Fidelity D & D Bancorp, Inc. 2012 Financial Results

DUNMORE, Pa., Jan. 30, 2013 /PRNewswire/ -- Fidelity D & D Bancorp, Inc. (OTC Bulletin Board: FDBC), parent company of The Fidelity Deposit and Discount Bank, announced a 5% net income increase for the year ended December 31, 2012, with net income of $5.3 million, or $2.32 per share, compared to net income for the year ended December 31, 2011 of $5.0 million, or $2.28 per share.  This was accomplished through generating revenue that in total increased $1.5 million, or 6%, in 2012 over to the 2011 year.  The net interest income decline was moderated, given the 2012 interest rate environment, to $202 thousand, or less than a 1% change. Asset quality was addressed with resolutions occurring but at a cost of $850 thousand in additional provisions for loan losses with an additional $63 thousand incurred in other real estate expenses.  Other income was propelled by $966 thousand more in gains from loan sales and $265 thousand gains on securities, partially offset by $139 thousand of additional foreclosed asset losses.  Improvements were made during 2012, where loan service charges, trust revenue, and interchange fees increased $302, $192 and $118 thousand, respectively.  In addition, other operating expense was elevated by a $236 thousand long-term debt pre-payment fee.  Excluding this fee and the other real estate costs, operating expenses remained mostly flat during 2012 compared to the 2011 year.

"We are very pleased with this year's financial result, which reflects growth in a number of key areas," stated Daniel J. Santaniello, President and Chief Executive Officer.  "Our strategic focus on offering a differentiated approach to customer service, along with our committed employees has enabled us to increase customers, loans and low cost deposits within our marketplace.  This focus produced revenue growth and an increase in capital that positions us well for continued growth."

Net income for the quarter ended December 31, 2012 was $1.3 million compared to $1.2 million for the same quarter of 2011.  The earnings per share for the quarter were $0.58 compared to $0.54 for the same prior year period.  Net interest income for the 2012 fourth quarter improved $161 thousand over the same 2011 period primarily from reduced interest expense and higher non-interest checking balances plus the contribution from growth in the loan portfolio.  The interchange fee, loan servicing and mortgage banking initiatives engaged during the past year improved the current quarter's other income $167 thousand and impairment losses on securities declined $165 thousand.  These improvements were partially offset by the $103 thousand, or 2%, increase in operating expenses, primarily in salary and benefits, compared to the 2011 fourth quarter.

The Company's assets totaled $601.9 million at December 31, 2012, down from $606.7 million at December 31, 2011.  Asset growth was muted from utilizing available cash to fund loan growth and pay down other liabilities and long-term debt.  Shareholders' equity grew $5.7 million, or 11%.  The Bank's regulatory capital ratios for the period ending December 31, 2012 were Total Risk Based Capital Ratio of 13.6%, Tier I Capital Ratio of 12.4% and Leverage Ratio of 9.8%, all of which soundly exceed the current "well capitalized" regulatory requirements.

Net interest income was $20.6 million for the year ended December 31, 2012, a less than 1% change, or $202 thousand below the $20.8 million earned in 2011, a reasonable result achieved from efforts to mitigate margin pressure caused by operating during significant economic and political uncertainties during a year which mid-to long-term interest rates were lowered to historical low levels.  As a result, net interest margin declined 9 basis points to 3.80% for 2012 from 3.89% for 2011.

Net interest income was $5.2 million for the quarter ended December 31, 2012, compared to the $5.0 million recorded during the same quarter of 2011.  The cost reductions on lower interest-bearing liabilities coupled with lower deposit rates, plus the larger loan portfolio, more than offset the persistent effect low rates had on reducing earning-asset yields. Utilizing low yield cash to fund higher yielding loans during the past year improved the fourth quarter 2012 net interest margin to 3.86%, compared to 3.67% for same 2011 period.

The provision for loan losses was $2.7 million for the 2012 year, compared to $1.8 million required in 2011.  The efforts to resolve asset quality, addressing the migration of commercial credits to non-performing status, including reaching a resolution on several substandard and non-accrual credits, necessitated the added requirement to increase the provision for loan losses $850 thousand.

The provision for loan losses was $650 thousand for the fourth quarter of 2012 compared to the $450 thousand required for the fourth quarter of 2011.  Replenishing the allowance for loan losses from charge-off activity taken during the fourth quarter of 2012 increased the level of provision for loan losses required when compared to the fourth quarter of 2011.

Workout efforts proved successful to begin reducing asset quality issues as the ratio of non-performing assets to total assets at December 31, 2012 decreased to 2.94% from 3.58% at December 31, 2011.  The ratio of non-accrual loans to total loans at December 31, 2012 decreased 67 basis-points to 2.73%.  Net charge-offs were $2.4 million in 2012 and $1.6 million in 2011.  The allowance for loan losses was 1.89% of total loans at December 31, 2012, down from 1.97% at December 31, 2011.

Total other income for the year ended December 31, 2012 was $7.6 million, compared to $5.9 million for the 2011 year.  The additional $967 thousand from significantly higher profit margin on mortgage banking activities, $302 thousand more loan service charges, along with growth of $192 thousand from trust activity and $118 thousand more interchange transaction fees plus $265 thousand of gains recognized on securities, collectively, pushed other income up by $1.7 million.

Total other income recorded for the quarter ended December 31, 2012 was a $1.8 million compared with $1.6 million for the same quarter in 2011.   The $167 thousand increase primarily occurred from higher mortgage banking and more interchange activity during the quarter.

Total other operating expenses remained basically even, except for the $236 thousand long-term debt pre-payment fee and $63 thousand in other real estate costs which increased other expenses to $18.4 million for the year ending December 31, 2012, compared to $18.0 million for the 2011 year. The reductions in occupancy and equipment expenses and FDIC assessment almost offset increased salary and benefits and marketing expenses.

Total other operating expenses increased $103 thousand, or 2%, to $4.6 million from $4.5 million for the quarters ending December 31, 2012 and 2011, respectively.  The other operating expenses primarily increased from higher salaries and benefits and added costs from more other real estate owned.

Fidelity D & D Bancorp, Inc. serves Lackawanna and Luzerne Counties through The Fidelity Deposit and Discount Bank's 11 community banking office locations.  The Bank's deposits are insured by the Federal Deposit Insurance Corporation up to the full extent permitted by law.

Forward-Looking Statements

Certain of the matters discussed in this press release may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect," "anticipate," "intend," "plan," "believe," "estimate," and similar expressions are intended to identify such forward-looking statements.

The Company's actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:

  • the effects of economic deterioration on current customers, specifically the effect of the economy on loan customers' ability to repay loans;
  • the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
  • the effects of new laws and regulations, specifically the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act;
  • governmental monetary and fiscal policies, as well as legislative and regulatory changes;
  • the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters;
  • the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks;
  • the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;
  • technological changes;
  • acquisitions and integration of acquired businesses;
  • the failure of assumptions underlying the establishment of reserves for loan and lease losses and estimations of values of collateral and various financial assets and liabilities;
  • volatilities in the securities markets;
  • deteriorating economic conditions;
  • acts of war or terrorism; and
  • disruption of credit and equity markets.

For more information please visit our investor relations web site located through www.bankatfidelity.com.

 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)




At Period End:

December 31, 2012

December 31, 2011

Assets



   Total cash and cash equivalents

$                      21,846

$                     52,165

   Investment securities

100,730

108,543

   Federal Home Loan Bank Stock

2,624

3,699

   Loans and leases

444,101

410,831

   Allowance for loan losses

(8,372)

(8,108)

   Premises and equipment, net

14,127

13,575

   Life insurance cash surrender value

10,065

9,740

   Other assets

16,800

16,297




      Total assets

$                    601,921

$                   606,742




Liabilities



   Non-interest-bearing deposits

$                    126,035

$                     96,155

   Interest-bearing deposits

388,625

419,647

       Total deposits

514,660

515,802

   Short-term borrowings

8,056

9,507

   Long-term debt

16,000

21,000

   Other liabilities

3,863

6,809

      Total liabilities

542,579

553,118




   Shareholders' equity

59,342

53,624




      Total liabilities and shareholders' equity

$                    601,921

$                   606,742







Average Year-To-Date Balances:

December 31, 2012

December 31, 2011

Assets



   Total cash and cash equivalents

$                      37,022

$                     50,325

   Investment securities

112,712

101,184

   Loans and leases, net

418,287

403,704

   Premises and equipment, net

13,943

14,188

   Other assets

26,522

26,926




      Total assets

$                    608,486

$                   596,327




Liabilities



   Non-interest-bearing deposits

$                    111,458

$                   102,441

   Interest-bearing deposits

406,948

406,568

       Total deposits

518,406

509,009

   Short-term borrowings and long-term debt

29,794

33,630

   Other liabilities

3,390

3,290

      Total liabilities

551,590

545,929




   Shareholders' equity

56,896

50,398




      Total liabilities and shareholders' equity

$                    608,486

$                   596,327

 

FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Statements of Income

(dollars in thousands)


Three Months Ended

Twelve Months Ended



Dec. 31, 2012

Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011


Interest income






    Loans and leases 

$            5,455

$             5,405

$          21,699

$           22,906


    Securities and other  

522

674

2,295

2,697








       Total interest income 

5,977

6,079

23,994

25,603








 Interest expense 






    Deposits 

553

763

2,439

3,672


    Borrowings and debt 

221

274

915

1,089








       Total interest expense 

774

1,037

3,354

4,761








       Net interest income 

5,203

5,042

20,640

20,842








    Provision for loan losses 

650

450

2,650

1,800


    OTTI - credit losses 

-

165

136

246


    Other income 

1,818

1,651

7,645

5,938


    Other expenses 

4,594

4,491

18,438

18,044


    Provision for income taxes 

452

385

1,763

1,645


       Net income 

$            1,325

$             1,202

$            5,298

$             5,045























Three Months Ended


Dec. 31, 2012

Sep. 30, 2012

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Interest income






    Loans and leases 

$            5,455

$             5,420

$            5,408

$             5,415

$            5,405

    Securities and other  

522

554

583

637

674







       Total interest income 

5,977

5,974

5,991

6,052

6,079







 Interest expense 






    Deposits 

553

585

617

684

763

    Borrowings and debt 

221

219

221

254

274







       Total interest expense 

774

804

838

938

1,037







       Net interest income 

5,203

5,170

5,153

5,114

5,042







    Provision for loan losses 

650

700

600

700

450

    OTTI - credit losses 

-

-

31

105

165

    Other income 

1,818

1,868

1,903

2,056

1,651

    Other expenses 

4,594

4,453

4,678

4,713

4,491

    Provision for income taxes 

452

486

430

395

385

       Net income 

$            1,325

$             1,399

$            1,317

$             1,257

$            1,202

 

 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)







At Period End:

Dec. 31, 2012

Sep. 30, 2012

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Assets






   Total cash and cash equivalents

$           21,846

$           45,622

$           22,791

$           65,681

$           52,165

   Investment securities

100,730

103,135

110,809

115,367

108,543

   Federal Home Loan Bank Stock

2,624

3,019

3,339

3,514

3,699

   Loans and leases

444,101

430,914

426,118

422,272

410,831

   Allowance for loan losses

(8,372)

(8,142)

(8,151)

(8,320)

(8,108)

   Premises and equipment, net

14,127

14,270

13,686

13,942

13,575

   Life insurance cash surrender value

10,065

9,984

9,901

9,819

9,740

   Other assets

16,800

16,645

17,243

17,005

16,297







      Total assets

$         601,921

$         615,447

$         595,736

$         639,280

$         606,742







Liabilities






   Non-interest-bearing deposits

$         126,035

$         114,653

$         110,283

$         129,041

$           96,155

   Interest-bearing deposits

388,625

409,467

401,787

419,124

419,647

       Total deposits

514,660

524,120

512,070

548,165

515,802

   Short-term borrowings

8,056

14,069

8,106

17,238

9,507

   Long-term debt

16,000

16,000

16,000

16,000

21,000

   Other liabilities

3,863

2,705

2,997

2,900

6,809

      Total liabilities

542,579

556,894

539,173

584,303

553,118







   Shareholders' equity

59,342

58,553

56,563

54,977

53,624







      Total liabilities and shareholders' equity

$         601,921

$         615,447

$         595,736

$         639,280

$         606,742













Average Quarterly Balances:

Dec. 31, 2012

Sep. 30, 2012

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Assets






   Total cash and cash equivalents

$           27,674

$           32,254

$           32,037

$           56,277

$           53,814

   Investment securities

107,021

111,112

118,721

114,076

112,554

   Loans and leases, net

426,040

423,250

416,755

406,962

402,093

   Premises and equipment, net

14,266

14,132

13,855

13,516

13,746

   Other assets

26,662

26,938

26,680

25,801

26,688







      Total assets

$         601,663

$         607,686

$         608,048

$         616,632

$         608,895







Liabilities






   Non-interest-bearing deposits

$         117,025

$         111,781

$         109,785

$         107,175

$           99,973

   Interest-bearing deposits

393,319

407,335

411,088

416,195

417,210

       Total deposits

510,344

519,116

520,873

523,370

517,183

   Short-term borrowings and long-term debt

28,527

27,616

27,954

35,117

35,114

   Other liabilities

3,549

3,390

3,266

3,355

3,658

      Total liabilities

542,420

550,122

552,093

561,842

555,955







   Shareholders' equity

59,243

57,564

55,955

54,790

52,940







      Total liabilities and shareholders' equity

$         601,663

$         607,686

$         608,048

$         616,632

$         608,895

FIDELITY D & D BANCORP, INC.

Selected Financial Ratios and Other Data






Three Months Ended


Dec. 31, 2012

Sep. 30, 2012

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Selected returns and financial ratios






   Diluted earnings per share

$              0.58

$               0.61

$              0.57

$               0.56

$              0.54

   Dividends per share

$              0.25

$               0.25

$              0.25

$               0.25

$              0.25

   Yield on interest-earning assets (FTE)

4.41%

4.36%

4.41%

4.39%

4.39%

   Cost of interest-bearing liabilities

0.73%

0.74%

0.77%

0.84%

0.91%

   Net interest spread

3.68%

3.62%

3.64%

3.55%

3.48%

   Net interest margin

3.86%

3.79%

3.81%

3.73%

3.67%

   Return on average assets

0.88%

0.92%

0.87%

0.82%

0.78%

   Return on average equity

8.90%

9.67%

9.47%

9.23%

9.01%

   Efficiency ratio

64.44%

61.74%

64.54%

62.89%

65.35%

   Expense ratio

1.88%

1.69%

1.84%

1.74%

1.88%








Twelve Months Ended





Dec. 31, 2012

Dec. 31, 2011




   Diluted earnings per share

$              2.32

$               2.28




   Dividends per share

$              1.00

$               1.00




   Yield on interest-earning assets (FTE)

4.39%

4.75%




   Cost of interest-bearing liabilities

0.77%

1.08%




   Net interest spread

3.62%

3.67%




   Net interest margin

3.80%

3.89%




   Return on average assets

0.87%

0.85%




   Return on average equity

9.31%

10.01%




   Efficiency ratio

63.40%

65.47%




   Expense ratio

1.78%

2.04%










Other data







Dec. 31, 2012

Sep. 30, 2012

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

   Book value per share

$            25.54

$             25.37

$            24.69

$             24.18

$            23.78

   Equity to assets

9.86%

9.51%

9.49%

8.60%

8.84%

   Allowance for loan losses to:






      Total loans

1.89%

1.89%

1.91%

1.97%

1.97%

      Non-accrual loans

0.69x

0.65x

0.60x

0.65x

0.58x

   Non-accrual loans to total loans

2.73%

2.89%

3.16%

3.04%

3.40%

   Non-performing assets to total assets

2.94%

2.72%

3.70%

3.32%

3.58%

 

SOURCE Fidelity D & D Bancorp, Inc.



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