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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee required] for the fiscal year ended December 31, 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [No fee Required] for the transition period from_______________
to________________
Commission file number 0-15261.
BRYN MAWR BANK CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2434506
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(State of other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (610) 525-1700
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1 par value)
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period than 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of shares of common stock held by non-affiliates of
Registrant (including fiduciary accounts administered by affiliates*) was
$55,580,893 on March 15, 1996.
As of March 15, 1996, 2,190,380 shares of common stock were outstanding.
Documents Incorporated by Reference: Parts I, II and IV - Portions of
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Registrant's Annual Report to Shareholders for the year ended December 31, 1995,
as indicated, Part III - Definitive Proxy Statement of Registrant filed with the
Commission pursuant to Regulation 14A.
*Registrant does not admit by virtue of the foregoing that its officers and
directors are "affiliates" as defined in Rule 405 and does not admit that it
controls the shares Registrants voting stock held by the Trust Department of its
bank subsidiary.
The exhibit index is on pages 37 through 40. There are 46 pages in this report.
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Form 10-K
Bryn Mawr Bank Corporation
Index
Item No. Page
Part I
1. Business................................................ 3
2. Properties..............................................26
3. Legal Proceedings.......................................29
4. Submission of Matters to a Vote of Security Holders.....29
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters.....................................30
6. Selected Financial Data.................................30
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................31
8. Financial Statements and Supplementary Data.............31
9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure.....................31
Part III
10. Directors and Executive Officers of Registrant..........32
11. Executive Compensation..................................36
12. Security Ownership of Certain Beneficial Owners and
Management..............................................36
13. Certain Relationships and Related Transactions..........36
Part IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.............................................37
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 15, 1996.
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PART I
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ITEM 1. BUSINESS
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GENERAL
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BRYN MAWR BANK CORPORATION
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Bryn Mawr Bank Corporation (the "Corporation"), hereinafter sometimes
referred to as the Registrant, was incorporated under the laws of the
Commonwealth of Pennsylvania on August 8, 1986. The Corporation is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Act"). On January 2, 1987, under a Plan of Reorganization, the
Corporation acquired all of the issued and outstanding shares of The Bryn Mawr
Trust Company (the "Bank"), through an exchange of three shares of the
Corporation stock for each share of Bank stock issued.
THE BRYN MAWR TRUST COMPANY
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The Bank, the principal subsidiary of the Corporation, is a state chartered
bank subject to the Pennsylvania Banking Code of 1965, as amended, and was
incorporated under the laws of the Commonwealth of Pennsylvania on March 25,
1889. The Bank is engaged in general commercial and retail banking business,
providing basic banking services as well as a full range of trust services.
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OPERATIONS OF BRYN MAWR FINANCIAL SERVICES, INC. AND PROFIT RESEARCH
CONSULTING, INC. ARE DISCONTINUED.
Bryn Mawr Financial Services, Inc. ("BMFS") and Profit Research Consulting
Inc. ("PRC") were formed to provide counter-cyclical fee income to the
Corporation of a different nature than the predominately interest income earned
by the Bank. During 1992 the Corporation's management evaluated the financial
performance and the current and estimated future additional capital requirements
of these entities. Based on that evaluation, the Corporation's management
determined to dissolve PRC and discontinue the operations of BMFS. However, the
Corporation may again commence the operations of BMFS at a future time.
SUMMARY
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The Corporation will concentrate its resources to expand the Bank's market
penetration by providing superior deposit, lending, trust and other banking
services to its existing customers and obtain additional customers in its market
in Montgomery, Delaware and Chester counties of Pennsylvania and to successfully
address the other challenges in the Bank's ever changing competitive market.
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OPERATIONS
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BRYN MAWR BANK CORPORATION
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The Corporation had no active staff as of December 31, 1995 and conducted
no activities other than those activities through its banking subsidiary, except
for the leasing of two properties, owned by Corporation, to the Bank, as
discussed in Item 2. Properties.
A complete list of directors and officers of the Corporation, as of
February 1, 1996 is incorporated by reference to page 36 and the inside of the
back cover of the Corporation's Annual Report to Shareholders for the year ended
December 31, 1995.
THE BRYN MAWR TRUST COMPANY
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The Bank is engaged in general, commercial and retail banking business,
providing basic banking services, including the acceptance of demand, time and
savings deposits and the making of commercial, real estate and consumer loans
and other extensions of credit. The Bank also provides a full range of trust
services including estate administration, investment advisory services, pension
and profit sharing administration and personal financial planning, including tax
preparation. During 1995, the Bank established a family office operation,
providing a full range of services to high net worth clients. As of December 31,
1995, the market value of assets administered by the Bank's Trust Division was
$1,039,804,000. In January 1996, as a part of the Bank's Trust Division, the
Bank formed Investment Counsellors of Bryn Mawr ("ICBM"), which is dedicated to
managing investment portfolios for high net worth individuals and employee
benefit plans.
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In 1995, residential mortgage interest rates decreased from 1994 levels and
the Bank was able to take advantage of the consumers renewed interest in
refinancing residential mortgages, thereby increasing the volume of the mortgage
loans it sold, as well as related loan fees and net gains on the sale of these
loans in the secondary mortgage market. As of March 1, 1996, the Bank has six
commissioned mortgage originators. The Bank originated and sold $67,826,000 in
residential mortgages to the secondary market in 1995 compared to $39,109,000
originated and sold in 1994. Net gains and loan fee income amounted to $918,000
in 1995 compared to $591,000 in 1994. During 1993 the Bank originated and sold
$108,865,000 in residential mortgage loans, generating $1,990,000 in related
net gains and loan fee income.
The operations and data processing support for the banking services
provided by the Bank were supplied by Financial Institution Outsourcing, a
division of Mellon Bank, N. A. under a five-year servicing contract, expiring
December 31, 1995 which is incorporated by reference into the Corporation's
10-K, filed with the Securities and Exchange Commission (the "Commission") on
March 26, 1991. In November 1993, Mellon Bank sold its outsourcing division to
FISERV, Inc., an outsourcing data processing company located in Brookfield, IL.
The Bank renegotiated its licensing and servicing agreement with FISERV in 1994
for the in-house data processing systems, which commenced in the first quarter
of 1996. This agreement is incorporated by reference into the Corporation's
10-K, filed with the Commission on March 31, 1995.
At December 31, 1995, the Bank had 182 full time and 31 part time
employees, including 80 officers, equalling 197.5 full time equivalent staff.
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SOURCES OF THE CORPORATION'S REVENUE
------------------------------------
The following table shows the percentage of consolidated revenues by major
source generated by the Corporation from the activities indicated below.
Year Ended December 31,
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1995 1994 1993 1992 1991
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Commercial Loans 16% 14% 12% 12% 12%
Mortgage and Construction Loans 16 15 16 23 29
Consumer Loans 25 25 26 26 24
Home Equity/Line of Credit 3 3 2 2 3
Securities 10 13 12 10 8
Federal Funds Sold 2 1 1 2 4
--- --- --- -- ---
Total Interest Income 72 71 67 75 80
Trust Services 17 16 15 14 12
Other Income * 11 13 18 11 8
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Total Revenues 100% 100% 100% 100% 100%
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* There were no revenues generated by BMFS and PRC during 1995, 1994 or 1993.
All revenues were generated by the Bank during 1995, 1994 and 1993. Revenues
generated by BMFS and PRC aggregated 1.3% and 1.0% in 1992 and 1991,
respectively.
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STATISTICAL INFORMATION
-----------------------
The statistical information required in this Item I is incorporated by
reference to the information appearing in Corporation's Annual Report to
Shareholders for the year ended December 31, 1995, as follows:
Disclosure Required by Reference to the Corporation's
Industry Guide 3 1995 Annual Report
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I. Distribution of Assets, Liabilities
and Stockholders Equity; Interest
Rates and Interest Differential
A. Average balance sheets, interest-
income and expense; average rates
earned/paid . . . . . . . . . . . Analyses of Interest Rates and
Interest Differential (page 12)
B. Rate/Volume Differentials . . . Rate/Volume Analyses (page 13)
C. Non-Accrual Policy . . . . . . . Loan Portfolio and Non-
performing Asset Analysis
(page 17)
D. Interest Rate Sensitivity
Analysis. . . . . . . . . . . . . .Interest Rate Sensitivity
Analysis (page 20)
II. Investment Portfolio
A. Book Values . . . . . . . . . . . Notes to Consolidated Financial
Statements, Note 3 (page 28)
B. Maturities . . . . . . . . . . . . Notes to Consolidated Financial
Statements, Note 3 (page 28)
III. Loan Portfolio
A. Types of Loans . . . . . . . . . . Loan Portfolio (page 16)
B. Maturities and Sensitivity to
changes in Interest Rates . . . . Loan Portfolio - Maturity
distribution (page 16)
Interest Rate Sensitivity
Analysis (page 20)
C. Non-Performing assets . . . . . . Non-Performing Assets (page 19)
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Disclosure Required by Reference to the Corporation's
Industry Guide 3 1995 Annual Report
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IV. Summary of Loan Loss Experience
A. Analysis of Loss Experience . . . Allowance for Possible Loan
Losses (page 13)
B. Allocation of Allowance for
Loan Losses . . . . . . . . . . . Allocation of the Allowance
for Possible Loan Losses
(page 14)
V. Deposits
A. Average Deposits . . . . . . . . . Average Daily Balances of
Deposits (Page 18)
B. Maturity tables and outstanding
balances, deposits $100,000 or
more . . . . . . . . . . . . . . . Maturity of Certificates of
Deposit of $100,000 or
Greater (page 18)
VI. Return on Equity and Assets . . . . . . Selected Financial Data
(page 9)
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COMPETITION
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The Corporation's principal purpose is to hold the stock of the Bank and
the Corporation's other subsidiaries. Therefore, there is presently no market
area nor competition for the Corporation since it does not conduct competitive
business activity other than through its subsidiaries.
The Bank's market area is primarily located in portions of Delaware,
Montgomery and Chester Counties, located in southeastern Pennsylvania. The
greatest concentration of activity is within a limited radius of Bryn Mawr,
Pennsylvania, the site of the Bank's main banking office. The Bank also has four
full service branch offices located in Havertown, Wayne, Wynnewood and Paoli,
Pennsylvania. In addition, there are five limited service facilities located in
life care communities in Waverly Heights, Martins Run, the Quadrangle, Beaumont
at Bryn Mawr and Bellingham and two limited service branches located in Radnor
Corporate Center and One Tower Bridge in West Conshohocken. All facilities are
located in either Montgomery, Chester and Delaware Counties. There is also an
automatic teller machine location at Villanova University.
The banking business is highly competitive and the Bank competes not only
with other commercial banks but it also experiences competition from savings and
loan associations and credit unions for deposits and loans as well as from
consumer finance companies, mortgage companies, insurance companies, stock
brokerage companies and other entities providing one or more of the services and
products offered by the Bank. All of these organizations must be considered
competitors of the Bank.
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SUPERVISION AND REGULATION
--------------------------
Bank holding companies, such as the Corporation, and its subsidiaries,
including the Bank, are extensively regulated under both federal and state law.
To the extent that the following information describes statutory provisions and
regulations which apply to the Corporation and its subsidiaries, it is qualified
in its entirety by reference to those statutory provisions and regulations.
Regulation of the Corporation
-----------------------------
The Bank Holding Company Act
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The Corporation, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended (the "Act"). The Act limits the business
of bank holding companies to banking, managing or controlling banks, performing
certain servicing activities for subsidiaries and engaging in such other
activities as the Federal Reserve Board may determine to be closely related to
banking. The Corporation and its non-bank subsidiaries are subject to the
supervision of the Federal Reserve Board and the Corporation is required to file
with the Federal Reserve Board an annual report and such additional information
as the Federal Reserve Board may require pursuant to the Act and the regulations
which implement the Act. The Federal Reserve Board also conducts inspections of
the Corporation and each of its non-banking subsidiaries.
The Act prohibits the Federal Reserve Board from approving a bank holding
company's application to acquire a bank or bank holding company located outside
the state in which the operations of its banking
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subsidiaries are principally conducted, unless such acquisition is specifically
authorized by statute of the state in which the bank or bank holding company to
be acquired is located or the bank is failing. Pennsylvania law permits bank
holding companies located in any state to acquire Pennsylvania banks and bank
holding companies, provided that the home state of the acquiring company has
enacted "reciprocal" legislation. In this context, reciprocal legislation is
generally defined as legislation that authorizes Pennsylvania bank holding
companies to acquire banks or bank holding companies located in another state on
terms and conditions substantially no more restrictive than those applicable to
such an acquisition in Pennsylvania by a bank holding company located in the
other state.
The Act requires each bank holding company to obtain prior approval by the
Federal Reserve Board before it may acquire (i) direct or indirect ownership or
control of more than 5% of the voting shares of any company, including another
bank holding company or a bank, unless it already owns a majority of such voting
shares, or (ii) all, or substantially all, of the assets of any company. The Act
provides that the Federal Reserve Board shall not approve any acquisition by a
bank holding company of more than 5% of the voting shares or substantially all
of the assets of a bank located outside of the state in which the operation of
the holding company's bank subsidiaries are principally conducted, unless such
acquisition is specifically authorized by a statute of the state in which the
bank whose shares are to be acquired is located.
The Act also prohibits a bank holding company from engaging in, or from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company engaged in non-banking activities unless
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the Federal Reserve Board, by order or regulation, has found such activities to
be so closely related to banking or to managing or controlling banks as to be
appropriate. The Federal Reserve Board has by regulation determined that certain
activities are so closely related to banking or to managing or controlling
banks, so as to permit bank holding companies, such as the Corporation, and its
subsidiaries formed for such purposes, to engage in such activities, subject to
obtaining the Federal Reserve Board's approval in certain cases. These
activities include operating a mortgage, consumer finance, credit card or
factoring company, servicing and brokering loans and other extensions of credit,
providing certain investment and financial consulting advice, leasing personal
property, providing certain bookkeeping or financially oriented data processing
services, acting as an insurance agent for certain types of credit-related
insurance and discount brokerage.
The Act further provides that the Federal Reserve Board shall not approve
any acquisition that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the country, or that in any other manner
would be in restraint of trade, unless the anticompetitive effects of the
proposed transactions are clearly outweighed by the public interest and the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served.
Under the Act, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension or
provision of credit, lease or sale of property or furnishing any service to a
customer on the condition that the customer provide additional credit or service
to the bank, to its bank holding company or any other subsidiaries of its bank
holding
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company or on the condition that the customer refrain from obtaining credit or
service from a competitor of its bank holding company. Further, the Bank, as a
subsidiary bank of a bank holding company, such as the Corporation, is subject
to certain restrictions on any extensions of credit it provides to the
Corporation or any of its non-bank subsidiaries, investments in the stock or
securities thereof, and on the taking of such stock or securities as collateral
for loans to any borrower.
In addition, the Federal Reserve Board may issue cease and desist orders
against bank holding companies and non-bank subsidiaries to stop actions
believed to present a serious threat to a subsidiary bank. The Federal Reserve
Board also regulates certain debt obligations and changes in control of bank
holding companies.
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its subsidiary banks and to
commit resources, including capital funds during periods of financial stress, to
support each such bank. Although this "source of strength" policy has been
challenged in litigation, the Federal Reserve Board continues to take the
position that it has the authority to enforce it. Consistent with its "source of
strength" policy for subsidiary banks, the Federal Reserve Board has stated
that, as a matter of prudent banking, a bank holding company generally should
not maintain a rate of cash dividends unless its net income available to common
shareholders has been sufficient to fund fully the dividends, and the
prospective rate of earnings retention appears to be consistent with the
company's capital needs, asset quality and overall financial condition.
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Financial Institutions Reform, Recovery and Enforcement Act
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Following enactment by the United States Congress, on August 9, 1989, the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
became law. Although the more significant provisions of FIRREA relate to
promoting the economic viability of thrift institutions through more stringent
capital requirements and changes to the regulatory structure of such
institutions, FIRREA also contains provisions that directly affect banks and
bank holding companies, such as the Corporation. First, FIRREA abolished the
Federal Savings and Loan Insurance Corporation and required the Federal Deposit
Insurance Corporation (the "FDIC") to establish two separate funds, the Bank
Insurance Fund ("BIF") to insure banks and the Savings Association Insurance
Fund ("SAIF") to insure savings and loan associations. Second, FIRREA amended
the Act to permit bank holding companies to acquire thrift institutions. Prior
to FIRREA, bank holding companies were permitted to acquire only failing thrift
institutions. FIRREA also abolished the restrictions on tandem operations of
acquired thrift institutions and the in-state preference for acquisitions of
failing thrifts. Finally, FIRREA enhanced the authority of the regulatory
authorities over financial institutions, including banks and bank holding
companies, to regulate more effectively with the entire structure of a bank
holding company.
Federal law also grants to federal banking agencies the power to issue
cease and desist orders when a depository institution or a bank holding company
or an officer or director thereof is engaged in or is about to engage in unsafe
and unsound practices. The Federal Reserve Board may require a bank holding
company, such as the Corporation, to discontinue certain of its activities or
activities of its other subsidiaries, other
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than the Bank, or divest itself of such subsidiaries if such activities cause
serious risk to the Bank and are inconsistent with the Bank Holding Company Act
or other applicable federal banking laws.
Federal Deposit Insurance Corporation Improvement Act of 1991
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The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") is legislation designed to reform and provide funding for the deposit
insurance system by, among other things, requiring early intervention and
closure of troubled institutions by the regulatory authorities and the
resolution of failed institutions on the least-cost basis.
The FDICIA substantially alters the deposit insurance assessment process.
The requirement that the FDIC provide at least sixty (60) days notice before
requiring changes to the semiannual insurance assessment has been removed and
the FDIC has the ability to change deposit insurance assessment rates much more
rapidly than in the past. FDICIA grants the FDIC the authority to impose special
"emergency" assessments on member banks at any time if necessary to pay interest
or principal on borrowings or for other appropriate purposes. The FDICIA also
requires the FDIC to establish a risk-based assessment system for the deposit
insurance funds. In addition, the FDICIA establishes capital categories, such
as, "well- capitalized", adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Under the guidelines
currently issued by the regulators, the Bank is considered "well-capitalized".
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FDICIA also requires the regulators to place a financial institution under
more intense scrutiny if its capital falls into a lower capital category. In
addition, FDICIA restricts the liquidity that is available, through the Federal
Reserve discount window, to troubled financial institutions and increases the
scope of the regulatory authorities supervisory powers over financial
institutions, including the Bank and Corporation.
Pursuant to federal law, federal regulatory authorities review the
performance of the Corporation and their subsidiaries in meeting the credit
needs of the communities served by the Bank. The applicable federal regulatory
authority considers compliance with this law in connection with applications
for, among other things, approval of branches, branch relocations and
acquisitions of banks and bank holding companies.
Pennsylvania Laws Affecting the Corporation
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Pennsylvania Anti-Takeover Legislation
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The Corporation is also subject to the Pennsylvania Business Corporation
Law of 1988, as amended and the general business and other laws of the
Commonwealth of Pennsylvania regulating corporations.
The Pennsylvania Legislature passed the Pennsylvania Anti-Takeover Law Act
36 of the 1990 Pennsylvania Legislature ("Act 36") on April 27, 1990 which adds
additional provisions to and amends the law of Pennsylvania concerning business
corporations (the "Corporation Law"). Specifically, Act 36 (i) modifies and
limits the fiduciary obligations of a
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corporation's directors, withholds voting rights from control shares of
corporation stock until consent of the Corporation's independent shareholders is
obtained at a shareholders meeting, prevents "green mail" by providing for
disgorgement of certain profits by a control person or group within eighteen
(18) months after an attempt to acquire control of a corporation. Act 36 also
provides for severance compensation for certain terminated employees following
control share acquisitions, and regulates the effect of certain business
combinations on labor contracts.
Act 36, which is the Legislature's response to the large volume of hostile
takeovers over recent years, contains provisions which permitted a corporation's
board of directors to "opt-out" of certain provisions of the Act by explicitly
amending the corporation's by-laws on or before July 26, 1990. On July 20, 1990,
the Corporation's Board amended the Corporation's By-Laws to explicitly opt-out
of the provisions of Act 36 which modify and limit a director's fiduciary duty
to the Corporation, withhold voting rights from "control shares" of the
Corporation stock, and provide for disgorgement of certain profits on certain
shares of the Corporation stock by a control person or group within eighteen
months after an attempt to acquire the Corporation's stock. Because the
Corporation's Board of Directors opted out of the provisions of Act 36
concerning fiduciary duty, control share acquisitions, and disgorgement of
profits, the severance compensation and labor contract provisions of Act 36 are
inapplicable to the Corporation.
The Corporation's Board opted-out of those provisions of the Act by
amending the Corporation's By-Laws because it believed and continues to believe
that those provisions of the Act were not in the best economic interests of the
Corporation's shareholders. In addition, the Board
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believes that, without those provisions of Act 36, the Board has sufficient
flexibility under the applicable law to protect the interest of the
shareholders. As outlined in the Corporation's definitive proxy statement for
the 1992 shareholders' meeting, the Board of Directors recommended that the
Corporation's shareholders ratify and approve the amendment to the Corporation's
By-Laws opting out of Act 36.
Regulation of the Bank
----------------------
The Corporation's Pennsylvania state chartered Bank, The Bryn Mawr Trust
Company, became a member of the Federal Reserve System in May 1995 and is
regulated and supervised by the Pennsylvania Department of Banking (the
"Department of Banking") and the Federal Reserve Board. These agencies regularly
examine the Bank's reserves, loans, investments, management practices and other
aspects of its operations and the Bank must furnish periodic reports to these
agencies.
Department of Banking and Federal Reserve Board Regulations
- -----------------------------------------------------------
The Bank's operations are subject to certain requirements and restrictions
under state and federal laws, including requirements to maintain reserves
against deposits, limitations on the interest rates that may be paid on certain
types of deposits, restrictions on the types and amounts of loans that may be
granted and the interest that may be charged thereon, limitations on the types
of investments that may be made and the types of services which may be offered.
Various consumer laws and regulations also affect the operations of the Bank.
These regulations and laws are intended primarily for the protection of the
Bank's depositors and customers rather than holders of the Corporation's stock.
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As a bank incorporated under and subject to Pennsylvania banking laws and a
member bank of the Federal Resrve System, the Bank must obtain the prior
approval of the Department of Banking and the Federal Resrve authorities before
establishing a new branch banking office. Depending on the type of bank or
financial institution, a merger of banks located in Pennsylvania are subject to
the prior approval of one or more of the following: the Department of Banking,
the FDIC, the Federal Reserve Board and the Office of the Comptroller of the
Currency. An approval of a merger by the appropriate bank regulatory agency
would depend upon several factors, including whether the merged institution is a
federally insured state bank, a member of the Federal Reserve System, or a
national bank. Additionally, any new branch expansion or merger must comply with
geographical branching restrictions provided by state law. The Pennsylvania
Banking Code permits Pennsylvania banks to establish branches anywhere in the
state.
The Bank is insured by the FDIC, which currently insures the Bank's
deposits to a maximum of $100,000 per deposit. For this protection, each insured
bank pays a semiannual statutory insurance assessment and is subject to certain
rules and regulations of the FDIC. The amount of FDIC assessments paid by
individual insured depository institutions, such as the Bank, is based on their
relative risk as measured by regulatory capital ratios and certain other
factors. Under this system, in establishing the insurance premium assessment for
each bank, the FDIC will take into consideration the probability that the
deposit insurance fund will incur a loss with respect to an institution, and
will charge an institution with perceived higher inherent risks a higher
insurance premium. The FDIC will also consider the different categories and
concentrations of assets and liabilities of the institution, the revenue
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needs of the deposit insurance fund, and any other factors the FDIC deems
relevant. Under existing regulations the Bank, as well capitalized financial
institiution, is not currently required to pay FDIC insurance premiums on
deposits. A significant increase in the assessment rate or a special additional
assessment with respect to insured deposits could have an adverse impact on the
results of operations and capital levels of the Bank or the Corporation.
Regulation of the Corporation-
Government Monetary Policies
------------------------------
The earnings and operations of the Corporation and its subsidiaries are
affected by the policies of regulatory authorities and legislative changes; in
particular, the policies of the Federal Reserve Board in regulating the money
supply and interest rates. Among the instruments used by the Federal Reserve
Board to implement its objectives are open-market operations in U.S. Government
securities, changes in the discount rate for member bank borrowings, changes in
reserve requirements against bank deposits, and changes with respect to
regulations affecting certain borrowing by banks and their affiliates.
The monetary and fiscal policies of the Federal Reserve Board and the other
regulatory agencies have had, and will probably continue to have, an important
impact on the operating results of the Bank through their power to implement
national monetary policy in order to, among other things, curb inflation or
combat a recession. The monetary policies of the Federal Reserve Board may have
a major effect upon the levels of the Bank's loans, investments and deposits
through the Federal Reserve Board's open market operations in United States
government securities, through its regulation of, among other things, the
discount rate on
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borrowing of depository institutions, and the reserve requirements against
depository institution deposits. It is not possible to predict the nature and
impact of future changes in monetary and fiscal policies.
The earnings of the Bank and therefore, of the Corporation are affected by
domestic economic conditions, particularly those conditions in the trade area as
well as the monetary and fiscal policies of the United States government and its
agencies.
The Federal Reserve Board also has authority to prohibit a bank holding
company from engaging in any activity or transaction deemed by the Federal
Reserve Board to be an unsafe or unsound practice. The payment of dividends
could, depending upon the financial condition of the Bank or Corporation, be
such an unsafe or unsound practice and the regulatory agencies have indicated
their view that it generally would be an unsafe and unsound practice to pay
dividends except out of current operating earnings. The ability of the Bank to
pay dividends in the future is presently and could be further influenced, among
other things, by applicable capital guidelines discussed below or by bank
regulatory and supervisory policies. The ability of the Bank to make funds
available to the Corporation is also subject to restrictions imposed by federal
law. The amount of other payments by the Bank to the Corporation is subject to
review by regulatory authorities having appropriate authority over the Bank or
Corporation and to certain legal limitations.
The passage of additional legislation by Congress, such as FIRREA or
FDICIA, authorizing additional continuing legal and regulatory supervision of
financial institutions, requiring additional disclosure concerning deposit
transactions and permitting more rapid increases in
22
<PAGE>
deposit insurance premiums may increase the cost and the operational expenses
even for efficiently run and well-capitalized financial institutions and may
adversely affect the profit margins of the Bank and the Corporation.
Risk Based Capital Guidelines
- -----------------------------
The Federal Reserve Board has promulgated certain "Risk Based Capital
Guidelines" which more narrowly define bank capital, as it relates to assets,
than do prior regulatory guidelines. Under the new guidelines, various types of
Corporation assets are assigned risk categories and weighted based on their
relative risk. In addition, certain off balance sheet items are translated into
balance sheet equivalents and also weighted according to their potential risk.
The sum of both of these asset categories, referred to as Total Risk Weighted
Assets, is then compared to the Corporation's total capital, providing a Tier I
Capital Ratio, under the new guidelines. A Tier II capital ratio is also
computed for the Corporation, adding an allowable portion of the loan loss
reserve to capital. Both the Tier I and Tier II ratios of the Corporation are in
excess of those minimum capital ratios required as of December 31, 1995 by the
regulators. The focus of the guidelines is to measure the Corporation's capital
risk. The guidelines do not explicitly take into account other risks, such as
interest rate changes or liquidity.
The Bank in its normal business originates off-balance sheet items, such as
outstanding loan commitments and standby letters of credit. The Bank makes loan
commitments to borrowers to assure the borrower of financing by the Bank for a
specified period of time and/or at a
23
<PAGE>
specified interest rate. The obligation to the Bank, pursuant to an unfunded
loan commitment, is limited by the terms of the commitment letter issued by the
Bank to each borrower. The Bank carefully reviews outstanding loan commitments
on a periodic basis. A standby letter of credit is an instrument issued by the
Bank which represents an obligation to make payments on certain transactions of
its customers. The Bank carefully evaluates the creditworthiness of each of its
letter of credit customers. The Corporation carefully monitors its risks as
measured by the Risk Capital Guidelines and seeks to adhere to the Risk Capital
Guidelines.
Governmental Policies and Future Legislation
--------------------------------------------
From time to time, various proposals are made in the United States Congress
as well as Pennsylvania legislature and by various bank regulatory authorities
which would alter the powers of, and place restrictions on, different types of
bank organizations. Among current proposals of significance to the Corporation
or its subsidiaries are the continued liberalization of the restrictions on the
acquisition of out-of-state banks by bank holding companies, the expansion of
the powers of banks and thrift institutions, the liberalization of the
restrictions upon the activities in which bank holding companies may engage, the
imposition of limitations on interest rates and service charges, certain
consumer legislation and the requirement to provide certain basic banking
services. It is impossible to predict whether any of the proposals will be
adopted and the impact, if any, of such adoption on the business of the
Corporation or its subsidiaries, especially the Bank.
24
<PAGE>
Subsidiaries
- ------------
BMFS is an inactive subsidiary of the Corporation, but is subject subject
to regulation and examination by the Federal Reserve Board and must file
periodic reports with the Federal Reserve Board.
25
<PAGE>
ITEM 2. PROPERTIES
------------------
The headquarters of the Corporation and the main office of the Bank are
located in a three story stone front office building, consisting of
approximately 37,000 net usable square feet, located at the main intersection of
Bryn Mawr, Pennsylvania, at Lancaster Avenue and Bryn Mawr Avenue. The main
office of the Bank has been located in Bryn Mawr since its founding in 1889. The
Corporation acquired two additional properties during 1988. The first property,
contiguous to the Bank's main office, houses an expanded drive-up facility and a
new meeting room. The second property, located in Bryn Mawr, became the new
location of the Bank's Trust Division in mid-December, 1989. Both properties are
subject to mortgages as outlined in Note 6 of the Corporation's financial
statements on page 28 of its Annual Report. The Corporation's other properties
are owned free and clear of all liens and encumbrances. Below is a schedule of
all properties owned or leased by the Corporation or its subsidiaries.
The Bank:
- --------
Date Acquired
Current Banking Office Address or Opened
- ---------------------- ------- ---------
Main Office and Principal 801 Lancaster Avenue 1889
Place of Business (owned) Bryn Mawr, PA 19010
Branch Office/Operations 330 E. Lancaster Avenue 1985
Center (owned) Wayne, PA 19087
Branch Office/Admin. 18 W. Eagle Road 1987
Office (owned) Havertown, PA 19083
Branch Office (owned) 312 E. Lancaster Avenue 1979
Wynnewood, PA 19096
Branch Office (owned) N.E. Corner of Lancaster 1986
and Greenwood Avenues
Paoli, PA 19301
26
<PAGE>
Date Acquired
Current Banking Office Address or Opened
- ---------------------- ------- ---------
Branch Office (leased) The Quadrangle (1) 1989
month to month basis 3300 Darby Road
Haverford, PA 19041-1095
Branch Office (leased) Waverly Heights, Ltd. (1) 1986
month to month basis Life Care Community
Gladwyne, PA 19035
Branch Office (leased) Martins Run (1) 1987
month to month basis Life Care Community
11 Martins Run
Media, PA 19063
Branch Office (leased) Bellingham (1) 1991
through October 31, 1998 1615 East Boot Road
West Chester, PA 19380
Temporary Agency Remote Villanova University 1969
Facility Campus (2)
Villanova, PA 19085
Branch Office (leased) Radnor Corporate Center (3) 1990
through December 18, 199 Three Radnor Corporate Center
Radnor, PA 19087
Branch Office (leased) Beaumont at Bryn Mawr (1) 1995
through April 16, 1998 Retirement Community
Bryn Mawr, PA 19010
Branch Office (leased) One Tower Bridge (6) 1995
through July 31, 1998 100 Front Street
West Conshohocken, PA 19428
The Corporation:
- ---------------
Date Acquired
Other Facilities Address or Opened
- ---------------- ------- ---------
Walk-in Lobby, Drive-up 813 Bryn Mawr Avenue (4) 1988
Windows, Meeting Room Bryn Mawr, PA 19010
(owned)
Office Building (owned) 10 Bryn Mawr Avenue (5) 1988
Bryn Mawr, PA 19010
27
<PAGE>
(1) This branch office has been established primarily to meet the needs of
the residents of the Life Care Community in which it is located.
(2) This temporary agency remote facility consists of two automatic teller
machines primarily for the use of staff and students.
(3) This limited service branch is on the lobby level of a building located
in a five building office complex and has been established primarily to
meet the needs of the occupants of this office building complex. The
lease was renegotiated in 1995 and the square footage was reduced to 551
square feet. The lease expires on December 18, 1998.
(4) This property is contiguous to the Bank's main office, originally housed a
gas station, which was demolished. This property houses a walk-in lobby,
expanded drive-up facility and a new meeting room, put in service in
August, 1990.
(5) This property became the new location of the Bank's Trust Division, in
mid-December, 1989. The Corporation leased the property to the prior owners
on a month-to-month basis through June, 1989.
(6) This limited service branch is on the lobby level of an office building and
has been established to primarily meet the needs of the occupants of the
office building. There is an automatic teller machine located within the
facility. The lease is for 1,250 square feet and expires on January 15,
1999.
28
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-------------------------
Neither the Corporation nor any of its subsidiaries is a party to, nor is
any of their property the subject of, any material legal proceedings other than
ordinary routine litigation incident to their business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders which is required to be
disclosed pursuant to the instructions contained in the form for this report.
29
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
Price Range of Shares
1995 1994
High-Low Quotations High-Low Quotations
--------------------------- -------------------------
High Low Dividend High Low Dividend
Quarter Bid Bid Declared Bid Bid Declared
- --------------------------------------- --------------------------
1st $17 1/4 $15 3/8 $0.125 $16 3/4 $15 7/8 $0.075
2nd 18 1/2 17 .125 16 5/8 15 7/8 0.075
3rd 22 3/4 18 .125 16 5/8 15 7/8 0.075
4th 27 1/2 22 3/8 .125 16 5/8 15 7/8 0.10
The approximate number of holders of record of common stock as of December 31,
1995 was 536. The shares are traded on the over-the-counter market, and the
price information was obtained from The National Association of Securities
Dealers (NASD). Prices and dividends paid per share are restated to reflect the
2-for-1 stock split, effective December 29, 1995.
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
The information required by this Item 6 is incorporated by reference to the
information appearing under the caption "Selected Financial Data" on page 9 of
the Corporation's Annual Report to Shareholders for the year ended December 31,
1995.
30
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
---------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The information required by this Item 7 is incorporated by reference to the
information appearing under the caption "Management's Discussion and Analysis of
Financial Condition and Result of Operations" on pages 10 to 21 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The financial statements and the auditor's report thereon and supplementary
data required by this Item 8 are incorporated by reference on pages 22 to 35 of
the Corporation's Annual Report to Shareholders for the year ended December 31,
1995.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
-------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
There were no matters which are required to be disclosed in this Item 9
pursuant to the instructions contained in the form for this report.
31
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
The information with respect to Directors of the Corporation is
incorporated by reference on pages 6 through 8 of the definitive proxy statement
of the Corporation filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
Executive Officers of the Corporation. Below is certain information with
-------------------------------------
respect to the executive officers of the Corporation and Bank as of March 1,
1996:
AGE AS OF OFFICE WITH THE
NAME MARCH 1, 1996 CORPORATION AND/OR BANK
---- ------------- -----------------------
Robert L. Stevens 58 Chairman, President and
Chief Executive Officer
Director of Corporation
and Bank
Samuel C. Wasson, Jr. 57 Secretary and Director of
Corporation and Bank and
Executive Vice
President of Bank - Loans
Joseph W. Rebl 51 Treasurer of Corporation
and Senior Vice President
and Treasurer of Bank -
Finance
Robert J. Ricciardi 47 Vice President of the
Corporation and Executive
Vice President of
Bank - Community Banking
Paul M. Kistler, Jr. 59 Senior Vice President of
Bank- Human Resources,
Facilities and Marketing
Thomas M. Petro 37 Senior Vice President of
Bank- Information
Management
Peter H. Havens 41 Executive Vice President
of Bank- Trust and
Director of Bank and
Corporation
32
<PAGE>
Joseph G. Keefer 37 Senior Vice President of
Bank - Commercial and
Real Estate Lending
Donald B. Krieble 52 Senior Vice President of
Bank- Consumer Credit
Services
Leo M. Stenson 45 Vice President and Auditor
of Bank
Mr. Stevens was employed by the Bank in 1960 and elected an Assistant
Treasurer in 1962. He was elected an Executive Vice President with
responsibility for lending functions in 1968. He was elected a director in 1974
and was elected President and Chief Executive Officer of the Bank, effective
January 1, 1980. Upon the formation of the Corporation in 1986, he was appointed
the President and Chief Executive Officer and a director. In December, 1995, Mr.
Stevens was appointed Chairman, President and Chief Executive Officer of the
Bank and Corporation.
Mr. Wasson was employed by the Bank in 1966. Later that year he was elected
an Assistant Treasurer. He was elected a Vice President in 1969 and in 1980 was
elected Treasurer of the Bank. In 1981, Mr. Wasson was elected a Senior Vice
President and elected a director of the Bank and upon the formation of the
Corporation in 1986, he was elected a Vice President and director of the
Corporation. In January, 1992, he was elected Secretary of the Corporation and
Bank and relinquished the title of Vice President of the Corporation. In
November, 1993, he was elected Executive Vice President of the Bank.
Mr. Ricciardi was employed by the Bank in 1971 and elected an Assistant
Treasurer in 1973. Mr. Ricciardi was elected an Assistant Vice President of the
Bank in 1976 and a Vice President in 1981. In 1989, Mr. Ricciardi was elected
Senior Vice President of Real Estate Lending. In November, 1993, he was elected
Executive Vice President and assumed responsibility for the Bank's Community
Banking Division.
33
<PAGE>
Mr. Rebl was employed by the Bank and elected its Comptroller in 1981. He
was elected Vice President and Comptroller in 1983 and Senior Vice President in
1987. Upon the formation of the Corporation in 1986, Mr. Rebl was elected
Treasurer of the Corporation. In 1992, Mr. Rebl was designated the Bank's Senior
Vice President - Finance. In 1994 Mr. Rebl was designated Treasurer of the Bank.
Mr. Kistler was retained by the Bank as a human resources consultant in
November 1992 and was appointed Senior Vice President of Human Resources,
Facilities and Marketing in January 1993. From 1976 to 1992, Mr. Kistler was
employed by Philadelphia National Bank (now merged into CoreStates Bank, N.A.)
in various capacities including Senior Vice President- Human Resource Manager,
Secretary of the Board of Directors, CoreStates Financial Corporation as Manager
and CoreSearch as a consultant.
Mr. Petro was appointed a Vice President of the Bank in January 1992 and
Senior Vice President- Information Management in November, 1993. Mr. Petro was
the President of PRC from its formation in June 1990 until it ceased operations
in December, 1992. Formerly, since August 1986, Mr. Petro was Assistant Vice
President and Manager - Banking Group of Management Science Associates, Inc.
From November 1981 to August 1986, Mr. Petro was Product Manager for Mellon
Bank's DataCenter.
Mr. Havens was employed by the Bank on May 1, 1995 as the Executive Vice
President in charge of the Trust Division of the Bank. Prior to joining the
Bank, Mr. Havens was manager of Kewanee Enterprises, a private investment
company since April of 1982. Mr. Havens has been a director of the Bank and the
Corporation since 1986.
Mr. Keefer was employed by the Bank in March, 1991 as Vice President-
Commercial Lending and was designated an executive officer of the Bank effective
January 1, 1992. In June, 1994, Mr. Keefer was designated Senior Vice President
of Commercial and Real Estate Lending. Mr. Keefer was
34
<PAGE>
employed by First Pennsylvania Bank N.A. (now merged into CoreStates Bank, N.A.)
since 1980 in various lending capacities including Divisional Vice President.
Mr. Krieble was employed by the Bank as Vice President of Consumer Services
in August 1992 and was designated as Senior Vice President of Consumer Credit
Lending in June, 1994. Formerly Mr. Krieble was a Senior Vice President-consumer
loan administration with Meridian Bank since 1968.
Mr. Stenson was employed by the Bank as Auditor in 1982, was elected Vice
President and Auditor in 1987 and was formerly an Assistant VicePresident of
Western Savings Bank.
None of the above executive officers has any family relationship with any
other executive officer or with any director of the Corporation or Bank.
35
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The information required by this Item 11 is incorporated by reference on
pages 8 through 18 of the definitive proxy statement of the Corporation, filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
-------------------------------------------------
OWNERS AND MANAGEMENT
---------------------
The information required by this Item 12 is incorporated by reference on
page 2, and pages 6 through 8 of the Corporation's definitive proxy statement,
filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
There were no relationships or transactions required to be disclosed in
this Item 13 pursuant to the instructions contained in the form for this report,
as discussed on page 16 of the Corporation's definitive proxy statement, filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
36
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(a) The following exhibits are filed as a part of this report.
EXHIBIT TABLE
-------------
3 - Articles of Incorporation and By-Laws
-------------------------------------------
(A) Articles of Incorporation, effective August 8, 1986, are incorporated
by reference to Form S-4 of the Registrant, No. 33-9001.
(B) By-Laws of the Registrant, as amended July 20, 1990, is incorporated
by reference to the Corporation's 10-K, filed with the Securities and
Exchange Commission on March 26, 1991.
4 - Instruments defining the rights of security holders
-------------------------------------------------------
Articles of Incorporation and By-Laws: See Item 3(A) & (B) above.
10 - Material Contracts
-----------------------
(A) Agreement dated December 31, 1990, between The Bryn Mawr Trust Company
and Mellon Bank, N.A. is incorporated by reference to the
Corporation's 10-K, filed with the Securities and Exchange Commission
on March 26, 1991.
(B) Mortgage dated December 16, 1988 between Fidelity Mutual Life
Insurance Company and Bryn Mawr Bank Corporation is incorporated by
reference to the Corporation's 10-K, filed with the Securities and
Exchange Commission on March 28, 1990.
(C) Mortgage dated May 18, 1988 between John A. Sparta and Helen M. Sparta
of the one part and Bryn Mawr Bank Corporation of the other part, is
incorporated by reference to the Corporation's 10-K, filed with the
Securities and Exchange Commissions on March 28, 1990.
(D) Agreement dated December 20, 1990 between Bryn Mawr Bank Corporation
and Profit Research Consulting, Inc., is incorporated
37
<PAGE>
by reference to the Corporation's 10-K, filed with the Securities and
Exchange Commissions on March 28, 1990.
(E) Letter of Understanding dated December 20, 1990, between Bryn Mawr
Bank Corporation and Profit Research Group, Inc., is incorporated by
reference to the Corporation's 10-K, filed with the Securities and
Exchange Commissions on March 28, 1990.
(F) License Agreement dated December 20, 1990, between Profit Research
Consulting, Inc. and Profit Research Group, Inc., is incorporated by
reference to the Corporation's 10-K, filed with the Securities and
Exchange Commissions on March 28, 1990.
(G) License Agreement dated December 30, 1994, between Bryn Mawr Bank
Corporation and FIserv Cir, Inc. is incorporated by reference to
the Corporation's 10-K, filed with the Securities and Exchange
Commission on March 31, 1995.
13. - Annual Report to Security Holders
---------------------------------
The Registrant's 1995 Annual Report to Shareholders is attached
herewith as Exhibit 13. Such Annual Report, except for the portions
thereof that are expressly incorporated by reference herein, is only
furnished for the information of the Securities and Exchange
Commission and is not deemed to be filed as a part of this Form 10-K.
22 - Subsidiaries of the Registrant
-----------------------------------
Name State of Incorporation
---- ----------------------
The Bryn Mawr Trust Company Pennsylvania
Bryn Mawr Financial Services, Inc. Pennsylvania
23 - Consent of Experts
------------------
Consent of Certified Public Accountants filed herewith as Exhibit
23.
99 - Portions of the Proxy Statement
-------------------------------
Excerpts from the Registrant's Proxy Statement for its 1996 Annual
Meeting to be held on April 16, 1996 are filed herewith as Exhibit 99.
38
<PAGE>
(b) No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1995.
39
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
-----------------------------------------------------
The report of Independent Certified Public Accountants as pertaining to
the Consolidated Financial Statements of Bryn Mawr Bank Corporation
and related notes is incorporated by reference to page 35 of the
Corporation's 1995 Annual Report to Shareholders.
Consolidated Financial Statements and related notes are incorporated by
reference to the Corporation's 1995 Annual Report to Shareholders, and
may be found on the pages of said Report as indicated in the
parenthesis:
Balance Sheets, December 31, 1995 and 1994 (page 22)
Statements of Income for the years ended December 31, 1995, 1994
and 1993 (page 23)
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993 (page 25)
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993 (page 24)
Notes to Financial Statements (pages 26 to 34)
Supplementary Data:
Quarterly Results of Operations are incorporated by reference to the in
formation under the caption "Selected quarterly financial data
(unaudited)", in Note 14 on page 33 of the Corporation's Annual Report
to Shareholders for the fiscal years ended December 31, 1995 and 1994.
Financial Statement Schedules are omitted because of the absence of the
conditions under which they are required or because the information
called for is included in the Consolidated Financial Statements or
notes thereto.
Exhibits:
For information regarding exhibits, including those incorporated by reference,
see pages 37 through 40 of this report.
40
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Corporation and
in the capacities and on the date indicated.
NAME TITLE DATE
---- ----- ----
\s\ Robert L. Stevens Chairman, President March 29, 1996
- ------------------------------ and Chief Executive ---
Robert L. Stevens Officer (Principal Executive
Officer) and Director
\s\ Joseph W. Rebl
- ----------------------------- Treasurer (Principal March 29, 1996
Joseph W. Rebl Financial and Principal ---
Accounting Officer)
/s/ Darrell J. Bell
- ----------------------------- Director March 29, 1996
Darrell J. Bell ---
\s\ Richard B. Cuff
- ----------------------------- Director March 29, 1996
Richard B. Cuff ---
- ----------------------------- Director March , 1996
Warren W. Deakins ---
\s\ Eleanor Carson Donato
- ----------------------------- Director March 29, 1996
Eleanor Carson Donato ---
- ----------------------------- Director March , 1996
William Harral III ---
- ----------------------------- Director March , 1996
Peter H. Havens ---
\s\ Sherman R. Reed, 3rd
- ----------------------------- Director March 29, 1996
Sherman R. Reed, 3rd ---
41
<PAGE>
NAME TITLE DATE
---- ----- ----
\s\ Phyllis M. Shea
- ----------------------------- Director March 29, 1996
Phyllis M. Shea ---
\s\ B. Loyall Taylor, Jr.
- ----------------------------- Director March 29, 1996
B. Loyall Taylor, Jr. ---
\s\ Samuel C. Wasson, Jr.
- ----------------------------- Director March 29, 1996
Samuel C. Wasson, Jr. ---
\s\ Thomas A. Williams
- ----------------------------- Director March 29, 1996
Thomas A. Williams ---
42
<PAGE>
EXHIBIT 13
BRYN MAWR BANK CORPORATION
ANNUAL REPORT 1995
<PAGE>
Contents
Consolidated Financial Highlights . 1
Chairman's Letter ................. 3
Selected Financial Data ........... 9
Management's Discussion
and Analysis ...................... 10
Consolidated Balance Sheets ....... 22
Consolidated Statements
of Income ......................... 23
Consolidated Statements
of Cash Flows ..................... 24
Consolidated Statements of
Changes in Shareholders' Equity ... 25
Notes to Consolidated
Financial Statements .............. 26
Report of Independent
Accountants ....................... 35
Corporate Information ............. 36
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FIVE-YEAR
COMPOUND
For the year 1995 1994 CHANGE GROWTH RATE
- ------------ ---- ---- ------ -----------
<S> <C> <C> <C> <C>
(dollars in thousands)
Net interest income........................................ $16,371 $15,301 7% 2%
Other income............................................ 9,197 8,383 10 11
Other expenses.......................................... 18,325 17,535 5 2
Net income.............................................. 4,643 4,049 15 51
At year-end
(dollars in thousands)
Total assets............................................... $354,956 $333,180 7% 3%
Total net loans......................................... 231,701 225,120 3 3
Total deposits.......................................... 317,601 301,337 5 3
Shareholders' equity.................................... 31,903 27,146 18 6
Per common share
Net income................................................. $ 2.08 $ 1.85 12% 49%
Dividends declared...................................... 0.50 0.325 54 -5
Book value.............................................. 14.57 12.41 17 6
Closing price........................................... 26.00 15.875 64 29
Selected ratios
Return on average assets................................ 1.39% 1.26%
Return on average shareholders' equity.................. 15.79 15.70
</TABLE>
<PAGE>
Our foundation is
service quality...
clearly distinguished
service to all we encounter.
[PHOTO APPEARS HERE]
<PAGE>
1995
LEFT: Bill Mannion of
BMT Mortgage Company with
Walter Smedley (standing)
and Vicki Quinn of Member
Banking Credit Services
Dear Shareholder:
The Company, at year-end 1991 -- four years ago -- had been severely battered by
bad loans. Our delinquent loan levels had approached the size of our net worth.
According to Bill Issac, then head of the FDIC, the single, most reliable
measure of bank failure was that of delinquencies exceeding net worth.
That year, we wrote down one quarter of our net worth. By year end, we had
reduced our staff to 200 from 254 two years earlier. About one in four employees
in the Bank -- excluding the Trust Division -- had lost their jobs.
During the fourth quarter of 1991, our stock hit a low of $3.25 a share, based
on today's split-adjusted shares. Our existence as an independent institution
was in danger.
As I write this, a little over four years later, the Bank has more than
recovered from the dark days. The bedrock of its well-being is better
understood, and the ways to build upon that well-being much more clearly seen.
Our foundation is service quality:the capture within our souls of a passion
everyday to provide satisfying, clearly distinguished service to all we
encounter, inside the Bank and out.
We've developed our information processing capabilities -- a process which has
no end in sight -- as we work to stay abreast, in appropriate ways, with
technological change.
We're improving the ways we find, correctly underwrite, and properly service
borrowers. Our commercial cash management program is first-rate.
And we've devoted important attention and resource to developing our critical
revenue sources -- our investment management and fiduciary services -- which
distinguish us from all but a few in the banking business.
The satisfaction in our recovery comes, though, not from what we are today, but
from the knowledge that we're well-equipped to continue our journey.
<PAGE>
LEFT: Peter Havens, Head
of our Trust Division.
[PHOTO APPEARS HERE] RIGHT: Commercial
Lender Bill Fink and
June Falcone of Banking
Operations call on
Pete Riley (left) and Bill
Riley of Joseph W. Riley
Company
I'm proud indeed of just how far we've come from the difficult days of 1991, and
I know that we're moving solidly ahead. Though we'll never reach a summit
because there really isn't one, it's the quality of the journey we're on that
counts. All that now said, here's how we did last year.
Net income in 1995 -- $4.6 million or $2.08 per share -- was up 15%, from $4.0
million or $1.85 per share. The per share amounts for 1995 included the effect
of adding common stock equivalents to the weighted average outstanding common
shares for the year. When their effect is dilutive to earnings per share, common
stock equivalents, consisting of certain shares subject to options, are added to
the weighted average outstanding common shares.
Lending revenues improved -- total interest income increased $3.2 million, from
$20.4 million in 1994 to $23.6 million in 1995. We also enjoyed greater fees for
services -- other income increased $800,000. Partially offsetting these gains
were a $2.2 million increase in interest expense, $800,000 more in noninterest
operating expenses, and a $500,000 jump in income taxes.
So, net income grew $600,000 in 1995. All in all, net interest income gained 7%
and fee-based other income was up 10%, while noninterest expense, excluding the
loan loss provision and income taxes, increased 5%.
Nonperforming assets stood at $4.4 million, up 4% from the levels at year-end
1994. Although nonperforming loans decreased, other real estate owned (OREO)
balances increased more than enough to offset that decline. We took two steps
which increased OREO. Capitalizable costs of $193,000 were added to an OREO
property which has been for sale -- we hold a pending agreement -- and we
acquired a participant's share in another OREO property for $404,000.
The quality of the loan portfolio is excellent. Delinquencies, 30 days or
longer, overall, were .9% of loans outstanding at year end.
In recognition of the good year and based on solid capital levels, the March 1,
1996, regular quarterly dividend was increased 20%. Though the dividend increase
outpaced the earnings gain, our payout ratio (dividend paid to net income) was
24% in 1995. We can, therefore, stand some modest increase in the dividend
payout beyond the gain in net income.
<PAGE>
We're improving the
ways we find, correctly
underwrite, and
properly service
borrowers
[PHOTO APPEARS HERE]
<PAGE>
Our investment
management andfiduciary
services . . . distinguish
us from all but a few in the
banking business.
[PHOTO APPEARS HERE]
<PAGE>
LEFT: Rich Sichel,
Forrest Mervine and Betty [PHOTO APPEARS HERE]
Taylor of Investment
Counselors of Bryn Mawr.
RIGHT: Amanda Bedford
at the trading desk in Trust
Investments
Now, let's review 1995 and look over a list of some of the year's highlights:
* In January, we signed an agreement to modernize our information processing
system. After considerable effort by many, we converted to the new system
in February of this year.
* We joined several other local banks in the Suburban Community Bank Council,
which helps low income men and women acquire first homes.
* I hosted a retiree luncheon, a personal highlight for me!
* Member Bankers visited the Barnes Foundation exhibit at the Philadelphia
Museum of Art.
* We opened a limited-service office at Beaumont, a retirement community in
Bryn Mawr.
* We acquired two new IBM AS/400 computers.
* Peter Havens joined the Bank to head the Trust Division, and we initiated
our Family Office service.
* We held our first Family Office Forum, a series of seminars and workshops
designed to help families with wealth better deal with interpersonal
issues, charitable giving, and wealth transfer. The forums continue.
* We held two free open air concerts on Ludington Library's lawn. It was our
15th year of sponsoring these concerts.
* Walter Smedley and Vicki Quinn joined the Bank as Member Banking lenders.
They specialize in lending to high net worth individuals and families.
* At One Tower Bridge in West Conshohocken, we opened a facility featuring an
automated teller machine and a part-time representative.
* Joe Bachtiger was installed as president of the National Association of
Estate Planning Councils, a high honor well-deserved.
* We introduced Tel-A-Loan, a state-of-the-art loan system that makes
applying for a car loan, line of credit, or home equity loan as close as
your phone.
* We split the stock, two-for-one, in December.
* We established Investment Counselors of Bryn Mawr, a department of our
Trust Division, in offices at Two Tower Bridge, Conshohocken, to provide
investment management services to high net worth individuals and employee
benefit plans. Rich Sichel, chief investment officer, and two "new-to-us"
professionals, Forrest Mervine and Betty Taylor, are its managing
directors.
* We were delighted that Bill Harral, president and chief executive officer
of Bell Atlantic-Pennsylvania, joined the boards. Bill has already proved
to be a wonderful addition and a real boost to the Corporation's
well-being.
* The Investment Department's record of superior performance was highlighted
during 1995 with its Qualified Equity Fund's total return of 40.0%
(compared to a return of 37.6% for the Standard and Poor's 500). For the
last three years, The Bryn Mawr Trust has ranked in the First Quartile of
six hundred investment managers according to Indata, a nationally
recognized monitor of investment manager performance.
<PAGE>
[PHOTO APPEARS HERE]
As time passes -- I've been at the Bank now for 35 years, the last 16 as its CEO
- -- I become ever more aware of the importance of quality talent. I feel, every
day, blessed to have so many extraordinary men and women in our midst. Every job
around here demands perfection in its execution. We all must be constantly
stretched, challenged, and charged to move along effectively, keeping our
service levels truly exceptional while managing costs well. Uninspired folks
don't do those things very well, if at all.
I'm enormously grateful to those here who, together, make us the exceptional
business we really are. They are the ones who create the goodness we so enjoy.
And, we continue to be fully committed to the concept and practice of equal
opportunity in all aspects of employment, and our resolve to provide a workplace
free of discrimination remains steadfast.
We'll keep on working to exceed service expectations of prospects and customers,
keeping in mind that all we do, in the end, is for the benefit of our
shareholders.
I hope that you'll call if ever you have a question about what we're doing here,
or if we could be of service to you or any of your family. We'll provide "simply
the best service you'll ever find in a bank."
Sincerely,
/s/ Robert L. Stevens
Robert L. Stevens
Chairman
March 1, 1996
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in thousands, except for share and per share data)
For the years ended December 31 1995 1994 1993 1992 1991
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income............................... $ 23,617 $ 20,378 $ 19,495 $ 21,316 $ 23,785
Interest Expense.............................. 7,246 5,077 5,823 7,683 11,527
Net interest income........................... 16,371 15,301 13,672 13,633 12,258
Loan loss provision........................... 500 500 500 725 7,459
------------------------------------------------------------------
Net interest income after loan loss provision. 15,871 14,801 13,172 12,908 4,799
Other income.................................. 9,197 8,383 9,786 7,979 6,430
Other expenses................................ 18,325 17,535 17,670 17,101 19,367
------------------------------------------------------------------
Income (loss) before income taxes,
extraordinary credit and
cumulative effect of accounting change..... 6,743 5,649 5,288 3,786 (8,138)
Applicable income taxes (benefit)............. 2,100 1,600 1,401 813 (2,695)
------------------------------------------------------------------
Income (loss) before extraordinary credit and
cumulative effect of accounting change..... 4,643 4,049 3,887 2,973 (5,443)
Extraordinary credit.......................... -- -- -- 250 --
Cumulative effect of accounting change........ -- -- (175) -- --
------------------------------------------------------------------
Net income (loss)............................. $ 4,643 $ 4,049 $ 3,712 $ 3,223 $ (5,443)
==================================================================
Per share data:
Earnings (loss)............................ $ 2.08 $ 1.85 $ 1.71 $ 1.48 $ (2.51)
Dividends declared......................... $ 0.50 $ 0.325 $ 0.20 -- $ 0.30
Weighted average shares outstanding,....... 2,233,898 2,183,900 2,176,446 2,170,588 2,170,220
(including common stock equivalents
in 1995)
<CAPTION>
(in thousands)
At December 31 1995 1994 1993 1992 1991
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets.................................. $ 354,956 $333,180 $320,942 $ 302,939 $ 292,929
Earning assets................................ 314,089 298,385 287,945 263,215 248,386
DEPOSITS...................................... 317,601 301,337 291,074 276,185 269,828
Shareholders' equity.......................... 31,903 27,146 24,627 21,320 18,065
For the years ended December 31 1995 1994 1993 1992 1991
==================================================================
Selected financial ratios:
Net income (loss) to:
Average total assets....................... 1.39% 1.26% 1.23% 1.13% (1.86)%
Average shareholders' equity............... 15.79% 15.70% 16.37% 16.41% (24.74)%
Average shareholders' equity
to average total assets.................... 8.79% 8.06% 7.51% 6.91% 7.52%
Dividends declared per share to
net income per share....................... 24.04% 17.52% 11.73% -- --
</TABLE>
Per share data and weighted average shares outstanding have been restated to
reflect the 2-for-1 stock split, effective on December 29, 1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is a discussion of the consolidated results of operations of Bryn
Mawr Bank Corporation (the "Corporation") for each of the three years in the
period ended December 31, 1995, as well as the financial condition of the
Corporation as of December 31, 1995 and 1994. The Bryn Mawr Trust Company (the
"Bank") is a wholly-owned subsidiary of the Corporation. This discussion should
be read in conjunction with the Corporation's consolidated financial statements
beginning on page 22.
RESULTS OF OPERATIONS
OVERVIEW
The Corporation declared a 2-for-1 stock split, effective December 29, 1995. All
share and per share data have been restated to reflect the effect of the 2-for-1
stock split. The Corporation reported net income of $4,643,000, or $2.08 per
share, including the dilutive effect of common stock equivalents, for the year
ended December 31, 1995. The year 1995 was a record year for Corporation
earnings, surpassing 1989's record earnings of $4,077,000. Net income for 1995
represented a 15% increase over net income for 1994 of $4,049,000, or $1.85 per
share.
These record results for 1995 are primarily due to a 7% increase in net interest
income in 1995, a 10% increase in other income, while other expenses were held
to a 5% increase over 1994 levels. Continued improvement in asset quality and
growth in earning assets, along with the establishment of the Trust division's
family office operation in 1995 played a significant role in the growth of both
net interest income and non-interest revenue streams in 1995 compared to 1994
levels.
Both return on average assets and return on average equity increased over those
reported for 1994. Return on average assets for the year increased to 1.39% from
1.26% in 1994, while return on average equity for 1995 was 15.79% compared to
15.70% in 1994.
[GRAPHIC APPEARS HERE]
During 1995, the Corporation declared and paid a $0.50 per share dividend, a 54%
increase over the $0.325 per share dividend declared and paid in 1994. The
dividend payout ratio for 1995 amounted to 24.04% of earnings per share, an
increase from the dividend payout ratio of 17.52% for 1994.
EARNINGS PERFORMANCE
Lines of Business
The Corporation continues to have three significant business lines from which it
derives its earnings. Its core business, that is the banking business, has been
the keystone of the Corporation's success over the years. Additional earnings
streams are received from its trust line of business and, in more recent years,
its mortgage banking line of business, the origination, sale and servicing of
mortgage loans to the secondary mortgage market. Following is a segmentation
analysis of the results of operations for those lines of business for 1995 and
1994:
TABLE 1 - Lines of Business Analysis
1995
-------------------------------------------
MORTGAGE
(dollars in thousands) BANKING TRUST BANKING CONSOLIDATED
-------------------------------------------
Net interest income after
loan loss provision ........ $15,391 $ -- $ 480 $15,871
Other income ................... 2,514 5,496 1,187 9,197
Other expenses ................. 14,056 3,413 728 18,197
-------------------------------------------
Operating profit ............... $ 3,849 $ 2,083 $ 939 $ 6,871
-------
General corporate expenses ..... -- -- -- 128
-------
Income before income taxes ..... -- -- -- $ 6,743
--------
% of consolidated operating profit 56% 30% 14% 100%
1994
-------------------------------------------
MORTGAGE
(dollars in thousands) BANKING TRUST BANKING CONSOLIDATED
-------------------------------------------
Net interest income after
loan loss provision ........ $14,557 $ -- $ 244 $14,801
Other income ................... 2,627 4,719 1,037 8,383
Other expenses ................. 13,763 2,917 685 17,365
-------------------------------------------
Operating profit ............... $ 3,421 $ 1,802 $ 596 $ 5,819
-------------------------------------------
General corporate expenses ..... -- -- -- 170
Income before income taxes
and cumulative effect of
accounting change ............ -- -- -- $ 5,649
-------------------------------------------
% of consolidated operating profit 59% 31% 10% 100%
The table reflects operating profits of each line of business before income
taxes and, in 1993, the cumulative effect of an accounting change.
Compared to 1994, all three segments of the Bank's lines of business showed
healthy increases in operating profits. A significant increase in the amount of
residential mortgage loans sold in the secondary mortgage market in 1995,
compared to 1994, is the main reason for the increase in the mortgage banking
percentage of operating profits to 14% from 10% in 1994. This increase in the
mortgage banking segment's percentage of operating profits is also responsible
for the declines in both the banking and trust segments' percentages of
consolidated operating profits in 1995, compared to 1994, from 59% to 56% and
31% to 30%, respectively.
<PAGE>
BANKING LINE OF BUSINESS
For most of 1995, the Bank's prime rate of interest increased over the prime
rate as of December 31, 1994. The prime rate did decrease 50 basis points, 25
basis points in July 1995 and again late in the fourth quarter of 1995, ending
the year at 8.5%. Much of the Bank's earning assets have rates of interest that
are directly related to the prime rate. Therefore, a 6% increase in the
Corporation's earning assets, along with an increase in the related rates of
interest, tied to the prime rate, partially offset by a 59% increase in the
Bank's higher costing certificates of deposit were the main reasons for a 6%
increase in net interest income after loan loss provision in 1995, compared to
1994.
An expanded discussion of net interest income follows under the section entitled
"Net Interest Income."
Other income decreased by 4% in 1995 compared to 1994. This was due primarily to
a decrease in gains on the sale of other real estate owned ("OREO") in 1995
compared to 1994. During 1994, the Corporation disposed of $681,000 in OREO,
realizing related gains of $294,000 compared to $278,000 sold in 1995,
generating gains of $137,000. Exclusive of the $157,000 decrease in OREO gains
from 1994 levels, other income in the banking line of business increased 2%.
Total other expenses of the banking line of business increased 3% in 1995
compared to 1994 levels. Overall, the operating profits of the banking line of
business increased 12% in 1995 compared to 1994.
TRUST LINE OF BUSINESS
The Bank's Trust Division reported a 16% increase in operating profit for 1995
compared to 1994 levels. Total trust fee income rose 16% in 1995. This was
partially due to a 30% increase in the market value of assets managed, from
$799,846,000 at December 31, 1994, to $1,039,804,000 as of December 31, 1995, as
well as new revenue streams generated by the establishment of the family office
operation in May 1995.
[GRAPHIC APPEARS HERE]
Other expenses of the Trust segment increased 17% in 1995 over 1994 levels.
During 1995, in conjunction with the establishment of the family office
operation, a Trust division incentive bonus, directly related to the overall
profitability of the Trust division, was implemented. Based on the parameters
established in this plan, a Trust division incentive bonus of $173,000 was
included in other expenses for 1995. Also included in the Trust divisions other
expenses for 1995 was the cost of administering the family office operation.
Exclusive of the Trust incentive expense and the cost of the family office
operation, Trust other expenses rose 9% in 1995 over 1994 levels.
MORTGAGE BANKING LINE OF BUSINESS
The operating profit of the Bank's mortgage banking segment increased 58% in
1995 compared to 1994. Mortgage interest rates increased sharply during 1994,
making refinancing less attractive to borrowers. In 1995, mortgage banking rates
began to decrease and the Bank was able to take advantage of the renewed
interest in refinancing, thereby increasing both the volume of loans sold in the
secondary mortgage market by 73% as well as the related loan fee and net gains
on sales by 55%. As a result of this loan sale activity, as of December 31,
1995, the Bank serviced $203,934,000 in mortgage loans for others, an 18%
increase over $172,108,000 in loans serviced for others at year end 1994.
Following is a table showing the volume of mortgage loans originated and sold in
the secondary mortgage market, the total loan fees and net gains realized, and
the yield on these loan sales:
TABLE 2: Summary of Loan Sale Activity
(dollars in thousands) 1995 1994
---------------------
Volume of loans sold ............ $ 67,826 $ 39,109
Loan fees and net gains on sales $ 918 $ 591
Yield on sales .................. 1.35% 1.51%
Other expenses of the Bank's mortgage banking segment increased 6% in 1995
compared to 1994 levels.
[GRAPHIC APPEARS HERE]
<PAGE>
NET INTEREST INCOME
A 16%, or $3,239,000, increase in interest income, partially offset by a 43%, or
$2,169,000 increase in interest expense from year to year resulted in an overall
increase in net interest income of 7% or $1,070,000. Growth in both average
earning assets and the overall yield on earning assets in 1995, compared to
1994, contributed to the growth in interest income. A 59% increase in average
outstanding certificates of deposit, primarily higher rate Premier CDs, offered
during the first quarter of 1995, was responsible for the related increase in
interest expense for 1995 compared to 1994 levels of interest expense. The
Bank's net interest margin, defined as net interest income exclusive of loan
fees as a percentage of average earning assets, remained level at 5.21% for both
1995 and 1994.
TABLE 3 - Analyses of Interest Rates and Interest Differential
The following table shows an analysis of the composition of net interest income
for each of the last three years. Interest income on loans includes fees on
loans of $798,000, $564,000 and $927,000 in 1995, 1994 and 1993, respectively.
The average loan balances include nonaccrual loans. All average balances are
calculated on a daily basis. Yields on investment securities are not calculated
on a tax-equivalent basis.
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
INTEREST RATES INTEREST RATES INTEREST RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
(dollars in thousands) BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks ......... $ 19,275 $ -- --% $ 22,474 $ -- --% $ 21,784 $ -- --%
Interest-bearing deposits
with other banks* .............. 108 8 7.4 422 12 2.8 532 15 2.8
Federal funds sold* ............. 13,658 813 6.0 6,839 261 3.8 11,305 343 3.0
Investment securities
available for sale:
Taxable* ...................... 48,502 2,562 5.3 59,717 2,899 4.9 53,799 2,647 4.9
Tax-exempt* ................... 11,905 607 5.1 13,498 708 5.2 13,593 749 5.5
-----------------------------------------------------------------------------------
Total investment securities ... 60,407 3,169 5.2 73,215 3,607 4.9 67,392 3,396 5.0
-----------------------------------------------------------------------------------
Loans* .......................... 225,656 19,627 8.7 202,177 16,498 8.2 183,792 15,741 8.6
Less allowance for loan losses .. (3,897) -- -- (3,734) -- -- (3,699) -- --
-----------------------------------------------------------------------------------
Net loans ....................... 221,759 19,627 8.9 198,443 16,498 8.3 180,093 $15,741 8.7
Other assets .................... 19,184 -- -- 18,694 -- -- 20,690 -- --
-----------------------------------------------------------------------------------
Total assets .................... $334,391 $23,617 -- $320,087 $20,378 -- $301,796 $19,495 --
===================================================================================
Liabilities:
Demand deposits,
noninterest-bearing ........... $ 68,654 $ -- --% $ 65,976 $ -- -- % $ 60,390 $ -- --%
Savings deposits ................ 161,744 3,487 2.2 179,900 3,540 2.0 168,066 4,126 2.5
Time deposits ................... 68,328 3,754 5.5 42,925 1,512 3.5 44,767 1,697 3.8
FEDERAL FUNDS PURCHASED ......... 89 5 5.6 469 25 5.3 -- -- --
Other liabilities ............... 6,175 -- -- 5,022 -- -- 5,894 -- --
-----------------------------------------------------------------------------------
Total liabilities ............... 304,990 7,246 -- 294,292 5,077 -- 279,117 5,823 --
Shareholders' equity ............ 29,401 -- -- 25,795 -- -- 22,679 -- --
-----------------------------------------------------------------------------------
Total liabilities and
shareholders' equity ............ $ 334,391 $7,246 -- $ 320,087 $ 5,077 -- $301,796 $ 5,823 --
===================================================================================
Total earning assets* ......... $ 299,829 -- -- $ 282,653 -- -- $263,021 -- --
Interest income
to earning assets .. -- -- 7.9 -- -- 7.2 -- -- 7.4
Interest expense to
earning assets . -- -- 2.4 -- -- 1.8 -- -- 2.2
Net yield on interest-earning
assets ......................... -- -- 5.5 -- -- 5.4 -- -- 5.2
Average effective rate paid on
interest-bearing liabilities ... -- -- 3.1 -- -- 2.3 -- -- 2.7
</TABLE>
*Indicates earning assets.
<PAGE>
The following table shows the effect of changes in volumes and rates on interest
income and interest expense. Variances which were not specifically attributable
to volume or rate were allocated proportionately between volume and rate.
Interest income on loans included increases (decreases) in fees on loans of
$234,000 in 1995, ($363,000) in 1994, and ($1,085,000) in 1993.
Table 4 - Rate/Volume Analyses
<TABLE>
<CAPTION>
(in thousands) 1995 vs. 1994 1994 vs. 1993
- --------------------------------------------------------------------------------------
INCREASE/(DECREASE) VOLUME RATE TOTAL VOLUME RATE TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest-bearing deposits
with other banks ............ $(13) $ 9 $ (4) $ (3) $ -- $ (3)
Federal funds sold ...... 354 198 552 (157) 75 (82)
Investment securities
available for sale:
Taxable ............... (577) 240 (337) 290 (38) 252
Tax-exempt ............ (82) (19) (101) (5) (36) (41)
Loans ................. 1,996 1,133 3,129 1,518 (761)* 757
------------------------------------------------------
Total interest
income ................ 1,678 1,561 3,129 1,643 (760) 883
Interest expense:
Savings deposits ....... (375) 322 (53) 272 (858) (586)
Time deposits .......... 1,152 1,09 (68) (117)
Federal funds
purchased ............. (21) 1 (20) 25 -- 25
------------------------------------------------------
Total interest expense . 756 1,413 2,169 229 (975) (746)
------------------------------------------------------
Interest differential .. $ 922 $148 $1,070 $1,414 $215 $1,629
------------------------------------------------------
</TABLE>
* Included in the loan rate variance was an increase in interest income related
to non performing loans of $69,000 and $110,000 in 1995 and 1994,
respectively. The variances due to rate include the effect of nonaccrual loans
because no interest is earned on such loans.
The 16% growth in interest income for 1995 was attributable to both a 6%
increase in average earning assets over the prior year as well as an increase in
the yield on average earning assets from 7.2% for 1994 to 7.9% for 1995, a 10%
increase. Average earning assets for 1995 were $299,829,000 compared to
$282,653,000 for 1994. The Bank's average outstanding balances in the loan
portfolio increased 12%, average federal funds sold grew 100%, reflecting the
investment of the proceeds derived from the Premier CD promotion discussed
above. The average balance of the investment portfolio decreased 17%.
As of December 31, 1995, outstanding loans increased 3%. The most significant
loan growth came in commercial and industrial loans, up 24% over December 31,
1994 levels. Construction lending, which has had little activity in recent years
grew 82% during 1995. Partially offsetting these increases were 7% and 5%
decreases in the respective year end 1995 balances of residential permanent
mortgage loans and consumer loans. Residential loan balances decreased due to
the increase in the sale of residential loans in the secondary mortgage market
referred to above. The decrease in consumer lending was due primarily to a
reduction in short-term indirect automobile loan balances at year-end 1995
compared to 1994.
Average deposits increased $9,925,000 or 3% during 1995. However, a change in
the mix of average daily balances of deposits has caused a 43% increase in
interest expense. As interest rates paid on the Bank's savings deposits,
including market rate, NOW and savings accounts, remained relatively unchanged
during 1995, depositors sought alternative investment opportunities. Average
savings deposits decreased 10% in 1995, compared to similar 1994 average
balances. During the first quarter of 1995, the Bank offered a Premier
certificate of deposit at highly competitive rates of interest. The Bank's
average certificate of deposit balances grew 59% over similar balances for 1994.
This change in the mix of average deposit balances, away from lower costing
savings deposits into higher costing CDs was responsible for the 43% increase in
interest expense for 1995. The cost of funds for the Bank averaged 2.4% in 1995
compared to 1.8% in 1994.
LOAN LOSS PROVISION
The Bank provided a loan loss provision of $500,000 in both 1995 and 1994. The
allowance for possible loan losses was $3,652,000 and $3,618,000 as of December
31, 1995 and 1994, respectively. The ratio of the loan loss reserve to
nonperforming loans was 598% and 466% as of December 31, 1995 and 1994,
respectively. Nonperforming loans amounted to $611,000 at December 31, 1995, a
21% decrease from $776,000 at December 31, 1994. The allowance for possible loan
losses, as a percentage of outstanding loans, was 1.55% as of December 31, 1995,
compared to 1.58% as of December 31, 1994. Bank management determined that the
1995 loan loss provision was sufficient to maintain an adequate level of the
allowance for possible loan losses during 1995.
A summary of the changes in the allowance for possible loan losses and a
breakdown of loan loss experience by major loan category for each of the past
five years follows:
TABLE 5 - Allowance for Possible Loan Losses
December 31
(dollars in thousands) 1995 1994 1993 1992 1991
----------------------------------------------------
Allowance for possible
loan losses:
Balance, January 1 ....... $3,618 $3,601 $3,848 $6,012 $3,894
----------------------------------------------------
Charge-offs:
Commercial and industrial (527) -- (462) (145) (538)
Real estate--construction -- (229) (37) (2,094) (3,778)
Real estate--mortgage .. (8) (69) (11) (92) (674)
Consumer ............... (234) (365) (388) (658) (536)
- -------------------------------------------------------------------------------
Total charge-offs ..... (769) (663) (898) (2,989) (5,526)
- -------------------------------------------------------------------------------
Recoveries:
Commercial and industrial 236 115 94 25 101
Real estate--construction -- -- -- -- 28
Real estate--mortgage .. 13 20 -- -- 1
Consumer ............... 54 45 57 75 55
- -------------------------------------------------------------------------------
Total recoveries ...... 303 180 151 100 185
- -------------------------------------------------------------------------------
Net charge-offs ...... (466) (483) (747) (2,889) (5,341)
Provision for loan losses 500 500 500 725 7,459
- -------------------------------------------------------------------------------
Balance, December 31 .... $3,652 $3,618 $3,601 $3,848 $6,012
- -------------------------------------------------------------------------------
Net charge-offs to
average loans .......... 0.2% 0.2% 0.4% 1.6% 2.7%
- --------------------------------------------------------------------------------
<PAGE>
TABLE 6 - Allocation of the Allowance for Possible Loan Losses
The table below allocates the balance of the allowance for possible loan losses
by loan category and the corresponding percentage of loans to total loans for
each loan category for the last five years:
<TABLE>
<CAPTION>
December 31
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
% LOANS % LOANS % LOANS % LOANS % LOANS
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
(dollars in thousands) LOANS LOANS LOANS LOANS LOANS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of
period applicable to:
Commercial and industrial ... $1,295 28.7% $1,289 23.9% $1,144 26.0% $1,335 26.5% $1,667 21.7%
Real estate--construction ... 648 3.8 273 2.1 411 4.9 924 7.4 2,273 17.0
Real estate--mortgage ....... 259 36.4 332 40.4 297 41.0 120 36.4 146 34.2
Consumer .................... 619 31.1 680 33.6 552 28.1 460 29.7 372 27.1
Unallocated ................. 831 -- 1,044 -- 1,197 -- 1,009 -- 1,554 --
- ----------------------------------------------------------------------------------------------------------------------------
Total .................... $3,652 100.0% $3,618 100.0 % $3,601 100.0% $3,848 100.0% $6,012 100.0%
============================================================================================================================
</TABLE>
The loan loss reserve allocation reflects a reserve based on specific loan loss
reserve allocations on loans reviewed individually as well as an average
historical loan write-off percentage for loans in each specific loan category
not individually reviewed and is also increased by an additional percentage to
reflect current market conditions.
Refer to page 19 for further discussion of the Corporation's loan review
process.
OTHER INCOME
The following table details other income for the years ended December 31, 1995
and 1994, and the percent change from year to year:
TABLE 7 - Other Income
1995 1994 % CHANGE
- -------------------------------------------------------------------------
Fees for trust services $5,496 $4,719 16%
Service charges on deposit accounts 1,049 1,068 (2)
Other fees and service charges 1,240 1,192 4
Net gain on sale of loans 479 386 24
Gain on sale of other real
estate owned 137 294 (53)
OREO revenues 353 319 11
Other operating income 443 405 9
- -------------------------------------------------------------------------
Total other income $9,197 $8,383 10%
- -------------------------------------------------------------------------
In addition to net interest income, the Bank's three operating segments generate
various fee-based income, including Trust income, service charges on deposit
accounts, as well as loan servicing income and gains/losses on loan sales.
As discussed in the "Lines of Business" section on pages 10 and 11, the increase
in other income in 1995 from 1994 levels is primarily a result of an increase in
Trust revenues and net gains on the sale of loans.
Trust income grew 16% from year to year, a combination of the establishment of a
new Trust product, the family office, and the increase in the market value of
trust assets by 30%, to $1,039,804,000 at the year end 1995, up from
$799,846,000 as of December 31, 1994.
As interest rates rose during most of 1995, so did the earnings credit rate
which is used to offset certain service charges on deposit accounts. This was
the primary reason for the 2% decrease in service charges on checking accounts.
As discussed in the banking line of business discussion, the 53% decline in
gains on the sale of OREO was directly attributable to a decline in the
disposition of OREO in 1995 compared to 1994 levels of OREO sales.
Other fees and service charges increased 4% in 1995 from 1994 levels primarily
due to an increase in documentation preparation fees related to the mortgage
banking line of business discussed above.
OTHER EXPENSES
The following table details other expenses for the years ended December 31, 1995
and 1994, and the percent change from year to year:
TABLE 8- Other Expenses
1995 1994 % CHANGE
- --------------------------------------------------------------------------
Salaries-regular ...................... $ 6,906 $6,705 3%
Salaries-other ........................ 1,112 817 36
Employee benefits ..................... 1,890 1,789 6
Occupancy expense ..................... 1,441 1,389 4
Furniture, fixtures and equipment ..... 877 851 3
Advertising ........................... 868 839 3
Computer processing ................... 1,174 1,085 8
Stationery and supplies ............... 279 258 8
Professional fees ..................... 701 683 3
Insurance ............................. 486 807 (40)
Merchant credit card processing ....... 314 299 5
Net cost of operation of
other real estate owned 52 39 33
Other operating expenses .............. 2,225 1,974 13
- --------------------------------------------------------------------------
Total other expenses .................. $18,325 $17,535 5%
- --------------------------------------------------------------------------
Other expenses increased for the year ended December 31, 1995 by 5% compared to
1994. Regular salaries, the largest component of other expenses, rose 3%, due
primarily to merit increases and staffing additions related to the establishment
of the family office operation in the Trust division and a Member Banking Credit
department, to service the credit needs of the Bank's Member Bankers. Both of
these new ventures were established near mid-year 1995. These staffing additions
were partially offset by staffing reductions at year end 1994, when the Bank
eliminated 4 full time positions associated with its business development
efforts. As of December 31, 1995, the Bank's full time equivalent staffing level
was 197.5 compared to 194.0 as of December 31, 1994.
<PAGE>
Other salaries increased 36% from 1994 to 1995. These increases were primarily
related to incentive based compensation, tied to the overall profitability of
the Bank or specific lines of business. Included in other salaries is incentive
compensation related to mortgage banking, Trust and overall Bank profitability.
Based on the increased profitability of each segment, these incentive costs
increased by $63,000, $173,000 and $164,000, respectively, from 1994.
Employee benefit costs increased 6% due to escalating costs associated with the
maintenance of a competitive employee benefits package.
Computer processing fees increased 8% in 1995 compared to 1994. The Bank is in
the process of converting from a remote job entry data processing system to an
in-house system. In addition to an increase in computer processing fees related
to the volume of transactions processed, additional data processing time was
required as a part of the conversion process, thereby increasing computer
processing fees. It is anticipated that the computer conversion will be
accomplished sometime during the first quarter of 1996.
Insurance expense decreased 40%. Insurance expense is composed of the premiums
paid to the Federal Deposit Insurance Corporation ("the FDIC") for deposit
insurance, as well as the cost of the Corporation's business insurance
coverages. During 1995, the FDIC announced that the bank insurance fund was
sufficiently funded to provide necessary coverage for insured bank deposits.
Therefore, to those banks considered "well capitalized" by FDIC criteria, the
FDIC refunded premiums paid from May 1995 through September 1995 and eliminated
any further premium for the 4th quarter of 1995. The Bank is considered "well
capitalized" by FDIC criteria. Therefore, for 1995, the Bank's FDIC deposit
insurance premiums decreased by $295,000 or 46% from those paid in 1994. As of
December 31, 1995, the FDIC anticipates no deposit insurance premiums for those
banks classified as "well capitalized" during 1996. Due to reductions in overall
insurance premiums related to the Corporation's business related coverages, the
Corporation's business insurance premiums decreased $26,000 or 15% in 1995 from
1994 levels. This reduction in premiums was accomplished with no reductions in
the related coverages for the Corporation.
Other operating expenses increased $251,000 or 13% from 1994 to 1995 due to a
number of factors. Of the $251,000 increase in other operating expenses in 1995,
$137,000 of this increase was because of expenses related to two claims against
the Bank. The Bank's hiring and extra help costs increased $53,000 as the Bank
continually expands its search for qualified staff. Telephone costs were up
$37,000, due primarily to increased costs associated with the expansion of the
Bank's local area network and wide area network of computers. Travel and
entertainment related expenses also rose $35,000, reflecting continued efforts
to increase the Bank's market share of business, especially in the lending
areas.
The Bank's efficiency ratio, which is defined as the ratio of operating expenses
to total revenues, measures the efficiency with which the Bank spends its
revenue. The ratio has improved to 70.7% for 1995 compared to 73.5% in 1994 and
75.0% in 1993. It has been management's goal, over time, to improve this ratio
to below 70%.
INCOME TAXES
The Corporation's provision for federal income taxes is based on the
Corporation's statutory tax rate of 34%. Federal income taxes for 1995 were
$2,100,000, compared to $1,600,000 for 1994. This represents an effective tax
rate of 31.1% and 28.3% for 1995 and 1994, respectively. Income taxes for
financial reporting purposes differ from the amount computed by applying the
statutory rate to income before taxes, due primarily to tax-exempt income from
certain loans and investment securities. See Note 8 to the consolidated
financial statements.
The Corporation adopted Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"), during the first quarter of 1993. The cumulative
effect of adopting SFAS No. 109 was a charge of $175,000.
FINANCIAL CONDITION
INVESTMENT SECURITIES
The Corporation adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"), as of January 1, 1994. Upon the adoption of SFAS No. 115, management
elected to classify 100% of the investment portfolio as available for sale.
Therefore, in accordance with SFAS No. 115, the investment portfolio was carried
at its estimated market value of $59,211,000 and $58,563,000 as of December 31,
1995 and 1994, respectively. The amortized cost of the portfolio as of December
31, 1995 was $58,890,000, resulting in net unrealized gains of $321,000. The
amortized cost of the portfolio at December 31, 1994 was $59,995,000, resulting
in net unrealized losses of $1,432,000.
The maturity distribution and weighted average yields on a fully tax-equivalent
basis of investment securities at December 31, 1995, are as follows:
TABLE 9 - Investment Portfolio
MATURING MATURING
FROM FROM
MATURING 1997 2001 MATURING
DURING THROUGH THROUGH AFTER
(dollars in thousands 1996 2000 2005 2005 TOTAL
- --------------------------------------------------------------------------------
Obligations of the
U.S. Government
and agencies:
Book value ............. $24,607 $22,685 $ -- $ -- $47,292
Weighted average yield . 5.2% 6.0% -- -- 5.6%
State and political
subdivisions:
Book value ............. $ 2,707 $ 7,930 -- -- $10,637
Weighted average yield 5.4% 4.9% -- -- 5.0%
Other investment securities:
Book value ............. $ 40 -- -- $1,242 $ 1,282
Weighted average yield . 5.0% -- -- 6.4% 6.4%
- --------------------------------------------------------------------------------
Total book value $27,354 $30,615 -- $1,242 $59,211
Weighted average yield 5.2% 5.7% -- 6.4% 5.5%
<PAGE>
The positive fluctuation in the unrealized gain/loss from year to year was
primarily a result of a decrease in market rates of interest during 1995.
Approximately 80% of the investment portfolio consists of fixed rate U. S.
Government and U. S. Government Agency securities and, therefore, the related
decrease in market rates of interest during 1995 caused an increase in the
market value of these securities during 1995, causing a net unrealized gain on
the investment portfolio at December 31, 1995, compared to a net unrealized loss
on the investment portfolio at December 31, 1994. The Corporation does not own
any derivative investments and does not plan to purchase any of these
investments in the foreseeable future.
LOANS
For financial reporting purposes, both fixed and floating rate home equity
loans, collateralized by mortgages, are included in other permanent mortgage
loans. Floating rate Personal CreditLine loans are included in consumer loans.
A breakdown of the loan portfolio by major categories at December 31 for each of
the last five years is as follows:
TABLE 10 - Loan Portfolio
December 31
(in thousands) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Real estate loans:
Permanent
mortgage loans $85,752 $92,395 $78,553 $65,362 $63,244
Construction loans 8,905 4,884 9,482 13,376 31,506
Commercial and
industrial loans 67,507 54,631 49,800 47,541 40,241
Consumer loans 73,189 76,828 53,882 53,302 50,287
- --------------------------------------------------------------------------------
Total $235,353 $228,738 $191,717 $179,581 $185,278
- --------------------------------------------------------------------------------
The maturity distribution of the loan portfolio, excluding loans secured by
one-family residential property and consumer loans, at December 31, 1995, is
shown below.
MATURING
FROM
MATURING 1997 MATURING
DURING THROUGH AFTER
(in thousands) 1996 2000 2000 TOTAL
- --------------------------------------------------------------------------------
COMMERCIAL, FINANCIAL,
AND AGRICULTURAL $37,189 $21,937 $ 8,381 $ 67,507
Real estate--construction 5,594 3,311 -- 8,905
Real estate--other 395 5,143 25,334 30,872
- --------------------------------------------------------------------------------
Total $43,178 $30,391 $33,715 $107,284
- --------------------------------------------------------------------------------
Interest sensitivity on
the above loans:
Loans with
predetermined rates $1,754 $14,468 $ 6,905 $ 23,127
Loans with adjustable
or floating rates 41,424 15,923 26,810 84,157
- --------------------------------------------------------------------------------
Total $43,178 $30,391 $33,715 $107,284
- --------------------------------------------------------------------------------
There are no scheduled prepayments on the loans included in the maturity
distributions.
The Bank's lending function is its principal income generating activity, and it
is the Bank's policy to continue to serve the credit needs of its market area.
Total loans at December 31, 1995, increased 3% to $235,353,000 from $228,738,000
as of December 31, 1994.
The most significant increase was in the commercial lending area. Commercial
loan balances grew by 24% in 1995 compared to year end 1994 outstanding
balances. During 1995, the Bank added a new commercial lender and created a
Member Banking Credit department, by employing two experienced lenders who
concentrate their efforts on meeting the loan requirements of the Bank's Member
Bankers.
The other area of loan growth was in the Bank's construction loan area. In
recent years the Bank has made a conscious decision to reduce its construction
loan balances, to lower its exposure to higher risk loans. As of December 31,
1995, the construction lending portfolio had no nonperforming loans nor any
loans delinquent 30 days or more. The Bank has chosen to selectively return to
the construction lending market. As of December 31, 1995, the construction loan
portfolio has grown 82% over December 31, 1994 balances.
Consumer loans, consisting of loans to individuals for household, automobile,
family and other consumer needs, as well purchased indirect automobile paper
from automobile dealers in the Bank's market area, decreased 5%. This was due
primarily to a decrease in the outstanding balances of the indirect automobile
paper. These installment contracts, typically, are shorter term in nature. The
maturity of existing indirect automobile contracts was not able to be overcome
by the addition of new contracts, due to a slowdown in consumer automobile
purchasing in 1995.
Permanent mortgage loans, which consist of commercial and residential mortgages
as well as home equity loans, decreased 7% during 1995, primarily the result of
the sale of $67,626,000 in residential mortgage loans in the secondary mortgage
market. The Bank continues to actively pursue the mortgage banking line of
business.
[GRAPHIC APPEARS HERE]
<PAGE>
TABLE 11 - Loan Portfolio and Nonperforming Asset Analysis
<TABLE>
<CAPTION>
LOAN LOSS
LOAN PORTFOLIO NONPERFORMING ASSETS RESERVE
------------------------------------------------------------------------------------------
Past Due Past Due Non- Other Total Non- Reserve for
30 to 89 90 Days Total Performing Real Estate Performing Loan Loss
(in thousands) Current Days or More Loans Loans* Owned** assets** Allocation
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Permanent mortgage loans:
Residential .......................... $ 12,380 $ 222 $ 55 $ 12,657 $ 55 $ 431 $ 486 $--
Commercial ........................... 30,715 96 61 30,872 61 1,386 1,447 --
Home equity .......................... 41,947 179 97 42,223 97 -- 97 --
------------------------------------------------------------------------------------------
Total permanent mortgage loans ....... 85,042 497 213 85,752 213 1,817 2,030 259
Construction mortgage loans:
Residential ........................... 7,655 -- -- 7,655 -- -- -- --
Commercial ............................ 1,250 -- -- 1,250 -- 1,977 1,977 --
------------------------------------------------------------------------------------------
Total construction mortgage loans .... 8,905 -- -- 8,905 -- 1,977 1,977 648
------------------------------------------------------------------------------------------
Total real estate loans .............. 93,947 497 213 94,657 213 3,794 4,007 907
Commercial and industrial loans ........ 66,437 919 151 67,507 339 -- 339 --
------------------------------------------------------------------------------------------
Total commercial and
industrial loans ..................... 66,437 919 151 67,507 339 -- 339 1,295
------------------------------------------------------------------------------------------
Consumer loans:
Direct ................................ 12,578 77 10 12,665 10 -- 10 --
Indirect .............................. 58,047 296 44 58,387 44 -- 44 --
CreditLine ............................ 2,112 20 5 2,137 5 -- 5 --
-----------------------------------------------------------------------------------------
Total consumer loans ................. 72,737 393 59 73,189 59 -- 59 619
Unallocated reserve for loan loss ..... -- -- -- -- -- -- -- 831
------------------------------------------------------------------------------------------
Total ............................. $233,121 $ 1,809 $ 423 $235,353 $ 611 $ 3,794 $4,405 $ 3,652
------------------------------------------------------------------------------------------
</TABLE>
* Nonperforming loans are loans on which scheduled principal and/or interest is
past due 90 days or more and loans less than 90 days past due which are deemed
to be problem loans by management. Total nonperforming loans of $611,000
includes the $423,000 in loans past due 90 days or more plus $188,000 in loans
less than 90 days delinquent, on which certain borrowers have paid interest
regularly.
**Other real estate owned was written down to current market values at the time
of reclassification to this category. These amounts are not included in the
total loan amounts.
DEPOSITS
The Bank attracts deposits from within its primary market area by offering
various deposit instruments, including savings accounts, NOW accounts, market
rate accounts, and certificates of deposits.
Total deposits increased 5% to $317,601,000 at December 31, 1995, from
$301,337,000 at year-end 1994. A more meaningful measure of deposit change is
average daily balances. As illustrated in Table 12, average deposit balances
increased 3%. In an effort to increase its deposit base in 1995, the Bank
offered one and two year Premier certificates of deposit, at interest rates of
6.50% and 7.00%, respectively. As a result, the Bank increased its average daily
certificate of deposit balances by 59%. Partially offsetting this increase in
average CD balances, was a 10% decrease in average daily balances of savings
deposits, specifically, market rate, NOW and savings account deposits. The
Bank's average daily non-interest bearing demand deposits grew 4% over similar
balances for 1994.
[GRAPHIC APPEARS HERE]
<PAGE>
The following table presents the average balances of deposits and the percentage
change for the years indicated:
TABLE 12 - Average Daily Balances of Deposits
% CHANGE % CHANGE
1995 VS. 1994 VS.
(dollars in thousands) 1995 1994 1994 1993 1993
---------------------------------------------------
Demand deposits, non-
interest-bearing ...... $ 68,654 $ 65,976 4.1 $ 60,390 9.2%
---------------------------------------------------
Market rate accounts .... 50,720 56,694 (10.5) 51,163 10.8
NOW accounts ............ 65,999 67,195 (1.8) 59,758 12.4
Regular savings ......... 45,025 56,011 (19.6) 57,145 (2.0)
---------------------------------------------------
161,744 179,900 (10.1) 168,066 7.0
---------------------------------------------------
Time deposits ........... 68,328 42,925 59.2 44,767 (4.1)
---------------------------------------------------
Total ................. $298,726 $288,801 3.4% $273,223 5.7%
---------------------------------------------------
The following table shows the maturity of certificates of deposit of $100,000 or
greater as of December 31, 1995:
TABLE 13 - Maturity of Certificates of Deposit of $100,000 or Greater
(in thousands)
Three months or less ......... $ 7,578
Three to six months .......... 2,549
Six to twelve months ......... 1,040
Greater than twelve months ... 851
-------
Total ....................... $12,018
=======
CAPITAL ADEQUACY
At December 31, 1995, total shareholders' equity of the Corporation was
$31,903,000, a $4,757,000 or 18% increase over $27,146,000 at December 31, 1994.
In addition to earnings and dividends for the year, the impact of SFAS No. 115
resulted in a significant increase in shareholders' equity in 1995. As of
December 31, 1995, shareholders' equity included unrealized gains on investment
securities, net of deferred taxes, of $212,000 compared to unrealized losses on
investment securities, net of taxes, of $945,000 at December 31, 1994. This
change accounts for a $1,157,000 increase in total shareholders' equity from
December 31, 1994, to year end 1995.
[GRAPHIC APPEARS HERE]
The Corporation and the Bank are required to meet certain regulatory capital
adequacy guidelines. Under these guidelines, risk-based capital ratios measure
capital as a percentage of risk-adjusted assets. Risk-adjusted assets are
determined by assigning various weights to all assets and off-balance sheet
arrangements, such as letters of credit and loan commitments, based on the
associated risk.
The Bank's risk-based capital ratios at December 31, 1995 and 1994, are listed
below. These ratios are all in excess of the minimum required capital ratios,
also listed below.
TABLE 14 - Risk-Based Capital Ratios
1995 1994
-------------------------------------------
Minimum Minimum
Actual Required Actual Required
-------------------------------------------
Tier I capital ratio 11.42% 4.00% 10.82% 4.00%
Total capital ratio 12.67 8.00 12.08 8.00
The FDIC has created a statutory framework for capital requirements that
established five categories of capital strength, ranging from a high of
"well-capitalized" to a low of "critically under capitalized." As of December
31, 1995 and 1994, the Bank exceeded the levels required to meet the definition
of a "well-capitalized" bank. Management anticipates that the Corporation and
the Bank will continue to be in compliance with all capital requirements and
continue to be classified as "well-capitalized."
The Corporation's continued declaration of dividends in the future is dependent
on future earnings.
RISK ELEMENTS
Risk elements, as defined by the Securities and Exchange Commission in its
Industry Guide 3, are composed of four specific categories: (1) nonaccrual, past
due, and restructured loans, (2) potential problem loans, loans not included in
the first category, but where information known by Bank management indicates
that the borrower may not be able to comply with present payment terms, (3)
foreign loans outstanding, and (4) loan concentrations. Table 11 presents a
summary, by loan type, of the Bank's nonaccrual and past due loans as of
December 31, 1995. It is the Bank's policy to promptly place nonperforming loans
on nonaccrual status. Bank management knows of no outstanding loans that
presently would meet the criteria for inclusion in the potential problem loan
category, as indicated under specific category (2) referred to above. The Bank
has no foreign loans, and loan concentrations are presented in Table 6. This
table presents the percentage of outstanding loans, by loan type, compared to
total loans outstanding as of December 31, 1995.
ASSET QUALITY
The Bank is committed to maintaining and developing quality assets. Loan growth
is generated primarily within the Bank's market area, which includes Montgomery,
Delaware and Chester Counties, as well as portions of Bucks and Philadelphia
Counties. The development of quality loan growth is controlled through a uniform
lending policy that defines the lending functions and goals, loan approval
process, lending limits, and loan review.
<PAGE>
Nonperforming assets amounted to $4,405,000 at December 31, 1995, a 4% increase
from $4,251,000 at December 31, 1994, because of an increase in OREO balances.
Nonperforming loans were $611,000 at December 31, 1995, a 21% decrease from
$776,000 at December 31, 1994. OREO increased $319,000 or 9% to $3,794,000 at
December 31, 1995, from $3,475,000 at December 31, 1994, because of $193,000 in
capitalizable costs being added to an existing OREO property and a $404,000
purchase of a participant's share of an OREO property. Both of these OREO
properties are being offered for sale and are appraised for more than the Bank's
new carrying value. These two increases in OREO balances were partially offset
by a $278,000 reduction in OREO balances related to the disposition of three
OREO properties during 1995. As of December 31, 1995, there were three
properties remaining in OREO. The ratio of nonperforming assets as a percentage
of total assets was 1.24% as of December 31, 1995, compared to 1.28% as of
December 31, 1994.
TABLE 15 - Nonperforming Assets
December 31
(in thousands) 1995 1994 1993 1992 1991
------------------------------------------
Loans past due 90 days or
more not on nonaccrual status:
Real estate--mortgage $ -- $ 48 $ 139 $240 $ 232
Consumer 155 82 59 121 182
Loans on which the accrual
of interest has been discontinued:
Commercial and industrial 339 -- 205 1,023 1,356
Real estate--mortgage 117 371 1,032 862 115
Real estate--construction -- 275 708 407 1,803
------------------------------------------
Total nonperforming loans 611 776 2,143 2,653 3,688
Other real estate owned* 3,794 3,475 3,539 6,524 9,654
------------------------------------------
Total nonperforming assets $4,405 $4,251 $5,682 $9,177 $13,342
------------------------------------------
All loans past due 90 days or more, except consumer loans and home equity
mortgage loans, are placed on nonaccrual status. Such factors as the type and
size of the loan, the quality of the collateral, and historical creditworthiness
of the borrower and/or guarantors are considered by management in assessing the
collectibility of such loans. Interest foregone on nonaccrual status loans was
$59,000 for the year ended December 31, 1995. Interest earned and included in
interest income on these loans prior to their nonperforming status amounted to
$50,000 in 1995.
* Refer to Note 2 to the consolidated financial statements.
The Bank maintains a Loan Review Committee (the "Committee") that periodically
reviews the status of all nonaccrual loans, loans criticized by both the Bank's
regulators and an independent consultant retained to review both the loan
portfolio as well as the overall adequacy of the loan loss reserve. During the
review of the loan loss reserve, the Committee considers specific loans on a
loan-by-loan basis, pools of similar loans, prior historical writeoff activity,
and a supplemental reserve allocation as a measure of conservatism for any
unforeseen loan loss reserve requirements. The sum of these components is
compared to the loan loss reserve balance, and any additions deemed necessary to
the loan loss reserve balance are charged to operating expenses on a timely
basis.
The Corporation is regulated and periodically inspected by The Federal Reserve
Board. During 1995, the Bank became a state member bank of the Federal Reserve
System. The Bank is regulated and periodically examined by the Federal Reserve
Board and the Pennsylvania Department of Banking. There are no recommendations
by the regulators which would have a material effect on the Corporation's
liquidity, capital resources, or results of operations.
In May 1993, Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114"), was issued. Under the
requirements of SFAS No. 114, recognition of an impairment in the performance of
a loan is required when it is probable that all amounts will not be collected in
accordance with the loan agreement. SFAS No. 114 was subsequently amended by
Statement of Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosure" ("SFAS No. 118"), to
allow a creditor to use existing methods for recognizing interest income on an
impaired loan. The Corporation adopted SFAS No. 114 and No. 118 during the first
quarter of 1995. The adoption of SFAS No. 114 and No. 118 has not had a material
impact on the financial position or results of operations of the Corporation.
ASSET AND LIABILITY MANAGEMENT
Through its Asset/Liability Committee ("ALCO") and the application of Risk
Management Policies and Procedures, the Bank seeks to minimize its exposure to
interest rate risk as well as to maintain sufficient liquidity and capital.
[GRAPHIC APPEARS HERE]
<PAGE>
TABLE 16 - Interest Rate Sensitivity Analysis
as of December 31, 1995
<TABLE>
<CAPTION>
REPRICING PERIODS
----------------------------------------------------------------------------------------
0 TO 30 31 TO 90 91 TO 180 181 TO 365 OVER NON-RATE
(dollars in thousands) DAYS DAYS DAYS DAYS 1 YEAR SENSITIVE TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing deposits
with other banks ...................... $ 115 $ -- $ -- $ -- $ -- $ -- $ 115
Federal funds sold ...................... 19,410 -- -- -- -- -- 19,410
Investment securities ................... 7,930 5,191 5,876 21,215 18,999 -- 59,211
Loans ................................... 70,897 7,387 13,132 19,648 124,289 $ (3,652) 231,701
Cash and due from banks ............... -- -- -- -- -- 25,128 25,128
Other assets ......................... -- -- -- -- -- 19,391 19,391
----------------------------------------------------------------------------------------
Total assets ......................... $ 98,352 $ 12,578 $ 19,008 $ 40,863 $ 143,288 $ 40,867 $ 354,956
----------------------------------------------------------------------------------------
Liabilities and shareholders' equity:
Demand, noninterest-bearing ........... $ -- $ -- $ -- $ -- $ -- $ 81,128 $ 81,128
Savings deposits ...................... 60,503 -- -- -- 100,838 -- 161,340
Time deposits ......................... 15,683 13,897 14,100 10,330 21,123 -- 75,133
Other liabilities ..................... -- -- -- -- -- 5,452 5,452
Shareholders' equity ................. -- -- -- -- -- 31,903 31,903
----------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity ................. $ 76,186 $ 13,897 $ 14,100 $ 10,330 $ 121,961 $ 118,483 $ 354,956
----------------------------------------------------------------------------------------
Gap ..................................... $ 22,167 $ (1,319) $ 4,908 $ 30,533 $ 21,328 $ (77,616) --
Cumulative gap .......................... $ 22,167 $ 20,848 $ 25,756 $ 56,289 $ 77,616 -- --
Cumulative earning assets as a ratio
of costing liabilities ................ 129% 123% 125% 149% 133% -- --
</TABLE>
INTEREST RATE SENSITIVITY
The difference between interest sensitive assets and interest sensitive
deposits, stated in dollars, is referred to as the interest rate sensitivity
gap. A positive gap is created when interest rate sensitive assets exceed
interest rate sensitive deposits. A positive interest rate sensitive gap 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 a negative gap. In practice, however, there may be a lag in
repricing some products in comparison to others. A positive gap in the
short-term, 30 days or less, in an increasing rate environment should produce an
increase in net interest income.
The converse is true of a negative gap in a rising interest rate environment.
As shown in Table 16, the Bank is presently asset interest rate sensitive in the
short term, 30 days or less category.
The Bank uses income 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 year-end 1995, based on an analysis of the results
from the simulation model, the amount of the Bank's interest rate risk was
within the acceptable range as established by the Bank's Risk Management
Policies and Procedures.
While future interest rate movements and their effect on Bank revenue cannot be
predicted, there are no trends, events, or uncertainties of which the
Corporation's management is currently aware 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.
LIQUIDITY
The Bank's liquidity is maintained by managing its core deposits, purchasing
federal funds, selling loans in the secondary market, and borrowing from the
Federal Home Loan Bank of Pittsburgh. The Bank had available a $33,000,000 line
of credit with the Federal Home Loan Bank of Pittsburgh as of December 31, 1995.
The Bank's liquid assets include cash and cash equivalents as well as certain
unpledged investment securities. Periodically, ALCO reviews the Bank's liquidity
ratio, which is basically the relationship of liquid assets to certain deposits.
This ratio, as of December 31, 1995, was 28% compared to 24% as of December 31,
1994. The primary reason for the increase in the liquidity ratio was an increase
in federal funds sold. It is the Bank's policy to maintain a liquidity ratio in
excess of 20%.
During 1995, the Corporation's financing activities provided $15,172,000 in net
cash, primarily the result of a $33,313,000 increase in outstanding certificate
of deposit balances, partially offset by decreases of $17,049,000 in demand and
savings deposits. This net increase in cash provided by financing activities,
along with a $12,827,000 increase in net cash provided from operations,
primarily due to a $6,721,000 net increase in cash from the origination and sale
of residential mortgage loans in the secondary mortgage market, were used to
fund the net cash used
<PAGE>
in investing activities of $13,783,000, primarily a $26,088,000 increase in
purchased automobile paper, partially offset by loan repayments, net of new loan
originations of $12,765,000. Loan repayments, net of originations, are exclusive
of residential mortgage loans originated for resale and loans sold in the
secondary residential mortgage market as well as the increase in loan balances
resulting from the purchased automobile paper from automobile dealerships during
1995, as discussed above. The balance of the increase in net cash available was
used to increase the Corporation's cash and cash equivalents by $14,216,000 from
December 31, 1994 to December 31, 1995.
1994 VS. 1993 RESULTS OF OPERATIONS
Net Income
Net income for the year ended December 31, 1994 was $4,049,000, a 9% increase
over net income of $3,712,000 for the year ended December 31, 1993. Exclusive of
the cumulative effect of an accounting change in 1993, the result of adopting
SFAS No. 109 in 1993, net income of $4,049,000 in 1994, increased 4% over income
before the cumulative effect of an accounting change of $3,887,000 for 1993.
On a per share basis, net income rose from $1.71 in 1993 to $1.85 in 1994. In
1994, the Corporation paid dividends of $0.325 per share, a 63% increase over
$.20 per share, paid in 1993.
Return on average assets was 1.26% for 1994 compared to 1.23% in 1993. Return on
average equity was 15.70% in 1994 versus 16.37% in 1993.
Net Interest Income
Net interest income increased 12% in 1994 from 1993 levels. Interest income
increased 5% and interest expense decreased 13%.
The 5% rise in interest income was due to a 7% increase in daily average earning
asset balances, partially offset by a decline in the average yield on earning
assets, from 7.4% in 1993 to 7.2% in 1994.
Interest expense declined 13% or $883,000 from 1993 to 1994 due to a decline in
interest rates paid on deposits, from 2.7% in 1993 to 2.3% in 1994. The result
was an increase in the net interest margin from 4.85% in 1993 to 5.21% in 1994.
Loan Loss Provision
The provision for loan losses amounted to $500,000 in 1994 and 1993. The
allowance for possible loan losses as a percentage of nonperforming loans
amounted to 466% and 168% as of December 31, 1994 and 1993, respectively. The
significant decline in outstanding nonperforming loans at December 31, 1994 from
year end 1993, $2,143,000 at December 31, 1993 to $776,000 at December 31, 1994,
is primarily responsible for the increase in the ratio of loan loss reserves to
nonperforming loans at year end 1994.
Other Income
Other income decreased 14% in 1994 from 1993 levels. Primarily responsible for
this $1,403,000 decrease in other income was a $1,056,000 decrease in net gains
on the sale of mortgage loans. The Bank sold $108,685,000 in mortgage loans
during 1993 compared to only $39,109,000 in 1994. Increasing mortgage interest
rates during 1994 were primarily responsible for this decline in income. The
Bank also had a $595,000 reduction in gains on the sale of OREO in 1994 compared
to 1993 gains. During 1993 the Bank disposed of $4,234,000 in OREO properties,
realizing related gains of $889,000 compared to OREO sales of $681,000 in 1994
realizing gains of $294,000. Trust fees increased by $300,000 or 7% in 1994 over
1993 levels.
Other Expenses
Other expenses decreased by $135,000 or 1% in 1994 from 1993. While regular
salaries increased $452,000 or 7%, salaries- other, primarily incentive based,
decreased $244,000 or 23%. Decreases in incentives based on mortgage banking
profitability and overall bank profitability are primarily responsible for the
decreases.
Advertising costs increased $123,000 or 17% in 1994 from 1993 levels, the result
of continuing the Corporation's television, radio, and print media advertising
campaign.
Professional fees, primarily associated with the administration of nonperforming
assets and the cost of operating OREO decreased $254,000 and $555,000,
respectively, in 1994 as the amount of nonperforming assets were reduced by 25%,
or $1,431,000, from year-end 1993 to 1994.
Income Taxes
The income tax provision for 1994 was $1,600,000, or a 28.3% effective rate,
compared to $1,401,000, or a 26.5% effective rate, for 1993.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands)
As of December 31 1995 1994
---------------------------
<S> <C> <C>
ASSETS
Cash and due from banks ........................................................................ $ 25,128 $ 19,353
Interest-bearing deposits with other banks ..................................................... 115 1,584
Federal funds sold ............................................................................. 19,410 9,500
Investment securities available for sale, at market value
(amortized cost of $58,890,000 and $59,995,000
at December 31, 1995 and 1994, respectively) ................................................ 59,211 58,563
---------------------------
Loans .......................................................................................... 235,353 228,738
Less: Allowance for possible loan losses .................................................... (3,652) (3,618)
---------------------------
Net loans .............................................................................. 231,701 225,120
Premises and equipment, net .................................................................... 11,820 11,383
Accrued interest receivable .................................................................... 2,463 1,999
Deferred federal income taxes .................................................................. 1,042 1,730
Other real estate owned ........................................................................ 3,794 3,475
Other assets ................................................................................... 272 473
---------------------------
Total assets ................................................................................ $ 354,956 $ 333,180
---------------------------
LIABILITIES
Deposits:
Demand, noninterest-bearing ................................................................. $ 81,128 $ 83,142
Savings ..................................................................................... 161,340 176,375
Time ........................................................................................ 75,133 41,820
---------------------------
Total deposits .............................................................................. 317,601 301,337
Other liabilities .............................................................................. 5,452 4,697
---------------------------
Total liabilities ........................................................................... 323,053 306,034
Commitments and contingencies (Note 12)
SHAREHOLDERS' EQUITY
Common stock, par value $1,
authorized, 5,000,000 shares, issued 2,493,200 shares and 1,245,100 shares as
of December 31, 1995 and 1994, respectively, and outstanding 2,190,380 shares
and 1,093,690 shares as of December 31, 1995
and 1994, respectively ...................................................................... 2,493 1,245
Paid-in capital in excess of par value ......................................................... 4,363 5,559
Unrealized investment appreciation (depreciation), net of deferred income taxes ................ 212 (945)
Retained earnings .............................................................................. 26,374 22,826
---------------------------
33,442 28,685
Less: Common stock in treasury, at cost -- 302,820 and 151,410
shares of December 31, 1995 and 1994, respectively ........................................... (1,539) (1,539)
---------------------------
Total shareholders' equity ................................................................ 31,903 27,146
---------------------------
Total liabilities and shareholders' equity ................................................ $ 354,956 $ 333,180
---------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share and per share data)
For the years ended December 31 1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Net interest income:
Interest income:
Interest and fees on loans ................................................... $ 19,627 $ 16,498 $ 15,741
Interest on federal funds sold ............................................... 813 261 343
Interest and dividends on investment securities:
Taxable interest income ..................................................... 2,491 2,853 2,594
Tax-exempt interest income .................................................. 607 708 749
Dividend income ............................................................. 79 58 68
---------------------------------------
Total interest income ..................................................... 23,617 20,378 19,495
Interest expense on deposits ................................................... 7,246 5,077 5,823
---------------------------------------
Net interest income ............................................................ 16,371 15,301 13,672
Loan loss provision ............................................................ 500 500 500
Net interest income after loan loss provision .................................. 15,871 14,801 13,172
---------------------------------------
Other income:
Fees for trust services ...................................................... 5,496 4,719 4,419
Service charges on deposit accounts .......................................... 1,049 1,068 1,266
Other fees and service charges ............................................... 1,240 1,192 1,394
Net gain on sale of loans .................................................... 479 386 1,442
Gain on sale of other real estate owned ...................................... 137 294 889
Other real estate owned revenue .............................................. 353 319 --
Other operating income ...................................................... 443 405 376
---------------------------------------
Total other income .......................................................... 9,197 8,383 9,786
---------------------------------------
Other expenses:
Salaries-regular ............................................................. 6,906 6,705 6,253
Salaries-other ............................................................... 1,112 817 1,061
Employee benefits ............................................................ 1,890 1,789 1,488
Occupancy expense ............................................................ 1,441 1,389 1,333
Furniture, fixtures, and equipment ........................................... 877 851 811
Advertising .................................................................. 868 839 716
Computer processing .......................................................... 1,174 1,085 1,051
Stationery and supplies ...................................................... 279 258 260
Professional fees ............................................................ 701 683 937
Insurance .................................................................... 486 807 867
Merchant credit card processing .............................................. 314 299 279
Net cost of operation of other real estate owned ............................. 52 39 594
Other operating expenses ..................................................... 2,225 1,974 2,020
---------------------------------------
Total other expenses ................................................... 18,325 17,535 17,670
---------------------------------------
Income before income taxes and
cumulative effect of accounting change ...................................... 6,743 5,649 5,288
Applicable income taxes ........................................................ 2,100 1,600 1,401
---------------------------------------
Income before cumulative effect of accounting change ........................... 4,643 4,049 3,887
Cumulative effect of accounting change ......................................... -- -- (175)
---------------------------------------
Net income ..................................................................... $ 4,643 $ 4,049 $ 3,712
---------------------------------------
Earnings per average common share before
cumulative effect of accounting change* ...................................... $ 2.08 $ 1.85 $ 1.79
Cumulative effect of accounting change* ........................................ $ -- $ -- $ (0.08)
Earnings per average common share from net income* ............................. $ 2.08 $ 1.85 $ 1.71
Average number of shares outstanding, including common stock
equivalents* ................................................................. 2,233,898 2,183,900 2,176,446
*Restated to reflect the 2-for-1 stock split, effective December 29, 1995.
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands)
For the years ended December 31 1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ...................................................................... $ 4,643 $ 4,049 $ 3,712
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses .................................................... 500 500 500
Provision for depreciation and amortization .................................. 986 891 873
Provisions for writedowns of other real estate owned ......................... -- -- 504
Cumulative effect of accounting change ....................................... -- -- 175
Loans originated for resale .................................................. (61,105) (41,260) (115,092)
Proceeds from sale of loans .................................................. 67,826 40,986 111,194
Net Gain on sale of loans .................................................... (479) (386) (1,442)
Gain on sale of investment securities ........................................ -- (2) --
Net gain on disposal of other real estate owned .............................. (137) (294 ) (889
Provision for deferred income taxes .......................................... (148) 66 290
Change in income taxes payable/refundable .................................... 160 (55) 676
Change in interest receivable ................................................ (464) (109) (215)
Change in interest payable ................................................... 101 (11) (27)
Other ........................................................................ 944 (97) 1,059
----------------------------------------------
Net cash provided by operating activities .................................... 12,827 4,278 1,318
----------------------------------------------
INVESTING ACTIVITIES:
Purchases of investment securities ............................................ (21,289) (10,261) (47,832)
Proceeds from maturities of investment securities ............................. 22,320 23,254 34,437
Proceeds from sales of investment securities available for sale ............... -- 7,009 --
Proceeds on disposition of other real estate owned ............................ 415 975 5,123
Purchase of other real estate owned ........................................... (404) -- (1,319)
Capitalization of costs of other real estate owned ............................ (193) -- --
Loan repayments, net of originations .......................................... 12,765 8,125 16,049
Purchase of automobile retail installment contracts ........................... (26,088) (45,877) (22,061)
Loan originations to facilitate the sale of other real estate owned ........... -- -- (1,532)
Purchases of premises and equipment ........................................... (1,309) (1,057) (869)
----------------------------------------------
Net cash used by investing activities ........................................ (13,783) (17,832) (18,004)
----------------------------------------------
FINANCING ACTIVITIES:
Change in demand and savings deposits ......................................... (17,049) 12,279 18,657
Change in time deposits ....................................................... 33,313 (2,016) (3,768)
Dividends paid ................................................................ (1,095) (710) (435)
Repayment of mortgage debt .................................................... (49) (43) (35)
Proceeds from issuance of common stock ........................................ 52 125 30
----------------------------------------------
Net cash provided by financing activities .................................... 15,172 9,635 14,449
----------------------------------------------
Change in cash and cash equivalents ............................................. 14,216 (3,919) (2,237)
Cash and cash equivalents at beginning of year .................................. 30,437 34,356 36,593
----------------------------------------------
Cash and cash equivalents at end of year ........................................ $ 44,653 $ 30,437 $ 34,356
----------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for:
Income taxes ................................................................. $ 1,414 $ 1,513 $ 1,220
Interest ..................................................................... 7,145 5,088 5,850
Noncash investing transactions:
Loans converted into other real estate owned ................................. -- 908 318
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands, except for shares of common stock)
SHARES OF UNREALIZED
COMMON COMMON PAID-IN RETAINED GAINS TREASURY
For the years ended 1995, 1994, and 1993 STOCK ISSUED STOCK CAPITAL EARNINGS (LOSSES) STOCK
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 ............................. 1,238,320 $ 1,238 $ 5,411 $ 16,210 $-- $ (1,539)
Net income ............................................. -- -- -- 3,712 -- --
Dividends declared, $0.40 per share .................... -- -- -- (435) --
Common stock issued .................................... 1,700 2 28 -- -- --
----------------------------------------------------------------------------
Balance, December 31, 1993 ............................. 1,240,020 1,240 5,439 19,487 -- (1,539)
Cumulative effect of change
in accounting principle, net of deferred
income taxes of $444,000 ............................. -- -- -- -- 863 --
Net income ............................................. -- -- -- 4,049 -- --
Dividends declared, $0.65 per share .................... -- -- -- (710) -- --
Change in unrealized gains (losses), net of income
taxes of $931,000 .................................... -- -- -- -- (1,808) --
Common stock issued .................................... 5,080 5 120
----------------------------------------------------------------------------
Balance, December 31, 1994 ............................. 1,245,100 1,245 5,559 22,826 (945) (1,539)
Net income ............................................. -- -- -- 4,643 -- --
Dividends declared, $0.50 per share .................... -- -- -- (1,095) -- --
Change in unrealized gains (losses), net of income
taxes of $596,000 .................................... -- -- -- -- 1,157 --
Common stock issued .................................... 1,500 1 51 -- -- --
Common stock issued in conjunction with the
2-for-1 stock split, effective
December 29, 1995 .................................... 1,246,600 1,247 (1,247) -- -- --
----------------------------------------------------------------------------
Balance, December 31, 1995 ............................. 2,493,200 $ 2,493 $ 4,363 $ 26,374 $ 212 $ (1,539)
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bryn Mawr Bank
Corporation (the "Corporation") and The Bryn Mawr Trust Company (the "Bank").
All significant intercompany transactions and accounts have been eliminated upon
consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies of the Corporation conform to generally accepted
accounting principles and to general practices of the banking industry. The
significant accounting policies are as follows:
Cash and cash equivalents:
Cash and cash equivalents include cash and due from banks, federal funds sold,
and interest-bearing deposits with other banks with original maturities of three
months or less. Cash balances reserved to meet regulatory requirements of the
Federal Reserve Board amounted to $9,674,000 and $8,257,000 at December 31, 1995
and 1994, respectively.
Investment securities:
On January 1, 1994, the Corporation adopted the provisions of 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 three categories as applicable: (1) trading,
(2) available for sale, and (3) held to maturity. Management categorized all of
its investment securities as available for sale as part of the asset/liability
management strategy since they may be sold in response to changes in interest
rates, prepayments, and similar factors. Investments in this classification are
reported at the current market value with net unrealized gains or losses, net of
the applicable deferred tax effect, being added to or deducted from the
Corporation's total shareholders' equity on the balance sheet.
In accordance with SFAS No. 115, prior period financial statements have not been
restated to reflect the change in accounting principle. The cumulative effect of
adopting SFAS No. 115 as of January 1, 1994 was an increase in the balance of
shareholders' equity of $863,000 to reflect the net unrealized gain (net of
$444,000 in deferred income taxes) of $1,307,000 on investment securities
classified as available for sale. As of December 31, 1994, shareholders' equity
was decreased by $945,000 due to unrealized losses (net of $487,000 in deferred
income tax benefits) of $1,432,000 in the investment securities portfolio. As of
December 31, 1995, shareholders' equity was increased by $212,000 due to
unrealized gains (net of $109,000 in deferred income taxes) of $321,000 in the
investment securities portfolio.
Prior to the adoption of SFAS No. 115, investments in fixed maturity securities
classified as available for sale were carried at the lower of aggregate
amortized cost or market value.
Loans:
Interest income on loans performing satisfactorily is recognized on the accrual
method of accounting. Nonperforming loans are loans on which scheduled principal
and/or interest is past due 90 days or more or loans less than 90 days past due
which are deemed to be problem loans by management. All nonperforming loans,
except consumer loans, are placed on nonaccrual status, and any outstanding
interest receivable at the time the loan is deemed nonperforming is deducted
from interest income. Such factors as the type and size of the loan, the quality
of the collateral, and historical creditworthiness of the borrower and/or
guarantors are considered by management in assessing the collectibility of such
loans.
In May 1993, Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114"), was issued. Under the
requirements of SFAS No. 114, recognition of an impairment in the performance of
a loan will be required when it is probable that all amounts will not be
collected in accordance with the loan agreement. SFAS No. 114 was subsequently
amended by Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and Disclosure" ("SFAS
No. 118"), to allow a creditor to use existing methods for recognizing interest
income on an impaired loan. The adoption of SFAS No. 114 and No. 118 was
required in the first quarter of 1995. As of December 31, 1995, the recorded
investment in loans for which impairment has been recognized in accordance with
SFAS No. 114 totaled $565,000. All impaired loans had a related allowance for
loan loss. The total related allowance for loan loss at December 31, 1995 was
$233,000. The adoption of SFAS No. 114 and No. 118 did not have a material
impact on the financial position or results of operations of the Corporation.
Loan loss provision:
The loan loss provision charged to operating expenses is based on those factors
which, in management's judgement, deserve current recognition in estimating
possible loan losses including the continuing evaluation of the loan portfolio
and the Bank's past loan loss experience. The allowance for possible loan losses
is an amount that management believes will be adequate to absorb losses inherent
in existing loans and commitments to extend credit.
<PAGE>
Premises and equipment:
Premises and equipment are stated at cost, less accumulated depreciation. The
provision for depreciation is computed on a straight-line basis over the
estimated useful lives, as follows: premises--10 to 50 years, and equipment--3
to 20 years. Leasehold improvements are being amortized over the shorter of the
estimated useful life or the term of the lease.
Maintenance and repairs are charged to expense; major renewals and betterments
are capitalized. Gains and losses on dispositions are reflected in current
operations.
Income taxes:
In February 1992, Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), was issued. It changes the
method of computing deferred income taxes from the deferred to a liability
approach. The Corporation adopted SFAS No. 109 on January 1, 1993. The
Corporation did not restate its prior years' consolidated financial statements
in conjunction with the adoption of SFAS No. 109, but rather, reported a charge
against 1993's earnings as the cumulative effect of the accounting change, in
the amount of $175,000. Since deferred taxes are adjusted for any enacted change
in tax rates under SFAS No. 109, the Corporation's results of operations may be
subject to volatility.
Trust income:
Trust Division income is recognized on the cash basis of accounting. Reporting
such income on a cash basis does not materially affect net income.
Other real estate owned:
Other real estate owned ("OREO") is comprised of properties acquired through
foreclosure proceedings or acceptance of a deed in lieu of foreclosure. OREO is
recorded at the lower of the carrying value of the loan at the time of
foreclosure or the market value of the property actually received. Should the
resulting current market value of the property underlying the loan be below the
current book value of the loan, the loan is written down to the current market
value through a charge to the loan loss reserve. Market values are estimated
through performing a detailed discounted cash flow analysis of each property,
taking into consideration a number of factors, including the projected time
period to complete the sale of the property, the projected selling price and
costs of administration of the property. This stream of both positive and
negative cash flows is discounted back to a present value using a current rate
of interest. In addition, a reserve is maintained for estimated losses to cover
potential risk of loss that may exist in the portfolio of real estate acquired
by foreclosure. The balance of this reserve amounted to $149,000 and $177,000 as
of December 31, 1995 and 1994, respectively. Revenues relating to the operation
of these properties are recognized on a cash basis. Subsequent costs directly
related to the completion of properties under construction are capitalized to
the extent they are considered to be realizable. Operating expenses and any
writedowns subsequent to foreclosure of the carrying value are charged to
current period earnings. Gains and losses upon disposition are reflected in
earnings as realized.
Earnings per share:
Earnings per average common share is based on the weighted average of common
shares outstanding during the year and, when their effect is dilutive, common
equivalent shares consisting of certain shares subject to options.
Recently issued accounting standards:
In May 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 122 "Accounting for Mortgage
Servicing Rights" which is effective for the Corporation beginning January 1,
1996. The statement 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 statement applies prospectively to
transactions entered into in 1996, therefore there will be no cumulative effect
upon adoption of this statement. In addition, this statement is not expected to
have a significant effect on the financial position or the results of operations
of the Corporation.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation", which is effective for the Corporation beginning January 1, 1996.
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 FASB encourages entities to adopt the fair
value based method, but does not require the adoption of this method. For those
entities that continue to apply APB 25, proforma disclosure of the effect, if
adopted, of SFAS 123 on net income and earnings per share would be required in
the 1996 financial statements. The Corporation will continue to apply APB 25 and
therefore, there will be no impact on the financial position and results of
operations.
<PAGE>
3. INVESTMENT SECURITIES
The amortized cost and estimated market value of investments, one hundred
percent of which were classified as available for sale, are as follows:
(in thousands) 1995
----------------------------------------------------
GROSS GROSS ESTIMATED
Amortized Unrealized Unrealized Market Carrying
COST GAINS LOSSES VALUE VALUE
----------------------------------------------------
Obligations of the
U.S. Government
and agencies ........... $47,100 $261 $69 $47,292 $47,292
State & political
subdivisions ........... 10,515 122 -- 10,637 10,637
Other securities ......... 1,275 7 -- 1,282 1,282
Total ................. $58,890 $390 $69 $59,211 $59,211
----------------------------------------------------
(in thousands) 1994
----------------------------------------------------
GROSS GROSS ESTIMATED
Amortized Unrealized Unrealized Market Carrying
COST GAINS LOSSES VALUE VALUE
----------------------------------------------------
Obligations of the
U.S. Government
and agencies .......... $46,134 $-- $1,297 $44,837 $44,837
State & political
subdivisions .......... 12,861 66 205 12,722 12,722
Other securities ........ 1,000 4 -- 1,004 1,004
Total ................ $59,995 $70 $1,502 $58,563 $58,563
----------------------------------------------------
At December 31, 1995, securities having a book value of $10,745,000 were pledged
as collateral for public funds, trust deposits, and other purposes.
The amortized cost and estimated market value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
(in thousands) 1995
-----------------------
ESTIMATED
AMORTIZED MARKET
Cost Value
-----------------------
Due in one year or less ..................... $27,283 $27,354
Due after one year through five years ....... 30,372 30,615
Due after five years through ten years ...... -- --
Due after ten years ......................... 1,235 1,242
-----------------------
Total .................................... $58,890 $59,211
-----------------------
Proceeds from sales of debt securities are as follows:
(in thousands) 1995 1994 1993
----------------------------
Proceeds ................. $-- $7,009 $--
Gross gains .............. -- 2 --
Gross losses ............. -- -- --
4. LOANS:
Loans outstanding at December 31 are detailed by category as follows:
(in thousands) 1995 1994
---------------------
Real estate loans:
Permanent mortgage loans .............................. $85,752 $92,395
Construction loans .................................... 8,905 4,884
Commercial and industrial loans ......................... 67,507 54,631
Loans to individuals for household, family,
and other consumer expenditures ....................... 73,189 76,828
---------------------
Total ............................................. $235,353 $228,738
---------------------
All loans past due 90 days or more, except consumer loans, are placed on
nonaccrual status.
Nonperforming loans amounted to $611,000 and $776,000 at December 31, 1995 and
1994, respectively. Forgone interest on nonaccrual loans was $59,000, $128,000,
and $238,000 in 1995, 1994, and 1993, respectively.
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES:
The summary of the changes in the allowance for possible loan losses is as
follows:
(in thousands) 1995 1994 1993
-------------------------------------
Balance, January 1 $3,618 $3,601 $3,848
Charge-offs (769) (663) (898)
Recoveries 303 180 151
-------------------------------------
Net charge-offs (466) (483) (747)
Loan loss provision 500 500 500
-------------------------------------
Balance, December 31 $3,652 $3,618 $3,601
-------------------------------------
6. PREMISES AND EQUIPMENT:
A summary of premises and equipment at December 31 is as follows:
(in thousands) 1995 1994
---------------------
LAND $ 2,974 $2,974
---------------------
Buildings .......................................... 10,472 10,425
Furniture and equipment ............................ 7,821 6,646
Leasehold improvements ............................. 169 89
---------------------
21,436 20,134
Less accumulated depreciation ...................... 9,616 8,751
---------------------
Total ........................................... $11,820 $11,383
---------------------
The Corporation has borrowings outstanding of $2,557,000 at December 31, 1995.
The borrowings are collateralized by properties with a book value of $4,351,000
at December 31, 1995. The weighted average interest rate on the borrowings was
9.75% in 1995 and 1994.
7. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments"("SFAS No. 107"), requires disclosure of the fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate such value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other market value techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard the derived fair value estimates
cannot be substantiated by comparison to independent markets
<PAGE>
and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No.107 excludes certain financial instruments and all
non-financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Corporation.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it practicable to estimate that
value:
Cash and cash equivalents:
The carrying amounts reported in the balance sheet for cash and cash equivalents
approximate their fair values.
Investment securities:
Estimated fair values for investment securities are based on quoted market
price, where available. If quoted market prices are not available, estimated
fair values are based on quoted market prices of comparable instruments.
Loans:
For variable rate loans that reprice frequently and which have no significant
change in credit risk, estimated fair values are based on carrying values. Fair
values of certain mortgage loans and consumer loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. The estimated
fair value of nonperforming loans is based on discounted flows as determined by
the internal loan review of the Bank or the value of the underlying collateral,
as determined by independent party appraisers.
Deposits:
The estimated fair values disclosed for noninterest-bearing demand deposits, NOW
accounts, and Market Rate and Market Rate Checking accounts are, by definition,
equal to the amounts payable on demand at the reporting date (i.e., their
carrying amounts). Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of expected monthly maturities on the
certificate of deposit. SFAS No. 107 defines the fair value of demand deposits
as the amount payable on demand and prohibits adjusting estimated fair value
from any value derived from retaining those deposits for an expected future
period of time.
Other liabilities:
Estimated fair values of long term mortgages, collateralized by two properties
included in premises and equipment, are based on discounted cash flow analyses,
using interest rates currently being offered for similar types of loans and
amortizing the loan under existing amortization tables for each loan.
Off-balance sheet instruments:
Estimated fair values of the Corporation's off-balance sheet instruments
(standby letters of credit and loan commitments) are based on fees currently
charged to enter into similar loan agreements, taking into account the remaining
terms of the agreements and the counterparties' credit standing. Since fees and
rates charged for off-balance sheet items are at market levels when set, there
is no material difference between the stated amount and estimated fair values of
off-balance sheet instruments.
The carrying amount and estimated fair value of the Corporation's financial
instruments at December 31 are as follows:
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------------------------------------------------
Financial assets:
Cash and due from banks ... $25,128 $25,128 $19,353 $19,353
Interest-bearing deposits
with other banks .......... 115 115 1,584 1,584
Federal funds sold ......... 19,410 19,410 9,500 9,500
Investment securities ...... 59,211 59,211 58,563 58,563
Net loans .................. 231,701 233,645 225,120 222,247
--------------------------------------------------
Total financial assets .... $335,565 $337,509 $314,120 $311,247
--------------------------------------------------
Financial liabilities:
Deposits ............... $317,601 $317,422 $301,337 $300,548
Other liabilities ....... 2,557 2,944 2,605 2,713
--------------------------------------------------
Total financial liabilities $320,158 $320,336 $303,942 $303,261
Off-balance sheet instruments $65,788 $65,788 $53,505 $ 53,505
--------------------------------------------------
8. APPLICABLE FEDERAL INCOME TAXES:
The Corporation adopted SFAS No. 109 as of January 1, 1993. The cumulative
effect of this change in accounting for income taxes as of January 1, 1993,
decreased net income by $175,000 ($0.08 per share) and is reported separately in
the statement of income for the year ended December 31, 1993.
The components of the net deferred tax asset as of December 31 are as follows:
(in thousands) 1995 1994
-----------------------
Deferred tax assets:
Other real estate owned ........................... $ 356 $ 366
Loan loss reserve ................................. 472 519
Unrealized depreciation on investment
securities ...................................... -- 487
Deferred loan fees ................................ 73 99
Other reserves .................................... 370 412
-----------------------
1,271 1,883
Deferred tax liabilities:
Depreciation ...................................... (120) (153)
Unrealized appreciation on investment
securities ...................................... (109) --
-----------------------
Total deferred tax assets ........................... $1,042 $1,730
-----------------------
No valuation allowance was recorded upon the adoption of SFAS No. 109 in the
first quarter of 1993 or as of December 31, 1995, 1994 or 1993.
The provisions for federal income taxes consist of the following:
(in thousands) 1995 1994 1993
------------------------------
Currently payable ............................ $2,008 $1,534 $1,111
Deferred ..................................... 92 66 290
------------------------------
Total ...................................... $2,100 $1,600 $1,401
------------------------------
The sources of timing differences resulting in deferred federal income taxes and
the approximate tax effect of each are as follows:
(in thousands) 1995 1994 1993
-----------------------------
Other real estate owned ......................... $10 $(99) $(122)
Loan loss provision ............................. 47 108 122
Depreciation .................................... (33) (31) (16)
Pension expense ................................. (67) 15 34
Deferred loan fees .............................. 26 75 (23)
Other ........................................... 109 (2) 295
- --------------------------------------------------------------------------------
Total .......................................... $92 $66 $290
- --------------------------------------------------------------------------------
<PAGE>
Applicable federal income taxes differed from the amount derived by applying the
statutory federal tax rate to income as follows:
(Dollars in thousands) 1995 1994 1993
-----------------------------
Statutory federal tax rate ...................... 34% 34% 34%
-----------------------------
Computed
"expected" tax expense ........................ $2,201 $1,921 $1,798
Benefit reductions in taxes
resulting from
tax-exempt income ............................. (285) (333) (326)
Other, net ...................................... 184 12 (71)
-----------------------------
Actual tax expense .............................. $2,100 $1,600 $1,401
-----------------------------
9. EMPLOYEE BENEFIT PLANS:
Pension Plan
The Bank sponsors a noncontributory, defined benefit pension plan (the "Plan")
covering substantially all employees. The Plan provides for normal retirement at
age 65 and, under certain conditions, also permits early retirement and payment
of spouse's benefits. Total pension expense (income) under the Plan amounted to
$122,000, ($45,000) and ($106,000) for the years ended December 31, 1995, 1994,
and 1993, respectively.
Pension expense (income) for the years ended December 31 is comprised of the
following:
(in thousands) 1995 1994 1993
-------------------------------
Service cost--benefits earned
during the period ........................... $428 $407 $301
Interest cost on projected
benefit obligation .......................... 669 611 585
Actual return on Plan assets .................. (3,009) (35) (1,303)
Unrecognized gain ............................. -- -- --
Net amortization and deferral ................. 2,034 (1,028) 311
-------------------------------
Net periodic pension cost (income) ............ $122 $(45) $(106)
-------------------------------
The following table presents a reconciliation of the funded status of the
defined benefit plan at December 31, 1995 and 1994. The accrued pension
liability is included in Other liabilities on the accompanying consolidated
balance sheets.
(in thousands) 1995 1994
-----------------------
Actuarial present value of benefit
obligation:
Accumulated benefit obligation
(including vested benefits of
$8,420,000 and $7,224,000 as
of December 31, 1995 and 1994) $(8,570) $(7,319)
-----------------------
Projected benefit obligation for
service rendered to date (10,510) (8,382)
Plan assets at fair value
(invested primarily in the Bank's
temporary, income, and equity
common trust funds) 12,691 10,081
-----------------------
Plan assets in excess of projected
benefit obligation 2,181 1,699
Unrecognized net gain (2,450) (1,716)
Unrecognized prior service cost 70 141
Unrecognized transition asset at January 1, 1994,
being amortized over a remaining
period of one year -- (201)
-----------------------
Accrued pension liability included
in consolidated balance sheets $ (199) $ (77)
-----------------------
Significant assumptions used in determining the accrued pension obligation were
as follows:
1995 1994 1993
-----------------------------
Discount rate .................................. 7.0% 8.0% 7.5%
Projected compensation increase ................ 5.0 5.0 5.0
Expected long-term rate
of return on plan assets ..................... 8.0 8.0 8.0
Supplemental Employee Retirement Plan
The Bank sponsors a noncontributory Supplemental Employee Retirement Plan (the
"SERP") covering one employee. The SERP provides for supplemental retirement
benefits, in an amount that is equal to the difference between what would have
been payable under the Plan and the maximum amount payable under current
regulations. SERP expense was first recognized in 1995 and amounted to $71,000.
SERP expense for the year ended December 31 is comprised of the following:
(in thousands) 1995
------
Service cost--benefits earned during the period ........................ $ 9
Interest cost on projected benefit obligation .......................... 24
Actual return on Plan assets ........................................... --
Unrecognized gain ...................................................... --
Net amortization and deferral .......................................... 38
------
Net periodic SERP cost ................................................. $71
------
The following table presents a reconciliation of the accrued liability for the
SERP as of December 31, 1995.
The accrued SERP liability is included in Other liabilities on the accompanying
consolidated balance sheets.
(in thousands) 1995
--------
Actuarial present value of benefit obligation:
Accumulated benefit obligation
(including vested benefits of
$65,000 as of December 31, 1995) ................................ $ (65)
Projected benefit obligation for
service rendered to date .......................................... (370)
Unrecognized net loss ............................................... 35
Unrecognized prior service cost ..................................... 264
Accrued SERP liability included
in consolidated balance sheets .................................... $ (71)
Significant assumptions used in determining the accrued pension obligation were
as follows:
1995
-----
Discount rate .......................................................... 7.0%
Projected compensation increase ........................................ 5.0
Expected long-term rate
of return on plan assets ............................................. --
Thrift Plan
The Corporation sponsors a thrift and savings plan (the "Thrift Plan") covering
substantially all employees. The Thrift Plan provides for the Corporation to
make incentive contributions equal to the participant's basic contribution up to
a maximum of 3% of compensation and provides for voluntary employee
contributions.
All contributions and interest earned thereon are vested immediately. The Thrift
Plan expense was approximately $165,000, $170,000, and $149,000 in 1995, 1994,
and 1993, respectively.
Post-Retirement Benefits
In addition to providing pension and thrift plan benefits, the Corporation
provides certain health care and life insurance benefits for certain retired
employees. The Corporation adopted Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Post-Retirement Benefits other than
<PAGE>
Pensions ("SFAS No. 106"), in the first quarter of 1993. SFAS No. 106 requires
that the expected cost of such benefits be actuarially determined and accrued
ratably from the date of hire to the date the employee is fully eligible to
receive benefits. The Corporation elected to amortize the net obligation
existing as of the date of adoption (transition obligation) over the remaining
service periods of active plan participants.
The net periodic post-retirement benefit cost for 1995 and 1994 was $335,000 and
$339,000, respectively.
The net periodic post-retirement benefit cost for the years ended December 31 is
comprised of the following:
(in thousands) 1995 1994
-------------------
Service cost-- benefits attributed to
service during the period ............................... $ 12 $ 11
Interest cost on accumulated Postretirement
benefit obligation ...................................... 204 201
Amortization of transition obligation ..................... 119 127
Amortization of unrecognized gain ......................... -- --
-------------------
Net periodic post-retirement benefit cost ................. $335 $339
-------------------
The assumed discount rate used in the calculation for the accumulated
post-retirement benefit obligation was 7.0% and 8.0% for 1995 and 1994,
respectively.
The assumed health care cost trend rate for 1996 was 9% and was graded down in
1% increments per year to an ultimate rate of 6% per year.
The following table summarizes the amounts recognized in the Corporation's
balance sheet as of December 31, 1995 and 1994:
(in thousands) 1995 1994
---------------------
Accumulated post-retirement benefit obligation .......... $(2,830) $(2,638)
Unrecognized variance of experience different
from that assumed and unamortized
transition obligation ................................. 2,428 2,365
Accrued post-retirement benefit cost .................... $(402) $ (273)
---------------------
The impact of a 1% increase in the assumed health care cost trend rate for each
future year would be as follows:
(in thousands) 1995
-------
Accumulated post-retirement benefit obligation
as of December 31 .................................................. $3,015
Service cost ......................................................... 12
Interest cost ........................................................ 217
Net amortization and deferral ........................................ 129
Post-Employment Benefits
In November 1992, Statement of Financial Accounting Standards No. 112,
Employers' Accounting for Post-Employment Benefits ("SFAS No. 112"), was issued.
SFAS No. 112 requires employers to recognize any obligation to provide
post-employment (as differentiated from post-retirement) benefits by accruing
the estimated liability. During the first quarter of 1994, the Corporation
adopted SFAS No. 112, which did not have a material impact on the results of
operations.
10. STOCK OPTION PLAN:
The Corporation maintains a stock option and stock appreciation rights plan (the
"Plan") whereby, prior to 1994, up to 108,000 authorized and unissued or
Treasury shares of the Corporation's common stock were reserved for issuance
under the Plan.
During 1994, the shareholders' approved an additional 108,860 shares for
issuance under the Plan. The option to purchase shares of the Corporation's
common stock may be issued to key officers. During 1995, the shareholder's
approved the issuance of 40,000 shares, 10,000 to be granted to outside
directors, for 4 years after each Annual Meeting. The option price will be set
at the last sale price for the stock on the 3rd business day following the
Corporation's Annual Meeting.
Options granted may either be incentive stock options within the meaning of the
Internal Revenue Service code, or non-qualified options. The stock options are
exercisable over a period determined by the Board of Directors; however, the
option period will not commence earlier than one year or be longer than ten
years from the date of the grant. The Plan provides that the option price at the
date of grant will not be less than the fair market value of the Corporation's
common stock. The following is a summary of transactions under the Plan:
SHARES AVAILABLE PRICE
UNDER FOR PER
OPTION OPTION SHARE
----------------------------------------------
Balance at December 31, 1992 .... 77,420 14,220 $ 9.00 - $16.50
Options granted ............... 14,000 (14,000) $14.75
Options exercised ............. (3,400) -- $ 9.00
----------------------------------------------
Balance at December 31, 1993 .... 88,020 220 $ 9.00 - $16.50
Options canceled .............. -- (220)
Options authorized ............ -- 108,860
Options granted ............... 107,600 (107,600) $15.50 - $18.60
Options exercised ............. (10,160) -- $ 9.00 - $14.75
Options expired ............... (3,800) -- $14.75 - $16.5
----------------------------------------------
Balance at December 31, 1994 .... 181,660 1,260 $ 9.00 - $18.60
Options authorized ............ -- 40,000
Options granted ............... 10,000 (10,000) $17.375
Options exercised ............. (3,000) -- $17.375
Options expired ............... (3,200) -- $15.50 - $18.60
----------------------------------------------
Balance at December 31, 1995 .... 185,460 31,260
----------------------------------------------
Exercisable at December 31, 1995 105,420 $ 9.00 - $18.60
----------------------------------------------
Stock appreciation rights may be granted in tandem with non-qualified stock
options. No stock appreciation rights have been granted under the Plan.
The options had a $.04 per share dilutive effect on earnings per share for the
year ended December 31, 1995 and would not have had a dilutive impact on
earnings per share for the years ended December 31, 1994 and 1993 had they been
exercised.
11. RELATED PARTY TRANSACTIONS:
The Corporation had loans outstanding directly to executive officers, directors
and certain other related parties of $2,898,000 and $2,405,000 at December 31,
1995 and 1994, respectively. Following is a summary of these transactions:
(in thousands) 1995 1994
---------------------
Balance, beginning of year ............................. $2,405 $2,326
Additions .............................................. 1,340 275
Amounts collected ...................................... (847) (196)
---------------------
Balance, end of year ................................... $2,898 $2,405
---------------------
<PAGE>
12. FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the consolidated statements of
financial condition.The contractual amounts of those instruments reflect the
extent of involvement the Corporation has in particular classes of financial
instruments.
The Corporation's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument of commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Corporation uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet financial
instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the agreement. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Some of the the commitments are expected to expire
without being drawn upon, and the total commitment amounts do not necessarily
represent future cash requirements. Total commitments to extend credit at
December 31, 1995, are $62,054,000. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis.The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral varies but may
include accounts receivable, marketable securities, inventory, property, plant
and equipment, residential real estate, and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by the Bank to a
customer for a third party. Such standby letters of credit are issued to support
private borrowing arrangements. The credit risk involved in issuing standby
letters of credit is similar to that involved in extending loan facilities to
customers. The collateral varies, but may include accounts receivable,
marketable securities, inventory, property, plant and equipment, and residential
real estate for those commitments for which collateral is deemed necessary. The
Corporation's obligation under standby letters of credit as of December 31,
1995, amounted to $3,734,000.
As of December 31, 1995, the Corporation had no loans sold with recourse
outstanding.
The Corporation grants construction, commercial, residential mortgage, and
consumer loans to customers primarily in Southeastern Pennsylvania. Although the
Corporation has a diversified loan portfolio, its debtors' ability to honor
their contracts is substantially dependent upon the general economic conditions
of the region.
13. RISKS AND UNCERTAINTIES
The earnings of the corporation depend on the earnings of the Bank. The Bank's
earnings are dependent upon both the level of net interest income and
non-interest revenue streams, primarily fees for trust services, that are earned
annually. Accordingly, the earnings of the Corporation are subject to risks and
uncertainties surrounding both its exposure to changes in the interest rate
environment and movements in financial markets.
Most of the Bank's lending activity is with customers located in southeastern
Pennsylvania. Lending is spread between commercial, consumer and real estate
related loans, including construction lending. While these loan concentrations
represent a potential concentration of credit risk, the Bank's credit loss
experience compares favorably to the Bank's peer group credit loss experience.
The financial statements of the Corporation are prepared in conformity with
generally accepted accounting principles that require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
Significant estimates are made by management in determining the allowance for
possible loan losses and the carrying value of other real estate owned.
Consideration is given to a variety of factors in establishing these estimates ,
including current economic conditions, the results of the internal loan review
process, delinquency statistics, borrowers perceived financial and managerial
strengths and the adequacy of supporting collateral, if collateral dependent ,
or the present value of future cash flows. Since the allowance for possible loan
losses and carrying value of other real estate owned are dependent, to a great
extent, on general and other economic conditions beyond the Bank's control, it
is at least reasonably possible that the estimates of the allowance for possible
loan losses and the carrying value of other real estate owned could differ
materially from currently reported values in the near term.
<PAGE>
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
QUARTERS ENDING 1995
(In thousands, except per share data) 3/31 6/30 9/30 12/31
------------------------------------
Interest income .......................... $5,516 $5,867 $6,071 $6,163
Interest expense ......................... 1,594 1,826 1,910 1,916
Net interest income ...................... 3,922 4,041 4,161 4,247
Provision for loan losses ................ 125 125 125 125
Income before income taxes ............... 1,540 1,634 1,858 1,711
Net income ............................... 1,090 1,144 1,299 1,110
Net income per share of common stock ..... 0.50 0.52 0.59 0.49
QUARTERS ENDING 1994
(In thousands, except per share data) 3/31 6/30 9/30 12/31
------------------------------------
Interest income .......................... $4,772 $4,955 $5,160 $5,491
Interest expense ......................... 1,257 1,241 1,258 1,321
Net interest income ...................... 3,515 3,714 3,902 4,170
Provision for loan losses ................ 125 125 125 125
Income before income taxes ............... 1,323 1,342 1,378 1,606
Net income ............................... 945 990 1,003 1,111
Net income per share of common stock ..... 0.43 0.45 0.46 0.51
15. CONDENSED FINANCIAL STATEMENTS:
The condensed financial statements of the Corporation (parent company only) as
of December 31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995, are as follows:
Condensed Balance Sheets
(in thousands) 1995 1994
--------------------
Assets:
Cash ................................................... $ 130 $ 182
Investments in subsidiaries, at
equity in net assets ................................. 29,982 25,117
Premises and equipment, net ............................ 4,351 4,450
Other assets ........................................... 5 2
--------------------
Total assets ......................................... $34,468 $29,751
--------------------
Liabilities and shareholders' equity:
Mortgages payable ...................................... $2,557 $2,605
Other liabilities ...................................... 8 --
--------------------
Total liabilities ...................................... 2,565 2,605
Common stock, par value $1, authorized
5,000,000 shares, issued 2,493,200 shares
and 1,245,100 shares as of
December 31, 1995 and 1994,
respectively, and outstanding 2,190,380
shares and 1,093,690 shares as of
December 31, 1995 and 1994, respectively ............... 2,493 1,245
Paid-in capital in excess of par value ................... 4,363 5,559
Unrealized investment appreciation (depreciation),
net of deferred income taxes ........................... 212 (945)
Retained earnings ........................................ 26,374 22,826
Less common stock in treasury,
at cost- 302,820 and 151,410 shares as of
December 31, 1995 and 1994, respectively. .............. (1,539) (1,539)
--------------------
Total shareholders' equity ........................... 31,903 27,146
--------------------
Total liabilities and shareholders' equity ........... $34,468 $29,751
--------------------
Condensed Statements of Income
(in thousands) 1995 1994 1993
------------------------------
Dividends from The Bryn
Mawr Trust Company $1,095 $ 710 $ 435
Interest and other income 236 389 389
Total operating income 1,331 1,099 824
Expenses 478 524 459
------------------------------
Income before equity in
undistributed income of
subsidiary and cumulative
effect of accounting change 853 575 365
Equity in undistributed income
of subsidiary before cumulative
effect of accounting change:
The Bryn Mawr Trust Company 3,708 3,428 3,498
------------------------------
Income before income taxes
and cumulative effect of
accounting change 4,561 4,003 3,863
Federal income tax benefit 82 46 24
------------------------------
Income before cumulative effect
of accounting change 4,643 4,049 3,887
Cumulative effect of
accounting change -- -- (175)
------------------------------
Net income $4,643 $4,049 $3,712
------------------------------
Condensed Statements of Cash Flows
(in thousands) 1995 1994 1993
-----------------------------
Operating activities
Net income .................................... $4,643 $4,049 $3,712
Adjustments to reconcile net income
to net cash provided
by operating activities:
Equity in undistributed earnings of subsidiary:
The Bryn Mawr Trust Company ..................... (3,708) (3,428) (3,323)
Depreciation expense ............................ 98 98 98
Other ........................................... (42) (47) (28)
-----------------------------
Net cash provided by
operating activities ........................ 991 672 459
-----------------------------
Financing activities:
Dividends paid ................................ (1,095) (710) (435)
Return from Bryn Mawr
Financial Services, Inc. ...................... -- -- 10
Proceeds from issuance of stock ............... 52 125 30
-----------------------------
Net cash used by financing
activities .................................. (1,043) (585) (395)
-----------------------------
(Decrease) increase in cash and cash
equivalents ..................................... (52) 87 64
Cash and cash equivalents at
beginning of year ............................... 182 95 31
Cash and cash equivalents at
end of year ................................... $ 130 $ 182 $ 95
-----------------------------
These statements should be read in conjunction with the other notes related to
the consolidated financial statements.
As a bank and trust company subject to the Pennsylvania Banking Code (the
"Banking Code") of 1965 as amended, the Bank is subject to legal limitations as
to the amount of dividends that can be paid to its shareholder, the Corporation.
The Banking Code restricts the payment of dividends by the Bank to the amount of
its retained earnings. As of December 31, 1995, the Bank's retained earnings
amounted to $29,982,000. Therefore, as of December 31, 1995, dividends available
for payment to the Corporation are limited to $29,982,000. Since the sole source
of dividend funding for the Corporation's dividend payments to its shareholders
is the Bank's dividends, the Corporation is effectively limited as to the amount
of dividends that it may pay to an amount equal to the limits placed on the
Bank, as discussed above.
<PAGE>
16. SEGMENT INFORMATION
As a part of its operating segments, the Bank generates significant operating
profits from its banking, its trust and mortgage banking activities. The Bank's
Trust Division provides both corporate and individual trust products and
services to its customers. Assets under management were $1,040,000,000,
$799,846,000, and $764,571,000 at December 31, 1995, 1994, and 1993,
respectively. The Bank also sells residential mortgage loans in the secondary
mortgage loan market, generating significant operating profits for the Bank. The
Bank originated and sold mortgage loans in the secondary mortgage loan market
amounting to $67,826,000, $39,109,000, and $108,865,000 in 1995, 1994, and 1993,
respectively.
Segment information for the years ended December 31, 1995, 1994, and 1993 is as
follows:
1995
----------------------------------------
MORTGAGE
BANKING TRUST BANKING CONSOLIDATED
----------------------------------------
Interest and fee income .............. $23,137 $-- $ 480 $ 23,617
----------------------------------------
Other operating income:
Fees for trust services ........... -- 5,496 -- 5,496
Service charges on
checking accounts ................ 1,049 -- -- 1,049
Other fees and service charges .... 487 -- 753 1,240
Net gains on loan sales ........... 45 -- 434 479
Gains on sale of other real
estate owned ..................... 137 -- -- 137
Other real estate owned revenue ... 353 -- -- 353
Other ............................. 443 -- -- 443
Total other operating income ......... 2,514 5,496 1,187 9,197
----------------------------------------
Total gross revenues ................. $25,651 $5,496 $1,667 $ 32,814
Operating profit ..................... $ 3,849 $2,083 $ 939 $ 6,871
----------------------------------------
General corporate expenses ........... -- -- -- $ 128
----------------------------------------
Income before income taxes,
extraordinary credit and
cumulative effect of an
accounting change .................. -- -- -- $ 6,743
----------------------------------------
Identifiable assets at
December 31 ....................... $354,774 $ 170 $ 12 $354,956
----------------------------------------
Capital expenditures ................. $ 1,269 $ 34 -- $ 1,303
----------------------------------------
Depreciation and amortization ........ $ 873 $ 99 $ 14 $ 986
----------------------------------------
1994
----------------------------------------
MORTGAGE
BANKING TRUST BANKING CONSOLIDATED
----------------------------------------
Interest and fee income .............. $20,134 $ -- $ 244 $20,378
----------------------------------------
Other operating income:
Fees for trust services ........... -- 4,719 -- 4,719
Service charges on
checking accounts ................ 1,068 -- -- 1,068
Other fees and service charges .... 502 -- 690 1,192
Net gains on loan sales ............ 39 -- 347 386
Gains on sale of other real
estate owned ..................... 294 -- -- 294
Other real estate owned revenue ... 319 -- -- 319
Other ............................. 405 -- -- 405
----------------------------------------
Total other operating income ......... 2,627 4,719 1,037 8,383
----------------------------------------
Total gross revenues ................. $22,761 $4,719 $1,281 $28,761
----------------------------------------
Operating profit ..................... $ 3,421 $1,802 $ 596 $ 5,819
General corporate expenses ........... -- -- -- $ 170
----------------------------------------
Income before income taxes,
extraordinary credit and
cumulative effect of an
accounting change .................. -- -- -- $ 5,649
Identifiable assets at
December 31 ....................... $332,909 $ 236 $ 35 $333,180
----------------------------------------
Capital expenditures ................. $ 841 $ 208 $ 8 $ 1,057
Depreciation and amortization ........ $ 806 $ 66 $ 19 $ 891
----------------------------------------
1993
----------------------------------------
MORTGAGE
BANKING TRUST BANKING CONSOLIDATED
----------------------------------------
Interest and fee income .............. $18,905 $ -- $ 590 $19,495
----------------------------------------
Other operating income:
Fees for trust services ........... 4,419 -- 4,419
Service charges on
checking accounts ................ 1,266 -- -- 1,266
Other fees and service charges .... 517 -- 877 1,394
Net gains on loan sales ........... 42 -- 1,400 1,442
Gains on sale of other real
estate owned ..................... 889 -- -- 889
Other .............................. 369 -- 7 376
Total other operating income ......... 3,083 4,419 2,284 9,786
----------------------------------------
Total gross revenues ................. $21,988 $4,419 $2,874 $29,281
----------------------------------------
Operating profit ..................... $ 2,144 $1,595 $1,649 $ 5,388
General corporate expenses ........... -- -- -- $ 100
----------------------------------------
Income before income taxes,
extraordinary credit and cumulative
effect of an accounting change .. -- -- -- $ 5,288
----------------------------------------
Identifiable assets at December 31 .. $320,816 $ 94 $ 32 $320,942
Capital expenditures ................. $ 840 $ 3 $ 26 $ 869
----------------------------------------
Depreciation and amortization ........ $ 821 $ 41 $ 11 $ 873
----------------------------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Bryn Mawr Bank Corporation:
We have audited the accompanying consolidated balance sheets of Bryn Mawr Bank
Corporation and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bryn Mawr Bank
Corporation and subsidiary as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the Corporation
changed its method of accounting for investment securities in 1994 and, as
discussed in Notes 8 and 9, changed its method of accounting for income taxes
and postretirement benefits other than pensions, respectively, in 1993.
/s/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 18, 1996
<PAGE>
CORPORATE INFORMATION
as of February 1, 1996
DIRECTORS
Darrell J. Bell
Consultant, Main Line Health, Inc.
Richard B. Cuff
President, Cuffco, Inc.
Warren W. Deakins
Self-Employed, Insurance Sales
Eleanor Carson Donato
President and Owner, C.N. Agnew, Realtor, Inc.
William Harral, III
President and Chief Executive Officer,
Bell Atlantic-Pennsylvania, Inc.
Peter H. Havens
Executive Vice President, The Bryn Mawr Trust Company
Sherman R. Reed, 3rd
Builder and Developer
Phyllis M. Shea
Attorney-at-Law, Shea and Shea
Robert L. Stevens
Chairman, Chief Executive Officer, and President of Bryn Mawr
Bank Corporation and The Bryn Mawr Trust Company
B. Loyall Taylor, Jr.
President, Taylor Gifts, Inc.
Samuel C. Wasson, Jr.
Secretary of Bryn Mawr Bank Corporation and Executive Vice
President and Secretary of The Bryn Mawr Trust Company
Thomas A. Williams
Vice President, Secretary/Treasurer, Houghton International, Inc.
ANNUAL MEETING
The Annual Meeting of Shareholders of Bryn Mawr Bank Corporation will be held at
The American College, 270 Bryn Mawr Avenue, Bryn Mawr, Pennsylvania, on Tuesday,
April 16, 1996, at 2:00 p.m.
CORPORATE HEADQUARTERS
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
(610)526-2300
AUDITORS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103-2962
LEGAL COUNSEL
Monteverde, McALee, FitzPatrick, Tanker & Hurd, P.C.
One Penn Center at Suburban Station
1617 John F. Kennedy Boulevard, Suite 1500
Philadelphia, Pennsylvania 19103-1815
STOCK LISTING
Bryn Mawr Bank Corporation common stock is traded over-the-counter and is listed
on the NASDAQ National Market System under the symbol BMTC.
TRANSFER AGENT
The Bryn Mawr Trust Company
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
REGISTRAR
Mellon Bank N.A.
P.O. Box 444
Pittsburgh, Pennsylvania 15230-0929
FORM 10-K
A copy of the Corporation's Form 10-K, including financial statement schedules
as filed with the Securities and Exchange Commission, is available without
charge to shareholders upon written request to Samuel C. Wasson, Jr., Secretary,
Bryn Mawr Bank Corporation, 801 Lancaster Avenue,Bryn Mawr, Pennsylvania
19010-3396.
SHAREHOLDER RELATIONS
Samuel C. Wasson, Jr.
Secretary
(610)526-2343
MARKET MAKERS
F. J. Morrissey & Co., Inc.
Philadelphia, Pennsylvania
Herzog, Heine, Geduld, Inc.
New York, New York
Janney Montgomery Scott, Inc.
Philadelphia, Pennsylvania
Legg Mason Wood Walker, Inc.
Philadelphia, Pennsylvania
McConnell Budd & Downes
Morristown, New Jersey
<PAGE>
The Bryn Mawr Trust Company
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
(610)525-1700
SENIOR MANAGEMENT:
Robert L. Stevens *
Chairman, Chief Executive Officer, and President
Peter H. Havens
Executive Vice President, Trust
Robert J. Ricciardi *
Executive Vice President, Community Banking
Samuel C. Wasson, Jr. *
Executive Vice President and Secretary, Loans
Joseph H. Bachtiger
Senior Vice President, Trust Administration
Joseph G. Keefer
Senior Vice President, Commercial &
Real Estate Lending Services
Paul M. Kistler, Jr.
Senior Vice President, Human Resources,
Facilities, & Marketing
Donald B. Krieble
Senior Vice President, Consumer Credit Services
Thomas M. Petro
Senior Vice President, Information Management
Joseph W. Rebl*
Senior Vice President and Treasurer, Finance
Walter Smedley, III
Senior Vice President, Member Banking Credit Services
William J. Fink
Group Vice President, Commercial &
Real Estate Lending Services
Geoffrey L. Halberstadt, Sr.
Group Vice President, Commercial &
Real Estate Lending Services
William R. Mixon
Group Vice President, Information Systems
Leo M. Stenson
Vice President and Auditor
William F. Mannion, Jr.
Managing Director, BMT Mortgage Company
Richard I. Sichel
Managing Director and Chief Investment Officer,
Investment Counselors of Bryn Mawr
* Also officer of the Corporation.
BRANCH OFFICES:
801 Lancaster Avenue
Bryn Mawr, Pennsylvania
19010-3396
(610)525-1700
18 West Eagle Road
Havertown, Pennsylvania 19083
(610)789-1840
39 West Lancaster Avenue
Paoli, Pennsylvania 19301
(610)640-9920
330 East Lancaster Avenue
Wayne, Pennsylvania 19087
(610)341-1400
312 East Lancaster Avenue
Wynnewood, Pennsylvania 19096
(610)896-6435
LIMITED SERVICE OFFICES:
Beaumont at Bryn Mawr Retirement Community
Bryn Mawr, Pennsylvania
Bellingham Retirement Living
West Chester, Pennsylvania
Martins Run Life Care Community
Media, Pennsylvania
One Tower Bridge
West Conshohocken, Pennsylvania
The Quadrangle
Haverford, Pennsylvania
Radnor Corporate Center
Radnor, Pennsylvania
Waverly Heights
Gladwyne, Pennsylvania
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Bryn Mawr Bank Corporation on Form S-8 (File 033- 12715 and 33-61881) of our
report dated January 18, 1996 on our audits of the consolidated financial
statements of Bryn Mawr Bank Corporation as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995, which report
is incorporated by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND, L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
March 27, 1996
<TABLE> <S> <C>
<PAGE>
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<PERIOD-START> JAN-01-1995
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