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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
[X]Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee required] for the fiscal year ended December 31, 2001 or
[ ]Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [No fee Required] for the transition period from_________________
to_____________________
Commission file number 0-15261.
BRYN MAWR BANK CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2434506
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(State of other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (610) 525-1700
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1 par value)
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
or Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of shares of common stock held by non-affiliates of
Registrant (including fiduciary accounts administered by affiliates*) was
$136,768,730 on February 28, 2002.
As of February 28, 2002, 4,287,421 shares of common stock were outstanding.
Documents Incorporated by Reference: Parts I, II and IV - Portions of
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Registrant's Annual Report to Shareholders for the year ended December 31,
2001, as indicated, Parts I and III - Definitive Proxy Statement of Registrant
filed with the Commission pursuant to Regulation 14A.
*Registrant does not admit by virtue of the foregoing that its officers and
directors are "affiliates" as defined in Rule 405 and does not admit that it
controls the shares of Registrant's voting stock held by the Trust Department
of its bank subsidiary.
The exhibit index is on pages 47 through 50. There are 101 pages in this report.
Form 10-K
Bryn Mawr Bank Corporation
Index
Item No. Page
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Part I
1. Business.................................................. 1
2. Properties................................................ 36
3. Legal Proceedings......................................... 39
4. Submission of Matters to a Vote of Security Holders....... 39
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 40
6. Selected Financial Data................................... 40
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 40
8. Financial Statements and Supplementary Data............... 40
9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 41
Part III
10. Directors and Executive Officers of Registrant............ 42
11. Executive Compensation.................................... 46
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 46
13. Certain Relationships and Related Transactions............ 46
Part IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 47
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF FEBRUARY 28, 2002.
PART I
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ITEM 1. BUSINESS
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GENERAL
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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 the actual results, performance or achievements of
Bryn Mawr Bank Corporation (the "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, the loan portfolio, 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,
1
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 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.
BRYN MAWR BANK CORPORATION
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The Corporation, hereinafter sometimes referred to as the Registrant, was
incorporated under the laws of the Commonwealth of Pennsylvania on August 8,
1986. The Corporation is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "Act"). On January 2, 1987, under a
Plan of Reorganization, the Corporation acquired all of the issued and
outstanding shares of The Bryn Mawr Trust Company (the "Bank"), through an
exchange of three shares of the Corporation stock for each share of Bank stock
issued.
THE BRYN MAWR TRUST COMPANY
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The Bank, the principal subsidiary of the Corporation, is a state chartered
bank subject to the Pennsylvania Banking Code of 1965, as amended, which was
incorporated under the laws of the Commonwealth of Pennsylvania on March 25,
1889. In addition, the Bank is a member of the Federal Reserve
2
System and, therefore, is subject to the laws and regulations, which govern a
Federal Reserve member bank. The Bank is engaged in a general commercial and
retail banking business, providing basic banking services as well as a full
range of wealth management services, including trust services.
BRYN MAWR ADVISORS, INC. (FORMERLY TAX COUNSELLORS OF BRYN MAWR, INC.)
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Tax Counsellors of Bryn Mawr, Inc. ("TCBM") was incorporated under the
laws of Pennsylvania on July 1, 1997. Effective December 31, 2000 TCBM name was
changed to Bryn Mawr Advisors, Inc. ("BMA") and the net assets of BMA were sold
to the management of BMA (the "Tax Professionals")in exchange for a note in
favor of BMA. As of December 31, 2001, with the exception of interest income
being earned on the note referred to above, BMA is an inactive wholly owned
subsidiary of the Corporation.
INSURANCE COUNSELLORS OF BRYN MAWR, INC.
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Insurance Counsellors of Bryn Mawr, Inc. ("Insurance Counsellors") was
incorporated on December 30, 1997 as a wholly owned subsidiary of the Bank.
Insurance Counsellors began operations on February 1, 1998. The staff of
Insurance Counsellors sells insurance products, including all facets of
casualty, property and allied insurance lines, as well as life insurance,
annuities, medical insurance and accident and health insurance for groups and
individuals.
BRYN MAWR BROKERAGE CO., INC.
- -----------------------------
Bryn Mawr Brokerage Co., Inc. ("BM Brokerage") was incorporated on
October 26, 1998 as a wholly owned subsidiary of the Corporation. BM Brokerage
began operating in January 1999. BM Brokerage offers an array of brokerage
related services to the Corporation's customers, including trading
3
of shares, annuities and mutual funds.
JOSEPH W. ROSKOS & CO., INC.
- ----------------------------
Joseph W. Roskos & Co., Inc. ("JWR&Co") was acquired as of January 1,
1999 as a wholly owned subsidiary of the Corporation. JWR&Co offers high
quality personalized family business office services to high net worth
individuals, including accounting, tax preparation services, consulting and
fiduciary support services.
BRYN MAWR FINANCE, INC.
- -----------------------
Bryn Mawr Finance is a wholly owned subsidiary of JWR&Co. Bryn Mawr
Finance provides the Corporation and its subsidiaries alternative financing
opportunities.
BRYN MAWR ASSET MANAGEMENT, INC. (FORMERLY CDC CAPITAL MANAGEMENT, INC).
- ------------------------------------------------------------------------
CDC Capital Management Inc. ("CDC") was acquired in January 1999 as a
wholly owned subsidiary of the Corporation and began operating in January 1999.
CDC provided investment consulting services to retirement plans, foundations and
high net worth individuals. During 2000, there were changes in CDC's management,
prompting the name change to Bryn Mawr Asset Management, Inc. ("BMAM"). During
2001, the decision was made to make BMAM an inactive subsidiary of the
Corporation.
BMT SETTLEMENT SERVICES, INC.
- -----------------------------
BMT Settlement Services, Inc. ("BMT Settlement") began operation in
February 2002. BMT Settlement was established as a limited partner in a newly
formed title abstract company, Bryn Mawr Settlement Services, LP (the "Limited
Partnership"). The services of the Limited Partnership are
4
expected to be used by mortgage borrowers using the services of BMT Mortgage
Company, a division of the Bank, as well as commercial and consumer loan
borrowers of the Bank.
SUMMARY
- -------
The Corporation will, through its subsidiaries, especially the Bank, seek to
market its services by providing superior banking services. This includes
deposits, lending and wealth management services, as well as other financial
services. These other services include insurance sales and services through
Insurance Counsellors, brokerage related services through BM Brokerage, family
business office services through JWR&Co and title abstract services through BMT
Settlement's affiliation with the Limited Partnership. The primary market for
these services is in Montgomery, Delaware and Chester counties of Pennsylvania.
The sale of these products and the offering of the services assist in
successfully addressing the other challenges in the ever-changing competitive
financial services market.
5
OPERATIONS
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BRYN MAWR BANK CORPORATION
- --------------------------
The Corporation had no active staff as of December 31, 2001 and conducted no
activities other than those activities through its subsidiaries, the Bank,
Insurance Counsellors, BM Brokerage, Joseph W. Roskos & Co., and JWR&Cos
subsidiary BMF.
A complete list of directors and officers of the Corporation, as of
February 28, 2002 is incorporated by reference to the next to last page of the
Corporation's Annual Report to Shareholders for the year ended December 31,
2001.
THE BRYN MAWR TRUST COMPANY
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The Bank is engaged in general, commercial and retail banking business,
providing basic banking services, including the acceptance of demand, time and
savings deposits and the making of commercial, real estate and consumer loans
and other extensions of credit. The Bank also provides a full range of wealth
management services including estate administration, investment advisory
services, pension and profit sharing administration and personal financial
planning, including tax preparation. As of December 31, 2001, the market value
of assets administered by the Bank's Wealth Management Division was
$1,707,000,000.
During 2001 residential mortgage interest rates decreased, making
residential mortgage refinancing more attractive to borrowers, compared to
similar activity in 1999 and 2000. As of March 1, 2002, the Bank had no
commissioned mortgage originators.
The Bank originated and sold $327,296,000 in residential mortgages to the
6
secondary market in 2001 compared to $71,737,000 originated and sold in 2000.
Net gains and loan fee income on such transactions amounted to $5,218,000 in
2001 compared to $1,232,000 in 2000. During 1999 the Bank originated and sold
$73,921,000 in residential mortgage loans, generating $984,000 in related net
gains and loan fee income.
The Bank renegotiated its licensing and servicing agreement with FISERV in
1994 for the in-house data processing systems, which commenced operation during
February 1996. That agreement is incorporated by reference into the
Corporation's 10-K, filed with the Commission on March 31, 1995. An addendum to
this agreement was executed in August 2001.
At December 31, 2001, the Bank had 213 full time and 29 part time
employees, including 120 officers, equaling 227.5 full time equivalent staff.
BRYN MAWR ADVISORS, INC. (FORMERLY TAX COUNSELLORS OF BRYN MAW, INC.)
- ---------------------------------------------------------------------
Effective December 31, 2000, the operations of BMA were transferred to the
Tax Professionals, concurrent with the sale of the net assets of the company.
BMA is presently an inactive subsidiary of the Corporation, having no employees.
INSURANCE COUNSELLORS OF BRYN MAWR, INC.
- ----------------------------------------
Insurance Counsellors is a full-service insurance agency, which enables
the Bank to offer insurance related products and services to its customer base.
This includes casualty, property and allied insurance lines, as well as life
insurance, annuities, medical insurance and accident and health insurance for
groups and individuals.
Insurance Counsellors employs 3 licensed insurance agents and a support
staff of 1 full time person, who have significant expertise in the design,
7
sale and service of insurance products. During the first quarter of 2001,
Insurance Counsellors entered into a joint marketing agreement with a local
insurance agency. As a result of this agreement Insurance Counsellors is able
to offer products from more than thirty major insurance companies for property
and casualty coverage. Through an affiliation with both a local benefits and
life insurance agency, Insurance Counsellors is able to offer more than thirty
life and health companies for specialized insurance needs. Insurance
Counsellors generated $377,000 of revenue during 2001.
BRYN MAWR BROKERAGE CO., INC.
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BM Brokerage offers securities products, including mutual funds,
annuities, individual stocks and bonds and retirement plans through the Bank's
branch system. BM Brokerage has entered into an agreement with UVEST Financial
Services, Inc., a broker-dealer headquartered in Charlotte, North Carolina to
provide the necessary back office support. As of December 31, 2001, BM Brokerage
had 2 full time employees. BM Brokerage generated $193,000 of revenue during
2001.
BRYN MAWR ASSET MANAGEMENT, INC.
- --------------------------------
BMAM provided investment-consulting services to retirement plans,
foundations and high net worth individuals. During 2000, there were changes in
BMAM's management, prompting the name change from CDC Capital Management, Inc.
to Bryn Mawr Asset Management, Inc. During 2001, the decision was made to make
BMAM an inactive subsidiary of the Corporation. As of December 31, 2001, BMAM
had no full time employees. During 2001, prior to moving to an inactive status,
BMAM generated $104,000 of revenues.
8
JOSEPH W. ROSKOS & CO. INC.
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JWR&Co provides family business office services to high net worth
individuals. Thus, JWR&Co offers to the clients of all the Bryn Mawr companies
access to high quality personalized financial services such as accounting, tax
preparation services, consulting and fiduciary support services to our
customers. As of December 31, 2001 JWR&Co had 23 full-time employees, 2
part-time employees and generated $2,567,000 of revenue during 2001.
BMT SETTLEMENT SERVICES, INC.
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BMT Settlement's primary market area is located in southeastern Pennsylvania.
BMT Settlement is housed in the main office of the Bank, located at 801
Lancaster Avenue, Bryn Mawr, PA 19010. BMT Settlement is a limited partner in
the Limited Partnership, which is located in Wayne, PA.
9
SOURCES OF THE CORPORATION'S REVENUE
------------------------------------
The following table shows, for a five-year period, the percentage of
consolidated revenues by major source generated by the Corporation's
subsidiaries from the activities indicated below.
Year Ended December 31,
-------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Commercial Loans 21% 23% 19% 18% 17%
Mortgage and Construction Loans 18 17 16 16 15
Consumer Loans 12 16 18 21 25
Home Equity/Line of Credit 4 4 2 2 2
Securities 3 3 4 5 6
Federal Funds Sold 1 1 1 2 3
- --- --- -- ---
Total Interest Income 59 64 60 64 68
Trust Services 17 18 21 23 21
Net gain on sale of loans 10 2 2 2 1
Other Income * 14 16 17 11 10
- --- --- --- ---
Total Revenues * 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
* Revenues were generated by the Bank, JWR&Co, BMAM, BMAM, Insurance
Counsellors, and BM Brokerage in 2001, 2000 and 1999 by the Bank, BMA, and
Insurance Counsellors in 1998 and by the Bank and BMA in 1997. The 2001 total
revenues generated by JWR&Co, BMAM, Insurance Counsellors and BM Brokerage were
5%, .2%, .5% and .4%, respectively. Of the Corporation's total revenues
generated in 2000, JWR&Co, BMAM, BMA, Insurance Counsellors and BM Brokerage,
respectively produced 5%, 1.8%, 1.8%, .5%, and .2% thereof. The 1999 total
revenues generated by JWR&Co, BMAM, BMA, Insurance Counsellors and BM Brokerage
were 4%, 2%, 1.5%, 1%, and .4%, respectively. Respective revenues generated by
BMA and Insurance Counsellors aggregated
10
1.7% and .5% of the Corporation's total revenues in 1998. BMA aggregated .4% in
1997.
STATISTICAL INFORMATION
-----------------------
The statistical information required in this Item I is incorporated by
reference to the information appearing in Corporation's Annual Report to
Shareholders for the year ended December 31, 2001, as follows:
Disclosure Required by Industry Reference to the Corporation's
- ------------------------------- ------------------------------
Guide 3 2001 Annual Report
- ------- ------------------
(Financial Section)
-------------------
I. Distribution of Assets, Liabilities
and Stockholders Equity; Interest
Rates and Interest Differential
A. Average balance sheets, interest-
income and expense; average rates
earned/paid . . . . . . . . . . . . . Analyses of Interest Rates and
Interest Differential (page 18)
B. Rate/Volume Differentials . . . . . Rate/Volume Analyses (page 19)
C. Non-Accrual Policy . . . . . . . Loan Portfolio and Non-
performing Asset Analysis
(page 24)
D. Interest Rate Sensitivity
Analysis . . . . . . . . . . . . . . . Interest Rate Sensitivity
Analysis (page 27)
II. Investment Portfolio
A. Book Values . . . . . . . . . . . . . Notes to Consolidated Finan-
cial statements, Note 3
(page 37)
B. Maturities . . . . . . . . . . . . . . Notes to Consolidated Finan-
cial Statements, Note 3
(page 37)
III. Loan Portfolio
A. Types of Loans . . . . . . . . . . . . Loan Portfolio (page 23)
11
Disclosure Required by Industry Reference to the Corporation's
- ------------------------------- ------------------------------
Guide 3 2001 Annual Report
- -------- ------------------
(Financial Section
------------------
B. Maturities and Sensitivity to
changes in Interest Rates . . . . . . Loan Portfolio-Maturity
Distribution (page 23)
Interest Rate Sensitivity
Analysis (page 27)
C. Non-Performing Assets . . . . . . . . Nonperforming Assets (page 26)
IV. Summary of Loan Loss Experience
A. Analysis of Loss Experience . . . . . Allowance for Loan
Losses (page 20)
B. Allocation of Allowance for
Loan Losses . . . . . . . . . . . . . Allocation of the Allowance
for Loan Losses (page 20)
V. Deposits
A. Average Deposits . . . . . . . . . . . Average Daily Balances of
Deposits (Page 25)
B. Maturity tables and outstanding
balances, deposits $100,000 or
more . . . . . . . . . . . . . . . . . Maturity of Certificates of
Deposit of $100,000 or
Greater (page 25)
VI. Return on Equity and Assets . . . . . Selected Financial Data
(page 12)
12
COMPETITION
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The Corporation's principal purpose is to hold the stock of the Bank and
the Corporation's other subsidiaries. Therefore, there is presently neither a
market area nor competition for the Corporation since it does not conduct
competitive business activity other than through its subsidiaries.
The Bank's market area is primarily located in portions of Delaware,
Montgomery and Chester Counties in southeastern Pennsylvania. The greatest
concentration of activity is within a limited radius of Bryn Mawr, Pennsylvania,
the site of the Bank's main banking office. The Bank has six full service branch
offices located in Bryn Mawr, Havertown, Wayne, Wynnewood, Paoli, and West
Conshohocken, Pennsylvania. In addition, there are six limited service
facilities located in life care communities in Waverly Heights, Martins Run, the
Quadrangle, Beaumont at Bryn Mawr, Bellingham and White Horse Village. All
facilities are located in Montgomery, Chester or Delaware Counties.
The banking business is highly competitive. The Bank competes not only
with other commercial banks but it also experiences competition from savings and
loan associations, trust companies and credit unions for deposits and loans, as
well as from consumer finance companies, mortgage companies, insurance
companies, stock brokerage companies and other entities providing one or more of
the services and products offered by the Bank. All of those organizations must
be considered competitors of the Bank.
13
Insurance Counsellors' market area is primarily located in southeastern
Pennsylvania, New Jersey and Delaware, although they are able to market and sell
insurance products and services anywhere in the United States. Insurance
Counsellors is housed in the main office building of the Bank, located at 801
Lancaster Avenue, Bryn Mawr, Pennsylvania. Insurance Counsellors' primary
competition is from insurance agencies and insurance agents.
BM Brokerage's market area is primarily located in southeastern
Pennsylvania, New Jersey and Delaware, although they are able to market and sell
securities related products anywhere in the United States. BM Brokerage is
housed in the main office building of the Bank, located at 801 Lancaster Avenue,
Bryn Mawr, Pennsylvania. BM Brokerage's primary competition is from brokerage
firms, mutual funds and financial institutions offering similar types of
securities related products.
JWR&Co's primary function is a family business office. Its market area is
Pennsylvania and targets individuals and families with substantial assets.
JWR&Co occupies the first floor of Number 6 Bryn Mawr Avenue, Bryn Mawr,
Pennsylvania. JWR&Co's primary competition is the wealth management departments
of various banks in the area.
BMT Settlement's primary market area is in southeastern Pennsylvania.
BMT Settlement is housed in the main office of the Bank, located at 801
Lancaster Avenue, Bryn Mawr, PA 19010. The Limited Partnership, the title
abstract company in which BMT Settlement is a limited partner, is located in
Wayne, PA. The Limited Partnership's main competition is other title abstract
companies. The Limited Partnership offers its services to
14
residential and commercial real estate borrowers.
15
SUPERVISION AND REGULATION
--------------------------
Bank holding companies, such as the Corporation, and its subsidiaries,
including the Bank, are subject to extensive regulation under both federal and
state law. To the extent that the following information describes statutory
provisions and regulations which apply to the Corporation and its subsidiaries,
it is qualified in its entirety by reference to those statutory provisions and
regulations.
REGULATION OF THE CORPORATION
-----------------------------
THE BANK HOLDING COMPANY ACT
- ----------------------------
The Corporation, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended (the "Act"). The Act limits the business
of bank holding companies to banking, managing or controlling banks, performing
certain servicing activities for subsidiaries and engaging in such other
activities as the Federal Reserve Board may determine to be closely related to
banking. The Corporation and its non-bank subsidiaries are subject to the
supervision of the Federal Reserve Board and the Corporation is required to file
with the Federal Reserve Board an annual report and such additional information
as the Federal Reserve Board may require pursuant to the Act and the regulations
which implement the Act. The Federal Reserve Board also conducts inspections of
the Corporation and each of its non-banking subsidiaries.
16
The Act prohibits the Federal Reserve Board from approving a bank holding
company's application to acquire a bank or bank holding company located outside
the state in which the operations of its banking subsidiaries are principally
conducted, unless such acquisition is specifically authorized by statute of the
state in which the bank or bank holding company to be acquired is located.
Pennsylvania law permits bank holding companies located in any state to acquire
Pennsylvania banks and bank holding companies, provided that the home state of
the acquiring company has enacted "reciprocal" legislation. In this context,
reciprocal legislation is generally defined as legislation that expressly
authorizes Pennsylvania bank holding companies to acquire banks or bank holding
companies located in another state on terms and conditions substantially no more
restrictive than those applicable to such an acquisition in Pennsylvania by a
bank holding company located in the other state.
The Act requires each bank holding company to obtain prior approval by the
Federal Reserve Board before it may acquire (i) direct or indirect ownership or
control of more than 5% of the voting shares of any company, including another
bank holding company or a bank, unless it already owns a majority of such voting
shares, or (ii) all, or substantially all, of the assets of any company. The Act
provides that the Federal Reserve Board shall not approve any acquisition by a
bank holding company of more than 5% of the voting shares or substantially all
of the assets of a bank located outside of the state in which the operation of
the holding company's bank subsidiaries are principally conducted, unless such
acquisition is specifically authorized by a statute of the state in which the
bank whose
17
shares are to be acquired is located.
The Act also prohibits a bank holding company from engaging in, or from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company engaged in non-banking activities unless the Federal
Reserve Board, by order or regulation, has found such activities to be so
closely related to banking or to managing or controlling banks as to be
appropriate. The Federal Reserve Board has by regulation determined that certain
activities are so closely related to banking or to managing or controlling
banks, so as to permit bank holding companies, such as the Corporation, and its
subsidiaries formed for such purposes, to engage in such activities, subject to
obtaining the Federal Reserve Board's approval in certain cases.
The Act further provides that the Federal Reserve Board shall not approve
any such acquisition that would result in a monopoly or would be in furtherance
of any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the country, or that in any other manner
would be in restraint of trade, unless the anti-competitive effects of the
proposed transactions are clearly outweighed by the public interest and the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served.
Under the Act, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension or
provision of credit, lease or sale of property or furnishing any service to a
customer on the condition that the customer provide additional credit or service
to the bank, to its bank holding company or any
18
other subsidiaries of its bank holding company or on the condition that the
customer refrain from obtaining credit or service from a competitor of its bank
holding company. Further, the Bank, as a subsidiary bank of a bank holding
company, such as the Corporation, is subject to certain restrictions on any
extensions of credit it provides to the Corporation or any of its non-bank
subsidiaries, investments in the stock or securities thereof, and on the taking
of such stock or securities as collateral for loans to any borrower.
In addition, the Federal Reserve Board may issue cease and desist orders
against bank holding companies and non-bank subsidiaries to stop actions
believed to present a serious threat to a subsidiary bank. The Federal Reserve
Board also regulates certain debt obligations and changes in control of bank
holding companies.
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its subsidiary banks and to
commit resources, including capital funds during periods of financial stress, to
support each such bank. Although this "source of strength" policy has been
challenged in litigation, the Federal Reserve Board continues to take the
position that it has the authority to enforce it. Consistent with its "source of
strength" policy for subsidiary banks, the Federal Reserve Board has stated
that, as a matter of prudent banking, a bank holding company generally should
not maintain a rate of cash dividends unless its net income available to common
shareholders has been sufficient to fund fully the dividends, and the
prospective rate of earnings retention appears to be consistent with the
company's capital needs, asset quality and overall financial condition.
19
FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT
- -----------------------------------------------------------
Following enactment by the United States Congress, on August 9, 1989, the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
became law. Although the more significant provisions of FIRREA relate to
promoting the economic viability of thrift institutions through more stringent
capital requirements and changes to the regulatory structure of such
institutions, FIRREA also contains provisions that directly affect banks and
bank holding companies, such as the Corporation. First, FIRREA abolished the
Federal Savings and Loan Insurance Corporation and required the Federal Deposit
Insurance Corporation (the "FDIC") to establish two separate funds, the Bank
Insurance Fund ("BIF") to insure banks and the Savings Association Insurance
Fund ("SAIF") to insure savings and loan associations. Second, FIRREA amended
the Act to permit bank holding companies to acquire thrift institutions. Prior
to FIRREA, bank holding companies were permitted to acquire only failing thrift
institutions. FIRREA also abolished the restrictions on tandem operations of
acquired thrift institutions and the in-state preference for acquisitions of
failing thrifts. Finally, FIRREA enhanced the authority of the regulatory
authorities over financial institutions, including banks and bank holding
companies, to regulate more effectively with the entire structure of a bank
holding company.
Federal law also grants to federal banking agencies the power to issue
cease and desist orders when a depository institution or a bank holding company
or an officer or director thereof is engaged in or is about to engage in unsafe
and unsound practices. The Federal Reserve Board may
20
require a bank holding company, such as the Corporation, to discontinue certain
of its activities or activities of its other subsidiaries, other than the Bank,
or divest itself of such subsidiaries if such activities cause serious risk to
the Bank and are inconsistent with the Bank Holding Company Act or other
applicable federal banking laws.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
-------------------------------------------------------------
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") is legislation designed to reform and provide funding for the deposit
insurance system by, among other things, requiring early intervention and
closure of troubled institutions by the regulatory authorities and the
resolution of failed institutions on the least-cost basis.
The FDICIA substantially alters the deposit insurance assessment process.
The requirement that the FDIC provide at least sixty (60) days notice before
requiring changes to the semiannual insurance assessment has been removed and
the FDIC has the ability to change deposit insurance assessment rates much more
rapidly than in the past. FDICIA grants the FDIC the authority to impose special
"emergency" assessments on member banks at any time if necessary to pay interest
or principal on borrowings or for other appropriate purposes. FDICIA also
requires the FDIC to establish a risk-based assessment system for the deposit
insurance funds. In addition, FDICIA establishes capital categories, such as,
"well-capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized", and "critically undercapitalized". Under the guidelines
currently
21
issued by the regulators, the Bank is currently considered "well-capitalized".
FDICIA also requires the regulators to place a financial institution under
more intense scrutiny if its capital falls into a lower capital category. In
addition, FDICIA restricts the liquidity that is available, through the Federal
Reserve discount window, to troubled financial institutions and increases the
scope of the regulatory authorities supervisory powers over financial
institutions, including the Bank and Corporation.
Pursuant to federal law, federal regulatory authorities review the
performance of the Corporation and their subsidiaries in meeting the credit
needs of the communities served by the Bank. The applicable federal regulatory
authority considers compliance with this law in connection with applications
for, among other things, approval of branches, branch relocations and
acquisitions of banks and bank holding companies.
PENNSYLVANIA LAWS AFFECTING THE CORPORATION
-------------------------------------------
PENNSYLVANIA ANTI-TAKEOVER LEGISLATION
- --------------------------------------
The Corporation is also subject to the Pennsylvania Business Corporation
Law of 1988, as amended and the general business and other laws of the
Commonwealth of Pennsylvania regulating corporations.
The Pennsylvania Legislature passed the Pennsylvania Anti-Takeover Law Act
36 of the 1990 Pennsylvania Legislature ("Act 36") on April 27, 1990
22
which adds additional provisions to and amends the law of Pennsylvania
concerning business corporations (the "Corporation Law"). Specifically, Act 36
(i) modifies and limits the fiduciary obligations of a corporation's directors,
withholds voting rights from control shares of corporation stock until consent
of the Corporation's independent shareholders is obtained at a shareholders
meeting, prevents "green mail" by providing for disgorgement of certain profits
by a control person or group within eighteen (18) months after an attempt to
acquire control of a corporation. Act 36 also provides for severance
compensation for certain terminated employees following control share
acquisitions, and regulates the effect of certain business combinations on
labor contracts.
Act 36, which is the Legislature's response to the large volume of hostile
takeovers over recent years, contains provisions which permitted a corporation's
board of directors to "opt-out" of certain provisions of the Act by explicitly
amending the corporation's by-laws on or before July 26, 1990. On July 20, 1990,
the Corporation's Board amended the Corporation's by-laws to explicitly opt-out
of the provisions of Act 36 which modify and limit a director's fiduciary duty
to the Corporation, withhold voting rights from "control shares" of the
Corporation stock, and provide for disgorgement of certain profits on certain
shares of the Corporation stock by a control person or group within eighteen
months after an attempt to acquire the Corporation's stock. Because the
Corporation's Board of Directors opted out of the provisions of Act 36
concerning fiduciary duty, control share acquisitions, and disgorgement of
profits, the severance compensation and labor contract provisions of Act 36 are
inapplicable to the Corporation.
The Corporation's Board opted-out of those provisions of the Act by
23
amending the Corporation's by-laws because it believed and continues to believe
that those provisions of the Act were not in the best economic interests of the
Corporation's shareholders. In addition, the Board believes that, without those
provisions of Act 36, the Board has sufficient flexibility under the applicable
law to protect the interest of the shareholders. As outlined in the
Corporation's definitive proxy statement for the 1992 shareholders' meeting, the
Board of Directors recommended that the Corporation's shareholders ratify and
approve the amendment to the Corporation's by-laws opting out of Act 36.
REGULATION OF THE BANK
----------------------
The Corporation's Pennsylvania state chartered Bank, The Bryn Mawr Trust
Company, is regulated and supervised by the Pennsylvania Department of Banking
(the "Department of Banking") and subject to regulation by Federal Reserve Board
and the FDIC. These agencies regularly examine the Bank's reserves, loans,
investments, management practices and other aspects of its operations and the
Bank must furnish periodic reports to these agencies. The Bank is a member of
the Federal Reserve System.
FEDERAL RESERVE BOARD AND DEPARTMENT OF BANKING REGULATIONS
- -----------------------------------------------------------
The Bank's operations are subject to certain requirements and restrictions
under federal and state laws, including requirements to maintain reserves
against deposits, limitations on the interest rates that may be paid on certain
types of deposits, restrictions on the types and
24
amounts of loans that may be granted and the interest that may be charged
thereon, limitations on the types of investments that may be made and the types
of services which may be offered. Various consumer laws and regulations also
affect the operations of the Bank. These regulations and laws are intended
primarily for the protection of the Bank's depositors and customers rather than
holders of the Corporation's stock.
As a bank incorporated under and subject to Pennsylvania banking laws and
insured by the FDIC, the Bank must obtain the prior approval of the Department
of Banking and the Federal Reserve Board before establishing a new branch
banking office. Depending on the type of bank or financial institution, a merger
of banks located in Pennsylvania are subject to the prior approval of one or
more of the following: the Department of Banking, the FDIC, the Federal Reserve
Board and the Office of the Comptroller of the Currency. An approval of a merger
by the appropriate bank regulatory agency would depend upon several factors,
including whether the merged institution is a federally insured state bank, a
member of the Federal Reserve System, or a national bank. Additionally, any new
branch expansion or merger must comply with geographical branching restrictions
provided by state law. Beginning in 1990, the Pennsylvania Banking Code
permitted Pennsylvania banks to establish branches anywhere in the state.
The Bank is insured by the FDIC, which currently insures the Bank's
deposits to a maximum of $100,000 per deposit. For this protection, each insured
bank pays a semiannual statutory insurance assessment and is subject to certain
rules and regulations of the FDIC. The amount of FDIC assessments paid by
individual insured depository institutions, such as the Bank, is based on their
relative risk as measured by regulatory capital
25
ratios and certain other factors. Under this system, in establishing the
insurance premium assessment for each bank, the FDIC will take into
consideration the probability that the deposit insurance fund will incur a loss
with respect to an institution, and will charge an institution with perceived
higher inherent risks a higher insurance premium. The FDIC will also consider
the different categories and concentrations of assets and liabilities of the
institution, the revenue needs of the deposit insurance fund, and any other
factors the FDIC deems relevant. A significant increase in the assessment rate
or a special additional assessment with respect to insured deposits could have
an adverse impact on the results of operations and capital levels of the Bank
or the Corporation.
REGULATION OF THE CORPORATION-
GOVERNMENT MONETARY POLICIES
----------------------------
The earnings and operations of the Corporation and its subsidiaries are
affected by the policies of regulatory authorities and legislative changes; in
particular, the policies of the Federal Reserve Board in regulating the money
supply and interest rates. Among the instruments used by the Federal Reserve
Board to implement its objectives are open-market operations in U.S. Government
securities, changes in the discount rate for member bank borrowings, changes in
reserve requirements against bank deposits, and changes with respect to
regulations affecting certain borrowing by banks and their affiliates.
The monetary and fiscal policies of the Federal Reserve Board and the
26
other regulatory agencies have had, and will probably continue to have, an
important impact on the operating results of the Bank through their power to
implement national monetary policy in order to, among other things, curb
inflation or combat a recession. The monetary policies of the Federal Reserve
Board may have a major effect upon the levels of the Bank's loans, investments
and deposits through the Federal Reserve Board's open market operations in
United States government securities, through its regulation of, among other
things, the discount rate on borrowing of depository institutions, and the
reserve requirements against depository institution deposits. It is not possible
to predict the nature and impact of future changes in monetary and fiscal
policies.
The earnings of the Bank and therefore, of the Corporation are affected by
domestic economic conditions, particularly those conditions in the trade area as
well as the monetary and fiscal policies of the United States government and its
agencies.
The Federal Reserve Board also has authority to prohibit a bank holding
company from engaging in any activity or transaction deemed by the Federal
Reserve Board to be an unsafe or unsound practice. The payment of dividends
could, depending upon the financial condition of the Bank or Corporation, be
such an unsafe or unsound practice and the regulatory agencies have indicated
their view that it generally would be an unsafe and unsound practice to pay
dividends except out of current operating earnings. The ability of the Bank to
pay dividends in the future is presently and could be further influenced, among
other things, by applicable capital guidelines discussed below or by bank
regulatory and supervisory policies. The ability of the Bank to make funds
available to the Corporation is also subject to
27
restrictions imposed by federal law. The amount of other payments by the Bank
to the Corporation is subject to review by regulatory authorities having
appropriate authority over the Bank or Corporation and to certain legal
limitations.
The passage of additional legislation by Congress authorizing additional
continuing legal and regulatory supervision of financial institutions, requiring
additional disclosure concerning deposit transactions and permitting more rapid
increases in deposit insurance premiums may increase the cost and the
operational expenses even for efficiently run and well-capitalized financial
institutions and may adversely affect the profit margins of the Bank and the
Corporation.
RISK BASED CAPITAL GUIDELINES
- -----------------------------
The Federal Reserve Board has promulgated certain "Risk Based Capital
Guidelines" which more narrowly define bank capital, as it relates to assets,
than do prior regulatory guidelines. Under the new guidelines, various types of
Corporation assets are assigned risk categories and weighted based on their
relative risk. In addition, certain off balance sheet items are translated into
balance sheet equivalents and also weighted according to their potential risk.
The sum of both of these asset categories, referred to as Total Risk Weighted
Assets, is then compared to the Corporation's total capital, providing a Tier I
Capital Ratio, under the new guidelines. A Tier II capital ratio is also
computed for the Corporation, adding an allowable portion of the loan loss
reserve to
28
capital. Both the Tier I and Tier II ratios of the Corporation are in excess of
those minimum capital ratios required. The focus of the guidelines is to
measure the Corporation's capital risk. The guidelines do not explicitly take
into account other risks, such as interest rate changes or liquidity.
The Bank in its normal business originates off-balance sheet items, such
as outstanding loan commitments and standby letters of credit. The Bank makes
loan commitments to borrowers to assure the borrower of financing by the Bank
for a specified period of time and/or at a specified interest rate. The
obligation to the Bank, pursuant to an unfunded loan commitment, is limited by
the terms of the commitment letter issued by the Bank to each borrower. The Bank
carefully reviews outstanding loan commitments on a periodic basis. A standby
letter of credit is an instrument issued by the Bank, which represents a
contingent obligation to make payments with respect to a specific transaction of
a customer. The Bank carefully evaluates the creditworthiness of each of its
letter of credit customers. The Corporation carefully monitors its risks as
measured by the Risk Capital Guidelines and seeks to adhere to the Risk Capital
Guidelines.
FINANCIAL SERVICES ACT OF 1999
- ------------------------------
On March 11, 2000 the Financial Services Act of 1999 (the "FSA"),
sometimes referred to as the Gramm-Leach-Bliley Act, became effective. The FSA
repealed provisions of the Glass-Steagall Act, which had prohibited commercial
banks and securities firms from affiliating with each other and engaging in each
other's businesses. Thus, many of the barriers prohibiting
29
affiliations between commercial banks and securities firms have been eliminated.
The FSA amended the Act to allow new "financial holding companies" ("FHC")
to offer banking, insurance, securities and other financial products to
consumers. Specifically, the FSA amends section 4 of the Act in order to
provide for a framework for the engagement in new financial activities. Bank
holding companies may elect to become a financial holding company if all its
subsidiary depository institutions are well-capitalized and well-managed. If
these requirements are met, a bank holding company may file a certification to
that effect with the Federal Reserve Board and declare that it elects to become
a FHC. After the certification and declaration is filed, the FHC may engage
either de novo or through an acquisition in any activity that has been
determined by the Federal Reserve Board to be financial in nature or incidental
to such financial activity. Bank holding companies may engage in financial
activities without prior notice to the Federal Reserve Board if those
activities qualify under the new list in section 4(k) of the Act. However,
notice must be given to the Federal Reserve Board, within 30 days after the FHC
has commenced one or more of the financial activities. The Corporation has not
become an FHC.
Under the FSA, a bank subject to various requirements is permitted to
engage through "financial subsidiaries" in certain financial activities
permissible for affiliates of FHC's. However, to be able to engage in such
activities a bank must continue to be well-capitalized and well-managed and
receive at least a "satisfactory" rating in its most recent Community
Reinvestment Act examination. The Corporation cannot be certain of the effect
of the foregoing recently enacted legislation on its business,
30
although there is likely to be consolidation among financial services
institutions and increased competition for the Corporation.
PRIVACY OF CONSUMER FINANCIAL INFORMATION
- -----------------------------------------
The FSA also contains a provision designed to protect the privacy of each
consumer's financial information in a financial institution. Pursuant to the
requirements of the FSA, the financial institution regulators (the "Regulators")
have effective November 13, 2000, promulgated final regulations (the
"Regulations") intended to better protect the privacy of a consumer's financial
information maintained in financial institutions. Compliance with the
regulations was optional until July 1, 2001.
The Regulations are designed to prevent financial institutions, such
as the Bank, from disclosing a consumer's nonpublic personal information to
third parties that are not affiliated with the financial institution.
However, financial institutions can share a customer's personal
information or information about business and corporations with their
affiliated companies. The Regulations also provide that financial institutions
can disclose nonpublic personal information to nonaffiliated third parties for
marketing purposes but the financial institution must provide a description of
its privacy policies to the consumers and give the consumers an opportunity to
opt-out of such disclosure and, thus, prevent disclosure by the financial
institution of the consumer's nonpublic personal information to nonaffiliated
third parties.
31
The Regulators, among other things, provide guidance concerning what
are "nonpublic personal information", "consumers", and "customers", as well as
about the required timing for notices to customers and the means by which
customers can exercise their rights to opt-out of disclosure of their personal
information.
These privacy Regulations will affect how consumer's information is
transmitted through diversified financial companies and conveyed to outside
vendors. Although it is not possible at this time to assess the impact of the
privacy Regulations on financial institutions or the Bank, the Bank does not
believe the privacy Regulations will have a material adverse impact on its
operations in the near term. Nevertheless, the implementation of the privacy
Regulations has and will continue to require significant effort by the staff
for the Bank and the Corporation.
CONSUMER PROTECTION RULES - SALE OF INSURANCE PRODUCTS
In addition, as mandated by the FSA, the Regulators have published
consumer protection rules (the "Rules") which apply to the retail sales
practices, solicitation, advertising or offers of insurance products, including
annuities, by depository institutions such as banks and their subsidiaries. The
Rules are proposed to be effective on October 1, 2001.
In very brief summary the Rules provide, that before the sale of insurance
or annuity products can be completed, disclosures must be made that state such
insurance products are not deposits or other obligations of or guaranteed by the
FDIC or any other agency of the United States, the Bank or its affiliates. In
the case of an insurance product, including an annuity, that involves an
investment risk, that there is an investment risk
32
involved with the product, including a possible loss of value.
The Rules also provide that the Bank may not condition an extension of
credit on the consumer's purchase of an insurance product or annuity from the
Bank or its affiliates or on the consumer's agreement not to obtain or a
prohibition on the consumer obtaining an insurance product or annuity from an
unaffiliated entity.
The Rules also require formal acknowledgement from the consumer that such
disclosures have been received. In addition, to the extent practical, the Bank
must keep insurance and annuity sales activities physically separate from the
areas where retail sales are routinely accepted from the general public.
GOVERNMENT POLICIES AND FUTURE LEGISLATION
- ------------------------------------------
As the enactment of the FSA confirms, from time to time, various
proposals are made in the United States Congress as well as Pennsylvania
legislature and by various bank regulatory authorities which would alter the
powers of, and place restrictions on, different types of banks and financial
organizations. Among current proposals of significance to the Corporation or its
subsidiaries are the continued liberalization of the restrictions on the
acquisitions of out-of-state banks by bank holding companies, the expansion of
the powers of banks and thrift institutions, the liberalization of the
restrictions upon the activities in which bank holding companies may engage, the
imposition of limitations on interest rates and service charges, certain
consumer legislation and the requirement to provide certain basic banking
33
services. It is impossible to predict whether any of the proposals will be
adopted and the impact, if any, of such adoption on the business of the
Corporation or its subsidiaries, especially the Bank.
RECENT REGULATORY DEVELOPMENTS
- ------------------------------
By the end of 2001, in the wake of the events of September 11, 2001, the
banking regulators published for comment or took under consideration new
regulations concerning money laundering, as well as other regulations which may
effect the Bank.
The federal budget for 2003 indicates the possible increase of bank
deposit insurance coverage and the premiums charged to banks for such insurance.
Draft legislation has been introduced in Congress with respect to those matters.
In March 2002, the FDIC announced that an increase in deposit insurance premiums
was likely in the second half of 2002. It is not possible to assess the impact
on the Bank of any of the foregoing proposals.
IMPACT OF FUTURE LEGISLATION AND GOVERNMENTAL POLICIES
- ------------------------------------------------------
As the enactment of the FSA confirms, from time to time, various proposals
are made in Congress, in the Pennsylvania legislature and by various bank
regulatory authorities which would alter the powers of or place restrictions
upon banks and other financial institutions.
As a consequence of the extensive regulations of banking activities in the
United States, the Bank's business is particularly susceptible to being affected
by federal and state legislation and regulations that may increase the cost of
doing business or curtail the business in which the Bank and its affiliates may
engage.
From time to time enactment of legislation or promulgation of regulations
may impact the business of the Bank and its affiliates. It cannot be
34
predicted whether such legislation or regulations will be adopted, and if
adopted, how these would affect the Bank and its affiliates.
SUBSIDIARIES OF THE CORPORATION
- -------------------------------
The non-bank subsidiaries of the Corporation are also subject to
regulation and examination by the Federal Reserve Board and must file periodic
reports with the Federal Reserve Board.
35
ITEM 2. PROPERTIES
------------------
The headquarters of the Corporation and the main office of the Bank are
located in a three story stone front office building, consisting of
approximately 37,000 net usable square feet, located at the main intersection of
Bryn Mawr, Pennsylvania, at Lancaster Avenue and Bryn Mawr Avenue. The main
office of the Bank has been located in Bryn Mawr since its founding in 1889. The
Corporation acquired two additional properties during 1988, that is (i) a
property contiguous to the Bank's main office and (ii) a property at 10 Bryn
Mawr Avenue to house the Bank's Wealth Management Division. The first property
which is contiguous to the Bank's main office, houses an expanded drive-up
facility and a meeting room and is subject to a mortgage as outlined in Note 6
to the Corporation's financial statements, on page 38 of the 2001 Annual Report.
The second property became the location of the Bank's Wealth Management Division
in mid-December, 1989. The real property owned by the Corporation and the Bank,
other than that contiguous to the Bank's main office is free and clear of all
liens and encumbrances.
Below is a schedule of all properties owned or leased by the Corporation or
its subsidiaries.
36
The Bank:
- --------
Date Acquired
Current Banking Office Address or Opened
----------------------- ------- ---------------
Main Office and Principal 801 Lancaster Avenue 1889
Place of Business (owned) Bryn Mawr, PA 19010
Branch Office/Operations 330 E. Lancaster Avenue 1985
Center (owned) Wayne, PA 19087
Branch Office/Admin. 18 W. Eagle Road 1987
Office (owned) Havertown, PA 19083
Date Acquired
Current Banking Office Address or Opened
----------------------- ------- ---------------
Branch Office (owned) 312 E. Lancaster Avenue 1979
Wynnewood, PA 19096
Branch Office (owned) N.E. Corner of Lancaster 1986
and Greenwood Avenues
Paoli, PA 19301
Branch Office (leased) One Tower Bridge/(1)/ 1995
Through July 31, 2004 West Conshohocken, Pa 19428
Branch Office (leased) The Quadrangle/(2)/ 1989
month to month basis 3300 Darby Road
Haverford, PA 19041-1095
Branch Office (leased) Waverly Heights, Ltd./(2)/ 1986
month to month basis Life Care Community
Gladwyne, PA 19035
Branch Office (leased) Martins Run/(2)/ 1987
month to month basis Life Care Community
11 Martins Run
Media, PA 19063
Branch Office (leased) Bellingham/(2)/ 1991
through August 31, 2004 1615 East Boot Road
West Chester, PA 19380
Branch Office (leased) Beaumont at Bryn Mawr/(2)/ 1995
through April 30, 2003 Retirement Community
Bryn Mawr, PA 19010
37
Office Space (leased) 2&6 Bryn Mawr Avenue/(5)/ 1999
through March 1, 2028 Bryn Mawr, Pa. 19010
Branch Office (leased) White Horse Village/(2)/ 2000
through March 1, 2005 535 Gradyville Road
Newtown Square, PA.
Branch Office (leased) Rosemont Presbyterian 2001
Village/(2)/
Through January 31, 2007 404 Cheswick Place
Rosemont, PA 19010-1251
Office Space (leased) 2011 Renaissance Blvd./(6)/ 1999
Through August 31, 2004 Suite 200
King of Prussia, PA 19406
The Corporation:
- ---------------
Date Acquired
Other Facilities Address or Opened
----------------------- ------- ---------------
Walk-in Lobby, Drive-up 813 Bryn Mawr Avenue/(3)/ 1988
Windows, Meeting Room Bryn Mawr, PA 19010
(owned)
Office Building (owned) 10 Bryn Mawr Avenue/(4)/ 1988
Bryn Mawr, PA 19010
/(1)/ This branch is on the lobby level of an office building and has been
established to primarily meet the needs of the occupants of the
office building and the surrounding community. There is an automatic
teller machine located within the facility. The lease is for 705
square feet and expires on July 31, 2004.
/(2)/ This branch office has been established primarily to meet the needs
of the residents of the Life Care Community in which it is located.
/(3)/ This property is contiguous to the Bank's main office, originally
housed a gas station, which was demolished. This property houses a
walk-in lobby, expanded drive-up facility and a meeting room, and was
put in service in August, 1990.
/(4)/ This property became the new location of the Bank's Wealth Management
Division, in mid-December, 1989. The
38
Corporation leased the property to the prior owners on a
month-to-month basis through June, 1989.
/(5)/ This lease is for 24,800 square feet of office space to house the
support staff which was formerly located in the Bank's main office at
801 Lancaster Avenue. The support areas currently located at this
location are Audit, Human Resources, Marketing, Loan Operations and
Comptrollers.
/(6)/ This lease is for 7,527 square feet of space, located in King of
Prussia, that previously housed the employees of JWR&Co. It is
presently vacant and the Bank intends to sublet the property for the
remainder of the term of the lease. The term of the lease is for 66
months(5 years and six months) which commenced February 1999.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Neither the Corporation nor any of its subsidiaries is a party to, nor is
any of their property the subject of, any material legal proceedings other than
ordinary routine litigation incident to their businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
No matter was submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders which is required to be disclosed
pursuant to the instructions contained in the form for this report.
39
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
The information required by this Item 5 is incorporated by reference to
the information appearing under the caption "Price Range of Shares" on page 10
of the Corporation's Annual Report to Shareholders for the year ended December
31, 2001.
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
The information required by this Item 6 is incorporated by reference to
the information appearing under the caption "Selected Financial Data" on page 12
of the Corporation's Annual Report to Shareholders for the year ended December
31, 2001.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
---------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The information required by this Item 7 is incorporated by reference to
the information appearing under the caption "Management's Discussion and
Analysis" on pages 13 to 29 of the Corporation's Annual Report to Shareholders
for the year ended December 31, 2001.
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The financial statements and the auditor's report thereon and
supplementary data required by this Item 8 are incorporated by reference on
page 11 and pages 30 to 47 of the Corporation's Annual Report to Shareholders
for the year ended December 31, 2001.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
-------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
There were no matters, which are required to be disclosed in this Item 9
pursuant to the instructions contained in the form for this report.
41
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
The information with respect to Directors of the Corporation is
incorporated by reference on pages 3 through 10 of the definitive proxy
statement of the Corporation filed with the Securities and Exchange Commission
pursuant to Regulation 14A.
Executive Officers of the Corporation. Below is certain information with
-------------------------------------
respect to the executive officers of the Corporation and Bank as of February
28, 2002:
AGE AS OF OFFICE WITH THE
NAME FEBRUARY 28, 2002 CORPORATION AND/OR BANK
---- ----------------- -----------------------
Frederick C. Peters II 52 President and Chief
Executive Officer and
Director of Corporation
and Bank
Joseph W. Rebl 57 Treasurer of Corporation
and Executive Vice
President, Treasurer &
Chief Financial Officer of
Bank
Robert J. Ricciardi 53 Secretary of Corporation
and Executive Vice
President and Secretary of
the Bank, Chief Credit
Policy Officer
Joseph W. Roskos 53 Executive Vice president
of Bank and Chairman of
Joseph W. Roskos & Co.
42
AGE AS OF OFFICE WITH THE
NAME FEBRUARY 28, 2002 CORPORATION AND/OR BANK
---- ----------------- -----------------------
Joseph G. Keefer 43 Executive Vice President
of Bank- Chief Lending
Officer
Alison E. Gers 44 Executive Vice President
of Bank- Administration
and Operations
John G. Roman 49 Executive Vice President-
Bank- Wealth Management
Division
Mr. Peters was elected President and Chief Executive Officer and a
Director of the Corporation and the Bank on January 22, 2001. Prior to that,
Mr. Peters was founder, President and Chief Executive Officer of the 1st Main
Line Bank, a division of National Penn Bank, from May 1995 to January 2001.
From 1985 to 1995, Mr. Peters was the founding President and Chief Executive
Officer of National Bank of the Main Line. Prior to 1985, Mr. Peters was
employed by Industrial Valley Bank as a Regional Vice President in a lending
capacity.
Mr. Rebl was employed by the Bank and elected its Comptroller in 1981. He
was elected Vice President and Comptroller in 1983 and Senior Vice President in
1987. Upon the formation of the Corporation in 1986, Mr. Rebl was elected
Treasurer of the Corporation. In 1992, Mr. Rebl was designated the Bank's
Senior Vice President-Finance. In 1994, Mr. Rebl was designated Treasurer of
43
the Bank. In 1999, Mr. Rebl was designated Chief Financial Officer of the Bank.
In February 2001, Mr. Rebl was designated Executive Vice President of the Bank.
Mr. Ricciardi was employed by the Bank in 1971 and elected an Assistant
Treasurer in 1973. Mr. Ricciardi was elected an Assistant Vice President of the
Bank in 1976 and a Vice President in 1981. In 1989, Mr. Ricciardi was elected
Senior Vice President of Real Estate Lending. In November, 1993, he was elected
Executive Vice President and assumed responsibility for the Bank's Community
Banking Division. In November 1997, Mr. Ricciardi was named the Bank's Chief
Credit Policy Officer and relinquished responsibility for the Community Banking
Division. In January 2001, Mr. Ricciardi was named Secretary of the Corporation
and the Bank.
Mr. Roskos was President of Joseph W. Roskos & Co. from January 1991 to
October 1999. In October 1999, Mr. Roskos was appointed Chairman of Joseph W.
Roskos & Co., a subsidiary of the Corporation. Prior to that, Mr. Roskos was
Vice President of the Corporation and an Executive Vice President of the Wealth
Management Division of the Bank from May 1999 to October 2000. Mr. Roskos was
appointed Executive Vice President of the Bank in December 2001.
Mr. Keefer was employed by the Bank as Vice President in March 1991. He
was promoted to Senior Vice President-Commercial Lending in July 1994 and was
made the Bank's Chief Lending Officer in December 1997. In February 2001, Mr.
Keefer was designated an Executive Vice President of the Bank. Prior to his
employment by the Bank, Mr. Keefer was employed by First Pennsylvania Bank, NA
from June 1980 until March 1991, where he was a Vice President in the
commercial lending division.
44
Ms. Gers was employed by the Bank as Senior Vice President-Marketing in
May 1998. In February 2001, Ms. Gers was designated Executive Vice President of
the Bank, having responsibility for marketing, administrative services and
operations. Prior to her employment by the Bank, she was Executive Vice
President of CoreStates Bank, NA from July 1995 until May 1998, having
responsibility for retail and small business marketing, advertising and product
development. From February 1988 until August 1992, Ms. Gers was Senior Vice
President of Home Unity Savings Bank, having responsibility for retail banking.
From January 1986 to October 1987, she was Marketing Director for Colonial Penn
Group. From February 1983 until January 1986, she was Product Manager for third
party life and health insurance products for National Liberty Marketing.
Mr. Roman was employed by the Bank as Senior Vice President of the Wealth
Management Division of the Bank. In February 2002, Mr. Roman was designated
Executive Vice President of the Wealth Management Division of the Bank. Prior
to that, Mr. Roman was President of Merrill Lynch Trust of New Jersey from June
1997 to July 2001.
None of the above executive officers has any family relationship with any
other executive officer or with any director of the Corporation or Bank.
45
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The information required by this Item 11 is incorporated by reference on
pages 10 through 20 of the definitive proxy statement of the Corporation, filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
-------------------------------------------------
OWNERS AND MANAGEMENT
---------------------
The information required by this Item 12 is incorporated by reference on
page 2, and pages 8 and 9 of the Corporation's definitive proxy statement,
filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
There were no relationships or transactions required to be disclosed in
this Item 13 pursuant to the instructions contained in the form for this
report, as discussed on pages 17 and 18 of the Corporation's definitive proxy
statement, filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
46
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(a) The following exhibits are filed as a part of this report.
EXHIBIT TABLE
- -------------
3 - Articles of Incorporation and By-Laws
- -----------------------------------------
(A) Articles of Incorporation, effective August 8, 1986, are incorporated
by reference to Form S-4 of the Registrant, No. 33-9001.
(B) By-Laws of the Registrant, as amended July 20, 1990, is incorporated
by reference to the Corporation's 10-K, filed with the Securities and
Exchange Commission on March 26, 1991.
4 - Instruments defining the rights of security holders
- -------------------------------------------------------
Articles of Incorporation and By-Laws: See Item 3(A) & (B) above.
10 - Material Contracts
- -----------------------
(A) Agreement dated December 31, 1990, between The Bryn Mawr Trust Company and
Mellon Bank, N.A. is incorporated by reference to the Corporation's 10-K,
filed with the Securities and Exchange Commission on March 26, 1991.
(B) Mortgage dated December 16, 1988 between Fidelity Mutual Life Insurance
Company and Bryn Mawr Bank Corporation is incorporated by reference to the
Corporation's 10-K, filed with the Securities and Exchange Commission on
March 28, 1990.
(C) Mortgage dated May 18, 1988 between John A. Sparta and Helen M. Sparta of
the one part and Bryn Mawr Bank Corporation of the other part, is
incorporated by reference to the Corporation's 10-K, filed
47
with the Securities and Exchange Commissions on March 28, 1990.
(D) Agreement dated December 20, 1990 between Bryn Mawr Bank Corporation and
Profit Research Consulting, Inc., is incorporated by reference to the
Corporation's 10-K, filed with the Securities and Exchange Commission on
March 28, 1990.
(E) Letter of Understanding dated December 20, 1990, between Bryn Mawr Bank
Corporation and Profit Research Group, Inc., is incorporated by reference
to the Corporation's 10-K, filed with the Securities and Exchange
Commission on March 28, 1990.
(F) License Agreement dated December 20, 1990, between Profit Research
Consulting, Inc. and Profit Research Group, Inc., is incorporated by
reference to the Corporation's 10-K, filed with the Securities and
Exchange Commission on March 20, 1990.
(G) The Bryn Mawr Bank Corporation Amended and Restated 1986 Stock Option and
Stock Appreciation Plan, is hereby incorporated by reference to the
Corporation's Proxy Statement dated March 14, 1994 and filed with the
Commission as Appendix A to the Proxy Statement on March 15, 1994.
(H) License Agreement dated December 30, 1994, between Bryn Mawr Bank
Corporation and FIserv Cir, Inc. is incorporated by reference to the
Corporation's 10-K, filed with the Securities and Exchange Commission on
March 31, 1995.
(I) The Bryn Mawr Bank Corporation Non-Employee Directors Stock Option Plan,
is hereby incorporated by reference to the Corporation's Proxy Statement
dated March 10, 1995 and filed with the Commission as Appendix A to the
Proxy Statement on March 10, 1995.
(J) The Bryn Mawr Bank Corporation 1998 Stock Option Plan, is hereby
incorporated by reference to the Corporation's Proxy Statement
48
dated March 2, 1998 and filed with the Securities and Exchange Commission
as Exhibit A to the Proxy Statement.
(K) Agreement dated May 2, 1997, between The Bryn Mawr Trust Company and
Marshall and Ilsley Corporation, to provide data processing services to
the Bank's Investment Management and Trust Division is incorporated by
reference to the Corporation's 10-K filed with the Securities and Exchange
Commission on March 30, 1998.
(L) Agreement dated January 1, 1999 between Bryn Mawr Brokerage Company, Inc.
and UVEST Financial Services Group, Inc., to provide brokerage support
services to BM Brokerage is incorporated by reference to the Corporation's
Form 10-K filed with the Securities and Exchange Commission on March 30,
1999.
(M) Lease dated March 1, 1999 between The Bryn Mawr Trust Company and Anthony
J. Marcozzi and The Real Viking, Inc. for the property and the buildings
known as 2 and 6 Bryn Mawr Avenue. The term of this lease is for an
initial period of twenty-nine years with the option to extend for one-ten
year period with the same terms and conditions as the initial lease. The
lease is hereby incorporated by reference to the Corporation's Form 10-K,
filed with the Securities and Exchange Commission on March 30, 2000
(N) Employment Agreement dated January 11, 2001 between Bryn Mawr Bank
Corporation and Frederick C. Peters II is incorporated by reference to the
Corporation's From 10-K, filed with the Securities and Exchange Commission
on March 30, 2001.
(O) The Bryn Mawr Bank Corporation 2001 Stock Option Plan, is hereby
incorporated by reference to the Corporation's Proxy Statement dated March
8, 2001 and filed with the Securities and Exchange Commission on March 8,
2001 as Appendix B to the Proxy Statement.
49
(P) Addendum, dated August 15, 2001, to the License agreement between Bryn
Mawr Bank Corporation and Fiserv Solutions,Inc. dated December 30, 1994 is
incorporated in this filing of the Corporation's Form 10-K.
13 - Annual Report to Security Holders
- --------------------------------------
The Registrant's 2001 Annual Report to Shareholders is attached herewith
as Exhibit 13.
21 - Subsidiaries of the Registrant
- -----------------------------------
23 - Consent of Independent Accountants
- ---------------------------------------
Consent of Independent Accountants filed herewith as Exhibit 23.
99 - Portions of the Proxy Statement
- ------------------------------------
Excerpts from the Registrant's Proxy Statement for its 2002 Annual Meeting
to be held on April 16, 2002, were filed with the Securities and Exchange
Commission on March 5, 2002 as Exhibit 99.
50
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
-----------------------------------------------------
The report of Independent Certified Public Accountants as pertaining to the
Consolidated Financial Statements of Bryn Mawr Bank Corporation and related
notes is incorporated by reference to page 11 of the Corporation's 2001 Annual
Report to Shareholders.
Consolidated Financial Statements and related notes are incorporated by
reference to the Corporation's 2001 Annual Report to Shareholders, and may be
found on the pages of said Report as indicated in the parenthesis:
Consolidated Balance Sheets, December 31, 2001 and 2000 (page 30)
Consolidated Statements of Income for the years ended December 31,
2001, 2000 and 1999 (page 31)
Consolidated Statements of Comprehensive Income for the years ended
December 31, 2001, 2000, and 1999 (page 33)
Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 2001, 2000 and 1999 (page 33)
Consolidated Statements of Cash Flows for the years ended December
31, 2001, 2000 and 1999 (page 32)
Notes to Financial Statements (pages 34 to 47)
Supplementary Data:
Quarterly Results of Operations are incorporated by reference to the information
under the caption "Selected Quarterly Financial Data (Unaudited)", in Note 18 on
page 45 of the Corporation's Annual Report to Shareholders for the fiscal years
ended December 31, 2001 and 2000.
Financial Statement Schedules are omitted because of the absence of the
conditions under which they are required or because the information called for
is included in the Consolidated Financial Statements or notes thereto.
Exhibits:
For information regarding exhibits, including those incorporated by reference,
see pages 47 through 50 of this report.
51
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Corporation
and in the capacities and on the date indicated.
NAME TITLE DATE
---- ----- ----
/s/ Robert L. Stevens Chairman, and March 21, 2002
- ----------------------------
Robert L. Stevens Director
/s/ Frederick C. Peters II President March 21, 2002
- ----------------------------
Frederick C. Peters II and Chief Executive
Officer (Principal
Executive Officer)
and Director
/s/ Joseph W. Rebl Treasurer (Principal March 20, 2002
- ----------------------------
Joseph W. Rebl Financial and Principal
Accounting Officer)
/s/ Richard B. Cuff Director March 21, 2002
- ----------------------------
Richard B. Cuff
Director March , 2002
- ----------------------------
Warren W. Deakins
/s/ William Harral, III Director March 22, 2002
- ----------------------------
William Harral, III
Director March , 2002
- ----------------------------
Wendell F. Holland
52
/s/ Phyllis M. Shea Director March 21, 2002
- --------------------------
Phyllis M. Shea
/s/ B. Loyall Taylor, Jr. Director March 22, 2002
- ---------------------------
B. Loyall Taylor, Jr.
Director March , 2002
- ----------------------------
Nancy J. Vickers
/s/ Thomas A. Williams Director March 22, 2002
- ----------------------------
Thomas A. Williams
53