<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934.
For Quarter ended September 30,1995 Commission File Number
----------------- 0-15261
-------
Bryn Mawr Bank Corporation
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2434506
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code (610) 525-1700
---------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and fiscal year, if changed since last report.
Indicate by check whether the registrant (1) has filed all reports to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No _____
-----
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at November 8, 1995
- -----------------------
Common Stock, par value $1 1,095,190
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED September 30, 1995
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
Consolidated Statements of Income for Nine
Months Ended September 30, 1995 and 1994..........Page 1
Consolidated Statements of Income for Three
Months Ended September 30, 1995 and 1994..........Page 2
Consolidated Balance Sheets as of September 30, 1995,
December 31, 1994 and September 30, 1994..........Page 3
Consolidated Statements of Cash Flows For the Nine
Months Ended September 30, 1995 and 1994..........Page 4
Notes to Consolidated Financial Statements.............Page 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....Page 7
PART II - OTHER INFORMATION.................................Page 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1995 1994*
--------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans........................................ $ 14,533 $ 11,821
Interest on federal funds sold.................................... 573 239
Interest on interest bearing deposits with banks.................. 6 10
Interest and dividends on investment securities:
U.S. Treasury securities........................................ 1,709 2,235
U.S. Government Agency Securities............................... 111 0
Obligations of states and political subdivisions................ 466 539
Dividend income................................................. 56 43
--------- ---------
Total interest income................................................. 17,454 14,887
Interest expense on deposits.......................................... 5,330 3,756
--------- ---------
Net interest income................................................... 12,124 11,131
Loan loss provision................................................... 375 375
--------- ---------
Net interest income after loan loss provision......................... 11,749 10,756
--------- ---------
Other income:
Fees for Trust services........................................... 4,027 3,533
Service charges on deposits....................................... 776 813
Other service charges, commissions and fees....................... 910 909
Net gain on sale of loans......................................... 302 367
Net gain on sale of other real estate owned....................... 134 251
Other operating income............................................ 561 542
--------- ---------
Total other income.................................................... 6,710 6,415
--------- ---------
Other expenses:
Salaries and wages................................................ 5,753 5,520
Employee benefits................................................. 1,322 1,400
Occupancy and bank premises....................................... 1,070 1,052
Furniture, fixtures, and equipment................................ 653 614
Other operating expenses.......................................... 4,629 4,542
--------- ---------
Total other expenses.................................................. 13,427 13,128
--------- ---------
Income before income taxes............................................ 5,032 4,043
Applicable income taxes............................................... 1,499 1,105
--------- ---------
Net Income............................................................ $ 3,533 $ 2,938
========= =========
Earnings per average common share:
Net income........................................................ $3.23 $2.69
Cash dividends declared........................................... $0.75 $0.45
Average number of shares outstanding.................................. 1,093,952 1,091,364
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
*- Reclassified for comparative purposes.
Form 10-Q
Page 1
<PAGE>
FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
September 30
1995 1994*
---------- ---------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans.......................................... $ 5,024 $ 4,184
Interest on federal funds sold...................................... 207 60
Interest on interest bearing deposits with banks.................... 1 0
Interest and dividends on investment securities:
U.S. Treasury securities.......................................... 563 726
U.S. Government Agency Securities................................. 111 0
Obligations of states and political subdivisions.................. 148 175
Dividend income................................................... 17 15
---------- ---------
Total interest income................................................... 6,071 5,160
Interest expense on deposits............................................ 1,910 1,258
---------- ---------
Net interest income..................................................... 4,161 3,902
Loan loss provision..................................................... 125 125
---------- ---------
Net interest income after loan loss provision........................... 4,036 3,777
---------- ---------
OTHER INCOME:
Fees for Trust services............................................. 1,357 1,183
Service charges on deposits......................................... 262 263
Other service charges, commissions and fees......................... 460 433
Net gain on sale of loans........................................... 158 69
Net gain on sale of other real estate owned......................... 2 120
Other operating income.............................................. 52 38
---------- ---------
Total other income...................................................... 2,291 2,106
---------- ---------
OTHER EXPENSES:
Salaries and wages.................................................. 2,004 1,861
Employee benefits................................................... 437 481
Occupancy and bank premises......................................... 374 361
Furniture, fixtures, and equipment.................................. 217 237
Other operating expenses............................................ 1,437 1,565
---------- ---------
Total other expenses.................................................... 4,469 4,505
---------- ---------
Income before income taxes.............................................. 1,858 1,378
Applicable income taxes................................................. 559 375
---------- ---------
Net Income.............................................................. $ 1,299 $ 1,003
========== =========
Earnings per average common share:
Net income.......................................................... $1.19 $0.92
Cash dividends declared............................................. $0.25 $0.15
Average number of shares outstanding.................................... 1,094,467 1,093,690
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
*- Reclassified for comparative purposes.
Form 10-Q
Page 2
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994*
(Unaudited) (Unaudited)
----------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................................. $ 19,767 $ 19,353 $ 24,153
Interest bearing deposits with banks................................. 137 1,584 58
Federal funds sold................................................... 10,412 9,500 5,301
Investment securities available for sale, at market (amortized
cost of $61,959, $59,995 and $67,530 as of September 30, 1995,
December 31, 1994 and September 30, 1994, respectively).......... 61,992 58,563 66,670
Loans:
Consumer......................................................... 73,814 76,828 70,520
Commercial....................................................... 56,647 54,631 48,245
Real Estate...................................................... 98,488 97,279 94,474
----------- ---------- ----------
Total loans.............................................. 228,949 228,738 213,239
Less: Allowance for possible loan losses......................... (4,038) (3,618) (3,834)
----------- ---------- ----------
Net loans................................................ 224,911 225,120 209,405
----------- ---------- ----------
Premises and equipment, net.......................................... 11,740 11,383 11,294
Accrued interest receivable.......................................... 2,318 1,999 1,898
Other real estate owned.............................................. 3,390 3,475 3,318
Other assets......................................................... 3,962 2,203 2,580
=========== ========== ==========
Total assets............................................. $ 338,629 $ 333,180 $ 324,677
=========== ========== ==========
LIABILITIES
Deposits:
Demand, noninterest-bearing...................................... $ 70,551 $ 83,142 $ 70,715
Savings.......................................................... 157,135 176,375 179,710
Time............................................................. 72,711 41,820 42,673
----------- ---------- ----------
Total deposits........................................... 300,397 301,337 293,098
Other liabilities.................................................... 7,354 4,697 4,941
----------- ---------- ----------
Total liabilities........................................ 307,751 306,034 298,039
----------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock, par value $1; authorized 5,000,000
shares; issued 1,246,600 shares as of September 30, 1995,
and 1,245,100 shares as of December 31, 1994 and
September 30, 1994; shares outstanding of 1,095,190 as of
September 30, 1995 and shares outstanding of 1,093,690 as of
December 31, 1994 and September 30, 1994, respectively........... 1,247 1,245 1,245
Paid-in capital in excess of par value............................... 5,610 5,559 5,559
Unrealized investment appreciation
(depreciation) net of deferred income taxes...................... 22 (945) (561)
Retained earnings.................................................... 25,538 22,826 21,934
----------- ---------- ----------
32,417 28,685 28,177
Less: Common stock in treasury at cost -- 151,410 shares............. (1,539) (1,539) (1,539)
----------- ---------- ----------
Total shareholders' equity....................................... 30,878 27,146 26,638
----------- ---------- ----------
Total liabilities and shareholders' equity....................... $ 338,629 $ 333,180 $ 324,677
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of consolidated financial
statements.
*- Reclassified for comparative purposes.
Form 10-Q
Page 3
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income.................................................................. $ 3,533 $ 2,938
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses................................................ 375 375
Provision for depreciation and amortization.............................. 738 649
Gain on sale of other real estate owned.................................. (126) (251)
Loans originated for resale.............................................. (40,615) (34,015)
Proceeds from loans sold................................................. 41,742 33,301
Gain on sale of loans.................................................... (302) (367)
Provision for (reduction in) deferred income taxes....................... (296) (500)
Decrease in taxes receivable............................................. 1,245 10
Increase in interest receivable.......................................... (319) (8)
Increase in interest payable............................................. 1,707 429
Other.................................................................... (2,220) (375)
---------- ----------
Net cash provided by operating activities............................. 5,462 2,186
---------- ----------
INVESTING ACTIVITIES:
Purchases of investment securities.......................................... (16,289) (10,261)
Proceeds from maturity of investment securities............................. 14,240 22,754
Loan repayments, net of loan originations................................... 18,300 12,373
Loans purchased (dealer loans).............................................. (19,291) (33,532)
Purchases of premises and equipment......................................... (1,010) (755)
Proceeds from disposition of other real estate owned........................ 404 765
Capitalization of costs of other real estate owned.......................... (193) 0
---------- ----------
Net cash used by investing activities................................. (3,839) (8,656)
---------- ----------
FINANCING ACTIVITIES:
Net decrease (increase) in demand and savings deposits...................... (31,831) 3,187
Net increase (decrease) in time deposits.................................... 30,891 (1,163)
Dividends paid.............................................................. (821) (492)
Repayment of mortgage debt.................................................. (36) (31)
Proceeds from issuance of common stock...................................... 53 125
---------- ----------
Net cash provided (used) by financing activities...................... (1,744) 1,626
---------- ----------
Increase (decrease) in cash and cash equivalents............................ (121) (4,844)
Cash and cash equivalents at beginning of period............................ 30,437 34,356
---------- ----------
Cash and cash equivalents at end of period.................................. $ 30,316 $ 29,512
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid........................................................ $ 551 $ 1,303
Interest paid............................................................ $ 3,623 $ 3,327
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 4
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of September 30, 1995 and 1994, the consolidated statements of
cash flows for the nine month periods ended September 30, 1995 and 1994 and the
related consolidated statements of income for the nine month and three month
periods ended September 30, 1995 and 1994 are unaudited. Management believes
that all adjustments, accruals and elimination entries necessary for the fair
presentation of the consolidated financial position and results of operations
for the interim periods presented have been made. The year-end balance sheet
data was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in the Corporation's 1994 Annual Report
incorporated in the 1994 Form 10-K (Exhibit #13).
2. Earnings Per Common Share:
Reference is made to Note #10, Stock Option Plan (the "Plan"), in the Notes
to Consolidated Financial Statements in the Corporation's 1994 Annual Report
incorporated in the 1994 Form 10-K (Exhibit #13). Shares under option under the
Plan did not have a dilutive impact on net income per share for the nine month
and three month periods ended September 30, 1995 or 1994.
3. Disclosure of Accounting Policy:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, interest bearing deposits with banks and federal funds sold.
4. Adoption of Financial Accounting Standards:
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", ("SFAS No. 115"). SFAS No. 115 requires all entities to
allocate their investments among three categories, as applicable. The categories
are: (1) trading, (2) available for sale and (3) held to maturity. The
Corporation has chosen to include all of its investment securities in the
available for sale category. Investments classified as available for sale are
carried at market value with the change in unrealized appreciation
(depreciation) credited (charged) directly to shareholders' equity, net of
applicable deferred income taxes. The cumulative effect of adopting SFAS No.
115, as of January 1, 1994, represented by the unrealized appreciation of
investment securities available for sale of $1,307,000, net of the related
deferred income taxes of $444,000, was recorded as a separate component of
shareholders' equity, amounting to an increase in shareholders' equity of
$863,000.
<PAGE>
As of September 30, 1995 the unrealized appreciation of investment
securities classified as available for sale, net of deferred taxes, increased
shareholders' equity by $22,000, while the unrealized depreciation of investment
securities classified as available for sale, net of deferred taxes, decreased
shareholders' equity by $945,000 as of December 31, 1994.
During the first quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS No. 114"), as amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". SFAS No. 114 requires measurement of impaired
loans based on the present value of expected future cash flows discounted at the
loan's effective interest rate, or at the loan's observable market price or, as
a practical expedient, the fair value of the collateral, if the loan is
collateral dependent. SFAS No. 114 does not apply to large groups of smaller-
balance homogeneous loans that are collectively evaluated for impairment. The
adoption of SFAS No. 114 did not have a material impact on the financial
position or results of operations of the Corporation.
5. Loans:
As of September 30, 1995, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114 totaled $694,000.
All impaired loans had a related allowance for loan losses. The total related
allowance for loan losses is $270,000.
Interest on loans, including impaired loans, is accrued only if deemed
collectible. Unpaid interest income is reversed when a loan becomes over 90 days
delinquent and on other loans, prior to 90 days, if management determines it is
warranted. Any principal or interest received on impaired loans is recorded as a
direct reduction of the recorded investment in the loan. When the recorded
investment has been fully collected, any additional amounts collected are
recognized as interest income.
6. Allowance for Possible Loan Losses:
The summary of changes in the allowance is as follows:
<TABLE>
<CAPTION>
nine months ended year ended
September 30, December 31,
1995 1994 1994
---------------- -------
<S> <C> <C> <C>
Balance, Beginning of period $3,618 $3,601 $3,601
------- ------- -------
Charge-offs:
Consumer (164) (234) (365)
Commercial and industrial (67) 0 0
Real estate (8) (56) (298)
------- ------- -------
Total charge-offs (239) (290) (663)
------- ------- -------
Recoveries:
Consumer 42 23 45
Commercial and industrial 229 105 115
Real estate 13 20 20
------- ------- -------
Total recoveries 284 148 180
------- ------- -------
Net (charge-offs) / recoveries 45 (142) (483)
Provision for loan losses 375 375 500
------- ------- -------
Balance, End of period $4,038 $3,834 $3,618
======= ======= =======
</TABLE>
<PAGE>
ITEM 2.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Bryn Mawr Bank Corporation (the "Corporation"), the parent company of The
Bryn Mawr Trust Company (the "Bank"), reported net income of $3,533,000 for the
first nine months of 1995, a 20% increase over $2,938,000 of net income reported
for the first nine months of 1994. Earnings per common share amounted to $3.23,
a 20% increase over earnings per common share of $2.69 reported for the first
nine months of 1994. Per share computations were based on 1,093,952 and
1,091,364 average shares outstanding for the first nine months of 1995 and 1994,
respectively.
For the third quarter of 1995, the Corporation reported net income of
$1,299,000, a 30% increase over net income of $1,003,000 reported for the third
quarter of 1994. Earnings per common share on net income amounted to $1.19 for
the third quarter of 1995, a 29% increase over $.92 for the third quarter of
1994 on average shares outstanding of 1,094,467 and 1,093,690, respectively.
A 2 for 1 stock split, in the form of a 100% stock dividend, was declared
by the Corporation's board of directors on October 19, 1995, payable on December
29, 1995 to shareholders of record on December 8, 1995. This transaction will be
effected after the filing of this report. Therefore, the effects of this
transaction will be included in the filing of the December 31, 1995 Form 10-K.
The increase in earnings for the first nine months of 1995 over the same
period in 1994 is the result of a number of factors, including an increase in
net interest income, up 9% over the first nine months of 1994, an increase in
other income, up 5% over the same period in 1994, due primarily to a rise in
trust related fee income, and a containment of other expenses, which grew 2% for
the first nine months of 1995, compared to the same period in 1994.
An increase in higher yielding average outstanding loan balances, up 14%
from 1994 levels and a 17% decrease in lower yielding investment and federal
funds sold balances, combined with a net increase of 25 basis points in the
Bank's prime rate of interest is primarily responsible for an increase in the
annualized net interest margin for the first nine months of 1995, to 5.19%, up
from 5.05% reported for the same period in 1994. The increase in the net
interest margin is due to earning assets repricing faster than interest rate
sensitive deposits, as interest rates increase.
As the prime rate decreased by 25 basis points in the third quarter of 1995
and home mortgage interest rates also declined, activity in the Bank's
origination and sale of mortgage loans in the secondary mortgage market began to
increase, thereby increasing related fee income and gains on the sale of
mortgage loans. Management currently believes that, in a decreasing interest
rate environment, the expected increase in mortgage origination and sale revenue
will help offset decreases in the net interest income, caused by declining
yields on the earning asset portfolio. While interest rate movements and their
effect on future revenue streams cannot be predicted, management believes that
there are presently no known trends, events or uncertainties that will have or
are reasonably likely to have a material effect on the Corporation's liquidity,
capital resources or results of
<PAGE>
operations in the future.
NET INTEREST INCOME
- -------------------
For the nine months ended September 30, 1995, net interest income rose 9%
to $12,124,000 from $11,131,000 in 1994. While total interest income grew 17%
for the first nine months of 1995, to $17,454,000 from $14,887,000 for the first
nine months of 1994, interest expense increased 42% over the same periods.
Interest expense for the nine months ended September 30, 1995 and 1994 was
$5,330,000 and $3,756,000, respectively. Overall, the yield on earning assets
for the first nine months of 1995 was 7.6% versus 6.8% for the first nine months
of 1994 while the effective rate paid on interest bearing deposits for the first
nine months of 1995 and 1994 was 3.1% and 2.2%, respectively. The increase in
both the yield on earning assets and the cost of deposits is due to the increase
in interest rates during 1994 and 1995 and a change in the mix of interest
bearing deposits, from lower costing interest rate sensitive deposits into
higher costing certificates of deposit.
Interest and fees on loans increased 23% from $11,821,000 for the first
nine months of 1994 to $14,533,000 for the first nine months of 1995. A
combination of increasing loan portfolio yields, up from 7.8% for the first nine
months of 1994 to 8.3% for 1995 and a 14% increase in daily average outstanding
loan balances from $196,360,000 for the first nine months of 1994 to
$223,868,000 for the same period in 1995, are the primary reasons for this
increase in loan related interest and fee income.
Interest income on investments decreased 17% from $2,817,000 for the first
nine months of 1994 to $2,342,000 for the first nine months of 1995. The primary
decrease was in interest from U.S. Treasury obligations which decreased 24% from
$2,235,000 for the first nine months of 1994 to $1,709,000 for the first nine
months of 1995. The daily average balance of U.S. Treasury securities decreased
by $17 million from $62,298,000 during the first nine months of 1994 to
$44,947,000 for the comparable period in 1995. The decrease in U.S. Treasury
obligations, which was primarily a result of investment maturities as opposed to
sales, was necessary to fund loan growth. During the third quarter of 1995, the
Bank purchased $9,976,000 in U.S. Government Agency securities. The overall
yield on investment securities increased slightly from 4.8% for the first nine
months of 1994 to 5.2% for the first nine months of 1995.
Interest expense on deposits increased 42% as the average rate paid on
interest bearing deposits increased 90 basis points from 2.2% in the first nine
months of 1994 to 3.1% in the first nine months of 1995. This increase is
primarily due to a change in the mix of deposits, from lower costing interest
rate sensitive deposits into higher rate certificates of deposit. In order to
help fund loan growth, the Bank offered a "Premier" certificate of deposit
product with an attractive interest rate. Raising over $15,000,000 in new funds
during the first quarter of 1995 through the Premier certificate of deposit
promotion contributed to the increase in the average effective rate paid on
deposits during the first nine months of 1995 compared to the similar period in
1994. The daily average interest bearing deposit balances increased 2% to
$228,808,000 at September 30, 1995 compared to $224,421,000 for the same period
in 1994. However, the deposit mix has changed for the first nine months of 1995
compared to the same period in 1994. For the first nine months
<PAGE>
of 1995, average time deposits represented 29% of the Bank's interest bearing
deposits compared to 19% for the same period in 1994.
For the first nine months of 1995, the net interest margin increased to
5.19% from 5.05% for same period in 1994. The increase in the net interest
margin is due to earning assets repricing faster than interest rate sensitive
deposits, as interest rates increase. The net interest margin is computed
exclusive of related loan fee income.
For the third quarter of 1995, net interest income increased 7%, to
$4,161,000 in 1995 from $3,902,000 for the same quarter in 1994. Total interest
income grew 18% to $6,071,000 in 1995 compared to $5,160,000 in 1994. Both
growth in average outstanding loans and an increase in interest rates in the
third quarter of 1995, compared to the same period in 1994, are primarily
responsible for this increase. Interest and fees on loans grew 20% during the
third quarter of 1995, compared to the third quarter of 1994. Interest income on
U.S. Treasury securities and obligations of states and political subdivisions
decreased 22% and 15%, respectively during the third quarter of 1995 compared to
the same quarter in 1994. This decrease is primarily due to a decrease in
average outstanding balances of these securities related to these income
streams. The Bank purchased $9,976,000 of U.S. Government Agency securities
during the third quarter of 1995. This is the reason for reporting $111,000 in
interest on U.S. Government Agency securities during the third quarter of 1995
compared to no similar interest income for the same quarter in 1994. An increase
in the Bank's funds available for sale and in the rate earned on federal funds
sold in the third quarter of 1995, compared to the same quarter in 1994,
accounted for a 245% increase in interest on federal funds sold, to $207,000 in
the third quarter of 1995 compared to $60,000 for the third quarter of 1994.
Interest on deposits grew 52% in the third quarter of 1995, compared to the same
quarter in 1994. This is due primarily to an increase in average outstanding
interest bearing deposits and a shift in the mix of these deposits to higher
costing certificates of deposit, due to the promotion, during the first quarter
of 1995, where $15,000,000 in new deposits were acquired by the Bank through the
certificate of deposit promotion.
LOAN LOSS PROVISION
- -------------------
The loan loss provision represents management's determination of the amount
necessary to be charged against the current year's income in order to maintain
an adequate loan loss reserve. The Bank maintains an Officer Loan Review
Committee (the "Committee") and retains the services of an independent loan
review consultant. The independent consultant performs an independent review of
the Bank's loan portfolio and the loan loss reserve. The Committee meets monthly
to review the adequacy of the loan loss reserve as well as all nonaccrual loans,
any potential problem loans and loans criticized by either the Bank's regulators
or the independent consultant.
Based on ratings assigned by the Committee on the quality of the loans
which are reviewed, a specific reserve may be computed for each loan. In
addition to the specific reserve amounts, the balance of loans not reviewed by
the Committee has a reserve computed based on the average of the prior five
years write-offs plus the annualized write-offs for the current year. Including
annualized write-offs for the current year takes into consideration current
trends in both volumes and write-offs, to be included in the computation.
Finally, an amount equal to .5% of all outstanding loans is
<PAGE>
included in the loan loss reserve calculation to address possible unforeseen
loan loss reserve requirements. The sum of the specific reserves, the reserve
calculated based on average write-offs and the reserve calculated based on the
entire portfolio for possible unforeseen loan losses are compared to the Bank's
current loan loss reserve balance. Any additions deemed necessary to the loan
loss reserve are then made on a timely basis.
Based on the results of the aforementioned reviews, the loan loss provision
was $375,000 for the first nine months of both 1995 and 1994. The loan loss
reserve amounted to 1.8% of outstanding loans both at September 30, 1995 and
1994. Nonperforming loans have decreased 67% to $646,000 as of September 30,
1995, down from $1,986,000 as of September 30, 1994. The loan loss reserve
amounted to 625% of nonperforming loans as of September 30, 1995 compared to
193% as of September 30, 1994. Based on the results of both the internal and
external loan review processes and the current level of nonperforming loans,
management believes the loan loss reserve to be adequate as of September 30,
1995.
During the first quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS No. 114"), as amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". SFAS No. 114 requires measurement of impaired
loans based on the present value of expected future cash flows discounted at the
loan's effective interest rate, or at the loan's observable market price or, as
a practical expedient, the fair value of the collateral, if the loan is
collateral dependent. SFAS No. 114 does not apply to large groups of smaller-
balance homogeneous loans that are collectively evaluated for impairment. The
adoption of SFAS No. 114 did not have a material impact on the financial
position or results of operations of the Corporation.
OTHER INCOME
- ------------
Other income increased 5% from $6,415,000 for the nine months ended
September 30, 1994 to $6,710,000 for the period ended September 30, 1995.
Fees for trust services rose 14% from $3,533,000 for the first nine months
of 1994 to $4,027,000 for the same period in 1995. Increased asset values, a
revised fee schedule, implemented in July of 1994 and the establishment of a new
family office business, generating family office revenues are primarily
responsible for this increase. The family office business is a new business
venture, established in the Bank's trust division and headed by Peter H. Havens,
who was named Executive Vice President, in charge of the Bank's trust division,
effective May 1, 1995.
As interest rates declined in the third quarter of 1995, refinancing of
existing mortgage loans began to increase. For the nine month period, the Bank
originated and sold $41,742,000 of mortgage loans in the secondary mortgage
market, a 29% increase over $32,266,000 of mortgage loans originated and sold
during the first nine months of 1994. Of the $41,742,000 in mortgage loans sold
in the nine month period, 46% or $19,136,000 were sold during the third quarter
of 1995. For the nine months ended September 30, 1995, the Bank reported net
gains on the sale of loans in the secondary mortgage market of $302,000, an 18%
decrease in net gains on loan sales reported for the first nine months of 1994
of $367,000. However, related loan fees, taken into
<PAGE>
income as a result of the sale of these loans, included in interest and fees on
loans, amounted to $315,000 for the first nine months of 1995, a 101% increase
over $157,000 in fee income reported for the first nine months of 1994.
For the nine month period ended September 30, 1995, the increase in
interest rates over the same period in 1994 was also responsible for a $37,000,
or 5%, decrease in service charges on deposit accounts, due primarily to
increases in the earnings credit rate used to offset these service charges.
The Bank has steadily decreased its balances in other real estate owned
("OREO") over previous years, therefore, fewer parcels of OREO were sold during
the first nine months of 1995 compared to the same period in 1994, reflecting a
47% reduction in net gains on the sale of OREO, from $251,000 for the first nine
months of 1994 to $134,000 in the same period of 1995.
For the quarter ended September 30, 1995, total other income was
$2,291,000, a 9% increase from $2,106,000 for the same period in 1994. Fees for
trust services, including revenues from the family office business venture in
1995 revenues, rose 15% from $1,183,000 in 1994 to $1,357,000 for the quarter
ended September 30, 1995. A decrease in mortgage interest rates prompted renewed
interest in refinancing mortgage loans. During the third quarter of 1995, the
Bank originated and sold in the secondary mortgage market $19,136,000 in
mortgage loans, compared to $6,077,000 during the same period in 1994. Net gains
on the sale of loans was $158,000 for the third quarter of 1995, a 129% increase
over $69,000 in net gains on the sale of loans reported for the third quarter of
1994.
OTHER EXPENSE
- -------------
Total other expense increased 2% for the first nine months of 1995 to
$13,427,000 from $13,128,000 for the first nine months ended in 1994. Salaries
and wages grew 4%, from $5,753,000 for the nine months ended September 30, 1995
compared to $5,520,000 for the same period in 1994. Included in these amounts is
a 2% increase in regular salary expense. This reflects both the addition of new
staff associated with the family office operation, established in May 1995 and
the elimination of the Bank's sales staff in December, 1994. Incentive salaries,
based on exceeding profitability goals were up 28%. The Bank's full time
equivalent staff decreased to 200 as of September 30, 1995, down from 201.5 as
of September 30, 1994. Employee benefits expenses are down $78,000 from last
year, primarily a result of the receipt of a $63,000 refund on health insurance
premiums for the 1993 policy year due to favorable claims experience.
Occupancy expense grew 2% for the first nine months of 1995 from $1,052,000
for the first nine months of 1994 to $1,070,000 for the first nine months of
1995. Furniture and equipment expenses grew 6% over the first nine months of
1994, from $614,000 for the first nine months of 1994 to $653,000 for the same
period in 1995, as depreciation began in the middle of 1994 on the purchase and
installation of a bank-wide local area network. Other operating expenses
increased 2% over the first nine months of 1994, from $4,542,000 for the first
nine months of 1994 to $4,629,000 for the first nine months of 1995. For the
first nine months of 1995, other operating expense includes a refund of $183,000
from the Federal Deposit Insurance Corporation
<PAGE>
(the "FDIC") of excess insurance premiums paid by the Bank for the months of May
through September 1995. In the future, the Bank should benefit from a reduced
insurance premium rate, which is presently $.04 per $100 of deposits, down from
$.23. This is the lowest rate charged by the FDIC for its healthiest banks.
Partially offsetting this reduction in other operating expenses were non-
recurring costs of $135,000 to settle two outstanding disputes involving the
Bank.
For the quarter, total other expenses decreased 1% to $4,469,000 for the
quarter ended September 30, 1995 compared to $4,505,000 in 1994. Salaries and
wages grew 8% from $1,861,000 for the third quarter of 1994 to $2,004,000 for
the same quarter in 1995. Regular salaries amounted to $1,767,000 for the third
quarter of 1995, a 4% increase over $1,701,000 for the third quarter of 1994.
Incentive related salary expenses rose 48% from $160,000 for the third quarter
of 1994 to $236,000 for the same quarter in 1995. The primary reason for this
growth was an increase in incentive based salaries related to overall
Corporation profitability, as well as profitability in the areas of mortgage
origination and trust incentives. Employee benefits expenses decreased 9% for
the quarter ended September 30, 1995, to $437,000, compared to $481,000 for the
same quarter in 1994. Occupancy and bank premises expense rose 4% to $374,000
for the quarter ended September 30, 1995, compared to $361,000 for the same
quarter in 1994. Furniture, fixtures and equipment expense decreased 8%, from
$237,000 for the third quarter of 1994, to $217,000 for the third quarter in
1995. Other operating expenses decreased 8%, for the third quarter of 1995, to
$1,437,000 compared to $1,565,000 for the same quarter of 1994. The primary
reasons for this decrease was the refund of FDIC insurance premiums of $183,000,
discussed above, which were reported in September 1995.
APPLICABLE INCOME TAXES
- -----------------------
The Corporation's effective tax rate for the first nine months of 1995 was
30% compared to 27% for 1994. The increase is due to a decrease in the tax-
favored income from obligations of states and political subdivisions. The
decrease in tax-favored income is related to the decrease in the investment
portfolio necessary to fund the loan growth.
FINANCIAL CONDITION
- -------------------
Total assets increased 2% from $333,180,000 at December 31, 1994 to
$338,629,000 as of September 30, 1995. Total assets grew 4% from $324,677,000 as
of September 30, 1994.
Outstanding earning assets increased 1% to $301,490,000 as of September 30,
1995 from $298,385,000 as of December 31, 1994. The Bank's loan portfolio
increased less than 1%, to $228,949,000 at September 30, 1995 from $228,738,000
as of December 31, 1994. However, from September 30, 1994, all loan categories
grew, with the largest increase in the commercial loan portfolio, up 17%.
Commercial loans at September 30, 1994 were $48,245,000; at September 30, 1995
commercial loans were $56,647,000, which represented a 4% increase from December
31, 1994 outstanding commercial loan balances of $54,631,000. This portfolio's
growth is a result of the Bank expanding its commercial lending staff and
aggressively seeking new commercial loan relationships within its market area.
<PAGE>
The Bank's investment portfolio, having a market value of $61,992,000 at
September 30, 1995, increased 6% from a value of $58,563,000 at December 31,
1994 and decreased 7% from $66,670,000 as of September 30, 1994. The funds
obtained from the decrease in the investment portfolio from September 1994 to
September 1995 were primarily used to help fund the increase in the Bank's loan
portfolio over the same period. As of January 1, 1994, the Corporation adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", ("SFAS No. 115"). SFAS No. 115
requires all entities to allocate their investments among six categories as
applicable: (1) trading, (2) available for sale and (3) held to maturity. The
Corporation has chosen to include all of its investment securities in the
available for sale category. Investments in this category are reported at the
current market value with net unrealized gains or losses, net of the deferred
tax effect, being added or deducted from the Corporation's total equity on the
balance sheet. Due to maturities, the shortening of the average term of the
investment portfolio and a decline in market rates of interest on investments
held in the investment portfolio, causing an increase in the market value of the
related investments, as of September 30, 1995, the investment portfolio had a
net unrealized gain of $33,000, compared to a net unrealized loss of $1,432,000
at December 31, 1994. The unrealized investment appreciation, net of deferred
income taxes, increased the Corporation's shareholders' equity on the balance
sheet by $22,000 as of September 30, 1995.
The balance of federal funds sold increased from $5,301,000 at September
30, 1994 and $9,500,000 at December 31, 1994 to $10,412,000 as of September 30,
1995. The 10% and 96% increases in federal funds sold balances at September 30,
1995, compared to December 31, 1994 and September 30, 1994 levels, respectively,
are primarily a result of both a recurring cyclical increase in year end deposit
balances and the availability of funds to the Bank from the certificate of
deposit promotion during the first quarter of 1995. This certificate of deposit
promotion has allowed the Bank to maintain a liquidity ratio within the limits
set in its risk management policies and procedures during the first nine months
of 1995.
Nonperforming assets amounted to $4,036,000 at September 30, 1995, a 5%
decrease from $4,251,000 at December 31, 1994 and a 24% decrease from
nonperforming assets of $5,304,000 at September 30, 1994. Nonperforming loans
decreased 17% to $646,000 at September 30, 1995 compared to nonperforming loans
of $776,000 at December 31, 1994 and decreased 67% from $1,986,000 as of
September 30, 1994. The OREO balances decreased 2% from $3,475,000 as of
December 31, 1994 to $3,390,000 at September 30, 1995, which was a 2% increase
from an OREO balance of $3,318,000 at September 30, 1994. During this twelve
month period ending September 30, 1995, two new residential properties were
added to OREO and three properties were sold, resulting in a net decrease of
$121,000 in OREO from these properties. During the first nine months of 1995,
$193,000 in capitalizable costs was added to the book value of an existing OREO
property, which is being offered for sale and which is appraised at more than
the Bank's new book value.
As of September 30, 1995 and 1994, there were no significant loans
classified for regulatory purposes as loss, doubtful, substandard or special
mention that either (i) represent or result from trends or uncertainties which
management reasonably expects will impact future operating results, liquidity,
or capital resources, or (ii) represent material credits about which management
is aware of any information, causing management to have serious
<PAGE>
doubts as to the borrower's ability to comply with the loan repayment terms.
Total deposits decreased less than 1% to $300,397,000 as of September 30,
1995 from $301,337,000 as of December 31, 1994. A more meaningful measurement of
deposit growth is the change in daily average outstanding deposit balances.
Total daily average outstanding deposit balances increased 3% to $297,317,000
for the nine month period ended September 30, 1995 from $289,599,000 for the
same period in 1994. Although the amount of total deposits remained relatively
stable, as previously mentioned, the mix of deposits has shifted. Since the Bank
raised approximately $15,000,000 in new funds from a "Premier" certificate of
deposit promotion, the percentage of average time deposits to the total average
interest bearing deposits for the first nine months of 1995 rose to 29% compared
to 19% for the first nine months of 1994. Daily average balances for
certificates of deposit grew 54% for the first nine months of 1995 compared to
the same period in 1994. As a reaction to a consistently low interest rate
environment for interest bearing deposits, all other daily average outstanding
balances declined during the first nine months of 1995 compared to the same
period in 1994. The largest decline came in daily average savings balances,
which decreased 19% from the first nine months of 1994. Noninterest bearing
demand deposit daily average outstanding balances grew 5% over the same period.
LIQUIDITY, INTEREST RATE SENSITIVITY
- ------------------------------------
The Bank's liquidity is maintained by managing its core deposits, selling
loans in the secondary market, borrowing from the Federal Home Loan Bank and
managing its position in the federal funds market. The Bank, through its
internal Asset/Liability Committee ("ALCO"), has adopted Risk Management
Policies and Procedures (the "Policy") for monitoring goals for both liquidity
and interest rate sensitivity. Periodically, ALCO reviews the Bank's liquidity
ratio, comparing liquid assets, cash, unpledged investments and federal funds
sold against deposits, net of certificates of deposit in excess of $100,000. It
is presently the goal of ALCO to maintain a ratio of not less than 20%. This
ratio was 26% at September 30, 1995, compared to 24% at December 31, 1994 and
28% at September 30, 1994.
In the short term, 30 days or less, the Bank is asset rate sensitive after
adjusting the interest rate sensitivity of savings deposits based on
management's experience and assumptions regarding the impact of product pricing,
interest rate spread relationships and customer behavior. Asset rate sensitivity
will result in a greater portion of assets compared to deposits repricing with
changes in interest rates within specified time periods. The opposite effect
results from being liability rate sensitive. Asset rate sensitivity in the short
term in an increasing rate environment should produce an increase in net
interest income. The Bank uses simulation models to measure its interest rate
risk and to manage its interest rate sensitivity. The simulation models consider
not only the impact of changes in interest rates on forecasted net interest
income, but also such factors as yield curve relationships, possible loan
prepayments, and deposit withdrawals. As of September 30, 1995, based on the
results from the simulation models, the amount of the Bank's interest rate risk
was within the acceptable range as established by the Policy.
<PAGE>
CAPITAL RESOURCES
- -----------------
Total consolidated shareholders equity of the Corporation was $30,878,000,
or 9.1% of total assets, as of September 30, 1995, compared to total
shareholders equity of $27,146,000, or 8.1% of total assets, as of December 31,
1994. As of September 30, 1994, shareholders' equity was $26,638,000, or 8.2% of
total assets. The Corporation's risk weighted Tier I capital ratio was 12.07% as
of September 30, 1995 compared to 11.45% and 11.86% at December 31, 1994 and
September 30, 1994, respectively. The respective Tier II ratios were 13.32%,
12.70% and 13.11%, respectively. The Corporation declared a dividend of $.25 per
share in January, April and July 1995 or a cumulative dividend of $.75 per
share, a 67% increase over the year to date dividend declared of $.45 per share
in 1994.
<PAGE>
PART II. OTHER INFORMATION
--------------------------
SEPTEMBER 30, 1995
ITEM 1. LEGAL PROCEEDINGS
--------
NONE
ITEM 2. CHANGES IN SECURITIES
--------
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
--------
NONE
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
--------
HOLDERS
NONE
ITEM 5. OTHER INFORMATION
--------
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bryn Mawr Bank Corporation
Date: November 8, 1995 By:/s/ Robert L.Stevens
----------------- --------------------
Robert L. Stevens
President
Date: November 8, 1995 By:/s/ Joseph W. Rebl
----------------- ------------------
Joseph W. Rebl
Treasurer and
Assistant Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JUL-01-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 19,767 0
<INT-BEARING-DEPOSITS> 137 0
<FED-FUNDS-SOLD> 10,412 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 61,992 0
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 228,949 0
<ALLOWANCE> 4,038 0
<TOTAL-ASSETS> 338,629 0
<DEPOSITS> 300,397 0
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 7,354 0
<LONG-TERM> 0 0
<COMMON> 1,247 0
0 0
0 0
<OTHER-SE> 29,631 0
<TOTAL-LIABILITIES-AND-EQUITY> 338,629 0
<INTEREST-LOAN> 14,533 5,024
<INTEREST-INVEST> 2,342 839
<INTEREST-OTHER> 579 208
<INTEREST-TOTAL> 17,454 6,071
<INTEREST-DEPOSIT> 5,330 1,910
<INTEREST-EXPENSE> 5,330 1,910
<INTEREST-INCOME-NET> 12,124 4,161
<LOAN-LOSSES> 375 125
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 13,427 4,469
<INCOME-PRETAX> 5,032 1,858
<INCOME-PRE-EXTRAORDINARY> 5,032 1,858
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,533 1,299
<EPS-PRIMARY> 3.23 1.19
<EPS-DILUTED> 3.23 1.19
<YIELD-ACTUAL> 5.19 0
<LOANS-NON> 646 0
<LOANS-PAST> 0 0
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<ALLOWANCE-OPEN> 3,618 0
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</TABLE>
