage in activities deemed by the Federal Reserve Board to be so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto, and the holding company must obtain permission from the Federal Reserve Board prior to engaging in most new business activities.

A bank holding company and its subsidiaries are subject to certain restrictions imposed by the BHC Act on any extensions of credit to the bank or any of its subsidiaries, investments in the stock or securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower. A bank holding company and its subsidiaries are also prevented from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.

Under the Dodd-Frank Act and Federal Reserve Board regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice or a violation of the Federal Reserve Board regulations or both. This doctrine is commonly known as the “source of strength” doctrine.

Regulation of Embassy Bank for the Lehigh Valley

Embassy Bank for the Lehigh Valley is a Pennsylvania-chartered banking institution and is subject to regulation, supervision and regular examination by the Pennsylvania Department of Banking and Securities and the FDIC. Federal and state banking laws and regulations govern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, the loans a bank makes and collateral it takes, the maximum interest rates a bank may pay on deposits, the activities of a bank with respect to mergers and consolidations, and the establishment of branches, and management practices and other aspects of banking operations.

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Embassy Bancorp, Inc.

Dividend Restrictions

The Company is a legal entity separate and distinct from the Bank. Declaration and payment of cash dividends depends upon cash dividend payments to the Company by the Bank, which is the Company’s primary source of revenue and cash flow. Accordingly, the right of the Company, and consequently the right of our creditors and shareholders, to participate in any distribution of the assets or earnings of any subsidiary is necessarily subject to the prior claims of creditors of the subsidiary, except to the extent that claims of the Company in its capacity as a creditor may be recognized.

As a Pennsylvania chartered bank, the Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, the ability of banking subsidiaries to pay dividends is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements. See Note 13 to the consolidated financial statements included at Item 8 of this Report.

The payment of dividends by the Bank and the Company may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the FDICIA of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. Federal banking regulators have the authority to prohibit banks and bank holding companies from paying a dividend if the regulators deem such payment to be an unsafe or unsound practice.

Community Reinvestment Act

The Company had its last CRA examination in 2018 and received a “satisfactory” rating.

The Company’s Directors and Officers are committed to reaching out to the community in which they live and work. The personal, business and community rewards for helping local residents and businesses are numerous. The Board is dedicated to recognizing an ongoing commitment and understanding of the Company’s responsibility under the CRA. The Company is committed to providing access to credit and deposit products for all members of the communities that it serves.

Restrictions on Transactions with Affiliates and Insiders

The Bank also is subject to the restrictions of Sections 23A, 23B, 22(g) and 22(h) of the Federal Reserve Act and Regulation O adopted by the Federal Reserve Board. Section 23A requires that loans or extensions of credit to an affiliate, purchases of securities issued by an affiliate, purchases of assets from an affiliate (except as may be exempted by order or regulation), the acceptance of securities issued by an affiliate as collateral and the issuance of a guarantee or acceptance of letters of credit on behalf of an affiliate (collectively, “Covered Transactions”) be on terms and conditions consistent with safe and sound banking practices. Section 23A also imposes quantitative restrictions on the amount of and collateralization requirements on such transactions. Section 23B requires that all Covered Transactions and certain other transactions, including the sale of securities or other assets to an affiliate and the payment of money or the furnishing of services to an affiliate, be on terms comparable to those prevailing for similar transactions with non-affiliates.

Section 22(g) and 22(h) of the Federal Reserve Act impose similar limitations on loans and extensions of credit from the bank to its executive officers, directors, and principal shareholders and any of their related interests. The limitations restrict the terms and aggregate amount of such transactions. Regulation O implements the provisions of Sections 22(g) and 22(h) and requires maintenance of records of such transactions by the bank and regular reporting of such transactions by insiders. The FDIC also requires the bank, upon request, to disclose publicly loans and extensions of credit to insiders in excess of certain amounts.

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Deposit Insurance and Premiums

The deposits of the Bank are insured up to applicable limits per insured depositor by the FDIC. In October 2008, the FDIC increased FDIC deposit insurance coverage per separately insured depositor for all account types to $250,000. This increase was extended permanently through the Dodd-Frank Act.

As a FDIC member institution, the Bank’s deposits are insured to the maximum of $250,000 per depositor through the Deposit Insurance Fund (“DIF”) that is administered by the FDIC and each institution is required to pay quarterly deposit insurance premium assessments to the FDIC.

Other Federal Laws and Regulations

State usury and credit laws limit the amount of interest and various other charges collected or contracted by a bank on loans. The Bank’s loans are also subject to federal laws applicable to credit transactions, such as the following:

Federal Truth-In-Lending Act, which governs disclosures of credit terms to consumer borrowers;

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves;

Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibitive factors in extending credit;

Real Estate Settlement Procedures Act, which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions;

Fair Credit Reporting Act governing the manner in which consumer debts may be collected by collection agencies; and

Various rules and regulations of various federal agencies charged with the implementation of such federal laws.

Additionally, the Company’s operations are subject to additional federal laws and regulations applicable to financial institutions, including, without limitation:

Privacy provisions of the Gramm-Leach-Bliley Act and related regulations, which require the Company to maintain privacy policies intended to safeguard customer financial information, to disclose the policies to the Company’s customers and to allow customers to “opt out” of having their financial service providers disclose their confidential financial information to non-affiliated third parties, subject to certain exceptions;

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Consumer protection rules for the sale of insurance products by depository institutions, adopted pursuant to the requirements of the Gramm-Leach-Bliley Act; and

USA Patriot Act, which requires financial institutions to take certain actions to help prevent, detect, and prosecute international money laundering and the financing of terrorism.

Effective July 1, 2010, a federal banking rule under the Electronic Fund Transfer Act prohibited financial institutions from charging consumers fees for paying overdrafts on automated teller machines (“ATM”) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those type of transactions. If a consumer does not opt in, any ATM transaction or debit that overdraws the consumer’s account will be denied. Overdrafts on the payment of checks and regular electronic bill payments are not covered by this new rule. Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. Financial institutions must provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. The Company did not charge customers for these transactions, nor provide these types of services.

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Sarbanes-Oxley Act of 2002

Enacted in 2002, the Sarbanes-Oxley Act represented a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity securities registered or that file reports under the Securities Exchange Act of 1934, including publicly held bank holding companies such as the Company. In particular, the Sarbanes-Oxley Act establishes: (i) requirements for audit committees, including independence, expertise, and responsibilities; (ii) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) standards for auditors and regulation of audits; (iv) increased disclosure and reporting obligations for the reporting company and its directors and executive officers; and (v) new and increased civil and criminal penalties for violations of the securities laws.

Governmental Policies

The Company’s earnings are significantly affected by the monetary and fiscal policies of governmental authorities, including the Federal Reserve Board. Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are open-market operations in U.S. Government securities and federal funds, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These instruments of monetary policy are used in varying combinations to influence the overall level of bank loans, investments and deposits, and the interest rates charged on loans and paid for deposits. The Federal Reserve Board frequently uses these instruments of monetary policy, especially its open-market operations and the discount rate, to influence the level of interest rates and to affect the strength of the economy, the level of inflation or the price of the dollar in foreign exchange markets. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of banking institutions in the past and are expected to continue to do so in the future. It is not possible to predict the nature of future changes in monetary and fiscal policies, or the effect which they may have on the Company’s business and earnings.

Other Legislative Initiatives

Proposals may be introduced in the United States Congress and in the Pennsylvania Legislature and before various bank regulatory authorities which would alter the powers of, and restrictions on, different types of banking organizations and which would restructure part or all of the existing regulatory framework for banks, bank holding companies and other providers of financial services. Moreover, other bills may be introduced in Congress which would further regulate, deregulate or restructure the financial services industry, including proposals to substantially reform the regulatory framework. It is not possible to predict whether these or any other proposals will be enacted into law or, even if enacted, the effect which they may have on the Company’s business and earnings.

Human Capital Management

We believe that outstanding people are the key to the Company’s growth and success. Through the efforts of our team, Embassy has established itself as a leading organization in our Lehigh Valley community. The Company’s philosophy is to strive to maintain simplicity in our policies and efficiency in our procedures. We pride ourselves in creating an open, diverse, and transparent culture that celebrates teamwork and recognizes team members at all levels. We believe that diversity of cultures, thoughts, and experiences results in better outcomes and empowers our team members to make more meaningful contributions within our company and community. This in turn provides an environment in which our team will thrive. The majority of our team are regular full-time employees, and we also employ regular part-time employees and some seasonal/temporary team members.

It is by design that the Company runs a very efficient operation, relying greatly on the knowledge and experience of its executive management team, and, where appropriate, the outsourcing of certain functions to high quality vendors, in order to do so. This level of efficiency requires that individual members of the Company’s executive management team assume roles that are most often held by multiple individuals at banks within the Company’s peer group. For example, David M. Lobach, Jr. serves as Chairman of the Board, as well as President and Chief Executive Officer, Judith A. Hunsicker serves as Chief Operating Officer and Chief Financial Officer, James R. Bartholomew serves as Senior Lending Officer and oversees business banking and business development, Diane M. Cunningham

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oversees retail banking and consumer lending, as well as marketing, and Lynne M. Neel oversees the finance department, deposit and loan operations and investor relations, to name a few such examples. This multidisciplinary approach is replicated throughout the Company.

The Company has created a group consisting of team members called the “Culture Club.” The club is designed to keep our business culture in the forefront of all we do. This team provides new employees with their first look at the unique Embassy culture through an orientation program created with the individual in mind. In addition, the team actively works on creative activities and educational events to enhance our existing culture for the entire Embassy team. Our culture is truly defined by “us.” The Company family is made up of a vast group of professionals who share the common goal of making our bank succeed by providing superior customer service through sales, education, technology and teamwork. Our experience has shown that when employees communicate openly and directly with supervisors, the work environment can be excellent, expectations can be clear, and attitudes will be positive. We believe that the Company amply demonstrates its commitment to employees by responding effectively to employee concerns.

Annually, every team member is asked to complete a team member commitment form, in which he or she describes duties and responsibilities they may face in their day to day work. The Company maintains these forms and uses them to aid in orienting new employees to their jobs, identifying the requirements of each position, balancing responsibilities amongst the team, establishing hiring criteria, setting standards for employee performance evaluations, and establishing a basis for making reasonable accommodations for individuals with disabilities. They are also used for discussion in connection with an existing employee’s review process. Supervisors and employees are strongly encouraged to discuss job performance and goals on an informal, day-to-day basis. Employees are asked to annually participate in the Company's self-assessment process, which includes their Personal Team Member Commitment (which describes positions) and Personal Balance Sheet. Additionally, this Balance Sheet is a formal performance evaluation conducted to provide both supervisors and employees the opportunity to discuss job tasks, identify and correct weaknesses, encourage and recognize strengths, and discuss positive, purposeful approaches for efficiently carrying out the responsibility of each position.

The salary and benefits program at the Company was created to achieve consistent pay practices, comply with federal and state laws, mirror our commitment to Equal Employment Opportunity, and offer competitive salaries and benefits within our labor market. Because recruiting and retaining talented and diverse employees is critical to our success, the Company is committed to paying its team members equitable wages that reflect the requirements and responsibilities of their positions and are competitive with the pay received by similarly situated employees in other banks in the area.

Compensation for every position is determined by several factors, including the essential duties and responsibilities of the job, and knowledge of pay practices of other employers. The Company periodically reviews its salary and benefits program and restructures it as necessary.

Eligible employees at the Company are provided a wide range of benefits. A number of the programs (such as Social Security, workers' compensation, state disability, and unemployment insurance) cover all employees in the manner prescribed by law. Benefits eligibility is dependent upon a variety of factors, primarily whether the employee is full time or part time.

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic and on March 13, 2020 the United States government declared COVID-19 as a national emergency. Specific to COVID-19, the Company’s top priority is the health and safety of our team, customers, vendors, and the public. Embassy Bank’s Pandemic Officer is responsible for the oversight of the Company’s COVID-19 Program. The COVID-19 Plan Guidance has been distributed to all employees, and when necessary, to on-site workers, and vendors. All team members, onsite workers, visitors, vendors, and customers must comply with local, state and federal government regulations regarding COVID-19 policies and personal protective equipment (PPE) requirements. The Company has followed, and intends to continue to follow, at minimum, the most recent guidance issued by the Center for Disease Control (“CDC”) and the Pennsylvania Department of Health.

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Available Information

The Company’s common stock is registered under Section 12(g) of the Securities Exchange Act of 1934. Trades in Company common stock made by certain brokerage firms are reported on the OTCQX Market Tier of the OTC Markets under the symbol “EMYB”. The Company is subject to the informational requirements of the Exchange Act, and, accordingly, electronically files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and other information with the U.S. Securities and Exchange Commission (“SEC”). You may obtain these reports and statements, and any amendments, from the SEC’s website at www.sec.gov. You may obtain copies of these reports, and any amendments, through our website at www.embassybank.com. These reports are available through our website as soon as reasonably practicable after they are filed electronically with the SEC.

The Company’s headquarters are located at 100 Gateway Drive, in Hanover Township, Bethlehem, Pennsylvania 18017, and its telephone number is 1-610-882-8800. The Company has adopted a Code of Conduct/Ethics that applies to all directors and officers of the Company. This document is available in the Investor Relations section on the Company’s website. The information included on the website and the Investor Relations page are not considered a part of this document.

Caution About Forward-looking Statements

This report contains forward-looking statements, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors, and other conditions that, by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty.

Such forward-looking statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “intends”, “will”, “should”, “anticipates”, or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy.

No assurance can be given that the future results covered by forward-looking statements will be achieved. Such statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could impact the Company’s operating results include, but are not limited to, (i) the effects of changing economic conditions in the Company’s market areas and nationally, (ii) credit risks of commercial, real estate, consumer and other lending activities, (iii) significant changes in interest rates, (iv) changes in federal and state banking laws and regulations which could impact the Company’s operations, and (v) other external developments which could materially affect the Company’s business and operations, including those described in this Report under section Item 1A – Risk Factors.

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Item 1A. RISK FACTORS.

Before investing in Embassy Bancorp, Inc. common stock, an investor should carefully consider the risk factors described below, which are not intended to be all inclusive, and review other information contained in this report and in our other filings with the SEC. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties that we are not aware of, or that we currently deem less significant, or that we otherwise are not specifically focused on, may also impact our business, results of operations, and our common stock. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the market price of our common stock could decline significantly, and an investor could lose all or part of his or her investment in the Company.

Unless the context otherwise requires, references to “we,” “us,” “our,” “Embassy,” or “Embassy Bancorp, Inc.,” collectively refer to Embassy Bancorp, Inc. and its banking subsidiary, and specific references to the “Bank” refer to Embassy Bank for the Lehigh Valley, the wholly-owned banking subsidiary of Embassy Bancorp, Inc.

Risks Related to Our Business

Changes in interest rates may adversely affect our earnings and financial condition.

Our ability to make a profit, like that of most financial institutions, substantially depends upon our net interest income, which is the difference between the interest income earned on interest earning assets, such as loans and investment securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or reduce net interest income and net income.

Different types of assets and liabilities may react differently, and at different times, to changes in market interest rates. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. When interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income. Changes in market interest rates are affected by many factors beyond our control, including inflation, unemployment, money supply, international events, and events in the United States and other financial markets.

We attempt to manage risk from changes in market interest rates, in part, by controlling the mix of interest rate sensitive assets and interest rate sensitive liabilities. However, interest rate risk management techniques are not exact and a substantial, unexpected, prolonged or rapid change in interest rates could adversely affect our financial condition and results of operations.

Interest rate volatility stemming from COVID-19 could negatively affect our net interest income, lending activities, deposits, and profitability.

Our net interest income, lending activities, deposits and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19. In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy sector. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition.

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We are required to transition from the use of the LIBOR interest rate index

We currently have no loans indexed to LIBOR to calculate the loan interest rate. The LIBOR index will be discontinued December 31, 2021. At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR.

As a participating lender in the Small Business Administration (“SBA”) PPP, we are subject to additional risks of litigation from our clients or other parties regarding our processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP and started accepting applications from qualified borrowers on April 3, 2020. Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. We may be exposed to the risk of litigation, from both clients and non-clients that approached us regarding PPP loans, regarding our process and procedures used in processing applications for the PPP. If any such litigation is filed against us and is not resolved in a manner favorable to us, it may result in significant financial liability or adversely affect our reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition, and results of operations.

We also have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

We are subject to credit risk.

As of December 31, 2020, excluding PPP loans, approximately 47 percent of the Company’s loan portfolio consisted of commercial, commercial construction, and commercial real estate loans. These types of loans are generally viewed as having more risk of default than residential real estate or secured consumer loans. These types of loans are also typically larger than residential real estate loans and consumer loans. Because our loan portfolio contains a significant number of commercial, commercial construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for possible loan and lease losses and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

Our allowance for loan and lease losses may be insufficient.

We maintain an allowance for loan and lease losses, which is a reserve established that represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The Company has determined, because of the 100% SBA guarantee, that no allowance for loan losses is required on the PPP loan portfolio. The allowance, in the judgment of management, is necessary to reserve for estimated loan and lease losses and risks inherent in the loan portfolio. The level of the allowance reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political, and regulatory conditions and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for possible loan and lease losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing

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loans, identification of additional problem credits and other factors, both within and outside of our control, may require an increase in the allowance. In addition, bank regulatory agencies periodically review our allowance for possible loan and lease losses and may require an increase in the provision for possible loan and lease losses or the recognition of further loan charge-offs, based on information unavailable to, or judgments different than those of, management. In addition, if charge-offs in future periods exceed the allowance, we may need additional provisions to increase the allowance for possible loan and lease losses. Any increases in the allowance resulting from loan loss provisions will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations.

Our profitability depends significantly on economic conditions in Pennsylvania.

Unlike larger or regional financial institutions that are more geographically diversified, our success is dependent to a significant degree on economic conditions in Pennsylvania, especially in Lehigh and Northampton Counties, which are the counties and markets primarily served by us in the years up to and including 2020. The banking industry is affected by general economic conditions, including the effects of inflation, recession, unemployment, real estate values, trends in national and global economics, and other factors beyond our control. An economic recession or a delayed recovery over a prolonged period of time in Pennsylvania, or more specific to the areas served by us, could cause an increase in the level of the Bank’s non-performing assets and loan and lease losses, thereby causing operating losses, impairing liquidity, and eroding capital. We can give no assurance that adverse changes in the local economy would not have a material adverse effect on our consolidated financial condition, results of operations, and cash flows.

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. The geographic market the Company serves is highly competitive for deposits and loans. The Company competes with local, regional, and national traditional banking institutions, as well as non-bank financial service providers such as credit unions, brokerage firms, insurance companies and mortgage companies. In the Company’s primary market area, major regional and super-regional banks generally hold larger market share positions. By virtue of their larger capital bases and greater financial resources, these institutions have significantly larger lending limits, more robust advertising campaigns, larger branch networks, and can invest in technology on a larger scale. The industry, as a whole, competes primarily in the area of interest rates, products offered, customer service and convenience. Our profitability depends upon our ability to successfully compete in our market area.

The Basel III capital rules require us to maintain higher levels of capital, which could reduce our profitability.

Basel III targets higher levels of base capital, certain capital buffers, and a migration toward common equity as the key source of regulatory capital. Although the new capital requirements were fully phased in as of January 1, 2019, Basel III signals a growing effort by domestic and international bank regulatory agencies to require financial institutions, including depository institutions, to maintain higher levels of capital. In the future, we may be required to maintain higher levels of capital, thus potentially reducing opportunities to invest capital into interest-earning assets, which could limit the profitable business operations available to us, and adversely impact our financial condition and results of operations.

If our information systems are interrupted or sustain a breach in security, those events may negatively affect our financial performance and reputation.

In conducting our business, we rely heavily on our information systems. Maintaining and protecting those systems and data is difficult and expensive, as is dealing with any failure, interruption, or breach in security of these systems, whether due to acts or omissions by us or by a third party, and whether intentional or not. Any such failure, interruption, or breach could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. A breach of our information security may result from fraudulent activity committed against us or our customers, resulting in financial loss to us or our customers, or privacy breaches against our customers. Such fraudulent activity may consist of check fraud, electronic fraud, wire fraud, “phishing”, social engineering, identity theft, or other deceptive acts. The policies, procedures, and technical safeguards put in place by

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us to prevent or limit the effect of any failure, interruption, or security breach of our information systems and data may be insufficient to prevent or remedy the effects of any such occurrences. The occurrence of any failures, interruptions, or security breaches of our information systems and data could damage our reputation, cause us to incur additional expenses, result in online services or other businesses becoming inoperable, subject us to regulatory sanctions or additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Our business operations and interaction with customers are increasingly done via electronic means, and this has increased risks related to cyber security.

We are exposed to the risk of cyber-attacks in the ordinary course of our business. In general, cyber incidents can result from deliberate attacks or unintentional events. An increased level of attention in the industry is focused on cyber-attacks that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. To combat against these attacks, we have policies and procedures in place to prevent or limit the effect of the possible security breach of our information systems and we have insurance against some cyber-risks and attacks. While we have not incurred any material losses related to cyber-attacks, nor are we aware of any specific or threatened cyber-incidents as of the date of this report, we may incur substantial costs and suffer other negative consequences if we fall victim to successful cyber-attacks. Such negative consequences could include remediation costs, which may include liability for stolen assets or information and repairing system damage; deploying additional personnel and protection technologies, training employees, and engaging third party experts and consultants; lost revenues resulting from unauthorized use of proprietary information or the failure to retain or attract customers following an attack; litigation; and reputational damage adversely affecting customer or investor confidence.

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision, and examination by federal and state banking authorities. Any change in applicable regulations or federal, state, or local legislation could have a substantial impact on us and our operations. Additional legislation and regulations that could significantly affect our powers, authority and operations may be enacted or adopted in the future, which could have a material adverse effect on our financial condition and results of operations. Further, regulators have significant discretion and authority to prevent or remedy unsafe or unsound practices or violations of laws by banks and bank holding companies in the performance of their supervisory and enforcement duties. The exercise of regulatory authority may have a negative impact on our results of operations and financial condition.

We are required to make a number of judgments in applying generally accepted accounting principles and different estimates and assumptions in the application of these standards could result in a decrease in capital and/or other material changes to our reports of financial condition and results of operations.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and reserve for unfunded lending commitments, the fair value of certain financial instruments (securities), income tax assets or liabilities (including deferred tax assets and any related valuation allowance), and share-based compensation. While we have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these standards could result in a decrease to net income and, possibly, capital and may have a material adverse effect on our financial condition and results of operations. From time to time, the Financial Accounting Standards Board (“FASB”) and the SEC issues changes to or updated interpretations of the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes are beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and results of operations. We could be required to apply new or revised guidance retrospectively, which may result in the revision of prior financial statements by material amounts. The implementation of new or revised guidance could also result in material adverse effects to our reported capital.

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Prior levels of market volatility were unprecedented and future volatility may have materially adverse effects on our liquidity and financial condition.

In the not too distant past and throughout the current year, the capital and credit markets experienced extreme volatility and disruption. In some cases, the markets exerted downward pressure on stock prices, security prices, and credit availability for certain issuers without regard to their underlying financial strength. If such levels of market disruption and volatility return, there can be no assurance that we will not experience adverse effects, which may materially affect our liquidity, financial condition, and profitability.

Our banking subsidiary may be required to pay higher FDIC insurance premiums or special assessments which may adversely affect our earnings.

Poor economic conditions and the resulting bank failures from the most recent recession have stressed the Deposit Insurance Fund and increased the costs of our FDIC insurance assessments. Additional bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue special assessments. We are generally unable to control the amount of premiums or special assessments that our banking subsidiary is required to pay for FDIC insurance. Any future changes in the calculation or assessment of FDIC insurance premiums may have a material adverse effect on our results of operations, financial condition, and our ability to continue to pay dividends on our common stock at the current rate or at all.

If we conclude that the decline in the value of any of our investment securities is other than temporary, we are required to write down the value of that security through a charge to earnings.

We review our investment securities portfolio at each quarter-end reporting period to determine whether the fair value of individual securities or the portfolio as a whole is below the current carrying value. When the fair value of any of our investment securities has declined below its carrying value, we are required to assess whether the decline is other than temporary. If we conclude that the decline is other than temporary, we are required to write down the value of that security through a charge to earnings. Due to the complexity of the calculations and assumptions used in determining whether an asset is impaired, the impairment disclosed, or lack thereof, may not accurately reflect the actual impairment in the future.

Our financial performance may suffer if our information technology is unable to keep pace with our growth or industry developments.

Effective and competitive delivery of our products and services is increasingly dependent upon information technology resources and processes, both those provided internally as well as those provided through third party vendors. In addition to better serving customers, the effective use of technology increases efficiency and enables us to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services to enhance customer convenience, as well as to create additional efficiencies in our operations. Many of our competitors have greater resources to invest in technological improvements. Additionally, as technology in the financial services industry changes and evolves, keeping pace becomes increasingly complex and expensive for us. Our failure to timely and effectively implement technological advances could adversely affect our financial condition and results of operations.

We are highly reliant on third party vendors and our ability to manage the operational risks associated with outsourcing those services.

We rely on third parties to provide services that are integral to our operations. These vendors provide services that support our operations, including the storage and processing of sensitive consumer and business customer data, as well as our sales efforts. A cyber security breach of a vendor’s system may result in theft of our data or disruption of business processes. In most cases, we will remain primarily liable to our customers for losses arising from a breach of a vendor’s data security system. We rely on our outsourced service providers to implement and maintain prudent cyber security controls. We have procedures in place to assess a vendor’s cyber security controls prior to establishing a contractual relationship and to periodically review assessments of those control systems; however, these procedures are not infallible, and a vendor’s system can be breached despite the procedures we employ. We cannot be sure that

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we will be able to maintain these relationships on favorable terms. The loss of these vendor relationships could disrupt the services we provide to our customers and cause us to incur expense in connection with replacing these services.

The soundness of other financial institutions may adversely affect us.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be readily realized or liquidated at prices sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Common Stock

The trading volume in our common stock is less than that of larger public companies, which can contribute to volatility in our stock price and adversely affect the liquidity of an investment in our common stock.

Our common stock is not traded on a security exchange. Trades in our stock made by certain brokerage firms are reported on the OTCQX Market Tier of the OTC Markets, but trading in our stock is sporadic. The trading history of our common stock has been characterized by relatively low trading volume. This lack of an active public market means that the value of a shareholder’s investment in our common stock may be subject to sudden fluctuations, as individual trades have a greater effect on our reported trading price than would be the case in a broad public market with significant daily trading volume.

The market price of our common stock may also be subject to fluctuations in response to numerous other factors, including the factors discussed in this report, regardless of our actual operating performance. The possibility of such fluctuations occurring is increased due to the illiquid nature of the trading market of our common stock. Therefore, a shareholder may be unable to sell our common stock at or above the price at which it was purchased, at or above the current market price, or at the time of his, her or its choosing.

Our insiders control a substantial percentage of our stock and therefore have the ability to exercise significant control over our affairs.

As of December 31, 2020, our directors and executive officers beneficially owned in excess of 27% of our issued and outstanding common stock on a fully diluted basis. Such persons, as a group, will have sufficient votes to strongly influence the outcome of all matters submitted to our shareholders, including the election of directors. This concentration of ownership might also have the effect of delaying or preventing a change in control of our company.
‎

Our ability to pay dividends on our common stock, and principal and interest on our debt, depends primarily on dividends from our banking subsidiary, which is subject to regulatory limits.

Embassy Bancorp, Inc. is a bank holding company and its operations are conducted by its direct and indirect subsidiaries, primarily the Bank. Our ability to pay dividends on our common stock and principal and interest on our debt depends on our receipt of dividends from the Bank. Dividend payments from the Bank are subject to legal and regulatory limitations, generally based on net profits and retained earnings, imposed by the various banking regulatory agencies. The ability of the Bank to pay dividends is also subject to profitability, financial condition, liquidity, and capital management limits. There is no assurance that our subsidiary will be able to pay dividends in the future or that we will generate adequate cash flow to pay dividends in the future. Federal Reserve policy, which applies to us as a registered bank holding company, also provides that dividends by bank holding companies should generally be paid out of earnings from both the current period and a designated look-back period. Our failure to pay dividends on our common stock could have a material adverse effect on the market price of our common stock.

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Embassy Bancorp, Inc.

Provisions of our articles of incorporation and bylaws, Pennsylvania law, state and federal banking regulations, and our significant percentage of insider ownership, could act to delay or prevent a takeover by a third party.

Various Pennsylvania laws affecting business corporations may have the effect of discouraging offers to acquire us, even if the acquisition would be advantageous to our shareholders. By incorporating under Pennsylvania law, our board of directors owes its fiduciary duty solely to the corporation. As such, Pennsylvania law does require a director to act solely because of the effect such action might have on an acquisition or potential acquisition of control of the corporation or the consideration that might be offered or paid to shareholders in such an acquisition. Additionally, Pennsylvania law:

expands the factors and groups which a corporation’s board of directors can consider in determining whether an action is in the best interests of the corporation, including the effect of such action on its shareholders, employees, suppliers, customers, creditors and communities;

provides that a corporation’s board of directors need not consider the interests of any particular group (including the shareholders) as dominant or controlling;

provides that a corporation’s directors, in order to satisfy the presumption that they have acted in the best interests of the corporation, need not satisfy any greater obligation or higher burden of proof with respect to actions relating to an acquisition or potential acquisition of control; and

provides that actions relating to acquisitions of control that are approved by a majority of “disinterested directors” are presumed to satisfy the directors’ standard, unless it is proven by clear and convincing evidence that the directors did not assent to such action in good faith after reasonable investigation.

In addition, we have various anti-takeover measures in place under our articles of incorporation and bylaws, including a supermajority vote requirement for mergers, advance notice requirements for nominations for election of directors and the presentation of shareholder proposals at meetings of shareholders, a staggered Board of Directors, and the absence of cumulative voting.

Further, federal and state banking laws and regulations generally require filings and approvals prior to certain transactions that would result in a party acquiring control of our company.

Any one or more of these laws or measures, particularly when coupled with the fact that our insiders hold approximately 27% of our voting shares, may impede the takeover of us and may prevent our shareholders from taking part in a transaction in which they could realize a premium over the current market price of our common stock.

General Risk Factors

Our controls and procedures may fail or could be circumvented.

Management has implemented a series of internal controls, disclosure controls and procedures, and corporate governance policies and procedures in order to ensure accurate financial control and reporting. However, any system of controls, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the objectives of the system are met. Any failure or circumvention of our controls and/or procedures could have a material adverse effect on our business and results of operation and financial condition.

Loss of our senior executive officers or other key employees could impair our relationship with our customers and adversely affect our business.

We have assembled a senior management team which has substantial background and experience in banking and financial services in the markets we serve. Loss of these key personnel could negatively impact our earnings because of their skills, customer relationships and/or the potential difficulty of promptly replacing them.

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Embassy Bancorp, Inc.

Acts of terrorism, natural disasters, global climate change, pandemics and global conflicts may have a negative impact on our business and operations.

Acts of terrorism, natural disasters, global climate change, pandemics, global conflicts, or other similar events could have a negative impact on our business and operations. While we have in place business continuity plans, such events could still damage our facilities, disrupt or delay the normal operations of our business (including communications and technology), result in harm to or cause travel limitations on our employees, and have a similar impact on our clients, suppliers, third-party vendors and counterparties. These events also could impact us negatively to the extent that they result in reduced capital markets activity, lower asset price levels, or disruptions in general economic activity in the United States or abroad, or in financial market settlement functions. In addition, these or similar events may impact economic growth negatively, which could have an adverse effect on our business and operations, and may have other adverse effects on us in ways that we are unable to predict.

Negative public opinion could damage our reputation and adversely affect our earnings.

Reputational risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from the actual or perceived manner in which we conduct our business activities, including banking operations, our management of actual or potential conflicts of interest and ethical issues, and our protection of confidential client information. Negative public opinion can adversely affect our ability to keep and attract customers and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in the way we conduct our business activities and deal with our customers, communities and vendors, these steps may not be effective.

If we need to, or are compelled to, raise additional capital in the future, that capital may not be available when it is needed and on terms favorable to current shareholders.

Federal banking regulators require us and our bank subsidiary to maintain adequate levels of capital to support our operations. These capital levels are determined and dictated by law, regulation, and bank regulatory agencies. In addition, capital levels are also determined by our management and board of directors based on capital levels that they believe are necessary to support our business operations. As of December 31, 2020, all three capital ratios for us and our banking subsidiary were above “well capitalized” levels under current bank regulatory guidelines.

Our ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital on terms and time frames acceptable to us or to raise additional capital at all. If we cannot raise additional capital in sufficient amounts when needed, our ability to comply with regulatory capital requirements could be materially impaired. Additionally, the inability to raise capital in sufficient amounts may adversely affect our operations, financial condition, and results of operating. Our ability to borrow could also be impaired by factors that are nonspecific to us, such as severe disruption of the financial markets or negative news and expectations about the prospects for the financial services industry as a whole as evidenced by recent turmoil in the domestic and worldwide credit markets. If we raise capital through the issuance of additional shares of our common stock or other securities, we would likely dilute the ownership interests of current investors and could dilute the per share book value and earnings per share of our common stock. Furthermore, a capital raise through issuance of additional shares of common stock may have an adverse impact on our stock price.

Our common stock is equity and is subordinate to all of our existing and future indebtedness.

Shares of our common stock are equity interests in our company and do not constitute indebtedness. As such, shares of our common stock rank junior to all indebtedness and other non-equity claims on us with respect to assets available to satisfy claims on us, including in a liquidation of us. Also, our right to participate in a distribution of assets upon the Bank’s liquidation or reorganization is subject to the prior claims of the Bank’s creditors, including the preferred claims of the Bank’s depositors.

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Embassy Bancorp, Inc.

Our common stock is not insured by any governmental entity.

Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section. As a result, if you acquire our common stock, you may lose some or all of your investment.
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Embassy Bancorp, Inc.

Item 1B. UNRESOLVED STAFF COMMENTS.

None.

Item 2. PROPERTIES.

The Company, through the Bank, occupies nine full-service banking offices in the Lehigh Valley:


Northampton County:
		Hanover Township (includes administrative offices)
		Lower Saucon Township
		Lower Nazareth Township
		Borough of Nazareth

Lehigh County:
		South Whitehall Township
		Salisbury Township
		Lower Macungie Township
		City of Bethlehem

		Borough of Macungie

The Company currently leases eight (8) of its bank operations premises and leases the land at Borough of Macungie branch. The Borough of Macungie branch building is owned by the Company. The Company has signed a lease for a future planned branch facility at 2002 West Liberty Street, Allentown, Lehigh County, Pennsylvania.

Item 3. LEGAL PROCEEDINGS.

The Company and the Bank are an occasional party to legal actions arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses and/or insurance coverage respecting any and each of these actions and does not believe that they will materially affect the Company’s operations or financial position.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

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Embassy Bancorp, Inc.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a)Shares of Company common stock are traded over-the-counter and in privately negotiated transactions. The Company’s common stock is not listed on any national securities exchange.

Trades in Company common stock made by certain brokerage firms are reported on the OTCQX Market Tier of the OTC Markets under the symbol “EMYB”. The following table reflects high and low bid prices for shares of the Company’s common stock for the periods indicated, based upon information derived from www.otcmarkets.com.



	2020				2019
	High		Low		High		Low
First Quarter	$	19.15	$	10.10	$	15.51	$	14.30
Second Quarter	$	13.33	$	10.10	$	16.99	$	15.07
Third Quarter	$	13.00	$	11.50	$	16.90	$	15.80
Fourth Quarter	$	14.60	$	12.09	$	18.97	$	16.00

The above quotations may not reflect inter-dealer prices and should not be considered over-the-counter market quotations as that term is customarily used.

(b)As of March 5, 2021, there are approximately 910 owners of record of the common stock of the Company.

(c)On September 30, 2020, the Company paid $1,644,063 or $0.22 per share, in an annual cash dividend on its common stock. On September 30, 2019, the Company paid $1,495,385 or $0.20 per share, in an annual cash dividend on its common stock As a general matter, cash available for dividend distribution to shareholders of the Company may come from dividends paid to the Company by the Bank, depending upon existing cash levels at the Company. See “Supervision and Regulation – Dividend Restrictions” in Item 1 of this report for a description of restrictions that may limit the Company’s ability to pay dividends on its common stock.

(d)The following table sets forth information about options outstanding under the Company’s shareholder approved Stock Incentive Plan, as of December 31, 2020:



	Number of Shares to be issued upon exercise of outstanding options	Weighted average exercise price of outstanding options	Number of Shares remaining available for future issuance
Equity Compensation Plans and Individual Employment Agreements	63,632	$ 7.61	452,814

(e)Sales of Securities.

None.

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Embassy Bancorp, Inc.

(f)Repurchase of Equity Securities.

The following table sets forth the number of shares of common stock repurchased by the Company, and the average paid for such shares, during the fourth quarter of 2020. The Company has not publicly announced any purchase plan or program.


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Pubicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 - 31, 2020	N/A		N/A	N/A	N/A
November 1 - 30, 2020	N/A		N/A	N/A	N/A
December 1 - 31, 2020	3,202	$	14.00	N/A	N/A

Item 6. SELECTED FINANCIAL DATA.

Not required.
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Embassy Bancorp, Inc.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis provides an overview of the consolidated financial condition and results of operations of the Company for the years ended December 31, 2020 and 2019. This discussion should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements appearing elsewhere in this report.

Critical Accounting Policies

Note 1 to the Company’s consolidated financial statements lists significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which require the Company to make estimates and assumptions. The Company believes that its determination of the allowance for loan losses and the valuation of deferred tax assets involve a higher degree of judgment and complexity than the Company’s other significant accounting policies. Further, these estimates can be materially impacted by changes in market conditions or the actual or perceived financial condition of the Company’s borrowers, subjecting the Company to significant volatility of earnings.

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Securities available for sale are carried at fair value. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Unrealized gains and losses are reported as increases or decreases in other comprehensive income. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Other-than-temporary impairment accounting guidance specifies that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Company recognized no other-than-temporary impairment charges during the years ended December 31, 2020 and 2019.

The allowance for loan losses is established through the provision for loan losses, which is a charge against earnings. Provision for loan losses is made to reserve for estimated probable losses on loans. The allowance for loan losses is a significant estimate and is regularly evaluated by the Company for adequacy by taking into consideration factors such as changes in the nature and volume of the loan portfolio, trends in actual and forecasted credit quality, including delinquency, charge-off and bankruptcy rates, and current economic conditions that may affect a borrower’s ability to pay. The use of different estimates or assumptions could produce different provision for loan losses. For additional discussion concerning the Company’s allowance for loan losses and related matters, see “Provision for Loan Losses” and “Allowance for Loan Losses.”

Real estate acquired through foreclosure, or deed-in-lieu of foreclosure is recorded at fair value less estimated selling costs at the date of acquisition or transfer, and subsequently at the lower of its new cost or fair value less estimated selling costs. Adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses. The carrying value of the individual properties is subsequently adjusted to the extent it exceeds estimated fair value less the estimated selling costs, at which time a provision for loan losses on such real estate is charged to operations. Appraisals are critical in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property. The assumptions supporting such

Embassy Bancorp, Inc.

appraisals are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable.

Deferred taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carryforwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Based upon the level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

GENERAL

The Company is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the BHC Act. The Company was formed for purposes of acquiring the Bank in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow.

The Bank, which is the Company’s primary operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

Since its inception, the Board’s philosophy has been that, by running the Bank with a view toward the long term, only good things will happen for the Bank’s customers, team members, shareholders, and the Lehigh Valley community.

OVERVIEW

The Company’s assets grew $265.9 million from $1.2 billion at December 31, 2019 to $1.4 billion at December 31, 2020. The Company’s deposits grew $200.4 million from $1.0 billion at December 31, 2019 to $1.2 billion at December 31, 2020. The growth in the Company’s deposits resulted primarily from a relationship building, sales and marketing effort, which served to further increase the Company’s overall presence in the market it serves, deposit relationships developed as a result of cross-marketing efforts to its loan and other non-depository banking service customers along with an injection of federal stimulus money into the economy in 2020 from PPP funds and consumer stimulus payments. The Bank also continued to capitalize on opportunities created by merger announcements, name changes, and competitive branch closures in the Company’s market area, attracting customers looking to relocate to a local, reputable community bank. During the same period, loans receivable (not including PPP loans), net of the allowance for loan losses, increased $73.2 million to $1.1 billion at December 31, 2020 from $1.0 billion at December 31, 2019 and PPP loans had a balance of $54.3 million as of December 31, 2020. With the onset of the COVID-19 pandemic, the market continues to be very competitive and the Company is committed to maintaining a high-quality portfolio that returns a reasonable market rate. While the past and current economic and competitive conditions in the marketplace have created more competition for loans to credit-worthy customers, the Company continues to expand its market presence and continues to focus on developing a reputation as being a market leader in both commercial and consumer/mortgage lending. Management believes that this combination of relationship building, cross marketing and responsible underwriting will translate into continued long-term growth of a portfolio of quality loans and core deposit relationships, although there can be no assurance of this. The Company continues to monitor interest rate exposure of its interest-bearing assets and liabilities and believes that it is well positioned for any anticipated future market rate adjustments.

The Company’s net income increased $1.9 million, or 17.7%, to $12.8 million from $10.9 million in 2019. Diluted earnings per share increased to $1.70 in 2020 from $1.44 in 2019, and basic earnings per share increased to $1.71 in 2020 from $1.46 in 2019, respectively. The difference in net income for the year ended December 31, 2020 and December 31, 2019 resulted, in part, from an increase in net interest income due to the Company’s loan portfolio

Embassy Bancorp, Inc.

growth, due to PPP loan interest and fee income, and a decrease in interest expense primarily due to a lower cost of funds. Also, contributing to the increase in net income is the increase in bank owned life insurance, gain on the sale of securities, gain on the sale of loans, a decrease in occupancy and equipment, a decrease in advertising and promotions, and a decrease in other expenses, offset by an increase in the provision for loan losses, a decrease in merchant processing and credit card processing fees, a decrease in other service fees, no gain on the sale of real estate owned, an increase in salary and employee benefits, an increase in data processing, an increase in professional fees, and an increase in FDIC insurance.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

The majority of the Company’s earnings derives from net interest income, which is the difference between income earned on assets and the cost supporting those assets. The net interest margin is the ratio of net interest income to average earning assets. Earning assets are composed primarily of loans and investments, along with interest-bearing deposits with other banks. Interest-bearing deposits and borrowings make up the cost of funds. Non-interest bearing deposits and capital are other components representing funding sources. Changes in the volume and mix of assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income and net interest margin. The timing of deposit and loan growth also impact net interest income.

Generally, changes in net interest income are measured by net interest rate spread and net interest margin. Interest rate spread is the mathematical difference between the average interest earned on earning assets and interest paid on interest bearing liabilities. Interest margin represents the net interest yield on earning assets. The interest margin gives a reader a better indication of asset earning results when compared to peer groups or industry standards.

The Company determines interest rate spread and margin on both US GAAP and tax equivalent basis. The use of tax equivalent basis in determining interest rate spread and margin is considered a non-US GAAP measure. The Company believes use of this measure provides meaningful information to the reader of the consolidated financial statements when comparing taxable and non-taxable assets. However, it is supplemental to US GAAP which is used to prepare the Company’s consolidated financial statements and should not be read in isolation or relied upon as a substitute for US GAAP measures. In addition, the non-US GAAP measure may not be comparable to non-US GAAP measures reported by other companies. The tax rate used to calculate the tax equivalent adjustments was 21% for 2020, 2019, and 2018.

2020 Compared to 2019

Total interest income for the year ended December 31, 2020 was $44.3 million, compared to $42.9 million for the year ended December 31, 2019. Total interest expense for the year ended December 31, 2020 was $6.4 million, compared to $9.3 million for the year ended December 31, 2019. Net interest income increased 13.1% to $37.9 million for the year ended December 31, 2020 as compared to $33.5 million for the year ended December 31, 2019. The improvement in net interest income for the year ended December 31, 2020 is in part the result of a decrease in the balance and rates of certificates of deposit and FHLBank Pittsburgh (“FHLB”) short-term borrowings, and a decrease in the rates of interest bearing demand deposits, NOW, money market, savings accounts, and securities sold under agreement to repurchase. Also contributing to the improvement in net interest income for the year ended December 31, 2020 was an increase in the balances of taxable loans, taxable investments, interest bearing deposits with banks, and interest income and fees from PPP loans. The improvements were offset, in part, by a decrease in the rates of taxable and non-taxable loans, taxable and non-taxable investments, fed funds sold and interest bearing deposits with banks, a decrease in the balance of non-taxable loans and non-taxable investments, an increase in the balance of interest bearing demand deposits, NOW and money markets, savings, FHLB long-term borrowings, and interest expense from Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings. The Company’s net interest margin for the year ended December 31, 2020 was 3.01% on a US GAAP basis and 3.03% on a non-US GAAP basis, compared to 3.06% on a US GAAP basis and 3.09% on a non-US GAAP basis for the year ended December 31, 2019.

In response to the COVID-19 outbreak, the Federal Reserve Board in mid-March 2020 reduced by 150 basis points the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 year and 30 year Treasury notes

Embassy Bancorp, Inc.

have declined to historic lows. As a result of the decline in the Federal Reserve Board’s target federal funds rate and yields on Treasury notes, the Company’s future net interest margin and spread may be further reduced. The Company’s net interest margin was also affected by the PPP loans, which bear interest at a rate of 1.0%, and the PPPLF borrowings added during the year. The net interest margin on a non-US GAAP basis excluding PPP loans and PPP interest income and PPPLF borrowings interest expense for the year ended December 31, 2020 was 3.04%.

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Embassy Bancorp, Inc.

The following table includes the average balances, interest income and expense and the average rates earned and paid for assets and liabilities for the periods presented. All average balances are daily average balances.

Average Balances, Rates and Interest Income and Expense



		Year Ended December 31, 2020					Year Ended December 31, 2019					Year Ended December 31, 2018

		Average			Tax Equivalent		Average			Tax Equivalent		Average			Tax Equivalent
		Balance		Interest	Yield		Balance		Interest	Yield		Balance		Interest	Yield

							(Dollars in Thousands)
ASSETS
Loans - taxable (2)	$	1,036,362	$	40,473	3.91%	$	970,232	$	39,390	4.06%	$	904,809	$	35,516	3.93%
Loans - Paycheck Protection Program		42,930		1,307	3.04%		-		-	0.00%		-		-	0.00%
Loans - non-taxable (1)		6,856		210	3.88%		7,862		246	3.96%		8,454		261	3.91%
Investment securities - taxable		85,091		1,353	1.59%		62,157		1,614	2.60%		54,980		1,321	2.40%
Investment securities - non-taxable (1)		27,698		826	3.77%		29,770		990	4.21%		35,785		1,249	4.42%
Federal funds sold		884		2	0.19%		780		16	2.11%		557		10	1.79%
Interest bearing deposits with banks		60,234		158	0.26%		24,940		606	2.43%		16,155		334	2.07%

TOTAL INTEREST EARNING ASSETS		1,260,055		44,329	3.54%		1,095,741		42,862	3.94%		1,020,740		38,691	3.83%

Less allowance for loan losses		(8,959)					(7,651)					(7,387)
Other assets		54,253					51,125					37,353

TOTAL ASSETS	$	1,305,349				$	1,139,215				$	1,050,706

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits, ‎NOW and money market	$	186,735	$	440	0.24%	$	158,944	$	1,094	0.69%	$	118,792	$	255	0.21%
Savings		471,403		1,508	0.32%		430,682		2,155	0.50%		477,881		2,323	0.49%
Certificates of deposit		227,907		4,177	1.83%		251,401		5,731	2.28%		169,679		2,877	1.70%
Securities sold under agreements to ‎ repurchase and other borrowings		25,696		159	0.62%		20,883		349	1.67%		43,568		682	1.57%
Paycheck Protection Program Liquidity ‎ Facility borrowings		36,837		129	0.35%		-		-	0.00%		-		-	0.00%

TOTAL INTEREST BEARING LIABILITIES		948,578		6,413	0.68%		861,910		9,329	1.08%		809,920		6,137	0.76%

Non-interest bearing demand deposits		231,384					163,485					150,615
Other liabilities		19,229					19,533					6,873
Stockholders' equity		106,158					94,287					83,298

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,305,349				$	1,139,215				$	1,050,706

Net interest income			$	37,916				$	33,533				$	32,554
Tax equivalent adjustments:
Loans				56					65					69
Investments				219					263					332
Total tax equivalent adjustments				275					328					401
Net interest income on a tax equivalent basis			$	38,191				$	33,861				$	32,955
Net interest spread (US GAAP basis)					2.84%					2.83%					3.03%
Net interest margin (US GAAP basis)					3.01%					3.06%					3.19%
Net interest spread (non-US GAAP basis) (3)					2.86%					2.86%					3.07%
Net interest margin (non-US GAAP basis) (3)					3.03%					3.09%					3.23%

(1) Yields on tax exempt assets have been calculated on a fully tax equivalent basis at a tax rate of 21% as of December 31, 2020, 2019, and 2018, respectively.
(2) The average balance of taxable loans includes loans in which interest is no longer accruing.
(3) Non- US GAAP net interest spread and net interest margin calculated on a fully tax equivalent basis at a tax rate of 21% as of December 31, 2020, 2019, and 2018, respectively.

Embassy Bancorp, Inc.

The table below demonstrates the relative impact on net interest income of changes in the volume of interest-earning assets and interest-bearing liabilities and changes in rates earned and paid by the Company on such assets and liabilities.



		2020 vs. 2019									2019 vs. 2018
	Increase (decrease) due to changes in:								Increase (decrease) due to changes in:
							(In Thousands)

	Volume		Rate			Total			Volume			Rate			Total
Interest-earning assets:
Loans - taxable	$	2,685		$	(1,602)		$	1,083		$	2,568		$	1,306		$	3,874
Loans - Paycheck Protection Program		1,307			-			1,307			-			-			-
Loans - non-taxable		(31)			(5)			(36)			(18)			3			(15)
Investment securities - taxable		596			(857)			(261)			172			121			293
Investment securities - non-taxable		(69)			(95)			(164)			(210)			(49)			(259)
Federal funds sold		2			(16)			(14)			4			2			6
Interest bearing deposits with banks		858			(1,306)			(448)			182			90			272
Total net change in income on
interest-earning assets		5,348			(3,881)			1,467			2,698			1,473			4,171

Interest-bearing liabilities:
Interest bearing demand deposits,
NOW and money market		191			(845)			(654)			86			753			839
Savings		204			(851)			(647)			(229)			61			(168)
Certificates of deposit		(536)			(1,018)			(1,554)			1,386			1,468			2,854
Total deposits		(141)			(2,714)			(2,855)			1,243			2,282			3,525
Securities sold under agreements to
repurchase and other borrowings		80			(270)			(190)			(355)			22			(333)
Paycheck Protection Program
Liquidity Facility borrowings		129			-			129			-			-			-
Total net change in expense on
interest-bearing liabilities		68			(2,984)			(2,916)			888			2,304			3,192
Change in net interest income	$	5,280		$	(897)		$	4,383		$	1,810		$	(831)		$	979

Provision for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level management considers to be adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change. The Company has determined, because of the 100% SBA guarantee, that no allowance for loan losses is required on PPP loans.

Embassy Bancorp, Inc.

The allowance consists of general, specific, qualitative, and unallocated components. The general component covers non-classified loans and classified loans not considered impaired, and is based on historical loss experience adjusted for qualitative factors. The specific component relates to loans that are classified as impaired and/or restructured. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. An allowance for loan losses is not maintained on loans designated as held for sale.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral-dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and home equity loans for impairment disclosures, unless such loans are the subject of a restructuring agreement or there is a possible loss expected.

For the year ended December 31, 2020, the provision for loan losses was $2.5 million, compared to $605 thousand for the year ended December 31, 2019. Gross loans, excluding PPP loans, grew $76.3 million, or 7.5%, in 2020 over 2019. There were no charge-offs in 2020 or 2019. There were recoveries of $28 thousand and $5 thousand for the years ended December 31, 2020 and December 31, 2019. The provision for loan losses is a function of the allowance for loan loss methodology that the Bank uses to determine the appropriate level of the allowance for inherent loan losses after net charge-offs have been deducted. During the year ending December 31, 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic. See further discussion following in the “Credit Risk and Loan Quality” section of the Bank’s considerations of its December 31, 2020 allowance for loan loss levels. The allowance for loan losses as of December 31, 2020 was $10.6 million representing 0.97% of outstanding loans receivable (not including PPP loans), as compared to $8.0 million as of December 31, 2019, representing 0.79% of outstanding loans receivable. Based principally on economic conditions, asset quality, and loan-loss experience, including that of comparable institutions in the Bank’s market area, the allowance is believed to be adequate to absorb any losses inherent in the portfolio. Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate, or that material increases will not be necessary should the quality of the loans deteriorate. The Bank has not participated in any sub-prime lending activity.

Non-interest Income

Non-interest income is derived from the Company’s operations and represents primarily credit card processing fees, debit card interchange fees, service fees on deposit and loan relationships and income from bank owned life insurance. Non-interest income also may include net gains and losses from the sale of available for sale securities, loans, and other real estate owned.

Total non-interest income was $2.4 million for the year ended December 31, 2020 compared to $2.2 million for the year ended December 31, 2019. The increase is attributable to an increase in bank owned life insurance of $239 thousand, the gain on the sale of securities of $128 thousand, and the gain on the sale of loans of $59 thousand; offset by a decrease of $75 thousand in merchant processing and credit card processing fees due, in part, to less merchant

Embassy Bancorp, Inc.

processing activity resulting from the COVID-19 pandemic and less credit card activity due to the credit card portfolio being sold in the second quarter of 2020, a decrease in other service fees of $89 thousand in part due to the Company waiving overdraft fees during part of the second quarter due to the COVID-19 pandemic, and the gain on the sale of real estate owned of $45 thousand during the year ended December 31, 2019. The increase in the bank owned life insurance was driven by the effect market conditions had on underlying life insurance assets, particularly the separate account life insurance assets as well as the purchase of $4.0 million in bank owned life insurance in 2020. As the deposit customer account base continues to grow and the Company continues to mature and develop additional sources of fee income, non-interest income is expected to become a more significant contributor to the overall profitability of the Company. Currently, and unlike many in the industry, the Company does not derive additional non-interest fee income by selling its mortgages in the secondary market, nor does it offer trust or investment/brokerage services to its customers.

Non-interest Expense

Non-interest expenses represent the normal operating expenses of the Company. These expenses include salaries, employee benefits, occupancy, equipment, data processing, advertising and other expenses related to the overall operation of the Company.

Non-interest expenses for the year ended December 31, 2020 was $22.1 million, compared to $21.7 million for the year ended December 31, 2019. The increase in non-interest expenses is primarily due to an increase of $634 thousand, or 6.1%, over 2019, in salaries and employee benefits primarily due to the number of employees, the annual increases in salaries and benefits, increase in health insurance cost, and increase in non-qualified pension expense; offset by an increase in deferred compensation costs primarily associated with PPP loan originations. At December 31, 2020, the Company had ninety-six (96) full-time equivalent employees compared to ninety-five (95) at December 31, 2019. Additional increases in non-interest expenses are attributable to an increase of $246 thousand, or 10.5%, in data processing due primarily to e-commerce and the expanding customer base, an increase of $56 thousand, or 7.1%, in professional fees primarily due to an increase in auditing and legal costs, and an increase of $190 thousand, or 95.5%, in FDIC insurance premiums primarily due to FDIC assessment credits of $206 thousand applied in 2019 compared to credits of $44 thousand applied in 2020. These increases in non-interest expenses were offset by a decrease of $77 thousand, or 2.3%, in occupancy and equipment due, in part, to fewer leasehold improvements and utility expenses, a decrease of $617 thousand, or 36.0%, in advertising and promotions from shifts in marketing strategies and less promotional items resulting in part from the COVID-19 pandemic, and a decrease of $80 thousand, or 4.8%, in other expenses in part due to less postage expenses, less fraud losses, and less employee, customer, and shareholder expenses primarily due to restrictions from the COVID-19 pandemic.

A breakdown of other non-interest expenses is included in the Consolidated Statements of Income in the Consolidated Financial Statements included in Item 8 of this Report.

Income Taxes

The provision for income taxes was $2.9 million and $2.5 million for December 31, 2020 and December 31, 2019. The effective rate on income taxes for the years ended December 31, 2020 and 2019 was 18.6%, respectively.

‎

Embassy Bancorp, Inc.

FINANCIAL CONDITION

Securities

The Company’s securities portfolio is classified, in its entirety, as “available for sale.” Management believes that a portfolio classification of available for sale allows complete flexibility in the management of the investment portfolio. Using this classification, the Company intends to hold these securities for an indefinite amount of time, but not necessarily to maturity. Such securities are carried at fair value with unrealized gains or losses reported as a separate component of stockholders’ equity. The portfolio is structured to provide maximum return on investments while providing a consistent source of liquidity and meeting strict risk standards. The Company holds no high-risk, non-investment grade, securities or derivatives as of December 31, 2020.

The Company’s securities portfolio was $130.9 million at December 31, 2020, a $40.1 million increase from securities of $90.8 million at December 31, 2019. The Company’s securities have increased primarily due to purchases in the amount of $144.7 million and an increase in unrealized gains of $2.0 million, offset by a combination of investment principal pay-downs, maturities, calls, and proceeds from sales totaling $106.3 million. The carrying value of the securities portfolio as of December 31, 2020 and December 31, 2019, includes a net unrealized gain of $3.7 million and $1.7 million, respectively, which is recorded to accumulated other comprehensive income in stockholders’ equity. This increase in the unrealized gain is due primarily to changes in market conditions from 2019 to 2020. No securities are deemed to be other than temporarily impaired.

The following table sets forth the composition of the securities portfolio at fair value as of December 31, 2020, 2019 and 2018.



	2020		2019		2018

			(In Thousands)

U.S. Treasury securities	$	9,998	$	-	$	-
U.S. Government agency obligations		39,036		-		2,997
Municipal securities		39,376		26,444		34,878
U.S. Government sponsored enterprise (GSE)
- Mortgage-backed securities - commercial		543		-		-
U.S. Government sponsored enterprise (GSE)
- Mortgage-backed securities - residential		41,987		64,385		52,873
Total Securities Available for Sale	$	130,940	$	90,829	$	90,748

‎

Embassy Bancorp, Inc.

The following table presents the maturities and average weighted yields of the debt securities portfolio as of December 31, 2020. Maturities of mortgage-backed securities are based on estimated life. Yields are based on amortized cost.

Securities by Maturities



	1 year or Less			1-5 Years			5-10 Years			Over 10 Years			Total
			Average			Average			Average			Average			Average
	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield

	(Dollars In Thousands)
U.S. Treasury securities	$	9,998	0.10%	$	-	-	$	-	-	$	-	-	$	9,998	0.00%
U.S. Government agency
obligations		9,902	0.11%		29,134	0.20%		-	-		-	-		39,036	0.18%
Municipal securities		717	4.66%		1,685	3.23%		7,157	2.91%		29,817	3.65%		39,376	3.52%
U.S. GSE - Mortgage-
backed securities-
commercial		-	-		-	-		543	2.18%		-	-		543	2.18%
U.S. GSE - Mortgage-
backed securities-
residential		1	6.02%		41,986	2.51%		-	-		-	-		41,987	2.51%
Total Debt Securities	$	20,618	0.26%	$	72,805	1.60%	$	7,700	2.86%	$	29,817	3.65%	$	130,940	1.93%

Loans

On May 1, 2020, the Company sold its entire $689 thousand commercial credit card loan portfolio to an unrelated third party for a gain of $59 thousand. These commercial credit cards were unsecured. The Company does not anticipate retaining a credit card loan portfolio by originating and selling commercial credits cards in the future, but will continue to utilize the third party vendor to offer the product.

The loan portfolio comprises a major component of the Bank’s earning assets. All of the Bank’s loans are to domestic borrowers. Total net loans receivable (not including PPP loans) at December 31, 2020 increased $73.2 million to $1.08 billion from $1.01 billion December 31, 2019. The gross loan-to-deposit ratio (not including PPP loans) decreased from 98% at December 31, 2019 to 88% at December 31, 2020. The Bank’s loan portfolio at December 31, 2020, was comprised of residential real estate and consumer loans of $577.1 million, an increase of $58.1 million from December 31, 2019, and commercial loans of $512.5 million, an increase of $18.2 million from December 31, 2019. The Bank has not originated, nor does it intend to originate, sub-prime mortgage loans. As described in Note 2 to the consolidated financial statements, the Bank is participating in the SBA PPP program to support the needs of its small business clients. PPP loans receivable at December 31, 2020 were $54.3 million. Including PPP loans receivable, the gross loan-to-deposit ratio was 93%.

Payment accommodations related to COVID-19 assistance were in the form of short-term (six months or less) principal and/or interest deferrals and the loans were considered current at the time of the accommodation. These payment accommodations were done in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and the Company did not categorize these modifications as troubled debt restructurings. Through December 31, 2020, the Company had provided payment accommodations on two hundred fifty-five (255) loans with balances of $151.3 million. Included in these totals are two hundred forty-three (243) loans totaling $133.0 million in which the payment accommodation period has ended and the loan payments have resumed under their original contractual terms. Also included in the totals above are six (6) loans totaling $984 thousand that are in their first short-term payment accommodation period, one (1) loan totaling $25 thousand that is in its second short-term payment accommodation period and five (5) loans totaling $17.3 million that are in their third short-term payment accommodation period. At December 31, 2020, Management has not changed its classification of these loans due to the quality knowledge our loan officers have obtained from their discussions with the borrowers and due to the strength of the collateral and guarantors. Management continues to carefully monitor those borrowers who remain on payment deferral for additional signs of distress that would result in a downgrade in loan classification. All loans under a modification period are considered current for payment status. All loans that have the CARES Act Section

Embassy Bancorp, Inc.

4013 modification, regardless of whether original contractual payment terms have resumed, are provided additional qualitative reserve in the Company’s allowance for loan loss calculation. None of the loans that remain in payment accommodation status at December 31, 2020 are considered impaired by Management at December 31, 2020 as, at this time, Management does not feel it probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement.

The following table sets forth information on the composition of the loan portfolio by type at December 31, 2020. All of the Company’s loans are to domestic borrowers.



	December 31, 2020			December 31, 2019			December 31, 2018
			Percentage of			Percentage of			Percentage of
	Balance		total Loans	Balance		total Loans	Balance		total Loans
		(Dollars in Thousands)

Commercial real estate	$	452,251	41.51%	$	427,987	42.24%	$	428,487	44.79%
Commercial construction		12,176	1.12%		12,622	1.25%		10,958	1.15%
Commercial		48,114	4.42%		53,747	5.30%		38,425	4.02%
Residential real estate		576,437	52.90%		518,150	51.13%		477,965	49.96%
Consumer		640	0.05%		820	0.08%		850	0.09%

Gross loans		1,089,618	100.00%		1,013,326	100.00%		956,685	100.00%
Unearned origination costs		291			813			671
Allowance for loan losses		(10,570)			(8,022)			(7,412)

Net Loans	$	1,079,339		$	1,006,117		$	949,944

	December 31, 2017			December 31, 2016
			Percentage of			Percentage of
	Balance		total Loans	Balance		total Loans
		(Dollars in Thousands)

Commercial real estate	$	347,292	40.46%	$	321,730	40.27%
Commercial construction		30,090	3.51%		28,606	3.58%
Commercial		36,406	4.24%		39,045	4.89%
Residential real estate		443,601	51.68%		408,872	51.17%
Consumer		904	0.11%		718	0.09%

Gross loans		858,293	100.00%		798,971	100.00%
Unearned origination costs		458			144
Allowance for loan losses		(7,040)			(6,517)

Net Loans	$	851,711		$	792,598

‎

Embassy Bancorp, Inc.

The following table shows the maturities of the commercial loan portfolio and the loans subject to interest rate fluctuations at December 31, 2020.



	One year or Less		After One Year Through Five Years		After Five Years		Total

	(In Thousands)

Commercial real estate	$	53,407	$	206,694	$	192,150	$	452,251
Commercial construction		12,068		108		-		12,176
Commercial		14,491		19,836		13,787		48,114

	$	79,966	$	226,638	$	205,937	$	512,541

Fixed Rates	$	46,794	$	225,602	$	205,912	$	478,308
Variable Rates		33,172		1,036		25		34,233

	$	79,966	$	226,638	$	205,937	$	512,541

Credit Risk and Loan Quality

The allowance for loan losses increased $2.5 million to $10.6 million at December 31, 2020 from $8.0 million at December 31, 2019. At December 31, 2020 and December 31, 2019, the allowance for loan losses represented 0.97% and 0.79%, respectively, of total loans (not including PPP loans which are guaranteed by the SBA). In 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans. In determining its allowance for loan loss level for the year ending December 31, 2020, the Bank considered the health and composition of its loan portfolio going into and during the COVID-19 pandemic. At December 31, 2020, approximately 94% of the Bank’s loan portfolio is collateralized by real estate. Less than 6% of the Bank’s loan portfolio is to borrowers in the more particularly hard-hit industries (including the travel and hotel industry, the full-service and limited-service restaurant industries, and the assisted living facilities industry) and the Bank has no direct international exposure. The Bank was not required to adopt the Current Expected Credit Losses (“CECL”) FASB accounting standard in 2020, as this guidance will not be effective for the Bank until 2023. Based upon current economic conditions, the composition of the loan portfolio, the perceived credit risk in the portfolio and loan-loss experience of the Bank and comparable institutions in the Bank’s market area, management feels the allowance is adequate to absorb reasonably anticipated losses.

At December 31, 2020, aggregate balances on non-performing loans (not including PPP loans) equaled $2.8 million compared to $2.7 million at December 31, 2019, representing 0.26% of total loans (not including PPP loans) at December 31, 2020 and December 31, 2019, respectively. In certain circumstances in which the Company has deemed it prudent for reasons related to a borrower’s financial condition, the Company has agreed to restructure certain loans (referred to as troubled debt restructurings). Troubled debt restructuring loans, which are considered non-performing loans, outstanding at December 31, 2020 and 2019 totaled $2.6 million and $2.7 million, respectively. Generally, a loan is classified as nonaccrual when it is determined that the collection of all or a portion of interest or principal is doubtful or when a default of interest or principal has existed for 90 days or more, unless the loan is well secured and in the process of collection. A non-performing loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Non-accrual loans outstanding as of December 31, 2020 and December 31, 2019 totaled $274 thousand and $18 thousand, respectively. At December 31, 2020 and December 31, 2019, the Company had no recorded investment in consumer mortgage loans collateralized by residential real estate property that is in the process of foreclosure. The Bank had no charge-offs for the years ended December 31, 2020 and December 31, 2019.

‎

Embassy Bancorp, Inc.

As of December 31, 2020 and 2019, the Company had no foreclosed assets. The details for the non-performing loans and assets are included in the following table:


	December 31,

	2020		2019		2018		2017		2016

	(Dollars In Thousands)

Non-accrual - commercial	$	-	$	-	$	-	$	104	$	280
Non-accrual - consumer		274		18		269		686		874
Restructured, accruing interest		2,559		2,663		2,918		4,705		4,831
Loans past due 90 or more days, accruing interest		-		-		-		-		55
Total nonperforming loans		2,833		2,681		3,187		5,495		6,040
Foreclosed assets		-		-		135		458		480
Total nonperforming assets	$	2,833	$	2,681	$	3,322	$	5,953	$	6,520
Nonperforming loans to total loans (not
including PPP loans)		0.26%		0.26%		0.33%		0.64%		0.76%
Nonperforming assets to total assets		0.20%		0.23%		0.30%		0.60%		0.71%

Allowance for Loan Losses

Based upon current economic conditions, the composition of the loan portfolio and loan loss experience of comparable institutions in the Company’s market areas, an allowance for loan losses has been provided at 0.97% of outstanding loans receivable (excluding PPP loans). Based on its knowledge of the portfolio and current economic conditions, management believes that, as of December 31, 2020, the allowance is adequate to absorb reasonably anticipated losses. As of December 31, 2020, the Company had $3.6 million of impaired loans (defined as a loan that management feels probable the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or loans considered to be troubled debt restructurings) compared to $3.5 million at December 31, 2019. Most of the Company’s impaired loans required no specific reserves due to adequate collateral. As of December 31, 2020, the Company had impaired loans of $1.5 million requiring a specific reserve of $169 thousand. As of December 31, 2019, the Company had impaired loans of $1.1 million requiring a specific reserve of $202 thousand.

‎

Embassy Bancorp, Inc.

The activity in the allowance for loan losses is shown in the following table, as well as period end loans receivable and the allowance for loan losses as a percent of the total loan portfolio (not including PPP loans):



	December 31,
	2020		2019		2018		2017		2016

	(Dollars In Thousands)

Loans receivable at end of year	$	1,089,909	$	1,014,139	$	957,356	$	858,751	$	799,115

Allowance for loan losses:
Balance, beginning	$	8,022	$	7,412	$	7,040	$	6,517	$	6,068
Provision for loan losses		2,520		605		1,080		1,085		770
Loans charged off:
Commercial real estate		-		-		-		(217)		(35)
Commercial construction		-		-		-		-		-
Commercial		-		-		(705)		(152)		(75)
Residential real estate		-		-		(23)		(206)		(207)
Consumer		-		-		-		-		(4)
Total charged off		-		-		(728)		(575)		(321)
Recoveries of loans previously charged-off:
Commercial real estate		24		-		12		13		-
Commercial construction		-		-		-		-		-
Commercial		-		4		-		-		-
Residential real estate		4		1		8		-		-
Consumer		-		-		-		-		-
Total recoveries		28		5		20		13		-
Net charged off		28		5		(708)		(562)		(321)
Balance at end of year	$	10,570	$	8,022	$	7,412	$	7,040	$	6,517

Allowance for loan losses to loans
receivable at end of year		0.97%		0.79%		0.77%		0.82%		0.82%

Allocation of the Allowance for Loan Losses

The following table details the allocation of the allowance for loan losses to various loan categories (excluding PPP loans) and the related percent of total loans in each category. While allocations have been established for particular loan categories, management considers the entire allowance to be available to absorb losses in any category.


	December 2020		% of Total Loans	December 2019		% of Total Loans	December 2018		% of Total Loans	December 2017		% of Total Loans	December 2016		% of Total Loans

	(Dollars in Thousands)

Commercial real estate	$	4,379	41.51%	$	3,221	42.24%	$	3,248	44.79%	$	2,251	40.46%	$	2,349	40.27%
Commercial construction		150	1.12%		121	1.25%		94	1.14%		369	3.51%		516	3.58%
Commercial		848	4.42%		770	5.30%		574	4.02%		472	4.24%		423	4.89%
Residential real estate		4,485	52.90%		3,488	51.13%		3,179	49.96%		3,510	51.68%		2,937	51.17%
Consumer		14	0.05%		19	0.08%		19	0.09%		18	0.11%		15	0.09%
Unallocated		694			403			298			420			277

Total Allowance for Loan Losses	$	10,570	100.00%	$	8,022	100.00%	$	7,412	100.00%	$	7,040	100.00%	$	6,517	100.00%

‎

Embassy Bancorp, Inc.

Deposits

As growth continues, the Company expects that the principal sources of its funds will be deposits, consisting of demand deposits, NOW accounts, money market accounts, savings accounts, and certificates of deposit from the local market areas surrounding the Company’s offices. These accounts provide the Company with a source of fee income and a relatively stable source of funds.

Total deposits at December 31, 2020 were $1.2 billion, an increase of $200.4 million, or 19.4%, over total deposits of $1.0 billion as of December 31, 2019. The growth in total deposits was due to organic growth of new and existing customers. Management believes the increase in deposits was from expansion of the Company’s online banking platform, competitive offered rates, the addition of a permanent branch office in Macungie, the continued convenience and efficiency of our branch network and branch personnel, along with an injection of federal stimulus money into the economy in 2020 from PPP funds and consumer stimulus payments and changing consumer and commercial spending as a result of the COVID-19 pandemic. The shift in time deposits was primarily due to prior year time deposit promotions rolling off and current time deposits yielding lower rates in the current rate environment. The funds were primarily used to fund new loan growth and purchase securities. The following table reflects the Company’s deposits by category for the periods indicated. All deposits are domestic deposits.


	December 31, 2020		December 31, 2019		December 31, 2018

			(In Thousands)
Demand, non-interest bearing	$	269,996	$	171,815	$	148,609
Demand, NOW and money market, interest bearing		199,845		180,869		135,915
Savings		546,784		425,284		452,809
Time, $250 and over		85,272		92,517		70,337
Time, other		130,482		161,483		123,845

Total deposits	$	1,232,379	$	1,031,968	$	931,515

The following table sets forth the average balance of the Company’s deposits and the average rates paid on those deposits:


	December 31, 2020				December 31, 2019			December 31, 2018
	Average		Average	Average		Average	Average		Average
	Amount		Rate	Amount		Rate	Amount		Rate

				(Dollars In Thousands)
Demand, NOW and money market,
interest bearing deposits	$	186,735	0.24%	$	158,944	0.69%	$	118,792	0.21%
Savings		471,403	0.32%		430,682	0.50%		477,881	0.49%
Certificates of deposit		227,907	1.83%		251,401	2.28%		169,679	1.70%
Total interest bearing deposits		886,045	0.69%		841,027	1.07%		766,352	0.71%
Non-interest bearing demand deposits		231,384			163,485			150,615
Total	$	1,117,429		$	1,004,512		$	916,967

‎

Embassy Bancorp, Inc.

The following table displays the maturities and the amounts of the Company’s certificates of deposit of $250,000 or more:


	December 31, 2020
	(In Thousands)
3 months or less	$	20,942
Over 3 through 6 months		28,162
Over 6 through 12 months		22,357
Over 12 months		13,811

Total	$	85,272

As a FDIC member institution, the Company’s deposits are insured to a maximum of $250,000 per depositor through the DIF that is administered by the FDIC and each institution is required to pay quarterly deposit insurance premium assessments to the FDIC.

Liquidity

Liquidity is a measure of the Company’s ability to meet the demands required for the funding of loans and to meet depositors’ requirements for use of their funds. The Company’s sources of liquidity are cash balances, due from banks, and federal funds sold. Cash and cash equivalents were $131.9 million at December 31, 2020, compared to $40.0 million at December 31, 2019. There are other sources of liquidity that are available to the Company, as well, including those described below.

Additional asset liquidity sources include principal and interest payments from the investment security, unpledged investment securities, and loan portfolios. Long-term liquidity needs may be met by selling unpledged securities available for sale, selling or participating loans, or raising additional capital. At December 31, 2020, the Company had $130.9 million of available for sale securities, compared to $90.8 million at December 31, 2019. Securities with carrying values of approximately $98.7 million and $74.0 million at December 31, 2020 and December 31, 2019, respectively, were pledged as collateral to secure securities sold under agreements to repurchase, public deposits, and for other purposes required or permitted by law.

At December 31, 2020, the Bank had a maximum borrowing capacity for short-term and long-term advances of approximately $682.6 million. This borrowing capacity with the FHLB includes a line of credit of $150.0 million. There were no short-term FHLB advances outstanding as of December 31, 2020 and $18.1 million in short-term FHLB advances outstanding as of December 31, 2019. There were $14.7 million in long-term FHLB advances outstanding as of December 31, 2020 and none outstanding at December 31, 2019. All FHLB borrowings are secured by qualifying assets of the Bank.

The Bank has a federal funds line of credit with the Atlantic Community Bankers Bank (“ACBB”) of $10.0 million, of which none was outstanding at December 31, 2020 and December 31, 2019. Advances from this line are unsecured.

As described in Note 2, the Bank has long-term PPPLF borrowings through the Federal Reserve Bank of Philadelphia of $50.8 million, at an interest rate of 0.35%, as of December 31, 2020 and none as of December 31, 2019. All PPPLF borrowings are secured by PPP loans. As of February 3, 2021, the PPPLF borrowings have been repaid in full.

Because of the composition of the Company’s balance sheet, its strong capital base, deposit growth, and borrowing capacity, the Company believes that it remains well positioned with respect to liquidity. While it is desirable to be liquid, it has the effect of a lower interest margin. The majority of the Company’s funds are invested in loans; however, a portion is invested in investment securities that generally carry a lower yield.

‎

Embassy Bancorp, Inc.

Contractual Obligations

The following table represents the Company’s contractual obligations to make future payments as of the year ended December 31, 2020:


	2021		2022-2023		2024-2025		Thereafter		Total

	(In Thousands)

Time deposits	$	150,966	$	59,078	$	5,710	$	-	$	215,754
Long-term borrowings		-		14,651		-		-		14,651
PPPLF borrowings		-		50,794		-		-		50,794
Operating leases		1,737		3,567		2,963		1,857		10,124

Total	$	152,703	$	128,090	$	8,673	$	1,857	$	291,323

As of February 3, 2021, the PPPLF borrowings have been paid off in full.

Off-Balance Sheet Arrangements

The Company’s consolidated financial statements do not reflect various off-balance sheet arrangements that are made in the normal course of business, which may involve some liquidity risk. These commitments consist of unfunded loans, lines of credit, and letters of credit made under the same standards as on-balance sheet loan instruments. These off-balance sheet arrangements at December 31, 2020 and December 31, 2019 totaled $140.8 million and $142.4 million, respectively. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to the Company. The Bank also issued standby letters of credit commitments for the benefit of a third party, which secure public deposits in the Bank through the FHLB. These deposit letters of credit are secured by qualifying assets of the Bank. The Company, through the Bank, had $7.6 million of FHLB deposit letters of credit outstanding as of December 31, 2019 and none as of December 31, 2020. For further information see Note 5.

Management believes that any amounts actually drawn upon can be funded in the normal course of operations. The Company has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity or the availability of capital resources. Management will continue to evaluate the Company’s liquidity position for changes caused by the COVID-19 pandemic.

Capital Resources and Adequacy

Total stockholders’ equity was $112.2 million as of December 31, 2020, representing a net increase of $12.6 million from December 31, 2019. The increase in capital was primarily the result of the net income of $12.8 million, an increase of $1.6 million in unrealized gains on available for sale securities, and an increase in surplus of $468 thousand due to stock grants, stock options, and employee stock purchases with compensation expense, offset by dividends paid of $1.6 million and treasury stock repurchases of $765 thousand.

The Company and the Bank are subject to various regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can initiate certain actions by regulators that could have a material adverse effect on the consolidated financial statements.

The regulations require that banks maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and Tier 1 capital to average assets (as defined). As of December 31, 2020, the Bank met the minimum requirements. In addition, the Bank’s capital ratios exceeded the amounts required to be considered “well capitalized” as defined in the regulations.

‎

Embassy Bancorp, Inc.

The following table provides a comparison of the Bank’s risk-based capital ratios and leverage ratios:


	December 31, 2020		December 31, 2019

	(Dollars In Thousands)

Tier 1, common stockholders' equity	$	109,013	$	98,230
Tier 2, allowable portion of allowance for loan losses		10,570		8,022

Total capital	$	119,583	$	106,252

Common equity tier 1 capital ratio		11.9%		12.0%
Tier 1 risk based capital ratio		11.9%		12.0%
Total risk based capital ratio		13.1%		13.0%
Tier 1 leverage ratio		8.1%		8.4%

Note: Unrealized gains on securities available for sale are excluded from regulatory capital components of risk-based capital and leverage ratios.

In July 2013, the FDIC and the Federal Reserve approved a new rule that substantially amended the regulatory risk based capital rules applicable to the Bank and the Company. The final rule implements the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.

The capital ratios to be considered “well capitalized” under the new capital rules are: common equity of 6.5%, Tier 1 leverage of 5%, Tier 1 risk-based capital of 8%, and Total Risk-Based capital of 10%.

The Company qualifies as a small bank holding company and is not subject to the Federal Reserve’s consolidated capital rules, although an institution that so qualifies may continue to file reports that include such capital amounts and ratios. The Company has elected to continue to report those amounts and ratios.
‎

Embassy Bancorp, Inc.

The following table provides the Company’s risk-based capital ratios and leverage ratios:


	December 31, 2020		December 31, 2019

	(Dollars In Thousands)

Tier 1, common stockholders' equity	$	109,237	$	98,275
Tier 2, allowable portion of allowance for loan losses		10,570		8,022

Total capital	$	119,807	$	106,297

Common equity tier 1 capital ratio		12.0%		12.0%
Tier 1 risk based capital ratio		12.0%		12.0%
Total risk based capital ratio		13.1%		13.0%
Tier 1 leverage ratio		8.1%		8.4%

Note: Unrealized gains on securities available for sale are excluded from regulatory capital components of risk-based capital and leverage ratios.

Interest Rate Risk Management

A principal objective of the Company’s asset/liability management policy is to minimize the Company’s exposure to changes in interest rates by an ongoing review of the maturity and repricing of interest-earning assets and interest-bearing liabilities. The Asset Liability Committee (ALCO), which meets as part of the Board of Directors meeting, oversees this review, which establishes policies to control interest rate sensitivity. Interest rate sensitivity is the volatility of a company’s earnings resulting from a movement in market interest rates. The Company monitors rate sensitivity in order to reduce vulnerability to interest rate fluctuations while maintaining adequate capital levels and acceptable levels of liquidity. The Company’s asset/liability management policy, monthly and quarterly financial reports, along with simulation modeling, supplies management with guidelines to evaluate and manage rate sensitivity.

‎

Embassy Bancorp, Inc.

GAP, a measure of the difference in volume between interest bearing assets and interest bearing liabilities, is a means of monitoring the sensitivity of a financial institution to changes in interest rates. The chart below provides an indicator of the rate sensitivity of the Company. NOW and savings accounts are categorized by their respective estimated decay rates. The Company is liability sensitive, which means that if interest rates fall, interest income will fall slower than interest expense and net interest income will likely increase. If interest rates rise, interest income will rise slower than interest expense and net interest income will likely decrease. The Company continues to monitor interest rate exposure of its interest bearing assets and liabilities and believes that it is well positioned for any future market rate adjustments.


			Over 3		Over 1		Over 4
	0 to 3		Months to		Year to		Years to		Over 5
	Months		12 Months		3 Years		5 Years		Years		Total
	(In Thousands)
Interest-earning assets
Federal funds sold and interest-
bearing deposits	$	117,379	$	-	$	-	$	-	$	-	$	117,379
Investment securities		20,348		16,188		49,067		11,375		35,292		132,270
Loans, gross		80,331		81,652		170,702		146,212		611,012		1,089,909
Loans - PPP, gross		12,365		37,095		4,874		-		-		54,334

Total interest-earning assets		230,423		134,935		224,643		157,587		646,304		1,393,892

Interest-bearing liabilities
NOW and money market accounts		50,713		149,132		-		-		-		199,845
Savings		546,784		-		-		-		-		546,784
Certificates of deposit		46,585		104,382		59,078		5,709		-		215,754
Other borrowed funds		-		-		14,651		-		-		14,651
PPPLF borrowings		50,794		-		-		-		-		50,794
Repurchase agreements
and federal funds purchased		13,612		-		-		-		-		13,612

Total interest-bearing liabilities		708,488		253,514		73,729		5,709		-		1,041,440

GAP	$	(478,065)	$	(118,579)	$	150,914	$	151,878	$	646,304	$	352,452

CUMULATIVE GAP	$	(478,065)	$	(596,644)	$	(445,730)	$	(293,852)	$	352,452

GAP TO INTEREST EARNING
ASSETS		-34.30%		-8.51%		10.83%		10.90%		46.37%

CUMULATIVE GAP TO
INTEREST EARNING ASSETS		-34.30%		-42.80%		-31.98%		-21.08%		25.29%

‎

Embassy Bancorp, Inc.

Based on a twelve-month forecast of the balance sheet, the following table sets forth our interest rate risk profile at December 31, 2020. For income simulation purposes, personal and business savings accounts reprice every three months, personal and business NOW accounts reprice every four months and personal and business money market accounts reprice every two months. The impact on net interest income, illustrated in the following table, would vary if different assumptions were used or if actual experience differs from that indicated by the assumptions.


	Change in Interest Rates		Percentage Change in Net Interest Income

	Down 100 basis points		-2.0%
	Down 200 basis points		-4.7%

	Up 100 basis points		1.2%
	Up 200 basis points		2.4%

Return on Assets and Equity

For the year ended December 31, 2020, the return on average assets was 0.98%, the return on average equity was 12.07%, and the ratio of average shareholders’ equity to average total assets was 8.13%.

For the year ended December 31, 2019, the return on average assets was 0.95%, the return on average equity was 11.54%, and the ratio of average shareholders’ equity to average total assets was 8.28%.

Dividend Payout Ratio

For the years ended December 31, 2020 and 2019 the dividend payout ratio was 12.83% and 13.74%, respectively.

Effects of Inflation

The majority of assets and liabilities of the Company are monetary in nature, and therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. The precise impact of inflation upon the Company is difficult to measure. Inflation may affect the borrowing needs of consumers, thereby impacting the growth rate of the Company’s assets. Inflation may also affect the general level of interest rates, which can have a direct bearing on the Company.

‎

Embassy Bancorp, Inc.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Table of Contents

	Page Number
Management Report on Internal Controls Over Financial Reporting	51
Report of Independent Registered Public Accounting Firm	52
Consolidated Balance Sheets	54
Consolidated Statements of Income	55
Consolidated Statements of Comprehensive Income	56
Consolidated Statements of Stockholders’ Equity	57
Consolidated Statement of Cash Flows	58
Notes to Financial Statements	60

‎

Embassy Bancorp, Inc.

Management Report on Internal Controls Over Financial Reporting

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in SEC Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the Company’s disclosure controls and procedures are effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that, as of December 31, 2020, the Company’s internal control over financial reporting is effective based on those criteria.

/s/
	/s/ David M. Lobach, Jr.	/s/ Judith A. Hunsicker
	David M. Lobach, Jr.	Judith A. Hunsicker
	Chairman, President and	First Executive Officer, Chief Operating
	Chief Executive Officer	Officer, Secretary and Chief Financial
	March 12, 2021	Officer
		March 12, 2021

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Embassy Bancorp, Inc. and Subsidiary:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Embassy Bancorp, Inc. and Subsidiary (Company) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses – General Component Qualitative Factors

As discussed in Note 1 to the consolidated financial statements, the allowance for loan losses is established through a provision for loan losses and represents an amount, which, in management’s judgment, will be adequate to absorb losses in the loan portfolio. The Company’s allowance for loan losses was $10.6 million at December 31, 2020 and consists of specific and general components of $169 thousand and $10.4 million, respectively. Management develops the general component based on historical loan loss experience adjusted for qualitative factors not reflected in the historical loss experience. Historical loss ratios are measured using the average charge-off ratio for the most recent rolling four years plus current year to date. The qualitative factors used by the Company include factors such as national and local economic conditions, levels of and trends in delinquency rates and nonaccrual loans, trends in volumes and terms of loans, changes in lending policies, lending personnel, and collateral, as well as concentrations in loan types, industry, and geography. The

adjustments for qualitative factors require a significant amount of judgment by management and involve a high degree of estimation uncertainty.

We identified the qualitative factor component of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

Our audit procedures related to the qualitative factor component of the allowance for loan losses included the following, among others:

Obtaining an understanding of the relevant controls related to the allowance for loan losses and testing such controls for design and operating effectiveness, including controls related to management’s establishment, review, and approval of the qualitative factors, and the completeness and accuracy of data used in determining qualitative factors.

Evaluation of the appropriateness of management’s methodology for estimating the allowance for loan losses.

Testing of the completeness and accuracy of data used by management in determining qualitative factor adjustments by agreeing them to internal and external source data.

Testing of management’s conclusions regarding the appropriateness of the qualitative factor adjustments and agreement of any changes therein to the allowance for loan losses calculation.

/s/ Baker Tilly US, LLP

We have served as the Company’s auditor since 2001.

Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause, LLP)

Allentown, Pennsylvania

March 12, 2021

Embassy Bancorp, Inc.

Consolidated Balance Sheets



	December 31,		December 31,
ASSETS	2020		2019

	(In Thousands, Except Share Data)
Cash and due from banks	$	14,528	$	5,825
Interest bearing demand deposits with banks		116,379		33,161
Federal funds sold		1,000		1,000
Cash and Cash Equivalents		131,907		39,986
Securities available for sale		130,940		90,829
Restricted investment in bank stock		1,330		1,478
Loans receivable, net of allowance for loan losses of $10,570 in 2020; $8,022 in 2019		1,079,339		1,006,117
Paycheck Protection Program loans receivable		54,334		-
Premises and equipment, net of accumulated depreciation		3,346		2,123
Bank owned life insurance		25,189		20,259
Accrued interest receivable		3,136		2,048
Other assets		12,509		13,279
Total Assets	$	1,442,030	$	1,176,119
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	269,996	$	171,815
Interest bearing		962,383		860,153
Total Deposits		1,232,379		1,031,968
Securities sold under agreements to repurchase		13,612		7,208
Short-term borrowings		-		18,067
Long-term borrowings		14,651		-
Paycheck Protection Program Liquidity Facility borrowings		50,794		-
Accrued interest payable		1,640		3,281
Other liabilities		16,780		15,980
Total Liabilities		1,329,856		1,076,504
Stockholders' Equity:
Common stock, $1 par value; authorized 20,000,000 shares;
2020 issued 7,637,216 shares; outstanding 7,528,967 shares;
2019 issued 7,543,524 shares; outstanding 7,478,477 shares		7,637		7,544
Surplus		26,405		25,937
Retained earnings		76,960		65,794
Accumulated other comprehensive income		2,937		1,340
Treasury stock, at cost: 108,249 and 65,047 shares at December 31, 2020 and
December 31, 2019, respectively		(1,765)		(1,000)
Total Stockholders' Equity		112,174		99,615
Total Liabilities and Stockholders' Equity	$	1,442,030	$	1,176,119

See notes to consolidated financial statements.

‎

Embassy Bancorp, Inc.

Consolidated Statements of Income



	Year Ended December 31,

	2020			2019

INTEREST INCOME	(In Thousands, Except Per Share Data)
Loans, including fees	$	40,683	$	39,636
Paycheck Protection Program loans, including fees		1,307		-
Securities, taxable		1,353		1,614
Securities, non-taxable		826		990
Short-term investments, including federal funds sold		160		622
Total Interest Income		44,329		42,862
INTEREST EXPENSE
Deposits		6,125		8,980
Securities sold under agreements to repurchase and
federal funds purchased		18		74
Short-term borrowings		51		275
Long-term borrowings		90		-
Paycheck Protection Program Liquidity Facility borrowings		129		-
Total Interest Expense		6,413		9,329
Net Interest Income		37,916		33,533
PROVISION FOR LOAN LOSSES		2,520		605
Net Interest Income after ‎ Provision for Loan Losses		35,396		32,928
OTHER NON-INTEREST INCOME
Merchant and credit card processing fees		265		340
Debit card interchange fees		647		612
Other service fees		416		505
Bank owned life insurance		930		691
Gain on sale of securities		128		-
Gain on sale of other real estate owned		-		45
Gain on sale of loans		59		-
Total Other Non-Interest Income		2,445		2,193
OTHER NON-INTEREST EXPENSES
Salaries and employee benefits		11,098		10,464
Occupancy and equipment		3,323		3,400
Data processing		2,585		2,339
Merchant and credit card processing		50		85
Advertising and promotion		1,096		1,713
Professional fees		846		790
FDIC insurance		389		199
Loan & real estate		251		211
Charitable contributions		869		864
Other		1,603		1,683
Total Other Non-Interest Expenses		22,110		21,748

Income before Income Taxes		15,731		13,373
INCOME TAX EXPENSE		2,921		2,494
Net Income	$	12,810	$	10,879

BASIC EARNINGS PER SHARE	$	1.71	$	1.46

DILUTED EARNINGS PER SHARE	$	1.70	$	1.44

DIVIDENDS PER SHARE	$	0.22	$	0.20

See notes to consolidated financial statements.
‎

Embassy Bancorp, Inc.

Consolidated Statements of Comprehensive Income





	Year Ended December 31,
	2020			2019

	(In Thousands)

Net Income	$		12,810	$		10,879
Change in Accumulated Other Comprehensive Income:
Unrealized holding gain
on securities available for sale		2,149			3,275
Less: reclassification adjustment
for realized gains		(128)			-
		2,021			3,275
Income tax effect		(424)			(688)
Net unrealized gain		1,597			2,587
Other comprehensive income, net of tax			1,597			2,587
Comprehensive Income	$		14,407	$		13,466

See notes to consolidated financial statements.

Embassy Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2020 and 2019



	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total
	(In Thousands, Except Share and Per Share Data)
BALANCE - DECEMBER 31, 2018	$	7,530	$	25,532	$	56,410	$	(1,247)	$	(1,000)	$	87,225
Net income		-		-		10,879		-		-		10,879
Other comprehensive income, net of tax		-		-		-		2,587		-		2,587
Dividend declared and paid, $0.20 per share		-		-		(1,495)		-		-		(1,495)
Compensation expense recognized on ‎ stock options		-		4		-		-		-		4
Common stock grants to directors,
10,799 shares		10		151		-		-		-		161
Compensation expense recognized on
stock grants, net of unearned compensation
expense of $457		-		202		-		-		-		202
Shares issued under employee stock purchase ‎ plan, 3,158 shares		4		48		-		-		-		52
BALANCE - DECEMBER 31, 2019	$	7,544	$	25,937	$	65,794	$	1,340	$	(1,000)	$	99,615

BALANCE - DECEMBER 31, 2019	$	7,544	$	25,937	$	65,794	$	1,340	$	(1,000)	$	99,615
Net income		-		-		12,810		-		-		12,810
Other comprehensive income, net of tax		-		-		-		1,597		-		1,597
Dividend declared and paid, $0.22 per share		-		-		(1,644)		-		-		(1,644)
Exercise of stock options, 52,611 shares		52		316		-		-		-		368
Stock tendered for funding exercise of
stock options, 11,144 shares		(11)		(145)		-		-		-		(156)
Common stock grants to directors,
12,757 shares		13		135		-		-		-		148
Common stock grants to officers, 34,429 shares
and compensation expense recognized on
stock grants, net of unearned compensation
expense of $758		34		104		-		-		-		138
Shares issued under employee stock purchase ‎ plan, 5,039 shares		5		58		-		-		-		63
Purchase treasury stock, 40,000 shares
at $18.00 per share and 3,202 shares at
$14.00 per share		-		-		-		-		(765)		(765)
BALANCE - DECEMBER 31, 2020	$	7,637	$	26,405	$	76,960	$	2,937	$	(1,765)	$	112,174

See notes to consolidated financial statements.

‎

Embassy Bancorp, Inc.

Consolidated Statements of Cash Flows



	Year Ended December 31,
	2020		2019

	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,810	$	10,879
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,520		605
Amortization of deferred loan costs		269		262
Accretion of deferred Paycheck Protection Program loan fees		(862)		-
Depreciation		760		829
Net amortization of investment security premiums and discounts		492		172
Stock compensation expense		286		367
Net realized gain on sale of other real estate owned		-		(45)
Income on bank owned life insurance		(930)		(691)
Deferred income taxes		(558)		(238)
Realized gain on sale of securities available for sale		(128)		-
Loans originated for sale		(689)		-
Proceeds from sale of loans		748		-
Realized gain on sale of loans		(59)		-
(Increase) decrease in accrued interest receivable		(1,088)		130
Decrease in other assets		904		1,449
(Decrease) increase in accrued interest payable		(1,641)		1,592
Increase (decrease) in other liabilities		800		(1,008)
Net Cash Provided by Operating Activities		13,634		14,303
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale		(144,744)		(20,429)
Maturities, calls and principal repayments of securities available for sale		102,267		23,451
Proceeds from sales of securities available for sale		4,023		-
Net increase in loans		(76,011)		(57,040)
Net increase in Paycheck Protection Program loans		(53,472)		-
Net redemption of restricted investment in bank stock		148		1,316
Purchase of bank owned life insurance		(4,000)		-
Proceeds from sale of other real estate owned		-		180
Purchases of premises and equipment		(1,983)		(778)
Net Cash Used in Investing Activities		(173,772)		(53,300)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		200,411		100,453
Net increase (decrease) in securities sold under agreements to repurchase		6,404		(11,675)
Proceeds from Employee Stock Purchase Plan		63		52
Decrease in short-term borrowed funds		(18,067)		(35,928)
Proceeds from long-term borrowed funds		14,651		-
Proceeds from Paycheck Protection Program Liquidity Facility borrowed funds		62,039		-
Repayment of Paycheck Protection Program Liquidity Facility borrowed funds		(11,245)		-
Purchase of treasury stock		(765)		-
Exercise of stock options, net of payment for stock tendered		212		-
Dividends paid		(1,644)		(1,495)
Net Cash Provided by Financing Activities		252,059		51,407
Net Increase in Cash and Cash Equivalents		91,921		12,410
CASH AND CASH EQUIVALENTS - BEGINNING		39,986		27,576
CASH AND CASH EQUIVALENTS - ENDING	$	131,907	$	39,986

Embassy Bancorp, Inc.

Consolidated Statements of Cash Flows

SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid	$	8,054	$	7,737
Income taxes paid	$	3,242	$	2,666

Non-cash Investing and Financing Activities:
Right of use assets obtained in exchange for new operating lease liabilities	$	923	$	-
Recognition of operating lease right of use assets	$	-	$	10,921
Recognition of operating lease liabilities	$	-	$	11,027

See notes to consolidated financial statements.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation and Nature of Operations

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of other-than-temporary impairment on available for sale debt securities, the determination of the allowance for loan losses, the valuation of other real estate owned, and the valuation of deferred tax assets.

Concentrations of Credit Risk

Most of the Company’s activities are with customers located in the Lehigh Valley area of Pennsylvania. Note 3 discusses the types of securities in which the Company invests. The concentrations of credit by type of loan are set forth in Note 4. The Company does not have any significant concentrations to any one specific industry or customer, with the exception of lending activity to a broad range of lessors of residential and non-residential real estate within the Lehigh Valley. Although the Company has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy.

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing demand deposits with bank, and federal funds sold. Generally, federal funds are purchased or sold for less than one week periods.

Securities

Embassy Bancorp, Inc.

Other-than-temporary accounting guidance specifies that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Company recognized no other-than-temporary impairment charges during the years ended December 31, 2020 and 2019.

Restricted Investments in Bank Stock

Restricted investments in bank stock consist of FHLBank Pittsburgh (“FHLB”) stock and Atlantic Community Bankers Bank (“ACBB”) stock. The restricted stocks have no quoted market value and are carried at cost. Federal law requires a member institution of the FHLB to hold stock of its district FHLB according to a predetermined formula.

Management evaluates the FHLB and ACBB restricted stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the issuer as compared to the capital stock amount for the issuer and the length of time this situation has persisted, (2) commitments by the issuer to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuer, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuer.

Management believes no impairment charge is necessary related to the FHLB or ACBB restricted stock as of December 31, 2020. No impairment charge was taken related to the FHLB or ACBB restricted stock as of December 31, 2019.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield using the effective interest method. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective interest method. Delinquency fees are recognized in income when collected.

As described in Note 2, the Company originates Paycheck Protection Program (“PPP”) loans as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The non-PPP loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial real estate, commercial construction and commercial. Consumer loans consist of the following classes: residential real estate and other consumer loans.

The Company makes commercial loans for real estate development and other business purposes required by the customer base. The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversion of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayments of these loans are dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Embassy Bancorp, Inc.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying interest rates (fixed or variable) depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages may have amortizations up to 30 years and home equity loans may have maturities up to 25 years. Other consumer loans include installment loans, car loans, and overdraft lines of credit. Some of these loans may be unsecured.

For all classes of loans receivable, the accrual of interest may be discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed. Interest received on nonaccrual loans, including impaired loans, generally is applied against principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans, or portions of loans, determined to be confirmed losses are charged against the allowance account and subsequent recoveries, if any, are credited to the account. A loss is considered confirmed when information available at the balance sheet date indicates the loan, or a portion thereof, is uncollectible. As further described in Note 2, because of the 100% SBA guarantee, the Company has determined that no allowance for loan losses is required on PPP loans.

Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

Management maintains the allowance for loan losses at a level it believes adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet dates. The allowance for loan losses account consists of specific and general reserves.

For the specific portion of the allowance for loan losses, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Factors considered by management in determining impairment include payment status, ability to pay and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Loans considered impaired are measured for impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. If the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent, is less than the recorded investment in the loan, including accrued interest and net deferred loan fees or costs, the Company will recognize the impairment by adjusting the allowance for loan losses account through charges to earnings as a provision for loan losses.

For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of

Embassy Bancorp, Inc.

the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

The general portion of the allowance for loan losses covers pools of loans by major loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and other consumer loans. Loss contingencies for each of the major loan pools are determined by applying a total loss factor to the current balance outstanding for each individual pool. The total loss factor is comprised of a historical loss factor using the loss migration method plus a qualitative factor, which adjusts the historical loss factor for changes in trends, conditions and other relevant factors that may affect repayment of the loans in these pools as of the evaluation date. Loss migration involves determining the percentage of each pool that is expected to ultimately result in loss based on historical loss experience. Historical loss factors are based on the ratio of net loans charged-off to loans, net, for each of the major groups of loans. The historical loss factor for each pool, includes but is not limited to, an average of the Company’s historical net charge-off ratio for the most recent rolling four years plus current year to date.

In addition to these historical loss factors, management also uses a qualitative factor that represents a number of environmental risks that may cause estimated credit losses associated with the current portfolio to differ from historical loss experience. These environmental risks include: (i) changes in lending policies and procedures including underwriting standards and collection, charge-off and recovery practices; (ii) changes in the composition and volume of the portfolio; (iii) changes in national, local and industry conditions, including the effects of such changes on the value of underlying collateral for collateral-dependent loans; (iv) changes in the volume and severity of classified loans, including past due, nonaccrual, troubled debt restructures and other loan modifications; (v) changes in the levels of, and trends in, charge-offs and recoveries; (vi) the existence and effect of any concentrations of credit and changes in the level of such concentrations; (vii) changes in the experience, ability and depth of lending management and other relevant staff; (viii) changes in the quality of the loan review system and the degree of oversight by the board of directors; and (ix) the effect of external factors such as competition and regulatory requirements on the level of estimated credit losses in the current loan portfolio. Each environmental risk factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation. In 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans.

The unallocated component of the general allowance is used to cover inherent losses that exist as of the evaluation date, but which have not been identified as part of the allocated allowance using the above impairment evaluation methodology due to limitations in the process. One such limitation is the imprecision of accurately estimating the impact current economic conditions will have on historical loss rates. Variations in the magnitude of impact may cause estimated credit losses associated with the current portfolio to differ from historical loss experience, resulting in an allowance that is higher or lower than the anticipated level.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payment, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weakness may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness and borrowers are highly leveraged. They include loans that are inadequately protected by the current sound net worth and the paying capacity of the obligor or

Embassy Bancorp, Inc.

of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Other Real Estate Owned

Other real estate owned is comprised of properties acquired through foreclosure proceedings or acceptance of a deed-in-lieu of foreclosure and loans classified as in-substance foreclosures. A loan is classified as an in-substance foreclosure when the Company has taken possession of the collateral, regardless of whether formal foreclosure proceedings take place. Other real estate owned is recorded at fair value less cost to sell at the time of acquisition. Any excess of the loan balance over the recorded value is charged to the allowance for loan losses at the time of acquisition. After foreclosure, valuations are periodically performed and the assets are carried at the lower of cost or fair value less cost to sell. Changes in the valuation allowance on foreclosed assets are included in other income. Costs to maintain the assets are included in other expenses. Any gain or loss realized upon disposal of other real estate owned is included in other income.

Bank Owned Life Insurance

The Company invests in bank owned life insurance (“BOLI”) as a tax deferred investment and a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Company on certain of its employees and directors. The Company is the owner and primary beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from increases in cash surrender value of the policies is included in non-interest income and is not subject to income taxes unless surrendered. The Company does not intend to surrender these policies, and accordingly, no deferred taxes have been recorded on the earnings from these policies. The Company purchased $4.0 million of BOLI in 2020. There were no BOLI purchases in 2019.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the related assets: furniture, fixtures and equipment for five years to ten years, leasehold improvements for the life of the lease, building for forty years, computer equipment and data processing software for one year to five years, and automobiles for five years.

Transfers of Financial Assets

Transfers of financial assets, including sales of loan participations, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred.

‎

Embassy Bancorp, Inc.

Income Taxes

Income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to taxable income. Deferred income taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carry forwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period, as adjusted for stock dividends and splits. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.



	Year Ended December 31,
	2020		2019

	(Dollars In Thousands, Except Per Share Data)

Net income	$	12,810	$	10,879

Weighted average shares outstanding		7,469,952		7,475,262
Dilutive effect of potential common
shares, stock options		53,643		68,839
Diluted weighted average common
shares outstanding		7,523,595		7,544,101
Basic earnings per share	$	1.71	$	1.46
Diluted earnings per share	$	1.70	$	1.44

There were no stock options not considered in computing diluted earnings per common share for the years ended December 31, 2020 and December 31, 2019.

Employee Benefit Plan

The Company has a 401(k) Plan (the “Plan”) for employees. All employees are eligible to participate after they have attained the age of 21 and have also completed 6 consecutive months of service during which at least 500 hours of service are completed. The employees may contribute up to the maximum percentage allowable by law of their compensation to the Plan, and the Company provides a match of fifty percent of the first 8% percent to eligible participating employees. Full vesting in the Plan is prorated equally over a four year period. The Company’s contributions to the Plan for the years ended December 31, 2020 and 2019 were $228 thousand and $210 thousand, respectively.

Off Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the balance sheet when they are funded.

Embassy Bancorp, Inc.

Comprehensive Income

US GAAP require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

Stock-Based Compensation

The Company measures and records compensation expense for share-based payments based on the instrument's fair value on the date of grant. The fair value of each stock option grant is measured using the Black-Scholes option pricing model. The fair value of stock awards is based on the Company's stock price. Share-based compensation expense is recognized over the service period, generally defined as the vesting period.

Non-Interest Income

The majority of the Company’s revenue-generating transactions are not subject to ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”, including revenue generated from financial instruments, such as its loans and investment securities, as these activities are subject to other US GAAP discussed elsewhere within the Company’s disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of Topic 606, which are presented in the consolidated statement of income as components of non-interest income, are merchant processing and credit card processing fees, debit card interchange fees, other service fees on deposit accounts, and gains and losses on other real estate owned. Credit card processing fees include income from commercial credit cards and merchant processing income. Income for such performance obligations are generally received at the time the performance obligations are satisfied or within the monthly service period. Service fees on deposit accounts represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). The Company recognizes debit card interchange fees daily from debit cardholder transactions conducted through the MasterCard payment network. The Company records a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of other real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction prices and related gain or loss on the sale if a significant financing component is present. The Company does not sell its mortgages on the secondary market, nor does it offer trust or investment brokerage services to its customers to generate fee income. On May 1, 2020, the Company sold its entire $689 thousand commercial credit card loan portfolio to an unrelated third party for a gain of $59 thousand. These loans were classified as held for sale at March 31, 2020 prior to the May 1, 2020 sale.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2020 through the date these consolidated financial statements were available for issuance for items that should potentially be recognized or disclosed in these consolidated financial statements. As of February 3, 2021, the Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings of $50.8 million were paid off in full. Refer to Note 2 for subsequent loan balances and activity related to the CARES Act.

Future Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses”. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These

Embassy Bancorp, Inc.

expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In November 2019, the FASB issued an update to defer the implementation date for smaller reporting companies from 2020 to 2023. The Company currently qualifies as a smaller reporting company under SEC Regulation S-K and, therefore, the guidance is effective for the Company in 2023. The Company has not yet determined the impact this standard will have on its financial statements or results of operations.

Reclassification

Certain amounts in the 2019 consolidated financial statements may have been reclassified to conform to 2020 presentation. These reclassifications had no effect on 2019 net income.

Note 2 – COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic and on March 13, 2020 the United States government declared COVID-19 as a national emergency. The continuing effects of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. The economic effects of COVID-19 may adversely affect the Company’s financial condition and results of operations as further described below. The full future potential impact is unknown at this time.

For the year ended December 31, 2020, the Company provided certain borrowers affected in a variety of ways by COVID-19 with payment accommodations that facilitate their ability to work through the immediate impact of the virus. Payment accommodations were in the form of short-term principal and/or interest deferrals. These payment accommodations were made in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. Section 4013 of the CARES Act, enacted on March 27, 2020, provides that, from the period beginning March 1, 2020 until the earlier of December 31, 2020, subsequently extended until December 31, 2021, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States under the National Emergencies Act terminates, the Company may elect to suspend US GAAP for loan modifications related to the pandemic which would otherwise be categorized as troubled debt restructurings and suspend any determination of a loan modified as a result of the effects of the pandemic as being a troubled debt restructuring, including impairment for accounting purposes. Interest income is continuing to be recognized during the accommodation period. The following table presents COVID-19 payment accommodations based on loan type and amount at December 31, 2020:


	Number of Loans	Loan Amount
		(In Thousands)
Commercial real estate	137	$	128,846
Commercial	44		8,197
Residential real estate	72		14,234
Consumer	2		31
Total	255	$	151,308

Included in the totals above are two hundred forty-three (243) loans totaling $133.0 million in which the payment accommodation period has ended and the loan payments have resumed under their original contractual terms. Also included in the totals above are six (6) loans totaling $984 thousand that are in their first short-term (three month) payment accommodation period, one (1) loan totaling $25 thousand that is in its second short-term (three month) payment accommodation period and five (5) loans totaling $17.3 million that are in their third short-term (three month) payment accommodation period. At December 31, 2020, Management has not changed its classification of

Embassy Bancorp, Inc.

these loans due to the quality knowledge our loan officers have obtained from their discussions with the borrowers and due to the strength of the collateral and guarantors. Management continues to carefully monitor those borrowers who remain on payment deferral for additional signs of distress that would result in a downgrade in loan classification. All loans under a modification period are considered current for payment status.

At February 28, 2021, the Company had two hundred forty-eight (248) Section 4013 loans totaling $149.5 million. Included in these totals are two hundred forty-three (243) loans totaling $132.6 million in which the payment accommodation period has ended and the loan payments have resumed under their original contractual terms. Also included in the totals are one (1) consumer loan totaling $418 thousand that is in its first short-term (three month) payment accommodation period and four (4) commercial loans totaling $16.5 million that have been given a fourth short-term (three month) payment accommodation period. Loans in the fourth short-term (three month) payment accommodation period consist of a $11.4 million loan to a borrower in the travel and hotel industry, a $3.8 million loan to a borrower in the assisted living facility industry and two (2) loans totaling $1.4 million to a borrower in the restaurant industry. Except for these four (4) loans being granted a fourth short-term (three month) payment accommodation, between January 1, 2021 and February 28, 2021, there were no new Section 4013 modifications made.

In order to participate in the SBA’s PPP program under the CARES Act, the Company made application for and was approved to be a PPP lender. The Company had not previously been an approved SBA 7(a) lender. The Company began accepting applications from qualified borrowers on April 3, 2020, and, as of December 31, 2020, the Company had a total of four hundred seventy (470) PPP loans with a receivable balance of $54.3 million, net of $1.2 million of unearned origination fees and costs. Through December 31, 2020, the Company had received forgiveness payments from the SBA on PPP loan principal balances of $13.2 million. From January 1, 2021 to February 28, 2021, the Company had received additional forgiveness payments from the SBA on PPP loan principal balances of $19.4 million.

These PPP loans are 100% guaranteed by the SBA, have a two year or up to five year maturity and an interest rate of 1% throughout the term of the loan, with payments deferred until forgiveness proceeds received from the SBA or ten months after the end of the covered period. The SBA may forgive the PPP loans if certain conditions are met by the borrower, including using at least 60% of the proceeds for payroll costs. The SBA also provided the Company with a processing fee for each loan, with the amount of such fee pre-determined by the SBA dependent upon the size of each loan. At December 31, 2020, the Company has recorded net deferred PPP loan fees and costs of $1.2 million, which will be recognized through interest income over the life of the related PPP loans. Because of the 100% SBA guarantee, the Company has determined that no allowance for loan losses is required on the PPP loans. All PPP loans have a pass rating and none are past due under their contractual terms.

On December 27, 2020 the 2021 Consolidated Appropriations Act (“CAA”) was signed into the law. The CAA included $284 billion in new PPP funding, and the Company is assisting its customers in applying for such funding. Through February 28, 2021, the Company originated new PPP loans under the CAA with a balance of $23.2 million, net of $922 thousand of unearned fees and costs.

‎

Embassy Bancorp, Inc.

In April 2020, the Company applied and was approved by the Federal Reserve Board for both the ability to borrow under its PPPLF, as well as its Discount Window. The PPPLF provides term funding to depository institutions that originate loans to small businesses under the PPP. PPP loans that are pledged to secure PPPLF extensions of credit are excluded from leverage ratio calculations. The components of long-term borrowings with the PPPLF at December 31, 2020 were as follows:


	December 31, 2020
	(Dollars in Thousands)
Maturity Date	Interest Rate		Outstanding
April 2022	0.35%	$	32,240
May 2022	0.35%		18,554
Total PPPLF Outstanding Borrowings		$	50,794

As of February 3, 2021, the PPPLF borrowings have been paid off in full. The Company is approved to borrow under the PPPLF through June 30, 2021.

The Company’s allowance for loan losses increased $2.5 million to $10.6 million at December 31, 2020 from $8.0 million at December 31, 2019. At December 31, 2020 and December 31, 2019, the allowance for loan losses represented 0.97% and 0.79%, respectively, of total loans (not including PPP loans which are guaranteed by the SBA). In 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans. In determining its allowance for loan loss level for the year ending December 31, 2020, the Bank considered the health and composition of its loan portfolio going into and during the COVID-19 pandemic. At December 31, 2020, approximately 94% of the Bank’s loan portfolio is collateralized by real estate. Less than 6% of the Bank’s loan portfolio is to borrowers in the more particularly hard-hit industries (including the travel and hotel industry, the full-service and limited-service restaurant industries, and the assisted living facilities industry) and the Bank has no direct international exposure. The Bank was not required to adopt the Current Expected Credit Losses (“CECL”) FASB accounting standard in 2020, as this guidance will not be effective for the Bank until 2023. Based upon current economic conditions, the composition of the loan portfolio, the perceived credit risk in the portfolio and loan-loss experience of the Bank and comparable institutions in the Bank’s market area, management feels the allowance is adequate to absorb reasonably anticipated losses.

In response to the COVID-19 outbreak, the Federal Reserve Board in mid-March 2020 has reduced by 150 basis points the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 year and 30 year Treasury notes have declined to historic lows. As a result of the decline in the Federal Reserve Board’s target federal funds rate and yields on Treasury notes, the Company’s future net interest margin and spread may be further reduced.

All loans that have the CARES Act Section 4013 modification, regardless of whether original contractual payment terms have resumed, are provided additional qualitative reserve in the Company’s allowance for loan loss calculation. None of the loans that remain in payment accommodation status at December 31, 2020 are considered impaired by Management at December 31, 2020 as, at this time, Management does not feel it probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement.

‎

Embassy Bancorp, Inc.

Note 3 – Securities Available For Sale

The amortized cost and approximate fair values of securities available-for-sale were as follows at December 31, 2020 and 2019, respectively:



			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In Thousands)
December 31, 2020:
U.S. Treasury securities	$	9,998	$	-	$	-	$	9,998
U.S. Government agency obligations		39,059		1		(24)		39,036
Municipal bonds		37,409		1,967		-		39,376
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - commercial		512		31		-		543
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		40,244		1,743		-		41,987
Total	$	127,222	$	3,742	$	(24)	$	130,940

December 31, 2019:
Municipal bonds	$	25,586	$	863	$	(5)	$	26,444
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		63,546		877		(38)		64,385
Total	$	89,132	$	1,740	$	(43)	$	90,829

The amortized cost and fair value of securities as of December 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without any penalties.



		Amortized		Fair
		Cost		Value

	(In Thousands)
Due in one year or less	$	20,615	$	20,618
Due after one year through five years		30,833		30,818
Due after five years through ten years		6,887		7,157
Due after ten years		28,131		29,817
		86,466		88,410
U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - commercial		512		543
U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential		40,244		41,987
	$	127,222	$	130,940

Gross gains of $128 thousand were realized on the sales of securities for the year ended December 31, 2020. There were no gross losses on the sales of securities for the year ended December 31, 2020. There were no sales of securities for the year ended December 31, 2019.

‎

Embassy Bancorp, Inc.

The following table shows the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020 and December 31, 2019, respectively:



		Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

December 31, 2020 :	(In Thousands)
U.S. Government agency obligations	$	31,369	$	(24)	$	-	$	-	$	31,369	$	(24)
Total Temporarily Impaired Securities	$	31,369	$	(24)	$	-	$	-	$	31,369	$	(24)

December 31, 2019 :
Municipal bonds	$	1,295	$	(5)	$	-	$	-	$	1,295	$	(5)
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		4,701		(1)		8,528		(37)		13,229		(38)
Total Temporarily Impaired Securities	$	5,996	$	(6)	$	8,528	$	(37)	$	14,524	$	(43)

The Company had five (5) securities in an unrealized loss position at December 31, 2020 and five (5) securities in an unrealized loss position at December 31, 2019. Unrealized losses are due only to market interest rate fluctuations. As of December 31, 2020, the Company either has the intent and ability to hold the securities until maturity or market price recovery or believes that it is more likely than not that it will not be required to sell such securities. Management believes that the unrealized loss only represents temporary impairment of the securities. None of the individual losses are significant.

Securities with a carrying value of $98.7 million and $74.0 million at December 31, 2020 and December 31, 2019, respectively, were subject to agreements to repurchase, pledged to secure public deposits, or pledged for other purposes required or permitted by law.

Note 4 – Loans Receivable and Credit Quality

On May 1, 2020, the Company sold its entire $689 thousand commercial credit card loan portfolio to an unrelated third party for a gain of $59 thousand. These loans were classified as held for sale at March 31, 2020 prior to the May 1, 2020 sale.

The Company has presented PPP loans of $54.3 million separately from loans receivable on the Consolidated Balance Sheet. As described in Note 2, PPP loans are 100% SBA guaranteed and the Company has determined that no allowance for loan losses is required on PPP loans. All PPP loans are risk rated as pass and considered current for payment status purpose. PPP loans are not included in the following composition and credit quality tables.

‎

Embassy Bancorp, Inc.

The following table presents the composition of loans receivable (not including PPP loans):



	December 31,
	2020		2019

	(In Thousands)

Commercial real estate	$	452,251	$	427,987
Commercial construction		12,176		12,622
Commercial		48,114		53,747
Residential real estate		576,437		518,150
Consumer		640		820

Total Loans		1,089,618		1,013,326

Unearned net loan origination costs		291		813
Allowance for Loan Losses		(10,570)		(8,022)

Net Loans	$	1,079,339	$	1,006,117

The following table summarizes information in regard to the allowance for loan losses (not including PPP loans) as of December 31, 2020 and 2019, respectively:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

	(In Thousands)
Allowance for loan losses
Year Ending December 31, 2020
Beginning Balance - December 31, 2019	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022
Charge-offs		-		-		-		-		-		-		-
Recoveries		24		-		-		4		-		-		28
Provisions		1,134		29		78		993		(5)		291		2,520
Ending Balance - December 31, 2020	$	4,379	$	150	$	848	$	4,485	$	14	$	694	$	10,570

Year Ending December 31, 2019
Beginning Balance - December 31, 2018	$	3,248	$	94	$	574	$	3,179	$	19	$	298	$	7,412
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		4		1		-		-		5
Provisions		(27)		27		192		308		-		105		605
Ending Balance - December 31, 2019	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022

‎

Embassy Bancorp, Inc.

The following tables represent the allocation of the allowance for loan losses and the related loan portfolio, (not including PPP loans), disaggregated based on impairment methodology at December 31, 2020 and December 31, 2019, respectively:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

	(In Thousands)
December 31, 2020
Allowance for Loan Losses
Ending Balance	$	4,379	$	150	$	848	$	4,485	$	14	$	694	$	10,570
Ending balance: individually evaluated for impairment	$	21	$	-	$	23	$	125	$	-	$	-	$	169
Ending balance: collectively evaluated for impairment	$	4,358	$	150	$	825	$	4,360	$	14	$	694	$	10,401

Loans receivables:
Ending balance	$	452,251	$	12,176	$	48,114	$	576,437	$	640			$	1,089,618
Ending balance: individually evaluated for impairment	$	1,547	$	315	$	230	$	1,548	$	-			$	3,640
Ending balance: collectively evaluated for impairment	$	450,704	$	11,861	$	47,884	$	574,889	$	640			$	1,085,978

December 31, 2019
Allowance for Loan Losses
Ending Balance	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022
Ending balance: individually evaluated for impairment	$	-	$	-	$	27	$	175	$	-	$	-	$	202
Ending balance: collectively evaluated for impairment	$	3,221	$	121	$	743	$	3,313	$	19	$	403	$	7,820

Loans receivables:
Ending balance	$	427,987	$	12,622	$	53,747	$	518,150	$	820			$	1,013,326
Ending balance: individually evaluated for impairment	$	1,626	$	315	$	234	$	1,346	$	-			$	3,521
Ending balance: collectively evaluated for impairment	$	426,361	$	12,307	$	53,513	$	516,804	$	820			$	1,009,805

‎

Embassy Bancorp, Inc.

The following table summarizes information in regard to impaired loans (not including PPP loans) by loan portfolio class as of December 31, 2020 and 2019, respectively:


							Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2020		(In Thousands)
With no related allowance recorded:
Commercial real estate	$	851	$	1,091			$	870	$	49
Commercial construction		315		315				315		10
Commercial		-		-				-		-
Residential real estate		944		1,014				873		32
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	696	$	696	$	21	$	699	$	21
Commercial construction		-		-		-		-		-
Commercial		230		230		23		232		9
Residential real estate		604		604		125		614		22
Consumer		-		-		-		1		-
Total:
Commercial real estate	$	1,547	$	1,787	$	21	$	1,569	$	70
Commercial construction		315		315		-		315		10
Commercial		230		230		23		232		9
Residential real estate		1,548		1,618		125		1,487		54
Consumer		-		-		-		1		-
	$	3,640	$	3,950	$	169	$	3,604	$	143
December 31, 2019
With no related allowance recorded:
Commercial real estate	$	1,626	$	1,890			$	1,686	$	86
Commercial construction		315		315				315		11
Commercial		-		-				-		-
Residential real estate		530		786				640		14
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Commercial construction		-		-		-		-		-
Commercial		234		234		27		236		10
Residential real estate		816		816		175		828		30
Consumer		-		-		-		-		-
Total:
Commercial real estate	$	1,626	$	1,890	$	-	$	1,686	$	86
Commercial construction		315		315		-		315		11
Commercial		234		234		27		236		10
Residential real estate		1,346		1,602		175		1,468		44
Consumer		-		-		-		-		-
	$	3,521	$	4,041	$	202	$	3,705	$	151

‎

Embassy Bancorp, Inc.

The following table presents the classes of the loan portfolio (not including PPP loans), summarized by the aggregate pass rating and the classified ratings of special mention (potential weaknesses), substandard (well defined weaknesses) and doubtful (full collection unlikely) within the Company's internal risk rating system as of December 31, 2020 and December 31, 2019, respectively:



	Pass		Special Mention		Substandard		Doubtful		Total

December 31, 2020		(In Thousands)
Commercial real estate	$	450,823	$	-	$	1,428	$	-	$	452,251
Commercial construction		11,861		-		315		-		12,176
Commercial		48,114		-		-		-		48,114
Residential real estate		575,344		512		581		-		576,437
Consumer		640		-		-		-		640
Total	$	1,086,782	$	512	$	2,324	$	-	$	1,089,618

December 31, 2019
Commercial real estate	$	426,526	$	-	$	1,461	$	-	$	427,987
Commercial construction		12,307		-		315		-		12,622
Commercial		53,656		91		-		-		53,747
Residential real estate		517,281		719		150		-		518,150
Consumer		820		-		-		-		820
Total	$	1,010,590	$	810	$	1,926	$	-	$	1,013,326

The following table presents nonaccrual loans by classes of the loan portfolio:



	December 31,

	2020		2019

	(In Thousands)
Commercial real estate	$	-	$	-
Commercial construction		-		-
Commercial		-		-
Residential real estate		274		18
Consumer		-		-
Total	$	274	$	18

‎

Embassy Bancorp, Inc.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Loans performing under a CARES Act modification are considered current for payment status. The following table presents the classes of the loan portfolio (not including PPP loans) summarized by the past due status as of December 31, 2020 and 2019, respectively:



	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loan ‎Receivables		Loan Receivables > 90 Days and Accruing

December 31, 2020	(In Thousands)
Commercial real estate	$	514	$	-	$	-	$	514	$	451,737	$	452,251	$	-
Commercial construction		-		-		-		-		12,176		12,176		-
Commercial		-		-		-		-		48,114		48,114		-
Residential real estate		336		-		42		378		576,059		576,437		-
Consumer		2		-		-		2		638		640		-
Total	$	852	$	-	$	42	$	894	$	1,088,724	$	1,089,618	$	-

December 31, 2019
Commercial real estate	$	-	$	-	$	-	$	-	$	427,987	$	427,987	$	-
Commercial construction		-		-		-		-		12,622		12,622		-
Commercial		-		-		-		-		53,747		53,747		-
Residential real estate		951		-		-		951		517,199		518,150		-
Consumer		-		-		-		-		820		820		-
Total	$	951	$	-	$	-	$	951	$	1,012,375	$	1,013,326	$	-

Troubled Debt Restructurings

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider, resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions to maturity, interest only payments, or payment modifications to better coincide the timing of payments due under the modified terms with the expected timing of cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company’s allowance for loan losses. Payment accommodations completed since the COVID-19 outbreak reported in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus are described in Note 2 and are not considered a TDR.

The Company identifies loans for potential restructure primarily through direct communication with the borrower and the evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

‎

Embassy Bancorp, Inc.

The following table presents TDRs outstanding at December 31, 2020 and 2019, respectively:



	Accrual Loans		Non-Accrual Loans		Total Modifications

	(In Thousands)
December 31, 2020
Commercial real estate	$	1,125	$	-	$	1,125
Commercial construction		260		-		260
Commercial		230		-		230
Residential real estate		944		15		959
Consumer		-		-		-
Total	$	2,559	$	15	$	2,574

December 31, 2019
Commercial real estate	$	1,188	$	-	$	1,188
Commercial construction		260		-		260
Commercial		233		-		233
Residential real estate		982		18		1,000
Consumer		-		-		-
Total	$	2,663	$	18	$	2,681

There were no new TDRs during the year ended December 31, 2020 and December 31, 2019.

As December 31, 2020 and 2019, no available commitments were outstanding on TDRs.

There were no loans that were modified and classified as a TDR within the prior twelve months that experienced a payment default (loans ninety or more days past due) during the years ended December 31, 2020 and December 31, 2019.

Note 5 - Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

‎

Embassy Bancorp, Inc.

The following financial instruments were outstanding whose contract amounts represent credit risk:



	December 31,
	2020		2019

	(In Thousands)

Commitments to grant loans, fixed	$	5,080	$	14,574
Commitments to grant loans, variable		75		1,450
Unfunded commitments under lines of credit, fixed		6,833		16,967
Unfunded commitments under lines of credit, variable		123,430		106,491
Standby letters of credit		5,412		2,889

Total	$	140,830	$	142,371

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation.

Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Outstanding letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Company requires collateral supporting these letters of credit as deemed necessary. The maximum undiscounted exposure related to these commitments at December 31, 2020 and 2019 was $5.4 million and $2.9 million, respectively, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $3.4 million and $1.8 million, respectively. The current amount of the liability as of December 31, 2020 and 2019 for guarantees under standby letters of credit issued is not considered material.

FHLB deposit letters of credit are standby letters of credit commitments issued by the Bank for the benefit of a third party, which secure public deposits in the Bank. FHLB deposit letters of credit are secured by qualifying assets of the Bank. The Company, through the Bank, had no FHLB deposit letters of credit outstanding as of December 31, 2020 and $7.6 million of FHLB deposit letters of credit outstanding as of December 31, 2019.

‎

Embassy Bancorp, Inc.

Note 6 - Bank Premises and Equipment

The components of premises and equipment are as follows:


	December 31,
	2020		2019

	(In Thousands)

Furniture, fixtures, and equipment	$	3,902	$	3,396
Leasehold improvements		3,419		3,268
Buildings		1,141		-
Computer equipment and data processing software		4,083		3,771
Automobiles		272		272
Construction in progress		-		127

		12,817		10,834
Accumulated depreciation		(9,471)		(8,711)

	$	3,346	$	2,123

The $1.2 million increase in premises and equipment is primarily due to the opening of the permanent branch in the Borough of Macungie in November of 2020.

Note 7 – Deposits

The components of deposits:



	December 31,
	2020		2019

	(In Thousands)

Demand, non-interest bearing	$	269,996	$	171,815
Demand, NOW and money market, interest bearing		199,845		180,869
Savings		546,784		425,284
Time, $250 and over		85,272		92,517
Time, other		130,482		161,483
Total deposits	$	1,232,379	$	1,031,968

At December 31, 2020, the scheduled maturities of time deposits are as follows (in thousands):



2021	$	150,966
2022		29,095
2023		29,983
2024		4,436
2025		1,274

	$	215,754

Embassy Bancorp, Inc.

Note 8 - Securities Sold under Agreements to Repurchase and Offsetting Assets and Liabilities

Securities sold under agreements to repurchase generally mature within a few days from the transaction date and are reflected at the amount of cash received in connection with the transaction. The securities are retained under the Company’s control at its safekeeping agent. The Company adjusts collateral based on the fair value of the underlying securities, on a monthly basis. Information concerning securities sold under agreements to repurchase is summarized as follows:



	2020			2019

	(Dollars In Thousands)

Balance outstanding at December 31	$	13,612		$	7,208
Weighted average interest rate at the end of the year		0.058	%		0.588	%
Average daily balance during the year	$	11,027		$	10,870
Weighted average interest rate during the year		0.159	%		0.676	%
Maximum month-end balance during the year	$	14,430		$	17,570

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company's consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Company does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.

The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., fails to make an interest payment to the counterparty). For private institution repurchase agreements, if the private institution counterparty were to default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest), and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third-party financial institution in the counterparty's custodial account. The counterparty has the right to sell or repledge the investment securities. For government entity repurchase agreements, the collateral is held by the Company in a segregated custodial account under a tri-party agreement.

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of December 31, 2020 and December 31, 2019:



						Net Amounts
		Gross		Gross Amounts		of Liabilities
		Amounts of		Offset in the		Presented in the
		Recognized		Consolidated		Consolidated		Financial		Cash Collateral
		Liabilities		Balance Sheet		Balance Sheet		Instruments		Pledged		Net Amount

		(In Thousands)
December 31, 2020
Repurchase Agreements:
Corporate Institutions	$	13,612	$	-	$	13,612	$	(13,612)	$	-	$	-

December 31, 2019
Repurchase Agreements:
Corporate Institutions	$	7,208	$	-	$	7,208	$	(7,208)	$	-	$	-

Embassy Bancorp, Inc.

As of December 31, 2020 and December 31, 2019, the fair value of securities pledged was $17.5 million and $10.1 million, respectively.

Note 9 – Short-term and Long-term Borrowings

Federal funds purchased and FHLB short term advances generally represent overnight or less than twelve month borrowings. Long term advances from the FHLB are for periods of twelve months or more and are generally less than sixty months. The Bank has an agreement with the FHLB, which allows for borrowings up to a percentage of qualifying assets. At December 31, 2020, the Bank had a maximum borrowing capacity for short-term and long-term advances of approximately $682.6 million. This borrowing capacity with the FHLB includes a line of credit of $150.0 million. There were no short-term FHLB advances outstanding as of December 31, 2020 and $18.1 million in short-term FHLB advances outstanding as of December 31, 2019. There were $14.7 million in long-term FHLB advances outstanding as of December 31, 2020 and none outstanding at December 31, 2019. All FHLB borrowings are secured by qualifying assets of the Bank.

The components of long-term borrowings with the FHLB at December 31, 2020 were as follows:


		2020

	(Dollars in Thousands)

Maturity Date		Interest ‎Rate		Outstanding

March 2022		0.79%	$	10,000
March 2022		0.64%		2,663
March 2022		0.61%		1,988
Total Outstanding Borrowings			$	14,651

The Bank also has a federal funds line of credit with the ACBB of $10.0 million, of which none was outstanding at December 31, 2020 and December 31, 2019. Advances from this line are unsecured.

As described in Note 2, the Bank participated in the PPPLF program and has long-term PPPLF borrowings through the Federal Reserve Bank of Philadelphia of $50.8 million, at an interest rate of 0.35%, as of December 31, 2020. All PPPLF borrowings are secured by PPP loans. As of February 3, 2021, the PPPLF borrowings have been paid off in full.

Note 10 - Employment Agreements and Supplemental Executive Retirement Plans

The Company has entered into employment agreements with its Chief Executive Officer, Chief Financial Officer and Senior Loan Officer.

The Company has an unfunded, non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain executive officers that provides for payments upon retirement, death, or disability. As of December 31, 2020 and 2019, other liabilities include $6.0 million and $5.3 million, respectively, accrued under these plans. For the years ended December 31, 2020 and 2019, $712 thousand and $463 thousand, respectively, were expensed under these plans.

Note 11 - Stock Incentive Plan and Employee Stock Purchase Plan

Stock Incentive Plan:

At the Company’s annual meeting on June 20, 2019, the shareholders approved the amendment and restatement of the Embassy Bancorp, Inc. 2010 Stock Incentive Plan (the “SIP”), which was originally adopted by the Company’s shareholders effective June 16, 2010, to replenish the number of shares of common stock available for issuance under

Embassy Bancorp, Inc.

the SIP and extend the term of the SIP for another ten (10) years. The SIP authorizes the Board of Directors, or a committee authorized by the Board of Directors, to award a stock based incentive to (i) designated officers (including officers who are directors) and other designated employees at the Company and its subsidiaries, and (ii) non-employee members of the Board of Directors and advisors and consultants to the Company and its subsidiaries. The SIP provides for stock based incentives in the form of incentive stock options as provided in Section 422 of the Internal Revenue Code of 1986, non-qualified stock options, stock appreciation rights, restricted stock, and deferred stock awards. The term of the option, the amount of time for the option to vest after grant, if any, and other terms and limitations will be determined at the time of grant. Options granted under the SIP may not have an exercise period that is more than ten years from the time the option is granted. The maximum number of shares of common stock authorized for issuance under the SIP increased from 500,000 to 756,356 (in order to replenish the shares that were previously issued). The SIP provides for appropriate adjustments in the number and kind of shares available for grant or subject to outstanding awards under the SIP to avoid dilution in the event of merger, stock splits, stock dividends or other changes in the capitalization of the Company. The SIP expires on June 20, 2029. At December 31, 2020, there were 452,814 shares available for issuance under the SIP.

The Company grants shares of restricted stock, under the SIP, to certain members of its Board of Directors as compensation for their services, in accordance with the Company’s Non-employee Directors Compensation program adopted in October 2010. The Company also granted restricted stock to certain officers under individual agreements with these officers. Some of these restricted stock awards vest immediately, while the remainder vest over a service period of three years to nine years. Management recognizes compensation expense for the fair value of the restricted stock awards on a straight-line basis over the requisite service period. Since inception of the plan and through the Company’s restricted stock grants activity for the year ended December 31, 2020, there have been 187,299 awards granted. During the years ended December 31, 2020 and 2019 there were 47,186 and 10,799 awards granted, respectively. During the years ended December 31, 2020 and 2019 the Company recognized $286 thousand and $363 thousand in compensation expense for the restricted stock awards.

Information regarding the Company’s restricted stock grants activity for the years ended December 31, 2020 and 2019 are as follows:


	Restricted Stock Awards		Weighted Average Grant Date Fair Value

Non-Vested at December 31, 2018	49,460	$	13.78
Granted	10,799		14.92
Vested	(25,005)		14.49

Non-Vested at December 31, 2019	35,254	$	13.63
Granted	47,186		12.45
Vested	(20,656)		12.82

Non-Vested at December 31, 2020	61,784	$	13.13

The Company has granted stock options to purchase shares of stock to certain executive officers under individual agreements and/or in accordance with their respective employment agreements. There was no stock compensation expense related to these options for the year ended December 31, 2020 and $4 thousand for the year ended December 31, 2019, respectively. At December 31, 2020, there was no unrecognized cost to the stock options.

‎

Embassy Bancorp, Inc.

Activities under the SIP, related to stock options, is summarized as follows:


	Number of ‎Options		Weighted ‎Average Exercise Price

Outstanding, December 31, 2018	116,243	$	7.34
Granted	-		-
Exercised	-		-
Forfeited	-		-

Outstanding, December 31, 2019	116,243	$	7.34
Granted	-		-
Exercised	(52,611)		7.00
Forfeited	-		-

Outstanding, December 31, 2020	63,632	$	7.61

Exercisable, December 31, 2020	63,632	$	7.61

Stock options outstanding at December 31, 2020 are exercisable at prices ranging from $6.60 to $13.21 per share. The weighted-average remaining contractual life of options outstanding and exercisable at December 31, 2020 is 1.82 years. The weighted-average remaining contractual life of options outstanding and exercisable at December 31, 2019 was 2.06 years, respectively. At December 31, 2020, the aggregate intrinsic value of options outstanding and exercisable was $445 thousand. The intrinsic value was determined by using the latest known sales price of the Company’s common stock.

The following table summarizes information about the range of exercise prices for stock options outstanding at December 31, 2020:


Range of Exercise ‎Price	Weighted ‎Average ‎Exercise Price		Number ‎Outstanding	Weighted Average Remaining Contractual Life (Years)	Number ‎Exercisable

$6.60 to $8.26	$	7.25	59,405	1.60	59,405
$11.56 to $13.21	$	12.64	4,227	4.97	4,227

			63,632	1.82	63,632

Employee Stock Purchase Plan:

On January 1, 2017, the Company implemented the Embassy Bancorp, Inc. Employee Stock Purchase Plan, which was approved by the Company’s shareholders at the annual meeting held on June 16, 2016. Under the plan, each employee of the Company and its subsidiaries who is employed on an offering date and customarily is scheduled to work at least twenty (20) hours per week and more than five (5) months in a calendar year is eligible to participate. The purchase price for shares purchased under the plan shall initially equal 95% of the fair market value of such shares on the date of purchase. The purchase price may be adjusted from time to time by the Board of Directors; provided, however, that the discount to fair market value shall not exceed 15%. The Company has authorized 350,000 shares of its common stock for the plan, of which 15,261 shares have been issued as of December 31, 2020. The Company recognized discount expense in relation to the employee stock purchase plan of $3 thousand during the years ending December 31, 2020 and 2019.

Embassy Bancorp, Inc.

Note 12 – Other Comprehensive Income

The components of other comprehensive income, both before tax and net of tax, are as follows:


	Year Ended December 31,
	2020						2019

	(In Thousands)

	Before		Tax		Net of		Before		Tax		Net of
	Tax		Effect		Tax		Tax		Effect		Tax
Change in accumulated other comprehensive income:
Unrealized holding gains on securities ‎ available for sale	$	2,149	$	(451)	$	1,698	$	3,275	$	(688)	$	2,587
Reclassification adjustments for gains on securities ‎ transactions included in net income (A), (B)		(128)		27		(101)		-		-		-
Total other comprehensive income	$	2,021	$	(424)	$	1,597	$	3,275	$	(688)	$	2,587

(A) Realized gains on securities transactions included in gain on sales of securities in the accompanying Consolidated Statements of Income.
(B) Tax effect included in income tax expense in the accompanying Consolidated Statements of Income.

A summary of the realized gains on securities available for sale for the years ended December 31, 2020 and 2019, net of tax, is as follows:


	Year Ended December 31,
		2020		2019

		(In Thousands)
Securities available for sale:
Realized gains on securities transactions	$	(128)	$	-
Income taxes		27		-
Net of tax	$	(101)	$	-

A summary of the accumulated other comprehensive income, net of tax, is as follows:


	Securities
	Available
	for Sale

	(In Thousands)
Year Ended December 31, 2020 and 2019
Balance January 1, 2020	$	1,340
Other comprehensive income before reclassifications		1,698
Amounts reclassified from accumulated other ‎ comprehensive income		(101)
Net other comprehensive income during the period		1,597
Balance December 31, 2020	$	2,937

Balance January 1, 2019	$	(1,247)
Other comprehensive income before reclassifications		2,587
Amounts reclassified from accumulated other ‎ comprehensive income		-
Net other comprehensive income during the period		2,587
Balance December 31, 2019	$	1,340

Note 13 - Regulatory Matters

The Company is required to maintain cash reserve balances in vault cash and with the Federal Reserve Bank. As of December 31, 2020, due to the reserve requirement ratios being set at 0% effective March 26, 2020, the Company had no minimum reserve requirement. The minimum reserve requirement at December 31, 2019 was $15.6 million.

Embassy Bancorp, Inc.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Under the BASEL III rules the Company and the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios. The net unrealized gain or losses on available-for-sale securities are not included in computing regulatory capital amounts. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth below) of total, Tier 1 common capital, and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2020, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Effective in 2018, the Federal Reserve raised the consolidated asset limit to be considered a small bank holding company from $1 billion to $3 billion. A company that qualifies as a small bank holding company is not subject to the Federal Reserve’s consolidated capital rules, although a company that so qualifies may continue to file reports that include such capital amounts and ratios. The Company has elected to continue to report those amounts and ratios.

As of December 31, 2020, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios at December 31, 2020 and 2019 are presented below:


	Actual				For Capital Adequacy ‎Purposes						To be Well Capitalized under ‎Prompt Corrective Action ‎Provisions
	Amount		Ratio		Amount			Ratio			Amount			Ratio

	(Dollar Amounts in Thousands)

December 31, 2020:
Total capital (to risk-weighted assets)	$	119,583	13.1	%	$	≥	73,119	≥	8.0	%	$	≥	91,399	≥	10.0	%
Tier 1 common capital (to risk-weighted assets)		109,013	11.9			≥	41,130	≥	4.5			≥	59,409	≥	6.5
Tier 1 capital (to risk-weighted assets)		109,013	11.9			≥	54,839	≥	6.0			≥	73,119	≥	8.0
Tier 1 capital (to average assets)		109,013	8.1			≥	53,721	≥	4.0			≥	67,152	≥	5.0

December 31, 2019:
Total capital (to risk-weighted assets)	$	106,252	13.0	%	$	≥	65,584	≥	8.0	%	$	≥	81,980	≥	10.0	%
Tier 1 common capital (to risk-weighted assets)		98,230	12.0			≥	36,891	≥	4.5			≥	53,287	≥	6.5
Tier 1 capital (to risk-weighted assets)		98,230	12.0			≥	49,188	≥	6.0			≥	65,584	≥	8.0
Tier 1 capital (to average assets)		98,230	8.4			≥	46,674	≥	4.0			≥	58,343	≥	5.0

‎

Embassy Bancorp, Inc.

The Company’s actual capital amounts and ratios at December 31, 2020 and 2019 are presented below:


	Actual				For Capital Adequacy ‎Purposes
	Amount		Ratio		Amount			Ratio

	(Dollar Amounts in Thousands)

December 31, 2020:
Total capital (to risk-weighted assets)	$	119,807	13.1	%	$	≥	73,122	≥	8.0	%
Tier 1 common capital (to risk-weighted assets)		109,237	12.0			≥	41,131	≥	4.5
Tier 1 capital (to risk-weighted assets)		109,237	12.0			≥	54,841	≥	6.0
Tier 1 capital (to average assets)		109,237	8.1			≥	53,722	≥	4.0

December 31, 2019:
Total capital (to risk-weighted assets)	$	106,297	13.0	%	$	≥	65,568	≥	8.0	%
Tier 1 common capital (to risk-weighted assets)		98,275	12.0			≥	36,882	≥	4.5
Tier 1 capital (to risk-weighted assets)		98,275	12.0			≥	49,176	≥	6.0
Tier 1 capital (to average assets)		98,275	8.4			≥	46,675	≥	4.0

The Bank is subject to certain restrictions on the amount of dividends that it may declare due to regulatory considerations. The Pennsylvania Banking Code provides that cash dividends may be declared and paid only out of accumulated net earnings.

Note 14 - Fair Value of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

Embassy Bancorp, Inc.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy utilized at December 31, 2020 and 2019 are as follows:



Description	(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total

		(In Thousands)
U.S. Treasury securities	$	-	$	9,998	$	-	$	9,998
U.S. Government agency obligations		-		39,036		-		39,036
Municipal bonds		-		39,376		-		39,376
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - commercial		-		543		-		543
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		41,987		-		41,987
December 31, 2020 Securities available for sale	$	-	$	130,940	$	-	$	130,940

Municipal bonds	$	-	$	26,444	$	-	$	26,444
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		64,385		-		64,385
December 31, 2019 Securities available for sale	$	-	$	90,829	$	-	$	90,829

The fair value of securities available for sale are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2020 and 2019 are as follows:


Description	(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total

		(In Thousands)
December 31, 2020 Impaired loans	$	-	$	-	$	1,361	$	1,361
December 31, 2019 Impaired loans	$	-	$	-	$	848	$	848

Impaired loans are those that are accounted for under existing FASB guidance, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. Fair values may also include qualitative adjustments by management based on economic conditions and liquidation expenses. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Embassy Bancorp, Inc.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets would be included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement. At both December 31, 2020 and December 31, 2019, the Company had no real estate properties acquired through, or in lieu of, foreclosure.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:


		Quantitative Information about Level 3 Fair Value Measurements
Description		Fair Value ‎Estimate		Valuation Techniques	Unobservable Input	Range ‎(Weighted Average)

			(Dollars In Thousands)
December 31, 2020:
Impaired loans		$	1,361	Appraisal of collateral	Appraisal adjustments (1)	0% to -25% (-15.1%)
					Liquidation expenses (2)	0% to -10.0% (-8.5%)
December 31, 2019:
Impaired loans		$	848	Appraisal of collateral	Appraisal adjustments (1)	0% to -25% (-25.0%)
					Liquidation expenses (2)	0% to -7.5% (-7.5%)

(1)	Appraisals may be adjusted by management for qualitative factors including economic conditions and the age of the appraisal.
	The range and weighted average of appraisal adjustments are presented as a percent of the appraisal.
(2)	Appraisals and pending agreements of sale are adjusted by management for liquidation expenses. The range and weighted average
	of liquidation expense adjustments are presented as a percent of the appraisal or pending agreement of sale.

‎

Embassy Bancorp, Inc.

The estimated fair values of the Company’s financial instruments were as follows at December 31, 2020 and 2019:



		Carrying Amount		Fair Value Estimate		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs

	(In Thousands)
December 31, 2020:
Financial assets:
Cash and cash equivalents	$	131,907	$	131,907	$	131,907	$	-	$	-
Securities available-for-sale		130,940		130,940		-		130,940		-
Loans receivable, net of allowance		1,079,339		1,158,545		-		-		1,158,545
Paycheck Protection Program loans receivable		54,334		54,632		-		-		54,632
Restricted investments in bank stock		1,330		1,330		-		1,330		-
Accrued interest receivable		3,136		3,136		-		3,136		-
Financial liabilities:
Deposits		1,232,379		1,235,483		-		1,235,483		-
Securities sold under agreements to
repurchase and federal funds purchased		13,612		13,612		-		13,612		-
Long-term borrowings		14,651		14,707		-		-		14,707
Paycheck Protection Program
Liquidity Facility		50,794		50,810		-		-		50,810
Accrued interest payable		1,640		1,640		-		1,640		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

December 31, 2019:
Financial assets:
Cash and cash equivalents	$	39,986	$	39,986	$	39,986	$	-	$	-
Securities available-for-sale		90,829		90,829		-		90,829		-
Loans receivable, net of allowance		1,006,117		1,013,093		-		-		1,013,093
Restricted investments in bank stock		1,478		1,478		-		1,478		-
Accrued interest receivable		2,048		2,048		-		2,048		-
Financial liabilities:
Deposits		1,031,968		1,033,786		-		1,033,786		-
Securities sold under agreements to
repurchase and federal funds purchased		7,208		7,208		-		7,208		-
Short-term borrowings		18,067		18,067		-		18,067		-
Accrued interest payable		3,281		3,281		-		3,281		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

Note 15 - Transactions with Executive Officers, Directors and Principal Stockholders

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families, and affiliated companies (commonly referred to as related parties).

Embassy Bancorp, Inc.

Related parties were indebted to the Company for loans totaling $16.2 million and $10.2 million at December 31, 2020 and 2019, respectively. During 2020, loans totaling $9.7 million were disbursed and loan repayments totaled $3.7 million.

Deposits with related parties were $18.4 million and $15.7 million at December 31, 2020 and 2019, respectively.

Fees paid to related parties for legal services for the years ended December 31, 2020 and 2019 were approximately $29 thousand and $43 thousand, respectively. The Company leases its main banking office from an investment group comprised of related parties and its West Broad Street office also from a related party, as disclosed in Note 16.

Note 16 - Lease Commitments

The Company’s leases are all classified as operating leases, with one lease being short term. Currently, many of these leases contain renewal options. The Company has reviewed and based the right of use assets and lease liabilities on the present value of unpaid future minimum lease payments. Additionally, the amounts for the branch leases were impacted by assumptions around renewals and/or extensions and the interest rate used to discount those future lease obligations. The Company used the FHLB advance rates to calculate the discount rate in their review because none of the Company’s leases provided an implicit rate. The weighted average discount rate for all operating leases was 3.00%, with branch leases having a weighted average discount rate of 3.04% and equipment leases having a weighted average discount rate of 1.20%. These leases expire at various dates through October 2030. All operating equipment leases do not have renewal language in their contracts and therefore use the current term. As of December 31, 2020, the operating leases overall had a weighted average lease term of 6.11 years, with the branch leases having a weighted average life of 6.16 years and equipment leases having a weighted average life of 4.10 years.

At December 31, 2020, the Company had right of use assets of $9.0 million (included in other assets) and lease liabilities of $9.2 million (included in other liabilities) and at December 31, 2019, the Company had right of use assets of $9.6 million (included in other assets) and lease liabilities of $9.7 million (included in other liabilities), respectively. The cost for operating leases was $1.7 million, including short-term lease cost of $18 thousand, for the year ended December 31, 2020 and the cost of operating leases was $1.7 million, including short-term lease cost of $3 thousand, for the year ended December 31, 2019, respectively. Operating cash flow paid for lease liabilities was $1.6 million for the year ended December 31, 2020 and December 31, 2019, respectively.

In addition to fixed rentals, the leases require the Company to pay certain additional expenses of occupying these spaces, including real estate taxes, insurance, utilities, and repairs. These additional expenses, along with depreciation on leasehold improvements, are included in occupancy and equipment expense in the Consolidated Statements of Income. A portion of these leases are with related parties as noted in the following table.

A reconciliation of operating lease liabilities by minimum lease payments by year and in aggregate and discount amounts in aggregate, as of December 31, 2020, are as follows:


	Branch Leases				Equipment
	Third Parties		Related Parties		Leases		Total
	(In Thousands)
2021	$	1,032	$	647	$	58	$	1,737
2022		1,062		660		53		1,775
2023		1,079		673		40		1,792
2024		933		685		38		1,656
2025		588		698		21		1,307
Thereafter		1,131		726		-		1,857
Total Payments		5,825		4,089		210		10,124
Less: Discount Amount		500		393		4		897
Total Lease Liability	$	5,325	$	3,696	$	206	$	9,227

Embassy Bancorp, Inc.

Rent expense to related parties was $661 thousand for the years ended December 31, 2020 and 2019, respectively, as described in Note 15.

Effective January 1, 2021 the Company entered into a lease agreement with a third party for a proposed new branch office to be located at 2002 West Liberty Street, Allentown, Lehigh County, Pennsylvania. The lease provides for an initial term of seven (7) years effective January 1, 2021, and grants the Bank two (2) successive options to renew for a term of five (5) years each and one (1) successive option to renew for a term of three (3) years. In addition to certain maintenance, real estate taxes and other costs, the annual basic rent for each of the first five (5) years of the initial term is $54 thousand, followed by annual basic rent in years six (6) and seven (7) of the initial term in the amount of $60 thousand. Under the first renewal option term, annual basic rent for the first three (3) years of this option term would be $60 thousand, followed by annual basic rent in the amount of $66 thousand for years four (4) and five (5) of this first renewal option term. Under the second renewal option term, annual basic rent for the first three (3) years of this option term would be $66 thousand, followed by annual rent in the amount of $72 thousand for years four (4) and five (5) of this second renewal option term. Under the third renewal option term of three (3) years, annual basic rent would be $72 thousand.

Note 17 - Federal Income Taxes

The components of income tax expense are as follows:



	Year Ended December 31,
	2020		2019

	(In Thousands)

Current	$	3,479	$	2,732
Deferred		(558)		(238)
Income Tax Expense	$	2,921	$	2,494

A reconciliation of the statutory federal income tax at a rate of 21% as of December 31, 2020 and December 31, 2019 to the income tax expense included in the consolidated statements of income is as follows:



	Years Ended December 31,
	2020				2019

	(In Thousands)

		Dollar	%			Dollar	%
Federal income tax at statutory rate	$	3,303	21.0	%	$	2,808	21.0	%
Tax-exempt interest		(208)	(1.3)	%		(249)	(1.9)	%
Bank owned life insurance		(171)	(1.1)	%		(120)	(0.9)	%
Other		(3)	0.0	%		55	0.4	%

Income Tax Expense	$	2,921	18.6	%	$	2,494	18.6	%

The Company evaluates its tax positions and a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a likelihood of being realized on examination of more than 50 percent. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Under the “more likely than not” threshold guidelines, the Company believes no significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. As of December 31, 2020 and 2019, the Company had no material unrecognized tax benefits or accrued interest and penalties. The Company’s policy is to account for interest as a component of interest expense and penalties as a component of other expense.

‎

Embassy Bancorp, Inc.

The components of the net deferred tax asset (included in other assets) are as follows:



	December 31,
	2020		2019

	(In Thousands)

Deferred tax assets:
Allowance for loan losses	$	2,220	$	1,685
Deferred compensation		1,261		1,112
Lease liability		1,938		2,041
Premises and equipment		-		3
Other		4		4

Total Deferred Tax Assets		5,423		4,845

Deferred tax liabilities:
Premises and equipment		53		-
Prepaid assets		221		276
Deferred loan costs		629		497
Right of use asset		1,896		2,006
Unrealized gain on securities available for sale		781		357

Total Deferred Tax Liabilities	$	3,580	$	3,136

Net Deferred Tax Asset	$	1,843	$	1,709

Based upon the level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

‎

Embassy Bancorp, Inc.

Note 18 – Parent Company Only Financial

Condensed financial information pertaining only to the parent company, Embassy Bancorp, Inc., is as follows:

BALANCE SHEETS



	December 31,
	2020		2019
	(In Thousands)
ASSETS

Cash	$	473	$	256
Other assets		33		26
Investment in subsidiary		111,950		99,569
Total Assets	$	112,456	$	99,851

LIABILITIES AND STOCKHOLDERS’ EQUITY

Other liabilities	$	282	$	236
Stockholders’ equity		112,174		99,615
Total Liabilities and Stockholders’ Equity	$	112,456	$	99,851

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



	Years Ending December 31,
	2020		2019
	(In Thousands)

Other expenses	$	(449)	$	(438)
Equity in net income of banking subsidiary		13,169		11,233
Income before income taxes		12,720		10,795
Income tax benefit		90		84
Net income	$	12,810	$	10,879

Equity in other comprehensive gain of banking subsidiary		1,597		2,587
Comprehensive income	$	14,407	$	13,466

‎

Embassy Bancorp, Inc.

STATEMENT OF CASH FLOWS



	Years Ending December 31,
	2020		2019
	(In Thousands)

Cash Flows from Operating Activities:
Net income	$	12,810	$	10,879
Adjustments to reconcile net income to net cash used in
operating activities:
Stock compensation expense		286		367
Net change in other assets and liabilities		39		32
Equity in net income of banking subsidiary		(13,169)		(11,233)
Net Cash (Used) Provided in Operating Activities		(34)		45

Cash Flows Provided By Investing Activities:
Dividend from banking subsidiary		2,385		1,323

Cash Flows from Financing Activities:
Exercise of stock options and proceeds from ESPP		431		52
Purchase of treasury stock		(765)		-
Stock tendered for options		(156)		-
Dividends paid		(1,644)		(1,495)

Net Cash Used in Financing Activities		(2,134)		(1,443)
Net Increase (Decrease) in Cash		217		(75)
Cash – Beginning		256		331

Cash - Ending	$	473	$	256

‎

Embassy Bancorp, Inc.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE.

None.

Item 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as of December 31, 2020. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded, as of December 31, 2020, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed by the Company within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

A Report of Management’s Assessment of Internal Control Over Financial Reporting is located on page 51 of this report, and incorporated herein by reference.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the fourth quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. OTHER INFORMATION.

None.

‎

Embassy Bancorp, Inc.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by Part III, Item 10, is incorporated herein by reference to the information under the captions “Board of Directors,” “Information as to Nominees and Directors,” “Executive Officers,” “Nominating Process,” “Code of Conduct (Ethics),” “Committees of the Board of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement to be filed with the SEC in connection with the Company’s 2021 annual meeting of shareholders.

Item 11. EXECUTIVE COMPENSATION.

The information required by Part III, Item 11, is incorporated herein by reference to the information under the captions “Director Compensation,” “Executive Compensation” and “Agreements with Executive Officers” in the Company’s definitive proxy statement to be filed with the SEC in connection with the Company’s 2021 annual meeting of shareholders.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Part III, Item 12, is incorporated herein by reference to the information under Item 5 of this report and the information under the caption “Information Concerning Share Ownership” in the Company’s definitive proxy statement to be filed with the SEC in connection with the Company’s 2021 annual meeting of shareholders.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Part III, Item 13, is incorporated herein by reference to the information under the captions “Certain Relationships and Related Transactions” and “Director Independence” in the Company’s definitive proxy statement to be filed with the SEC in connection with the Company’s 2021 annual meeting of shareholders.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by Part III, Item 14, is incorporated herein by reference to the information under the captions “Independent Registered Public Accounting Firm”, “Fees of Independent Accountants” and “Report of Audit Committee” in the Company’s definitive proxy statement to be filed with the SEC in connection with the Company’s 2021 annual meeting of shareholders.

‎

Embassy Bancorp, Inc.



PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

	(a)	Financial Statement Schedules can be found under Item 8 of this report.
	(b)	Exhibits required by Item 601 of Regulation S-K:

	Exhibit
	Number	Description
	3.1	Articles of Incorporation, as amended (conformed) (Incorporated by reference to Exhibit 3.1 of Registrant's Form 10-Q filed on August 12, 2016).
	3.2	By-Laws (Incorporated by reference to Exhibit 3.2 of Registrant's Form 10-Q filed on August 12, 2016).
	10.1	Amended and Restated Embassy Bancorp, Inc. 2010 Stock Incentive Plan (Incorporated by reference to Annex A of Registrant's definitive proxy statement filed on May 1, 2019).
	10.2	Form of Stock Option Grant Agreement – Directors (Incorporated by reference to Exhibit 10.3 of Registrant’s Form 10-K filed on March 30, 2016).
	10.3	Form of Stock Option Grant Agreement – Executive Officers (Incorporated by reference to Exhibit 10.4 of Registrant’s Form 10-K filed on March 30, 2016).
	10.4	Lease Agreement dated June 11, 2001 for the Rte. 512 Bethlehem office, Bethlehem, PA.
	10.5	Lease Agreement dated October 21, 2005 for Hamilton Blvd. and Mill Creek Rd., Lower Macungie Township, PA.
	10.6	Lease Addendum dated January 1, 2005 for additional space in the Rte. 512, Bethlehem office, Bethlehem, PA.
	10.7	Lease Agreement dated March 11, 2009 for Cedar Crest Blvd., Allentown, PA.
	10.8	Lease Agreement dated March 21, 2003 for Tilghman Street, Allentown, PA.
	10.9	Lease Agreement dated March 17, 2006 for 925 West Broad St, Bethlehem PA.
	10.10	Lease Agreement dated June 17, 2008 for 5828 Old Bethlehem Pike, Center Valley, PA.
	10.11	Lease Agreement dated March 13, 2009 for Corriere Road and Route 248 in Lower Nazareth Township, PA.
	10.12	Second Lease Expansion Addendum dated October 21, 2011 by and between Embassy Bank for the Lehigh Valley and Red Bird Associates, LLC (Incorporated by reference to Exhibit 10.13 of Registrant’s Form 10-K filed on March 30, 2017).
	10.13	Lease Renewal and Modification Agreement dated May 4, 2012 by and between Embassy Bank for the Lehigh Valley and Red Bird Associates LLC (Incorporated by reference to Exhibit 10.14 of Registrant’s Form 10-K filed on March 15, 2018).
	10.14	Lease Renewal dated February 17, 2017 by and between Embassy Bank for the Lehigh Valley and Red Bird Associates, LLC (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on February 21, 2017).
	10.15	Lease Agreement dated September 1, 2015 by and between Embassy Bank for the Lehigh Valley and Orwig Property Management Center Square, LLC.
	10.16	Lease Agreement dated November 10, 2017 by and between Embassy Bank for the Lehigh Valley and Pope Valley Properties, LLC (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on November 14, 2017).
	10.17	Lease Expansion Agreement dated June 15, 2018 by and between Embassy Bank for the Lehigh Valley and Red Bird Associates, LLC (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on June 19, 2018).
	10.18	Lease Amendment dated December 28, 2018 for a reduced rent escalator for 5828 Old Bethlehem Pike, Center Valley, PA (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on December 31, 2018).
	10.19	Amended and Restated Employment Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated May 24, 2018 (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on May 29, 2018).
	10.20	Amended and Restated Employment Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated May 24, 2018 (Incorporated by reference to Exhibit 10.2 of Registrant's Form 8-K filed on May 29, 2018).
	10.21	Employment Agreement – J. Bartholomew, dated February 20, 2009.

‎

Embassy Bancorp, Inc.


Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (Continued)

	Exhibit
	Number	Description
	10.22	Amendment to Employment Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated November 19, 2010 (Incorporated by reference to Exhibit 10.21 of Registrant’s Form 10-K filed on March 30, 2016).
	10.23	Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated November 19, 2010 (Incorporated by reference to Exhibit 10.22 of Registrant’s Form 10-K filed on March 30, 2016).
	10.24	Amendment No. 1 to Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated November 21, 2011 (Incorporated by reference to Exhibit 10.23 of Registrant’s Form 10-K filed on March 30, 2017).
	10.25	Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated November 19, 2010 (Incorporated by reference to Exhibit 10.24 of Registrant’s Form 10-K filed on March 30, 2016).
	10.26	Amendment No. 2 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated January 1, 2013 (Incorporated by reference to Exhibit 10.27 of Registrant’s Form 10-K filed on March 13, 2019).
	10.27	Amendment No. 3 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and David M. Lobach, Jr., dated January 23, 2014 (Incorporated by reference to Exhibit 10.29 of Registrant’s Form 10-K filed on March 11, 2020).
	10.28	Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated November 19, 2010 (Incorporated by reference to Exhibit 10.27 of Registrant’s Form 10-K filed on March 30, 2016).
	10.29	Amendment No. 2 to Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated January 1, 2013 (Incorporated by reference to Exhibit 10.30 of Registrant’s Form 10-K filed on March 13, 2019).
	10.30	Amendment No. 3 to Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated January 23, 2014 (Incorporated by reference to Exhibit 10.32 of Registrant’s Form 10-K filed on March 11, 2020).
	10.31	Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated November 19, 2010 (Incorporated by reference to Exhibit 10.30 of Registrant’s Form 10-K filed on March 30, 2016).
	10.32	Amendment No. 2 to Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated January 1, 2013 (Incorporated by reference to Exhibit 10.33 of Registrant’s Form 10-K filed on March 13, 2019).
	10.33	Amendment No. 3 to Amended and Restated Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated January 23, 2014 (Incorporated by reference to Exhibit 10.35 of Registrant’s Form 10-K filed on March 11, 2020).
	10.34	Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated December 23, 2015.
	10.35	Amendment No. 1 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated December 21, 2016 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on December 27, 2016).
	10.36	Amendment No. 2 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated December 20, 2017 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on December 20, 2017).
	10.37	Amendment No. 3 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated December 21, 2018 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on December 21, 2018).
	10.38	Amendment No. 4 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and Judith A. Hunsicker, dated December 18, 2020 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on December 21, 2020).

Embassy Bancorp, Inc.


Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (Continued)

	Exhibit
	Number	Description
	10.39	Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated December 23, 2015.
	10.40	Amendment No. 1 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated December 21, 2016 (Incorporated by reference to Exhibit 10.2 of Registrant’s Form 8-K filed on December 27, 2016).
	10.41	Amendment No. 2 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated December 20, 2017 (Incorporated by reference to Exhibit 10.2 of Registrant’s Form 8-K filed on December 20, 2017).
	10.42	Amendment No. 3 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated December 21, 2018 (Incorporated by reference to Exhibit 10.2 of Registrant’s Form 8-K filed on December 21, 2018).
	10.43	Amendment No. 4 to Supplemental Executive Retirement Plan Agreement between Embassy Bank for the Lehigh Valley and James R. Bartholomew, dated December 18, 2020 (Incorporated by reference to Exhibit 10.2 of Registrant’s Form 8-K filed on December 21, 2020).
	10.44	Embassy Bancorp, Inc. Employee Stock Purchase Plan (Incorporated by reference to Appendix A of Registrant's definitive proxy statement filed on April 21, 2016).
	11.1	The statement regarding computation of per share earnings required by this exhibit is contained in Note 1 to the financial statements captions “Earnings Per Share.”
	21.1	Subsidiaries of the Registrant.
	23.1	Consent of Baker Tilly US, LLP.
	31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002.

	101.1	XBRL - Related Documents

		No. Description
	101. INS	XBRL Instance Document. *
	101. SCH	XBRL Taxonomy Extension Schema Document.
	101. CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
	101. LAB	XBRL Taxonomy Extension Label Linkbase Document.
	101. PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
	101. DEF	XBRL Taxonomy Extension Definitions Linkbase Document.
	104	Cover Page Interactive Data File (formatted as inline XBRL
		and contained in Exhibit 101)

	* This instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL.

Item 16. FORM 10-K SUMMARY.

None.

‎

Embassy Bancorp, Inc.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned, thereunto duly authorized.

EMBASSY BANCORP, INC.



Dated: March 12, 2021	By:	/s/ David M. Lobach, Jr.
		David M. Lobach, Jr.
		Chairman, President and Chief Executive Officer




Dated: March 12, 2021	By:	/s/ Judith A. Hunsicker
		Judith A. Hunsicker
		First Executive Officer, Chief Operating
		Officer, Secretary and Chief Financial Officer

‎

100

Embassy Bancorp, Inc.



	Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
	below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Dated: March 12, 2021			/s/ Frank Banko III
				Frank Banko III, Director

	Dated: March 12, 2021			/s/ Geoffrey F. Boyer
				Geoffrey F. Boyer, Director

	Dated: March 12, 2021			/s/ John G. Englesson
				John G. Englesson, Director

	Dated: March 12, 2021			/s/ Bernard M. Lesavoy
				Bernard M. Lesavoy, Director

	Dated: March 12, 2021			/s/ David M. Lobach, Jr.
				David M. Lobach, Jr., Director and Chairman of the Board

	Dated: March 12, 2021			/s/ John C. Pittman
				John C. Pittman, Director

	Dated: March 12, 2021			/s/ Patti Gates Smith
				Patti Gates Smith, Director

	Dated: March 12, 2021			/s/ John T. Yurconic
				John T. Yurconic, Director

101

COMMERCIAL LEASE AGREEMENT

THIS COMMERCIAL LEASE AGREEMENT (hereinafter called the "Lease") is made this 17 day of June, 2008 by and between Pierpont Slater Properties, which has as its address 5828 Old Bethlehem Pike, Center Valley, PA 18034, or its assignee or nominee (the "Lessor")

AND

EMBASSY BANK FOR THE LEHIGH VALLEY, a Pennsylvania financial institution, which has as its address 100 Gateway Drive, Suite 100, Bethlehem, Pennsylvania 18017 (the "Lessee").

1. IMPROVED LEASED PREMISES. In consideration of the rents, covenants and agreements set forth herein, and subject to the terms and conditions of this Lease, Lessor hereby leases to Lessee those certain premises located at Route 378 & Colesville Road, Lower Saucon Township, Northampton County, PA (the "Improved Lease Premises"). A description of said Improved Lease Premises is attached hereto as Exhibit "A".

(a) Lessee's obligations under this Lease are conditioned upon the approval of this Lease and the location of such bank branch by the Pennsylvania Department of Banking and the FDIC for which Lessee shall diligently and in good faith apply immediately following the execution of this Lease by the parties hereto. In the event such approvals are not obtained within 180 days of the date of this Lease, this Lease shall be null and void and all payments, if any, made by Lessee to Lessor shall be refunded to Lessee without offset.

2. TERM.

(a) The term of this Lease for the Improved Leased Premises shall be Ten (10) years commencing on the date Lessor has substantially completed the improvements in accordance with Lessor's Work attached hereto as Exhibit "B" and a certificate of occupancy is issued by the applicable municipal authority (the "Commencement Date").

(b) Lessee shall have the option to extend the Term of this Lease for four successive five (5) year terms (each, a "Renewal Term"), on the same terms and conditions set forth herein, provided that the rental during the original Term for each Renewal Term, commencing upon the fifth anniversary of the Commencement Date (i.e. the sixth year of the lease Term) shall increase at the rate of two and seventy five hundredths percent ( 2.75%) per year and as provided in Section 4 hereof. Lessee may exercise its right to renew the Lease Term by providing Lessor with written notice of its option to renew the Lease not less than nine (9) months prior to the expiration of the then current Term or Renewal Term.

(c) Notwithstanding anything to the contrary contained herein, the term of this lease shall be such term that enables Lessee to report and account for this lease as an operating lease, as that term is generally defined for accounting purposes. In the event the term set forth above does not permit such classification, or requires Lessee to report and account for this lease as a capital lease, the parties shall negotiate in good faith as to a revised term. If the parties are unable to agree on the same, this lease shall be null and void and all payments, if any, made by Lessee to Lessor shall be refunded to Lessee without offset, excepting those Lease payments made based upon Lessee's actual occupancy of the Premises.

3. USE. Lessee shall use the Improved Leased Premises as an Embassy Bank or any successor bank or, with Lessor's prior written consent, for any other lawful purpose permitted under zoning and other applicable laws, ordinances, and regulations.

4. RENT.

(a) During the first year of the Term, Lessee shall pay to Lessor as minimum annual rent the sum of One Hundred Sixty Two Thousand Nine Hundred Dollars ($162,900.00), payable in equal monthly installments of Thirteen Thousand Five Hundred Seventy Five Dollars ($13,575.00) each. Thereafter, commencing upon the fourth anniversary of the Commencement Date, for each Lease year during the Term and any Renewal Term, minimum annual rent shall equal the minimum annual rent payable in the immediately preceding Lease year, multiplied by two and seventy five hundredths percent (2.75%) (e.g., the prior year's rental plus an increase of 2.75%). Such minimum annual rent shall be payable in advance, in equal monthly installments on the first day of each calendar month during the term hereof, without demand, offset or deduction, and shall be payable in lawful money of the United States of America.

(b) This Lease is intended to be a "triple net" lease. Accordingly, Lessee agrees to pay as additional rent, all charges for utilities, taxes, assessments and other governmental charges with respect to the Improved Leased Premises and as may be further provided in this Lease. It is the parties' intent that Lessee shall pay all such charges directly. In the event Lessor shall receive any such charges, Lessor shall bill Lessee for any such charges and Lessee shall promptly pay Lessor for such charges upon invoice. In the event of nonpayment of additional rent, Lessor shall have, in addition to all other rights and remedies, all the rights and remedies provided for herein or by law in the case of nonpayment of the minimum rent.

(c) For all purposes under this Lease, rent shall mean both minimum and additional rent. Rent shall be delivered to Lessor at Lessor's address as set forth above, or at such other place or to such other person as Lessor may designate in writing from time to time.

(d) Any and all rent payments payable under this Lease Agreement shall be paid to Lessor at an account or accounts maintained at Embassy Bank For The Lehigh Valley.

(e) Lessor shall provide Lessee with a LESSEE improvement allowance of One Hundred and Fifty Thousand Dollars ($150,000.00) for use exclusively for LESSEE fit out of the Premises.

5. ALTERATIONS AND IMPROVEMENTS.

(a) Lessee shall not make or cause to be made any alterations, additions or improvements to the Improved Leased Premises without the prior written consent of Lessor. All alterations, additions or improvements approved by Lessor shall be made solely at Lessee's expense by a contractor approved by Lessor, shall be made in a good and workmanlike manner and shall be performed in compliance with all laws, ordinances and requirements of any and all Federal, State, Municipal and/or other authorities, the Board of Fire Underwriters and any mortgages to which the Improved Leased Premises is subject. Any alteration, addition or improvement made by Lessee under this Section 5, and any fixtures installed as a part thereof, shall, at Lessor's option, become the property of Lessor upon the expiration or other termination of this Lease. Lessor shall have the right, however, to require Lessee to remove such fixtures at Lessee's cost upon such termination of this Lease, and Lessee shall promptly remove the same and repair any damage to the Improved Leased Premises caused by such removal.

(b) In the event of a lien or claim of any kind, arising out of the exercise of the rights set forth hereunder by Lessee, its agents, employees, contractors, subcontractors, and materialmen, being filed against the interest of Lessor, any mortgagee and/or against the Improved Leased Premises, Lessee covenants and agrees that at its expense it will within thirty (30) days after written notice from Lessor, cause the Improved Leased Premises and any such interest therein to be released from the legal effect of such lien or claim, either by payment or by posting of bond or by the payment into court of the amount necessary to relieve and release the Improved Leased Premises or the interest from such claim or in any manner satisfactory to Lessor and any mortgagee. If Lessee desires to contest the validity of any lien or claim, Lessee may do so upon Lessor's prior written consent, provided Lessee sustains the cost of such contest, and Lessee remains liable to pay or discharge any lien or claim deemed to be due or payable. Lessee hereby indemnifies and holds Lessor harmless against any and all liability, loss or damage sustained by Lessor by reason of such contest, unless such contest arises from any negligent or intentional act or omission of Lessor.

6. UTILITIES. Lessee shall pay, when the same shall become due, all charges for utilities consumed by it on the Improved Leased Premises including without limitation electricity, heat and telephone, and any other utilities, as well as water and sewer charges, provided such utilities shall be separately metered as to the Improved Leased Premises. In the event any such utilities shall not be separately metered, but rather shared with another LESSEE or with Lessor, the parties hereto shall provide for a mechanism of equitably allocating the cost of such utility(s). Lessor shall not be required to furnish to Lessee any utility, janitorial or other service of any kind whatsoever during the Term of this Lease. Notwithstanding the preceding, Lessor shall be responsible for all costs, including parts, labor and municipal assessments, related to the Leased Premises' "tie in" or "hook up" to the public sewer system.

7. MAINTENANCE AND REPAIRS. Lessor has made no representations concerning the condition of the Improved Leased Premises other than that the improvements will be completed in accordance with the agreement between the parties as referred to in Exhibit B hereof. Lessee shall maintain and be responsible for maintaining and repairing all portions of the Improved Leased Premises. Lessee, at its sole cost and expense, shall take good care of the Improved Leased Premises and will maintain the same in good order and condition, ordinary wear and tear excepted, and make all necessary repairs thereto, interior as well as exterior, including and without limiting the generality of the foregoing, roof and structural members, including walls, unless such repairs or maintenance shall be caused by the negligence or willful misconduct of Lessor, either in connection with the construction thereof or by any act or omission subsequent to such construction. Lessee shall be responsible for the routine regular cleaning of the Improved Leased Premises, and shall keep all portions of the Improved Leased Premises in a clean and orderly condition, free of unlawful obstruction, and shall not permit or cause any damage, waste or injury to the building or other improvements on the Improved Leased Premises.

8. REFUSE REMOVAL. Lessee shall provide for its own garbage, rubbish and refuse disposal and agrees to keep the Improved Leased Premises free and clear of debris. Lessee agrees to keep all rubbish, garbage and refuse in covered containers within the Improved Leased Premises (or at such other location identified by Lessor) and to have the same removed regularly.

9. COMPLIANCE. With regard to its use of the Improved Leased Premises, Lessee shall, at its own expense, comply with all laws, rules, orders, regulations, and requirements of all Federal, State, and municipal governments, courts, departments, commissions, boards, and officers having jurisdiction over the Improved Leased Premises, the lawful orders, rules, and regulations of the Board of Fire Underwriters having jurisdiction over the Improved Leased Premises, any mortgages to which the Improved Leased Premises is subject, and any rules and regulations of Lessor. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any governmental law, rule, order, regulation or requirement. Lessee hereby indemnifies and holds Lessor harmless against any and all liability, loss, or damage sustained by Lessor by reason of such contest. Notwithstanding any of the foregoing, Lessee shall promptly comply with any such law, rule, order, regulation or requirement if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to criminal liability for non-compliance therewith.

10. TAXES. Lessee shall pay as and when the same shall become due all real property taxes, assessments and other governmental charges assessed against the Improved Leased Premises during the Term of this Lease. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any such tax, assessment or other governmental charge. Lessee hereby indemnifies Lessor against any and all liability, loss or damage sustained by Lessor by reason of such contest. Notwithstanding any of the foregoing, Lessee shall promptly pay any such tax, assessment or other government charge if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to any criminal liability for nonpayment thereof.

11. SURRENDER OF IMPROVED LEASED PREMISES. Lessee covenants that upon the termination or expiration of this Lease or any renewal thereof, Lessee shall surrender the Improved Leased Premises in good order and condition and shall surrender all keys to the Improved Leased Premises to Lessor at the place then fixed for the payment of rent. This covenant shall survive termination of this Lease.

12. RIGHT OF ENTRY. Upon prior notice and in the presence of an authorized representative of Lessee (whom Lessee agrees to provide upon such notice received from Lessor), Lessor and/or its agents shall have the right to enter upon and inspect the Improved Leased Premises at all reasonable times and to exhibit the Improved Leased Premises to prospective purchasers and prospective LESSEEs (but in this case, only during the last six (6) months of the term of this Lease). Lessor shall be permitted to affix a "To Let" or "For Sale" sign on the Improved Leased Premises during the last ninety (90) days of the term of this Lease in such place as shall not interfere with the business then being conducted at the Improved Leased Premises. Lessor acknowledges that Lessee shall operate the Improved Leased Premises as a bank, and therefore any inspection or entry upon the Improved Leased Premises shall only occur if all appropriate security measures shall be complied with.

13. SIGNS. Lessee shall have the right to Install and maintain on the Improved Leased Premises such signs and advertising matter as Lessee may reasonably desire, subject to the prior consent of Lessor. Lessee shall comply with any laws or ordinances with respect to such signs or advertising, and shall obtain any necessary permits. Lessee agrees to maintain such signs or advertising in good condition, and to repair any damage which may be caused by erection, maintenance, repair or removal of such signs or advertising.

14. LIABILITY AND OTHER INSURANCE. Lessee shall, during the entire term hereof, keep in fall force and effect policies of comprehensive liability and property damage insurance, with respect to the Improved Leased Premises and the business operated by Lessee in and upon the Improved Leased Premises, in which the limits of bodily injury liability and property damage liability shall be mutually agreed upon. The policy (or policies) shall name Lessor, and any persons, firms, or corporations designated by Lessor, mortgagees, if any, and Lessee as insured and shall contain a clause that the insurer will not cancel or modify the insurance without first giving the named parties thirty (30) days prior written notice. Copies of the policy or certificates of accord or insurance shall be delivered to Lessor upon the Commencement Date. If Lessee shall not comply with its covenants made in this section, Lessor may, at its option, cause insurance as aforesaid to be issued and in such event, Lessee agrees to pay the premium for such insurance promptly upon Lessor's demand as additional rent.

15. WAIVER OF SUBROGATION. Neither Lessee nor anyone claiming by, through, under or on behalf of Lessee, shall have any claim, right of action, or right of subrogation against Lessor for or based upon any loss or damage caused by any casualty, including but not limited to fire or explosion, relating to the Improved Leased Premises or property therein. Notwithstanding the preceding, such waiver of subrogation shall not be self-operative, but rather shall only be effective upon the application by Lessee and the issuance of an appropriate endorsement to Lessee's insurance policy(s).

16. INDEMNITY. Lessee hereby agrees to indemnify, hold harmless and defend, at its own expense, Lessor from and against any and all claims, actions, damages, liability, judgments and expenses, including without limitation reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Lessor or Lessor's interest in the Improved Leased Premises, by reason of any loss of life, personal injury or claim of injury, or damage to property or claim of damage to property in or about the Improved Leased Premises, howsoever caused, arising out of or relating to the occupancy or use by Lessee, its employees, agents or invitees, of the Improved Leased Premises, including without limitation the streets, alleys, sidewalks or parking areas, and including without limitation any environmental liability, unless such claims, damages, liability, judgments and expenses are caused by the negligence or willful misconduct of Lessor. In addition, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all expenses incurred by Lessor arising out of or relating to Lessee's failure to pay or perform its obligations under this Lease.

17. CASUALTY. In the event that the Improved Leased Premises, or any portion thereof, are damaged or destroyed by any cause whatsoever, Lessee shall commence such restoration as soon as possible after such occurrence, but in no event later than ninety (90) days thereafter, and shall diligently pursue such repair or restoration to completion, with a contractor approved by Lessor. Rent shall be equitably abated based on the area of the Improved Leased Premises rendered untenantable, if any, during the period of such untenantability. Notwithstanding the foregoing, if destruction of more than forty percent (40%) of the Improvements on the Improved Leased Premises occurs at any point in the last three (3) years of the then-current Term of the Lease or if any destruction of more than ten percent (10%) of the improvements on the Improved Leased Premises occurs in the last year of the then current Term of the Lease, then Lessee shall have the right to terminate the Lease.

18. EMINENT DOMAIN. If the entire Improved Leased Premises shall be taken by reason of condemnation or under eminent domain proceedings, Lessee may terminate this Lease as of the date when possession of the Improved Leased Premises is so taken by the condemning entity. If a portion of the Improved Leased Premises, including without limitation the building, site improvements, parking or access, shall be taken under eminent domain or by reason of condemnation to such an extent that the taking materially adversely affects Lessee's use of the Improved Leased Premises, Lessee shall have the option to terminate this Lease by written notice to Lessor within forty-five (45) days of such taking. If this Lease is not so terminated, Lessee may at its sole cost and expense, and with a contractor acceptable to Lessor, restore the remaining portions of the Improved Leased Premises as Lessee deems necessary or appropriate (subject to applicable law). In such event, rent shall be equitably adjusted commensurate with the partial taking. For purposes of this Section 18, (i) a partial taking shall be deemed to include loss or impairment of access to and from the Improved Leased Premises and (ii) grants or conveyances made in lieu or in anticipation of or under threat of a taking or condemnation shall be deemed a taking. Both parties shall pursue their own damage awards with respect to any such taking, provided however that Lessee shall be entitled to, and nothing herein shall prevent Lessee from seeking, an award for taking of or damage to Lessee's trade fixtures and any award for Lessee's moving expenses, so long as said awards do not diminish the award to which Lessor is entitled.

19. DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder:

(a) Lessee shall fail to pay in full when due, any installment of rent or any other sum payable by Lessee hereunder, and such failure shall continue for a period often (10) days;

(b) Lessee shall fail to perform or observe (or cause or permit any such failure) any other covenant, term, condition, agreement or obligation to be performed or observed by Lessee under this Lease, and such failure shall continue for twenty (20) days after written notice thereof from Lessor to Lessee; provided however that a failure as described in this Section 19(b) shall not constitute a default if it is curable but cannot with reasonable diligence be cured by Lessee within a period of twenty (20) days, so long as Lessee promptly commences cure and proceeds to cure the failure with reasonable diligence and in good faith.

(c) The insolvency of Lessee, as evidenced by (i) the adjudication of Lessee as a bankrupt or insolvent; (ii) the filing of a petition seeking reorganization of Lessee or an arrangement with creditors, or any other petition seeking protection of any bankruptcy or insolvency law; (iii) the filing of a petition seeking the appointment of a receiver, trustee or liquidator of Lessee or of all or any part of Lessee's assets or property; (iv) an assignment by Lessee for the benefit of creditors; or (v) the levy against any portion of Lessee's assets or property by any sheriff or other officer.

(d) Notwithstanding any other provisions contained in this Lease Agreement, in the event (a) Lessee or its successors or assignees shall become subject to a bankruptcy case pursuant to Title 11 of the U.S. Code or similar proceeding during the term of this Lease or (b) the depository institution then operating the Improved Leased Premises is closed, or it taken over by any depository institution supervisory authority (hereinafter referred to as the "Authority") during the term of this Lease, Lessor may, in either such event, terminate this Lease only with the concurrence of any Receiver or Liquidator appointed by such Authority or pursuant to the appropriate order of the Court with jurisdiction over such case or proceeding, or upon the expiration of the stated term of this Lease as provided herein, provided that in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Lessor for rent, damages or indemnity resulting from the termination, rejection, or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid rent and additional rent to the date of termination.

20. REMEDIES. Upon the occurrence of any Event of Default, Lessor shall have the following rights and remedies in addition to all other rights and remedies otherwise available at law or in equity:

(a) If Lessee shall at any time fail to pay any sum, charge, or imposition or perform any other act on its part to be performed, then Lessor, after ten (10) days written notice to Lessee and without waiving or releasing Lessee from any obligation hereunder, may pay such charge or sum of money or make any other payment or perform any other act on the Lessee's part to be made or performed, and may enter upon the Improved Leased Premises for any such purpose, and take all such action thereon as may be necessary therefor. All sums so paid by Lessor and all costs and expenses incurred by Lessor in connection with the performance of any such act, together with interest thereon at the rate often percent (10%) per annum from the respective dates of Lessor's making of each such payment or incurring of each such cost and expense, shall constitute additional rent payable by Lessee under this Lease and Lessor shall have the same remedies for the collection thereof as in the case of a failure to pay rent.

(b) At the option of Lessor and upon written notice to Lessee, this Lease, without waiver of any other rights of Lessor herein, may be terminated and declared void, without any right on the part of Lessee to save forfeiture by payment of any sum due or by performance of any term, covenant, or condition broken and Lessor may re-enter and possess the Improved Leased Premises without demand or notice, with or without process of law, using such reasonable force as may be necessary, without being deemed guilty of trespass, eviction, forcible entry, conversion or becoming liable for any loss or damage which may be occasioned thereby. In such event, Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Improved Leased Premises; expenses of reletting, including necessary renovation and alteration of the Improved Leased Premises; reasonable attorneys' fees; rent payment through the balance of the term; or the difference between the rent to be paid by the Lessee pursuant to this Lease and the rent charges collected by Lessor upon reletting;

(d) Lessor may retake possession of the Improved Leased Premises without terminating the Lease, in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Improved Leased Premises. In such event, Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent and any other charges and adjustments as may become due hereunder;

(e) At Lessor's option, the entire rent and other charges which would have become due during the balance of the lease term or renewal thereof shall be accelerated and shall at once become due and payable as if by the terms of this Lease it were all payable in advance, without presentment, demand, notice of nonpayment, protest, notice of protest, or other notice, all of which are hereby expressly waived by Lessee;

(f) Lessee shall pay Lessor a ten percent (10%) late charge for any rent payment not paid when due.

(g) Upon the occurrence of an Event of Default and the exercise by Lessor of any of the remedies set forth above in subsections (b), (d) or (e), Lessor shall use its best efforts to relet the Improved Lease Premises, and shall appropriately credit Lessee for any rents received, after Lessor recovers its reasonable costs incurred by reason of Lessee's breach and Lessor's exercise of its rights hereunder.

21. CUMULATIVE REMEDIES. Lessor shall have and may exercise ail remedies available to Lessor hereunder and at law and in equity and all such remedies shall be cumulative, concurrent, and nonexclusive. The waiver of or failure to exercise any one or more rights or remedies shall be wholly without prejudice to the exercise and enforcement of any other right or remedy, whether herein expressly provided for or given by law or in equity.

22. SUBORDINATION AND ATTORNMENT TO LEASEHOLD MORTGAGEE.

(a) Lessee agrees that this Lease shall be subordinate to any mortgages that may hereafter be placed upon the Lessor's interest in the Improved Lease Premises and to any and all advances to be made thereunder, and all renewals, replacements, and extensions thereof, without the necessity of any further instrument or act on the part of Lessee. This Lease Agreement is expressly contingent upon Lessor executing, and causing Lessor's mortgagees to execute, a customary subordination and non-disturbance agreement ("SNDA"). Lessor shall also cause any future mortgagee of Lessor to execute a similar SNDA.

(b) Lessee shall, in the event any proceedings are brought for the foreclosure of any mortgage made by Lessor covering the Improved Leased Premises, attorn to the purchaser upon any such foreclosure and sale and recognize such purchaser as the Lessor under this Lease.

23. ESTOPPEL CERTIFICATE. Both parties agree, within fifteen (15) days after the other party's written request, to execute, acknowledge and deliver to the requesting party a written instrument in recordable form certifying (i) whether this Lease is in full force and effect and whether there have been any modifications, supplements, side agreements or amendments and, if so, stating such modifications, supplements, side agreements and amendments; (ii) the date to which rent has been paid; (iii) the amount of any prepaid rent and any credit due Lessee if any; (iv) the Commencement Date and whether any option to renew the Term has been exercised and, if so, the day that Renewal Term expires; (v) whether either party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default; and (vi) such other matters as Lessor or Lessor's mortgagee, or Lessee or Lessee's leasehold mortgagee may reasonably require. Any such instrument delivered pursuant to this section may be relied upon by Lessor and Lessee, and any mortgagee or permitted assignee of any of them, and any prospective purchaser of the Improved Leased Premises.

24. MEMORANDUM OF LEASE AND RECORDING. This Lease is expressly contingent upon Lessor and Lessee executing a Memorandum of Lease hereof, in form reasonably satisfactory to each of them, and Lessee may record such Memorandum of Lease in the office of the Recorder of Deeds of and for Northampton County, Pennsylvania.

25. ASSIGNMENT AND SUBLETTING. Neither Lessee or its successors or permitted assigns shall assign this Lease or any interest therein, sublet the whole or any portion of the Improved Leased Premises or subject its interest in this Lease to any leasehold mortgage without the prior written consent of Lessor. No assignment or sublease shall release Lessee from its obligations to perform the terms, covenants, and conditions of this Lease.

26. BINDING OBLIGATION. Each and every provision of this Lease shall bind and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

27. PROHIBITED ACTS. Lessee shall not use or operate any equipment or machinery or in any way use the Improved Leased Premises in a way which is harmful to the Improved Leased Premises. Lessee shall not cause or permit any hazardous substances to be utilized at, on or in the Improved Leased Premises except with the prior written consent of Lessor and in strict compliance with all applicable environmental laws, ordinances, rules and regulations. Lessee shall not do or allow to be done any acts, omissions, or activity which would cause the fire, hazard, or any other insurance now in force or hereinafter to be placed on the Improved Leased Premises or building, or any part thereof, to become void, suspended, or rated as a more hazardous risk than at the date of the execution of this Lease. Furthermore, Lessee shall not be permitted to act or conduct business in any way that is against any applicable law.

28. LESSOR'S FURTHER AGREEMENTS.

(a) Right of First Refusal. In the event Lessor and a third party enter into a written agreement or letter of intent for the sale of the premises, Lessee shall have a right of first refusal whereby Lessee may purchase the premises from Lessor on the same terms and conditions as the third party has offered. Lessee shall exercise said right of first refusal, within thirty (30) days of receiving written notice of the intended third party sale. In the event Lessee fails to exercise such right, Lessor shall be free to sell the premises on the terms disclosed to Lessee. Any such sale shall be under and subject to the terms of this lease.

(b) During the Term and any Renewal Term and subject to the conditions hereinafter set forth in (i) and (ii) below, Lessor agrees that it will not sell or lease any real property or interest therein located within five (5) mile(s) of the Improved Leased Premises to another bank which competes with Lessee in the Lehigh Valley, provided however that (i) Lessee is still existing as the same legal entity as on the date of this Lease and has not been sold, merged or acquired, and (ii) Lessee is not in default of any of its obligations under this Lease.

(c) Lessor agrees that Lessee may, at its option, declare this Lease void and of no further effect if, prior to the Commencement Date, the billboard signs located on the Property are not removed.

29. CONSTRUCTION AND INTERPRETATION. This Lease shall be considered as having been made, executed, and delivered in the Commonwealth of Pennsylvania, and all questions regarding its validity, interpretation, or construction shall be construed in accordance with the laws of this Commonwealth. Words contained herein that are gender specific, singular, or plural, shall, if the context permits, be construed to include all genders, and both singular and plural forms.

30. WAIVER. No waiver by Lessor of any breach by Lessee of any of its obligations, agreements, or covenants hereunder and no failure of Lessor to exercise available remedies allowed upon the occurrence of an Event of Default, shall be a waiver of any subsequent breach of obligations, agreements, or covenants and nor shall it be a waiver by Lessor of its rights or remedies with respect to such or any subsequent Event of Default.

31. ENTIRE AGREEMENT. This Lease and any exhibits attached hereto and forming a part hereof set forth all of the covenants, promises, agreements, conditions, and understanding between Lessor and Lessee concerning the Improved Leased Premises, and there are no covenants, promises, agreements, conditions, or understandings, either oral or written, between the parties other than as are herein set forth. No subsequent alteration, amendment, 10 change or addition to this Lease shall be binding upon either Lessor or Lessee unless the same is reduced to writing and executed by Lessor and Lessee.

32. NOTICES. All notices, elections, requests, demands or other communications with respect to this Lease shall be in writing and shall be deemed to have been given when hand delivered, when deposited with a reputable overnight delivery service (such as Federal Express) or when deposited in a postal depository maintained by the United States Postal Service, first class certified mail, postage prepaid to Lessor or Lessee at the addresses recited in the Preamble to this Lease, or to such other address as designated in writing by Lessor or Lessee.

33. PARTIAL INVALIDITY. If any term, covenant, or condition of this Lease or the application thereof to any person, partnership, association, corporation, or other entity, is determined to be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant, or condition to persons, partnerships, associations, corporations or other entities other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant, or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.

34. HEADINGS. Any headings preceding the text of the sections set forth herein are inserted solely for convenience and shall not in any way define, limit, or describe the scope, intent, or meaning of such sections, and such headings shall not constitute a part of this Lease.

35. QUIET ENJOYMENT. Lessor agrees that Lessee, on payment of the rent and all other charges provided for in this Lease and Lessee's fulfillment of all obligations under the covenants, agreements and conditions of this Lease shall and may (subject to the exceptions, reservations, terms and conditions of this Lease, superior mortgages, and matters of record) peaceably and quietly have, hold and enjoy the Improved Leased Premises for the Term without interference by or from Lessor or any party claiming through or under Lessor.

36. TIME OF THE ESSENCE. Time is of the essence in the performance by Lessee of its obligations hereunder.

[Signature page follows.]

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Lease to be executed by persons duly authorized as of the day and year first above written.

	LESSOR:
WITNESS:	PIERPONT SLATER PROPERTIES

Cinthia L. Morley	By:	/s/ Andrew F. S. Warner
		Name:	Andrew F. S. Warner
		Title:	President - Partner


	LESEE:
ATTEST/WITNESS:	EMBASSY BANK FOR THE LEHIGH VALLEY

Cinthia L. Morley	By:	/s/ David M. Lobach Jr.
		Name:	David M. Lobach Jr.
		Title:	CEO

LEASE

JOSEPH I LIMITED PARTNERSHIP

LANDLORD,

EMBASSY BANK FOR THE LEHIGH VALLEY

TENANT.

TABLE OF CONTENTS


			Page

ARTICLE I

	BASIC LEASE PROVISIONS AND ENUMERATION OF EXHIBITS		1
	1.1	INTRODUCTION	1
	1.2	BASIC DATA	1
	1.3	ENUMERATION OF EXHIBITS	3
	1.4	CERTAIN DEFINITIONS	3

ARTICLE II

	DESCRIPTION OF PREMISES AND APPURTENANT RIGHTS		4
	2.1	LOCATION OF PREMISES	4
	2.2	APPURTENANT RIGHTS AND RESERVATIONS	4

ARTICLE III

	TERM OF LEASE		4
	3.1	COMMENCEMENT DATE	4
	3.2	LANDLORD'S WORK AND ESTIMATED OCCUPANCY DATE .	5
	3.3	TENANTS WORK	7
	3.4	INTENTIONALLY LEFT BLANK	8
	3.5	CONTINGENCIES	8

ARTICLE IV

	RENT		9
	4.1	MINIMUM RENT	9
	4.2	LEASE YEAR	10

ARTICLE V

	USE OF PREMISES		10
	5.1	PERMITTED USE	10
	5.2	EXCLUSIVE USE	11

ARTICLE VI

	ASSIGNMENT AND SUBLETTING		11
	6.1	ASSIGNMENT LIMITATIONS	11

ARTICLE VII

	MAINTENANCE OF BUILDING, ETC		12
	7.1	LANDLORD'S REPAIR OBLIGATIONS	12
	7.2	TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS	12
	7.3	TENANT'S ALTERATIONS	13
	7.4	UTILITIES	13
	7.5	SECURITY	14
	7.6	LIGHTING	14

			Page

ARTICLE VIII

	INDEMNITY AND PUBLIC LIABILITY INSURANCE		14
	8.1	TENANT'S INDEMNITY	14
	8.2	INJURY CAUSED BY THIRD PARTIES	15
	8.3	LANDLORD'S INDEMNITY	15
	8.4	SCOPE OF INDEMNITY	16

ARTICLE IX

	LANDLORD'S ACCESS TO PREMISES REIMBURSEMENTS AND RIGHTS OF SELF HELP		16
	9.1	LANDLORD'S RIGHT OF ACCESS	16
	9.2	EXHIBITION OF SPACE TO PROSPECTIVE TENANTS	16

ARTICLE X

	INSURANCE		16
	10.1	FIRE AND EXTENDED COVERAGE INSURANCE	16
	10.2	SPRINKLER SYSTEM	17
	10.3	FIXTURES AND EQUIPMENT INSTALLED BY TENANT	17
	10.4	INSURANCE RATES	17
	10.5	NON-SUBROGATION AGAINST TENANT	17
	10.6	NON-SUBROGATION AGAINST LANDLORD	18


ARTICLE XI

	DAMAGE OR DESTRUCTION		18
	11.1		18
	11.2		18
	11.3	ABATEMENT OF RENT AND OTHER CHARGES	18

ARTICLE XII

	TAXES		18
	12.1	REAL PROPERTY TAXES	18
	12.2	PERSONAL PROPERTY TAXES	19
	12.3	DEFINITION OF TENANT'S ALLOCABLE (OR PRO RATA) SHARE OF INSURANCE	19

ARTICLE XIII

	EMINENT DOMAIN .		20
	13.1	EFFECT OF CONDEMNATION	20
	13.2	DIVISION OF AWARD	20
	13.3	ABATEMENT OF RENT AND OTHER CHARGES	20

ARTICLE XIV

	DEFAULT		21
	14.1	EVENTS OF DEFAULT	21

ARTICLE XV

	TENANT'S SIGNS		23
	15.1	TENANT'S SIGNING RIGHTS	23

			Page

ARTICLE XVI

	COMMON AREA MAINTENANCE		23

ARTICLE XVII

	MISCELLANEOUS PROVISIONS		26
	17.1	MECHANIC'S LIENS	26
	17.2	WAIVER	26
	17.3	DISPUTES	26
	17.4	INTEREST	27
	17.5	INVALIDITY OF PARTICULAR PROVISIONS	27
	17.6	NOTICES	27
	17.7	PROMOTIONAL EVENTS; ACCESS	27
	17.8	INTENTIONALLY OMITTED	27
	17.9	GOVERNING LAW	27

	17.10	DEFINITION OF TERM	27
	17.11	PARAGRAPH HEADINGS	27
	17.12	ESTOPPEL CERTIFICATE OF LANDLORD	27
	17.13	ESTOPPEL CERTIFICATE OF TENANT	28
	17.14	RELATIONSHIP OF THE PARTIES	28
	17.15	AUTHORITY	28
	17.16	COMPLETE AGREEMENT	28
	17.17	LIMITATION OF LANDLORD'S LIABILITY	29
	17.18	HOLDOVER	29
	17.19	BROKER'S COMMISSION	29
	17.20	SURVIVAL OF OBLIGATIONS	29
	17.21	FORCE MAJEURE	29
	17.22	RADIUS RESTRICTION	29
	17.23	TAXES ON LEASEHOLD	29
	17.24	SUBORDINATION, ATTORNMENT	29
	17.25	COVENANT OF QUIET ENJOYMENT	30
	17.26	SHORT FORM LEASE	30
	17.27	LANDLORD'S DEFAULT	30
	17.28	COVENANTS OF LANDLORD	30
	17.29	NOTICE TO MORTGAGEE	31
	17.30	STATUS REPORTS	31
	17.31	ASSIGNMENT OF THE LEASE TO MORTGAGEE	31
	17.32	ENVIRONMENTAL	31
	17.33	INTENTIONALLY OMITTED	33
	17.34	LANDLORD'S TITLE	33
	17.35		33
	17.36	PARKING	33
	17.37	EASEMENTS	33

ARTICLE XVIII

	RIGHTS OF EXTENSION		33

ARTICLE XIX

	RIGHT OF FIRST REFUSAL		34

ARTICLE XX

	LEASEHOLD MORTGAGE		34
	20.1	LEASEHOLD MORTGAGE	34
	20.2	EFFECT OF TERMINATION OF LEASE ON LEASEHOLD MORTGAGE .	36

iii

SHOPPING CENTER LEASE

AGREEMENT made as of the date set forth below between JOSEPH I LIMITED PARTNERSHIP (hereinafter referred to as "Landlord") and EMBASSY BANK FOR THE LEHIGH VALLEY (hereinafter referred to as "Tenant") with respect to the Premises, as hereinafter defined, which is a part of a shopping center (the "Shopping Center"), located on Corriere Road and Route 248 in Lower Nazareth Township, Pennsylvania.

In consideration of one dollar ($1.00) and other good and valuable consideration, receipt of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:

ARTICLE I

BASIC LEASE PROVISIONS AND ENUMERATION OF EXHIBITS

1.1 INTRODUCTION. The following sets forth basic data and identifies Exhibits referred to in this Lease, and, certain definitions of terms referred to herein.

1.2 BASIC DATA.

Execution Date: March 13, 2009

Landlord: JOSEPH I LIMITED PARTNERSHIP

Present Mailing Address of

Landlord: 1510 Bangor Road

Bangor, PA 18013

Tenant: EMBASSY BANK FOR THE LEHIGH VALLEY

Present Mailing Address of

Tenant: 100 Gateway Drive

Bethlehem, PA 18017

Premises Leasable Floor Area: Approximately 2,700 square feet

Lease Term:

180 calendar months (15 years) plus the partial month, if any, immediately following the Rent Commencement Date, together with two (2) five (5) year options, and one (1) four (4) year, eleven month option, if exercised by the Tenant, provided however that in no event shall the term of this Lease extend beyond a period of twenty-nine (29) years and eleven (11) months.

Tenant's Construction and Fixturing Period:

Six (6) months after the delivery of the building pad as evidenced by a Pad Delivery Notice to be sent by Landlord to Tenant in the form annexed hereto as Exhibit "D".

Minimum Rent:

During the initial term of this Lease (15 years plus the partial month, if any) immediately following the Rent Commencement Date as hereinafter defined in Section 3.1 (a) of this Lease, the Tenant shall pay to the Landlord the following annual minimum rent ("Minimum Rent") payable in the following equal monthly installments in advance on the first day of each and every month.

	MINIMUM	MONTHLY
YEAR	RENT	INSTALLMENT
1-5	$ 80,000.00	$ 6,666.67
6-10	$85,000.00	$7,083.33
11-15	$95,000.00	$7,916.67

During the first five year option term, if exercised, the Tenant shall pay to the Landlord the following Minimum Rent payable in the following equal monthly installments in advance on the first day of each and every month:

	MINIMUM	MONTHLY
YEAR	RENT	INSTALLMENT
16-20	$105,000.00	$ 8,750.00

During the second five year option term, if exercised, the Tenant shall pay to the Landlord the following Minimum Rent payable in the following equal monthly installments in advance on the first day of each and every month:

	MINIMUM	MONTHLY
YEAR	RENT	INSTALLMENT
21-25	$115,000.00	$9,583.33

During the four (4) year, 11 month option term, if exercised, the Tenant shall pay to the Landlord the following Minimum Rent payable in the following equal monthly installments in advance on the first day of each and every month:

	MINIMUM	MONTHLY
YEAR	RENT	INSTALLMENT
26-29 years	$125,000.00	$10,416.67
11 months

All Minimum Rent and Additional Rent shall be paid by the Tenant to the Landlord without demand, deduction, set-off or counterclaim, except as specifically provided for in this Lease. If the Minimum Rent or any Additional Rent is not received by Landlord within ten (10) days of the date it is due, Tenant shall also pay to Landlord a late fee of $500.00 plus any other interest as provided in Paragraph 17.4 herein.

Use:

(a)

Solely for the purpose of operating a retail financial institution (including drive-thru service windows and/or automatic tellers and all services or products which may be permitted under applicable Federal and State Banking Laws). It is understood that the Tenant may not use the Premises as hereinafter defined for any retail purposes which are otherwise prohibited by any other leases in the Shopping Center or which violate any prohibited or exclusive uses, as shown on Exhibit "U" attached hereto, or which violate any exclusive uses which may hereinafter be granted to other tenants in the Shopping Center, or which compete with any other existing use in the Shopping Center provided that Tenant shall not be prevented from operating the Premises for the permitted use set forth above.

1.3

ENUMERATION OF EXHIBITS. The following Exhibits are a part of this Lease, are incorporated herein by reference, attached hereto, and to be treated as apart of this Lease for all purposes. Undertakings contained in such Exhibits are agreements on the part of Landlord and Tenant, respectively, to perform the obligations stated therein to be performed by Landlord and Tenant, as and where stipulated therein.

Exhibit "S". A plan showing the location of the leased premises (the "Premises"), which term means both the land demised to Tenant under this Lease constituting such location and improvements constructed or to be constructed thereon together with the area constituting the drive-thru lanes, which Premises as shown on Exhibit "S" as the red hatched area. References to the building mean the building improvements which are

a part of the Premises (the "Building"). The plan also shows the area surrounding the Building which, except for the drive-thru lanes, shall not be deemed part of the Premises but upon which Tenant shall have certain construction and maintenance obligations as set forth herein ("Building Perimeter"), which Building Perimeter is shown on Exhibit "S" as the red hatched area. Exhibit "S" also shows the boundaries of the Shopping Center ("Shopping Center"), and buildings to be constructed thereon, or building area locations in which other buildings may be constructed. Specifically included in the Premises are all canopies extending from the walls of the Building. All walks adjacent or contiguous to such walls, and ramps adjacent or contiguous to such walls, any emergency exits and handicapped ramps which are constructed by Tenant for its use shall be part of the Premises. Exhibit "S" pursuant to Section 17.36 hereof also shows the ten (10) parking spaces over which Tenant has exclusive parking and the fourteen (14) parking spaces over which Tenant has non-exclusive parking. Tenant is also granted rights of ingress and egress over the Access Drive(s) as shown on Exhibit "S" as the blue hatched area, together with the right to bring utilities, including water and sewer lines, to the Building in locations selected by Landlord

Exhibit "C". Commencement Agreement.

Exhibit "D". Pad Delivery Notice.

Exhibit "L". Description of Landlord's Work.

Exhibit "T". Description of Tenant's Work (including prototype plans and specifications of proposed building).

Exhibit "T-l". Tenant's Signs.

Exhibit "T-2". Monument Signs.

Exhibit "U". List of Prohibited Uses and Exclusive Uses Accorded to Tenants of the Shopping Center.

Exhibit "V". Form of Subordination, Non Disturbance and Attornment Agreement. Exhibit "M". Form of Memorandum of Lease.

1.4	CERTAIN DEFINITIONS. As used herein, the terms set forth below have the following meanings:

(a) "Common Areas" - See Section 16(a).

(b) "Premises" - See Section 1.3.

(d) "Building" - See Section 1.3.

(e) "Building Perimeter" - See Section 1.3.

ARTICLE II

DESCRIPTION OF PREMISES AND APPURTENANT RIGHTS

2.1	LOCATION OF PREMISES. Landlord hereby demises and leases Tenant and Tenant hereby accepts from Landlord, the Premises shown on Exhibit "S" as the red hatched area as those to be occupied by Tenant.

2.2

APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use and permit its customers to use in common with others lawfully entitled thereto, without any charge therefor, the Access Drive(s) as shown on Exhibit "S" for ingress and egress, public or common areas, not including buildings, sidewalks, parking areas, roadways in the Shopping Center (collectively, the "Common Areas" as more fully hereinafter defined), but such rights shall always be subject to reasonable, uniform rules and regulations from time to time established by Landlord (subject to Tenant's rights under Section 16(b) hereof) by suitable notice and applicable to all tenants in the Center. Neither Tenant, nor its customers shall be permitted to park in the adjoining parcel.

ARTICLE III TERM OF LEASE

3.1	COMMENCEMENT DATE.

(a)

The term of this Lease shall be the period specified in Section "1.2" hereof as the "Lease Term". The "Rent Commencement Date" of this Lease shall commence on the earlier of (a) the opening for business or (b) six (6) months after the date when Landlord delivers the Building Pad to Tenant provided Landlord has substantially completed all other site work as set forth on Exhibit "L" by the end of such six (6) month period, unless Landlord is prevented by Tenant's failure to complete Tenant's Work as set forth on Exhibit "T", in which event Tenant shall commence paying rent at the end of such six (6) month period notwithstanding that Tenant may not have completed Tenant's Work or opened for business. Landlord will complete Landlord's Work when Tenant has completed such work to enable Landlord to complete its work. If Landlord's Work is not substantially complete by the end of the six (6) month period, not due to Tenant's fault, the Rent Commencement Date, shall be extended until Landlord's Work is substantially complete. If Tenant's building is not complete by the Rent Commencement Date, Tenant shall commence paying rent and all other charges subject to the provisions of this Section 3.1 (a) and the failure to have the building completed shall not be an Event of Default, unless the Tenant's building is not completed by the date provided in Section 3.3(a) below,

(b)

Upon the Rent Commencement Date, the Tenant shall (i) be obligated to commence payment of Minimum Rent, Additional Rent and all other charges required to be paid by the Tenant under this Lease, all of which shall be deemed to be additional rent and (ii) be required to perform all obligations required to be performed by the Tenant under the terms of the Lease (in addition to the obligations required to be performed by the Tenant prior to the Rent Commencement Date).

(c)

As soon as may be convenient after the Rent Commencement Date has been determined, Landlord and Tenant agree to join with each other in the execution of a Commencement Certificate, in the form set forth on Exhibit "C". The Rent Commencement Date and specified term of this Lease shall be stated in said Commencement Certificate.

(d)

It is understood and agreed that at such time as Tenant or its employees, agents, contractors or invitees enter the Premises after the Execution Date and prior to the Rent Commencement Date, for any purpose whatsoever, including without limitation, the performance of Tenant's Work, all of the terms, covenants and conditions of this Lease shall apply to the parties as if the Lease Term had begun at such time excepting those provisions as to Minimum Rent, Additional Rent and any other charges payable by Tenant, which shall go into effect as of the Rent Commencement Date, even if Tenant's Work is not completed. Tenant shall place in its name, any utilities which Tenant requires during the performance of Tenant's Work, and Tenant shall be responsible for any and all utility charges incurred.

3.2	LANDLORD'S WORK AND ESTIMATED OCCUPANCY DATE.

(a)

Subject to delay by causes beyond the reasonable control of Landlord or those set forth in Section 17.21 of this Lease, or attributable to Tenant's action or inaction, Landlord shall use reasonable speed and diligence to perform the work to be performed by Landlord, as specified in Exhibit "L", Landlord's Work shall be performed in accordance with all applicable laws and codes. Landlord's work shall primarily consist of the preparation of the building pad to specifications provided by Tenant and attached hereto as Exhibit "L" and preparation of the Site Work as defined in Exhibit "L".

(b)(l)

When Landlord Substantially Completes the Building Pad (as the term "Substantial Completion" is defined below), Landlord shall give Tenant written notice of Landlord's intent to tender possession of the Building ("Pad Delivery Notice") and Tenant shall have ten (10) business days from receipt of the Pad Delivery Notice to inspect the Building Pad to assure that it complies with all requirements of Tenant's Plans. Upon acceptance of the Building Pad by Tenant or the failure of Tenant to object to Landlord's Work within said ten (10) business day period, Landlord shall have no further responsibility or liability to Tenant for any matters arising out of Landlord's preparation of the Building Pad. Tenant shall give Landlord written notice within the ten (10) business day inspection period of any deficiencies in the Building Pad and upon completion or correction of such deficiencies, Landlord shall promptly provide Tenant with a new Pad Delivery Notice. Landlord agrees to use all reasonable efforts to complete the Building Pad by July 1,2009 (provided all of Tenant's contingencies to this Lease are either satisfied or waived by June 1, 2009), but such date is merely a target date (the "Target Date") and Tenant agrees to accept Landlord's tender of possession when the Building Pad has been completed, provided, however, if Landlord has not delivered the Pad Delivery Notice within ninety (90) days after the Target Date, subject to the matters provided in Section 17.21 of this Lease, Tenant may, upon ten (10) business days written notice to Landlord, complete the balance of Landlord's Work to be completed and bill the actual and reasonable cost thereof to Landlord unless Landlord commences to complete the Building Pad within said ten (10) day period and proceeds with due diligence to complete the same. If Landlord fails to pay Tenant's costs of completing the Building Pad within ten (10) business days after receipt of Tenant's bill, Tenant may deduct such sum plus interest at the default rate as set forth in Section 17.4 of this Lease, from the Minimum Rent, Additional Rent due and owing to Landlord until such bill is paid in full. Notwithstanding the foregoing, Landlord and Tenant agree that if the contingencies to this Lease are either satisfied or waived prior to June 1, 2009, Landlord agrees to use all reasonable efforts to complete the Building Pad within thirty (30) days after the date that Landlord receives written notice confirming all of the contingencies have been either satisfied or waived.

(b)(2)

When Landlord Substantially Completes Landlord's Work, other than the Building Pad, Landlord shall give Tenant written notice of Landlord's intent to tender possession of the Premises ("Notice of Tender") and Tenant shall have ten (10) business days from receipt of the Notice of Tender to inspect Landlord's Work to assure that it complies with all requirements of Tenant's Plans and of this Section "3.2". Upon acceptance of the Landlord's work by Tenant or the failure of Tenant to object to Landlord's Work within said ten (10) business day period, such Landlord's Work shall be deemed substantially complete, Tenant shall give Landlord written notice within the ten (10) business day inspection period of any deficiencies in Landlord's Work and upon completion or correction of such deficiencies, Landlord shall promptly provide Tenant with a new Notice of Tender. Landlord agrees to use all reasonable efforts to complete Landlord's Work, other than the Building Pad, by November 1, 2009 (provided all of Tenant's contingencies are either satisfied or waived by June 1, 2009), and provided that Tenant has completed no later than October 1, 2009 its building construction and completed the installation of its drive-thru canopy, but such date is merely a target date, (the "Remainder Work Target Date") and Tenant agrees to accept Landlord's tender of possession when the Landlord's Work at the Premises has been Substantially Completed; provided, however, if Landlord has not give the Notice of Tender within ninety (90) days after the Remainder Work Target Date, subject to the matters provided in Section "17,21" of this Lease and provided that the delay is not the result of Tenant's failure to complete its building construction and complete the installation of its drive-thru canopy, Tenant may, either upon ten (10) business days written notice to Landlord, complete the balance of Landlord's Work to be completed and bill the actual and reasonable cost thereof to Landlord, unless Landlord commences to complete Landlord's Work within said ten (10) day period and proceeds with due diligence to complete. If Landlord fails to pay Tenant's costs of completing Landlord's Work within ten (10) days after receipt of Tenant's bill, Tenant may deduct such sum plus interest at the default rate as set forth in Section 17.4 of this Lease from the Minimum Rent, Additional Rent due and owing to Landlord until such bill is paid in full. Notwithstanding the foregoing, Landlord and Tenant agree that if the contingencies to this Lease are either satisfied or waived prior to June 1, 2009, the Landlord agrees to use all reasonable efforts to complete Landlord's Work, other than the Building Pad, within thirty (30) days after the date that Tenant has completed its building construction and completed the installation of its drive-thru canopy.

(c)

"Substantial Completion", as used in this Article, shall mean completed subject to minor punch list items which shall be completed by Landlord within thirty (30) days of the Notice of Tender, or completed by Tenant pursuant to Section 3.3 above to such an extent that Tenant may reasonably commence and thereafter continue to perform the work to be performed by Tenant under Exhibit "T" without undue interference with the balance of the work to be performed by Landlord in the Premises, in accordance with Exhibit "L", or unreasonable interference by Landlord with the work to be performed by Tenant in the Premises, in accordance with Exhibit "T".

(d)

Tenant shall reimburse Landlord for any utility, traffic and Township impact fees in an amount not to exceed $15,000.00. Such amount shall be due and payable by Tenant on the Rent Commencement Date,

(e)

This Lease is contingent on Landlord being able to secure proper zoning, site plan and land development approvals. If said approvals are not issued by June 1, 2009, Landlord or Tenant shall be permitted to terminate this Lease upon ten (10) days written notice to the other party in which event this Lease will be deemed terminated as of the date set forth in said notice unless the approvals are received within said ten (10) day period. Landlord and Tenant acknowledge that in the event this Lease is terminated pursuant to this Section 3.2(e) that neither party shall be entitled to reimbursement for any costs they have incurred in connection with this transaction.

3.3	TENANT'S WORK.

(a)

Tenant shall perform, at its own cost and expense, all of the Tenant's Work set forth in Exhibit "T" and all other work required by Tenant under this Section "3.3" and any other provisions of this Lease. It is understood that Tenant shall be obligated to construct the building shown on Exhibit "T", and the sidewalks, canopies, roof drains, drive-thru lanes and all other improvements set forth onExhibit "T". Tenant shall be responsible for obtaining all necessary permits from all governmental authorities in connection with Tenant's Work and Landlord agrees to cooperate with Tenant in obtaining such permits.

Tenant shall construct or cause to be constructed all improvements within the perimeter of the work limit lines designated on Exhibit "S" pursuant to the "Plans" as hereinafter defined. Construction of such improvements shall proceed with reasonable diligence and shall be completed, subject to causes beyond the reasonable control of Tenant or those set forth in Section 17.21 of this Lease, within twelve (12) months after delivery of the Building Pad. Tenant's improvements are hereinafter referred to as "Tenant's Work", shall be constructed pursuant to the final plans and specifications to be provided by Tenant to Landlord for Landlord's approval within thirty (30) days after the execution of this Lease, which Plans are to be annexed hereto as part of Exhibit "T".

Tenant shall provide original final lien waivers from its contractors and all subcontractors within thirty (30) days of the earlier of the date Tenant opens for business or the date Tenant completes its work. Landlord acknowledges that final lien waivers cannot be obtained in advance of the work being completed.

(b)

In addition to the work required to be performed by the Tenant as set forth in Exhibit "T", the Tenant shall, at its sole cost and expense order, install and pay for the installation of all other improvements, fixtures, personal property and equipment (not set forth in Exhibit "L"), necessary, suitable and appropriate for the operation of Tenant's business in the Premises (the "Fixtures and Equipment").

(c)

The Building and all improvements and all leasehold repairs, alterations, additions at any time made by the Tenant at and/or to the Premises or attached to or used in connection with the Premises (all hereinafter collectively called the "Tenant's Improvements") shall be deemed attached to the Premises and shall be deemed to be the property of the Landlord upon the expiration or sooner termination of this Lease. The Tenant may not remove said Tenant's Improvements but said Tenant's Improvements shall remain upon the Premises and upon the expiration or sooner termination of this Lease shall be surrendered with the Premises as a part thereof without disturbance, molestation or injury. Tenant's Fixtures and Equipment shall remain the property of the Tenant at all times and may be removed by the Tenant from the Premises upon the expiration or earlier termination of this Lease. Tenant shall repair any damages caused by the removal of its Fixtures and Equipment.

(d)

Intentionally Omitted.

(e)

Within thirty (30) days after the execution of this Lease, Tenant, at its sole cost and expense, shall prepare final building plans and specifications (the "Plans") in accordance with the prototype plans and specifications included within Exhibit "T". Tenant shall provide the plans to Landlord for its approval which shall not be unreasonably withheld or delayed. Landlord shall within five (5) business days after receipt of such Plans, advise Tenant of any objections to the Plans. Landlord's objections, if any, must be based upon the failure of the Plans to conform to Exhibit "T". Within ten (10) days after receipt of Landlord's objections, if any, Tenant shall revise the Plans and resubmit to Landlord for approval. This process shall continue until the Plans are approved by Landlord. Each party agrees to use reasonable efforts and good faith in connection with the approval process for the Plans. If during any period when the Plans are out for the Landlord's approval, the Plans are not approved or rejected within the time period provided for herein the same shall be deemed approved. If the Plans are not approved by Landlord within ninety (90) days after the execution of this Lease, Landlord shall have the right to terminate this Lease upon ten (10) days written notice which termination shall be deemed null and void if Tenant provides acceptable Plans within said ten (10) day period. The Plans must be prepared and the building constructed in accordance with all applicable building codes, rules and regulations, including fire regulations and in accordance with standards set forth in the Americans with Disabilities Act.

(f)

All work performed by the Tenant with respect to the Premises and the Building Perimeter shall:

(1)

be done as expeditiously as possible, in a good and workmanlike manner and with first-class new materials,

(2)

be done in such manner as will not interfere unreasonably with work being done by the Landlord upon the Premises or any other portion of the Shopping Center,

(3)

be subject to the reasonable inspection of the Landlord or its agents or contractors so long as they do not interfere with such construction,

(4)

be performed only by such contractors or subcontractors as have been duly licensed by the authority having jurisdiction over the appropriate profession,

(5)

be done at the risk of the Tenant, and

(6)

be done in accordance with the applicable laws and requirements of all regulatory authorities having jurisdiction with respect thereto.

(g)

The Tenant agrees at its expense to obtain and maintain for so long as the Tenant's Work continues, builders risk insurance, and public liability insurance in an amount not less than $2,000,000.00 to protect the Landlord as well as the Tenant from and against any and all liability for death of or injury to person or damage to property caused by reason of the conduct of the Tenant's Work and workers' compensation insurance. The Tenant shall deliver to the Landlord certificates evidencing such coverage prior to the commencement of the Tenant's Work which shall name Landlord as an additional insured using ISO Form 20-26. Tenant's contractor and each subcontractor shall provide evidence of liability insurance naming Landlord as additional insured as provided above.

(h)

Tenant shall have the right to enter onto the Premises after the execution of this Lease for purposes of commencing Tenant's Work and conducting any tests it requires in connection therewith, pursuant to Section 3.1(d).

3.4	INTENTIONALLY LEFT BLANK.

3.5	CONTINGENCIES. This Lease is contingent upon satisfaction of the following conditions by June 1, 2009:

(a)

Tenant and Landlord obtaining permits for the development and operation of a bank branch on the Premises in a form and manner acceptable to Tenant (including all desired signs and service windows), including but not limited to, all required municipal, county and state approvals and permits, including PennDOT (if applicable).

(b)

Tenant and Landlord obtaining acceptable title (including recordation of all necessary ancillary lease documents such as a memorandum of lease and all required non-disturbance agreements).

(c)

Acceptable survey provided by Landlord (including confirmation of acceptable and adequate utilities for the operation of the Premises and acceptable access to public roads).

(d)

Acceptable environmental conditions, with a Phase I Environmental Report provided by Landlord.

(e)

Acceptable soil conditions to be verified by Tenant.

(f)

Banking regulatory approval(s) to be secured by Tenant, including the approval of this Lease and the location of the bank branch by the Pennsylvania Department of Banking and the FDIC. In executing this Lease, Landlord grants Tenant and its consultants a license (revocable by Landlord on written notice) to enter the Premises to perform such inspections, provided Tenant delivers an insurance certificate for liability insurance in an amount not less than $1,000,000.00 naming Landlord as additional insured and agrees to indemnify and hold Landlord harmless from any claims, suits, causes of action, costs or expenses (including reasonable attorneys fees) arising out of any personal injury or property damage by Tenant, its agents, employees, consultants or contractors. Tenant shall apply for such regulatory approval within sixty (60) days after the execution of this Lease.

If all of the contingencies set forth above are not satisfied by June 1, 2009, either Landlord or Tenant shall have the right to terminate this Lease on ten (10) days written notice to the other party. If Landlord and/or Tenant cures and/or waives any contingency not satisfied within said ten (10) day notice period then the notice to terminate shall be null and void. Landlord and Tenant acknowledge that in the event this Lease is terminated pursuant to this Section 3.5 that neither party shall be entitled to reimbursement for any costs they have incurred in connection with this transaction.

ARTICLE IV

RENT

4.1

MINIMUM RENT. Tenant agrees to pay to Landlord, at Landlord's mailing address, or at such other place as Landlord shall from time to time designate by notice, monthly, in advance, on the Rent Commencement Date, and on the first day of each and every calendar month during the term of this Lease, a sum equal to the monthly installment of Minimum Rent specified in Section "1.2" hereof ("Minimum Rent"), Minimum Rent for any partial month shall be paid by Tenant to Landlord at such rate, and if the term of this Lease commences on a day other than the first day of a calendar month, the first payment which Tenant shall make to Landlord shall be a payment equal to a proportionate part of such monthly Minimum Rent for the partial month from the Rent Commencement Date to the first day of the succeeding calendar month. Other charges payable by Tenant on a monthly basis, as hereinafter provided, shall likewise be prorated, and the first payment on account thereof shall be determined in similar fashion; and any other provisions of this Lease calling for monthly payments shall be read as incorporating this undertaking by Tenant.

4.2

LEASE YEAR. The term "Lease Year" means, as to the first Lease Year, the period commencing with the Rent Commencement Date and ending on the last day of the twelfth (12th) full month next succeeding the Rent Commencement Date; and thereafter the term Lease Year means each succeeding one (1) year period thereafter. For purposes of reconciling Common Area Maintenance, Landlord may use a calendar year.

ARTICLE V USE

OF PREMISES

5.1	PERMITTED USE.

(a)

Tenant agrees that the Premises and the Building Perimeter shall be used and occupied by Tenant only for the purposes specified as the use thereof in Section "1.2" of this Lease, and for no other purpose or purposes.

(b)

Tenant further agrees to conform to the following provisions during the entire term of this Lease:

(1)

No auction, fire or bankruptcy sales may be conducted within the Premises without the previous consent of Landlord;

(2)

Except as provided below, Tenant may not use any portion of the Common Area adjacent to the Premises, for any retail purpose unless expressly permitted by Landlord; Tenant may not use any outside loudspeakers; Tenant may not use any of the Common Area or any area outside the Premises for the storage of any goods, products or other materials whether in trailers, storage containers or otherwise. During construction of the Improvements, Landlord shall designate a staging area for Tenant's construction in which construction materials may be temporarily stored, provided they are properly screened and secured. Landlord shall not be responsible for any of Tenant's materials or those of its contractors;

(3)

It is expressly understood that the Tenant shall not violate any of the Prohibited and Exclusive Uses set forth on Exhibit "U" attached hereto. Any such violation shall be an Event of Default with a twenty (20) day notice and cure period;

(4)

Until removal is effected, Tenant shall, at its sole cost and expense, keep all garbage or refuse in the Premises or in Tenant's dumpster suitably covered so that the same is not visible to the public and the Tenant shall comply with any and all recycling and other environmental laws in connection therewith; and

(5)

Tenant shall use its best efforts not to perform any act or carry out any practice which may injure the Premises, or any other part of the Shopping Center, or cause any offensive odors or loud noise in violation of municipal requirements or constitute a nuisance or a menace to any other tenant or tenants or other persons in the Shopping Center. Tenant shall cause all deliveries to the Premises to be made at the rear or side of the Premises. No delivery vehicles may be parked, or stopped in front of the Premises to deliver any goods.

(c)

Tenant shall be obligated to operate the Embassy Bank for at least one (1) day as indicated herein. The failure to open for business within twelve (12) months after all approvals are received and Building Pad is delivered shall constitute an Event of Default. It is understood that after the initial opening of the Embassy Bank, there is no covenant by Tenant of continuous operation and as long as Tenant is paying its rent and complying with all other obligations under this Lease, the failure to continuously operate shall not be deemed an Event of Default.

5.2	EXCLUSIVE USE.

Landlord agrees not to lease any other space in the Shopping Center for use as a standalone Bank Branch. This exclusive shall not prohibit other Tenants from having an ATM on its premises or from offering some banking services within its premises, provided such banking services are not such tenant's primary use. If at any time during the term hereof Landlord shall be in violation of this provision, in addition to any other remedies the Tenant may have at law or in equity, the Tenant's obligations for Minimum Rent shall be reduced to fifty percent (50%) of the rate then in effect until such time as such violation is cured. If Tenant exercises an option to extend this Lease, any such existing violation of any exclusive shall be waived by Tenant and Tenant shall commence paying full Minimum Rent. Upon any violation and thirty (30) days written notice to Landlord, Tenant may seek injunctive relief or any other remedy available at law.

ARTICLE VI

ASSIGNMENT AND SUBLETTING

6.1	ASSIGNMENT LIMITATIONS.

(a)

Limitations. Tenant shall be permitted to assign this Lease, in whole or in part, or to sublet all or any part of the Premises, provided that the following conditions are met:

(1)

Tenant remains liable for all obligations under the Lease, as no such assignment or subletting shall be deemed to release Tenant from performance of the covenants on the part of Tenant provided herein; and

(2)

Tenant shall notify Landlord in writing of such assignment or transfer within thirty (30) days prior to the occurrence of such assignment or transfer; and

(3)

no Event of Default shall then exist and no default shall then exist which with the giving of notice or passage of time would become an Event of Default; and

(4)

said assignment or subletting shall not be for the operation of any business which would violate any of Prohibited Uses set forth in this Lease nor violate the terms of any exclusive use now in effect and/or granted by Landlord after the date of this Lease; and

(5)

said assignment or subletting shall be subject to all of the terms and conditions provided in this Lease.

In the event that Tenant so assigns this Lease or sublets the Leased Premises as permitted herein, Tenant shall pay to Landlord all reasonable legal fees incurred by Landlord in connection with the negotiation, drafting and/or review by Landlord's attorneys of the terms and provisions of any instrument of assignment or subletting.

(b)

Tenant shall have the right without the consent of the Landlord to assign this Lease as collateral security to Tenant's lender and to give a Security Interest in Tenant's Fixtures and Equipment to Tenant's Lender.

(c)

Notwithstanding any other terms and conditions of this Lease, no assignment or subletting shall, shall relieve the Tenant of its obligations under this Lease, and the Tenant shall at all times remain liable to fulfill all of the terms, covenants and conditions on the part of the Tenant to be performed under this Lease including, without limitation, the obligation to pay the Minimum Rent and Additional Rent and all other amounts which become due under this Lease.

(d)

In the event of an assignment of this Lease, Landlord shall give to Tenant, i.e. Embassy Bank, a copy of each notice of default at the same time as and whenever any such notice of default shall thereafter be given by Landlord to any assignee, addressed to Tenant, i.e. Embassy Bank, at its address last furnished to Landlord. Tenant, i.e. Embassy Bank, shall thereupon have the same period of time as the assignee does pursuant to the terms of this Lease in which to cure or correct such default. Landlord agrees to accept performance by Tenant, i.e. Embassy Bank, of any covenant, condition, or agreement on the assignee's part to be performed hereunder with the same force and effect as though performed by said assignee. The foregoing cure rights are subject to the rights granted to any leasehold mortgagee.

ARTICLE VII

MAINTENANCE OF BUILDING, ETC.

7.1	LANDLORD'S REPAIR OBLIGATIONS.

(a)

Landlord shall maintain or cause to be maintained, the Shopping Center and all utility lines servicing the Premises and located five (5) feet outside of the Premises, in good order and repair at Landlord's expense (which is reimbursable by Tenant as part of Common Area Maintenance [Article 16] and keep all Access Drive(s) and parking areas in good repair free of potholes, snow, ice and debris including repair, striping or maintenance of the parking lot which shall be part of Common Area Maintenance. Landlord has no obligation to repair or maintain any part of the building, drive-thru lanes or any improvement constructed by Tenant on the Premises.

(b)

If Landlord fails or refuses to make or perform any of the repairs, maintenance or replacements required to be performed by Landlord under this Lease, including Common Area Maintenance and if, Landlord, fails or refuses, within twenty (20) business days after written notice from Tenant to commence (and thereafter complete) or such shorter period in the event of an emergency or if Landlord fails to remove snow and debris after reasonable notice, or complete such repair, maintenance or replacements unless such the same are delayed by weather conditions or force majeure events, then Tenant shall have the right to make such required maintenance, repairs and replacements in which event Landlord agrees that it will on demand pay to the Tenant the cost thereof within thirty (30) days after a receipt of a bill together with copies of all invoices and if Landlord shall fail to make such payment, Tenant shall be entitled to offset the amount due against Minimum Rent, and other amounts due hereunder.

7.2

TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS. Except as otherwise provided in Section "7.1", Tenant covenants and agrees at its sole cost and expense to keep and maintain in good order, condition and repair (which obligation shall include replacements) all interior and exterior portions of the Premises which shall include but shall not be limited to the repair, maintenance, replacement and any required inspection of all exterior and interior structural portions of the building (including the walls, foundation, roof, gutters, downspouts, etc.) and all interior and exterior portions of all doors, plate glass and windows, drive-thru lanes, the Fixtures and Equipment and all other improvements at the Premises and/or used in connection with the Premises, the repair, maintenance and replacement of all carpeting and wall coverings, all signs and awnings of the Tenant, wherever located, permitted by this Lease, the mechanical, electrical, plumbing, heating, ventilating, air-conditioning systems, sprinkler and fire protection systems, grease traps (even if located outside of building). Tenant further agrees to keep the Premises in a clean, sanitary and safe condition in accordance with the requirements of all public authorities having jurisdiction thereof. Tenant further agrees to replace all glass in the Premises. The Tenant has the obligation to maintain and pay for a service and maintenance contract for the heating, ventilating and air-conditioning systems, including routine preventative maintenance, including changing filters, belts and the lubrication of all moving parts from a service contractor authorized to service such systems by the manufacturer. Tenant shall be responsible for all janitorial services at the Premises. Tenant shall be responsible for any and all damages caused to the Premises and/or to third-parties arising out of and/or in connection with any work performed by the Tenant. All work and repairs, maintenance and replacements performed by the Tenant shall be performed in compliance with all Federal, State, local and municipal codes, rules and regulations.

7.3	TENANT'S ALTERATIONS.

(a)

Tenant shall not make any structural or other alterations, improvements and/or additions to the Premises including exterior color or other exterior finishes without first obtaining, in each instance, the written consent of Landlord, upon condition that such alterations, improvements and additions shall be made in accordance with all applicable laws, codes, rules and regulations in a good and first-class workmanlike manner. Prior to any alterations, improvements and additions being performed at the Premises by the Tenant, the Tenant agrees to supply to the Landlord plans and specifications in connection with the same. Notwithstanding the foregoing, the Tenant shall not make any changes, alterations or improvements which in any way impair the structural safety or stability of the Building or the Premises or affect the aesthetics of the exterior portion of the Building or the Premises,

(b)

Tenant shall have the right to erect and maintain antennae and satellite dishes on the roof of the Premises, provided (i) Tenant's plans for the installation and screening of such equipment are previously approved by Landlord which approval shall not be unreasonably withheld or delayed, (ii) Tenant repairs any damage to the roof caused by the making of the roof penetrations, including, but not limited to, the repair of the roof upon the removal of any equipment installed thereon, and (iii) Tenant complies with any applicable laws and ordinances. Landlord agrees to cooperate with Tenant in connection with any application to Lower Nazareth Township.

7.4	UTILITIES.

(a)

Landlord shall be responsible for running all utilities to within five (5) feet of the Building Pad (or to the transformer in the case of electrical service) at its sole cost and expense and Tenant shall pay for connecting such utilities to the building from such point and for the use of all utilities, such as gas, steam, water, sewer and electricity, heating and air-conditioning and all other utilities used by the Tenant at the Premises as separately metered to the Premises.

(b)

Landlord has advised Tenant that presently Met Ed ("Electric Service Provider") is the utility company selected by Landlord to provide electricity service for the Shopping Center. Notwithstanding the foregoing, if permitted by law, Landlord shall have the right at any time and from time to time during the Lease Term to either contract for service from a different company or companies providing electricity service (each such company shall hereinafter be referred to as an "Alternate Service Provider") or continue to contract for service from the Electric Service Provider, so long as the same is at no expense to the Tenant and at a rate competitive with those of Met Ed and the Tenant shares in any premiums or incentive paid to the Landlord for switching to the alternate provider.

(c)

Tenant shall cooperate with Landlord, the Electric Service Provider, and any Alternate Service Provider at all times and, as reasonably necessary, shall allow Landlord, Electric Service Provider, and any Alternate Service Provider reasonable access to the Premises' electric lines, feeders, risers, wiring, and any other machinery within the Premises.

(d)

Unless caused by the negligent act of Landlord, Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant may sustain or incur by reason of any change, failure, interference, disruption, or defect in the supply or character of the electric energy furnished to the Premises, or if the quantity or character of the electric energy supplied by the Electric Service Provider or any Alternate Service Provider is no longer available or suitable for Tenant's requirements, and no such change, failure, defect, unavailability, or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relive Tenant from any of its obligations under the Lease.

7.5

SECURITY. Landlord shall have no responsibility or liability for providing any security for the Tenant or its assets, and Landlord is hereby released from and not responsible for any claims arising out of any thefts, break-ins or other losses incurred by Tenant arising out of any criminal activity, or intentional acts of third parties. Tenant shall be responsible for any and all security to be provided for its facility.

7.6

LIGHTING. Landlord agrees that Tenant shall be permitted to install on its building such lighting and related equipment as is required by all applicable laws and regulations, including but not limited to, any applicable state and/or federal ATM Safety Act. Tenant acknowledges that Landlord is to be provided with a copy of any and all plans and specifications in connection with said installations by Tenant, which shall be done at Tenant's sole cost and expense in accordance with all applicable laws and in a good and first-class workmanlike manner.

ARTICLE VIII

INDEMNITY AND PUBLIC LIABILITY INSURANCE

8.1	TENANTS INDEMNITY.

(a)

Tenant agrees to defend, indemnify and save harmless Landlord from and against all suits, claims or causes of action and any loss, costs and expenses of whatever nature arising from, or claimed to have arisen from, any action, omission or negligence of Tenant, its employees, agents, servants, contractors or invitees or arising from any accident, injury or damage whatsoever caused to any person, or to the property of any person, occurring after the date on which Tenant first enters the Premises to commence its construction work and thereafter which accident, injury or damage occurred, or is claimed to have occurred, at or in connection with the Premises and/or in connection with Tenant's use of the Building Perimeter. In the event Landlord shall be made a party to any litigation or proceeding commenced by or against Tenant (except with respect to suits or litigation commenced by Tenant against Landlord as a result of a breach of this Lease by Landlord), then Tenant shall protect and hold Landlord harmless and shall pay all costs and expenses and reasonable attorneys' fees incurred or paid by Landlord in connection with such litigation or proceeding and shall satisfy any judgment or fines that may be entered against Landlord in such litigation or proceeding.

(b)

Tenant agrees to maintain in full force and effect during the term of this Lease, a policy of comprehensive commercial general public liability insurance under which Tenant is a named insured, and under which the insurer agrees to defend, indemnify and hold Landlord, and those in privity of estate with Landlord, harmless from and against all loss, cost, expense and/or liability arising out of or based upon any and all claims, accidents, injuries and damages mentioned in the first paragraph of this Section "8.1" and otherwise, in the form of such standard coverage from time to time available in the Commonwealth of Pennsylvania. Such policy, which may be a blanket policy covering other premises, shall be non- cancelable with respect to Landlord and Landlord's said designees without thirty (30) days' prior written notice to Landlord, and a duplicate original or certificate thereof and of each renewal or replacement thereof during the term of this Lease shall be delivered to Landlord. The minimum limits of liability of such insurance per occurrence shall be Five Million Dollars ($5,000,000) level limits for bodily injury (or death) and property damage. The Landlord shall be an additional insured on said policy using ISO Form 20-26. The said policy shall contain a contractual indemnity clause. Tenant's insurance shall also include contractual liability coverage products and completed operations liability. Landlord shall review Tenant's insurance policy and provide written approval, if acceptable by Landlord, of same within ten (10) days of receipt.

8.2

INJURY CAUSED BY THIRD PARTIES. Except as provided in Section 8.3 below, to the maximum extent this Lease may be made effective according to law, Tenant agrees that Landlord shall not be responsible or liable to Tenant, or to those claiming by, through or under Tenant, for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Premises or any part of the Shopping Center, or by any other unrelated third parties or for any loss or damage resulting to Tenant or those claiming by, through or under Tenant or its or their property from the breaking, bursting, stopping or leaking of electric cables and wires, and water, gas, sewer or steam pipes or conduits, except that the foregoing shall not apply to any loss or damage resulting from any negligence of the Landlord.

8.3	LANDLORD'S INDEMNITY.

(a)

Landlord agrees to defend, indemnify and save harmless Tenant from and against all suits, claims or causes of action and any loss, costs and expenses of whatever nature arising from, or claimed to have arisen from, any action, omission or negligence of Landlord, its employees, agents, servants, contractors or invitees or arising from any accident, injury or damage whatsoever caused to any person, or to the property of any person, occurring after the date on which Landlord first commences its construction work and thereafter which accident, injury or damage occurred, or is claimed to have occurred, at or in connection with the Premises or the Shopping Center and/or in connection with Landlord's use of the Premises. In the event Tenant shall be made a party to any litigation or proceeding commenced by or against Landlord (except with respect to suits or litigation commenced by Landlord against Tenant as a result of a breach of this Lease by Tenant), then Landlord shall protect and hold Tenant harmless and shall pay all costs and expenses and reasonable attorneys' fees incurred or paid by Tenant in connection with such litigation or proceeding and shall satisfy any judgment or fines that may be entered against Tenant in such litigation or proceeding and shall satisfy any judgment or fines that may be entered against the Tenant in such litigation or proceeding,

(b)

Landlord agrees to maintain in full force during the term of this Lease a policy of public liability and property damage insurance under which Landlord is a named insured, from and against all costs, expenses and/or liability arising out of any and all accidents, injuries and damages mentioned in the first paragraph of this Section "8.3", in the form of such standard coverage from time to time available in the Commonwealth of Pennsylvania. The limits of liability of such insurance per occurrence shall be Five Million Dollars ($5,000,000) level limits for bodily injury (or death) and property damage. The Tenant shall be an additional insured on said policy using ISO Form 20-26. Such policy, which may be a blanket policy covering other premises, shall be noncancelable without thirty (30) days' written prior notice to Tenant and a duplicate or original or certificate and each renewal or replacement thereof shall be delivered to Tenant.

8.4

SCOPE OF INDEMNITY. The indemnity and hold harmless agreements of Landlord and Tenant contained herein shall include indemnity against all costs, and expenses incurred in or in connection with any such claim and the defense thereof, before, during and at trial and any appeal, and each party agrees to provide the other with prompt written notice of any claim as to which such party invokes the indemnity agreement in such party's favor, and shall afford the other party a reasonable opportunity to defend the same.

ARTICLE IX

LANDLORD'S ACCESS TO PREMISES

REIMBURSEMENTS AND RIGHTS OF SELF HELP

9.1

LANDLORD'S RIGHT OF ACCESS. Landlord shall have the right with reasonable prior notice to Tenant and at times reasonably convenient to Landlord and Tenant, and accompanied by a representative of Tenant to make access available to prospective or existing mortgagees or purchasers of any part of the Shopping Center or to inspect the Premises to determine if repairs are required. If repairs are required to be made by Tenant pursuant to the terms hereof, Landlord may by notice demand that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch, after such demand, Landlord may (but shall not be required to do so) make or cause such repairs to be made (at such times and in such manner as to minimize any interference with Tenant's business operations in the Premises), and the Landlord shall not be responsible for any loss or damage to Tenant's business by reason thereof except if such loss or damage arises out of the negligence of Landlord as provided herein. If Landlord makes or causes such repairs to be made, Tenant agrees that it will forthwith, on demand, pay to Landlord the reasonable cost thereof, and if it shall default in such payment, Landlord shall have the remedies provided for the non-payment of rent or other charges payable hereunder. Likewise, if any repairs are required to be made by Landlord under the terms of this Lease, and it fails or refuses to make such repairs, within a reasonable time after notice from Tenant of the need for such repairs, then Tenant shall have the right to make such required repairs in which event Landlord agrees that it will on demand pay to the Tenant the cost thereof. In the event of an emergency where something is required to be done forthwith in order to avoid damage, either party shall have the foregoing right of self-help without the requirement of formal notice; however, this emergency right as well as the foregoing right of self-help shall be carefully and judiciously exercised by either party, it being understood and agreed that wherever possible, the party initially responsible for taking such action should be given sufficient opportunity so to do in order to avoid any conflict with respect to whether or not self-help should have been invoked or with respect to the reasonableness of the expenses thus incurred.

9.2

EXHIBITION OF SPACE TO PROSPECTIVE TENANTS. For a period commencing twelve (12) months prior to the expiration of the term of this Lease, Landlord may, at reasonable times upon notice to Tenant, have access to the Premises accompanied by a representative of Tenant for the purpose of exhibiting the same to prospective tenants.

ARTICLE X

INSURANCE

10.1	FIRE AND EXTENDED COVERAGE INSURANCE.

(a)

Tenant shall keep the Premises and all leasehold improvements installed in the Premises by the Tenant (and all of Tenant's Trade Fixtures and Equipment, Tenant's merchandise, furnishings, equipment, personal property and plate glass, Tenant's wall covering, floor covering, carpeting and drape, and fixtures and equipment installed by Tenant) insured against loss or damage by fire, with the usual extended coverage and all risk endorsements, including flood and earthquake, in amounts not less than the full insurable, replacement value thereof above foundations. Tenant shall also obtain rental interruption insurance for the benefit of the Landlord. Landlord shall be named as an additional insured on said policy using ISO Form 20-26.

(b)

If Tenant fails to obtain or maintain the policy required by section 10.1 (a) above, this shall be considered an Event of Default under this Lease which must be cured upon three (3) days written notice. In the event Tenant fails to maintain the insurance provided for herein, Landlord may obtain such policy and in such event, Tenant agrees to pay Landlord, as Additional Rent, all such insurance premiums separately assessed against the Premises or Tenant's Allocable Share, if such insurance is contained in a blanket policy covering the Shopping Center, as computed under Section "12.3", of any such insurance premiums for the Premises as computed under Section "12.3", as estimated by Landlord. In addition, Tenant shall pay to Landlord its Allocable Share of such premiums relating to the Common Areas, within twenty (20) days after Tenant receives a bill for such premium from the Landlord. For the insurance years in which this Lease commences and terminates, the provisions of this paragraph shall apply and Tenant's liability for its Allocable Share of any insurance for such year shall be subject to a pro-rata adjustment based on the number of days of said year(s) during which the term of this Lease was in effect.

10.2	SPRINKLER SYSTEM. The Tenant shall perform and pay for all charges levied or assessed for services and maintenance related to the sprinkler or to fire protection of the said systems servicing only the Premises.

10.3

FIXTURES AND EQUIPMENT INSTALLED BY TENANT. The Tenant shall also at its sole cost and expense, be responsible for carrying insurance against fire and such other risks as are from time to time reasonably required by the Landlord, including, but not limited to a standard "All Risk" policy of property insurance protecting against all risk of physical loss or damage in amounts not less than the replacement cost covering the Fixtures and Equipment, Tenant's merchandise, wall coverings, floor coverings, carpeting, drapes and other equipment and items of personal property. Tenant shall provide to Landlord certificates of insurance (and of each renewal or replacement thereof) evidencing the above. In the event Tenant fails to provide a certificate of insurance evidencing compliance with this Section, Landlord may, but is not obligated to, obtain such insurance and Tenant shall pay to Landlord the premium therefore upon demand.

10.4

INSURANCE RATES. Tenant covenants and agrees that it shall not permit anything to be done in or upon the Premises or bring in anything or keep anything therein, which shall increase the rate of insurance on the Premises and/or the Building and/or the Shopping Center above the standard rate on said Premises and/or Building and/or the Shopping Center for the Permitted Use(s), but if it shall do so, it will promptly pay to Landlord on demand any such increase resulting therefrom, which shall be due and payable on demand as additional rent hereunder.

10.5

NON-SUBROGATION AGAINST TENANT. Landlord hereby releases Tenant or anyone claiming through the Tenant from any liability or responsibility (to Landlord or anyone claiming through or under Landlord by way of subrogation) for any loss or damage to Landlord's property or loss of rents caused by fire or other risks covered, or required hereunder to be covered, in Landlord's fire policies and in Landlord's policies of rental insurance, if any, even if such loss or damage shall have been caused by the fault or negligence of Tenant (or its agents or employees) provided, however, that this release shall apply and be effective if and only so long as the loss or damage in question shall be covered, or under the Landlord's said insurance required hereunder would have been covered, by a policy or policies containing a clause or endorsement substantially to the effect that any such release by the insured shall not adversely affect, impair, or prejudice the right of the insured to recover for such loss or damage. Landlord agrees to use its best efforts to have such policies contain such clause or endorsement without any extra charge or premium therefor, but if there shall be any extra charge or premium, Landlord shall be excused from obtaining or maintaining such clause or endorsement in said policies unless Tenant shall promptly after notice reimburse Landlord for such extra charge or premium. Upon request of Tenant, Landlord shall furnish Tenant with evidence of the inclusion of such clause or endorsement in such policies; and Landlord shall notify Tenant if such clause or endorsement is thereafter deleted from such policies or any renewals thereof.

10.6

NON-SUBROGATION AGAINST LANDLORD. Tenant hereby releases Landlord or anyone claiming through the Landlord from any liability or responsibility (to Tenant or anyone claiming through or under Tenant by way of subrogation) for any loss or damage to Tenant's property or loss of income caused by fire or other risks covered, or required hereunder to be covered, in Tenant's fire policies and in Tenant's policy of business interruption insurance, if any, even if such loss or damage shall have been caused by the fault or negligence of the Landlord or its agents or employees; provided, however, that this release shall apply and be effective if and only so long as the loss or damage in question shall be covered, or under the Tenant's insurance required hereunder would have been covered, by a policy or policies containing a clause or endorsement substantially to the effect that any such release by the insured shall not adversely affect, impair, or prejudice the right of the insured to recover for such loss or damage. Tenant agrees to use it best efforts to have such policies contain such clause or endorsement without any extra charge or premium therefor, but if there shall be any such extra charge or premium, Tenant shall be excused from obtaining or maintaining such clause or endorsement in said policies unless Landlord shall promptly after notice reimburse Tenant for such extra charge or premium. Upon request of Landlord, Tenant shall furnish Landlord with evidence of the inclusion of such clause or endorsement in such policies, and Tenant shall notify Landlord if such clause or endorsement is thereafter deleted from such policies or any renewals thereof.

ARTICLE XI

DAMAGE OR DESTRUCTION

11.1	If the Demised Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Landlord, and this Lease shall continue in full force and effect except as hereinafter set forth.

11.2

Subject to the foregoing provisions of this Section 11, in the event of damage to, or destruction of, the Demised Premises by fire or other casualty, with respect to which Tenant has not terminated this Lease or is not entitled to terminate this Lease, regardless of whether or not the insurance proceeds are sufficient Tenant's responsibility shall be to restore or cause to be restored the affected portion of the Demised Premises, to the extent necessary to permit the restoration and use and enjoyment of the Demised Premises. Tenant's restoration shall be commenced within thirty (30) days of the damage or destruction and receipt of insurance proceeds (but except in the case of an act of God, not later than sixty (60) days after the damage or destruction), and shall be performed diligently.

11.3	ABATEMENT OF RENT AND OTHER CHARGES. The Minimum Rent and any other charges due to the Landlord from the Tenant under this Lease shall not be abated or reduced as a result of damage to the Premises.

ARTICLE XII

TAXES

12.1	REAL PROPERTY TAXES.

(a)

Tenant shall pay all real property and school taxes separately assessed against the Tax Parcel located within Lower Nazareth Township as shown on Exhibit "S". These taxes shall include property tax assessments, water and sewer rent rates and charges, parking and environmental surcharges, and any other governmental charges and all other forms of real property taxes and assessments of every name, nature and description, general and special, ordinary and extraordinary, which may be levied or assessed by any lawful authority against the Premises and the Tax Parcel (collectively called "Real Property Taxes"). The Tax Parcel comprises 23% of the area of the entire tax parcel located in Lower Nazareth Township. Tenant shall pay 23% of the Real Property Taxes associated with the land value only for the Tax Map Parcel and 100% of the Real Property Taxes associated with the Building and all other Improvements on the Tax Parcel. Notwithstanding the foregoing, Tenant shall not be responsible to pay all real property and school taxes separately assessed against the Tax Parcel located within Palmer Township as shown on Exhibit "S".

(b)

Tenant agrees that following the Rent Commencement Date, Tenant shall pay to Landlord, as Additional Rent and within twenty (20) days after receipt of a bill therefor, the amount of Tenant's Allocable Share of all Real Property Taxes, computed as of the Rent Commencement Date for the then current tax fiscal year which have been prepaid by the Landlord. Such amount shall be calculated on the basis of the number of days (from the Rent Commencement Date) remaining in each such current tax fiscal year.

(c)

INTENTIONALLY OMITTED.

(d)

Tenant may seek a reduction in the assessed valuation (for Real Property Tax purposes) of the Tax Parcel at its sole cost and expense.

(e)

Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way of substitution for or in addition to . any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay Tenant's Allocable Share of such tax in the manner provided in Section "12.3".

12.2

PERSONAL PROPERTY TAXES. Tenant shall pay all such taxes which may be lawfully charged, assessed, or imposed upon the personal property and Fixtures and Equipment in the Premises, including taxes on any signs of Tenant located anywhere in the Shopping Center, and Tenant shall pay all license fees which may be lawfully imposed upon the business of Tenant conducted upon the Premises or in connection with the maintenance of any such signs.

12.3	DEFINITION OF TENANT'S ALLOCABLE (OR PRO RATA) SHARE OF INSURANCE

(a)

Tenant's Allocable Share of Insurance Premiums pursuant to Section "10.1" shall be the product of multiplying the amount of said Insurance Premiums separately by a fraction, the numerator of which is the number of square feet in the Tax Parcel as shown on Exhibit "S"and the denominator of which is the square footage of the area in the Shopping Center (not including the parcel noted as Future Shopping Center), Tenant's Allocable Share of Insurance Premiums is 23% currently. In the event that certain tenants in the Shopping Center pay their own Real Property Taxes or Insurance, such tenants shall, nevertheless, be required to pay their proportionate share of Real Property Taxes or insurance assessed covering the Common Areas.

(b)

Tenant's said allocable share of such Real Property Taxes and Insurance charges shall be equitably adjusted for and with respect to the first and last partial tax years, if any, within the Lease Term. Where the applicable tax bills and computations are not available prior to the expiration of the Lease Term, then a tentative computation shall be made on the basis of the previous year's taxes payable by the Tenant pursuant to the provisions hereof and a final computation shall be made promptly after all bills and computations are available for such period.

(c)

Tenant's said allocable share of said Insurance and charges shall be due and payable within twenty (20) days after receipt by Tenant of Landlord's invoice together with a copy of the bills involved and such other information reasonably relating thereto.

ARTICLE XIII

EMINENT DOMAIN

13.1	EFFECT OF CONDEMNATION.

(a)

As used in this Section the word "taking" or "taken" shall be deemed to mean the acquisition or condemnation by Eminent Domain for any public or quasi public use or purpose under any law or by a private purchase in lieu thereof by a public body vested with the power of Eminent Domain.

(b)

If the entire Premises shall be taken, then in such event this Lease shall cease and terminate from the date of title vesting in such public body (subject to the terms and conditions set forth herein).

(c)

If a portion of the building on the Premises or adjacent parking area or access to same, as in the reasonable opinion of Landlord or Tenant, would render the balance of the Premises unsuitable for the purposes of Tenant, shall be taken or if in the reasonable opinion of the Landlord or the Tenant a taking shall result in such a diminution of the parking area in the Shopping Center as would make it economically impracticable to continue to operate the business of the Tenant because of lack of adequate and available parking facilities, or if in the reasonable opinion of the Landlord or the Tenant a taking shall deprive the Premises or the Shopping Center of adequate and convenient motor vehicle access to any of the principal highways serving the Shopping Center, then Landlord or the Tenant, upon written notice to Tenant or Landlord, as the case may be, shall be entitled to terminate this Lease, provided that such notice is given before the last to expire of the thirty (30) day period after the taking authority has taken actual physical possession of any portion of the Premises, said parking area or said highway access and twenty (20) days after notice from Landlord to Tenant or Tenant to the Landlord of the fact of such taking. Should any part of the Premises be so taken and should this Lease not be terminated in accordance with the foregoing provision, Tenant covenants and agrees promptly upon such taking to expend so much as may be necessary of the net amount which may be awarded or granted to it in such proceeding or acquisition and available (subject to the rights of the holder of any mortgages covering the Premises) in restoring the Premises to an architectural unit as nearly like their condition prior to such taking as shall be practicable, subject to zoning and building laws then in existence.

13.2

DIVISION OF AWARD. Out of any award for any taking of Landlord's interest in the Premises, Landlord shall be entitled to receive and retain the amounts awarded for the value of the Ground Lease and Tenant shall have the right to file a claim and/or to obtain an award for the value of the unexpired term of this Lease and all Leasehold Improvements, the building and for the depreciated value of the Fixtures and Equipment and the Tenant's moving expenses and loss of business and the Tenant shall have the right to be a party to the acquisition or condemnation proceeding to make a claim for all of such aforesaid damages.

13.3

ABATEMENT OF RENT AND OTHER CHARGES. In the event of any such taking, a fair and just proportion thereof, shall be suspended or abated pending restoration by Tenant, and in the event this Lease is terminated by reason of such taking any prepaid rent or other charges shall be refunded to Tenant. If this Lease is not terminated by reason of such taking, Tenant shall be entitled to and receive a proportionate reduction in Minimum Rent according to any reduction in the size of the Leased Premises. The base Minimum Rent and all charges due from the Tenant hereunder which are based on the ratio of Tenant's Allocable Share shall also be adjusted downward in the same percentage as Minimum Rent is so reduced.

13.4

In the event that the Landlord or the Tenant decides not to terminate this Lease as aforementioned, the Landlord shall use its best efforts to restore the remaining portion of the Shopping Center (if applicable), other than the Premises which Tenant is responsible to restore, to an architectural unit as nearly like its condition before any such taking as Landlord deems practical (subject to zoning and building laws then in existence). In the event that the Landlord decides to rebuild the Shopping Center (if applicable) and the Tenant has not exercised its right to terminate this Lease as provided for in this Lease, the Tenant shall restore the Premises and/or repair and/or rebuild or replace the Fixtures and Equipment together with any other items used at and/or in connection with the Premises.

ARTICLE XIV

DEFAULT

14.1

(a)

EVENTS OF DEFAULT: The following shall be Events of Default under this Lease:

(1)

Tenant shall neglect or fail to pay any installment of Minimum Rent, Additional Rent or any portion thereof or any other payments due under this Lease after the same shall become due after ten (10) days notice of the failure to make such payment and demand therefor;

(2)

Tenant shall neglect or fail to perform or observe any other covenant, term, provision or condition contained in the Lease on its part to be performed or observed within thirty (30) days after notice of such failure or if more than thirty (30) days shall be required to cure such default because of the nature of the default, if Tenant shall fail to proceed diligently to cure such default after the expiration of such thirty (30) day period;

(3)

The estate hereby created shall be taken on execution or by other process of law;

(4)

Tenant under this Lease shall be declared bankrupt or insolvent according to law, or if any assignment shall be made of the property of Tenant for the benefit of creditors, or if a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of Tenant's property under this Lease by a court of competent jurisdiction, or a petition shall be filed for the reorganization of Tenant under any provisions of the Bankruptcy Act now or hereafter enacted, and such appointment, petition or proceeding is not dismissed within one hundred twenty (120) days after it is begun, or if Tenant shall file a petition for such reorganization, or for arrangement under any provisions of the Bankruptcy Act now or hereafter enacted and providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts; and/or

(5)

Tenant shall fail to open as an Embassy Bank within twelve (12) months after Substantial Completion of the Building Pad, provided that such failure to open is not the result of (i) a delay caused solely by Landlord's failure to complete Landlord's Work or (ii) a force majeure event. Notwithstanding the foregoing, Tenant shall not be relieved from its obligation to Rent and all other charges due hereunder upon the Rent Commencement Date.

(b)

Landlord's Remedies: Upon the occurrence of any Event of Default (notwithstanding any waiver of any former breach of covenant or waiver of the benefit hereof or consent in a former instance), Landlord may, at its option:

(1)

Terminate this Lease and the term hereof upon giving to the Tenant five (5) days written notice of the Landlord's intention to terminate this Lease. This Lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this Lease for the expiration thereof,

If the Tenant shall remain in the Premises after the expiration date of this Lease, the Tenant will be deemed a hold-over tenant and the Tenant agrees that the Landlord shall have the right to immediately commence a summary proceeding for eviction in the proper local court; or

(2)

Immediately, or at any time after the occurrence of an Event of Default, subject to proceedings to regain possession or eviction commenced in the appropriate municipal court, 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 or their effects (forcibly if necessary) without being deemed guilty of any manner of 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.

(3)

Seek damages and avail itself of any remedies in a court of proper and competent jurisdiction as a result of Tenant's default under this Lease,

(c)

Tenant's Obligations After Termination: Tenant covenants and agrees, notwithstanding any termination of this Lease or entry or re-entry by Landlord whether by summary proceedings or otherwise, to pay and be liable for, in advance, for the entire amount of the Minimum Rent and estimated Additional Rent due for the balance of the Lease term, but in the event the Premises be relet by Landlord, Tenant shall be entitled to a credit in the net amount of rent received by Landlord (which may be less than the Minimum Rent herein) in reletting (but not in excess of sums due from Tenant to Landlord under this Lease) for the actual terms of the Lease for any replacement tenant, excluding options, after deduction of all reasonable expenses incurred in reletting the Premises and in collecting the rent in connection therewith, including reasonable attorneys' fees. Such reasonable expenses of reletting shall include, but not be limited to, brokerage commissions, expenses of remodeling and incentive rent or free rent for a period of time. Landlord agrees to use commercially reasonable efforts to mitigate Tenant's damages by attempting to re-let the Premises to another compatible Tenant.

(d)

Litigation Expenses: In the event that Landlord and Tenant are involved in any litigation regarding the performance of any of their obligations under the provisions of this Lease, or in connection with Tenant's or Landlord's default hereunder the unsuccessful party by final order, decree or judgment in such litigation by a court of competent jurisdiction shall reimburse the successful party for all reasonable costs and expenses (including reasonable attorneys' fees and court costs) incurred by such successful party in connection with obtaining such final order, decree or judgment.

(e)

In the event of termination of this Lease as a result of default, or otherwise, the building and all leasehold improvements shall be deemed to be the property of the Landlord and Tenant shall have no further claim or interest in said property.

(f)

Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant acknowledge that Tenant's liability upon a default is subject to the limitations provided in 12 U.S.C. Section 182l(e)(4). Therefore, in the event (a) Tenant, but not its assignees, shall become subject to a bankruptcy proceeding pursuant to Title 11 of the United States Code or similar proceeding during the term of this Lease, or (b) the depository institution operated by Tenant is taken over by any depository institution supervisory authority (hereinafter referred to as the "Authority") during the term of this Lease, Lessor may, in either such event, terminate this Lease only with the concurrence of any receiver or liquidator appointed by such Authority or pursuant to an order of the Court with jurisdiction over such case or proceeding, or upon the expiration of the stated term of this Lease as provided herein, provided that in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Lessor for rent, damages or indemnity resulting from the termination, rejection, or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid rent and additional rent due as of the date of termination.

ARTICLE XV

TENANTS SIGNS

15.1	TENANT'S SIGNAGE RIGHTS.

(a)

Subject to Landlord's approval, Tenant shall have the right to obtain, install, maintain, at its sole cost and expense, the following signs or such signs as may be approved by the Municipality (provided that such signs do not violate any federal, state or municipal codes, rules and regulations and are approved by Lower Nazareth Township);

(1)

The signs located on the building more particularly shown on Exhibit "T- 1" in such location(s) as is shown on Exhibit "T-l" attached hereto;

(2)

Tenant's 4 x 4 monument sign panel shown on Exhibit "T-2" in such location as is shown on Exhibit "S" attached hereto. All signs and any substitutions or replacements thereof shall be subject to Landlord's prior written consent, which shall not be unreasonably withheld and such substitutions or replacements must comply with all local laws and regulations.

(b)

All such signs of Tenant set forth in subparagraph (a) above shall comply with all applicable building codes and zoning laws and regulations, shall advertise only Tenant's business and, shall be constructed and maintained in good repair at Tenant's expense, and Tenant shall pay the cost of any electricity consumed in illuminating such signs. None of the signs referred to in subparagraph (a) above shall be flashing, blinking or of a raceway type. All signs must be channel letters (not box signs).

(c)

The Landlord agrees to procure all necessary permits for the monument sign described herein. The cost of the signs and installation thereof shall be paid by the Tenant. Landlord will bring electric service to the base of the monument sign but shall not supply any transformers.

(d)

Landlord agrees not to erect any additional signs within the Shopping Center which would unreasonably obstruct the view of the Embassy Bank branch from adjacent streets.

ARTICLE XVI

COMMON AREA MAINTENANCE

16.

(a)

Common Areas shall include all areas of the Shopping Center not covered by Buildings, including but shall not be limited to, all parking areas and facilities, roadways, driveways, entrances and exits, truck serviceways, utilities, retaining and exterior walls, sidewalks, open malls, outside courts, landscaped and planted areas, service corridors, service areas, loading docks, public rest rooms, if any, equipment, signs and any special services provided by Landlord for the common or joint use and benefit of all tenants in the Shopping Center, their employees, customers and invitees.

(b)

Landlord shall make available the Common Areas for the common benefit of the tenants and occupants of the Shopping Center. Landlord shall operate, manage, equip, insure, repair and maintain such Common Areas for their intended purposes in a first class manner as Landlord shall reasonably determine. Landlord shall at all times have the right to reasonably determine, reasonably change or reasonably alter the nature, extent, size or location of the Common Areas, provided such alterations do not affect access to or visibility of the Premises and Landlord shall not be subject to liability therefor, nor shall Tenant be entitled to any compensation or diminution or abatement of rent on account of any such determination or change, nor shall any such action be deemed an actual or a constructive eviction of Tenant. It is understood and agreed that Landlord may construct or demolish and reconstruct additional improvements and buildings on the parcels designated as Out Parcels or "Future" or "Small Shops" on the Site Plan but not otherwise in the Common Areas and incorporate such parcels into the Shopping Center which parcels shall be subject to all conditions imposed on all tenants by virtue of the leases entered into by Landlord. In addition, Landlord may erect the monument sign shown on the site plan and other reasonable signs in connection with the Out Parcels provided they do not block the view of Tenant's signs. Landlord shall also have the right to operate a kiosk in the Common Areas but not in front of the Premises in the no-build area, if any, outlined on Exhibit "S".

(c)

Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated from time to time by Landlord, subject to such reasonable regulations as Landlord may from time to time impose uniformly on all Tenants in the Shopping Center. Employee parking areas, if any, for Tenant's employees shall be designated on Exhibit "S". Tenant agrees to abide by such reasonable regulations and to use its best efforts to cause its officers, employees, customers and invitees to conform thereto. Landlord may at any time close temporarily the Common Areas or any portion thereof to make repairs or changes to prevent the acquisition of public rights therein, or to discourage non-customer parking, and may do such other acts in and to the Common Areas as in its reasonable judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas.

(d)

Tenant shall pay all CAM charges relating to the Common Areas shown on Exhibit "S". Tenant shall pay Tenant's CAM in monthly installments of one twelfth (1/12th) of the annual amount of such share as is reasonably estimated by Landlord. After the end of each Lease Year or partial Lease Year, Landlord shall give Tenant a statement (prepared in accordance with Shopping Center Practices, including a detail of all CAM Expenses listed below for which the Tenant is liable, as provided by this Lease) of CAM for that year. The statement shall be binding upon Tenant unless objected to by Tenant within twelve (12) months after it is given. If such statement shows that Tenant's CAM exceeds the monthly installments previously paid to Landlord, then Tenant shall pay Landlord the excess. If such statement shows that Tenant's monthly installments exceeds Tenant's CAM, then the overpayment to Landlord shall be paid by Landlord to Tenant or, at Landlord's election, credited to the next amount due from Tenant to Landlord under this Lease. Provided Tenant is not in monetary or other material default under the terms of this Lease, Tenant shall have the right not more often than once per Lease Year, to conduct an audit, following at least fifteen (15) days written notice and during business hours of Business Days, of Landlord's books and records pertaining to Common Area Maintenance and Real Estate Taxes at the offices of the Landlord. Only one audit is permitted for any Lease Year. Audits must be conducted within six (6) months of receipt of Landlord's summary of CAM changes for any given year. Any errors must be claimed within three (3) months of the Audit or such claim is waived. Tenant's audit shall be at its sole cost and expense unless such an audit reveals an error in Landlord's statement which increased CAM by more than three percent (3%) as disclosed by the audit, in which event Landlord shall pay Tenant within thirty (30) days after demand the reasonable costs of such audit. Tenant shall not have any right to audit Landlord's books and records for any period ending more than twelve (12) months prior to the date the audit notice is given. Notwithstanding anything to the contrary contained herein, Landlord's failure to provide such CAM cost statement to Tenant in a timely manner shall in no way excuse Tenant from its obligation to pay its CAM costs or constitute a waiver of Landlord's right to bill and collect such CAM costs from Tenant in accordance with this clause.

(e)

CAM means all costs incurred or paid by Landlord for the operation, maintenance, replacement and repair of the Common Areas (not the buildings located in the Shopping Center), including but not limited to, landscaping, parking lot repaving (not more than once each 10 years), access road repaving (not more than once each 5 years), repairing and striping, snow removal, pest control, common area utilities, including irrigation water, sanitary clean out and control as to lines servicing the Premises, exterior lighting (including maintenance of fixtures and replacement of light bulbs), removal of common area trash, supplies, security, traffic control devices, the amortized cost of the reasonable purchase or lease of any machinery, equipment or vehicles used in connection with the operation or maintenance of the Common Areas, repair and replacement of on-site water, sanitary and storm sewer lines as to lines servicing the Premises, maintenance of on-site drainage facilities, any governmental impositions or surcharges, repair to retaining walls, maintenance and other personnel performing the above activities (including wages, benefits, unemployment, social security taxes and workers' compensation insurance), pedestrian traffic control and an administrative charge equal to fifteen percent (15%) of the CAM costs. The fifteen percent (15%) CAM administrative charge shall not include CAM costs related to real estate taxes, utilities and insurance payments. CAM also includes the premiums for Landlord's Liability insurance for the Common Areas. Notwithstanding anything to the contrary herein, Tenant shall be responsible for snow removal for the sidewalks surrounding the Premises and for landscaping the areas surrounding the Premises. Landlord agrees to be responsible for snow removal from Tenant's drive-thru area, provided that, such expense shall be included in CAM costs.

Notwithstanding the foregoing, CAM shall not include costs incurred or paid for: repairs and replacement of roofs; structural repairs and replacements to the Buildings; all costs and depreciation and amortization of the initial construction and installation of the Common Areas of the Shopping Center including without limitation, the initial construction of all paving areas, driveways, aisles, sidewalks, traffic and safety equipment signs, landscaping and other improvements; leasehold improvements, negotiating, amending, extending, administering or terminating leases with any tenant including, without limitation, brokerage commissions, architectural or legal services; payments under mortgages or ground leases encumbering all or any part of the Shopping Center; cash reserves for replacement of facilities; curing defects in the construction of the Buildings; capital costs or capital improvements and repaving the entire parking areas more often than once every ten (10) years (repaving once every ten (10) years is a permitted CAM cost) (patching the parking area is a permitted CAM cost); and repaving the entire Access Road more often than once every five (5) years (repaving once every five (5) years is a permitted CAM cost) (patching the Access Road is a permitted CAM cost); repairs and other costs incurred for the sole benefit of any tenant; Landlord's charitable or political contributions; costs of refinancing, selling or otherwise transferring ownership of the Shopping Center and/or improvements thereon; general overhead and administrative expenses not directly related to the operation and management of the Shopping Center; and further provided that any costs incurred with respect to the Common Areas which have been charged to and paid directly by Tenant or another tenant (as part of Tenant's Pro Rata Share or another tenant's share of CAM) and which have been reimbursed to Landlord from condemnation or insurance awards shall, after deducting Landlord's costs in obtaining such awards, be deducted from CAM for the year in which Landlord receives such payments or awards. Also, upon the development of the "Developer's Future Area" (as depicted on Exhibit "S"), or in the event any other tenant shall utiltize the Access Drive (as depicted on Exhibit "S"), such other tenant shall be responsible for their pro rata share of maintenance, repair and other applicable CAM costs related to such Access Drive.

ARTICLE XVII

MISCELLANEOUS PROVISIONS

17.1

MECHANIC'S LIENS. Tenant agrees to pay, when due, all sums of money that may become due for, any labor, services, materials, supplies, or equipment alleged to have been furnished or to be furnished to or for Tenant, in, upon or about the Premises except that Tenant may in good faith contest bills for such labor, services, materials, supplies or equipment. Notwithstanding the foregoing, Tenant will not permit any mechanics or materialmen or other liens to stand against the Premises or the Shopping Center or Landlord's interest therein. The Tenant agrees to immediately remove or bond off any such liens within thirty (30) days after notice of such lien by Landlord or any other party. Tenant agrees to indemnify and hold harmless Landlord of and from any liability, damages, expenses, fees, penalties, actions, causes of action, suits, costs, claims or judgments arising out of or in connection with any such liens.

If either party has not removed a lien or taken such action with respect thereto which is acceptable to the other party hereto as required in Section 17.1 within thirty (30) days after notice, the party giving notice may discharge same by payment, deposit, bonding against collection against the Premises, order of a court of competent jurisdiction or otherwise and the notified party shall pay the notifying party the amount so paid or deposited, with interest thereon at the Default Rate.

17.2

WAIVER, Failure on the part of either party to complain of any action or non-action on the part of the other party, no matter how long the same may continue, shall never be construed as a waiver by either party of any of its rights hereunder. No waiver at any time of any of the provisions hereof by either party shall be construed as a waiver of any of the other provisions hereunder and a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions.

17.3

DISPUTES. It is agreed that if at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said party to institute suit for the recovery of such sum, and if it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease; if at any time a dispute shall arise between the parties hereto as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation to perform the work is asserted may perform such work and pay the cost thereof "under protest" and the performance of such work shall in no event be regarded as a voluntary performance and there shall survive the right on the part of said party to institute suit for the recovery of the cost of such work, and if it shall be adjudged that there was no legal obligation on the part of said party to perform the same or any part thereof, said party shall be entitled to recover the cost of such work or the cost of so much thereof as said party was not legally required to perform under the provisions of this Lease.

17.4

INTEREST. Any payment to be made pursuant to the provisions of this Lease (other than any amount paid under protest as provided in this Lease) which is not paid within ten (10) days after the date when due shall bear interest from the due date thereof until paid at an annual rate of interest equal to the lesser of (i) the per annum interest rate from time to time publicly announced by The Wall Street Journal (or similar successor print or electronic publication) as the prime rate, plus four percent (4%) or (ii) the highest rate of interest that may lawfully be charged to the party then required to pay interest under this Lease at the Default Rate, not exceeding 18% per annum.

17.5

INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

17.6	NOTICES. Whenever by the terms of this Lease notice shall or may be given either to Landlord or to Tenant, such notice shall be in writing and shall be sent by registered or certified mail, postage prepaid, return receipt requested or by recognized overnight delivery service or by personal service.

If intended for Landlord, addressed to it at the present mailing address of Landlord set forth in Section "1.2" above with a copy to Howard M. Rittberg, Esq., Levene, Gouldin & Thompson, LLP, 450 Plaza Drive, Vestal, New York 13850 (or to such other address or addresses as may from time to time hereafter be designated by Landlord by like notice);

If intended for Tenant, addressed to it at the present mailing address of the Tenant as set forth in Section "1.2" with a copy to Robert H. Jacobs, Esq., 8 Centre Square, Easton, Pennsylvania 18042 (or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice).

All such notices shall be effective when received by the party to whom addressed (or when delivery is refused) after being sent by United States mail within the Continental United States or with such recognized overnight delivery service, provided that the same are received in the ordinary course at the address to which the same were sent. Notice from an attorney acting or purporting to act on behalf of a party shall be deemed to be notice from such party provided that such attorney is authorized to act on behalf of such party. If a party fails to pick up or sign for such notice any notice may then be served personally by a process server who must thereafter sign an affidavit with respect to such service.

17.7

PROMOTIONAL EVENTS; ACCESS. Landlord agrees that Landlord and the Shopping Center manager will advise Tenant and will use reasonable efforts to minimize any adverse effect upon Tenant's business in the Premises resulting from any promotional event intended or likely to draw a large crowd to the Shopping Center.

17.8	INTENTIONALLY OMITTED.

17.9	GOVERNING LAW. This Lease shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Pennsylvania.

17.10

DEFINITION OF TERM. As used in this Lease the words "term" "Term" or "Term of this Lease" shall include any extension of the term, unless otherwise specifically stated.

17.11

PARAGRAPH HEADINGS. The paragraph headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease.

17.12

ESTOPPEL CERTIFICATE OF LANDLORD. Within ten (10) days after request by Tenant or Tenant's Lender, Landlord, from time to time and without charge, shall deliver to Tenant or Tenant's Lender or to a person, firm or corporation specified by Tenant, a duly executed and acknowledged instrument, certifying: (i) that the rents are paid to date, and that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; and (ii) whether Landlord knows or does not know, as the case may be, of any default by Tenant in the performance by Tenant of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any.

Such certification shall not prevent Landlord from thereafter asserting any existing default of which Landlord did not have actual knowledge on the date of execution thereof.

17.13

ESTOPPEL CERTIFICATE OF TENANT, Within ten (10) days after request by Landlord or Landlord's ground lessor or mortgagee, Tenant, from time to time and without charge, shall deliver to Landlord or the requesting party, or to a person, firm or corporation, specified by Landlord, a duly executed and acknowledged instrument, certifying: (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; and (ii) whether Tenant knows or does not know, as the case may be, of any default by Landlord in the performance by Landlord of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any; and (iii) whether or not there are any then existing permitted set-offs or defenses by Tenant, and if so, specifying them; and (iv) the dates to which the Minimum Rent and Additional Rent have been paid.

Such certification shall not prevent Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof.

17.14

RELATIONSHIP OF THE PARTIES. Landlord shall not be responsible for any debts incurred by the Tenant in the conduct of Tenant's business. Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent nor any other provision herein contained, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than Landlord and Tenant.

17.15

AUTHORITY. Each party hereto hereby warrants and represents that it has the necessary power and authority to enter into this Lease and that it has taken all necessary action in order to enter into this Lease. The Tenant and the persons on behalf of the Tenant executing this Lease warrant that the Tenant is authorized to do business in the Commonwealth of Pennsylvania.

17.16

COMPLETE AGREEMENT. This Lease contains and embraces the entire agreement between the parties hereto with respect to the matters contained herein, and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement is in writing and signed by the parties hereto, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Premises, this Lease or the Shopping Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant's execution and delivery of this Lease is based upon Tenant's independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant hereby expressly waives any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understandings or agreements by Landlord or Landlord's representative that are not contained in the express terms of this Lease.

17.17

LIMITATION OF LANDLORD'S LIABILITY. It is understood and agreed that Tenant shall look solely to the estate and property of the Landlord in the Shopping Center for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by the Landlord in the event of any default or breach by the Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed or performed by the Landlord and any other obligation of Landlord created by or under this Lease, and no other property or assets of the Landlord shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant's remedies.

17.18

HOLDOVER.

(a)

It is expressly understood by Tenant that Tenant's right to possession of the Premises under this Lease shall terminate at the expiration or earlier termination of the term, and should Tenant continue thereafter to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall be responsible for any damage, expense, cost or loss which Landlord may incur by reason of such holding over.

(b)

Should Tenant continue to occupy the Premises after the expiration or earlier termination of the term with consent of Landlord, such tenancy shall be from month-to-month, and such month-to-month tenancy shall be under the same terms, covenants and conditions as set forth in this Lease except that the annual Minimum Rent shall be 110% of the rent required to be paid by Tenant during the proceeding Lease Year.

17.19

BROKER'S COMMISSION. It is agreed that no broker brought about or was involved in this transaction except Metro Commercial and Sperry Van Ness. Landlord and Tenant each covenant and agree to indemnify, defend and save the other harmless against any and all claims for brokerage commissions and fees in connection with this transaction alleged to arise from the dealing of any claimant with the respective indemnitor. Landlord will pay the commission due to the Brokers.

17.20

SURVIVAL OF OBLIGATIONS. All obligations of the Tenant for Minimum Rent, Additional Rent and all other obligations of the Tenant and the Landlord of any name, nature and description under and pursuant to the terms and conditions of this Lease shall survive the termination of this Lease provided that said obligation accrued prior to the date of termination and/or said obligation accrues pursuant to the default provisions provided in Article XIV of this Lease.

17.21

FORCE MAJEURE. Neither Landlord nor Tenant shall be held to be in default under the provisions of this Lease in the performance of its obligations hereunder for such period of time as it is prevented from performing the same by reason of acts of God, including adverse weather conditions, strikes, and other causes beyond its reasonable control; provided, however, that financial inability shall never be deemed to be a cause beyond a party's reasonable control.

17.22

Intentionally left blank.

17.23

TAXES ON LEASEHOLD. Tenant shall be responsible for and shall pay before delinquent all municipal, county, federal or state taxes whether enacted now or in the future coming due during or after the Lease Term against Tenant's interest in this Lease or against the Fixtures and Equipment and personal property of any kind owned or placed in, upon or about the Premises by the Tenant.

17.24

SUBORDINATION, ATTORNMENT.

(a)

This Lease shall be subject and subordinate at all times to the lien of any mortgage, deed of trust or other security interest now or hereafter placed upon the Premises and/or on any portion of the Shopping Center, and to all renewals, modifications, amendments, consolidations, replacements, and extensions thereof, provided Landlord obtains from the holder of any and all mortgages, deeds of trust or security agreements now in effect or hereafter placed upon the Premises an agreement that if, by dispossess, foreclosure, or otherwise such holder or any successor in interest or purchaser, shall come into possession of the Premises and/or the Shopping Center, or take over the rights of the Landlord in the Premises and/or the Shopping Center, it will not disturb the possession, use or enjoyment of the Premises by the Tenant, its successors or assigns, nor disaffirm this Lease or the Tenant's rights or estate hereunder, so long as all of the covenants and obligations hereunder of the Tenant are fully performed in accordance with the terms of this Lease and Tenant is not in default under the terms of this Lease. The Tenant shall execute and deliver any instrument which may be reasonably required by Landlord in confirmation of such subordination, promptly upon Landlord's request.

(b)

Tenant shall, in the event of a sale or assignment of Landlord's interest in the Premises or the Building or the Shopping Center, or if the Premises or such Building or Shopping Center comes into the hands of a mortgagee, ground lessor or any other person whether because of a mortgage foreclosure, exercise of a power of sale under a mortgage, termination of the ground lease, or otherwise, attorn to the purchaser or such mortgagee or other person and recognize the same as Landlord hereunder. Tenant shall execute, at Landlord's request, any attornment agreement required by any mortgagee, ground lessor or other such person to be executed, containing such reasonable provisions as such mortgagee, ground lessor or other person requires. No such attornment shall relieve the Landlord from liability for matters arising prior to the date of such attornment.

17.25

COVENANT OF QUIET ENJOYMENT. Landlord covenants and agrees that Tenant, subject to the terms and provisions of this Lease, on payment of the rent and observing, keeping and performing all of the terms and provisions of this Lease on its part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises and any appurtenant rights granted to Tenant under this Lease during the term hereof without hindrance or ejection by any persons and Tenant agrees to permit other tenants at the Shopping Center to quietly and peaceably hold, occupy and enjoy their premises and any appurtenant rights at the Shopping Center.

17.26

SHORT FORM LEASE. Landlord and Tenant agree not to place this Lease on public record. However, Landlord and Tenant agree to execute, deliver and record (the cost of recording to be shared equally) as soon as may be possible after the execution of this Lease a short form or a memorandum of lease in form attached as Exhibit "M" and suitable for recording in accordance with local law or custom, which will not set forth any of the Minimum Rent payable by Tenant hereunder, but which may set forth all or any other parts of this Lease as requested by the Landlord or Tenant. Landlord and Tenant further agree to execute, deliver and record a memorandum of amended lease in accordance with the foregoing which will reflect the terms of any amendment of this Lease, whenever reasonably required by either party,

17.27

LANDLORD'S DEFAULT. Landlord shall in no event be in default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to perform such obligations within thirty (30) days (or, provided that Landlord has promptly commenced and thereafter diligently pursued the correction of such default, such additional time as is reasonably required to correct any such default) after written notice by Tenant to Landlord specifying wherein Landlord has failed to perform any such obligation.

17.28

COVENANTS OF LANDLORD. Anything contained in this Lease to the contrary notwithstanding, after the commencement of the Term of this Lease, it is agreed that all covenants of the Landlord contained in this Lease shall be binding upon the Landlord, its successors and assigns, only with respect to breaches occurring during its and their respective ownership of the Landlord's interest in this Lease, any subsequent owner or owners by accepting conveyance automatically being obligated to fulfill all provisions of this Lease required to be performed by the Landlord during its or their respective ownership of the Landlord's interest in this Lease.

17.29

NOTICE TO MORTGAGEE. If the Tenant is notified by the Landlord or the Landlord's mortgagee that there is a mortgage on the Premises, and is given the name and address of the Landlord's mortgagee, the Tenant will give written notice to the Landlord's mortgagee in same manner as provided in Section 17.6 herein of any default at the time that the Tenant gives notice of such default to the Landlord, and the Landlord's mortgagee shall have the same time period as provided to the Landlord under this Lease or such additional time as such mortgagee may reasonably request, not to exceed an additional thirty (30) days to cure such default of the Landlord. The Tenant shall not have the right to terminate this Lease nor the right to cure such default and deduct the cost of the same from rent, if the Landlord's mortgagee commences or causes to be commenced promptly after such notice the curing of such default, and if the default is cured within such time period after such notice.

17.30

STATUS REPORTS. Recognizing that both parties may find it necessary to establish to third parties, such as accountants, banks, mortgagees, or the like, the then current status of performance hereunder, either party, on the reasonable written request of the other made from time to time, will promptly furnish a written statement on the status of any matter pertaining to this Lease.

17.31

ASSIGNMENT OF THE LEASE TO MORTGAGEE. With reference to any assignment by the Landlord of its interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to or held by a bank, trust company or insurance company holding a mortgage on the Premises, the Tenant agrees:

(a)

That the execution thereof by the Landlord and the acceptance thereof by such mortgagee, shall never be treated as an assumption by such mortgagee of any of the obligations of the Landlord thereunder, unless such mortgagee shall, by written notice sent to the Tenant, specifically otherwise elect; and

(b)

That, except as aforesaid, such mortgagee shall be treated as having assumed the Landlord's obligations thereunder only upon foreclosure of such mortgagee's mortgage or conveyance in lieu thereof and the taking of possession of the Premises and a request from such Mortgagee that Tenant attorn to Mortgagee or its assigns.

17.32

ENVIRONMENTAL.

(a)

Tenant shall, at all times, comply with all local, state and federal laws, rules and regulations governing the use, handling and disposal of Hazardous Material in and at the Premises including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C, §6901 et. seq. (42 U.S.C. §6903) and any additions, amendments, or modifications thereto and the laws of the Commonwealth of Pennsylvania. As used herein, the term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Premises is located or the United States Government, Landlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the Premises and take whatever actions reasonably necessary to comply including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Tenant shall pay all such costs incurred by Landlord ten (10) days after receipt of a bill therefor plus fifteen percent (15%) for administration.

(b)

The Tenant shall be responsible for all damages and clean-up costs caused by Tenant resulting from the leaking, discharging or spilling of any gas, oil or petroleum products or other contaminants or Hazardous Material on or into the Premises and/or on and/or into any adjoining premises and/or into the surrounding environment,

(c)

The Tenant shall defend, indemnify and hold harmless the Landlord of, from and against any and all suits, claims and causes of action and any loss, costs, expenses, fines or penalties (including reasonable attorney's fees), and clean up costs which the Landlord may incur or become liable to pay arising out of the breach by the Tenant of any of its obligations contained in Sections "17.32(a)" and "17.32(b)" above.

(d)

Landlord shall, at all times, comply with all local, state and federal laws, rules and regulations governing the use, handling and disposal of Hazardous Material in and at the Premises including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. §6901 et. seq. (42 U.S.C. §6903) and any additions, amendments, or modifications thereto and the laws of the Commonwealth of Pennsylvania. As used herein, the term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Premises is located or the United States Government. Tenant and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Landlord is complying with the terms of this Section, If Landlord is not in compliance with this Section, Tenant shall have the right to immediately enter upon the Shopping Center and take whatever actions reasonably necessary to comply including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Landlord shall pay all such costs incurred by Tenant ten (10) days after receipt of a bill therefor plus ten percent (10%) for administration.

(e)

The Landlord shall be responsible for all damages and clean-up costs caused by the Landlord resulting from the leaking, discharging or spilling of any gas, oil or petroleum products or other contaminants or Hazardous Material on or into the Premises and/or on and/or into any adjoining premises and/or into the surrounding environment. The Landlord represents that, to its knowledge, there are no gas, oil, or petroleum products or other contaminants or Hazardous Materials located on the property in violation of applicable law. To Landlord's knowledge, (i) there are no underground storage tanks under the Premises, (ii) there is no notice of intent to sue, notice of violation, citation, warning or similar notification under any Environmental Law regarding the Premises, and (iii) there is no investigation or inquiry by any "Governmental Authority" (as hereinafter defined) concerning the Property. "Governmental Authority" shall mean all federal, state, county, municipal and local departments, commissions, boards, bureaus, agencies and offices thereof, having or claiming jurisdiction over all or any part of the Demised Premises or Shopping Center or the use thereof. The Landlord will provide the Tenant with the most recent environmental audit reports in its possession.

(f)

The Landlord shall defend, indemnify and hold harmless the Tenant of, from and against any and all suits, claims and causes of action and any loss, costs, expenses, fines or penalties (including reasonable attorney's fees), and clean up costs which the Tenant may incur or become liable to pay arising out of the breach by the Landlord of any of its obligations contained in Sections "17.32(d)" and "17.32(e)" above.

17.33

INTENTIONALLY OMITTED.

17.34

LANDLORD'S TITLE. Landlord represents that it is well seized of and has good title to the Demised Premises and all improvements located on it on the date of this Lease, free and clear of all liens, encumbrances, easements, tenancies and restrictions except easements and restrictions and liens of record.

17.35

Landlord hereby represents and warrants to Tenant that it has full right, power and authority to enter into this Lease for the term herein granted and Landlord covenants and agrees with Tenant that upon Tenant paying the rent, additional rents and other charges due hereunder, and observing and performing all the terms, covenants and conditions on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the Premises, free from any interference, molestation or acts of Landlord or of anyone claiming by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease.

17.36

PARKING.

(a)

Landlord shall provide for the Shopping Center a number of parking spaces equal to or greater than the minimum number of spaces required under applicable law.

(b)

Landlord shall provide Tenant with ten (10) exclusive parking spaces and fourteen (14) non-exclusive parking spaces (which shall be identified as all parking spaces within the Tax Parcel as shown on Exhibit "S"), provided, however, that Landlord shall not be responsible in any way for preventing customers of other tenants within the Shopping Center or other third parties from parking in such exclusive parking spaces.

17.37

EASEMENTS. In the event that Landlord subdivides the property compromising the Shopping Center, Landlord agrees to execute any required easements as may be necessary to insure Tenant has utility services, access to the parking areas and ingress and egress to and from the Premises.

ARTICLE XVIII

RIGHTS OF EXTENSION

18.

RIGHTS OF EXTENSION. Landlord hereby agrees that Tenant shall have the right to extend the term of this Lease for two (2) periods of five (5) years each and one (1) period of four (4) years, eleven (11) months. The first five (5) year period shall immediately follow the expiration of the initial Lease Term (specified in Section "1.2" above) and the second five (5) year period shall follow the expiration of the first extension term and the four (4) year, eleven (11) month period shall immediately follow such second extension term and shall be at the Minimum Rent and Additional Rent for said respective extension term as set forth in Section "1.2" and upon all of the other terms, conditions and provisions of this Lease; provided, however, the foregoing rights of extension shall be deemed exercised unless Tenant gives Landlord written notice of its election not to extend the term of this Lease no later than six (6) months prior to the expiration of the then current Lease Term. Notwithstanding any of the other terms and conditions set forth in this Article XVIII, the term of this Lease shall not be extended for any option period in the event that the Tenant is in default of any of the terms and conditions of this Lease on the part of the Tenant to be kept, observed and performed beyond any applicable time period in which Tenant may cure the default.

Notwithstanding the aforesaid, the parties understand and agree that, in no event shall the term of this Lease extend beyond a period of twenty-nine (29) years and eleven (11) months.

ARTICLE XIX

RIGHT OF FIRST REFUSAL

19.

If a separate subdivision is obtained for the Tax Parcel by the Landlord and the Landlord offers the Tax Parcel only for sale, then Tenant shall have the Right of First Refusal to purchase the Tax Parcel, including the Premises, upon the same terms and conditions as a bonafide offer (the "Offer") presented by Landlord to Tenant as set forth below. Landlord shall give Tenant notice in writing of the terms and conditions of the Offer and Tenant shall have twenty (20) days to agree to purchase the Tax Parcel upon the same terms and conditions as contained in the Offer. If Tenant fails to respond or declines to purchase the Premises, Tenant shall be deemed to have waived its Right to Purchase the Tax Parcel. If the Tax Parcel is actually sold, this right shall be terminated and of no further force or effect. If Tenant accepts the Offer, it shall close such transaction within thirty (30) days of the date of such acceptance and such acceptance shall be without condition or contingency. If Tenant fails to close on the terms of the Offer which was accepted, Tenant's Right of First Offer shall be deemed waived and Landlord may enforce any rights against the Tenant, including a claim for any losses or damages and the right of specific performance. This Right of First Refusal shall at all times be subject and subordinate to any and all lender financing and shall be subject and subordinate to the sale by any lender of the Tax Parcel to a third party or a purchaser at a foreclosure sale or a deed in lieu of foreclosure. This right shall not apply to the sale of the entire Shopping Center or to a portion of the Shopping Center which includes the Tax Parcel together with other property within, but not all of, the Shopping Center.

ARTICLE XX

LEASEHOLD MORTGAGE

20.1

LEASEHOLD MORTGAGE. Tenant and every successor and assignee of Tenant is hereby given the right by Landlord, in addition to any other rights herein granted, without Landlord's prior written consent, to mortgage its interest in this Lease under a leasehold mortgage one or more times and to assign Tenant's interest under this Lease as collateral security for such mortgage upon the condition that all rights acquired under such mortgage shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights, interest and estate of Landlord herein, none of which covenants, conditions or restrictions are or shall be waived by Landlord by reason of the right so given to mortgage such interest, except as expressly provided herein. If Tenant and/or Tenant's successors and assigns shall mortgage their leasehold interest (a "Leasehold Mortgage") and if the holder(s) of such mortgage (a "Leasehold Mortgagee") shall send to Landlord written notice specifying the name and address of the mortgagee (any such lender that shall have given such notice only if such lender is not an affiliate of Tenant shall be deemed a "Recognized Mortgagee" and any mortgage held by such Recognized Mortgagee, a "Recognized Mortgagee"), Landlord agrees that so long as any such Recognized Mortgage shall remain unsatisfied of record or until written notice of satisfaction is given by the holder to Landlord, the following provisions shall apply;

(a) In the event Recognized Mortgage exercises its right to execute on its security interest in the Lease, Recognized Mortgagee shall acquire all Tenant's rights under this Lease, including options to renew, and shall agree to comply with and otherwise by bound by the terms and conditions of this Lease from and after the effective date of such assignment while (or with respect to any period of time that) Recognized Mortgagee or its designee is in possession of the Demised Premises, Recognized Mortgagee shall cure any monetary and non-monetary defaults of Tenant which arise prior to the date of any assignment of this Lease to Recognized Mortgagee or its designee. In such case, if requested by Recognized Mortgagee, Landlord and Recognized Mortgagee shall cooperate in executing a new lease for the Premises in accordance with this Lease. On request by Recognized Mortgagee, Landlord shall deliver a Landlord's estoppel to Recognized Mortgagee confirming that the Lease is in full force and effect, and whether there are any outstanding defaults.

(b) Except following an event of default, as set forth in Paragraph (d) below, there shall be no cancellation, surrender or modification of this Lease by joint action of Landlord and Tenant without the prior consent in writing of the Recognized Mortgagee;

(c) On request by Tenant, Landlord shall deliver a Landlord's estoppel to Tenant's proposed leasehold mortgagee and to Tenant's Recognized Mortgagee, confirming that the Lease is in full force and effect, and whether there are any outstanding defaults;

(d) Landlord shall, upon serving Tenant with any notice of default, simultaneously serve a copy of such notice upon the Recognized Mortgagee who has given Landlord written notice as aforesaid, which default notice shall be served upon such Recognized Mortgagee in the manner specified in 17.6 of this Lease, Landlord shall only be required to provide written notice of default to Recognized Mortgagee if Landlord is required to provide written notice of default to Tenant. Upon written request by Recognized Mortgagee at any time after Landlord has provided a default notice to Tenant, Landlord will provide written confirmation of Tenant's cure or failure to cure the default. If Tenant shall not cure any such defaults within such time period, the Recognized Mortgagee shall have a period of twenty (20) days more, in the case of a monetary default, and thirty (30) days more, in the case of all other defaults, than is given to Tenant to cure such default (or to commence and diligently pursue such cure), to remedy the default in question and the Landlord shall accept such performance on the part of the Recognized Mortgagee as though the same had been done or performed by the Tenant.

(e) Anything herein contained notwithstanding, while such Recognized Mortgage remains unsatisfied of record or until written notice of satisfaction is given by the Recognized Mortgagee to Landlord, if any

default in the payment of rent or other monetary sum shall occur which, pursuant to any provision of this Lease entitles Landlord to terminate this Lease and if before the expiration of thirty (30) days following the date of service of termination upon such Recognized Mortgagee, any such Recognized Mortgagee shall have notified Landlord, in writing, of its desire to nullify such notice and shall have paid to Landlord all Rent and other payments herein provided for and then in default, then in such event, Landlord shall not be entitled to terminate this Lease due to such monetary default and any notice of termination theretofore given due to such monetary default shall be void and of no effect.

(f) If this Lease shall be terminated because of Tenant's bankruptcy or other default which cannot by its nature be cured by the Recognized Mortgagee, the Recognized Mortgagee, if any, or its assignee or nominee, shall have the right by written notice to Landlord given within thirty (30) days after notice to the Recognized Mortgagee of such termination to enter into a new lease of the Premises with Landlord for the balance of the term remaining as of the date of any such default, on the same terms and conditions as those contained herein and at the rental prevailing under this Lease and with such rental increases thereafter in accordance with the terms of this Lease. Such new lease, by virtue of the recording of this Lease (or a short form or memorandum thereof), shall have priority equal to this Lease, provided that Landlord shall not be deemed to have made any representation regarding such priority.

(g) A Recognized Mortgagee (or its designee or nominee) may become the legal owner and holder of the interest of Tenant under the Lease, including, without limitation, the interest of Tenant in all improvements erected by Tenant on the Premises, by foreclosure or other enforcement proceedings, or by obtaining an assignment of the Lease in lieu of foreclosure or through settlement of or arising out of any pending or threatened foreclosure proceeding, without Landlord's consent and without any obligation to assume the Lease, but subject to the applicable terms and provisions of the Lease. In the event the Recognized Mortgagee becomes the holder of the interest of Tenant under the Lease, the obligations of the Recognized Mortgagee under the Lease shall be nonrecourse, and Landlord shall look solely to the interest of the Recognized Mortgagee in the Premises for the recovery of any judgment against the Recognized Mortgagee, and Landlord hereby covenants and agrees not to bring any action or suit seeking to impose liability on the Recognized Mortgagee beyond its interest in the Premises. Such right of non-recourse shall be personal to the Recognized Mortgagee or other mortgagee and shall not apply to any other assignee, transferee or other holder of the Lease. Further, the Recognized Mortgagee (or its designee or nominee) shall have the right thereafter to assign the Lease to a "Permitted Assignee" (as hereafter defined), without any requirement for prior notice to or consent by Landlord, but subject to the other terms and provisions of the Lease, provided, that, promptly following such assignment, the Recognized Mortgagee or such assignee shall notify the Landlord of such assignment, including the name and address of the assignee. As used herein, "Permitted Assignee" shall mean an assignee who shall operate a business at the Premises which will not violate any of the Prohibited Uses set forth in this Lease nor violate the terms of any exclusive use now in effect and/or granted by Landlord after the date of this Lease.

(h) Upon the delivery to Landlord of a duplicate original of an instrument of assignment containing the assignee's assumption of the Lease (subject to the provisions of the Lease), such assignee of the Recognized Mortgagee shall become Tenant, and shall be substituted for the Recognized Mortgagee as the owner and holder of the Lease for all purposes, as of the effective date of such assignment (and from and after the effective date of such assignment), the Recognized Mortgagee (or its designee or nominee) shall be relieved from all liability under the Lease.

(i) If more than one Recognized Mortgagee has exercised any of the rights afforded by this section, only that Recognized Mortgagee, to the exclusion of all other Recognized Mortgagees, whose Recognized Mortgage is most senior in lien shall be recognized by Landlord as having exercised such right, for so long as such Recognized Mortgagee shall be diligently exercising its rights under this Lease with respect thereto, and thereafter only the Recognized Mortgagee whose Recognized Mortgage is next most senior in lien shall

be recognized by Landlord, unless such Recognized Mortgagee has designated a Recognized Mortgagee whose mortgage is junior in lien to exercise such right. If the parties shall not agree on which Recognized Mortgage is prior in lien, such dispute shall be determined by a title insurance company chosen by Landlord, and such determination shall bind the parties Landlord shall enter into a Landlord-Lender Agreement if so requested by the Recognized Mortgagee, confirming Landlord's agreements hereunder and otherwise in commercially reasonable form, including provisions that may make commercially reasonable modifications to this Lease. If requested by Tenant or Recognized Mortgagee, Landlord shall also cause its fee mortgagee to execute and deliver a lender non-disturbance agreement in substantially the form attached hereto.

20.2

EFFECT OF TERMINATION OF LEASE ON LEASEHOLD MORTGAGE. In the event of termination of this Lease, or of any succeeding lease made pursuant to the provisions of this Section, prior to the stated expiration date thereof, at the request of Leasehold Mortgagee, Landlord will enter into a New Lease of the Premises with the Leasehold Mortgagee, or, at the request of such Leasehold Mortgagee, to a corporation or partnership formed by or on behalf of such Leasehold Mortgagee, or by and on behalf of the holders of notes secured by the Leasehold Mortgage held by such Leasehold Mortgagee, or, at the request of such Leasehold Mortgagee, to such other persons as such Leasehold Mortgagee shall designate (provided that it meets the requirements of an assignee under this Lease), for the remainder of the Term, effective as of the date of such termination of this Lease or any succeeding lease, at the Rent and upon the terms, covenants, and conditions herein contained, subject to the additional conditions listed below;

(a) Such Leasehold Mortgagee makes written request upon Landlord for such New Lease within thirty (30) days from the date of such termination and such written request is accompanied by payment to Landlord of all amounts then due to Landlord.

(b) Such Leasehold Mortgagee pays, or causes to be paid, to Landlord at the time of execution and delivery of the New Lease, any and all sums that would at the time of execution and delivery thereof be due under this Lease, but for such termination and pays or causes to be paid any and all expenses, including reasonable attorneys' fees, court costs, and disbursements incurred by Landlord in connection with any such default and termination, as well as in connection with the execution and delivery of such New Lease, less the net income, if any, collected by Landlord from the use of the Premises subsequent to the date of termination of this Lease and prior to the execution and delivery of the New Lease.

(c) Such New Lease executed and delivered in accordance with the provisions of this Section shall provide that, with respect to each and every sublease that immediately prior to the termination of the Term was superior to the legal operation and effect of the Leasehold Mortgage held by the Leasehold Mortgagee that obtained such New Lease by entering into such New Lease, the tenant thereunder shall be deemed to have recognized the subtenant under the sublease, pursuant to the terms of the sublease, as though the sublease had never terminated but had continued in full force and effect after the termination of the Term of this Lease, and such tenant shall be deemed to have assumed all of the obligations of the sublandlord under the sublease accruing from and after the termination of the Term; provided that the obligation of the tenant under such New Lease on any covenant of quiet enjoyment, express or implied, contained in the sublease shall be limited to the acts of such tenant and those claiming by, under, or through such tenant. Upon execution and delivery of a New Lease, all subleases that may previously have been assigned and transferred to Landlord shall thereupon be assigned and transferred without recourse by Landlord to the new tenant.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

WITNESS the execution hereof, under seal, as of the date first set forth in Section "1.2" above as the date of this Lease, in any number of counterpart copies, each of which shall be an original for all purposes.

	JOSEPH I LIMITED PARTNERSHIP


	By:	/s/ Jeanne Joseph
	Name:	Jeanne Joseph
	Title:	Partner


	EMBASSY BANK FOR THE LEHIGH VALLEY


	By:	/s/ David M. Lobach Jr.
	Name:	David M. Lobach Jr.
	Title:	CEO

COMMONWEALTH OF PENNSYLVANIA )

)ss.:

COUNTY OF NORTHAMPTON )

On the 25th day of March in the year 2009, before me, the undersigned, personally appeared Jeanne Joseph, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City/Town of Easton, State of Pennsylvania

	/s/ Mary A. Dieter
	Notary Public

COMMONWEALTH OF PENNSYLVANIA )

)ss.:

COUNTY OF NORTHAMPTON )

On the 25th day of March in the year 2009, before me, the undersigned, personally appeared David M. Lobach Jr., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City/Town of Easton, State of Pennsylvania.

	/s/ Lorraine A. Serencsits
	Notary Public

EXHIBIT "S"

SITE PLAN

EXHIBIT "C"

COMMENCEMENT AGREEMENT

This Commencement Agreement, made this day of 2009, by and between

(hereinafter called "Landlord") and

(hereinafter called "Tenant").

WITNESSETH:

WHEREAS, Landlord and Tenant have entered into a Lease, covering premises containing approximately square feet located at the .

WHEREAS, Landlord and Tenant have a desire to mutually enter into a Commencement Agreement establishing the actual date of the commencement of the term of said Lease,

NOW THEREFORE, Parties hereto agree as follows:

The date of execution of the Lease for the Premises was 2009.

The "Commencement Date" (commencement of lease term) was 2009.

The term of the Lease by and between Landlord and Tenant dated shall actually commence on . The initial term of said Lease shall terminate on, subject to Tenant's option to renew the term of the Lease for up to additional terms of years each.

IN WITNESS WHEREOF, the parties hereto have executed this Commencement Agreement as of the day and year above written.

Witness:		Landlord:


By:		By:
		Name:
		Title:
		Date:

Witness:		Tenant:

By:		By:
		Name:
		Title:
		Date:

EXHIBIT "D"

PAD DELIVERY NOTICE

BUILDING PAD/CERTIFICATION FORM


Date
Engineer
Surveyor
Grading
Const. Mgr.

CERTIFICATION

I certify that the building pad for the above referenced project, has been constructed in accordance with the Plans and Specifications, dated , prepared by

All earth cuts and fills have been installed competently, properly and have been compacted under the supervision of the below certifying Engineer. The building pad has been acceptably prepared to support the proposed construction.


Engineer (signature)
Date
Registration No.
Expiration Date

EXHIBIT "L"

LANDLORD'S WORK

A. Landlord's Work. Landlord, at its expense, will be responsible for performing all site work within the Tax Parcel excluding the work to be done by Tenant as shown on Exhibit "T", and not including any work upon or within the Pad except as specifically provided in subsection (B) below. Landlord's work will include all grading, drainage and storm water management facilities, driveway and parking area paving, curbing, site lighting and landscaping, other than work to be performed upon and within the Pad, which shall be performed by Tenant except for Landlord's responsibilities set forth in subsection (B).

B. Preliminary Site Work. Landlord will deliver the Pad to Tenant with the "Preliminary Site Work" described in this subsection (B) having been performed and completed, as promptly as possible, but in no case later than sixty (60) days after Landlord received Site Plan approval for the Development Parcel, subject to the terms of this Lease, including, but not limited to, Section 3.2. Landlord will clear the area within the Pad and grade and compact disturbed soil within the Pad to within 2" of its finished subgrade as shown on the Drawings. Such compaction shall be performed to within approximately ninety-five percent (95%) of maximum density, verified by a compaction report delivered to Tenant by Landlord's engineer. Landlord will bring sanitary sewer, electricity, natural gas, telephone and cable conduits, one inch (1") water line, and, if required by the applicable governmental authorities, within five (5) feet of the proposed footprint for the Building, with Tenant's cooperation, arrange for the appropriate utility companies to install conduit for telephone and cable television to the Pad. Any costs of such installation that the utility companies are not required go bear and have not agreed to bear shall be paid by Landlord, based on standard charges for standard installation (which, as to electric service, shall be 120/208 volt 400 amp service, as to water shall be 110 gallons per day, and as to gas shall be 300,000 BTU). Landlord will also complete such other portions of the Landlord's Work (except work to be performed by Tenant) as may be required by the township as a condition precedent for issuance of a building permit for the Building, and/or as may be necessary to provide Tenant with access to the Pad for construction period drainage, and installation of stone base underlying the parking areas around the Pad and connecting the Pad with access to and from Route 248. Landlord's Work shall include installing the curbs abutting the Pad.

C. Final Paving. Tenant shall give Landlord at least sixty (60) days advance written notice of the date when Tenant expects to open for business. Prior to Tenant opening for business, but not necessarily earlier than the opening date of which Tenant has given Landlord at least sixty (60) days prior written notice, subject to force majeure, Landlord shall have installed the finish coat of paving for and completed the striping of, all parking spaces (including the ten (10) exclusive parking areas and the fourteen (14) non-exclusive parking areas).

D. Intentionally left blank.

E. Coordination of Construction. The parties shall cooperate to expedite completion of both Tenant's and Landlord's construction work. To expedite such construction, Landlord and Tenant acknowledge that their respective construction obligations shall be coordinated by performing work simultaneously and jointly in stages, as appropriate.

EXHIBIT "M"

MEMORANDUM OF LEASE

THIS MEMORANDUM OF LEASE dated , 2009 is made by and between ("Landlord"), and ("Tenant").

Recitals:

A. Landlord entered into a certain lease dated (the "Lease") with Tenant covering a portion of those premises commonly known as ("Premises").

B. Landlord and Tenant desire to give notice of the Lease and of the terms, conditions and provisions thereof, including the options to extend the term and the use restriction as set forth therein.

NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

1. Lease Agreement. Landlord has leased to Tenant and Tenant has leased from Landlord the Premises, together with certain rights and appurtenances thereto, upon and subject to the terms and provisions set forth in the Lease, which includes the permitted use of a bank and related uses.

2. Term. The Term of the Lease shall commence on the Rent Commencement Date as defined in the Lease, and unless sooner terminated or extended pursuant to the provisions thereof, expires on the Expiration Date as defined in the Lease.

3. Extension Options. The Lease grants to Tenant the right and option, subject to certain conditions, to extend the Initial Term for .

4. Notice. The purpose of this Memorandum is to give notice of the Lease of all the provisions thereof, including extension options, to the same extent as if fully set forth herein. If and to the extent of any conflict between the provisions of the Lease and those set forth in this Memorandum, the provisions of the Lease shall control.

IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this instrument as of the day and year first above written.

LANDLORD:


TENANT:

COMMONWEALTH OF )

COUNTY OF ) ss:

On this day of , in the year 2009, before me, the undersigned, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose narne(s) are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.


	Notary Public

COMMONWEALTH OF )

COUNTY OF ) ss:

On this day of , in the year 2009, before me, the undersigned, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.


	Notary Public

EXHIBIT "T"

Tenant's Work

Tenant is responsible for all work in connection with the construction of its building, including, but not limited to:

(a)

The building, drive-thru canopy and concrete approach slabs per the plans and specifications to be provided by Tenant and approved by Landlord per the terms of this Lease.

(b)

Sidewalks around the Building or in the Building Perimeter.

(c)

Landscaping around Building Perimeter.

(d)

Backflow preventer, RPZ valves, electrical meters and/or meter cabinets.

(e)

Building signage and monument sign including all electrical connections and required services.

(f)

Sub-base under all concrete.

Tenant shall also cause its contractor to complete and file the "Tranferee/Co-Permittee Application for a General or Individual NPDES Permit for Stormwater Discharges Associated with Construction Activities".

EXHIBIT "T-l"

TENANT'S SIGNS

To be approved by Landlord per the terms of this Lease.

EXHIBIT "T-2"

MONUMENT SIGNS

To be approved by Landlord per the terms of this Lease.

EXHIBIT "U"

Prohibited and Exclusive Uses

The parties hereto agree, however, that no part of the Premises or the Shopping Center shall be used or occupied for the operation of the following:

(a) Stand alone independent bar or cocktail lounge (unless associated with a restaurant or other establishment permitted hereunder or other permitted use).

(b) Adult book store, massage parlor, or other adult entertainment facility or any facility for the sale or display of adjudicated pornographic materials;

(d) Off track betting parlor;

(e) Any "second hand" store whose principal business is selling used merchandise, unless similar to a franchised store such as "Play It Again Sports", thrift shops, salvation army and "goodwill" type stores, and similar businesses;

(f) Mobile home park, trailer court, labor camp, junkyard or stockyard (except that this provisions shall not prohibit the temporary use of construction trailers during periods of construction);

(g) Dumping, disposing, incineration or reduction of garbage (exclusive of dumpsters for the temporary storage of garbage and any garbage compactors, in each case which are regularly emptied so as to minimize offensive odors located in the rear of any building);

(h) any facility for the sale of paraphernalia for use with illicit drugs;

(i) Intentionally left blank;

(j) flea market;

(k) central laundry, dry cleaning plant or Laundromat; provided, however, this prohibition shall not be applicable to on-site service oriented to pickup and delivery by the ultimate consumer, including, nominal supporting facilities, as the same may be found in retail shopping districts in the metropolitan area where the Shopping Center is located;

(1) automobile, truck, trailer, mobile home, or R. V. sales, leasing, display or repair (except that the sale of tires, batteries and products incidental thereto shall be permitted in the outparcel shown on the Site Plan);

(m) living quarters, sleeping apartments, or lodging rooms;

(n) veterinary hospital or animal raising facilities (except that this prohibition shall not prohibit pet shops or any services provided in conjunction therewith or incidental thereto);

(o) funeral home or mortuary;

(p) separate stand-alone newsstand:

(q) any facility using an outside loudspeaker;

(r) any operation primarily used as a warehouse (except mini-warehouses), or for any assembling, manufacturing, distilling, refining, smelting, agricultural, or mining operation;

(s) any carnival, amusement park, or circus or adult, teenage or children entertainment facility or amusement center;

(t) any gas station, car wash or auto repair or body shop;

(u) any arcade, pinball or computer gameroom, unless such area is incidental to the Tenant's or occupant's primary use and has no separate entrance.

Exclusive Uses

Tenant agrees that the Premises shall not violate any of the exclusive uses granted to other tenants in the Shopping Center, as follows:

Applebees

Landlord agrees not to lease any other space in the Center or sell or lease any outparcel to another casual sit-down restaurant, including, but not limited to, TGI Fridays, Ruby Tuesday, Chili's, Bennigan's, Hooter's, Houlihan's, Max and Erma's, O'Charlies Ground Round or other similar restaurants.

EXHIBIT "V"

SUBORDINATION. NONDISTURBANCE AND ATTORNMENT AGREEMENT

Prepared By:

Robert H. Jacobs, Esq.

8 Centre Square

Easton, PA, 18042

(610)253-9389

Return To:

Robert H. Jacobs, Esq.

8 Centre Square

Easton, PA, 18042

(610)253-9389

SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

This Agreement is made as of , 2009, by and between Merchants Bank, with an office at 1250 Braden Blvd. Suite 300, Easton, PA 18040 ("Bank"), Joseph I Limited Partnership, with an office at 1510 Bangor Road, Bangor, PA 18013 ("Landlord"), and Embassy Bank for the Lehigh Valley, with an office at 100 Gateway Drive, Bethlehem, PA 18017 ("Tenant").

BACKGROUND

A. Landlord and Tenant have executed that certain Lease ("Lease"), dated , in connection with that certain premises known as a part of the shopping center located on Corriere Road and Route 248 in Lower Nazareth Township, PA (the "Leased Premises").

B. Landlord has executed and delivered to Bank that certain mortgage ("Mortgage"), dated and duly recorded in the County Recorder of Deeds Office, Instrument # , covering the Leased Premises.

C. Tenant desires to be assured of the continued use and occupancy of the Leased Premises under the terms of said Lease in the event of any foreclosure sale, transfer in lieu of foreclosure, or Landlord bankruptcy, relating to the Mortgage or otherwise affecting the Leased Premises.

D. Bank desires to accommodate Tenant subject to the terms set forth herein.

E. Bank desires that Landlord and Tenant confirm that the said Lease is subordinate to the lien of the said Mortgage.

NOW, THEREFORE, for and in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, agree as follows:

1. Subordination of Lease. The lien of the Lease is, and shall at all times during the term of the Mortgage be, subject and subordinate to the provisions and lien of the Mortgage to the extent of the secured indebtedness under the Mortgage.

2. Attainment by Tenant. Tenant agrees that if the interests of Landlord in the Leased Premises shall be transferred to Bank or to any purchaser pursuant to a foreclosure sale, transfer in lieu of foreclosure, or sale or other transfer pursuant to a Landlord bankruptcy (hereafter, collectively "Purchaser"), Tenant shall be bound to Bank or to such Purchaser under all of the terms, covenants and conditions of the Lease for the balance of the term thereof and any extensions or renewals thereof with the same force and effect as if Bank or such Purchaser were the Landlord under the Lease. Tenant does hereby attorn to Bank or such Purchaser as its substitute landlord, said attornment to be effective and self-operative without the execution of any further instrument by any of the parties hereto, immediately upon Bank's or such Purchaser's succeeding to the interest of Landlord in the Leased Premises. Bank or such Purchaser shall be similarly bound by all the terms and conditions set forth in the Lease as substitute Landlord, and subject to any claims, offsets or other remedies afforded to Tenant as provided in the Lease, except that Bank or such Purchaser shall not be liable or responsible in any manner for any act or omission of a previous landlord (including Landlord).

A. Bank agrees that it shall not name or join Tenant as a defendant in any exercise of Bank's rights and remedies arising under the Mortgage, unless applicable law requires Tenant to be made a party thereto as a condition to proceeding against Landlord. In such case, Bank may join Tenant as a defendant only for such purpose and not to terminate the Lease or otherwise adversely affect Tenant's rights under the same.

B. Bank or such Purchaser shall not be bound by any amendments or modification to the Lease, unless made with Bank's written consent.

C. Bank or such Purchaser shall not be liable or responsible for any payment of rent that Tenant may have made to a prior landlord more than thirty (30) days before the date such payment was due under the Lease.

3. Non-Disturbance. The parties agree that the Lease shall not be terminated and Tenant's use, possession and enjoyment of the Leased Premises shall not be interfered with in the event that Bank or any such Purchaser takes possession of the Leased Premises pursuant to any provisions of the Mortgage or in any foreclosure or other proceeding instituted in connection with the Mortgage or pursuant to a Landlord bankruptcy, so long as Tenant is not in default under the terms and conditions of said Lease.

4. Lease Approval. Bank hereby consents and approves the Lease, including any amendments thereto existing as of the date hereof, and agrees that the exercise by Tenant of the rights, remedies and options provided for therein do not and shall not constitute a default under the Mortgage.

5. Assignment of Rents. In the event Bank, pursuant to an assignment of rents or similar document, gives notice to Tenant that Bank has elected to exercise its rights under such assignment and collect the rents or other charges otherwise payable by Tenant to Landlord under the Lease, Tenant shall thereafter pay to Bank such rents and other charges payable under the Lease, subject to any offsets or counterclaims that Tenant may have as provided in the Lease. Landlord hereby consents to Tenant's payment of the rent and other sums directly to Bank upon Tenant's receipt of any such notice, and releases Tenant from any claim or liability related thereto.

6. Miscellaneous. This Agreement shall bind and benefit the parties, their successors and assigns. This Agreement constitutes the entire agreement among the parties as to the subject matter hereof, and may only be amended by a written instrument executed by all the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

	MERCHANTS BANK ("Bank")
	By:
	Its:


	JOSEPH I LIMITED PARTNERSHIP ("Landlord")
	By:
	Its:


	EMBASSY BANK FOR THE LEHIGH VALLEY ("Tenant")
	By:
	Its:

COMMONWEALTH OF PENNSYLVANIA :

:SS:

COUNTY OF :

On this, the day of , 2009, before me, a Notary Public, the undersigned officer, personally appeared , who acknowledged himself to be the of Merchants Bank ("Bank") and that as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the limited liability company by himself as such officer,

IN WITNESS WHEREOF, I hereunto set my hand and official seal.


	Notary Public

COMMONWEALTH OF PENNSYLVANIA :

:SS:

COUNTY OF :

On this, the day of , 2009, before me, a Notary Public, the undersigned officer, personally appeared , who acknowledged himself to be the of Joseph I Limited Partnership ("Landlord"), and that as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as such officer.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.


	Notary Public

COMMONWEALTH OF PENNSYLVANIA :

:SS:

COUNTY OF NORTH HAMPTON :

On this, the day of , 2009, before me, a Notary Public, the undersigned officer, personally appeared , who acknowledged himself to be the of Embassy Bank for the Lehigh Valley ("Tenant") and that as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the limited liability company by himself as such officer.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.


	Notary Public

COMMERCIAL LEASE AGREEMENT

THIS COMMERCIAL LEASE AGREEMENT (hereinafter called the “Lease”) is dated as of September 1, 2015 by and between ORWIG PROPERTY MANAGEMENT CENTER SQUARE LLC, which has as its address 220 E. Lawn Road, Suite 12, Nazareth, PA 18064, or its assignee or nominee (the “Lessor”)

AND

EMBASSY BANK FOR THE LEHIGH VALLEY, a Pennsylvania financial institution, which has as its address 100 Gateway Drive, Suite 100, Bethlehem, Pennsylvania 18017 (the “Lessee”).

1.IMPROVED LEASED PREMISES. In consideration of the rents, covenants and agreements set forth herein, and subject to the terms and conditions of this Lease, Lessor hereby leases to Lessee those certain premises located at 10 N. Main Street, Nazareth PA (the “Improved Leased Premises”). A description of said Improved Lease Premises is attached hereto as Exhibit “A”.

(a) Lessee’s obligations under this Lease are conditioned upon the approval of this Lease and the location of such bank branch by the Pennsylvania Department of Banking and the FDIC for which Lessee shall diligently and in good faith apply immediately following the execution of this Lease by the parties hereto. In the event such approvals are not obtained within 120 days of the date of this Lease, this Lease shall be null and void and all payments, if any, made by Lessee to Lessor shall be refunded to Lessee without offset.

2.TERM.

(a) The term of this Lease for the Improved Leased Premises shall be ten (10) years (the “Term”), commencing on September 1, 2015, (the “Commencement Date”).

(b) Lessee shall have the option to extend the Term of this Lease for four successive five year terms (except the last such renewal term shall be 59 months, not a full five years) (each, a “Renewal Term”), on the same terms and conditions set forth herein. Lessee may exercise its right to renew the Lease Term by providing Lessor with written notice of its option to renew the Lease not less than nine (9) months prior to the expiration of the then current Term or Renewal Term.

3.USE. Lessee shall use the Improved Leased Premises as an Embassy Bank or any successor bank or, with Lessor’s prior written consent, for any other lawful purpose permitted under zoning and other applicable laws, ordinances, and regulations.

4.RENT.

(a) During the first five years of the Term, Lessee shall pay to Lessor as minimum annual rent the sum of Sixty Thousand Dollars ($60,000.00), payable in equal monthly installments of Five Thousand Dollars ($5,000.00) each. Such minimum annual rent shall be payable in advance, in equal monthly installments on the first day of each calendar month during the term hereof, without demand, offset or deduction, and shall be payable in lawful money of the United States of America. The minimum annual rent during the balance of the initial Term and during each Renewal Term shall increase each year based on increases (if any) in the CPI Index, as more fully described below:

(i) Following the initial five years of the initial Term of the lease (i.e. the initial 5 years), Lessor shall have the right to increase the minimum rent, on an annual basis, based on increases in the Consumer Price Index (“CPI”). For purposes of clarification, the first such increase (if any) may occur on September 1, 2020. The rental increases shall be calculated by multiplying the minimum rental rate paid in the preceding year by a fraction, the numerator of which shall be the CPI for the most recently published month immediately preceding the applicable adjustment date, and the denominator of which shall be the CPI for the same month of the immediately preceding lease year. The annual rent so computed shall be paid during the next twelve months, or for such other term as Lessor elects but in no event less than twelve months. For purposes herein, the term “CPI” means the Consumer Price Index figures published by the U.S. Department of Labor, designated as All Urban Consumers, All Items, U.S. City Average, (1982-1984=100), or such other consumer price index reasonably elected by Lessor, which, in Lessor’s sole discretion, most nearly results in an appropriate index for rent escalation.

(ii) Notwithstanding the above CPI calculation, in no event shall an annual increase in minimum rent exceed three percent (3%).

(b) This Lease is intended to be a “triple net” lease. Accordingly, Lessee agrees to pay as additional rent, all charges for utilities and services which are separately metered or separately assessed against the Improved Leased Premises. As to items which are not separately metered, charged, or assessed (i.e. real estate taxes, property insurance, certain landscape maintenance and snow plowing, etc.), Lessee shall pay its Proportionate Share of Lessor’s cost related to such items. For purposes of this provision, Lessee’s “Proportionate Share” shall be Eighty Percent (80%). It is the parties’ intent that Lessee shall pay all such charges directly to the extent invoices or bills are registered in Lessee’s name. In the event Lessor shall receive any such charges, Lessor shall bill Lessee for any such charges and Lessee shall promptly pay Lessor for such charges upon invoice. In the event of nonpayment of additional rent, Lessor shall have, in addition to all other rights and remedies, all the rights and remedies provided for herein or by law in the case of nonpayment of the minimum rent.

(c) For all purposes under this Lease, rent shall mean both minimum and additional rent. Rent shall be delivered to Lessor at Lessor’s address as set forth above, or at such other place or to such other person as Lessor may designate in writing from time to time.

(d) Any and all rent payments payable under this Lease Agreement shall be paid to Lessor at an account or accounts maintained at Embassy Bank for the Lehigh Valley.

5.ALTERATIONS AND IMPROVEMENTS.

(a) Lessee shall not make or cause to be made any alterations, additions or improvements to the Improved Leased Premises without the prior written consent of Lessor (Lessor acknowledges it has reviewed and approved Lessee’s plans and specifications in connection with its contemplated improvements). All alterations, additions or improvements approved by Lessor shall be made solely at Lessee’s expense by a contractor(s) approved by Lessor, shall be made in a good and workmanlike manner and shall be performed in compliance with all laws, ordinances and requirements of any and all Federal, State, Municipal and/or other authorities, the Board of Fire Underwriters and any mortgages to which the Improved Leased Premises is subject. Any alteration, addition or improvement made by Lessee under this Section 5, and any fixtures installed as a part thereof, shall, at Lessor’s option, become the property of Lessor upon the expiration or other termination of this Lease. Lessor shall have the right, however, to require Lessee to remove such fixtures at Lessee’s cost upon such termination of this Lease, and Lessee shall promptly remove the same and repair any damage to the Improved Leased Premises caused by such removal. Notwithstanding the preceding, Lessee shall not be obligated to remove any vault(s) installed in the Improved Leased Premises.

with Lessor, the parties hereto shall provide for a mechanism of equitably allocating the cost of such utility(s) (i.e. the Proportionate Share allocation referenced above). Lessor shall not be required to furnish to Lessee any utility, janitorial or other service of any kind whatsoever during the Term of this Lease.

7.MAINTENANCE AND REPAIRS. Lessor has made no representations concerning the condition of the Improved Leased Premises. Lessee shall maintain and be responsible for maintaining and repairing all portions of the Improved Leased Premises. Lessee, at its sole cost and expense, shall take good care of the Improved Leased Premises and will maintain the same in good order and condition, ordinary wear and tear excepted, and make all necessary repairs thereto, interior as well as exterior, including and without limiting the generality of the foregoing, roof and structural members, including walls, unless such repairs or maintenance shall be caused by the negligence or willful misconduct of Lessor, either in connection with the construction thereof or by any act or omission subsequent to such construction. Lessee shall be responsible for the routine regular cleaning of the Improved Leased Premises, and shall keep all portions of the Improved Leased Premises in a clean and orderly condition, free of unlawful obstruction, and shall not permit or cause any damage, waste or injury to the building or other improvements on the Improved Leased Premises.

8.REFUSE REMOVAL. Lessee shall provide for its own garbage, rubbish and refuse disposal and agrees to keep the Improved Leased Premises free and clear of debris. Lessee agrees to keep all rubbish, garbage and refuse in covered containers within the Improved Leased Premises (or at such other location identified by Lessor) and to have the same removed regularly.

9.COMPLIANCE. With regard to its use of the Improved Leased Premises, Lessee shall, at its own expense, comply with all laws, rules, orders, regulations, and requirements of all Federal, State, and municipal governments, courts, departments, commissions, boards, and officers having jurisdiction over the Improved Leased Premises, the lawful orders, rules, and regulations of the Board of Fire Underwriters having jurisdiction over the Improved Leased Premises, any mortgages to which the Improved Leased Premises is subject, and any rules and regulations of Lessor. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any governmental law, rule, order, regulation or requirement. Lessee hereby indemnifies and holds Lessor harmless against any and all liability, loss, or damage sustained by Lessor by reason of such contest. Notwithstanding any of the foregoing, Lessee shall promptly comply with any such law, rule, order, regulation or requirement if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to criminal liability for non-compliance therewith.

10.TAXES. Lessee shall pay as and when the same shall become due, its Proportionate Share of real property taxes, assessments and other governmental charges assessed against the Improved Leased Premises during the Term of this Lease. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any such tax, assessment or other governmental charge. Lessee hereby indemnifies Lessor against any and all liability, loss or damage sustained by Lessor by reason of

such contest. Notwithstanding any of the foregoing, Lessee shall promptly pay any such tax, assessment or other government charge if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to any criminal liability for nonpayment thereof. Lessor agrees to promptly forward to Lessee all applicable tax bills when received from any taxing authority to enable Lessee to pay the same at “discount”.

11.SURRENDER OF IMPROVED LEASED PREMISES. Lessee covenants that upon the termination or expiration of this Lease or any renewal thereof, Lessee shall surrender the Improved Leased Premises in good order and condition and shall surrender all keys to the Improved Leased Premises to Lessor at the place then fixed for the payment of rent. This covenant shall survive termination of this Lease.

12.RIGHT OF ENTRY. Upon prior notice and in the presence of an authorized representative of Lessee (whom Lessee agrees to provide upon such notice received from Lessor), Lessor and/or its agents shall have the right to enter upon and inspect the Improved Leased Premises at all reasonable times and to exhibit the Improved Leased Premises to prospective purchasers and prospective tenants (but in this case, only during the last six (6) months of the term of this Lease). Lessor shall be permitted to affix a “To Let” or “For Sale” sign on the Improved Leased Premises during the last ninety (90) days of the term of this Lease in such place as shall not interfere with the business then being conducted at the Improved Leased Premises. Lessor acknowledges that Lessee shall operate the Improved Leased Premises as a bank, and therefore any inspection or entry upon the Improved Leased Premises shall only occur if all appropriate security measures shall be complied with.

13.SIGNS. Lessee shall have the right to install and maintain on the Improved Leased Premises such signs and advertising matter as Lessee may reasonably desire, subject to the prior consent of Lessor. Lessee shall comply with any laws or ordinances with respect to such signs or advertising, and shall obtain any necessary permits. Lessee agrees to maintain such signs or advertising in good condition, and to repair any damage which may be caused by erection, maintenance, repair or removal of such signs or advertising.

14.LIABILITY AND OTHER INSURANCE. Lessee shall, during the entire term hereof, keep in full force and effect policies of commercial general liability and property damage insurance, with respect to the Improved Leased Premises and the business operated by Lessee in and upon the Improved Leased Premises, in which the limits of bodily injury liability and property damage liability shall be mutually agreed upon, provided Lessee’s property coverage shall be not less than 100% replacement value of its leasehold improvements, furniture, fixtures, equipment, merchandise and Tenant personal property located within the Improved Leased Premises. The policy (or policies) shall name Lessor as additional insured, and shall contain a clause that the insurer will not cancel or modify the insurance without first giving the named parties thirty (30) days prior written notice. Copies of the policy or certificates of accord or insurance shall be delivered to Lessor upon the Commencement Date. If Lessee shall not comply with its covenants made in this section, Lessor may, at its option, cause insurance as aforesaid to be issued and in such event, Lessee agrees to pay the premium for such insurance promptly upon Lessor’s demand as additional rent. Lessor shall maintain special form property insurance covering the Improved Leased Premises for 100% of its replacement value (provided

the parties agree Lessee shall be responsible for its Proportionate Share of the insurance premium related thereto).

15.WAIVER OF SUBROGATION. Lessor and Lessee release each other from all claims or liabilities for damage to the Improved Leased Premises or damage to personal property within such Premises, that are covered by the releasing party’s property insurance or that would have been covered by the required insurance if the party fails to maintain the property coverages required by this Lease. The party incurring the loss will be responsible for any deductible or self-insured retention under its property insurance. Lessor and Lessee will notify the issuing property insurance companies of the release set forth in this paragraph and will have the property insurance policies endorsed, if necessary, to prevent invalidation of coverage. This release will not apply if it invalidates the property insurance coverage of the releasing party.

16.INDEMNITY. Lessee hereby agrees to indemnify, hold harmless and defend, at its own expense, Lessor from and against any and all claims, actions, damages, liability, judgments and expenses, including without limitation reasonable attorneys’ fees, which may be imposed upon or incurred by or asserted against Lessor or Lessor's interest in the Improved Leased Premises, by reason of any loss of life, personal injury or claim of injury, or damage to property or claim of damage to property in or about the Improved Leased Premises, howsoever caused, arising out of or relating to the occupancy or use by Lessee, its employees, agents or invitees, of the Improved Leased Premises, unless such claims, damages, liability, judgments and expenses are caused by the negligence or willful misconduct of Lessor. In addition, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all expenses incurred by Lessor arising out of or relating to Lessee’s failure to pay or perform its obligations under this Lease.

17.CASUALTY. In the event that the Improved Leased Premises, or any portion thereof, are damaged or destroyed by any cause whatsoever, Lessee shall commence such restoration as soon as possible after such occurrence, but in no event later than ninety (90) days thereafter, and shall diligently pursue such repair or restoration to completion, with a contractor approved by Lessor. Rent shall be equitably abated based on the area of the Improved Leased Premises rendered untenantable, if any, during the period of such untenantability. The net insurance proceeds, if any, collected by Lessor in connection with any such casualty, will be available to be used by Lessee for restoration of the Improved Leased Premises, subject to Lessor’s reasonable review and confirmation that Lessee is diligently pursuing the restoration provided for in this provision. Notwithstanding the foregoing, if destruction of more than forty percent (40%) of the Improvements on the Improved Leased Premises occurs at any point in the last three (3) years of the then-current Term of the Lease or if any destruction of more than ten percent (10%) of the improvements on the Improved Leased Premises occurs in the last year of the then current Term of the Lease, then Lessee shall have the right to terminate the Lease.

18.EMINENT DOMAIN.

of the Improved Leased Premises, including without limitation the building, site improvements, parking or access, shall be taken under eminent domain or by reason of condemnation to such an extent that the taking materially adversely affects Lessee’s use of the Improved Leased Premises, Lessee shall have the option to terminate this Lease by written notice to Lessor within forty-five (45) days of such taking. If this Lease is not so terminated, Lessee may at its sole cost and expense, and with a contractor acceptable to Lessor, restore the remaining portions of the Improved Leased Premises as Lessee deems necessary or appropriate (subject to applicable law). In such event, rent shall be equitably adjusted commensurate with the partial taking. For purposes of this Section 18, (i) a partial taking shall be deemed to include loss or impairment of access to and from the Improved Leased Premises and (ii) grants or conveyances made in lieu or in anticipation of or under threat of a taking or condemnation shall be deemed a taking. Both parties shall pursue their own damage awards with respect to any such taking, provided however that Lessee shall be entitled to, and nothing herein shall prevent Lessee from seeking, an award for taking of or damage to Lessee’s trade fixtures and any award for Lessee’s moving expenses, so long as said awards do not diminish the award to which Lessor is entitled.

19.DEFAULT. The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:

(a)Lessee shall fail to pay in full when due, any installment of rent or any other sum payable by Lessee hereunder, and such failure shall continue for a period of ten (10) days;

(b)Lessee shall fail to perform or observe (or cause or permit any such failure) any other covenant, term, condition, agreement or obligation to be performed or observed by Lessee under this Lease, and such failure shall continue for twenty (20) days after written notice thereof from Lessor to Lessee; provided however that a failure as described in this Section 19(b) shall not constitute a default if it is curable but cannot with reasonable diligence be cured by Lessee within a period of twenty (20) days, so long as Lessee promptly commences cure and proceeds to cure the failure with reasonable diligence and in good faith.

(c)The insolvency of Lessee, as evidenced by (i) the adjudication of Lessee as a bankrupt or insolvent; (ii) the filing of a petition seeking reorganization of Lessee or an arrangement with creditors, or any other petition seeking protection of any bankruptcy or insolvency law; (iii) the filing of a petition seeking the appointment of a receiver, trustee or liquidator of Lessee or of all or any part of Lessee's assets or property; (iv) an assignment by Lessee for the benefit of creditors; or (v) the levy against any portion of Lessee's assets or property by any sheriff or other officer.

appropriate order of the Court with jurisdiction over such case or proceeding, or upon the expiration of the stated term of this Lease as provided herein, provided that in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Lessor for rent, damages or indemnity resulting from the termination, rejection, or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid rent and additional rent to the date of termination.

20.REMEDIES. Upon the occurrence of any Event of Default, Lessor shall have the following rights and remedies in addition to all other rights and remedies otherwise available at law or in equity:

(a)If Lessee shall at any time fail to pay any sum, charge, or imposition or perform any other act on its part to be performed, then Lessor, after ten (10) days written notice to Lessee and without waiving or releasing Lessee from any obligation hereunder, may pay such charge or sum of money or make any other payment or perform any other act on the Lessee’s part to be made or performed, and may enter upon the Improved Leased Premises for any such purpose, and take all such action thereon as may be necessary therefor. All sums so paid by Lessor and all costs and expenses incurred by Lessor in connection with the performance of any such act, together with interest thereon at the rate of ten percent (10%) per annum from the respective dates of Lessor’s making of each such payment or incurring of each such cost and expense, shall constitute additional rent payable by Lessee under this Lease and Lessor shall have the same remedies for the collection thereof as in the case of a failure to pay rent.

(b)At the option of Lessor and upon written notice to Lessee, this Lease, without waiver of any other rights of Lessor herein, may be terminated and declared void, without any right on the part of Lessee to save forfeiture by payment of any sum due or by performance of any term, covenant, or condition broken and Lessor may re-enter and possess the Improved Leased Premises without demand or notice, with or without process of law, using such reasonable force as may be necessary, without being deemed guilty of trespass, eviction, forcible entry, conversion or becoming liable for any loss or damage which may be occasioned thereby. In such event, Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee’s default including, but not limited to, the cost of recovering possession of the Improved Leased Premises, expenses of reletting, including necessary renovation and alteration of the Improved Leased Premises, and reasonable attorneys’ fees;

(c)Lessor may retake possession of the Improved Leased Premises without terminating the Lease, in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Improved Leased Premises. In such event, Lessor shall be entitled to enforce all of Lessor’s rights and remedies under this Lease, including the right to recover the rent and any other charges and adjustments as may become due hereunder;

(d)At Lessor’s option, the entire rent and other charges which would have become due during the balance of the lease term or renewal thereof shall be accelerated and shall at once become due and payable as if by the terms of this Lease it were all payable in advance, without presentment, demand, notice of nonpayment, protest, notice of protest, or other notice, all of which are hereby expressly waived by Lessee;

(e)Lessee shall pay Lessor a ten percent (10%) late charge for any rent payment not paid when due.

(f) Upon the occurrence of an Event of Default and the exercise by Lessor of any of the remedies set forth above in subsections (b), (c), or (d), Lessor shall use its best efforts to relet the Improved Lease Premises, and shall appropriately credit Lessee for any rents received, after Lessor recovers its reasonable costs incurred by reason of Lessee’s breach and Lessor’s exercise of its rights hereunder.

21.CUMULATIVE REMEDIES. Lessor shall have and may exercise all remedies available to Lessor hereunder and at law and in equity and all such remedies shall be cumulative, concurrent, and nonexclusive, to the extent permitted by law. The waiver of or failure to exercise any one or more rights or remedies shall be wholly without prejudice to the exercise and enforcement of any other right or remedy, whether herein expressly provided for or given by law or in equity.

22.SUBORDINATION AND ATTORNMENT.

(a)Lessee agrees that this Lease shall be subordinate to any mortgages that may hereafter be placed upon the Lessor’s interest in the Improved Lease Premises and to any and all advances to be made thereunder, and all renewals, replacements, and extensions thereof, without the necessity of any further instrument or act on the part of Lessee. Such subordination is contingent upon Lessor executing, and causing Lessor’s mortgagees to execute, a customary subordination and non-disturbance agreement (“SNDA”) providing that Lessee’s rights under this Lease shall not be disturbed provided Lessee is in compliance with the terms of this Lease. Lessor shall also cause any future mortgagee of Lessor to execute a similar SNDA.

(b)Subject to the preceding paragraph, Lessee shall, in the event any proceedings are brought for the foreclosure of any mortgage made by Lessor covering the Improved Leased Premises, attorn to the purchaser upon any such foreclosure and sale and recognize such purchaser as the Lessor under this Lease.

23. ESTOPPEL CERTIFICATE. Both parties agree, within fifteen (15) days after the other party’s written request, to execute, acknowledge and deliver to the requesting party a written instrument in recordable form certifying (i) whether this Lease is in full force and effect and whether there have been any modifications, supplements, side agreements or amendments and, if so, stating such modifications, supplements, side agreements and amendments; (ii) the date to which rent has been paid; (iii) the amount of any prepaid rent and any credit due Lessee if any; (iv) the Commencement Date and whether any option to renew the Term has been exercised and, if so, the day that Renewal Term expires; (v) whether either party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default; and (vi) such other matters as Lessor or Lessor’s mortgagee, or Lessee or Lessee’s leasehold mortgagee (if any) may reasonably require. Any such instrument delivered pursuant to this section may be relied upon by Lessor and Lessee, and any mortgagee

or permitted assignee of any of them, and any prospective purchaser of the Improved Leased Premises.

24.MEMORANDUM OF LEASE AND RECORDING. This Lease is expressly contingent upon Lessor and Lessee executing a Memorandum of Lease hereof, in form reasonably satisfactory to each of them, and Lessee may record such Memorandum of Lease in the office of the Recorder of Deeds of and for Northampton County, Pennsylvania.

25. ASSIGNMENT AND SUBLETTING. Neither Lessee nor its successors or permitted assigns shall assign this Lease or any interest therein, sublet the whole or any portion of the Improved Leased Premises or subject its interest in this Lease to any leasehold mortgage without the prior written consent of Lessor. No assignment or sublease shall release Lessee from its obligations to perform the terms, covenants, and conditions of this Lease.

26.BINDING OBLIGATION. Each and every provision of this Lease shall bind and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

27.PROHIBITED ACTS. Lessee shall not use or operate any equipment or machinery or in any way use the Improved Leased Premises in a way which is harmful to the Improved Leased Premises. Lessee shall not cause or permit any hazardous substances to be utilized at, on or in the Improved Leased Premises except with the prior written consent of Lessor and in strict compliance with all applicable environmental laws, ordinances, rules and regulations. Lessee shall not do or allow to be done any acts, omissions, or activity which would cause the fire, hazard, or any other insurance now in force or hereinafter to be placed on the Improved Leased Premises or building, or any part thereof, to become void, suspended, or rated as a more hazardous risk than at the date of the execution of this Lease. Furthermore, Lessee shall not be permitted to act or conduct business in any way that is against any applicable law.

28.LESSOR’S FURTHER AGREEMENTS.

Lessee is still existing as the same legal entity as on the date of this Lease and has not been sold, merged or acquired, and (ii) Lessee is not in default of any of its obligations under this Lease.

29.CONSTRUCTION AND INTERPRETATION. This Lease shall be considered as having been made, executed, and delivered in the Commonwealth of Pennsylvania, and all questions regarding its validity, interpretation, or construction shall be construed in accordance with the laws of this Commonwealth. Words contained herein that are gender specific, singular, or plural, shall, if the context permits, be construed to include all genders, and both singular and plural forms.

30.WAIVER. No waiver by Lessor of any breach by Lessee of any of its obligations, agreements, or covenants hereunder and no failure of Lessor to exercise available remedies allowed upon the occurrence of an Event of Default, shall be a waiver of any subsequent breach of obligations, agreements, or covenants and nor shall it be a waiver by Lessor of its rights or remedies with respect to such or any subsequent Event of Default.

31.ENTIRE AGREEMENT. This Lease and any exhibits attached hereto and forming a part hereof set forth all of the covenants, promises, agreements, conditions, and understanding between Lessor and Lessee concerning the Improved Leased Premises, and there are no covenants, promises, agreements, conditions, or understandings, either oral or written, between the parties other than as are herein set forth. No subsequent alteration, amendment, change or addition to this Lease shall be binding upon either Lessor or Lessee unless the same is reduced to writing and executed by Lessor and Lessee.

32.NOTICES. All notices, elections, requests, demands or other communications with respect to this Lease shall be in writing and shall be deemed to have been given when hand delivered, when deposited with a reputable overnight delivery service (such as Federal Express) or when deposited in a postal depository maintained by the United States Postal Service, first class certified mail, postage prepaid to Lessor or Lessee at the addresses recited in the Preamble to this Lease, or to such other address as designated in writing by Lessor or Lessee.

33.PARTIAL INVALIDITY. If any term, covenant, or condition of this Lease or the application thereof to any person, partnership, association, corporation, or other entity, is determined to be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant, or condition to persons, partnerships, associations, corporations or other entities other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant, or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.

34.HEADINGS. Any headings preceding the text of the sections set forth herein are inserted solely for convenience and shall not in any way define, limit, or describe the scope, intent, or meaning of such sections, and such headings shall not constitute a part of this Lease.

35.QUIET ENJOYMENT. Lessor agrees that Lessee, on payment of the rent and all other charges provided for in this Lease and Lessee’s fulfillment of all obligations under the covenants, agreements and conditions of this Lease shall and may (subject to the exceptions,

reservations, terms and conditions of this Lease, superior mortgages, and matters of record) peaceably and quietly have, hold and enjoy the Improved Leased Premises for the Term without interference by or from Lessor or any party claiming through or under Lessor.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Lease to be executed by persons duly authorized as of the day and year first above written.


	LESSOR:
WITNESS:	ORWIG PROPERTY MANAGEMENT
	CENTER SQUARE, LLC


/s/ Walter Mosteller	By:	/s/ Raymond W. Orwig
	Name:	Raymond W. Orwig
	Title:	Member

	By:	/s/ Jenna R. Orwig Tice
	Name:	Jenna R. Orwig Tice
	Title:	Member


	LESSEE:
ATTEST/WITNESS:	EMBASSY BANK FOR THE LEHIGH VALLEY


/s/ Judith A. Hunsicker	By:	/s/ David M. Lobach Jr.
	Name:	David M. Lobach Jr.
	Title:	Chairman, CEO

EXHIBIT A

LEGAL DESCRIPTION

(Page 1 of 2}

THE LEGAL DESCRIPTION IS NOT WARRANTED OR GUARANTEED BY SELLER

PARCEL 1:

ALL THAT CERTAIN messuage, tenement and tract of land, situate in the Borough of Nazareth, County of Northampton and Commonwealth of Pennsylvania, being designated and numbered on Plan or Draft of said Borough as Lot Number Two (No. 2) described as follows, to wit:

BEGINNING at a stone; thence along North Main Street, northward seventy-seven (77) feet to a post; thence by Lot late of Henry C. Clewell, and now or late of Andrew J. Schlissler, eastward one hundred and forty (140) feet to a post thence by Lot late of Theodore Whitesell, now or late of Dr. Sam G. Beck, southward seventy-seven (77) feet to a post; thence by Lot late of Andrew G. Kern, now or late of Sam G. Beck and Centre Square, westward one hundred and forty (140) feet to the place of beginning, bounded as follows, to wit:

NORTH by lot now or late of Andrew J. Schlissler;

EAST by Lot now or late of Dr. Sam G. Beck;

SOUTH by Lot now or late of Dr. Sam G. Beck and Centre Square; and

WEST by North Main Street.

MAP No. J7SE2D Block 9, Lot 9.

PARCEL 2:

ALL THAT CERTAIN messuage, tenement and tract of land, situate in the Borough of Nazareth, County of Northampton and Commonwealth of Pennsylvania, marked and designated on Plan or Draft of the said Town of Nazareth as No. 4 North Main Street, bounded and described as follows, to wit:

BEGINNING at a post: thence along the East side of North Main Street northward seventy (70) feet to a post; thence by a Lot now or late of Edmund Ricksecker (Lot No. 6) eastward three hundred fifty one (351) feet and five (5) inches to a post; thence along a public alley southward seventy (70) feet to a post; thence by Lot now or late of Gotthold Michael, Daniel Scheuerman, Lewis A. Gerlach and Christian Hoebner, westward three hundred fifty-one (351) feet and five (5) inches to the place of beginning.

EXHIBIT A

LEGAL DESCRIPTION

(Page 2 of 2)

EXCEPTING AND RESERVING therefrom all that certain piece or parcel of land situate in the Borough of Nazareth, measuring 70.086 feet by 150.73 feet and more fully described in Deed to John F. Marshall and Susan Mellone Marshall, husband and wife, and recorded in Deed Book 672 at page 649.

MAP No. J7SE2D Block 9, Lot 10.

The parcels described above being the same property conveyed by Deed dated April 27, 1990, from Atlantic Financial Savings, F.A. to First Eastern Bank, N.A., and recorded in the Office of the Recorder of Deeds of Northampton County, Pennsylvania on June 8, 1990, in Deed Book 803, pages 21-24.

Following a series of mergers, First Eastern Bank, N.A, is now known as PNC Bank, National Association.

NOTE: Purchaser shall have the right to use an updated legal description prepared by Purchaser’s surveyor in the Deed for the transfer contemplated by this Agreement, provided (a) such survey is prepared by a surveyor licensed in the State in which the Premises are located; (b) the legal description and survey are subject to the reasonable approval of Seller: and (c) the survey is certified to Seller and signed by the surveyor, with an original thereof to the provided to Seller. Any survey of the Premises desired by Purchaser shall be the responsibility of Purchaser, at Purchaser’s sole cost and expense.

February 20, 2009

James Bartholomew

Executive Vice President

Embassy Bank

P. O. Box 20405

Lehigh Valley, PA 18002

Dear Jim:

This will set forth our understandings concerning your continued employment with the Bank. This agreement shall supersede and replace all prior agreements and understandings concerning the terms of your employment.

The term of your employment by the Bank will be three (3) years from February 20, 2009. On each February 20th of your employment, the term of your employment will automatically extend for an additional year beyond the then-existing termination date, so that upon each automatic extension, your employment contract will again have a remaining term of three (3) years.

However, by written notice, the Bank can terminate this Agreement and the employment relationship without “cause” effective three years from the date of the notice. Additionally, the Bank will have the right to immediately terminate your employment upon thirty (30) days written notice for “cause”. For purposes of this Agreement, “cause” is defined as theft, fraud or dishonesty in connection with your duties at the Bank, your willful failure to follow the lawful directives of the Board or your willful and persistent failure to perform your duties at the Bank. Any termination by the Bank cannot be contrary to law or public policy. Additionally, if you become unable to perform your duties due to death or permanent disability, the Bank’s obligation to pay any further compensation to you shall terminate as of the date of such death or disability; subject to the terms of any benefit plans and other compensation due you under the Bank’s standard personnel policies and plans. You will be considered permanently disabled if you are considered as such under the Bank’s disability plan in which you participate.

The Bank shall also have the right to immediately terminate your employment in the event of your voluntary resignation.

It is intended that by this agreement, the Bank will commit to your employment for not less than a three-year term and provide additional protections to you in the event the Bank is sold or acquired. In exchange, you will provide certain “non compete” protection to the Bank in the event you voluntarily leave the employ of the Bank.

You will continue to be employed by the Bank as an Executive Vice President and our Senior Commercial Loan Officer. You will continue to receive your salary and bonuses, including increases thereto, as shall be agreed by you and the Board of Directors from time to time. Your salary will not be less than currently paid.

You will continue to participate in and receive all benefit plans, stock option plans, paid vacations and other leave as are provided to other senior officers of the Bank in accordance with the Bank’s standard personnel policies and the terms of the Bank’s benefit plans.

We have agreed to a severance pay arrangement in the event the Bank (or a bank holding company controlling the Bank) is acquired by or merges into or with another banking institution, bank holding company or other entity. In the event such a transaction is consummated while you are employed by the Bank and results in another entity obtaining control (through stock ownership, board membership or otherwise) of the operation and management of the Bank (or a bank holding company controlling the Bank), the following severance arrangement shall apply:

If you are discharged or you resign because your duties, position or title are materially changed, or if your are relocated 50 miles beyond 512 & 22 in Bethlehem, PA, in either case within one year of the effective date of such transaction, you will be paid in a lump sum 300% of the base salary you would have earned had you not been discharged or resigned for such reasons. In addition, the health and fringe benefits package you are receiving shall continue to be provided to you for a period of one (1) year from the date of your discharge. The 300% lump-sum payment would be in lieu of any compensation due to you for the remainder of your then current term of employment.

In consideration of our commitment to the above severance arrangement, you agree that for a period of one (1) year from any voluntary resignation of your employment by you, you will not become employed by, or associated with any other bank if that bank’s principal office or your place of employment is within fifty (50) miles of the Bank’s offices at 100 Gateway Drive, Hanover Township, Northampton County, Pennsylvania. You recognize that violation of this clause would cause substantial damages to the Bank. The foregoing non-compete clause will not apply in the event the Bank (or a bank holding company controlling the Bank) is acquired by or merges into or with another banking institution, bank holding company or other entity and such transaction results in another entity obtaining control of the Bank through stock ownership or otherwise.

If the foregoing correctly sets forth our understandings, please sign and return one copy of this letter to me.

EMBASSY BANK FOR THE LEHIGH VALLEY



	By	/s/ David M. Lobach Jr.
		David M. Lobach, Jr.
	The foregoing is agreed.

Dated: March 14, 2009	/s/ James Bartholomew
	James Bartholomew

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

THIS AGREEMENT is made and entered into this 23rd day of December, 2015, by and among Embassy Bank for the Lehigh Valley (hereinafter referred to as the “Bank”), a bank organized and existing under the laws of Pennsylvania, and Judith A. Hunsicker (hereinafter referred to as the “Employee”).

WHEREAS, the Employee has performed her duties in an efficient and capable manner; and

WHEREAS, the Bank is desirous of retaining the services of the Employee; and

WHEREAS, the Board of Directors of the Bank has approved the adoption of a Supplemental Executive Retirement Plan as described in this Agreement (the “Plan”); and

WHEREAS, the Employee has been selected to participate in the Plan; and

WHEREAS, the Bank and the Employee are parties to an Amended and Restated Supplemental Benefit Plan Agreement dated November 19, 2010 (the “Original Agreement”); and

WHEREAS, the Bank desires to provide Employee with supplemental benefits in addition to those provided in the Original Agreement, on the terms and conditions set forth herein.

NOW, THEREFORE, for value received and in consideration of the mutual covenants contained herein, the parties agree as follows:

1.Normal Retirement Supplemental Pension

a.The Bank hereby agrees with the Employee that the Employee may retire upon attaining age sixty-five (65), such age hereinafter being called the “Normal Retirement Age.”

b.Upon the Employee’s retirement on or after Normal Retirement Age, the Bank shall pay the Employee a supplemental annual pension equal to $11,500, such amount being referred to herein as the “Normal Retirement Supplemental Pension,” payable in equal monthly installments and continuing for a period of fifteen (15) years.

2.Early Retirement or Termination

a.If the Employee retires or his or her employment with the Bank is otherwise terminated subsequent to attaining age sixty (60), but prior to attaining Normal Retirement Age, then the Bank shall pay the Employee a supplemental annual pension in the amount indicated on

the following schedule, payable in equal monthly installments and continuing for a period of fifteen (15) years:

	Age of Employee on Effective Date of Early Retirement or Termination	% of Normal Retirement Supplemental Pension
	60	50%
	61	60%
	62	70%
	63	80%
	64	90%
	65	100%

3.Death or Disability

a.Upon the death of the Employee while actively employed, the Bank shall pay to the Employee’s designated beneficiary the Normal Retirement Supplemental Pension, payable in equal monthly installments commencing on the first business day of the month following the month in which the Employee dies and continuing for a period of fifteen (15) years.

b.Upon the death of the Employee while receiving any supplemental pension benefits as provided in this Agreement, the Bank shall pay to the Employee’s designated beneficiary the remaining payments which would have otherwise been due the Employee.

c.If the Employee becomes permanently “disabled” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, and ceases employment with the Bank as a result of such disability, the Employee will be treated as actively employed, for purposes of this Agreement, while such disability continues. In such event, the Bank shall pay to the Employee the Normal Retirement Supplemental Pension in equal monthly installments commencing upon the Employee’s attainment of Normal Retirement Age and continuing for a period of fifteen (15) years.

d.If the Employee shall have failed to make an effective designation of beneficiary, or if the individual or individuals so designated shall die prior to receiving all payments required to made to them hereunder and there is no designated alternate beneficiary, then in such event the remaining payments shall be made first to the Employee’s surviving spouse, second the Employee’s surviving children, equally per stirpes if there is no surviving spouse, and finally to the estate of the Employee if there are neither a surviving spouse nor surviving children.

4.Assignment

If such assignment or transfer is attempted, the Bank may disregard it and continue to discharge its obligations hereunder as though such assignment or transfer were not attempted.

5.Independent Arrangement

The benefits payable under this Agreement shall be independent of, and in addition to, any other agreement which may exist from time to time between the parties hereto, or any other compensation payable by the Employee’s employer. This Agreement shall not be deemed to constitute a contract of employment between the parties hereto, nor shall any provisions hereof restrict the right of the Employee’s employer to discharge the Employee or restrict the right of the Employee to terminate his or her employment.

6.Non-Trust or Fiduciary Obligation

a.The rights of the Employee under this Agreement and of any beneficiary of the Employee or of any other person who may acquire such rights shall be solely those of an unsecured creditor of the Bank. Any insurance policy on the life of the Employee or any other asset acquired by the Bank in connection with the obligations assumed by it hereunder shall not be deemed to be held under any trust for the benefit of the Employee or his or her beneficiaries or to be security for the performance of the obligations of the Bank, but shall be, and remain, a general, unpledged, unrestricted asset of the Bank.

b.Nothing contained in the Agreement and no action taken pursuant to the provisions of the Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Bank and the Employee or his or her beneficiaries.

7.Change of Control

a.If the Employee’s employment with the Bank is involuntarily terminated within two years after a “Change in Control” (as defined below) of the Employee’s employer, payment hereunder will commence immediately in an amount equal to the amount which would have been payable as though Employee retired from service with the Bank upon attaining Normal Retirement Age.

b.As used herein, the term “Change of Control” shall mean a change in the ownership or effective control applicable to the Bank or Embassy Bancorp, Inc., as described in Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended.

8.Arbitration

a.Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with Rules of the American Arbitration Association, and judgment upon the award rendered by an arbitrator may be entered in any court having jurisdiction thereof.

b.The parties hereby submit themselves and consent to the jurisdiction of the Courts of the Commonwealth of Pennsylvania and further consent that any process or notice of motion, or other application of the Court, or any Judge thereof, may be served outside the Commonwealth of Pennsylvania by certified mail or by personal service provided that a reasonable time for appearance is allowed. The arbitrators in any such controversy shall have no authority or power to modify or alter any express condition or provision of this Agreement or to render an award which has the effect of altering or modifying any express condition or provision hereof.

9.Excise Tax Adjustment

Should the total of all amounts or benefits payable under this Agreement, together with any other payments which Employee has a right to receive from the Bank, any affiliates or subsidiaries of the Bank, or any successors of any of the foregoing, result in the imposition of an excise tax under Section 4999 of the Internal Revenue Code (or any successor thereto), Employee shall be entitled to an additional “excise tax” adjustment payment in an amount such that, after the payment of all federal and state income and excise taxes, Employee will be in the same after-tax position as if no excise tax had been imposed. Any payment or benefit which is required to be included under Sections 280G or 4999 of the Internal Revenue Code (or any successor provisions thereto) for purposes of determining whether an excise tax is payable shall be deemed a payment “made to Employee” or a payment “which Employee has a right to receive” for purposes of this provision. The Bank (or its successor) shall be responsible for the costs of calculation of the deductibility of payments and benefits and the excise tax by the Bank’s independent certified accountant and tax counsel and shall notify Employee of the amount of excise tax prior to the time such excise tax is due. If at any time it is determined that the additional “excise tax” adjustment payment previously made to Employee was insufficient to cover the effect of the excise tax, the gross-up payment pursuant to this provision shall be increased to make Employee whole, including an amount to cover the payment of any penalties resulting from any incorrect or late payment of the excise tax resulting from the prior calculation. All amounts required to be paid pursuant to this paragraph shall be paid at the time any withholding may be required (or, if earlier, the time Employee shall be required to pay such amounts) under applicable law, and any additional amounts to which Employee may be entitled shall be paid or reimbursed no later than fifteen (15) days following confirmation of such amount by the Bank’s independent certified accountant provided, however, that any payments to be made under this paragraph shall in all events be made no later than the end of Employee’s taxable year next following the taxable year in which the Employee remits such excise tax payments. The parties recognize that the actual implementation of the provisions of this paragraph are complex and agree to deal with each other in good faith to resolve any questions or disagreements arising hereunder.

10.Competition after Termination of Employment

a.Forfeiture of Benefits. Employee shall forfeit her right to any benefits under this Agreement and the Original Agreement if Employee, without the prior written consent of Bank, violates the restrictive covenant described in Section 10(b).

b.Non-Competition and Non Solicitation. Employee hereby acknowledges and recognizes the highly competitive nature of the business of the Bank and accordingly agrees that, during the period the Employee has the right to receive payment pursuant to this Agreement or the Original Agreement, Employee shall not:

(1)be engaged (other than by Bank), directly or indirectly, either for his own account or as agent, consultant, employee, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm, corporation or enterprise engaged in (1) the banking (including bank holding company) or financial services industry, or (2) any other activity in which Bank or any of its subsidiaries are engaged during the period of Employee’s employment with the Bank, within fifty (50) miles of the Bank’s offices at 100 Gateway Drive, Hanover Township, Northampton County, Pennsylvania, (the “Non-Competition Area”) unless Employee exclusively performs all such activity outside of the Non-Competition Area; or

(2)provide financial or other assistance (other than through Bank) to any person, firm, corporation, or enterprise engaged in (1) the banking (including bank holding company) or financial services industry, or (2) any other activity in which Bank or any of its subsidiaries is engaged as of the date of Employee’s termination of employment, in the Non-Competition Area; or

(3)other than on behalf of the Bank, solicit, directly or indirectly, current or former customers of the Bank or any of its subsidiaries in the Non-Competition Area; or

(4)other than on behalf of the Bank, solicit, directly or indirectly, current or former employees of the Bank or any of its subsidiaries.

c.Amendment of Restrictive Covenant. It is expressly understood and agreed that, although Employee and Bank consider the restrictions contained in Section 10(b) hereof reasonable for the purpose of preserving for Bank and its subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in this Section 10(b) hereof is an unreasonable or otherwise unenforceable restriction against Employee, the provisions of Section 10(b) hereof shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable.

and/or the Employee’s employer of attorney’s fees and costs reasonably incurred in obtaining such final and nonappealable injunction. In addition, the Bank shall be entitled to pursue reimbursement from the Employee and/or the Employee’s employer of costs reasonably incurred in securing a qualified replacement for any employee enticed away from the Bank by Employee. Further, the Bank shall be entitled to set off against or obtain reimbursement from Employee of any payments owed or made to the Employee hereunder.

e.This Section 10 shall not apply following a Change in Control.

11.Miscellaneous Provisions

a.Notwithstanding anything in this Agreement to the contrary, if Employee is determined to be a “specified employee” (as defined in Section 409A of the Internal Revenue Code of 1986, as amended), payments to such Employee pursuant to this Agreement, other than payments qualifying as short term deferrals or an exempt separation pay arrangement under Section 409A, shall not begin earlier than the first day of the seventh month after the date of termination. The Bank agrees to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to this Section 11(a) in accordance with Section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Section 409A.

For purposes of the foregoing, the date upon which a determination is made as to the Specified Employee status of the Employee, the “identification date” (as defined in Section 409A) shall be December 31.

b.This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement.

c.This instrument contains the entire Agreement of the parties. It may be amended only by a writing signed by both of the parties hereto.

d.This Agreement shall be governed and construed in accordance with the law of the Commonwealth of Pennsylvania.

e.The Bank intends in good faith that this plan comply with Section 409A of the Internal Revenue Code of 1986, as amended. To the extent any provision of this Agreement is deemed inconsistent with that section, said provision in hereby expunged and the Agreement shall be deemed amended to comply with said law and the Bank shall take such steps as to amend the Agreement so that it complies in form with Section 409A.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the Bank by it duly authorized officer, on the day and year first above written.

WITNESS:EMPLOYEE:

/s/ Lynne M. Neel /s/ Judith A. Hunsicker

Lynne M. Neel Judith A. Hunsicker

ATTEST:EMBASSY BANK FOR THE LEHIGH VALLEY

/s/ Lynne M. Neel By: /s/ David M. Lobach, Jr.

Lynne M. Neel Name: David M. Lobach, Jr.

Title: Chairman, CEO & President

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

THIS AGREEMENT is made and entered into this 23rd day of December, 2015, by and among Embassy Bank for the Lehigh Valley (hereinafter referred to as the “Bank”), a bank organized and existing under the laws of Pennsylvania, and James R. Bartholomew (hereinafter referred to as the “Employee”).

WHEREAS, the Employee has performed his duties in an efficient and capable manner; and

WHEREAS, the Bank is desirous of retaining the services of the Employee; and

WHEREAS, the Board of Directors of the Bank has approved the adoption of a Supplemental Executive Retirement Plan as described in this Agreement (the “Plan”); and

WHEREAS, the Employee has been selected to participate in the Plan; and

WHEREAS, the Bank and the Employee are parties to an Amended and Restated Supplemental Benefit Plan Agreement dated November 19, 2010 (the “Original Agreement”); and

WHEREAS, the Bank desires to provide Employee with supplemental benefits in addition to those provided in the Original Agreement, on the terms and conditions set forth herein.

NOW, THEREFORE, for value received and in consideration of the mutual covenants contained herein, the parties agree as follows:

1.Normal Retirement Supplemental Pension

a.The Bank hereby agrees with the Employee that the Employee may retire upon attaining age seventy (70), such age hereinafter being called the “Normal Retirement Age.”

b.Upon the Employee’s retirement on or after Normal Retirement Age, the Bank shall pay the Employee a supplemental annual pension equal to $7,500, such amount being referred to herein as the “Normal Retirement Supplemental Pension,” payable in equal monthly installments and continuing for a period of fifteen (15) years.

2.Early Retirement or Termination

a.If the Employee retires or his or her employment with the Bank is otherwise terminated subsequent to attaining age sixty-sixty (66), but prior to attaining Normal Retirement Age, then the Bank shall pay the Employee a supplemental annual pension in the amount

indicated on the following schedule, payable in equal monthly installments and continuing for a period of fifteen (15) years:

	Age of Employee on Effective Date of Early Retirement or Termination	% of Normal Retirement Supplemental Pension
	67	50%
	68	60%
	69	80%
	70	100%

3.Death or Disability

4.Assignment

Except as otherwise provided herein, it is understood that neither the Employee, nor any person designated by him pursuant to this Agreement, shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive payments to be made hereunder, which payments and the right thereto are expressly declared to be non-assignable and non-transferable. If such assignment or transfer is attempted, the Bank may disregard it and continue to discharge its obligations hereunder as though such assignment or transfer were not attempted.

5.Independent Arrangement

6.Non-Trust or Fiduciary Obligation

7.Change of Control

8.Arbitration

Commonwealth of Pennsylvania by certified mail or by personal service provided that a reasonable time for appearance is allowed. The arbitrators in any such controversy shall have no authority or power to modify or alter any express condition or provision of this Agreement or to render an award which has the effect of altering or modifying any express condition or provision hereof.

9.Excise Tax Adjustment

10.Competition after Termination of Employment

a.Forfeiture of Benefits. Employee shall forfeit his right to any benefits under this Agreement and the Original Agreement if Employee, without the prior written consent of Bank, violates the restrictive covenant described in Section 10(b).

(3)other than on behalf of the Bank, solicit, directly or indirectly, current or former customers of the Bank or any of its subsidiaries in the Non-Competition Area; or

(4)other than on behalf of the Bank, solicit, directly or indirectly, current or former employees of the Bank or any of its subsidiaries.

d.Breach of Restrictive Covenant. The Employee acknowledges and agrees that any breach of the restrictions set forth in this Section 10(b) will result in irreparable injury to the Bank for which it shall have no meaningful remedy at law, and the Bank shall be entitled to injunctive relief in order to enforce provisions hereof. Upon obtaining any such final and nonappealable injunction, the Bank shall be entitled to pursue reimbursement from the Employee and/or the Employee’s employer of attorney’s fees and costs reasonably incurred in obtaining such final and nonappealable injunction. In addition, the Bank shall be entitled to pursue reimbursement from the Employee and/or the Employee’s employer of costs reasonably incurred in securing a qualified replacement for any employee enticed away from the Bank by Employee. Further, the Bank shall be entitled to set off against or obtain reimbursement from Employee of

any payments owed or made to the Employee hereunder.

e.This Section 10 shall not apply following a Change in Control.

11.Miscellaneous Provisions

b.This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement.

c.This instrument contains the entire Agreement of the parties. It may be amended only by a writing signed by both of the parties hereto.

d.This Agreement shall be governed and construed in accordance with the law of the Commonwealth of Pennsylvania.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the Bank by it duly authorized officer, on the day and year first above written.

WITNESS:EMPLOYEE:

/s/ Judith A. Hunsicker /s/ James R. Bartholomew

Judith A. Hunsicker James R. Bartholomew

ATTEST:EMBASSY BANK FOR THE LEHIGH VALLEY

/s/ Judith A. Hunsicker By: /s/ David M. Lobach, Jr.

Judith A. Hunsicker Name: David M. Lobach, Jr.

Title: Chairman, CEO & President

Revised 6/05/01

GATEWAY PLAZA

STANDARD FORM

MULTI-TENANT

LEASE AGREEMENT

TENANT: EMBASSY BANK

DATED: June 11, 2001

TABLE OF CONTENTS


1.	Premises, Parking and Common Areas
2.	Term
3.	Rent
4.	Security Deposit
5.	Use
6.	Maintenance, Repairs, Alterations, and Common Area Services
7.	Insurance; Indemnity
8.	Damage or Destruction
9.	Real Property Taxes
10	Utilities
11.	Assignment and Subletting
12.	Default; Remedies
13.	Condemnation
14.	Estoppel Certificate
15.	Landlord's Liability
16.	Severability
17.	Interest on Past Due Obligations
18.	Time of Essence
19.	Additional Rent
20.	Incorporation of Prior Agreements; Amendments
21.	Notices
22.	Waivers
23.	Recording
24.	Holding Over
25.	Cumulative Remedies
26.	Covenants and Conditions
27.	Binding Effect; Choice of Law
28.	Subordination
29.	Attorney's Fees
30.	Landlord's Access

31.	Auctions
32.	Signs
33.	Merger
34.	Consents
35.	Guarantor
36.	Quiet Possession
37.	Options
38.	Security Measures
39.	Easements
40.	Performance Under Protest
41.	Authority
42.	Conflict
43.	Landlord's Lien
44.	Attorneys' Fees
45.	No Implied Waiver
46.	Exterior Signs
47.	Force Majeure
48.	Transfers by Landlord
49.	Offer

50.	Brokers
51.	Consents
52.	Addendum

Exhibits

“A” OUTLINE OF PREMISES

“B” PLANS AND SPECIFICATIONS

“C” RENTAL ESCALATION

“D” ESTIMATED OPERATING EXPENSES

LEASE AGREEMENT

THIS LEASE, made this 11th day of June, 2001, by and between GATEWAY ASSOCIATES, LLC a Pennsylvania limited liability company with its principal address at 54 South Commerce Way, Suite 175, Bethlehem, Pennsylvania 18017 (hereinafter referred to as the "Landlord"); and EMBASSY BANK, a Pennsylvania state bank with its principal office at Bethlehem, Pennsylvania 18017 (hereinafter referred to as the "Tenant").

1. PREMISES, PARKING AND COMMON AREAS.

1.1 Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord for the term, at the rental, and upon all of the terms and conditions set forth herein, a portion of the real property situated at 10 0 Gateway Drive in Hanover Township, Northampton County, Pennsylvania, which is described as the first floor and drive-thru banking facility (hereinafter referred to as the "Premises") outlined in Exhibit "A", which is attached hereto and made a part hereof, consisting of 7,827 square feet (including the drive-thru), of leasable area, including rights to the Common Areas, as defined herein, but not including any rights to the roof of the Premises. The Premises is a portion of the office building to be constructed (hereinafter referred to as the "Building") at 10 0

Gateway Drive, Hanover Township, Northampton County, Pennsylvania. The Premises, the Building, the Common Areas, and the land upon which same are located, together with all other improvements thereon are hereinafter collectively referred to as the "Gateway Plaza".

1.1.1 Site Plan. Tenant shall have the right to approve any changes to the Site Plan for the Building and surrounding areas including the driveway entrances to the Building. If any changes are made from the Site Plans previously provided to Tenant, Tenant shall have the right to withdraw from this Lease and receive the return of the Security Deposit.

1.2 Vehicle Parking. Tenant shall be guaranteed forty (40) vehicle parking spaces, of which fifteen (15) shall be reserved and the balance of which shall be unreserved and unassigned on those portions of the Common Areas designated by Landlord for parking. By separate letter agreement contemporaneous with the execution of this Lease, Landlord and Tenant have agreed on the location of the 15 reserved spaces. Tenant shall not use more parking spaces than said number. Said parking spaces shall be used only for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks (hereinafter referred to as "Permitted Size Vehicles"). Vehicles other than Permitted Size Vehicles are hereinafter referred to as "Oversized Vehicles".

1.2.1. Loading. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant, or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities, except that Tenant's bank courrier may use the front entrance for deliveries and pick-ups.

1.2.2. Towing. Tenant acknowledges and agrees that vehicles that are loaded, unloaded or parked in areas other than designated areas may not only disturb the quiet possession of other Tenants in the Gateway Plaza, but may also be dangerous and hazardous. If Tenant permits or allows any of the prohibited activities described in Paragraph 1.2 of this Lease, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have to remove or tow away the vehicle involved and charge the cost thereof to Tenant, which cost shall be immediately payable upon demand by Landlord.

1.3 Common Areas--Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Gateway Plaza that are provided and designated by the Landlord from time to time for the general non-exclusive use of Landlord, Tenant, and other Tenants of the Gateway Plaza and their respective employees, suppliers, shippers, customers and invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, mechanical rooms and landscaped areas.

1.4 Common Areas--Tenant's Rights. Landlord hereby grants to Tenant, for the benefit of Tenant and its employees, suppliers, shippers, customers, and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Landlord under the term hereof or under the terms of any rules and regulations or restrictions governing the use of the Gateway Plaza. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Landlord or Landlord's designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur, then Landlord shall have the right, without notice in addition to such other rights and remedies that it may have to remove the property and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord.

1.5 Common Areas--Rules and Regulations. Landlord or such other person(s) as Landlord may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations with respect thereto. Tenant agrees

to abide by and conform to all such rules and regulations and to cause its employees, suppliers, shippers, customers, and invitees to so abide and conform. Landlord shall not be responsible to Tenant for the non-compliance with said rules and regulations by other Tenants of the Gateway Plaza, but shall make reasonable efforts to enforce such rules.

1.6 Common Areas- -Chancres. Landlord shall have the right, in Landlord's sole discretion, from time to time: (a) To make changes in the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways; (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (c) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Gateway Plaza, or any portion thereof; (d) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Gateway Plaza as Landlord may, in the exercise of sound business judgment, deem to be appropriate, provided that any changes described in (a) , (b) , or (d) above do not interfere with or materially adversely affect Tenant's use of the Premises as banking offices or the use of the drive-thru by Tenant's customers.

1.6.1 No Reduction. Landlord shall at all times provide the parking facilities required by applicable law and in no event shall the number of parking spaces that Tenant is entitled to under Paragraph 1.2 be reduced.

2. TERM.

2.1. Term. The term of this Lease shall be for ten (10) years commencing on March 1, 2002 (hereinafter referred to as the "Commencement Date"), and ending on February 28, 2012 (hereinafter referred to as the "Termination Date"), unless sooner terminated pursuant to any provision hereof.

2.2. Delay in Possession. Notwithstanding said Commencement Date, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said Commencement Date, Landlord shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder or extend the term hereof, but in such case, Tenant shall not be obligated to pay rent or perform any other obligations of Tenant under the terms of this Lease, except as may be otherwise provided in this Lease, until possession of the Premises is tendered to Tenant; provided, however, that if Landlord shall not have delivered possession of the Premises within ninety (90) days from said Commencement Date, Tenant may, at Tenant's option, by notice in writing to Landlord within ten (10) days of the expiration of the ninety (90) day period, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder; provided further, however, that if such written notice of Tenant is not received by Landlord within said ten (10) day period, Tenant's right to cancel this Lease hereunder shall terminate and be of no further force or effect, and in such event Tenant shall be entitled to occupy Tenant's temporary offices in the Hampton Inn & Suites, leased from Eastupland Associates, and Tenant's temporary pad site for a temporary modular building, on a rent free basis, beginning on the ninety-first day from the Commencement Date until the Premises are ready for occupancy (but in no event longer than 9 months from the Commencement Date), Tenant only being responsible for its utility costs at the temporary offices (including any hook-up charges) during such period. In calculating the ninety (90) day period from the Commencement Date, days lost as a result of Force Majeure, as defined herein, shall be in addition to such ninety (90) day period.

2.3. Early Possession. If Tenant occupies the Premises, or any portion thereof, prior to said Commencement Date, such occupancy (or portion thereof) shall be subject to all provisions of this Lease, such occupancy (or portion thereof) shall not advance the Termination Date, and Tenant shall pay Rent, as defined herein, for such period at the initial monthly rates set forth below.

3. RENT.

3.1. Base Rent. Tenant shall pay to Landlord, as Base Rent (or "Rent") for the Premises, without any offset or deduction whatsoever, except as may be otherwise expressly provided in this Lease, on the first day of each month of the term hereof, monthly payments in advance of Thirteen Thousand Forty-five and 00/100 ($13,045.00) Dollars. Tenant shall pay Landlord upon execution hereof Thirteen Thousand Forty-five ($13,045.00) Dollars as Base Rent for March 1, 2002. Rent for any period during the term hereof which is for less than one (1) month shall be a pro rata portion of the Base Rent. Rent shall be payable in lawful money of the United States to Landlord at the address stated herein or to such other persons or at such other places as Landlord may designate in writing. The annual Base Rent for each Lease year or portion thereof during the Lease Term, shall be adjusted pursuant to Exhibit "C", which is attached hereto and made a part hereof.

3.2. Operating Expenses. Tenant shall pay to Landlord during the term hereof, in addition to the Base Rent, Tenant's Share, as hereinafter defined, of all Operating Expenses, as hereinafter defined during the term of this Lease, in accordance with the following provisions:

3.2.1 "Tenant's Share" is defined, for purposes of this Lease, as Thirty-three (33%) percent;

3.2.2 "Operating Expenses" shall mean and include the direct and indirect costs and expenses of any kind, in each calendar year relating to the operation, maintenance, insuring, repairing, managing, use, care and ownership of the Building and the Common Areas consisting of the following:

3.2.2.1 the cost of all utilities and services provided to the Gateway Plaza and not otherwise separately metered and billed to the individual Tenants of the Building, and Landlord represents that all electric, water, sewer and other utilities to all tenants will be separately metered so that Tenant shall only be obligated to pay Tenant's Share of the utility services to the Common Areas, only;

3.2.2.2 the cost of management fees of the Gateway Plaza (which shall not exceed of the Base Rent, annually);

3.2.2.3 payments made by the Landlord for personal property taxes, if any (except those payable by Tenants), license fees, permit and inspection fees, equipment, tools and expenses of the Building;

3.2.2.4 the cost of all supplies and materials used in the operation and maintenance of the Building;

3.2.2.5 the cost of all utilities and reasonably necessary or advisable communications services for the Building, including, but not limited to, water and sewer, power, heating, lighting, air conditioning and ventilating, but only to the extent not directly metered and separately billed to the individual Tenants of the Building, and Landlord represents that all such utilities shall be separately metered to all tenant so that Tenant shall only be obligated to pay Tenant's Share of the utility services to the Common Areas, only;

3.2.2.6 the cost of all repairs, maintenance and service agreements and equipment rental agreements of the Building or for equipment therein, such as and including, but not limited to, management, security and exterminating services, alarm service, window cleanings, rubbish and snow removal, telephone, utility lines, sewer lines, sidewalks, walkways, parkways, driveways, striping, bumpers, roadways, loading and unloading areas, irrigation systems, lighting facilities, fences, gates, Tenant directories, trash disposal services, fire detection systems, including without limitation, sprinkler systems and landscape maintenance, bonds posted or amounts incurred in connection with the management or maintenance of the Building; provided, however,

the foregoing shall not include leasing commissions, advertising or promotional costs or expenses, the cost of Tenant alterations, mortgage interest and principal payments, and depreciation of the Building or equipment;

3.2.2.7 the cost of all insurance applicable to the Building and the Gateway Plaza, which shall be determined on a competitive bid basis;

3.2.2.8 the cost of all accounting, legal and professional services incurred in connection with the operation of the Building; and

3.2.2.9 the cost of all repairs, replacements and improvements (other than those items which are not and may not be expensed by Landlord for federal income tax purposes, and general maintenance, including, without limitation, all costs of landscaping, parking lot, and roof repairs, with respect to the Building; provided, however the foregoing shall not include such items to the extent Landlord is compensated through the proceeds of insurance or condemnation nor such items if the incurring thereof shall be solely for the benefit of a Tenant other than Tenant and not otherwise benefitting the Premises or the Building; and

3.2.2.10 amortization of costs (together with interest at the Landlord's cost of borrowed funds from time to time) of (a) capital improvements or alterations which are reasonably anticipated to reduce (or to avoid an increase in) other Operating Expenses by an amount bearing a reasonable relationship to the amortized costs of the capital improvement or alteration, (b) capital improvements or alterations which are made by reason of any governmentally imposed requirement, whether of past, present or future origin, and whether by way of statute, regulations, rule, order, ordinance or other uses, relating to the overall or structural use, design, construction and operation of the Building, and (c) any other capital improvements or alterations which Landlord determines necessary to maintain the Building as a first class facility, including without limitation, major repairs to or replacements of parking lots, roofs and other mechanical systems within the Building, and including also any installation of direct metering not separately billed to the individual Tenants involved, such amortization in each case to be determined in each case using an amortization period equal to the shorter of (i) the useful life (as determined for accounting purposes using generally accepted accounting principles) of the capital improvement or alteration, the aggregate cost of which is less than or equal to $500,000 and (ii) ten (10) years in the case of such capital improvements or alterations, the aggregate cost of which is greater than $500,000.

Attached hereto as Exhibit "D" is a good faith estimate by Landlord of the annual Operating Expenses. On Exhibit "D", Landlord will indicate which of the items will be capped.

3.2.3 Obligation Not Imposed. The inclusion of the improvements, facilities and services set forth in Paragraph 3.2.2 of the definition of Operating Expenses shall not be deemed to impose an obligation upon Landlord to either have said improvements or facilities or to provide those services unless the Gateway Plaza already has the same, Landlord al ready provides the services, or Landlord has agreed elsewhere in this Lease to provide the same or some of them.

3.2.4 Payment of Tenant's Share. Tenant's Share of Operating Expenses shall be payable by Tenant within ten (10) days after a reasonably detailed statement of actual expenses is presented to Tenant by Landlord; subject to any express limitations as provided in this Lease.. At Landlord’s option, however, an amount may be estimated by Landlord, from time to time, of Tenant's Share of annual Operating Expenses and the same shall be payable monthly during each twelve (12) month period, or part hereof, of the Lease term, on the same day as the Base Rent is due hereunder. In the event that Tenant pays Landlord's estimate of Tenant's Share of Operating Expenses as aforesaid, Landlord shall deliver to Tenant within sixty (60) days after the expiration of each calendar year, or a part thereof, a reasonably detailed statement showing Tenant's Share of the actual Operating Expenses incurred during the preceding year, or a part thereof. If Tenant's payments under this Paragraph 3.2.4 during said

period exceed Tenant's Share as indicated on said statement, Tenant shall be entitled to credit the amount of such overpayment against Tenant's Share of Operating Expenses next falling due. If Tenant's payments under this Paragraph during said period were less than Tenant's Share as indicated on said statement, Tenant shall pay to Landlord the amount of the deficiency within ten (10) days after delivery by Landlord to Tenant of said statement.

4. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution hereof $26,090.00 as security (hereinafter referred to as the "Security Deposit") for Tenant's faithful performance of Tenant's obligation hereunder. Upon the opening of Tenant's bank for business, Tenant may substitute a letter of credit for the actual funds, provided such form of letter of credit is in form, scope and substance reasonably satisfactory to Landlord and is provided by another acceptable financial institution. The Security Deposit requirement shall be void on the third anniversary of the Commencement Date. If Tenant fails to pay rent or other charges due hereunder or otherwise defaults with respect to any provision of this Lease, Landlord may use, apply or retain all or any portion of said Security Deposit for the payment of any other sum to which Landlord may become obligated by reason of Tenant's default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said Security Deposit, Tenant shall, within ten (10) days after written demand therefore, deposit cash with Landlord in an amount sufficient to restore said Security Deposit to the full amount then required of Tenant if the monthly rent shall, from time to time, increase during the term of this Lease. Tenant shall, at the time of such increase, deposit with Landlord additional money as a Security Deposit so that the total amount of the Security Deposit held by Landlord shall at all times bear the same proportion to the then current Base Rent as the initial Security Deposit bears to the initial Base Rent set forth in Paragraph 4. If Tenant performs all of Tenant's obligations hereunder, said Security Deposit or so much thereof as has not theretofore been applied by Landlord shall be returned without payment of interest or other increment for its use to Tenant or at Landlord's option to the last assignee, if any, of Tenant's interest hereunder on the third anniversary of the Commencement Date. No trust relationship is created herein between Landlord and Tenant with respect to said Security Deposit.

5. USE.

5.1. Use. The Premises shall be used and occupied only for a retail banking operation with a drive-in facility or any other use which is reasonably comparable and for no other purpose.

5.2. Compliance with Law.

5.2.1 Landlord warrants to Tenant that the Premises, in the state existing on the Commencement Date but without regard to the use for which Tenant will occupy the Premises, does not violate any covenants or restrictions of record, or any applicable building code regulation or ordinance, including applicable Federal ADA and OSHA Regulations, in effect on such Commencement Date. In the event it is determined that this warranty has been violated then it shall be the obligation of the Landlord, after written notice from Tenant, to promptly, at Landlord's sole cost and expense, rectify any such violation. In the event Tenant does not give to Landlord written notice of the violation of this warranty within thirty (30) days from the date Tenant learns of the violation, the correction of same shall be the obligation of the Tenant at Tenant's sole cost.

5.2.2 Except as provided in Paragraph 5.2.1, Tenant shall, at Tenant's expense, promptly comply with all applicable federal, state, and local statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements of any fire insurance, underwriters or rating bureaus, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from that now existing, during the term or any part of the term hereof, relating in any manner to the Premises and the occupation and use by Tenant of the Premises and of the Common Areas. Tenant shall not use nor permit the use of the Premises or the Common Areas in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Gateway Plaza.

5.3. Condition of Premises.

5.3.1 Landlord shall deliver the Premises as well as the ground floor lobby, ground floor Common Areas, parking lot, walkways and entrance, to Tenant clean and free of debris on the Commencement Date, in a completed condition free from defects in materials and workmanship, except for normal punch list items, and Landlord warrants to Tenant that the plumbing, lighting, air conditioning, and heating, in the Premises shall be in good operating condition on the Commencement Date. In the event that it is determined that this warranty has been violated, then it shall be the obligation of Landlord, after receipt of written notice from Tenant setting forth with specificity the nature of the violation to promptly, at Landlord's sole cost, rectify such violation. Tenant's failure to give such written notice to Landlord within ninety (90) days after the Commencement Date shall cause the conclusive presumption that Landlord has complied with all of Landlord's obligations hereunder.

5.3.2 Except as otherwise provided in this Lease, Tenant hereby accepts the Premises in the condition existing as of the Commencement Date or the date that Tenant takes possession of the Premises, whichever is earlier subject to all applicable zoning, municipal, county, state and federal laws, ordinances and regulations governing and regulating the use of the Premises and any covenants or restrictions of record, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Landlord's agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Tenant's business.

5.4 Hazardous Materials. Tenant shall not cause or permit any Hazardous Materials (as defined herein) to be used, stored, transported, released, handled, produced or installed in, on or from the Gateway Plaza, the Premises or the Building. Tenant shall indemnify and hold Landlord harmless from and against any and all claims, demands, liabilities, costs, expenses, penalties, damages and losses, including, without limitation, reasonable attorneys' fees, resulting from the existence of Hazardous Materials on the Premises, the Gateway Plaza or the Building discharged from the Premises, the Gateway Plaza or the Building or penetrating any surface or subsurface rivers or streams crossing or adjoining the Premises, the Gateway Plaza or the Building as a result of Tenant's use of the Premises, the Gateway Plaza or the Building. "Hazardous Materials", as used herein, means and includes those elements, materials, compounds, mixtures or substances which are now contained in any list of hazardous substances and/or wastes or any list of toxic pollutants adopted by the United States Environmental Protection Agency (the "EPA") or any federal, state or local governmental agency having jurisdiction over the Gateway Plaza (such agency is hereinafter referred to as the "Environmental Agencies") which are defined as hazardous, toxic, pollutant, infectious, flammable, or radioactive by any of the Environmental Laws (as defined herein) , and whether or not included in such lists, shall be deemed to include all products or substances which are or contain petroleum, petroleum constituents, natural gas, natural gas liquids, asbestos, polychlorinated biphenyls and any chemicals known to cause cancer or reproductive toxicity as published by any Environmental Agencies; provided, however, the term "Hazardous Materials" does not include small qualities of chemicals and other substances used as janitorial supplies or otherwise customarily used in constructing, maintaining and operating properties similar to the Property and provided that all such chemicals and other substances are properly handled and stored in accordance with all Environmental Laws. In the event of a breach of the provisions of this Paragraph, Landlord shall have the right, in addition to all other rights and remedies of Landlord under this Lease or at law, to require Tenant to remove any Hazardous Materials from the Premises in the manner prescribed for such removal by laws and requirements of any public authorities. The provisions of this Paragraph shall survive the expiration or termination of this Lease. As used herein, the term "Environmental Laws" means and includes any Federal, State, or local statute, law, ordinance, code, rule, regulation, judgment, order or decree regulating, relating to or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance, pollutant, contaminant, element, compound, mixture or material, as now in effect including, without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. 9601 et seq., the Federal Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Federal Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq., the Federal Hazardous Material Transportation Act, 49 U.S.C. 1801 et seq., the Federal Clean Air Act 42 U.S.C. 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq., the Emergency Planning and

Community Right-to-Know Act, 42 U.S.C. 11001 et seq., and all rules and regulations of any of the Governmental Authorities. The provisions hereof shall survive the termination of the Lease.

5.5 Proscribed Uses. Tenant shall not at any time use or occupy the Premises or the Building, or suffer or permit anyone to use or occupy the Premises, or do anything in the Premises or the Building, or suffer or permit anything to be done in, brought into or kept on the Premises, which in any manner in the discretion of Landlord: (i) violates the Certificate of Occupancy for the Premises or the Building; (ii) causes or is liable to cause injury to the Premises or the Building or any equipment, facilities or systems therein; (iii) or constitutes a violation of the laws and requirements of any public authorities or the requirements of insurance bodies; (iv) impairs or tends to impair the character, reputation or appearance of the Building as a first-class facility; (v) impairs or tends to impair the proper and economic maintenance, operation and repair of the Building and/or its equipment, facilities or systems; (vi) annoys or inconveniences or tends to annoy or inconvenience other Tenants or occupants of the Building; (vii) constitutes a nuisance, public or private; (viii) makes unobtainable from reputable insurance companies authorized to do business in Pennsylvania all risk property insurance, or liability, elevator, boiler or other insurance at standard rates required to be furnished by Landlord under the terms of any mortgages covering the Premises; or (ix) discharges objectionable fumes, vapors or odors into the Building's flues or vents or otherwise.

6. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.

6.1. Landlord's Obligation. Landlord shall arrange for and oversee (as a component of its management fee) the provision of services required to maintain the Common Areas for which there is an Operating Expense. Landlord shall have no obligation to make repairs under this Paragraph 6.1 until a reasonable time not exceeding five days or less depending on the nature of the required repair, after receipt of written notice from Tenant of the need for such repairs. In the event of Landlord's failure to make such repairs, Tenant, after written notice to Landlord, may make such repairs at Landlord's cost. Landlord shall not be liable for damages or loss of any kind or nature by reason of Landlord's failure to arrange for any Common Area services when such failure is caused by accident, breakage, repairs, strikes, lockout, Force Majeure or other labor disturbances or disputes of any character or by any other cause beyond the reasonable control of Landlord.

6.2. Tenant's Obligations.

6.2.1 Subject to the provision of Paragraphs 5 (Use), 6.1 (Landlord's Obligations), and 8 (Damage or Destruction), Tenant, at Tenant's expense, shall keep in good order, condition and repair, the Premises and their fixtures and improvements therein including, without limitation, the property which is deemed Landlord's and Tenant's and every part thereof (whether or not the damaged portion of the Premises or the means of repairing the same are reasonably or readily accessible to Tenant) including, without limiting the generality of the foregoing, all plumbing, heating, ventilating and air conditioning systems (Tenant shall procure and maintain, at Tenant's expense, a heating, ventilating and air conditioning system maintenance contract), electrical and lighting facilities, and equipment within the Premises, fixtures, interior walls and interior surfaces of exterior walls, ceilings, windows, doors, plate glass, and skylights, if any, located within the Premises, whether ordinary, extraordinary, foreseen or unforseen. Tenant shall annually provide Landlord, during the term of this Lease, with satisfactory evidence of the maintenance contract required hereunder. Landlord reserves the right to procure and maintain the ventilating and air conditioning system maintenance contract, and if Landlord so elects, Tenant shall reimburse Landlord, upon demand, for the entire cost thereof. All repairs in and to the Premises for which Tenant is responsible shall be promptly performed by Tenant in a manner which will not interfere with the use of the Building by others. Any repairs in or to the Building and the facilities and systems thereof for which Tenant is responsible may be performed by Landlord at Tenant's expense; but, Landlord may, at its option, before commencing any such work or at any time thereafter, require Tenant to furnish to Landlord such security, in form and amount as Landlord shall deem necessary to assure the payment for such work by Tenant.

6.2.2 If Tenant fails to perform Tenant's obligations under this Paragraph 6.2 or under any other Paragraph of this Lease, Landlord may enter upon the Premises after ten (10) days' prior written notice to Tenant (except in the case of emergency, in which event no notice shall be required), perform such obligations on Tenant's behalf and put the Premises and/or Building in good order, condition and repair, and the cost thereof together with interest thereon at the maximum rate then allowable by law shall be due and payable as additional rent to Landlord together with Tenant's next Base Rent installment.

6.2.3 On the last day of the term hereof, or on any sooner termination, Tenant shall surrender the Premises to Landlord in the same condition as received, ordinary wear and tear excepted, clean and free of debris. Any damage or deterioration of the Premises and/or the Building shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices. Tenant shall repair any damage to the Premises and/or Building occasioned by the installation or removal of Tenant's trade fixtures, alterations, furnishings, and equipment. Notwithstanding anything to the contrary otherwise stated in this Lease, Tenant shall leave the air lines, power panel, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing and fencing, if any, on the Premises in good operating condition.

6.3. Alteration and Additions.

6.3.1 Tenant shall not, without Landlord's prior written consent make any alterations, improvements, additions, or utility installations in, on, or about the Premises, or the Gateway Plaza except for nonstructural alterations to the Premises not exceeding Ten Thousand and 00/100($10,000.00) Dollars in cumulative costs, during the term of this Lease. In any event, whether or not in excess of Ten Thousand and 00/100 ($10,000.00) Dollars in cumulative cost, Tenant shall make no change or alteration to the exterior of the Premises nor the exterior of the Building nor the Gateway Plaza without Landlord's prior written consent. Landlord acknowledges receipt of Tenant's plans and specifications for Tenant's initial leasehold improvements and hereby consents to the same. Such initial leasehold improvements need not be removed upon termination of the Lease. As used in this Paragraph 6.3 the term "Utility Installation" shall mean air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing, sprinkler equipment, and fencing. Should Tenant make any alterations, improvements, additions or Utility Installations without the prior approval of Landlord, Landlord may at any time during the term of this Lease, require that Tenant remove any or all of the same at Tenant's sole cost and expense.

6.3.2 Any alterations, improvements, additions or Utility Installations in or about the Premises or the Gateway Plaza that Tenant shall desire to make and which requires the consent of the Landlord shall be presented to Landlord in written form, with proposed detailed plans. If Landlord shall give its consent, the consent shall be deemed conditioned upon Tenant acquiring a permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Landlord prior to the commencement of the work, and the compliance by Tenant of all conditions of said permit in a prompt and expeditious manner.

6.3.3 Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises, or the Gateway Plaza, or any interest therein. Tenant shall give Landlord not less than ten (10) days' notice prior to the commencement of any work in the Premises, and Landlord shall have the right to post notices of non-responsibility in or on the Premises or the Building as provided by law. If Tenant shall in good faith, contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense defend itself and Landlord against the same and shall pay and satisfy any such adverse judgment that

may be rendered thereon before the enforcement thereof against the Landlord or the Premises or the Gateway Plaza, upon the condition that if Landlord shall require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to such contested lien claim or demand indemnifying Landlord against liability for the same and holding the Premises and the Gateway Plaza free from the effect of such lien or claim. In addition, Landlord may require Tenant to pay Landlord's attorneys’ fees and costs in participating in such action if Landlord shall decide it is to Landlord's best interest to do so.

6.3.4 All alterations, improvements, additions, and Utility Installations (whether or not such Utility Installation constitute trade fixtures of Tenant) , which may be made on the Premises, shall be the property of Landlord and shall remain upon and be surrendered with the Premises at the expiration of the Lease term, unless Landlord requires their removal pursuant to Paragraph 6.3.1, provided that upon termination of the Lease, Tenant may remove at its expense, ATM machines, night depository equipment, drive-thru equipment and security systems. Tenant shall repair any damage caused by such removal. Notwithstanding the provisions of this Paragraph 6.3.4, Tenant's machinery and equipment other than that described in the preceding sentence and other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, and other than Utility Installations, shall remain the property of Tenant and may be removed by Tenant subject to the provisions of Paragraph 6.2.

6.4. Utility Additions. Landlord reserves the right to install new or additional utility facilities throughout the Building, the Premises, and the Common Areas for the benefit of Landlord or Tenant, or any other Tenant of the Gateway Plaza, including, but not by way of limitation, such utilities as plumbing, electrical systems, security systems, communication systems, and fire protection and detection systems, so long as such installations do not unreasonably interfere with Tenant's use of the Premises.

7. INSURANCE; INDEMNITY.

7.1. Liability Insurance--Tenant. Tenant shall, at Tenant's expense obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury and Property Damage insurance insuring Tenant and Landlord against any liability arising out of the use, occupancy, or maintenance of the Premises and the Gateway Plaza. Such insurance shall be in an amount not less than Three Million ($3,000,000) Dollars per occurrence. The policy shall insure performance by Tenant of the indemnity provisions of this Paragraph 7. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. Tenant's policy shall contain a clause stating that Tenant's insurance is primary and noncontributory, and Landlord shall be named as an additional insured.

7.2. Liability Insurance--Landlord. Landlord shall obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily injury and property Damage Insurance, insuring Landlord, but not Tenant, against any liability arising out of the ownership, use, occupancy or maintenance of the Gateway Plaza in an amount not less than Three Million ($3,000,000) Dollars per occurrence.

7.3. Property Insurance. Landlord shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Gateway Plaza, including the Building and improvements, but not Tenant's personal property, fixtures, equipment or Tenant improvements, in an amount hot to exceed the full replacement value thereof, as the same may exist from time to time, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Premises) and special extended perils ("all risk" as such term is used in the insurance industry). Tenant shall be responsible to replace loss of rental income (in an amount solely determined by Landlord), and any such other insurance as Landlord deems advisable.

7.4 Payment of Premium Increase.

7.4.1 After the term of this Lease has commenced, Tenant shall not be responsible for paying Tenant's Share of any increase in the property insurance premium for the Gateway Plaza specified by Landlord's insurance carrier as being caused by the use, acts or omission of any other Tenant of the Gateway Plaza, or by the nature of such other Tenant's occupancy which create an extraordinary or unusual risk.

7.4.2 Tenant, however, shall pay the entirety of any increase in the property insurance premium for the Gateway Plaza over what it was immediately prior to the commencement of the term of this Lease if the increase is specified by Landlord's insurance carrier as being caused by the nature of Tenant's occupancy or any act or omission of Tenant.

7.5. Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of at least B plus, or such other rating as may be required by a lender having a lien on the Premises, as set forth in the most current issue or "Best's Insurance Guide". Tenant shall not do or permit to be done anything which shall invalidate the insurance policies carried by Landlord. Tenant shall deliver to Landlord copies of liability insurance policies required under Paragraph 7.1 or certificates evidencing the existence and amounts of such insurance within seven (7) days after the Commencement Date. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days prior written notice to Landlord. Tenant shall, at least thirty (30) days prior to the expiration of such policies, furnish Landlord with renewals or "binders" thereof.

7.6. Waiver of Subrogation. Tenant and Landlord each hereby release and relieve the other, and waive their entire right of recovery against the other for loss or damage to the Building (including Loss of Income) arising out of or incident to the perils insured against which perils occur in, on or about the Premises, whether due to the negligence of Landlord or Tenant or their agents, employees, contractors and/or invitees. Tenant and Landlord shall, upon obtaining the policies of insurance required, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease.

7.7. Indemnity. Tenant shall indemnify and hold harmless Landlord from any and all claims arising from Tenant's use of the Gateway Plaza, or from the conduct of Tenant's business or from any activity, work or things done, permitted or suffered by Tenant in or about the Premises or elsewhere and shall further indemnify and hold harmless Landlord from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease, attorneys' fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding that may be brought against Landlord by reason of any such claim. Tenant upon notice from Landlord shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord and Landlord shall cooperate with Tenant in such defense. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property of Tenant or injury to persons, in, upon, or about the Gateway Plaza arising from any cause and Tenant hereby waives all claims in respect thereof against Landlord or arising from the negligence, acts or omissions to act of the Tenant, licensees, invitees, and from any and all costs. The foregoing indemnity provisions shall not apply to any damages, claims, expenses or limitations arising out of the gross negligence or intentional acts of Landlord.

7.8. Exemptions of Landlord from Liability. Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Tenant, Tenant's employees, invitees, customers, or any other person in or about the Premises or the Gateway Plaza, nor shall Landlord be liable for injury to the person of Tenant, Tenant's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions

arising upon the Premises or upon other portions of the Gateway Plaza, or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant. Landlord shall not be liable for any damages arising from any act or neglect of any other Tenant, occupant or user of the Gateway Plaza, nor from the failure of Landlord to enforce the provisions of any other lease of the Gateway Plaza. The foregoing exemptions shall not apply to the gross negligence or intentional acts of Landlord.

8. DAMAGE OR DESTRUCTION.

8.1. Definitions.

8.1.1 "Premises Partial Damage" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is less than fifty percent (50%) of the then replacement cost of the Premises.

8.1.2 "Premises Total Destruction" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is fifty percent (50%) or more of the then replacement cost of the Premises.

8.1.3 "Premises Building Partial Damage" shall mean if the Building of which the Premises are a part is damaged or destroyed to the extent that the cost to repair is less than fifty percent (50%) of the then replacement cost of the Building.

8.1.4 "Premises Building Total Destruction" shall mean if the Building of which the Premises are a part is damaged or destroyed to the extent that the cost to repair is fifty percent (50%) or more of the then replacement cost of the Building.

8.1.5 "Insured Loss" shall mean damage or destruction which was covered by an event required to be covered by the insurance described in Paragraph 7. The fact that an insured Loss has a deductible amount shall not make the loss an uninsured loss.

8.1.6 "Replacement Cost" shall mean the amount of money necessary to be spent in order to repair or rebuild the damaged area to the condition that existed immediately prior to the damage occurring excluding all improvements made by the Tenant.

8.2. Premises Partial Damage: Premises Building Partial Damage.

8.2.1 Insured Loss. Subject to the provisions of Paragraphs 8.4 and 8.5, if at any time during the term of this Lease there is damage which is an Insured Loss and which falls into the classification of either Premises Partial Damage or Premises Building Partial Damage, then Landlord shall, at Landlord's expense, repair such damage to the Premises, but not Tenant's fixtures, equipment or Tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect and to the extent of insurance proceeds received, repair such damage to the Premises, but not Tenant's fixtures, equipment or Tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect.

8.2.2 Uninsured Loss. Subject to the provisions of Paragraph 8.4 and 8.5, if at any time during the term of this Lease there is damage which is not an Insured Loss and which falls within the classification of Premises Partial Damage or Premises Building Partial Damage, unless caused by a negligent or willful act of Tenant (in which event Tenant shall make repairs at Tenant's expense), which damage prevents Tenant from using the Premises, Landlord may at Landlord's option either (i) repair such damage as soon as reasonably possible at Landlord's expense, in which event this Lease shall continue in full force and effect; or (ii) give written notice to Tenant within twenty (20) days after the date of the occurrence of such damage, of its intention to cancel and terminate this Lease. In the event Landlord elects to give such notice of Landlord's intention to cancel and terminate this Lease, Tenant shall have the right within twenty (20) days after the receipt of such notice to give written notice

to Landlord of Tenant's intention to repair such damage at Tenant's expense, without reimbursement from Landlord, in which event this Lease shall continue in full force and effect, and Tenant shall proceed to make such repairs as soon as reasonably possible. If Tenant does not give such notice within such twenty (20) day period, this Lease shall be canceled and terminated as of the date of the occurrence of such damage and the parties hereto shall have no further rights or liabilities one to the other hereunder or otherwise.

8.3 Premises Total Destruction; Premises Building Total Destruction.

8.3.1 Subject to the provisions of Paragraphs 8.4 and 8.5, if at any time during the term of this Lease there is damage, covered by an Insured Loss, and which falls into the classification of either: (i) Premises Total Destruction; or (ii) Premises Building Total Destruction; then Landlord shall repair such damage or destruction, to the extent of Landlord's receipt of insurance proceeds covering such loss and subject to the consent of Landlord's mortgagee, but not Tenant's fixtures, equipment or Tenant improvements, as soon as reasonably possible at Landlord's expense, and this Lease shall continue in full force and effect.

8 .4 Damage Near End of Term.

8.4.1 Subject to Paragraph 8.4.2, if at any time during the last six (6) months of the term of this Lease there is damage whether or not it is an Insured Loss which falls within the classification of Premises Partial Damage or Premises Building Partial Damage, Landlord may at Landlord's option cancel and terminate this Lease on or as of the date of occurrence of such damage by giving written notice to Tenant as of Landlord's election to do so within twenty (20) days after the date of occurrence of such damage and the parties hereto shall have no further rights or liabilities one to the other hereunder, or otherwise.

8.4.2 Notwithstanding Paragraph 8.4.1, in the event that Tenant has an option to extend or renew this Lease, and the time within which said option may be exercised has not yet expired, Tenant shall exercise such option, if it is to be exercised at all, no later than twenty (20) days after the occurrence of an Insured Loss falling within the classification of Premises Total Damage during the last six (6) months of the term of this Lease. If Tenant duly exercises such option during said twenty (20) day period, Landlord shall, at Landlord's expense, repair such damage, but not Tenant's fixtures, equipment or Tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect. If Tenant fails to exercise said option during said twenty (20) day period, then Landlord may at Landlord's option terminate and cancel this Lease as of the expiration of said twenty (20) day period by giving written notice to Tenant of Landlord's election to do so within ten (10) days after the expiration of said twenty (20) day period, notwithstanding any term or provision in the grant of option to the contrary.

8.5 Abatement of Rent; Tenant's Remedies.

8.5.1 In the event Landlord repairs or restores the Premises pursuant to the provisions of this Paragraph, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree in which Tenant's use of the Premises is impaired. Except for abatement of rent, if any, Tenant shall have no claim against Landlord for any damage suffered by reason of any such damage, destruction, repair or restoration, unless caused by Landlord's willful acts or gross negligence.

8.5.2 If Landlord shall be obligated to repair or restore the Premises under the provisions of this Paragraph and shall not commence such repair or restoration within ninety (90) days after such obligation shall accrue, Tenant may at Tenant's option make such repairs at Landlord's cost, in which case Tenant shall be entitled to

the receipt of the insurance proceeds covering such loss, provided Landlord's mortgagee consents thereto, or cancel and terminate this Lease by giving Landlord written notice of Tenant's election to do so at any time prior to the commencement of such repair or restoration. In such event this Lease shall terminate as of the date of such notice and the parties hereto shall have no further rights or liabilities one to the other hereunder, or otherwise, provided, however, that each party shall retain any rights or causes of action arising from the other party's default during the term of this Lease.

8.6 Termination-Advance Payments. Upon termination of this Lease pursuant to this Paragraph 8, an equitable adjustment shall be made concerning advance rent and any advance payments made by Tenant to Landlord. Landlord shall, in addition, return to Tenant so much of Tenant's security deposit as has not theretofore been applied by Landlord.

8.7 Waiver. Landlord and Tenant waive the provisions of any statute which relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease.

9. REAL PROPERTY TAXES.

9.1 Payment of Taxes. Landlord shall pay the real property tax as defined in Paragraph 9.3, applicable to the Gateway Plaza subject to reimbursement by Tenant of Tenant's Share of such taxes in accordance with the provisions of Paragraph 3.2, except as otherwise provided in Paragraph 9.2.

9.2 Additional Improvements. Tenant shall not be responsible for paying Tenant's Share of any increase in real property tax specified in the tax assessor's records and work sheets as being caused by additional improvements placed upon the Gateway Plaza by other Tenants or by Landlord for the exclusive enjoyment of such other Tenants. Tenant shall, however, pay to Landlord at the time that Operating Expenses are payable under Paragraph 3.2.3 the entirety of any increase in real property tax if assessed solely by reason of additional improvements placed upon the Premises by Tenant or at Tenant's request.

9.3 Definition of "Real Property Tax". As used herein, the term "Real Property Tax" shall include any real estate tax or assessment, general, special, ordinary or extraordinary, levy or tax (other than inheritance, personal income, business privilege, license or other tax based on Landlord's rental receipts or income, or estate taxes), imposed on the Gateway Plaza or any portion thereof by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord in the Gateway Plaza or in any portion thereof. The term "Real Property Tax” shall also include any tax, fee, levy, assessment or charge: (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "Real Property Tax"; or (ii) the nature of which was hereinbefore included within the definition of "Real Property Tax".

9.4 Joint Assessment. If the Gateway Plaza is not separately assessed, Tenant's Share of the Real Property Tax liability shall be an equitable proportion of the real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Landlord from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Landlord's reasonable determination thereof, in good faith, shall be conclusive. Landlord shall use its best efforts to have the Gateway Plaza taxed as a separate parcel.

9.5 Personal Property Tax.

9.5.1 Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Premises or elsewhere.

When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord.

9.5.2 If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay to Landlord the taxes attributable to Tenant within ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property.

10. UTILITIES. Tenant shall pay for all water, gas, heat, light, power, telephone and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to the Premises, Tenant shall pay at Landlord's option either Tenant's Share or a reasonable proportion to be determined by Landlord of all charges jointly metered with other premises in the Building.

11. ASSIGNMENT AND SUBLETTING.

11.1 Consent Required. Subject to any provisions of this Paragraph to the contrary, Tenant shall not, without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed: (i) assign, convey or mortgage this Lease or any interest hereunder; (ii) permit to occur or permit to exist any assignment of this Lease, or any lien upon Tenant's interest, voluntarily or by operation of law; (iii) sublet the Premises or any part thereof; (iv) advertise as available for sublet or assignment all or any portion of the Premises; or (v) permit the use of the Premises by any parties other than Tenant and its employees. Any such action on the part of Tenant shall be void and of no effect. There shall be no partial assignment of Tenant's interest in this Lease. The term "sublease" and all words derived therefrom as used in this subparagraph, shall include any subsequent sublease or assignment of such sublease and any other interest arising under such sublease. Landlord's consent to any assignment, subletting or transfer or Landlord's election to accept any assignee, sublessee or transferee as the Tenant hereunder and to collect rent from such assignee, subtenant or transferee shall not release Tenant or any subsequent Tenant from any covenant or obligation under this Lease. Landlord's consent to any assignment, subletting or transfer shall not constitute a waiver of Landlord's right to withhold its consent to any future assignment, subletting, or transfer. Landlord may condition its consent upon execution by the sublessee or assignee of an instrument confirming such restrictions on further subleasing or assignment and joining in the waivers and indemnities made by Tenant hereunder insofar as such waivers and indemnities relate to the affected space. Without limitation of the foregoing, Tenant agrees to indemnify, defend and hold Landlord and its employees, agents, their members, officers and partners harmless from and against any claims made by any broker or finder for a commission or fee in connection with any subleasing or assignment by Tenant or any sublessee or assignee of Tenant.

Tenant agrees that Landlord shall be acting reasonably when such consent is not granted if the prospective sublessee or assignee: (i) in the reasonable judgment of Landlord, is of a character or engaged in a business which is not in keeping with the standards of Landlord for the Building; (ii) in the reasonable judgment of Landlord, the purposes for which the Premises are intended to be used are not in keeping with the standards of Landlord for the Building, or are in violation of the terms of any other leases in the Building, it being understood that the purpose for which subtenant or assignee intends to use the Premises may not be in violation of this Lease; (iii) the portion of the Premises to be sublet does not have appropriate means of ingress and egress and suitable for normal renting purposes for the portion of the Premises to be sublet or assigned; (iv) is a government (or a subdivision or agency thereof) intending to use the Premises other than for general business offices; (v) does not, in the reasonable judgment of Landlord, have adequate financial strength; (vi) Tenant is in Default under this Lease; or (vii) is or was during the term of this Lease a Tenant of Landlord or a related entity in this Building or another building of Landlord or a related entity. Landlord's consent to any subletting or Landlord's election to accept any subtenant or assignee as the Tenant hereunder and to collect rent from such subtenant shall not release Tenant or any subsequent Tenant from any covenant or obligation under this Lease.

11.2 Information Required. If Tenant desires the consent of Landlord to an assignment or subletting, Tenant shall submit to Landlord at least thirty (30) days prior to the proposed effective date of the assignment or sublease a written notice which includes: (i) all documentation then available related to the proposed sublease or assignment (copies of final executed documentation to be supplied on or before the effective date); and (ii) sufficient information to permit Landlord to determine the identity and character of the proposed sublessee or assignee and the financial condition of the proposed assignee.

11.3 Landlord's Alternatives. In addition to withholding its consent Landlord shall have the right to terminate this Lease as to that portion of the Premises which Tenant assigns or sublets in violation of this Lease. Landlord may exercise such right to terminate by giving written notice to Tenant at any time prior to Landlord's written consent to such assignment or sublease. In the event that Landlord exercises such right to terminate, Landlord shall be entitled to recover possession of and Tenant shall surrender such portion of the Premises on the later of (i) the date for possession by such unapproved subtenant or assignee, or (ii) ninety (90) days after the date of Landlord's notice of termination to Tenant.

11.4 Consent. In the event that Landlord consents to any assignment or sublease of any portion of the Premises, as a condition of Landlord's consent, if Landlord consents, Tenant shall pay to Landlord any reasonable attorneys' fees and expenses incurred by Landlord in connection with such assignment or sublease.

11.5 Restrictions on "in Substance" Assignments. If Tenant is a partnership, a withdrawal or change, whether voluntary, involuntary or by operation of law or in one or more transactions, Tenant shall be deemed an assignment of this Lease and subject to the provisions of this Paragraph. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or the sale, transfer or redemption of a direct or indirect controlling interest in the capital stock of Tenant, in one or more transactions, shall be deemed a voluntary assignment of this Lease and subject to the provisions of this Paragraph. Neither this Lease nor any interest therein nor any estate created thereby shall pass by operation of law or otherwise to any trustee, custodian or receiver in bankruptcy of Tenant or any assignee for the assignment of the benefit of creditors of Tenant. Provided, however, that Tenant's merger with or into another existing banking institution or the purchase of substantially all the assets of Tenant by an existing banking institution shall be permitted and shall not be considered an assignment of this Lease.

12. DEFAULT; REMEDIES.

12.1 Default. The occurrence of any one or more of the following events shall constitute a material default (hereinafter referred to as a "Material Default" or "Default") of this Lease by Tenant:

12.1.1 The vacating or abandonment of the Premises by Tenant.

12.1.2 The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of five (5) days after written notice thereof from Landlord to Tenant. In the event that Landlord serves Tenant with a notice to pay rent or quit pursuant to applicable unlawful detainer statutes such notice to pay rent or quit shall also constitute the notice required by this subparagraph.

12.1.3 Except as otherwise provided in this Lease, the failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Tenant, other than described in Paragraph 12.1.2, supra, where such failure shall continue for a period of thirty (3 0) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of Tenant's noncompliance is such that more than thirty (3 0) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commenced such cure within said thirty (30) day period and thereafter diligently prosecutes such

cure to completion. To the extent permitted by law, such thirty (30) day notice shall constitute the sole and exclusive notice required to be given to Tenant under applicable unlawful detainer statutes.

12.1.4 (i) The making by Tenant of any general arrangement or general assignment for the benefit of creditors; (ii) Tenant becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days) ; (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored by Tenant within thirty (3 0) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, which such seizure is not discharged within thirty (30) days. In the event that any provision of this Paragraph 12.1.4 is contrary to any applicable law, such provision shall be of no force or effect.

12.1.5 The discovery by Landlord that any financial statement given to Landlord by Tenant, any assignee of Tenant, any sublessee of Tenant, any successor in interest of Tenant was materially false.

12.1.6 The foregoing notwithstanding, Tenant shall not be considered in default if it disputes in good faith Tenant's Share of any Operating Expenses claimed by Landlord and pays the amount acknowledged by Tenant to be due and thereafter immediately pays the disputed amount upon receiving supporting information and documentation from Landlord.

12.2 Remedies. In the event of any such Material Default by Tenant, Landlord may at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such Default:

12.2.1 Terminate Tenant' right to possession of the Premises by any lawful means, in which case this Lease and the term hereof shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant's default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and any real estate commission actually paid; the amount of the unpaid Rent for the balance of the term; that portion of the leasing commission paid by Landlord applicable to the unexpired term of this Lease; unamortized Tenant improvement work.

12.2.2 Maintain Tenant's right to possession in which case this Lease shall continue in effect whether or not Tenant shall have vacated or abandoned the Premises. In such event Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due hereunder.

12.2.3 Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of Tenant under the terms of this Lease shall bear interest from the date due at the maximum rate than allowable by law.

12.3 Default by Landlord. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Tenant in writing, specifying wherein Landlord has failed

to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance then Landlord shall not be in default if Landlord commences performance within such thirty (3 0) day period and thereafter diligently prosecutes the same to completion.

12.4 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of Base Rent, Tenant's Share of Operating Expenses or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage of trust deed covering the Gateway Plaza. Accordingly, if any installment of Base Rent, Operating Expenses, or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Tenant, Tenant shall pay to Landlord a late charge equal to six percent (6%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of any of the aforesaid monetary obligations of Tenant, the Base Rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding Paragraph 3.1 or any other provision of this Lease to the contrary.

13. CONDEMNATION. If the Premises or any portion thereof or the Gateway Plaza are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein referred to as "Condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of the floor area of the Premises, or more than twenty-five percent (25%) of that portion of the Common Areas designated as parking for the Gateway Plaza is taken by condemnation, Tenant may, at Tenant's option, to be exercised in writing only within twenty (20) days after Landlord shall have given Tenant written notice of such taking (or in the absence of such notice, within twenty (20) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premisses remaining, except that the rent shall be reduced in the proportion that the floor areas of the Premises taken bears to the total floor area of the Premises. No reduction of Rent shall occur if the only area taken is that which does not have the Premises located thereon. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such award shall be made as compensation for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any separated award for diminution in value of the leasehold or for loss of or damage to Tenant's trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Landlord shall to the extent of severance damages received by Landlord in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Tenant has been reimbursed therefore by the condemning authority. Tenant shall pay any amount in excess or such severance damages required to complete such repair.

14. ESTOPPEL CERTIFICATE.

14.1 Each party (hereinafter referred to as the "Responding Party"), shall, at its own expense, at any time upon not less than ten (10) days' prior written notice form the other party (hereinafter referred to as the "Requesting Party") execute, acknowledge, and deliver to the Requesting Party a statement in writing: (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) , and the date to which the rent and other charges are paid in advance, if any; and (ii) acknowledging that there are not, to the Responding Party's knowledge, any uncured Defaults on the part of the Requesting Party, or specifying such Defaults if any are claimed.

Any such statement may become conclusively relied upon by any prospective purchaser or encumbrancer of the Premises or of the business of the Requesting Party.

14.2 At the Requesting Party's option, the failure to deliver such statement within such time shall be a Material Default of this Lease by the party who is to respond, without any further notice to such party, or it shall be conclusive upon such party that: (i) this Lease is in full force and effect, without modification except as may be represented by the Requesting Party; (ii) there are no uncured Defaults in the Requesting Party's performance; and (iii) if Landlord is the Requesting Party, not more than one (1) month's Rent has been paid in advance.

14.3 If Landlord desires to finance, refinance, or sell the Property, or any part thereof, Tenant hereby agrees to deliver to any lender or purchaser designated by Landlord such financial statements of Tenant as may be reasonably required by such lender or purchaser. All such financial statements shall be received by Landlord and such lender or purchaser in confidence and shall be used only for the purpose herein set forth.

15. LANDLORD'S LIABILITY.

15.1 The term "Landlord" as used herein shall mean only the owner or owners, at the time in question, of the fee title or a Tenant's interest in a ground lease of the Gateway Plaza; and in the event of any transfer of such title or interest, Landlord herein named (and in the case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall, subject as aforesaid, be binding on Landlord's successors and assigns, only during their respective periods of ownership.

15.2 The liability of Landlord to Tenant or any default by Landlord under the terms of this Lease shall be limited to the interest of Landlord in the Gateway Plaza and Tenant agrees to look solely to Landlord's interest in the Gateway Plaza for the recovery of any judgment from the Landlord, it being intended that neither Landlord nor any member, partner or principal of Landlord nor any other property disclosed or undisclosed of such partners or principals shall be personally liable for any judgment or

16. SEVERABILITY. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

17. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any amount due to Landlord not paid when due shall bear interest at the maximum rate then allowable by law from the date due. Payment of such interest shall not excuse or cure any default by Tenant under this Lease; provided, however, that interest shall not be payable on late charges incurred by Tenant nor on any amounts upon which late charges are paid by Tenant.

18. TIME OF ESSENCE. Time is of the essence with respect to the obligations to be performed under this Lease.

19. ADDITIONAL RENT. All monetary obligations of Tenant to Landlord under the terms of this Lease, including but not limited to, Tenant's Share of Operating Expenses and insurance and tax expenses payable shall be deemed to be rent, and payable as additional Base Rent.

20. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior or contemporaneous agreement or understanding pertaining to such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease, Tenant hereby acknowledges that no real estate broker, if any, on this transaction nor the Landlord or any employee or agents of any such persons has made any oral or written warranties or representations to Tenant relative to the condition or use by Tenant of the Premises or the Building and Tenant acknowledges that Tenant assumes all responsibility regarding the Occupational Safety and Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease except as otherwise specifically stated in this Lease.

21. NOTICES. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery or by certified mail, and if given personally or by mail, shall be deemed sufficiently given if addressed to Tenant or the Landlord at the address noted below:

	Landlord:	Gateway Associates, LLC
		54 S. Commerce Way, Suite 175
		Bethlehem, PA 18017-8915

	With copies to:
		Richard E. Thulin
		2509 Center Street
		Bethlehem, PA 18017

		Nicholas M. Zumas, Esquire
		54 S. Commerce Way, Suite 172
		Bethlehem, PA 18017

	Tenant:	Embassy Bank
		100 Gateway Drive, Suite 100
		Bethlehem, PA 18017-8915

	With a copy to:
		Fredric C. Jacobs, Esquire
		214 Bushkill Street
		Easton, PA 18042

Either party may by notice to the other specify a different address for notice purposes except that upon Tenant's taking possession of the Premises, the Premises shall constitute Tenant's address for notice purposes. A copy of all notices required or permitted to be given to Landlord hereunder shall be concurrently transmitted to such party or parties at such addresses as Landlord may from time to time hereafter designate by notice to Tenant.

22. WAIVERS. No waiver by Landlord of any provision hereof shall be deemed a waiver of any other provision herein or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of any provision hereto, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent.

23. RECORDING. Tenant shall, upon request of the Landlord, execute, acknowledge, and deliver to Landlord in recordable form a "short form" memorandum of this Lease for recording purposes.

24. HOLDING OVER. In the event of holding over by Tenant without Landlord's written consent after the expiration or other termination of this Lease or in the event Tenant continues to occupy the Premises after the termination of Tenant's right of possession, Tenant shall, throughout the entire holdover period, pay Rent equal on a per diem basis, to one and one-half (1 1/2) times the Base Rent, as adjusted under Exhibit "C" hereto, which would have been applicable had the term of this Lease continued through the period of such holding over by Tenant. No holding over by Tenant after the expiration of the term of this Lease shall be construed to extend the term of this Lease.

25. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible be cumulative with all other remedies at law or in equity.

26. COVENANTS AND CONDITIONS. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition.

27. BINDING EFFECT; CHOICE OF LAW. Subject to any provision hereof restricting assignment or subletting by Tenant and subject to the provisions of Paragraph 15, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the Commonwealth of Pennsylvania and any litigation concerning this Lease between the parties hereto shall be initiated in Northampton County.

28. SUBORDINATION.

28.1 This Lease, and any Option granted hereby, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Gateway Plaza and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the Rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms, if any mortgagee, trustee or ground Landlord shall elect to have this Lease and any Options granted hereby prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease and such Options shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease or such Options are dated prior to or subsequent to the date of said mortgage, deed or trust, or ground lease or the date of recording thereof.

28.2 Tenant, at its sole cost and expense, agrees to execute any documents required to effectuate an attornment, a subordination or to make this Lease or any Option granted herein prior to the lien of any mortgage, deed of trust or ground lease, as the case may be, whether precipitated by Landlord or a proposed transferee of Landlord. Tenant's failure to execute such documents within ten (10) days after written demand shall constitute a material default by Tenant hereunder without further notice to Tenant or, at Landlord's option, Landlord shall execute such documents on behalf of Tenant as Tenant's attorney-in-fact. Tenant does hereby make, constitute, and irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead, to execute such documents in accordance with this Paragraph 28.2.

29. ATTORNEYS' FEES. If either party named herein brings an prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorneys' fees to be paid by the losing party as fixed by the court.

30. LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the right upon reasonable notice and in a manner which does not interfere with Tenant's business or compromise the security of Tenant's banking offices, to enter the Premises at reasonable times for the purpose of extending any utilities, services or related items, inspecting the Premises, showing the Premises to prospective purchasers, lenders, or Tenants, and making such alterations, repairs, improvements or additions to the Premises or to the Building of which they are a part as Landlord may deem necessary or desirable. Landlord may at any time, place on or about the Building any ordinary "For Sale" signs and Landlord may at any time during the last one hundred twenty (12 0) days of the term hereof place on or about the Premises any ordinary "For Lease" signs. All activities of Landlord pursuant to this Paragraph shall be without abatement of Rent, nor shall Landlord have any liability to Tenant for the same.

31. AUCTIONS. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises or the Common Areas without first having obtained Landlord's prior written consent. Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.

32. SIGNS. Tenant shall not place any sign upon the Premises or the Gateway Plaza without Landlord's prior written consent. Under no circumstances shall Tenant place a sign on any roof of the Gateway Plaza. By separate letter agreement contemporaneous with the execution of this Lease, Landlord and Tenant have agreed upon interior and exterior signage, subject to any Township approvals.

33. MERGER. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, or a termination by Landlord, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies.

34. CONSENTS. Except for Paragraph 31, supra, wherever in this Lease the consent of one party is required to an act of the other party such consent shall not be unreasonably withheld or delayed.

35. GUARANTOR. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Tenant under this Lease, and shall execute and deliver the Guaranty substantially in the form contained in Exhibit "D", which is attached hereto and made a part hereof.

36. QUIET POSSESSION. Upon Tenant paying the rent for the Premises and observing and performing all of the covenants, conditions, and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executing this Lease on behalf of Landlord represent and warrant to Tenant that they are fully authorized and legally capable of executing this Lease on behalf of Landlord and that such execution is binding upon all parties holding an ownership interest in the Gateway Plaza, subject to Paragraph 15.

37. OPTIONS.

37.1 Definition. As used in this Paragraph, the word "Option" shall mean the right or option to extend the term of this Lease or to renew this Lease or to extend or renew any lease that Tenant has on other property of Landlord.

37.2 Option Personal . Each Option that may be granted to Tenant in this Lease is personal to the original Tenant and may be exercised only by the original Tenant while occupying the Premises who does so

without the intent of thereafter assigning this Lease or subletting the Premises or any portion thereof, and may not be exercised or be assigned, voluntarily or involuntarily, by or to any person or entity other than Tenant; provided, however, that an Option may be exercised by or assigned to any Tenant Affiliate as defined in Paragraph 11.2 of this Lease. The Option, if any, herein granted to Tenant is not assignable separate and apart from this Lease, nor many any Option be separated from this Lease in any manner, either by reservation or otherwise. The foregoing notwithstanding, all Options may be exercised by any Assignee or Sublessee permitted under Section 11, above, or which is consented to by Landlord.

37.3 Multiple Options. In the event that Tenant has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Option to extend or renew this Lease has been so exercised.

37.4 Effect of Default on Options.

37.4.1 Tenant shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary: (i) during the time commencing from the date Landlord gives to Tenant a notice of Default pursuant to Paragraph 12.1.2 or 12.1.3 and continuing until the noncompliance alleged in said notice of Default is cured; or (ii) during the period of time commencing on the date after any monetary obligation to Landlord is due from Tenant and unpaid (without any necessity for notice thereof to Tenant) and continuing until the obligation is paid; or (iii) at any time after an event of Default described in Paragraphs 12.1.1, 12.1.4, or 12.1.5 (without any necessity of Landlord to give notice of such Default to Tenant) ; nor (iv) in the event that Landlord has given to Tenant three (3) or more notices of Default under Paragraph 12.1.2, or Paragraph 12.1.3, whether or not the Defaults are cured, during the twelve (12) month period of time immediately prior to the time that Tenant attempts to exercise the subject Option.

37.4.2 The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Tenant's inability to exercise an Option because of the provisions of Paragraph 3 7.4.1.

37.4.3 All rights of Tenant under the provisions of an Option shall terminate and be of no further force or effect, notwithstanding Tenant's due and timely exercise of the Option; if, after such exercise and during the term of this Lease: (i) Tenant fails to pay to Landlord a monetary obligation of Tenant for a period of thirty (30) days after such obligation becomes due (without any necessity of Landlord to give notice thereof to Tenant) ; or (ii) Tenant fails to commence to cure a Default specified in Paragraph 12.1.3 within thirty (30) days after the date that Landlord gives notice to Tenant of such Default and/or Tenant fails thereafter to diligently prosecute said cure to completion; or (iii) Tenant commits a Default described in Paragraph 12.1.1, 12.1.4, or 12.1.5 (without any necessity of Landlord to give notice of such Default to Tenant) ; or (iv) Landlord gives to Tenant three (3) or more notices of Default under Paragraph 12.1.2, or Paragraph 12.1.3 within a period of twelve (12) months, whether or not the Defaults are cured.

37.5 Option to Renew. Provided Tenant is not in Default in the performance of any of its obligations under this Lease, or any renewal thereof, upon written notice to Landlord on or before one hundred eighty (180) days prior to the Termination Date of this Lease, or any extension thereof, Tenant may elect to extend the term hereof for a period of five (5) terms of five (5) additional years each. Said extended terms of five (5) years each shall be on the terms of this Lease except that the Base Rent payable during such renewal term shall be at the then prevailing market rate for comparable space in the Building as determined by mutual agreement of Landlord and Tenant, but no less than the most recent Base Rent as increased in Exhibit "C"; and further provided, that if Landlord and Tenant cannot reach mutual agreement on the Base Rent for such renewal term within thirty (30) days of written receipt by Landlord of Tenant's written notice of exercise of its option, then the Base Rent for such renewal term shall be determined as follows:

37.5.1 Tenant shall hire, at its expense, a licensed, independent real estate appraiser who shall deliver a fair market rental appraisal of the Premises within thirty (30) days of the date on which Landlord and Tenant fail to reach agreement on Landlord's proposed Base Rent.

37.5.2 If Landlord disagrees with Tenant's appraiser's Base Rent amount, then Landlord, at its expense, shall hire a licensed, independent real estate appraiser with shall deliver a fair market rental value appraisal of the Premises within thirty (30) days of the date on with Landlord receives Tenant's Appraiser's appraisal.

37.5.3 If the two appraisals are within ten percent of each other, then the average of the two shall be the base rent for the Renewal Term. If the two appraisals are not within ten percent of each other, then the two appraisers shall select a third licensed, independent appraiser who shall deliver an appraisal within thirty (30) days of the date the second appraiser's appraisal is delivered. The Base Rent for the Renewal Term shall then be the average of the third appraisal and whichever of the first two appraisals is closest to the third appraisal. If the third appraisal is exactly in the middle of the first two appraisals, then the third appraisal amount shall be the Base Rent for the Renewal Term.

38. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Gateway Plaza. Tenant assumes all responsibility for the protection of Tenant, its agents, employees, licensees, invitees, and the property of Tenant and of Tenant's agents and invitees from acts of third parties. Nothing herein contained shall prevent Landlord, at Landlord's sole option, from providing security protection for the Gateway Plaza or any part thereof, in which event the cost thereof shall be included within the definition of Operating Expenses, as set forth in Paragraph 3.2.2.

39. EASEMENTS. Landlord reserves to itself the right, from time to time, to grant such easements, rights, and dedications that Landlord deems necessary or desirable, and to cause the recordation of Parcel Maps and restrictions, so long as such easements, rights, dedications, Maps, and restrictions do not unreasonably interfere with the use of the Premises by Tenant. Tenant shall sign any of the aforementioned documents upon request of Landlord and failure to do so shall constitute a Material Default of this Lease by Tenant without the need for further notice to Tenant.

40. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any amount of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment, and there shall survive the right on the part of said party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease.

41. AUTHORITY. If Tenant is a corporation, limited liability company, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity; if Tenant is a corporation, limited liability company, trust, or partnership, Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord evidence of such authority satisfactory to Landlord.

42. CONFLICT. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions, if any, shall be controlled by the typewritten provisions.

43. LANDLORD'S LIEN. Tenant hereby grants to Landlord - a statutory Landlord's lien on all property of Tenant now or hereafter placed in or upon the Premises, and such property shall be and remain subject to such lien of Landlord for payment of all Base Rent, additional rent and other sums agreed to be paid by Tenant herein as provided by Pennsylvania law. Landlord agrees to sign subordination agreements and lien waivers as Tenant may reasonably request to permit Tenant to lease ro finance the purchase of equipment to be used on the Premises.

44. ATTORNEYS' FEES. In the event either party Defaults in the performance of any of the terms of this Lease and the other party employs an attorney in connection therewith, the defaulting party agrees to pay the prevailing party's reasonable attorneys' fees, plus interest thereon at the highest rate permitted by law.

45. NO IMPLIED WAIVER. No provision of this Lease shall be deemed to have been waived by Landlord unless such a waiver is in writing signed by Landlord. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent due under this Lease shall be deemed to be other than on account of the earliest Rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or purse any other remedy in this Lease herein provided. No agreement to accept a surrender of this Lease shall be valid unless in writing signed by Landlord and Tenant. The payment by Tenant of Rent or the receipt by Landlord of Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach.

46. EXTERIOR SIGNS. Tenant shall be responsible for the maintenance, repair, and replacement of all signage for the Premises. All exterior signs must be approved by Landlord prior to their installation, provided that such approval will not be unreasonably withheld or delayed and provided that such approval will be granted if the signage is in conformity with applicable zoning and sign ordinances.

47. FORCE MAJEURE. Whenever a period of time is herein prescribed for the taking of any action by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other cause whatsoever beyond the control of Landlord.

48. TRANSFERS BY LANDLORD. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Building, Gateway Plaza and property referred to herein, and in such event and upon such transfer Landlord shall be released from any further obligations hereunder, and it shall be deemed and construed as a covenant running with the land without further agreement between the parties and the transferee of the Building, or of the land upon which it is situate and the Building that the transferee has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder. Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations.

49. OFFER. Preparation of this Lease by Landlord or Landlord's agent and submission of same to Tenant shall not be deemed an offer to lease. This Lease shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant.

50. BROKERS. Landlord and Tenant warrant that no real estate broker or brokerage firm other than Grubb & Ellis (hereinafter referred to as the "Broker"), whose fees shall be paid by Landlord, has participated in

bringing about this Lease and Landlord and Tenant agree to hold each other harmless and to indemnify each other from all claims of other arising out of the negotiation or entering into of this Lease. Landlord agrees to pay the Broker a commission for services in connection with this Lease pursuant to a separate agreement between Landlord and Broker.

51. CONSENTS. Any consents required of Landlord or Tenant under this Lease shall not be unreasonably withheld or delayed.

52. ADDENDUM. Exhibit "B", which is attached hereto and made a part hereof is the Plans and Specifications which contain the terms and conditions of Landlord's and Tenant's obligations in the finishing of the Premises for Tenant's use. Also attached hereto is an addendum or addenda containing Paragraph Al which constitute a part of this Lease.

LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE PREMISES.

THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR APPROVAL. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE

WITNESS:	LANDLORD: GATEWAY ASSOCIATES, LLC

/s/ Charles Diacount	/s/ Richard Thulin,
	Manager, Arcadia Properties

Executed on: 6-11-01	Address:	54 South Commerce
		Way, Suite 175
		Bethlehem, PA 18017

WITNESS/ATTEST:	TENANT: EMBASSY BANK

/s/ Judith A. Hunsicker	/s/ David M. Lobach Jr.

Executed on: 6-11-01	Address:	100 Gateway Drive,
		Suite 101
		Bethlehem, PA 18017

LEASE

THIS LEASE ("Lease"), is made and entered into as of October 21, 2005 (the "Effective Date") by and between Lower Macungie Associates, LP, having an office at c/o RD Management Corp., 810 Seventh Avenue, 28th Floor, New York, New York 10019 ("Landlord"), and Embassy Bank, a Pennsylvania banking company having an address at 100 Gateway Drive, Suite 100, Bethlehem, PA 18017 ("Tenant").

W I T N E S S E T H:

ARTICLE I - GRANT AND TERM

SECTION 1.01.

Leased Premises.

In consideration of the rents, covenants and agreements hereinafter reserved and contained on the part of Tenant to be observed and performed, the Landlord demises and leases to the Tenant, and Tenant rents from Landlord, those certain premises, now or hereafter to be erected in the Shopping Center (herein called the "Shopping Center") located at the intersection of Hamilton Boulevard and Mill Creek Road, Lower Macungie Township. Lehigh County, Commonwealth of Pennsylvania, which consists of a store and containing an area of approximately four thousand (4000) rentable square feet (herein collectively called the "Leased Premises").

b)	The boundaries and location of the Leased Premises are crosshatched on the site plan of the Shopping Center ("Site Plan"), which is marked Exhibit A and is attached hereto and hereby made a part hereof.

Landlord reserves the use of the roof and exterior walls of the Leased Premises, and the right, from time to time, to install, maintain, use, repair, place and replace utility lines, pipes, conduits, wires, and satellites in, on or under the Leased Premises (in locations which shall not materially interfere with Tenant's use thereof) to serve other parts of or premises in the Shopping Center. All such work shall be done at Landlord's expense in a manner which minimizes interference with Tenant’s business. Landlord shall, at Landlord’s sole cost and expense, repair and correct any and all damage to the Leased Premises caused by such work.

The Leased Premises are demised and let subject to (a) the existing state of the title thereof as of the date of this Lease, (b) any state of facts which may be shown by an, updated survey or physical inspection of the Premises, (c) all zoning regulations, restrictions, rules and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction over the Leased Premises, and all agreements, licenses, easements, covenants, restrictions and other matters which affect the Leased Premises, the title thereto, or the use, enjoyment, occupancy or possession thereof but do not prohibit or materially interfere with the use or development of the Leased Premises as a bank office and (d) the Ground Lease between Landlord, as tenant, and Lloyd Jones and Blanche M. Jones, as landlord, dated as of July 8, 2005. A redacted copy of the Ground Lease is attached hereto as Exhibit E.

Tenant's obligations under this Lease are conditioned upon the approval of this Lease and the location of the bank branch office by the Pennsylvania Department of Banking and the FDIC for which Tenant shall diligently and in good faith apply immediately following the execution of this Lease by Landlord and Tenant. In the event such approvals are not obtained within 120 days of the date of this Lease, this Lease shall be null and void and all payments, if any, made by Tenant to Landlord shall be refunded to Tenant without offset.

INTIALS:	LANDLORD	RB

	TENANT	DL

Notwithstanding any other provisions contained in this Lease, in the event (a) Tenant or its successors or assignees shall become subject to a bankruptcy case pursuant to Title 11 of the U.S. Code or similar proceeding during the term of this Lease or (b) the depository institution then operating at the Leased Premises is closed, or is taken over by any depository institution supervisory authority (hereinafter referred to as the "Authority") during the term of this Lease, Landlord may, in either such event, terminate this Lease only with the concurrence of any Receiver or Liquidator appointed by such Authority or pursuant to appropriate order of the Court with jurisdiction over such case or proceeding, or upon the expiration of the stated term of this Lease during the term of this Lease provided that in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Landlord for rent, damages or indemnity for injury, resulting from the termination, rejection, or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid Minimum Rent and Additional Rent to the date of termination.

SECTION 1.02.

Use of Additional Areas.

The use and occupancy by the Tenant of the Leased Premises shall include the use in common with others entitled thereto of the common areas, employees' parking areas, service roads, loading facilities, sidewalks and customer car parking areas, shown and depicted on Exhibit A, and other facilities as may be designated from time to time by the Landlord, subject however to the terms and conditions of this Lease.

SECTION 1.03.

Commencement and Ending Date of Term.

(a) The term of this Lease shall commence on the date (the ("Commencement Date") on which Landlord delivers the Leased Premises to Tenant with Landlord's Work (as defined in Section 27.28 hereof) substantially complete. Landlord's Work will be deemed substantially complete when Landlord's Work is completed but for minor construction items which do not materially interfere with Tenant's ability to complete Tenant's initial alterations to the Leased Premises or conduct business therein. Landlord agrees to perform Landlord's Work in a good and workmanlike manner, in conformity with the Plans and Specifications attached as Exhibit C and in compliance with all applicable laws and codes. Landlord will correct any defects in materials or workmanship or incomplete items within thirty days after Tenant provides a list of all such defects, such list to be provided within ninety days of Landlord's delivery of possession (provided that if the defects are not reasonably capable of correction within said thirty day period, Landlord agrees to commence correcting the defect within said thirty day period and thereafter complete correcting the defects with due diligence).

(b) Landlord agrees to use commercially reasonable efforts to deliver possession of the Leased Premises to Tenant, free and clear of any tenancies or occupancies and with Landlord's Work substantially completed on or about September 1, 2006 ("Premises Delivery Date"). Landlord agrees to give Tenant at least ninety days' advance notice of the intended Premises Delivery Date and to update same as and when reasonably appropriate if there is a material change in the intended Premises Delivery Date.

(c) The date (the "Rent Commencement Date") on which Tenant is obligated to commence paying the Minimum Rent and additional rent shall be the earlier to occur of (a) seventy-five (75) days after the Commencement Date; or (b) the date on which Tenant opens all or any portion of the Leased Premises for business.

INITIALS:	LANDLORD	RB

	TENANT	DL

(d) The initial term of this Lease shall be for a period of approximately thirteen (13) years running from the Commencement Date through the last day of the month in which the thirteenth anniversary of the Commencement Date occurs (the "Termination Date").

(e) Tenant shall have an option (the "Option") to extend the term of this Lease for one (1) additional terms of seven (7) years, one additional term of five (5) years and one additional term of four years and ten months (each, a "Renewal Term"), each successively, commencing on the first day next succeeding the Termination Date or the last day of the immediately preceding Renewal Term, as the case may be, upon the same terms, conditions and provisions as are provided for in this Lease.

The Option may be exercised only by Tenant giving written notice to Landlord of Tenant's said Option by certified mail, return receipt requested, not more than fifteen (15) nor less than nine (9) months prior to the Expiration Date of the term of this Lease or the last day of the immediately preceding Renewal Term, as the case may be (the "Exercise Notice"). Upon Tenant's giving of the Exercise Notice, the term of this Lease shall be extended automatically upon the terms and conditions without the execution of an extension agreement or other instrument. If Tenant shall not give Landlord the Exercise Notice at the time and in the manner set form above, the Option shall terminate and be deemed waived by Tenant. Time is of the essence as to the date for the giving of the Exercise Notice.

Notwithstanding the foregoing provisions, if on the date that Tenant exercises the Option, or if on any subsequent date up to and including the date upon which the Renewal Term commences, Tenant is in default, beyond any applicable notice and grace periods, in the payment of Minimum Rent or additional rent hereunder, or is in default in the performance of any of the other terms, conditions or provisions of this Lease, Tenant's exercise of the Option and the extension of the term contemplated thereby shall, at the option of Landlord exercised by written notice to Tenant, be rendered null and void and shall be of no further force and effect and Tenant shall have no other additional right to exercise such Option, which shall be deemed waived by Tenant.

Time shall be of the essence with respect to the exercise of the Option by Tenant.

(f) Any access by Tenant to the Leased Premises prior to the Commencement Date (which prior access shall occur only with Landlord's prior written consent) shall be upon all of the terms, covenants and conditions of this Lease, except for the payment of Minimum Rent and Tenant's proportionate share of additional charges.

SECTION 1.04.

Lease Year Defined.

The term "Lease Year" as used herein shall mean a period of twelve (12) consecutive full calendar months. The first Lease Year shall begin on the Commencement Date and shall continue through the last day of the month in which the first anniversary of the Commencement Date occurs. Each succeeding twelve month period shall be the sequential Lease Year.

SECTION 1.05.

Holding Over.

If Tenant shall be in possession of the Leased Premises after the Termination Date, in the absence of an agreement extending the term hereof, the tenancy under this Lease shall become that of "month to month", terminable by either party upon thirty days' prior written notice, at a monthly rental equal to one and one-half times the sum of the monthly installment of Minimum Rent, payable during the last month of the term. Tenant shall also pay all other charges payable under the terms of this Lease, pro rated for each month during which Tenant remains in possession. Such month-to-month tenancy shall also be subject to all other conditions, provisions, and obligations of this Lease. Tenant shall not interpose any counterclaim or counterclaims in a summary proceeding or other action based upon such holding over.

INITIALS:	LANDLORD	RB

	TENANT	DL

SECTION 1.06.

Force Majeure.

In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this Section 1.06 shall not operate to excuse Tenant from prompt payment of Minimum Rent, additional rent or any other payments required by the terms of this Lease.

ARTICLE II - RENT

SECTION 2.01.

Minimum Rent.

(a) From and after the Rent Commencement Date. Tenant agrees to pay to Landlord on the first day of each and every calendar month at the office of Landlord, or at such other place designated by Landlord, without any prior demand therefor and without any deduction or set-off whatsoever, as minimum rent ("Minimum Rent") as follows:

Initial Term	Monthly Minimum Rent		Annual Minimum Rent
Lease Years 1-5	$	8,333.33	$	100,000.00
Lease Years 6-10	$	9,333.33	$	112,000.00
Lease Years 11-13	$	10,333.33	$	124,000.00

Renewal Terms	Monthly Minimum Rent		Annual Minimum Rent
Lease Years 14-15	$	10,333.33	$	124,000.00
Lease Years 16-20	$	11,470.00	$	137,640.00
Lease Years 21-25	$	12,731.70	$	152,780.40
Years 26-29 and 10 months	$	14,132.19	$	169,586.24

(b) If the Rent Commencement Date is a day other than the first day of a calendar month, then Tenant shall pay, on the Rent Commencement Date, a pro-rata portion of the fixed monthly Minimum Rent described in the foregoing clause (a) prorated on a per diem basis with respect to the fractional calendar month preceding the commencement of the first Lease Year hereof. The rent for a partial month shall be prorated on a thirty (30) day month basis in all cases. Tenant shall contemporaneously with the execution of this Lease, deposit with Landlord an amount equal to one (1) month's Minimum Rent, which amounts shall be applied to Tenant's initial Minimum Rent payment due hereunder.

(c) No payment by Tenant or receipt by Landlord of a lesser amount than the rent due pursuant to this Lease shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check on payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided.

INTIALS:	LANDLORD	RB

	TENANT	DL

SECTION 2.02.

Additional Rent.

In addition to Minimum Rent, Tenant shall pay as additional rent any money required to be paid pursuant to the terms hereof, including without limitation, Sections 2.03, 2.04, 2.05, 8.01, 10.01, 10.03, 12.01, 12.02, 13.02, 13.03, 13.04, 13.05, 13.06, Articles IV and X and 16.02, and all other sums of money or charges required to be paid by Tenant under this Lease, whether or not the same be designated as "minimum rent," "rent" or "additional rent". Unless stated otherwise herein, any and all money, payments, amounts or charges owed by Tenant under this Lease, shall be due and payable upon demand thereof. Minimum Rent and additional rent are hereinafter collectively also called "rent."

SECTION 2.03.

Late Charge and Dishonored Check Fee.

Anything in this Lease to the contrary notwithstanding, at Landlord's option, Tenant shall pay a "late charge" not to exceed eight (8%) percent on any Minimum Rent rent and additional rent when said sums are received by Landlord more than ten (10) days after the due date thereof, to cover the extra expense involved in handling delinquent payments. Tenant agrees to pay Landlord promptly after billing as additional rent the sum of $75.00 for each check remitted by it to Landlord that is dishonored. If two or more checks remitted by Tenant to Landlord arc dishonored within a six month period, Landlord may require that any or all future remittances by Tenant to Landlord be in the form of certified or bank checks.

SECTION 2.04.

Rent and Additional Rent More Than 30 Days Overdue.

(a) If Landlord has not received any rent or additional rent, or charges of the character described in Article II hereof within ten (10) days after the same was due and payable, such unpaid amounts shall bear interest from the date when same was due and payable to the date of payment, at a rate equal to the lesser of (i) ten (10%) percentage points over the Prime Rate (as defined below) or (ii) the maximum interest rate permitted by law ("Interest").

(b) "Prime Rate" shall mean the "Base Rate" (or prime rate or similar equivalent rate) of interest from time to time in effect established by Citigroup, Inc. and announced by it as the rate charged by it to its prime commercial customers on short term unsecured borrowings. If Citigroup, Inc. ceases to report such rate, the term "Prime Rate" shall mean a substitute and comparable rate selected by Landlord.

SECTION 2.05.

Taxes on Rent and Additional Rents

Tenant shall pay to Landlord each month together with Minimum Rent any sales or other tax imposed upon Minimum Rent and additional rent hereunder by any governmental (or quasi-governmental) authorities governing the Shopping Center. Except as other provided in Article IV of this Lease, Tenant will not be responsible for Landlord's business privilege, gross receipts, earned income, franchise or any other tax based on the gross receipts or rental income of Landlord.

ARTICLE III - INTENTIONALLY OMITTED

ARTICLE IV - TAXES

(a) From and after the Commencement Date, and for each year of the lease term, or portion thereof, Tenant shall pay to Landlord as additional rent, Tenant's share of the Real Estate Taxes (as hereinafter defined) which may be levied or assessed by any lawful authority against the land and improvements in the Shopping Center.

INTIALS:	LANDLORD	RB

	TENANT	DL

(b) Tenant shall pay a portion of such taxes equal to the product obtained by multiplying the total taxes by a fraction, the numerator being the rentable square foot area of the Leased Premises, and the denominator of which shall be the total square footage of all leasable First floor area in the Shopping Center (hereinafter called Tenant's "proportionate share"). Notwithstanding the foregoing, if any portion or portions of the Shopping Center are separately assessed for real estate tax purposes, at Landlord's option, Tenant's proportionate share of Real Estate Taxes shall be equal to the product obtained by multiplying the total taxes on the parcel or parcels containing the Leased Premises by a fraction, the numerator being the rentable square foot area of the Leased Premises, and the denominator of which shall be the total square footage of all leaseable first floor area on such parcel or parcels excluding any portion of such parcel or parcels which are separately assessed and paid for directly by another tenant. In the event that certain buildings and/or improvements in the Shopping Center are separately assessed, but land area is not, Landlord may, at its option and in its reasonable discretion, calculate Tenant's proportionate share of each component of Real Estate Taxes in accordance with the respective formulas set forth herein.

(c) Tenant shall initially pay an estimated amount of $333.33 per month toward its proportionate share of all Real Estate Taxes. Landlord shall estimate Tenant's annual share of Real Estate Taxes referred to in this Section and Tenant shall pay one-twelfth (l/12th) of such estimate monthly in advance without prior demand therefor and without any setoff or deduction whatsoever, together with the payment of Minimum Rent. Landlord shall have the right, at any time and from time to time during each calendar year, to increase said estimates based on changed circumstances, additional facts previously unknown to Landlord or for any other reason. After the end of each calendar year (or fiscal tax year should Landlord so decide), Landlord shall furnish Tenant a statement of the actual Real Estate Taxes for the Leased Premises as aforesaid, and there shall be an adjustment between Landlord and Tenant, with payment to Landlord on demand, or credit to Tenant against the next such payment due, as the case may require, to the end that Landlord shall receive from Tenant the entire and proper amount of Tenant's annual share of Real Estate Taxes for such period.

(d) For any portion of the aggregate lease term covered herein which is less than a full calendar year, the allocation of taxes shall be further reduced to limit such charge to a corresponding proportionate share of such year. This last provision shall apply both at the beginning and the end of the lease term.

(e) "Real Estate Taxes" shall mean any property taxes, betterments and assessments imposed upon the land and improvements upon said land, flat rate water and sewer charges, and all other governmental levies made with respect to real property; Real Estate Taxes shall not include Landlord's business privilege, franchise, gross receipts, earned income or other taxes based on the gross receipts or income of Landlord; provided, however, that if due to a change in the method of taxation, any franchise, income, rent or profit tax shall be levied against the owner of the Shopping Center or by Landlord in substitution for or in lieu of any tax which would otherwise constitute a real estate tax, such franchise, income, rent or profit tax shall be deemed to be a Real Estate Tax for the purpose hereof. Additionally, Real Estate Taxes shall be any and all expenses incurred by Landlord, at its discretion, in reducing or maintaining the existing level of such tax obligations to the taxing authorities.

(f) Notwithstanding anything herein to the contrary, if at any time during the term of this Lease any assessment (either general or special) is levied upon or assessed against the Leased Premises or any part thereof, and such assessment may be paid in installments, Tenant's obligation under this Section to pay such assessment shall be limited to the amount of such installments (plus applicable interest thereon charged by the taxing authority, if any) which become due during the term hereof, calculated using the payment option as determined by Landlord.

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(g) In the event there is currently in effect any law providing for the taxation of leases or if any law is enacted or adopted after the Effective Date which changes the laws now in force for the taxation of leases, including but not limited to a Goods and Services Tax (GST), or the manner of the operation of any such taxes, or which otherwise imposes a tax either directly or indirectly on the lease or the rents received therefrom, Tenant will pay such tax with interest and penalties thereon. This provision shall not be deemed to impose liability for any income or franchise tax owed by Landlord by reason of this Lease.

(h) For purpose of this Lease, the periods applicable to the payment of Real Estate Taxes shall be determined on the basis of the calendar year in which the Landlord pays the taxes rather than the period as may be stated within the tax bill.

(i) For the first partial calendar year of this Lease, Tenant shall pay its proportionate share of the Real Estate Taxes as provided for in this Article IV for the entire year multiplied by a fraction consisting of the number of days in the calendar year subsequent to the Commencement Date, divided by the number of days in that calendar year.

ARTICLE V - LANDLORD'S RIGHT TO ALTER AND RELOCATE BUILDINGS.

SECTION 5.01.

Changes and Additions to Buildings.

Landlord hereby reserves the right at any time to make alterations or additions to and to build additional stories on the building in which the Leased Premises are contained and to build adjoining the same. Landlord also reserves the right to construct other buildings or improvements in the Shopping Center from time to time and to make alterations thereto or additions or additional stories thereto and to build adjoining same and to construct double-decker elevated parking facilities. Any such alterations, additions, new buildings or other improvements shall not materially affect the visibility of the Leased Premises or access thereto.

SECTION 5.02.

Right to Relocate.

The purpose of the Site Plan attached hereto as Exhibit A is to show the approximate location of the Leased Premises. Landlord reserves the right at any time to relocate the various buildings, automobile parking areas, and other common areas shown on said Site Plan; provided, however, that Landlord agrees that Landlord will not erect buildings or other improvements (other than standard directional signage and the like) in the area identified as "No-Build Area" on Exhibit A.

ARTICLE VI - CONDUCT OF BUSINESS BY TENANT

SECTION 6.01.

Use of Premises.

(a) Tenant shall use the Leased Premises solely as a retail bank or any other lawful retail use; provided that Tenant may not use the Leased Premises for a use which (i) violates any then existing exclusive benefiting any other tenant or occupant of the Shopping Center or in violation of any of the exclusives attached hereto as Exhibit G or (ii) competes with the use of any other tenant or occupant in the Shopping Center. Tenant shall occupy the Leased Premises and shall conduct continuously in the Leased Premises the business above stated and as further provided in Section 6.02 herein. Provided that Tenant continuously operates the Leased Premises as a retail bank, Landlord agrees that Landlord will not lease any other portions of the Shopping Center for use principally as a retail bank or retail bank office and Landlord will not allow a retail bank or retail bank office within the space of another tenant of the Shopping center.

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(b) Tenant shall not use or permit any person to use, in any manner whatsoever the Leased Premises for any purpose, trade, business, occupation or vocation whatever, which may be in any way disreputable, immoral or pornographic in nature. Tenant will not use the Leased Premises as a "check cashing" business, "payday loan" business or pawn shop business. Tenant agrees that it shall not sell, distribute, display or offer for sale any item which, in Landlord's reasonable judgment, is inconsistent with the quality of operation of the Shopping Center or may tend to injure or detract from the moral character or image of the Shopping Center within such community. Without limiting the generality of the foregoing, Tenant shall not sell, distribute, display or offer for sale (i) any roach clip, water pipe, bong, toke, coke spoon, cigarette papers, hypodermic syringe or other paraphernalia commonly utilized in the use or ingestion of illicit drugs, or (ii) any pornographic, lewd, suggestive, or "adult" newspaper, book, magazine, film, picture, representation or merchandise of any kind. Landlord agrees that Landlord will not permit any other tenant or occupant of the Shopping Center to use its premises for any purpose prohibited by this Section 6.01(b).

(c) Tenant shall conduct the operation of its business in such a manner so as not to permit unreasonable disturbances or other inconveniences, directly or indirectly, to other tenants, customers or shoppers in the Shopping Center. Tenant shall not permit loitering in, on or about, the Leased Premises.

(d) Tenant shall obtain, at its sole cost and expense and prior to opening for business, all permits and certificates of occupancy required for it to open and operate its business at the Leased Premises. Copies of all permits and certificates of occupancy shall be delivered to Landlord promptly after receipt by Tenant. Tenant agrees to open the Leased Premises for business with the general public fully staffed and operational, within sixty days of Landlord's delivery of possession of the Leased Premises to Tenant.

(e) Tenant shall not perform any acts or carry on any practices, which may damage any building or structure within the Shopping Center or be a nuisance or menace to other tenants in the Shopping Center.

(f) The Leased Premises shall not be used for any of the following purposes: a flea market or a business selling so-called "second hand" goods (the term "second hand" shall mean stores which sell goods primarily as a service to the public rather than to a retail customer for a profit); cemetery; mortuary; any establishment engaged in the business of selling, exhibiting or delivering pornographic or obscene materials; a so-called "head shop"; off-track betting parlor; junk yard; recycling facility or stockyard; motor vehicle or boat dealership, repair shop (including lubrication and/or service center) that stores vehicles outdoors overnight, body and fender shop, or motor vehicle or boat storage facility; a mini-storage or self-storage facility; a dry-cleaning facility; a bar, tavern or cocktail lounge; a discotheque, dance hall, comedy club, night club or adult entertainment facility; billiard or pool hall; massage parlor, game parlor or video arcade (which shall be defined as any store

containing more than three (3) electronic games); a beauty school, barber college, reading room, place of instruction or any other operation catering primarily to students or trainees and not to customers; office usage other than incidental in connection with non-prohibited uses; industrial, residential or manufacturing uses, school or house of worship.

SECTION 6.02.

Operation of Business.

(a) Tenant shall conduct its business in the Leased Premises during at least the following days and hours-

Monday through Thursday:	9:00 am to 5:00 pm
Friday:	9:00 am to 6:00 pm
Saturday:	9:00 am to Noon

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(b) Tenant shall install and maintain at all times displays of merchandise in the display windows (if any), of the Leased Premises. Tenant shall keep the display windows and signs, if any, in the Leased Premises well lighted during the hours from sundown to 11:00 o'clock P.M. If Tenant or a permitted assignee of Tenant fails to continuously operate the Leased Premises for the permitted use under this Lease and same continues for a period of six months or longer, Landlord will have the right to terminate this Lease upon notice to Tenant.

SECTION 6.03.

Competition.

Neither Tenant nor any affiliate, parent or subsidiary of Tenant shall, directly or indirectly, operate, manage or engage in any similar or competing business within a radius of one (1) mile from the outside boundary of the Shopping Center which shall not be applicable if Tenant is acquired by other entity which maintains a retail bank within said one mile radius. Tenant shall not perform any acts or carry on any practices which may injure the building or be a nuisance or menace to other tenants in the Shopping Center.

SECTION 6.04.

Storage, Office Space.

Tenant shall use for office, clerical or other non-selling purposes only such space in the Leased Premises as is from time to time reasonably required for Tenant's business in the Leased Premises. No auction, fire, going out of business, lost our lease or bankruptcy sales may be conducted in the Leased Premises without the prior written consent of Landlord.

ARTICLE VII - OPERATION OF CONCESSIONS

SECTION 7.01.

Consent of Landlord.

Tenant shall not permit any business to be operated in or from the Leased Premises by any sublessee, concessionaire or licensee without the prior written consent of Landlord.

ARTICLE VIII - SECURITY DEPOSIT

SECTION 8.01.

Amount of Deposit.

Tenant shall, contemporaneously with the execution of this Lease, deposit with Landlord the sum of Thirty One Thousand Dollars ($31,000). Said deposit shall be held by Landlord, without liability for interest, as security for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease by Tenant to be kept and performed during the term hereof. If at any time during the term of this Lease or expiration or early termination thereof, any rent and additional rent herein reserved shall be overdue and unpaid, or any other sum payable by Tenant to Landlord hereunder shall be overdue and unpaid Landlord may, at its option (but Landlord shall not be required to), apply any portion of said deposit to the payment of any such overdue rent or other sum. Provided that Tenant is not in default of Tenant's obligations under this Lease, upon request of Tenant, Landlord agrees to refund to Tenant the then existing principal amount of the security deposit as of the first anniversary of the Rent Commencement Date.

SECTION 8.02.

Use and Return of Deposit.

In the event of the failure of Tenant to keep and perform any of the terms, covenants and conditions of this Lease to be kept and performed by Tenant, then Landlord at its option may appropriate and apply said entire deposit, or so much thereof as may be necessary, to compensate the Landlord for loss or damage sustained or suffered by Landlord due to such breach on the part of Tenant. Should the entire deposit, or any portion thereof, be appropriated and applied by Landlord for the payment of overdue rent or other sums due and payable to Landlord by Tenant hereunder, then Tenant shall, upon the written demand of Landlord, forthwith remit to Landlord a sufficient amount in cash to restore said deposit to its prior level and Tenant's failure to do so within five (5) days after receipt of such demand shall constitute a default under this Lease. At the expiration or early termination of this Lease, said deposit shall be returned to Tenant in full upon the later of (i) delivery by Tenant of the Leased Premises in good order and condition and in compliance with all of the provisions of this Lease and (ii) full payment of all rents, additional rents and other sums due and owing hereunder (including, without limitation, any and all year end adjustments to additional rents owed by Tenant through the expiration or earlier termination of the Lease calculated by Landlord in accordance with the terms of this Lease). In the event of a permitted assignment or sublet of the Leased Premises, Landlord shall continue to hold the deposit as if no such assignment or sublet had taken place, and the Tenant and assignee/sublessee shall look to each other for the settlement of same, it being understood and agreed that any portion of the deposit to be returned in accordance with this Section, shall be returned to the Tenant in possession at the end of this Lease. Tenant and its successors and assigns shall indemnify, defend and hold Landlord harmless from and against any and all claims, demands, suits, actions, judgments, costs and obligations, including reasonable attorneys' fees in connection therewith.

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SECTION 8.03.

Transfer of Deposit.

Landlord shall deliver the funds deposited hereunder by Tenant to the purchaser of Landlord's interest in the Leased Premises, in the event that such interest be sold and thereupon Landlord shall be discharged from any further liability with respect to such deposit.

ARTICLE IX - PARKING AND COMMON USE AREAS AND FACILITIES

SECTION 9.01.

Control of Common Areas by Landlord.

All automobile parking areas, driveways, entrances and exits thereto, and other facilities furnished by Landlord in or near the Shopping Center, including employee parking areas, the truck way or ways, loading docks, package pick-up stations, pedestrian sidewalks, curbs and lamps, service and access roads, drainage facilities, public

signage equipment, landscaped areas, exterior stairways, first aid stations, comfort stations and other areas and improvements provided by Landlord for the general use, in common, of tenants, their officers, agents, employees and customers (herein collectively called "Common Areas"), shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas mentioned in this article. Landlord shall have the right to construct, maintain and operate lighting facilities on all said areas and improvements; to police the same; from time to time to change the area, level, location and arrangement of and ingress and egress to such parking areas and other facilities hereinabove referred to; to restrict parking by tenants, their officers, agents and employees to employee parking areas; to enforce parking charges (by operation of meters or otherwise), with appropriate provisions for free parking ticket validating by tenants; to close all or any portion of said areas or facilities to such extent as may, in the opinion of Landlord's counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or the public therein; to close temporarily all or any portion of the parking areas or facilities; to discourage non-customer parking; and to do and perform such other acts in said areas and improvements as, in the use of good business judgment, the Landlord shall determine to be advisable with a view to the improvement of the convenience and use thereof by Tenant, their officers, agents, employees and customers. Landlord will operate and maintain the Common Areas referred to above in such manner as Landlord, in its sole discretion, shall determine from time to time. Without limiting the scope of such discretion, Landlord shall have full right and authority to employ all personnel and to make all rules and regulations pertaining to and necessary for the proper operation and maintenance of the Common Areas. Landlord agrees to operate and maintain the Common Areas in a good and proper manner consistent with the manner in which comparable shopping centers in the vicinity of the Shopping Center are operated.

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SECTION 9.02.

License.

All Common Areas not within the Leased Premises, which Tenant may be permitted to use and occupy, are hereby used and occupied under a revocable license, and if the amount of such areas be diminished, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation, diminution or abatement of rent, nor shall such diminution of such areas be deemed constructive or actual eviction.

SECTION 9.03.

Employee Parking.

Tenant will cause all of Tenant's employees, servants and agents to park their vehicles in the area designated as "Tenant's Employee's Parking Area" on Exhibit A.

ARTICLE X - COST OF MAINTENANCE OF COMMON AREAS

SECTION 10.01.

Tenant's Payments.

(a) From and after the Commencement Date, and for each year of the lease term or portion thereof, Tenant shall pay to Landlord as additional rent, Tenant's share of Common Charges (as defined below). Tenant's share shall be calculated by dividing the rentable square foot area of the Leased Premises by the gross leaseable first floor area of the Shopping Center.

(b) Notwithstanding anything contained in the Lease to the contrary, space occupied by any other tenant in the Shopping Center that pays directly for its own Common Charges (or component thereof) or fire

and/or extended coverage insurance may be excluded by Landlord from the denominator when computing Tenant's share of any of such charges.

SECTION 10.02.

Definition of Common Charges.

"Common Charges" shall mean all costs and expenses incurred by the owner of the Shopping Center or by Landlord or Landlord's, employees, agents, managing agent or contractors, either pursuant to this Lease or otherwise, arising from or in connection with or as a result of the operating, equipping, policing, protecting, lighting, heating, air conditioning, providing sanitation, sewer, water, fire protection and other services, insuring, maintaining, repairing and replacing the Common Areas and all buildings and improvements within the Shopping Center. Common Charges shall include, but shall not be limited to: (i) the maintenance, repair and replacement of all roofs, exterior walls and other structural and exterior portions of the Shopping Center, on and off site sewer treatment plans and storm water drainage and detention (and/or retention) facilities, if any, servicing the Leased Premises and/or Shopping Center, on and off site traffic controls, equipment and systems, the Shopping Center pylon signs (including all taxes relating thereto), curbs, gutters, sidewalks, pylons and signs (including all taxes relating thereto), drainage and irrigation ditches, conduits and pipes, utility systems (permanent and temporary), sewage disposal or treatment systems, public toilets and sound systems whether within or without the Shopping Center; (ii) the removal of trash, snow and ice, sanding and salting; (iii) landscaping, including the maintenance, repair and replacement of any sprinkler systems and equipment, and the water to operate same; (iv) supplies; (v) licensing, permits, service and usage charges; (vi) obtaining and maintaining the insurance policies described in Section 13.01 of this Lease and the cost of any insured event deductible amounts under such policies, (vii) the settlement or disposition of any claims against Landlord to the extent the same are not covered by insurance; (viii) all capital expenditures, together with reserves for capital improvements required by the holder of any mortgage; (ix) the repaving, re-striping, re-grading, re- sealing and general maintenance and repair of parking areas; (x) compliance with all laws, statues, codes, ordinances, rules, regulations and orders of governmental authorities pertaining to the Shopping Center including those pertaining to traffic control, engineering and environmental issues, air pollution control and the cost of monitoring air quality; (xi) personal property taxes, licensing and permit fees and taxes; (xii) lighting the Common Areas, including the maintenance, repair and replacement of the lighting facilities, equipment and system, and the electricity to operate same (xiii) costs and expenses of enforcing the rules and regulations established by Landlord for the Shopping Center; (xiv) the cost, lease payment or depreciation of any equipment used in the operation or maintenance of the Shopping Center; (xv) total compensation and benefits (including premiums for workers' compensation or any other insurance or other retirement or employee benefits, and including all costs incurred in providing such benefits) paid to or on behalf of employees involved in the performance of the work specified in this Section or employees otherwise providing services to tenants or customers of the Shopping Center whether on or off site including compensation paid for the promotion of the Shopping Center by any employee or independent contractor; (xvi) the maintenance, repair and operation of any mall or enclosed common area; (xvii) the costs of performance of all of Landlord's obligations pursuant to this Lease or as contemplated herein except those costs of construction of new building areas, the cost of initial improvements to premises leased to tenants of the Shopping Center other than Tenant, leasing commissions, ground rent and debt service payable under any Mortgage; (xviii) other costs and expenses and fees incurred in connection with the operation and management of the Shopping Center; plus (xix) an amount equal to ten (10%) percent of all of the foregoing costs and expenses to compensate Landlord for administrative and overhead expenses. Common Charges shall include costs and expenses for services, equipment or materials furnished by Landlord or its affiliates, including management fees, provided the same are furnished at rates similar to those generally paid.

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SECTION 10.03.

Estimated Payments.

(a) On each date that an installment of Minimum Rent is due, Tenant shall also pay Landlord an amount equal to one-twelfth (l/12lh) of its share of such estimated Common Charges (as determined by Landlord) for the calendar year or portion thereof in which such payment is made. Tenant shall pay $666.67 per month toward its share of such Common Charges. On or before June 1 of each year (or thereafter if Landlord shall elect), Landlord shall provide Tenant with a statement setting forth the amount due from Tenant on account of Common Charges for the preceding calendar year and the amount of estimated Common Charges paid by Tenant during such year. If the amount due from Tenant exceeds the amount of estimated payments, Tenant shall pay the difference to Landlord within ten (10) days of the receipt of such statement. If the amount of estimated payments exceeds the amount due, Landlord shall credit such difference to the next installment or installments of estimated payments due under this Section. During any year, Landlord from time to time, may revise its estimate of the Common Charges which will be due for that year and the monthly payments to be made by Tenant on account thereof.

(b) Tenant shall have the right, upon ten (10) days' prior written notice to Landlord, to audit the applicable records of Landlord to confirm that the Common Charges billed to Tenant are proper and conform to the provisions of this Article X. Such audit right shall be exercisable by Tenant within two (2) years of Tenant's receipt of Landlord's annual reconciliation statement of such charges for the applicable year in question. Should any such audit disclose that Tenant has overpaid the Common Charges, then Landlord shall promptly refund the amount of the overpayment to Tenant. Should any such audit disclose that Tenant overpaid the Common Area Expenses by five percent (5%) or more, Landlord shall promptly pay for the reasonable cost of such audit. If Tenant does not make an audit within two (2) years from the end of a given year, then the annual statement of Common Charges and Tenant's share for such year shall be deemed correct and Tenant shall have no right thereafter to inspect, audit or contest same.

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ARTICLE XI - SIGNS, AWNINGS, CANOPIES, FIXTURES, ALTERATIONS

SECTION 11.01.

Installations and Alterations by Tenant.

(a) All fixtures installed or used by Tenant shall be new or completely reconditioned. Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any trade fixture, exterior signs, floor covering, interior or exterior lighting, plumbing fixtures, shades or awnings or make any changes to the store front without first obtaining Landlord's prior written approval and consent and without first obtaining, at Tenant's sole cost and expense, all governmental permits and approvals required for such work ("Permits"). Tenant shall present to the Landlord detailed plans and specifications for such work at the time approval is sought and deliver a copy of all Permits to Landlord prior to commencing any alteration, addition, improvement or installation. All approved alterations, additions, improvements and installations shall comply with all governmental laws, rules, regulations and codes.

(b) Tenant shall not make any alterations, repairs or installations, or perform Tenant's initial work or any other work to or on the Leased Premises unless prior to the commencement of such work Tenant shall obtain (and during the performance of such work keep in force) builders risk, public liability and workmen's compensation insurance to cover every contractor to be employed, and any other insurance reasonably required by Landlord and such insurance shall name Landlord and its designees as additional insureds (including, without limitation, the owner of the Leased Premises, Landlord's managing agent and Landlord designees). Such policies shall be non-cancelable without ten (10) days prior notice to Landlord. The policies shall have amounts of coverage,

and shall be issued by companies reasonably satisfactory to Landlord. Prior to the commencement of such work, Tenant shall deliver duplicate originals or certificates of such insurance policies to Landlord.

(c) To the fullest extend permitted by law, Tenant agrees to indemnify, defend and hold harmless Landlord and its designees (including, without limitation, the owner of the Leased Premises, mortgagees and Landlord's managing agent) from any and all claims, suits, damages, liabilities, professional fees including, without limitation, attorney's fees, costs, court costs, expenses and disbursements relating to death, personal injuries or property damage (including loss of use thereof) arising out of or in connection with the performance of the work of any contractor, its agents, servants, subcontractors or employees, or the use by contractor, its agents, servants, subcontractors or employees, of facilities owned by Landlord. This agreement to indemnify specifically contemplates full indemnity in the event of liability imposed against the Landlord and/or managing agent without negligence and solely by reason of statute, operation of law or otherwise, and partial indemnity in the event of any actual negligence on the part of Landlord or managing agent either causing or contributing to the underlying claim, In that event, indemnification will be limited to any liability imposed over and above that percentage attributable to actual fault, whether by statute, by operation of law or otherwise.

(d) Subject to the terms and provisions of this Lease, Tenant shall, at its own cost and expense, promptly following delivery of possession, construct on the Leased Premises a prototypical Embassy Bank retail bank and all facilities appurtenant thereto, including, without limitation leasehold improvements, fixtures, furniture and equipment and the like and a drive through facility appurtenant to the Leased Premises.

(e) If Tenant fails to commence the construction of the improvements to the Leased Premises within thirty days of the date of delivery of possession thereof, Landlord shall, by written notice to Tenant (the "Termination Notice"), have the right to terminate the Lease on the terms and conditions set forth herein and recapture the Leased Premises, Any such termination shall be effective as of the sixtieth (60th) day after the date of Landlord's Termination Notice. Tenant shall have the right to vitiate the Termination Notice by providing notice to Landlord that Tenant will commence and diligently pursue to completion the construction of the building and actually commences same within sixty (60) days of receipt of the Termination Notice. At any time after Tenant has opened the Leased Premises for business fully stocked and staffed as a prototype Embassy Bank facility if Tenant discontinues the operation of its business in the Leased Premises for more than three months, Landlord shall have the right, upon notice to Tenant, to terminate this Lease effective no earlier than thirty days following Landlord's notice to Tenant.

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SECTION 11.02.

Removal and Restoration by Tenant

All alterations, decorations, additions, installations and improvements made by Tenant, or made by Landlord on Tenant's behalf by agreement under this Lease, shall remain the property of Tenant for the term of the lease, and any extension or renewal thereof. Such alterations, decorations, additions, installations and improvements shall not be removed from the Leased Premises prior to the end of the term hereof without the prior written consent of Landlord. Upon expiration of this Lease, or any renewal term thereof, Tenant shall surrender possession of the Leased Premises to Landlord in the condition required pursuant to Section 1.2.03 and remove all alterations, decorations, additions, installations and improvements which are specific to Tenant's use of the Leased Premises as a bank (as opposed to another retail use) such as, by way of example and not limitation, automatic teller machines, vaults and drive-up facilities, repair all damage, and restore the Leased Premises as provided in Section 12.03 hereof. If Tenant fails to remove such alterations, decorations, additions, installations and improvements and restore the Leased Premises, then upon the expiration of this Lease, or any renewal thereof, and upon Tenant's vacating the

Leased Premises, all such alterations, decorations, additions, installations and improvements shall, at Landlord's option, become the property of Landlord.

SECTION 11.03.

Tenant Shall Discharge all Liens.

Tenant shall promptly pay all contractors and materialmen, so as to minimize the possibility of a lien attaching to the Leased Premises or the Shopping Center, and should any such lien be made or filed, Tenant shall bond against or discharge the same within the earlier of: (a) the date Tenant becomes aware of such lien or (b) ten (10) days alter written request by Landlord. Should Tenant fail to take any action within said ten (10) day period, Landlord may, at its option, bond or pay the said lien without inquiring into the validity thereof, and Tenant shall forthwith reimburse Landlord the total expense incurred by Landlord as additional rent hereunder.

SECTION 11.04.

Signs, Awnings and Canopies

(a) Tenant shall not place or suffer to be placed or maintained on any exterior door, wall or window of the Leased Premises any sign, awning or canopy, or advertising matter or other thing of any kind, and will not place or maintain any decoration, lettering or advertising matter on the glass of any window or door of the Leased Premises or in a location within the Leased Premises visible by the general public from outside the Leased Premises without first obtaining Landlord's written approval and consent. Tenant must furnish to Landlord all signage applications and permits for Landlord's prior written approval, along with a copy of the current local governmental sign regulations to facilitate the approval process. Landlord will not grant its consent to any exterior signage that fails to conform to the specifications attached hereto and made a part hereof as Exhibit B. Landlord hereby consents to the installation by Tenant of signage on the exterior of the Leased Premises as shown on the rendering and with the specifications shown on Exhibit B-l hereof. Tenant further agrees at all times to maintain any such sign, awning, canopy, decoration, lettering, advertising matter or other thing, as may be approved, in good condition and repair, and upon the expiration or other termination of this Lease to remove same and repair all damage resulting therefrom. Tenant shall not be entitled to utilize space on a Shopping Center pylon, if any, unless specified herein.

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(b) Tenant will be permitted to install a panel on the Shopping Center pylon sign where indicated on the pylon sign exhibit attributed hereto as Exhibit F. Tenant shall install and maintain, repair and replace the panel at Tenant's sole cost and expense. In the event Tenant shall be entitled to utilize space on a Shopping Center pylon, Tenant shall pay to Landlord as additional rent (i) Tenant's pro-rata share of Landlord's actual cost to erect the Shopping Center sign, (ii) the cost of installing Tenant's panel on the existing Shopping Center sign, and (iii) Tenant's pro-rata share of the maintenance cost of said Shopping Center sign (including all taxes relating thereto). Tenant's pro-rata share shall be computed by multiplying such sign maintenance costs by a fraction, the numerator of which is the total number of square feet of sign area occupied by Tenant's panel and the denominator of which is the total number of square feet of sign area on the Shopping Center sign.

ARTICLE XII - MAINTENANCE OF LEASED PREMISES

SECTION 12.01.

Maintenance by Tenant.

Tenant shall at all times keep the Leased Premises (including, but not limited to, maintenance of exterior entrances, all glass, plate glass and show window moldings) and all partitions, doors, fixtures, flooring, ceiling tiles, equipment and appurtenances thereof (including, but not limited to, lighting, heating, electrical and

plumbing fixtures, equipment and systems, escalators, elevators, and any air conditioning system) in good order, condition and repair, (including all required replacements and reasonably periodic painting as determined by Landlord), damage by unavoidable casualty excepted, except for structural portions of the Leased Premises, which shall be maintained by Landlord, but if Landlord is required to make repairs to structural portions by reason of Tenant's negligent acts or omission to act, Landlord may add the cost of such repairs to additional rent which shall thereafter become due. Tenant agrees to sweep and clean, and remove snow and ice from the sidewalk and curb in front of the Leased Premises.

SECTION 12.02.

Maintenance by Landlord.

If Tenant refuses or neglects to repair any 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 plus twenty (20%) percent for overhead, upon presentation of a bill therefor, as additional rent.

SECTION 12.03.

Surrender of Premises.

At the expiration of the tenancy hereby created, Tenant shall surrender the Leased Premises in the same condition as the Leased Premises were in upon delivery of possession thereto under this Lease, reasonable wear and tear, 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 Leased Premises. Tenant shall remove all its trade fixtures, and any alterations or improvements as provided in Section 11.02 hereof, before surrendering the Leased Premises as aforesaid and shall repair any damage to the Leased Premises caused thereby. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease.

SECTION 12.04.

Rules and Regulations.

The rules and regulations are appended to this Lease as Exhibit D attached hereto and made a part hereof (the "Rules and Regulations"). Tenant agrees to comply with and observe the Rules and Regulations. Tenant's failure to keep and observe the Rules and Regulations shall constitute a default under this Lease in the manner as if the same were contained herein as covenants. Landlord reserves the right from time to time to amend or supplement the Rules and Regulations and to adopt and promulgate additional rules and regulations applicable to the Leased Premises and the Shopping Center. Notice of such additional rules and regulations, and amendments and supplements, if any, shall be given to Tenant, and Tenant agrees thereupon to comply with and observe all such rules and regulations, and amendments thereto and supplements thereof, provided the same shall apply uniformly to all tenants of the Shopping Center.

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ARTICLE XIII - INSURANCE AND INDEMNIFICATION

SECTION 13.01.

Liability Insurance.

(a) Tenant shall, from and after the date Landlord delivers possession of the Leased Premises and during the entire term hereof, keep in full force and effect a policy of public liability and property damage insurance (including terrorism insurance) with respect to the Leased Premises, and the business operated by Tenant and any subtenants, licensees or concessionaires of Tenant in the Leased Premises, which limits of public

liability and properly damage liability shall not be less than $3,000,000.00 in respect of any one occurrence. The policy shall name Landlord, its managing agent any and person, firms or corporations designated by Landlord, and Tenant as additional insured, and shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord thirty (30) days prior written notice. The insurance shall be with an insurance company licensed and admitted in the State that the Leased Premises is located, with a Best Rating of at lease A VIII and a copy of the policy or a certificate of insurance shall be delivered to Landlord prior to Tenant entering into possession of the Leased Premises.

(b) Landlord shall maintain and keep in full force and effect a policy of public liability and property damage insurance with respect to the Common Areas of the Shopping Center in coverage amounts determined by Landlord.

SECTION 13.02.

Indemnification of Landlord.

Except to the extent due to Landlord's willful misconduct or gross negligence, Tenant shall indemnify Landlord, its managing agent, agents, contractors, employees, servants, lessees or concessionaires, and Landlord's mortgagees, and save them harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon or at the Leased Premises, or the occupancy or use by Tenant of the Leased Premises or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, lessees or concessionaires. In case Landlord shall, without fault on its part, be made a party to any litigation commenced by or against Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney's fees incurred or paid by Landlord in connection with such litigation. Tenant shall also pay all costs, expenses and reasonable attorney's fees that may be incurred or paid by Landlord in enforcing the covenants and agreements in this Lease.

SECTION 13.03.

Plate Glass.

Tenant shall replace, at the expense of Tenant, any and all plate and other glass damaged or broken resulting from any cause whatsoever in and about the Leased Premises. Tenant shall insure, and keep insured, at Tenant's expense, all plate and other glass in the Leased Premises for and in the name of Landlord.

SECTION 13.04.

Fire and Extended Coverage Insurance.

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(a) Commencing from and after the Commencement Dale, and for each year of the lease term, or portion thereof, in addition to the insurance which Tenant is required to maintain pursuant to this Article XIII, Tenant shall pay to Landlord, as additional rent, Tenant's share of the Fire Insurance (as defined below) which may be maintained by Landlord on the buildings and improvements in the Shopping Center, Tenant shall pay as its share of such Fire Insurance an amount equal to that proportion of the cost of the premiums for the Fire Insurance as the leaseable square foot area of the Leased Premises bears to the leaseable square foot area of all the buildings covered under the relevant policy.

(b) On each date that an installment of Minimum Rent is due, Tenant shall pay, as additional rent, an amount equal to one-twelfth (1/12th) of its share of the estimated total premiums paid by Landlord for Fire Insurance (as defined below). Tenant shall initially pay $83.33 per month towards its share of said insurance premium(s). Landlord will bill the Tenant annually for its proportionate share accompanied by copies of

the appropriate invoices setting forth the amount due from Tenant on account of the Fire Insurance for the preceding year and the amount of estimated Fire Insurance paid by Tenant during such year. The total billing for the insurance less the amount previously paid by Tenant will result in an adjustment whereby Tenant will either receive a credit for an overpayment toward the next installment or installments due under this Section or Tenant shall pay within ten (10) days of the receipt of such statement, any balance due to Landlord for such insurance. The monthly amount to be paid on account will be revised each year to more closely reflect one-twelfth (1/12th) of Tenant's share of insurance costs most recently determined. With respect to any insurance effective for a term extending beyond the term of Tenant's lease, Tenant will be obligated to pay only such proportion of Tenant's share of the premium as that portion of the term of the policy lapsing prior to the expiration of the term of Tenant's lease bears to the entire term of the policy.

(c) "Fire Insurance" shall mean the fire, extended coverage and loss of rents insurance (including so-called "extended coverage and/or all risk endorsement", "flood and earthquake endorsement", "terrorism endorsement" and "boiler and machinery endorsement"), maintained by Landlord or others upon all buildings and improvements in the Shopping Center.

(d) The amount of Fire Insurance to be maintained by Landlord shall not be less than eighty (80%) percent and not more than one hundred (100%) percent of the Replacement Cost Valuation of all buildings and improvements in the Shopping Center as such value may exist from time to time.

SECTION 13.05.

Increase in Fire Insurance Premium.

(a) Tenant agrees that it shall not keep, use, sell or offer for sale in or upon the Leased Premises any article which may be prohibited by the standard form of fire insurance policy. Tenant agrees to pay any increase in Landlord’s premiums for fire and extended coverage insurance during the term of this Lease resulting from Tenant’s use of the Leased Premises or the type of merchandise sold by Tenant in the Leased Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Leased Premises, a schedule, issued by the organization making the insurance rate on the Leased Premises, showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up the fire insurance rate on the Leased Premises.

(b) In the event Tenant's use or occupancy of the Leased Premises causes an increase in Landlords premiums for the fire, boiler and/or casualty rates on the Leased Premises or any part thereof above the rate for the least hazardous type of occupancy legally permitted in the Leased Premises, Tenant shall also pay in such event, any additional premiums, including on the rent and terrorism insurance policy that may be carried by the Landlord for its protection against loss resulting from fire or terrorist act. Bills for such additional premiums shall be sent by Landlord to

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Tenant at such times as Landlord may elect, and shall be due from, and payable by Tenant when sent, and the amount thereof shall be deemed to be, and shall be paid as, additional rent.

SECTION 13.06.

Waiver of Subrogation.

Neither party to this Lease shall be liable for any damage by fire or other peril includable in the coverage afforded by the standard form of fire insurance policy with extended coverage endorsement attached, no

matter how caused, it being understood that the damaged party will look solely to its insurer for reimbursement, provided that this waiver of liability shall apply only to the extent that the party incurring such loss is actually reimbursed for such loss by the proceeds of insurance. Landlord's and Tenant's policies of insurance shall contain a waiver of subrogation confirming the foregoing. Any waiver of rights required by this Section 13.06 shall be ineffective if such waiver shall be unobtainable, or result in a breach of the insurance contract or in material increase in the cost of insurance of the waiving party, unless the other party shall pay such increase within ten (10) days after notice thereof.

ARTICLE XIV - UTILITIES

SECTION 14.01.

Utility Charges.

(a) Tenant shall be solely responsible for and promptly pay all charges for electricity, gas, and water or any other utility used or consumed in the Leased Premises from and after the date possession of the Leased Premises are delivered to Tenant. Tenant will pay for electricity, gas and water as measured by a meter measuring Tenant's consumption thereof directly to utility provider in question. In no event shall Landlord be liable for an interruption or failure in the supply of any such utilities to the Leased Premises. Tenant is responsible for, and shall promptly pay, all charges for monitoring the sprinkler system (if any) within the Leased Premises.

(b) Tenant and Landlord agree that any utility easements requested by Tenant, shall be subject to Landlord's prior written approval, which approval shall be in Landlord's sole discretion. Such utility easements shall be in a form acceptable to Landlord, in its sole discretion, and further Tenant shall reimburse Landlord for any and all costs and expenses relating to the negotiation and approval of such utility easements (including, without limitation, reasonable attorneys' fees).

ARTICLE XV - OFFSET STATEMENT, ATTORNMENT SUBORDINATION

SECTION 15.01.

Offset Statement/Estoppel Certificate.

Within ten days after request therefor by Landlord, or in the event that upon any sale, assignment or hypothecation of the Leased Premises and/or the land thereunder by Landlord, an offset statement shall be required from Tenant, Tenant agrees to deliver in recordable form a certificate to any proposed mortgagee or purchaser, or to Landlord, certifying (if such be the case) that this Lease is in full force and effect and that there are no defenses or offsets thereto, or stating those claimed by Tenant and containing such other reasonable information as Landlord, its mortgagee, or the purchaser shall request.

SECTION 15.02.

Attornment.

Tenant shall, in the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage made by the Landlord covering the Leased Premises, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease.

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SECTION 15.03.

Subordination.

This Lease, at lender(s) option, as the case may be, shall be automatically subordinate to any mortgage of the Shopping Center or portion thereof to which Landlord's interest in the Shopping Center or portion thereof is

subordinated and to any overlease by or under which Landlord holds its interest therein, regardless of the time when any such mortgage or any such overlease (or any notice thereof) is executed or recorded. Tenant hereby agrees to execute a confirmatory agreement which shall subordinate the Lease to the instrument(s) evidencing such loan or overlease in which the lender(s) or overlandlord agree for itself, its successors and assigns by written instrument in such form which is acceptable to the lender(s) or overlandlord, as the case may be: (i) to be bound by the terms of this Lease; provided, however, the lender(s) or overlandlord, as the case may be, shall not be (a) liable for any act or omission of any prior landlord (including Landlord); (b) bound by any rent or additional rent which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord); or (c) bound by any amendment or modification of the Lease made without lender's or overlandlord' s consent; (ii) to not disturb Tenant's use or possession of the Leased Premises in the event of a foreclosure of such lien or encumbrance so long as Tenant is not in default hereunder; (iii) to not join Tenant as a party defendant in any foreclosure proceeding relating to the Shopping Center or any part thereof (except to the extent required to prosecute said foreclosure proceeding); (iv) to require Tenant to give notice to the lender(s) or overlandlord, as the case may be, simultaneous with any notice given by Tenant to Landlord in the event that Landlord defaults; and (v) to require Tenant to give the lender(s) or overlandlord, as the case maybe, the right to cure a Landlord default simultaneous with Landlord's right to cure. If any ground lease covering the Leased Premises to which this Lease is subordinate shall be terminated, this Lease, at the option of the then-owner, shall become a direct lease with the then-owner of the Leased Premises.

SECTION 15.04.

Attorney-in-Fact.

Tenant shall, upon request of any party in interest, promptly execute such instruments or certificates necessary to carry out the intent of Article XV as shall be requested by Landlord. Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver, in the name of Tenant, any such instruments or certificates.

SECTION 15.05.

Financial Data.

Tenant shall cooperate with Landlord in every reasonable respect to assist Landlord in securing financing on the Shopping Center, including, but not by way of limitation, supplying to Landlord and or its proposed lender detailed financial statements and factual background of Tenant.

ARTICLE XVI - ASSIGNMENT AND SUBLETTING

SECTION 16.01.

Consent Required.

(a) Except as otherwise set forth herein, Tenant shall not, whether voluntarily, involuntarily or by operation of law, without in each instance obtaining the prior written consent of Landlord, which consent may be withheld in Landlord's sole discretion (a) assign or otherwise transfer this Lease or the term or estate herby granted, (b) sublet all or part of the Leased Premises or allow the same to be used or occupied by anyone other than Tenant, or (c) mortgage, pledge or encumber this Lease or all or part of the Leased Premises in any manner by reason of any act or omission on the part of Tenant. Landlord agrees that Landlord will not unreasonably withhold Landlord's consent to a sublease of the entire Leased Premises provided that the use thereof is in compliance with the use requirements and restrictions set forth in this Lease.

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(b) The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting. This prohibition against assigning or

subletting shall be construed to include a prohibition against any assignment or subletting by operation of law. If this Lease be assigned, or if the Leased Premises or any part thereof be underlet or occupied by any entity other than Tenant, Landlord may collect rent from the assignee, undertenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained.

For purposes of this Article 16, (i) the transfer, directly or indirectly, of a majority of any class of the issued and outstanding capital stock of any corporate tenant or subtenant, or the direct or indirect transfer or a majority of the total interest in any other entity (limited liability company, partnership or otherwise) which is a tenant or subtenant, however accomplished, whether in a single transaction or in a series of related or unrelated transactions (including, without limitation, and by way of example only, the transfer of a majority of the outstanding capital stock of a company which company owns a second tier company, which in turn owns 51% of the outstanding capital stock of a corporate tenant hereunder), shall be deemed an assignment of this Lease, or of such sublease, as the case may be, (ii) a so called "takeover" agreement (i.e., an agreement where another entity agrees to become responsible for all or a portion of Tenant's obligations under this Lease without actually entering into an assignment or sublease) shall be deemed a transfer of this Lease, (iii) any person or legal representative of Tenant, to whom Tenant's interest under this Lease passes by operation of law, or otherwise, shall be bound by the provisions of this Article 16, and (iv) a modification, amendment or extension without Landlord's prior written consent of a sublease previously consented to by Landlord shall be deemed a new sublease. Tenant agrees to furnish to Landlord upon demand at any time and from time to time such information and assurances as Landlord may reasonably request that neither Tenant, nor any subtenant, is in violation of the provisions of this Section 16.01. As long as Embassy Bank is Tenant, Tenant shall have the privilege, subject to the terms and conditions hereinafter set forth, without the consent of Landlord, to assign its interest in this Lease (i) to any corporation which is a successor to Tenant either by merger or consolidation, (ii) to a purchaser of all of Tenant's assets (provided such purchaser shall have also assumed substantially all of Tenant's liabilities) or (iii) to a person or entity which shall (1) Control (2) be under the Control of, or (3) be under common Control with Tenant (any such Person referred to in this clause (iii) being a "Related Entity"). As long as Embassy Bank is Tenant, Tenant shall have the privilege, subject to the terms and conditions set forth herein, without the consent of Landlord to sublease all or any portion of the Leased Premises to a Related Entity. Any assignment or subletting described above may only be made upon the condition that (a) any such assignee or subtenant shall continue to use the Leased Premises for the conduct of the same business as Tenant was conducting prior to such assignment or sublease, (b) the principal purpose of such assignment or sublease is not the acquisition of Tenant's interest in this Lease or to circumvent the provisions of this Section 16.02, and (c) in the case of an assignment, any such assignee shall have a net worth and annual income and cash flow, determined in accordance with generally accepted accounting principles, consistently applied, after giving effect to such assignment, equal to the greater of Tenant's net worth and annual income and cash flow, as so determined, on (i) the date immediately preceding the date of such assignment, and (ii) the Commencement Date. Tenant shall, within ten (10) days after execution thereof, deliver to Landlord either (x) a duplicate original instrument of assignment in form and substance reasonably satisfactory to Landlord, duly executed by Tenant, together with an instrument in form and substance reasonably satisfactory to Landlord, duly executed by the assignee, in which such assignee shall assume observance and performance of, and agree to be personally bound by, all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, or (y) a duplicate original sublease in form and substance reasonably satisfactory to Landlord, duly executed by Tenant and the subtenant. "Control" or "control" shall mean ownership of more than fifty percent (50%) of the outstanding voting stock of a corporation or other majority equity and control interest if not a corporation and the possession of power to direct or cause the direction of the management and policy of such corporation or other entity, whether through the ownership of voting securities, by statute or according to the provisions of a contract.

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(c) In the event the Tenant shall seek Landlord's consent pursuant to this Section 16.01, Tenant shall furnish Landlord with such information regarding the proposed assignee or sublessee as the Landlord may reasonably request, including, without limitation, information regarding the financial viability and business experience of the proposed assignee or sublessee.

(d) Notwithstanding any assignment or sublease: (i) Tenant and any guarantor, if any, shall always remain fully liable under the lease and shall not be released from performing any of the terms, covenants and conditions of this Lease; (ii) the assignment or subletting shall be subject to all of the terms and conditions of this Lease; (iii) any assignee shall assume, in writing, all of Tenant's obligations under this Lease; (iv) Tenant shall give Landlord at least thirty (30) days prior written notice of any such assignment or subletting; (v) Tenant shall pay over to Landlord, on a monthly basis, all profit derived by Tenant from any assignment or subletting; and (vi) Tenant further agrees that it will reimburse Landlord for Landlord's reasonable expenses, arising out of said assignment or sublet, including reasonable attorney's fees, whether such assignment or sublease was approved by Landlord or not.

(e) Notwithstanding the foregoing, in lieu of consenting to any such proposed assignment or subletting, Landlord may, within thirty (30) days following Landlord's receipt of Tenant's notice of such proposed assignment or subletting, elect to terminate this Lease upon at least sixty (60) days notice thereof to Tenant.

SECTION 16.02.

Additional Security Deposit upon Assignment or Sublease.

If Landlord should consent to an assignment or sublease, Tenant agrees to assign, transfer and set over to its assignee or sublessee all of Tenant's right, title and interest in and to any and all security deposit(s) held by Landlord and to look only to assignee or sublessee for reimbursement and to indemnify, defend and hold Landlord harmless from any and all claims, demands, suits, actions, judgments, costs and obligations, including reasonable attorneys fees in connection therewith.

ARTICLE XVII - WASTE AND COMPLIANCE WITH LAWS

SECTION 17.01.

Waste or Nuisance.

Tenant shall not commit or suffer to be committed any waste upon the Leased Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the Leased Premises may be located, or in the Shopping Center, or which may disturb the quiet enjoyment of any person within five hundred feet (500') of the boundaries of the Shopping Center.

SECTION 17.02.

Compliance with Laws.

Tenant shall, at Tenant's sole cost and expense, comply with all of the requirements of all county, municipal, state, federal and other applicable governmental authorities, and Landlord's insurance underwriters, now in force, or which may hereafter be in force, pertaining to the Leased Premises, and shall faithfully observe in the use of the Leased Premises, all county and municipal ordinances and regulations and all local and state and federal statutes and laws now in force or which may hereafter be in force.

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SECTION 17.03

Matters of Record.

The Shopping Center and Tenant's use and occupancy of the Leased Premises, and Tenant's rights and obligations herein are subject to all matters of record. Tenant hereby covenants and agrees to abide by the terms and provisions to all matters of record.

ARTICLE XVIII - ADVERTISING, MERCHANTS ASSOCIATION

SECTION 18.01.

Intentionally Omitted.

SECTION 18.02.

Solicitation of Business.

Tenant and Tenant's employees and agents shall not solicit business in the parking lot or other Common Areas, nor shall Tenant distribute any handbills or place other advertising matter on automobiles parked in the parking area or in other Common Areas.

SECTION 18.03.

Merchant's Association.

Tenant shall become a member of, participate fully in, and remain in good standing in the Merchant's Association (as soon as the same has been formed) which shall be limited to tenants occupying premises in the Shopping Center, and shall abide by the regulations of such Merchants Association. Tenant shall be entitled to receive notice and the right to vote at all meetings of the Merchant's Association if in good standing.

ARTICLE XIX - DESTRUCTION

SECTION 19.01.

Total or Partial Destruction.

If the Leased Premises and any necessary Common Areas ancillary or adjacent thereto shall be damaged by fire, the elements, unavoidable accident or other casualty, but are not thereby rendered untenantable in whole or in part, Landlord shall at its own expense cause such damage to be repaired, and the rent shall not be abated. If by reason of such occurrence, the Leased Premises shall be rendered untenantable only in part, Landlord shall, at its own expense, cause the damage to be repaired, and the Minimum Rent and additional rent shall be abated proportionately as to the portion of the Leased Premises rendered untenantable provided that same can be accomplished within 90 days of such destruction. If the Leased Premises shall be rendered wholly untenantable by reason of such occurrence, Landlord shall, at its own cost and expense, cause such damage to the Leased Premises (but not to Tenant's improvements or personal property) to be repaired, and the Minimum Rent and additional rent shall abate until the Leased Premises have been restored and rendered tenantable, or Landlord may at its election, terminate this Lease and the tenancy hereby created, by giving Tenant within the next sixty (60) days following the date of said occurrence, written notice of Landlord's election so to do and in the event of such termination rent shall be adjusted as of such date.

SECTION 19.02.

Partial Destruction of Shopping Center.

In the event that seventy (70%) percent or more of the leasable area of the Shopping Center shall be damaged or destroyed by fire or other casualty, notwithstanding that the Leased Premises may be unaffected by such fire or other casualty, Landlord may terminate this Lease and the tenancy hereby created by giving to Tenant five (5) days prior written notice of its election to terminate which notice shall be given, if at all, not later than thirty (30) days following the date of said occurrence. Rent shall be adjusted as of the date of such termination.

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In the event that seventy (70%) percent or more of the leasable area of the Shopping Center shall be damaged or destroyed by fire or other casualty, notwithstanding that the Leased Premises may be unaffected by such fire or other casualty and such fire or casualty occurs during the last two years of the term of this Lease, Tenant may terminate this Lease and the tenancy hereby created by giving to Landlord five (5) days prior written notice of its election to terminate which notice shall be given, if at all, not later than thirty (30) days following the date of said occurrence. Rent shall be adjusted as of the date of such termination.

ARTICLE XX - EMINENT DOMAIN

SECTION 20.01.

Total Condemnation of Leased Premises.

If the whole of the Leased Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding and all rent shall be paid up to and including that date and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease.

SECTION 20.02.

Partial Condemnation.

If any part of the Leased Premises shall be acquired or condemned as aforesaid, and in the event that such partial taking or condemnation shall render the Leased Premises unsuitable for the business of Tenant, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding. Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease and rent shall be adjusted up to and including the date of such termination. In the event of a partial taking or condemnation which is not extensive enough to render the Leased Premises unsuitable for the business of Tenant, then Landlord shall promptly restore the Leased Premises (but not Tenant's improvements or personal property) to a condition comparable to its condition at the time of such condemnation less the portion lost in the taking, and this Lease shall continue in full force and effect without any reduction or abatement of rent.

SECTION 20.03.

Total Condemnation of Parking Area.

If the whole of the parking areas located in the Common Areas of the Shopping Center shall be acquired or condemned as aforesaid, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding unless Landlord shall take immediate steps to provide other parking facilities substantially equal to the previously existing ratio between the parking areas and the Leased Premises, and such substantially equal parking facilities shall be provided by Landlord at its own expense within ninety (90) days from the date of acquisition. In the event that Landlord shall provide such other substantially equal parking facilities, then this Lease shall continue in full force and effect without any reduction or abatement of rent.

SECTION 20.04.

Partial Condemnation of Parking Area.

If any part of the parking areas in the Common Areas of the Shopping Center shall be acquired or condemned as aforesaid, and if, as the result thereof, the ratio of square feet of parking field to square feet of the sales area of the entire Shopping Center buildings is reduced to a ratio below two to one, then the term of this Lease shall cease and terminate upon the vesting of title in such proceeding, unless Landlord shall take immediate steps toward increasing the parking ratio to a ratio in excess of two to one, in which event this Lease shall be unaffected and remain in full force and effect without any reduction or abatement of rent. In event of termination of this Lease as aforesaid, Tenant shall have no claim against Landlord nor the condemning authority for the value of any unexpired term of this Lease and rent shall be adjusted up to and including the date of said termination.

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SECTION 20.05.

Landlord's Damages.

In the event of any condemnation or taking as aforesaid, whether whole or partial, Tenant shall not be entitled to any part of the award paid for such condemnation and Landlord is to receive the full amount of such award. Tenant hereby expressly waives any right or claim to any part thereof.

SECTION 20.06.

Tenant's Damages.

Although all damages in the event of any condemnation are to belong to the Landlord whether such damages are awarded as compensation for diminution in value of the leasehold or to the fee of the Leased Premises, Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant's own right on account of any and all damage to Tenant's business by reason of the condemnation and for or on account of any cost or loss which Tenant might sustain in removing Tenant's business by reason of the condemnation and for or on account of any cost or loss which Tenant might sustain in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment.

SECTION 20.07.

Condemnation of Less than a Fee.

In the event of a condemnation of a leasehold interest in all or a portion of the Leased Premises without the concurrent condemnation of the fee simple title, this Lease shall not terminate and such condemnation shall not excuse Tenant from full performance of all of its covenants hereunder, but Tenant in such event shall be entitled to present or pursue against the condemning authority its claim for and to receive all compensation or damages sustained by it by reason of such condemnation, and Landlord's right to recover compensation or damages shall be limited to compensation for and damages if any, to its reversionary interest; it being understood however, that during such time as Tenant shall be out of possession of the Leased Premises by reason of such condemnation, the lease shall not be subject to forfeiture for failure to observe and perform those covenants not calling for the payment of money. In the event the condemning authority shall fail to keep the Leased Premises in the state of repair required hereunder, or to perform any other covenant not calling for the payment of money, Tenant shall have ninety (90) days after the restoration of possession to it within which to carry out its obligations under such covenant or covenants. During such time as Tenant shall be out of possession of the Leased Premises by reason of such leasehold condemnation, Tenant shall pay to Landlord, in lieu of the Minimum Rent provided for hereunder, and in addition to any other payments required of Tenant hereunder, an annual rent equal to the average annual Minimum Rent paid by Tenant for the period from the commencement of the term until the condemning authority shall take possession, or during the preceding three full calendar years, whichever period is shorter. At any time after such condemnation proceedings are commenced Landlord shall have the right, at its option, to require Tenant to assign to Landlord all compensation and damages payable by the condemnor to Tenant, to be held without liability for interest thereon as security for the full performance of Tenant's covenants hereunder, such compensation and damages received pursuant to said assignment to be applied first to the payment of rents and all other sums from time to time payable by Tenant pursuant to the terms of this Lease as such sums fall due, and the remainder, if any, to be payable to Tenant at, the end of the term hereof, or on restoration of possession of the Leased Premises to Tenant, whichever shall first occur, it being understood and agreed that such assignment shall not relieve Tenant of any of its obligations under this Lease with respect to such rents, and other sums except as the same shall be actually received by Landlord.

ARTICLE XXI - DEFAULT OF THE TENANT

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SECTION 21.01.

Right to Re-enter.

Tenant shall be deemed in default hereunder in the event of any failure of Tenant to pay any rent when due hereunder. In the event Tenant shall be in default or Tenant fails to perform any other of the terms, conditions or covenants of this Lease to be observed or performed by Tenant for more than thirty (30) days after written notice of such default shall have been sent by Landlord, or if Tenant or an agent of Tenant shall falsify any report required to be furnished to Landlord pursuant to the terms of this Lease, or if Tenant or any guarantor of this Lease shall become bankrupt or insolvent, or file any debtor proceedings or take or have taken against Tenant or any guarantor of this Lease in any court pursuant to any statute either of the United States or of any State a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of Tenant's or any such guarantor's properly, or if Tenant or any such guarantor makes an assignment for the benefit of creditors, or petitions for or enters into an arrangement, or if Tenant shall abandon said premises, or suffer this Lease to be taken under any writ of execution, the Landlord besides other rights or remedies it may have, hereunder or by law or in equity, shall have the immediate right of re-entry and may remove all persons and property from the Leased Premises and such property may, at Landlord's option, either be removed and stored in a public warehouse or elsewhere at the cost of, and for the account of Tenant, or may be disposed of by Landlord as it, in its sole discretion, deems fit, all without service of notice or resort to legal process and without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby.

SECTION 21.02.

Right to Relet.

Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceeding or pursuant to any notice provided for by law, Landlord may either terminate this Lease or may, from time to time, without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the Leased Premises and may relet said Leased Premises or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable; and upon each such reletting all rent received by the Landlord from such reletting shall be applied, first, to the payment of any indebtedness other than rent, due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees, attorney's fees, free rent and of costs of such alterations and repairs; third, to the payment of rent due and unpaid hereunder, and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. If such rent received from such reletting during any month shall be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of said Leased Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may, at any time thereafter, elect to terminate this Lease for such previous default. Should Landlord at any time terminate this Lease for any default, in addition to any other remedies it may have, it may recover from Tenant all damages it may incur by reason of such default, including the cost of recovering the Leased Premises, reasonable attorneys fees, and including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to rent reserved in this Lease for the remainder of the stated term over the then reasonable rental value of the Leased Premises for the remainder of the stated term, all of which amounts shall be immediately due and payable from Tenant to Landlord. In determining the rent which would be payable by Tenant hereunder, subsequent to default, the annual rent for each year of the unexpired term shall be equal to the average annual Minimum Rent payable by Tenant from the commencement of the term to the time of default, or during the preceding three full calendar years, whichever period is shorter. If Landlord terminates this Lease as a result of a default by Tenant under this Lease, Landlord agrees to use reasonable efforts to re-let the Leased Premises, which reasonable efforts will be deemed satisfied if Landlord lists the Leased Premises for re-letting with a local real estate broker.

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	TENANT	DL

SECTION 21.03.

Legal Expense.

In the event legal action shall be brought for recovery of possession of the Leased Premises, for the recovery of rent or any other amount due under the provisions of this Lease, or because of the default in the performance of any other covenant herein contained on the part of Tenant to be kept or performed, and a default shall be established, Tenant shall pay to Landlord all expenses incurred therefor, including reasonable attorneys' fees. In the event Landlord sends Tenant a legal notice pursuant to the terms of this Lease due to a default (monetary or non-monetary), Tenant shall pay to Landlord as additional rent the sum of Two Hundred and Fifty Dollars ($250.00) to cover the legal fees in connection with the preparation and service of such notice.

In the event Tenant requests Landlord to review and execute any documentation relating to Tenant's occupancy or use (including, without limitation, assignments, subletting or tenant financing) of the Leased Premises, Tenant agrees to promptly reimburse Landlord, for all fees and expenses (legal, administrative or otherwise) incurred by Landlord in connection with the processing of such requests and/or transaction regardless of the ultimate resolution thereof.

SECTION 21.04.

Waiver of Jury Trial and Counterclaims,

The parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either party hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Leased Premises, and/or any claim of injury or damage. In the event Landlord commences any proceedings for non-payment of rent, Minimum Rent or additional rent, Tenant shall not interpose any counterclaim of whatever nature or description in any such proceedings. This shall not, however, be construed as a waiver of Tenant's right to assert such claims in any separate action or actions brought by Tenant.

SECTION 21.05.

Waiver of Rights of Redemption.

Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises, by reason of the violation by Tenant of any of the covenants or conditions of this Lease, or otherwise.

ARTICLE XXII - ACCESS BY LANDLORD

SECTION 22.01.

Right of Entry.

Landlord or Landlord's agents shall have the right to enter the Leased Premises at all times (except that, unless such entry is on an emergency basis, Landlord agrees to give Tenant at least 24 hours' notice) to examine same, and to show them to prospective purchasers or mortgagees, and to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable. Landlord shall be allowed to take all material into and upon the Leased Premises that may be required therefor without the same constituting an eviction of Tenant in whole or in part and the rent reserved shall in no way abate while said repairs, alterations, improvements, or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. During the six (6) months prior to the expiration of the term of this Lease or any renewal term, Landlord may exhibit the Leased Premises to prospective tenants or purchasers, and place upon the Leased Premises the usual notices "To

Let" or "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant shall not be personally present to open and permit an entry into said Leased Premises, at any time, when for any reason an entry therein shall be necessary or permissible, Landlord or Landlord's agent may enter the same by a master key, or may forcibly enter the same, without rendering Landlord or such agents liable therefor, and without in any matter affecting the obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, maintenance or repair of the building or any part thereof, except as otherwise herein specifically provided.

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	TENANT	DL

SECTION 22.02.

Excavation.

If an excavation shall be made upon land adjacent to the Leased Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Leased Premises for the purpose of doing such work as Landlord shall deem necessary to preserve the wall or the building of which the Leased Premises form a part from injury or damage and to support the same by proper foundations, without any claim for damages or indemnification against Landlord or diminution or abatement of rent.

ARTICLE XXIII - TENANTS PROPERTY

SECTION 23.01.

Taxes on Leasehold.

Tenant shall be responsible for and shall pay before delinquency all municipal, county or state taxes assessed during the term of this Lease against any leasehold interest or personal property of any kind, owned by or placed in, upon or about the Leased Premises by the Tenant.

SECTION 23.02.

Loss and Damage.

Except in the event of Landlord's willful misconduct or gross negligence, Landlord shall not be liable for any damage to the property of Tenant or of others located in the Leased Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise. Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Leased Premises or from the pipes, appliances or plumbing works or from the roof, street or sub-surface or from any other place or by dampness or by any other cause of whatsoever nature. Landlord shall not be liable for any such damage caused by other tenants or persons in the Leased Premises, occupants of adjacent property, of the Shopping Center, or the public, or caused by operations in construction of any private, public or quasi-public work. Landlord shall not be liable for any latent defect in the Leased Premises or in the building of which they form a part except for a period of one (1) year from the date Tenant takes possession of the Leased Premises. All property of Tenant kept or stored in the Leased Premises shall be so kept or stored at the risk of Tenant only and Tenant shall hold Landlord harmless from any claims arising out of damage to same, including subrogation claims by Tenant's insurance carrier, unless such damage shall be caused by the willful act or gross neglect of Landlord.

SECTION 23.03.

Notice by Tenant.

Tenant shall give immediate notice to Landlord in case of fire or accidents in the Leased Premises or in the building of which the Leased Premises are a part or defects therein or in any fixtures or equipment.

ARTICLE XXIV - SUCCESSORS

SECTION 24.01.

Successors.

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All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall inure to the benefit of and bind the several respective heirs, executors, administrators, successors, and assigns of the said parties; and if there shall be more than one tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment to such assignee has been approved by Landlord in writing as provided in Section 16.01 hereof.

ARTICLE XXV - QUIET ENJOYMENT

SECTION 25.01.

Covenant of Quiet Enjoyment.

Upon timely payment by Tenant of the rents herein provided, and upon the observance and performance of all the covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the term hereby demised without interference by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject, nevertheless, to the terms and conditions of this Lease.

ARTICLE XXVI - LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD

SECTION 26.01.

Limitation.

(a) Tenant acknowledges and agrees that the liability of Landlord under this Lease shall be limited to its interest in the Shopping Center and any judgments rendered against Landlord shall be satisfied solely out of the proceeds of sale of its interest in the Shopping Center. No personal judgment shall lie against Landlord upon extinguishment of its rights in the Shopping Center and any judgment so rendered shall not give rise to any right of execution or levy against Landlord's assets. The provisions hereof shall inure to Landlord's successors and assigns including any mortgagee and their respective directors, officers, principals and stockholders. The foregoing provisions are not intended to relieve Landlord from the performance of any of Landlord's obligations under this Lease, but only to limit the personal liability of Landlord in case of recovery of a judgment against Landlord; nor shall the foregoing be deemed to limit Tenant's rights to obtain injunctive relief or specific performance or to avail itself of any other right or remedy which may be awarded Tenant by law or under this Lease.

(b) Other than as expressly provided herein, no assets of the Landlord and no assets of any of Landlord's, directors, officers, partners, agents, members, or employees shall be subject to any remedy exercised by Tenant hereunder and Tenant agrees that Tenant shall not pursue any remedies against Landlord or any of Landlord's directors, officers, partners, agents members, or employees.

(c) In the event of a transfer of Landlord's interest in the Leased Premises and/or the Shopping Center, the transferor shall be, and hereby is, freed and relieved of all covenants and obligations of Landlord under this Lease arising or to be performed from and after the date of such transfer.

ARTICLE XXVII - MISCELLANEOUS

SECTION 27.01.

Waiver.

The waiver by Landlord of any default of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent default of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding default by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term or conditions of this Lease shall be deemed to have been waived by Landlord, unless such waiver be in writing by Landlord.

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SECTION 27.02.

Accord and Satisfaction.

No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided.

SECTION 27.03.

Entire Agreement.

This Lease, the Exhibits and Rider, if any, attached hereto and forming a part hereof, set forth all the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Leased Premises and there are no covenants, promises, agreements, conditions and understandings, either oral or written, between them other than as herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by both parties.

SECTION 27.04.

No Partnership,

Landlord shall not, in any way or for any purpose, be construed as a partner of Tenant in the conduct of its business, or otherwise, or joint venturer or a member of a joint enterprise with Tenant.

SECTION 27.05.

Notices.

Any notice, demand, request or other instrument which may be or is required to be given under this Lease shall be delivered in person or sent by United States certified mail postage prepaid or by nationally recognized overnight courier (so long as same provide receipts for the delivery thereof) and shall be addressed (a) if to Landlord at the address first hereinabove given or at such other address as Landlord may designate by written notice, with a copy to RD Management LLC, 810 Seventh Avenue, New York, New York 10019, attention: Legal Department and a copy to Tannenbaum Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New York, New York 10022, attention Neil E. Botwinoff, Esq. and (b) if to Tenant at the Leased Premises or at such other address as Tenant shall designate by written notice. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given, shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver. All notices on behalf of Landlord may be given by Landlord's managing agent and/or its counsel with the same force and effect as if given by Landlord.

SECTION 27.06.

Captions and Section Numbers.

The captions, section numbers, article numbers, and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease nor in any way affect this Lease.

SECTION 27.07.

Tenant Defined, Use of Pronoun.

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The word "Tenant" shall be deemed and taken to mean each and every person or party mentioned as a Tenant herein, be the same one or more; and if there shall be more than one Tenant, any notice required or permitted by the terms of this Lease may be given by or to any one thereof, and shall have the same force and effect as if given by or to all thereof. The use of the neuter singular pronoun to refer to Landlord or Tenant shall be deemed a proper reference even though Landlord or Tenant may be an individual, a partnership, a corporation, or a group of two or more individuals or corporations. The necessary grammatical changes required to make the provisions of this Lease apply in the plural sense where there is more than one Landlord or Tenant and to either corporations, associations, partnerships, or individuals, males or females, shall in all instances be assumed as though in each case fully expressed.

SECTION 27.08.

Broker's Commission.

Each of the parties represents and warrants that there are no claims for brokerage commission or finder's fees in connection with the execution of this Lease, except as listed below, and each of the parties agrees to indemnify the other against and hold it harmless from all liabilities arising from any such claim (including, without limitation, the cost of counsel fees in connection therewith) from any broker or agent it has dealt with or employed except as follows: Hertzl Benjamini and RD Management LLC, as a broker (which shall be paid by Landlord pursuant to a separate agreement).

SECTION 27.09.

Partial Invalidity.

If any term, or covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be deemed by a court of law to be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.

SECTION 27.10.

No Option.

The submission of this Lease to Tenant for examination does not constitute a reservation of or option for the Leased Premises and, notwithstanding any correspondence or e-mail transmission to the contrary, any this Lease shall become effective as a lease only upon execution and delivery thereof by Landlord and Tenant.

SECTION 27.11.

Recording.

Tenant shall in no event record this Lease or a memorandum thereof without the prior written consent of Landlord, which consent may be withheld in Landlord' sole discretion.

SECTION 27.12.

Landlord's Default.

In the event of any breach under this Lease by Landlord, Landlord shall not be deemed to be in default under this Lease, unless and until Landlord shall fail to cure such breach within thirty (30) days after receipt of written notice thereof from Tenant (provided, however, that Landlord shall not be deemed in default with respect to any matter which by its nature may not be cured within thirty (30) days if Landlord shall promptly commence to cure such breach and thereafter diligently prosecutes the cure to completion). Notwithstanding anything contained herein or in the Lease, Landlord shall in no event have any liability hereunder to Tenant for consequential, special or indirect damages. In no event shall Tenant have the right to terminate or cancel this Lease as a result of any default by Landlord or breach by Landlord of its covenants or any warranties or promises hereunder.

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SECTION 27.13.

Parking Lot Lights.

(a) At Landlord's option, the parking lot lights shall not be in operation after the regular closing hours of the Shopping Center (11:00 P.M. is considered closing). Therefore, it is agreed that if Tenant requires parking lot lighting past the regular hours, Tenant shall pay the cost incurred for keeping all the parking lot lights on in the Shopping Center since there is no separate metering or lighting applicable to the Tenant's immediate parking area. Landlord shall be entitled to charge the entire cost of the extended lighting period to Tenant and Tenant shall be bound to pay all the additional lighting costs.

(b) Tenant shall have the right, subject to Landlord's reasonable prior written consent, to install lights from the facade of its store in accordance with all applicable codes and regulations at its sole cost and expense. Such lights shall be connected to and billed to Tenant's meter.

SECTION 27.14.

Intentionally Omitted.

SECTION 27.15.

Computation.

(a) Notwithstanding anything to the contrary herein, for purposes of computing Tenant's proportionate share of Real Estate Taxes, Common Charges, and insurance expenses of the Shopping Center, Landlord reserves the right to make such computation on a basis of a 30 day month and a 360 day year.

(b) Unless stated otherwise, any time Tenant's proportionate share of costs and expenses shall be calculated, the square foot area of floor levels (such as storage basements and mezzanines) not used for sales purposes, and outdoor selling areas shall be excluded from the square foot areas used to determine the denominator of the applicable percentage and share.

SECTION 27.16.

Tenant Contribution.

At Landlord's option, the initial Tenant contributions (for Common Charges, Real Estate Taxes and fire and extended coverage insurance) for partial months should be prorated on a thirty (30) day month basis (360 days per year).

SECTION 27.17.

Covenants.

Anything to the contrary in this Lease notwithstanding, the covenants in this Lease to be performed by Landlord, shall not be binding personally, but instead said covenants are made for the purpose of binding only the fee simple or leasehold estate which Landlord owns in the Leased Premises.

SECTION 27.18.

Utilities.

Upon Tenant taking possession of the Leased Premises, all utilities shall be put in Tenant's name and Tenant shall pay the bills directly to the utility company. Upon request, Tenant shall furnish Landlord with evidence of payment of its utility bills.

SECTION 27.19.

Intentionally Omitted.

SECTION 27.20.

Hazardous Substances.

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Tenant agrees that it shall not generate, store, manufacture, refine, transport, treat, dispose of or otherwise permit to be present on or about the Leased Premises or the Shopping Center, any Hazardous Substances. As used herein, Hazardous Substances shall be defined as any "hazardous chemical," "hazardous substance," or similar term as defined in the Comprehensive Environmental Responsibility Compensation and Liability Act, as amended (42 U.S.C. 59601, et seq.), any rules or regulations promulgated thereunder, or in any other applicable federal, state or local law, rule or regulation dealing with environmental protection. It is understood and agreed that the provisions contained in this Section shall be applicable notwithstanding the fact that any substance shall not be deemed to be a Hazardous Substance at the time of its use by Tenant but shall thereafter be deemed to be a Hazardous Substance. Tenant shall defend, indemnify and hold harmless Landlord, its agents, contractors, employees and managing agent from and against any and all costs, expenses, claims and liabilities whatsoever from the default of this Section by Tenant, its agents, contractors invitees or employees.

SECTION 27.21.

Landlord Consent.

If any action by Tenant with respect to any term, provision or condition of this Lease requires the consent or approval of Landlord, Landlord's consent or approval of such action on one occasion shall not be deemed a consent to or approval of the same action on a subsequent occasion. If Landlord's consent or approval is required with respect to any term, provision or condition of this Lease to not be unreasonably withheld and a court of competent jurisdiction determines that Landlord has acted unreasonably, Tenant's sole remedy shall be the granting by Landlord of the consent or approval theretofore withheld by Landlord.

SECTION 27.22.

Vermin/Odor/Noise.

It is understood and agreed that Tenant will use its best efforts to assure that no pest or vermin are created due to the nature of Tenant's business and it is further understood and agreed that Tenant will use its best efforts to prohibit offensive odors (in Landlord's sole judgement) from permeating the air surrounding the Leased Premises and adjacent premises. Tenant, at its sole cost and expense, shall take any action required (including, without limitation, the installation of ventilation systems, filtration systems and physical barriers) to ensure its compliance with the foregoing. Tenant further agrees not to make or permit any noise that would disturb other tenants from quiet enjoyment of their leased premises.

SECTION 27.23.

The Office of Foreign Assets Control ("OFAC").

(a) At all times throughout the term of this Lease, Tenant and all of its respective Affiliates shall (i) not be a Prohibited Person (defined below) and (ii) be in full compliance with all applicable orders, rules, regulations and recommendations of OFAC of the U.S. Department of Treasury.

(b) The term "Prohibited Person" shall mean any person or entity:

i. listed in the Annex to, or otherwise subject to the provisions of, the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the "Executive Order");

ii. that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order; iii. with whom Landlord is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;

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iv. who commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order;

v. that is named as a "specially designed national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, www.ustreas.gov/offices/enforcement/ofac or at any replacement website or other replacement official publication of such list; or

vi. who is an Affiliate of or affiliated with a person or entity listed above.

b. For purposes of this Section 27.26, the term "Affiliate", shall mean, as to any person or entity, any other person or entity that, directly or indirectly, is in control of, is controlled by or is under common control with such person or entity or is a director or officer of such person or entity or of an Affiliate of such person or entity. As used herein, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a person or entity, whether through ownership of voting securities, by contract or otherwise.

c. Tenant represents and warrants to Landlord that neither Tenant nor any of its respective Affiliates is a Prohibited Person and Tenant and all of its respective Affiliates are in full compliance with all applicable orders, rules, regulations and recommendations of the Office of Foreign Assets Control of the U.S. Department of the Treasury.

d. Tenant acknowledges that in accepting this Lease and the other documents relating thereto, Landlord is expressly and primarily relying on the truth and accuracy of the warranties and representations set forth above (notwithstanding any investigation of the Tenant by Landlord); that such reliance existed on the part of Landlord prior to the date hereof; that the warranties and representations arc a material inducement to Landlord in executing and delivering the Lease and that Landlord would not enter into this Lease in the absence of such warranties.

SECTION 27.24.

Entire And Binding Agreement; Governing Law, Counterparts.

This Lease, Exhibits and Riders, if any, attached hereto contain all of the agreements between the parties hereto, and same may not be modified in any manner other than by agreement in writing signed by all the party or parties to be charged or such party's successors in interest. The terms, covenants, and conditions contained herein shall inure to the benefit of, and be binding upon, Landlord and Tenant, and their respective successors and assigns, except as may be otherwise expressly provided in this Lease. Both parties have freely negotiated this Lease. In any controversy, dispute, or contest over the meaning, interpretation, validity, or enforceability of this Lease or any of its terms or conditions, there shall be no inference, presumption, or conclusion drawn whatsoever against either party by virtue of that party having drafted this Lease or any portion thereof. This Lease shall be governed by the laws of the State in which the Shopping Center is located. This Lease may be signed in counterparts with the same force and effect as if all required signatures were contained in a single, original instrument.

SECTION 27.25.

Provisions Severable.

If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances, other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid, and be enforced to the fullest extent permitted by law.

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SECTION 27.26.

Evidence of Formation/Incorporation.

In the event that the Tenant named herein is an entity (i.e., not a natural person), Tenant shall deliver to Landlord, within thirty (30) days following Landlord's delivery of a fully executed Lease to Tenant, appropriate documentation evidencing that Tenant has been duly formed or incorporated (as applicable). In the event Landlord does not receive such evidence within such thirty (30) day period, the individual (or individuals) executing on behalf of Tenant shall automatically be deemed the "Tenant" herein.

SECTION 27.27.

Rider.

SECTION 27.28.

Landlord Work.

Landlord will deliver the Leased Premises to Tenant as per the specifications described on Exhibit C attached hereto and incorporated as part of the Lease ("Landlord's Work").

SECTION 27.29.

Landlord Requirements

Subject to the provisions of this Lease, prior to commencing Tenant's Work, Tenant shall comply with Landlord's requirements, which shall include, but not be limited to the following: (i) Landlord reviewing and approving Tenant's contractor's insurance coverage (which shall name the parties designated by Landlord as additional insured); (ii) delivering to Landlord a traffic and maintenance protection plan for the Leased Premises in form and substance acceptable to Landlord; (iii) holding pre-construction meetings with Landlord's representative(s) and thereafter promptly and diligently making the necessary modifications to Tenant's site plan (other than modifications requiring approval by the local planning board/building department) and/or construction plan in order to comply with Landlord's requirements; (iv) designating the staging area (as such term is commonly used to

describe the area for the placement of construction equipment and trailers); (v) phasing the construction work in order to minimize interference with other tenant's business operations in the Shopping Center; (vi) cleaning the construction site on a daily basis and (vii) protecting existing site improvements from damage during the course of Tenant's Work. Tenant's Work shall not interfere with or block access to any entrance or access road in or within the Shopping Center. Tenant shall, at its expense, promptly replace and restore the areas disturbed by Tenant's Work to substantially the same condition that existed prior to Tenant's Work (including, without limitation, any and all paved parking area and utilities that existed within the Leased Premises prior to commencing Tenant's Work).

(Continued on following page.)

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Effective Date.

LANDLORD:

Lower Macungie Associates, LP
By: Lower Macungie Development LLC G.P.
By:	/s/ Richard Berdoff
	Richard Berdoff
	Managing Member



TENANT:

Embassy Bank

By:	/s/ David M. Lobach Jr.

LEASE ADDENDUM

THIS LEASE ADDENDUM is dated January 1, 2005 and is by and between EMBASSY BANK, a Pennsylvania state bank ("Embassy") and Red Bird Associates, LLC, a Pennsylvania Limited Liability Company ("Red Bird").

WHEREAS, by Lease Agreement dated June 11,2001 Embassy Bank leased from Gateway Associates, LLC, approximately 7,827 square feet of office space on the first floor of the office building commonly known as 100 Gateway Drive, Hanover Township, Northampton County, Pennsylvania; and

WHEREAS, the said building was acquired from Gateway Associates, LLC by Red Bird on January 10,2003, together with an assignment to Red Bird of all leases affecting the premises; and

WHEREAS, the parties desire to amend the Lease Agreement in order to provide for the lease by Embassy of an additional 4,349 square feet of space on the second floor of the premises.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties agree as follows:

1. Lease. Red Bird hereby leases to Embassy and Embassy hereby leases from Red Bird 4,349 square feet of office space on the second floor of the premises known as 100 Gateway Drive, Hanover Township, Northampton County, Pennsylvania. The additional space to be occupied by Embassy is shown on the diagram attached hereto as Exhibit "A".

2. Term. This Addendum and the lease of additional space shall be effective as of January 1, 2005 and shall continue for the remaining term of the underlying Lease Agreement, including all renewal options.

3. Increased Rent. As a result of the additional space added to the lease, Embassy's annual base rent shall be increased by $78,282 (4,349 additional square feet at $ 18.00 per square foot per year) or $6,523.50 per month.

4. Rent Escalator. On the third anniversary of this Addendum and each anniversary thereafter, the annual base rent for the additional space shall increase by three (3%) percent per year, to be calculated in the same manner as set forth in Exhibit "C" of the underlying Lease Agreement with respect to the rent escalator for the original space.

5. Leasehold Improvement Allowance. Red Bird hereby grants to Embassy a tenant improvement allowance of $44,512.50 (3,561 square feet of interior rentable space at $12,50 per square foot) which amount may be used by Embassy as an offset against the rent due hereunder.

6. Operating Expenses. As a result of Embassy's lease of the additional space, its share of the Operating Expenses (as defined in the Lease Agreement) shall be increased from 33% to 47.5%.

7. Incorporation by Reference. Except as provided herein, all terms and provisions of the Lease Agreement are incorporated herein by reference thereto and are hereby ratified and confirmed as if the additional space leased hereunder was included as part of the terms of the original Lease Agreement.

8. Entire Agreement. This Lease Addendum, together with the underlying Lease Agreement, contains the entire agreement between the parties concerning the subject matter hereof

IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed this Lease Addendum as of the day and year first above written.

ATTEST:

EMBASSY BANK


/s/ Judith A. Hunsicker	By	/s/ Elmer Gates
Judith A. Hunsicker		Elmer Gates
Secretary		Chairman


	RED BIRD ASSOCIATES, LLC


	By	/s/ Frank Banko
		Frank Banko
		President

COMMERCIAL LEASE AGREEMENT

THIS COMMERCIAL LEASE AGREEMENT (hereinafter called the "Lease") is made this 11 day of March, 2009 by and between POLARIS CEDAR CREST, LLC, a Pennsylvania limited liability company, which has as its address 7562 Perm Drive, Suite 100, Allentown, Pennsylvania 18106, or its assignee or nominee (the "Lessor")

AND

EMBASSY BANK FOR THE LEHIGH VALLEY, a Pennsylvania financial institution, which has as its address 100 Gateway Drive, Suite 100, Bethlehem, Pennsylvania 18017 (the "Lessee").

WITNESSETH:

WHEREAS, VIST Bank, f/k/a Madison Bank, a division of Leesport Bank ("VIST"), has succeeded to the interests of Center Square Associates, a Pennsylvania general partnership as owner of the fee interest in certain tract or parcel of land located in Salisbury Township, Lehigh County, Pennsylvania, as more particularly described in Exhibit "A" attached hereto and made a part hereof (the "Premises"), pursuant to VIST's purchase of the Premises at the January 23, 2009 Lehigh County Sheriffs Sale; and

WHEREAS, VIST, pursuant to its rights in that certain Subordination, Non-Disturbance and Attornment Agreement dated October 2, 2007 and recorded in the Lehigh County Recorder of Deeds office on December 28, 2007 at Document ID# 7458028, has succeeded to the rights of Center Square Associates as the Ground Lessor of all improvements, including but not limited to the bank building (the "Improvements") located upon the Premises pursuant to that certain Ground Lease dated July 12, 2005, as amended by those certain four (4) Amendments thereto (collectively, the "Ground Lease"); and

WHEREAS, VIST and Lessee, also the tenant under the Ground Lease, have agreed to terminate the Ground Lease on the day of Closing of the sale of the Premises from VIST to Lessor; and

WHEREAS, VIST and Lessor have executed an Agreement of Sale dated January 22, 2009 (the "Agreement of Sale") pursuant to which Lessor, subject to certain conditions contained therein, is the equitable owner of the Premises; and

WHEREAS, Lessee has requested that Lessor construct on the Premises a bank building in accordance with the Site Plan prepared by Bohler Engineering, Inc. revised March 28, 2007 and recorded on July 26, 2007 ("Site Plan"), and Lessor has in fact substantially completed construction thereof, and which the Improved Lease Premises the Lessee will then lease from Lessor.

NOW, THEREFORE, the parties hereto, in consideration of the covenants and agreements herein, and intending to be legally bound hereby, agree as follows:

1. IMPROVED LEASED PREMISES. Subject to the terms and conditions of this Lease, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the Premises and the Improvements now existing and to be constructed thereon (collectively, the "Improved Lease Premises") as provided herein. Lessor will complete the improvements to the Premises in accordance with the Work Letter attached hereto as Exhibit "B" and incorporated herein. Lessee agrees to the terms and conditions set forth on Exhibit "B" hereto.

(a) For the purposes of this Lease, the term "Improved Lease Premises" shall also include the all rights contained in that certain Declaration of Cross Easements and Easements dated May 22, 2008 and recorded as document #7481685 in the Lehigh County Office of the Recorder of Deeds.

2. TERM.

(a) The term of this Lease for the Improved Leased Premises (the "Term") shall be approximately eleven (11) years commencing on the date on which Lessor has closed on the purchase of the Premises (the "Commencement Date"), and ending at midnight on the day preceding the eleventh (11th) anniversary of the Commencement Date.

(b) Provided that Lessee shall not then be in default hereunder, Lessee shall have the option to extend the Term of this Lease for two (2) successive renewal terms of seven (7) years, followed by one (1) additional renewal period of four (4) years and ten (10) months, (each, a "Renewal Term"), on the same terms and conditions set forth herein and with the rental for each Renewal Term continuing to increase at the rate of two and one-half percent (2-1/2%) per year such that the rental for each lease year during any Renewal Term shall be 102.5% of the rental for the immediately preceding lease year. Lessee may exercise its right to renew the Lease Term by providing Lessor with written notice of its option to renew the Lease not less than nine (9) months prior to the expiration of the then current Term or Renewal Term.

(c) Notwithstanding the Commencement Date of the Term, Lessee shall be bound by all of the terms and conditions hereof, from and after the date of execution of this Lease.

3. CONDITIONS OF COMMENCEMENT. The Commencement of this Commercial Lease is expressly conditioned upon the occurrence of all of the following conditions:

(a) The Closing of the purchase contemplated by the Agreement of Sale ("Closing"); and

(b) The termination of the Ground Lease by mutual agreement between VIST and Lessee contemporaneous with the Closing.

(i) In the event that VIST fails to terminate the Ground Lease, Lessee and Lessor, as successor in interest to VIST as landlord under the Ground Lease, hereby agree to mutually terminate the Ground Lease , in a separate writing signed by both Lessor and Lessee. Said termination will be effective contemporaneously with the effective date of this Lease.

(c) After the conditions of Section 3(a) and (b) have occurred, the withdrawal with prejudice by Lessor of the civil action which Lessor filed in the Lehigh County Court of Common Pleas at docket # 2008-C-4098 (the "Civil Action") against Lessee.

4. USE. Lessee shall use the Improved Leased Premises as an Embassy Bank or any successor bank or, with Lessor's prior written consent, for any other lawful purpose permitted under zoning and other applicable laws, ordinances, and regulations.

5. RENT.

(a) During the first year of the Term, Lessee shall pay to Lessor as minimum annual rent the sum of One Hundred Eighty-four Thousand Eight Dollars ($184,008.00), payable in equal monthly installments of Fifteen Thousand Three Hundred Thirty-four Dollars ($15,334.00) each. Thereafter, for each Lease year during the Term and any Renewal Term, minimum annual rent shall equal the minimum annual rent payable in the immediately preceding Lease year, multiplied by 102.5% (e.g., the prior year's rental plus an increase of 2.5%).

Such minimum annual rent shall be payable in advance, in equal monthly installments on the first day of each calendar month during the Term and any Renewal Term hereof, without demand, offset or deduction, and shall be payable in lawful money of the United States of America. Lessor agrees that it will use its best efforts to obtain a Certificate of Occupancy on or before July 1, 2009.

(i) In the event Lessor shall not deliver a Certificate of Occupancy by August 1, 2009, Lessee shall have the option of (i) completing such work necessary to obtain a Certificate of Occupancy, and deduct the actual and reasonable cost thereof from the rent otherwise payable under this Lease until such amount is paid in full, or (ii) pay 50% of the rent otherwise payable pursuant to this lease until such time as Lessor delivers a Certificate of Occupancy.

(b) This Lease is intended to be a "triple net" lease. Accordingly, Lessee agrees to pay as additional rent, all charges for utilities, taxes, assessments and other governmental charges with respect to the Improved Leased Premises and as may be further provided in this Lease. It is the parties' intent that Lessee shall pay all such charges directly. In the event Lessor shall receive any such charges, Lessor shall bill Lessee for any such charges and Lessee shall promptly pay Lessor for such charges upon invoice. In the event of nonpayment of additional rent. Lessor shall have, in addition to all other rights and remedies, all the rights and remedies provided for herein or by law in the case of nonpayment of the minimum rent.

(d) The parties acknowledge that Lessee has obtained regulatory approval that requires the subject bank branch to open by November 21, 2009. Only in the limited event that Lessor has not delivered a Certificate of Occupancy on or before November 21, 2009, and Lessee is unable to obtain an extension of all applicable bank regulatory approvals necessary to operate a bank branch at the subject location, but has diligently pursued such approvals and/or extensions of time, then Lessee shall have the option of terminating this Lease as of such date, provided that Lessee continues to make regular monthly payments as required in this Section 5 for a period of nine (9) months following the termination date. The Lessee shall be relieved of the liability for the post- termination monthly rental payments upon the expiration of nine (9) months following the termination date, or the date upon which rental obligations commence with a replacement Tenant at the property, whichever is sooner.

(i) The Lessee shall have no other termination rights hereunder except in the limited circumstance provided for in Section 5(d), above.

(ii) Notice of termination pursuant to Section 5(d) shall be in writing signed by an authorized representative of Lessee and delivered according to the provisions of Section 32, below.

6. ALTERATIONS AND IMPROVEMENTS.

(a) Lessee shall not make or cause to be made any alterations, additions or improvements to the Improved Leased Premises without the prior written consent of Lessor. All alterations, additions or improvements approved by Lessor shall be made solely at Lessee's expense by a contractor approved by Lessor, shall be made in a good and workmanlike manner and shall be performed in compliance with all laws, ordinances and requirements of any and all Federal, State, Municipal and/or other authorities, the Board of Fire Underwriters and any mortgages to which the Improved Leased Premises is subject. Any alteration, addition or improvement made by Lessee under this Section 6, and any fixtures installed as a part thereof, shall, at Lessor's option, become the property of Lessor upon the expiration or other termination of this Lease. Lessor shall have the right, however, to

require Lessee to remove such fixtures at Lessee's cost upon such termination of this Lease, and Lessee shall promptly remove the same and repair any damage to the Improved Leased Premises caused by such removal.

(b) All persons to whom these presents may come are put upon notice of the fact that Lessee shall never, under any circumstances, have the power to subject the interest of Lessor or any mortgagee in the Improved Leased Premises to any mechanic's, materialman's or similar lien.

(c) Any contract or agreement for labor, equipment, services, materials or supplies in connection with the rights set forth hereunder shall provide that no lien or claim shall thereby be created or arise, or be filed by anyone thereunder, upon or against the Improved Leased Premises and/or the interest of Lessor, or any mortgagee of Lessor, or the buildings or improvements thereon to be erected on the Improved Leased Premises or any of the equipment thereof.

(d) In the event of a lien or claim of any kind, arising out of the exercise of the rights set forth hereunder by Lessee, its agents, employees, contractors, subcontractors, and materialmen, being filed against the interest of Lessor, any mortgagee of Lessor and/or against the Improved Leased Premises, Lessee covenants and agrees that at its expense it will within thirty (30) days after written notice from Lessor, cause the Improved Leased Premises and any such interest therein to be released from the legal effect of such lien or claim, either by payment or by posting of bond or by the payment into court of the amount necessary to relieve and release the Improved Leased Premises or the interest from such claim or in any manner satisfactory to Lessor, and any mortgagee of Lessor. If Lessee desires to contest the validity of any lien or claim, Lessee may do so upon Lessor's prior written consent, provided Lessee sustains the cost of such contest, and Lessee remains liable to pay or discharge any lien or claim deemed to be due or payable. Lessee hereby indemnifies and holds Lessor harmless against any and all liability, loss or damage sustained by Lessor by reason of such contest, unless such contest arises from any negligent or intentional act or omission of Lessor.

7. UTILITIES. Lessee shall pay, when the same shall become due, all charges for utilities consumed by it on the Improved Leased Premises including without limitation electricity, heat and telephone, and any other utilities, as well as water and sewer charges. Lessor shall not be required to furnish to Lessee any utility, janitorial or other service of any kind whatsoever during the Term of this Lease.

8. MAINTENANCE AND REPAIRS. Lessor has made no representations concerning the condition of the Improved Leased Premises other than that the improvements will be completed in accordance with the agreement between the parties as referred to in Section 1 hereof. Lessee shall maintain and be responsible for maintaining and repairing all portions of the Improved Leased Premises. Lessee, at its sole cost and expense, shall take good care of the Improved Leased Premises and will maintain the same in good order and condition, ordinary wear and tear excepted, and make all necessary repairs thereto, interior as well as exterior, including and without limiting the generality of the foregoing, roof and structural members, including walls. Lessee shall be responsible for the routine regular cleaning of the Improved Leased Premises, and shall keep all portions of the Improved Leased Premises in a clean and orderly condition, free of unlawful obstruction, and shall not permit or cause any damage, waste or injury to the building or other improvements on the Improved Leased Premises.

9. REFUSE REMOVAL. Lessee shall provide for its own garbage, rubbish and refuse disposal and agrees to keep the Improved Leased Premises free and clear of debris. Lessee agrees to keep all rubbish, garbage and refuse in covered containers within the Improved Leased Premises (or at such other location identified by Lessor) and to have the same removed regularly.

10. COMPLIANCE. With regard to its use of the Improved Leased Premises, Lessee shall, at its own expense, comply with all laws, rules, orders, regulations, and requirements of all Federal, State, and municipal governments, courts, departments, commissions, boards, and officers having jurisdiction over the Improved Leased Premises, the lawful orders, rules, and regulations of the Board of Fire Underwriters having jurisdiction over the Improved Leased Premises, any mortgages to which the Improved Leased Premises is subject, and any rules and regulations of Lessor. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any governmental law, rule, order, regulation or requirement. Lessee hereby indemnifies and holds Lessor harmless against any and all liability, loss, or damage sustained by Lessor by reason of such contest. Notwithstanding any of the foregoing, Lessee shall promptly comply with any such law, rule, order, regulation or requirement if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to criminal liability for non-compliance therewith.

11. TAXES. Lessee shall pay as and when the same shall become due all real property taxes, assessments and other governmental charges assessed against the Improved Leased Premises during the Term of this Lease. Lessee shall have the right to contest by appropriate legal proceedings, diligently pursued, without cost or expense to Lessor, the validity of any such tax, assessment or other governmental charge. Lessee hereby indemnifies Lessor against any and all liability, loss or damage sustained by Lessor by reason of such contest. Notwithstanding any of the foregoing, Lessee shall promptly pay any such tax, assessment or other government charge if at any time the Improved Leased Premises or any part thereof shall then be immediately subject to forfeiture or Lessee shall be subject to any criminal liability for nonpayment thereof. Lessor shall deliver all applicable tax bills to Lessee upon receipt to enable Lessee to timely pay all such taxes in the discount period.

12. SURRENDER OF IMPROVED LEASED PREMISES. Lessee covenants that upon the termination or expiration of this Lease or any renewal thereof, Lessee shall surrender the Improved Leased Premises in good order and condition and shall surrender all keys to the Improved Leased Premises to Lessor at the place then fixed for the payment of rent. This covenant shall survive termination of this Lease.

13. RIGHT OF ENTRY. Upon prior notice and in the presence of an authorized representative of Lessee (whom Lessee agrees to provide upon such notice received from Lessor), Lessor and/or its agents shall have the right to enter upon and inspect the Improved Leased Premises at all reasonable times and to exhibit the Improved Leased Premises to prospective purchasers and prospective tenants (but in this case, only during the last six (6) months of the term of this Lease). Lessor shall be permitted to affix a "To Let" or "For Sale" sign on the Improved Leased Premises during the last ninety (90) days of the term of this Lease in such place as shall not interfere with the business then being conducted at the Improved Leased Premises.

14. SIGNS. Lessee shall have the right to install and maintain on the Improved Leased Premises such signs and advertising matter as Lessee may reasonably desire, subject to the prior consent of Lessor. Lessee shall comply with any laws or ordinances with respect to such signs or advertising, and shall obtain any necessary permits. Lessee agrees to maintain such signs or advertising in good condition, and to repair any damage which may be caused by erection, maintenance, repair or removal of such signs or advertising.

15. LIABILITY AND OTHER INSURANCE. Lessee shall, during the entire term hereof, keep in full force and effect policies of comprehensive liability and property damage insurance, with respect to the Improved Leased Premises and the business operated by Lessee in and upon the Improved Leased Premises. The policy (or policies) shall name Lessor, and any persons, firms, or corporations designated by Lessor, including the Ground Lessor and mortgagees, if any, and Lessee as insured and shall contain a clause that the insurer will not cancel or modify the insurance without first giving the named parties thirty (30) days prior written notice. Copies of the policy or certificates of accord or insurance shall be delivered to Lessor upon the Commencement Date. If Lessee shall not comply with its covenants made in this section, Lessor may, at its option, cause insurance as aforesaid to be issued and in such event, Lessee agrees to pay the premium for such insurance promptly upon Lessor's demand as

additional rent. All obligations contained in this Section 15 shall be subject to the requirements of Lessor's lender and/or mortgagee. In the event the Lessor's lender requires minimum insurance coverage in excess of the limits described herein, then the Lessee expressly agrees to comply with all requirements of Lessor's lender. Failure to do so shall constitute an Event of Default under this Lease.

(a) Property and Personal Injury Liability Insurance. At all times during theTerm of this Lease, Lessee shall maintain, at its sole cost, comprehensive broad-form general public liability insurance against claims and liability for personal injury, death, and property damage arising from the use, occupancy, disuse, or condition of the Leased Premises and Improvements. The insurance shall be carried by insurance companies authorized to transact business in Pennsylvania, selected by Lessee and approved by Lessor, which approval shall not be unreasonably withheld, delayed or conditioned. In addition, the following conditions shall be met:

(i) The insurance provided pursuant to this Paragraph 15(a)(1) shall be in an amount no less than One Million ($1,000,000.00) Dollars for property coverage, and in an amount no less than One Million ($1,000,000.00) Dollars for one person and Two Million ($2,000,000.00) Dollars for one accident for personal injury.

(ii) The insurance shall be maintained for the mutual benefit of Landlord and Lessee, any succeeding owners of the fee title in the Leased Premises, any successors and assigns of this Lease. The insurance policy or policies shall name Lessor and Lessee as insureds and shall not be subject to cancellation unless Lessor has received a minimum of thirty (30) days prior written notice of the intention of the insurer to cancel the coverage.

(iii) Construction Liability Insurance. Lessee agrees either to obtain and maintain (to the extent reasonably procurable) construction liability insurance at all times when demolition, excavation, or construction work is in progress on the Leased Premises, or cause its contractors to maintain such construction liability insurance. This insurance shall be carried by insurance companies authorized to transact business in Pennsylvania, selected by Lessee and shall be paid for by Lessee. The insurance shall have limits of no less than One Million ($1,000,000.00) Dollars for property damage, and One Million ($1,000,000.00) Dollars for one person and Two Million ($2,000,000.00) Dollars for one accident for personal injury. The insurance shall be maintained for the mutual benefit of Lessor and Lessee, as well as any succeeding owners of the fee title in the Leased Premises, any successors and assigns of this Lease, against all liability for injury or damage to any person or property in any way arising out of demolition, excavation, or construction work on the premises. The insurance policy or policies shall name Lessor and Lessee as insureds and shall not be subject to cancellation unless Lessor has received a minimum of thirty (30) days prior written notice of the intention of the insurer to cancel the coverage.

(iv) Certificates of Insurance. Lessee shall furnish Lessor with certificates of all insurance required by this Section 15. Lessee agrees that if it does not keep this insurance in full force and effect, Lessor may notify Lessee of this failure, and if Lessee does not deliver to Lessor certificates showing all of the required insurance to be in full force and effect within ten (10) days after this notice, Lessor may, at its option, take out and pay the premiums on the insurance needed to fulfill Lessee's obligations herein. On demand from Lessor, Lessee shall reimburse Lessor the full amount of any insurance premiums paid by Lessor, with interest at the rate of ten (10%) percent per annum from the date of Lessor's demand until reimbursement by Lessee.

16. WAIVER OF SUBROGATION. Neither Lessee nor anyone claiming by, through, under or on behalf of Lessee, shall have any claim, right of action, or right of subrogation against Lessor for or based upon any loss or damage caused by any casualty, including but not limited to fire or explosion, relating to the Improved Leased Premises or property therein. Neither Lessor nor anyone claiming by, through, under or on behalf of Lessor,

shall have any claim, right of action, or right of subrogation against Lessee for or based upon any loss or damage caused by any casualty, including but not limited to fire or explosion, relating to the Improved Leased Premises or property therein. This release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair or prejudice the right of the releasor to recover thereunder. Lessor and Lessee each agree that their policies will include such a clause or endorsement so long as the same is obtainable and if not obtainable, shall so advise the other in writing and such notice shall release both parties from the obligation to obtain such a clause or endorsement.

17. INDEMNITY. Lessee hereby agrees to indemnify, hold harmless and defend, at its own expense, Lessor from and against any and all claims, actions, damages, liability, judgments and expenses, including without limitation reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Lessor or Lessor's interest in the Improved Leased Premises, by reason of any loss of life, personal injury or claim of injury, or damage to property or claim of damage to property in or about the Improved Leased Premises, howsoever caused, arising out of or relating to the occupancy or use by Lessee, its employees, agents or invitees, of the Improved Leased Premises, including without limitation the streets, alleys, sidewalks or parking areas. The Lessee shall indemnify Lessor for any environmental liability, but only to the extent that such claims, damages, liability, judgments and expenses are caused by the negligence or willful misconduct of Lessee, its employees, agents and/or invitees. In addition, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all expenses incurred by Lessor arising out of or relating to Lessee's failure to pay or perform its obligations under this Lease.

18. CASUALTY. In the event that the Improved Leased Premises, or any portion thereof, are damaged or destroyed by any cause whatsoever, Lessee shall commence such restoration as soon as possible after such occurrence, but in no event later than ninety (90) days thereafter, and shall diligently pursue such repair or restoration to completion, with a contractor approved by Lessor. Only to the extent that the casualty to the Improved Leased Premises is caused directly by the gross negligence of Lessor, Rent shall be equitably abated based on the area of the Improved Leased Premises rendered untenantable, if any, during the period of such untenantability. Notwithstanding the foregoing, if destruction of more than forty percent (40%) of the Improvements on the Improved Leased Premises occurs at any point in the last three (3) years of the then-current Term of the Lease or if any destruction of more than ten percent (10%) of the Improvements on the Improved Leased Premises occurs in the last year of the then current Term of the Lease, then Lessee shall have the right to terminate the Lease.

19. EMINENT DOMAIN.

If the entire Improved Leased Premises shall be taken by reason of condemnation or under eminent domain proceedings, Lessee may terminate this Lease as of the date when possession of the Improved Leased Premises is so taken by the condemning entity. If a portion of the Improved Leased Premises, including without limitation the building, site improvements, parking or access, shall be taken under eminent domain or by reason of condemnation to such an extent that the taking materially adversely affects Lessee's use of the Improved Leased Premises, Lessee shall have the option to terminate this Lease by written notice to Lessor within forty-five (45) days of such taking. If this Lease is not so terminated, Lessee may at its sole cost and expense, and with a contractor acceptable to Lessor, restore the remaining portions of the Improved Leased Premises as Lessee deems necessary or appropriate (subject to applicable law) without abatement of rent. For purposes of this Section 19, (i) a partial taking shall be deemed to include loss or impairment of access to and from the Improved Leased Premises and (ii) grants or conveyances made in lieu or in anticipation of or under threat of a taking or condemnation shall be deemed a taking. Both parties shall pursue their own damage awards with respect to any such taking, provided however that Lessee shall be entitled to, and nothing herein shall prevent Lessee from seeking, an award for taking of or damage to Lessee's trade fixtures and any award for Lessee's moving expenses, so long as said awards do not diminish the award to which Lessor is entitled.

20. DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder:

(a) Lessee shall fail to pay in full when due, any installment of rent or any other sum payable by Lessee hereunder, and such failure shall continue for a period of ten (10) days;

(b) Lessee shall fail to perform or observe (or cause or permit any such failure) any other covenant, term, condition, agreement or obligation to be performed or observed by Lessee under this Lease or under the Ground Lease, and such failure shall continue for twenty (20) days after written notice thereof from Lessor to Lessee; provided however that a failure as described in this Section 20(b) shall not constitute a default if it is curable but cannot with reasonable diligence be cured by Lessee within a period of twenty (20) days, so long as Lessee promptly commences cure and proceeds to cure the failure with reasonable diligence and in good faith.

(d) Lessor acknowledges and agrees that, notwithstanding any other provisions contained in this Lease Agreement, in the event (i) Lessee or its successors or assignees shall become subject to a bankruptcy case pursuant to Title 11 of the U.S. Code or similar proceeding during the term of this Lease or (ii) the depository institution then operating the Improved Leased Premises is closed or is taken over by any depository institution supervisory authority during the term of this Lease, Lessor shall be bound by all applicable federal statutes and regulations, including specifically 12 U.S.C. 1821(e)(4).

21. REMEDIES. Upon the occurrence of any Event of Default, Lessor shall have the following rights and remedies in addition to all other rights and remedies otherwise available at law or in equity:

(a) If Lessee shall at any time fail to pay any sum, charge, or imposition or perform any other act on its part to be performed, then Lessor, after ten (10) days written notice to Lessee and without waiving or releasing Lessee from any obligation hereunder, may pay such charge or sum of money or make any other payment or perform any other act on the Lessee's part to be made or performed, and may enter upon the Improved Leased Premises for any such purpose, and take all such action thereon as may be necessary therefor. All sums so paid by Lessor and all costs and expenses incurred by Lessor in connection with the performance of any such act, together with interest thereon at the rate of ten percent (10%) per annum from the respective dates of Lessor's making of each such payment or incurring of each such cost and expense, shall constitute additional rent payable by Lessee under this Lease and Lessor shall have the same remedies for the collection thereof as in the case of a failure to pay rent.

necessary renovation and alteration of the Improved Leased Premises; reasonable attorneys' fees; rent payment through the balance of the term; or the difference between the rent to be paid by the Lessee pursuant to this Lease and the rent charges collected by Lessor upon reletting;

(c) Lessor may retake possession of the Improved Leased Premises without terminating the Lease, in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Improved Leased Premises. In such event, Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent and any other charges and adjustments as may become due hereunder;

(d) At Lessor's option, the entire rent and other charges which would have become due during the balance of the lease term or renewal thereof shall be accelerated and shall at once become due and payable as if by the terms of this Lease it were all payable in advance, without presentment, demand, notice of nonpayment, protest, notice of protest, or other notice, all of which are hereby expressly waived by Lessee;

(e) CONFESSION OF JUDGMENT. FOR VALUE RECEIVED, LESSEE HEREBY AUTHORIZES AND EMPOWERS ANY PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR LESSEE, AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER LESSEE, AND WITH OR WITHOUT DECLARATION FILED, UPON THE EXPIRATION OF A TEN (10) DAY PRIOR NOTICE AND CURE PERIOD, TO CONFESS JUDGMENT AGAINST LESSEE AND IN FAVOR OF LESSOR, ITS SUCCESSORS AND ASSIGNS, FOR THE SUM DUE BY REASON OF SAID DEFAULT IN THE PAYMENT OF RENT, INCLUDING UNPAID RENT FOR THE BALANCE OF THE TERM IF THE SAME SHALL HAVE BECOME DUE AND PAYABLE UNDER THE PROVISIONS OF THIS LEASE, AND/OR FOR THE SUM DUE BY REASON OF ANY BREACH OF ANY OTHER COVENANT BY LESSEE HEREIN, TOGETHER WITH INTEREST AND COSTS OF SUIT AND AN ATTORNEYS' COMMISSION OF FIVE (5%) PERCENT (BUT NO LESS THAN $1,000.00) FOR COLLECTION. LESSOR MAY THEREAFTER ISSUE A WRIT OR WRITS OF EXECUTION UPON THE JUDGMENT OBTAINED, AND LESSEE HEREBY WAIVES AND RELEASES ALL ERRORS AND EXEMPTIONS WHICH LESSEE COULD OTHERWISE RAISE AS DEFENSES TO SAID EXECUTION. SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS ANY SAID RENT AND/OR OTHER SUMS SHALL BE IN ARREARS. FOR THE PURPOSE OF PROCEEDING UNDER THIS SECTION, THIS LEASE SHALL BE A SUFFICIENT WARRANT, AND A TRUE AND CORRECT COPY OF THIS LEASE MAY BE FILED WITH THE COURT IN LIEU OF FILING AN ORIGINAL HEREOF;

(f) IN ADDITION, FOR DEFAULT WITH FAILURE TO CURE AS SET FORTH ABOVE, LESSEE FURTHER AUTHORIZES, AT THE OPTION OF LESSOR, ANY PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD, EITHER IN ADDITION TO OR WITHOUT JUDGMENT FOR THE AMOUNT DUE UNDER THE LEASE, TO APPEAR AS ATTORNEY FOR LESSEE, AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER LESSEE, AND TO CONFESS JUDGMENT IN EJECTMENT AGAINST LESSEE AND IN FAVOR OF LESSOR, FOR RECOVERY BY LESSOR OF POSSESSION OF THE IMPROVED LEASED PREMISES, FOR WHICH THIS LEASE OR A TRUE COPY THEREOF SHALL BE SUFFICIENT WARRANT; THEREUPON, IF LESSOR SO DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE FORTHWITH WITHOUT LEAVE OF COURT. IF FOR ANY REASON ANY SUCH ACTION SHALL BE TERMINATED AND POSSESSION SHALL REMAIN IN OR BE RESTORED TO LESSEE, SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID AS OFTEN AS THERE SHALL BE ANY DEFAULT WITH FAILURE TO CURE; AND

(g) LESSEE HEREBY WAIVES ANY RIGHT IT MAY HAVE, INCLUDING ANY CONSTITUTIONAL RIGHT, TO NOTICE OR OPPORTUNITY FOR A HEARING PRIOR TO JUDGMENT BEING ENTERED AGAINST IT UNDER (e) OR (f) ABOVE AND PRIOR TO EXECUTION AGAINST ITS ASSETS UNDER (e) OR (f) ABOVE. LESSEE ACKNOWLEDGES THAT IT UNDERSTANDS THE CONFESSION OF JUDGMENT PROVISIONS IN (e) AND (f) ABOVE, AND THIS (g).

(h) LESSEE SHALL PAY LESSOR A TEN PERCENT (10%) LATE CHARGE FOR ANY RENT PAYMENT NOT PAID WHEN DUE. SAID LATE CHARGE SHALL BEGIN TO ACCRUE ON THE FIRST DAY FOLLOWING THE EXPIRATION OF THE TEN (10) DAY GRACE PERIOD REFERENCED IN PARAGRAPH 21(a).

22. CUMULATIVE REMEDIES. Lessor shall have and may exercise all remedies available to Lessor hereunder and at law and in equity and all such remedies shall be cumulative, concurrent, and nonexclusive. The waiver of or failure to exercise any one or more rights or remedies shall be wholly without prejudice to the exercise and enforcement of any other right or remedy, whether herein expressly provided for or given by law or in equity.

23. SUBORDINATION AND ATTORNMENT TO LESSOR'S MORTGAGEE.

(a) Lessee agrees that this Lease shall be subordinate to any mortgages that may presently or hereafter be placed upon the Lessor's interest in the Improved Lease Premises and to any and all advances to be made thereunder, and all renewals, replacements, and extensions thereof, without the necessity of any further instrument or act on the part of Lessee, subject however to the execution of a customary subordination and non-disturbance agreement which Lessee agrees to execute in the form required by Lessor's lender. Lessee will, upon written demand by Lessor, execute such instruments as may be required at any time and from time to time to confirm such subordination. Although this subordination shall be self-operative, Lessor agrees to provide Lessee with a non-disturbance agreement executed by Lessor's current mortgagee, substantially in the form attached as Exhibit "C." Lessor further agrees to use its best efforts to provide a customary non-disturbance agreement signed by any future mortgagee of Lessor. Any such subordination agreement shall provide that so long as Lessee is not in default of the terms of this Lease, the party holding the instrument to which this Lease is subordinate shall recognize and preserve this Lease in the event of any foreclosure sale or possessory action, and in such case this Lease shall continue in full force and effect. Following written notice from Lessor's lender directing Lessee to pay any rent or additional sums directly to such lender (otherwise payable to Lessor pursuant to the Lease), Lessee's payment of such sums directly to such lender shall not constitute a default under the terms of this Lease Agreement and Lessor expressly waives any claims related thereto.

24. ESTOPPEL CERTIFICATE. Lessee agrees, within fifteen (15) days after the Lessor's written request, to execute, acknowledge and deliver to the Lessor party a written instrument in recordable form reasonably required by Lessor and/or Lessor's lender or mortagee certifying (i) whether this Lease is in full force and effect and whether there have been any modifications, supplements, side agreements or amendments and, if so, stating such modifications, supplements, side agreements and amendments; (ii) the date to which rent has been paid; (iii) the amount of any prepaid rent and any credit due Lessee if any; (iv) the Commencement Date and whether any option to renew the Term has been exercised and, if so, the day that Renewal Term expires; (v) whether either party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying

each such default; and (vi) such other matters as Lessor's mortgagee may reasonably require. Any such instrument delivered pursuant to this section may be relied upon by Lessor and Lessee, and any mortgagee or permitted assignee of any of them, and any prospective purchaser of the Improved Leased Premises.

25. MEMORANDUM OF LEASE AND RECORDING. Lessor and Lessee shall execute a Memorandum of Lease hereof, in form reasonably satisfactory to each of them, and Lessee may record such Memorandum of Lease in the office of the Recorder of Deeds of and for Lehigh County, Pennsylvania. Upon the Commencement Date hereof, the parties shall execute and record a modification of the Memorandum of Lease to reflect the actual term of the last Renewal Term pursuant hereto.

26. ASSIGNMENT AND SUBLETTING. Neither Lessee or its successors or permitted assigns shall assign this Lease or any interest therein, sublet the whole or any portion of the Improved Leased Premises or subject its interest in this Lease to any leasehold mortgage without the prior written consent of Lessor. No assignment or sublease shall release Lessee from its obligations to perform the terms, covenants, and conditions of this Lease. Lessor's consent shall not be unreasonably withheld, provided that: (i) the assigning or subletting entity and any guarantor remains liable for all of Lessee's obligations hereunder; (ii) there exists no Event of Default under this Lease either at the time Lessee notifies Lessor of such proposed assignment or sublease or at the time such assignment or sublease is to become effective; (iii) Lessee delivers to Lessor an executed copy of the proposed sublease or assignment; (iv) the proposed sublease or assignment shall meet all use requirements and restrictions set forth in this Lease; and (v) Lessor has no contractual requirement of to obtain the consent of Lessor's mortagee and/or lender, or alternatively, if such a contractual requirement exists, then the Lessor's mortgagee and/or lender has consented to the proposed sublease and/or assignment.

27. BINDING OBLIGATION. Each and every provision of this Lease shall bind and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

28. PROHIBITED ACTS. Lessee shall not use or operate any equipment or machinery or in any way use the Improved Leased Premises in a way which is harmful to the Improved Leased Premises. Lessee shall not cause or permit any hazardous substances to be utilized at, on or in the Improved Leased Premises except with the prior written consent of Lessor and in strict compliance with all applicable environmental laws, ordinances, rules and regulations. Lessee shall not do or allow to be done any acts, omissions, or activity which would cause the fire, hazard, or any other insurance now in force or hereinafter to be placed on the Improved Leased Premises or building, or any part thereof, to become void, suspended, or rated as a more hazardous risk than at the date of the execution of this Lease, furthermore, Lessee shall not be permitted to act or conduct business in any way that is against any applicable law.

alteration, amendment, change or addition to this Lease shall be binding upon either Lessor or Lessee unless the same is reduced to writing and executed by Lessor and Lessee.

35. QUIET ENJOYMENT. Lessor agrees that Lessee, on payment of the rent and all other charges provided for in this Lease and Lessee's fulfillment of all obligations under the covenants, agreements and conditions of this Lease shall and may (subject to the exceptions, reservations, terms and conditions of this Lease, superior mortgages, the Ground Lease and matters of record) peaceably and quietly have, hold and enjoy the Improved Leased Premises for the Term without interference by or from Lessor or any party claiming through or under Lessor.

36. TIME OF THE ESSENCE. Time is of the essence in the performance by Lessee of its obligations hereunder.

[Signature page follows.]

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Lease to be executed by persons duly authorized as of the day and year first above written.

WITNESS:	LESSOR:
	POLARIS CEDAR CREST, LLC,
	a Pennsylvania limited liability company


/s/ Jessica Gentile	By:	/s/ James Gentile
		Name:	James Gentile
		Title:	Member


ATTEST/WITNESS:	LESSEE:
	EMBASSY BANK FOR THE LEHIGH
	VALLEY, a Pennsylvania financial
	institution



/s/ Mark A. Casciano	By:	/s/ David M. Lobach Jr.
		Name:	David M. Lobach Jr.
		Title:	CEO

EXHIBIT A

Premises

LEGAL DESCRIPTION

ALL THAT CERTAIN LOT OF LAND BEING 1142 SOUTH CEDAR CREST BOULEVARD IN SALISBURY TOWNSHIP, LEHIGH COUNTY, PENNSYLVANIA, SHOWN AS LOT A ON THE PLAN OF CENTER SQUARE ASSOCIATES RECORDED TO LEHIGH COUNTY DOCUMENT NO. 7431330, BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING ATA POINT ON THE WESTERLY RIGHT-OF-WAY LINE OF CEDAR CREST BOULEVARD (A.K.A. S.R. 0029, A.K.A. LR. 557, 80 FOOT WIDE RIGHT-OF-WAY) AT THE INTERSECTION OF THE DIVIDING LINE BETWEEN PROPOSED LOT A AND PROPOSED LOT B, SAID POINT BEING DISTANT SOUTH 00 DEGREES 03 MINUTES 00 SECONDS WEST, A DISTANCE OF 237.91 FEET FROM THE DIVIDING LINE BETWEEN T.M.P. J8NE2-14-5, LANDS NOW OR FORMERLY CENTER SQUARE ASSOCIATES AND T.M.P. J8NE2-14-4, LANDS NOW OR FORMERLY KILARESKI AND FROM SAID POINT OF BEGINNING RUNNING; THENCE ALONG THE WESTERLY RIGHT-OF-WAY LINE OF CEDAR CREST BOULEVARD, SOUTH 00 DEGREES 03 MINUTES 00 SECONDS WEST, DISTANCE OF 128.34 FEET TO A POINT; THENCE THE FOLLOWING FOUR (4) COURSES AND DISTANCES CONNECTING THE WESTERLY RIGHT-OF-WAY LINE OF CEDAR CREST BOULEVARD WITH THE NORTHERLY RIGHT-OF-WAY LINE OF LINCOLN AVENUE (A.K.A. T-481, A.K.A. EAST TEXAS ROAD, 60 FOOT WIDE RIGHT-OF-WAY); (1) NORTH 89 DEGREES 57 MINUTES 00 SECONDS WEST, A DISTANCE OF 1.63 FEET TO A POINT OF CURVATURE; (2) ALONG THE OF A CIRCLE CURVING TO THE RIGHT HAVING A RADIUS OF 25.00 FEET, A CENTRAL ANGLE OF 73 DEGREES 59 MINUTES 54 SECONDS, AN ARC LENGTH OF 32.29 FEET, A CHORD BEARING SOUTH 39 DEGREES 35 MINUTES 28 SECONDS WEST, AND A CHORD DISTANCE OF 30.09 FEET TO A POINT OF COMPOUND CURVATURE; (3) ALONG THE ARC OF A CIRCLE CURVING TO THE RIGHT, HAVING A RADIUS OF 149.50 FEET, A CENTRAL ANGLE OF 03 DEGREES 37 MINUTES 40 SECONDS, AN ARC LENGTH OF 9.47 FEET, A CHORD BEARING SOUTH 78 DEGREES 24 MINUTES 15 SECONDS WEST, AND A CHORD DISTANCE OF 9.46 FEET TO A POINT; (4) SOUTH 05 DEGREES 51 MINUTES 08 SECONDS WEST, DISTANCE OF 2.26 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF LINCOLN AVENUE; THENCE ALONG THE NORTHERLY RIGHT-OF-WAY LINE OF LINCOLN AVENUE, NORTH 84 DEGREES 08 MINUTES 52 SECONDS WEST, A DISTANCE OF 153.53 FEET TO A POINT; THENCE ALONG THE DIVIDING LINE BETWEEN PROPOSED LOTA AND T.M.P. J8NE2-14-7, LANDS NOW OR FORMERLY SHOEMAKER, ALONG THE ARC OF A CIRCLE CURVING TO THE RIGHT, HAVING A RADIUS OF 225.00 FEET, A CENTRAL ANGLE OF 20 DEGREES 58 MINUTES 52 SECONDS, AND ARC LENGTH OF 82.39 FEET, A CHORD BEARING NORTH 23 DEGREES 49 MINUTES 16 SECONDS EAST, AND A CHORD DISTANCE OF

81.93 FEET TO A POINT ON THE CENTERLINE OF A 20 FOOT WIDE UNOPENED ALLEY; THENCE ALONG THE CENTERLINE OF A 20 FOOT WIDE UNOPENED ALLEY, NORTH 00 DEGREES 03 MINUTES 00 SECONDS EAST, A DISTANCE OF 65.20 FEET TO A POINT; THENCE ALONG THE DIVIDING LINE BETWEEN PROPOSED LOT A AND PROPOSED LOT B, SOUTH 89 DEGREES 57 MINUTES 00 SECONDS EAST, A DISTANCE OF 150.00 FEET TO THE PLACE OF BEGINNING.

CONTAINING 23,854 SQUARE FEET OF LAND (0.548 ACRE), MORE OR LESS.

PARCEL 548588071238-1

Village Comer EMBASSY Lease 022503

LEASE AGREEMENT

This LEASE AGREEMENT is made this 21 day of March, 2003, by and between

VILLAGE CORNER, LLC, a Pennsylvania limited liability company, as Landlord (hereinafter sometimes called "Landlord")

And

EMBASSY BANK FOR THE LEHIGH VALLEY, as Tenant (hereinafter sometimes called "Tenant").

RELEVANT FACTS

A. Landlord plans to construct an office building (hereinafter sometimes referred to as the Building) on its real property. Tenant desires to lease a portion of the Building from Landlord and Landlord desires to lease such premises to Tenant.

B. Tenant hereby acknowledges that it has read this Lease and is cognizant of the fact that this Lease contains restrictions upon the activities which may be conducted in the Building and other restrictions and provisions applicable to this Lease. Tenant agrees that all activities conducted by it, its employees, agents, partners and shareholders and anyone claiming by, through or under Tenant in any part of the Building shall be in accordance with the terms, covenants and conditions of this Lease including, without limitation, Paragraph 1.2 which pertains to use of Building, assignment and subleasing, specifically prohibited uses and other matters.

1. Lease of Premises.

1.1 Leased Premises. Landlord hereby demises and leases to Tenant and Tenant hereby leases from Landlord, on the terms and conditions herein set forth, that portion of the Building consisting of:

approximately 3,584 rentable sq. ft., designated as SUITES 8 and 9

on the building plans maintained by the Landlord. The leased space is sometimes referred to herein as the "Premises", and its location is shown on the attached Exhibit "A".

The Premises are leased with bare, exterior walls insulated but not covered with drywall, and with plumbing and electrical lines and HVAC service brought to the Premises, as depicted in Landlord's shell building plans. All other finishes and improvements, including without limitation, internal walls and partitions, diffusers, terminal units, internal duct work, thermostats, paint, wall coverings, carpets, tile, cabinets, plumbing fixtures, outlets, switches, lighting and other fixtures, subpanels as required shall be the responsibility of Tenant to construct and install.

The building and the leased premises, when completed, will be in compliance with all applicable building, safety and fire codes and with the Americans with Disabilities Act.

It is understood the drive thru window and canopy construction will be at the tenant's expense. It is understood the approximate cost for said construction will be between $15,000-$18,000. It is further understood appropriate documentation will be provided to substantiate the final cost.

All interior finish improvements to the Premises shall be obtained from a competent construction contractor of Tenant's choice, provided, however, that Landlord shall approve the selection of Tenant's contractor (and its subcontractors) prior to the commencement of any work at the Premises. Tenant shall be responsible for completing these interior finishes and improvements to the Premises in accordance with the written architectural and

construction agreements approved by Landlord, whose approval shall not be unreasonably withheld or delayed. Tenant shall pay any and all costs necessary to complete these interior finishes and improvements.

Prior to the commencement of any improvements to finish the interior of the Premises, Tenant and any contractor working in or on the Premises shall execute a Stipulation Against Liens to be recorded in the Office of the Clerk of Courts, Lehigh County, Pennsylvania, at Tenant's expense.

1.2 Use of Premises. The Premises shall be used by Tenant solely as a:

RETAIL BANK BRANCH

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Village Comer EMBASSY Lease 022503

and the business activities related thereto and for no other purposes, with the sole exception that with the prior written consent of Landlord, in its sole discretion, the Premises may be used for other approved purposes.

Tenant shall not use or permit any part of the Premises to be used for any unlawful purpose. Tenant shall be solely responsible for obtaining all required zoning and occupancy permits.

Landlord agrees that, during the term of this lease, Landlord shall not lease or permit to be occupied any other portion to the Building to a Tenant for a use by such Tenant similar to or in competition with the use of the Premises by Tenant set forth in this paragraph.

1.3 Quiet Enjoyment. Landlord warrants and represents that it has the right and authority to lease the Premises to Tenant. Tenant, upon the payment of all rents herein reserved and upon the performance of all terms of this lease, shall at all times during the lease term peaceably and quietly enjoy the Premises without any disturbance from Landlord.

1.4 Landlords Right of Entry. Landlord and its agents and employees shall have the right to enter the Premises at all reasonable times, and upon twenty-four (24) hours prior notice to Tenant, in order to examine it, to show it to prospective purchasers, mortgagees or tenants, to make repairs, alterations, improvements or additions as Landlord may deem necessary or desirable, to place upon the Premises "for sale" and "for rent" signs, and for any other purpose whatsoever. Landlord's right of entry hereunder does not extend to personal property, documents and files possessed or owned by the Tenant and located upon the Premises. Landlord shall exercise its right of entry only in the presence of Tenant, or its designee, except in the case of emergency.

2. Term of Lease.

2.1 Initial Term. The term of this Lease for the Premises shall be a period of five (5) years (hereinafter the "Initial Term") beginning on the date (herein sometimes called the "Commencement Date") of substantial completion of the Premises. Substantial completion shall be deemed to have occurred thirty (30) days after the Premises may be occupied for the uses herein provided as evidenced by a Certificate of Occupancy issued by the applicable municipal authority or, in the absence of such Certificate, as determined by Landlord's Architect. Landlord and Tenant shall sign a written statement in the form of Exhibit "B" hereto setting forth the Commencement Date and termination date of the Initial Term. In the event that either Landlord or Tenant causes any delay in the substantial completion of the Premises so that the Premises are substantially completed on a date later than when it would have been substantially completed, but for such delay, then the Commencement Date shall be deemed to have occurred on the date when the Premises would have been substantially completed but for such delay. In the event that substantial completion of the Premises is delayed because of late delivery of fixtures, equipment or other materials necessary to complete the Premises to comply with Tenant's requirements, then the Commencement Date shall be deemed to have occurred on the date when the Premises would have been

substantially completed but for such late delivery. Landlord and Tenant agree that Landlord shall use its best efforts to cause the leased premises to be delivered to Tenant for commencement of fit-out no later than November 1, 2003. In the event that Landlord delays delivery of the Premises to Tenant for fit-out beyond such date, Tenant shall receive a rental credit equal to one hundred (100%) percent of the monthly installment of Rent for each month or portion thereof of such delay.

2.2 Option Term. Tenant shall have the right or option to lease the Premises for four additional terms (hereinafter sometimes called the "Option Term") of five (5) years each for a total of twenty (20) years following the termination of the Initial Term. Such options shall be exercised by Tenant sending written notice to Landlord of its intention to exercise this option at least six (6) months prior to the expiration of the Initial Term and each subsequent term, time being of the essence. Tenant's right to extend the term for each Option Term shall automatically be extinguished as if it had never existed if Tenant fails to exercise its option in the required manner within the required period of time. If Tenant shall duly exercise its right or option to lease the Premises for such Option Terms, all terms and conditions herein shall remain the same, except that (i) Tenant shall have no further right to extend the term of this Lease; and (ii) the Base Rent (hereinafter defined) at the commencement of such Option Term shall be adjusted to Fair Market Value as provided in Paragraph 3.3

2.3 Additional Term. Upon the termination of the Initial Term if the options under Paragraph 2.2 are not exercised, or upon the expiration of the Option Terms, this lease shall continue upon the same terms and conditions for a further period of one (1) year and so on from year to year unless or until terminated by either Landlord or Tenant giving to other party written notice of termination at least ninety (90) days prior to the expiration of the then current term; provided, however, that upon the commencement of the Additional Term and upon each annual anniversary thereof, the Base Rent (as hereinafter defined) shall be adjusted to Fair Market Value as provided in Paragraph 3.3.

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Village Corner EMBASSY Lease 022503

3. Rent.

3.1 Base Rent. For the Initial Term of this Lease, Tenant shall pay to Landlord an annual base rental of

SEVENTY-SEVEN THOUSAND FIFTY-SIX and 00/100 ($77,056.00) Dollars per year

(equal to $21.50 per rentable sq. ft. per year) payable in advance, in equal monthly installments of

SIX THOUSAND FOUR HUNDRED TWENTY-ONE and 33/100 ($6,421.33) Dollars,

on or before the first day of each month (such annual amount is hereinafter sometimes called "Base Rent"). On the second anniversary of the Commencement Date and annually thereafter, as of the anniversary of the Commencement Date, the Base Rent shall be adjusted to Fair Market Value as provided in Paragraph 3.3.

3.2 Payment of Rent. Both Base Rent and Additional Rent (as defined in Paragraph 3.4) shall be payable without demand, setoff or deduction whatsoever except as may be specifically provided in this Lease. Rent shall be payable at such place as Landlord may from time to time designate. In the event that this Lease commences or expires in the middle of a month, rental for the portion of such month shall be prorated, and payable in advance.

3.3 Adjustment to Fair Market Value. Whenever this Lease calls for adjustment of the Base Rent to Fair Market Value, the same shall be accomplished by multiplying the Base Rent installment for the month immediately preceding the adjustment date by twelve (12) (the "Product") and then by adding thereto a sum equal to

the Product multiplied by the cumulative rate of change (expressed as a percentage) in the Consumer Price Index, Northeast Pennsylvania B/C from the last adjustment date to arrive at the annual Base Rent for the succeeding period.

3.4 Additional Rent. Tenant shall pay to Landlord, in addition to the Base Rent specified hereinabove, from the Commencement Date and continuing through the term of this Lease and any renewal terms hereof, as Additional Rent,

TEN THOUSAND SEVEN HUNDRED FIFTY-TWO and 00/100 ($10,752.00) Dollars

(equal to $3.00 per rentable sq. ft. per year) payable in advance, in equal monthly installments of

EIGHT HUNDRED NINETY-SIX and 00/100 ($896.00) Dollars

representing ELEVEN percent (11%) of Landlord's total projected operating expenses.

For the initial twelve (12) months of the term of this Lease, Landlord's operating expenses shall be fixed at $3.00 per rentable sq. ft.

The total of the base rent plus additional rent shall be:

EIGHTY-SEVEN THOUSAND EIGHT HUNDRED SEVEN and 96/100 ($87,807.96) Dollars annually or

SEVEN THOUSAND THREE HUNDRED SEVENTEEN and 33/100 ($7,317.33) Dollars monthly for the first year.

As used in this Lease, the term operating expenses shall mean the reasonable costs incurred by Landlord in the management, operation and maintenance of the Building and its common areas, including, but not limited to, the cost of maintenance, real property taxes and assessments, common area utilities, non-hazardous waste removal, supplies, ground usage, property management and fire, casualty and liability insurance. Operating expenses shall not include depreciation, interest on and amortization of debt, repairs, alterations, or additions that under generally accepted accounting principles are properly classified as capital expenditures, or costs incurred in the solicitation or execution of leases.

A copy of the calculated operating expenses will be provided upon written request.

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Village Comer EMBASSY Lease 022503

3.5 Changes in Operating Expenses. If Landlord's operating expenses during the first twelve (12) months of the Term or such portion thereof as shall end on June 30 of the following year, exceed the sum fixed hereinabove in Paragraph 3.4, Landlord shall so notify Tenant by September 30 of the second year of the Term, and commencing on October 1 of the second year of the Term, Tenant shall pay to Landlord in the following nine (9) month period Tenant's percentage share of the increased operating expenses in nine (9) equal monthly installments.

If Landlord's operating expenses during the first twelve (12) months of the Term or such portion thereof as shall end on June 30 of the second year, are less than the sum fixed hereinabove in Paragraph 3.4, Landlord shall so notify Tenant by September 30 of the second year of the Term, and commencing October 1 of each year Tenant receive a credit in the following nine (9) month period Tenant's percentage share of the decreased operating expenses in nine (9) equal monthly installments.

Thereafter, from year (commencing July 1) to year (ending June 30) during the Term, Landlord shall calculate its annual operating expenses and deliver to Tenant Landlord's statement showing its operating expenses, any increase or decrease in which shall be collected from or credited to Tenant by Landlord in the same manner as stated herein following the initial twelve (12) months of the Term or such portion as shall end on June 30.

3.6 Tenants Space Ratio. The percentage specified in Paragraph 3.4 of this Lease is that percentage determined by dividing the square footage of the Premises, as the numerator, by the total square footage of the Building less the common areas, as the denominator, as set forth in Exhibit "A" attached hereto. In the event that the completed Building, Premises or common areas contain different square footage than that set forth in the attached Exhibit, then Tenant's Space Ratio, and the corresponding percentage, shall be recalculated based upon the actual as built conditions.

3.7 Utilities. Landlord and Tenant agree that separate utility metering for any and all utilities will be installed for the Premises. Tenant shall pay directly to the appropriate utility company or authority all utility charges and fees for utilities used of consumed in, on or at the Premises which are separately metered. Tenant shall indemnify and save and hold Landlord harmless from and against all fees, charges, expenses, penalties, interest and other charges with respect to utility service which is separately metered and provided directly to the Premises. If requested, Tenant shall furnish to Landlord, within ten (10) days after the date any amount is payable by Tenant directly to a utility supplier proof of payment satisfactory to Landlord.

3.8 Interest. Tenant shall pay as additional rent without demand and without setoff all sums of money or charges required to be paid by Tenant under this Lease, whether or not the same be designated rent. If such amounts or charges are not paid at the time provided in this Lease, they shall nevertheless if not paid when due, be collectible as additional rent with the next installment of the rent thereafter falling due hereunder and shall bear interest from the due date thereof to the date of payment at the rate of fifteen (15%) percent per annum. Nothing in this Paragraph 3.8 shall prevent or hinder or delay Landlord from pursuing any remedy which may be available at law or in equity or pursuant to the terms of this Lease by reason of such failure by Tenant to pay sums when due.

3.9 Security Deposit. In lieu of a Security Deposit, Tenant shall pay the first month's rent upon the signing of this lease as a good faith deposit for the full and faithful performance by Tenant of the terms and conditions of this Lease. Tenant waives any requirement that such payment be held in any escrow account or in any other way segregated from Landlord's other funds. Tenant further waives any requirement that such payment be held in any interest bearing account.

Landlord may apply all or any part of the deposit required to cure any default of Tenant under the terms and conditions of this Lease. In the event of such application, Tenant must deposit with the Landlord the amount applied to cure its default immediately on notice from Landlord of the nature and amount of the application.

If Landlord transfers its interest in the Lease, it may do either of the following: (1) return the deposit to Tenant, without interest, any deductions made and not replaced by Tenant; or (2) transfer the deposit, without interest, minus any deductions made and not replaced by Tenant, to Landlord's successor in interest. In the event Landlord transfers all or any portion of the deposit under this Paragraph, upon such transfer Landlord shall be relieved of all obligations with regard to the deposit, and all of rights and obligations regarding such good faith deposit shall accrue to the transferee. Landlord shall give Tenant notice of any such transfer, including the name and address of the transferee and the amount transferred.

4. Casualty Loss.

4.1 Total Destruction If the Premises or the Building are totally destroyed by fire, flood or other casualty, or if the Building or Leased Premises should be so damaged by such cause that the rebuilding or repairs cannot, in Landlord's reasonable judgment, be completed within ninety (90) working days and at a cost not to exceed One Hundred Fifty and no/00 ($150.00) Dollars per rentable sq. ft. excluding Tenant's finishes, Landlord shall give written notice of such determination to Tenant and this Lease shall terminate, and rent be abated for the unexpired portion of the Lease, effective as of the date of determination.

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4.2 Partial Destruction If the Premises are damaged by fire, flood or other casualty, but not to such an extent that rebuilding or repairs cannot reasonably be completed within ninety (90) working days at a cost not to exceed One Hundred Fifty and no/00 ($150.00) Dollars per rentable sq. ft. excluding Tenant's finishes, this Lease shall not be terminated, but Base and Additional Rent shall be abated pro rata for the number of days during which Tenant is reasonably unable to utilize the Premises for its intended purposes.

5. Insurance.

Landlord shall maintain and keep in effect throughout the term of this Lease a liability insurance policy with a minimum combined single limit of not less than One Million and no/100 ($1,000,000.00) Dollars for personal injury and property damage, and shall purchase casualty insurance for not less than the full replacement cost of the Premises other than the Tenant's interior finish improvements. Such casualty policy shall satisfy all coinsurance requirements of the policy and may contain a commercially reasonable deductible and shall be included in Landlord's policy for the Building. Tenant, at Tenant's sole cost and expense, shall maintain and keep in effect throughout the term of this Lease (1) a premises general liability insurance policy with a minimum combined single limit of not less than One Million and no/100 ($1,000,000.00) Dollars, for personal injury and property damage, and (2) broad form casualty insurance for the full replacement cost of Tenant's interior finish improvements. In the event of an insured casualty loss of the Building, at Landlord's option, this Lease shall be terminated in its entirety. In the event of a casualty loss of less than all of the Building, the insurance proceeds shall be applied at Landlord's option to repair or replace the damage and, if applicable, in accordance with the provisions of Landlord's financing documents to which this Lease is subordinate. The aforementioned policies of insurance shall name as the insured Landlord and Tenant as their interests may appear, and shall contain standard mortgagee endorsements for any holders of mortgage(s) on the Premises. In the event of a loss due to any casualty or peril for which Landlord or Tenant has agreed to provide insurance, each party shall look solely to its insurance (including policies maintained by the other party where the damaged party is named as the additional insured) for recovery. To the extent permissible by their insurers, Landlord and Tenant hereby grant to each other, on behalf of an insurer providing insurance to either of them with respect to the Premises, the improvements thereon and the equipment, a waiver of any right of subrogation which any insurer of one party may acquire against the other by virtue of the payment of any loss under such insurance. Landlord and Tenant agree to furnish each other suitable evidence by certificate or copies of such insurance policies indicating that such insurance is in force and includes, if available, the above-described waiver of subrogation and other clauses.

6. Maintenance of Premises.

6.1 Tenant's Obligation. Throughout the term of this Lease, Tenant shall, at its sole cost and expense, make all necessary repairs, maintenance, and replacements to keep the Premises in good order and repair, including all floor and wall coverings, all doors, the ceiling system, all light fixtures and bulbs, reasonable wear and tear alone excepted. Tenant shall not be obligated to maintain, repair or replace portions of the building systems which also service other tenants or which also service common areas. Tenant shall, at its sole cost and expense, make all necessary repairs, replacements and maintenance the need for which is caused by or results from the acts or negligence of Tenant or Tenant's employees, agents, contractors, subtenants or invitees. The quality of all work performed by or on behalf of Tenant, and the quality of all materials furnished, by or on behalf of Tenant, shall be of a quality at least equal to the quality of the original construction. Tenant shall periodically maintain the Premises, as needed, so that the appearance of the Premises is at all times at least consistent with the prevailing quality of the appearance of similar first class buildings in the Lehigh Valley.

6.2 Landlord's Obligation. Landlord shall be responsible for all repairs and maintenance which are not the express responsibility of Tenant as provided above, including, but not limited to the roof, exterior walls,

foundation, building systems not serving solely the Premises, roof-mounted air conditioning units not serving solely the Premises, elevators, exterior windows and common areas.

6.3 Surrender. Upon the termination of this Lease, whenever occurring or howsoever caused, Tenant shall surrender the Premises and all improvements and replacements constructed or placed thereon, broom clean, in good condition and repair, and in the same condition, maintenance and repair as Tenant has agreed in Paragraph 6.1 above, reasonable wear and tear excepted. Provided that Tenant is not in default hereunder at the termination of this Lease, Tenant may, at Tenant's sole cost and expense, remove from the Premises Tenant's equipment and Tenant's trade fixtures not attached to the Premises in any manner. Tenant, at Tenant's sole cost and expense shall repair any damage caused by such removal. Tenant's removal of the foregoing items and repair of any damage caused thereby shall be effectuated during the week immediately prior to the termination of this Lease. Tenant shall comply with all laws, rules, ordinances and directives applicable to all work performed by Tenant or on Tenant's behalf.

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Village Comer EMBASSY Lease 022503

6.4 Improvements. Tenant shall have the right to make and install such improvements, additions, fixtures, equipment, and installations in the Premises as Tenant shall desire, subject to Landlord's prior written consent, which consent shall not be unreasonably withheld. Tenant shall comply with all laws, rules, ordinances and directives applicable to all work performed by Tenant or on Tenant's behalf. Tenant shall obtain all required permits and approvals with respect to all such work, Tenant shall not commence any such work unless and until Tenant has complied with all of Landlord's requirements with respect thereto, including, without limitation, requirements for insurance, mechanics lien waivers, approval of contractors and subcontractors and approval of plans and specifications. All improvements, additions, fixtures, and installations, other than movable equipment, including without limitation, items which are an integral part of the Building or a building system (such as fixtures, plumbing, and telephone, electrical and other utility lines) shall be the property of the Landlord on termination of the Lease and may not be removed by Tenant. However, it is understood that the vault placed in this location may be removed at tenant's expense or, in the alternative, may remain on the premises at the termination of the lease providing that it will be the responsibility and the expense of Tenant to restore the vacated area to Landlord's satisfaction. Tenant may also remove certain other improvements attached to the Premises provided they can be removed without causing material damage and under the same terms of the preceding sentence.

7. Signs.

Tenant shall not place or allow to be placed any stand, booth, sign or show case upon the doorsteps, vestibules or outside walls or pavements of the Premises, the Building or any common areas of the Building, or paint, place, erect or cause to be painted, placed or erected any sign, projection or devise on or in any part of the Premises, the Building or any common areas of the Building, except as provided for herein.

Tenant shall be permitted a sign on the exterior pole signboard. The size and design of such sign shall be approved by Landlord, in writing, prior to installation. Tenant shall be solely responsible, at Tenant's sole cost and expense, for the cost of Tenant's sign, including, but not limited to, design, construction, and installation.

Tenant shall be responsible, at Tenant's sole cost and expense, for the identification lettering of Tenant's Premises, which lettering shall be approved by Landlord, in writing, prior to installation. Tenant shall, at Tenant's sole cost and expense, insert a sign or other identifier on the exterior of the Building designating Tenant's use of the Premises, subject to approval, in writing, prior to installation, by Landlord.

Tenant shall remove any sign, projection or device painted, placed or erected, if permission has been granted and restore the walls, etc., to their former conditions, at or prior to the expiration of this lease.

In case of the breach of this covenant (in addition to all other remedies given to Landlord in case of the breach of any conditions or covenants of this lease) Landlord shall have the privilege of removing said stand, booth sign, showcase, projection or device, and restoring said walls, etc., to their former condition, and Tenant, at Landlord's option, shall be liable to Landlord for any and all expenses so incurred by Landlord.

8. Rules and Regulations; Parking.

8.1 Rules and Regulations. Landlord shall have the right from time to time to promulgate, adopt, amend, supplement, and modify rules and regulations applicable to (i) the Building; (ii) each demised space therein; (iii) the parking areas which are made available to the Building; (iv) the common area within the Building; and (v) all other areas which in any way affect the Building or its use or operation.. Tenant agrees to abide by, and comply with, all of the terms and provisions of the rules and regulations in effect from time to time as if such rules and regulations were specifically set forth in this Lease. Landlord agrees that all rules and regulations shall, to the extent practicable, apply uniformly to all building tenants.

8.2 Parking. Landlord confirms that the successful operation of the Building is dependent upon sufficient accessible parking being available to customers, clients, patients, tenants in the Building, and their employees. Therefore, Landlord agrees that all tenants and their employees may park their vehicles in those portions of the parking lot constructed by Landlord. However, all tenants and their employees shall park their vehicles only in those portions of the parking lot constructed by Landlord designated by Landlord for tenant and employee parking. To enable this provision to be enforced, Tenant shall furnish Landlord, upon demand from time to time, with the state automobile license number assigned to the vehicles utilized by Tenant and its employees who work in the Premises. Tenant shall be responsible for compliance with this provision and shall require its employees to comply with it. Three (3) parking spaces in front of the building shall be allocated and designated for Embassy Bank's use only. There is ample parking on the west side of the building for bank use. Landlord may modify, amend, suspend, or otherwise change this Paragraph 8.2 by exercising from time to time its rights pursuant to Paragraph 8.1.

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Village Comer EMBASSY Lease 022503

9. Trash Removal and Landlord's Services.

Except as specifically set forth in this Lease, Landlord shall not be obligated to supply or provide any services to Tenant or to the Premises. Landlord's system for the removal of trash from the Premises shall be for the removal of normal office trash such as papers and cups and shall not be for the removal of any items (hereinafter called Special Items) which, by law, require special handling or special disposal such as, by example only, radioactive material, explosive material, toxins or human parts. Tenant shall remove and dispose of all Special Items, as its sole cost and expense in accordance with all applicable laws, ordinances, rules and regulations.

10. Compliance with Laws and Governmental Regulations.

10.1 Governmental Rules. Tenant shall throughout the term of this Lease, at its sole expense, promptly comply with all laws, ordinances, rules, directives and regulations of all federal, state and municipal governments and appropriate departments, commissions, boards and offices thereof, and the orders and regulations of the National Board of Fire Underwriters, or any other body now or hereafter exercising similar functions, which may be applicable to the Premises, Tenant, or the use thereto by Tenant.

10.2 Permits. Tenant at its sole cost and expense, shall obtain all permits and authorizations required for Tenant's activities in the Building. In the event any occupant of the Premises desires to provide services therein

to customers, clients, patients or others which cannot be legally provided therein unless Building itself has certain licenses, certificates, and facilities, then such services shall not be provided unless the Building has all such required certificates, licenses, and facilities. Landlord is not required to obtain any such certificates, licenses or facilities other than the customary Certificates of Occupancy for the Building.

10.3 Safety. Tenant shall conduct all of its activities in the Premises in a safe manner so as not to create any risks to the Building or any occupant or invitee of the Building. At Tenant's expense, Tenant shall cause the Premises to contain all necessary safety features for the activities conducted therein such as, by example only, lead shielded walls if Tenant uses X-ray equipment.

10.4 Insurance Reimbursement. Without in any way relieving Tenant of any obligations imposed by Paragraph 10.1 above, Tenant shall promptly reimburse Landlord upon demand, if anything, done or not done in the Premises causes an increase in the cost to Landlord for any insurance carried by Landlord.

11. Assignments and Subletting.

Tenant shall have the right to sublet the Premises on such terms and to such parties (subject to the use restrictions set forth in Paragraph 1 above and all other terms and conditions hereof) with the prior written consent of Landlord which shall not be unreasonably withheld. No sublease shall in any manner relieve or release Tenant from its obligations as Tenant under this lease. Tenant shall not under any circumstances have the right to mortgage, pledge or hypothecate this Lease. All subleases shall be in writing on a form approved by Landlord in writing in advance. No sublease shall be effective unless and until all requirements of Landlord have been satisfied.

12. Mechanics Liens.

Tenant shall not cause or permit to be created, remain, and shall discharge any lien, encumbrance or charge which might be or become a lien or encumbrance upon the Building, the Premises or any part thereof or the income therefrom, including, without limitation, any mechanics, laborers or materialmans lien or charge.

13. Subordination; Non-Disturbance.

This Lease shall be subject and subordinate at all times to the lien of any mortgages, security interests and other encumbrances now or hereafter placed upon the Building or any part thereof and to all renewals, modifications, amendments, consolidations, replacements and extensions thereof. Tenant shall promptly execute and deliver in recordable form any instruments which may be reasonably required by Landlord in confirmation of such subordination upon Landlord's request. Tenant shall attorn to and recognize the holder of any mortgage(s) or any purchaser at a foreclosure sale under any mortgage(s) or any transferee who acquires the Building by deed in lieu of foreclosure, and the successors and assigns of such purchasers, as Landlord for the unexpired balance (and any extensions, if exercised) of the term of this Lease upon the same terms and conditions set forth herein. In the event Landlord subjects the Building to any mortgage or other financing, Landlord shall use its best efforts to assure that this Lease shall be superior to the lien of any or all such mortgages or financing or any part thereof and to all renewals, modifications, amendments, consolidations, replacements and extensions thereof.

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Village Corner EMBASSY Lease 022503

Any and all Subordinatioiifs) signed by Embassy Bank in favor of any mortgagee of the Landlord will provide that the mortgagee(s) be subject to Tenant's non-disturbance rights, as set forth in paragraph 1.3 of this lease.

14. Public Taking.

If the Building becomes the subject of condemnation, an eminent domain proceeding or a like court proceeding which materially affects the conduct of Tenant's business in the Premises, Landlord or Tenant may terminate this Lease upon written notice to the other party delivered within ninety (90) days of the date title vests in the condemner. All compensation or damages awarded or paid upon the total, partial or temporary taking of the Building shall be the property of Landlord; provided, however, that nothing herein contained shall be construed to preclude Tenant from prosecuting any claim directly against the condemning authority for business dislocation damages, moving expenses, removal expenses, and depreciation to, damage to or cost of the removal of, transportation of and reinstallation of the removable stock, goods, fixtures, furniture, machinery, equipment and other personal property of the Tenant or any other damages which are payable to tenants under the provision of the Eminent Domain Code of Pennsylvania and under any other applicable law, provided, in each instance, that any sums awarded to Tenant do not in any way diminish or otherwise adversely affect the amount of any award(s) which may be payable to Landlord. Tenant shall not be precluded from prosecuting any other claim directly against the condemning authority in such condemnation proceedings or otherwise for any damages allowed to Tenant by law if such claim shall not diminish or otherwise adversely affect Landlord's award. If the condemnation shall result in the taking of only a portion of the Building and shall not materially adversely affect the conduct of Tenant's business in the Premises, this Lease and Tenant's obligations hereunder, including, without limitation, the payment in full of all Base Rent and Additional Rent, shall continue in full force and effect.

15. Indemnification.

Tenant shall indemnify and save harmless Landlord from and against any and all claims arising from the occupancy, conduct, operation or management of the Premises or from any work or thing whatsoever done or which was not done in or on the Premises, or arising from any breach or default on the part of the Tenant in the performance of any covenant or agreement on the part of Tenant to be performed pursuant to the terms of this Lease, or under the law, or arising from any act, neglect or negligence of Tenant, or any of its agents, contractors, servants, employees, or licensees, or arising from any accident, injury or damage whatsoever occurring during the term of this Lease, in or about the Premises, and from and against all costs, expenses and liabilities incurred in connection with any such claim or action or proceeding brought thereon (including without limitation the fees of attorneys, investigators and experts); and in case any action or proceeding be brought against Landlord by reason of any such claim, Tenant upon notice from Landlord covenants at Tenant's cost and expense to resist or defend such action or proceeding or to cause it to be resisted or defended by an insurer.

The indemnification of the Landlord will not apply to the Landlord's own negligence or willful acts.

16. Default by Tenant; Termination and Entry; Distraint.

16.1 Default. In the event Tenant shall at any time be in default in the payment of rent herein

reserved, or of any other sum required to be paid by Tenant under this Lease, or in the performance of or compliance with any of the terms, covenants, conditions or provisions of this Lease, or compliance with any rule or regulation promulgated by Landlord, or if Tenant shall file a petition for relief under the federal Bankruptcy Code or shall have filed against it a petition in bankruptcy or insolvency which is not discharged within forty-five (45) days of filing, or Tenant shall make an assignment for the benefit of creditors or shall file any proceedings for reorganization or an arrangement under any federal or state law, or if any proceedings for the appointment of a receiver shall be instituted by any creditor of Tenant under any state or federal law which is not discharged within forty-five (45) days of filing, or if Tenant is levied upon and is about to be sold out upon the Premises under execution or other legal process, or if the Premises shall be deserted abandoned or vacated, or if Tenant fails to continuously conduct its business activities in the Premises, the occurrence of any such event shall constitute an event of default and a breach under this Lease. 16.2 Termination and Entry. Upon the occurrence of any event of default or breach of this Lease, Tenant shall receive written notice thereof and shall have a period of five (5) days, in the case of a monetary default, or thirty (30) days, in the case of a nonmonetary default, within which to cure said default or, only in the case of a nonmonetary default, have thirty (30) days to notify Landlord that it is proceeding in good faith to cure said default or breach. In the event that Tenant has failed within said period to cure the default or breach, or provide the notice aforesaid, then in addition to any other rights or remedies Landlord may have under this Lease or at law or in equity, Landlord shall have the right to terminate this Lease and the term hereby created without any right on the part of Tenant to waive the forfeiture by payment of any sum due or by other performance of any condition, term or covenant broken. In such event Landlord shall have the right to re-enter or repossess the Premises, either by force,

summary proceedings, surrender or otherwise, and dispossess and remove therefrom the Tenant, and any other occupants thereof, and their effects, without being liable for any prosecution therefore. Landlord may store such effects at Tenant's expense and/or dispose of all or any of them at any time(s) without being liable to Tenant in any manner. In such event Landlord may, at its option, relet the Premises or any part thereof for such term as Landlord desires and in such event Tenant shall be liable for and shall pay to Landlord, as and for liquidated and agreed current damages for Tenant's default, all rent then due and the rent for the unexpired balance of the lease term less the net proceeds of any reletting after deduction of all Landlord's expenses in connection with such reletting, including, without limitation all repossession costs, brokerage commissions, legal expenses, attorneys fees, and costs of alterations. Such reletting and liquidation damages shall not apply if the lessee pursuant to such reletting defaults. Notwithstanding the foregoing, upon default hereunder the balance of the rent unpaid for the remainder of the term of this Lease, together with all other charges, payments, costs and expenses herein agreed to be paid by Tenant, and all costs and reasonable attorneys fees of Landlord (whether internal or external) incurred and likely to be incurred in connection with any default or the collection of sums due from Tenant hereunder, shall become immediately due and payable without any notice or demand whatsoever by Landlord and may be collected by distraint or any other means. It is agreed that the Landlord will exercise reasonable efforts to mitigate its damages.

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16.3 U.C.C. Rights. Upon default by Tenant, Landlord shall have and may exercise any of or all of the rights and remedies provided to a secured party under the Uniform Commercial Code then in force in Pennsylvania provided, however, that upon request of Tenant, Landlord shall execute a waiver of its lien as to leased or financed equipment or fixtures in favor of any bank, leasing company or other lender providing financing for Tenant.

16.4 Assignee's Rights. The right by Landlord to exercise any and all rights upon a default may also be exercised by any assignee of this Lease or of Landlord's right, title and interest in this Lease in the name of the Landlord or in the name of such assignee. Landlord and Tenant acknowledge Landlord's right to assign its rights in this Lease and Tenant hereby consents to such assignment and upon written notice from Landlord and an assignee agrees to make any and all payments hereunder directly to said assignee.

16.5 Non-exclusivity. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy herein or by law provided but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity by statute.

16.6 Waiver. No waiver by Landlord of any breach by Tenant of any of Tenant's obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord of any rights and remedies with respect to such breach or default or with respect to any other breach or default.

16.7 Cure by Landlord. If Tenant shall be in default hereunder, Landlord may, but shall not be

obligated to, in addition to any other rights which Landlord may have, cure such default on behalf of Tenant. In such event Tenant shall reimburse Landlord upon demand for any sums paid or costs incurred by Landlord in curing such default, including an administration fee of fifteen percent (15%) per annum of all sums advanced by Landlord as aforesaid, which sums, costs and fee shall be deemed Additional Rent payable hereunder.

17. Notices.

Notices required or provided for in the Lease Agreement shall be given in writing by personal hand delivery or United States certified mail, postage prepaid, addressed as follows:


To Landlord at:	Vincent A. Palumbo, Manager
	Village Corner, LLC
	1612 W. Allen Street 2nd floor
	Allentown, PA, 18102


With a Simultaneous	Charles E. Shoemaker, Jr., Esquire
Copy to:	727-729 North 19th Street
	Allentown, PA, 18104


To Tenant at:	Embassy Bank
	P.O. Box 20405
	Lehigh Valley, PA, 18002-0405
	Attn. David M. Lobach Jr.

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With a Simultaneous
Copy to:	Attorney Fred Jacobs
	214 Bushkill Street
	Easton, PA, 18042-1886

or to such other address or persons as the parties may designate by notice in accordance with this paragraph. Payments of rent hereunder shall be made to Landlord at the address from time to time designated as aforesaid for the giving of notice.

18. Effect of Agreement.

18.1 Construction. This Lease shall constitute the entire agreement of the parties and supersedes all prior or contemporaneous agreements and understandings, and there are no other terms and conditions other than those set forth herein. No covenant or condition not expressed in this Lease shall be effective to interpret, change, or restrict this Lease. No change, termination or attempted waiver of any of the provisions of this Lease shall be binding on the parties unless in writing. The rights, obligations, duties and agreements of the parties hereto shall inure to and be binding on their respective heirs, administrators, executors, personal representatives, successors and assigns, except as otherwise herein provided.

Nothing herein expressed or implied is intended or shall be construed to confer upon or to give to any person or entity, other than the parties hereto, their respective heirs, administrators, executors, personal representatives, successors and assigns and their respective partners or shareholders, or any of them, any rights or remedies under or by reason of this Lease.

18.2 Invalid Provisions. If any term, condition, clause or provision of this Lease is determined to be invalid or unenforceable, then all other terms, conditions, clauses or provisions herein set forth shall nevertheless be valid and continue in full force and effect.

18.3 Applicable Law, Jurisdiction and Venue. This Lease and the interpretation and construction thereof shall be governed by the laws of the Commonwealth of Pennsylvania. This Lease may not be recorded

without the consent of Landlord and Tenant, and any such recordation without written consent shall be of no effect and, if recorded by Tenant, shall, at the option of Landlord, be an event of default hereunder by Tenant.

The parties hereto agree that the sole and exclusive jurisdiction and venue for and with regard to the resolution of any and all disputes between the parties hereto shall be vested in the Court of Common Pleas of Lehigh County, Pennsylvania.

18.4 Headings. The headings and captions in this Lease shall be given no effect and are only for convenience.

18.5 Pledge of Lease. Tenant shall not pledge its interest in this Lease or grant any security interest in its interest in this Lease or otherwise hypothecate this Lease. The immediately preceding sentence shall apply in all events including, without limitation, in the event of any financing obtained by Tenant involving the Premises or in the event of any loan whatsoever.

IN WITNESS THEREOF, the parties hereto have executed this Lease Agreement under seal the day and year first above written, intending to be legally bound thereby.

ATTEST:	LANDLORD:

/s/ Mary Shelley	/s/ Vincent A. Palumbo
	Village Corner, LLC
	By:	Vincent A. Palumbo, Manager


WITNESS:	TENANT:

/s/ Elmer Gates	/s/ David M. Lobach Jr.
	Embassy Bank
	By:	David M. Lobach Jr.

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ADDENDUM

LEASE AGREEMENT

The following shall be added and/or amended and made part of the Lease Agreement entered into between the undersigned parties on March 21, 2003, 2003.

Section 1.1 Leased Premises The following is to be added as the second paragraph - "The building and the leased premises shall be constructed in a good and workmanlike manner and in conformity with the building plans and specifications which are attached as Exhibit "C." The Landlord will correct or cause to be corrected any defects in materials or workmanship provided a list of all such defects is given to Landlord within ninety (90) days of Tenant's occupancy."

Section 1.2 Use of Premises The following sentence shall be added at the end of Section 1.2 - "No suites or space In the Village Corner complex will be leased to or used by any Tenant for the conduct of a check cashing or pay day loan business, pawn shop, massage parlor, retailer of 'sexual aids' or similar type businesses."

Section 1.4 Landlord's Right of Entry The first sentence is amended to read "Landlord and its agents and employees shall have the right to enter the Premises at all reasonable times, and upon twenty-four (24) hours prior notice to Tenant, In order to examine it, to show it to prospective purchasers, mortgagees or tenants, to make repairs, alterations, Improvements or additions as Landlord may deem necessary or desirable and for any other purpose whatsoever. However no 'for sale' or 'for rent' signs shall be placed inside or on the Premises."

Section 2.1 Initial Term The first and second sentences are replaced by the following: The term of this Lease for the Premises shall be a period of five (5) years (hereinafter the "Initial Term") beginning on the date (herein sometimes called the "Commencement Date") of substantial completion of the Premises or upon physical occupancy of the Tenant whichever occurs first Substantial completion shall be deemed to have occurred thirty (30) days after the Premises may be occupied for the uses herein provided as evidenced by a Certificate of Occupancy issued by the applicable municipal authority.

Section 3.1 Base Rent The last sentence of the first paragraph shall be amended to read "Beginning with the twenty-fifth (25th) month following the Commencement Date and annually thereafter, as of the anniversary of the Commencement Date, the Base Rent shall be adjusted to Fair Market Value as provided in Paragraph 3.3."

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Section 3.5 Changes in Operating Expenses. Insert the following statement between the first and second paragraph of this section "Tenant will be given the opportunity to review, obtain reasonable verification of and consult with the Landlord for thirty (30) days after each September 30 concerning adjustments in Tenant's percentage share of the increased operating expenses before the adjustments have to be paid over the next nine months."

Section 3.9 Security Deposit. This section is amended to read: "In lieu of a Security Deposit, Tenant shall pay the first month's rent upon the signing of this lease as a good faith deposit for the full and faithful performance by Tenant of the terms and conditions of this Lease." The remainder of this section is stricken.

Section 4.1 Casualty Loss. The wording 'effective as of the date of determination' is changed to read 'effective as of the date of destruction'

Section 6.4 Improvements. This Section shall be replaced in its entirety by the following: "Tenant shall have the right, at Tenant's expense, to make and install such improvements, additions, fixtures, equipment, and installations in the Premises as Tenant shall desire, subject to Landlord's prior written consent, which consent shall not be unreasonably withheld. Tenant shall comply with all laws, rules, ordinances and directives applicable to all work performed by Tenant or on Tenant's behalf. Tenant shall obtain all required permits and approvals with respect to all such work, Tenant shall not commence any such work unless and until Tenant has complied with all of Landlord's requirements with respect thereto, including, without limitation, requirements for insurance, mechanics lien waivers, approval of contractors and subcontractors and approval of plans and specifications. All improvements, additions, fixtures, and installations (including the proposed canopy), other than movable equipment, including without limitation, items which are an integral part of the Building or a building system (such as fixtures, plumbing, and telephone, electrical and other utility lines) shall be the property of the Landlord on termination of the Lease and may not be removed by Tenant." However, it is understood that the vault, ATM machines, night depositories, drive-thru equipment and other bank equipment placed in this location may be removed at Tenant's expense or, in the alternative, may remain on the premises at the termination of the lease providing that it will be the responsibility and the expense of Tenant to restore the vacated area to Landlord's satisfaction.

Section 10.2 Approvals Insert as 10.2.1 'Tenant's obligations under this Lease are conditioned upon the approval of the Lease and the location of the premises by the Pennsylvania Department of Banking and the FDIC for which Tenant shall diligently apply following the signing hereof. In the event such approvals cannot be obtained, this Lease shall be void and all deposits and rentals previously paid by Tenant shall be refunded without offset."

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Section 16.1 Insolvency Insert as 16.1.1 "Not withstanding any other provisions contained in this Lease, in the event (a) Tenant or its successors or assignees shall become insolvent or bankrupt, or their interests under the Lease shall be levied upon or sold under execution or other legal process, or (b) the depository institution then operating on the Premises is closed, or is taken over by any depository institution supervisory authority (hereinafter referred to as the "Authority"), Landlord may in either such event, terminate this Lease only with the concurrence of any Receiver or Liquidator appointed by such Authority; provided, that in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Landlord for rent, damages or indemnity for injury resulting from the termination, rejection, or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid rent to the date of termination."

All other terms and conditions of the Lease Agreement shall remain in full force and effect.

IN WITNESS THEREOF, the parties hereto have executed this Addendum to Lease Agreement under seal the day and year set forth below, intending to be legally bound thereby.

ATTEST:	LANDLORD:
	Village Corner, LLC


/s/ Mary Shelley	By:	/S/ Vincent A. Palumbo
	Vincent A. Palumbo, Managing Partner
	Village Corner, LLC

	Date:	3-18	, 2003

WITTNESS/ATTEST:	TENANT;
	EMBASSY BANK

	BY:	/s/ David M. Lobach Jr.

	TITLE:	CEO

	Date:	3/21	, 2003

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LEASE AGREEMENT

THIS LEASE AGREEMENT (the "Lease"), made, entered into, and effective on March 17, 2006, by and between FRANK BANKO ("Landlord") and EMBASSY BANK FOR THE LEHIGH VALLEY("Tenant").

WITNESSETH:

For and in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1	BASIC DATA SUMMARY

The following is a summary of some of the basic data set forth elsewhere in this Lease. This summary is intended to serve as a compilation of data for reference purposes only and in the event of any conflict between the terms of this summary and the remaining provisions of this Lease, the remaining provisions of this Lease shall control; notwithstanding the foregoing, capitalized terms used herein and not otherwise defined shall have the meanings set forth in this Section.

Leased Premises:

The first floor of the building at the corner of 9th Avenue and West Broad Street, commonly known as 925 West Broad Street, Bethlehem, Pennsylvania, such first floor consisting as of the date of this Lease, of approximately 2,588 square feet of space. The leased premises shall also include, when constructed, a "drive through" consisting of an additional 330 square feet (the "Premises").

Landlord:

Frank Banko

Landlord's Address:

950 N. West End Boulevard Quakertown, PA 18951

Tenant:

Embassy Bank For the Lehigh Valley

Tenant's Address:

100 Gateway Drive, Suite 100 Bethlehem, PA 18017

Tenant's Trade Name:

Embassy Bank

Use of the Premises:

Banking offices including drive through

Term of Lease:

Five (5) years, subject to renewal options as set forth below

Commencement Date:

The date the Premises are delivered to Tenant for occupancy estimated to be March 31, 2006

Minimum Rental:

$45,000.00 per annum for the initial five-year term and the first five-year renewal term, payable in monthly installments of $3,750.00 per month ($15.42 per square foot per year), with increases thereafter during the remaining renewal terms as set forth in Article IV below.

Leasehold Improvements:

None to be paid or reimbursed by Landlord. All leasehold improvements, including the cost of construction of the drive through, shall be the responsibility of and at the cost of Tenant

Security Deposit:

None.

Tenant Expenses:

Tenant shall pay one-half of all real estate taxes, water, sewer, garbage collection, snow removal and landscaping costs relating to the building. Tenant shall pay for all electric service to the Premises, which shall be separately metered. Tenant shall also maintain liability insurance for an amount not less than $3,000,000.00, naming Landlord as an additional insured and shall be responsible for all interior maintenance of the Premises, including replacing any broken windows.

Renewal Options:

Tenant shall have four renewal options of five (5) years each and a final renewal option of four (4) years, eleven months. Such renewal options must be exercised in writing at least one hundred eighty (180) days prior to the end of the preceding term.

1.2	LEASE YEAR

The first year of this Lease Agreement shall commence on the Commencement Date. Each successive lease year shall commence on the same date of each year thereafter during the term of the lease and any renewal terms.

ARTICLE II

DEMISE OF PREMISES AND IMPROVEMENTS

Landlord hereby leases and demises to Tenant and Tenant hereby leases and takes from landlord the Premises upon the terms, conditions, covenants and provisions set forth herein. Landlord and Tenant hereby acknowledge and agree mat the rentable square footage of the Premises as of the date of this Lease is 2,588 square feet, not including the 330 square foot drive through to be constructed.

2.1	CONDITION OF PREMISES

Tenant hereby accepts the Premises in its "AS IS" condition. Tenant acknowledges that, except for the environmental representation set forth in paragraph 11.7 below, Landlord has made no representations or warranties whatsoever regarding the condition of the Premises or its suitability for use by Tenant.

ARTICLE III

TERM - OBLIGATION TO PAY RENT - TERMINATION

3.1

TERM

This Lease Agreement shall be binding upon the parties from the date hereof, it being understood and agreed that the term of this Lease shall commence on the first day of the first lease year and shall continue, unless sooner terminated as provided herein, for a period of five (5) lease years thereafter.

Tenant shall have four (4) renewal options of five (5) years each and a fifth and final renewal option of four (4) years, eleven (11) months. Such renewal options must be exercised in writing by Tenant at least one hundred eighty (180) days prior to the end of the preceding term.

3.2	TENANT'S OBLIGATION TO PAY RENT

Tenant's obligation to pay rent and all other charges set forth in Article IV hereof shall commence on the "Commencement Date". In the event any of the conditions set forth in Paragraph 13.1 below are not satisfied, and Tenant gives Landlord written notice of termination within the 120-day period, Tenant's obligation to pay rent and other charges shall cease, but Landlord shall be entitled to retain all rent and other charges paid by Tenant to Landlord to that date.

3.3	ESTOPPEL AGREEMENTS

Tenant agrees that from time to time at reasonable intervals (but not more than three (3) times in any one (1) lease Year), within fifteen (15) days after written request by Landlord, Tenant will execute, acknowledge and deliver to Landlord, or to such other party as may be designated by Landlord in its reasonable discretion, a certificate stating that to the best of Tenant's knowledge (i) this Lease is in full force and effect and has not been modified, supplemented or amended in any way, except as indicated in such certificate; (ii) all conditions and agreements under this Lease to be performed by Landlord have been satisfied or performed, except as set forth in said certificate; (iii) there are no existing defenses or offsets, except as indicated in said certificate; (iv) Tenant has not paid any rental in advance, except as indicated in said certificate; (v) Tenant is not in default in the payment of rent or any of the other obligations required of Tenant under this Lease; (v) Tenant has paid minimum rentals as of the date set forth in the certificate; and (vii) other reasonable matters as may be requested by Landlord or its designee. Landlord agrees that from time to time at reasonable intervals (but not more than three (3) times in any one (1) lease year), within fifteen (15) days after written request by Tenant, Landlord will execute, acknowledge and deliver to Tenant, or to such other party as may be designated by Tenant in its reasonable discretion, a certificate stating that to the best of Landlord's knowledge (1) this Lease is in full force and effect and has not been modified, supplemented or amended in any way, except as indicated in such certificate; (b) all conditions and agreements under this Lease to be performed by Landlord have been satisfied or performed, except as set forth certificate; (c) there are no existing defenses or offsets, except as indicated in said certificate; (d) Tenant has not paid any rental in advance, except as indicated in said certificate; (e)Tenant is not in default in the payment of rent or any of the other obligations required of Tenant under this Lease; (f) Tenant has paid minimum rentals as of the date set forth in the certificate; and (g) other reasonable matters as may be requested by Tenant or its designee.

ARTICLE IV

TENANT PAYMENTS

4.1	MINIMUM RENT

Tenant covenants and agrees to pay Landlord as Minimum Rent for the Premises, without demand, deduction, abatement, or setoff, except as specifically provided herein, the minimum rental as set forth in Article I above. The minimum rent shall increase to $15.75 per square foot per year in the eleventh lease year, to $16.25 per square foot in the sixteenth lease year, to $16.75 per square foot in the twenty-first lease year and to $17.25 per square foot in the twenty sixth lease year.

Minimum Rent shall be payable in advance on the first day of each full calendar month for which rental is due hereunder. Tenant shall be allowed a ten-day grace period for the payment of rent after the first day of each month before Tenant shall be in default for non-payment.

Any Minimum Rent due for a portion of a month at the beginning or end of the lease shall be pro-rated based on the number of days in such month.

4.2

TAXES

Tenant agrees to pay one-half of all ad valorem real property taxes and assessments of every kind and nature assessed against the land and building which contains the Premises within ten (10) days of receipt of an invoice therefor from Landlord, which invoice shall be accompanied by documentation of Landlord's payment of the ad valorem property taxes and/or other assessments with respect to the Premises for which Landlord seeks reimbursement

4.3	FIRE AND CASUALTY INSURANCE ON TENANT IMPROVEMENTS

Tenant will maintain such fire and casualty insurance coverages on its improvements made to the Premises as is reasonable for commercial properties of the size, character and nature of the Premises in an amount equal to the full replacement cost of such improvements naming Landlord and Tenant as insureds as their interests may appear. Tenant shall provide evidence of such insurance to Landlord at the commencement of the lease term and on an annual basis thereafter. Landlord shall maintain fire and casualty insurance on the building of which the Premises are a part, in an amount equal to the full replacement cost thereof and as is reasonable for commercial properties of the size, nature and character of the building.

4.4

UTILITIES

Tenant shall immediately reimburse Landlord upon presentation of invoices therefore for one-half of all charges for any and all services to the Premises during the term of the lease for water, sewer, garbage collection, ice and snow removal and exterior landscape services. Tenant shall pay for its own use of all electricity, which shall be separately metered.

4.5	LATE PAYMENTS

In the event Tenant shall fail to pay rent or other charges within ten (10) days after the date when due, then such sums shall bear interest at the highest contract rate permitted under the laws of the Commonwealth of Pennsylvania in any event not to exceed twelve (12%) percent per annum, calculated from the date due. Such interest shall be considered additional rent under the provisions hereof, the non-payment of which shall be considered a default on the part of Tenant and shall entitle Landlord to exercise all of its rights and privileges hereunder.

ARTICLE V

TENANT'S USE OF PREMISES AND REGULATIONS RELATED THERETO

5.1	USE CLAUSE - REGULATIONS

Tenant shall not use the Premises or any part thereof for any purposes other than banking offices including a drive through, notwithstanding any of the foregoing to the contrary, Landlord shall not unreasonably withhold or delay its consent to any request by Tenant to use the Premises for any other purpose, provided that, such purpose shall not be considered to be a noxious or offensive use and shall be in compliance with applicable zoning and other laws. In addition to the foregoing, Tenant shall:

(a)

Keep the interior and exterior of the Premises and all glass, doors and windows of the Premises clean.

(b)

Replace promptly at Tenant's expense, with glass of a like kind and quality, any plate glass or window glass of the Premises, which may become cracked or broken.

(c)

Maintain the Premises at Tenant's expense in a clean, orderly and sanitary condition free of offensive odors from garbage, spoilage or the like, insects, rodents, vermin and other pests.

(d)

Keep rubbish, garbage, trash and other refuse in proper containers in the interior of the Premises. Tenant shall place its refuse for collection in a space designated by Landlord.

(e)

Comply with all laws, ordinances and rules and regulations of the United States, Commonwealth of Pennsylvania, and County of Northampton or any agencies thereof to the extent the same relate to Tenant's use of the Premises, and further to comply with all recommendations of any public or private agency having authority over insurance rates with respect to Tenant's use of the Premises.

5.2	ALTERATIONS TO PREMISES BY TENANT

Tenant shall not alter the exterior of the Premises and/or signs, and shall not make any structural alterations, renovations or additions to the Premises or any part thereof without first obtaining Landlord's written approval of such alterations, which approval shall not be unreasonably withheld or delayed.

5.3	SIGNS AND DISPLAYS

Tenant shall have the right, at Tenant's expense, to install signs at the Premises, provided the design and location must (i) be approved by Landlord, in its discretion (not to be unreasonably withheld or delayed), and (ii) comply with all applicable local governmental regulations. Tenant shall have the right to have its name displayed on any existing exterior signs identifying tenants in the building.

5.4	LIENS AND OTHER

Any work performed by Tenant on the Premises shall be performed in good and workmanlike manner. Prior to the commencement of any such work by any contractor, subcontractor, laborer or materialman, Tenant shall furnish Landlord with copies of Stipulations vs. Liens signed by all such persons and provide evidence that the same have been duly recorded at the Northampton County Prothonotary's Office.

Should mechanics', materialmen's or other liens or claims thereof be filed against the Premises by reason of Tenant's acts or omissions or because of a claim against Tenant, Tenant shall use best efforts to cause the lien to be canceled and discharged of record by bond or otherwise within thirty (30) days after receipt of notice from Landlord. Should Tenant fail to cause such lien to be discharged or bonded within such time period, Tenant shall be in default hereunder, and Landlord may exercise any or all remedies available to Landlord pursuant to this Lease, or in lieu thereof, Landlord may at its option, within the sixty (60) days next following Tenant's failure and upon prior written notice to Tenant, discharge the same by paying the amount claimed to be due, and Tenant shall pay as additional rent on demand the amount so paid and all reasonable costs and expenses incurred by Landlord including reasonable attorney's fees in processing such discharge.

Tenant shall secure at its expense any and all building permits and other governmental approvals necessary in connection with any of Tenant's improvements or alterations to the Premises.

5.5	INSPECTIONS BY LANDLORD

Tenant shall permit Landlord, its agents and employees to enter all parts of the Premises during business hours for the purpose of inspecting the same and enforcing and carrying out any provision hereof; provided, however, all inspections by Landlord other than in the case of an emergency, shall only be made after not less than twenty-four (24) hours written notice to Tenant and shall not unreasonably interfere with Tenant's operations at the Premises.

ARTICLE VI

REPAIRS AND MAINTENANCE

6.1	MAINTENANCE AND REPAIRS

All repairs to all electric, plumbing, and other mechanical systems including the heating, ventilating and air conditioning units and systems serving the Premises (such units and systems, the "HVAC"), shall be made by Landlord. Tenant shall maintain and repair as necessary the interior of the Premises, including interior plumbing and electric fixtures and light bulb replacement. Landlord shall keep the parking lot, steps and walkways of the building free from ice and snow and shall maintain the exterior landscaping. Tenant shall not overload the floor slab, electric wiring, or utilities serving the Premises or located within the Premises and shall install at Tenant's sole expense, after first obtaining Landlord's written approval, which shall not be unreasonably withheld or delayed, any additional electric wiring which may be required by applicable law in connection with Tenant's apparatus, equipment, or fixtures. Landlord shall be responsible for the maintenance of the roof, exterior walls and parking lot.

6.2	SURRENDER OF PREMISES IN PROPER REPAIR

Tenant shall surrender the Premises at the expiration of the term hereof or at such other time as Tenant may be required to vacate the Premises pursuant to the provisions hereof, broom clean, reasonable wear and tear and damage by fire or other casualty covered by the insurance provisions of this Lease, excepted, provided that Tenant shall not be required to surrender the installations, equipment and mechanical systems on or serving the Premises, including, without limitation, the HVAC, the roof, roof membrane, and roof covering in any particular repair or condition beyond the repair or condition of the same as of the date of this Lease. At the expiration or earlier termination of this Lease, Tenant shall not remove any structural alterations or structural improvements made to the Premises by Tenant, provided that Tenant shall have the right to remove, at its election all of its trade fixtures, movable equipment and furniture, ATM machines, security systems, signs, bank vaults and safety deposit boxes and Tenant shall be obligated to remove all of the same if requested to do so by Landlord. Tenant agrees to repair all damage to the Premises as a result of the removal of any of the foregoing items. Any such items that remain on the Premises after the expiration of the Lease shall be deemed to have been abandoned and shall become the property of Landlord.

ARTICLE VII

COMMON AREAS

7.1 Tenant, its customers and employees shall have the right to use, at no additional cost to Tenant, the 587 square feet common entrance area serving both floors of the building. Tenant shall have the right, at its expense, to improve the appearance of this area.

ARTICLE VIII

INSURANCE - INDEMNITY

8.1	TENANT LIABILITY INSURANCE

Tenant shall keep in force at Tenant's expense as long as this Lease remains in effect and during such other time as Tenant occupies the Premises or any part thereof, commercial general liability insurance for Tenant, Landlord and Landlord's mortgagee, if applicable, as their interests may appear covering the Premises, with companies qualified to do business in the Commonwealth of Pennsylvania in good standing therein and otherwise satisfactory to Landlord, in its reasonable discretion, with limits of (i) One Million and No/100 Dollars ($1,000,000.00), with respect to each occurrence, (ii) One Million and No/100 Dollars ($1,000,000.00) with respect to personal injury or death of a single person, and (iii) Three Million and No/100 Dollars ($3,000,000.00) general aggregate. All insurance maintained by Tenant shall (a) be in form reasonably acceptable to Landlord, (b) name Landlord and Landlord's mortgagee, as an additional insured, and (c) contain an endorsement providing that such insurance may not be terminated or cancelled for any reason until after thirty (30) days written notice to Landlord, and, if requested by Landlord, to Landlord's mortgagee. All such insurance shall also contain a provision that no act or omission of Tenant will affect or limit the obligation of the insurer to pay on behalf of Landlord the amount of the loss sustained by, or claim made against, Landlord. Tenant shall in addition keep in force workers' compensation or similar insurance to the extent required by law. Tenant shall deposit the policy or policies of such insurance or a certificate of certificates thereof with Landlord no less than ten (10) days prior to the commencement of the term hereof. Should Tenant fail to carry or keep in force such insurance, Landlord may, upon prior written notice to Tenant, cause such insurance to be issued and in such event Tenant agrees to pay as additional rental hereunder any reasonable premium for such insurance promptly upon Landlord's written demand therefor.

8.2	TENANT INDEMNITY

Tenant covenants, at its expense, at all times during the term hereof to defend and save Landlord, its agents, employees and contractors, harmless and indemnified from all injury, cost, liability, loss, claims, actions, expenses or damages (including, without limitation, attorney's fees) to any person or property, arising from, related to, or in any way connected with the use or occupancy of the Premises or the conduct or operation of Tenant's business, unless such injury, loss, claims, or damage are attributable to the gross negligence or intentional misconduct of Landlord, its agents or employees. Landlord and its agents and employees shall not be liable for, and Tenant waives all claims for, loss or damage to Tenant's business or damage to person or property sustained by Tenant or any other party claiming through Tenant resulting from any accident or occurrence (unless caused by or resulting from the gross negligence or intentional misconduct of Landlord) in or upon the Premises. All personal property belonging to Tenant or any other person in the Premises shall be there at the sole risk of Tenant or such other person, and neither Landlord, its agents nor employees shall be liable for any damage to, theft of misappropriation of such property, unless said employees of Landlord engage in willful misconduct or gross negligence.

8.3

DELETED

8.4	DAMAGE OR DESTRUCTION

In the event the Premises shall be damaged due to fire, the elements, unavoidable accident or other casualty, Landlord shall provide Tenant with an estimate of the time period required to repair or restore the Premises and shall then cause the damage to the Premises (not including Tenant's betterments or improvements) to be repaired or restored with due diligence to substantially the same condition as existed immediately prior to such damage, and this Lease shall continue in full force and effect, subject to any abatement rights of Tenant provided herein; provided, however, that Landlord shall not be required to expend in such repair more than the proceeds of insurance recovered or recoverable with respect to such damage (i.e., the full replacement cost of the Premises). Tenant shall upon written notice from Landlord promptly restore, replace or repair Tenant's betterments and improvements to the Premises and other property items required to be insured by Tenant pursuant to Section 4.3 hereof.

If the cost of restoring the Premises (not including Tenant's betterments or improvements) to their condition prior to damage shall exceed the amount recoverable in any insurance policies carried by Landlord, or if the Premises are damaged by any casualty not insured against, Landlord, in the event Tenant elects (in writing) not to make such repairs, shall have the right to terminate this Lease by giving Tenant written notice of its election to do so within thirty (30) days after the date on which the damage occurs, whereupon this Lease shall terminate as of the date on which the damage occurred and all rent payable hereunder shall be equitably adjusted as of said date. In the event Landlord fails to give such notice, this Lease shall continue, and Landlord shall cause the Premises (not including Tenant's betterments and improvements) to be repaired and restored with due diligence to substantially the same condition as existed immediately prior to such damage, and Tenant shall promptly restore, replace or repair Tenant's betterments and improvements to the Premises and other property items required to be insured by Tenant pursuant to Section 4.3 hereof.

If Tenant is unable to reasonably occupy the premises following a casualty, as long as the damage to the premises was not caused by the Tenant's gross negligence or willful misconduct, the Tenant's obligation to pay rent under this Lease shall abate during the period Tenant is unable to conduct its business on the Premises.

ARTICLE IX

TRANSFER OF TENANT'S INTEREST

9.1	ASSIGNMENT AND SUBLETTING

Tenant shall not sublet the Premises in whole or in part or sell, assign, lien, encumber, or in any manner transfer this Lease or assign or delegate the management or permit the use of the Premises or any part thereof by anyone other than Tenant without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, provided the Tenant is not in default under the terms of this Lease Agreement. Landlord and Tenant acknowledge and agree that the foregoing provisions have been freely negotiated by the parties hereto and that Landlord would not have entered into this Lease without Tenant's consent to the terms of this Section 9.1. No assignment, transfer, mortgage, sublease or other encumbrance by Tenant and no indulgence granted by Landlord to any assignee or subtenant, shall in any way impair the continuing primary liability (which after an assignment shall be joint and several with the assignee) of Tenant hereunder, and no approval in a particular instance shall be deemed to be a waiver of the obligation to obtain Landlord's approval in any other case.

ARTICLE X

DEFAULT BY TENANT AND REMEDIES OF LANDLORD

10.1	REMEDIES CUMULATIVE - EFFECT OF WAIVER

The following occurrences are "Events of Default":

(a)

Tenant defaults in the due and punctual payment of rent, and the default continues for ten (10) days after mailing of written notice of the default; provided however. Tenant shall be entitled to only three (3) notices per calendar year and thereafter Tenant shall be in default for failure to pay rent without the necessity of written notice from Landlord; without the necessity of written notice from Landlord;

(b)

Tenant vacates or abandons the Premises, provided that Tenant is not obligated to continuously operate its business at the Premises so long as Tenant continues to pay any and all rent due and payable hereunder.

(c)

This Lease of the Premises or any part of the Premises are taken upon execution or by other process of law directed against Tenant, or are taken upon or subjected to any attachment by any creditor of Tenant or claimant against Tenant, and the attachment is not discharged within sixty (60) days after its levy;

(d)

Tenant files a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any insolvency act of any state, or is dissolved, or makes an assignment for the benefit of creditors;

(e)

Involuntary proceedings under any bankruptcy laws or insolvency act or for the dissolution of Tenant are instituted against Tenant, or a receiver or trustee is appointed for all or substantially all of Tenant's property, and the proceeding is not dismissed or the receivership or trusteeship is not vacated within sixty (60) days after the institution or appointment;

(f)

Tenant fails to take possession of the Premises on the Commencement Date of the term; and

(g)

Tenant breaches any of the other agreements, terms, covenants, or conditions that this Lease requires Tenant to perform, and the breach continues for a period of thirty (30) days after written notice by Landlord to Tenant, or such further period of time in the event it is not feasible for Tenant to cure such failure within such thirty-day period, provided that, Tenant shall have begun to perform such covenant within such period and to diligently pursue the completion of the same within a reasonable time thereafter.

If any one or more events of default set forth in this paragraph occurs, then Landlord may, at its election, either:

(a) Terminate this Lease by written notice to Tenant, whereupon Tenant's right to possession of the Premises will cease and the Lease will be terminated. In such case, Tenant shall be liable to Landlord for damages in an amount equal to the rent and other sums that would have been owing by Tenant under this Lease for the balance of the term if this Lease had not been terminated, all of which sums shall immediately be due and payable by Tenant. In addition, if this Lease is terminated, Landlord will be entitled to recover from Tenant: (i) all of the unpaid rent and other unpaid sums to the date of termination; and (ii) any other reasonable amount necessary to compensate Landlord for any expenses and costs proximately caused by Tenant's failure to perform its obligations under this Lease or that in the ordinary course would be likely to result from that failure. Provided, however, that Landlord agrees to take commercially reasonable steps to mitigate its damages by reletting the premises and in the event Landlord is successful in doing so, Tenant shall have a right of offset for such amounts as may be received by Landlord upon such reletting.

(b) (1) Re-enter and take possession of the Premises, without terminating the Lease, relet the Premises or any part of the Premises, either alone or in conjunction with other portions of the building of which the Premises are a part, in Landlord's or Tenant's name but for the account of Tenant, for such term or terms (which may be greater or less than the period that would otherwise have constituted the balance of the term of this Lease) and on such terms and conditions (which may include concessions of free rent, and the alteration and repair of the Premises) as Landlord, in its reasonable discretion, may determine. Landlord may collect and receive the rents for the Premises. Landlord will not be responsible or liable for any failure to re-let the Premises, or any part of the Premises, or for any failure to collect any rent due upon reletting, provided that Landlord shall be obligated to take commercially reasonable steps to mitigate its damages by reletting the Premises. No re-entry or taking possession of the Premises by Landlord will be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention is given to Tenant. No notice from Landlord under this Lease or under a forcible entry and detainer statute or similar law will constitute an election by Landlord to terminate this Lease unless the notice specifically says so. Landlord reserves the right following any re-entry or reletting, or both, to exercise its right to terminate this Lease by giving Tenant written notice, and, in that event, the Lease will terminate as specified in the notice.

(2) If Landlord elects to take possession of the Premises according to this paragraph (b) without terminating the Lease, Tenant will pay Landlord the rent and other sums that would have been payable under this Lease if such repossession had not occurred, less the net proceeds, if any, of any reletting of the Premises after deducting all of Landlord's reasonable expenses incurred in connection with such reletting, including without limitation, all reasonable repossession costs, brokerage commissions, legal expenses, attorneys' fees, expenses of employees, alteration, remodeling, repair costs, and expenses of preparation for reletting. Tenant will pay such amounts to Landlord monthly on the days on which the rent and all other amounts owing under this Lease would have been payable if possession had not been retaken, and Landlord will be entitled to receive the rent and other amounts from Tenant on those days.

(c) Suit or suits for the recovery of the rents and other amounts and damages set forth in this paragraph may be brought by Landlord, from time to time, at Landlord's election, and nothing in this Lease will be deemed to require Landlord to await the date on which the term of this Lease expires. Each right and remedy in this Lease will be cumulative and will be in addition to every other right or remedy in this Lease or existing at law or in equity or by statute or otherwise, including without limitation, suits for injunctive relief and specific performance.

10.2	NO LANDLORD LIEN

Landlord hereby waives any and all rights to any Landlord's lien provided by law or to seize or distrain against the property of Tenant in the absence of a Court Order of Judgment authorizing Landlord to do so.

ARTICLE XI

MISCELLANEOUS

11.1

BINDING

The covenants, conditions and agreements herein contained shall inure to the benefit of and be binding upon Landlord, its successors and assigns, and shall be binding upon Tenant, its successors and assigns of Tenant to whom the assignment by Tenant has been consented to by Landlord. Nothing contained in this Lease shall in any manner restrict Landlord's right to assign or encumber this Lease in its sole discretion, and it is further agreed, anything to the contrary herein contained notwithstanding, that in the event Landlord sells its interest in the Premises, Landlord shall be relieved of all further obligations hereunder (except obligations with respect to damages for which Landlord is liable hereunder) provided that the successor the Landlord expressly assumes such obligations.

11.2	SUBORDINATION AND NON-DISTURBANCE

Tenant agrees that this Lease is subordinate and subject to any bona fide mortgage, deed of trust, or any other hypothecation for security which has been or which hereafter may be placed upon the Premises or property of Landlord of which they are a part. This provision is self-operative and shall not require any further documentation to evidence or effectuate this subordination. Notwithstanding the foregoing, however, Tenant agrees to execute any documents which may be required or requested by Landlord to evidence such subordination. Provided that any such superior interest holder shall not disturb Tenant's possession of the Premises and rights under the Lease so long as Tenant is not in default hereunder beyond any applicable notice or cure period.

11.3	ATTORNMENT

Should Landlord assign this Lease or otherwise sell or transfer the Premises, Tenant shall be bound to said assignee or transferee under all the terms, covenants and conditions of this Lease for the balance of the term hereof remaining after such succession, and Tenant shall attorn to such succeeding party as its Landlord under this Lease promptly upon any such succession. Tenant agrees that should any party so succeeding to the interest of Landlord require a separate agreement of "Attornment Agreement", provided the same does not modify any of the provisions of this Lease, has no adverse effects upon Tenant's continued occupancy of the Premises, and provides that such assignee will not disturb Tenant's possession of the Premises and rights under the Lease (so long as Tenant is not in default beyond any applicable notice or cure period).

11.4

RECORDING

Tenant shall not record this Lease without Landlord's prior written consent. Any such recording at the election of Landlord, shall render this Lease null and void.

11.5	QUIET ENJOYMENT

Tenant shall, subject to the provisions this Lease and all matters of record on the date hereof, peaceably and quietly hold and enjoy the Premises during the term hereof and any renewal terms without hindrance or interruption by Landlord so long as Tenant performs and observes all of the terms, covenants, agreements and conditions to be performed and observed by Tenant hereunder and pays all sums due from Tenant for rent, additional rent or reimbursement for sums advanced by Landlord on Tenant's behalf in accordance with the provisions hereof.

11.6	EMINENT DOMAIN

If the whole or any part of the Premises shall be taken under the power of eminent domain, whether by condemnation or friendly acquisition, this Lease shall terminate as to the part so taken on the date Tenant is required to yield possession thereof to the condemning or acquiring authority and all rent payable hereunder shall be equitably adjusted as of such date. If such eminent domain materially, adversely affects Tenant's ability to conduct a banking business on the Premises, this Lease shall terminate as of the date Tenant is obligated to yield possession. Tenant shall have no right to any award or compensation in connection with any exercise of the power of eminent domain; provided, however, nothing contained herein shall prevent Tenant from claiming, proving and receiving awards for its losses, so long as such award does not diminish the amount of any award to Landlord.

11.7	ENVIRONMENTAL MATTERS

Tenant shall not cause or permit any of its employees, agents, contractor, subcontractors or any others occupying or present on the Premises to generate, manufacture, store, dispose or release on, about or under the Hazardous Material (as hereinafter defined) to be brought upon, kept, or used in or about the Premises by Tenant, its agents, employees, contractors or invitees. Tenant shall not discharge, leak, or emit, or permit to be discharged, leaked, or emitted, any material into the atmosphere, ground, sewer system, or any body of water, if that material (as is reasonably determined by the Landlord, or any governmental authority) does or may pollute or contaminate the same, or may adversely affect (a) the health, welfare, or safety of persons whether located in the Premises or elsewhere, or (b) the condition, use or enjoyment of the Premises or any other real or personal property. As used herein, the term "Hazardous Material" means (i) any "hazardous waste" as defined by the Resource Conservation and Recovery act of 1976, as amended from time to time, and the regulations promulgated thereunder; (ii) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (iii) any oil, petroleum products, and their by-products; (iv) any substance that is or becomes regulated by any federal, state, or local governmental authority, and (v) include all hazardous and toxic substances, waste, materials, compounds, pollutants and contaminants (including without limitation, asbestos, polychlorinated biphenyls and petroleum products) which are included under or regulated by the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601, et seq., the Resource Conservation and Recover Act, 42 U.S.D. §6901, et seq., the Water Quality Act of 1987, 33 U.S.C. §1251, et seq., the Clean Air Act, 42 U.S.C. §7401, et seq., the Hazardous Substances Control Act of Pennsylvania, and any other federal, state, or local statute, ordinance, law, code, rule, regulation or order regulating or imposing liability (including strict liability) or standards of conduct regarding Hazardous Substances (hereinafter and hereinabove the "Environmental Laws")

Tenant further agrees that it will indemnify Landlord, its successors and assigns, and hold it harmless from and against any and all liabilities, damages, losses, costs and expenses, including reasonable attorney's fees incurred by Landlord, as a result of Hazardous Substances being brought upon, located on or removed from the Property by Tenant or as a result of violation of any of the Environmental Laws by Tenant.

Landlord represents that no portion of the Premises has been used to store, release, use, bury or deposit hazardous material during Landlord's ownership of the Premises and that to Landlord's knowledge, there are no underground storage tanks on the Premises.

11.8	ENTIRE AGREEMENT

This Lease and any Exhibits attached hereto, set forth the entire agreement between parties concerning the Premises and no subsequent agreement, amendment, change or addition to this Lease shall be binding upon either party unless reduced in writing and signed by each party.

11.9	ADDRESSES - NOTICES

Each provision of this instrument or of any applicable governmental laws, ordinances, regulations, or other requirements with reference to the sending, mailing, or delivery of any notice by Landlord to Tenant or with reference to these sending, mailing, or delivery of any notice or the Landlord to Tenant or with reference to these sending, mailing, or delivery of any notice or the making of any payment by Tenant to Landlord shall be deemed to be complied with when and if the following steps are taken:

(a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address hereinbelow set forth or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant's obligations to pay rent and any other amounts to Landlord under the terms and of this Lease shall not be deemed satisfied until such rent and other amounts have been actually received by Landlord in immediately-available funds.

(b) Any notice or document required or permitted to be delivered hereunder shall be deemed to be delivered whether actually received or not when deposited in the United States Mail, postage prepaid, Certified or Registered Mail, return receipt requested, addressed to the parties hereto at the respective addresses set out below, or at other such addresses as they have heretofore specified by written notice delivered in accordance therewith.

Landlord:	Frank Banko 950 N. West End Boulevard Quakertown, PA 18951


With a copy in like manner to:
Tenant:	Embassy Bank For The Lehigh Valley 100 Gateway Drive, Suite 100 Bethlehem, PA 18017


With a copy in like manner to:	Jacobs & Jacobs 214 Bushkill Street Easton, PA 18042

11.10

RELATIONSHIP OF THE PARTIES

This Lease shall in no way create the relationship of partner or joint venturer between Landlord and Tenant.

11.11

GOVERNING LAW

The laws of the Commonwealth of Pennsylvania shall govern the interpretation, the validity, performance and enforcement of this Lease.

11.12

SEVERABILITY

In the event any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Lease shall be valid and enforceable to the full extent permitted by law.

11.13

TIME OF ESSENCE

Time is of the essence in this Lease.

ARTICLE XII

SECURITY DEPOSIT

DELETED.

ARTICLE XIII

ADDITIONAL CONDITIONS AND TERMS

13.1 All of Tenant's obligations under this Lease are conditioned upon Tenant obtaining banking regulatory approvals for the operation of a branch office at the site and obtaining all required zoning, planning, highway access, building permits and other necessary governmental approvals for the construction of a bank branch office, including drive thru, and signage. All of such due diligence and approvals shall be conducted within 120 days of the signing of this Lease and shall be diligently conducted and applied for by Tenant. In the event Tenant notifies Landlord within the 120-day period that any of such contingencies have not been satisfied, this Lease Agreement shall be null and void and neither party shall have any rights against the other.

13.2 Notwithstanding any other provisions contained in this Lease, in the event (a) Tenant or its successors or assignees shall become subject to a bankruptcy case pursuant to Title 11 of the U.S. Code or similar proceeding during the term of this Lease or (b) the depository institution then operating at the Leased Premises is closed, or is taken over by any depository institution supervisory authority (hereinafter referred to as the "Authority") during the term of this Lease, Landlord may, in either such event, terminate this Lease only with the concurrence of any Receiver or Liquidator appointed by such Authority or pursuant to appropriate order of the Court with jurisdiction over such case or proceeding, or upon the expiration of the stated term of this Lease, provided that, in the event this Lease is terminated by the Receiver or Liquidator, the maximum claim of Landlord for rent, damages or indemnity for injury, resulting from the termination, rejection or abandonment of the unexpired Lease shall by law in no event exceed all accrued and unpaid Minimum Rent and Additional Rent to the date of termination.

13.3 Tenant shall have the use of not less than six off-street parking spaces in the parking lot serving the building at no additional cost.

IN WITNESS WHEREOF, the parties hereto have duly executed this instrument in quadruplicate, individually or through their authorized officers, agents or attorney-in-fact, as the case may be or required, with the intent to be legally bound hereby, causing their respective seals to be affixed hereto the day and year first above written.

	LANDLORD:

/s/ Frank Banko	By	/s/ Frank Banko
		Frank Banko


Attest:	TENANT:
	EMBASSY BANK FOR THE LEHIGH VALLEY

	By	/s/ David M. Lobach Jr.
/s/ Judith A. Hunsicker		Name: David M. Lobach Jr.
Secretary		Title: CEO

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

1. Embassy Bank for the Lehigh Valley, Bethlehem, Pennsylvania; a state-chartered bank organized under Pennsylvania Banking Code of 1965.

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-169018, 333-212583, and 333-233401) of Embassy Bancorp, Inc. and Subsidiary of our report dated March 12, 2021 relating to the consolidated financial statements, which appears in this annual report on Form 10-K, for the year ended December 31, 2020.

/s/ Baker Tilly US, LLP

Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause, LLP)

Allentown, Pennsylvania

March 12, 2021

EXHIBIT 31.1

CERTIFICATION

I, David M. Lobach, Jr., certify that:

1.I have reviewed this annual report on Form 10-K of Embassy Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) I evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:

/s/ David M. Lobach, Jr.

David M. Lobach, Jr.

Chairman, President and Chief Executive Officer

DATED: March 12, 2021

EXHIBIT 31.2

CERTIFICATION

I, Judith A. Hunsicker, certify that:

1.I have reviewed this annual report on Form 10-K of Embassy Bancorp, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	By:		/s/ Judith A. Hunsicker
			Judith A. Hunsicker
			First Executive Officer, Chief Operating
			Officer, Secretary and Chief Financial Officer
			DATED: March 12, 2021

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. 1350 and

Section 906 of Sarbanes-Oxley Act of 2002

We hereby certify that the foregoing Form 10-K of Embassy Bancorp, Inc. for the year ended December 31, 2020 complies in all respects with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of Embassy Bancorp, Inc.



	/s/ David M. Lobach, Jr.
	David M. Lobach, Jr.
	Chairman, President and Chief Executive Officer



	/s/ Judith A. Hunsicker
	Judith A. Hunsicker
	First Executive Officer, Chief Operating
	Officer, Secretary and Chief Financial Officer

	DATED: March 12, 2021