Fidelity D & D Bancorp, Inc. Reports Third Quarter 2012 Financial Results

DUNMORE, Pa., Oct. 24, 2012 /PRNewswire/ -- 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 September 30, 2012 of $1.4 million, an increase of $72 thousand, or 5%, compared to the 2011 third quarter.  Progress in improving earnings occurred from producing further other income, which more than offset 2% lower net interest income and, more so, the additional provision for loan losses required over the previous year's third quarter to replenish the allowance for loan losses.  Earnings per share on a diluted basis for the quarter were $0.61 and $0.59 for the three months ended September 30, 2012 and 2011, respectively.

"We are pleased with the Third Quarter's results, which reflect steady growth in an number of key strategic areas, including loans, core deposits, and customer relationships," stated Daniel J. Santaniello, President and Chief Executive Officer.  "Our strategic plan focuses on offering a differentiated approach to customer service that centers on offering customers the financial products and services that meet their needs.  Through this approach we have been able to grow the Company's revenue."

Net income for the nine months ended September 30, 2012 was $4.0 million, an increase of $129 thousand, or 3%, compared to net income of $3.8 million for the same 2011 period. The current year-to-date period earnings improvement occurred from producing more other income, which more than off-set the declining net interest income and significantly higher loan losses, compared to the prior year-to-date period.  Earnings per share were $1.74 for each of the nine months ended September 30, 2012 and 2011.

The Company's assets grew $8.7 million, or 1%, to total $615.4 million at September 30, 2012 from $606.7 million at December 31, 2011.  The growth resulted primarily from a $18.5 million increase in non-interest bearing deposit balances, sheltering the $10.2 million decline within interest-bearing deposits, along with $4.6 million growth in repurchase agreements, a short-term borrowing, partially offsetting the $5.0 million long-term debt pay off during the first nine months of 2012.

Net interest income declined 2% to $5.2 million for the quarter ended September 30, 2012 from $5.3 million recorded during the same quarter of 2011.  The 26 basis point cost reductions, from lowering rates primarily on savings and certificate of deposit accounts, are no longer adequate to keep pace with either assets repricing to or new growth at lower current yields, both of which had reduced yield on earning assets by 29 basis points.  As a result, net interest income decreased $79 thousand in the third quarter of 2012 compared to the year ago period.  The decline in net interest income reduced net interest margin to 3.79% for the third quarter of 2012, compared to 3.85% for same 2011 period.

Net interest income decreased $363 thousand, or 2%, to $15.4 million for the nine months ended September 30, 2012 from $15.8 million recorded during the same period of 2011.  Net interest margin was 3.78% during the first nine months of 2012 compared to 3.97% during the first nine months of 2011, down 19 basis points from repricing activity, even though partially mitigated by a $15.0 million increase in average earning assets.

The provision for loan losses was $700 thousand and $500 thousand for the third quarter ending September 30, 2012 and 2011, respectively.  Provision for loan losses was $2.0 million for the nine months ending September 30, 2012, as compared to over $1.3 million for the same 2011 period.  The allowance for loan losses was 1.89% of total loans at September 30, 2012, down from 1.99% at September 30, 2011.

Total other income recorded for the quarter ended September 30, 2012 was $1.9 million compared with $1.5 million for the same quarter in 2011.  The increase in other income was primarily due to improving revenue by $339 thousand of added gains from the sale of loans, $43 thousand more fees from trust fiduciary activity and $40 thousand more service charges on loans for the quarter ended September 30, 2012, compared to the same 2011 period.

Total other income for the nine months ended September 30, 2012 was $5.8 million compared to $4.3 million for the same period in 2011.  The revenue increase in the comparative periods resulted primarily from mortgage banking activity producing $811 thousand more gains from the sale of loans and added $293 thousand to loan service charges, along with $235 thousand more gains from sale on investment securities, and $149 thousand added fees from trust fiduciary services for the nine months ended September 30, 2012 compared to the same 2011 period.

Total other operating expenses were maintained at $4.4 million for each of the quarters ending September 30, 2012 and 2011.

Total other operating expenses increased $290 thousand, or 2%, to $13.8 million for the nine months ending September 30, 2012 from $13.6 million in the same 2011 period. The other expense increase resulted primarily from the $236 thousand prepayment fee incurred on the early payoff of long-term debt in the 2012 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.