BMTC - Bryn Mawr Bank Corporation Reports Second Quarter Net Income of $15.8 Million Increases Dividend by 4% to $0.26 per share

BRYN MAWR, Pa., July 18, 2019 (GLOBE NEWSWIRE) -- Bryn Mawr Bank Corporation (NASDAQ: BMTC) (the “Corporation”), parent of The Bryn Mawr Trust Company (the “Bank”), today reported net income of $15.8 million, or $0.78 diluted earnings per share for the three months ended June 30, 2019, as compared to net income of $10.7 million, or $0.53 diluted earnings per share, for the three months ended March 31, 2019, and $14.7 million, or $0.72 diluted earnings per share, for the three months ended June 30, 2018.

On a non-GAAP basis, core net income, which excludes income tax charges incurred in connection with the Tax Cuts and Jobs Act ("Tax Reform"), due diligence and merger-related expenses, one-time costs associated with our voluntary Years of Service Incentive Program (the “Incentive Program”), and other non-core income and expense items, as detailed in the appendix to this earnings release, was $15.8 million, or $0.78 diluted earnings per share, for the three months ended June 30, 2019, as compared to $14.2 million, or $0.70 diluted earnings per share, for the three months ended March 31, 2019, and $17.0 million, or $0.83 diluted earnings per share, for the three months ended June 30, 2018. 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.

"We continue to execute on our strategy as reflected in our second quarter results,” commented Frank Leto, President and Chief Executive Officer, continuing, “Despite the challenges of a flat yield curve and an increasingly competitive market for loans and deposits, we continue to produce solid results in both the Bank and Wealth businesses without compromising on the execution of longer term vision as demonstrated by our ongoing investments in talent and technology.”

Mr. Leto then continued, “I am also pleased to announce that the Board of Directors has approved a dividend increase of 4%, making this the ninth consecutive year the Corporation has raised its dividend.”

The Board of Directors of the Corporation declared a quarterly dividend of $0.26 per share, payable September 1, 2019 to shareholders of record as of August 1, 2019.

SIGNIFICANT ITEMS OF NOTE

Results of Operations – Second Quarter 2019 Compared to First Quarter 2019

• Net income for the three months ended June 30, 2019 was $15.8 million, compared to net income of $10.7 million for the three months ended March 31, 2019. Net interest income for the three months ended June 30, 2019 was $36.6 million, a decrease of $1.0 million over the linked quarter. The provision for loan and lease losses (the “Provision”) for the three months ended June 30, 2019 decreased $2.1 million as compared to the first quarter of 2019. Total noninterest income increased $968 thousand, total noninterest expense decreased $4.5 million, and income tax expense increased $1.5 million for the three months ended June 30, 2019, as compared to the three months ended March 31, 2019.
  
  On a non-GAAP basis, core net income, which excludes income tax charges incurred in connection with Tax Reform, due diligence and merger-related expenses, one-time costs associated with the Incentive Program, and other non-core income and expense items, as detailed in the appendix to this earnings release, was $15.8 million, or $0.78 per diluted share, for the three months ended June 30, 2019, as compared to $14.2 million or $0.70 per diluted share, for the three months ended March 31, 2019. 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.
  
  
• Net interest income for the three months ended June 30, 2019 was $36.6 million, a decrease of $1.0 million over the linked quarter. Tax-equivalent net interest income for the three months ended June 30, 2019 was $36.7 million, a decrease of $1.0 million over the linked quarter. Tax-equivalent net interest income for the second quarter of 2019 was impacted by the accretion of purchase accounting fair value marks of $1.3 million as compared to $2.1 million for the linked quarter. Excluding the effects of these purchase accounting fair value marks, the adjusted tax-equivalent net interest income for the three months ended June 30, 2019 was $35.4 million, a decrease of $182 thousand over the linked quarter. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release. Items contributing to the decrease in tax-equivalent net interest income adjusted for purchase accounting included an increase of $1.5 million in interest paid on deposits, partially offset by an increase of $749 thousand in tax-equivalent interest and fees earned on loans and leases and a decrease of $586 thousand of interest expense on short-term borrowings for the three months ended June 30, 2019 as compared to the linked quarter ended March 31, 2019.
  
  Interest expense on deposits for the three months ended June 30, 2019 increased $1.6 million over the linked quarter. The increase was primarily due to a 16 basis point increase in the rate paid on deposits as compared to the linked quarter. The increase in rate paid was related to the competitive dynamics in the markets in which we operate and certain promotional interest rates offered during the first and second quarters of 2019. A $120.7 million increase in average interest-bearing deposits also contributed to the increase in interest expense on deposits.
  
  Tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2019 was relatively unchanged as compared to the linked quarter, decreasing $55 thousand. Average loans and leases for the three months ended June 30, 2019 increased $46.5 million over the linked quarter and experienced a 13 basis point decrease in tax-equivalent yield.
  
  Tax-equivalent interest income on available for sale investment securities for the three months ended June 30, 2019 was relatively unchanged as compared to the linked quarter, increasing $25 thousand. Average available for sale investment securities increased by $15.0 million over the linked quarter and experienced a 7 basis point tax-equivalent yield decrease.
  
  Interest expense on short-term borrowings for the three months ended June 30, 2019 decreased $586 thousand over the linked quarter. Average short-term borrowings decreased $89.1 million coupled with a 34 basis point decrease in the rate paid as compared to the linked quarter.
  
  
• The tax-equivalent net interest margin was 3.55% for the three months ended June 30, 2019 as compared to 3.75% for the linked quarter. Adjusting for the impact of the accretion of purchase accounting fair value marks, the adjusted tax-equivalent net interest margin was 3.43% for the three months ended June 30, 2019 as compared to 3.54% for the linked quarter. The main drivers for the decrease in the adjusted tax-equivalent net interest margin were the rate and volume increases of interest-bearing deposits as discussed above. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
  
  
• Noninterest income of $20.2 million for the three months ended June 30, 2019 increased $968 thousand as compared to the linked quarter. Contributing to the increase were increases of $1.1 million, $433 thousand, and $205 thousand in fees for wealth management services, net gain on sale of loans, and other operating income, respectively, partially offset by a decrease of $730 thousand in capital markets revenue.
  
  
• Noninterest expense of $35.2 million for the three months ended June 30, 2019 decreased $4.5 million as compared to $39.7 million for the first quarter of 2019. The decrease on a linked quarter basis was primarily due to decreases of $3.9 million and $849 thousand in salaries and wages and employee benefits, respectively, largely driven by the $4.5 million one-time expense from the Incentive Program recorded in the first quarter of 2019.
  
  
• The Provision decreased $2.1 million for the three months ended June 30, 2019 to $1.6 million, as compared to $3.7 million for the first quarter of 2019. During the second quarter of 2019, net loan and lease charge-offs of $1.1 million represented a $1.5 million, or 58.3%, decrease from the first quarter of 2019. Contributing to net charge-offs for the second quarter of 2019 was $554 thousand in charge-offs recorded in conjunction with the sale of a group of nonperforming loans. The decrease in net charge-offs on a linked quarter basis was primarily related to the partial charge-off of a single commercial credit recorded in the first quarter of 2019. The effect of the decrease in net charge-offs on a linked quarter basis was partially offset by increases in certain qualitative factors used in the allowance for loan and lease losses (the "Allowance") calculation.
  
  
• The effective tax rate for the second quarter of 2019 increased to 21.18% as compared to 20.57% for the first quarter of 2019. The increase was primarily related to a $97 thousand decrease in net discrete tax benefits for the second quarter of 2019 as compared to the first quarter of 2019. These discrete items were the result of excess tax benefits from stock-based compensation.

Results of Operations – Second Quarter 2019 Compared to Second Quarter 2018

• Net income for the three months ended June 30, 2019 was $15.8 million, or $0.78 diluted earnings per share, as compared to net income of $14.7 million, or diluted earnings per share of $0.72 for the same period in 2018. Net interest income for the three months ended June 30, 2019 was $36.6 million, a decrease of $705 thousand as compared to the same period in 2018. The Provision for the three months ended June 30, 2019 decreased $1.5 million as compared to the same period in 2018. Total noninterest income increased $146 thousand, total noninterest expense decreased $648 thousand, and income tax expense increased $516 thousand for the three months ended June 30, 2019 as compared to the same period in 2018.
  
  On a non-GAAP basis, core net income, which excludes income tax charges incurred in connection with Tax Reform, due diligence and merger-related expenses, one-time costs associated with the Incentive Program, and other non-core income and expense items, as detailed in the appendix to this earnings release, was $15.8 million, or $0.78 per diluted share, for the three months ended June 30, 2019 as compared to $17.0 million, or $0.83 per diluted share, for the same period in 2018. 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.

• Net interest income for the three months ended June 30, 2019 was $36.6 million, a decrease of $705 thousand as compared to the same period in 2018. Tax-equivalent net interest income for the three months ended June 30, 2019 was $36.7 million, a decrease of $687 thousand as compared to the same period in 2018. Tax-equivalent net interest income for the second quarter of 2019 was impacted by the accretion of purchase accounting fair value marks of $1.3 million as compared to $2.2 million for the same period in 2018. Excluding the effects of these purchase accounting fair value marks, the adjusted tax-equivalent net interest income for the three months ended June 30, 2019 was $35.4 million, an increase of $244 thousand as compared to the same period in 2018. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release. Items contributing to the increase adjusted for purchase accounting included increases of $3.9 million and $507 thousand in tax-equivalent interest and fees earned on loans and leases and tax-equivalent interest earned on available for sale investment securities, respectively, as well as decreases of $628 thousand and $230 thousand in interest paid on short-term borrowings and long-term FHLB advances, respectively.  These increases to tax-equivalent net interest income were partially offset by a $5.0 million increase in interest paid on deposits for the three months ended June 30, 2019 as compared to the same period in 2018.
  
  Tax-equivalent interest and fees earned on loans and leases increased $3.1 million for the three months ended June 30, 2019 as compared to the same period in 2018. Average loans and leases for the second quarter of 2019 increased $170.9 million from the same period in 2018 and experienced an 11 basis point increase in tax-equivalent yield.
  
  Tax-equivalent interest income on available for sale investment securities increased $507 thousand for the three months ended June 30, 2019 as compared to the same period in 2018. Average available for sale investment securities increased by $35.3 million as compared to the same period in 2018 and experienced a 22 basis point tax-equivalent yield increase.
  
  Interest expense on short-term borrowings and long-term FHLB advances for the three months ended June 30, 2019 decreased $628 thousand and $221 thousand, respectively as compared to the same period in 2018. Average short-term borrowings and average long-term FHLB advances decreased $136.8 million and $49.6 million, respectively, offset by a 17 and 13 basis point increase in the rate paid on short-term borrowings and long-term FHLB advances, respectively, as compared to the same period in 2018.
  
  Interest expense on deposits for the three months ended June 30, 2019 increased $5.2 million as compared to the same period in 2018. The increase was primarily due to a 67 basis point increase in the rate paid on deposits as compared to the same period in 2018. The increase in rate paid was related to the competitive dynamics in the markets in which we operate and certain promotional interest rates offered during the first and second quarters of 2019. A $305.6 million increase in average interest-bearing deposits also contributed to the increase in interest expense on deposits.
  
  
• The tax-equivalent net interest margin was 3.55% for the three months ended June 30, 2019 as compared to 3.81% for the same period in 2018. Adjusting for the impact of the accretion of purchase accounting fair value marks, the adjusted tax-equivalent net interest margin was 3.43% and 3.58% for three months ended June 30, 2019 and 2018, respectively. The main drivers for the decrease in the adjusted tax-equivalent net interest margin were the rate and volume increases of interest-bearing deposits as discussed above. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
  
  
• Noninterest income of $20.2 million for the three months ended June 30, 2019 increased by $146 thousand as compared to the same period in 2018. Increases of $852 thousand and $224 thousand in fees for wealth management services and net gain on sale of loans, respectively, were partially offset by decreases of $616 thousand and $205 thousand of capital markets revenue and insurance commissions, respectively.
  
  
• Noninterest expense of $35.2 million for the three months ended June 30, 2019 decreased $648 thousand as compared to the same period in 2018. Contributing to the decrease were decreases of $3.1 million and $448 thousand in due diligence, merger-related and merger integration expenses and other operating expenses, respectively. Partially offsetting these decreases were increases of $798 thousand, $499 thousand, $440 thousand, and $428 thousand in salaries and wages, furniture, fixtures and equipment expenses, employee benefits, and occupancy and bank premises expense, respectively.
  
  
• The Provision decreased $1.5 million for the three months ended June 30, 2019 to $1.6 million, as compared to $3.1 million for the same period in 2018. The decrease in Provision was related to the smaller volume of loan and lease growth during the second quarter of 2019 as compared to the same period in 2018. Net loan and lease growth during the second quarter of 2019 totaled $11.2 million, as compared to $83.7 million for the same period in 2018. Net charge-offs of loans and leases decreased by $340 thousand for the second quarter of 2019 as compared to the same period in 2018.
  
  
• The effective tax rate for the second quarter of 2019 increased to 21.18% as compared to 20.21% for the second quarter of 2018. The increase was primarily related to a $94 thousand decrease in net discrete tax benefits for the second quarter of 2019 as compared to the same period in 2018. These discrete items were the result of excess tax benefits from stock-based compensation as well as the re-measurement of deferred tax items related to Tax Reform.

Financial Condition – June 30, 2019 Compared to December 31, 2018

• Total assets as of June 30, 2019 were $4.74 billion, an increase of $84.1 million from December 31, 2018. The increase was primarily due to a $107.5 million increase in portfolio loans and leases, a $61.3 million increase in other assets, and $43.1 million of operating lease right-of-use assets as of June 30, 2019 included on the balance sheet as a result of a recently adopted accounting pronouncement. The $61.3 million increase in other assets was primarily due to a $31.7 million increase in the fair value of interest rate swaps. Partially offsetting these increases was a decrease in available for sale investment securities of $149.3 million.
  
  
• Available for sale investment securities as of June 30, 2019 totaled $588.1 million, a decrease of $149.3 million from December 31, 2018. The decrease was primarily related to the maturing of $200.0 million short-term U.S. Treasury securities in the first quarter of 2019, partially offset by a $59.1 million increase in mortgage-backed securities.
  
  
• Total portfolio loans and leases of $3.53 billion as of June 30, 2019 increased by $107.5 million from December 31, 2018, an increase of 3.1%. Increases of $98.4 million, $18.3 million, $11.7 million, $8.6 million and $2.5 million in commercial mortgages, leases, residential mortgages, commercial and industrial loans and consumer loans, respectively, were offset by decreases of $28.5 million and $3.5 million in construction loans and home equity loans and lines, respectively.
  
  
• The Allowance as of June 30, 2019 was $21.2 million, or 0.60% of portfolio loans and leases, as compared to $19.4 million, or 0.57% of portfolio loans and leases as of December 31, 2018. In addition to the ratio of Allowance to portfolio loans and leases, management also calculates two non-GAAP measures: the Allowance for originated loans and leases as a percentage of originated loans and leases, which was 0.68% as of June 30, 2019, as compared to 0.67% as of December 31, 2018, and the Allowance plus the remaining loan mark as a percentage of gross loans, which was 1.00% as of June 30, 2019, as compared to 1.08% as of December 31, 2018. A reconciliation of these and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
  
  
• Deposits of $3.63 billion as of June 30, 2019 increased $33.3 million from December 31, 2018. Increases of $104.0 million, $80.4 million, $45.0 million, $39.3 million, and $16.7 million in money market accounts, interest-bearing demand accounts, wholesale non-maturity deposits, noninterest bearing deposits, and savings accounts, respectively, were offset by decreases of $212.1 million and $40.0 million in in wholesale time deposits and retail time deposits, respectively.
  
  
• Borrowings of $376.1 million as of June 30, 2019, which include short-term borrowings, long-term FHLB advances, subordinated notes and junior subordinated debentures, decreased $51.8 million from December 31, 2018, primarily due to a $44.5 million decrease in short-term borrowings.
  
  
• Wealth assets under management, administration, supervision and brokerage totaled $14.82 billion as of June 30, 2019, an increase of $1.39 billion from December 31, 2018.
  
  
• The capital ratios for the Bank and the Corporation, as of June 30, 2019, as shown in the attached tables, indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered “well capitalized.”

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 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; unanticipated regulatory or legal proceedings, outcomes of litigation or other contingencies; cybersecurity events; 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)

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.
3. Capital Ratios for the current quarter are to be considered preliminary until the Call Reports are filed.

Bryn Mawr Bank Corporation
Detailed Balance Sheets (unaudited)
(dollars in thousands)

Bryn Mawr Bank Corporation
Supplemental Balance Sheet Information (unaudited)
(dollars in thousands)