BMTC - Bryn Mawr Bank Corporation Reports Third Quarter Net Income of $16.4 Million Wealth Assets Surpass $15 Billion Milestone Declares $0.26 Dividend

BRYN MAWR, Pa., Oct. 17, 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 $16.4 million, or $0.81 diluted earnings per share for the three months ended September 30, 2019, as compared to net income of $15.8 million, or $0.78 diluted earnings per share, for the three months ended June 30, 2019, and $16.7 million, or $0.82 diluted earnings per share, for the three months ended September 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 $16.4 million, or $0.81 diluted earnings per share, for the three months ended September 30, 2019, as compared to $15.8 million, or $0.78 diluted earnings per share, for the three months ended June 30, 2019, and $17.1 million, or $0.84 diluted earnings per share, for the three months ended September 30, 2018. Management believes core net income is an important measure 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.

“This is an exciting time for BMT as the Board’s commitment to building a market-leading company continues to manifest through another quarter of solid earnings and strong credit performance,” commented Frank Leto, President and Chief Executive Officer. “Our wealth business continued its growth trajectory as assets under management surpassed $15 billion and we believe our strong sales pipeline in this and other business lines is indicative of our focus on new business development,” Mr. Leto continued. “Our client-focused team is going to market as One BMT, bringing a unified, full suite of banking and wealth financial solutions to the communities we serve enabling us to continue our momentum into year-end and 2020.”

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

SIGNIFICANT ITEMS OF NOTE

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

• Net income for the three months ended September 30, 2019 was $16.4 million, compared to net income of $15.8 million for the three months ended June 30, 2019. Net interest income for the three months ended September 30, 2019 was $37.4 million, an increase of $787 thousand over the linked quarter. The provision for loan and lease losses (the “Provision”) for the three months ended September 30, 2019 decreased $708 thousand as compared to the second quarter of 2019. Total noninterest income decreased $766 thousand, total noninterest expense remained relatively unchanged, and income tax expense increased $163 thousand for the three months ended September 30, 2019, as compared to the three months ended June 30, 2019.
   
• Net interest income for the three months ended September 30, 2019 was $37.4 million, an increase of $787 thousand over the linked quarter. Tax-equivalent net interest income for the three months ended September 30, 2019 was $37.5 million, an increase of $781 thousand over the linked quarter. Tax-equivalent net interest income for the third quarter of 2019 was impacted by the accretion of purchase accounting fair value marks of $1.6 million as compared to $1.3 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 September 30, 2019 was $35.9 million, an increase of $494 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 increase in tax-equivalent net interest income adjusted for purchase accounting included increases of $431 thousand and $358 thousand in tax-equivalent interest and fees earned on loans and leases and tax-equivalent interest income on available for sale investment securities, respectively, and a decrease of $165 thousand in interest paid on deposits, partially offset by an increase of $580 thousand of interest expense on short-term borrowings for the three months ended September 30, 2019 as compared to the linked quarter ended June 30, 2019.
  
  Tax-equivalent interest and fees earned on loans and leases for the three months ended September 30, 2019 increased $739 thousand as compared to the linked quarter. Average loans and leases for the three months ended September 30, 2019 increased $8.7 million over the linked quarter and experienced a two basis point increase in tax-equivalent yield.
  
  Tax-equivalent interest income on available for sale investment securities for the three months ended September 30, 2019 increased $358 thousand as compared to the linked quarter. Average available for sale investment securities increased by $33.0 million over the linked quarter and experienced an eight basis point increase in tax-equivalent yield.
  
  Interest expense on deposits for the three months ended September 30, 2019 decreased $145 thousand over the linked quarter. Average interest-bearing deposits decreased $18.6 million coupled with a three basis point decrease in the rate paid as compared to the linked quarter.
  
  Interest expense on short-term borrowings for the three months ended September 30, 2019 increased $580 thousand over the linked quarter. Average short-term borrowings increased $101.5 million coupled with a 10 basis point increase in the rate paid as compared to the linked quarter.

• The tax-equivalent net interest margin was 3.54% for the three months ended September 30, 2019 as compared to 3.55% 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 3.39% for the three months ended September 30, 2019 as compared to 3.43% for the linked quarter. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
   
• Noninterest income of $19.5 million for the three months ended September 30, 2019 decreased $766 thousand as compared to the linked quarter. Contributing to the decrease were decreases of $797 thousand and $684 thousand in other operating income and fees for wealth management services, respectively, partially offset by an increase of $624 thousand in capital markets revenue.
   
• Noninterest expense of $35.2 million for the three months ended September 30, 2019 remained relatively unchanged, decreasing $15 thousand as compared to the second quarter of 2019. The decrease on a linked quarter basis was primarily due to decreases of $272 thousand, $233 thousand and $218 thousand in professional fees, furniture, fixtures and equipment expenses, and other operating expenses, respectively, partially offset by an increase of $727 thousand in salaries and performance based incentives.
   
• The Provision decreased $708 thousand for the three months ended September 30, 2019 to $919 thousand, as compared to $1.6 million for the second quarter of 2019. Net loan and lease charge-offs for the third quarter of 2019 totaled $1.3 million as compared to $1.1 million for the second quarter of 2019. The effect on the Provision of the $263 increase in net charge-offs on a linked quarter basis was offset by improvements in certain qualitative factors linked to economic indicators used in the calculation of the allowance for loan and lease losses (the “Allowance”).
   
• The effective tax rate of 21.20% for the third quarter of 2019 was relatively unchanged compared to 21.18% for the second quarter of 2019.

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

• Net income for the three months ended September 30, 2019 was $16.4 million, or $0.81 diluted earnings per share, as compared to net income of $16.7 million, or diluted earnings per share of $0.82 for the same period in 2018. Net interest income for the three months ended September 30, 2019 was $37.4 million, an increase of $669 thousand as compared to the same period in 2018. The Provision for the three months ended September 30, 2019 increased $255 thousand as compared to the same period in 2018. Total noninterest income increased $1.2 million, total noninterest expense increased $1.6 million, and income tax expense increased $336 thousand for the three months ended September 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 $16.4 million, or $0.81 per diluted share, for the three months ended September 30, 2019 as compared to $17.1 million, or $0.84 per diluted share, for the same period in 2018. Management believes core net income is an important measure 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 September 30, 2019 was $37.4 million, an increase of $669 thousand as compared to the same period in 2018. Tax-equivalent net interest income for the three months ended September 30, 2019 was $37.5 million, an increase of $666 thousand as compared to the same period in 2018. Tax-equivalent net interest income for the third quarter of 2019 was impacted by the accretion of purchase accounting fair value marks of $1.6 million as compared to $1.7 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 September 30, 2019 was $35.9 million, an increase of $794 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 $3.4 million and $808 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 $159 thousand and $153 thousand in interest paid on short-term borrowings and long-term Federal Home Loan Bank (“FHLB”) advances, respectively. These increases to tax-equivalent net interest income were partially offset by a $3.8 million increase in interest paid on deposits for the three months ended September 30, 2019 as compared to the same period in 2018.
  
  Tax-equivalent interest and fees earned on loans and leases increased $3.4 million for the three months ended September 30, 2019 as compared to the same period in 2018. Average loans and leases for the third quarter of 2019 increased $153.2 million from the same period in 2018 and experienced a 17 basis point increase in tax-equivalent yield.
  
  Tax-equivalent interest income on available for sale investment securities increased $808 thousand for the three months ended September 30, 2019 as compared to the same period in 2018. Average available for sale investment securities increased by $71.2 million as compared to the same period in 2018 and experienced a 27 basis point tax-equivalent yield increase.
  
  Interest expense on short-term borrowings and long-term FHLB advances for the three months ended September 30, 2019 decreased $159 thousand and $151 thousand, respectively as compared to the same period in 2018. Average short-term borrowings and average long-term FHLB advances decreased $38.2 million and $35.8 million, respectively, offset by a 10 and 19 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 September 30, 2019 increased $4.0 million as compared to the same period in 2018. The increase was primarily due to a 48 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 $283.0 million increase in average interest-bearing deposits also contributed to the increase in interest expense on deposits.

• The tax-equivalent net interest margin was 3.54% for the three months ended September 30, 2019 as compared to 3.69% 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 3.39% and 3.52% for three months ended September 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 $19.5 million for the three months ended September 30, 2019 increased by $1.2 million as compared to the same period in 2018. Increases of $1.4 million and $483 thousand in capital markets revenue and fees for wealth management services, respectively, were partially offset by a decrease of $916 thousand in other operating income.
   
• Noninterest expense of $35.2 million for the three months ended September 30, 2019 increased $1.6 million as compared to the same period in 2018. Contributing to the increase were increases of $1.2 million, $291 thousand, $265 thousand, $238 thousand and $222 thousand in salaries and wages, occupancy and bank premises expense, furniture, fixtures and equipment expenses, advertising expense, and data processing expense, respectively. Partially offsetting these increases were decreases of $389 thousand and $371 thousand in due diligence, merger-related and merger integration expenses and other operating expenses, respectively.
   
• The Provision increased by $255 thousand for the three months ended September 30, 2019 to $919 thousand, as compared to $664 thousand for the same period in 2018. The increase in Provision was related to the level of loan and lease growth during the third quarter of 2019 as compared to the negative growth experienced during the same period in 2018. Total portfolio loans and leases increased by $6.1 million during the third quarter of 2019, as compared to an $8.0 million decrease in total portfolio loans and leases for the same period in 2018. Net charge-offs of loans and leases decreased slightly, by $54 thousand for the third quarter of 2019 as compared to the same period in 2018.
   
• The effective tax rate for the third quarter of 2019 increased to 21.20% as compared to 19.60% for the third quarter of 2018. The increase was primarily related to a $281 thousand decrease in net discrete tax benefits for the third 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 – September 30, 2019 Compared to December 31, 2018

• Total assets as of September 30, 2019 were $4.83 billion, an increase of $176.2 million from December 31, 2018. The increase was primarily due to a $113.6 million increase in portfolio loans and leases, a $99.8 million increase in other assets, and $42.2 million of operating lease right-of-use assets as of September 30, 2019 included on the balance sheet as a result of a required accounting pronouncement adopted in the first quarter of 2019. The $99.8 million increase in other assets was primarily due to a $50.0 million increase in the fair value of interest rate swaps. Partially offsetting these increases was a decrease in available for sale investment securities of $133.3 million.
   
• Available for sale investment securities as of September 30, 2019 totaled $604.2 million, a decrease of $133.3 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 $99.0 million increase in mortgage-backed securities.
   
• Total portfolio loans and leases of $3.54 billion as of September 30, 2019 increased by $113.6 million from December 31, 2018, an increase of 3.3%. Increases of $104.9 million, $18.6 million, $14.2 million, $10.9 million and $3.7 million in commercial mortgages, leases, commercial and industrial loans, residential mortgages and consumer loans, respectively, were offset by decreases of $29.4 million and $9.3 million in construction loans and home equity loans and lines, respectively.
   
• The Allowance as of September 30, 2019 was $20.8 million, or 0.59% 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 0.66% as of September 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 0.92% as of September 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 $3.70 billion as of September 30, 2019 increased $99.4 million from December 31, 2018. Increases of $219.1 million, $120.5 million, $114.1 million, $2.8 million, and $1.5 million in wholesale non-maturity deposits, money market accounts, interest-bearing demand accounts, noninterest bearing deposits, and savings accounts, respectively, were offset by decreases of $283.2 million and $75.4 million in in wholesale time deposits and retail time deposits, respectively.
   
• Borrowings of $368.6 million as of September 30, 2019, which include short-term borrowings, long-term FHLB advances, subordinated notes and junior subordinated debentures, decreased $59.3 million from December 31, 2018, primarily due to decreases of $48.9 million and $10.6 million in short-term borrowings and long-term FHLB advances, respectively.
   
• Wealth assets under management, administration, supervision and brokerage (“wealth assets”) totaled $15.61 billion as of September 30, 2019, an increase of $2.18 billion from December 31, 2018. Wealth assets consisted of $9.21 billion of wealth assets where fees are set at fixed amounts and $6.40 billion of wealth assets where fees are predominantly determined based on the market value of the assets held in their accounts as of September 30, 2019, an increase of $1.33 billion and $363.6 million, respectively, from December 31, 2018.
   
• The capital ratios for the Bank and the Corporation, as of September 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 or or accounting standards, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020; 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; uncertainty regarding the future of LIBOR; 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.