<PAGE>
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, 1996 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.
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BRYN MAWR BANK CORPORATION
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(Exact name of registrant as specified in its charter)
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Pennsylvania 23-2434506
- ------------------------------------------------------ --------------
(State of other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
- ------------------------------------------------------ --------------
(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
------------------- ------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1 par value)
---------------------------------------------------------------------
(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
----------- ------------
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]
<PAGE>
The aggregate market value of shares of common stock held by non-affiliates of
Registrant (including fiduciary accounts administered by affiliates*) was
$74,992,610 on March 20, 1997.
As of March 20, 1997, 2,205,665 shares of common stock were outstanding.
Documents Incorporated by Reference: Parts I, II and IV - Portions of
- -----------------------------------
Registrant's Annual Report to Shareholders for the year ended December 31, 1996,
as indicated, Parts I and 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 of Registrant's voting stock held by the Trust Department of
its bank subsidiary.
The exhibit index is on pages 37 through 40. There are 85
pages in this report.
3
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Form 10-K
Bryn Mawr Bank Corporation
Index
Item No. Page
- --------
Part I
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1. Business................................................ 1
2. Properties..............................................25
3. Legal Proceedings.......................................28
4. Submission of Matters to a Vote of Security Holders.....28
</TABLE>
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters.....................................29
6. Selected Financial Data.................................29
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................29
8. Financial Statements and Supplementary Data.............30
9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure.....................31
Part III
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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
</TABLE>
Part IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.............................................37
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 14, 1997.
<PAGE>
PART I
------
ITEM 1. BUSINESS
-----------------
GENERAL
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BRYN MAWR BANK CORPORATION
- --------------------------
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
- ---------------------------
The Bank, the principal subsidiary of the Corporation, is a state chartered
bank subject to the Pennsylvania Banking Code of 1965, as amended, which was
incorporated under the laws of the Commonwealth of Pennsylvania on March 25,
1889. The Bank is engaged in a general commercial and retail banking business,
providing basic banking services as well as a full range of trust services.
1
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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
- -------
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.
2
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OPERATIONS
----------
BRYN MAWR BANK CORPORATION
- --------------------------
The Corporation had no active staff as of December 31, 1996 and conducted no
activities other than those activities through its banking subsidiary.
A complete list of directors and officers of the Corporation, as of February
3, 1997 is incorporated by reference to page 39 and 40 of the Corporation's
Annual Report to Shareholders for the year ended December 31, 1996.
THE BRYN MAWR TRUST COMPANY
- ---------------------------
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. As of December 31, 1996, the market value of assets administered by
the Bank's Trust Division was $1,229,926,000. In January 1996, the Bank formed
Investment Counsellors of Bryn Mawr ("ICBM"), as a part of the Bank's Trust
Division. ICBM is dedicated to managing investment portfolios for high net worth
individuals and employee benefit plans.
During 1996, residential mortgage interest rates did not decrease enough to
make refinancing attractive to borrowers. 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
3
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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 those
residential mortgage loans in the secondary mortgage market. As of March 1,
1997, the Bank has two commissioned mortgage originators.
The Bank originated and sold $55,276,000 in residential mortgages to the
secondary market in 1996 compared to $67,826,000 originated and sold in 1995.
Net gains and loan fee income on such transactions amounted to $615,000 in 1996
compared to $918,000 in 1995. During 1994 the Bank originated and sold
$39,109,000 in residential mortgage loans, generating $591,000 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, which expired on
December 31, 1995 and 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 operation during
February 1996. This agreement is incorporated by reference into the
Corporation's 10-K, filed with the Commission on March 31, 1995.
At December 31, 1996, the Bank had 188 full time and 35 part time employees,
including 91 officers, equalling 205.5 full time equivalent staff.
4
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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 Bank from the activities indicated below.
Year Ended December 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Commercial Loans 18% 16% 14% 12% 12%
Mortgage and Construction Loans 16 16 15 16 23
Consumer Loans 25 25 25 24 26
Home Equity/Line of Credit 3 3 3 2 2
Securities 7 10 13 12 10
Federal Funds Sold 1 2 1 1 2
--- --- --- -- ---
Total Interest Income 70 72 71 67 75
Trust Services 17 17 16 15 14
Other Income * 13 11 13 18 11
----- --- --- --- ---
Total Revenues 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
* There were no revenues generated by BMFS and PRC during 1996, 1995, 1994 or
1993. All revenues were generated by the Bank during 1996, 1995, 1994 and 1993.
Revenues generated by BMFS and PRC aggregated 1.3% in 1992.
5
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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, 1996, as follows:
Disclosure Required by Industry Reference to the Corporation's
- ------------------------------- ------------------------------
Guide 3 1996 Annual Report
- ------- ------------------
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 14)
B. Rate/Volume Differentials . . . . Rate/Volume Analyses (page 15)
C. Non-Accrual Policy . . . . . . . . Loan Portfolio and Non-
performing Asset Analysis
(page 20)
D. Interest Rate Sensitivity
Analysis. . . . . . . . . . . . . .Interest Rate Sensitivity
Analysis (page 23)
II. Investment Portfolio
A. Book Values . . . . . . . . . . . Notes to Consolidated Financial
Statements, Note 3 (page 31)
B. Maturities . . . . . . . . . . . . Notes to Consolidated Financial
Statements, Note 3 (page 31)
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III. Loan Portfolio
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A. Types of Loans............... Loan Portfolio (page 19)
B. Maturities and Sensitivity to
changes in Interest Rates . . . . Loan Portfolio - Maturity
distribution (page 19)
Interest Rate Sensitivity Analysis (page 23)
C. Non-Performing assets........ Non-Performing Assets (page 22)
</TABLE>
6
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Disclosure Required by Industry Reference to the Corporation's
- ------------------------------- ------------------------------
Guide 3 1996 Annual Report
- ------- ------------------
IV. Summary of Loan Loss Experience
A. Analysis of Loss Experience . . . Allowance for Possible Loan
Losses (page 16)
B. Allocation of Allowance for
Loan Losses . . . . . . . . . . . Allocation of the Allowance
for Possible Loan Losses
(page 16)
V. Deposits
A. Average Deposits . . . . . . . . . Average Daily Balances of
Deposits (Page 21)
B. Maturity tables and outstanding
balances, deposits $100,000 or
more . . . . . . . . . . . . . . . Maturity of Certificates of
Deposit of $100,000 or
Greater (page 21)
VI. Return on Equity and Assets . . . . . . Selected Financial Data
(page 10)
7
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COMPETITION
-----------
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 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 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. The Bank's Trust department
leases facilities at Two Tower Bridge. There is also an automatic teller
machine location at Villanova University. All facilities are located in either
Montgomery, Chester or Delaware Counties.
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 those organizations must be
considered competitors of the Bank.
8
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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
- ----------------------------
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 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
9
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located outside the state in which the operations of its banking 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
10
<PAGE>
the voting shares of any company engaged in non-banking activities unless 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 anti-competitive 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 on the condition that the customer
11
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provide additional credit or service to the bank, to its bank holding company or
any other subsidiaries of its bank holding 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.
12
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The Corporation is a legal entity separate and distinct from its subsidiary
bank and its nonbank subsidiary. Accordingly, the right of the Corporation, and
consequently the right of creditors and shareholders of the Corporation, to
participate in any distribution of the assets or earnings of any subsidiary is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Corporation in its capacity as creditor may be
recognized. The principal source of the Corporation's revenue and cash flow is
dividends from its subsidiary bank. There are legal limitations on the extent
to which its subsidiary bank can finance or otherwise supply funds to the
Corporation and its nonbank subsidiary.
The Act currently permits bank holding companies from any state to acquire
banks and bank holding companies located in any other state, subject to certain
conditions, including certain nationwide and state-imposed concentration limits.
Effective June 1, 1997, the Corporation's subsidiary Bank will have the ability,
subject to certain restrictions, including state opt-out provisions, to
consolidate with one another or to acquire by acquisition or merger branches
outside their home states. States may affirmatively opt-in to permit these
transactions earlier, which Delaware, New Jersey and Pennsylvania, among other
states, have done. The establishment of new interstate branches also will be
possible in those states with laws that expressly permit it. Interstate branches
will be subject to certain laws of the states in which they are located.
Competition may increase further as banks branch across state lines and enter
new markets.
Financial Institutions Reform, Recovery and Enforcement Act
- -----------------------------------------------------------
Following enactment by the United States Congress, on August 9, 1989, the
Financial Institutions Reform, Recovery and Enforcement Act of 1989
13
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("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. 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 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.
14
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Federal Deposit Insurance Corporation Improvement Act of 1991
-------------------------------------------------------------
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
is 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".
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
15
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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
-------------------------------------------
Pennsylvania Anti-Takeover Legislation
- --------------------------------------
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 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
16
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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 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
17
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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.
As a bank incorporated under and subject to Pennsylvania banking laws and a
member bank of the Federal Reserve System, the Bank must obtain the prior
approval of the Department of Banking and the Federal Reserve
18
<PAGE>
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 requirements 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 needs of the deposit
insurance fund, and any other factors the FDIC deems relevant. Under existing
regulations the Bank, as well capitalized financial institution, is not
currently required to pay FDIC insurance
19
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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.
Deposit Insurance Assessment
As a "well capitalized" financial institution the Bank was not assessed any
BIF deposit premiums in 1996 by the FDIC. The Deposit Insurance Act of 1996
(the "Deposit Act") was enacted on September 30, 1996 to recapitalize the SAIF
and requires banks, such as the Bank, which are well capitalized and insured by
the BIF to share the burden of repaying certain outstanding bonds issued by SAIF
in the late 1980s to address the savings and loan crisis. The Deposit Act
mandates that the Bank, and the other BIF insured financial institutions,
starting in 1997 must pay as a special deposit assessment of 4.2 basis points of
its deposits until 2000 and then a special deposit insurance assessment of 2.4
basis points of its deposits from 2000 until 2017. The Bank estimates that its
BIF insurance premium for 1997 will be $40,000.
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
20
<PAGE>
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 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
21
<PAGE>
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, similar to 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 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
22
<PAGE>
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, 1996 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 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
23
<PAGE>
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.
Subsidiaries
- ------------
BMFS is an inactive subsidiary of the Corporation, but is subject to
regulation and examination by the Federal Reserve Board and must file periodic
reports with the Federal Reserve Board.
24
<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 31 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.
<TABLE>
<CAPTION>
The Bank:
- ---------
Date Acquired
Current Banking Office Address or Opened
- --------------------------- ------------------------ -------------
<S> <C> <C>
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
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Date Acquired
Current Banking Office Address or Opened
- --------------------------- ------------------------------ -------------
<S> <C> <C>
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, 1998 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
Office Space (leased) Two Tower Bridge (7) 1996
through January 15, 1999 One Fayette Street
Conshohocken, PA 19428
The Corporation:
- ----------------
Date Acquired
Other Facilities Address or Opened
- ---------------- ------- ----------------
<S> <C> <C>
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
</TABLE>
26
<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 380 square feet and expires on August 1, 1998.
(7) This lease is for 1,250 square feet of office space to house the Trust
Division's Investment Counsellors of Bryn Mawr ("ICBM"). ICBM was established in
January 1996 to provide investment advisory services to both existing and new
clients of the Trust Division. The lease expires on January 15, 1999.
27
<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.
28
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
The information required by this Item 5 is incorporated by reference to the
information appearing under the caption "Price Range of Shares" on page 10 of
the Corporation's Annual Report to Shareholders for the year ended December 31,
1996.
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 10 of
the Corporation's Annual Report to Shareholders for the year ended December 31,
1996.
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 11 to 24 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
1996.
29
<PAGE>
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 25 to 38 of
the Corporation's Annual Report to Shareholders for the year ended December 31,
1996.
Recent Accounting Pronouncements:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS No. 128").
SFAS No. 128 specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. SFAS No. 128 requires the presentation of both basic earnings per
share and, when not anitdilutive, diluted earnings per share. Basic earnings
per share is computed by dividing net income by the weighted-average number of
common shares outstanding during the period. Dilutive earnings per share is
computed in a manner similar to basic earnings per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive common shares had been issued.
SFAS No. 128 supersedes Accounting Principals Board Opinion No. 15-Earnings
per Share and is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Early application is not permitted.
Had SFAS No. 128 been in effect at December 31, 1996, the earnings per share
computation would have been as follows:
1996 1995
---- ----
Earnings per common share $2.76 $2.12
Earnings per common share-assuming dilution $2.67 $2.08
30
<PAGE>
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 9 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 3,
1997:
<TABLE>
<CAPTION>
AGE AS OF OFFICE WITH THE
NAME MARCH 3, 1997 CORPORATION AND/OR BANK
- ---------------------------- ------------- -------------------------
<S> <C> <C>
Robert L. Stevens 59 Chairman, President and
Chief Executive Officer
Director of Corporation
and Bank
Samuel C. Wasson, Jr. 58 Secretary and Director of
Corporation and Bank and
Executive Vice
President of Bank - Loans
Joseph W. Rebl 52 Treasurer of Corporation
and Senior Vice President
and Treasurer of Bank -
Finance
Robert J. Ricciardi 48 Vice President of the
Corporation and Executive
Vice President of
Bank - Community Banking
Paul M. Kistler, Jr. 60 Senior Vice President of
Bank- Banking Operations,
Human Resources, Facilities
and Information Systems
Thomas M. Petro 38 Senior Vice President of
Bank- Marketing
Peter H. Havens 42 Executive Vice President of Bank-
Trust and Director of Bank
and Corporation
</TABLE>
32
<PAGE>
Leo M. Stenson 45 Senior 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.
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
33
<PAGE>
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 in January 1993, in April 1993 assumed responsibility for the Bank's
marketing function and in August, 1996, Mr. Kistler assumed responsibility for
the information systems and banking operations and turned over responsibility
for the Bank's marketing function to Mr. Petro. 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. In August,
1996, Mr. Petro assumed responsibility for the Bank's marketing function and
turned over responsibility for the Bank's banking operations and information
systems to Mr. Kistler. 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.
34
<PAGE>
Mr. Stenson was employed by the Bank as Auditor in 1982, was elected Vice
President and Auditor in 1987 and was formerly an Assistant Vice President of
Western Savings Bank. In December, 1996, Mr. Stenson was elected Senior Vice
President and Auditor.
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 1996 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 Independent 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 15, 1997 are filed herewith as Exhibit 99.
(b) No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1996.
38
<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 38 of the Corporation's 1996
Annual Report to Shareholders.
Consolidated Financial Statements and related notes are incorporated by
reference to the Corporation's 1996 Annual Report to Shareholders, and may
be found on the pages of said Report as indicated in the parenthe sis:
Balance Sheets, December 31, 1996 and 1995 (page 25)
Statements of Income for the years ended December 31, 1996, 1995 and
1994 (page 26)
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994 (page 28)
Statements of Cash Flows for the years ended December 31, 1996, 1995
and 1994 (page 27)
Notes to Financial Statements (pages 29 to 37)
Supplementary Data:
Quarterly Results of Operations are incorporated by reference to the in
formation under the caption "Selected quarterly financial data (unaudit
ed)", in Note 14 on page 36 of the Corporation's Annual Report to
Shareholders for the fiscal years ended December 31, 1996 and 1995.
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.
39
<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 21, 1997
------------------------------- ----
Robert L. Stevens and Chief Executive
Officer (Principal Executive
Officer) and Director
\s\ Joseph W. Rebl Treasurer (Principal March 21, 1997
------------------------------- ----
Joseph W. Rebl Financial and Principal
Accounting Officer)
______________________________ Director March ____, 1997
Darrell J. Bell
\s\ Richard B. Cuff Director March 26, 1997
------------------------------- ----
Richard B. Cuff
------------------------------- Director March ___, 1997
Warren W. Deakins
\s\ Eleanor Carson Donato Director March 25, 1997
------------------------------ ----
Eleanor Carson Donato
\s\ William Harral III Director March 25, 1997
------------------------------ ----
William Harral III
Director March ___, 1997
------------------------------
Peter H. Havens
\s\ Sherman R. Reed, 3rd Director March 26, 1997
------------------------------- ----
Sherman R. Reed, 3rd
\s\ Phyllis M. Shea Director March 26, 1997
------------------------------- ----
Phyllis M. Shea
_______________________________ Director March ____, 1997
B. Loyall Taylor, Jr.
_______________________________ Director March ____, 1997
Samuel C. Wasson, Jr.
\s\ Thomas A. Williams Director March 25, 1997
------------------------------- ----
Thomas A. Williams
40
<PAGE>
Commission File No. 0-15261
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Year Ended December 31, 1996
____________________________________________________________
B R Y N M A W R B A N K C O R P O R A T I O N
E X H I B I T S
<PAGE>
[LOGO] Bryn Mawr Bank Corporation 1996 ANNUAL REPORT
Exhibit 13
Consolidated Financial Highlights
Five-Year
Compound
1996 1995 Change Growth Rate
---------------------------------------------
For the year
(dollars in thousands)
Net interest income $ 17,847 $ 16,371 9% 8%
Other income 10,423 9,197 13 12
Other expenses 18,978 18,325 4 0
Net income 6,042 4,643 30 N/A
At year-end
(dollars in thousands)
Total assets $345,747 $354,956 (3)% 3%
Total net loans 255,245 231,701 10 7
Total deposits 303,183 317,601 (5) 2
Shareholders' equity 35,808 31,903 12 15
Per common share
Net income $ 2.67 $ 2.08 28% N/A
Dividends declared 0.92 0.50 84 44
Book value 16.27 14.57 12 14
Closing price 27.25 26.00 5 45
Selected ratios
Return on average assets 1.79% 1.39%
Return on average
shareholders' equity 18.16% 15.79%
Contents
Chairman's Letter 2
The Year in Review 4
Selected Financial Data 10
Management's Discussion
and Analysis of
Financial Condition and
Results of Operations 11
Consolidated Balance Sheets 25
Consolidated Statements
of Income 26
Consolidated Statements
of Cash Flows 27
Consolidated Statements
of Changes in
Shareholders' Equity 28
Notes to Consolidated
Financial Statements 29
Report of Independent
Accountants 38
Corporate Information 39
<PAGE>
Dear Shareholder:
We've built our Bank on the bedrock of thoughtful, personal service provided by
competent and happy men and women. Thanks largely to their effort, this year's
results were excellent, though we're mindful of the strong economic underpinning
that low inflation has provided.
The good year resulted from the strength of our basic banking business,
increased fees for investment management and fiduciary services, and reasonably
controlled expenses.
Net income was $2.67 per share, up 28% from $2.08 in 1995. But after "apples-to-
apples" adjusting for the gain from the sale of a property held in other real
estate owned (OREO), unrelated nonrecurring expenses, and related federal income
taxes, net income per share was $2.43, up 17% from $2.08 last year. Using these
adjusted earnings, return on beginning-of-the-year equity was 17.2%. Excluding
the onetime 32c dividend paid on May 1, 1996, from the after-tax proceeds of the
OREO property sale, regular quarterly dividends were up 20%. All in, a solid
year of growth.
The regular quarterly dividend was again increased 20%, from 15c to 18c per
share, beginning with the dividend payable March 1, 1997.
We're committed to becoming the very best there is in what we do, and here's
some measure of how we're doing:
- -- Our investment managers, once again, topped the Standard and Poor's market
advance, this last year by 410 basis points.
- -- Our commercial lenders continue to be "as good as it gets" in terms of
satisfied clients.
- -- Our dealer-originated automobile loan program expanded again. There's no one
better at making these indirect loans.
- -- Our mortgage origination business was good in 1996; we can finance our
customers' homes just about anywhere in the U.S.
- -- We spearheaded a successful effort to provide a time-tested education
program to low income and minority children within our community. The
program was developed by The Franklin Institute and is being offered through
facilities provided by the Zion Baptist Church in Ardmore. Some 20 students
are participating.
2 Bryn Mawr Bank Corporation
<PAGE>
Looking back is fun, and we are thankful for the fine year. However, our
relentless challenge is to look ahead, to learn more about the needs of our
customers and prospects, and to equip ourselves to meet these needs. There's no
question in my mind that earnings growth is the key to our independent
existence, so building streams of revenue while effectively managing expenses is
our goal. We're looking to continue to strengthen our traditional banking
business -- gathering deposits, particularly checking account deposits, and
making loans -- while we expand our capacity to produce fees from asset
management and fiduciary services, and from originating and underwriting loans
for sale in the secondary market.
There's a sincere dedication to expanding the high quality, fee-based advice and
service that we intend to provide to customers. In line with this goal, we've
arranged with The American College -- the life insurance industry's premier
educational institution -- to prepare more than 50 of our employees for the
examination required for attainment of the professional designation of Certified
Financial Planner (CFP).
My heartfelt thanks, as always, to the men and women who comprise this great
institution and who have made it all that it's becoming, and to you, our owners,
for investing in our collective future. We'll work hard to improve our earnings,
the best underpinning we can give our stockholders, customers, and community.
If you bank with us, thanks, and if you do not, let's get started. You'll find
banking here a remarkable, unusually refreshing experience. I'm at (610)526-
2300.
Sincerely,
/s/ Robert L. Stevens
Robert L. Stevens
Chairman
February 3, 1997
1996 Annual Report 3
<PAGE>
[PHOTO]
THE YEAR IN REVIEW
The men and women, who are the Bank, delivered quality financial services again
this year, with integrity, care, candor, and respect. These values have been the
hallmark and distinguishing characteristic of The Bryn Mawr Trust
Company throughout its 107 year history. We treat people well, but what we do is
more than simply being nice. Our staff is competent, capable, and equipped with
the technology, products, and services that customers demand. And to meet the
future, the Bank embarked on many key initiatives, while continuing its
stewardship within the communities it serves, to build a better tomorrow.
Technology Advances
- -------------------
Bank customers expect more than 9-to-5 banking these days. Last year, Bryn Mawr
Trust made significant advancements in technology designed to provide customers
access to us anytime from anywhere.
The TELEPHONE BANKER service was upgraded for both personal and business
accounts. It's now easier for customers to get account information, and obtain
loan balances and other helpful information. Expanded features now enable
customers to transfer funds using a touch-tone phone.
The PC BANKER software was expanded. This software competes well with the best
cash management software available anywhere. It provides business customers 24-
hour, on-line access to account information for Bryn Mawr Trust accounts and
accounts they might maintain with other financial institutions. Powerful
transaction features allow customers to send wire transfers, concentrate funds
from around the country, and originate automated clearinghouse transactions --
all from the convenience of their office.
The BUSINESS SWEEP product is yet another demonstration of the Bank's customer-
driven technology advances. It is an automated investment system that sweeps
excess cash from a business checking account to an overnight investment and is
an effective way to manage working capital. Unlike most sweeps, which delay
investing for one day, the Bank's Business Sweep invests on a same-day basis. So
Bryn Mawr Trust customers' funds are invested faster.
Bryn Mawr Trust also converted to a new technology platform in February of 1996,
including changes in the Bank's computer software, which resulted in greater
control over technology resources. Thanks to the dedication of a team of Bank
employees, the adverse impact on customers was remarkably small.
4 Bryn Mawr Bank Corporation
<PAGE>
The new technology platform has enabled the Bank to develop a number of exciting
new technology-driven services that will be launched in 1997. These will provide
additional convenience to our customers. Of course, technology, no matter how
convenient, is never a substitute for capable, caring service, and it is the
quality of care that continues to distinguish Bryn Mawr Trust from our
competitors.
Outstanding Investment Management Results
- -----------------------------------------
Bryn Mawr Trust ranks among the top investment managers in the United States
according to Indata, a nationally recognized monitor of investment fund
performance. For the last four years, Bryn Mawr Trust has ranked in the first
quartile of 600 equity funds in the Indata universe. The Bryn Mawr Trust
Qualified Equity Fund outperformed the S&P 500 again in 1996, gaining 26.9%
compared to the S&P 500's 22.8% advance. Over the past five years, the
investment team at Bryn Mawr Trust has outperformed the S&P 500.
In January of 1996, Investment Counsellors of Bryn Mawr was established as a
separate department of the Trust Division. The group is dedicated to managing
portfolios for high net-worth individuals, as well as large group employee
benefit plans. Richard I. Sichel, Betty K. Taylor, and Forrest J. Mervine, Jr.,
are the managing directors. This team of seasoned investment professionals has a
broader investment charter than typically found in the administration of trusts
and estates. This means that they are experienced, not only with well-known
large-cap stocks and trust investment grade bonds, but are adept with lesser
known equities and non-traditional investment options. Their expertise
complements the broad spectrum of trust and investment services available
through the Trust Division. They are headquartered at Two Tower Bridge in
Conshohocken.
Our investment leadership was demonstrated by the launch of an innovative group
401(k) plan. Among the first of its kind anywhere, this program offers plan
participants the ability to allocate assets among several of the world's top
performing mutual fund families, including Fidelity Advisor, Federated,
Delaware, AIM Family of Funds, and Nicholas Applegate, as well as the Bryn Mawr
Trust Qualified Funds. The Bank's Trust Employee Benefits Department continues
to bring market leading solutions such as this to its clients. This group not
only works with small businesses, but handles pension funds for larger
corporations.
The Bryn Mawr Trust Family Office conducted a series of seminars and workshops
on issues associated with the unique problems experienced by families with
substantial assets. The Family Office brought in leading experts from around the
country to address topics such as succession planning, the effect of gender in
professional relationships, wealth and social responsibility, and other issues.
[PHOTO]
1996 Annual Report 5
<PAGE>
[PHOTO]
[PHOTO OF BMT MORTGAGE COMPANY]
Substantial resource has been put into investment research capability. We've
developed and are continually updating our proprietary investment research
models. These computer programs organize and assimilate thousands of facts about
publicly traded companies and help guide our world class investment team.
Serving the Business Community
- ------------------------------
The Commercial Loan Department expanded in 1996 and continued to meet the
credit, working capital, cash management, and investment needs of business
owners. The combination of seasoned credit professionals and the Bank's
technology capabilities is enabling it to serve an expanded market including
ever larger business concerns.
Expanding Fee-Based Revenues
- ----------------------------
In January, the Board of Directors approved the formation of BMT Mortgage
Company, a division of The Bryn Mawr Trust Company, headed up by Managing
Directors William F. Mannion, Jr., and Patrick J. Keenan, and Vice President
Regina Hurley. The division was formed to better compete in the very aggressive
market for originating and refinancing residential mortgage loans. This is one
example of how management is expanding revenue streams that are not tied to
balance sheet assets. Most of the Bank's mortgage loans are sold in the
secondary market to buyers like Fannie Mae and Freddie Mac. The Bank then earns
fee revenues for servicing the sold loans.
Bryn Mawr Trust is also developing markets for commercial and consumer loans.
Last year, the Bank played a leadership role with a consortium of local bankers,
who banded together with the express purpose of creating a local secondary
market for certain types of loans. And the Bank continues to explore other
outlets for loan sales.
Targeting Medical Professionals
- -------------------------------
Healthcare delivery is changing rapidly, and Bryn Mawr Trust renewed its
commitment to serve this market in 1996. The Bank sponsored a physicians' forum
in December, and featured as guest speaker a nationally recognized authority in
group practice formation, medical practice mergers and acquisitions, and
formation of managed care networks.
Community Leadership
- --------------------
At a special news conference called by Mayor Ed Rendell in Philadelphia's City
Hall, Bob Fishman, director of Resources for Human Development, Inc. (RHD),
announced the granting of a $1.5 million line of credit from Bryn Mawr Trust.
This
6 Bryn Mawr Bank Corporation
<PAGE>
line of credit is to be used to finance the acquisition of abandoned vacant
houses for subsequent rehabilitation and sale to first-time, low-income
homebuyers in Philadelphia. Mayor Rendell praised Bryn Mawr Trust for its unique
commitment as a suburban bank to the revitalization of city neighborhoods. The
Bank's Chairman Robert L. Stevens pointed out that the well-being of Bryn Mawr
Trust and the vitality of the city of Philadelphia are interdependent, and that
the Bank is proud to be working with RHD, a not-for-profit agency, to make home
ownership affordable to Philadelphians.
Bryn Mawr Trust provided 40% of the funding for a science and cultural
enrichment program designed to give students, from the suburban Philadelphia
area, an opportunity to enhance their personal and professional goals by
exploring hands-on science activities and career opportunities with African-
American professionals in science-related fields. This program, Partnerships for
Achieving Careers in Technology and Science (PACTS), was established at The
Franklin Institute Science Museum in 1989, and is offered this year at the Zion
Baptist Church in Ardmore to students in grades eight through eleven. BMT
Mortgage Company's William F. Mannion, Jr., has championed this effort in the
local business community and is monitoring the success of the program while
continuing his efforts in developing additional corporate sponsorship.
Under the leadership of Senior Vice President Paul M. Kistler, Jr., the Bank has
developed a forum for the purpose of discussing and resolving issues pertaining
to Bryn Mawr Commercial District revitalization and other community concerns. A
group of business, civic, and government leaders convene quarterly to develop
healthy and constructive discussion pertaining to projects and activities of the
various interest groups.
Another leader in the Bryn Mawr community is Community Banking's Vice President
Richard J. Fuchs, who has assumed the presidency of the Bryn Mawr Business
Association.
The Bank, in cooperation with The Main Line Chamber of Commerce, presented a
three-part series of forums entitled "Building a Regional Workforce for National
and International Competition." These conferences have been extremely well
received by both the business and education community. Speakers at the
conferences have included U.S. Congressman Curt Weldon, Philadelphia Mayor Ed
Rendell, and Philadelphia Superintendent of Schools Dr. David Hornbeck. Also
participating in the conferences have been Dr. Ted Hershberg, director of the
Center of Greater Philadelphia at the University of Pennsylvania, and William
Hankowsky, president of the Philadelphia Industrial Development Corporation.
[PHOTO]
1996 Annual Report 7
<PAGE>
[PHOTO]
Many charitable organizations benefitted from Bank sponsorship. And the employee
and corporate United Way Campaign, led by Vice President James J. Egan, was the
most successful in our history, setting records in both total amount and, even
more importantly, in the number of employee participants.
Leadership in Cultural Activities
- ---------------------------------
- -- The Bank continued its underwriting for the Main Line Art Center's series of
art lectures at various locations throughout the Main Line, including the
retirement communities of Beaumont, Quadrangle, and Waverly Heights.
- -- Residents of these retirement communities were also beneficiaries of
delightful musical programs by members of The Savoy Company, a renowned
musical society dedicated to the preservation and performance of music and
operettas of Gilbert and Sullivan. These performances were courtesy of BMT's
Trust Division. Trust also sponsored the 1996 Antique Show at Historic
Yellow Springs in Chester County.
- -- The Bank presented its 16th consecutive summer series of free open air
concerts on the lawn of Ludington Library in Bryn Mawr. Over 500 people
attended each performance in the 1996 program.
- -- More than 300 Member Bankers were guests of the Bank at a private tour of
The Cezanne Retrospective at the Philadelphia Museum of Art. A reception on
the terrace of the museum followed the tour.
Attracting Professionals
- ------------------------
In a continued effort to strengthen our professional resources, the Bank
welcomed the following staff members in 1996:
- -- Doris P. Theune, CFP, with over 25 years experience in the personal
financial services industry, joined BMT as vice president of sales and
business development for the Trust Division and Investment Counsellors of
Bryn Mawr.
- -- Ann Marie Young, who has over 15 years of banking experience, joined the
Member Banking Credit Services Department as vice president specializing in
personal real estate investment financing.
- -- George H. Banks, III, with over 24 years of banking experience, and Carmen
L. Fiorentino, with over 26 years of banking experience, both joined the
Commercial & Real Estate Lending Division as vice presidents.
8 Bryn Mawr Bank Corporation
<PAGE>
- -- Walter J. Beckman, Jr., with over 13 years of audit experience, joined the
Audit Department as audit officer, while John Metz, a certified internal
auditor with over 20 years of bank auditing experience, joined the Audit
Department as assistant auditor.
Continuing Education
- --------------------
The Bank initiated a special program in order to better equip its staff to
provide advice to customers and prospects. Some 50 employees, approximately 20%
of the Bank staff, have begun coursework offered through The American College,
an independent, accredited institution that provides graduate level and
professional education to those seeking career advancement in the fields of
financial services and insurance. Their studies will prepare them for the
examination required for attainment of the professional designation of Certified
Financial Planner (CFP).
Classes are being conducted in The Centennial Wing of the Bank's main office in
Bryn Mawr. The on-site program is structured as a 21/2 year process. Five
courses are required before sitting for the CFP examination. They are: Insurance
and Financial Planning, Income Taxation, Planning for Retirement Needs,
Investments, and Fundamentals of Estate Planning. The goal of the program is to
have 40 CFP-certified staff members by July of 1999.
Positioning for the Future
- --------------------------
The Bank also reorganized the responsibility of its senior management team.
Senior Vice President Thomas M. Petro, who oversaw the highly successful
computer conversion -- a remarkable team effort from a group of dedicated
individuals representing all disciplines within the Bank -- was charged with the
responsibility for the new effort to refocus the Bank's marketing direction. The
Banking Operations and Information Services functions previously reporting to
Tom now report to Senior Vice President Paul M. Kistler, Jr., who also retains
responsibility for Human Resources and Facilities.
Commitment to Equal Employment Opportunity
- ------------------------------------------
It is now and has been the policy of the Bank not to discriminate against
minorities or women with respect to recruitment, hiring, training, promotion,
and other terms and conditions of employment, provided the individual is
qualified to perform the work available. Further, it is the policy of the Bank
to comply voluntarily with the concepts and practices of affirmative action.
[PHOTO]
1996 Annual Report 9
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
(in thousands, except for share and per share data)
For the years ended December 31 1996 1995 1994 1993 1992
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income.......................................... $ 24,337 $ 23,617 $ 20,378 $ 19,495 $ 21,316
Interest expense......................................... 6,490 7,246 5,077 5,823 7,683
-------------------------------------------------------------
Net interest income...................................... 17,847 16,371 15,301 13,672 13,633
Loan loss provision...................................... 350 500 500 500 725
-------------------------------------------------------------
Net interest income after loan loss provision............ 17,497 15,871 14,801 13,172 12,908
Other income............................................. 10,423 9,197 8,383 9,786 7,979
Other expenses........................................... 18,978 18,325 17,535 17,670 17,101
-------------------------------------------------------------
Income before income taxes, extraordinary credit,
and cumulative effect of accounting change.......... 8,942 6,743 5,649 5,288 3,786
Applicable income taxes.................................. 2,900 2,100 1,600 1,401 813
-------------------------------------------------------------
Income before extraordinary credit and
cumulative effect of accounting change.............. 6,042 4,643 4,049 3,887 2,973
Extraordinary credit..................................... -- -- -- -- 250
Cumulative effect of accounting change................... -- -- -- (175) --
-------------------------------------------------------------
Net income............................................... $ 6,042 $ 4,643 $ 4,049 $ 3,712 $ 3,223
=============================================================
Per share data:
Earnings............................................ $ 2.67 $ 2.08 $ 1.85 $ 1.71 $ 1.48
Dividends declared.................................. $ 0.92 $ 0.50 $ 0.325 $ 0.20 $ --
Weighted average shares outstanding, including
common stock equivalents in 1996 and 1995........... 2,262,904 2,233,898 2,183,900 2,176,446 2,170,588
(in thousands)
At December 31........................................... 1996 1995 1994 1993 1992
-------------------------------------------------------------
Total assets............................................. $ 345,747 $ 354,956 $333,180 $320,942 $302,939
Earning assets........................................... 305,911 314,089 298,385 287,945 263,215
Deposits................................................. 303,183 317,601 301,337 291,074 276,185
Shareholders' equity..................................... 35,808 31,903 27,146 24,627 21,320
For the years ended December 31 1996 1995 1994 1993 1992
-------------------------------------------------------------
Selected financial ratios:
Net income to:
Average total assets...................................... 1.79% 1.39% 1.26% 1.23% 1.13%
Average shareholders' equity.............................. 18.16 15.79 15.70 16.37 16.41
Average shareholders' equity
to average total assets................................... 9.88 8.79 8.06 7.51 6.91
Dividends declared per share to
net income per share...................................... 34.46 24.04 17.52 11.73 --
</TABLE>
Price Range of Shares
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------------
High Low Dividend High Low Dividend
Quarter Bid Bid Declared Bid Bid Declared
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st..................... $27 1/2 $25 $0.47* $17 1/4 $15 3/8 $0.125
2nd..................... 26 1/4 $22 3/4 0.15 18 1/2 17 0.125
3rd..................... 26 1/4 $23 1/4 0.15 22 3/4 18 0.125
4th..................... 28 $25 1/4 0.15 27 1/2 22 3/8 0.125
</TABLE>
The approximate number of holders of record of common stock as of December 31,
1996, was 525.
The shares are traded on the over-the-counter market, and price information was
obtained from the National Association of Securities Dealers (NASD).
*First quarter 1996 dividend included a nonrecurring dividend of $0.32 per
share, paid to shareholders from the after-tax proceeds from the sale of a
commercial property held in the Bank's other real esate owned. The sale occured
during the first quarter of 1996.
10 Bryn Wawr Bank Corporation
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following is a discussion of the consolidated results of operations of Bryn
Mawr Bank Corporation and its subsidiary (the "Corporation") for each of the
three years in the period ended December 31, 1996, as well as the financial
condition of the Corporation as of December 31, 1996 and 1995. 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 25.
Significant Items for 1996
- --------------------------
Sale of a Commercial Property in the Bank's Other Real Estate Owned ("OREO")
During the first quarter of 1996, the Bank sold a commercial property (the "OREO
Property") it had acquired in connection with its workout of a defaulted loan.
The Bank recognized a nonrecurring gain on the sale of the OREO Property of
$1,073,000 which was in part offset by increases in its OREO and contingency
reserves, totaling $155,000, and the payment of a onetime bonus of $92,000 to
certain Bank officers and employees. The after-tax effect of these transactions
added $545,000 to 1996 net income or $0.24 per share.
Dividend Increase
Based on strong earnings performance in 1995, the Corporation increased its
quarterly dividend payment for 1996 by 20%, from $0.125 per share to $0.15 per
share. In addition, during the first quarter of 1996, the Corporation's Board of
Directors approved a special onetime dividend of $0.32 per share to return to
shareholders the after-tax gain on the sale of the OREO Property. The addition
of the onetime dividend increased the Corporation's payout ratio to 34.46% of
earnings per share, an increase from 24.04% for 1995.
Conversion to an In-house Data Processing System
During the first quarter of 1996, the Bank converted from a remote job entry
data processing system to an in-house system (the "Conversion"). This new system
has and will continue to provide additional reporting flexibility and more
control over the Bank's data processing in future periods. For 1996, the
Conversion resulted in an increase in depreciation and amortization of
electronic data processing ("EDP") conversion expenses over 1995 levels of
$256,000, offset by lower related computer processing fees of $274,000, for 1996
compared to 1995.
Results of Operations
- ---------------------
Overview
The Corporation reported net income of $6,042,000 for the year ended December
31, 1996, a record year for Corporation earnings, surpassing 1995's record
earnings of $4,643,000 by 30%. Earnings per common share amounted to $2.67 for
1996, a 28% increase over $2.08 reported for 1995. Exclusive of the net gain on
the sale of the OREO Property, the nonrecurring expenses referred to above and
the income tax effect on the transaction, which produced a net gain of $545,000
in 1996, net income would have been $5,497,000, an 18% increase over 1995 net
income. Earnings per common share would have been $2.43, a 17% increase over
$2.08 for 1995.
These record results for 1996 were primarily due to a 9% increase in net
interest income in 1996 and, exclusive of OREO gains and related OREO revenues,
a 6% increase in other income, while other expenses were held to a 4% increase
over 1995 levels. A change in the mix of earning assets, increasing higher
yielding loans and decreasing investments and balances in federal funds sold,
along with a decrease in higher costing certificates of deposit ("CDs") in the
Bank's deposits were the primary reasons for the increase in net interest
income. All noninterest revenue streams increased in 1996 over 1995 levels,
except for net gains on loan sales, which was directly attributable to a lower
volume of loan sales in 1996 and OREO revenues, directly related to the
disposition of the OREO Property. A reduction in actuarially computed pension
and post-retirement benefits expenses and the elimination of the Federal Deposit
Insurance Corporation's (the "FDIC") deposit insurance premiums for 1996 were
the primary reasons that other expenses increased only 4% in 1996, compared to
1995.
Both return on average assets and return on average equity increased over those
reported for 1995. Return on average assets for the year increased to 1.79% from
1.39% in 1995, while return on
[GRAPHIC APPEARS HERE]
Net Income
(in thousands of dollars)
1992 - 2,973
1993 - 3,712
1994 - 4,049
1995 - 4,643
1996 - 5,497
1996 net income is exclusive of a nonrecurring gain on the sale of OREO, and
nonrecurring expenses and income taxes.
1996 Annual Report 11
<PAGE>
average equity for 1996 was 18.16% compared to 15.79% in 1995. Exclusive of the
nonrecurring items referred to above, which increased net income by $545,000,
the return on average assets and the return on average equity for 1996 would
have been 1.63% and 16.52%, respectively.
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 its mortgage banking
line of business the origination, servicing, and sale of mortgage loans to the
secondary mortgage market. Following is a segmentation analysis of the results
of operations for those lines of business for 1996 and 1995:
TABLE 1 - LINES OF BUSINESS ANALYSIS
<TABLE>
<CAPTION>
1996
-------------------------------------------
Mortgage
(dollars in thousands) Banking Trust Banking Consolidated
-------------------------------------------
<S> <C> <C> <C> <C>
Net interest income after
loan loss provision......... $17,241 $ -- $ 256 $17,497
Other income.................. 3,249 5,936 1,238 10,423
Other expenses................ 14,346 3,817 715 18,878
-------------------------------------------
Operating profit.............. $ 6,144 $2,119 $ 779 $ 9,042
---------------------------------
General corporate expenses.... -- -- -- 100
-------
Income before income taxes.... -- -- -- $ 8,942
-------
% of consolidated
operating profit............ 68% 23% 9% 100%
<CAPTION>
1995
-------------------------------------------
Mortgage
(dollars in thousands) Banking Trust Banking Consolidated
-------------------------------------------
<S> <C> <C> <C> <C>
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%
</TABLE>
The table reflects operating profits of each line of business before income
taxes.
A strong increase in the Bank's net interest income in 1996, compared to 1995,
and the gain on the sale of OREO in 1996, net of nonrecurring expenses, were
primarily responsible for the increase in the percentage of consolidated profits
for the banking segment in 1996, to 68% from 56% in 1995, and the corresponding
decrease in the percentage of trust and mortgage banking segments. While
operating profits for the trust business segment increased 2% in 1996, the trust
percentage of consolidated profits decreased to 23% in 1996 compared to 30% in
1995. A decrease in the volume of loans sold in the secondary mortgage market
was responsible for the decrease in the mortgage banking segment's percentage of
consolidated operating profit to 9% in 1996 from 14% in 1995.
Banking Line of Business
During 1996, the Bank's prime rate decreased once. The prime rated decreased by
25 basis points during the first quarter of 1996 and ended the year at 8.25%.
While the Bank's average earning assets of $301,255,000 remained relatively
unchanged from $299,829,000 for 1995, the mix changed significantly. Higher
yielding average outstanding loans grew by 12%, while lower yielding investments
and federal funds sold decreased by 26% and 66%, respectively. Average
outstanding deposits decreased 1% in 1996 compared to 1995. However, the largest
decrease occurred in the Bank's higher costing CDs, down 11%, partially offset
by a 6% increase in noninterest-bearing demand deposits, both of which led to
the decrease in interest expense and an increase in the net interest margin to
5.67% in 1996 compared to 5.21% in 1995. An expanded discussion of net interest
income follows under the section entitled "Net Interest Income."
Other income increased by 29% in 1996 compared to 1995. This was due primarily
to an increase in gains on the sale of OREO in 1996 compared to 1995, the result
of the disposition of OREO referred to above. Exclusive of OREO gains and OREO
revenues, other income in the banking line of business increased 3%.
Total other expenses of the banking line of business increased 2% in 1996
compared to 1995 levels. Overall, the operating profits of the banking line of
business increased 60% in 1996 compared to 1995. Exclusive of OREO related gains
and revenues in both periods and the nonrecurring expenses incurred in 1996,
operating profits of the banking line of business would have increased by 56% in
1996, compared to 1995.
12 Bryn Mawr Bank Corporation
<PAGE>
Trust Line of Business
The Bank's Trust Division reported a 2% increase in operating profit for 1996
compared to 1995 levels. Total trust fee income rose 8% in 1996. This was
primarily due to an 18% increase in the market value of assets managed, from
$1,039,804,000 at December 31, 1995, to $1,229,926,000 as of December 31, 1996.
Other expenses of the Trust segment increased 12% in 1996 over 1995 levels. In
January of 1996, the Trust Division established a new business line, Investment
Counsellors of Bryn Mawr ("ICBM"), to provide investment advisory services to
both existing and new clients of the Trust Division. During 1995, 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 $96,000 was included in other expenses
for 1996, compared to $173,000 for 1995. Exclusive of the Trust incentive bonus
and the cost of administering ICBM in 1996, Trust other expenses decreased 4% in
1996 compared to 1995 levels.
[GRAPHIC APPEARS HERE]
Trust Fees
(in thousands of dollars)
1992 - 4,016
1993 - 4,419
1994 - 4,719
1995 - 5,496
1996 - 5,936
[GRAPHIC APPEARS HERE]
Trust Assets
(in millions of dollars)
Discretionary Non-Discretionary
------------- -----------------
1992 - 417,946 267,959
1993 - 448,328 316,243
1994 - 456,302 343,544
1995 - 573,990 465,804
1996 - 719,384 510,542
[GRAPHIC APPEARS HERE]
Trust Revenues
(as a percentage of total revenues)
1992 - 14%
1993 - 15%
1994 - 16%
1995 - 17%
1996 - 18%
Mortgage Banking Line of Business
The operating profit of the Bank's mortgage banking segment decreased 17% in
1996 compared to 1995. During 1996, mortgage interest rates did not decrease
enough to make refinancing attractive to borrowers. In 1996, the mortgage
banking line of business had a 19% decrease in the volume of loans sold in the
secondary mortgage market as well as a 24 basis point decrease in the yield on
sales, compared to 1995 levels and yields. The result was a 33% decrease in loan
fees and net gains on sales. This was the reason for the 47% decrease in net
interest income for the mortgage banking line of business. As of December 31,
1996, the Bank serviced $205,137,000 in mortgage loans for others, compared to
$203,934,000 in loans serviced for others at year-end 1995. Partially offsetting
the reduction in net gains on the sale of loans was a 12% increase in loan
servicing revenues and late fees as well as a $55,000 fee for brokering a loan
transaction for two other financial institutions. These were the primary reasons
for the 4% increase in other income in 1996, compared to 1995, for the mortgage
banking line of business. 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
<TABLE>
<CAPTION>
(dollars in thousands) 1996 1995
-----------------
<S> <C> <C>
Volume of loans sold $55,276 $67,826
Loan fees and net gains on sales $ 615 $ 918
Yield on sales 1.11% 1.35%
</TABLE>
Other expenses of the Bank's mortgage banking segment decreased 2% in 1996
compared to 1995 levels.
Net Interest Income
A 3% or $720,000 increase in interest income and a 10% or $756,000 decrease in
interest expense from year to year resulted in an overall increase in net
interest income of 9% or $1,476,000. While average earning assets remained
practically unchanged in 1996, compared to 1995 levels, the mix of average
earning asset balances changed. Higher yielding average outstanding loan
balances grew by 12%, being partially funded by decreases of 26% and 66% in
average outstanding balances of investments and federal funds sold,
respectively. A decrease in the Bank's higher costing average outstanding CD
balances, by 11%, partially offset by a 6% increase in noninterest-bearing
demand deposits, was the primary reason for the 10% decrease in interest expense
for 1996, compared to 1995 levels. The Bank's net interest margin, defined as
net interest income exclusive of loan fees as a percentage of average earning
assets, increased by 9% over the net interest margin in 1995, to 5.67% in 1996,
compared to 5.21% in 1995.
1996 Annual Report 13
<PAGE>
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 $789,000, $798,000, and $564,000 in 1996, 1995, and 1994, 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 3 - ANALYSES OF INTEREST RATES AND INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------------------------------------
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........ $ 21,942 $ -- -- % $ 19,275 $ -- -- % $ 22,474 $ -- -- %
Interest-bearing deposits
with other banks.............. 94 4 4.3 108 8 7.4 422 12 2.8
Federal funds sold*............ 4,660 257 5.5 13,658 813 6.0 6,839 261 3.8
Investment securities
available for sale:
Taxable*................ 36,680 2,157 5.9 48,502 2,562 5.3 59,717 2,899 4.9
Tax-exempt*............. 8,142 406 5.0 11,905 607 5.1 13,498 708 5.2
------------------- ----------------- --------------------
Total investment
securities............. 44,822 2,563 5.7 60,407 3,169 5.2 73,215 3,607 4.9
------------------- ----------------- --------------------
Loans*......................... 251,679 21,513 8.5 225,656 19,627 8.7 202,177 16,498 8.2
Less allowance for loan
losses........................ (4,017) -- -- (3,897) -- -- (3,734) -- --
------------------- ----------------- --------------------
Net loans............... 247,662 21,513 8.7 221,759 19,627 8.9 198,443 16,498 8.3
Other assets................... 17,539 -- -- 19,184 -- -- 18,694 -- --
------------------- ----------------- --------------------
Total assets............ $336,719 $ 24,337 -- $334,391 $23,617 -- $320,087 $ 20,378 --
Liabilities:
Demand deposits,
noninterest-bearing........... $ 73,034 $ -- -- % $ 68,654 $ -- -- % $ 65,976 $ -- -- %
Savings deposits............... 161,577 3,187 2.0 161,744 3,487 2.2 179,900 3,540 2.0
Time deposits.................. 60,930 3,203 5.3 68,328 3,754 5.5 42,925 1,512 3.5
Federal funds purchased........ 1,824 100 5.5 89 5 5.6 469 25 5.3
Other liabilities.............. 6,085 -- -- 6,175 -- -- 5,022 -- --
------------------- ----------------- --------------------
Total liabilities....... 303,450 6,490 -- 304,990 7,246 -- 294,292 5,077 --
Shareholders' equity........... 33,269 -- -- 29,401 -- -- 25,795 -- --
------------------- ----------------- --------------------
Total liabilities
and shareholders'
equity................. $336,719 $ 6,490 -- $334,391 $ 7,246 -- $320,087 $ 5,077 --
------------------- ----------------- --------------------
Total earning assets*.......... $301,255 -- -- $299,829 -- -- $282,653 -- --
Interest income to earning
assets........................ -- -- 8.1 -- -- 7.9 -- -- 7.2
Interest expense to earning
assets........................ -- -- 2.2 -- -- 2.4 -- -- 1.8
--- --- ---
Net yield on
interest-earning
assets........................ -- -- 5.9 -- -- 5.5 -- -- 5.4
Average effective rate paid on
interest-bearing liabilities.. -- -- 2.9 -- -- 3.1 -- -- 2.3
</TABLE>
*Indicates earning assets.
14 Bryn Mawr Bank Corporation
<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
($9,000) in 1996, $234,000 in 1995, and ($363,000) in 1994.
TABLE 4 - RATE/VOLUME ANALYSES
<TABLE>
<CAPTION>
(in thousands) 1996 vs. 1995 1995 vs. 1994
--------------------------------------------------------------------
Increase/(decrease) Volume Rate Total Volume Rate Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-bearing deposits
with other banks...................... $ (1) $ (3) $ (4) $ (13) $ 9 $ (4)
Federal funds sold..................... (494) (62) (556) 354 198 552
Investment securities
available for sale:
Taxable.............................. (674) 269 (405) (577) 240 (337)
Tax-exempt........................... (189) (12) (201) (82) (19) (101)
Loans................................ 2,325 (439)* 1,886 1,996 1,133* 3,129
--------------------------------------------------------------------
Total interest income................. 967 (247) 720 1,678 1,561 3,239
--------------------------------------------------------------------
Interest expense:
Savings deposits..................... (3) (297) (300) (375) 322 (53)
Time deposits........................ (412) (139) (551) 1,152 1,090 2,242
Federal funds purchased.............. 95 -- 95 (21) 1 (20)
--------------------------------------------------------------------
Total interest expense............... (320) (436) (756) 756 1,413 2,169
--------------------------------------------------------------------
Interest differential.................. $1,287 $ 189 $1,476 $ 922 $ 148 $1,070
--------------------------------------------------------------------
</TABLE>
* Included in the loan rate variance was a decrease in interest income related
to nonperforming loans of $85,000 in 1996 and an increase of $69,000 in 1995.
The variances due to rate include the effect of nonaccrual loans because no
interest is earned on such loans.
The 3% growth in interest income for 1996 was attributable to an increase in the
yield on average earning assets from 7.9% for 1995 to 8.1% for 1996. Average
earning assets for 1996 were $301,255,000 compared to $299,829,000 for 1995.
While the average yield on loans and federal funds sold decreased in 1996,
compared to similar yields in 1995, due to the reduction in the prime rate
during the first quarter of 1996, the yield on the investment portfolio
increased by 50 basis points from 5.2% in 1995 to 5.7% in 1996. This is due to
the maturity of older, lower yielding investments in the portfolio. The majority
of maturing investments was used to fund new loan growth. The growth in interest
income attributable to volume was the result of strong loan growth, offset by
lower volumes of all other earning assets. Offsetting this was a reduction in
interest income related to the rate variance, with the exception of an increase
in the rate variance for investments. The mixture of both variances was
attributable to the 3% increase in interest income in 1996 over 1995 levels.
As of December 31, 1996, outstanding loans increased 10%. The most significant
loan growth came in permanent mortgage loans, which includes residential
mortgage loans, commercial mortgage loans, and home equity loans. Permanent
mortgage loans grew by 10%, primarily due to a 17% growth in outstanding home
equity loans, a 7% increase in outstanding residential mortgage loan balances,
and a 10% growth in outstanding commercial mortgage loans. An 11% increase in
outstanding consumer loans was due primarily to a 9% increase in short-term
indirect automobile loan balances at year-end 1996 compared to 1995. Commercial
and industrial loans were up 11% over December 31, 1995 levels, reflecting
increased lending effort in this line of business, including Member Banking
Credit Services, which commenced operation in July 1995. Construction lending
decreased 14% during 1996.
Average deposits decreased $3,185,000 or 1% during 1996. However, a change in
the mix of average daily balances of deposits caused a 10% decrease in interest
expense. During the first quarter of 1996, the first of the Premier CDs, issued
during the first quarter of 1995 at highly competitive rates of interest,
matured. During 1996, the Bank's average CD balances decreased by $7,398,000 or
11% compared to similar balances for 1995. As interest rates paid on the Bank's
savings deposits, including market rate, NOW, and savings accounts, remained
relatively unchanged during 1996, some depositors sought alternative investment
opportunities. Average savings deposits decreased by $3,448,000 or 8% in 1996,
compared to similar 1995 average balances. Offsetting this decrease was a 7% or
$4,550,000 increase in the average outstanding balances of transaction-based NOW
accounts. Average outstanding noninterest-bearing demand deposits also grew by
$4,380,000 or 6%, contributing to a lower cost of funds. This change in the mix
of average deposit balances, away from higher costing CDs, was primarily
responsible for the 10% decrease in interest expense for 1996. The cost of funds
for the Bank averaged 2.2% in 1996 compared to 2.4% in 1995.
Loan Loss Provision
The Bank provided a loan loss provision of $350,000 for 1996, compared to
$500,000 for 1995. The allowance for possible loan losses was $4,182,000 and
$3,652,000 as of December 31, 1996 and 1995, respectively. Due to the low level
of delinquencies at December 31, 1996, 0.74% of outstanding loans, and the level
of the loan loss reserve, management deemed it appropriate to lower the
provision for loan losses during 1996. The ratio of the loan loss reserve to
nonperforming loans was 461% and 598% as of December 31, 1996 and 1995,
respectively. Nonperforming loans amounted to $907,000 at December 31, 1996, a
48% increase from $611,000 at December 31, 1995. The allowance for possible
1996 Annual Report 15
<PAGE>
loan losses, as a percentage of outstanding loans, was 1.61% as of December 31,
1996, compared to 1.55% as of December 31, 1995. Bank management determined
that the 1996 loan loss provision was sufficient to maintain an adequate level
of the allowance for possible loan losses during 1996.
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) 1996 1995 1994 1993 1992
---------------------------------------------
Allowance for possible
loan losses:
Balance, January 1 $3,652 $3,618 $3,601 $3,848 $ 6,012
---------------------------------------------
Charge-offs:
Commercial and industrial (84) (527) -- (462) (145)
Real estate--construction -- -- (229) (37) (2,094)
Real estate--mortgage (4) (8) (69) (11) (92)
Consumer (180) (234) (365) (388) (658)
---------------------------------------------
Total charge-offs (268) (769) (663) (898) (2,989)
---------------------------------------------
Recoveries:
Commercial and industrial 404 236 115 94 25
Real estate--construction -- -- -- -- --
Real estate--mortgage 8 13 20 -- --
Consumer 36 54 45 57 75
---------------------------------------------
Total recoveries 448 303 180 151 100
---------------------------------------------
Net recoveries/
(charge-offs) 180 (466) (483) (747) (2,889)
Provision for loan losses 350 500 500 500 725
---------------------------------------------
Balance, December 31 $4,182 $3,652 $3,618 $3,601 $ 3,848
---------------------------------------------
Net recoveries/
(charge-offs) to
average loans 0.1% (0.2)% (0.2)% (0.4)% (1.6)%
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 6 -- ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
December 31 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------
% Loans % Loans % Loans % Loans % Loans
(dollars in thousands) to Total to Total to Total to Total to Total
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................................... $ 483 28.8% $ 1,295 28.7% $ 1,289 23.9% $ 1,144 26.0% $1,335 26.5%
Real estate--construction..................... 751 2.9 648 3.8 273 2.1 411 4.9 924 7.4
Real estate--mortgage......................... 289 36.9 259 36.4 332 40.4 297 41.0 120 36.4
Consumer...................................... 609 31.4 619 31.1 680 33.6 552 28.1 460 29.7
Unallocated................................... 2,050 -- 831 -- 1,044 -- 1,197 -- 1,009 --
----------------------------------------------------------------------------------
Total....................................... $ 4,182 100.0% $ 3,652 100.0% $ 3,618 100.0% $ 3,601 100.0% $3,848 100.0%
----------------------------------------------------------------------------------
</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. As a part of the internal loan review
process, loans considered impaired under SFAS NO. 114 are individually reviewed
and, when deemed appropriate, a specific portion of the loan loss reserve is
allocated to the respective impaired loans. Refer to page 22 for further
discussion of the Corporation's loan review process.
Other Income
The following table details other income for the years ended December 31, 1996
and 1995, and the percent change from year to year:
TABLE 7 - OTHER INCOME
<TABLE>
<CAPTION>
(dollars in thousands) 1996 1995 % Change
-------------------------------------
<S> <C> <C> <C>
Fees for trust services $ 5,936 $5,496 8%
Service charges on deposit accounts..... 1,081 1,049 3
Other fees and service charges.......... 1,280 1,240 3
Net gain on sale of loans............... 398 479 (17)
Gain on sale of other real estate owned. 1,081 137 689
OREO revenues........................... 74 353 (79)
Other operating income.................. 573 443 29
-------------------------------------
Total other income................... $10,423 $9,197 13%
-------------------------------------
</TABLE>
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 12 and 13, the increase
in other income in 1996 from 1995 levels was primarily a result of an increase
in gains on the sale of OREO.
Trust income grew 8% from year to year, due primarily to an increase in the
market value of trust assets by 18%, to $1,229,926,000 at year-end 1996, up from
$1,039,804,000 as of December 31, 1995.
16 Bryn Wawr Bank Corporation
<PAGE>
As discussed in the "Mortgage Banking Line of Business" section, the 17% decline
in gains on the sale of loans was directly attributable to both a decline in the
volume of loans sold in 1996 compared to 1995, as well as the yield realized on
the sale of loans in 1996 compared to 1995.
As discussed in the "Significant Items for 1996" section, during the first
quarter of 1996, the Bank sold the OREO Property, generating a gain of
$1,073,000 on the transaction. This was the primary reason for the 689% increase
in the gain on sale of OREO, from $137,000 in 1995 to $1,081,000 in 1996.
The sale of the OREO Property from the Bank's OREO eliminated the OREO revenue
stream in March 1996, compared to a full year's revenue being earned in 1995.
Other operating income increased 29% in 1996 from 1995 levels, primarily due to
an increase of $35,000 or 9% in revenues from merchant credit card processing
and, as discussed in the "Mortgage Banking Line of Business" paragraph, a
$55,000 fee for brokering a loan transaction between two other financial
institutions. Exclusive of these items, other operating income increased by 9%
in 1996 over 1995 levels.
Other Expenses
The following table details other expenses for the years ended December 31, 1996
and 1995, and the percent change from year to year:
TABLE 8 - OTHER EXPENSES
<TABLE>
<CAPTION>
1996 1995 % Change
---------------------------------------------
<S> <C> <C> <C>
Salaries-regular................. $ 7,594 $ 6,906 10 %
Salaries-other................... 1,045 1,112 (6)
Employee benefits................ 1,585 1,890 (16)
Occupancy expense................ 1,537 1,441 7
Furniture, fixtures,
and equipment............. 1,246 877 42
Advertising...................... 991 868 14
Computer processing.............. 836 1,174 (29)
Stationery and supplies.......... 355 279 27
Professional fees................ 677 701 (3)
Insurance........................ 159 486 (67)
Merchant credit
card processing........... 376 314 20
Net cost of operation of
other real estate owned... 97 52 87
Other operating expenses......... 2,480 2,225 11
---------------------------------------------
Total other expenses............. $18,978 $18,325 4 %
---------------------------------------------
</TABLE>
Other expenses increased for the year ended December 31, 1996, by 4% compared to
1995. Regular salaries, consisting of regular, part-time, and overtime salary
expense, and the largest component of other expenses, rose 10%, due primarily to
merit increases and staffing additions related to the establishment of ICBM in
the Trust Division. Exclusive of the addition of ICBM salaries for 1996,
regular salary expense increased 4% in 1996 over 1995 regular salary levels. As
of December 31, 1996, the Bank's full-time equivalent staffing level was 205.5
compared to 197.5 as of December 31, 1995.
Other salaries, which primarily consist of incentive compensation, decreased 6%
from 1995 to 1996. The $67,000 decrease was primarily related to incentive based
compensation, tied to the overall profitability of the Bank, specific lines of
business, or the Conversion. Incentive compensation related to overall Bank
profitability increased $95,000 in 1996, and a onetime bonus of $92,000, related
to the nonrecurring gain on the sale of the OREO Property, was paid in 1996.
Offsetting these increases in incentive compensation were decreases in Trust and
mortgage banking incentive compensation of $122,000 and $16,000, respectively.
Nonrecurring conversion related incentive and severance costs of $107,000 were
incurred in 1995. This accounted for $58,000 of the $67,000 decrease in other
salary expense from 1995 to 1996.
Employee benefit costs decreased 16% due to reductions in actuarially computed
pension and post-retirement benefits costs for 1996 compared to 1995. Pension
expense and post-retirement benefits costs decreased from year to year by
$85,000 and $173,000, respectively.
The primary reason for the increase in occupancy expenses from 1995 to 1996 was
the cost of snow removal associated with the "Blizzard of 1996."
As outlined in the "Significant Items for 1996" section, the 42% increase in
furniture, fixtures, and equipment expense was primarily due to the additional
depreciation and amortization of EDP conversion costs associated with the
Conversion. Partially offsetting this increase of $369,000 was a $338,000 or 29%
decrease in the cost of computer processing fees in 1996, compared to 1995,
directly related to the discontinuance of the remote job-entry EDP system
earlier in 1996.
Advertising increased $123,000 or 14%, reflecting the continued commitment to
both print and electronic media as a means of increasing the public's awareness
of the Bank's array of products and services.
Stationery and supplies increased $76,000 or 27% in 1996, compared to 1995, due
primarily to additional costs associated with the Conversion.
1996 Annual Report 17
<PAGE>
Insurance expense decreased 67%. Insurance expense is composed of the premiums
paid to the FDIC for deposit insurance, as well as the cost of the Corporation's
business insurance coverage. 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 1996, the
Bank's FDIC deposit insurance premiums, which amounted to $2,000, decreased by
$334,000 or 99% from those paid in 1995. The Bank's business insurance premiums
increased $9,000 or 5% during 1996, compared to similar premiums in 1995.
Other operating expenses increased $255,000 or 11% from 1995 to 1996 due to a
number of factors. Of the $255,000 increase in other operating expenses in 1996,
$42,000 of this increase was due to employee tuition expenses related to the
introduction of a Certified Financial Planning program being offered to a number
of staff having customer contact. The cost of corporate wear, career clothing
for tellers and customer service representatives, increased by $31,000 as the
Bank outfitted those employees. Postage increased by $30,000, partially related
to mailings dealing with the Conversion. Travel and entertainment related
expenses also rose $47,000, reflecting continued efforts to increase the Bank's
market share of business, especially in the lending areas.
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 1996 were
$2,900,000, compared to $2,100,000 for 1995. This represents an effective tax
rate of 32.4% and 31.1% for 1996 and 1995, 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.
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 $34,747,000 and $59,211,000 as of December 31,
1996 and 1995, respectively. The amortized cost of the portfolio as of December
31, 1996, was $34,748,000, resulting in net unrealized losses of $1,000. The
amortized cost of the portfolio at December 31, 1995, was $58,890,000, resulting
in net unrealized gains of $321,000.
The maturity distribution and weighted average yields on a fully tax-equivalent
basis of investment securities at December 31, 1996, are as follows.
TABLE 9 - INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
Maturing Maturing
from from
Maturing 1998 2002 Maturing
during through through after
(DOLLARS IN THOUSANDS) 1997 2001 2006 2006 Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Obligations of the
U.S. Government
and agencies:
Book value................$ 11,514 $ 14,942 $ -- $ -- $ 26,456
Weighted average
yield.................... 5.8% 5.8% -- -- 5.8%
State and political
subdivisions:
Book value................ 1,024 5,958 -- -- 6,982
Weighted average
yield.................... 6.0% 4.7% -- -- 5.0%
Other investment
securities:
Book value................ -- -- -- 1,309 1,309
Weighted average
yield.................... -- -- -- 6.0% 6.0%
--------------------------------------------------------------------------------
Total book value............ $12,538 $ 20,900 $ -- $ 1,309 $ 34,747
Weighted average
yield................... 5.8% 5.5% --% 6.0% 5.5%
</TABLE>
The majority of maturing investments were used to fund growth in the loan
portfolio. In addition to maturities, during 1996, $9,905,000 in municipal bonds
were called and, to provide additional liquidity, an additional $9,500,000 in
shorter term maturities were sold, with a gain of $2,000. Those transactions
were primarily responsible for the $24,464,000 or 41% decrease in the investment
portfolio from December 31, 1995, to December 31, 1996. At December 31, 1996,
approximately 76% of the investment portfolio consisted of fixed rate U.S.
Government and U.S. Government Agency securities. The Corporation does not own
any derivative investments and does not plan to purchase any of those
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.
18 Bryn Mawr Bank Corporation
<PAGE>
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
<TABLE>
<CAPTION>
(in thousands) December 31
----------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans:
Permanent
mortgage loans........... $ 95,588 $ 85,752 $ 92,395 $ 78,553 $ 65,362
Construction loans....... 7,639 8,905 4,884 9,482 13,376
Commercial and
industrial loans......... 74,688 67,507 54,631 49,800 47,541
Consumer loans............ 81,512 73,189 76,828 53,882 53,302
----------------------------------------------------------
Total................... $259,427 $235,353 $228,738 $191,717 $179,581
----------------------------------------------------------
</TABLE>
The maturity distribution of the loan portfolio, excluding loans secured by one-
family residential property and consumer loans, at December 31, 1996, is shown
below.
<TABLE>
<CAPTION>
Maturing
Maturing from 1998
during through Maturing
(in thousands) 1997 2007 after 2001 Total
------------------------------------------------------
Commercial, financial, <S> <C> <C> <C>
and agricultural.......................................... $43,687 $ 24,474 $ 6,527 $74,688
Real estate--construction................................... 7,217 422 -- 7,639
Real estate--other.......................................... 314 7,484 23,260 31,058
------------------------------------------------------
Total.................................................... $51,218 $32,380 $29,787 $113,385
------------------------------------------------------
Interest sensitivity on the above loans:
Loans with predetermined
rates................................................. $ 2,627 $19,895 $ 5,313 $ 27,835
Loans with adjustable
or floating rates..................................... 48,591 12,485 24,474 85,550
------------------------------------------------------
Total.................................................. $51,218 $32,380 $29,787 $113,385
------------------------------------------------------
</TABLE>
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, 1996, increased 10% to $259,427,000 from
$235,353,000 as of December 31, 1995.
The largest increase was in permanent mortgage loans, which consist of
commercial and residential mortgages as well as home equity loans. Outstanding
permanent mortgage loan balances increased by 11% or $9,836,000 during 1996,
from $85,752,000 at December 31, 1995, to $95,588,000 at December 31, 1996. This
growth was due primarily to a $5,903,000 or 17% increase in home equity loans.
Commercial mortgage loans grew $2,794,000 or 10%, and residential mortgage loans
increased $1,139,000 or 7%.
Consumer loans, consisting of loans to individuals for household, automobile,
family, and other consumer needs, as well as purchased indirect automobile paper
from automobile dealers in the Bank's market area, increased $8,323,000 or 11%,
from $73,189,000 at December 31, 1995, to $81,512,000 at December 31, 1996. This
was due primarily to an increase in the outstanding balances of the indirect
automobile paper. Outstanding indirect automobile paper increased $5,002,000 or
9% from $58,387,000 at December 31, 1995, to $63,389,000 at December 31, 1996.
The other area of loan growth was in the Bank's commercial and industrial
lending area. Commercial loans grew $7,181,000 or 11%, from $67,507,000 at
December 31, 1995, to $74,688,000 at December 31, 1996. In addition to its
standard commercial lending practice, in July 1995, the Bank created a Member
Banking Credit Services Department, by employing two experienced lenders who
concentrate their efforts on meeting the loan requirements of the Bank's Member
Banking clients. During 1996, an additional lender was added to the Member
Banking Credit Services staff. This department's loans increased $8,031,000 or
103% from $7,792,000 at December 31, 1995, to $15,823,000 at December 31, 1996.
In recent years, the Bank had made a decision to reduce its construction loan
balances, to lower its exposure to higher risk loans. As of December 31, 1995
and 1996, 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, 1996, the construction loan
portfolio decreased $1,266,000 or 14%, from $8,905,000 at December 31, 1995, to
$7,639,000 at December 31, 1996.
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 deposit.
Loans Serviced for Others
(in millions of dollars)
[GRAPHIC HERE]
1992 - 152,582
1993 - 185,875
1994 - 192,113
1995 - 224,430
1996 - 224,336
1996 Annual Report 19
<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
30 to 89 90 Days Total Performing Real Estate Performing Loan Loss
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................ $ 16,295 $ 61 $ 47 $ 16,403 $ 47 $ -- $ 47 $ --
Commercial................. 30,205 188 665 31,058 665 1,411 2,076 --
Home equity................ 47,860 199 68 48,127 68 -- 68 --
-----------------------------------------------------------------------------------------------------
Total permanent mortgage
loans.................... 94,360 448 780 95,588 780 1,411 2,191 289
Construction mortgage loans:
Residential................ 6,389 -- -- 6,389 -- 112 112 --
Commercial................. 1,250 -- -- 1,250 -- -- -- --
-----------------------------------------------------------------------------------------------------
Total construction
mortgage loans........... 7,639 -- -- 7,639 -- 112 112 751
-----------------------------------------------------------------------------------------------------
Total real estate loans... 101,999 448 780 103,227 780 1,523 2,303 1,040
-----------------------------------------------------------------------------------------------------
Commercial and industrial
loans...................... 74,530 156 2 74,688 76 -- 76 --
-----------------------------------------------------------------------------------------------------
Total commercial and
industrial................ 74,530 156 2 74,688 76 -- 76 483
-----------------------------------------------------------------------------------------------------
Consumer loans:
Direct...................... 10,542 74 12 10,628 12 -- 12 --
Indirect.................... 68,461 376 13 68,850 13 -- 13 --
CreditLine.................. 1,969 39 26 2,034 26 -- 26 --
-----------------------------------------------------------------------------------------------------
Total consumer loans........ 80,972 489 51 81,512 51 -- 51 609
Unallocated reserve for
loan loss................... -- -- -- -- -- -- -- 2,050
-----------------------------------------------------------------------------------------------------
Total $257,501 $1,093 $ 833 $259,427 $907 $ 1,523 $ 2,430 $4,182
-----------------------------------------------------------------------------------------------------
</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 $907,000
includes $833,000 in loans past due 90 days or more plus $74,000 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.
Total deposits decreased 5% to $303,183,000 at December 31, 1996, from
$317,601,000 at year-end 1995. A more meaningful measure of deposit change is
average daily balances. As illustrated in Table 12, average daily deposit
balances decreased 1%. In an effort to increase its deposit base in 1995, the
Bank offered one and two year Premier CDs, at interest rates of 6.50% and 7.00%,
respectively. During the first quarter of 1996, the one year Premier CDs
matured. This was the primary reason for the 11% decrease in average outstanding
CD balances from 1995 to 1996. In a reaction to continued low market rates of
interest on savings-related balances, average daily outstanding balances of
regular savings and market rate accounts decreased by 8% and 3%, respectively.
Partially offsetting these decreases were increases in the average daily
balances of NOW accounts and noninterest-bearing demand deposits, which grew 7%
and 6%, respectively over similar balances for 1995.
During 1996, in an effort to balance its liquidity needs, the Bank purchased
federal funds. The average daily outstanding balance of federal funds purchased
was $1,824,000 for 1996, compared to $89,000 in 1995. The Bank maintains credit
lines with various correspondent banks as well as the ability to borrow from the
Federal Home Loan Bank of Pittsburgh (the "FHLB").
Deposits
(in millions of dollars)
[GRAPHIC APPEARS HERE]
1992 - 276,185
1993 - 291,074
1994 - 301,337
1995 - 317,601
1996 - 303,183
Common Stock
(dollars per share)
[GRAPHIC APPEARS HERE]
Market Value Book Value
1992 $11.38 $ 9.81
1993 $16.31 $11.31
1994 $15.88 $12.41
1995 $26.00 $14.57
1996 $27.75 $16.27
20 Bryn Mawr Bank Corporation
<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
<TABLE>
<CAPTION>
% Change % Change
1996 vs. 1995 vs.
(dollars in thousands) 1996 1995 1995 1994 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Demand deposits, non-
interest-bearing................... $ 73,034 $ 68,654 6.4% $ 65,976 4.1%
--------------------------------------------------------------------
Market rate accounts............... 49,451 50,720 (2.5) 56,694 (10.5)
NOW accounts....................... 70,549 65,999 6.9 67,195 (1.8)
Regular savings.................... 41,577 45,025 (7.7) 56,011 (19.6)
--------------------------------------------------------------------
161,577 161,744 (0.1) 179,900 (10.1)
--------------------------------------------------------------------
Time deposits...................... 60,930 68,328 (10.8) 42,925 59.2
--------------------------------------------------------------------
Total............................. $295,541 $298,726 (1.1)% $288,801 3.4%
--------------------------------------------------------------------
</TABLE>
The following table shows the maturity of certificates of deposit of $100,000 or
greater as of December 31, 1996.
TABLE 13 - MATURITY OF CERTIFICATES OF DEPOSIT OF $100,000 OR GREATER
(in thousands)
Three months or less............. $ 4,345
Three to six months.............. 1,512
Six to twelve months............. 1,300
Greater than twelve months....... 283
--------
Total........................... $ 7,440
--------
Capital Adequacy
At December 31, 1996, total shareholders' equity of the Corporation was
$35,808,000, a $3,905,000 or 12% increase over $31,903,000 at December 31, 1995.
In addition to earnings and dividends for the year, the impact of SFAS No. 115
resulted in a decrease in shareholders' equity in 1996. As of December 31,
1996, shareholders' equity included unrealized losses on investment securities,
net of deferred taxes, of $1,000 compared to unrealized gains on investment
securities, net of taxes, of $212,000 at December 31, 1995. This change
accounted for a $213,000 decrease in total shareholders' equity from December
31, 1995, to year-end 1996.
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, 1996 and 1995, are listed
below. These ratios are all in excess of the minimum required capital ratios,
also listed below.
TABLE 14 - RISK-BASED CAPITAL RATIOS
1996 1995
------------------------------------------
Minimum Minimum
Actual Required Actual Required
------------------------------------------
Tier I capital ratio.............. 12.27% 4.00% 11.42% 4.00%
Total capital ratio............... 13.53 8.00 12.67 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,
1996 and 1995, 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, 1996. 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, 1996.
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.
1996 Annual Report 21
<PAGE>
Nonperforming assets amounted to $2,430,000 at December 31, 1996, a 45% decrease
from $4,405,000 at December 31, 1995, because of a decrease in OREO balances.
Nonperforming loans were $907,000 at December 31, 1996, a 48% increase from
$611,000 at December 31, 1995. OREO decreased $2,271,000 or 60% to $1,523,000 at
December 31, 1996, from $3,794,000 at December 31, 1995, primarily because of
the sale of the OREO Property, included in OREO, as discussed in the
"Significant Items for 1996" section. As of December 31, 1996, there were three
properties remaining in OREO. The largest is a commercial building located in
King of Prussia and is presently being offered for sale. The ratio of
nonperforming assets as a percentage of total assets was 0.70% as of December
31, 1996, compared to 1.24% as of December 31, 1995.
Total nonperforming assets, which include nonaccruing and past due loans and
other real estate owned, are presented in the table below for each of the five
years in the period ended December 31,1996.
TABLE 15 - NONPERFORMING ASSETS
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------
(in thousands) 1996 1995 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans past due 90 days
or more not on
nonaccrual status:
Real estate--
mortgage.................. $ 68 $ -- $ 48 $ 139 $ 240
Consumer................... 51 155 82 59 121
Loans on which the
accrual of interest
has been discontinued:
Commercial and
industrial................ 76 339 -- 205 1,023
Real estate--
mortgage.................. 712 117 371 1,032 862
Real estate--
construction.............. -- -- 275 708 407
-------------------------------------------------------------------
Total nonperforming
loans....................... 907 611 776 2,143 2,653
Other real estate
owned*....................... 1,523 3,794 3,475 3,539 6,524
-------------------------------------------------------------------
Total nonperforming
assets...................... $2,430 $4,405 $4,251 $5,682 $9,177
-------------------------------------------------------------------
</TABLE>
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
$144,000 for the year ended December 31, 1996. Interest earned and included in
interest income on these loans prior to their nonperforming status amounted to
$40,000 in 1996.
* 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 and impaired 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 write-
off 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
compliance.
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 interest rate environment should produce
an increase in net interest income. The converse is true of a negative gap in a
rising interest rate environment.
22 Bryn Mawr Bank Corporation
<PAGE>
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 1996, 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
FHLB. The Bank had available a $44,240,000 line of credit with the FHLB as of
December 31, 1996.
The Bank's liquid assets include cash and cash equivalents as well as certain
unpledged investment securities. Bank management is presently developing a
revised liquidity measure, incorporating its ability to borrow from the FHLB to
meet liquidity needs and goals. Periodically, ALCO reviews the Bank's liquidity
needs, incorporating the ability to borrow from the FHLB and reports these
findings to the Risk Management Committee of the Bank's Board of Directors.
During 1996, cash provided by operations amounted to $5,284,000 and was
primarily provided from net income of $6,042,000 for 1996. Cash provided from
investing activities amounted to $4,913,000 and was primarily due to $3,462,000
in proceeds from the sale of OREO in 1996. Investment activity provided
$24,006,000 in cash, providing funding for an increased loan portfolio. Loan
activity, including the purchase of $40,831,000 in indirect automobile paper,
used $21,857,000 in funds during 1996. Offsetting the increases in funds from
operating and investing activities was a decrease in funds from the
Corporation's financing activities, which used $16,396,000 in net cash,
primarily the result of a $16,255,000 decrease in outstanding CD balances, due
primarily to the maturity of Premier CDs during the first quarter of 1996. The
Corporation's cash and cash equivalents decreased from December 31, 1995, to
December 31, 1996, by $6,199,000, from $44,653,000 at December 31, 1995, to
$38,454,000 at December 31, 1996.
As shown in the following table, the Bank is presently asset interest rate
sensitive in the short-term, 30 days or less category.
TABLE 16 -- INTEREST RATE SENSITIVITY ANALYSIS
as of December 31, 1996
<TABLE>
<CAPTION>
Repricing Periods
-------------------------------------------------------------------------------
0 to 30 31 to 90 91 to 181 180 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......... $ 121 $ -- $ -- $ -- $ -- $ -- $ 121
Federal funds sold................. 11,616 -- -- -- -- -- 11,616
Investment securities.............. 7,400 7,956 4,012 4,664 10,715 -- 34,747
Loans.............................. 80,383 9,137 18,211 32,417 119,279 (4,182) 255,245
Cash and due from banks............ -- -- -- -- -- 26,717 26,717
Other assets....................... -- -- -- -- -- 17,301 17,301
-------- ---------- -------- ------- -------- ------- --------
Total assets....................... $ 99,520 $ 17,093 $ 22,223 $37,081 $129,994 $39,836 $345,747
-------- ---------- -------- ------- -------- ------- --------
Liabilities and shareholders' equity:
Demand, noninterest-bearing........ $ -- $ -- $ -- $ -- $ -- $81,865 $ 81,865
Savings deposits................... 60,915 -- -- -- 101,525 -- 162,440
Time deposits...................... 15,696 12,719 11,109 10,894 8,460 -- 58,878
Other liabilities.................. -- -- -- -- -- 6,756 6,756
Shareholders' equity............... -- -- -- -- -- 35,808 35,808
-------- ---------- -------- ------- -------- ------- --------
Total liabilities and
shareholders' equity.............. 76,611 $ 12,719 $ 11,109 $10,894 $109,985 $124,429 $345,747
-------- ---------- -------- ------- -------- ------- --------
Gap..................................... $ 22,909 $ 4,374 $ 11,114 $26,187 $ 20,009 $(84,593) --
Cumulative gap.......................... $ 22,909 $ 27,283 $ 38,397 $64,584 $ 84,593 -- --
Cumulative earning assets as a ratio
of interest-bearing liabilities.... 130% 131% 138% 158% 138% -- --
</TABLE>
1996 Annual Report 23
<PAGE>
1995 vs. 1994 Results of Operations
Net Income
Net income for the year ended December 31, 1995, was $4,643,000, a 15% increase
over net income of $4,049,000 for the year ended December 31, 1994.
On a per share basis, net income rose from $1.85 in 1994 to $2.08 in 1995. In
1995, the Corporation paid dividends of $0.50 per share, a 54% increase over
$0.325 per share, paid in 1994.
Return on average assets was 1.39% for 1995 compared to 1.26% in 1994. Return on
average equity was 15.79% in 1995 versus 15.70% in 1994.
Net Interest Income
A 16% rise in interest income was due to a 6% increase in daily average earning
asset balances, and a 70 basis point increase in the average yield on earning
assets, from 7.2% in 1994 to 7.9% in 1995.
Interest expense increased 43% or $2,169,000 from 1994 to 1995. All of this
increase was due to the addition, during the first quarter of 1995, of one and
two-year Premier CDs, with average yields of 6.50% and 7.00%, respectively.
Interest expense on CDs rose $2,242,000 for the year ended 1995 compared to the
same period in 1994. The average effective rate paid on interest-bearing
liabilities rose from 2.3% in 1994 to 3.1% in 1995.
Net interest income increased 7%, while the net interest margin remained level
at 5.21% for both 1994 and 1995.
Loan Loss Provision
The provision for loan losses amounted to $500,000 in 1995 and 1994. The
allowance for possible loan losses as a percentage of nonperforming loans
amounted to 598% and 466% as of December 31, 1995 and 1994, respectively.
Other Income
Other income increased 10% in 1995 from 1994 levels. Primarily responsible for
this $814,000 increase in other income was a $777,000 or 16% increase in fees
for Trust services. Net gains on the sale of mortgage loans increased $93,000 or
24%, due primarily to the sale of $67,826,000 in mortgage loans in the secondary
mortgage market in 1995, compared to only $39,109,000 in 1994. The Bank also had
a $157,000 or 53% reduction in gains on the sale of OREO in 1995 compared to
similar gains in 1994.
Other Expenses
Other expenses increased by $790,000 or 5% in 1995 over 1994. While regular
salaries increased $201,000 or 3%, other salaries, primarily incentive based,
increased $295,000 or 36%. Increases in incentive-based compensation, tied to
overall profitability of the Bank as well as to specific lines of business, was
the reason for this increase.
Insurance, including the Corporation's business coverage premiums and FDIC
deposit insurance premiums, decreased by $321,000 or 40% in 1995 compared to
1994 levels. During 1995, the FDIC announced that the bank insurance fund was
sufficiently funded to provide necessary coverage for insured bank deposits.
Therefore, for those banks considered "well-capitalized" by FDIC criteria, which
the Bank is considered, the FDIC refunded premiums paid from May through
September 1995 and eliminated any further premiums for the fourth quarter of
1995. This was the main reason for a $295,000 decrease in FDIC deposit insurance
premiums from 1994 to 1995.
Income Taxes
The income tax provision for 1995 was $2,100,000, or a 31.1% effective rate,
compared to $1,600,000, or a 28.3% effective rate, for 1994. All of the increase
in income before income taxes from 1994 to 1995 occurred in taxable income,
thereby increasing the effective tax rate for 1995, compared to 1994.
24 Bryn Mawr Bank Corporation
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(in thousands)
As of December 31 1996 1995
-----------------------
<S> <C> <C>
Assets
- ------
Cash and due from banks............................................................................. $ 26,717 $ 25,128
Interest-bearing deposits with other banks.......................................................... 121 115
Federal funds sold.................................................................................. 11,616 19,410
Investment securities available for sale, at market value
(amortized cost of $34,748,000 and $58,890,000
at December 31, 1996 and 1995, respectively)................................................... 34,747 59,211
Loans............................................................................................... 259,427 235,353
Less: Allowance for possible loan losses....................................................... (4,182) (3,652)
-----------------------
Net loans................................................................................ 255,245 231,701
-----------------------
Premises and equipment, net......................................................................... 11,334 11,820
Accrued interest receivable......................................................................... 2,164 2,463
Deferred federal income taxes....................................................................... 1,312 1,042
Other real estate owned............................................................................. 1,523 3,794
Other assets........................................................................................ 968 272
-----------------------
Total assets................................................................................... $345,747 $354,956
=======================
Liabilities
- -----------
Deposits:
Demand, noninterest-bearing.................................................................... $ 81,865 $ 81,128
Savings........................................................................................ 162,440 161,340
Time........................................................................................... 58,878 75,133
-----------------------
Total deposits................................................................................. 303,183 317,601
Other liabilities................................................................................... 6,756 5,452
-----------------------
Total liabilities.............................................................................. 309,939 323,053
-----------------------
Commitments and contingencies (Note 12)
Shareholders' equity
- -------------------
Common stock, par value $1,
authorized, 5,000,000 shares,
issued 2,503,885 shares and 2,493,200 shares
as of December 31, 1996 and 1995, respectively,
and outstanding 2,201,065 shares and
2,190,380 shares as of December 31, 1996
and 1995, respectively......................................................................... 2,504 2,493
Paid-in capital in excess of par value.............................................................. 4,445 4,363
Unrealized investment (depreciation) appreciation, net of deferred income taxes..................... (1) 212
Retained earnings................................................................................... 30,399 26,374
-----------------------
37,347 33,442
Less: Common stock in treasury, at cost -- 302,820 shares
at December 31, 1996 and 1995.................................................................. (1,539) (1,539)
-----------------------
Total shareholders' equity..................................................................... 35,808 31,903
-----------------------
Total liabilities and shareholders' equity..................................................... $345,747 $354,956
=======================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1996 Annual Report 25
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
(in thousands, except for share and per share data)
For the years ended December 31 1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
Net interest income:
Interest income:
Interest and fees on loans................................................. $ 21,513 $ 19,627 $ 16,498
Interest on federal funds sold............................................. 257 813 261
Interest and dividends on investment securities:
Taxable interest income.................................................. 2,082 2,491 2,853
Tax-exempt interest income............................................... 406 607 708
Dividend income............................................................ 79 79 58
--------------------------------------------------
Total interest income.................................................... 24,337 23,617 20,378
Interest expense on deposits................................................. 6,490 7,246 5,077
--------------------------------------------------
Net interest income.......................................................... 17,847 16,371 15,301
Loan loss provision.......................................................... 350 500 500
--------------------------------------------------
Net interest income after loan loss provision................................ 17,497 15,871 14,801
--------------------------------------------------
Other income:
Fees for trust services.................................................... 5,936 5,496 4,719
Service charges on deposit accounts........................................ 1,081 1,049 1,068
Other fees and service charges............................................. 1,280 1,240 1,192
Net gain on sale of loans.................................................. 398 479 386
Gain on sale of other real estate owned.................................... 1,081 137 294
Other real estate owned income............................................. 74 353 319
Other operating income..................................................... 573 443 405
--------------------------------------------------
Total other income.................................................... 10,423 9,197 8,383
--------------------------------------------------
Other expenses:
Salaries-regular........................................................... 7,594 6,906 6,705
Salaries-other............................................................. 1,045 1,112 817
Employee benefits.......................................................... 1,585 1,890 1,789
Occupancy expense.......................................................... 1,537 1,441 1,389
Furniture, fixtures, and equipment......................................... 1,246 877 851
Advertising................................................................ 991 868 839
Computer processing........................................................ 836 1,174 1,085
Stationery and supplies.................................................... 355 279 258
Professional fees.......................................................... 677 701 683
Insurance.................................................................. 159 486 807
Merchant credit card processing............................................ 376 314 299
Net cost of operation of other real estate owned........................... 97 52 39
Other operating expenses................................................... 2,480 2,225 1,974
--------------------------------------------------
Total other expenses.................................................. 18,978 18,325 17,535
--------------------------------------------------
Income before income taxes................................................... 8,942 6,743 5,649
Applicable income taxes...................................................... 2,900 2,100 1,600
--------------------------------------------------
Net income................................................................... $ 6,042 $ 4,643 $ 4,049
==================================================
Earnings per average common share............................................ $2.67 $2.08 $1.85
Average number of shares outstanding, including common stock equivalents..... 2,262,904 2,233,898 2,183,900
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26 Bryn Mawr Bank Corporation
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(in thousands)
For the years ended December 31 1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Operating activities:
- --------------------
Net income..................................................................... $ 6,042 $ 4,643 $ 4,049
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses.................................................... 350 500 500
Provision for depreciation and amortization.................................. 1,142 986 891
Loans originated for resale.................................................. (56,915) (61,105) (41,260)
Proceeds from sale of loans.................................................. 55,276 67,826 40,986
Net gain on sale of loans.................................................... (398) (479) (386)
Net gain on disposal of other real estate owned.............................. (1,081) (137) (294)
Provision for deferred income taxes.......................................... (161) (148) 66
Change in income taxes payable/refundable.................................... -- 160 (55)
Change in interest receivable................................................ 299 (464) (109)
Change in interest payable................................................... 1,443 101 (11)
Other........................................................................ (713) 944 (99)
---------------------------------------------
Net cash provided by operating activities............................... 5,284 12,827 4,278
---------------------------------------------
Investing activities:
- --------------------
Purchases of investment securities........................................... (12,086) (21,289) (10,261)
Proceeds from maturities of investment securities............................ 16,685 22,320 23,254
Proceeds from sales of investment securities available for sale.............. 9,502 -- 7,009
Proceeds from calls of investment securities................................. 9,905 -- --
Proceeds on disposition of other real estate owned........................... 3,462 415 975
Purchase of other real estate owned.......................................... (141) (404) --
Capitalization of costs of other real estate owned........................... -- (193) --
Loan repayments, net of originations......................................... 18,974 12,765 8,125
Purchase of automobile retail installment contracts.......................... (40,831) (26,088) (45,877)
Purchases of premises and equipment.......................................... (557) (1,309) (1,057)
---------------------------------------------
Net cash provided (used) by investing activities........................ 4,913 (13,783) (17,832)
---------------------------------------------
Financing activities:
- --------------------
Change in demand and savings deposits........................................ 1,837 (17,049) 12,279
Change in time deposits...................................................... (16,255) 33,313 (2,016)
Dividends paid............................................................... (2,017) (1,095) (710)
Repayment of mortgage debt................................................... (54) (49) (43)
Proceeds from issuance of common stock....................................... 93 52 125
---------------------------------------------
Net cash (used) provided by financing activities........................ (16,396) 15,172 9,635
---------------------------------------------
Change in cash and cash equivalents............................................ (6,199) 14,216 (3,919)
Cash and cash equivalents at beginning of year................................. 44,653 30,437 34,356
---------------------------------------------
Cash and cash equivalents at end of year....................................... $ 38,454 $ 44,653 $ 30,437
=============================================
Supplemental cash flow information:
- ----------------------------------
Cash paid during the year for:
Income taxes............................................................... $ 3,340 $ 1,414 $ 1,513
Interest................................................................... 5,047 7,145 5,088
Noncash investing transactions:
Loans converted into other real estate owned............................... -- -- 908
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1996 Annual Report 27
<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 1996, 1995, and 1994 Stock issued Stock Capital Earnings (Losses) Stock
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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)
Net income............................................ -- -- -- 6,042 -- --
Dividends declared, $0.92 per share................... -- -- -- (2,017) -- --
Change in unrealized gains (losses), net of
income taxes of $109,000............................ -- -- -- -- (213) --
Purchase of treasury stock............................ -- -- -- -- -- 138
Retirement of treasury stock.......................... (4,975) (5) (133) -- -- (138)
Common stock issued................................... 15,660 16 215 -- -- --
---------------------------------------------------------------------------
Balance, December 31, 1996............................ 2,503,885 $ 2,504 $4,445 $ 30,399 $ (1) $(1,539)
===========================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
28 Bryn Mawr Bank Corporation
<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").
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of related revenue and expense during the
reporting period. Actual results could differ from those estimates. For all
years presented, all adjusting entries required for the fair presentation of the
financial statements were made. All such adjustments were of a normal recurring
nature. 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 GAAP 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 $10,487,000 and $9,674,000 at December 31,
1996 and 1995, 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. As of December 31, 1995,
shareholders' equity was increased by $212,000 due to unrealized gains (net of
$109,000 in deferred income tax benefits) of $321,000 in the investment
securities portfolio. As of December 31, 1996, shareholders' equity was
decreased by $1,000 due to unrealized losses of $1,000 in the investment
securities portfolio.
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. The charge-off policy for all loans, including
nonperforming and impaired loans, considers such factors as the type and size of
the loan, the quality of the collateral, and historical creditworthiness of the
borrower in management's assessment of 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, a loan is considered to be impaired when it is
probable that all amounts will not be collected in accordance with the terms of
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 a part of its internal loan review process, management, when considering
making a loan an impaired loan, considers a number of factors, such as a
borrower's current financial strength, the value of related collateral and the
ability to continue to meet the original contractual terms of a loan. Major risk
classifications, used to aggregate loans for application of SFAS No. 114 include
both credit risk or the risk of failure to repay a loan and concentration risk.
A loan is not considered impaired if there is merely an insignificant delay or
shortfall in the amounts of payments. An insignificant delay or shortfall is a
temporary delay in the payment process of a loan. However, under these
circumstances, the Bank expects to collect all amounts due, including interest
accrued at the contractual interest rate for the period of the delay.
When a borrower is deemed to be unable to meet the original terms of a loan, the
loan is considered impaired. While all impaired loans are not necessarily
considered non-performing loans, if a loan is delinquent for 90 days or more, it
is considered both a nonperforming and impaired loan. All of the Corporation's
impaired loans, which amounted to $2,069,000 and $565,000 at December 31, 1996
and 1995, respectively, were put on a nonaccrual status and any outstanding
accrued interest receivable on such loans, at the time they were put on a
nonaccrual status, was reversed from income.
Under SFAS No. 114, impaired loans subject to the statement are required to be
measured based upon the present value of expected future cash flows, discounted
at the loan's initial effective interest rate or at the loan's market price or
fair value of the collateral, if the loan is collateral dependent. As of
December 31, 1996 and 1995, impaired loans measured using the present value of
expected future cash flows amounted to $165,000 and $210,000, respectively.
Impaired loans measured by the fair value of the loan's collateral amounted to
$1,904,000 and $355,000, respectively.
If the loan valuation is less than the recorded value of the loan, an impairment
reserve must be established for the difference. The impairment reserve is
established by either an allocation of the reserve for loan losses or by a
provision for loan losses, depending on the adequacy of the reserve for loan
losses. All impairment reserves established in either 1996 or 1995 were
allocated from the existing reserve for loan losses. As of December 31, 1996 and
1995, there were $1,381,000 and $414,000, respectively of
1996 Annual Report 29
<PAGE>
impaired loans for which there is a related allowance for loan losses. The total
related allowance for loan loss at December 31, 1996 and 1995 was $191,000 and
$232,000, respectively. Impaired loans for which no loan loss allowance was
allocated amounted to $688,000 and $151,000 at December 31, 1996 and 1995.
Average impaired loans during both 1996 and 1995 amounted to $2,237,000 and
$1,082,000, respectively.
While SFAS No. 118 permits existing income recognition practices to continue,
when a loan is classified as impaired, it is put on a nonaccrual status and any
income subsequently collected is credited to the outstanding principal balance.
Therefore, no interest income was reported on outstanding loans while considered
impaired in either 1996 or 1995. No loans considered impaired since the adoption
of SFAS No. 114 and SFAS No. 118 have been removed from the impaired loan
status. Loans may be removed from impaired status and returned to accrual status
when all principal and interest amounts contractually due are reasonably assured
of repayment within an acceptable period of time and there is a sustained period
of repayment performance by the borrower, with a minimum repayment of at least
six months, in accordance with the contractual terms of interest and principal.
Subsequent income recognition would be recorded under the existing terms of the
loan.
Smaller balance, homogeneous loans, exclusively consumer loans, when included in
nonperforming loans, for practical consideration, are not put on a nonaccrual
status nor is the current accrued interest receivable reversed from income. 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 nor do they
materially impact the comparability of the credit risk tables under Industry
Guide 3.
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.
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:
The Corporation files a consolidated Federal income tax return with its
subsidiary, the Bank. Certain items of income and expense (primarily loan
origination fees, allowance for possible loan losses, and other real estate
owned losses) are reported in different periods for tax purposes. Deferred taxes
are provided on such temporary differences existing between financial and income
tax reporting, subject to the deferred tax asset realization criteria required
under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109").
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 $172,000 and $149,000 as
of December 31, 1996 and 1995, 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 No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS No. 122") which was 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. The adoption of SFAS No. 122
did not have a significant effect on the financial position or the results of
operation of the Corporation.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which was 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. The Corporation will continue to apply APB 25 and therefore,
there was no impact on the financial position and results of
30 Bryn Mawr Bank Corporation
<PAGE>
operation. The proforma effect of applying SFAS No. 123 on net income and
earnings per share is included on Note No. 10 of Corporation's financial
statements.
In June, 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
125") which is effective for the Corporation beginning January 1, 1997. SFAS No.
125, which is to be applied prospectively, provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on the concept of control. It is anticipated that the adoption
of SFAS No. 125 will not have a material effect on the financial position or the
results of operation of the Corporation.
3. Investment Securities:
- ------------------------
The amortized cost and estimated market value of investments, all of which were
classified as available for sale, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996
----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market Carrying
Cost Gains Losses Value Value
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Obligations of
the U.S.
Government
and agencies..... $26,524 $ 16 $ 84 $26,456 $26,456
State & political
subdivisions........ 6,924 58 -- 6,982 6,982
Other securities..... 1,300 9 -- 1,309 1,309
--------------------------------------------------------------
Total............... $34,748 $ 83 $ 84 $34,747 $34,747
==============================================================
</TABLE>
<TABLE>
<CAPTION>
(in thousands) 1995
----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market Carrying
Cost Gains Losses Value Value
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
================================================================
</TABLE>
At December 31, 1996, securities having a book value of $10,518,000 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, 1996, 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.
<TABLE>
<CAPTION>
(in thousands) 1996
----------------------
Amortized Estimated
Cost Market
Value
----------------------
<S> <C> <C>
Due in one year or less................... $12,525 $12,537
Due after one year through five years..... 20,923 20,901
Due after five years through ten years.... -- --
Due after ten years....................... -- --
Other securities.......................... 1,300 1,309
--------------------
Total................................ $34,748 $34,747
--------------------
</TABLE>
Proceeds from sales of debt securities are as follows:
(in thousands) 1996 1995 1994
----------------------------------
Proceeds.......................... $ 9,502 $ -- $ 7,009
Gross gains....................... 2 -- 2
Gross losses...................... -- -- --
4. Loans:
- ---------
Loans outstanding at December 31 are detailed by category as follows:
(in thousands) 1996 1995
---------------------------
Real estate loans:
Permanent mortgage loans................ $ 95,588 $ 85,752
Construction loans........................... 7,639 8,905
Commercial an industrial loans............... 74,688 67,507
Loans to individuals for household,
family, and other consumer
expenditures................................ 81,512 73,189
----------------------------
Total..................................... $259,427 $235,353
============================
All loans past due 90 days or more, except consumer loans, are placed on
nonaccrual status. Nonperforming loans amounted to $907,000 and $611,000 at
December 31, 1996 and 1995, respectively. Forgone interest on nonaccrual loans
was $144,000, $59,000, and $128,000 in 1996, 1995, and 1994, respectively.
5. Allowance for Possible Loan Losses:
- -------------------------------------
The summary of the changes in the allowance for possible loan losses is as
follows:
(in thousands) 1996 1995 1994
----------------------------
Balance, January 1.......................... $ 3,652 $ 3,618 $ 3,601
Charge-offs................................. (268) (769) (663)
Recoveries.................................. 448 303 180
----------------------------
Net recoveries / (charge-offs).............. 180 (466) (483)
Loan loss provision......................... 350 500 500
----------------------------
Balance, December 31........................ $ 4,182 $ 3,652 $ 3,618
============================
6. Premises and Equipment:
- --------------------------
A summary of premises and equipment at December 31 is as follows:
(in thousands) 1996 1995
-------------------
Land............................................... $ 2,973 $ 2,974
Buildings.......................................... 10,479 10,472
Furniture and equipment............................ 8,350 7,821
Leasehold improvements............................. 169 169
-------------------
21,971 21,436
Less accumulated depreciation...................... (10,637) (9,616)
-------------------
Total......................................... $11,334 $11,820
===================
The Corporation has borrowings outstanding of $2,503,000 at December 31, 1996.
The borrowings are collateralized by properties with a book value of $4,253,000
at December 31, 1996. The weighted average interest rate on the borrowings was
9.75% in 1996 and 1995.
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 and, in many cases,
could not be realized in
1996 Annual Report 31
<PAGE>
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 is 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 quote 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 estimated cash flows as
determined by the internal loan review of the Bank or the appraised value of the
underlying collateral, as determined by independent third 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:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks.......................... $ 26,717 $ 26,717 $ 25,128 $ 25,128
Interest-bearing deposits with
other banks..................................... 121 121 115 115
Federal funds sold............................... 11,616 11,616 19,410 19,410
Investment securities............................ 34,747 34,747 59,211 59,211
Net loans........................................ 255,245 255,417 231,701 233,645
-----------------------------------------------------------
Total financial assets............................. $328,446 $328,618 $335,565 $337,509
===========================================================
Financial liabilities:
Deposits......................................... $303,183 $303,131 $317,601 $317,422
Other liabilities................................ 2,503 2,811 2,557 2,944
-----------------------------------------------------------
Total financial liabilities........................ $305,686 $305,942 $320,158 $320,366
===========================================================
Off-balance sheet
instruments...................................... $ 69,653 $ 69,653 $ 65,788 $ 65,788
===========================================================
</TABLE>
8. Applicable Federal Income Taxes:
- ----------------------------------
The components of the net deferred tax asset as of December 31 are as
follows:
(in thousands) 1996 1995
-----------------------
Deferred tax assets:
Other real estate owned......... $ 364 $ 356
Loan loss reserve............... 591 472
Deferred loan fees.............. 46 73
Other reserves.................. 348 370
-------------------------
1,349 1,271
Deferred tax liabilities:
Depreciation.................... (37) (120)
Unrealized depreciation
on investments
securities.................... -- (109)
-------------------------
Total deferred tax assets........... $ 1,312 $ 1,042
=========================
No valuation allowance has been recorded for these gross deferred tax assets as
of December 31, 1996 and 1995, as full realization of these costs is expected.
The provisions for federal income taxes consist of the following:
(in thousands) 1996 1995 1994
--------------------------
Currently payable.... $3,061 $2,008 $1,534
Deferred............. (161) 92 66
-------------------------
Total................ $2,900 $2,100 $1,600
=========================
The sources of temporary differences resulting in deferred federal income taxes
and the approximate tax effect of each are as follows:
(in thousands) 1996 1995 1994
----------------------
Other real estate owned... ($8) $ 10 ($99)
Loan loss provision....... (119) 47 108
Depreciation.............. (83) (33) (31)
Pension expense........... (37) (67) 15
Deferred loan fees........ 27 26 75
Other..................... 59 109 (2)
---------------------
Total................ ($161) $ 92 $ 66
=====================
32 Bryn Mawr Bank Corporation
<PAGE>
Applicable federal income taxes differed from the amount derived by applying the
statutory federal tax rate to income as follows:
(dollars in thousands) 1996 1995 1994
-----------------------------
Statutory federal tax rate..... 34% 34% 34%
Computed
"expected" tax expense.... $3,040 $2,201 $1,921
Benefit reductions in taxes
resulting from
tax-exempt income......... (181) (285) (333)
Other, net..................... 41 184 12
--------------------------
Actual tax expense........ $2,900 $2,100 $1,600
==========================
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
$37,000, $122,000 and ($45,000) for the years ended December 31, 1996, 1995,
and 1994, respectively.
Pension expense (income) for the years ended December 31 is comprised of the
following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Service cost--benefits earned
during the period.................... $ 480 $ 428 $ 407
Interest cost on projected
benefit obligation................... 668 669 611
Actual return on Plan assets.......... (2,196) (3,009) (35)
Unrecognized gain..................... -- -- --
Net amortization and deferral......... 1,085 2,034 (1,028)
------------------------------------
Net periodic pension
cost (income)........................ $ 37 $ 122 $ (45)
====================================
</TABLE>
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.
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-------------------
<S> <C> <C>
Actuarial present value of benefit
obligation:
Accumulated benefit obligation
(including vested benefits of
$7,867,000 and $8,420,000 as
of December 31, 1996 and 1995)................ $(7,955) $(8,570)
------- -------
Projected benefit obligation for
service rendered to date....................... (9,811) (10,510)
Plan assets at fair value
(invested primarily in the Bank's
temporary, income, and equity
common trust funds)............................ 14,508 12,691
------- -------
Plan assets in excess of projected
benefit obligation............................. 4,697 2,181
Unrecognized net gain........................... (4,932) (2,450)
Unrecognized prior service cost................. -- 70
------- -------
Accrued pension liability included
in consolidated balance sheets................. $ (235) $ (199)
======= =======
</TABLE>
Significant assumptions used in determining the accrued pension
obligation were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
<S> <C> <C> <C>
Discount rate................................ 7.5% 7.0% 8.0%
Projected compensation increase.............. 5.0 5.0 5.0
Expected long-term rate
of return on plan assets................ 8.0 8.0 8.0
</TABLE>
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. SERP expense was $72,000
and $71,000 for 1996 and 1995, respectively.
SERP expense for the year ended December 31 is comprised of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-------------------------
<S> <C> <C>
Service cost--benefits earned
during the period........................... $ 9 $ 9
Interest cost on projected benefit obligation.. 25 24
Actual return on Plan assets................... -- --
Unrecognized gain.............................. -- --
Net amortization and deferral.................. 38 38
----- -----
Net periodic SERP cost......................... $ 72 $ 71
===== =====
</TABLE>
The following table presents a reconciliation of the accrued liability for the
SERP as of December 31, 1996 and 1995.
The accrued SERP liability is included in "Other liabilities" on the
accompanying consolidated balance sheets.
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------
<S> <C> <C>
Actuarial present value of benefit
obligation:
Accumulated benefit obligation
(including vested benefits of
$71,000 and $65,000 as of
December 31, 1996 and 1995,
respectively)................................... $ (71) $ (65)
----- -----
Projected benefit obligation for
service rendered to date............................ (363) (370)
Unrecognized net (gain) loss........................... (6) 35
Unrecognized prior service cost........................ 226 264
----- -----
Accrued SERP liability included
in consolidated balance sheets........................ $(143) $ (71)
===== =====
</TABLE>
Significant assumptions used in determining the accrued pension obligation were
as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------
<S> <C> <C>
Discount rate........................................ 7.5% 7.0%
Projected compensation increase...................... 5.0 5.0
Expected long-term rate of return
on plan assets...................................... 8.0 8.0
</TABLE>
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 $180,000, $165,000, and $170,000 in 1996, 1995,
and 1994, 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
Pensions" ("SFAS No. 106"), in the
1996 Annual Report 33
<PAGE>
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 1996, 1995 and
1994 was $162,000, $335,000 and $339,000, respectively.
The net periodic post-retirement benefit cost for the years ended December 31 is
comprised of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits
attributed to service
during the period................. $ 11 $ 12 $ 11
Interest cost on accumulated
Postretirement
benefit obligation............... 106 204 201
Amortization of transition
obligation........................ 122 119 127
Amortization of
unrecognized gain................. (77) -- --
----- ----- -----
Net periodic post-retirement
benefit cost...................... $ 162 $ 335 $ 339
===== ===== =====
</TABLE>
The assumed discount rate used in the calculation for the accumulated post-
retirement benefit obligation was 7.5% and 7.0% for 1996 and 1995, respectively.
The assumed health care cost trend rate for 1997 was 8% 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, 1996 and 1995:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
--------------------
<S> <C> <C>
Accumulated post-retirement benefit
obligation................................. $(1,573) $(2,830)
Unrecognized variance of experience
different from that assumed
and unamortized transition................. 1,223 2,428
------- -------
Accrued post-retirement benefit cost........ $ (350) $ (402)
------- -------
</TABLE>
The impact of a 1% increase in the assumed health care cost trend rate for each
future year would be as follows:
<TABLE>
<CAPTION>
(in thousands) 1996
------
<S> <C>
Accumulated post-retirement benefit obligation
as of December 31.....................................$1,669
Service cost........................................... 11
Interest cost.......................................... 113
</TABLE>
10. Stock Option Plan:
At December 31, 1996, the Corporation maintains a stock option and stock
appreciation rights plan (the "Stock Option Plan"), which is described below.
The Corporation applies APB Opinion 25 and related interpretations in accounting
for the Stock Option Plan. Accordingly, no compensation cost has been recognized
for the Stock Option Plan. Had compensation for the Corporation's Stock Option
Plan been determined based on the fair value at the grant date for awards in
1996 and 1995, consistent with the optional provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation", the
Corporation's net income and earnings per share would have been reduced to the
proforma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
-----------------
<S> <C> <C>
Net income - as reported........... $6,042 $4,643
Net Income pro forma............... $5,946 $4,568
Earnings per share - as reported... $ 2.67 $ 2.08
Earnings per share - proforma...... $ 2.63 $ 2.04
</TABLE>
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996: dividend yield of 3.09% for both
years, expected volatility of 43.1% for both years, expected life of nine years
for both years and risk-free interest rates of 7.1% and 6.6% respectively.
The Plan had, prior to 1994, up to 108,000 authorized and unissued or Treasury
shares of the Corporation's common stock 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 four
years after each Annual Meeting. The option price will be set at the last sale
price for the stock on the third 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:
<TABLE>
<CAPTION>
Weighted
Shares Available Average
Under for Price Per Exercise
Option Issuance Share Price
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993..... 88,020 220 $ 9.00 - $ 16.50 $13.41
Options canceled............ -- (220)
Options authorized.......... -- 108,860
Options granted............. 107,600 (107,600) $ 15.50 - $ 18.60 $16.18
Options exercised........... (10,160) -- $ 9.00 - $ 14.75 $12.28
Options expired............. (3,800) -- $ 14.75 - $ 16.50 $15.76
------- --------
Balance at December 31, 1994..... 181,660 1,260 $ 9.00 - $ 18.60 $15.08
Options authorized.......... -- 40,000
Options granted............. 10,000 (10,000) $ 17.375 $17.38
Options exercised........... (3,000) -- $ 17.375 $17.38
Options expired............. (3,200) -- $ 15.50 - $ 18.60 $17.15
------- --------
Balance at December 31, 1995..... 185,460 31,260 $ 9.00 - $ 18.60 $15.12
Options granted............. 9,000 (9,000) $ 25.00 $25.00
Options exercised........... (15,660) -- $ 13.50 - $ 16.50 $14.72
------- --------
Balance at December 31, 1996..... 178,800 22,260 $ 9.00 - $ 25.00 $15.65
------- --------
Weighted-average remaining
contractual life of options
outstanding at December 31, 1996............... 6.32 years
</TABLE>
The weighted-average fair value of options granted during 1995 and 1996 were
$7.52 and $10.64, respectively.
34 Bryn Mawr Bank Corporation
<PAGE>
The number of exercisable shares at December 31, 1994, 1995, and 1996 were
78,780, 105,420, and 119,840, respectively, with respective weighted average
exercise prices of $13.65, $14.42, and $15.42.
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 $0.09 per share and $0.04 per share dilutive effect on earnings
per share for the years ended December 31, 1996 and 1995, respectively. The
options would not have had a dilutive impact on earnings per share for the year
ended December 31, 1994.
11. Related Party Transactions:
The Corporation had loans outstanding directly to executive officers, directors
and certain other related parties of $3,465,000 and $2,898,000 at December 31,
1996 and 1995, respectively.
Following is a summary of these transactions:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
--------------------
<S> <C> <C>
Balance, beginning of year... $2,898 $2,405
Additions.................... 871 1,340
Amounts collected............ (304) (847)
------ ------
Balance, end of year......... $3,465 $2,898
------ ------
</TABLE>
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 commitments are expected to expire without
being drawn upon, and the total commitment amounts do not necessarily represent
future cash requirement. Total commitments to extend credit at December 31, 1996
are $66,808,000.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, 1996
amounted to $2,845,000.
As of December 31, 1996, 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
noninterest 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 the 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.
1996 Annual Report 35
<PAGE>
14. Selected Quarterly Financial Data (Unaudited):
- ------------------------------------------------
<TABLE>
<CAPTION>
Quarters ending 1996
-------------------------------------
(in thousands, except per share data) 3/31 6/30 9/30 12/31
-------------------------------------
<S> <C> <C> <C> <C>
Interest income.......................... $5,959 $6,053 $6,203 $6,122
Interest expense......................... 1,679 1,592 1,624 1,595
Net interest income...................... 4,280 4,461 4,579 4,527
Provision for loan losses................ 125 75 75 75
Income before income taxes............... 2,597 1,915 2,245 2,185
Net income............................... 1,757 1,275 1,499 1,511
Net income per share of
common stock........................... 0.77 0.56 0.66 0.66
<CAPTION>
Quarters ending 1995
-------------------------------------
(in thousands, except per share data) 3/31 6/30 9/30 12/31
-------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
15. Condensed Financial Statements:
- -----------------------------------
The condensed financial statements of the Corporation (parent company only) as
of December 31, 1996 and 1995, and for each of the three years in the ended
December 31, 1996, are as follows:
Condensed Balance Sheets
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------
<S> <C> <C>
Assets:
Cash............................... $ 128 $ 130
Investments in subsidiaries, at
equity in net assets............. 33,932 29,982
Premises and equipment, net........ 4,253 4,351
Other assets....................... 14 5
----------------------
Total assets..................... $38,327 $34,468
----------------------
Liabilities and shareholders' equity:
Mortgages payable.................. $ 2,503 $ 2,557
Other liabilities.................. 16 8
----------------------
Total liabilities.................. 2,519 2,565
Common stock, par value $1, authorized
5,000,000 shares, issued 2,503,885 shares
and 2,493,200 shares as of
December 31, 1996 and 1995,
respectively, and outstanding 2,201,065
shares and 2,190,380 shares as of
December 31, 1996 and 1995, respectively 2,504 2,493
Paid-in capital in excess of par value.. 4,445 4,363
Unrealized investment appreciation
(depreciation), net of deferred
income taxes.......................... (1) 212
Retained earnings....................... 30,399 26,374
Less common stock in treasury,
at cost- 302,820 shares as of
December 31, 1996 and 1995,
respectively. (1,539) (1,539)
----------------------
Total shareholders' equity......... 35,808 31,903
----------------------
Total liabilities and shareholders'
equity............................ $38,327 $34,468
----------------------
</TABLE>
Condensed Statements of Income
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1996
-------------------------------
<S> <C> <C> <C>
Dividends from The Bryn
Mawr Trust Company.................... $ 2,017 $ 1,095 $ 710
Interest and other income............. 237 236 389
-------------------------------
Total operating income................ 2,254 1,331 1,099
Expenses.............................. 445 478 524
-------------------------------
Income before equity in
undistributed income of
subsidiary........................... 1,809 853 575
Equity in undistributed income
of subsidiary:
The Bryn Mawr Trust
Company.............................. 4,162 3,708 3,428
-------------------------------
Income before income taxes.............. 5,971 4,561 4,003
Federal income tax benefit.............. 71 82 46
-------------------------------
Net income.............................. $ 6,042 $ 4,643 $ 4,049
-------------------------------
</TABLE>
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1996
-------------------------------
<S> <C> <C> <C>
Operating activities:
Net income......................... $ 6,042 $ 4,643 $ 4,049
Adjustments to reconcile
net income to net
cash provided
by operating activities:
Equity in undistributed
earnings of subsidiary:
The Bryn Mawr
Trust Company.................... (4,162) (3,708) (3,428)
Depreciation expense............... 98 98 98
Other.............................. (56) (42) (47)
-------------------------------
Net cash provided by
operating activities............. 1,922 991 672
Financing activities:
Dividends paid...................... (2,017) (1,095) (710)
Proceeds from issuance
of stock.......................... 93 52 125
-------------------------------
Net cash used by financing
activities........................ (1,924) (1,043) (585)
-------------------------------
(Decrease) increase in cash
and cash equivelents.................. (2) (52) 87
Cash and cash equivalents
at beginning of year.................. 130 182 95
-------------------------------
Cash and cash equivalents at
end of year........................... $ 128 $ 130 $ 182
-------------------------------
</TABLE>
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 31,1996, the Bank's retained earnings
amounted to $27,343,000. Therefore, as of December 31,1996, dividends available
for payment to the Corporation are limited to $27,343,000. 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 limits placed on the Bank, as
discussed above.
36 Bryn Mawr Bank Corporation
<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 $1,229,926,000
$1,039,804,000, and $799,846,000 at December 31, 1996, 1995, and 1994,
respectively. The Bank also originates and sells residential mortgage loans in
the secondary mortgage loan market. The Bank originated and sold mortgage loans
in the secondary mortgage loan market amounting to $55,276,000, $67,826,000, and
$39,109,000 in 1996, 1995, and 1994, respectively.
Segment information for the years ended December 31, 1996, 1995, and 1994 is as
follows:
<TABLE>
<CAPTION>
1996
------------------------------------------
Mortgage
Banking Trust Banking Consolidated
------------------------------------------
<S> <C> <C> <C> <C>
Interest and fee income............ $ 24,081 $ -- $ 256 $ 24,337
------------------------------------------
Other operating income:
Fees for trust services.......... -- 5,936 -- 5,936
Service charges on
checking accounts............... 1,081 -- -- 1,081
Other fees and service charges... 458 -- 822 1,280
Net gain on sale of loans........ 35 -- 363 398
Gains on sale of other real
estate owned.................... 1,081 -- -- 1,081
Other real estate owned
revenue........................ 74 -- -- 74
Other............................ 520 -- 53 573
------------------------------------------
Total other operating income....... 3,249 5,936 1,238 10,423
------------------------------------------
Total gross revenues............... $ 27,330 $ 5,936 $ 1,494 $ 34,760
------------------------------------------
Operating profit................... $ 6,144 $ 2,119 $ 779 $ 9,042
------------------------------------------
General corporate expenses......... -- -- -- $ 100
------------------------------------------
Income before income taxes......... -- -- -- $ 8,942
------------------------------------------
Identifiable assets at
December 31...................... $345,551 $ 189 $ 7 $345,747
------------------------------------------
Capital expenditures............... $ 409 $ 143 $ 5 $ 557
------------------------------------------
Depreciation and amortization...... $ 1,007 $ 125 $ 10 $ 1,142
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------
Mortgage
Banking Trust Banking Consolidated
------------------------------------------
<S> <C> <C> <C> <C>
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 gain on sale of loans....... 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......... -- -- -- $ 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
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1994
-----------------------------------------
Mortgage
Banking Trust Banking Consolidated
------------------------------------------
<S> <C> <C> <C> <C>
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 gain on sale of loans....... 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......... -- -- -- $ 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
------------------------------------------
</TABLE>
1996 Annual Report 37
<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, 1996 and 1995, 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, 1996. 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 consolidated financial position of Bryn
Mawr Bank Corporation and subsidiary as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand, LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 16, 1997
38 Bryn Mawr Bank Corporation
<PAGE>
Corporate Information
as of December 31, 1996
Directors
- ---------
Darrell J. Bell
Retired Senior Vice President,
Main Line Health, Inc.
Richard B. Cuff
Chairman, 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 in
The Centennial Wing of The Bryn Mawr Trust Company, located at the corner of
Lancaster Avenue and Morton Road in Bryn Mawr, Pennsylvania, on Tuesday, April
15, 1997, at 2:00 p.m.
Corporate Headquarters
- ----------------------
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
(610)526-2302
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.
Registrar & Transfer Agent
- --------------------------
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
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.
Continued...
1996 Annual Report 39
<PAGE>
The Bryn Mawr Trust Company
- ---------------------------
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
(610)525-1700
Senior Management:
as of February 3, 1997
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, Loans,
and Secretary
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, Banking Operations,
Facilities, Human Resources, &
Information Systems
Donald B. Krieble
Senior Vice President,
Consumer Credit Services
Herbert T. McDevitt
Senior Vice President, Family Office
Thomas M. Petro
Senior Vice President, Marketing
Joseph W. Rebl *
Senior Vice President, Finance,
and Treasurer
Walter Smedley, III
Senior Vice President, Member Banking
Credit Services
Leo M. Stenson
Senior Vice President & Auditor,
Audit & Security
June M. Falcone
Group Vice President, Banking Operations
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
Patrick J. Keenan
Managing Director, BMT Mortgage Company
William F. Mannion, Jr.
Managing Director, BMT Mortgage Company
Richard I. Sichel
Managing Director and Chief Investment
Officer, Investment Counsellors of
Bryn Mawr
Branch Offices:
801 Lancaster Avenue
Bryn Mawr, Pennsylvania 19010-3396
18 West Eagle Road
Havertown, Pennsylvania 19083
39 West Lancaster Avenue
Paoli, Pennsylvania 19301
330 East Lancaster Avenue
Wayne, Pennsylvania 19087
312 East Lancaster Avenue
Wynnewood, Pennsylvania 19096
Trust Division:
No. 10 South Bryn Mawr Avenue
Bryn Mawr, Pennsylvania 19010
Investment Counsellors of Bryn Mawr
Two Tower Bridge
One Fayette Street, Suite 150
Conshohocken, Pennsylvania 19428
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
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
* Also officer of the Corporation.
40 Bryn Mawr Bank Corporation
<PAGE>
EXHIBIT 99
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registra tion
Statements of Bryn Mawr Bank Corporation on Form S-8 (File 033-12715 and 33-
61881) of our report dated January 16, 1997 on our audits of the consolidated
financial statements of Bryn Mawr Bank Corporation as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996,
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
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<PAGE>
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