DUNMORE, Pa., Oct. 26, 2016 (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 September 30, 2016 of $2.0 million, an improvement of $0.1 million, or 5%, compared to $1.9 million for the third quarter of 2015.  Earnings improvement resulted from strategic growth which expanded net interest income by 6%.  The Company continued to focus on its relationship management strategy with $33.1 million growth in quarterly average earning assets in the third quarter of 2016 compared to the third quarter of 2015.  $0.2 million in additional operating expenses were incurred primarily from an increase in salaries and employee benefits compared to the previous year’s third quarter.  Earnings per share on a diluted basis was $0.82 and $0.79 for the quarters ended September 30, 2016 and 2015, respectively.

“We are very pleased with the third quarter financial results and the continued growth in the Company’s performance,” stated Daniel J. Santaniello, President and Chief Executive Officer.  “The strong results are reflective of the Fidelity Banker's 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 $0.4 million, or 7%, from $5.3 million for the nine months ended September 30, 2015 to $5.7 million for the nine months ended September 30, 2016.  The year-to-date improvement stemmed from producing $1.3 million more net interest income and $0.2 million more non-interest income partially offset by less than $0.1 million higher expenses.  Earnings per share on a diluted basis was $2.30 and $2.16 for the nine months ended September 30, 2016 and 2015, respectively.

The Company’s assets increased $41.0 million, or 6%, to total $770.4 million at September 30, 2016 from $729.4 million at December 31, 2015.  The growth during the first nine months of 2016 was due mostly to a $16.6 million net increase in the loan portfolio, $3.5 million increase in securities and $19.2 million increase in cash balances.  This growth was funded by a $51.1 million increase in deposits and a $5.2 million increase in shareholders’ equity along with paying down $17.2 million in short-term borrowings.

Net interest income was $6.4 million for the third quarter of 2016 compared to $6.0 million for the third quarter of 2015.  The $0.4 million, or 6%, increase resulted from earning higher yields on investment securities combined with lower rates paid on liabilities, which offset the continued declining yields in the loan portfolio.  This lead to a six basis point improvement in the net interest spread and net interest margin to 3.66% and 3.78%, respectively, for the third quarter of 2016 compared to 3.60% and 3.72%, respectively, for the same 2015 quarter.

Net interest income increased $1.3 million, or 7%, to $18.7 million for the nine months ended September 30, 2016, from $17.4 million reported during the first nine months of 2015.  Net interest margin was 3.71% and 3.69% for the nine months ended September 30, 2016 and 2015, respectively.  Net interest spread was higher by three basis points for the nine months ended September 30, 2016 compared with the same period in 2015 resulting from a seven basis point reduction on interest-bearing liability rates partially offset by a four basis point decline on interest earning asset yields.  Revenue from $34.4 million and $7.5 million higher average balances in the loan and investment portfolios, respectively, added $1.1 million to interest income.  Lower interest costs of $0.2 million resulted primarily from lower debt of $10.7 million and the repricing of deposit rates, which more than offset the added interest expense from the $37.1 million growth of interest-bearing deposits for the nine months ended September 30, 2016 compared with the same period in 2015.  Cost of funds declined 6 basis points from the lower interest costs and the $12.3 million growth in average non-interest bearing deposits. 

The provision for loan losses was $25 thousand higher for the third quarter of 2016 compared to the third quarter of 2015.  Provision for loan losses was $650 thousand for the nine months ended September 30, 2016 compared to $500 thousand for the same period in 2015.  The additional provision expense resulted from loan growth and the increase in non-performing loans.  The increase in non-performing loans was due mainly to a single commercial relationship, which has been adequately reserved.  The allowance for loan losses was $9.2 million, or 1.61% of total loans at September 30, 2016 compared to $9.1 million, or 1.69% of total loans at September 30, 2015.

Total other income was $2.0 million for both the third quarters of 2016 and 2015.  Increases of $117 thousand in deposit fees and $41 thousand in interchange fees were offset by $102 thousand fewer gains on loan sales and $71 thousand less service charges on loans for the three months ended September 30, 2016 compared to the three months ended September 30, 2015.

Total other income recorded for the nine months ended September 30, 2016 was $5.8 million, an increase of $0.2 million, or 4%, from the $5.6 million recorded for the nine months ended September 30, 2015.  Other income increased from $0.3 million more deposit service charges and $0.1 million in additional interchange fees that offset $0.2 million fewer gains on loan sales when compared to the first nine months of 2015.

Other expenses increased $0.2 million, or 3%, for the third quarter of 2016 compared to the third quarter of 2015.  The increase was due to a $0.2 million in additional salaries and employee benefits expense and $74 thousand in higher data processing expense.  These increases were partially offset by $78 thousand lower advertising and marketing expense and $72 thousand lower professional service expense.

Other expenses increased to $16.2 million for the nine months ended September 30, 2016, an increase of $0.1 million from $16.1 million for the nine months ended September 30, 2015.  Increases within this category included a $0.7 million increase in salaries and employee benefits expense, a $0.3 million increase in data processing expense and $0.2 million in PA shares tax expense.  These increases were partially offset by a $0.6 million FHLB prepayment fee, which was paid in the second quarter of 2015 for the early payoff of long-term debt which did not recur in 2016.  Also partially offsetting the increases was a $0.3 million decrease in advertising and marketing expenses for the first nine months of 2016 when compared to the same period of 2015 due to expenses from two branch grand openings in 2015. Additional decreases were $0.1 million in premises and equipment expense and $0.1 million in professional services.

During the nine months ended September 30, 2016, provision for income taxes increased by $0.8 million.  This growth primarily resulted from an audit adjustment reducing income tax expense by $0.4 million during the second quarter of 2015 plus a higher level of taxable income in 2016. 

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, 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 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 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 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.

FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)
At Period End:		September 30, 2016					December 31, 2015
Assets
Total cash and cash equivalents	$		31,440			$		12,277
Investment securities			128,765					125,232
Federal Home Loan Bank Stock			1,201					2,120
Loans and leases			573,898					557,630
Allowance for loan losses			(9,196	)				(9,527	)
Premises and equipment, net			16,497					16,723
Life insurance cash surrender value			11,346					11,082
Other assets			16,472					13,821
Total assets	$		770,423			$		729,358
Liabilities
Non-interest-bearing deposits	$		160,129			$		142,774
Interest-bearing deposits			511,678					477,901
Total deposits			671,807					620,675
Short-term borrowings			10,996					28,204
Other liabilities			6,061					4,128
Total liabilities			688,864					653,007
Shareholders' equity			81,559					76,351
Total liabilities and shareholders' equity	$		770,423			$		729,358
Average Year-To-Date Balances:		September 30, 2016					December 31, 2015
Assets
Total cash and cash equivalents	$		26,274			$		22,248
Investment securities			129,246					122,549
Loans and leases, net			554,587					525,571
Premises and equipment, net			16,518					15,954
Other assets			26,107					26,520
Total assets	$		752,732			$		712,842
Liabilities
Non-interest-bearing deposits	$		149,724			$		138,389
Interest-bearing deposits			507,090					475,853
Total deposits			656,814					614,242
Short-term borrowings			11,849					19,886
Other liabilities			4,841					4,306
Total liabilities			673,504					638,434
Shareholders' equity			79,228					74,408
Total liabilities and shareholders' equity	$		752,732			$		712,842

FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Statements of Income
(dollars in thousands)
		Three Months Ended								Nine Months Ended
		Sep. 30, 2016				Sep. 30, 2015				Sep. 30, 2016				Sep. 30, 2015
Interest income
Loans and leases	$		6,155		$		5,934		$		18,150		$		17,385
Securities and other			851				678				2,307				1,969
Total interest income			7,006				6,612				20,457				19,354
Interest expense
Deposits			580				574				1,727				1,639
Borrowings and debt			5				6				30				285
Total interest expense			585				580				1,757				1,924
Net interest income			6,421				6,032				18,700				17,430
Provision for loan losses			(225	)			(200	)			(650	)			(500	)
Other income			2,024				2,023				5,811				5,606
Other expenses			(5,409	)			(5,239	)			(16,166	)			(16,070	)
Provision for income taxes			(776	)			(687	)			(2,031	)			(1,184	)
Net income	$		2,035		$		1,929		$		5,664		$		5,282
	Three Months Ended
		Sep. 30, 2016				Jun. 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sep. 30, 2015
Interest income
Loans and leases	$		6,155		$		5,989		$		6,006		$		5,979		$		5,934
Securities and other			851				726				730				681				678
Total interest income			7,006				6,715				6,736				6,660				6,612
Interest expense
Deposits			580				567				580				597				574
Borrowings and debt			5				7				18				8				6
Total interest expense			585				574				598				605				580
Net interest income			6,421				6,141				6,138				6,055				6,032
Provision for loan losses			(225	)			(275	)			(150	)			(575	)			(200	)
Other income			2,024				2,100				1,687				1,927				2,023
Other expenses			(5,409	)			(5,369	)			(5,388	)			(4,952	)			(5,239	)
Provision for income taxes			(776	)			(669	)			(586	)			(634	)			(687	)
Net income	$		2,035		$		1,928		$		1,701		$		1,821		$		1,929

FIDELITY D & D BANCORP, INC.
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)
At Period End:		Sep. 30, 2016				Jun. 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sep. 30, 2015
Assets
Total cash and cash equivalents	$		31,440		$		27,853		$		41,091		$		12,277		$		25,690
Investment securities			128,765				129,760				128,673				125,232				126,782
Federal Home Loan Bank Stock			1,201				1,140				1,420				2,120				1,085
Loans and leases			573,898				562,758				557,293				557,630				543,497
Allowance for loan losses			(9,196	)			(9,207	)			(9,384	)			(9,527	)			(9,149	)
Premises and equipment, net			16,497				16,455				16,519				16,723				16,875
Life insurance cash surrender value			11,346				11,257				11,169				11,082				10,995
Other assets			16,472				16,460				16,601				13,821				13,433
Total assets	$		770,423		$		756,476		$		763,382		$		729,358		$		729,208
Liabilities
Non-interest-bearing deposits	$		160,129		$		157,776		$		157,358		$		142,774		$		150,714
Interest-bearing deposits			511,678				505,524				510,553				477,901				492,289
Total deposits			671,807				663,300				667,911				620,675				643,003
Short-term borrowings			10,996				7,258				12,765				28,204				6,743
Other liabilities			6,061				5,522				4,397				4,128				3,829
Total liabilities			688,864				676,080				685,073				653,007				653,575
Shareholders' equity			81,559				80,396				78,309				76,351				75,633
Total liabilities and shareholders' equity	$		770,423		$		756,476		$		763,382		$		729,358		$		729,208
Average Quarterly Balances:		Sep. 30, 2016				Jun. 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sep. 30, 2015
Assets
Total cash and cash equivalents	$		21,166		$		28,753		$		28,960		$		17,612		$		20,486
Investment securities			130,301				129,604				127,820				127,509				126,238
Loans and leases, net			562,429				553,212				548,034				541,144				532,646
Premises and equipment, net			16,468				16,445				16,641				16,843				17,009
Other assets			26,594				26,347				25,374				24,409				24,769
Total assets	$		756,958		$		754,361		$		746,829		$		727,517		$		721,148
Liabilities
Non-interest-bearing deposits	$		155,516		$		148,703		$		144,890		$		141,198		$		143,794
Interest-bearing deposits			505,673				512,695				502,917				493,383				488,608
Total deposits			661,189				661,398				647,807				634,581				632,402
Short-term borrowings			9,266				9,162				17,145				12,003				9,820
Other liabilities			5,409				4,713				4,396				4,766				4,327
Total liabilities			675,864				675,273				669,348				651,350				646,549
Shareholders' equity			81,094				79,088				77,481				76,167				74,599
Total liabilities and shareholders' equity	$		756,958		$		754,361		$		746,829		$		727,517		$		721,148

FIDELITY D & D BANCORP, INC.
Selected Financial Ratios and Other Data
			Three Months Ended
			Sep. 30, 2016				Jun. 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sep. 30, 2015
Selected returns and financial ratios
Basic earnings per share		$		0.83		$		0.79		$		0.69		$		0.74		$		0.79
Diluted earnings per share		$		0.82		$		0.79		$		0.69		$		0.74		$		0.79
Dividends per share		$		0.29		$		0.29		$		0.27		$		0.37		$		0.27
Yield on interest-earning assets (FTE)				4.11	%			3.99	%			4.04	%			4.05	%			4.06	%
Cost of interest-bearing liabilities				0.45	%			0.44	%			0.46	%			0.48	%			0.46	%
Net interest spread				3.66	%			3.55	%			3.58	%			3.57	%			3.60	%
Net interest margin				3.78	%			3.66	%			3.70	%			3.69	%			3.72	%
Return on average assets				1.07	%			1.03	%			0.92	%			0.99	%			1.06	%
Return on average equity				9.99	%			9.80	%			8.83	%			9.48	%			10.26	%
Efficiency ratio				61.85	%			63.09	%			66.49	%			61.15	%			63.98	%
Expense ratio				1.77	%			1.75	%			1.99	%			1.68	%			1.77	%
			Nine Months Ended
			Sep. 30, 2016				Sep. 30, 2015
Basic earnings per share		$		2.31		$		2.17
Diluted earnings per share		$		2.30		$		2.16
Dividends per share		$		0.85		$		0.79
Yield on interest-earning assets (FTE)				4.04	%			4.08	%
Cost of interest-bearing liabilities				0.45	%			0.52	%
Net interest spread				3.59	%			3.56	%
Net interest margin				3.71	%			3.69	%
Return on average assets				1.01	%			1.00	%
Return on average equity				9.55	%			9.57	%
Efficiency ratio				63.75	%			65.51	%
Expense ratio				1.84	%			1.90	%
Other financial data			Three Months Ended
			Sep. 30, 2016				Jun. 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sep. 30, 2015
Book value per share		$		33.24		$		32.76		$		31.92		$		31.25		$		31.00
Equity to assets				10.59	%			10.63	%			10.26	%			10.47	%			10.37	%
Allowance for loan losses to:
Total loans				1.61	%			1.64	%			1.69	%			1.71	%			1.69	%
Non-accrual loans				1.57	x			1.56	x			1.13	x			1.06	x			2.09	x
Non-accrual loans to total loans				1.02	%			1.05	%			1.49	%			1.61	%			0.80	%
Non-performing assets to total assets				1.32	%			1.37	%			1.77	%			1.76	%			1.11	%

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