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

DUNMORE, Pa., Feb. 5, 2014 /PRNewswire/ -- Fidelity D & D Bancorp, Inc. (OTC Bulletin Board: FDBC), parent company of The Fidelity Deposit and Discount Bank, announced a 45% net income increase for the year ended December 31, 2013, with net income of $7.1 million, or $3.03 per share, compared to net income for the year ended December 31, 2012 of $4.9 million, or $2.14 per share.  This increase resulted primarily from recognizing a $2.9 million net gain ($1.9 million after tax, or $0.80 per share) on the sale of the Company's entire pooled trust preferred security portfolio, completed in late December.  The additional pretax increase in operating income was accomplished through $0.7 million lower provision for loan losses required and $0.2 million more net interest income, partially offset by the $0.3 million other real estate owned write-downs plus $0.2 million increases recorded within other expenses. Asset quality issues were further addressed through resolutions occurring throughout the loan portfolio and the liquidation of the pooled trust preferred security portfolio, with total non-performing assets down to 1.4% of total assets at December 31, 2013.

"Fidelity achieved record net income for 2013," stated Daniel J. Santaniello, President and Chief Executive Officer.  "In 2013, through our customer-centric approach, we grew our base of consumer and business customers, while achieving higher capital ratios.  The Company's strong balance sheet positions us to continue to deliver value to our key stakeholders as the regulatory and economic climate evolves."

Net income for the quarter ended December 31, 2013 was $2.7 million compared to $0.9 million for the same quarter of 2012.  The earnings per share for the quarter were $1.15 compared to $0.40 for the same prior year period.  The quarter increase resulted from the mentioned $2.9 million gain on the pooled trust preferred security portfolio sale.  Net interest income improved $0.1 million and provision for loan losses was down by $0.3 million, offset by the $0.2 million decrease in other income and $0.3 increase in other expenses from the other real estate owned write-downs during the fourth quarter of 2013 over the same 2012 period.

The Company's assets totaled $623.8 million at December 31, 2013, growth of $22.3 million, or 4%, from $601.5 million at December 31, 2012.  Asset growth occurred from the $44.6 million, or 11%, increase in loans partially funded by $9.6 million and $3.2 million reductions in loans held-for-sale and investment securities, respectively, plus utilizing $8.6 million of cash balances.  Total deposits increased $15.0 million, or 3%, and shareholders' equity grew $7.1 million, or 12%.  The Bank's regulatory capital ratios for the period ending December 31, 2013 were Total Risk Based Capital Ratio of 15.1%, Tier I Capital Ratio of 13.9% and Leverage Ratio of 10.3%.

Net interest income was $20.9 million for the year ended December 31, 2013, a 1% increase, or $245 thousand above the $20.6 million earned in 2012 achieved from efforts to mitigate margin pressure, by actively growing the loan portfolio and reducing non-performing assets, when operating during volatile economic conditions and uncertainties while interest rates remained at low levels.  As a result, net interest margin was maintained at 3.80% for 2013 and 2012.

Net interest income was $5.3 million for the quarter ended December 31, 2013, compared to the $5.2 million recorded during the same quarter of 2012.  The cost reductions on lower interest-bearing liabilities have leveled out that no longer offset the persistent effect low rates had on reducing earning-asset yields.  This 10 basis point reduction in spread was overcome by the non-interest bearing deposit growth achieved plus, more so, the larger loan portfolio to improve net interest income. As a result, net interest margin declined to 3.76% for the fourth quarter 2013, compared to 3.86% for same 2012 period.

The provision for loan losses was $2.6 million for the 2013 year, compared to $3.3 million required in 2012.  The efforts taken that resolved asset quality by addressing the migration of commercial credits to non-performing status, including reaching a resolution on several rated as substandard, and reducing non-accrual loans, necessitated the lower requirement to provision for loan losses by $700 thousand.

The provision for loan losses was $950 thousand for the fourth quarter of 2013 compared to the $1.3 million required for the fourth quarter of 2012.  Replenishing the allowance for loan losses from activity taken during the fourth quarter of 2013 required a lower level of provision for loan losses, stemming from less non-performing loans, when compared to the fourth quarter of 2012.

Workout efforts were successful to improve asset quality as the ratio of non-performing assets to total assets at December 31, 2013 was 1.44%, a 150 basis point decrease from 2.94% at December 31, 2012.  The ratio of non-accrual loans to total loans at December 31, 2013 decreased 155 basis-points to 1.18%.  Net charge-offs were $2.6 million in 2013 and $2.4 million in 2012.  The allowance for loan losses was 1.86% of total loans at December 31, 2013 down from 2.02% at December 31, 2012.

Total other income for the year ended December 31, 2013 was $10.5 million, compared to $7.8 million for the 2012 year.  This increase resulted primarily from recognizing a $2.9 million net gain on the sale of the entire pooled trust preferred security portfolio.   The additional  growth of $131 thousand more interchange transaction fees, $76 thousand additional deposit service charges and $59 thousand from higher financial service and trust activities plus $39 thousand of more net servicing fees, was more than offset by the $363 thousand fewer in gains on sold loans and $124 thousand less fees collected on loans.

Total other income recorded for the quarter ended December 31, 2013 was a $4.5 million compared with $1.9 million for the same quarter in 2012.   Again, this increase resulted primarily from recognizing a $2.9 million net gain on the sale of the entire pooled trust preferred security portfolio.   The $241 thousand fewer in gains on sold loans, occurring from the reduction in mortgage banking activity, pushed other income down during the fourth quarter of 2013 compared to the same 2012 quarter.

Total other operating expenses increased by $538 thousand, or 3%, to $19.1 million for the year ending December 31, 2013, compared to $18.6 million for the 2012 year. The reductions in occupancy and equipment expenses of $103 thousand, loan collection costs of $95 thousand and FDIC assessment of $41 thousand partially offset the increases of $290 thousand in other real estate costs, $259 thousand in additional salary and benefit expenses, $186 thousand of automated transaction processing expenses and $44 thousand more in advertising and marketing expenses throughout 2013.

Total other operating expenses increased $347 thousand, or 7%, to $5.0 million from $4.6 million for the quarters ending December 31, 2013 and 2012, respectively.  The other operating expenses primarily increased from $292 thousand additional other real estate costs recognized during the fourth quarter of 2013.

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 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;
  • 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;
  • the effects of the failure of the Federal government to reach an agreement to raise the debt ceiling or avoid sequester and the negative effects on economic or business conditions as a result;
  • 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 banking 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, 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;
  • volatility in the securities markets;
  • deteriorating 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:

December 31, 2013

December 31, 2012

Assets





   Total cash and cash equivalents

$

13,218

$

21,846

   Investment securities


97,423


100,730

   Federal Home Loan Bank Stock


2,640


2,624

   Loans and leases


479,061


444,101

   Allowance for loan losses


(8,928)


(8,972)

   Premises and equipment, net


13,602


14,127

   Life insurance cash surrender value


10,402


10,065

   Other assets


16,407


17,004






      Total assets

$

623,825

$

601,525






Liabilities





   Non-interest-bearing deposits

$

122,919

$

126,035

   Interest-bearing deposits


406,779


388,625

       Total deposits


529,698


514,660

   Short-term borrowings


8,642


8,056

   Long-term debt


16,000


16,000

   Other liabilities


3,425


3,863

      Total liabilities


557,765


542,579






   Shareholders' equity


66,060


58,946






      Total liabilities and shareholders' equity

$

623,825

$

601,525











Average Year-To-Date Balances:

December 31, 2013

December 31, 2012

Assets





   Total cash and cash equivalents

$

19,703

$

37,022

   Investment securities


103,563


112,712

   Loans and leases, net


452,898


418,287

   Premises and equipment, net


13,852


13,943

   Other assets


28,756


26,522






      Total assets

$

618,772

$

608,486






Liabilities





   Non-interest-bearing deposits

$

126,149

$

111,458

   Interest-bearing deposits


396,411


406,948

       Total deposits


522,560


518,406

   Short-term borrowings and long-term debt


31,524


29,794

   Other liabilities


3,803


3,390

      Total liabilities


557,887


551,590






   Shareholders' equity


60,885


56,896






      Total liabilities and shareholders' equity

$

618,772

$

608,486

 

FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Statements of Income

(dollars in thousands)




Three Months Ended


Twelve Months Ended




Dec. 31, 2013

Dec. 31, 2012

Dec. 31, 2013

Dec. 31, 2012



Interest income











    Loans and leases 

$

5,438

$

5,455

$

21,818

$

21,699



    Securities and other  


581


522


2,035


2,295














       Total interest income 


6,019


5,977


23,853


23,994














 Interest expense 











    Deposits 


530


553


2,081


2,439



    Borrowings and debt 


223


221


887


915














       Total interest expense 


753


774


2,968


3,354














       Net interest income 


5,266


5,203


20,885


20,640














    Provision for loan losses 


950


1,250


2,550


3,250



    OTTI - credit losses 


-


-


-


136



    Other income 


4,514


1,866


10,541


7,788



    Other expenses 


4,989


4,642


19,119


18,581



    Provision for income taxes 


1,131


248


2,635


1,559



       Net income 

$

2,710

$

929

$

7,122

$

4,902









































Three Months Ended



Dec. 31, 2013


Sep. 30, 2013


Jun. 30, 2013


Mar. 31, 2013


Dec. 31, 2012

Interest income











    Loans and leases 

$

5,438

$

5,455

$

5,456

$

5,469

$

5,455

    Securities and other  


581


499


456


499


522












       Total interest income 


6,019


5,954


5,912


5,968


5,977












 Interest expense 











    Deposits 


530


525


511


515


553

    Borrowings and debt 


223


223


221


220


221












       Total interest expense 


753


748


732


735


774












       Net interest income 


5,266


5,206


5,180


5,233


5,203












    Provision for loan losses 


950


450


600


550


1,250

    Other income 


4,514


1,908


2,051


2,068


1,866

    Other expenses 


4,989


4,644


4,606


4,880


4,642

    Provision for income taxes 


1,131


515


512


477


248























       Net income 

$

2,710

$

1,505

$

1,513

$

1,394

$

929

 

 

 FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)












At Period End:


Dec. 31, 2013


Sep. 30, 2013


Jun. 30, 2013


Mar. 31, 2013


Dec. 31, 2012

Assets











   Total cash and cash equivalents

$

13,218

$

35,885

$

15,266

$

20,730

$

21,846

   Investment securities


97,423


103,111


96,466


99,496


100,730

   Federal Home Loan Bank Stock


2,640


2,160


3,214


2,238


2,624

   Loans and leases


479,061


464,008


465,351


450,677


444,101

   Allowance for loan losses


(8,928)


(8,405)


(8,296)


(8,236)


(8,972)

   Premises and equipment, net


13,602


13,709


13,802


13,876


14,127

   Life insurance cash surrender value


10,402


10,316


10,231


10,146


10,065

   Other assets


16,407


19,510


19,141


19,244


17,004












      Total assets

$

623,825

$

640,294

$

615,175

$

608,171

$

601,525












Liabilities











   Non-interest-bearing deposits

$

122,919

$

134,114

$

127,268

$

122,855

$

126,035

   Interest-bearing deposits


406,779


410,716


392,255


391,611


388,625

       Total deposits


529,698


544,830


519,523


514,466


514,660

   Short-term borrowings


8,642


14,197


16,199


13,593


8,056

   Long-term debt


16,000


16,000


16,000


16,000


16,000

   Other liabilities


3,425


3,471


3,550


4,333


3,863

      Total liabilities


557,765


578,498


555,272


548,392


542,579












   Shareholders' equity


66,060


61,796


59,903


59,779


58,946












      Total liabilities and shareholders' equity

$

623,825

$

640,294

$

615,175

$

608,171

$

601,525























Average Quarterly Balances:


Dec. 31, 2013


Sep. 30, 2013


Jun. 30, 2013


Mar. 31, 2013


Dec. 31, 2012

Assets











   Total cash and cash equivalents

$

17,177

$

18,296

$

13,554

$

29,939

$

27,674

   Investment securities


104,729


102,617


102,335


104,582


107,021

   Loans and leases, net


462,528


456,479


450,684


441,632


426,040

   Premises and equipment, net


13,692


13,841


13,838


14,042


14,266

   Other assets


29,173


29,622


28,441


27,761


26,662












      Total assets

$

627,299

$

620,855

$

608,852

$

617,956

$

601,663












Liabilities











   Non-interest-bearing deposits

$

126,200

$

124,794

$

122,805

$

130,864

$

117,025

   Interest-bearing deposits


404,633


400,305


390,392


390,113


393,319

       Total deposits


530,833


525,099


513,197


520,977


510,344

   Short-term borrowings and long-term debt


30,058


31,263


31,199


33,616


28,527

   Other liabilities


3,848


3,892


3,657


3,811


3,549

      Total liabilities


564,739


560,254


548,053


558,404


542,420












   Shareholders' equity


62,560


60,601


60,799


59,552


59,243












      Total liabilities and shareholders' equity

$

627,299

$

620,855

$

608,852

$

617,956

$

601,663

 

 

FIDELITY D & D BANCORP, INC.

Selected Financial Ratios and Other Data














Three Months Ended



Dec. 31, 2013


Sep. 30, 2013


Jun. 30, 2013


Mar. 31, 2013


Dec. 31, 2012

Selected returns and financial ratios










   Basic earnings per share

$

1.15

$

0.64

$

0.64

$

0.60

$

0.40

   Diluted earnings per share

$

1.14

$

0.64

$

0.64

$

0.60

$

0.40

   Dividends per share

$

0.35

$

0.25

$

0.25

$

0.25

$

0.25

   Yield on interest-earning assets (FTE)


4.27%


4.26%


4.37%


4.36%


4.41%

   Cost of interest-bearing liabilities


0.69%


0.69%


0.70%


0.70%


0.73%

   Net interest spread


3.58%


3.57%


3.67%


3.66%


3.68%

   Net interest margin


3.76%


3.74%


3.84%


3.84%


3.86%

   Return on average assets


1.71%


0.96%


1.00%


0.91%


0.61%

   Return on average equity


17.19%


9.85%


9.98%


9.49%


6.24%

   Efficiency ratio


67.48%


64.51%


61.90%


66.17%


64.44%

   Expense ratio


2.02%


1.83%


1.69%


1.92%


1.88%














Twelve Months Ended









Dec. 31, 2013


Dec. 31, 2012







   Basic earnings per share

$

3.03

$

2.14







   Diluted earnings per share

$

3.02

$

2.14







   Dividends per share

$

1.10

$

1.00







   Yield on interest-earning assets (FTE)


4.31%


4.39%







   Cost of interest-bearing liabilities


0.69%


0.77%







   Net interest spread


3.62%


3.62%







   Net interest margin


3.80%


3.80%







   Return on average assets


1.15%


0.81%







   Return on average equity


11.70%


8.62%







   Efficiency ratio


64.99%


63.40%







   Expense ratio


1.87%


1.78%


















Other financial data





Dec. 31, 2013


Sep. 30, 2013


Jun. 30, 2013


Mar. 31, 2013


Dec. 31, 2012

   Book value per share

$

27.62

$

26.06

$

25.42

$

25.52

$

25.37

   Equity to assets


10.59%


9.65%


9.74%


9.83%


9.80%

   Allowance for loan losses to:










      Total loans


1.86%


1.81%


1.78%


1.83%


2.02%

      Non-accrual loans


1.58x


1.37x


1.24x


0.85x


0.74x

   Non-accrual loans to total loans


1.18%


1.32%


1.44%


2.16%


2.73%

   Non-performing assets to total assets


1.44%


1.82%


2.03%


2.47%


2.94%

SOURCE Fidelity D & D Bancorp, Inc.

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