<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 March 31, 1996 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 May 1, 1996
- -----------------------
Common Stock, par value $1 2,190,380
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED March 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated Statements of Income for Three
Months Ended March 31, 1996 and 1995..............Page 1
Consolidated Balance Sheets as of March 31, 1996,
December 31, 1995 and March 31, 1995..............Page 2
Consolidated Statements of Cash Flows For the Three
Months Ended March 31, 1996 and 1995..............Page 3
Notes to Consolidated Financial Statements.............Page 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....Page 7
PART II - OTHER INFORMATION................................Page 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1996 1995
------- ------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans...................................................... $ 5,049 $ 4,698
Interest on federal funds sold.................................................. 160 85
Interest on interest bearing deposits with banks................................ 1 4
Interest and dividends on investment securities:
U.S. Treasury securities...................................................... 442 553
U.S. Government Agency securities............................................ 168 0
Obligations of states and political subdivisions.............................. 122 160
Dividend income............................................................... 17 16
------ ------
Total interest and dividend income................................................ 5,959 5,516
Interest expense on deposits...................................................... 1,679 1,594
Net interest income............................................................... 4,280 3,922
Loan loss provision............................................................... 125 125
------- -------
Net interest income after loan loss provision..................................... 4,155 3,797
------- -------
OTHER INCOME:
Fees for Trust services......................................................... 1,445 1,264
Service charges on deposits..................................................... 289 235
Other service charges, commissions and fees..................................... 329 270
Net gain on sale of loans....................................................... 101 41
Net gain on sale of other real estate owned..................................... 1,074 55
Other operating income.......................................................... 201 169
------- -------
Total other income................................................................ 3,439 2,034
------- -------
OTHER EXPENSES:
Salaries and wages.............................................................. 2,122 1,829
Employee benefits............................................................... 512 410
Occupancy and bank premises..................................................... 415 326
Furniture, fixtures, and equipment.............................................. 222 217
Other operating expenses........................................................ 1,726 1,509
------- -------
Total other expenses.............................................................. 4,997 4,291
------- -------
Income before income taxes........................................................ 2,597 1,540
Applicable income taxes........................................................... 840 450
------- -------
Net Income........................................................................ $ 1,757 $ 1,090
======= =======
Earnings per average common share:
Net income *................................................................. $0.77 $0.50
Cash dividends declared *.................................................... $0.47 $0.125
Average number of shares outstanding including common stock equivalents *........2,269,086 2,187,380
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
*- 1995 per share data has been restated to relect the 2-for-1 stock
split, effective on December 29, 1995.
FORM 10-Q
PAGE 1
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
(UNAUDITED) (UNAUDITED)
--------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................................ $ 22,269 $ 25,128 $ 19,136
Interest bearing deposits with banks................................... 107 115 61
Federal funds sold..................................................... 0 19,410 13,152
Investment securities available for sale, at market (amortized
cost of $51,258, $58,890 and $59,594 as of March 31, 1996,
December 31, 1995 and March 31, 1995, respectively).................. 51,354 59,211 58,959
Loans:
Consumer............................................................. 72,967 73,189 75,588
Commercial........................................................... 69,208 67,507 52,516
Real Estate.......................................................... 103,461 94,657 96,454
--------- -------- --------
Total loans........................................................ 245,636 235,353 224,558
Less: Allowance for loan losses...................................... (3,927) (3,652) (3,633)
--------- -------- --------
Net loans.......................................................... 241,709 231,701 220,925
--------- -------- --------
Premises and equipment, net............................................ 12,353 11,820 11,629
Accrued interest receivable............................................ 2,540 2,463 1,907
Other real estate owned................................................ 1,386 3,794 3,198
Other assets........................................................... 1,500 1,314 1,857
--------- --------- ---------
Total assets....................................................... $ 333,218 $ 354,956 $ 330,824
========= ========= =========
LIABILITIES
Deposits:
Demand, noninterest-bearing.......................................... $ 70,676 $ 81,128 $ 67,175
Savings.............................................................. 162,238 161,340 163,613
Time................................................................. 61,173 75,133 66,884
--------- --------- ---------
Total deposits..................................................... 294,087 317,601 297,672
Other liabilities...................................................... 6,649 5,452 4,663
--------- --------- ---------
Total liabilities.................................................. 300,736 323,053 302,335
--------- --------- ---------
Shareholders' equity
Common stock, par value $1; authorized 5,000,000
shares; issued 2,493,200 shares as of March 31, 1996 and
December 31, 1995 and 1,245,100 shares as of March 31,
1995 and outstanding 2,190,380 shares as of March 31,
1996 and December 31, 1995 and 1,093,690 as of
March 31, 1995....................................................... 2,493 2,493 1,245
Paid-in capital in excess of par value................................. 4,363 4,363 5,559
Unrealized investment appreciation
(depreciation) net of deferred income taxes.......................... 63 212 (419)
Retained earnings...................................................... 27,102 26,374 23,643
-------- -------- ---------
34,021 33,442 30,028
Less: Common stock in treasury at cost -- 302,820 shares as of
March 31, 1996 and December 31, 1995 and 151,410 as of
March 31, 1995....................................................... (1,539) (1,539) (1,539)
--------- --------- ---------
Total shareholders' equity........................................... 32,482 31,903 28,489
--------- --------- ---------
Total liabilities and shareholders' equity........................... $ 333,218 $ 354,956 $ 330,824
========= ========= =========
</TABLE>
The accompanying notes are an integral part of consolidated financial
statements.
FORM 10-Q
PAGE 2
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1996 1995
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income................................................................... $ 1,757 $ 1,090
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Provision for loan losses................................................. 125 125
Provision for depreciation and amortization............................... 243 241
Gain on sale of other real estate owned................................... (1,074) (55)
Loans originated for resale............................................... (17,862) (5,784)
Proceeds from loans sold.................................................. 10,248 9,691
Gain on sale of loans..................................................... (101) (41)
Reduction in deferred income taxes........................................ (40) (54)
Decrease in taxes receivable.............................................. 0 505
Change in interest receivable............................................. (77) 92
Increase in interest payable.............................................. 453 510
Other..................................................................... 729 (834)
--------- ---------
Net cash (used) provided by operating activities....................... (5,599) 5,486
--------- ---------
INVESTING ACTIVITIES:
Purchases of investment securities........................................... (4,066) (37)
Proceeds from maturity of fixed income securities............................ 11,629 410
Loan repayments, net of loan originations.................................... 5,017 6,755
Loans purchased (dealer loans)............................................... (7,435) (6,551)
Purchases of premises and equipment.......................................... (749) (459)
Proceeds from disposition of other real estate owned......................... 3,482 332
--------- ---------
Net cash provided by investing activities.............................. 7,878 450
--------- ---------
FINANCING ACTIVITIES:
Net decrease in demand and savings deposits.................................. (9,554) (28,729)
Net decrease in time deposits................................................ (13,960) 25,064
Dividends paid............................................................... (1,029) (273)
Repayment of mortgage debt................................................... (13) (12)
--------- ---------
Net cash used by financing activities.................................. (24,556) (3,950)
--------- ---------
(Decrease) increase in cash and cash equivalents............................. (22,277) 1,986
Cash and cash equivalents at beginning of period............................. 44,653 30,437
--------- ---------
Cash and cash equivalents at end of period................................... 22,376 $ 32,423
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid......................................................... $ 276 $ 0
Interest paid............................................................. $ 1,226 $ 1,084
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
FORM 10-Q
PAGE 3
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(UNAUDITED)
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of March 31, 1996 and 1995, the consolidated statements of
cash flows for the three month periods ended March 31, 1996 and 1995 and the
related consolidated statements of income for the three month periods ended
March 31, 1996 and 1995 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 1995 Annual Report
incorporated in the 1995 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 1995 Annual Report
incorporated in the 1995 Form 10-K (Exhibit #13). Shares under option under the
Plan had a dilutive impact on net income per share for the three month period
ended March 31, 1996 and did not have a material dilutive impact on net income
for the three month period ended March 31, 1995.
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:
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.
During the first quarter of 1996, the Corporation adopted Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS No. 122".) SFAS No. 122 requires the recognition of separate
assets relating to the rights to service mortgage loans for others based on
their fair value, if it is practicable to estimate the value. The adoption of
SFAS No. 122 did not have a material impact on the financial position or
FORM 10-Q
PAGE 4
<PAGE>
results of operations of the Corporation.
Also, during the first quarter of 1996, the Corporation adopted Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS No. 123"). SFAS No. 123 provides an alternative method of
accounting for stock based compensation arrangements, based on fair value of the
stock based compensation determined by an option pricing model utilizing various
assumptions regarding the underlying attributes of the options and the
Corporation's stock, rather than the existing method of accounting for stock
based compensation which is provided in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"). The Financial
Accounting Standards Board encourages entities to adopt the fair value based
method, but does not require the adoption of this method at this time. For
those entities that continue to apply APB No. 25, proforma disclosure of the
effect of SFAS No. 123, if adopted, on net income and earnings per share will be
required in the 1996 financial statements. The Corporation has determined to
continue to apply APB 25 and, therefore, there will be no material impact on the
financial position and results of operations.
5. Loans:
As of March 31, 1996, the recorded investment in loans for which impairment
has been recognized in accordance with SFAS No. 114 totaled $1,145,000. All
impaired loans had a related allowance for loan losses. The total related
allowance for loan losses is $151,000.
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 any loans, prior to 90 days delinquency, if management
determines it is warranted. Any principal or interest received on impaired
loans is recorded as a direct reduction of the unpaid principal balance of the
loan. When the unpaid principal balance of the loan has been fully collected,
any additional amounts collected are recognized as interest income.
FORM 10-Q
PAGE 5
<PAGE>
6. Allowance for Possible Loan Losses:
The summary of changes in the allowance is as follows:
<TABLE>
<CAPTION>
three months ended year ended
March 31, December 31,
1996 1995 1995
----------------- -------
<S> <C> <C> <C>
Balance, Beginning of period $3,652 $3,618 $3,618
------- ------- -------
Charge-offs:
Consumer (56) (60) (234)
Commercial and industrial 0 (67) (527)
Real estate 0 (8) (8)
------- ------- -------
Total charge-offs (56) (135) (769)
------- ------- -------
Recoveries:
Consumer 11 12 54
Commercial and industrial 187 13 236
Real estate 8 0 13
------- ------- -------
Total recoveries 206 25 303
------- ------- -------
Net (charge-offs) / recoveries 150 (110) (466)
Provision for loan losses 125 125 500
------- ------- -------
Balance, End of period $3,927 $3,633 $3,652
======= ======= =======
</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 $1,757,000 for the
first three months of 1996, a 61% increase over $1,090,000 of net income
reported for the first three months of 1995. The realization of a $1,073,000
pre-tax gain from the sale of a commercial property in the Bank's other real
estate owned ("OREO"), was primarily responsible for the large increase in net
income in the first quarter of 1996 compared to the first quarter of 1995.
Exclusive of this pre-tax gain and certain non-recurring expense items, net
income for the first quarter of 1996 was 11% ahead of first quarter 1995 net
income. For the first three months of 1996, earnings per common share,
including the dilutive effect of common stock equivalents, amounted to $.77, a
54% increase over earnings per common share of $.50 reported for the first three
months of 1994. Per share computations were based on 2,269,086 average shares
outstanding, including common stock equivalents for the first three months of
1996 and 2,187,380 average shares outstanding for the first three months of
1995. Per share amounts and average outstanding shares for 1995 have been
restated to reflect the 2-for-1 stock split, effective December 29, 1995.
The increase in earnings for the first three months of 1996 over the same
period in 1995 may be attributed to a number of factors, including an increase
in net interest income, up 9% over the first three months of 1995 and increases
in all categories of other income, which, exclusive of the increases from the
gains on the sale of OREO, were up 16% over the same period in 1995. Other
expenses rose 16% for the first three months of 1996 compared to the same period
in 1995.
Higher yielding average outstanding loan balances for 1996 grew 5% from
average daily outstanding loan balances for the first three months of 1995,
while lower yielding average outstanding investment balances decreased by 7%.
The average cost of funds for the respective periods remained unchanged at 2.2%.
The result was an increase in the Bank's annualized net interest margin, to
5.49% for the first three months of 1996 compared to 5.28% for the same period
in 1995.
The prime rate decreased by 75 basis points from March 1995 to March 1996.
Since, in the short term, 30 days or less, the Bank is asset rate sensitive, a
declining prime rate usually will cause a related decrease in interest income.
However, a change in the mix of earning assets, increasing higher yielding
average outstanding loan balances while decreasing lower yielding average
outstanding investment balances, caused an increase in the yield on earning
assets for the first three months of 1996 compared to the same period in 1995.
In an effort to further mitigate the effect of a declining prime rate, Bank
management was able to lower the average cost of funds on all interest bearing
deposit accounts for the first three months of 1996 compared to 1995, except for
certificates of deposit, which reflect the
FORM 10-Q
PAGE 7
<PAGE>
addition of one year and two year, higher costing, Premier CDs (the"Premier CD")
during the first quarter of 1995. 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 three months ended March 31, 1996, net interest income rose 9% to
$4,280,000 from $3,922,000 in 1995. Total interest income grew 8% for the first
three months of 1996, to $5,959,000 from $5,516,000 for the first three months
of 1995. Interest expense increased 5% over the same periods. Interest expense
for the three months ended March 31, 1996 and 1995 was $1,679,000 and
$1,594,000, respectively. The yield on earning assets for the first three
months of 1996 was 7.7% compared to 7.5% for the first three months of 1995
while the effective rate paid on interest bearing deposits for the first three
months of 1996 and 1995 was 2.9% for each respective period.
Interest and fees on loans increased 7% from $4,698,000 for the first three
months of 1995 to $5,049,000 for the first three months of 1996. A combination
of increasing loan portfolio yields, up from 8.2% for the first three months of
1995 to 8.3% for the first three months of 1995 and a 5% increase in average
outstanding loan balances from $224,669,000 for the first three months of 1995
to $236,177,000 for the same period in 1996, are the primary reasons for this
increase in loan related interest and fee income.
Interest income on investments increased $20,000 or 3%, from $729,000 for
the first three months of 1995 to $746,000 for the first three months of 1996.
Interest from U.S. Treasury obligations decreased 20% from $553,000 for the
first three months of 1995 to $442,000 for the first three months of 1996. The
primary reason for this decrease was a $12,257,000 or 28% decrease in the
average balance of U.S. Treasury securities, from $45,140,000 during the first
three months of 1995 to $32,383,000 for the comparable period in 1996. 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.
The Bank also held U.S. Government Agency securities at March 31, 1996. No such
securities were held by the Bank at March 31, 1995. Interest income on U.S.
Government Agency securities amounted to $168,000 for the three months ended
March 31, 1996 and is the primary reason for the 3% increase in interest income
on investment securities from the first three months of 1995 to the same period
in 1996. Interest income on obligations of states and political subdivisions
decreased by 24%, from $160,000 for the three months ended March 31, 1995 to
$122,000 for the same period in 1996. A decrease of $2,717,000 or 22% in
average outstanding balances of obligations of state and political subdivisions,
from $12,451,000 in average outstanding balances for the first three months of
1995 down to $9,734,000 for the same period in 1996 is the primary reason for
this decrease. The overall yield on investment securities increased from 5.0%
for the first three months of 1995 to 5.5% for the first three months of 1996,
due primarily to the maturity of lower yielding investments in the Bank's
investment portfolio.
FORM 10-Q
PAGE 8
<PAGE>
Interest expense on deposits increased 5%, to $1,679,000 for the three
months ended March 31, 1996 compared to $1,594,000 for the same period in 1995.
The average cost of interest bearing deposits remained at 2.9% for each
respective period. The average interest bearing deposit balances increased 1%
to $228,298,000 at March 31, 1996 compared to $225,508,000 for the same period
in 1995. However, the average deposit mix has changed for the first three
months of 1996 compared to the same period in 1995. During the first quarter of
1995, the Bank offered a new one and two year Premier CD, at highly competitive
rates of interest. The one year Premier CDs matured during the first quarter of
1996, the two year CDs will mature during the first quarter of 1997. The one
year Premier CDs were not renewed. As a result of the addition of the Premier
CDs, during the first quarter of 1995, the average daily outstanding balances of
time deposits increased 13% for the first three months of 1996 compared to 1995.
The annualized cost of CDs increased from 5% for the first three months of 1995
to 5.5% for the first three months of 1996. However, declining rates of
interest on the remaining interest bearing deposits, Savings, NOW accounts and
Market Rate Accounts, from 2.1% for the first quarter of 1995 to 2.0% for the
same period in 1996, along with a decrease in average daily outstanding
balances, caused the overall cost of interest bearing deposits to remainl level
at 2.9% for both periods presented.
For the first three months of 1996, the net interest margin increased to
5.49% from 5.28% for same period in 1995. The net interest margin is computed
exclusive of related loan fee income.
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 "Consultant"). The 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 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 is 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.
FORM 10-Q
PAGE 9
<PAGE>
Based on the results of the aforementioned reviews, the loan loss provision
was $125,000 for the three months ended March 31, 1996 and 1995. The loan loss
reserve amounted to 1.6% of outstanding loans at March 31, 1996 and March 31,
1995. Nonperforming loans have decreased 38% to $698,000 as of March 31, 1996,
down from $1,128,000 as of March 31, 1995. The loan loss reserve amounted to
563% of nonperforming loans as of March 31, 1996 compared to 322% as of March
31, 1995. 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 March 31, 1996.
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 69% from $2,034,000 for the three months ended March
31, 1995 to $3,439,000 for the period ended March 31, 1996. During the first
quarter of 1996, the Bank sold a commercial real estate property, included in
OREO, and realized a pre-tax gain of $1,073,000 on the sale. Exclusive of the
net gains on the sale of OREO, reported in each year, other income increased 16%
for the first three months of 1996, compared to the same period in 1995.
Fees for trust services rose 14% from $1,264,000 for the first three months
of 1995 to $1,445,000 for the same period in 1996. The establishment of both a
new family office business, in May of 1995, generating family office revenues
and Investment Counsellors of Bryn Mawr ("ICBM"), in January of 1996, to provide
investment management services to high net worth individuals and employee
benefit plans, along with increased asset values are the primary reasons for the
increase in fees for trust services.
For the three month period ended March 31, 1996, the Bank originated and
sold $9,850,000 of mortgage loans in the secondary mortgage market, a 26%
increase over $7,847,000 of mortgage loans originated and sold during the first
three months of 1995. The Bank offers potential borrowers the opportunity to
obtain a mortgage loan at market rates of interest with points attached or to
have no points with a slightly higher rate of interest. Upon the sale of the
loan, the higher rate of interest allows the Bank to recognize a larger gain on
the sale, as opposed to increased deferred loan fees recognized as income at the
time of sale. For the first three months of 1996, more borrowers chose to take
no point loans with higher rates of interest than in the same period in 1995.
Hence, net gains on the sale of residential mortgage loans in the secondary
mortgage market amounted to $96,000 for the first three months of 1996, a 200%
increase over $32,000 in gains on loan sales, reported for the first three
months of 1995. However, deferred loan
FORM 10-Q
PAGE 10
<PAGE>
fee income, earned as a result of these sales declined by 54%, to $36,000 for
the first three months of 1996 from $78,000 during the same period in 1996. The
net result is that loan sale activity for the first three months of 1996 earned
133 basis points on loans sold compared to 140 basis points for the same period
in 1995.
For the three month period ended March 31, 1996, the decrease in interest
rates was also responsible for a $54,000, or 23%, increase in service charges on
deposit accounts, from $235,000 for the three months ended March 31, 1995 to
$289,000 for the same period in 1996, due primarily to decreases in the earnings
credit rate used to offset these service charges.
OTHER EXPENSE
- -------------
Total other expense increased 16% for the first three months of 1996 to
$4,997,000 from $4,291,000 for the first three months of 1995. Salaries and
wages grew $293,000 or 16%, from $1,829,000 for the three months ended March 31,
1995 to $2,122,000 for the same period in 1996. Of this increase, $244,000
relates to regular salary expense and, in addition to planned salary increases,
reflects both the addition of new staff associated with the family office
operation, established in May 1995 as well as the staffing additions associated
with the establishment of ICBM in January 1996. Incentive salaries were up
$49,000 or 28%, from $176,000 for the three months ended March 31, 1995 to
$225,000 for the same period in 1996. The Bank's full time equivalent staff
increased to 198.5 as of March 31, 1996, compared to 186 as of March 31, 1995.
Employee benefits expenses grew $102,000 or 25% compared to the first three
months of 1995, primarily a result of a $74,000 increase in the projected
Pension expense for the first three months of 1996 compared to the same period
in 1995 and a $35,000 increase in Social Security taxes, associated with the
addition of new staff, primarily associated with the establishment of the Trust
family office and ICBM.
Occupancy expense grew $89,000 or 27% for the first three months of 1996
from $326,000 for the first three months of 1995 to $415,000 for the first three
months of 1996. The largest additional cost contributing to this expense was
$30,000 for the removal of snow in 1996, as well as unplanned repairs during the
first three months of 1996. Furniture and equipment expenses grew $5,000 or 2%
over the first three months of 1995, from $217,000 for the first three months of
1995 to $222,000 for the same period in 1996.
Other operating expenses increased $217,000 or 14% over the first three
months of 1995, from $1,509,000 for the first three months of 1995 to $1,726,000
for the first three months of 1996. Included in other operating expenses for
the first three months of 1995 was a $162,000 expense for the cost of Federal
Deposit Insurance Corporation (the "FDIC") deposit insurance premiums.
Presently, the Bank, which is classified as "Well Capitalized" by the FDIC, is
benefitting from the elimination of FDIC insurance premiums for banks inlcuded
in this classification. The related expense for the first quarter of 1996
amounted to $1,000 compared to $162,000 for the same period in 1995. Exclusive
of this $161,000 net decrease in FDIC deposit insurance premium expense, other
operating expenses increased by $378,000 or 28% over the first three months of
1995. There are a number of factors primarily
FORM 10-Q
PAGE 11
<PAGE>
responsible for this increase. Included in this increase was a $61,000 increase
in the cost of OREO maintenance, as the Bank increased its OREO reserve by
$85,000 during the first quarter of 1996, to provide additional reserves for the
remaining parcel of OREO. Additional increases in other operating expenses also
included a $70,000 expense to settle a regulatory dispute, $90,000 in additional
expenses primarily associated with the EDP conversion accomplished during the
first quarter of 1996, comprised of computer processing fees, up $32,000,
stationery and supplies, up $25,000 and telephone expense, up $33,000.
Advertising expense increased $52,000, reflecting the Bank's continued
committment to broadening its base of customers. Appraisal fees and the cost of
obtainaing credit reports, both related to the Bank's origination and sale of
residential loans to the secondary mortgage market, increased $48,000 over 1995
levels. The balance of the $378,000 increase in other operating expenses for
the first quarter of 1996 amounted to a 7% increase over similar expenses for
the first quarter of 1995.
APPLICABLE INCOME TAXES
- -----------------------
The Corporation's effective tax rate for the first three months of 1996 was
32% compared to 29% for 1995. 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 decreased 6% from $354,956,000 at December 31, 1995 to
$333,218,000 as of March 31, 1996. Total assets grew 1% from $330,824,000 as of
March 31, 1995.
Outstanding earning assets decreased 5% to $297,097,000 as of March 31,
1996 from $314,089,000 as of December 31, 1995. The Bank's loan portfolio
increased 4%, to $245,636,000 at March 31, 1996 from $235,353,000 as of December
31, 1995. Outstanding loans increased by 9%, from $224,558,000 as of March 31,
1995. Outstanding consumer loans of $72,967,000 at March 31, 1996 were level
with consumer loan outstanding balances of $73,189,000 as of December 31, 1995
and down 3% from $75,588,000 as of March 31, 1995. Maturities of shorter term
automobile loans are primarily responsible for this decline in outstanding
balances. Outstanding commercial loans at March 31, 1996 were $69,208,000, a 3%
increase over outstanding commercial loan balances of $67,507,000 at December
31, 1995 and 32% ahead of $52,516,000 at March 31, 1995. This portfolio's
growth is a result of the Bank expanding its commercial lending staff, including
the establishment of the Member Banking Credit Department in July 1995, adding
two experienced lenders to the Bank's lending staff, to provide loans to high
net worth individuals and, also, by aggressively seeking new commercial loan
relationships within its market area. Outstanding real estate loans were
$103,461,000 at March 31, 1996, a 9% increase over $94,657,000 in outstanding
real estate loans at December 31, 1995 and a 7% increase over $96,454,000 in
outstanding real estate loans as of March 31, 1995. The largest increase in
outstanding real estate loans from March 31, 1995 to March 31, 1996 was in the
Bank's commercial mortgage loan portfolio, which grew by 24% from $26,615,000 at
March 31, 1995 to $32,935,000 at March 31, 1996. This growth reflects the
increased commercial lending efforts put forth in the commercial lending area.
FORM 10-Q
PAGE 12
<PAGE>
The Bank's investment portfolio, having a market value of $51,354,000 at
March 31, 1996, decreased 13% from a market value of $59,211,000 at December 31,
1995 and decreased 13% from $58,959,000 as of March 31, 1995. The funds
obtained from these decreases in the investment portfolio 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 primarily to maturities
and the shortening of the average term of the investment portfolio, the
unrealized gain in the investment portfolio decreased to $96,000 as of March 31,
1996, compared to a net unrealized gain of $321,000 at December 31, 1995. The
unrealized investment appreciation, net of deferred income taxes, increased the
Corporation's shareholders' equity on the balance sheet by $63,000 as of March
31, 1996.
There were no federal funds available for sale at March 31, 1996, compared
to federal funds sold balances of $19,410,000 at December 31, 1995 and
$13,152,000 at March 31, 1995. The reduction of federal funds available for
sale at March 31, 1996, compared to December 31, 1995, is primarily a result of
a recurring cyclical increase in year-end deposit balances, the maturity of the
one year Premier CDs, during the first quarter of 1996 and the continued growth
in the loan portfolio. Bank management believed that, in order to maintain a
strong net interest margin, it was prudent to not renew the higher costing
Premier CDs as they matured during the first quarter of 1996. Management
continues to monitor the liquidity requirements of the Bank and believes that it
has the ability to increase its liquidity position through growth of new CDs,
borrowing from the Federal Home Loan Bank and the sale of investments,
classified as available for sale.
Nonperforming assets amounted to $2,084,000 at March 31, 1996, a 53%
decrease from $4,405,000 at December 31, 1995 and a 52% decrease from
nonperforming assets of $4,326,000 at March 31, 1995. Nonperforming loans
increased 14% to $698,000 at March 31, 1996 compared to nonperforming loans of
$611,000 at December 31, 1995 and decreased 38% from $1,128,000 as of March 31,
1995. The OREO balances decreased 63% from $3,794,000 as of December 31, 1995
to $1,386,000 at March 31, 1996, which was a 57% decrease from an OREO balance
of $3,198,000 at March 31, 1995. As of March 31, 1996, one property remained as
OREO on the Bank's books.
As of March 31, 1996 and 1995, 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.
FORM 10-Q
PAGE 13
<PAGE>
Total deposits decreased 7% to $294,087,000 as of March 31, 1996 from
$317,601,000 as of December 31, 1995. A more meaningful measurement of deposit
change is the change in average outstanding deposit balances. Total average
outstanding deposit balances increased 3% to $300,678,000 for the three month
period ended March 31, 1996 from $292,747,000 for the same period in 1995.
Although the amount of average total deposits remained relatively stable, the
mix of deposits shifted. The Bank raised approximately $15,000,000 in new funds
from a Premier CD promotion during the first quarter of 1995, approximately one-
half of these balances matured during the first quarter of 1996. Therefore, the
net result was an increase in the average outstanding CD balances, by
$7,697,000 or 13%, from $58,695,000 in average outstanding balances for the
first three months of 1995 to $66,392,000 for the same period in 1996. As a
reaction to a consistently low interest rate environment for interest bearing
deposits, average outstanding savings and Market Rate Account balances decreased
by 12% and 4%, respectively from the first three months of 1995 to the first
three months of 1996. Average savings balances decreased $6,128,000 from
$49,088,000 for the first three months of 1995 to $42,960,000 for the same
period in 1996 and Market Rate Account balances decreased $2,194,000 from
$51,837,000 in average daily outstanding balances for the three months ended
March 31, 1995 to $49,643,000 for the same period in 1996. Average outstanding
NOW account balances grew 6% or $3,775,000, from $65,528,000 for the first three
months of 1995 to $69,303,000 for the same period in 1996. Noninterest bearing
demand deposit average outstanding balances grew 8% or $5,141,000 from
$67,239,000 for the three months ended March 31, 1995 to $72,380,000 for the
same period in 1996.
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 the attaining of 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 liquidity ratio of not
less than 20%. Due primarily to the increase in loan balances and the maturity
of Premier CDs, during the first quarter of 1996, this ratio was 20% at March
31, 1996, compared to 28% at December 31, 1995 and 27% at March 31, 1995.
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 help
measure its interest rate risk and to help manage its interest rate sensitivity.
The simulation models consider not only the impact of changes in
FORM 10-Q
PAGE 14
<PAGE>
interest rates on forecasted net interest income, but also such factors as yield
curve relationships, possible loan prepayments, and deposit withdrawals. As of
March 31, 1996, 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 $32,482,000,
or 9.7% of total assets, as of March 31, 1996, compared to total shareholders
equity of $31,903,000, or 9.0% of total assets, as of December 31, 1995. As of
March 31, 1995, shareholders' equity was $28,489,000, or 8.6% of total assets.
The Corporation's risk weighted Tier I capital ratio was 12.23% as of March 31,
1996 compared to 11.96% and 11.98% at December 31, 1995 and March 31, 1995,
respectively. The respective Tier II ratios were 13.48%, 13.21% and 13.23%,
respectively. In March 1996, the Corporation declared a one-time special
dividend of $.32 per share, to distribute to shareholders the after-tax proceeds
of the gain on the disposition of a commercial property, held in the Bank's OREO
category. In April 1996, the Corporation declared its regular dividend of $.15
per share, a 20% increase over $.125 per share declared in April 1995. The 1995
dividend has been restated to reflect the 2-for-1 stock split, effective on
December 29, 1995. The cumulative dividends declared for 1996, including the
one-time special dividend, amounted to $.47 per share compared to $.125 per
share for the same period in 1995.
FORM 10-Q
PAGE 15
<PAGE>
PART II. OTHER INFORMATION
--------------------------
March 31, 1996
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
- -------
On March 22, 1996, the Corporation filed a Report on Form 8-K
reporting that the Corporation's principal subsidiary, The Bryn Mawr
Trust Company, (the "Bank") sold for $3,200,000 its interest in a
commercial property and business which the Bank had acquired in 1991
in connection with a defaulted loan. The sale transaction resulted in
a $1.07 million pre-tax profit and an after tax gain of $708,013,
which sum was destributed to the Corporation's shareholders as a
special $.32 per share dividend.
Form 10-Q
Page 16
<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: May 3, 1996 By:/s/ Robert L. Stevens
----------------- ----------------------
Robert L. Stevens
Chairman,
President & Chief
Executive Officer
Date: May 3, 1996 By:/s/ Joseph W. Rebl
----------------- ------------------
Joseph W. Rebl
Treasurer and
Assistant Secretary
FORM 10-Q
PAGE 17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 22,269
<INT-BEARING-DEPOSITS> 107
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,354
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 245,636
<ALLOWANCE> 3,927
<TOTAL-ASSETS> 333,218
<DEPOSITS> 294,087
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,649
<LONG-TERM> 0
0
0
<COMMON> 2,493
<OTHER-SE> 29,989
<TOTAL-LIABILITIES-AND-EQUITY> 333,218
<INTEREST-LOAN> 5,049
<INTEREST-INVEST> 749
<INTEREST-OTHER> 161
<INTEREST-TOTAL> 5,959
<INTEREST-DEPOSIT> 1,679
<INTEREST-EXPENSE> 1,679
<INTEREST-INCOME-NET> 4,280
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,997
<INCOME-PRETAX> 2,597
<INCOME-PRE-EXTRAORDINARY> 2,597
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,757
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
<YIELD-ACTUAL> 5.49
<LOANS-NON> 698
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,652
<CHARGE-OFFS> 56
<RECOVERIES> 206
<ALLOWANCE-CLOSE> 3,927
<ALLOWANCE-DOMESTIC> 2,942
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 985
</TABLE>
