Bryn Mawr Bank Corporation Reports First Quarter Net Income of $8.3 Million, Driven by Strong Loan Growth, Net Interest Margin Expansion and Reduced Operating Expenses; Core Net Income Up From Prior Quarter

BRYN MAWR, Pa., April 28, 2016 (GLOBE NEWSWIRE) -- Bryn Mawr Bank Corporation (NASDAQ:BMTC) (the “Corporation”), parent of The Bryn Mawr Trust Company (the “Bank”), today reported net income of $8.3 million and diluted earnings per share of $0.49 for the three months ended March 31, 2016, as compared to a net loss of $6.4 million, or $(0.37) diluted loss per share for the three months ended December 31, 2015 and net income of $7.5 million, or $0.42 diluted earnings per share for the three months ended March 31, 2015.

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 also $8.3 million for the three months ended March 31, 2016 as compared to $7.5 million for the three months ended December 31, 2015 and $8.9 million for the three months ended March 31, 2015. 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 are very pleased to start the new year on a positive note,” commented Frank Leto, President and Chief Executive Officer, continuing, “Many of the decisions we made in 2015, which included the addition of new teams and talent, branch and office consolidations, significant investments in technology, and the settlement of our corporate pension plan, to name a few, positioned the Corporation well for a strong start to the new year and provide a solid foundation from which we will drive long-term performance.” Mr. Leto added, “The outstanding loan growth during the first quarter of 2016, which exceeded 19% annualized, along with a 41% increase in mortgage originations during the first quarter of 2016, compared to the first quarter of 2015, as well as the continued growth in our wealth assets are all promising indicators for the remainder of 2016.”

On April 28, 2016, the Board of Directors of the Corporation declared a quarterly dividend of $0.20 per share, payable June 1, 2016 to shareholders of record as of May 10, 2016.

SIGNIFICANT ITEMS OF NOTE
Results of Operations – First Quarter 2016 Compared to Fourth Quarter 2015

• Net income for the three months ended March 31, 2016 was $8.3 million, as compared to a net loss of $6.4 million for the three months ended December 31, 2015. The primary driver of the loss in the fourth quarter of 2015 was the loss on settlement of the corporate pension plan, which resulted in a $17.4 million pre-tax charge. On a core basis (a non-GAAP measure detailed in the appendix to this earnings release), core net income for the first quarter of 2016 of $8.3 million was a $778 thousand increase from core net income of $7.5 million for the fourth quarter of 2015. The increase in core net income was primarily driven by a $473 thousand increase in net interest income and a $367 thousand decrease in the provision for loan and lease losses (the “Provision”).
   
• Net interest income for the three months ended March 31, 2016 was $25.9 million, an increase of $473 thousand from $25.4 million for the three months ended December 31, 2015. The increase in net interest income between the periods was largely related to loan growth during the first quarter of 2016. Average loans and leases for the three months ended March 31, 2016 increased by $60.9 million as compared to the fourth quarter of 2015. The increase in average loans was accompanied by a 5 basis point increase in tax-equivalent yield earned on loans, resulting in a $616 thousand increase in interest income on loans and leases. Partially offsetting the increase in average loans and leases was a $51.8 million decrease in average interest-bearing deposits with banks. This decrease in cash deposits resulted in a $17 thousand decrease in interest earned on deposits with banks. On the liability side, average interest-bearing deposits increased by $22.1 million, resulting in a $30 thousand increase in interest expense on deposits.
   
• The tax-equivalent net interest margin of 3.87% for the three months ended March 31, 2016 increased 10 basis points from 3.77% for the fourth quarter of 2015. The increase was primarily the result of a $60.9 million increase in average loans and leases during the first quarter of 2016. The tax equivalent yield earned on loans and leases during the first quarter of 2016 was 4.67%. The increase in average loans and leases was largely offset by a $51.8 million decrease in average interest-bearing deposits with banks, which earned interest at a rate of 0.47% during the first quarter of 2016 and 0.28% during the fourth quarter of 2015. The contribution of fair value mark accretion to the tax equivalent net interest margin accounted for 16 basis points of the margin for the first quarter of 2016 as compared to 13 basis points for the fourth quarter of 2015.
   
• Non-interest income for the three months ended March 31, 2016 decreased $460 thousand from the fourth quarter of 2015. The decrease was related to a decrease in fees for wealth management services of $163 thousand, a $76 thousand loss on sale of other real estate owned, a $116 thousand decrease in dividends on Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stocks, and a $392 thousand decrease in other operating income. The decrease in other operating income was related to the $319 thousand of noninterest income recorded in the fourth quarter of 2015 in connection with the full payoff of a purchased credit-impaired loan. Partially offsetting the decreases was an increase of $434 thousand in insurance revenues related to contingent commissions received from insurance carriers.
   
• Non-interest expense for the three months ended March 31, 2016 decreased $21.9 million, to $25.1 million, as compared to $47.0 million for the fourth quarter of 2015. The primary cause for the decrease was a $17.4 million loss on settlement of the corporate pension plan and a $929 thousand branch lease termination expense recorded in the fourth quarter of 2015, both of which did not reoccur, and a $1.9 million decrease in due diligence, merger-related and merger integration costs between the periods. Partially offsetting these decreases was a $684 thousand increase in Pennsylvania bank shares tax. The Pennsylvania bank shares tax is based on the Bank’s equity base as of December 31, 2015, which increased due to the acquisition of Continental Bank. In addition, during the fourth quarter of 2015, the Bank received tax credits related to its contributions under the Pennsylvania Educational Improvement Tax Credit (EITC) program.
   
• For the three months ended March 31, 2016, the Corporation recorded net loan and lease charge-offs of $422 thousand, as compared to $1.9 million for the fourth quarter of 2015. The Provision for the three months ended March 31, 2016 was $1.4 million, as compared to $1.8 million for the fourth quarter of 2015. The disparity between the $367 thousand, or 20.7%, decrease in Provision from the fourth quarter of 2015 to the first quarter of 2016, relative to the $1.4 million, or 77.3%, decrease in net charge-offs between the periods was primarily driven by the loan growth between the dates.

Results of Operations – First Quarter 2016 Compared to First Quarter 2015

• Net income for the three months ended March 31, 2016 was $8.3 million, as compared to $7.5 million for the same period in 2015. Significantly contributing to the increase was a $1.1 million increase in net interest income and a $2.5 million reduction in due diligence, merger-related and merger integration costs, partially offset by an $841 thousand increase in the Provision, an $825 thousand decrease in gain on sale of available for sale investment securities and an $868 thousand increase in salaries and wages.
   
• Net interest income for the three months ended March 31, 2016 was $25.9 million, an increase of $1.1 million, or 4.5%, from $24.8 million for the same period in 2015. The increase in net interest income between the periods was largely related to loan growth between the periods. Average loans and leases for the three months ended March 31, 2016 increased by $225.7 million from the same period in 2015. The increase in average balances was offset by a 24 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 $1.5 million increase in interest income on loans. On the liability side, a $26.7 million decrease in average interest-bearing deposits was offset by a $29.5 million increase in average subordinated notes, related to the issuance, during the third quarter of 2015, of $30 million of 4.5% fixed-to-floating rate subordinated notes. The interest expense effect of the decrease in interest-bearing deposits, which saw a rate decrease of 1 basis point, combined with the increase in average subordinated notes, which paid interest at 4.99%, was a net increase in interest expense of $408 thousand.
   
• The tax-equivalent net interest margin of 3.87% for the three months ended March 31, 2016 was an 8 basis point increase from 3.79% for the same period in 2015. The increase was largely the result of the $167.6 million reduction in low-yielding interest-bearing deposits with banks and the $225.7 million increase in average loans and leases. The tax-equivalent yield earned on loans and leases for the three months ended March 31, 2016 was 4.67%. Partially offsetting the effect of the loan growth on the tax-equivalent interest margin was the $29.5 million increase in average subordinated notes at a rate of 4.99% for the first quarter of 2016 as compared to the same period in 2015. The contribution of fair value mark accretion to the tax equivalent net interest margin accounted for 16 basis points of the margin for the first quarter of 2016 as compared to 22 basis points for the first quarter of 2015.
   
• Non-interest income for the three months ended March 31, 2016 decreased $1.6 million as compared to the same period in 2015. Largely contributing to this decrease was an $825 thousand decrease in net gain on sale of available for sale investment securities, a $401 thousand decrease in dividends on FHLB and FRB stocks and a $273 thousand decrease in fees for wealth management services. During the three months ended March 31, 2016, $80 thousand of available for sale investment securities, related to a rabbi trust, were sold, resulting in a net loss of $15 thousand as compared to the $63.2 million of available for sale investment securities sold during the first quarter of 2015, much of which had been acquired from Continental Bank, and which resulted in a net gain on sale of $810 thousand. The decrease in dividends on FHLB and FRB stocks was related to the $448 thousand special dividend issued by the FHLB in the first quarter of 2015 which was not repeated in 2016. The decrease in wealth revenue largely related to the shifting of the composition of the wealth portfolio to lower-yielding, fixed-fee accounts. Although assets under management administration, supervision and brokerage increased by $1.47 billion from March 31, 2015 to March 31, 2016, the portion of the portfolio which derives its fees from market value changes declined, offset by increases in the lower-yielding fixed-fee accounts. This shift serves to reduce the earnings volatility associated with market movement.
   
• Non-interest expense for the three months ended March 31, 2016 decreased $2.4 million, to $25.0 million, as compared to $27.4 million for the same period in 2015. Largely accounting for the decrease was a $2.5 million decrease in due diligence, merger-related and merger integration costs, a $273 thousand decrease in advertising expense and a $244 thousand decrease in employee benefits. The merger expense and higher advertising expense during the first quarter of 2015 were related to the January 1, 2015 Continental Bank acquisition. The decrease in employee benefits was related to the December 2015 settlement of the corporate pension plan, not only due to the elimination of the recurring pension costs associated with a defined benefits plan, but also due to the excess assets remaining in the plan at settlement. For the three months ended March 31, 2016, excess assets from the settled pension plan were used to reduce 401(k) contribution costs by $300 thousand. Partially offsetting these decreases were increases of $868 thousand in salaries related to staff additions, which included the April 2015 Robert J. McAllister Agency acquisition, the October 2015 formation of the Key Capital Mortgage, Inc. subsidiary, and additions to our lending teams in our residential mortgage operation and our Hershey office, as well as the addition of a number of key senior management positions which had become vacant since the first quarter of 2015.
   
• Nonperforming loans and leases totaled $9.6 million as of March 31, 2016, representing 0.41% of total portfolio loans and leases, as compared to $9.1 million, or 0.44% of total portfolio loans and leases as of March 31, 2015. For the three months ended March 31, 2016, the Corporation recorded net loan and lease charge-offs of $422 thousand, as compared to $859 thousand for the same period in 2015. The decrease of net charge-offs between periods was the result of impairment analyses on collateral-dependent loans which identified collateral shortfalls and determined appropriate charge-offs. Based on the analyses performed as of March 31, 2016, and the full or partial charge-offs recorded, management believes there is sufficient collateral to cover the principal balances of the collateral-dependent loans. The Provision for the three months ended March 31, 2016 was $1.4 million as compared to $569 thousand for the same period in 2015. The increase in the Provision for the first quarter of 2016 was largely driven by the increases in loan volume which were concentrated in the commercial mortgage and construction segments of the portfolio.       

Financial Condition – March 31, 2016 Compared to December 31, 2015

• Total portfolio loans and leases of $2.38 billion as of March 31, 2016 increased by $109.9 million from December 31, 2015. Loan growth was concentrated in the commercial mortgage and construction categories, which increased $80.2 million and $28.8 million, respectively, during the first quarter of 2016.
   
• The allowance for loan and lease losses (the “Allowance”) as of March 31, 2016 was $16.8 million, or 0.71% of portfolio loans as compared to $15.9 million, or 0.70% of portfolio loans and leases, as of December 31, 2015. In addition to the ratio of Allowance to portfolio loans, management considers two non-GAAP measures: the Allowance as a percentage of originated loans and leases, which was 0.83% as of March 31, 2016, as compared to 0.84% as of December 31, 2015, and the Allowance plus the remaining loan mark as a percentage of gross loans, which was 1.37% as of March 31, 2016, as compared to 1.44% as of December 31, 2015. 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, 2016 were $365.8 million, an increase of $16.9 million from December 31, 2015. Increases of $23.7 million in mortgage-related securities were partially offset by decreases of $5.4 million in U.S. government securities.
   
• Total assets as of March 31, 2016 were $3.06 billion, an increase of $27.3 million from December 31, 2015. Increases in loans and leases and available for sale investment securities were partially offset by reductions in interest-bearing deposits with banks, which decreased by $90.7 million.
   
• Wealth assets under management, administration, supervision and brokerage totaled $9.28 billion as of March 31, 2016, an increase of $916.9 million from December 31, 2015. However, due to the change in the composition of the assets held in the wealth portfolio, fees for wealth management services did not grow proportionately, as more of the portfolio was comprised of assets held in lower-yielding fixed-fee accounts.
   
• Deposits of $2.34 billion as of March 31, 2016 increased $91.3 million from December 31, 2015. A significant portion of the growth in deposits was in the wholesale sector, which grew by $72.7 million.
   
• The capital ratios for the Bank and the Corporation, as of March 31, 2016, as shown in the attached tables, indicate levels well above the regulatory minimum to be considered “well capitalized.” The capital ratios of the Bank increased from the fourth quarter of 2015 primarily as a result of a $15.0 million downstream of capital from the Corporation during the first quarter. The capital ratios of the Corporation decreased from the fourth quarter of 2015, as shareholders’ equity decreased $534 thousand, while total assets increased by $27.3 million. The decrease in shareholders’ equity occurred as a result of dividend payments and the repurchase, during the first quarter of 2016, of $8.0 million of treasury shares.      

EARNINGS CONFERENCE CALL
The Corporation will hold an earnings conference call at 8:30 a.m. Eastern Time on Friday, April 29, 2016.  Interested parties may participate by dialing (toll-free) 1-877-504-8812 (international (toll) 1-412-902-6656).  A recorded replay of the conference call will be available one hour after the conclusion of the call and will remain available through May 13, 2016.  The recorded replay may be accessed by dialing (toll-free) 1-877-344-7529 (international (toll) 1-412-317-0088).The conference number is 10083628.

The conference call will be simultaneously broadcast live over the Internet through a webcast on the investor relations portion of the Bryn Mawr Bank Corporation website. To access the call, please visit the website at http://services.choruscall.com/links/bmtc160429. An online archive of the webcast will be available within one hour of the conclusion of the call.  The Corporation has also recently expanded its Investor Relations website to include added resources and information for shareholders and interested investors.  Interested parties are encouraged to utilize the expanded resources of the site for more information on Bryn Mawr Bank Corporation.

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, 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.