<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934.
For Quarter ended March 31, 2000 Commission File
--------------
Number 0-15261
-------
Bryn Mawr Bank Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2434506
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code (610) 525-1700
--------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and fiscal year, if changed since last report.
Indicate by check whether the registrant (1) has filed all reports to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No _____
-----
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at April 24, 2000
- -----------------------
Common Stock, par value $1 4,298,444
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED March 31, 2000
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three
months ended March 31, 2000 and 1999.......................Page 1
Consolidated Balance Sheets as of March 31 2000,
December 31, 1999 and March 31, 1999.......................Page 2
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999.......................Page 3
Consolidated Statements of Comprehensive Income for
the three months ended March 31, 2000 and 1999.............Page 4
Notes to Consolidated Financial Statements.....................Page 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............Page 10
PART II - OTHER INFORMATION..........................................Page 17
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999*
--------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans............................................. $ 7,011 $ 5,727
Interest on federal funds sold......................................... 132 233
Interest on interest bearing deposits with banks....................... 59 44
Interest and dividends on investment securities:
U.S. Treasury securities.............................................. 57 102
U.S. Government Agency securities..................................... 293 455
Obligations of states and political subdivisions...................... 33 51
Dividend income....................................................... 34 20
--------- ---------
Total interest and dividend income........................................... 7,619 6,632
Interest expense............................................................. 1,599 1,344
--------- ---------
Net interest income.......................................................... 6,020 5,288
Loan loss provision.......................................................... 63 63
--------- ---------
Net interest income after loan loss provision................................ 5,957 5,225
--------- ---------
Other income:
Fees for Trust services................................................ 2,261 2,418
Service charges on deposits............................................ 285 276
Other service charges, commissions and fees............................ 352 313
Net gain on sale of loans.............................................. 186 350
Other operating income................................................. 1,225 1,176
--------- ---------
Total other income........................................................... 4,309 4,533
--------- ---------
Other expenses:
Salaries and wages..................................................... 3,491 3,412
Employee benefits...................................................... 806 662
Occupancy and bank premises............................................ 536 407
Furniture, fixtures, and equipment..................................... 496 510
Other operating expenses............................................... 1,992 1,925
--------- ---------
Total other expenses......................................................... 7,321 6,916
--------- ---------
Income before income taxes................................................... 2,945 2,842
Applicable income taxes...................................................... 985 1,000
--------- ---------
Net Income................................................................... $ 1,960 $ 1,842
========= =========
Earnings per common share ................................................... $ 0.45 $ 0.42
Earnings per common share - assuming dilution................................ $ 0.44 $ 0.40
Cash dividends declared...................................................... $ 0.17 $ 0.15
Weighted-average shares outstanding.......................................... 4,320,467 4,381,205
Dilutive potential common shares............................................. 168,858 225,855
--------- ---------
Adjusted weighted-average shares............................................. 4,489,325 4,607,060
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
* Reclassified for comparative purposes.
Form 10-Q
Page 1
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
2000 1999* 1999
(Unaudited) (Unaudited)
--------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks.................................................................. $ 21,329 $ 17,914 $ 20,651
Interest bearing deposits with banks..................................................... 599 13,793 143
Federal funds sold....................................................................... 1,074 17,609 15,223
Investment securities available for sale, at market (amortized
cost of $29,690, $30,201 and $44,044 as of March 31, 2000,
December 31, 1999 and March 31, 1999, respectively)................................ 29,011 29,611 40,042
Loans:
Consumer........................................................................... 69,765 70,211 69,293
Commercial......................................................................... 122,134 119,835 92,941
Real Estate........................................................................ 146,023 148,893 131,403
-------- -------- --------
Estate
Total loans..................................................................... 337,922 338,939 293,637
Less: Allowance for loan loses..................................................... (4,323) (4,400) (4,124)
-------- -------- --------
Net loans....................................................................... 333,599 334,539 289,513
-------- -------- --------
Premises and equipment, net.............................................................. 11,888 11,880 12,406
Accrued interest receivable.............................................................. 2,371 2,411 2,108
Goodwill................................................................................. 3,249 3,294 3,432
Other real estate owned.................................................................. -- -- 312
Other assets............................................................................. 6,328 5,769 5,577
-------- -------- --------
Total assets.................................................................... $ 409,448 $ 436,820 $ 389,407
======== ======== ========
Liabilities
Deposits:
Demand, noninterest-bearing........................................................ $ 90,046 $ 98,790 $ 89,496
Savings............................................................................ 192,943 194,057 185,563
Time............................................................................... 72,886 78,221 60,318
-------- -------- --------
Total deposits.................................................................. 355,875 371,068 335,377
-------- -------- --------
Short term borrowings.................................................................... -- 10,000 --
Other liabilities........................................................................ 6,105 9,033 9,449
-------- -------- --------
Total liabilities............................................................... 361,980 390,101 344,826
-------- -------- --------
Shareholders' equity
Common stock, par value $1; authorized 25,000,000 shares at
March 31, 2000, December 31, 1999 and March 31, 1999;
issued 5,188,617, 5,179,708 and 5,147,065 shares
as of March 31, 2000, December 31, 1999 and March 31, 1999,
respectively and outstanding 4,306,259, 4,323,350 and
4,369,805 shares as of March 31, 2000, December 31, 1999
and March 31, 1999, respectively................................................... 5,188 5,180 5,147
Paid-in capital in excess of par value................................................... 4,616 4,467 4,042
Accumulated other comprehensive income
net of taxes....................................................................... (448) (389) (1)
Retained earnings........................................................................ 46,373 45,149 40,986
-------- -------- --------
55,729 54,407 50,174
Less: Common stock in treasury at cost -- 882,358, 856,358 and
777,260 shares as of March 31, 2000, December 31, 1999
and March 31, 1999, respectively................................................... (8,261) (7,688) (5,593)
-------- -------- --------
Total shareholders' equity......................................................... 47,468 46,719 44,581
-------- -------- --------
Total liabilities and shareholders' equity......................................... $ 409,448 $ 436,820 $ 389,407
======== ======== ========
</TABLE>
The accompanying notes are an integral part of consolidated financial
statements.
* - Reclassified for comparative purposes.
Form 10-Q
Page 2
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net Income ................................................................. $ 1,960 $ 1,842
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses ............................................... 63 63
Provision for depreciation and amortization ............................. 365 305
Loans originated for resale ............................................. (8,339) (29,477)
Proceeds from loans sold ................................................ 9,979 26,911
Gain on sale of loans ................................................... (72) (351)
Provision for deferred income taxes (benefit) ........................... (66) (24)
(Decrease) increase in interest receivable .............................. 40 (39)
Increase (decrease) in interest payable ................................. 58 (53)
Other.................................................................... (3,289) 963
-------- --------
Net cash provided by operating activities ........................... 699 140
-------- --------
Investing activities:
Purchases of investment securities ......................................... (250) (35,875)
Proceeds from maturities of investment securities .......................... 752 44,800
Proceeds from calls of fixed income securities ............................. -- 2,000
Loan repayments (originations), net ........................................ 4,592 (1,714)
Loans purchased (dealer loans) ............................................. (5,283) (7,860)
Cost of acquiring new subsidiaries 0 (2,195)
Capitalized cost of OREO ................................................... -- (41)
Purchases of premises and equipment ........................................ (368) (558)
-------- --------
Net cash provided (used) by investing activities ..................... (557) (1,443)
-------- --------
Financing activities:
Net decrease in demand and savings deposits ................................ (9,858) (3,573)
Net decrease in time deposits .............................................. (5,335) (3,407)
Repayment of short term borrowings ......................................... (10,000) --
Dividends paid ............................................................. (736) (647)
Proceeds from issuance of common stock ..................................... 157 --
Purchase of treasury stock ................................................. (573) (378)
Repayment of mortgage debt ................................................. (8) (7)
-------- --------
Net cash used by financing activities ................................ (26,353) (8,012)
-------- --------
Decrease in cash and cash activities ....................................... (26,211) (9,315)
Cash and cash equivalents at beginning of period ........................... 49,213 45,332
-------- --------
Cash and cash equivalents at end of period ................................. $ 23,002 $ 36,017
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 3
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Unaudited
Three Months Ended
March 31
2000 1999
-------------------
Net Income ..................................... $ 1,960 $ 1,842
Other comprehensive income:
Unrealized holding gains (losses) on
available-for-sale securities ............ (89) (153)
Deferred income tax (benefit) expense on
unrealized holding gains (losses) on
available for sale securities............. 30 52
------- -------
Comprehensive net income ....................... $ 1,901 $ 1,741
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 4
<PAGE>
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(Unaudited)
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of March 31, 2000 and 1999, the related consolidated
statements of cash flows for the three month periods ended March 31, 2000 and
1999, the related consolidated statements of income for the three month periods
ended March 31, 2000 and 1999 and the related consolidated statements of
comprehensive income for the three month periods ended March 31, 2000 and 1999
are all unaudited.
The preparation of financial statements in conformity with generally
accepted accounting principles 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. Management
believes that all adjustments, accruals and elimination entries necessary for
the fair presentation of the consolidated financial position and results of
operations for the interim periods presented have been made. All such
adjustments were of a normal recurring nature. The year-end balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in the Corporation's 1999 Annual Report
incorporated in the 1999 Form 10-K (Exhibit #13).
2. Earnings Per Common Share:
Reference is made to Note #12, Stock Option Plan (the "Plan"), in the Notes
to Consolidated Financial Statements in the Corporation's 1999 Annual Report
incorporated in the 1999 Form 10-K (Exhibit #13). Shares under option under the
Plan had a dilutive impact on net income per share for the three month periods
ended March 31, 2000 and 1999.
3. Disclosure of Accounting Policy:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, interest bearing deposits with banks and federal funds sold.
4. Adoption of Financial Accounting Standards:
In June 1998, Statement of Financial Accounting Standard No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133")
was issued and subsequently amended by Statement of Financial Accounting
Standard No. 137 "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the effective date of SFAS No. 133" ("SFAS No. 137").
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 133, as amended by SFAS No.
137, is effective for all fiscal quarters beginning after June 15, 2000. The
Corporation does not own any derivative instruments and does not
Form 10-Q
Page 5
<PAGE>
engage in hedging activities. These statements will not have a material impact
on the financial condition or results of operations of the Corporation.
5. 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 collectability of such loans.
As a part of its internal loan review process, management, when considering
classifying a loan as an impaired loan, considers a number of factors, such as a
borrower's 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, include both credit 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 Corporation's
subsidiary, The Bryn Mawr Trust Company (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 an impaired loan. All of the
Corporation's impaired loans, which amounted to $738,000, $720,000 and
$1,752,000 at March 31, 2000, December 31, 1999 and March 31, 1999,
respectively, were placed on nonaccrual status and any outstanding accrued
interest receivable on such loans at the time they were placed on nonaccrual
status, was reversed from income.
Impaired loans 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 March 31, 2000, December 31, 1999 and March 31,
1999, no impaired loans were measured using the present value of expected future
cash flows or the loan's market price because all impaired loans were collateral
dependent at these respective dates. Impaired loans measured by the value of the
loan's collateral amounted to $738,000, $720,000, and $1,752,000, respectively.
If the loan valuation is less than the recorded value of the loan, an
impairment reserve must be established for the difference. All impairment
reserves established in either 2000 or 1999 were allocated from the existing
reserve for loan losses. As of March 31, 2000, December 31, 1999 and March 31,
1999, there were $697,000, $679,000 and $1,013,000, respectively of impaired
loans for which there is a related allowance for loan losses. The total related
allowance for loan loss at March 31, 2000, December 31, 1999 was
$110,000,respectively, and $278,000 at March 31 1999. Impaired loans for which
no loan loss allowance was allocated amounted to $41,000, at March 31,
Form 10-Q
Page 6
<PAGE>
2000 and December 31, 1999 and $739,000 at March 31, 1999. Average impaired
loans for the quarter ended March 31, 2000, December 31, 1999 and March 31, 1999
amounted to $000,000, 1,088,000 and $1,797,000, respectively.
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 during either quarter ended March 31, 2000 or 1999. 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. Based on the above criteria, no loans considered impaired were removed
from the impaired loan status, during the first quarter of either 2000 or 1999.
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.
Form 10-Q
Page 7
<PAGE>
6. Allowance for Possible Loan Losses:
The summary of changes in the allowance is as follows:
three months ended year ended
March 31, December 31,
2000 1999 1999
----------------- -------
Balance, Beginning of period $ 4,400 $ 4,100 $ 4,100
------- ------- -------
Charge-offs:
Consumer (166) (46) (209)
Commercial and industrial 0 0 (10)
Real estate 0 0 22*
------- ------- -------
Total charge-offs (166) (46) (197)
------- ------- -------
Recoveries:
Consumer 26 7 44
Commercial and industrial 0 0 87
Real estate 0 0 116
------- ------- -------
Total recoveries 26 7 247
------- ------- -------
Net (charge-offs) / recoveries (140) (39) 50
Provision for loan losses 63 63 250
------- ------- -------
Balance, End of period $ 4,323 $ 4,124 $ 4,400
======= ======= =======
*The negative charge-off of $22,000 in real estate loans reflects the adding
back to the loan loss reserve of an amount previously charged off, in
conjunction with the acquisition of other real estate owned.
Form 10 -Q
Page 8
<PAGE>
7. Segment Information:
The Corporation's principal operating segments are structured around the
financial services provided its customers. The banking segment gathers deposits
and makes funds available for loans to its customers. The Bank's investment
Management and Trust segment provides both corporate and individual investment
management and trust products and services. The Bank's mortgage banking segment
originates and sells residential mortgage loans to the secondary mortgage
market. Bryn Mawr Bank Corporation and all other subsidiaries are aggregated
under the "All Other" heading.
Segment information for the three months ended March 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
---------------------------------------------- ----------------------------------------------
2000 1999
Mortgage All Mortgage All
Banking Trust Banking Other Consolidated Banking Trust Banking Other Consolidated
------- ----- ------- ----- ------------ ------- ----- ------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income 6,020 -- -- -- 6,020 5,288 -- -- -- 5,288
Less Loan loss provision 63 -- -- -- 63 63 -- -- -- 63
---------------------------------------------- -----------------------------------------------
Net interest income after
loan loss provision 5,957 -- -- -- 5,957 5,225 -- -- -- 5,225
Other income:
Fees for investment
management and trust
services -- 2,261 -- -- 2,261 -- 2,418 -- -- 2,418
Other income 604 -- 382 1,062 2,048 627 -- 530 1,085 2,242
---------------------------------------------- -----------------------------------------------
Total other income 604 2,261 382 1,062 4,309 627 2,418 530 1,085 4,660
Other expenses:
Salaries and benefits 2,543 976 151 627 4,297 2,368 949 169 588 4,074
Occupancy 829 113 38 52 1,032 704 128 39 46 917
Other operating expense 1,217 241 62 472 1,992 1,301 237 78 436 2,052
---------------------------------------------- -----------------------------------------------
Total other expense 4,589 1,330 251 1,151 7,321 4,373 1,314 286 1,070 7,043
---------------------------------------------- -----------------------------------------------
Segment profit (loss) 1,972 931 131 (89) 2,945 1,479 1,104 244 15 2,842
Intersegment (revenues)
expenses (8) 59 -- (51) 0 (1) 59 -- (58) 0
---------------------------------------------- -----------------------------------------------
Segment profit after
eliminations 1,964 990 131 (140) 2,945 1,478 1,163 244 (43) 2,842
---------------------------------------------- -----------------------------------------------
% of segment profit (loss) 67% 34% 4% -5% 100% 52% 41% 9% -2% 100%
---------------------------------------------- -----------------------------------------------
</TABLE>
*_ Intersegment revenues consist of rental payments to Bryn Mawr Bank
Corporation from its subsidiaries.
Intersegment expenses consist of a $1,000 management fee, paid by Bryn Mawr
Bank Corporation to the Bank.
Form 10-Q
Page 9
<PAGE>
Item 2.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
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 subsidiaries (the "Corporation") for the
three months ended March 31, 2000 and 1999, as well as the financial condition
of the Corporation as of March 31, 2000, December 31, 1999 and March 31, 1999.
The Bryn Mawr Trust Company (the "Bank"),Tax Counsellors of Bryn Mawr, Inc.
("TCBM"), Bryn Mawr Brokerage Company, Inc. ("BM Brokerage"), CDC Capital
Management, Inc. ("CDC") and Joseph W. Roskos & Co., Inc. ("JWR&Co") are wholly-
owned subsidiaries of the Corporation, Insurance Counsellors of Bryn Mawr, Inc.
("ICBM") is a wholly-owned subsidiary of the Bank.
RESULTS OF OPERATIONS
- ---------------------
The Corporation reported net income of $1,960,000 for the three months
ended March 31, 2000, a 6% increase over $1,842,000 reported for the same period
in 1999. Earnings per common share amounted to $0.45, a 7% increase over $0.42
reported for the first quarter of 1999. Earnings per common share, assuming
dilution were $0.44 and $0.40, respectively.
The increase in earnings, for the first three months of 2000 over the same
period in 1999 is primarily attributable to an increase in net interest income,
up $732,000 or 14% over the first three months of 1999. This increase in net
interest income is due to a combination of an 8% growth in average earning
assets for the first three months of 2000, compared to the same period in 1999
and increasing interest rates on loans, compared to the first quarter of 1999.
Total other income decreased by $224,000 or 5%, due primarily to decreases in
both fees for Trust services, down by $157,000 or 6%, and gains on the sale of
loans to the secondary mortgage market, down by $164,000. Other expenses rose 6%
for the first three months of 2000 compared to the same period in 1999.
Average outstanding loan balances for the first three months of 2000 grew
19% from average outstanding loan balances for the first three months of 1999.
Partially funding this growth in average outstanding loans was a 37% decrease in
average outstanding investment security balances and a 51% decrease in average
outstanding federal funds sold. Additional funding was provided by an 8%
increase in average outstanding deposit balances. Average outstanding balances
of non-interest bearing demand deposit accounts and NOW accounts were up 8% and
2%, respectively, while the average outstanding balances of certificates of
deposit ("CDs") increased by 18%, primarily as a result of a promotion of the
Bank's CD product in the third quarter of 1999. Average balances of money market
accounts and savings deposits increased by 8% and 5%, respectively.
The prime rate increased by 125 basis points from 7.75% at March 31, 1999
to 9.00% at March 31, 2000. Since, in the short term, 30 days or less, the Bank
is asset rate sensitive, an increasing prime rate usually will cause a related
increase in the respective yields on earning assets. The overall annualized
yield on earning assets increased by 40 basis points, from 7.4% at March 31,
1999 to 7.8% for the same period in 2000.
Form 10-Q
Page 10
<PAGE>
Compared to the first quarter of 1999, the average cost of funds for the
respective periods increased 14 basis points, from 1.60% in 1999 to 1.74% in
2000. The result was an increase in the Bank's annualized net interest margin,
to 6.15% for the first three months of 2000 compared to 5.98% for the same
period in 1999. While interest rate movements and their effect on future revenue
streams cannot be predicted, management believes that there are presently no
known trends, events or uncertainties that will have or are reasonably likely to
have a material effect on the Corporation's liquidity, capital resources or
results of operations in the future.
NET INTEREST INCOME
- -------------------
For the three months ended March 31, 2000, net interest income rose 14% to
$6,020,000 from $5,288,000 in 1999. Total interest income grew 15% for the first
three months of 2000, to $7,619,000 from $6,632,000 for the first three months
of 1999. Interest expense increased 19% for the three months ended March 31,
2000, to $1,599,000 compared to $1,344,000 for the first three months of 1999.
The yield on earning assets for the first three months of 2000 was 7.8% compared
to 7.4% for the first three months of 1999 while the effective rate paid on
interest bearing deposits for the first three months of 2000 and 1999 was 2.4%
and 2.2%, respectively.
Interest and fees on loans increased 22% from $5,727,000 for the first
three months of 1999 to $7,011,000 for the first three months of 2000. A 19%
increase in average outstanding loan balances for the first three months of
2000, to $337,362,000, compared to $282,671,000 for the same period in 1999,
along with a 40 basis point increase in the annualized average yield on earning
assets are the primary reasons for this increase in loan related interest and
fee income.
Interest and dividend income on investments decreased $211,000 or 34%, from
$628,000 for the first three months of 1999 to $417,000 for the first three
months of 2000. Interest from U.S. Treasury obligations decreased 44% from
$102,000 for the first three months of 1999 to $57,000 for the first three
months of 2000. The primary reason for this decrease was a $3,369,000 or 46%
decrease in the average balance of U.S. Treasury securities, from $7,321,000
during the first three months of 1999 to $3,952,000 for the comparable period in
2000. The decrease in U.S. Treasury obligations was a result of maturities, not
sales of U.S. Treasury obligations. Interest income on U.S. Government Agency
securities decreased 36% from $455,000 for the three months ended March 31, 1999
to $293,000 at March 31, 2000. A 40% decrease in the average balance of U.S.
Government Agency securities, from $34,180,000 for the three months ended March
31, 1999 to $20,389,000 for the same period in 2000, is primarily responsible
for the related 36% decrease in interest income. Interest income on obligations
of states and political subdivisions decreased 35% from $51,000 for the three
months ended March 31, 1999 to $33,000 for the same period in 2000. Average
outstanding balances of obligations of state and political subdivisions
decreased by 35%, from $4,676,000 in 1999 to $3,041,000 in 2000. The overall
yield on investment securities increased from 5.4% for the first three months of
1999 to 5.6% for the first three months of 2000, a result of higher rates of
interest being paid on investments purchased during the twelve month period.
Interest expense on deposits increased 19% or $255,000, to $1,599,000
Form 10-Q
Page 11
<PAGE>
for the three months ended March 31, 2000 compared to $1,344,000 for the same
period in 1999. The average cost of interest bearing deposits increased 20 basis
points, from 2.2% at March 31, 1999 to 2.4% for the three months ended March 31,
2000. The average interest bearing deposit balances increased 9% to $271,336,000
at March 31, 2000 compared to $249,568,000 for the same period in 1999. Average
non-transaction savings accounts increased 5% for the first three months of
2000, compared to the same period in 1999, while average Market Rate Accounts
and CDs increased by 8% and 18%, respectively. The Bank's average transaction
based NOW account and non-interest bearing demand deposit account balances
increased 2% and 8%, respectively. The annualized cost of CDs increased 30 basis
points, from 4.6% for the first three months of 1999 to 4.9% for the same period
in 2000. The average cost of Market Rate Accounts, savings accounts and NOW
accounts all remained unchanged for the first three months of 2000, compared to
the same period in 1999. The average cost of deposits, including non-interest
bearing demand deposits increased from 1.60% for the first quarter of 1999, to
1.74% for the first quarter of 2000.
The Bank's asset / liability structure is asset rate sensitive, which
should cause an increase in the net interest margin, should interest rates
increase. Therefore, the 125 basis point increase in the prime rate over the
past twelve months is partially responsible for a 27 basis point increase in the
annualized net interest margin for the first three months of 2000, when compared
to the same period in 1999. For the first three months of 2000, the net interest
margin increased to 6.15% from 5.88% for same period in 1999. The net interest
margin is computed exclusive of related loan fee income.
LOAN LOSS PROVISION
- -------------------
The Bank provided a loan loss provision of $63,000 for the three months
ended March 31, 2000, equal with the same period in 1999. The loan loss reserve
amounted to 1.28% of outstanding loans at March 31, 2000. Delinquencies, as a
percentage of outstanding loans, were 67 basis points as of March 31, 2000.
Nonperforming loans increased 1% to $824,000 as of March 31, 2000, compared to
$792,000 as of December 31, 1999 and increased 35% from $612,000 in
nonperforming loans as of March 31, 1999. The loan loss reserve amounted to 525%
of nonperforming loans as of March 31, 2000 compared to 674% as of March 31,
1999. Based on the results of both an internal and external loan review process
and the current level of nonperforming loans, management believes the loan loss
reserve to be adequate as of March 31, 2000.
OTHER INCOME
- ------------
Total other income of $4,309,000 for the three months ended March 31, 2000
decreased 5% from $4,533,000 reported for the same period in 1999.
Fees for trust services declined $157,000 or 6% from $2,418,000 for the
first three months of 1999 to $2,261,000 for the same period in 2000. This
decrease in trust fees was primarily due to a $165,000 decline in investment
management fees earned in the first quarter of 2000, compared to the same period
in 1999. The market value of Trust assets under management decreased by 4%, to
$1,789,000,000 at March 31, 2000 from $1,813,000,000 as of March 31, 1999.
Form 10-Q
Page 12
<PAGE>
The increase in interest rates over the twelve months ended March 31, 2000
caused a decline in the Bank's mortgage banking activity. For the three month
period ended March 31, 2000, the Bank originated and sold $9,907,000 of
residential mortgage loans to the secondary mortgage market, a 63% decrease from
$26,736,000 of residential mortgage loans originated and sold during the first
three months of 1999. A combination of deferred loan fees earned as income
resulting from the sale of residential mortgage loans to the secondary mortgage
market and related gains on the same respective sales of residential mortgage
loans to the secondary mortgage market amounted to $72,000 or 73 basis points
for the first quarter of 2000 compared to $226,000 or 85 basis points for the
same period in 1999.
Income from other service charges, commissions and fees amounted to
$352,000 for the first quarter of 2000, a 12% increase from $313,000 reported
for the first quarter of 1999.
Other operating income increased by $49,000 or 4% to $1,225,000 for the
first three months of 2000, compared to $1,176,000 for the same period in 1999.
OTHER EXPENSES
- --------------
Total other expense increased 6% for the first three months of 2000 to
$7,321,000 from $6,916,000 for the first three months of 1999.
Salaries and wages grew $79,000 or 2%, from $3,412,000 for the three months
ended March 31, 1999 to $3,491,000 for the same period in 2000. Regular salary
expense, including regular, part time and overtime salaries, increased $332,000
or 11% during the first quarter of 2000, compared to the same period in 1999.
Incentive salaries, tied to overall corporate profitability goals, decreased
$254,000 or 72%, from $351,000 for the three months ended March 31, 1999 to
$97,000 for the same period in 2000.
Employee benefits expenses increased $144,000 or 22% from $662,000 for the
first three months of 1999 to $806,000 for the same period in 2000. The Bank's
cost of social security taxes increased by $44,000, the result of a three-pay
month in the first quarter of 2000, adding additional social security expense to
the Bank. There were no three-pay months in the first quarter of 1999. The cost
of the Corporation's pension increased by $40,000, due primarily to changes in
applicable interest rate assumptions, while the cost of medical benefits
increased $43,000.
Occupancy expense increased $129,000 or 32%, from $407,000 for the first
three months of 1999 to $536,000 for the first three months of 2000. Expenses
directly related to the non-banking subsidiaries accounted for $41,000 or 32% of
the increase, while the Bank's occupancy expense increased by 7%. Of this
$129,000 increase, $78,000 was an increase in occupancy expenses associated with
the leasing of No. 2 and No. 6 Bryn Mawr Avenue ("the Buildings") by the Bank
during the first quarter of 1999. The Bank also incurred $20,000 in snow removal
costs in 2000, not incurred during 1999.
Furniture, fixtures and equipment expense decreased $14,000 or 3% from
$510,000 for the first quarter of 1999 to $496,000 for the same period in 2000.
Depreciation expense for the Bank's furniture, fixtures and equipment
Form 10-Q
Page 13
<PAGE>
decreased by $16,000 or 6%, reflecting the elimination of the cost of fully
depreciated fixed assets during the first quarter of 2000. The cost of small
equipment expense was also down by $17,000 or 54%, reflecting the increased
costs associated with the Year 2000 ("Y2K") initiative during the first quarter
of 1999.
Other operating expenses increased $67,000 or 3%, from $1,925,000 for the
first three months of 1999 to $1,992,000 for the first three months of 2000.
APPLICABLE INCOME TAXES
- -----------------------
Federal income taxes for the first three months of 2000 were $985,000
compared to $1,000,000 for the first three months of 2000. This represents an
effective tax rate for each three month period ended March 31, 2000 and 1999 of
33.4% and 35.2%, respectively.
FINANCIAL CONDITION
- -------------------
Consistant with historical trends, total assets decreased 6% from
$436,820,000 at December 31, 1999 to $409,448,000 as of March 31, 2000. Total
assets grew 5% from $389,407,000 as of March 31, 1999.
Outstanding earning assets decreased 8% to $368,606,000 as of March 31,
2000 from $399,952,000 as of December 31, 1999. The Bank's loan portfolio
increased less than 1%, to $337,922,000 at March 31, 2000 from $338,939,000 as
of December 31, 1999. Outstanding loans increased by 15%, from $293,637,000 as
of March 31, 1999. Outstanding consumer loans of $69,765,000 at March 31, 2000
were practically level with consumer loan outstanding balances of $70,211,000 as
of December 31, 1999 and increased 1% from $69,293,000 as of March 31, 1999.
Competition from automobile manufacturers for automobile loans was the primary
reason for the overall lack of growth in consumer loan balances from March 31,
1999. Outstanding commercial loans at March 31, 2000 were $122,134,000, a 2%
increase from outstanding commercial loan balances of $119,835,000 at December
31, 1999 and 31% ahead of $92,941,000 at March 31, 1999. Outstanding real estate
loans were $146,023,000 at March 31, 2000, a 2% decrease from $148,893,000 in
outstanding real estate loans at December 31, 1999 and a 11% increase over
$131,403,000 in outstanding real estate loans as of March 31, 1999.
The Bank's investment portfolio, having a market value of $29,011,000 at
March 31, 2000, decreased 2% from a market value of $29,611,000 at December 31,
1999 and decreased 28% from $40,042,000 as of March 31, 1999.
The Corporation has chosen to include all of its investment securities in
the available for sale category. Investments in this category are reported at
the current market value with net unrealized gains or losses, net of the
deferred tax effect, being added or deducted from the Corporation's total equity
on the balance sheet. As of March 31, 2000, the investment portfolio had an
unrealized loss of $679,000, compared to an unrealized loss of $590,000 as of
December 31, 1999. The unrealized investment depreciation, net of deferred
income tax benefit, decreased the Corporation's shareholders' equity on the
balance sheet by $448,000 as of March 31, 2000.
Federal funds sold amounted to $1,074,000 as of March 31, 2000, a 94%
Form 10-Q
Page 14
<PAGE>
decrease from $17,609,000 as of December 31, 1999 and a 93% decrease from
$15,223,000 as of March 31, 1999. A large increase in deposits at year-end 1999
provided for a similar increase in federal funds sold. In an effort to mitigate
potential concentration risk in the sale of federal funds sold, the Bank
invested excess funds into its interest bearing account at the Federal Home Loan
Bank of Pittsburgh (the "FHLB"). As deposits decreased during the first quarter
of 2000, the balance of the FHLB account was also decreased. This is the reason
for a $13,194,000 decrease in interest bearing deposits with banks from December
31, 1999 to March 31, 2000. The decrease in outstanding federal funds sold from
December 31, 1999 was primarily due to the repayment of a short term borrowing
from the FHLB of $10,000,000 during January 2000, thereby reducing funds
available to sell by $10,000,000. Management continues to monitor the liquidity
requirements of the Bank and believes that it has the ability to increase its
liquidity position through growth of new CDs, borrowing from the FHLB and the
sale of investments, classified as available for sale.
Nonperforming assets amounted to $824,000 at March 31, 2000, a 4% increase
from $792,000 at December 31, 1999 and an 11% decrease from nonperforming assets
of $923,000 at March 31, 1999. Nonperforming loans increased 4% to $824,000 at
March 31, 2000 compared to nonperforming loans of $792,000 at December 31, 1999
and increased 35% from $612,000 as of March 31, 1999. OREO balances amounted to
$312,000 as of March 31, 1999. There were no OREO balances on the Bank's books
at either December 31, 1999 or March 31, 2000.
As of March 31, 2000 and 1999, there were no significant loans classified
for regulatory purposes as loss, doubtful, substandard or special mention that
either (i) represent or result from trends or uncertainties which management
reasonably expects will impact future operating results, liquidity, or capital
resources, or (ii) represent material credits about which management is aware of
any information, causing management to have serious doubts as to the borrower's
ability to comply with the loan repayment terms.
Total deposits decreased 4% to $355,875,000 as of March 31, 2000 from
$371,068,000 as of December 31, 1999. A more meaningful measurement of deposit
change is the change in average outstanding deposit balances. Total average
outstanding deposit balances increased 8% to $369,421,000 for the three month
period ended March 31, 2000 from $340,764,000 for the same period in 1999. All
deposit categories had growth in average outstanding balances. Average savings
balances grew 5% at $42,515,000 for the first three months of 2000, compared to
$40,455,000 for the same period in 1999. Market Rate Account balances increased
8% or $4,102,000 from $48,895,000 in average daily outstanding balances for the
three months ended March 31, 1999 to $52,997,000 for the same period in 2000.
Average outstanding NOW account balances grew 2% or $1,811,000, from $97,672,000
for the first three months of 1999 to $99,483,000 for the same period in 2000.
Non-interest bearing demand deposit average outstanding balances grew 8% or
$6,889,000 from $91,196,000 for the three months ended March 31, 1999 to
$98,085,000 for the same period in 2000. Average outstanding CD balances
increased 18% or $11,448,000 from $62,546,000 in average outstanding balances
for the first three months of 1999 to $73,994,000 for the same period in 2000.
The larger increase in average outstanding CD balances was due primarily to a CD
promotion, during the third quarter of 1999, to strengthen the Bank's liquidity
position.
Form 10-Q
Page 15
<PAGE>
LIQUIDITY, INTEREST RATE SENSITIVITY
- ------------------------------------
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's liquid assets include cash and cash equivalents as
well as certain unpledged investment securities. Bank management incorporates a
liquidity measure, incorporating its ability to borrow from the FHLB to meet
liquidity needs and goals. Periodically, the Asset / Liability Committee of the
Bank reviews the Bank's liquidity needs and reports its findings to the Risk
Management Committee of the Bank's Board of Directors.
In the short term, 30 days or less, the Bank is asset rate sensitive after
adjusting the interest rate sensitivity of savings deposits based on
management's experience and assumptions regarding the impact of product pricing,
interest rate spread relationships and customer behavior. Asset rate sensitivity
will result in a greater portion of assets compared to deposits repricing with
changes in interest rates within specified time periods. The opposite effect
results from being liability rate sensitive. Asset rate sensitivity in the short
term, in an increasing rate environment, should produce an increase in net
interest income. The Bank uses simulation models to help measure its interest
rate risk and to help manage its interest rate sensitivity. The simulation
models consider not only the impact of changes in interest rates on forecasted
net interest income, but also such factors as yield curve relationships,
possible loan prepayments, and deposit withdrawals. As of March 31, 2000, based
on the results from the simulation models, the amount of the Bank's interest
rate risk was within the acceptable range as established by the Policy.
CAPITAL RESOURCES
- -----------------
Total consolidated shareholders equity of the Corporation was $47,468,000,
or 11.6% of total assets, as of March 31, 2000, compared to total shareholders
equity of $46,719,000, or 10.7% of total assets, as of December 31, 1999. As of
March 31, 1999, shareholders' equity was $44,581,000, or 11.4% of total assets.
The Corporation's risk weighted Tier I capital ratio was 12.13% as of March 31,
2000 compared to 11.08% and 12.55% at December 31, 1999 and March 31, 1999,
respectively. The respective Tier II ratios were 13.30%, 12.19% and 13.80%.
During the first quarter of 2000, the Corporation declared its regular dividend
of $0.17 per share, a 13% increase over $0.15 per share declared during the
first quarter of 1999.
In March 2000, the Corporation elected to continue a stock repurchase
program, originally established in March 1997. During the three year period
since the establishment of the stock repurchase program, the Corporation
repurchased 296,300 shares of its stock at a cost of $7,113,000, for an average
cost of $24.00 per share.
Form 10-Q
Page 16
<PAGE>
PART II. OTHER INFORMATION
--------------------------
March 31, 2000
Item 1. Legal Proceedings
- -------
None
Item 2. Changes in Securities
- -------
None
Item 3. Defaults Upon Senior Securities
- -------
None
Item 4. Submission of Matters to Vote of Security Holders
- -------
None
Item 5. Other Information
- -------
None
Item 6. Exhibits and Reports on Form 8-K
- -------
None
Form 10-Q
Page 17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bryn Mawr Bank Corporation
Date: May 3, 2000 By: Robert L. Stevens
------------------- ---------------------
Robert L. Stevens
Chairman,
President & Chief
Executive Officer
Date: May 3, 2000 By: Joseph W. Rebl
-------------------- ------------------
Joseph W. Rebl
Treasurer and
Assistant Secretary
Form 10-Q
Page 18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 21,329
<INT-BEARING-DEPOSITS> 599
<FED-FUNDS-SOLD> 1,074
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,011
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 337,922
<ALLOWANCE> 4,323
<TOTAL-ASSETS> 409,448
<DEPOSITS> 355,875
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,105
<LONG-TERM> 0
0
0
<COMMON> 5,188
<OTHER-SE> 42,280
<TOTAL-LIABILITIES-AND-EQUITY> 409,448
<INTEREST-LOAN> 7,011
<INTEREST-INVEST> 417
<INTEREST-OTHER> 191
<INTEREST-TOTAL> 7,619
<INTEREST-DEPOSIT> 1,599
<INTEREST-EXPENSE> 1,599
<INTEREST-INCOME-NET> 6,020
<LOAN-LOSSES> 63
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,321
<INCOME-PRETAX> 2,945
<INCOME-PRE-EXTRAORDINARY> 2,945
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,960
<EPS-BASIC> .45
<EPS-DILUTED> .44
<YIELD-ACTUAL> 6.15
<LOANS-NON> 824
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,400
<CHARGE-OFFS> 166
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 4,323
<ALLOWANCE-DOMESTIC> 2,722
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,601
</TABLE>
