Fidelity D & D Bancorp, Inc. Reports Second Quarter 2012 Financial Results

DUNMORE, Pa., July 27, 2012 /PRNewswire/ -- Fidelity D & D Bancorp, Inc. (OTC Bulletin Board: FDBC), parent company of The Fidelity Deposit and Discount Bank, announced net income for the quarter ended June 30, 2012 of $1.3 million, an increase of $28 thousand, or 2%, compared to the same 2011 quarter.  Progress in improving earnings occurred from producing further other income that covered the lower net interest income and additional provision for loan losses, impairment charge and other expenses, over the previous year's second quarter.  Earnings per share on a diluted basis for the quarter were $0.57 and $0.59 for the three months ended June 30, 2012 and 2011, respectively.

"We are very pleased with the 2nd quarter results.  The results reflected continued improvement in operating results in a very challenging global and regional economic climate," stated Daniel J. Santaniello, President and Chief Executive Officer.  "The improvement in operating results is reflective of our continued success of executing upon our strategic plan, which focuses on adding new, and cross selling existing relationships, by offering outstanding customer service. The increase in non-interest income continued to be very strong through the 2nd quarter of 2012 as loan rates remained low and the Bank continued to be the consumer's preferred residential mortgage lender within northeastern Pennsylvania."

Net income for the six months ended June 30, 2012 was $2.6 million, an increase of $58 thousand, or 2%, compared to net income of $2.5 million for the same 2011 period. The current year-to-date period earnings improvement occurred from producing more other income, which more than off-set the declining net interest income and higher loan losses, impairment charges and other expense, compared to the prior year-to-date period.  Earnings per share were $1.13 and $1.15 for the six months ended June 30, 2012 and 2011, respectively.

The Company's assets contracted $11.0 million, or 2%, to total $595.7 million at June 30, 2012 from $606.7 million at December 31, 2011.  The decline resulted primarily from the $5 million long-term debt pay off, a $3.7 million decline in deposit balances, principally interest-bearing, the $1.4 million reduction in repurchase agreements, a short-term borrowing, and paying $3.8 million of obligations from utilizing excess cash balances during the first half of 2012.

Net interest income declined 3% to $5.2 million for the quarter ended June 30, 2012 from $5.3 million recorded during the same quarter of 2011.  The cost reductions, from lowering rates on interest-bearing liabilities plus removing negative leverage spreads linked to the flattening short-term interest rate environment, were waning.  The cost savings were no longer enough to keep pace with either asset repricing, to significantly lower short- to mid-term interest rates, or asset growth, primarily at mid-term yields, both of which had the effect of reducing yield on earning assets.  As a result, net interest income decreased $164 thousand, or 3% in the second quarter of 2012 compared to the year ago period.  This decline with the $13.1 million growth in earning asset volume sent net interest margin down 20 basis points to 3.81% for the second quarter of 2012, compared to 4.01% for same 2011 period.

"This type of pressure on margin would normally lead banks to seek higher yields by investing in long-term assets, stated Salvatore R. DeFrancesco, Jr., Treasurer and Chief Financial Officer.  "We believe lower returns may be necessary over the near-term horizon, so we will be able to best serve our community as the economy turns positive."

Net interest income decreased $284 thousand, or 3%, to $10.3 million for the six months ended June 30, 2012 from $10.6 million recorded during the same period of 2011.  Net interest margin was 3.77% during the first half of 2012 compared to 4.03% during the first half of 2011, down 21 basis points from repricing activity and, more so, the $21.9 million increase in average earning assets.

The provision for loan losses was $600 thousand and $375 thousand for the second quarter ending June 30, 2012 and 2011, respectively.  Provision for loan losses was $1.3 million for the six months ending June 30, 2012, as compared to $850 thousand for the same 2011 period.  The allowance for loan losses was 1.91% of total loans at June 30, 2012, down from 2.00% at June 30, 2011.

Total other income recorded for the quarter ended June 30, 2012 was $1.9 million compared with $1.4 million for the same quarter in 2011.  The increase in other income was primarily due to a surge in mortgage banking revenue from the $341 thousand added gains from the sale of loans and $144 thousand more service charges on loans for the quarter ended June 30, 2012, compared to the same 2011 period.  Furthermore, fees from fiduciary trust services contributed $42 thousand more of other income.

Total other income for the six months ended June 30, 2012 was $4.0 million compared to $2.8 million for the same period in 2011.  The revenue increase in the comparative periods resulted primarily from mortgage banking activity producing $490 thousand more gains from the sale of loans and $318 thousand added loan service charges, along with $245 thousand further gains from sale on investment securities, and $107 thousand added fees from fiduciary trust services for the six months ended June 30, 2012 compared to the same 2011 period.

Total other operating expenses were $4.7 million compared to $4.6 million for the quarters ending June 30, 2012 and 2011, respectively.  The other operating expenses rose primarily from $98 thousand greater collection and ORE costs realized during the second quarter 2012.

Total other operating expenses increased $282 thousand, or 3%, to $9.4 million for the six months ending June 30, 2012 from $9.1 million in the same 2011 period. The other expense increase resulted primarily from the $236 thousand prepayment fee incurred on the early payoff of long-term debt in the 2012 year-to-date period.

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.

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

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;
  • 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 Mid Penn'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.

 

 

 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)




At Period End:

June 30, 2012

December 31, 2011

Assets



   Total cash and cash equivalents

$                     22,791

$                     52,165

   Investment securities

110,809

108,543

   Federal Home Loan Bank Stock

3,339

3,699

   Loans and leases

426,118

410,831

   Allowance for loan losses

(8,151)

(8,108)

   Premises and equipment, net

13,686

13,575

   Life insurance cash surrender value

9,901

9,740

   Other assets

17,243

16,297




      Total assets

$                   595,736

$                   606,742




Liabilities



   Non-interest-bearing deposits

$                   110,283

$                     96,155

   Interest-bearing deposits

401,787

419,647

       Total deposits

512,070

515,802

   Short-term borrowings

8,106

9,507

   Long-term debt

16,000

21,000

   Other liabilities

2,997

6,809

      Total liabilities

539,173

553,118




   Shareholders' equity

56,563

53,624




      Total liabilities and shareholders' equity

$                   595,736

$                   606,742







Average Year-To-Date Balances:

June 30, 2012

December 31, 2011

Assets



   Total cash and cash equivalents

$                     44,157

$                     50,325

   Investment securities

116,398

101,184

   Loans and leases, net

411,858

403,704

   Premises and equipment, net

13,685

14,188

   Other assets

26,242

26,926




      Total assets

$                   612,340

$                   596,327




Liabilities



   Non-interest-bearing deposits

$                   108,480

$                   102,441

   Interest-bearing deposits

413,641

406,568

       Total deposits

522,121

509,009

   Short-term borrowings and long-term debt

31,536

33,630

   Other liabilities

3,310

3,290

      Total liabilities

556,967

545,929




   Shareholders' equity

55,373

50,398




      Total liabilities and shareholders' equity

$                   612,340

$                   596,327

 

FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Statements of Income

(dollars in thousands)


Three Months Ended

Six Months Ended



Jun. 30, 2012

Jun. 30, 2011

Jun. 30, 2012

Jun. 30, 2011


Interest income






    Loans and leases 

$            5,408

$             5,893

$          10,824

$           11,828


    Securities and other  

583

704

1,219

1,320








       Total interest income 

5,991

6,597

12,043

13,148








 Interest expense 






    Deposits 

617

1,015

1,301

2,057


    Borrowings and debt 

221

265

475

540








       Total interest expense 

838

1,280

1,776

2,597








       Net interest income 

5,153

5,317

10,267

10,551








    Provision for loan losses 

600

375

1,300

850


    OTTI - credit losses 

31

-

136

75


    Other income 

1,903

1,398

3,959

2,811


    Other expenses 

4,678

4,620

9,391

9,110


    Provision for income taxes 

430

431

825

811


       Net income 

$            1,317

$             1,289

$            2,574

$             2,516























Three Months Ended


Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011

Interest income






    Loans and leases 

$            5,408

$             5,415

$            5,405

$             5,673

$            5,893

    Securities and other  

583

637

674

703

704







       Total interest income 

5,991

6,052

6,079

6,376

6,597







 Interest expense 






    Deposits 

617

684

763

852

1,015

    Borrowings and debt 

221

254

274

275

265







       Total interest expense 

838

938

1,037

1,127

1,280







       Net interest income 

5,153

5,114

5,042

5,249

5,317







    Provision for loan losses 

600

700

450

500

375

    OTTI - credit losses 

31

105

165

6

-

    Other income 

1,903

2,056

1,651

1,477

1,398

    Other expenses 

4,678

4,713

4,491

4,444

4,620

    Provision for income taxes 

430

395

385

449

431

       Net income 

$            1,317

$             1,257

$            1,202

$             1,327

$            1,289









 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)







At Period End:

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011

Assets






   Total cash and cash equivalents

$           22,791

$           65,681

$          52,165

$           76,126

$          46,676

   Investment securities

110,809

115,367

108,543

106,147

98,805

   Federal Home Loan Bank Stock

3,339

3,514

3,699

3,894

4,099

   Loans and leases

426,118

422,272

410,831

400,768

406,816

   Allowance for loan losses

(8,151)

(8,320)

(8,108)

(7,960)

(8,144)

   Premises and equipment, net

13,686

13,942

13,575

13,846

14,166

   Life insurance cash surrender value

9,901

9,819

9,740

9,660

9,581

   Other assets

17,243

17,005

16,297

19,213

16,685







      Total assets

$         595,736

$         639,280

$        606,742

$         621,694

$        588,684







Liabilities






   Non-interest-bearing deposits

$         110,283

$         129,041

$          96,155

$         100,668

$          98,751

   Interest-bearing deposits

401,787

419,124

419,647

424,929

408,176

       Total deposits

512,070

548,165

515,802

525,597

506,927

   Short-term borrowings

8,106

17,238

9,507

18,005

8,007

   Long-term debt

16,000

16,000

21,000

21,000

21,000

   Other liabilities

2,997

2,900

6,809

5,010

2,404

      Total liabilities

539,173

584,303

553,118

569,612

538,338







   Shareholders' equity

56,563

54,977

53,624

52,082

50,346







      Total liabilities and shareholders' equity

$         595,736

$         639,280

$        606,742

$         621,694

$        588,684













Average Quarterly Balances:

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011

Assets






   Total cash and cash equivalents

$           32,037

$           56,277

$          53,814

$           64,037

$          44,364

   Investment securities

118,721

114,076

112,554

103,624

98,646

   Loans and leases, net

416,755

406,962

402,093

393,771

408,047

   Premises and equipment, net

13,855

13,516

13,746

14,065

14,311

   Other assets

26,680

25,801

26,688

26,464

27,052







      Total assets

$         608,048

$         616,632

$        608,895

$         601,961

$        592,420







Liabilities






   Non-interest-bearing deposits

$         109,785

$         107,175

$          99,973

$           99,025

$        108,882

   Interest-bearing deposits

411,088

416,195

417,210

414,748

401,790

       Total deposits

520,873

523,370

517,183

513,773

510,672

   Short-term borrowings and long-term debt

27,954

35,117

35,114

33,707

29,180

   Other liabilities

3,266

3,355

3,658

3,192

3,048

      Total liabilities

552,093

561,842

555,955

550,672

542,900







   Shareholders' equity

55,955

54,790

52,940

51,289

49,520







      Total liabilities and shareholders' equity

$         608,048

$         616,632

$        608,895

$         601,961

$        592,420

 

 

FIDELITY D & D BANCORP, INC.



Selected Financial Ratios and Other Data










Three Months Ended




Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011



Selected returns and financial ratios








   Diluted earnings per share

$              0.57

$               0.56

$              0.54

$               0.59

$              0.59



   Dividends per share

$              0.25

$               0.25

$              0.25

$               0.25

$              0.25



   Yield on interest-earning assets (FTE)

4.41%

4.39%

4.39%

4.65%

4.94%



   Cost of interest-bearing liabilities

0.77%

0.84%

0.91%

1.00%

1.19%



   Net interest spread

3.64%

3.55%

3.48%

3.65%

3.75%



   Net interest margin

3.81%

3.73%

3.67%

3.85%

4.01%



   Return on average assets

0.87%

0.82%

0.78%

0.87%

0.87%



   Return on average equity

9.47%

9.23%

9.01%

10.27%

10.44%



   Efficiency ratio

64.54%

62.89%

65.35%

64.16%

67.08%



   Expense ratio

1.84%

1.74%

1.88%

1.96%

2.19%












Six Months Ended







Jun. 30, 2012

Jun. 30, 2011






   Diluted earnings per share

$              1.13

$               1.15






   Dividends per share

$              0.50

$               0.50






   Yield on interest-earning assets (FTE)

4.40%

4.98%






   Cost of interest-bearing liabilities

0.80%

1.22%






   Net interest spread

3.60%

3.76%






   Net interest margin

3.77%

4.03%






   Return on average assets

0.85%

0.86%






   Return on average equity

9.35%

10.43%






   Efficiency ratio

63.72%

66.27%






   Expense ratio

1.80%

2.17%














Other data









Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011



   Book value per share

$            24.69

$             24.18

$            23.78

$             23.26

$            22.70



   Equity to assets

9.49%

8.60%

8.84%

8.38%

8.55%



   Allowance for loan losses to:








      Total loans

1.91%

1.97%

1.97%

1.99%

2.00%



      Non-accrual loans

0.60x

0.65x

0.58x

1.00x

0.85x



   Non-accrual loans to total loans

3.16%

3.04%

3.40%

1.99%

2.36%



   Non-performing assets to total assets

3.70%

3.32%

3.58%

2.43%

2.37%




 

SOURCE Fidelity D & D Bancorp, Inc.



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