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Fidelity D & D Bancorp, Inc. Reports Second Quarter 2017 Financial Results

DUNMORE, Pa., July 26, 2017 -- Fidelity D & D Bancorp, Inc. (OTC US:FDBC) and its banking subsidiary Fidelity Deposit and Discount Bank, announced net income for the quarter ended June 30, 2017 of $2.2 million, or $0.88 diluted earnings per share, compared to $1.9 million, or $0.79 diluted earnings per share, for the quarter ended June 30, 2016.  The $0.3 million, or 13%, improvement resulted from $81.3 million in quarterly average earning asset growth producing $0.9 million additional net interest income, which more than offset $0.7 million higher operating expenses.  The Company continued to increase interest-earning assets using core deposit growth, acquired branch deposits and utilizing borrowings.  Return on average assets (ROA) and return on average equity (ROE) were 1.04% and 10.49%, respectively, for the second quarter of 2017 and 1.03% and 9.80%, respectively, for the second quarter of 2016.

“We are very pleased with the 2nd quarter results and the continued growth in the Company’s performance,” stated Daniel J. Santaniello, President and Chief Executive Officer.  “The strong financial results continue to be a reflection of the Fidelity Banker’s commitment to building relationships and partnering with our clients to achieve their financial success.  During the 2nd quarter we increased deposits, loans, and revenue, while effectively managing expenses.”

Net income increased $0.5 million, or 15%, for the six months ended June 30, 2017 to $4.1 million from $3.6 million for the same 2016 period.  The year-to-date improvement resulted from earning $1.8 million higher revenue on a larger asset base which was partially offset by $1.1 million additional other expenses. Earnings per share on a diluted basis was $1.68 and $1.48 for the six months ended June 30, 2017 and 2016, respectively.

The Company’s total assets increased $62.5 million, or 8%, to $855.4 million at June 30, 2017 from $792.9 million at December 31, 2016.  This asset growth resulted primarily from $37.3 million net growth in the loan portfolio and a $23.4 million increase in securities along with an additional $8.3 million of bank owned life insurance.  Asset growth was funded by $30.2 million in additional short-term borrowings, $23.7 million of debt, $4.0 million more in deposits and $3.5 million higher shareholders' equity.  Despite a temporary non-interest bearing deposit of $48.7 million that inflated deposits at the end of 2016, deposit growth continued from the Company’s relationship strategy.

Net interest income was $7.0 million for the second quarter of 2017, a $0.9 million, or 15%, increase over the $6.1 million earned for the second quarter of 2016.  The net interest income growth stemmed from a larger average balance of interest-earning assets that generated better yields that offset the cost of utilized debt to fund them.  Although the Company had $47.6 million more in average borrowings and $23.0 million more in average interest-bearing deposits during the second quarter of 2017, the increase in costs wasn’t large enough to offset the higher yield earned on interest-earning assets which resulted in an improvement in both interest rate spread and margin.

Net interest income was $13.7 million for the six months ended June 30, 2017 compared to $12.3 million for the six months ended June 30, 2016.  The $1.4 million, or 12%, improvement was the result of earnings from a higher yielding larger average balance of interest-earning assets which offset higher interest expense paid on more average borrowings.  The loan portfolio generated the largest impact producing $1.2 million more in interest income from $61.5 million in higher average loan balances.  The investment portfolio also contributed $0.7 million in additional earnings, primarily from a larger average balance of higher-yielding mortgage-backed securities.  On the liability side, $57.0 million in additional interest-bearing liabilities resulted in $0.3 million more interest expense.  As a result of the higher earnings on a larger average portfolio of earning assets, net interest margin was 3.74% for the first half of 2017, or six basis points higher, than the 3.68% recorded for the first half of 2016.

The provision for loan losses was stable at $0.2 million for both the second quarters of 2017 and 2016.  For the six months ended June 30, 2017, the provision for loan losses was $0.5 million compared to $0.4 million for the same 2016 period.  The $0.1 million increase in the provision was primarily attributable to the growth in the loan portfolio during the first half of 2017.  The allowance for loan losses was 1.48% of total loans at June 30, 2017 compared to 1.64% of total loans at June 30, 2016.

Total other income was $2.1 million for both the second quarters of 2017 and 2016.  Increases of $0.1 million in trust income and $0.1 million in earnings on bank-owned life insurance were offset by decreases of $0.1 million in loan service charges and $0.1 million in fees from financial services.

Total other income recorded for the six months ended June 30, 2017 was $4.2 million, an increase of $0.4 million, or 12%, from the $3.8 million recorded for the six months ended June 30, 2016.  The increase in other income was comprised of the following: $0.1 million in gains on loan sales, $0.1 million in trust income, $0.1 million deposit service charges, $0.1 million in interchange fees, and $0.1 million earnings on bank-owned life insurance.  Partially offsetting these increases was $0.1 million less service charge income on loans.

Other expenses increased $0.7 million, or 13%, for the second quarter of 2017 to $6.1 million from $5.4 million for the second quarter of 2016.  The increase was primarily due to $0.3 million higher salaries and benefits, $0.1 million in additional professional services, and $0.1 million more expenses for premises and equipment.

Other expenses increased to $11.8 million for the six months ended June 30, 2017, an increase of $1.1 million from $10.7 million for the six months ended June 30, 2016.  Increases within this category included a $0.6 million increase in salaries and employee benefits expense, $0.2 million increase in premises and equipment expense, a $0.1 million increase in data processing expense, $0.1 million increase professional services expense and $0.1 million increase in automated transaction processing.  These increases were partially offset by a $0.1 million lower FDIC assessment.

Fidelity D & D Bancorp, Inc. has built a strong history as trusted advisors to the customers served by The Fidelity Deposit and Discount Bank, and is proud to be an active member of the community of Northeastern Pennsylvania.  The Company serves Lackawanna and Luzerne Counties through The Fidelity Deposit and Discount Bank’s 10 community banking office locations providing personal and business banking products and services, including wealth management assistance through fiduciary activities with the Bank’s full trust powers; as well as offering a full array of asset management services.  The Bank provides 24 hour, 7 day a week service to customers through branch offices, online at www.bankatfidelity.com, and through the Customer Care Center at 800-388-4380.  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 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 conditions 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 or changes in existing laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations promulgated there under;
  • impacts of the capital and liquidity requirements of the Basel III standards and other regulatory pronouncements, regulations and rules;
  • governmental monetary and fiscal policies, as well as legislative and regulatory changes;
  • effects of short- and long-term federal budget and tax negotiations and their effect on economic and business conditions;
  • 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;
  • the interruption or breach in security of our information systems and other technological risks and attacks resulting in failures or disruptions in customer account management, general ledger processing and loan or deposit updates and potential impacts resulting therefrom including additional costs, reputational damage, regulatory penalties, and financial losses;
  • 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;
  • acts of war or terrorism;
  • disruption of credit and equity markets; and
  • the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

The Company cautions readers not to place undue reliance on forward-looking statements, which reflect analyses only as of the date of this release.  The Company has no obligation to update any forward-looking statements to reflect events or circumstances after the date of this release.

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:June 30, 2017 December 31, 2016
Assets     
Total cash and cash equivalents$ 14,877  $25,843 
Investment securities  153,405   130,037 
Federal Home Loan Bank stock  4,028   2,606 
Loans and leases  637,710   600,348 
Allowance for loan losses  (9,406)  (9,364)
Premises and equipment, net  16,833   17,164 
Life insurance cash surrender value  19,699   11,435 
Other assets  18,322   14,875 
      
Total assets$ 855,468  $792,944 
      
Liabilities     
Non-interest-bearing deposits$ 174,909  $211,153 
Interest-bearing deposits  532,526   492,306 
Total deposits  707,435   703,459 
Short-term borrowings  34,455   4,223 
Long-term debt  23,704   - 
Other liabilities  5,738   4,631 
Total liabilities  771,332   712,313 
      
Shareholders' equity  84,136   80,631 
      
Total liabilities and shareholders' equity  $ 855,468  $792,944 
      
      
Average Year-To-Date Balances:June 30, 2017 December 31, 2016
Assets     
Total cash and cash equivalents$ 13,872  $23,801 
Investment securities  154,059   129,679 
Loans and leases, net  612,013   559,538 
Premises and equipment, net  17,034   16,584 
Other assets  33,105   26,244 
      
Total assets$ 830,083  $755,846 
      
Liabilities     
Non-interest-bearing deposits$ 164,103  $152,826 
Interest-bearing deposits  522,715   505,079 
Total deposits  686,818   657,905 
Short-term borrowings and long-term debt  55,225   13,044 
Other liabilities  5,553   5,120 
Total liabilities  747,596   676,069 
      
Shareholders' equity  82,487   79,777 
      
Total liabilities and shareholders' equity$       830,083  $755,846 
      


 
FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Statements of Income
(dollars in thousands)
 
  Three Months Ended Six Months Ended  
  Jun. 30, 2017 Jun. 30, 2016 Jun. 30, 2017 Jun. 30, 2016  
Interest income          
Loans and leases$ 6,783 $5,989 $ 13,153 $11,995   
Securities and other  1,071  726   2,067  1,456   
           
Total interest income  7,854  6,715   15,220  13,451   
           
Interest expense          
Deposits  643  567   1,229  1,147   
Borrowings and debt  144  7   246  25   
           
Total interest expense  787  574   1,475  1,172   
           
Net interest income  7,067  6,141   13,745  12,279   
           
Provision for loan losses  (225) (275)  (550) (425)  
Other income  2,131  2,100   4,236  3,787   
Other expenses  (6,051) (5,369)  (11,848) (10,757)  
Provision for income taxes    (739) (669)  (1,420) (1,255)  
Net income$ 2,183 $1,928 $ 4,163 $3,629   
           
           
           
           
 Three Months Ended
  Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016
Interest income          
Loans and leases$ 6,783 $6,370 $6,212 $6,155 $5,989 
Securities and other  1,071  996  826  851  726 
           
Total interest income  7,854  7,366  7,038  7,006  6,715 
           
Interest expense          
Deposits  643  586  582  580  567 
Borrowings and debt  144  102  19  5  7 
           
Total interest expense  787  688  601  585  574 
           
Net interest income  7,067  6,678  6,437  6,421  6,141 
           
Provision for loan losses  (225) (325) (375) (225) (275)
Other income  2,131  2,105  2,194  2,024  2,100 
Other expenses  (6,051) (5,797) (5,489) (5,409) (5,369)
Provision for income taxes  (739) (681) (738) (776) (669)
Net income$ 2,183 $1,980 $2,029 $2,035 $1,928 
           


 
FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)
           
At Period End: Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016
Assets          
Total cash and cash equivalents$ 14,877 $29,116 $25,843 $31,440 $27,853 
Investment securities  153,405  154,223  130,037  128,765  129,760 
Federal Home Loan Bank stock  4,028  2,467  2,606  1,201  1,140 
Loans and leases  637,710  623,130  600,348  573,898  562,758 
Allowance for loan losses  (9,406) (9,548) (9,364) (9,196) (9,207)
Premises and equipment, net  16,833  17,026  17,164  16,497  16,455 
Life insurance cash surrender value  19,699  19,542  11,435  11,346  11,257 
Other assets  18,322  16,730  14,875  16,472  16,460 
           
Total assets$ 855,468 $852,686 $792,944 $770,423 $756,476 
           
Liabilities          
Non-interest-bearing deposits$ 174,909 $190,482 $211,153 $160,129 $157,776 
Interest-bearing deposits  532,526  543,444  492,306  511,678  505,524 
Total deposits  707,435  733,926  703,459  671,807  663,300 
Short-term borrowings  34,455  14,699  4,223  10,996  7,258 
Long-term debt  23,704  17,000  -  -  - 
Other liabilities  5,738  4,868  4,631  6,061  5,522 
Total liabilities  771,332  770,493  712,313  688,864  676,080 
           
Shareholders' equity  84,136  82,193  80,631  81,559  80,396 
           
Total liabilities and shareholders' equity  $ 855,468 $852,686 $792,944 $770,423 $756,476 
           
           
Average Quarterly Balances: Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016
Assets          
Total cash and cash equivalents$ 13,221 $14,529 $16,435 $21,166 $28,753 
Investment securities  158,443  149,627  130,971  130,301  129,604 
Loans and leases, net  620,850  603,078  574,283  562,429  553,212 
Premises and equipment, net  16,946  17,124  16,780  16,468  16,445 
Other assets  36,447  29,725  26,651  26,594  26,347 
           
Total assets$ 845,907 $814,083 $765,120 $756,958 $754,361 
           
Liabilities          
Non-interest-bearing deposits$ 163,869 $164,340 $162,065 $155,516 $148,703 
Interest-bearing deposits  535,697  509,588  499,087  505,673  512,695 
Total deposits  699,566  673,928  661,152  661,189  661,398 
Short-term borrowings and long-term debt  57,283  53,145  16,606  9,266  9,162 
Other liabilities  5,603  5,501  5,950  5,409  4,713 
Total liabilities  762,452  732,574  683,708  675,864  675,273 
           
Shareholders' equity  83,455  81,509  81,412  81,094  79,088 
           
Total liabilities and shareholders' equity$ 845,907 $814,083 $765,120 $756,958 $754,361 
           


 
FIDELITY D & D BANCORP, INC.
Selected Financial Ratios and Other Data
           
  Three Months Ended
  Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016
Selected returns and financial ratios          
Basic earnings per share$ 0.89 $0.80 $0.83 $0.83 $0.79 
Diluted earnings per share$ 0.88 $0.80 $0.83 $0.82 $0.79 
Dividends per share$ 0.31 $0.31 $0.39 $0.29 $0.29 
Yield on interest-earning assets (FTE)   4.17% 4.08% 4.07% 4.11% 3.99%
Cost of interest-bearing liabilities 0.53% 0.50% 0.46% 0.45% 0.44%
Net interest spread 3.64% 3.58% 3.61% 3.66% 3.55%
Net interest margin 3.77% 3.72% 3.73% 3.78% 3.66%
Return on average assets 1.04% 0.99% 1.06% 1.07% 1.03%
Return on average equity 10.49% 9.85% 9.92% 9.99% 9.80%
Efficiency ratio 62.10%      64.33%       61.23%       61.85%       63.09%
Expense ratio 1.80% 1.88% 1.69% 1.77% 1.75%
           
  Six Months Ended      
  Jun. 30, 2017 Jun. 30, 2016      
Basic earnings per share$ 1.69 $1.48       
Diluted earnings per share$ 1.68 $1.48       
Dividends per share$ 0.62 $0.56       
Yield on interest-earning assets (FTE) 4.13% 4.01%      
Cost of interest-bearing liabilities 0.51% 0.45%      
Net interest spread 3.62% 3.56%      
Net interest margin 3.74% 3.68%      
Return on average assets 1.01% 0.97%      
Return on average equity 10.18% 9.32%      
Efficiency ratio       63.17% 64.75%      
Expense ratio 1.83% 1.87%      
           
Other financial data At period end:
  Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016 Jun. 30, 2016
Book value per share$ 34.06 $33.27 $32.86 $33.24 $32.76 
Equity to assets   9.84% 9.64% 10.17% 10.59% 10.63%
Allowance for loan losses to:          
Total loans 1.48% 1.54% 1.57% 1.61% 1.64%
Non-accrual loans 1.44x  1.22x  1.27x  1.57x  1.56x 
Non-accrual loans to total loans 1.02% 1.26% 1.23% 1.02% 1.05%
Non-performing assets to total assets 1.06% 1.28% 1.33% 1.32% 1.37%
Net charge-offs to average total loans 0.16% 0.09% 0.21% 0.23% 0.27%

 

Contacts:

Daniel J. Santaniello
President and Chief Executive Officer
570-504-8035

Salvatore R. DeFrancesco, Jr.
Treasurer and Chief Financial Officer
570-504-8000

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