FDBC Fidelity D and D Bancorp Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C.  20549

 

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FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

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Date of Report (Date of earliest event reported):  February 4, 2015

 

 

FIDELITY D & D BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Blakely and Drinker Streets, Dunmore, PA       18512

(Address of principal executive offices)              (Zip Code)

Registrant’s telephone number, including area code: (570) 342-8281

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR

240.14d-2(b))

 ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act  (17 CFR

240.13e-4(c))

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FIDELITY D & D BANCORP, INC.

CURRENT REPORT ON FORM 8-K

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On February 4, 2015, Fidelity D & D Bancorp, Inc. issued a press release describing its results of operations for the quarter and year-to-date periods ended December 31, 2014.  A copy of the related press release is being furnished as Exhibit 99.1 to this Form 8-K.

 

The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

 

 

 

ITEM 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit NumberDescription

 

99.1Copy of the Press Release,  dated February 4, 2015.

 

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

FIDELITY D & D BANCORP, INC.

 

 

 

 

 

 

 

 

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EXHIBIT INDEX

 

 

 

 

EXHIBIT NO.

 

99.1                       Copy of the Press Release, dated February 4, 2015.

 

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Exhibit 99.1 

FIDELITY D & D BANCORP, INC.

FOR IMMEDIATE RELEASE

 

Date: February 4,  2015

Contacts:

 

FIDELITY D & D BANCORP, INC.

REPORTS 2014 FINANCIAL RESULTS AND

RECORD CORE NET INCOME OF $6.3 MILLION

Dunmore, PA – Fidelity D & D Bancorp, Inc. (OTC Bulletin Board: FDBC), parent company of The Fidelity Deposit and Discount Bank, announces net income for the year ended December 31, 2014 of $6.4 million, or $2.62 diluted earnings per share, compared to net income for the year ended December 31, 2013 of $7.1 million, or $3.02 diluted earnings per share.  The decrease resulted primarily from a one-time $2.9 million net gain ($1.9 million after tax, or $0.80 per share) from the sale of the Company’s entire pooled trust preferred security portfolio in December 2013.  Furthermore, the Company incurred a $0.5 million pre-payment penalty expense, $0.3 million after tax, on a $6 million early pay-down of long-term debt in December 2014.  The additional operating income produced during 2014 was accomplished by $1.0 million more net interest income earned and $1.5 million lower provision for loan losses, partially offset by the $0.3 million less other income from fewer gains on loans sold plus $0.1 million increase within other expenses.

Excluding the effects from sales of securities and non-recurring expense, the Company’s core net income for the year ending December 31, 2014 was $6.3 million, up 24% from $5.0 million for the same period in 2013.  Core net income of $6.3 million for the 2014 year is the highest in the Company’s history.  Core diluted earnings per share for the year December 31, 2014 was $2.58, up from $2.13 for the same period in 2013.

“The Company is very pleased with the 24% increase in core earnings for 2014, when compared to 2013,” stated Daniel J. Santaniello, President and Chief Executive Officer.  “The growth in core earnings reflects strong loan and deposit growth, continued credit quality improvement, and disciplined expense management.  We continue to create shareholder value by exceeding our client’s expectations and building lasting relationships through a differentiated banking experience.”

Net income for the quarter ended December 31, 2014 was $1.6 million compared to $2.7 million for the same quarter of 2013.  The diluted earnings per share for the quarter were $0.67 compared to $1.14 for the same prior year period.  The quarter decrease resulted from the previously cited $2.9 million pre-tax gain on the pooled trust preferred security portfolio sale.  Net interest income improved $0.4 million and provision for loan losses was down by $0.7 million, with a $0.4 million increase in other income and a $0.3 million spike in other expenses from the long-term debt pre-payment penalty during the fourth quarter of 2014 over the same 2013 period.

Core net income for the three months ended December 31, 2014 was $1.7 million up from $0.8 million for the same period in 2013.  Core diluted earnings per share for the three months ended December 31, 2014 was $0.71 up from $0.33 for the same period in 2013.

The Company’s total assets increased 8% to $676.5 million at December 31, 2014, growth of $52.7 million, from $623.8 million at December 31, 2013.  Asset growth occurred from the $37.6 million, or 8%, increase in loans and $12.6 million in additional cash balances resulting from a year-end security portfolio restructuring.  Total deposits grew $57.2 million, or 11%, while short-term borrowings declined $4.7 million, or 54%, and long-term debt was reduced $6.0 million, or 38%, plus the $6.2 million, or 9%, shareholders’

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equity increase.  The Bank’s regulatory capital ratios for the period ending December 31, 2014 were Total Risk Based Capital Ratio of 15.2%, Tier I Capital Ratio of 13.9% and Leverage Ratio of 10.0%.

Net interest income was $21.9 million for the year ended December 31, 2014, a 5% increase, or $1.0 million above the $20.9 million earned in 2013.  This was achieved from efforts to mitigate margin pressure, while operating during volatile economic conditions and uncertainties even though interest rates remained at very low levels, through ample growth throughout the loan portfolio, further reduction in non-performing assets and active strategic growth from adding core deposits.  As a result, net interest margin was 3.75% for 2014, or 5 basis points lower, from 3.80% for 2013, primarily from generating lower yields on the $38.2 million larger average interest-earning asset base in 2014.

Net interest income was $5.6 million for the quarter ended December 31, 2014, $377 thousand, or 7% higher compared to the $5.3 million recorded during the same quarter of 2013.  The additional interest income on larger interest-bearing assets contributed to the increase. A 9 basis point reduction in spread was overcome by the non-interest bearing deposit growth plus the larger loan portfolio to improve net interest income. As a result, net interest margin declined to 3.65% for the fourth quarter 2014, compared to 3.76% for same 2013 period.

The provision for loan losses was $1.1 million for the 2014 year, down more than half compared to $2.6 million required in 2013.  The efforts taken to resolve asset quality by addressing the migration of commercial credits to non-performing status, including further reduction of non-accrual loans, necessitated the lower requirement to provision for loan losses by $1.5 million.

The provision for loan losses was $250 thousand for the fourth quarter of 2014 compared to the $950 thousand required for the fourth quarter of 2013.  The allowance for loan losses during the fourth quarter of 2014 required a lower level of provision for loan losses.  The fourth quarter provision for loan losses resulted primarily from new loan growth booked with much less need stemming from 2014 non-performing loan activities, when compared to the fourth quarter of 2013.

Successful loan workout efforts improved asset quality as the ratio of non-performing assets to total assets at December 31, 2014 was 1.18%, a decrease from 1.44% at December 31, 2013.  The ratio of non-accrual loans to total loans at December 31, 2014 decreased 36 basis-points to 0.82%.  Net charge-offs were $0.8 million in 2014 compared to $2.6 million in 2013.  The allowance for loan losses was 1.78% of total loans at December 31, 2014 down from 1.86% at December 31, 2013.

Total other income for the year ended December 31, 2013 was $10.5 million, compared to $7.4 million for the 2014 year.  This decrease resulted primarily from recognizing a $2.9 million net gain on the sale of the entire pooled trust preferred security portfolio in 2013.  The additional  growth of $123 thousand in rental income, $106 thousand of more net servicing fees, $102 thousand more interchange transaction fees, and $44 thousand from higher trust activities, all helped mitigate the $757 thousand fewer gains on sold loans and $149 thousand less fees collected on loans and $85 thousand fewer deposit service charges.

Total other income recorded for the quarter ended December 31, 2013 was a $4.5 million compared with $2.0 million for the same quarter in 2014.   The decrease resulted primarily from recognizing the $2.9 million net gain on the sale of the entire pooled trust preferred security portfolio in December 2013.

Total other operating expenses increased by $584 thousand, or 3%, to $19.7 million for the year ending December 31, 2014, compared to $19.1 million for the 2013 year. This increase was primarily attributable to the $457 thousand long-term debt pre-payment penalty incurred in December 2014.  Reductions in loan collection costs of $290 thousand, other real estate costs of $259 thousand and FDIC assessment of $106 thousand partially offset expense increases of $514 thousand additional salary and benefit expenses, $138 thousand increased premises and equipment expenses, $65 thousand more professional services and $56 thousand more in advertising and marketing expenses throughout 2014.

 

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Total other operating expenses increased $258 thousand, or 5%, to $5.2 million from $5.0 million for the quarters ending December 31, 2014 and 2013, respectively.  The other operating expenses primarily increased from $235 thousand additional salary and benefit expenses from much more self-insured medical claims losses recognized during the fourth quarter of 2014 compared to the same 2013 period.

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:

 

 

For more information please visit our investor relations web site located through www.bankatfidelity.com.

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Non-GAAP Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures adjust GAAP measures to exclude the effects of sales of securities and certain non-recurring expense. Where non-GAAP disclosures are used in this press release, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Because of the non-recurring nature of the excluded items, management believes that these non-GAAP measures provided useful information that is important to an understanding of the operating results of the Company’s core business. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Fidelity D & D Bancorp, Inc.

 

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FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)

 

 

 

 

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FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Statements of Income

(dollars in thousands)

 

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FIDELITY D & D BANCORP, INC.

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)

 

 

 

 

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FIDELITY D & D BANCORP, INC.

Selected Financial Ratios and Other Data

 

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