Bryn Mawr Bank Corporation Reports First Quarter Net Income of $9.0 Million, Improved Net Interest Margin

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BRYN MAWR, Pa., April 20, 2017 (GLOBE NEWSWIRE) — Bryn Mawr Bank Corporation (NASDAQ:BMTC) (the “Corporation”), parent of The Bryn Mawr Trust Company (the “Bank”), today reported net income of $9.0 million and diluted earnings per share of $0.53 for the three months ended March 31, 2017, as compared to net income of $9.4 million, or $0.55 diluted earnings per share, for the three months ended December 31, 2016 and $8.3 million, or $0.49 diluted earnings per share, for the three months ended March 31, 2016.

On a non-GAAP basis, core net income, which excludes certain non-core income and expense items, as detailed in the appendix to this earnings release, was $9.4 million, or $0.55 diluted earnings per share, for the three months ended March 31, 2017 as compared to $9.4 million, or $0.55 diluted earnings per share, for the three months ended December 31, 2016 and $8.3 million, or $0.49 diluted earnings per share, for the three months ended March 31, 2016. Management believes the core net income measure is important in evaluating the Corporation’s performance on a more comparable basis between periods. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.

“With our merger preparation efforts in full swing, we are pleased to report another strong quarter,” commented Frank Leto, President and Chief Executive Officer, continuing, “The uptick in our net interest margin contributed to the increase in net interest income on both a linked quarter as well as a year-over-year basis. And while net loan growth for the first quarter was relatively flat, at $20.2 million, originations were consistent with prior quarters. Net paydowns totaled $106.7 million for the first quarter of 2017.”

Mr. Leto also stated, “In keeping with our strategy of selectively expanding our brand into new market areas, we recently announced two new initiatives: the anticipated opening of a new wealth office in Princeton, New Jersey and the expected acquisition of the Hirshorn Boothby insurance agency in the Chestnut Hill section of Philadelphia. These initiatives seek to leverage the branch network we’ll be acquiring in the contemplated Royal Bancshares acquisition, and will enable us to offer a full range of financial solutions to the residents and businesses in the surrounding areas.”

Each of the opening of the Princeton office and the acquisitions of Hirshorn Boothby and Royal Bancshares of Pennsylvania, Inc. (“Royal” or “Royal Bancshares”) is subject to applicable regulatory approvals, and the acquisitions are also subject to certain closing conditions.

On April 20, 2017, the Board of Directors of the Corporation declared a quarterly dividend of $0.21 per share, payable June 1, 2017 to shareholders of record as of May 2, 2017.

SIGNIFICANT ITEMS OF NOTE

Results of Operations –First Quarter 2017 Compared to Fourth Quarter 2016

  • Net income for the three months ended March 31, 2017 was $9.0 million, as compared to $9.4 million for the three months ended December 31, 2016. Contributing to the decrease was a $511 thousand increase in merger expenses, a $763 thousand increase in salaries and wages related to annual merit increases, normalization of incentive compensation and staff additions, and a $583 thousand decrease in recoveries on mortgage servicing rights (“MSRs”). Partially offsetting these changes was an increase of $413 thousand in net interest income, a $768 thousand decrease in provision for loan and lease losses (the “Provision”) and a $1.2 million decrease in other operating expenses.

     

  • Net interest income for the three months ended March 31, 2017 was $27.4 million, an increase of $413 thousand from $27.0 million for the three months ended December 31, 2016. Average interest-earning assets increased by $28.7 million, with average loans increasing $37.7 million and average interest-bearing deposits with banks decreasing $15.6 million. The yield earned on loans increased by 6 basis points.

     

  • The tax-equivalent net interest margin of 3.74% for the first quarter of 2017 increased 9 basis points from 3.65% for the fourth quarter of 2016. The increase was largely the result of a 6 basis point increase in tax-equivalent yield earned on average loans, which totaled $2.56 billion for the three months ended March 31, 2017, and a 16 basis point increase in tax-equivalent yield on available for sale investment securities. The rate paid on interest-bearing liabilities remained unchanged on a linked-quarter basis. The impact of accretion of purchase accounting adjustments for the first quarter of 2017 and the fourth quarter of 2016 was the same, contributing 11 basis points to the margin in both periods.

     

  • Non-interest income for the three months ended March 31, 2017 decreased by $21 thousand from the fourth quarter of 2016. Decreases of $41 thousand and $95 thousand in service charges on deposits and dividends on bank stocks, respectively, were partially offset by a $92 thousand increase in loan servicing and other fees and a $48 thousand increase in insurance revenues.

     

  • Non-interest expense for the three months ended March 31, 2017 increased $1.6 million, to $26.7 million, as compared to $25.1 million for the fourth quarter of 2016. The increase was driven by the $511 thousand of merger-related expenses incurred as the Corporation prepares for the merger with Royal Bancshares, a $595 thousand increase in salaries and wages related to annual increases, normalization of incentive compensation and staff additions and a decrease in recoveries of MSR impairments, which were impacted positively in the fourth quarter of 2016 with the prospect of rising interest rates. Pennsylvania bank shares tax increased by $868 thousand, however this was offset with a corresponding decrease in contributions expense, which is reported as part of other operating expense.  

     

  • For the three months ended March 31, 2017, net loan and lease charge-offs totaled $670 thousand, as compared to $1.3 million for the fourth quarter of 2016. The Provision for the three months ended March 31, 2017 was $291 thousand, a decrease of $768 thousand from the fourth quarter of 2016. The decrease in the Provision was the result of lower net charge-offs and improving credit quality metrics which factor into the calculation of the overall allowance for loan and lease losses (the “Allowance”) requirement.

     

  • Income tax expense for the first quarter of 2017 decreased by $49 thousand as compared to the fourth quarter of 2016. The increase in the effective tax rate from the fourth quarter of 2016 to the first quarter of 2017 was primarily the result of certain non-deductible merger expenses incurred in the first quarter of 2017.

Results of Operations –First Quarter 2017 Compared to First Quarter 2016

  • Net income for the three months ended March 31, 2017 was $9.0 million, or $0.53 diluted earnings per share, as compared to $8.3 million, or diluted earnings per share of $0.49 for the same period in 2016. Contributing to the increase in net income were increases of $1.5 million in net interest income and $471 thousand in fees for wealth management services and decreases of $1.1 million in Provision, $198 thousand in amortization of intangible assets and $174 thousand in information technology expenses. Partially offsetting these changes were decreases of $513 thousand in insurance revenues and $76 thousand in gain on sale of mortgage loans, along with increases of $712 thousand in salaries and wages and $511 thousand in merger expenses.

     

  • Net interest income for the three months ended March 31, 2017 was $27.4 million, an increase of $1.5 million, or 5.8%, from $25.9 million for the same period in 2016. The increase in net interest income was primarily related to the growth in average loan balances between the periods. Average loans and leases for the three months ended March 31, 2017 increased by $247.1 million from the same period in 2016. The increase in average loan balances was offset by a 13 basis point decrease in tax-equivalent yield earned on loans and leases. The net effect of the yield decrease and volume increase on average loans and leases was a $1.8 million increase in tax-equivalent interest income on loans. Partially offsetting the increase in average loans was a $218.5 million increase in average interest-bearing deposits accompanied by a 14 basis point increase in rate paid on deposits.

     

  • The tax-equivalent net interest margin of 3.74% for the three months ended March 31, 2017 was a 13 basis point decrease from 3.87% for the same period in 2016. The primary reason for the decline in the margin was the 13 basis point decrease in tax-equivalent yield earned on loans and the 14 basis point increase in rate paid on deposits. The impact of accretion of purchase accounting adjustments for the first quarter of 2017 added 11 basis points to the tax-equivalent net interest margin, while the first quarter of 2016 saw a 16 basis point increase from this accretion.

     

  • Non-interest income for the three months ended March 31, 2017 increased by $74 thousand from the same period in 2016. A $144 thousand increase in other operating income and a  $471 thousand increase in fees for wealth management services, as wealth assets have increased 26.3% from the March 31, 2016 level, were partially offset by a decrease of $76 thousand in gain on sale of residential mortgage loans, as market interest rate increases reduced origination activity, and a $513 thousand decrease in insurance revenues related to the recognition of contingent commissions from providers during the first quarter of 2016, which are being ratably recognized in 2017.

     

  • Non-interest expense for the three months ended March 31, 2017 increased $1.7 million from the same period in 2016, primarily related to salary and wage increases of $712 thousand due to staffing increases, annual salary and wage increases and increases in incentive compensation, a $511 thousand increase in merger expenses in connection with the merger with Royal, and a $700 thousand increase in other operating expenses, largely related to deferred compensation expense associated with the valuation of Corporation stock held in the deferred compensation trusts.

     

  • The Provision for the three months ended March 31, 2017 of $291 thousand was a $1.1 million decrease from the same period in 2016. Net charge-offs for the first quarter of 2017 were $670 thousand as compared to $422 thousand for the same period in 2016. The decrease in Provision is indicative of improvements in certain qualitative factors used to determine the Allowance.

Financial Condition – March 31, 2017 Compared to December 31, 2016

  • Total portfolio loans and leases of $2.56 billion as of March 31, 2017, increased by $20.2 million from December 31, 2016. Loan growth was concentrated in the commercial mortgage segment which grew by $27.0 million and was partially offset by an $11.8 million decrease in commercial and industrial loans.

     

  • The Allowance as of March 31, 2017 was $17.1 million, or 0.67% of portfolio loans as compared to $17.5 million, or 0.69% of portfolio loans and leases, as of December 31, 2016. In addition to the ratio of Allowance to portfolio loans, management also calculates two non-GAAP measures: the Allowance as a percentage of originated loans and leases, which was 0.75% as of March 31, 2017, as compared to 0.78% as of December 31, 2016, and the Allowance plus the remaining loan mark as a percentage of gross loans, which was 1.12% as of March 31, 2017, as compared to 1.17% as of December 31, 2016. A reconciliation of these and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.

     

  • Available for sale investment securities as of March 31, 2017 were $391.0 million, a decrease of $176.0 million from December 31, 2016. The primary contributor to the decrease in the portfolio was the maturing, during January 2017, of $200 million of short-term U.S. Treasury bills.

     

  • Total assets as of March 31, 2017 were $3.29 billion, a decrease of $128.9 million from December 31, 2016. Increases in cash and cash equivalents and portfolio loans partially offset the decrease in available for sale investment securities discussed in the previous bullet point.

     

  • Wealth assets under management, administration, supervision and brokerage totaled $11.73 billion as of March 31, 2017, an increase of $397.0 million from December 31, 2016.

     

  • Deposits of $2.64 billion as of March 31, 2017 increased $56.9 million from December 31, 2016. Noninterest-bearing deposits increased by $35.4 million, while interest-bearing accounts increased by $21.5 million.

     

  • Borrowings of $198.3 million as of March 31, 2017 was a $195.6 million decrease from December 31, 2016. The decrease was largely comprised of short-term borrowings which were repaid at the beginning of January 2017 in connection with the maturing of $200 million of short-term U.S. Treasury bills.

     

  • The capital ratios for the Bank and the Corporation, as of March 31, 2017, as shown in the attached tables, indicate levels well above the regulatory minimum to be considered “well capitalized.” At the Bank level, all capital ratios have increased slightly from their December 31, 2016 levels due to the effect of an increase in retained earnings and a decrease in other comprehensive loss partially offset by an increase in risk-weighted assets. At the Corporation level, Tier 1 and Total (Tier 1 & 2) capital to risk weighted assets declined by 1 and 5 basis points, respectively, related to an increase in risk-weighted assets and the decrease in retained earnings associated with the dividend payment during the first quarter of 2017 which totaled $3.6 million.

FORWARD LOOKING STATEMENTS AND SAFE HARBOR

This press release contains statements which, to the extent that they are not recitations of historical fact may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Such forward-looking statements may include financial and other projections as well as statements regarding the Corporation’s future plans, objectives, performance, revenues, growth, profits, operating expenses or the Corporation’s underlying assumptions. The words “may,” “would,” “should,” “could,” “will,” “likely,” “possibly,” “expect,” “anticipate,” “intend,” “indicate,” “estimate,” “target,” “potentially,” “promising,” “probably,” “outlook,” “predict,” “contemplate,” “continue,” “plan,” “forecast,” “project,” “are optimistic,” “are looking,” “are looking forward” and “believe” or other similar words and phrases may identify forward-looking statements. Persons reading this press release are cautioned that such statements are only predictions, and that the Corporation’s actual future results or performance may be materially different.

Such forward-looking statements involve known and unknown risks and uncertainties.   A number of factors, many of which are beyond the Corporation’s control, could cause our actual results, events or developments, or industry results, to be materially different from any future results, events or developments expressed, implied or anticipated by such forward-looking statements, and so our business and financial condition and results of operations could be materially and adversely affected. Such factors include, among others, our inability to obtain applicable regulatory approvals with respect to, or our inability to complete, the contemplated Royal and Hirshorn Boothby acquisitions and the opening of the Princeton office, that the integration of acquired businesses with the Corporation’s may take longer than anticipated or be more costly to complete and that the anticipated benefits, including any anticipated cost savings or strategic gains may be significantly harder to achieve or take longer than anticipated or may not be achieved, our need for capital, our ability to control operating costs and expenses, and to manage loan and lease delinquency rates; the credit risks of lending activities and overall quality of the composition of our loan, lease and securities portfolio; the impact of economic conditions, consumer and business spending habits, and real estate market conditions on our business and in our market area; changes in the levels of general interest rates, deposit interest rates, or net interest margin and funding sources; changes in banking regulations and policies and the possibility that any banking agency approvals we might require for certain activities will not be obtained in a timely manner or at all or will be conditioned in a manner that would impair our ability to implement our business plans; changes in accounting policies and practices; the inability of key third-party providers to perform their obligations to us; our ability to attract and retain key personnel; competition in our marketplace; war or terrorist activities; material differences in the actual financial results, cost savings and revenue enhancements associated with our acquisitions; and other factors as described in our securities filings.  All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made.  The Corporation does not undertake to update forward-looking statements.

For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, as updated by our quarterly or other reports subsequently filed with the SEC.

Bryn Mawr Bank Corporation                      
Summary Financial Information (unaudited)                      
(dollars in thousands, except per share data)                      
  As of or For the Three Months Ended    
  March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016    
Consolidated Balance Sheet (selected items)                      
Interest-bearing deposits with banks $   69,978     $   34,206     $   30,118     $   20,481     $   33,954      
Investment securities (AFS, HTM and Trading)     400,360         573,763         373,508         371,906         369,461      
Loans held for sale     3,015         9,621         11,506         11,882         7,807      
Portfolio loans and leases     2,555,589         2,535,425         2,493,357         2,423,821         2,378,841      
Allowance for loan and lease losses (“ALLL”)     (17,107 )       (17,486 )       (17,744 )       (17,036 )       (16,845 )    
Goodwill and other intangible assets     124,629         125,170         126,000         126,888         127,777      
Total assets     3,292,617         3,421,530         3,174,080         3,090,090         3,058,247      
Deposits – interest-bearing     1,865,009         1,843,495         1,759,862         1,720,477         1,700,550      
Deposits – non-interest-bearing     771,556         736,180         718,015         689,214         643,492      
Short-term borrowings     23,613         204,151         50,065         19,119         37,010      
Long-term FHLB advances and other borrowings     174,711         189,742         204,772         224,802         249,832      
Subordinated notes     29,546         29,532         29,518         29,505         29,491      
Total liabilities     2,904,522         3,040,403         2,795,621         2,717,623         2,693,070      
Shareholders’ equity     388,095         381,127         378,459         372,467         365,177      
                       
Average Balance Sheet (selected items)                      
Interest-bearing deposits with banks $   39,669     $   55,298     $   33,532     $   44,950     $   39,050      
Investment securities (AFS, HTM and Trading)     393,306         386,658         373,616         371,153         360,957      
Loans held for sale     4,238         11,591         12,887         7,844         5,481      
Portfolio loans and leases     2,551,439         2,506,376         2,464,085         2,404,799         2,303,103      
Total interest-earning assets     2,988,652         2,959,923         2,884,120         2,828,746         2,708,591      
Goodwill and intangible assets     124,884         125,614         126,505         127,402         128,296      
Total assets     3,244,060         3,215,868         3,142,019         3,089,953         2,973,148      
Deposits – interest-bearing     1,852,194         1,809,276         1,729,689         1,717,252         1,633,651      
Short-term borrowings     47,603         40,629         40,966         32,328         34,158      
Long-term FHLB advances and other borrowings     182,507         198,454         218,920         236,248         250,015      
Subordinated notes     29,537         29,523         29,509         29,496         29,482      
Total interest-bearing liabilities     2,111,841         2,077,882         2,019,084         2,015,324         1,947,306      
Total liabilities     2,861,846         2,837,825         2,769,065         2,723,838         2,612,276      
Shareholders’ equity     382,214         378,043         372,954         366,115         360,872      
                       
Income Statement                      
Net interest income $   27,403     $   26,990     $   26,717     $   26,627     $   25,902      
Provision for loan and lease losses     291         1,059         1,412         445         1,410      
Noninterest income     13,227         13,248         13,786         13,781         13,153      
Noninterest expense     26,660         25,087         25,371         26,220         24,996      
Income tax expense (benefit)     4,635         4,684         4,346         4,810         4,328      
Net income     9,044         9,408         9,374         8,933         8,321      
Basic earnings per share     0.53         0.56         0.56         0.53         0.49      
Diluted earnings per share     0.53         0.55         0.55         0.52         0.49      
Net income (core) (1)     9,375         9,402         9,392         8,961         8,331      
Basic earnings per share (core) (1)     0.55         0.56         0.56         0.53         0.49      
Diluted earnings per share (core) (1)     0.55         0.55         0.55         0.53         0.49      
Cash dividends paid per share     0.21         0.21         0.21         0.20         0.20      
Profitability Indicators                      
Return on average assets   1.13 %     1.16 %     1.19 %     1.16 %     1.13 %    
Return on average equity   9.60 %     9.90 %     10.00 %     9.81 %     9.27 %    
Return on tangible equity(1)   14.96 %     15.68 %     16.06 %     16.02 %     15.39 %    
Tax-equivalent net interest margin   3.74 %     3.65 %     3.71 %     3.81 %     3.87 %    
Efficiency ratio(1)   62.66 %     60.30 %     60.41 %     62.62 %     61.70 %    
Mortgage Banking Information                      
Mortgage loans originated $   48,550     $   78,749     $   84,885     $   64,893     $   51,532      
Residential mortgage loans sold – servicing retained     27,690         44,763         40,462         26,944         25,965      
Residential mortgage loans sold – servicing released     4,981         4,632         10,522         5,278         2,397      
  Total residential mortgage loans sold $   32,671     $   49,395     $   50,984     $   32,222     $   28,362      
Residential mortgage loans serviced for others $   638,553     $   631,889     $   618,134     $   610,418     $   605,366      
Share Data                      
Closing share price $   39.50     $   42.15     $   31.99     $   29.20     $   25.73      
Book value per common share $   22.87     $   22.50     $   22.40     $   22.14     $   21.73      
Tangible book value per common share $   15.53     $   15.11     $   14.94     $   14.60     $   14.13      
Price / book value   172.71 %     187.34 %     142.80 %     131.90 %     118.38 %    
Price / tangible book value   254.41 %     278.96 %     214.07 %     200.05 %     182.10 %    
Weighted average diluted shares outstanding     17,182,689         17,164,675         17,072,358         17,027,419         16,883,364      
Shares outstanding, end of period     16,969,451         16,939,715         16,893,878         16,824,564         16,801,801      
Wealth Management Information:                      
Wealth assets under mgmt, administration, supervision and brokerage (2) $   11,725,460     $   11,328,457     $   9,969,745     $   9,632,521     $   9,281,743      
Fees for wealth management services $   9,303     $   9,327     $   9,100     $   9,431     $   8,832      
Capital Ratios                      
Bryn Mawr Trust Company                      
Tier I capital to risk weighted assets (“RWA”)   10.58 %     10.50 %     10.99 %     10.94 %     10.69 %    
Total (Tier II) capital to RWA   11.25 %     11.19 %     11.70 %     11.65 %     11.39 %    
Tier I leverage ratio   8.83 %     8.73 %     9.17 %     9.06 %     9.15 %    
Tangible equity ratio (1)   8.46 %     7.85 %     8.85 %     8.79 %     8.53 %    
Common equity Tier I capital to RWA   10.58 %     10.50 %     10.99 %     10.94 %     10.69 %    
                       
Bryn Mawr Bank Corporation                      
Tier I capital to RWA   10.50 %     10.51 %     10.42 %     10.45 %     10.22 %    
Total (Tier II) capital to RWA   12.30 %     12.35 %     12.30 %     12.35 %     12.13 %    
Tier I leverage ratio   8.77 %     8.73 %     8.70 %     8.65 %     8.76 %    
Tangible equity ratio (1)   8.32 %     7.76 %     8.28 %     8.29 %     8.10 %    
Common equity Tier I capital to RWA   10.50 %     10.51 %     10.42 %     10.45 %     10.22 %    
                       
Asset Quality Indicators                      
                       
Net loan and lease charge-offs (“NCO”s) $   670     $   1,317     $   704     $   254     $   422      
Nonperforming loans and leases (“NPL”s) $   7,329     $   8,363     $   9,883     $   9,617     $   9,636      
Other real estate owned (“OREO”)     978         1,017         867         784         756      
Total nonperforming assets (“NPA”s) $    8,307     $    9,380     $    10,750     $    10,401     $    10,392      
                       
Nonperforming loans and leases 30 or more days past due $   5,097     $   6,072     $   6,684     $   5,599     $   6,193      
Performing loans and leases 30 to 89 days past due     6,077         3,062         2,537         3,564         6,296      
Performing loans and leases 90 or more days past due     -         -         -         -         -      
Total delinquent loans and leases $    11,174     $    9,134     $    9,221     $    9,163     $    12,489      
                       
Delinquent loans and leases to total loans and leases   0.44 %     0.36 %     0.37 %     0.38 %     0.52 %    
Delinquent performing loans and leases to total loans and leases   0.24 %     0.12 %     0.10 %     0.15 %     0.26 %    
NCOs / average loans and leases (annualized)   0.11 %     0.21 %     0.11 %     0.04 %     0.07 %    
NPLs / total portfolio loans and leases   0.29 %     0.33 %     0.40 %     0.40 %     0.41 %    
NPAs / total loans and leases and OREO   0.32 %     0.37 %     0.43 %     0.43 %     0.44 %    
NPAs / total assets   0.25 %     0.27 %     0.34 %     0.34 %     0.34 %    
ALLL / NPLs   233.42 %     209.09 %     179.54 %     177.14 %     174.81 %    
ALLL / portfolio loans   0.67 %     0.69 %     0.71 %     0.70 %     0.71 %    
ALLL on originated loans and leases / Originated loans and leases (1)   0.75 %     0.78 %     0.81 %     0.81 %     0.83 %    
(Total Allowance + Loan mark) / Total Gross portfolio loans and leases (1)   1.12 %     1.17 %     1.24 %     1.30 %     1.37 %    
                       
Troubled debt restructurings (“TDR”s) included in NPLs $   2,681     $   2,632     $   1,680     $   1,779     $   1,756      
TDRs in compliance with modified terms     6,492         6,395         6,305         4,984         4,893      
Total TDRs $    9,173     $    9,027     $    7,985     $    6,763     $    6,649      
                       
(1)Non-GAAP measure – see Appendix for Non-GAAP to GAAP reconciliation.                      
(2)Brokerage assets represent assets held at a registered broker dealer under a clearing agreement.                    

 

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