Back to GetFilings.com

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 or 15 (d)

of the Securities and Exchange Act of 1934.

For Quarter ended March 31, 2004

Commission File Number 0-15261

Bryn Mawr Bank Corporation

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (610) 525-1700

Not Applicable

Former name, former address and fiscal year, if changed since last report.

Indicate by check whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)    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.

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED March 31, 2004

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars In Thousands*)

Unaudited

The accompanying notes are an integral part of the consolidated financial statements.

1

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

The accompanying notes are an integral part of the consolidated financial statements.

2

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars In Thousands)

Unaudited

The accompanying notes are an integral part of the consolidated financial statements.

3

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars In Thousands)

Unaudited

The accompanying notes are an integral part of the consolidated financial statements.

4

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2004 AND 2003

(Unaudited)

1. Unaudited Interim Results:

The consolidated statements of income of Bryn Mawr Bank Corporation (the “Corporation”) for the three month periods ended March 31, 2004 and 2003, the consolidated balance sheets as of March 31, 2004 and 2003, the related consolidated statements of cash flows for the three month periods ended March 31, 2004 and 2003, the related and the related consolidated statements of comprehensive income for the three month periods ended March 31, 2004 and 2003 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 2003 Annual Report incorporated in the 2003 Form 10-K (Exhibit #13).

2. Earnings Per Common Share:

Reference is made to Note #13, Stock Option Plan (the “Plan”), in the Notes to Consolidated Financial Statements in the Corporation’s 2003 Annual Report incorporated in the 2003 Form 10-K (Exhibit #13). Shares under option under the Plan had a dilutive impact on net income per share for the three-month period ended March 31, 2004.

3. Summary of Significant Accounting Policies:

The significant accounting policies are as follows:

Cash and cash equivalents:

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, interest-bearing deposits with banks and federal funds sold.

5

Table of Contents

Investment securities:

Management categorized all of its investment securities as available for sale as part of its asset/liability management strategy since they may be sold in response to changes in interest rates, prepayments, and similar factors. Investments in this classification are reported at the current market value with net unrealized gains or losses, net of the applicable deferred tax effect, being added to or deducted from the Corporation’s total shareholders’ equity on the balance sheet. As of March 31, 2004, shareholders’ equity increased by $49,000 due to unrealized gains (net of $28,000 in deferred income taxes) of $77,000 in the investment securities portfolio. As of December 31, 2003, shareholders’ equity was decreased by $9,000 due to unrealized losses (net of $5,000 in deferred income tax benefit) of $14,000 in the investment securities portfolio.

Mortgage Servicing Rights:

Mortgage servicing rights (“MSRs”) are recorded when residential mortgage loans are sold with servicing retained by The Bryn Mawr Trust Company (the “Bank”). A quarterly independent valuation of MSRs is completed to determine (1) the market value of the MSR portfolio at that quarter end and (2) the projected cash flows from the MSR portfolio for the subsequent quarter (the “MSR Valuation”). The subsequent cash flow projections, which measures a number of factors, including the projected pre-payment speeds of the respective mortgage loans, is the basis for the amortization of the MSRs in the subsequent quarter. The amount of quarterly amortization is measured each quarter from the results of the quarterly MSR Valuation and any changes to the amount of amortization are made on a quarterly basis. When loans are paid off, any unamortized balances of the respective MSRs are written off against current Bank net income. Should any impairment of the MSRs be determined by the quarterly MSR Valuation, the balance of the MSRs would be written down by the amount of the impairment.

Loan Loss Provision:

The loan loss provision charged to operating expenses is driven by a systematic formula and those factors which, in management’s judgment, deserve current recognition in estimating loan losses including the continuing evaluation of the loan portfolio and the Bank’s past loan loss experience. The allowance for loan losses is an amount that management believes will be adequate to absorb losses inherent in existing loans. In addition, the Bank’s primary regulators, as an integral part of their examination process, may require adjustments to the allowance for loan losses.

6

Table of Contents

Pension and Other Postretirement Benefits:

The Corporation sponsors two pension plans and a postretirement benefit plan for certain employees.

The following table provides a reconciliation of the components of the net periodic benefits cost for the three months ended March 31, 2004 and 2003:

Employer contributions

The Corporation previously disclosed in its financial statements for the year ended December 31, 2003, that it did not expect to contribute to its pension plan in 2004. As of March 31, 2004, no contributions have been made. The Corporation does not anticipate contributing to its pension plan in 2004.

Accounting for Stock Based Compensation:

The Corporation has elected to use the intrinsic value method of accounting for stock-based employee compensation under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees. No stock-based employee compensation cost is reflected in net income, as all options granted under the Plan had an exercise price equal to the market value of the underlying common stock on the date of the grant. The fair value approach under Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation, takes into account the time value of the options and will generally result in compensation expense.

7

Table of Contents

The following table presents net income and basic and diluted earnings per share, as reported, the stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income, if the fair value method of accounting for stock-based employee compensation had been applied to all awards and proforma net income and basic and diluted earnings per share, had the fair value method of accounting for stock-based employee compensation been applied to all awards.

Trust income:

The trust income is recognized on the cash basis of accounting. Reporting such income on a cash basis does not materially affect net income.

Income taxes:

The Corporation files a consolidated Federal income tax return with its subsidiaries. Certain items of income and expense (primarily pension and post retirement benefits, provision for loan loss, mortgage servicing rights and other reserves) are reported in different periods for tax purposes. Deferred taxes are provided for on such temporary timing differences existing between financial and income tax reporting, subject to the deferred tax asset realization criteria required under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”).

4. Adoption of Financial Accounting Standards:

Accounting standards, recently issued as of December 31, 2003, are discussed in Note 2 “Summary of Significant Accounting Policies” in the Corporation’s Annual Report, incorporated in the 2003 Form 10-K (Exhibit #13).

8

Table of Contents

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 the fourth quarter of 2002 an additional $400,000 of impairment loss was booked reducing the balance of goodwill to $2,405,000. There was no income or loss from discontinued operations reported for the first three months of 2004. The loss from discontinued operations reported for the first three months of 2003 was $192,000. During 2003, Corporation management determined that JWR&Co. was not attaining its strategic goals and that it would be in the best interest of the Corporation to discontinue offering family business office services through JWR&Co. Therefore, on August 1, 2003 effective as of June 30, 2003 the Corporation sold substantially all of the assets of JWR&Co. to Private Family Office, Inc. which is owned by Robert M. Fedoris, former president of JWR&Co. (the “Asset Sale”). The balance of goodwill was written-off as a result of the Asset Sale. There was no goodwill recorded on the Corporation’s books as of March 31, 2004 relating to JWR&Co.

Since the assets sold in the Asset Sale met all the requirements of Statement of Financial Accounting Standard No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the long-lived assets of JWR&Co. were classified as assets of discontinued operations and were classified as available for sale in the balance sheet through June 30, 2003, and the revenues and expenses, the write-down of goodwill and other related disposal expenses were classified as (loss) income from discontinued operations, net of taxes in the respective statements of income.

5. Loans:

The Bank recognizes interest income on loans performing satisfactorily on the accrual method of accounting. Non-performing 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 non-performing loans, except consumer loans, which may be considered for charge-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 non-performing is deducted from interest income. Smaller balance, homogeneous loans, exclusively consumer loans, when included in non-performing loans, for practical consideration, are not put on a nonaccrual status nor is the current accrued interest receivable reversed from income. The charge-off policy for all loans, including non-performing and impaired loans, considers such factors as the type and size of the loan, the quality of the collateral, and historical credit worthiness of the borrower in management’s assessment of the collectiblity of such loans.

9

Table of Contents

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, that is a temporary delay in the payment process of a loan. Under these circumstances, the Bank, expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of the delay.

When a borrower is deemed to be unable to meet the original terms of a loan, a loan may be considered impaired or could be restructured. While all impaired loans are not necessarily considered non-performing loans, if a loan is delinquent for 90 days or more, it is considered both a non-performing and an impaired loan. All of the Bank’s impaired loans, which amounted to $442,000, $371,000 and $80,000 at March 31, 2004, December 31, 2003 and March 31, 2003, respectively, were placed on nonaccrual status when they were delinquent for greater than 90 days, and any outstanding accrued interest receivable on such loans, except for consumer loans, at the time they were placed on nonaccrual status, was reversed from income.

Impaired loans are required to be measured based upon the present value of expected future cash flows, discounted at the loan’s initial effective interest rate or at the loan’s market price or fair value of the collateral, if the loan is collateral dependent. As of March 31, 2004, one impaired loan amounting to $61,000 was measured using the present value of expected future cash flows or the loan’s market price. As of December 31, 2003 and March 31, 2003, 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 $381,000, $371,000, and $80,000, as of March 31, 2004, December 31, 2003 and March 31, 2003, 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 March 31, 2004, December 31, 2003 and March 31, 2003, there were no impaired loans for which it was necessary to establish an impairment reserve. Impaired loans for which no loan loss allowance was allocated amounted to $442,000, at March 31, 2004 and $371,000 at December 31, 2003 and $80,000 at March 31, 2003. Average impaired loans for the three-month period ended March 31, 2004, year ended December 31, 2003 and March 31, 2003 amounted to $445,000, $170,000 and $79,000, respectively.

When a loan is put on a nonaccrual status, any loan payment subsequently collected is credited to reduce the outstanding principal balance. Therefore, no interest income was reported on nonaccrual loans during either three-month period ended March 31, 2004 or 2003. 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

10

Table of Contents

period of repayment performance by the borrower, with a minimum repayment of at least three 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 three months of 2004 or 2003.

6. Allowance for Loan Losses:

The summary of changes in the allowance is as follows:

11

Table of Contents

7. Segment Information:

Statement of Financial Accounting Standard No. 131, Segment Reporting, identifies operating segments as components of an enterprise which are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criteria to the Corporation’s results of continuing operations.

The Corporation’s Banking segment is managed as a traditional banking segment. The Banking segment gathers deposits, makes loans and purchases investments. In addition to net interest income generated by this segment, revenues are earned from the service charging of deposit accounts, rental of vaults, as well as other service charge revenues.

The Wealth Management segment has responsibility for all fiduciary activity within the Corporation. This includes trust investment and administration, client employee benefit administration, trust tax services and client custodial responsibilities.

The Mortgage Banking segment is responsible for the origination of residential mortgage loans, as well as the sale and servicing of all or a portion of these residential mortgage loans to the secondary mortgage loan market. All related revenues are included in this segment, as well as income and expense associated with the mortgage servicing rights related to the servicing of sold residential mortgage loans.

The “All Other” segment includes revenues and expenses for Insurance Counsellors of Bryn Mawr, Inc., Bryn Mawr Settlement Services, Inc., Bryn Mawr Bank Corporation and, for 2003, Bryn Mawr Finance, Inc. This segment also includes any revenue and expenses from continuing operations for JWR & Co.

12

Table of Contents

7. Segment Information:

The Corporation’s principal operating segments are structured around the financial services provided to its customers. The Banking segment gathers deposits and makes funds available for loans to its customers. The Bank’s Wealth Management’s segment provides both corporate and individual investment management and trust products and services. The Bank’s Mortgage Banking segment originates and sells residential mortgage loans to the secondary mortgage market. Bryn Mawr Bank Corporation and all other subsidiaries are aggregated under the “All Other” heading.

Segment information for the three months ended March 31, 2004 and 2003 for continuing operations is as follows:

(Dollars in thousands)