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

7/27/17

DUNMORE, Pa., July 26, 2017 (GLOBE NEWSWIRE) -- 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 2ndquarter 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

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