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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, 2002 Commission File
------------------
Number 0-15261
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Bryn Mawr Bank Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2434506
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(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
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Not Applicable
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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 28,2002
- ----------------------------
Common Stock, par value $1 4,351,174
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED September 30, 2002
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the nine
months ended September 30, 2002 and 2001 ..................... Page 1
Consolidated Statements of Income for the three
months ended September 30, 2002 and 2001 ..................... Page 2
Consolidated Balance Sheets as of September 30 2002,
December 31, 2001 and September 30, 2001 ..................... Page 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2002 and 2001 ..................... Page 4
Consolidated Statements of Comprehensive Income for
the nine months ended September 30, 2002 and 2001 ............ Page 5
Notes to Consolidated Financial Statements ........................ Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............. Page 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS ........................................ Page 29
ITEM 4. CONTROLS AND PROCEDURES ................................... Page 30
PART II - OTHER INFORMATION ....................................... Page 31
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
2002 2001
----------- -----------
Interest income:
Interest and fees on loans........................................ $ 20,946 $ 21,575
Interest on federal funds sold.................................... 73 298
Interest on interest bearing deposits with banks.................. 34 28
Interest and dividends on investment securities:
U.S. Government Agency securities............................... 753 722
U.S. Treasury--Securities....................................... - 161
Obligations of states and political subdivisions................ 34 50
Dividend income................................................. 47 86
----------- -----------
Total interest income................................................. 21,887 22,920
Interest expense on deposits.......................................... 2,969 4,599
Interest expense on borrowed funds.................................... 287 253
----------- ----------
Total interest expense............................................... 3,256 4,852
----------- -----------
Net interest income................................................... 18,631 18,068
Loan loss provision................................................... 750 900
----------- -----------
Net interest income after loan loss provision......................... 17,881 17,168
----------- -----------
Other income:
Fees for trust services........................................... 6,448 6,651
Service charges on deposits....................................... 1,343 1,088
Other service charges, commissions and fees....................... 389 599
Net gain on sale of loans......................................... 5,410 3,114
Other operating income............................................ 3,357 3,324
----------- -----------
Total other income.................................................... 16,947 14,776
----------- -----------
Other expenses:
Salaries and wages................................................ 12,614 11,514
Employee benefits................................................. 2,698 2,162
Occupancy and bank premises....................................... 1,473 1,606
Furniture, fixtures, and equipment................................ 1,408 1,470
Other operating expenses.......................................... 5,163 4,825
----------- -----------
Total other expenses.................................................. 23,356 21,577
----------- -----------
Income before income taxes............................................ 11,472 10,367
Applicable income taxes............................................... 3,935 3,550
----------- -----------
Net income............................................................ $ 7,537 $ 6,817
=========== ===========
Earnings per common share............................................. $ 1.73 $ 1.58
Diluted earnings per share............................................ $ 1.71 $ 1.53
Cash dividends declared per share..................................... $ 0.57 $ 0.54
Weighted-average shares outstanding................................... 4,352,981 4,318,319
Dilutive potential common shares...................................... 65,920 129,708
----------- -----------
Adjusted weighted-average shares...................................... 4,418,901 4,448,027
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
2002 2001**
---------- ----------
Interest income:
Interest and fees on loans .................................... $ 7,195 $ 7,196
Interest on federal funds sold ................................ 10 86
Interest on interest bearing deposits with banks .............. 15 10
Interest and dividends on investment securities:
U.S. Government Agency securities .......................... 224 262
U.S. Treasury Securities .................................. - 48
Obligations of states and political subdivisions ........... 5 14
Dividend income ............................................ 12 20
---------- ----------
Total interest income .............................................. 7,461 7,636
Interest expense on deposits ....................................... 981 1,511
Interest expense on borrowed funds ................................. 108 178
---------- ----------
Total interest expense ............................................. 1,089 1,689
---------- ----------
Net interest income ................................................ 6,372 5,947
Loan loss provision ................................................ 250 200
---------- ----------
Net interest income after loan loss provision ...................... 6,122 5,747
---------- ----------
Other income:
Fees for trust services ....................................... 2,214 2,090
Service charges on deposits ................................... 451 409
Other service charges, commissions and fees ................... 12 194
Net gain on sale of loans ..................................... 2,330 1,227
Other operating income ........................................ 1,168 1,027
---------- ----------
Total other income ................................................. 6,175 4,947
---------- ----------
Other expenses:
Salaries and wages ............................................ 4,519 3,502
Employee benefits ............................................. 906 681
Occupancy and bank premises ................................... 512 517
Furniture, fixtures, and equipment ............................ 461 473
Other operating expenses ...................................... 1,822 1,775
---------- ----------
Total other expenses ............................................... 8,220 6,948
---------- ----------
Income before income taxes ......................................... 4,077 3,746
Applicable income taxes ............................................ 1,405 1,276
---------- ----------
Net income ......................................................... $ 2,672 $ 2,470
========== ==========
Earnings per common share .......................................... $ 0.61 $ 0.57
Diluted earnings per share ......................................... $ 0.60 $ 0.55
Cash dividends declared per share .................................. $ 0.19 $ 0.18
Weighted-average shares outstanding ................................ 4,387,177 4,345,531
Dilutive potential common shares ................................... 83,880 146,009
---------- ----------
Adjusted weighted-average shares ................................... 4,471,057 4,491,540
The accompanying notes are an integral part of the consolidated financial
statements.
* Except for share and per share data.
**-Reclassified for comparative purposes.
Form 10-Q
Page 2
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
September 30, December 31, September 30,
2002 2001 2001
(Unaudited) (Unaudited)
------------------------------------------
Assets
Cash and due from banks ....................................................... $ 30,643 $ 28,157 $ 30,145
Interest bearing deposits with banks .......................................... 555 516 846
Federal funds sold ............................................................ 1,000 -- 8,350
Investment securities available for sale, at market (amortized
cost of $21,864, $25,807 and $25,451 as of September 30, 2002,
December 31, 2001 and September 30, 2001, respectively) .................... 22,248 26,222 25,999
Loans:
Consumer ................................................................... 27,754 35,521 45,925
Commercial ................................................................. 148,549 167,452 148,507
Real estate ................................................................ 272,620 197,876 187,920
--------- --------- ---------
Total loans ............................................................. 448,923 400,849 382,352
Less: Allowance for loan losses .................................... (5,806) (4,928) (4,662)
--------- --------- ---------
Net loans ............................................................... 443,117 395,921 377,690
--------- --------- ---------
Premises and equipment, net ................................................... 12,218 12,478 12,605
Accrued interest receivable ................................................... 2,178 2,222 2,244
Goodwill (net) ................................................................ 2,805 2,805 2,846
Mortgage servicing rights ..................................................... 3,649 2,206 1,491
Other assets .................................................................. 6,991 6,296 6,800
--------- --------- ---------
Total assets ............................................................ $ 525,404 $ 476,823 $ 469,016
========= ========= =========
Liabilities
Deposits:
Demand, noninterest-bearing ................................................ $ 122,294 $ 110,564 $ 113,170
Savings .................................................................... 218,463 204,852 184,445
Time ....................................................................... 93,060 75,643 86,374
--------- --------- ---------
Total deposits .......................................................... 433,817 391,059 383,989
--------- --------- ---------
Borrowed funds ................................................................ 20,000 20,000 20,000
Other liabilities ............................................................. 10,814 8,457 8,978
--------- --------- ---------
Total liabilities ....................................................... 464,631 419,516 412,967
--------- --------- ---------
Shareholders' equity
Common stock, par value $1; authorized 25,000,000
shares; issued 5,535,808, 5,329,675 and 5,314,875 shares
as of September 30, 2002, December 31, 2001 and September 30, 2001,
respectively and outstanding of 4,351,174, 4,322,121 and
4,345,811 shares as of September 30, 2002, December 31, 2001
and September 30, 2001, respectively ....................................... 5,536 5,330 5,315
Paid-in capital in excess of par value ........................................ 11,044 6,676 5,773
Other accumulated comprehensive gain (loss)
net of deferred income taxes ............................................... 254 274 362
Retained earnings ............................................................. 61,546 56,499 54,974
--------- --------- ---------
78,380 68,779 66,424
Less: Common stock in treasury at cost -- 1,184,634, 1,007,554 and
969,064 shares as of September 30, 2002, December 31, 2001
and September 30, 2001, respectively ....................................... (17,607) (11,472) (10,375)
--------- --------- ---------
Total shareholders' equity ................................................. 60,773 57,307 56,049
--------- --------- ---------
Total liabilities and shareholders' equity ................................. $ 525,404 $ 476,823 $ 469,016
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
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
-------------------------
2002 2001
----------- ------------
Operating activities:
Net income ............................................................... $ 7,537 $ 6,817
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Provision for loan losses ............................................. 750 900
Provision for depreciation and amortization ........................... 1,086 988
Loans originated for resale ........................................... (346,681) (212,184)
Proceeds from loans sold .............................................. 330,399 207,594
Gain on sale of loans ................................................. (5,410) (3,114)
Provision for deferred income taxes (benefit) ......................... 43 (333)
Change in income taxes payable / refundable............................ 1,735 1,587
Change in interest receivable ......................................... 44 736
Change in interest payable ............................................ (857) 441
Change in mortgage servicing rights.................................... (1,443) (1,118)
Other ................................................................. 2,219 274
--------- ---------
Net cash (used) provided by operating activities ................... (10,578) 2,588
--------- ---------
Investing activities:
Purchases of investment securities ....................................... (10,349) (16,585)
Proceeds from maturity and calls of fixed income securities .............. 13,951 17,952
Proceeds from sales of fixed income securities............................ 337 -
Loan repayments (originations), net ...................................... (26,043) (18,474)
Loans purchased (dealer loans) ........................................... (211) (1,341)
Purchases of premises and equipment ...................................... (799) (1,022)
--------- ---------
Net cash used by investing activities .............................. (23,114) (19,470)
--------- ---------
Financing activities:
Net increase (decrease) in demand and savings deposits ................... 25,341 (19,449)
Net increase in time deposits............................................. 17,417 16,472
Dividends paid ........................................................... (2,489) (2,331)
Repayment of mortgage debt ............................................... (34) (31)
Purchases of treasury stock .............................................. (6,183) (1,091)
Proceeds from borrowed funds ............................................. -- 20,000
Proceeds from issuance of common stock ................................... 3,165 1,280
--------- ---------
Net cash provided by financing activities .......................... 37,217 14,850
--------- ---------
Increase(decrease) in cash and cash equivalents .......................... 3,525 (2,032)
Cash and cash equivalents at beginning of period ......................... 28,673 49,213
--------- ---------
Cash and cash equivalents at end of period ............................... $ 32,198 $ 47,181
========= =========
Supplemental cash flow information:
Income taxes paid......................................................... 2,200 2,700
Interest paid............................................................. 4,113 4,411
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
2002 2001 2002 2001
---------------------------- ---------------------------
Net income ..................................................... $ 2,672 $ 2,470 $ 7,537 $ 6,817
Other comprehensive income:
Unrealized holding gains (losses) on
available-for-sale securities ........................ 12 448 (31) 612
Deferred income tax expense on
unrealized holding gains (losses) on
available for sale securities ....................... (4) (152) 11 (208)
----------- ---------- ----------- ----------
Comprehensive net income ....................................... $ 2,680 $ 2,766 $ 7,517 $ 7,221
=========== ========== =========== ==========
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, 2002 AND 2001
(Unaudited)
1. Unaudited Interim Results:
The consolidated balance sheets of Bryn Mawr Bank Corporation (the
"Corporation") as of September 30, 2002 and 2001, the related consolidated
statements of cash flows for the nine month periods ended September 30, 2002 and
2001, the related consolidated statements of income for the three month and nine
month periods ended September 30, 2002 and 2001 and the related consolidated
statements of comprehensive income for the three month and nine month periods
ended September 30, 2002 and 2001 are all unaudited.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of related revenue and expense
during the reporting period. Actual results could differ from those estimates.
Management believes that all adjustments, accruals and elimination entries
necessary for the fair presentation of the consolidated financial position and
results of operations for the interim periods presented have been made. All such
adjustments were of a normal recurring nature. The year-end balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements contained in the Corporation's 2001 Annual Report
incorporated in the 2001 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 2001 Annual
Report incorporated in the 2001 Form 10-K (Exhibit #13). Shares under option
under the Plan had a dilutive impact on net income per share for the nine-month
periods ended September 30, 2002 and 2001.
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:
Accounting standards, recently issued as of December 31, 2001, are
discussed in Note 2 "Summary of Significant Accounting Policies" in the
Corporation's Annual Report, incorporated in the 2001 Form 10-K (Exhibit 13).
In April 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 145, "Recission of Statements of Financial
Accounting Standards No. 4 "Reporting Gains and Losses from Extinguishment of
Debt", No. 44 "Accounting for Intangible Assets of Motor Carriers" and No. 64
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements", Amendment
to Statement of Financial Accounting Standard No. 13, "Accounting for Leases"
and Technical Corrections" ("SFAS No. 145"). SFAS No. 145 rescinds SFAS No. 4,
which required all gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of the related income
tax on the income statement. The provision of SFAS No. 145 related to SFAS No. 4
are applicable in fiscal years beginning after May 15, 2002 with early
application encouraged. The provisions of SFAS No. 145 related to SFAS No. 13
are effective for transactions occurring after May 15, 2002, with early
application encouraged. All other provisions of SFAS No. 145 are effective for
financial statements issued on or after May 15, 2002, with early application
encouraged. SFAS No. 145 will not have a material impact on the financial
condition or results of operations of the Corporation.
In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 146, "Accounting for Costs Associated with
Exit or disposal Activities" ("SFAS No 146"). SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal related
activities. Those costs include termination benefits provided to current
employees that are involuntarily terminated, the cost to terminate a contract
that is not a capital lease and costs to consolidate facilities or relocate
employees. SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No.
94-3. "Liability Recognition for Certain Employee Termination Benefits and Other
Cost to Exit an Activity (including Certain Cost Incurred in a Restructuring)"
("Issue 94-3"). Under Issue 94-3, a liability for an exit cost as defined in
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
SFAS No. 146 improves financial reporting by requiring that a liability for the
cost associated with an exit or disposal activity be recognized and measured
initially at fair value only when the liability is incurred. The provisions of
SFAS No. 146 shall be effective for exit and disposal activities initiated after
December 31, 2002. Early application is encouraged. SFAS No. 146 will not have a
material impact on the financial condition or results of operations of the
Corporation.
In October 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 147 "Acquisition of Certain
Form 10-Q
Page 7
Financial Institutions an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9" ("SFAS No. 147"). Except for transactions between two or
more mutual enterprises, SFAS No.147 removes acquisitions of financial
institutions from the scope of both Statement of Financial Accounting Standard
No. 72 and Statement of FASB Interpretation No. 9 and requires that those
transactions be accounted for in accordance with Statement of Financial
Accounting Standards No. 141 "Business Combinations" and Statement of Financial
Accounting Standards No. 142 ("Goodwill and Other Intangible Assets"). In
addition, SFAS No. 147 amends Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment of Long-Lived Assets" to include in its scope
long-term customer-relationship intangible assets. The provisions for SFAS No.
147 shall be effective for transactions incurred on or after October 1, 2002.
SFAS No. 147 will not have a material impact on the financial condition or
results of operations of the Corporation.
As a result of the implementation of Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS No.
142"), issued in September 2001, goodwill will not be amortized. This asset will
be tested at least annually for impairment. An impairment analysis will be
completed during 2002.
As a part of the acquisition of Joseph W. Roskos & Co. ("JWR&Co.") in
1999, the Corporation recorded goodwill of $3,300,000. In compliance with SFAS
No. 142, the amortization of the balance of goodwill as of December 31, 2001 of
$2,805,000 was discontinued. During 2002, for various reasons, including the
need to grow professional staff to accommodate planned future growth, as well as
reduced revenues, due primarily to a decrease in estate fees because of the
settlement of certain client estates, JWR&Co. reported a net loss of $9,000 for
the first nine months of 2002, compared to a net profit of $239,000 for the same
period in 2001. JWR&Co.'s management is in the process of evaluating
alternatives that should enhance JWR&Co.'s net income in the future. Should
JWR&Co. prove unable to produce net income sufficient to support the related
goodwill on the Corporation's balance sheet, future annual testing for
impairment of goodwill could determine that a goodwill impairment exists. Should
the annual testing indicate any impairment in goodwill, said impairment would be
written-off against the then current earnings.
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, which are charged-off when greater than 90 days
past due, 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
Form 10-Q
Page 8
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 the ability of the
borrower to continue to meet the original contractual terms of a loan. 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 may be considered impaired or could be restructured. 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
$206,000, $21,000 and $781,000 at September 30, 2002, December 31, 2001 and
September 30, 2001, respectively, were placed on nonaccrual status when they
were delinquent for greater than 90 days, and any outstanding accrued interest
receivable on such loans at the time they were placed on nonaccrual status, was
reversed from income.
Impaired loans are required to be measured based upon the present value of
expected future cash flows, discounted at the loan's initial effective interest
rate or at the loan's market price or fair value of the collateral, if the loan
is collateral dependent. As of September 30, 2002, December 31, 2001 and
September 30, 2001, 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 $206,000, $21,000, and $781,000,
respectively.
If the loan valuation is less than the recorded value of the loan, an
impairment reserve must be established for the difference. As of September 30,
2002 and December 31, 2001 there were no impaired loans for which there was a
related allowance for loan losses, compared to $760,000 as of September 30,
2001. The total related allowance for loan loss as of September 30,2001 was
$350,000. Impaired loans for which no loan loss allowance was allocated amounted
to $206,000, at September 30, 2002 and $39,000 at December 31, 2001 and $21,000
at September 30, 2001. Average impaired loans for the nine-month period ended
September 30, 2002, year ended December 31, 2001 and September 30, 2001 amounted
to $49,000, $499,000 and $562,000, respectively.
When a loan is put on a nonaccrual status, any income subsequently
collected is credited to the outstanding principal balance. Therefore, no
interest income was reported on nonaccrual loans during either nine-month
Form 10-Q
Page 9
period ended September 30, 2002 or 2001. Loans may be removed from nonaccrual
status and returned to accrual status when all principal and interest amounts
contractually due are reasonably assured of repayment within an acceptable
period of time and there is a sustained period of repayment performance by the
borrower, with a minimum repayment of at least six months, in accordance with
the contractual terms of interest and principal. Subsequent income recognition
would be recorded under the existing terms of the loan. Based on the above
criteria, no nonaccrual loans were removed from nonaccrual status, during the
first nine months of 2001, while $36,000 in impaired loans were paid off during
the first nine months of 2002.
Smaller balance, homogeneous loans, exclusively consumer loans, when
included in nonperforming loans, for practical consideration, are not put on a
nonaccrual status nor is the current accrued interest receivable reversed from
income.
Form 10-Q
Page 10
6. Allowance for Loan Losses:
The summary of changes in the allowance is as follows:
Nine months-ended Year ended
September 30, December 31,
2002 2001 2001
---- ---- ----
Balance, beginning of period $ 4,928 $ 4,320 $ 4,320
Charge-offs:
Consumer (43) (126) (178)
Commercial and industrial 0 (941) (940)
Real estate 0 0 (51)
------- ------- -------
Total charge-offs (43) (1,067) (1,169)
------- ------- -------
Recoveries:
Consumer 23 31 38
Commercial and industrial 148 2 63
Real estate 0 476 476
------- ------- -------
Total recoveries 171 509 577
------- ------- -------
Net (charge-offs) / recoveries 128 (558) (592)
Provision for loan losses 750 900 1,200
Balance, end of period $ 5,806 $ 4,662 $ 4,928
======= ======= =======
Form 10-Q
Page 11
7. Segment Information:
The Corporation's principal operating segments are structured around the
financial services provided its customers. The Banking segment gathers deposits
and makes funds available for loans to its customers. The Bank's Investment
Management and Trust segment ("Wealth") 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, 2002 and 2001 is as
follows:
-------------------------------------------------- ---------------------------------------------------
2002 2001
Mortgage All Mortgage All
Banking Wealth Banking Other Consolidated Banking Wealth Banking Other Consolidated
-------------------------------------------------- ---------------------------------------------------
Net interest income $ 18,610 $ -- $ -- $ 21 $18,631 $ 17,789 $ -- $ -- $ 279 $ 18,068
Less Loan loss provision 750 -- -- -- 750 900 -- -- -- 900
-------------------------------------------------- ---------------------------------------------------
Net interest income after
loan loss provision 17,860 -- -- 21 17,881 16,889 -- -- 279 17,168
Intersegment interest
(revenues) expenses* 3 -- -- (3) -- 251 -- -- (251) --
-------------------------------------------------- ---------------------------------------------------
Net interest income after
loan loss provision and
eliminations 17,863 -- -- 18 17,881 17,140 -- -- 28 17,168
Other income:
Fees for investment
management and trust
services -- 6,448 -- -- 6,448 -- 6,651 -- -- 6,651
Other income 2,587 3 5,610 2,299 10,499 2,176 11 3,487 2,451 8,125
-------------------------------------------------- ---------------------------------------------------
Total other income 2,587 6,451 5,610 2,299 16,947 2,176 6,662 3,487 2,451 14,776
Other expenses:
Salaries and benefits 9,270 3,344 1,104 1,594 15,312 8,372 2,772 792 1,740 13,676
Occupancy 2,284 445 128 24 2,881 2,300 483 133 160 3,076
Other operating expense 3,108 653 768 634 5,163 2,771 850 498 706 4,825
-------------------------------------------------- ---------------------------------------------------
Total other expense 14,662 4,442 2,000 2,252 23,356 13,443 4,105 1,423 2,606 21,577
-------------------------------------------------- ---------------------------------------------------
Segment profit (loss) 5,788 2,009 3,610 65 11,472 5,873 2,557 2,064 (127) 10,367
Intersegment (revenues)
expenses ** (180) 125 -- (70) -- 37 125 -- (162) --
-------------------------------------------------- ---------------------------------------------------
Segment profit after
eliminations $ 5,608 $ 2,134 $ 3,610 ($5) $11,472 $ 5,910 $ 2,682 $ 2,064 ($289) $ 10,367
================================================== ===================================================
% of segment profit (loss) 49% 19% 32% -- 100% 57% 26% 20% (3%) 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 10Q
Page 12
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
nine months ended September 30, 2002 and 2001, as well as the financial
condition of the Corporation as of September 30, 2002, December 31, 2001 and
September 30, 2001. The Bryn Mawr Trust Company (the "Bank"), Bryn Mawr
Advisors, Inc. ("BMA"), Bryn Mawr Brokerage Company, Inc. ("BM Brokerage"), Bryn
Mawr Asset Management, Inc. ("BMAM"), (formerly "CDC Capital Management, Inc")
and Joseph W. Roskos & Co., Inc. ("JWR&Co") are wholly-owned subsidiaries of the
Corporation, Insurance Counsellors of Bryn Mawr, Inc. ("ICBM") and Bryn Mawr
Settlement Services, Inc ("BMSS") are wholly-owned subsidiaries of the Bank and
Bryn Mawr Finance, Inc ("BMF") is a wholly-owned subsidiary of Joseph W. Roskos
& Co.,Inc.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
Certain of the statements contained in this Report and the documents
incorporated by reference herein, 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 the Corporation to be materially different from
future results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements include statements
with respect to the Corporation's financial goals, business plans, business
prospects, credit quality, credit risk, reserve adequacy, liquidity, origination
and sale of residential mortgage loans, impairment of goodwill, the effect of
changes in accounting standards, and market and pricing trends loss. 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:
. the effect of future economic conditions on the Corporation and its
customers, including economic factors which affect consumer confidence
in the securities markets, wealth creation, investment and savings
patterns, and the Corporation's interest rate risk exposure and credit
risk;
. changes in the securities markets with respect to the market
Form 10-Q
Page 13
values of financial assets and the stability of particular securities
markets;
. governmental monetary and fiscal policies, as well as legislation
and regulatory changes;
. changes in accounting requirements or interpretations;
. 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;
. 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;
. any extraordinary events (such as the September 11, 2001 events and
the U.S. Government's response to those events);
. the Corporation's success in continuing to generate new business in
its existing markets, as well as its success in identifying and
penetrating targeted markets and generating a profit in those markets
in a reasonable time;
. the Corporation's ability to continue to generate investment
results for customers and the ability to continue to develop investment
products in a manner that meets customers needs;
. the Corporation's timely development of competitive new products
and services in a changing environment and the acceptance of such
products and services by customers;
. the Corporation's ability to originate and sell residential
mortgage loans during a decreasing or low interest rate environment;
. 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; and
. the Corporation's success in managing the risks involved in the
foregoing.
All written or oral forward-looking statements attributed to the
Form 10-Q
Page 14
Corporation are expressly qualified in their entirety by use of the foregoing
cautionary statements. All forward-looking statements included in this Report
are based upon information presently available, and the Corporation assumes no
obligation to update any forward-looking statement.
CRITICAL ACCOUNTING POLICIES
The Corporation's most critical accounting policy is the allowance for loan
loss. The allowance for loan loss represents management's estimate on the
probable losses inherent in the loan portfolio. This is consistently monitored
to determine its adequacy. Ongoing review of credit standards, the level of
delinquencies on loan products and loan segments, and the current state of the
economy are included in this review. Actual losses may differ from management's
estimates.
In December 2001, the Corporation adopted Statement of Financial Accounting
Standard No. 142 "Goodwill and Other Intangible Assets" ("SFAS No. 142"). In
compliance with SFAS No. 142, the Corporation is no longer amortizing goodwill.
Goodwill will continue to be tested for impairment annually, using a valuation
method requiring projected cash flows into future periods. Actual cash flows
could differ from management's estimates; thereby effecting the determined value
of the goodwill.
RESULTS OF OPERATIONS
The Corporation reported net income of $7,537,000 for the nine months
ended September 30, 2002, an 11% increase over $6,817,000 reported for the same
period in 2001. Earnings per common share amounted to $1.73, a 9% increase over
$1.58 reported for the first nine months of 2001. Primarily the result of the
Corporation's stock repurchase program, diluted earnings per share increased 12%
to $1.71 for the nine months ended September 30, 2002 compared to $1.53 for the
same period in 2001.
Form 10-Q
Page 15
The following table sets forth the net income, basic earnings per share and
fully diluted earnings per share as adjusted to exclude goodwill amortization
expense for the nine month and three month periods ended September 30, 2002 and
2001.
Nine months ended Three months ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income 7,537 6,817 2,672 2,470
Add back: Goodwill amortization -- 124 -- 41
--------------------------- --------------------------
Adjusted net income 7,537 6,941 2,672 2,511
Basic earnings per share:
Reported net income $ 1.73 $ 1.58 $ 0.61 $ 0.57
Goodwill amortization -- $ 0.03 -- $ 0.01
--------------------------- --------------------------
Adjusted net income $ 1.73 $ 1.61 $ 0.61 $ 0.58
Diluted earnings per share:
Reported net income $ 1.71 $ 1.53 $ 0.60 $ 0.55
Goodwill amortization -- $ 0.03 -- $ 0.01
-------------------------- --------------------------
Adjusted net income $ 1.71 $ 1.56 $ 0.60 $ 0.56
The increase in earnings, for the first nine months of 2002 over the
same period in 2001 is primarily attributable to an increase in other income, up
$2,171,000 or 15% over the first nine months of 2001. This increase in other
income is due to a $2,296,000 increase in the net gain on the sale of
residential mortgage loans for the first nine months of 2002, compared to the
same period in 2001. This is a result of increased loan sale activity associated
with mortgage loan refinancings that were stimulated by a decline in interest
rates.
The ability to originate and sell residential mortgage loans, including
loans refinancing existing loan balances from higher to lower interest rates
during a decreasing interest rate environment, provides a counter-cyclical
source of additional non-interest revenue, offsetting a declining net interest
margin, the result of the Corporation's balance sheet being asset interest rate
sensitive in a decreasing interest rate environment. In future periods, should
interest rates begin to rise, the Corporation would benefit from its asset
interest rate sensitivity, increasing its net interest margins, while decreasing
its revenues from the residential refinancing environment. Should interest rates
remain at the present lower levels, the possibility exists that the number of
customers desiring to refinance residential mortgage loans could decrease. A
potential decrease in residential mortgage loan refinances, prior to market
interest rates moving upward, could have a detrimental impact on the
Form 10-Q
Page 16
Corporation's net income, due to a potential decrease in revenues from this
counter-cyclical activity, without a corresponding increase in the Corporation's
net interest income or net interest margin.
Net interest income, after the provision for loan loss, for the first
nine months of 2002, is 4% higher than the first nine months of 2001. While loan
balances increased $66,571,000 or 17% from the same period in 2001, the lower
interest rate environment that existed during the first nine months of 2002,
compared to the same period in 2001, offset the effect of this increase. The
current trends of higher income from the gain on sale of loans and the lower
levels of interest income on loans should reverse, as interest rates increase
because these income generators are counter cyclical. During 2001, the
Corporation's management identified a problem commercial loan, which was put on
nonaccrual status and written down by $870,000, thus necessitating a larger
increase in the provision for loan loss to $900,000. The economic indicators are
still pointing to a slow economy and the continued growth in the loan portfolio
has prompted Corporation management to provide for loan losses at $750,000 for
the first nine months of 2002.
Average outstanding loan balances for the first nine months of 2002
grew 15% from average outstanding loan balances for the first nine months of
2001. Funding this growth in average outstanding loans was a 9% decrease in
average outstanding investment security balances and an increase in average
outstanding balances of non-interest bearing demand deposit accounts of 17%, NOW
accounts of 18%, market rate accounts of 15% and savings accounts of 5%. The
average outstanding balances of certificates of deposit ("CDs") decreased 3%.
The prime rate decreased by 125 basis points from 6.00% at September
30, 2001 to 4.75% at September 30, 2002. For the majority of 2001 rates were
higher than the current level. 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 110 basis points, from 7.6% at
September 30, 2001 to 6.5% for the same period in 2002, due to the decline in
the interest rates during this period. Compared to the first nine months of
2001, the average cost of funds for the respective periods decreased 70 basis
points, from 1.70% in 2001 to 1.00% in 2002. The overall result was a decline in
the Bank's annualized net interest margin, to 5.48% for the first nine months of
2002 compared to 5.98% for the same period in 2001. 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, related to potential changes in interest rates 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. However, as discussed
previously, a continued lower market rate environment, thereby holding the
Corporation's ability to increase its net interest margin and related net
interest income, combined with a decrease in the number of loan customers
seeking refinancing opportunities, lowering the gains on the respective
Form 10-Q
Page 17
residential loan sales in the secondary market, could cause an adverse effect on
the Corporation's results of operations.
As discussed in Note 4 "Adoption of Financial Accounting Standards", in
the Notes to Consolidated Financial Statements, should an impairment of the
Corporation's goodwill occur in future periods, while not anticipated to have an
adverse effect on the Corporation's liquidity or a decrease in capital resources
below those deemed well capitalized by the Corporation's regulators, a material
decrease in the Corporation's results of operations could occur in the year in
which the impairment would be recognized.
NET INTEREST INCOME
For the nine months ended September 30, 2002, net interest income of
$18,631,000 was 3% higher than $18,068,000 reported for the same period in 2001.
Primarily the effect of a downward trend in interest rates during the previous
twelve months, total interest and dividend income declined 5% for the first nine
months of 2002, to $21,887,000 from $22,920,000 for the first nine months of
2001. Interest expense decreased 33% for the nine months ended September 30,
2002, to $3,256,000 compared to $4,852,000 for the first nine months of 2001.
The yield on earning assets for the first nine months of 2002 was 6.5% compared
to 7.6% for the first nine months of 2001 while the effective rate paid on
interest bearing deposits and borrowed funds for the first nine months of 2002
and 2001 was 1.4% and 2.3%, respectively.
Due primarily to a decrease in interest rates during the last twelve
months, interest and fees on loans decreased 3% from $21,575,000 for the first
nine months of 2001 to $20,946,000 for the first nine months of 2002. A 15%
increase in average outstanding loan balances for the first nine months of 2002,
to $411,860,000, compared to $358,826,000 for the same period in 2001, was
offset by a 110 basis point decrease in the annualized average yield on earning
assets. This is the primary reason for the decline in loan related interest and
fee income.
Interest and dividend income on investments decreased $185,000 or 18%,
from $1,019,000 for the first nine months of 2001 to $834,000 for the first nine
months of 2002. Due to the fact that there were no outstanding balances of U.S.
Treasury securities during the first nine months of 2002, there was no interest
income from such investments, compared to $161,000 for the same period in 2001.
Interest on U.S. Government Agency securities increased 4% from $722,000 for the
first nine months of 2001 to $753,000 for the first nine months of 2002. The
primary reason for this increase was a $2,202,000 or 13% increase in the average
balance of U.S. Government Agency securities, from $17,328,000 during the first
nine months of 2001 to $19,530,000 for the comparable period in 2002. Interest
income on obligations of states and political subdivisions decreased 32% from
$50,000 for the nine months ended September 30, 2001 to $34,000 for the same
period in 2002. Average outstanding balances of obligations of state and
political subdivisions decreased by 34%, from $1,668,000 in 2001 to
Form 10-Q
Page 18
$1,103,000 in 2002. The overall yield on investment securities decreased from
5.5% for the first nine months of 2001 to 5.0% for the first nine months of
2002, a result of lower rates of interest being paid on investments purchased
during the twelve-month period.
Interest expense on deposits and borrowed funds decreased 33% or
$1,596,000, to $3,256,000 for the nine months ended September 30, 2002 compared
to $4,852,000 for the same period in 2001. The average cost of interest bearing
deposits and borrowed funds decreased 90 basis points, from 2.3% at September
30, 2001 to 1.4% for the nine months ended September 30, 2002. The average
interest bearing deposit balances increased 9% to $291,803,000 at September 30,
2002 compared to $266,930,000 for the same period in 2001. Average deposits
increased 11% to $413,905,000 for the nine months ended September 20, 2002
compared $371,324,000 for the same period in 2001. Average non-transaction
savings accounts increased 5% for the first nine months of 2002, compared to the
same period in 2001, while average NOW accounts and Market Rate Accounts
increased by 18% and 15%, respectively. Average outstanding CD balances
decreased by 3% for the same period. Average borrowed funds grew by 121% from
$9,198,000 for the nine months ended September 30, 2001 to $20,360,000 for the
same period in 2002. This growth in borrowed funds is due to the increase in
residential mortgage loan sale activity and the related increased funding
requirements of available-for-sale residential mortgage loans, awaiting funding
from their respective purchasers at each period end. The Bank's average
non-interest bearing demand deposit account balances increased 13%. Primarily in
response to a declining prime rate during 2001, the average cost of each deposit
category decreased. The annualized cost of CDs decreased 190 basis points, from
5.1% for the first nine months of 2001 to 3.2% for the same period in 2002. The
average cost of Market Rate Accounts decreased from 2.1% to 1.5% or 60 basis
points, savings accounts decreased from 1.1% to .8% or 30 basis points and NOW
accounts decreased from .7% to .3% or 40 basis points for the first nine months
of 2002, compared to the same period in 2001. The average cost of borrowed funds
decreased by 200 basis points, from 4.1% for the first nine months of 2001 to
2.1% for the same period in 2002. The average cost of deposits and borrowed
funds, including non-interest-bearing demand deposits decreased 71 basis points,
from 1.70% for the first nine months of 2001, to 1.00% for the first nine months
of 2002.
For the third quarter of 2002 compared to the third quarter of 2001,
total interest income decreased by $175,000 or 2%. A continued decline in the
prime rate, compressing yields on the Bank's floating rate loans, was partially
offset by continued growth in outstanding loan volumes. Offsetting this decline
in total interest income was a $600,000 or 36% decrease in interest expense, the
result of the Bank's ability to adjust deposit rates downward, in response to
declining yields in earning assets. The result was a $425,000 or 7% increase in
net interest income.
The Bank's asset / liability structure is asset rate sensitive, which
should cause a reduction in the net interest margin, should interest rates
decrease. The annualized net interest margin decreased 50 basis points for the
first nine months of 2002, compared to the same period in 2001. This
Form 10-Q
Page 19
decrease is a result of the steep decline in interest rates in 2001. For the
first nine months of 2002, the net interest margin decreased to 5.48% from 5.98%
for same period in 2001. The net interest margin is computed exclusive of
related loan fee income.
LOAN LOSS PROVISION
As previously indicated, the current state of the economy and continued
growth in the loan portfolio are the primary factors that determine the level of
the provision for loan loss. Due to the continued loan growth and the general
uncertainty of economic conditions, a $750,000 provision for loan loss was
needed based on the Bank's analysis. This is a decrease of $150,000 from the
same period in 2001. During the first nine months of 2001, the identification
and writedown of a loan put on nonaccrual status prompted Corporation management
to increase the provision for loan loss to $900,000 for the first nine months of
2001. The loan loss reserve amounted to 1.29% of outstanding loans at September
30, 2002. Delinquencies, as a percentage of outstanding loans, were 16 basis
points as of September 30, 2002, compared to 83 basis points for the same period
in 2001. Nonperforming loans increased to $239,000 as of September 30, 2002,
compared to $43,000 as of December 31, 2001 but decreased from $808,000 as of
September 30, 2001. In addition to a monthly internal loan review, the Bank has
an external loan review performed annually. The most recent completed external
loan review was as of November 2001. The current external loan review process is
due to be completed in November 2002. Based on the results of both the 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,
2002.
OTHER INCOME
Total other income of $16,947,000 for the nine months ended September
30, 2002 increased 15% from $14,776,000 reported for the same period in 2001.
Fees for trust services decreased $203,000 or 3% from $6,651,000 for
the first nine months of 2001 to $6,448,000 for the same period in 2002. The
market value of Trust assets under management decreased by 11%, to
$1,447,000,000 at September 30, 2002 from $1,625,000,000 as of September 30,
2001. This is primarily a result of a decline in the equity market values during
the first nine months of 2002, reflecting the general decline in equity market
values in recent months, partially offset by an increase in account pricing in
2002, as well as the acquisition of new accounts in 2002. Since a significant
portion of fees for trust services are earned based on a percentage of the value
of assets under management, a continued decline in stock market values and the
values of assets under management could have an adverse effect on the
Corporation's ability to grow its fees for trust services, thereby being
potentially detrimental to the Corporation's results of operations in future
periods.
Form 10-Q
Page 20
The low level of interest rates continues to enhance the volume of
mortgage banking activity. For the nine month period ended September 30, 2002,
the Bank originated $381,544,000 and sold $324,989,000 of residential mortgage
loans to the secondary mortgage market, a 62% increase from $234,212,000 of
residential mortgage loans originated and a 59% increase from the $204,480,000
sold during the first nine months of 2001. The available-for-sale loans totaling
$38,249,000, as of September 30, 2002 are included in the real estate loan total
on the balance sheet. A combination of deferred loan fees earned as income
resulting from the sale of residential mortgage loans to the secondary mortgage
market, related gains on the same respective sales of residential mortgage loans
to the secondary market and the effect of recording mortgage servicing rights,
amounted to $5,410,000 or a 166 basis point gain on loans sold for the first
nine months of 2002 compared to $3,114,000 or 152 basis points for the same
period in 2001.
Service charges on deposits amounted to $1,343,000 for the first nine
months of 2002, a 23% increase from $1,088,000 reported in the first nine months
of 2001. The $255,000 increase is a result of increases to both account analysis
fees and overdraft fees.
Income from other service charges, commissions and fees amounted to
$389,000 for the first nine months of 2002, a 35% decrease from $599,000
reported for the first nine months of 2001. This decrease is primarily
attributed to the accelerated amortization of mortgage servicing rights,
reducing income, as borrowers continue to refinance existing mortgage loans
during 2002.
Other operating income increased by $33,000 or 1% for the first nine
months of 2002, with operating income of $3,357,000 for the first nine months of
2002, compared with the $3,324,000 for the same period in 2001. This is a result
of changes in the revenues provided by some of the Corporation's subsidiaries.
The most significant changes are as follows. Primarily in response to the
significant increase in residential mortgage refinancing activity, BMSS began
operations in 2002 and became a limited partner in a partnership with a title
abstract company. BMSS earned revenues of $313,000 in 2002. No such revenues
were earned in 2001. Offsetting this increase was a $242,000 decrease in
revenues from JWR&Co. for the first nine months of 2002, compared to the same
period in 2001. This decrease is primarily caused by a reduction of fee income
from estates that have been settled prior to 2002.
For the third quarter of 2002, compared to the same quarter in 2001,
total other income increased by $1,228,000 or 25%. Fees for trust services
increased by $124,000 or 6%, reflecting the positive effect of both an increase
in fees over the third quarter 2001, as well as acquiring new trust accounts in
the Bank's Wealth Management division. Net gains on the sale of loans grew
$1,103,000 or 90%. Increased refinancing activity of residential mortgage loans
and the subsequent sale of these loans to the secondary mortgage market is
responsible for this increase. Service
Form 10-Q
Page 21
charges on deposit accounts grew by $42,000 or 10%, lower interest rates provide
lower earnings credits to depositors accounts, thereby allowing the Bank to
charge for the deposit services rendered. Other operating income increased by
$141,000 or 14%, due primarily to $172,000 in revenues earned by BMSS in the
third quarter of 2002. No such revenues were earned during 2001. Partially
offsetting this increase in other operating income for the third quarter was a
$37,000 decrease in revenue for ICBM, the result of a revenue sharing agreement
with an independent insurance agency (the "Agency"). No such agreement existed
in 2001. The agreement is in the process of being terminated with the Agency.
OTHER EXPENSES
Total other expense increased 8% for the first nine months of 2002 to
$23,356,000 from $21,577,000 for the first nine months of 2001. Exclusive of a
non-recurring recovery in 2001 of $355,000, total other expense increased 6% for
the first nine months of 2002, compared to the same period in 2001.
Salaries and wages grew $1,100,000 or 10%, from $11,514,000 for the nine
months ended September 30, 2001 to $12,614,000 for the same period in 2002.
Regular salary expense, including regular, part time and overtime salaries and
excluding incentive salaries, increased $174,000 or less than 2%, to $10,495,000
during the first nine months of 2002 from $10,321,000 for the same period in
2001. During 2001, the decision was made to exit the financial advisory
business. BMAM's business was terminated and the then existing staff terminated.
Therefore, the elimination of BMAM's salaries, as well as some other positions
within the Bank, partially offset annual salary increases in the Bank and other
subsidiaries. Incentive salaries, tied to overall corporate profitability goals,
increased $926,000 or 78%, from $1,193,000 for the nine months ended September
30, 2001 to $2,119,000 for the same period in 2002. This is due to a strong
earnings performance in the first nine months of 2002, increasing both incentive
payments associated with specific business line profitability, as well as the
Corporation's corporate bonus pool, which is related directly to the increases
in corporate profits.
Employee benefits expenses increased $536,000 or 25% from $2,162,000 for
the first nine months of 2001 to $2,698,000 for the same period in 2002. A
decline both in the market valuation of the pension plan's assets, compared to
previous periods, and a decline in the projected yields on such assets caused a
decrease in the earnings from the pension plan assets and an increase in the
cost of the pension plan over the nine months ended September 30, 2001. An
economic environment at current levels in future periods, producing lower yields
on the pension plan's assets, could result in additional increases to the
pension expense in future periods.
Occupancy expense decreased $133,000 or 8%, from $1,606,000 for the first
nine months of 2001 to $1,473,000 for the first nine months of 2002, due
primarily to the relocation of several employees at the end of the first nine
months of 2001.
Form 10-Q
Page 22
Furniture, fixtures and equipment expense decreased $62,000 or 4% from
$1,470,000 for the first nine months of 2001 to $1,408,000 for the same period
in 2002. This decrease is related to the Bank's processing system being fully
depreciated during 2001.
Other operating expenses increased $338,000 or 7%, from $4,825,000 for
the first nine months of 2001 to $5,163,000 for the first nine months of 2002.
In the first nine months of 2001, a $355,000 non-recurring recovery of operating
expense related to a charged-off loan reduced other operating expense. Exclusive
of this recovery, total other expenses were $17,000 or less than 1% below the
same period in 2001. This is primarily due to advertising expense being below
the first nine months of 2001 by $126,000.
For the third quarter of 2002, compared to the same quarter in 2001,
total other expenses increased by $1,272,000 or 18%. The majority of this
increase occurred in salaries and wages, up $1,017,000 or 29% from $3,502,000,
compared to $4,519,000 for the third quarter of 2002. Regular salaries increased
by $164,000 or 5% and other salaries, primarily incentive based salaries,
related to the increased corporate profitability, increased by $853,000.
Employee benefits expense increased by $225,000 or 33% due to increased costs
caused by decreased earnings from the pension plan's assets, as described
previously. Occupancy declined by $5,000 or 1%. Furniture, fixtures and
equipment expense decreased by $12,000 or 3%. Other operating expenses increased
by $47,000 or 3%. The largest increases occurred in expenses related to the
increased sale of residential mortgage loans. Appraisal fee expenses increased
by $87,000, quarter to quarter, while loan pair-off fees grew by $99,000.
APPLICABLE INCOME TAXES
Federal income taxes for the first nine months of 2002 were $3,935,000
compared to $3,550,000 for the first nine months of 2001. This represents an
effective tax rate for each nine-month period ended September 30, 2002 and 2001
of 34.3% and 34.2%, respectively.
FINANCIAL CONDITION
Total assets increased 10% from $476,823,000 at December 31, 2001 to
$525,404,000 as of September 30, 2002. Total assets grew 12% or $56,388,000 from
$469,016,000 as of September 30, 2001.
Outstanding earning assets increased 11% to $472,726,000 as of September
30, 2002 from $427,587,000 as of December 31, 2001. The Bank's loan portfolio
increased 12%, to $448,923,000 at September 30, 2002 from $400,849,000 as of
December 31, 2001. Outstanding loans increased by 17%, from $382,352,000 as of
September 30, 2001. Outstanding consumer loans of $27,764,000 at September 30,
2002 decreased by 22% from consumer loan balances of $35,521,000 as of December
31, 2001 and 40% from the
Form 10-Q
Page 23
outstanding balance of $45,925,000 as of September 30, 2001. A continued
decrease in the balance of purchased dealer automobile paper, the result of
continued strong competition from automobile manufacturers, is the primary
reason for the decrease at September 30, 2002, compared to both periods.
Outstanding commercial loans at September 30, 2002 were $148,549,000, an 11%
decrease in commercial loan balances of $167,452,000 at December 31, 2001 and
even with $148,507,000 at September 30, 2001. The decrease in commercial loan
balances from December 31, 2001 was primarily due to anticipated commercial loan
repayments and the transfer of commercial loan balances to commercial mortgage
loan balances in the real estate lending category of $18,000,000. Outstanding
real estate loans were $272,620,000 at September 30, 2002, a 38% increase from
$197,876,000 in outstanding real estate loans at December 31, 2001 and a 45%
increase over $187,920,000 in outstanding real estate loans as of September 30,
2001. Included in this increase over both periods was the $18,000,000 transfer
from the commercial loan portfolio referred to previously in this paragraph. The
primary reason for this increase over both periods was growth in the Bank's home
equity loans, as well as growth in the balance of available-for-sale residential
real estate mortgage loans, awaiting funding from purchasers in the secondary
residential mortgage market.
The Bank's investment portfolio, having a market value of $22,248,000 at
September 30, 2002, decreased 15% from a market value of $26,222,000 at December
31, 2001 and decreased 14% from $25,999,000 as of September 30, 2001.
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 to or deducted from the Corporation's total
equity on the balance sheet. As of September 30, 2002, the investment portfolio
had an unrealized gain of $384,000, compared to an unrealized gain of $415,000
as of December 31, 2001. The unrealized investment appreciation, net of deferred
income tax benefit, increased the Corporation's shareholders' equity on the
balance sheet by $254,000 as of September 30, 2002.
Federal funds sold outstanding amounted to $1,000,000 as of September 30,
2002. There were no federal funds sold at December 31, 2001, compared to
$8,350,000 as of September 30, 2001. 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 and borrowing from the
Federal Home Loan Bank of Pittsburgh ("the FHLB").
Both nonperforming assets and nonperforming loans amounted to $239,000 at
September 30, 2002, a 456% increase from $43,000 at December 31, 2001 and a 70%
decrease from the nonperforming assets and loans of $808,000 at September 30,
2001. There were no OREO balances on the Bank's books at September 30, 2002,
December 31, 2001 or September 30, 2001.
As of September 30, 2002 and 2001, there were no significant loans
Form 10-Q
Page 24
classified for regulatory purposes as loss, doubtful, substandard or special
mention that either (i) represent or result from trends or uncertainties which
management reasonably expects will impact future operating results, liquidity,
or capital resources, or (ii) represent material credits about which management
is aware of any information, causing management to have serious doubts as to the
borrower's ability to comply with the loan repayment terms.
As a part of its sale of residential mortgage loans in the secondary
market, for those loans sold with the loan servicing retained by the Bank, the
Bank records mortgage-servicing rights ("MSRs") as an asset. The MSRs are
amortized over the expected lives of the respective mortgage loans. Due to the
recent lower interest rate environment, the Corporation has significantly
increased its residential mortgage origination and sale activity, thereby
increasing the balances of MSRs being recorded on its books. As of September 30,
2002, MSRs recorded on the Corporation's books amounted to $3,649,000, a 65%
increase over $2,206,000 in MSRs as of December 31, 2001 and a 145% increase
over $1,491,000 in MSRs as of September 30, 2001. MSRs are recorded on the
Bank's books at values determined by reviewing the current value of MSRs in the
mortgage servicing market. The current value of new MSRs being recorded, as
loans are sold with servicing retained, is reviewed periodically and any
adjustment to the initial basis point values being recorded is done in a timely
manner. The balance of loans serviced for others amounted to $536,847,000,
$406,093,000 and $358,897,522, as of September 30, 2002, December 31, 2001 and
September 30, 2001, respectively. Periodically, the book value of the balance of
the MSRs on the Bank's books is tested for potential impairment. Should any
impairment be determined, the MSR balances would be written down against current
Corporation earnings. In a lower residential mortgage loan interest rate
environment, should mortgage loans that were sold by the Bank with the servicing
retained begin to refinance, the balance of the respective MSRs would be subject
to accelerated amortization, potentially lowering the Bank's net income. Should
the Bank refinance the loans, the accelerated amortization of the MSRs may be
offset by the recording of new MSRs, increasing the gain on the loans sold,
thereby reducing or eliminating the negative effect of the accelerated
amortization of the MSRs. Should the Bank not refinance or replace the loans
being paid off, the Bank could be subject to an adverse effect on the results of
operations from the accelerated amortization of MSRs, as the respective mortgage
loans are paid off.
Total deposits increased 11% to $433,817,000 as of September 30, 2002
from $391,059,000 as of December 31, 2001. A more meaningful measurement of
deposit change is the change in average outstanding deposit balances. Total
average outstanding deposit balances of $413,905,000 at September 30, 2002
increased 11% from the average deposits of $371,324,000 for the same period in
2001. Average savings balances increased 5% at $42,390,000 for the first nine
months of 2002, compared to $40,238,000 for the same period in 2001. Market Rate
Account balances increased 15% or $7,897,000 from $52,398,000 in average daily
outstanding balances for the nine months ended September 30, 2001 to $60,295,000
for the same period in 2002. Average
Form 10-Q
Page 25
outstanding NOW account balances increased 18% or $17,190,000, from $97,357,000
for the first nine months of 2001 to $114,547,000 for the same period in 2002.
Non-interest bearing demand deposit average outstanding balances grew 17% or
$17,708,000 from $104,394,000 for the nine months ended September 30, 2001 to
$122,102,000 for the same period in 2002. Average outstanding CD balances
decreased 3% or $2,366,000 from $76,937,000 in average outstanding balances for
the first nine months of 2001 to $74,571,000 for the same period in 2002.
OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK
The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby letters of credit.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the loan agreement. Total
commitments to extend credit at September 30, 2002 are $196,417,000.
Standby letters of credit are conditional commitments issued by the Bank to a
customer for a third party. Such standby letters of credit are issued to support
private borrowing arrangements. The credit risk involved in issuing standby
letters of credit is similar to that involved in extending loan facilities to
customers. The Corporation's obligation under standby letters of credit at
September 30, 2002 amounted to $10,388,000.
Concentration of credit risk is measured by periodically reviewing with the
Bank's board of directors outstanding loans balances, by industry and discussing
potential risks inherent in the respective industries, based on the then current
economic environment. Quarterly, the Bank's board of directors reviews the level
of loan delinquencies of the Bank, by loan type compared to a peer group
analysis.
LIQUIDITY, INTEREST RATE SENSITIVITY
The Bank's liquidity is maintained by managing its core deposits,
purchasing federal funds, selling loans in the secondary market, and borrowing
from the FHLB. The Bank's liquid assets include cash and cash equivalents as
well as certain unpledged investment securities. Bank management incorporates a
liquidity measure, incorporating its ability to borrow from the FHLB to meet
liquidity needs and goals. Periodically, the Asset / Liability Committee of the
Bank reviews the Bank's liquidity needs and reports its findings to the Risk
Management Committee of the Bank's Board of Directors.
Form 10-Q
Page 26
INTEREST RATE SENSITIVITY ANALYSIS
as of September 30, 2002
--------------------------------------------------------------------------------------
(dollars in thousands) 0 to 30 31 to 90 91 to 180 181 to 365 Over Non-Rate
Days Days Days Days 1 Year Sensitive Total
--------------------------------------------------------------------------------------
Assets:
Interest-bearing deposits with
other banks $ 555 $ --- $ --- $ --- $ --- $ --- $ 555
Federal funds sold 1,000 --- --- --- --- --- 1,000
Investment 29 4,058 3,087 11,174 3,438 384 22,170
securities
Loans 201,012 37,524 29,053 18,627 162,512 (5,806) 442,922
Cash and due from banks --- --- --- --- --- 30,519 30,519
Other assets --- --- --- --- --- 19,680 19,680
--------------------------------------------------------------------------------------
Total assets $ 202,596 $ 41,582 $ 32,140 $ 29,801 $ 165,950 $ 44,777 $ 516,846
======================================================================================
Liabilities and shareholders'
equity:
Demand, noninterest-bearing $ 6,426 $ 12,851 $ 5,141 $ 8,996 $ 70,426 $ 24,674 $ 128,514
Savings deposits 11,449 22,899 9,412 18,824 155,878 --- 218,462
Time deposits 14,873 8,877 10,251 20,324 38,735 --- 93,060
Other liabilities 500 --- --- 20,000 --- 9,325 29,825
Shareholders' equity 350 701 1,051 2,102 37,843 4,938 46,985
--------------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 33,598 $ 45,328 $ 25,855 $ 70,246 $ 302,882 $ 38,936 $ 516,846
======================================================================================
Gap $ 168,998 ($ 3,746) $ 6,285 ($ 40,445) ($ 136,932) $ 5,840 ---
Cumulative gap $ 168,998 $ 165,252 $ 171,537 $ 131,092 ($ 5,840) --- ---
Cumulative earning assets as a ratio
of interest bearing liabilities 603% 309% 264% 174% 99% --- ---
In the short term, 30 days or less, the Bank is asset rate sensitive
after adjusting the interest rate sensitivity of savings deposits based on
management's experience and assumptions regarding the impact of product pricing,
interest rate spread relationships and customer behavior. Asset rate sensitivity
will result in a greater portion of assets compared to deposits repricing with
changes in interest rates within specified time periods. The opposite effect
results from being liability rate sensitive. Asset rate sensitivity in the short
term, in an increasing rate
Form 10-Q
Page 27
environment, should produce an increase in net interest income. The Bank uses
simulation models to help measure its interest rate risk and to help manage its
interest rate sensitivity. The simulation models consider not only the impact of
changes in interest rates on forecasted net interest income, but also such
factors as yield curve relationships, possible loan prepayments, and deposit
withdrawals. As of September 30, 2002, 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 policy.
CAPITAL RESOURCES
Total consolidated shareholders equity of the Corporation was
$60,773,000, or 11.6% of total assets, as of September 30, 2002, compared to
total shareholders equity of $57,307,000, or 12.0% of total assets, as of
December 31, 2001. As of September 30, 2001, shareholders' equity was
$56,049,000, or 12.0% of total assets. The Corporation's risk weighted Tier I
capital ratio was 11.99% as of September 30, 2002 compared to 12.86% and 12.98%
at December 31, 2001 and September 30, 2001, respectively. The respective Tier
II ratios were 13.19%, 14.03% and 14.13%. Both the Corporation and the Bank
exceed the required capital levels to be considered "Well Capitalized" by their
respective regulators at the end of each period presented. During the first nine
months of 2002, the Corporation declared its regular dividend of $0.57 per
share, a 6% increase over $0.54 per share declared during the first nine months
of 2001.
In October 2001, the Corporation elected to continue a stock repurchase
program, originally established in September 1997, authorizing the purchase of
up to 5% of the then outstanding stock or 217,231 shares, not to exceed
$7,500,000. As of September 30, 2002, the Corporation has completed that
program, repurchasing 216,836 shares at a cost of $7,248,000 or an average cost
per share of $33.42. At its October 2002 meeting the Board of Directors of the
Corporation authorized the additional repurchase of 4% or 174,047 shares of
Corporation stock, not to exceed $7,500,000. The program will be accomplished
through the use of future retained earnings as well as the proceeds of future
stock option exercises.
Form 10-Q
Page 28
Item 3.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS
There has been no material change in the Corporation's assessment of
its sensitivity to market risks since its presentation in the 2001 Annual Report
and form 10-K filed with the SEC.
Form 10-Q
Page 29
Item 4.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Corporation
carried out an evaluation, under the supervision and with the participation of
the Corporation's management, including the Corporation's Chief Executive
Officer, Frederick C. Peters II, and Chief Financial Officer, Joseph W. Rebl, of
the effectiveness of the design and operation of the Corporation's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Corporation
(including its consolidated subsidiaries) required to be included in the
Corporation's periodic SEC filings.
As of the date of this report, there have not been any significant
changes to the Corporation's internal controls or in any other factors that
could significantly affect those controls subsequent to the date of the
evaluation.
Form 10-Q
Page 30
PART II. OTHER INFORMATION
September 30, 2002
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
During 2001, the Corporation decided to exit its financial advisory
business line. During the 4/th/ quarter of 2001, Bryn Mawr Asset
Management, Inc. was put on an inactive status. During 2002, the
Corporation filed a Form ADV-W with the Securities and Exchange
Commission, withdrawing Bryn Mawr Asset Management, Inc.'s registration
as an investment advisor under the Investment Advisory Act of 1940.
In October 2002, the Corporation's board of directors authorized a new
stock repurchase program, authorizing Corporation management to
repurchase up to 4% or 174,047 shares of Corporation stock, not to
exceed $7.5 million. Funding for this program will come from future
retained earnings and proceeds from future stock option exercises.
Form 10-Q
Page 31
The Bank will open a new full service branch office in Newtown Square,
PA in the third or fourth quarter of 2003. The Bank is leasing the
property under a twenty-nine year lease. All capital improvements will
be capitalized and amortized over the life of the lease.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Form 10-Q
Page 32
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 12, 2002 By: /s/ Frederick C. Peters II
--------------------------
Fredrick C. Peters II
President & Chief
Executive Officer
Date: November 12, 2002 By: /s/ Joseph W. Rebl
------------------
Joseph W. Rebl
Treasurer and
Assistant Secretary
Form 10-Q
Page 33
I, Frederick C. Peters, II, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002 /s/ Frederick C. Peters II
---------------------------
Frederick C. Peters II
Chief Executive Officer
I, Joseph W. Rebl, Chief Financial Officer, certify that:
7. I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank
Corporation;
8. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
9. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
10. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based o
our evaluation as of the Evaluation Date;
11. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
12. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002 /s/ Joseph W.Rebl
-----------------
Joseph W. Rebl
Chief Financial Officer