<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 June 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) (Zip Code)
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 August 10, 1995
----------------------- 1,094,690
Common Stock, par value $1
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED June 30, 1995
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
Consolidated Statements of Income for Six
Months Ended June 30, 1995 and 1994...............Page 1
Consolidated Statements of Income for Three
Months Ended June 30, 1995 and 1994...............Page 2
Consolidated Balance Sheets as of June 30, 1995,
December 31, 1994 and June 30, 1994...............Page 3
Consolidated Statements of Cash Flows For the Six
Months Ended June 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 15
<PAGE>
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
ITEM 1. BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In Thousands)
Unaudited
Six Months Ended
June 30
1995 1994
------- -------
<S> <C> <C>
Interest income:
Interest and fees on loans........................... $ 9,509 $ 7,637
Interest on federal funds sold....................... 366 179
Interest on interest bearing deposits with banks..... 5 10
Interest and dividends on investment securities:
U.S. Treasury securities........................... 1,146 1,509
Obligations of states and political subdivisions... 318 364
Dividend income.................................... 39 28
------- -------
Total interest income.................................. 11,383 9,727
Interest expense on deposits........................... 3,420 2,498
------- -------
Net interest income.................................... 7,963 7,229
Loan loss provision.................................... 250 250
------- -------
Net interest income after loan loss provision.......... 7,713 6,979
------- -------
Other income:
Fees for Trust services.............................. 2,670 2,350
Service charges on deposits.......................... 514 550
Other service charges, commissions and fees.......... 450 476
Net gain on sale of loans............................ 144 298
Net gain on sale of other real estate owned.......... 132 131
Other operating income............................... 509 504
------- -------
Total other income..................................... 4,419 4,309
------- -------
Other expenses:
Salaries and wages................................... 3,749 3,659
Employee benefits.................................... 885 919
Occupancy and bank premises.......................... 696 692
Furniture, fixtures, and equipment................... 436 377
Other operating expenses............................. 3,192 2,976
------- -------
Total other expenses................................... 8,958 8,623
------- -------
Income before income taxes............................. 3,174 2,665
Applicable income taxes................................ 940 730
------- -------
Net Income............................................. $ 2,234 $ 1,935
======= =======
Earnings per average common share:
Net income........................................... $2.04 $1.77
Cash dividends declared.............................. $0.50 $0.30
Average number of shares outstanding................... 1,093,690 1,090,182
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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
June 30
1995 1994
------- -------
<S> <C> <C>
Interest income:
Interest and fees on loans.......................... $ 4,811 $ 3,911
Interest on federal funds sold...................... 281 82
Interest on interest bearing deposits with banks.... 1 0
Interest and dividends on investment securities:
U.S. Treasury securities.......................... 593 768
Obligations of states and political subdivisions.. 158 180
Dividend income................................... 23 14
--------- ---------
Total interest income.................................. 5,867 4,955
Interest expense on deposits........................... 1,826 1,241
--------- ---------
Net interest income.................................... 4,041 3,714
Loan loss provision.................................... 125 125
--------- ---------
Net interest income after loan loss provision.......... 3,916 3,589
--------- ---------
Other income:
Fees for Trust services............................. 1,406 1,150
Service charges on deposits......................... 279 277
Other service charges, commissions and fees......... 243 217
Net gain on sale of loans........................... 103 51
Net gain on sale of other real estate owned......... 77 86
Other operating income.............................. 277 263
--------- ---------
Total other income..................................... 2,385 2,044
--------- ---------
Other expenses:
Salaries and wages.................................. 1,920 1,805
Employee benefits................................... 475 422
Occupancy and bank premises......................... 370 338
Furniture, fixtures, and equipment.................. 219 180
Other operating expenses............................ 1,683 1,546
--------- ---------
Total other expenses................................... 4,667 4,291
--------- ---------
Income before income taxes............................. 1,634 1,342
Applicable income taxes................................ 490 352
--------- ---------
Net income............................................. $ 1,144 $ 990
========= =========
Earnings per average common share:
Net income.......................................... $1.04 $0.90
Cash dividends declared............................. $0.25 $0.15
Average number of shares outstanding................... 1,093,690 1,091,736
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 2
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
(Unaudited) (Unaudited)
-----------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks.......................................................... $ 20,451 $ 19,353 $ 25,456
Interest bearing deposits with banks............................................. 79 1,584 43
Federal funds sold............................................................... 25,307 9,500 4,150
Investment securities available for sale, at market (amortized
cost of $61,207, $59,995 and $75,739 as of June 30, 1995,
December 31, 1994 and June 30, 1994, respectively)............................. 61,168 58,563 75,027
Loans:
Consumer....................................................................... 73,678 76,828 61,155
Commercial..................................................................... 53,923 54,631 49,358
Real Estate.................................................................... 95,169 97,279 87,789
---------- ---------- ----------
Total loans.................................................................. 222,770 228,738 198,302
Less: Allowance for possible loan losses....................................... (3,954) (3,618) (3,800)
---------- ---------- ----------
Net loans.................................................................... 218,816 225,120 194,502
---------- ---------- ----------
Premises and equipment, net...................................................... 11,765 11,383 11,151
Accrued interest receivable...................................................... 2,036 1,999 2,042
Other real estate owned.......................................................... 3,390 3,475 2,887
Other assets..................................................................... 2,055 2,203 2,302
---------- ---------- ----------
Total assets................................................................. $ 345,067 $ 333,180 $ 317,560
========== ========== ==========
Liabilities
Deposits:
Demand, noninterest-bearing.................................................... $ 77,777 $ 83,142 $ 66,385
Savings........................................................................ 159,303 176,375 177,274
Time........................................................................... 71,810 41,820 43,159
---------- ---------- ----------
Total deposits............................................................... 308,890 301,337 286,818
Other liabilities................................................................ 6,425 4,697 4,839
---------- ---------- ----------
Total liabilities............................................................ 315,315 306,034 291,657
---------- ---------- ----------
Shareholders' equity
Common stock, par value $1; authorized 5,000,000
shares; issued 1,245,100 shares as of June 30, 1995,
December 31, 1994 and June 30, 1994 and 1,093,690
shares outstanding at June 30, 1995, December 31, 1994
and June 30, 1994.............................................................. 1,245 1,245 1,245
Paid-in capital in excess of par value........................................... 5,559 5,559 5,559
Unrealized investment appreciation
(depreciation) net of deferred income taxes.................................... (26) (945) (457)
Retained earnings................................................................ 24,513 22,826 21,095
---------- ---------- ----------
31,291 28,685 27,442
Less: Common stock in treasury at cost -- 151,410 shares......................... (1,539) (1,539) (1,539)
---------- ---------- ----------
Total shareholders' equity..................................................... 29,752 27,146 25,903
---------- ---------- ----------
Total liabilities and shareholders' equity..................................... $ 345,067 $ 333,180 $ 317,560
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of consolidated financial
statements.
Form 10-Q
Page 3
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
1995 1994*
---------- ----------
<S> <C> <C>
Operating activities:
Net Income................................................................. $ 2,234 $ 1,935
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses............................................... 250 250
Provision for depreciation and amortization............................. 490 414
Gain on sale of other real estate owned................................. (126) (131)
Loans originated for resale............................................. (19,237) (30,001)
Proceeds from loans sold................................................ 22,606 26,674
Gain on sale of loans................................................... (144) (298)
Provision for (reduction in) deferred income taxes...................... (203) (479)
Decrease in taxes receivable............................................ 1,043 105
Increase in interest receivable......................................... (37) (152)
Increase in interest payable............................................ 1,106 328
Other................................................................... (522) (271)
---------- ----------
Net cash provided (used) by operating activities..................... 7,460 (1,626)
---------- ----------
Investing activities:
Purchases of investment securities......................................... (8,283) (10,261)
Proceeds from maturity of investment securities............................ 7,015 14,575
Loan repayments, net of loan originations.................................. 14,563 14,883
Loans purchased (dealer loans)............................................. (11,734) (18,159)
Purchases of premises and equipment........................................ (815) (406)
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................................ 957 1,397
---------- ----------
Financing activities:
Net decrease in demand and savings deposits................................ (22,437) (3,579)
Net increase (decrease) in time deposits................................... 29,990 (677)
Dividends paid............................................................. (547) (327)
Repayment of mortgage debt................................................. (23) (20)
Proceeds from issuance of common stock..................................... 0 125
---------- ----------
Net cash provided (used) by financing activities..................... 6,983 (4,478)
---------- ----------
Increase (decrease) in cash and cash equivalents........................... 15,400 (4,707)
Cash and cash equivalents at beginning of period........................... 30,437 34,356
---------- ----------
Cash and cash equivalents at end of period................................. $ 45,837 $ 29,649
========== ==========
Supplemental cash flow information:
Income taxes paid....................................................... $ 101 $ 668
Interest paid........................................................... $ 2,314 $ 2,170
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
*- Reclassified for comparative purposes.
Form 10-Q
Page 4
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of June 30, 1995 and 1994, the consolidated statements of cash
flows for the six month periods ended June 30, 1995 and 1994 and the related
consolidated statements of income for the six month and three month periods
ended June 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. These
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 six month
and three month periods ended June 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.
Form 10-Q
Page 5
<PAGE>
As of June 30, 1995 and 1994, the unrealized depreciation of investment
securities classified as available for sale, net of deferred taxes, decreased
shareholders' equity by $26,000 and $457,000, respectively.
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 the
fair value of the collateral. 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 June 30, 1995, the recorded investment in loans for which impairment
has been recognized in accordance with SFAS No. 114 totaled $731,000. All
impaired loans had a related allowance for loan losses. The total related
allowance for loan losses is $271,000.
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>
six months ended year ended
June 30, December 31,
1995 1994 1994
------ ------ ------
<S> <C> <C> <C>
Balance, Beginning of period $3,618 $3,601 $3,601
------ ------ ------
Charge-offs:
Consumer (102) (161) (365)
Commercial and industrial (67) 0 0
Real estate (8) 0 (298)
------ ------ ------
Total charge-offs (177) (161) (663)
------ ------ ------
Recoveries:
Consumer 25 18 45
Commercial and industrial 228 92 115
Real estate 10 0 20
------ ------ ------
Total recoveries 263 110 180
------ ------ ------
Net (charge-offs) / recoveries 86 (51) (483)
Provision for loan losses 250 250 500
------ ------ ------
Balance, End of period $3,954 $3,800 $3,618
====== ====== ======
</TABLE>
Form 10-Q
Page 6
<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 $2,234,000 for the
first six months of 1995, a 15% increase over $1,935,000 of net income reported
for the first six months of 1994. Earnings per common share amounted to $2.04,
a 15% increase over earnings per common share of $1.77 reported for the first
six months of 1994. Per share computations were based on 1,093,690 and
1,090,182 average shares outstanding for the first six months of 1995 and 1994,
respectively.
For the second quarter of 1995, the Corporation reported net income of
$1,144,000 a 16% increase over net income of $990,000, reported for the second
quarter of 1994. Earnings per common share on net income amounted to $1.04 for
the second quarter of 1995 compared to $.90 for the second quarter of 1994 on
average shares outstanding of 1,093,610 and 1,091,736, respectively.
The increase in earnings for the first six months of 1995 over the same
period in 1994 is primarily a result of the increases in interest rates during
1994 and 1995. As interest rates began to rise in the beginning of 1994 and
continued through the beginning of 1995, so did the Corporation's net interest
margin rise. The net interest margin is the difference between the rate earned
by the Bank on its interest-bearing assets and the rate paid to fund the
interest-earning assets. This growth in income generated by the rise in the net
interest margin was partially offset by a decrease in the income generated by
the mortgage banking business which slowed significantly since the first quarter
of 1994. This mortgage banking activity increased in the second quarter of
1995.
Management currently believes that, in an increasing interest rate
environment, the expected increase in the net interest margin will help offset
any decrease in mortgage origination and sale revenue. 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 operations in
the future.
NET INTEREST INCOME
-------------------
For the six months ended June 30, 1995, net interest income rose 10% to
$7,963,000 from $7,229,000 in 1994. While total interest income grew 17% for
the first six months of 1995, to $11,383,000 from $9,727,000 for the first six
months of 1994, interest expense increased 37% over the same periods. Interest
expense for the six months ended June 30, 1995 and 1994 was $3,420,000 and
$2,498,000, respectively. Overall, the yield on earning assets for the first
six months of 1995 was 7.5% versus 6.7% for the first six months of 1994 while
the effective rate paid on interest bearing liabilities for the
Form 10-Q
Page 7
<PAGE>
first six months of 1995 and 1994 was 3.0% and 2.2%, respectively. The increase
in both the yield on earning assets and the cost of liabilities is due to the
increase in interest rates during 1994 and 1995.
Interest and fees on loans increased 25% from $7,637,000 for the first six
months of 1994 to $9,509,000 for the first six months of 1995. While the
average yield on the loan portfolio increased from 7.7% for the first six months
of 1994 to 8.3% for 1995, the primary reason for the 25% increase in loan income
was a 16% increase in the daily average outstanding loan balances from
$191,558,000, for the first six months of 1994 to $222,524,000 for the same
period in 1995.
Interest income on investments decreased 21% from the first six months of
1994 to the first six months of 1995. The primary decrease was in interest from
U.S. Treasury obligations which decreased 24% from $1,509,000 for the first six
months of 1994 to $1,146,000 for the first six months of 1995. The daily
average balance of U.S. Treasury securities decreased by $18 million from
$64,132,000 during the first six months of 1994 to $45,942,000 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
in order to fund the loan growth. The yield on investment securities increased
slightly from 4.8% for the first six months of 1994 to 5.1% for the first six
months of 1995.
Interest expense on deposits increased 37% as the average rate paid on
interest bearing deposits increased 80 basis points from 2.2% in the first six
months of 1994 to 3.0% in the first six months of 1995. The rate paid on
interest bearing deposits increased for two reasons. The overall rate paid on
deposits increased during 1994 and 1995 as interest rates increased.
Additionally, in order to help fund loan growth, the Bank offered a "Premier"
certificate of deposit product with an attractive interest rate. Therefore,
raising over $15,000,000 in new funds during the first quarter of 1995 through
the certificate of deposit promotion contributed to the increase in the average
effective rate paid on deposits during the first six months of 1995 compared to
the similar period in 1994. The daily average interest bearing deposit balances
increased 1% to $227,449,000 at June 30, 1995 compared to $224,445,000 for the
same period in 1994. However, the deposit mix has changed for the first six
months of 1995 compared to the same period in 1994. For the first six months of
1994, average time deposits represented 19% of the Bank's interest bearing
deposits compared to 28% for the first six months of 1995.
For the first six months of 1995, the net interest margin increased to
5.23% from 4.95% for the first six months of 1994. The increase in the net
interest margin is due to earning assets repricing faster than the costing
liabilities as interest rates increase. The net interest margin is computed
exclusive of related loan fee income.
For the second quarter of 1995, net interest income increased 9%, to
$4,041,000 in 1995 from $3,714,000 for the same quarter in 1994. Total interest
income grew 18% to $5,867,000 in 1995 compared to $4,955,000 in 1994. Both
growth in the average outstanding loans and an increase in interest rates in the
second quarter of 1995, compared to the same period in 1994, are primarily
responsible for this increase. Interest and fees on loans grew 23%
Form 10-Q
Page 8
<PAGE>
during the second quarter of 1995, compared to the second quarter of 1994.
Interest income on U.S. Treasury securities and obligations of states and
political subdivisions decreased 23% and 12%, respectively during the second
quarter of 1995 compared to the same quarter in 1994. This is primarily due to
a decrease in average outstanding balances related to these income streams. A
combination of an increase in excess funds available for sale and an increase in
the rate paid on federal funds sold in the second quarter of 1995 compared to
the same quarter in 1994 accounted for a 243% increase in interest on federal
funds sold in 1995 compared to the second quarter of 1994. Interest on deposits
grew 47% in the second 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 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 $250,000 for the first six months of both 1995 and 1994. The loan loss
reserve amounted to 1.8% of outstanding loans at June 30, 1995 and 1.9% in 1994.
Nonperforming loans have decreased 55% to $943,000 as of June 30, 1995, down
from $2,081,000 as of June 30, 1994. The loan loss reserve amounted to 419% of
nonperforming loans as of June 30, 1995 compared to 183% as of June 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 June 30, 1995.
During the first quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Form 10-Q
Page 9
<PAGE>
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 the fair value of the collateral. 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 3% from $4,309,000 for the period ended June 30,
1994 to $4,419,000 for the period ended June 30, 1995.
Fees for trust services rose 14% from $2,350,000 for the first six months
of 1994 to $2,670,000 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.
While a rise in short term interest rates proved beneficial to the
Corporation's core business of banking, it was primarily responsible for a
decline in income from the Bank's mortgage banking line of business. The
combined decrease in fees and net gains on the origination and sale of mortgages
loans was $243,000 from the first six months of 1994 compared to the same period
in 1995. For the six months ended June 30, 1995, the Bank reported net gains on
the sale of loans in the secondary mortgage market of $144,000, a 52% decrease
in net gains on loan sales reported for the first half of 1994 of $$298,000.
Loans originated and sold in the first six months of 1994 amounted to
$26,674,000 compared to $22,606,000 originated and sold in the first six months
of 1995.
For the period ended June 30, 1995, the increase in interest rates was also
responsible for a $36,000, or 7%, decrease in service charges on deposit
accounts, due primarily to increases in the earnings credit rate used to offset
these service charges. Other service charges, commissions and fees also
decreased 5% as mortgage documentation fees decreased in connection with the
decline in the mortgage origination activity.
For the quarter ended June 30, 1995, total other income was $2,385,000 a
17% increase from $2,044,000 for the same period in 1994. Fees for trust
services, including two months revenues from the family office business venture
in 1995 revenues, rose 22% from $1,150,000 in 1994 to $1,406,000 for the quarter
ended June 30, 1995. A decrease in mortgage interest rates prompted renewed
interest in refinancing mortgage loans. During the second quarter of 1995, the
Bank originated and sold in the secondary mortgage market $14,759,000 in
mortgage loans, compared to $6,451,000 during the same period in 1994. Net
gains on the sale of loans was $103,000 for the second quarter of 1995, a 102%
increase over $51,000 in net gains on the sale of loans reported for the second
quarter of 1994.
Form 10-Q
Page 10
<PAGE>
OTHER EXPENSE
-------------
Total other expense increased 4% for the first six months of 1995 to
$8,958,000 from $8,623,000 for the first six months ended in 1994. Salaries and
wages grew 2% for the six months ended June 30, 1995 compared to the same period
in 1994. There are a number of factors accounting for this change. A reduction
in incentive salaries, specifically associated with salary incentive plans
related to both the sale of mortgage loans in the secondary mortgage market and
increases in certain deposit accounts, was offset by merit increases given to
staff during the prior twelve month period as well as the expansion of the
Bank's staff to accommodate the establishment of the family office business
venture in the trust division in May 1995. However, the Bank's full time
equivalent staff decreased to 199 as of June 30, 1994, down from 204 as of June
30, 1994. Fringe benefits are down $34,000 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 1% for the first six months of 1995 from $692,000
for the first six months of 1994 to $696,000 for the first six months of 1995.
Furniture and equipment expenses grew 16% over the first six months of 1994,
from $377,000 for the first six months of 1994 to $436,000 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 (LAN). Other operating expenses
increased 7% over the first six months of 1994, from $2,976,000 for the first
six months of 1994 to $3,192,000 for the first six months of 1995, as computer
processing, ATM charges, and postage costs increased from year to year.
For the quarter, total other expenses increased 9% to $4,667,000 for the
quarter ended June 30, 1995 compared to $4,291,000 in 1994. Salaries and wages
grew 6% from $1,805,000 for the second quarter of 1994 to $1,920,000 for the
same quarter in 1995. Regular salaries amounted to $1,700,000 for the second
quarter of 1995, a 1% increase over $1,682,000 for the second quarter of 1994.
Incentive related salary expenses rose 79% from $123,000 for the second quarter
of 1994 to $220,000 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 sales and trust incentives. Employee benefits expenses rose 13%
for the quarter ended June 30, 1995, to $475,000, compared to $422,000 for the
same quarter in 1994, reflecting the increased costs associated with
administering the Corporation's employee benefits package. Occupancy and bank
premises expense rose 9% to $370,000 for the quarter ended June 30, 1995,
compared to $338,000 for the same quarter in 1994. A 22% increase in the
expense of furniture, fixtures and equipment for the second quarter of 1995, to
$219,000 compared to $180,000 for the second quarter in 1994, reflects the
expense of upgrading the Bank's local area network during the second half of
1994. Other operating expenses rose 9% or $137,000 for the second quarter of
1995, to $1,683,000 compared to $1,546,000 for the same quarter of 1994. The
primary reasons for this increase were non-recurring costs of $135,000 to settle
two outstanding disputes involving the Bank.
APPLICABLE INCOME TAXES
-----------------------
The Corporation's effective tax rate for the first six months of 1995 was
30% compared to 27% for 1994. The increase is due to a decrease in the tax-
Form 10-Q
Page 11
<PAGE>
favored income from obligations from states and political subdivisions. The
decrease in tax-favored income corresponds to the decrease in the investment
portfolio necessary to fund the loan growth.
FINANCIAL CONDITION
-------------------
Total assets increased 4% from $333,180,000 at December 31, 1994 to
$345,067,000 as of June 30, 1995. Total assets grew 9% from $317,560,000 as of
June 30, 1994.
Outstanding earning assets increased 4% to $309,324,000 as of June 30, 1995
from $298,385,000 as of December 31, 1994. The Bank's loan portfolio decreased
3% to $222,770,000 at June 30, 1995 from $228,738,000 as of December 31, 1994 as
all loan categories, consumer, commercial and real estate, experienced slight
declines. However, from June 30, 1994, all loan categories grew, with the
consumer loan portfolio growing the most, by 20%. Consumer loans at June 30,
1994 were $61,155,000; at June 30, 1995, consumer loans were $73,678,000, which
represented a 4% decrease from December 31, 1994 outstanding consumer loan
balances of $76,828,000. The consumer loan portfolio consists primarily of
shorter term direct consumer loans and purchased automobile dealer loans. This
portfolio's growth is a result of the Bank expanding the network of automobile
dealerships from which dealer loans are purchased.
The Bank's investment portfolio, having a market value of $61,168,000 at
June 30, 1995, increased 4% from a value of $58,563,000 at December 31, 1994 and
decreased 18% from $75,027,000 as of June 30, 1994. The decrease in the
investment portfolio from June 1994 to June 1995 was primarily used to 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 June 30, 1995, the amount of the net
unrealized loss on investment securities decreased to $39,000 from $1,432,000 at
December 31, 1994. The unrealized investment depreciation, net of deferred
income taxes, reduced the Corporation's shareholders' equity on the balance
sheet by $26,000 as of June 30, 1995.
The balance of federal funds sold increased from $4,150,000 at June 30,
1994 and $9,500,000 at December 31, 1994 to $25,307,000 as of June 30, 1995.
The increase in federal funds sold balances at June 30, 1995, compared to year
end 1994 levels is a result of both the availability of funds to the Bank from
the certificate of deposit promotion during the first quarter of 1995 and a net
reduction in the Bank's outstanding loans and investments from December 31, 1994
outstanding balances.
Form 10-Q
Page 12
<PAGE>
Nonperforming assets amounted to $4,333,000 at June 30, 1995, a 2% increase
from $4,251,000 at December 31, 1994 and a 13% decrease from nonperforming
assets of $4,968,000 at June 30, 1994. Nonperforming loans increased 22% to
$943,000 at June 30, 1995 compared to nonperforming loans of $776,000 at
December 31, 1994 and decreased 55% from $2,081,000 as of June 30, 1994. The
OREO balances decreased 2% from $3,475,000 as of December 31, 1994 to $3,390,000
at June 30, 1995, which was a 17% increase from an OREO balance of $2,887,000 at
June 30, 1994. During this twelve month period ending June 30, 1995, three new
residential properties were added to OREO; three properties were sold, resulting
in a net increase of $310,000 in OREO from these properties. Another $193,000
in capitalizable costs was added to an existing OREO property, which is being
offered for sale and which is appraised for more than the Bank's new carrying
value.
As of June 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 doubts as to the borrower's
ability to comply with the loan repayment terms.
Total deposits increased 3% to $308,890,000 as of June 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 grew 2% to $295,364,000 for the six month
period ended June 30, 1995 from $289,525,000 for the same period in 1994.
Although the amount of total deposits remained relatively stable, as previously
mentioned, the mix of deposits has shifted. As 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 six months of 1995 was 28% compared to 19% for the first
six months of 1994. Daily average balances for certificates of deposit grew 46%
for the first six 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
six months of 1995 compared to the same period in 1994. The largest decline
came in daily average savings balances, which decreased 18% from the first six
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 30% at June 30, 1995, compared to 24% at December
Form 10-Q
Page 13
<PAGE>
31, 1994 and 32% at June 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 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 June 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.
CAPITAL RESOURCES
-----------------
Total consolidated shareholders equity of the Corporation was $29,752,000,
or 8.6% of total assets, as of June 30, 1995, compared to total shareholders
equity of $27,146,000, or 8.1% of total assets, as of December 31, 1994. As of
June 30, 1994, shareholders' equity was $25,903,000, or 8.2% of total assets.
The Corporation's risk weighted Tier I capital ratio was 12.14% as of June 30,
1995 compared to 11.45% and 12.16% at December 31, 1994 and June 30, 1994,
respectively. The respective Tier II ratios were 13.40%, 12.70% and 13.42%,
respectively. The Corporation declared a dividend of $.25 per share in January
and again in April 1995 or a cumulative dividend of $.50 per share, a 67%
increase over the year to date dividend declared of $.30 per share in 1994.
Form 10-Q
Page 14
<PAGE>
PART II. OTHER INFORMATION
--------------------------
June 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
The Registrant, Bryn Mawr Bank Corporation,
held its regular annual shareholders meeting
on April 18, 1995. At the 1995 Annual
Meeting, in addition to the traditional
election of directors (which need not be
described in this Item 4 since that election
fulfilled the requirements of Instruction 3
to this Item 4) the Registrant's shareholders
adopted a Bryn Mawr Bank Corporation Non-
Employee Directors Stock Option Plan and the
votes cast were as follows:
For 848,502
Against 105,180
Abstain 28,411
The Registrant is not aware of any broker
non-votes with respect to the Stock Option
Proposal.
Item 5. Other Information
--------
None
Item 6. Exhibits and Reports on Form 8-K
--------
None
Form 10-Q
Page 15
<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: August 11, 1995 By:/s/ Robert L. Stevens
---------------- ------------------------
Robert L. Stevens
President
Date: August 11, 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> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 APR-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 20,541 0
<INT-BEARING-DEPOSITS> 79 0
<FED-FUNDS-SOLD> 25,307 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 61,168 0
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 222,770 0
<ALLOWANCE> 3,954 0
<TOTAL-ASSETS> 345,067 0
<DEPOSITS> 308,890 0
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 6,425 0
<LONG-TERM> 0 0
<COMMON> 1,245 0
0 0
0 0
<OTHER-SE> 28,507 0
<TOTAL-LIABILITIES-AND-EQUITY> 345,067 0
<INTEREST-LOAN> 9,509 4,811
<INTEREST-INVEST> 1,503 774
<INTEREST-OTHER> 371 282
<INTEREST-TOTAL> 11,383 5,867
<INTEREST-DEPOSIT> 3,420 1,826
<INTEREST-EXPENSE> 3,420 1,826
<INTEREST-INCOME-NET> 7,963 4,041
<LOAN-LOSSES> 250 125
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 8,958 6,667
<INCOME-PRETAX> 3,174 1,634
<INCOME-PRE-EXTRAORDINARY> 3,174 1,634
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,234 1,144
<EPS-PRIMARY> 2.04 1.04
<EPS-DILUTED> 2.04 1.04
<YIELD-ACTUAL> 5.46 0
<LOANS-NON> 943 0
<LOANS-PAST> 0 0
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