BRYN MAWR, Pa., July 22, 2021 – Bryn Mawr Bank Corporation (NASDAQ: Bryn Mawr TrustC) (the “Corporation”), parent of The Bryn Mawr Trust Company (the “Bank”), today reported net income of $21.3 million, or $1.06 diluted earnings per share, for the three months ended June 30, 2021, as compared to $17.1 million, or $0.85 diluted earnings per share, for the three months ended March 31, 2021, and $15.0 million, or $0.75 diluted earnings per share, for the three months ended June 30, 2020.
On a non-GAAP basis, core net income, which excludes due diligence and merger-related expenses related to the pending merger with WSFS Financial Corporation (“WSFS”) and other non-core income and expense items, as detailed in the appendix to this earnings release, was $21.6 million, or $1.08 diluted earnings per share, for the three months ended June 30, 2021 as compared to $18.7 million, or $0.93 diluted earnings per share, for the three months ended March 31, 2021. There were no meaningful non-core income or expense items for the three months ended June 30, 2020. 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 excited to report record results, with second quarter net income exceeding $20 million for the first time in the Corporation’s history,” commented Frank Leto, President and Chief Executive Officer, continuing, “The hard work and dedication of our employees combined with an improving economy are reflected in our results. Preparation for the pending merger with WSFS are ongoing as management and staff are working diligently to ensure a smooth transition as we await regulatory approval.” In addition to regulatory approval, the merger with WSFS is subject to certain closing conditions.
On July 22, 2021, the Board of Directors of the Corporation declared a quarterly dividend of $0.28 per share, payable September 1, 2021 to shareholders of record as of August 2, 2021.
SIGNIFICANT ITEMS OF NOTE
Results of Operations – Second Quarter 2021 Compared to First Quarter 2021
- Net income for the three months ended June 30, 2021 was $21.3 million, or $1.06 diluted earnings per share, as compared to $17.1 million, or $0.85 diluted earnings per share, for the three months ended March 31, 2021. Net interest income for the three months ended June 30, 2021 was $35.2 million, a $458 thousand increase as compared to the linked quarter. The provision for credit losses (the “Provision”), which includes the provision for credit losses on loans and leases, off-balance sheet credit exposures, and accrued interest receivable on COVID-19 deferrals, for the three months ended June 30, 2021 was a recovery of $6.6 million, as compared to a recovery of $5.2 million for the three months ended March 31, 2021. Total noninterest income increased $1.1 million, total noninterest expense decreased $2.2 million, and income tax expense increased $906 thousand for the three months ended June 30, 2021, as compared to the three months ended March 31, 2021.
- Net interest income for the three months ended June 30, 2021 was $35.2 million, a $458 thousand increase as compared to the linked quarter. Tax-equivalent net interest income for the three months ended June 30, 2021 was $35.3 million, a $454 thousand increase as compared to the linked quarter. Tax-equivalent net interest income for the second quarter of 2021 was positively impacted by the accretion of purchase accounting fair value marks of $882 thousand, an increase of $367 thousand as compared to $515 thousand 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, 2021 was $34.5 million, an increase of $87 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.
The tax-equivalent net interest margin was 3.17% for the three months ended June 30, 2021 as compared to 3.16% 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 3.09% for the three months ended June 30, 2021 as compared to 3.11% 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.
The increase in tax-equivalent net interest income adjusted for purchase accounting was driven by a decrease of $474 thousand in interest expense on deposits partially offset by a decrease of $355 thousand in tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2021 as compared to the linked quarter.
Interest expense on deposits for the three months ended June 30, 2021 decreased $466 thousand as compared to the linked quarter. The rate paid on average interest-bearing deposits for the three months ended June 30, 2021 was 0.15%, a 7 basis point decrease as compared to the linked quarter. Average interest-bearing deposits for the three months ended June 30, 2021 decreased $92.7 million as compared to the linked quarter.
Tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2021 decreased $56 thousand as compared to the linked quarter. The tax-equivalent yield on average loans and leases for the three months ended June 30, 2021 was 3.86%, a decrease of 4 basis points as compared to the linked quarter. Average loans and leases increased $4.3 million for the three months ended June 30, 2021 as compared to the linked quarter.
- Noninterest income of $21.0 million for the three months ended June 30, 2021 increased $1.1 million as compared to the linked quarter. The increase was primarily driven by increases of $1.2 million and $275 thousand in fees for wealth management services and net gain on sale of loans, respectively, partially offset by decreases of $306 thousand and $215 thousand in capital markets revenue and insurance commissions, respectively.
- Noninterest expense of $35.5 million for the three months ended June 30, 2021 decreased $2.2 million as compared to the linked quarter. The decrease was primarily driven by a decrease of $1.4 million in due diligence and merger-related expenses related to the pending merger with WSFS coupled with decreases of $463 thousand, $385 thousand, and $263 thousand in employee benefits, other operating expenses, and occupancy and bank premises expense, respectively.
- A recovery of Provision of $6.6 million was recorded for the three months ended June 30, 2021 as compared to a recovery of Provision of $5.2 million for the three months ended March 31, 2021. The recovery of Provision of $6.6 million for the three months ended June 30, 2021 was primarily comprised of a $6.0 million recovery of provision for credit losses on loans and leases and a $570 thousand recovery of provision for credit losses on off-balance sheet credit exposures. The difference in Provision between the two periods was driven by changes in current and forward-looking economic assumptions included in the estimation of expected credit losses on loans and leases as of June 30, 2021 as compared to March 31, 2021. Net loan and lease charge-offs for the second quarter of 2021 totaled $2.4 million, an increase of $1.7 million as compared to $642 thousand for the first quarter of 2021.
- The effective tax rate for the second quarter of 2021 decreased to 21.92% as compared to 22.93% for the first quarter of 2021. The decrease in effective tax rate was primarily due to $323 thousand in discrete tax items related to non-deductible merger-related expenses recognized in the first quarter of 2021 as compared to $47 thousand recognized in the second quarter of 2021.
Results of Operations – Second Quarter 2021 Compared to Second Quarter 2020
- Net income for the three months ended June 30, 2021 was $21.3 million, or $1.06 diluted earnings per share, as compared to $15.0 million, or $0.75 diluted earnings per share, for the three months ended June 30, 2020. Net interest income for the three months ended June 30, 2021 was $35.2 million, a decrease of $2.1 million as compared to the same period in 2020. A recovery of Provision of $6.6 million was recorded for the three months ended June 30, 2021 as compared to a Provision of $3.4 million for the three months ended June 30, 2020, a difference of $10.0 million. The difference in Provision between the two periods was driven by the current and forward-looking economic impacts of the COVID-19 pandemic included in the estimation of expected credit losses on loans and leases as of June 30, 2021 as compared to June 30, 2020. Total noninterest income increased $400 thousand, total noninterest expense decreased $36 thousand, and income tax expense increased $2.0 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
- Net interest income for the three months ended June 30, 2021 was $35.2 million, a decrease of $2.1 million as compared to the same period in 2020. Tax-equivalent net interest income for the three months ended June 30, 2021 was $35.3 million, a decrease of $2.1 million as compared to the same period in 2020. Tax-equivalent net interest income for the second quarter of 2021 was positively impacted by the accretion of purchase accounting fair value marks of $882 thousand as compared to $1.0 million for the same period in 2020. Excluding the effects of these purchase accounting fair value marks, the adjusted tax-equivalent net interest income for the three months ended June 30, 2021 was $34.5 million, a decrease of $2.0 million as compared to the same period in 2020. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
The tax-equivalent net interest margin was 3.17% for the three months ended June 30, 2021 as compared to 3.22% for the same period in 2020. Adjusting for the impacts of the accretion of purchase accounting fair value marks, the adjusted tax-equivalent net interest margin was 3.09% for the three months ended June 30, 2021 as compared to 3.13% for the same period in 2020. A reconciliation of this and other non-GAAP to GAAP performance measures is included in the appendix to this earnings release.
The decrease in tax-equivalent net interest income adjusted for purchase accounting was driven by a decrease of $6.0 million in tax-equivalent interest and fees earned on loans and leases, partially offset by decreases of $3.6 million and $227 thousand in interest paid on deposits and interest expense on short-term borrowings, respectively, and an increase of $128 thousand in tax-equivalent interest income on available for sale investment securities for the three months ended June 30, 2021 as compared to the same period in 2020.
Tax-equivalent interest and fees earned on loans and leases for the three months ended June 30, 2021 decreased $6.0 million as compared to the same period in 2020. The tax-equivalent yield on average loans and leases for the three months ended June 30, 2021 was 3.86%, a 30 basis point decrease as compared to the same period in 2020. Average loans and leases decreased $328.6 million for the three months ended June 30, 2021 as compared to the same period in 2020.
Interest expense on deposits for the three months ended June 30, 2021 decreased $3.5 million as compared to the same period in 2020. The rate paid on average interest-bearing deposits for the three months ended June 30, 2021 was 0.15%, a 46 basis point decrease as compared to the same period in 2020. Average interest-bearing deposits for the three months ended June 30, 2021 decreased $448.8 million as compared to the same period in 2020.
Interest expense on short-term borrowings for the three months ended June 30, 2021 decreased $227 thousand as compared to the same period in 2020. The decrease was primarily due to a $116.9 million decrease in average short-term borrowings for the three months ended June 30, 2021 as compared to the same period in 2020, coupled with a 58 basis point decrease in the rate paid for the three months ended June 30, 2021 as compared to the same period in 2020.
Tax-equivalent interest income on available for sale investment securities for the three months ended June 30, 2021 increased $128 thousand as compared to the same period in 2020. The tax-equivalent yield on average available for sale investment securities for the three months ended June 30, 2021 was 1.58%, a 58 basis point decrease as compared to the same period in 2020. Average available for sale investment securities increased $223.0 million for the three months ended June 30, 2021 as compared to the same period in 2020.
- Noninterest income of $21.0 million for the three months ended June 30, 2021 increased $400 thousand as compared to the same period in 2020. The increase was driven by a $5.0 million increase in fees for wealth management services partially offset by decreases of $2.6 million and $1.7 million in net gain on sale of loans and capital markets revenue, respectively. The increase in fees for wealth management services was driven by the lack of non-recurring costs associated with the wind-down of Bryn Mawr Trust Investment Advisers, which had a $2.2 million impact on fees for wealth management services in the second quarter of 2020, as well as the $3.62 billion increase in wealth assets under management, administration, supervision and brokerage (“wealth assets”) between June 30, 2021 and June 30, 2020. The decrease in net gain on sale of loans was driven by a $2.4 million gain on the sale of approximately $292.1 million of PPP loans in the second quarter of 2020.
- Noninterest expense of $35.5 million for the three months ended June 30, 2021 decreased $36 thousand as compared to the same period in 2020. Decreases of $506 thousand, $404 thousand, and $226 thousand in other operating expenses, occupancy and bank premises expense, and salaries and wages, respectively, were partially offset by increases of $602 thousand, $266 thousand, and $217 thousand in Pennsylvania bank shares tax expense, merger-related expenses, and advertising expenses, respectively.
- A recovery of Provision of $6.6 million was recorded for the three months ended June 30, 2021 as compared to a Provision of $3.4 million for the three months ended June 30, 2020, a decrease of $10.0 million. The difference in Provision between the two periods was driven by changes in the current and forward-looking economic impacts of the COVID-19 pandemic included in the estimation of expected credit losses on loans and leases as of June 30, 2021 as compared to June 30, 2020. Net loan and lease charge-offs for the second quarter of 2021 totaled $2.4 million, a decrease of $1.0 million as compared to $3.4 million for the second quarter in 2020.
- The effective tax rate for the second quarter of 2021 increased to 21.92% as compared to 21.09% for the second quarter of 2020.
Financial Condition – June 30, 2021 Compared to December 31, 2020
- Total assets as of June 30, 2021 were $4.96 billion, a decrease of $473.3 million from December 31, 2020. The decrease was primarily driven by a $446.2 million decrease in available for sale investment securities.
- Available for sale investment securities as of June 30, 2021 totaled $728.7 million, a decrease of $446.2 million from December 31, 2020. The decrease was primarily due to the maturing, in January 2021, of $500.0 million of short-term U.S. Treasury securities included on the balance sheet as of December 31, 2020, partially offset by increases of $28.7 million and $23.6 million of mortgage-backed securities and U.S. Government and agency securities, respectively.
- Total portfolio loans and leases of $3.62 billion as of June 30, 2021 decreased $11.0 million as compared to December 31, 2020. Increases of $51.7 million and $43.1 million in commercial and industrial loans and construction loans, respectively, were partially offset by decreases of $41.8 million, $25.0 million, $17.6 million and $15.9 million in residential mortgage 1st liens, owner-occupied commercial mortgages, home equity lines of credit, and nonowner-occupied commercial mortgages, respectively.
As of the date of this earnings release, 9 consumer loans and leases in the amount of $1.2 million and 19 commercial loans in the amount of $31.1 million are within a deferral period under the Bank’s COVID-19 related modification programs. Of those commercial loans within a deferral period, $29.2 million, or 94.0% of deferred commercial loans, continue to make interest-only payments.
- The ACL on loans and leases was $39.2 million as of June 30, 2021 as compared to an ACL on loans and leases of $53.7 million as of December 31, 2020, a decrease of $14.5 million. The difference in ACL on loans and leases between the two periods was driven by the current and forward-looking economic impacts of the COVID-19 pandemic, as well as projected prepayments, included in the estimation of expected credit losses on loans and leases as of June 30, 2021 as compared to December 31, 2020.
- Deposits of $3.96 billion as of June 30, 2021 decreased $416.5 million from December 31, 2020. The decrease was primarily driven by decreases of $217.1 million, $202.0 million, $60.6 million, and $29.9 million in interest-bearing demand accounts, wholesale non-maturity deposits, retail time deposits, and wholesale time deposits, respectively, offset by increases of $66.8 million, $19.6 million, and $6.7 million in noninterest-bearing deposits, money market accounts, and savings accounts, respectively. The decrease in wholesale non-maturity deposits was primarily due to a decrease of approximately $200.0 million of wholesale deposits in the first quarter of 2021, which was used to partially fund the purchase of $500.0 million of short-term U.S. Treasury securities included on the balance sheet as of December 31, 2020. The decrease in interest-bearing demand deposits was primarily driven by management’s active management of excess liquidity in this current interest rate environment.
- Borrowings of $182.5 million as of June 30, 2021, which include short-term borrowings, long-term FHLB advances, subordinated notes and junior subordinated debentures, decreased $50.4 million from December 31, 2020, primarily due to a decrease of $50.6 million in short-term borrowings.
- Wealth assets totaled $20.63 billion as of June 30, 2021, an increase of $1.65 billion from December 31, 2020. As of June 30, 2021, wealth assets consisted of $13.02 billion of wealth assets where fees are set at fixed amounts, an increase of $1.16 billion from December 31, 2020, and $7.61 billion of wealth assets where fees are predominantly determined based on the market value of the assets held in their accounts, an increase of $492.7 million from December 31, 2020.
- The capital ratios for the Bank and the Corporation, as of June 30, 2021, 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.” In September 2020, the U.S. banking agencies issued a final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. This final rule is consistent with the interim final rule issued by the U.S. banking agencies in March 2020. The current and prior quarter ratios reflect the Corporation’s election of the five-year transition provision.
FORWARD LOOKING STATEMENTS AND SAFE HARBOR
This communication 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 “believe,” “intend,” “expect,” “anticipate,” “strategy,” “plan,” “estimate,” “approximately,” “target,” “project,” “propose,” “possible,” “potential,” “should” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (many of which are beyond the control of the Corporation) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to, the possibility that the proposed transaction with WSFS does not close when expected or at all because required regulatory or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the delay in or failure to close for any other reason; the outcome of any legal proceedings that may be instituted against the Corporation; the occurrence of any event, change or other circumstance that could give rise to the right of one or both parties to terminate the merger agreement providing for the merger; the risk that the businesses of WSFS and the Corporation will not be integrated successfully; the possibility that the cost savings and any synergies or other anticipated benefits from the proposed transaction may not be fully realized or may take longer to realize than expected; disruption from the proposed transaction making it more difficult to maintain relationships with employees, customers or other parties with whom the Corporation has business relationships; diversion of management time on merger-related issues; the reaction to the proposed transaction of our customers, employees and counterparties; uncertainty as to the extent of the duration, scope, and impacts of the COVID-19 pandemic; and other factors, many of which are beyond the control of the Corporation. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020 and any updates to those risk factors set forth in the Corporation’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed by the Corporation with the SEC and are available on the SEC’s website at www.sec.gov. All forward-looking statements, expressed or implied, included herein are expressly qualified in their entirety by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Corporation or its businesses or operations. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date on which they are made. The Corporation undertakes no obligation, and specifically declines any obligation, to revise or update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as specifically required by law.
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