Fidelity D & D Bancorp, Inc. Reports Third Quarter 2013 Financial Results

Oct 30, 2013, 10:19 ET from Fidelity D & D Bancorp, Inc.

DUNMORE, Pa., Oct. 30, 2013 /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 September 30, 2013 of $1.5 million, an increase of $106 thousand, or 8%, compared to the 2012 third quarter.  Progress in improving earnings occurred from the further generation of other income sources.  This happened while maintaining the level of net interest income along with the less required provision for loan losses, which more than offset additional other operating expenses.  Earnings per share on a diluted basis for the quarters were $0.64 and $0.61 for the three months ended September 30, 2013 and 2012, respectively.  The return on average assets was 0.96% and 0.92% with the return on average equity of 9.85% and 9.67% for the three months ended September 30, 2013 and 2012, each respectively.

"The improved financial results are reflective of the significant progress on our strategic objective of focusing on deepening and broadening existing customer relationships while continuing to add new households and business clients. Asset quality across all loan segments has continued to improve while loan originations continued to be strong," stated Daniel J. Santaniello, President and Chief Executive Officer.  "During the current challenging banking and economic climate we have continued to enhance our capital position while continuing to control expenses and diversify our sources of revenue, creating greater shareholder value."

Net income for the nine months ended September 30, 2013 was $4.4 million, an increase of $439 thousand, or 11%, compared to net income of $4.0 million for the same 2012 period. The current year-to-date earnings improvement occurred from producing additional other income and net interest income, with less provision for loan losses required.  This revenue growth more than offset the increase of other expenses compared to the prior year-to-date period.  Earnings per share on a diluted basis were $1.88 and $1.74 for the nine months ended September 30, 2013 and 2012, respectively.

The Company's assets grew $38.8 million, or 6%, to total $640.3 million at September 30, 2013 from $601.5 million at December 31, 2012.  The asset growth resulted primarily in $20.5 million increase in the loans and leases, net of allowance for loan losses, and a $14.0 million increase in cash and cash equivalent balances.  The asset growth was funded from a $22.1 million increase in interest-bearing deposit balances, $8.1 million increase in non-interest-bearing deposits, along with $6.1 million short-term borrowing growth in repurchase agreements, during the first nine months of 2013.

Net interest income increased $36 thousand to $5.2 million for the quarter ended September 30, 2013 compared to the same quarter of 2012.  The 5 basis points in interest cost reductions, from lowering rates primarily on certificate of deposit accounts, were not adequate to maintain the spread with repricing assets or new loan growth added at lower yields, both of which had reduced yield on average earning assets by 10 basis points.  However, the $12.4 million increase on average earning assets was what increased net interest income by $36 thousand in the third quarter of 2013 compared to the year ago period.  This asset growth at lower earning yields contributed towards the net interest margin reduction to 3.74% for the third quarter of 2013 compared to 3.79% for the same 2012 period.

Net interest income increased $182 thousand, or 1%, to $15.6 million for the nine months ended September 30, 2013 from $15.4 million recorded during the same period of 2012.  Net interest margin was 3.81% during the first nine months of 2013 compared to 3.78% during the first nine months of 2012, up 3 basis points primarily from interest cost savings on certificate of deposit rates repricing lower, with merely a $2.4 million increase in average earning assets.

The provision for loan losses was $450 thousand and $700 thousand for the third quarters ending September 30, 2013 and 2012, respectively.  Provision for loan losses was $1.6 million for the nine months ending September 30, 2013, as compared to $2.0 million for the same 2012 period.  Although provision for loan losses was required on the 2013 loan growth, overall the provision was down from improved loan portfolio credit quality and fewer non-performing assets.  The allowance for loan losses was 1.81% of total loans at September 30, 2013, down from 1.89% at September 30, 2012.

Total other income recorded for each of the quarters ended September 30, 2013 and 2012 was $1.9 million. Other income fee based items that produced $60 thousand more revenue were from $43 thousand added interchange fees and $22 thousand additional service charges on deposit accounts, plus $34 thousand more fees and other revenue from loan servicing and rent income.  This more than offset the $33 thousand less service charges on loans and $52 thousand lower net gains from sales of loans and securities for the quarter ended September 30, 2013, compared to the same 2012 period.

Total other income for the nine months ended September 30, 2013 was $6.0 million compared to $5.9 million for the same period in 2012.  The revenue increase resulted primarily from $101 thousand more interchange fees, $90 thousand added service charges on deposit accounts, $86 thousand additional fees and other revenue from loan servicing and rent income, along with $33 thousand more fees from trust fiduciary services.  This was partially offset by $122 thousand fewer gains from the sale of loans and $102 thousand less loan service charges for the nine months ended September 30, 2013 compared to the same 2012 period.

Total other operating expenses were $4.6 million, a $165 thousand, or 4%, increase for the quarter ending September 30, 2013 when compared to the same quarter in 2012.  The increase in other expenses resulted from $132 thousand increase in salary and benefits, $81 thousand more automated transaction processing costs, $50 thousand additional advertising and $33 thousand more appraisal expenses partially reduced from $113 thousand less collection expenses incurred and $25 thousand lower FDIC premiums, when comparing the third quarter of 2013 to 2012.

Total other operating expenses increased $192 thousand, or 1%, to $14.1 million for the nine months ending September 30, 2013 from $13.9 million in the same 2012 period. The other expense increase resulted primarily from $378 thousand growth in salary and benefits expense, $140 thousand more automated transaction processing costs and $122 thousand added advertising expenses incurred, partially offset by $97 thousand lower premises and equipment expenses, $72 thousand less professional fees, and $51 thousand lower collection expenses.  These incurred variances are in addition to a $236 thousand early payoff of long-term debt cost included within the 2012 year-to-date other expenses.

Fidelity D & D Bancorp, Inc. serves Lackawanna and Luzerne Counties through The Fidelity Deposit and Discount Bank's 11 community banking office locations, including wealth management assistance through providing fiduciary activities with the Bank's full trust powers; as well as offering a full array of asset management services.  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 Quarterly Report on Form 10-Q 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 and the prolonged economic malaise 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 impact of new laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations promulgated there under;
  • possible impacts of the capital and liquidity requirements proposed by the Basel III standards and other regulatory pronouncements, regulations and rules;
  • 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 our 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 losses and estimations of values of collateral and various financial assets and liabilities;
  • volatilities in the securities markets;
  • slow 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:

September 30, 2013

December 31, 2012

Assets

   Total cash and cash equivalents

$

35,885

$

21,846

   Investment securities

103,111

100,730

   Federal Home Loan Bank Stock

2,160

2,624

   Loans and leases

464,008

444,101

   Allowance for loan losses

(8,405)

(8,972)

   Premises and equipment, net

13,709

14,127

   Life insurance cash surrender value

10,316

10,065

   Other assets

19,510

17,004

      Total assets

$

640,294

$

601,525

Liabilities

   Non-interest-bearing deposits

$

134,114

$

126,035

   Interest-bearing deposits

410,716

388,625

       Total deposits

544,830

514,660

   Short-term borrowings

14,197

8,056

   Long-term debt

16,000

16,000

   Other liabilities

3,471

3,863

      Total liabilities

578,498

542,579

   Shareholders' equity

61,796

58,946

      Total liabilities and shareholders' equity

$

640,294

$

601,525

Average Year-To-Date Balances:

September 30, 2013

December 31, 2012

Assets

   Total cash and cash equivalents

$

20,554

$

37,022

   Investment securities

103,171

112,712

   Loans and leases, net

449,652

418,287

   Premises and equipment, net

13,906

13,943

   Other assets

28,615

26,522

      Total assets

$

615,898

$

608,486

Liabilities

   Non-interest-bearing deposits

$

126,132

$

111,458

   Interest-bearing deposits

393,640

406,948

       Total deposits

519,772

518,406

   Short-term borrowings and long-term debt

32,018

29,794

   Other liabilities

3,787

3,390

      Total liabilities

555,577

551,590

   Shareholders' equity

60,321

56,896

      Total liabilities and shareholders' equity

$

615,898

$

608,486

FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Statements of Income

(dollars in thousands)

Three Months Ended

Nine Months Ended

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Interest income

  Loans and leases

$

5,455

$

5,420

$

16,380

$

16,244

  Securities and other

499

554

1,454

1,773

    Total interest income

5,954

5,974

17,834

18,017

Interest expense

  Deposits

525

585

1,551

1,886

  Borrowings and debt

223

219

664

694

    Total interest expense

748

804

2,215

2,580

    Net interest income

5,206

5,170

15,619

15,437

  Provision for loan losses

450

700

1,600

2,000

  OTTI - credit losses

-

-

-

136

  Other income

1,908

1,894

6,027

5,922

  Other expenses

4,644

4,479

14,131

13,939

  Provision for income taxes

515

486

1,503

1,311

    Net income

$

1,505

$

1,399

$

4,412

$

3,973

Three Months Ended

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2012

Interest income

  Loans and leases

$

5,455

$

5,456

$

5,469

$

5,455

$

5,420

  Securities and other

499

456

499

522

554

    Total interest income

5,954

5,912

5,968

5,977

5,974

Interest expense

  Deposits

525

511

515

553

585

  Borrowings and debt

223

221

220

221

219

    Total interest expense

748

732

735

774

804

    Net interest income

5,206

5,180

5,233

5,203

5,170

  Provision for loan losses

450

600

550

1,250

700

  Other income

1,908

2,051

2,068

1,866

1,894

  Other expenses

4,644

4,606

4,880

4,642

4,479

  Provision for income taxes

515

512

477

248

486

    Net income

$

1,505

$

1,513

$

1,394

$

929

$

1,399

 

 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)

At Period End:

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2012

Assets

   Total cash and cash equivalents

$

35,885

$

15,266

$

20,730

$

21,846

$

45,622

   Investment securities

103,111

96,466

99,496

100,730

103,135

   Federal Home Loan Bank Stock

2,160

3,214

2,238

2,624

3,019

   Loans and leases

464,008

465,351

450,677

444,101

430,914

   Allowance for loan losses

(8,405)

(8,296)

(8,236)

(8,972)

(8,142)

   Premises and equipment, net

13,709

13,802

13,876

14,127

14,270

   Life insurance cash surrender value

10,316

10,231

10,146

10,065

9,984

   Other assets

19,510

19,141

19,244

17,004

16,645

      Total assets

$

640,294

$

615,175

$

608,171

$

601,525

$

615,447

Liabilities

   Non-interest-bearing deposits

$

134,114

$

127,268

$

122,855

$

126,035

$

114,653

   Interest-bearing deposits

410,716

392,255

391,611

388,625

409,467

       Total deposits

544,830

519,523

514,466

514,660

524,120

   Short-term borrowings

14,197

16,199

13,593

8,056

14,069

   Long-term debt

16,000

16,000

16,000

16,000

16,000

   Other liabilities

3,471

3,550

4,333

3,863

2,705

      Total liabilities

578,498

555,272

548,392

542,579

556,894

   Shareholders' equity

61,796

59,903

59,779

58,946

58,553

      Total liabilities and shareholders' equity

$

640,294

$

615,175

$

608,171

$

601,525

$

615,447

Average Quarterly Balances:

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2012

Assets

   Total cash and cash equivalents

$

18,296

$

13,554

$

29,939

$

27,674

$

32,254

   Investment securities

102,617

102,335

104,582

107,021

111,112

   Loans and leases, net

456,479

450,684

441,632

426,040

423,250

   Premises and equipment, net

13,841

13,838

14,042

14,266

14,132

   Other assets

29,622

28,441

27,761

26,662

26,938

      Total assets

$

620,855

$

608,852

$

617,956

$

601,663

$

607,686

Liabilities

   Non-interest-bearing deposits

$

124,794

$

122,805

$

130,864

$

117,025

$

111,781

   Interest-bearing deposits

400,305

390,392

390,113

393,319

407,335

       Total deposits

525,099

513,197

520,977

510,344

519,116

   Short-term borrowings and long-term debt

31,263

31,199

33,616

28,527

27,616

   Other liabilities

3,892

3,657

3,811

3,549

3,390

      Total liabilities

560,254

548,053

558,404

542,420

550,122

   Shareholders' equity

60,601

60,799

59,552

59,243

57,564

      Total liabilities and shareholders' equity

$

620,855

$

608,852

$

617,956

$

601,663

$

607,686

   

FIDELITY D & D BANCORP, INC.

Selected Financial Ratios and Other Data

Three Months Ended

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2012

Selected returns and financial ratios

   Diluted earnings per share

$

0.64

$

0.64

$

0.60

$

0.40

$

0.61

   Dividends per share

$

0.25

$

0.25

$

0.25

$

0.25

$

0.25

   Yield on interest-earning assets (FTE)

4.26%

4.37%

4.36%

4.41%

4.36%

   Cost of interest-bearing liabilities

0.69%

0.70%

0.70%

0.73%

0.74%

   Net interest spread

3.57%

3.67%

3.66%

3.68%

3.62%

   Net interest margin

3.74%

3.84%

3.84%

3.86%

3.79%

   Return on average assets

0.96%

1.00%

0.91%

0.61%

0.92%

   Return on average equity

9.85%

9.98%

9.49%

6.24%

9.67%

   Efficiency ratio

64.51%

61.90%

66.17%

64.44%

61.74%

   Expense ratio

1.83%

1.69%

1.92%

1.88%

1.69%

Nine Months Ended

Sep. 30, 2013

Sep. 30, 2012

   Diluted earnings per share

$

1.88

$

1.74

   Dividends per share

$

0.75

$

0.75

   Yield on interest-earning assets (FTE)

4.33%

4.39%

   Cost of interest-bearing liabilities

0.70%

0.78%

   Net interest spread

3.63%

3.61%

   Net interest margin

3.81%

3.78%

   Return on average assets

0.96%

0.87%

   Return on average equity

9.78%

9.46%

   Efficiency ratio

64.18%

63.06%

   Expense ratio

1.81%

1.76%

Other financial data

Three Months Ended

Sep. 30, 2013

Jun. 30, 2013

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2012

   Book value per share

$

26.06

$

25.42

$

25.52

$

25.37

$

25.37

   Equity to assets

9.65%

9.74%

9.83%

9.80%

9.51%

   Allowance for loan losses to:

      Total loans

1.81%

1.78%

1.83%

2.02%

1.89%

      Non-accrual loans

1.37x

1.24x

0.85x

0.74x

0.65x

   Non-accrual loans to total loans

1.32%

1.44%

2.16%

2.73%

2.89%

   Non-performing assets to total assets

1.82%

2.03%

2.47%

2.94%

2.72%

 

SOURCE Fidelity D & D Bancorp, Inc.



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