Fidelity D & D Bancorp, Inc. Second Quarter 2010 Financial Results

DUNMORE, Pa., July 28 /PRNewswire-FirstCall/ -- 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, 2010 of $719,000, despite the pre-tax $676,000 other-than-temporary impairment charges, compared to $912,000 for the same quarter of 2009 with no impairment charge required.  Earnings per share on a diluted basis for the quarter were $0.34 and $0.44 for the three months ended June 30, 2010 and 2009, respectively.

The Company's assets grew $23,253,000, or 4%, to total $579,270,000 at June 30, 2010 from $556,017,000 at December 31, 2009.  The 2010 growth resulted from a 5% increase in deposits totaling $21,932,000.   Deposit growth principally took place in traditional deposit activities including non-interest-bearing checking and interest-bearing checking, savings and club accounts.

Net interest income increased 10% to $5,217,000 for the quarter ended June 30, 2010 from $4,741,000 recorded during the same quarter of 2009.  The cost reduction from lowering rates on interest bearing liabilities exceeded the effect the current interest rate environment had on lowering earning asset yields.  As a result, net interest income increased $477,000 in the second quarter of 2010.  This increase pushed the net interest margin to 3.92% for the second quarter of 2010, compared to 3.70% for same 2009 period.

Net income for the six months ended June 30, 2010 was $1,275,000 compared to net income of $1,737,000 for the same 2009 period. Pre-tax earnings improvement visibly occurred in the current year-to-date period, aside from the additional $429,000 other-than-temporary impairment charges, $398,000 retirement and severance costs and $200,000 additional credit collection expenses incurred, over the prior year period.  Earnings per share were $0.60 and $0.84 for the six months ended June 30, 2010 and 2009, respectively.

Net interest income increased $811,000, or 8%, to $10,376,000 for the six months ended June 30, 2010 from $9,565,000 recorded during the same period of 2009.  Net interest margin was 3.91% during the first half of 2010 compared to 3.71% during the first half of 2009.

"As current economic conditions test and challenge the financial services sector, the Bank continues to demonstrate strength with quarterly earnings above the prior first quarter results, all during a period of ongoing stress. For the quarter ending June 30th, the Bank increased low cost core deposits.  As a result, net interest income grew 10% for the quarter ending June 30th vs. the same period year ago," stated Patrick J. Dempsey, Chairman of the Board.  "With the development and continued execution of a strong customer marketing program, the Company's assets increased 4% to over $579 million at June 30, 2010.  Over the past six months, one of the areas of strength for Fidelity has been the growth in new households…even though the overall market has been flat.  Through Fidelity's commitment to meet its customer's financial needs and adhere to sound banking practices, Fidelity Bank remains strong and in a positive growth mode."

The provision for loan loss was $300,000 for both the second quarter ending June 30, 2010 and 2009.  Provision for loan loss was $875,000 for the six months ending June 30, 2010, as compared to a $725,000 requirement for the same 2009 period.  The allowance for loan losses was 1.76% of total loans at June 30, 2010, up from 1.22% at June 30, 2009.

Total other income recorded for the quarter ended June 30, 2010 was $640,000 compared with $1,458,000 for the same quarter in 2009.  The decrease in other income was primarily due to the $676,000 other-than-temporary impairment on two pooled trust preferred securities in the quarter ended June 30, 2010. The impairment charge recognized represents the expected credit loss on these two securities.   In the event further interest deferrals and defaults occur within the trust preferred portfolio, additional other-than-temporary impairment credit losses could be recognized through future earnings.  Excluding the impairment charge, other noninterest income was $1,316,000 for the quarter ended June 30, 2010.  Furthermore, mortgage banking produced $198,000 less revenue recorded during the second quarter of 2010 from less loan demand which tapered back toward normal levels when compared to mortgage loans sold during the second quarter in 2009.

Total other income for the six months ended June 30, 2010 was $1,786,000, compared to $2,772,000 for the same period in 2009.  The decrease for the comparative period resulted primarily from fewer mortgage sales processed, which in-turn reduced total gains realized by $590,000.  In addition, the Company recognized an additional $429,000 of other-than-temporary impairment charges for the six months ended June 30, 2010 compared to the same 2009 period.

Total other operating expenses were $4,694,000, down modestly, compared to $4,739,000 for the quarters ending June 30, 2010 and 2009, respectively.  The other operating expenses declined from $190,000 salary and benefit savings that offset the added $151,000 collection costs incurred during the second quarter.

Total other operating expenses increased 4% to $9,799,000 for the six months ending June 30, 2010 from $9,401,000 for the same 2009 period. The operating expense increase resulted from $398,000 in early retirement and severance costs, $200,000 of additional collection costs, $177,000 of less costs deferred on lower mortgage originations and $97,000 in added legal and professional fees incurred in the 2010 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.

SOURCE Fidelity D & D Bancorp, Inc.