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 September 30, 2001 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
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(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 October 19, 2001
Common Stock, par value $1 4,359,421
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED September 30, 2001
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the nine
months ended September 30, 2001 and 2000.....................Page 1
Consolidated Statements of Income for the three
months ended September 30, 2001 and 2000.....................Page 2
Consolidated Balance Sheets as of September 30 2001,
December 31, 2000 and September 30, 2000.....................Page 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2001 and 2000.....................Page 4
Consolidated Statements of Comprehensive Income for
the nine months ended September 30, 2001 and 2000
and the three months ended September 30, 2001 and 2000.......Page 5
Notes to Consolidated Financial Statements...................Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........Page 11
PART II - OTHER INFORMATION.......................................Page 22
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands*)
Unaudited
Nine Months Ended
September 30
2001 2000
------------ -------------
Interest income:
Interest and fees on loans.................................. $ 21,557 $ 21,971
Interest on federal funds sold.............................. 298 288
Interest on interest bearing deposits with banks............ 46 89
Interest and dividends on investment securities:
U.S. Government Agency securities......................... 722 890
U.S. Treasury securities.................................. 161 170
Obligations of states and political subdivisions.......... 50 94
Dividend income........................................... 86 98
------------- -------------
Total interest income............................................. 22,920 23,600
Interest expense on deposits and borrowed funds.................... 4,852 5,111
------------- -------------
Net interest income................................................ 18,068 18,489
Loan loss provision................................................ 900 188
------------- -------------
Net interest income after loan loss provision...................... 17,168 18,301
------------- -------------
Other income:
Fees for trust services..................................... 6,651 6,710
Service charges on deposits................................. 1,088 830
Other service charges, commissions and fees................. 599 793
Net gain on sale of loans................................... 3,114 845
Other operating income...................................... 3,324 3,929
------------- -------------
Total other income................................................. 14,776 13,107
------------- -------------
Other expenses:
Salaries and wages.......................................... 11,514 10,825
Employee benefits........................................... 2,162 1,501
Occupancy and bank premises................................. 1,606 1,604
Furniture, fixtures, and equipment.......................... 1,470 1,602
Other operating expenses.................................... 4,825 6,635
------------- -------------
Total other expenses............................................... 21,577 22,167
------------- -------------
Income before income taxes......................................... 10,367 9,241
Applicable income taxes............................................ 3,550 3,271
------------- -------------
Net income......................................................... $ 6,817 $ 5,970
============= =============
Earnings per common share.......................................... $1.58 $1.39
Diluted earnings per share......................................... $1.53 $1.34
Cash dividends declared per share.................................. $0.54 $0.51
Weighted-average shares outstanding................................ 4,318,319 4,302,590
Dilutive potential common shares................................... 129,708 161,803
------------- -------------
Adjusted weighted-average shares................................... 4,448,027 4,464,393
The accompanying notes are an integral part of the consolidated
financial statements.
* Except for share and per share data.
Form 10-Q
Page 1
FINANCIAL STATEMENTS
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands*)
Unaudited
Three Months Ended
September 30
2001 2000
------------ ------------
Interest income:
Interest and fees on loans........................................... $ 7,190 $ 7,605
Interest on federal funds sold....................................... 86 52
Interest on interest bearing deposits with banks..................... 16 11
Interest and dividends on investment securities:
U.S. Government Agency securities.................................. 262 300
U.S. Treasury securities........................................... 48 57
Obligations of states and political subdivisions................... 14 28
Dividend income.................................................... 20 31
------------ ------------
Total interest income....................................................... 7,636 8,084
Interest expense on deposits and borrowed funds............................. 1,689 1,835
------------ ------------
Net interest income......................................................... 5,947 6,249
Loan loss provision......................................................... 200 63
------------ ------------
Net interest income after loan loss provision............................... 5,747 6,186
------------ ------------
Other income:
Fees for trust services.............................................. 2,090 2,147
Service charges on deposits.......................................... 409 277
Other service charges, commissions and fees.......................... 194 258
Net gain on sale of loans............................................ 1,227 342
Other operating income............................................... 1,027 1,263
------------ ------------
Total other income.......................................................... 4,947 4,287
------------ ------------
Other expenses:
Salaries and wages................................................... 3,502 3,417
Employee benefits.................................................... 681 511
Occupancy and bank premises.......................................... 517 530
Furniture, fixtures, and equipment................................... 473 555
Other operating expenses............................................. 1,775 2,015
------------ ------------
Total other expenses........................................................ 6,948 7,028
------------ ------------
Income before income taxes.................................................. 3,746 3,445
Applicable income taxes..................................................... 1,276 1,142
------------ ------------
Net income.................................................................. $ 2,470 $ 2,303
============ ============
Earnings per common share................................................... $0.57 $0.54
Diluted earnings per share.................................................. $0.55 $0.52
Cash dividends declared per share........................................... $0.18 $0.17
Weighted-average shares outstanding......................................... 4,345,531 4,285,657
Dilutive potential common shares............................................ 146,009 157,220
------------ ------------
Adjusted weighted-average shares............................................ 4,491,540 4,442,877
The accompanying notes are an integral part of the consolidated financial
statements.
* Except for share and per share data.
Form 10-Q
Page 2
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
September 30, December 31, September 30,
2001 2000* 2000
(Unaudited) (Unaudited)
---------------------------------------------
Assets
Cash and due from banks.......................................... $ 30,145 $ 34,656 $ 23,620
Interest bearing deposits with banks............................. 846 322 653
Federal funds sold............................................... 8,350 6,395 10,816
Investment securities available for sale, at market
(amortized cost of $25,451, $26,821 and
$29,117 as of September 30, 2001, December 31,
2000 and September 30, 2000, respectively)................ 25,999 26,757 28,766
Loans:
Consumer.................................................. 45,540 61,189 66,559
Commercial................................................ 148,507 147,398 128,800
Real estate............................................... 187,920 146,419 154,804
Other loans............................................... 150 150 -
----------- ------------ -----------
Total loans.......................................... 382,117 355,156 350,163
Less: Allowance for possible loan losses.................. (4,662) (4,320) (4,317)
----------- ------------ -----------
Net loans............................................ 377,455 350,836 345,846
----------- ------------ -----------
Premises and equipment, net...................................... 12,605 12,394 12,102
Accrued interest receivable...................................... 2,244 2,980 2,681
Goodwill (net)................................................... 2,846 2,970 3,011
Other assets..................................................... 8,526 7,115 7,277
----------- ------------ -----------
Total assets......................................... $ 469,016 $ 444,425 $ 434,772
=========== ============ ===========
Liabilities
Deposits:
Demand, noninterest-bearing............................... $ 113,170 $ 115,630 $ 93,300
Savings................................................... 184,445 201,434 182,352
Time...................................................... 86,374 69,902 68,711
----------- ------------ -----------
Total deposits....................................... 383,989 386,966 344,363
----------- ------------ -----------
Borrowed funds................................................... 20,000 - 35,000
Other liabilities................................................ 8,978 6,489 6,084
----------- ------------ -----------
Total liabilities.................................... 412,967 393,455 385,447
----------- ------------ -----------
Shareholders' equity
Common stock, par value $1; authorized 25,000,000 shares;
issued 5,314,875, 5,203,719 and 5,191,455 shares
as of September 30, 2001, December 31, 1999 and
September 30, 2000, respectively and outstanding
of 4,345,811, 4,272,046 and 4,264,782 shares as of
September 30, 2001, December 31, 2000
and September 30, 2000, respectively ..................... 5,315 5,204 5,191
Paid-in capital in excess of par value ......................... 5,773 4,604 4,622
Other accumulated comprehensive gain (loss)
net of deferred income taxes.............................. 362 (42) (232)
Retained earnings................................................ 54,974 50,488 48,923
----------- ------------ -----------
66,424 60,254 58,504
Less: Common stock in treasury at cost -- 969,064, 931,673
and 926,673 shares as of September 30, 2001,
December 31, 2000 and September 30, 2000, respectively.... (10,375) (9,284) (9,179)
----------- ------------ -----------
Total shareholders' equity................................ 56,049 50,970 49,325
----------- ------------ -----------
Total liabilities and shareholders' equity................ $ 469,016 $ 444,425 $ 434,772
=========== ============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
*-Reclassified for comparative purposes.
Form 10-Q
Page 3
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Unaudited
Nine Months Ended
September 30
---------------------------------------
2001 2000
--------------- ---------------
Operating activities:
Net income............................................................................... $ 6,817 $ 5,970
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Provision for loan losses............................................................. 900 188
Depreciation and amortization......................................................... 988 1,111
Loans originated for resale........................................................... (212,184) (50,232)
Proceeds from loans sold.............................................................. 207,594 52,560
Gain on sale of loans................................................................. (3,114) (845)
Increase (Decrease) in deferred income taxes.......................................... (333) 21
Decrease (Increase) in interest receivable............................................ 736 (270)
Increase in interest payable.......................................................... 441 322
Other................................................................................. 743 (4,277)
------------ -------------
Net cash provided by operating activities.......................................... 2,588 4,548
------------ -------------
Investing activities:
Purchases of investment securities....................................................... (16,585) (445)
Proceeds from maturity and calls of fixed income securities.............................. 17,952 1,512
Loan repayments (originations) , net .................................................... (18,474) 934
Loans purchased (dealer loans)........................................................... (1,341) (14,187)
Purchases of premises and equipment...................................................... (1,022) (1,337)
------------ -------------
Net cash used by investing activities.............................................. (19,470) (13,523)
------------ -------------
Financing activities:
Net decrease in demand and savings deposits.............................................. (19,449) (17,195)
Net (decrease) increase in time deposits................................................. 16,472 (9,510)
Dividends paid........................................................................... (2,331) (2,196)
Repayment of mortgage debt............................................................... (31) (27)
Purchases of treasury stock.............................................................. (1,091) (1,491)
Proceeds from borrowed funds............................................................. 20,000 25,000
Proceeds from issuance of common stock................................................... 1,280 165
------------ -------------
Net cash (used) provided by financing activities................................... 14,850 (5,254)
------------ -------------
Decrease in cash and cash equivalents.................................................... (2,032) (14,229)
Cash and cash equivalents at beginning of period......................................... 49,213 49,213
------------ -------------
Cash and cash equivalents at end of period............................................... $ 47,181 $ 34,984
============ =============
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 4
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
------------------------------ -----------------------------
Net income........................................... $2,470 $2,303 $6,817 $5,970
Other comprehensive income:
Unrealized holding gains on
available-for-sale securities.................... 448 238 612 238
Deferred income tax expense on
unrealized holding gains on
available for sale securities.................... (152) (81) (208) (81)
-------------- ------------- ------------ ------------
Comprehensive net income............................. $2,766 $2,460 $7,221 $6,127
============== ============= ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
Form 10-Q
Page 5
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 AND 2000
(Unaudited)
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of September 30, 2001 and 2000, the related consolidated
statements of cash flows for the nine month periods ended September 30, 2001 and
2000, the related consolidated statements of income for the nine month periods
and three month periods ended September 30, 2001 and 2000 and the related
consolidated statements of comprehensive income for the nine month periods and
three month periods ended September 30, 2001 and 2000 are all unaudited.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 accounting principals generally
accepted in the United States of America. The financial statements should be
read in conjunction with the Notes to Consolidated Financial Statements
contained in the Corporation's 2000 Annual Report incorporated in the 2000 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 2000 Annual Report
incorporated in the 2000 Form 10-K (Exhibit #13). Shares under option under the
Plan had a dilutive impact on net income per share for the three and nine-month
periods ended September 30, 2001 and 2000.
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.
Form 10-Q
Page 6
4. Adoption of Financial Accounting Standards:
In September 2000, Statement of Financial Accounting Standard No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS No. 140") was issued. SFAS No. 140 replaces Statement of
Financial Accounting Standard No. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ("SFAS No. 125").
SFAS No. 140 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. SFAS No. 140
requires that servicing assets and liabilities be subsequently measured by (a)
amortization in proportion to and over the period of estimated net servicing
income or loss and (b) assessment for asset impairment or increased obligation
based on their respective fair values. The Corporation has adopted SFAS No. 125
in accounting for its mortgages servicing rights and, therefore, the adoption of
SFAS No. 140 did 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 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 nonperforming 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 $781,000, $10,000 and $92,000 at
September 30, 2001, December 31, 2000 and September 30, 2000, respectively, were
placed on nonaccrual status and any outstanding accrued interest receivable on
such loans at the time they were
Form 10-Q
Page 7
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 September 30, 2001, December 31, 2000 and
September 30, 2000, 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 $781,000, $10,000 and $92,000,
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 2001 or 2000 were allocated from the existing
reserve for loan losses. As of September 30, 2001 and September 30, 2000, there
were $760,000 and $33,000, respectively of impaired loans for which there is a
related allowance for loan losses. As of December 31, 2000,there were no
impaired loans for which there was a related allowance for loan losses. The
total related allowance for loan losses as of September 30, 2001 and 2000 were
$350,000 and $25,000, respectively. As of December 31, 2000, there was no
allowance for loan losses allocated to impaired loans. Impaired loans for which
no loan loss allowance was allocated amounted to $21,000, at September 30, 2001,
$10,000, at December 31, 2000 and $67,000 at September 30, 2000. Average
impaired loans as of September 30, 2001, December 31, 2000 and September 30,
2000 amounted to $562,000, $337,000 and $436,000,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 nine-month period ended September 30, 2001 or
2000. 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
nine 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 nine months of 2001 or 2000.
Smaller balance, homogeneous loans, exclusively consumer loans, for practical
considerations are charged-off when they become ninety days past due.
Form 10-Q
Page 8
6. Allowance for Possible Loan Losses:
The summary of changes in the allowance is as follows:
Nine Months ended Year ended
September, 30 December,31
2001 2000 2000
------ ------ ------
Balance, Beginning of period $4,320 $4,400 $4,400
Charge-offs:
Consumer (126) (334) (355)
Commercial and industrial (941) 0 (32)
Real estate 0 0 (12)
------ ------ ------
Total charge-offs (1067) (334) (399)
------ ------ ------
Recoveries:
Consumer 31 64 66
Commercial and industrial 2 0 3
Real estate 476 0 0
------ ------ ------
Total recoveries 509 64 69
------ ------ ------
Net (charge-offs)/ recoveries (558) (270) (330)
Provision for loan losses 900 187 250
------ ------ ------
Balance, End of period $4,662 $4,317 $4,320
====== ====== ======
Form 10-Q
Page 9
7. Segment Information:
The Corporation's principal operating segments are structured around the
finanical 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 ("Trust") 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 nine months ended September 30, 2001 and 2000 is as
follows:
2001 2000
Mortgage All Consol- Mortgage All Consol-
Banking Trust Banking Other idated Banking Trust Banking Other idated
-------------------------------------------- -----------------------------------------------
Net interest income $17,789 $ -- $ -- $ 279 $18,068 $18,481 $ -- $ -- $ 8 $18,489
Less Loan loss provision 900 -- -- -- 900 188 -- -- -- 188
-------------------------------------------- -----------------------------------------------
Net interest income after
loan loss provision 16,889 -- -- 279 17,168 18,293 -- -- 8 18,301
Intersegment interest (revenues)
expenses* 251 -- -- (251) 0 -- -- -- -- --
-------------------------------------------- -----------------------------------------------
Net interest income after
loan loss provision and
eliminations 17,140 -- -- 28 17,168 -- -- -- -- --
Other income:
Fees for investment
management and trust
services -- 6,651 -- -- 6,651 -- 6,710 -- -- 6,710
Other income 2,176 11 3,487 2,451 8,125 1,761 8 1,405 3,223 6,397
-------------------------------------------- -----------------------------------------------
Total other income 2,176 6,662 3,487 2,451 14,776 1,761 6,718 1,405 3,223 13,107
Other expenses:
Salaries and benefits 8,372 2,772 792 1,740 13,676 6,895 2,973 472 1,986 12,326
Occupancy 2,300 483 133 160 3,076 2,579 350 107 170 3,206
Other operating expense 2,771 850 498 706 4,825 4,119 676 225 1,615 6,635
-------------------------------------------- -----------------------------------------------
Total other expense 13,443 4,105 1,423 2,606 21,577 13,593 3,999 804 3,771 22,167
-------------------------------------------- -----------------------------------------------
Segment profit (loss) 5,873 2,557 2,064 (127) 10,367 6,461 2,719 601 (540) 9,241
Intersegment (revenues)
expenses ** 37 125 -- (162) -- 138 136 -- (274) --
-------------------------------------------- -----------------------------------------------
Segment profit after
eliminations $ 5,910 $2,682 $2,064 ($289) $10,367 $ 6,599 $2,855 $ 601 ($814) $ 9,241
============================================ ===============================================
% of segment profit (loss) 57% 26% 20% (3%) 100% 71% 31% 7% (9%) 100%
-------------------------------------------- -----------------------------------------------
*- Bryn Mawr Finance, Inc. provides intercompany financing to The Bryn Mawr
Trust Company and Joseph W. Roskos & Co. Intersegment interest revenues and
expenses consist of interest payments made by The Bryn Mawr Trust Company
and Joseph W. Roskos & Co. to Bryn Mawr Finance, Inc.
**- Intersegment revenues consist of rental payments to Bryn Mawr Bank
Corporation from its subsidiaries, and insurance commissions paid by the
Bank to Insurance Counsellors of Bryn Mawr, Inc. Intersegment expenses
consist of a $4,000 management fee, paid by Bryn Mawr Bank Corporation to
the Bank.
Form 10-Q
Page 10
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 and nine months ended September 30, 2001 and 2000, as well as the
financial condition of the Corporation as of September 30, 2001, December 31,
2000 and September 30, 2000. The Bryn Mawr Trust Company (the "Bank"), Bryn
Mawr Advisors ("BMA"); (formerly Tax Counsellors of Bryn Mawr, Inc.), Bryn Mawr
Brokerage Company, Inc. ("BM Brokerage"), Bryn Mawr Asset Management ("BMAM")
(formerly CDC Capital Management, Inc. ("CDC")) and Joseph W. Roskos & Co., Inc.
("JWR&Co") are wholly-owned subsidiaries ("Subsidiaries")of the Corporation,
Insurance Counsellors of Bryn Mawr, Inc. ("ICBM") is a wholly-owned subsidiary
of the Bank and Bryn Mawr Finance, Inc. ("BMF") is a wholly owned subsidiary of
JWR&Co.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
- --------------------------------------------------------------
Certain of the matters discussed in this document and the documents
incorporated by reference herein, including matters discussed under the captions
"Management Discussion and Analysis of Financial Condition and Results of
Operations" may constitute forward-looking statements for the purposes of the
Securities Exchange act of 1933, as amended and the Securities Exchange Act of
1934, as amended, and may involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of
Corporation to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. The words
"expect," "anticipate," "intended," "plan," "believe," "seek," "estimate," and
similar expressions are intended to identify such forward- looking statements.
The Corporation's actual results may differ materially from the results
anticipated by the forward looking statement due to a variety of factors,
including without limitations: (a) the effect of future economic conditions on
the Corporation and its customers; (b) governmental monetary and fiscal
policies, as well as legislation and regulatory changes; (c) the risks of
changes in interest rates on the level and composition of deposits, loan demand,
and the value of loan collateral and securities, as well as interest rate risk;
(d) the effects of competition from other commercial banks, thrifts, mortgage
companies, consumer finance companies, credit unions, securities brokerage
firms, insurance companies, money-market and mutual funds and other institutions
operating in the Corporation's trade market area and elsewhere including
institutions operating locally, regionally, nationally and internationally
together with such competitors offering banking products and services by mail,
telephone, computer and the internet; and (e) the failure of assumptions
underlying the establishment of reserves for loan losses and estimates in the
value of collateral, and various financial assets and liabilities and
technological changes being more
Form 10-Q
Page 11
difficult or expensive than anticipated. All written or oral forward- looking
statements attributed to the Corporation are expressly qualified in their
entirety by use of the foregoing cautionary statements.
RESULTS OF OPERATIONS
- ---------------------
The Corporation reported net income of $6,817,000 for the nine months ended
September 30, 2001, a 14% increase from $5,970,000 reported for the same period
in 2000. Earnings per common share amounted to $1.58, a 14% increase over the
$1.39 reported for the same period in 2000. Diluted earnings per share were
$1.53 and $1.34, respectively. During the first nine months of 2000, a
management change in BMAM created a non-recurring expense related to contractual
severance and the elimination of the remaining goodwill of the subsidiary.
Exclusive of the non-recurring items referred to above net income increased 10%
for the first nine months of 2001, compared to the same period in 2000. This
increase is primarily attributable to an increase in other income, up $1,669,000
or 13% over the first nine months of 2000. This is a result of the significant
increase in loan sale activity, associated with mortgage loan refinancings that
were stimulated by a decline in interest rates. Net interest income for the
first nine months of 2001 is $421,000 below the first nine months of 2000. While
loan balances increased $32,000,000 or 9.1% from the same period in 2000, the
effect of this increase was offset by the decline in interest rates during the
first nine months of 2001. There are a number of economic indicators pointing
to a slowing of the economy and, during the first quarter of 2001, the
Corporation's management identified a problem commercial loan, which was put on
nonaccrual status and written down by $870,000. These factors have prompted
Corporation management to increase the provision for loan loss to $900,000 for
the first nine months of 2001, compared to $188,000 for the for the same period
in 2000.
During the first quarter of 2001, there was a recovery of $355,000 in expense
related to a prior year problem loan. This recovery, in conjunction with the
non-recurring expense in 2000, mentioned above, is primarily responsible for a
3% decline in other expense for the first nine months of 2001, compared to the
same period of 2000.
For the third quarter 2001, the Corporation reported net income of $2,470,000,
a 7% increase from the $2,303,000, reported for the third quarter of 2000. For
the three months ended September 30, 2001 and 2000, earnings per common share
amounted to $0.57 and $0.54 respectively. The 7% increase in earnings for the
third quarter was due mainly to the $660,000 or 15% increase in other income
resulting from the loan sale activity related to mortgage loan refinancings. Net
interest income for the third quarter of 2001 was $302,000 below the same period
in 2000. This decrease is the result of the continued decline in interest rates
during the third quarter of 2001. There are a number of economic indicators
pointing to a slowing of the economy, which have prompted Corporation management
to increase the provision for loan loss to $200,000 for the third quarter 2001,
compared to $63,000 for the same period in 2000. For the three months ended
September 30, 2001, other expenses were $80,000 below the
Form 10-Q
Page 12
second quarter of 2000.
Average outstanding loan balances for the first nine months of 2001 grew 8%
from average outstanding loan balances for the first nine months of 2000.
Partially funding this growth in average outstanding loans was an increase in
total average deposits from $361,262,000 as of September 2000 to $368,514,000 as
of September 2001 or a 2% increase. Additional funding was provided by a 15%
decrease in average investments. Average outstanding balances of non-interest
bearing demand deposit accounts increased 6% and NOW accounts declined 2.3%,
while the average outstanding balances of certificates of deposit ("CDs")
increased 7.1% as a result of a CD promotion in July. Average balances of money
market accounts increased by .2% and savings deposits declined 2.8%.
The prime rate decreased 350 basis points from 9.50% at September 30, 2000 to
6.00% at September 30, 2001. Since, in the short term, 30 days or less, the
Bank is asset rate sensitive, a decreasing prime rate usually will cause a
related decrease in the respective yields on earning assets. The overall
annualized yield on earning assets decreased by 50 basis points, from 8.10% at
September 30, 2000 to 7.60% for the same period in 2001.
Compared to the first nine months of 2000, the average cost of funds for the
respective periods decreased 13 basis points, from 1.83% in 2000 to 1.70% in
2001.
The result of the decline in yields on earning assets and the decline in the
cost of funds was a decrease in the Bank's annualized net interest margin, to
5.98% for the first nine months of 2001 compared to 6.29% for the same period in
2000. 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 nine months ended September 30, 2001, net interest income after loan
loss provision declined 6.2% to $17,168,000 from $18,301,000 in 2000. Total
interest income dropped 2.9% for the first nine months of 2001, to $22,920,000
from $23,600,000 for the first nine months of 2000. Interest expense decreased
5.1% for the nine months ended September 30, 2001, to $4,851,000 compared to
$5,111,000 for the first nine months of 2000. The yield on earning assets for
the first nine months of 2001 was 7.6% compared to 8.1% for the first nine
months of 2000. The effective rate paid on interest bearing deposits for the
first nine months of 2001 and 2000 was 2.3% and 2.4%, respectively.
Interest and fees on loans decreased 2% from $21,971,000 for the first nine
months of 2000 to $21,557,000 for the first nine months of 2001.
Form 10-Q
Page 13
Contributing to the decline in the interest and fees on loans was a 40 basis
point decline in the annualized average yield on earning assets from 8.3% for
the first nine months of 2000 to 7.9% for the first nine months of 2001. This
was partially offset by a 4% increase in average outstanding loan balances for
the first nine months of 2001, to $359,031,000, compared to $344,817,000 for the
same period in 2000.
Interest and dividend income on investments decreased $233,000 or 19%, from
$1,252,000 for the first nine months of 2000 to $1,019,000 for the first nine
months of 2001. Interest from U.S. Treasury obligations was down 5.3% from
$170,000 for the first nine months of 2000 to $161,000 for the first nine months
of 2001. Interest income on U.S. Government Agency securities decreased 19% from
$890,000 for the nine months ended September 30, 2000 to $722,000 at September
30, 2001. A 15% decrease in the average balance of U.S. Government Agency
securities, from $20,413,000 for the nine months ended September 30, 2000 to
$17,328,000 for the same period in 2001, is primarily responsible for the
related 19% decrease in interest income. The overall yield on the investment
securities decreased from 5.7% for the first nine months of 2000 to 5.5% for the
first nine months of 2001. This is a result of the lower rate environment
increasing the securities being called and lower rates being paid on new
purchases during the twelve-month period.
Interest expense on deposits and borrowed funds decreased 5% or $259,000, to
$4,852,000 for the nine months ended September 30, 2001 compared to $5,111,000
for the same period in 2000. The average cost of interest bearing deposits and
borrowed funds declined from 2.5% for the nine months ended September 30, 2000
to 2.3% for the nine months ended September 30, 2001. The average interest
bearing deposit balances increased 1% to $276,128,000 at September 30, 2001
compared to $273,766,000 for the same period in 2000. Average balances of non-
transaction savings accounts decreased 3% for the first nine months of 2001,
compared to the same period in 2000, while average balances of money market
accounts increased 1% and CDs increased 7% from the period ended September 30,
2000. The Bank's average transaction based NOW account decreased 2.7% and non-
interest bearing demand deposit account balances increased 6.7%. The annualized
cost of CDs increased 10 basis points, from 5.0% for the first nine months of
2000 to 5.1% for the same period in 2001. The average cost of money market
accounts decreased 30 basis points, savings accounts decreased 40 basis points,
and NOW accounts declined 10 basis points for the first nine months of 2001,
compared to the same period in 2000. The average cost of deposits, including
non-interest-bearing demand deposits decreased from 1.84% for the first nine
months of 2000, to 1.70% for the first nine months of 2001.
For the third quarter of 2001 compared to the third quarter of 2000, net
interest income after loan loss provision decreased 7%. This is due to the
decrease in the prime rate from 9.5% as of September 30, 2000 to 6.00% as of
September 30, 2001. Partially offsetting the decrease in interest income of
$448,000 from $8,084,000 as of September 30, 2000 to $7,636,000 as of September
30, 2001, is a decrease in interest expense. Interest
Form 10-Q
Page 14
expense declined $146,000 from $1,835,000 in the third quarter of 2000 to
$1,689,000 in the third quarter of 2001. This decrease in interest expense is
due to the decrease in the rates paid on money market accounts, saving accounts
and NOW accounts.
INTEREST RATE SENSITIVITY ANALYSIS
as of September 30, 2001
Repricing Periods
---------------------------------------------------------------------------------
0 to 30 31 to 90 91 to 180 181 to 365 Over Non-Rate
(dollars in thousands) Days Days Days Days 1 year Sensitive Total
---------------------------------------------------------------------------------
Assets:
Interest-bearing deposits with other banks $ 846 $ -- $ -- $ -- $ -- $ -- $ 846
Federal funds sold 8,350 -- -- -- -- -- 8,350
Investment securities 2,000 -- 5,500 8,453 8,008 1,960 25,921
Loans 147,695 16,917 18,709 30,138 168,658 $ (4,661) 377,456
Cash and due from banks -- -- -- -- -- 29,876 29,876
Other assets -- -- -- -- -- 17,707 17,707
---------------------------------------------------------------------------------
Total assets $158,891 $ 16,917 $ 24,209 $ 38,591 $176,666 $ 44,882 $460,156
=================================================================================
Liabilities and shareholders' equity:
Demand, noninterest-bearing $ 33,571 $ -- $ -- $ -- $ -- $ 84,252 $117,823
Savings deposits 6,387 12,774 19,161 38,322 110,646 -- 187,290
Time deposits 17,867 16,964 16,044 28,467 7,032 -- 86,374
Other liabilities -- -- 20,000 -- -- 6,918 26,918
shareholders' equity -- -- -- -- -- 41,751 41,751
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 57,825 $ 29,738 $ 55,205 $ 66,789 $117,678 $ 132,921 $460,156
=================================================================================
Gap $101,066 $(12,821) $(30,996) $(28,198) $ 58,988 $ (88,039) --
Cumulative gap $101,066 $ 88,245 $ 57,249 $ 29,051 $ 88,039 -- --
Cumulative earning assets as a ratio of interest
bearing liabilities 275% 201% 140% 114% 127% -- --
The Bank's asset / liability structure is asset rate sensitive, detailed in
the preceding table, which should cause a decrease in the net interest margin,
should interest rates decrease. Therefore, the 350 basis point decrease in the
prime rate over the past twelve months is partially responsible for the 31 basis
point decline in the annualized net interest margin for the first nine months of
2001, when compared to the same period in 2000. For the first nine months of
2001, the net interest margin decreased to 5.98% from 6.29%, for the same period
in 2000. The net interest margin is computed exclusive of related loan fee
income.
Form 10-Q
Page 15
LOAN LOSS PROVISION
- -------------------
As previously indicated, a slowing of the economy, coupled with the
identification and writedown of a loan put on nonaccrual status during the first
quarter of 2001, prompted Corporation management to increase the provision for
loan loss to $900,000 for the first nine months of 2001, a $712,000 increase
over $188,000 for the same period in 2000. The loan loss reserve amounted to
1.22% of outstanding loans at September 30, 2001. Delinquencies, as a percentage
of outstanding loans, were 83 basis points as of September 30, 2001 compared to
27 basis points for the same period in 2000. Nonperforming loans increased to
$808,000 as of September 30, 2001 compared to $81,000 as of December 31, 2000
and $84,000 as of September 30, 2000. 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 September 30,
2001.
OTHER INCOME
- ------------
Total other income of $14,776,000 for the nine months ended September 30, 2001
increased 13% from $13,107,000 reported for the same period in 2000.
Fees for trust services of $6,651,000 for the first nine months of 2001 are 1%
below the $6,710,000 from the same period in 2000. The revenues for trust are
impacted significantly by the market value of assets under management. Trust
accounts under management declined in value by 7%, to $1,625,000,000 at
September 30, 2001 from $1,752,000,000 as of September 30, 2000 as a result of
the decline in the market, and the value of these accounts is a basis for the
determination of fees.
The decrease in interest rates for the nine months ended September 30, 2001
caused a significant increase in the Bank's mortgage banking activity. For the
nine month period ended September 30, 2001, the Bank originated and sold
$204,480,000 of residential mortgage loans to the secondary mortgage market, a
303% increase from $50,800,000 of residential mortgage loans originated and sold
during the first nine months of 2000. The net gain on the sale of loans
increased $2,269,000 or 269% from $845,000 for the nine month period ending
September 30, 2000 to $3,114,000 for the nine month period ending September 30,
2001.
Service charges on deposits amounted to $1,088,000 for the first nine months
of 2001 a 31% increase from $830,000 reported for the first nine months of 2000.
This is primarily due to an increase in the account pricing in the fourth
quarter of 2000 and a reduction in the earning credit rate, which is used to
compute account analysis fees.
Other service charges, commissions and fees amounted to $599,000 for the first
nine months of 2001 a 24% decrease from $793,000 reported for the first nine
months of 2000. This is primarily due to the accelerated
Form 10-Q
Page 16
amortization of mortgage servicing rights as borrowers continue to refinance
mortgage loans.
Other operating income decreased by $605,000 or 15% to $3,324,000 for the
first nine months of 2001, compared to $3,929,000 for the same period in 2000.
The primary reason for this decline was a reduction in BMA's revenue of $657,000
due to the sale of the assets of BMA at year-end 2000. Additionally, BMAM's
revenue was lower by $686,000. Expenses related to these entities were also
significantly reduced in 2001, compared to the same period in 2000.
For the quarter, other income increased 15% or $660,000 to $4,947,000 for the
quarter ended September 30, 2001 from $4,287,000 for the same quarter in 2000.
The increase of $885,000 or 258% in net gain on sale of loans from $342,000 in
the third quarter of 2000 to $1,227,000 for the same period in 2001 was
attributed to the increase in the Bank's mortgage activity. This was partially
offset by the decline in other operating income from $1,263,000 in the third
quarter of 2000 to $1,207,000 in the third quarter of 2001 that resulted from
the sale of BMA's assets at year end 2000.
OTHER EXPENSES
- --------------
Total other expenses decreased 3% for the first nine months of 2001 to
$21,577,000 from $22,167,000 for the first nine months of 2000.
Salaries and wages grew $689,000 or 6%, from $10,825,000 for the nine months
ended September 30, 2000 to $11,514,000 for the same period in 2001. Regular
salary expense, including regular, part time and overtime salaries, decreased
$37,000 or .4% to $10,321,000 during the first nine months of 2001, from
$10,358,000 for the same period in 2000. BMBC sold the assets of BMA at year
end 2000 and BMA's employees left the company. This reduction in salary expense
in 2001, compared to 2000, is partially responsible for the decrease in regular
salaries in 2001. Incentive salaries, tied to overall corporate profitability
goals, increased $726,000 or 155%, from $467,000 for the nine months ended
September 30, 2000 to $1,193,000 for the same period in 2001.
Employee benefits expenses increased $661,000 or 44% from $1,501,000 for the
first nine months of 2000 to $2,162,000 for the same period in 2001. The
decline in the earnings on the Bank's pension plan assets, due to market
performance, accounts for $600,000 of this change. The remaining increase is due
to the increased cost of medical benefits.
Occupancy expense increased $2,000 or .1%, from $1,604,000 for the first nine
months of 2000 to $1,606,000 for the first nine months of 2001.
Furniture, fixtures and equipment expense decreased $132,000 or 8% from
$1,602,000 for the first nine months of 2000 to $1,470,000 for the same period
in 2001. This decrease in expense is due to the completion of the amortization
of the original capitalized conversion costs related to
Form 10-Q
Page 17
the Banks main computer system.
Other operating expenses decreased $1,810,000 or 27%, from $6,635,000 for the
first nine months of 2000 to $4,825,000 for the first nine months of 2001. This
decrease is due to the write off of BMAM's goodwill and other legal expenses
associated with the change in BMAM's management during the first nine months of
2000. Also major factors, during the first nine months of 2001, a $375,000
expense recovery related to a charged off loan, and the sale of assets of BMA at
year-end 2000, eliminating expenses related to BMA, are major factors
contributing to the decrease.
For the quarter, total other expenses decreased 1% or $80,000 to $6,948,000
for the quarter ended September 30, 2001 from $7,028,000 from the same quarter
in 2000. The decrease of $240,000 in other operating expense is mainly due to
the expenses associated with the changes in BMAM's management in 2000 and the
sale of assets of BMA at year-end 2000. Offsetting this decrease is an increase
of $170,000 in employee benefit expense, which is due to the increased cost of
the pension plan.
APPLICABLE INCOME TAXES
- -----------------------
Income taxes (state and federal) for the first nine months of 2000 were
$3,550,000 compared to $3,271,000 for the first nine months of 2001. This
represents an effective tax rate for each nine-month period ended September 30,
2001 and 2000 of 34.2% and 35.4%, respectively. The change in the effective tax
rate for the two periods is due to the reduction of state corporate net income
taxes applicable to the Subsidiaries.
FINANCIAL CONDITION
- -------------------
Total assets have increased 5.5% from December 31, 2000. Total assets at year-
end were $444,425,000 and were $469,016,000 as of September 30, 2001. This is an
increase of 8% from $434,772,000 as of September 30, 2000.
Outstanding earning assets increased 7% to $417,312,000 as of September 30,
2001 from $388,630,000 as of December 31, 2000. The Bank's loan portfolio
increased 8%, to $382,117,000 at September 30, 2001 from $355,156,000 as of
December 31, 2000. Outstanding loans increased by 9%, from $350,163,000 as of
September 30, 2000. Outstanding consumer loans of $45,540,000 at September 30,
2001 were $15,649,000 or 26% below the consumer loan outstanding balances of
$61,189,000 as of December 31, 2000 and $21,019,000 or 32% below September 30,
2000 outstandings of $66,559,000. Mortgage refinancings' and a desire to exit
the indirect automobile product line were the primary reasons for the overall
decline in consumer loan balances. Outstanding commercial loans at September
30, 2001 were $148,507,000, which is 1% above outstanding commercial loan
balances of $147,398,000 at December 31, 2000 and 15% ahead of $128,800,000 at
September 30, 2000. Outstanding real estate loans were $187,920,000 at
September 30, 2001, a 28% increase from $146,419,000 in outstanding real
Form 10-Q
Page 18
estate loans at December 31, 2000 and a 21% increase over $154,804,000 in
outstanding real estate loans as of September 30, 2000. The increase in real
estate loans is due to the increased volume of residential mortgages and the
timing between closing the loan and the loan sale.
The Bank's investment portfolio, having a market value of $25,999,000 at
September 30, 2001, decreased 3% from a market value of $26,757,000 at December
31, 2000 and decreased 10% from $28,766,000 as of September 30, 2000. This
decrease were directly attributable to a reduction in the volume of investment
securities held by the Corporation, as a result of maturities and calls and were
not due to any depreciation in market values.
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 September 30, 2001, the investment portfolio had an
unrealized gain of $548,000, which was $612,000 greater than the unrealized loss
of $64,000 as of December 31, 2000. The unrealized investment amortization, net
of deferred income tax benefit, increased the Corporation's shareholders' equity
on the balance sheet by $362,000 as of September 30, 2001.
Federal funds sold amounted to $8,350,000 as of September 30, 2001, a 30%
increase from $6,395,000 as of December 31, 2000 and an 23% decrease from
$10,816,000 as of September 30, 2000.
The ongoing loan demand has necessitated the need to borrow additional funds,
thereby reducing the funds available for sale. Borrowed funds have increased
$20,000,000 from December 31, 2000 and decreased $15,000,000 from September 30,
2000. The $20,000,000 in short term borrowings has a maturity date of January
17, 2002. Management continues to monitor the liquidity requirements of the
Bank and believes that it has the ability to increase its liquidity position
through growth of new CDs, borrowing from the Federal Home Loan Band of
Pittsburgh ("FHLB") and the sale of investments that are classified as available
for sale.
Due primarily to the addition of a problem loan to nonaccrual status, as
previously discussed, nonperforming assets amounted to $808,000 at September 30,
2001, a 897% increase from $81,000 at December 31, 2000 and a 862% increase from
nonperforming assets of $84,000 at September 30, 2000. Nonperforming loans
increased 897% to $808,000 at September 30, 2001 compared to nonperforming loans
of $81,000 at December 31, 2000 and increased 862% from $84,000 as of September
30, 2000. There were no OREO balances on the Bank's books at September 30,
2001, December 31, 2000 or September 30, 2000.
As of September 30, 2001 and 2000, 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
Form 10-Q
Page 19
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 1% to $383,989,000 as of September 30, 2001 from
$386,966,000 as of December 31, 2000. A more meaningful measurement of deposit
change is the change in average outstanding deposit balances. Total average
outstanding deposit balances increased 1% to $368,514,000 for the nine month
period ended September 30, 2001 from $361,261,000 for the same period in 2000.
Average savings balances decreased 3% to $40,237,000 for the first nine months
of 2001, from $41,350,000 at December 31,2000 and a decline of 3% from
$41,399,000 for the same period in 2000. Money market account balances increased
.2% or $86,000 from $50,976,000 in average daily outstanding balances for the
nine months ended September 30, 2000 to $51,072,000 for the same period in 2001.
Average outstanding NOW account balances declined 2% or $2,405,000, from
$101,088,000 for the first nine months of 2000 to $98,683,000 for the same
period in 2001. Non-interest bearing demand deposit average outstanding
balances increased 6% or $5,592,000 to $101,585,000 for the nine months ended
September 30, 2001 from $95,993,000 for the same period in 2000. Average
outstanding CD balances increased 6% or $4,601,000 from $71,796,000 in average
outstanding balances for the first nine months of 2000 to $76,397,000 for the
same period in 2001.
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, including 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 a decreasing rate environment, should produce
a decrease 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,
Form 10-Q
Page 20
and deposit withdrawals. As of September 30, 2001, 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 Asset / Liability Policies and
Procedures.
CAPITAL RESOURCES
- -----------------
Total consolidated shareholders equity of the Corporation was $56,049,000, or
12% of total assets, as of September 30, 2001, compared to total shareholders
equity of $50,970,000, or 11.5% of total assets, as of December 31, 2000. As of
September 30, 2000, shareholders' equity was $49,325,000, or 11.3% of total
assets. The Corporation's risk weighted Tier I capital ratio was 12.98% as of
September 30, 2001 compared to 12.49% and 12.20% at December 31, 2000 and
September 30, 2000, respectively. The respective Tier II ratios were 14.13%,
13.61% and 13.33%. These ratios meet the definition of a well-capitalized
institution as defined by applicable banking regulations. During the nine month
period ended September 30, 2001, the Corporation declared its regular dividend
of $0.54 per share, a 6% increase over $0.51 per share declared during the same
period in 2000.
In March 2001, 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 has repurchased
379,990 shares of its stock at a cost of $9,149,000, for an average cost of
$24.08 per share.
Form 10-Q
Page 21
PART II. OTHER INFORMATION
--------------------------
September 30, 2001
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 22
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: November 13, 2001 By: Frederick C. Peters, II
----------------------- ------------------------
Frederick C. Peters, II
President & Chief
Executive Officer
Date: November 13, 2001 By: Joseph W. Rebl
--------------------- ----------------
Joseph W. Rebl
Executive Vice President and
Chief Financial Officer
Form 10-Q
Page 23