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CST: 05/04/2020 11:57:49   

Fidelity D & D Bancorp, Inc. Reports Third Quarter 2019 Financial Results

165 Days ago

DUNMORE, Pa., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Fidelity D & D Bancorp, Inc. (NASDAQ: FDBC) and its banking subsidiary Fidelity Deposit and Discount Bank, announced net income for the quarter ended September 30, 2019 of $3.1 million, or $0.80 diluted earnings per share, compared to $2.9 million, or $0.75 diluted earnings per share, for the quarter ended September 30, 2018.  The $0.2 million, or 7%, growth in net income resulted primarily from $0.3 million higher net interest income combined with a $0.3 million increase in non-interest income and $0.1 million lower provision for loan losses, partially offset by a $0.5 million increase in operating expenses.  The Company experienced a $50.1 million, or 6%, increase in average interest-earning assets funded by a $70.8 million increase in average deposits and a $13.3 million increase in average shareholders’ equity partially offset by $24.8 million less in average borrowings for the third quarter of 2019 compared to the same 2018 period.  Return on average assets (ROA) and return on average equity (ROE) were 1.22% and 11.77%, respectively, for the third quarter of 2019 and 1.22% and 12.65%, respectively, for the third quarter of 2018.

“We are very pleased that third quarter and 2019 year-to-date financial results posted record net income,” stated Daniel J. Santaniello, President and Chief Executive Officer.  “Additionally, for the first time in the Company’s history, total assets exceeded $1 billion.  The continued asset growth and record earnings reflect the Fidelity Bankers’ commitment to building relationships and partnering with our clients to achieve financial success.  We continue to increase deposits, loans, and non-interest income, while effectively managing expenses.”

Net income increased $0.7 million, or 9%, for the nine months ended September 30, 2019 to $8.9 million from $8.2 million for the same 2018 period.  The year-to-date increase was primarily driven by 6% higher total revenue from a $1.2 million increase in net interest income and $0.6 million more non-interest income.  The 5% increase in net interest income was the result of $62.7 million growth in average interest-earning assets.  This total revenue growth combined with a $0.3 million lower provision for loan losses more than offset $1.3 million in additional non-interest expenses.  Earnings per share on a diluted basis were $2.32 and $2.15 for the nine months ended September 30, 2019 and 2018, respectively.

Consolidated Third Quarter Operating Results Overview

Net interest income was $8.0 million for the third quarter of 2019, a $0.3 million, or 4%, increase over the $7.7 million earned for the third quarter of 2018.  The net interest income growth resulted from a $50.1 million larger average balance of interest-earning assets that generated a 20 basis point higher fully-taxable equivalent (FTE) yield which increased interest income by $1.0 million.  The loan portfolio had the biggest impact, producing a $0.7 million increase in interest income from a $30.7 million higher average balance and a 20 basis point higher yield with all portfolios contributing to the increase.  The investment portfolio benefited from the Company investing $19.5 million more, on average, in mortgage backed securities and municipal securities which caused interest income on investments to increase $0.1 million.  Partially offsetting this interest income growth, interest expense increased $0.7 million.  The average balance of interest-bearing deposits increased $76.2 million and the rates paid on these deposits increased 36 basis points resulting in $0.7 million in additional interest expense.  The cost of interest-bearing liabilities was 1.17% for the third quarter of 2019, an increase of 34 basis points over the 0.83% paid for the third quarter of 2018.  The Company’s FTE net interest spread was 3.18% for the third quarter of 2019, or 14 basis points lower than the 3.32% recorded for the same 2018 quarter.  The decrease was due to the rates paid on interest-bearing liabilities increasing faster than the yields earned on interest-earning assets.  The cost of funds increased 28 basis points despite a 34 basis point higher rate paid on interest-bearing liabilities.  The Company’s FTE net interest margin decreased by seven basis points to 3.49% for the three months ended September 30, 2019 from 3.56% for the same 2018 period.

The provision for loan losses was $320 thousand for the third quarter of 2019, a $80 thousand decrease compared to $400 thousand for the third quarter of 2018.  The decrease in the provision for loan losses from the third quarter of 2018 was due primarily to a deceleration in the Company’s loan growth along with improved asset quality when compared to the third quarter of 2019.

Total other income increased $0.3 million to $2.6 million for the third quarter of 2019 compared to $2.3 million for the third quarter of 2018.  The increase in other income was primarily due to $0.2 million higher service charges on loans and a $0.1 million increase in financial service fees during the third quarter of 2019 compared to the same 2018 period. 

Other expenses increased $0.5 million, or 8%, for the third quarter of 2019 to $6.6 million from $6.1 million for the same 2018 quarter.  Most of the increase was due to $0.2 million in added salaries and employee benefits, $0.1 million more data processing and communication expense, $0.1 million in additional premises and equipment expense due to a new branch which opened in December of 2018 and $0.1 million in additional professional service expenses.

Consolidated Year-To-Date Operating Results Overview

Net interest income was $23.7 million for the nine months ended September 30, 2019 compared to $22.5 million for the nine months ended September 30, 2018.  The $1.2 million, or 5%, improvement was the result of earnings from a larger average balance of higher-yielding interest-earning assets which more than offset the increased interest expense from higher rates paid on more interest-bearing liabilities.  The loan portfolio caused the largest impact, producing $2.9 million more in interest income, of which $1.6 million was the result of higher average loan balances and $1.3 million stemmed from higher yields earned on loans.  The investment portfolio contributed $0.5 million in additional earnings, primarily from a higher yield on a larger mortgage-backed securities portfolio.  On the liability side, interest expense increased by $2.4 million primarily due to higher rates paid on $48.7 million more interest-bearing deposits.  A larger average balance of borrowings at higher rates also contributed $0.6 million in additional interest expense.  FTE net interest spread was 3.25% for the first nine months of 2019, or 17 basis points lower than the 3.42% recorded for the first nine months of 2018.  The rates paid on interest-bearing liabilities rose faster than the yields earned on interest-earning assets, which reduced the spread.  Over the same time period, the Company’s FTE net interest margin decreased by six basis points to 3.55% from 3.61%.

For the nine months ended September 30, 2019, the provision for loan losses was $0.8 million compared to $1.1 million for the same 2018 period.  The $0.3 million reduction in the provision was due to deceleration in the Company’s loan growth during 2019 along with improved asset quality when compared to the same 2018 period.

Total other income for the nine months ended September 30, 2019 was $7.5 million, an increase of $0.6 million, or 9%, from $6.9 million for the nine months ended September 30, 2018.  The increase in other income was comprised of the following: $0.4 million in loan service charges, $0.1 million in interchange fees and $0.2 million in financial service fees.

Other expenses increased to $19.8 million, for the nine months ended September 30, 2019, an increase of $1.3 million, or 7%, from $18.5 million for the nine months ended September 30, 2018.  The largest driver of this increase was a $0.7 million increase in salaries and employee benefits expense.  In addition, there was $0.3 million in additional premises and equipment expenses, a $0.3 million increase in data processing expense and $0.1 million more loan collection expenses.  These increases were partially offset by $0.3 million lower professional service expenses.

Consolidated Balance Sheet & Asset Quality Overview

During the third quarter of 2019, the Company’s total assets grew to over $1 billion for the first time.  The Company’s total assets increased $30.3 million, or 3%, to $1,011.4 million at September 30, 2019 from $981.1 million at December 31, 2018.  This asset growth resulted primarily from a $16.7 million increase in the loan portfolio and $6.4 million increase in the investment portfolio.  Deposit growth of $82.1 million was used to pay down $68.7 million in borrowings and fund loan growth.  The Company will focus on increasing assets using its relationship management strategy to grow loans and deposits and achieve profitable returns.  The Company has begun its Luzerne County expansion plans, opening the Back Mountain branch in December 2018 and the Mountain Top branch in October 2019.

Total non-performing assets were $5.5 million, or 0.55% of total assets, at September 30, 2019.  Non-performing assets decreased $0.8 million from December 31, 2018, as a $0.9 million decrease in troubled debt restructured loans and a $0.4 million decrease in non-performing loans was partially offset by a $0.5 million increase in other real estate owned.  Net charge-offs to average total loans increased to 0.21% at September 30, 2019 compared to 0.13% at December 31, 2018.

During the first nine months of 2019, the Company purchased an additional $2.0 million of bank-owned life insurance for tax-free income to mitigate added employee benefit costs.  On January 1, 2019, the Company recognized right-of-use assets and lease liabilities for leases classified as operating leases as it transitioned to ASU 2016-02, Leases (Topic 842).  At September 30, 2019, the right-of-use assets and operating lease liabilities amounted to $5.5 million and $6.1 million, respectively.

Shareholders’ equity increased $11.2 million, or 12%, to $104.8 million at September 30, 2019 from $93.6 million at December 31, 2018.  Net income of $8.9 million was supplemented by a $4.5 million, after tax, improvement in net unrealized gains from the investment portfolio.  An additional $0.9 million recorded from the issuance of common stock under the Company’s stock plans and stock-based compensation, was offset by $3.0 million in cash dividends paid to shareholders.  The Company remains well capitalized and is positioned for continued growth with total shareholders’ equity at 10.36% of total assets at September 30, 2019.  Book value per share was $27.71 at September 30, 2019 compared to $24.89 at December 31, 2018.

Fidelity D & D Bancorp, Inc. has built a strong history as trusted financial advisors to the clients served by The Fidelity Deposit and Discount Bank and is proud to be an active member of the community of Northeastern Pennsylvania.  Part of the Bank’s mission is to be a good corporate partner within its market areas by providing over 1,600 hours of volunteer time to non-profit organizations yearly.  The Company serves multiple office locations throughout Lackawanna and Luzerne Counties providing personal and business banking products and services, including wealth management planning 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 Tax Cuts and Jobs Act and 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.

Contacts:

Daniel J. Santaniello Salvatore R. DeFrancesco, Jr.
President and Chief Executive Officer Treasurer and Chief Financial Officer
570-504-8035 570-504-8000

FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)

         
         
At Period End: September 30, 2019
  December 31, 2018  
Assets        
Cash and cash equivalents $  18,687   $  17,485  
Investment securities    189,246      182,810  
Federal Home Loan Bank stock    3,818      6,339  
Loans and leases    750,470      733,771  
Allowance for loan losses    (9,441 )    (9,747 )
Premises and equipment, net    18,149      18,289  
Life insurance cash surrender value    23,094      20,615  
Other assets    17,401      11,540  
         
Total assets $  1,011,424   $  981,102  
         
Liabilities        
Non-interest-bearing deposits $  203,816   $  194,731  
Interest-bearing deposits    648,506      575,452  
Total deposits    852,322      770,183  
Short-term borrowings    24,355      76,366  
FHLB advances    15,000      31,704  
Other liabilities    14,958      9,292  
Total liabilities    906,635      887,545  
         
Shareholders' equity    104,789      93,557  
         
Total liabilities and shareholders' equity $  1,011,424   $  981,102  
         
         
Average Year-To-Date Balances: September 30, 2019
  December 31, 2018  
Assets        
Cash and cash equivalents $  15,470   $  18,639  
Investment securities    189,319      172,085  
Loans and leases, net    714,243      678,217  
Premises and equipment, net    18,311      16,389  
Other assets    38,259      32,612  
         
Total assets $  975,602   $  917,942  
         
Liabilities        
Non-interest-bearing deposits $  195,757   $  196,790  
Interest-bearing deposits    610,636      564,763  
Total deposits    806,393      761,553  
Short-term borrowings    37,968      37,558  
FHLB advances    19,109      22,109  
Other liabilities    13,094      7,697  
Total liabilities    876,564      828,917  
         
Shareholders' equity    99,038      89,025  
         
Total liabilities and shareholders' equity $  975,602   $  917,942  


FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Statements of Income
(dollars in thousands)

                     
    Three Months Ended   Nine Months Ended    
    Sep. 30, 2019   Sep. 30, 2018   Sep. 30, 2019   Sep. 30, 2018    
Interest income                    
Loans and leases $  8,499    $  7,779   $  24,850   $  21,940      
Securities and other    1,509      1,249      4,470      3,766      
                     
Total interest income    10,008      9,028      29,320      25,706      
                     
Interest expense                    
Deposits    1,683      981      4,489      2,671      
Borrowings and debt    325      336      1,127      542      
                     
Total interest expense    2,008      1,317      5,616      3,213      
                     
Net interest income    8,000      7,711      23,704      22,493      
                     
Provision for loan losses    (320 )    (400 )    (830 )    (1,125 )    
Other income    2,632      2,283      7,578      6,937      
Other expenses    (6,643 )    (6,172 )    (19,848 )    (18,542 )    
                     
Income before income taxes    3,669      3,422      10,604      9,763      
                     
Provision for income taxes    (611 )    (559 )    (1,742 )    (1,604 )    
Net income $  3,058    $  2,863   $  8,862   $  8,159      
                     
                     
                     
  Three Months Ended
    Sep. 30, 2019   Jun. 30, 2019   Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018
Interest income                    
Loans and leases $  8,499   $  8,193   $  8,158   $  8,173   $  7,779  
Securities and other    1,509      1,464      1,497      1,451      1,249  
                     
Total interest income    10,008      9,657      9,655      9,624      9,028  
                     
Interest expense                    
Deposits    1,683      1,474      1,331      1,140      981  
Borrowings and debt    325      389      414      520      336  
                     
Total interest expense    2,008      1,863      1,745      1,660      1,317  
                     
Net interest income    8,000      7,794      7,910      7,964      7,711  
                     
Provision for loan losses    (320 )    (255 )    (255 )    (325 )    (400 )
Other income    2,632      2,489      2,457      2,263      2,283  
Other expenses    (6,643 )    (6,435 )    (6,770 )    (6,530 )    (6,172 )
                     
Income before income taxes    3,669      3,593      3,342      3,372      3,422  
                     
Provision for income taxes    (611 )    (591 )    (540 )    (525 )    (559 )
Net income $  3,058   $  3,002   $  2,802   $  2,847   $  2,863  


FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)

At Period End:   Sep. 30, 2019   Jun. 30, 2019   Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018
Assets                    
Cash and cash equivalents $  18,687   $  19,190   $  15,310   $  17,485   $  16,944  
Investment securities    189,246      189,899      182,496      182,810      171,451  
Federal Home Loan Bank stock    3,818      4,396      3,663      6,339      4,717  
Loans and leases    750,470      735,685      713,761      733,771      715,413  
Allowance for loan losses    (9,441 )    (9,495 )    (9,522 )    (9,747 )    (9,944 )
Premises and equipment, net    18,149      18,353      18,186      18,289      16,204  
Life insurance cash surrender value    23,094      22,926      22,761      20,615      20,464  
Other assets    17,401      16,085      17,565      11,540      14,605  
                     
Total assets $  1,011,424   $  997,039   $  964,220   $  981,102   $  949,854  
                     
Liabilities                    
Non-interest-bearing deposits $  203,816   $  215,973   $  230,610   $  194,731   $  206,588  
Interest-bearing deposits    648,506      623,650      594,675      575,452      572,473  
Total deposits    852,322      839,623      825,285      770,183      779,061  
Short-term borrowings    24,355      29,105      5,906      76,366      40,269  
FHLB advances    15,000      15,000      21,704      31,704      31,704  
Other liabilities    14,958      11,885      13,583      9,292      8,768  
Total liabilities    906,635      895,613      866,478      887,545      859,802  
                     
Shareholders' equity    104,789      101,426      97,742      93,557      90,052  
                     
Total liabilities and shareholders' equity $  1,011,424   $  997,039   $  964,220   $  981,102   $  949,854  
                     
                     
Average Quarterly Balances:   Sep. 30, 2019   Jun. 30, 2019   Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018
Assets                    
Cash and cash equivalents $  15,357   $  14,518   $  16,548   $  14,682   $  14,597  
Investment securities    194,125      189,704      184,017      183,548      169,280  
Loans and leases, net    727,441      704,748      710,351      715,974      696,678  
Premises and equipment, net    18,288      18,362      18,281      16,499      16,257  
Other assets    40,008      38,135      36,598      33,921      33,123  
                     
Total assets $  995,219   $  965,467   $  965,795   $  964,624   $  929,935  
                     
Liabilities                    
Non-interest-bearing deposits $  198,188   $  193,702   $  195,349   $  200,936   $  203,530  
Interest-bearing deposits    630,810      602,161      598,582      573,211      554,652  
Total deposits    828,998      795,863      793,931      774,147      758,182  
Short-term borrowings    34,096      39,291      40,587      59,289      55,141  
FHLB advances    15,000      18,831      23,593      31,704      18,725  
Other liabilities    14,008      12,477      12,783      8,625      8,077  
Total liabilities    892,102      866,462      870,894      873,765      840,125  
                     
Shareholders' equity    103,117      99,005      94,901      90,859      89,810  
                     
Total liabilities and shareholders' equity $  995,219   $  965,467   $  965,795   $  964,624   $  929,935  


FIDELITY D & D BANCORP, INC.
Selected Financial Ratios and Other Data

                     
                     
    Three Months Ended
    Sep. 30, 2019   Jun. 30, 2019   Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018
Selected returns and financial ratios                    
Basic earnings per share $  0.82   $  0.79   $  0.74   $  0.76   $  0.76  
Diluted earnings per share $  0.80   $  0.79   $  0.73   $  0.75   $  0.75  
Dividends per share $  0.26   $  0.26   $  0.26   $  0.26   $  0.24  
Yield on interest-earning assets (FTE)*   4.35 %   4.36 %   4.40 %   4.26 %   4.15 %
Cost of interest-bearing liabilities   1.17 %   1.13 %   1.07 %   0.99 %   0.83 %
Cost of funds   0.91 %   0.88 %   0.82 %   0.76 %   0.63 %
Net interest spread (FTE)*   3.18 %   3.23 %   3.33 %   3.27 %   3.32 %
Net interest margin (FTE)*   3.49 %   3.54 %   3.62 %   3.54 %   3.56 %
Return on average assets   1.22 %   1.25 %   1.18 %   1.17 %   1.22 %
Return on average equity   11.77 %   12.16 %   11.98 %   12.43 %   12.65 %
Efficiency ratio (FTE)*   61.41 %   61.47 %   64.15 %   62.66 %   60.65 %
Expense ratio   1.60 %   1.64 %   1.81 %   1.76 %   1.66 %
                     
                     
    Nine Months Ended            
    Sep. 30, 2019   Sep. 30, 2018            
Basic earnings per share $  2.35   $  2.17              
Diluted earnings per share $  2.32   $  2.15              
Dividends per share $  0.78   $  0.72              
Yield on interest-earning assets (FTE)*   4.37 %   4.12 %            
Cost of interest-bearing liabilities   1.12 %   0.70 %            
Cost of funds   0.87 %   0.53 %            
Net interest spread (FTE)*   3.25 %   3.42 %            
Net interest margin (FTE)*   3.55 %   3.61 %            
Return on average assets   1.21 %   1.21 %            
Return on average equity   11.96 %   12.34 %            
Efficiency ratio (FTE)*   62.34 %   61.91 %            
Expense ratio   1.68 %   1.72 %            
                     
Other financial data   At period end:
(dollars in thousands except per share data)   Sep. 30, 2019   Jun. 30, 2019   Mar. 31, 2019   Dec. 31, 2018   Sep. 30, 2018
Interest income adjustment to FTE* $  186   $  185   $  187   $  196   $  182  
Book value per share $  27.71   $  26.82   $  25.85   $  24.89   $  23.97  
Equity to assets   10.36 %   10.17 %   10.14 %   9.54 %   9.48 %
Allowance for loan losses to:                    
Total loans   1.26 %   1.29 %   1.34 %   1.34 %   1.40 %
Non-accrual loans   2.45 x   2.31 x   2.54 x   2.27 x   2.63 x
Non-accrual loans to total loans   0.51 %   0.56 %   0.53 %   0.59 %   0.53 %
Non-performing assets to total assets   0.55 %   0.62 %   0.62 %   0.64 %   0.65 %
Net charge-offs to average total loans   0.21 %   0.21 %   0.27 %   0.13 %   0.07 %
                     
Capital Adequacy Ratios                    
Total risk-based capital ratio   15.56 %   15.01 %   15.24 %   14.75 %   14.87 %
Common equity tier 1 risk-based capital ratio   14.31 %   13.76 %   13.99 %   13.50 %   13.61 %
Tier 1 risk-based capital ratio   14.31 %   13.76 %   13.99 %   13.50 %   13.61 %
Leverage ratio   10.20 %   10.26 %   9.99 %   9.79 %   9.93 %
                     

* Interest income was FTE adjusted, using the corporate federal tax rate of 21% for 2019 and 2018, to recognize the income from tax-exempt interest-earning assets as if the interest was taxable.

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