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

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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