DOWNINGTOWN, Pa., Oct. 24, 2017 (GLOBE NEWSWIRE) -- DNB Financial Corporation (Nasdaq: DNBF), today reported net income of $2.4 million, or $0.56 per diluted share, for the quarter ending September 30, 2017, compared with $1,000, or less than a penny per share, for the same quarter, last year.  Earnings for the three month period ending September 30, 2016 included merger-related expenses of $1.5 million. For the nine months ending September 30, 2017, net income was $7.1 million, or $1.66 per diluted share, compared with $2.7 million, or $0.93 per diluted share, for the same period, last year. 

DNB Financial Corporation (the “Company” or “DNB”) is the parent of DNB First, National Association, one of the first nationally-chartered community banks to serve the greater Philadelphia region.  On October 1, 2016, the Company completed its acquisition of Philadelphia-based East River Bank ("East River") and its results of operations are included in the consolidated results for the periods ended December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017, but are not included in the results of operations for any other periods.

William J. Hieb, President and CEO, commented, “Our third quarter results serve as an important milestone in the successful execution of DNB’s long term strategies.  We continue to invest in the future by making critical hires and enhancing our technology to ensure the superior service our customers expect.” Mr. Hieb added, “Although the lending environment remains highly competitive, we are pleased to report that asset quality remained strong with net charge-offs amounting to just two basis points of total average loans.”

Highlights

• The net interest margin was 3.72% for the quarter ending September 30, 2017 compared with 3.59% for the June 2017 quarter.  The net interest margin, when excluding purchase accounting adjustments, was 3.42% and 3.39% for the same quarters, respectively.
  
  
• Asset quality remained strong as net charge-offs were only 0.02% of total average loans for the quarter ending September 30, 2017.  Non-performing loans were 0.87% of total loans at September 30, 2017.
  
  
• On a sequential quarter basis, noninterest-bearing deposits increased $16.9 million over the three months ending September 30, 2017, and were 22.8% of total deposits.  Total core deposits, however, slipped 3.3% (not annualized) and were 79.5% of total deposits as of September 30, 2017.
  
  
• Wealth management assets under care increased 15.0% (not annualized) to $246.3 million as of September 30, 2017 from $214.2 million as of December 31, 2016.  Wealth management fees represented 32.3% of total non-interest income.
  
  
• The Company paid a quarterly cash dividend of $0.07 per share on September 20, 2017.

Income Statement Summary

Reported net income of $2.4 million for the third quarter of 2017 generated a return on average assets (“ROAA”) and return on average tangible common equity (“ROTCE”) of 0.90% and 11.2%, respectively.

Net interest income for the three months ending September 30, 2017 was $9.5 million, which represented a $4.0 million increase from the three months ending September 30, 2016.  The year-over-year increase was primarily due to a $320.2 million, or 64.2%, rise in total average loans and 66 basis point increase in the reported net interest margin to 3.72% for the quarter ending September 30, 2017.  The main driver for the increase in both volume and rate was the East River acquisition.  Interest income for the third quarter of 2017 included $409,000 of purchase accounting adjustments recognized due to the pay-off of certain loans acquired from East River.  For the third quarter of 2017, the weighted average yield on total interest-earning assets was 4.30%, which included purchase accounting adjustments.  The net interest margin was 3.42% for the third quarter of 2017 compared with 3.39% for the second quarter of 2017 when excluding purchase accounting marks.

Total interest expense was $1.5 million for the three months ending September 30, 2017, compared with $1.4 million for the second quarter of 2017, and $760,000 for the third quarter of 2016.  The year-over-year increase was primarily due to a higher amount of interest-bearing liabilities, largely due to the East River acquisition.  The weighted average rate paid for interest-bearing liabilities was 0.61% and 0.56% for the quarters ending September 30, 2017 and June 30, 2017, respectively.

The provision for credit losses was $375,000 for the most recent quarter compared with $585,000 for the three months ended June 30, 2017 and $100,000 for the third quarter of 2016.  As of September 30, 2017, the allowance for credit losses was $5.6 million and represented 0.68% of total loans.  Loans acquired in connection with the purchase of East River were recorded at fair value based on an initial estimate of expected cash flows, including a reduction for estimated credit losses, and without carryover of the respective portfolio's historical allowance for credit losses.  At September 30, 2017, the allowance for credit losses as a percentage of originated loans, which represents all loans other than those acquired, was 1.0%.

Total non-interest income for the third quarter of 2017 was $1.3 million, compared with $1.4 million for the same quarter, last year.  Non-interest income was 11.8% of total revenue for the quarter ending September 30, 2017.  There were no gains from the sale of securities realized in the third quarter of 2017, compared with $197,000 for the quarter ending September 30, 2016.  Wealth management fees were $411,161 for the third quarter of 2017, compared with $393,372 for the third quarter of 2016. Wealth management fees represented 32.3% of total fee income. 

Non-interest expense was $7.0 million for the third quarter of 2017, compared with $6.9 million for the second quarter of 2017, and $6.7 million for the quarter ending March 31, 2017. Merger-related costs were $1.5 million for the quarter ending September 30, 2016.  Excluding merger-related costs, year-over-year increases were largely due to additional expenses related to staff, offices and equipment.

Balance Sheet Summary

As of September 30, 2017, total assets were $1.1 billion.  On a sequential quarter basis, total assets were relatively stable across all major categories.  Total deposits decreased $21.7 million, or 2.4% (not annualized), on a sequential quarter basis primarily due to a planned decrease in municipal balances as part of our liquidity management strategy.  As of September 30, 2017, total shareholders’ equity was $101.9 million, compared with $94.8 million as of December 31, 2016.  Tangible book value per share was $20.15 as of September 30, 2017, compared with $18.56 as of December 31, 2016.

On a sequential quarter basis, total loans increased $3.2 million, or 0.40% (not annualized), to $819.8 million as of September 30, 2017 and were 76.9% of total assets.   The Company’s commercial real estate and commercial and industrial lending portfolios increased $7.6 million, or 1.7% and $2.3 million or 1.9% respectively (not annualized). Residential mortgage loans grew $1.6 million, or 1.9%, and commercial construction loans declined $7.7 million or 8.4%. All other loan categories experienced slight declines. Loan originations have been challenging as the Company continues to operate in a highly competitive market, while maintaining prudent underwriting standards.  

On a sequential quarter basis, total core deposits decreased $23.4 million, or 3.3% (not annualized), and were 79.5% of total deposits as of September 30, 2017.  As of the same date, non-interest-bearing deposits, which increased $16.9 million in the third quarter, were 22.8% of total deposits.  The decline in core deposits in the third quarter of 2017 was primarily attributable to a decrease in money market and NOW accounts, which was partially offset by the aforementioned rise in demand accounts.  Time deposits decreased $10.4 million, which was part of the Company’s asset/liability strategy.  Brokered deposits, which the Company does not include as core, increased $12.0 million and were $41.8 million, or 4.8% of total deposits as of September 30, 2017.  As of the same date, the loan-to-deposit ratio was 94.1%.

Capital ratios continue to exceed all regulatory standards for well-capitalized institutions.  As of September 30, 2017, the tier 1 leverage ratio was 9.22%, the tier 1 risk-based capital was 11.88%, the common equity tier 1 risk-based capital ratio was 10.78% and the total risk based capital ratio was 13.79%. As of the same date, the tangible common equity-to-tangible assets ratio was 8.18%.  Intangible assets and goodwill totaled $16.1 million as of September 30, 2017.  

Asset Quality Summary

Asset quality remained strong as net charge-offs decreased to 0.02% of total average loans for the quarter ending September 30, 2017, from 0.36% for the quarter ending June 30, 2017, and 0.03% for the quarter ending September 30, 2016.  Total non-performing assets, including loans and other real estate property, were $12.0 million as of September 30, 2017, compared with $12.2 million as of June 30, 2017, and $11.3 million as of December 31, 2016.  The ratio of non-performing loans to total loans was 0.87% as of September 30, 2017, versus 1.04% as of December 31, 2016.    

Interest Rate Risk Management

DNB's strategy has been to seek shorter duration over yield in its lending and investing activities and lengthen duration over rate in its financing activities to minimize interest rate risk.  The Company also strives to offer products and services that develop strong relationships to retain core deposits. The Bank has an Asset Liability Management Committee that actively monitors and manages the Bank's interest rate exposure using simulation models and gap analysis. The Committee's primary objective is to minimize the adverse impact of changes in interest rates on net interest income, while maximizing earnings. Simulation model results show moderate liability sensitivity to rising rates in 100, 200, 300 and 400 basis point shock scenarios. Rate changes ramped in over 24 months also show moderate liability sensitivity.

General Information

DNB Financial Corporation is a bank holding company whose bank subsidiary, DNB First, National Association, is a community bank headquartered in Downingtown, Pennsylvania with 15 locations. DNB First, which was founded in 1860, provides a broad array of consumer and business banking products, and offers brokerage and insurance services through DNB Investments & Insurance, and investment management services through DNB Investment Management & Trust. DNB Financial Corporation's shares are traded on NASDAQ’s Capital Market under the symbol: DNBF. We invite our customers and shareholders to visit our website at https://www.dnbfirst.com. DNB's Investor Relations site can be found at http://investors.dnbfirst.com/.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, expectations or predictions of future financial or business performance, conditions relating to DNB and East River Bank (“East River”) or other effects of the merger of DNB and East River. These forward-looking statements include statements with respect to DNB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond DNB’s control). The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements.

In addition to factors previously disclosed in the reports filed by DNB with the Securities and Exchange Commission (the “SEC”) and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward looking statements or historical performance: difficulties and delays in integrating the East River business or fully realizing anticipated cost savings and other benefits of the merger; business disruptions following the merger; the strength of the United States economy in general and the strength of the local economies in which DNB conducts its operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the downgrade, and any future downgrades, in the credit rating of the U.S. Government and federal agencies; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors’ products and services for DNB’s products and services; the success of DNB in gaining regulatory approval of its products and services, when required; the impact of changes in laws and regulations applicable to financial institutions (including laws concerning taxes, banking, securities and insurance); technological changes; additional acquisitions; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms; and the success of DNB at managing the risks involved in the foregoing. Annualized, pro forma, projected and estimated numbers presented herein are presented for illustrative purpose only, are not forecasts and may not reflect actual results.

DNB cautions that the foregoing list of important factors is not exclusive. Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date of this press release, even if subsequently made available by DNB on its website or otherwise. DNB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of DNB to reflect events or circumstances occurring after the date of this press release.

For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the SEC, including our most recent annual report on Form 10-K, as supplemented by our quarterly or other reports subsequently filed with the SEC.

FINANCIAL TABLES FOLLOW

DNB Financial Corporation
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2017			2016			2017			2016
EARNINGS:
Interest income	$	10,989		$	6,277		$	32,144		$	18,562
Interest expense		1,483			760			4,127			2,118
Net interest income		9,506			5,517			28,017			16,444
Provision for credit losses		375			100			1,285			630
Non-interest income		1,236			1,142			3,762			3,435
Gain from insurance proceeds		-			30			80			1,180
Gain on sale of investment securities		-			197			25			431
Gain on sale of SBA loans		35			-			132			39
Loss on sale / write-down of OREO and ORA		7			160			121			164
Due diligence & merger expense		-			1,498			77			1,961
Non-interest expense		6,983			5,046			20,621			15,169
Income before income taxes		3,412			82			9,912			3,605
Income tax expense		1,001			81			2,774			939
Net income	$	2,411		$	1		$	7,138		$	2,666
Net income per common share, diluted	$	0.56		$	-		$	1.66		$	0.93
Net income before taxes includes accretion of purchase accounting fair value marks of $754,000 and $1.8 million for the three and nine month periods ended September 30, 2017, respectively.

DNB Financial Corporation
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)
	Quarterly
	2017				2017				2017				2016				2016
	3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr
Earnings and Per Share Data
Net income	$	2,411			$	2,286			$	2,441			$	2,313			$	1
Basic earnings per common share	$	0.57			$	0.54			$	0.57			$	0.55			$	-
Diluted earnings per common share	$	0.56			$	0.53			$	0.57			$	0.55			$	-
Dividends per common share	$	0.07			$	0.07			$	0.07			$	0.07			$	0.07
Book value per common share	$	23.90			$	23.35			$	22.88			$	22.36			$	20.76
Tangible book value per common share	$	20.15			$	19.59			$	19.11			$	18.56			$	20.73
Average common shares outstanding		4,262				4,258				4,247				4,203				2,853
Average diluted common shares outstanding		4,296				4,292				4,274				4,230				2,886
Performance Ratios
Return on average assets		0.90	%			0.84	%			0.92	%			0.84	%			0.00	%
Return on average equity		9.42	%			9.23	%			10.28	%			9.78	%			0.01	%
Return on average tangible equity		11.18	%			11.00	%			12.34	%			12.04	%			0.01	%
Net interest margin		3.72	%			3.59	%			3.67	%			3.63	%			3.06	%
Efficiency ratio		63.45	%			63.80	%			63.14	%			62.47	%			94.43	%
Wtd average yield on earning assets		4.30	%			4.12	%			4.16	%			4.10	%			3.47	%
Asset Quality Ratios
Net charge-offs to average loans		0.02	%			0.36	%			0.14	%			0.01	%			0.03	%
Non-performing loans/Total loans		0.87	%			0.84	%			0.94	%			1.04	%			1.36	%
Non-performing assets/Total assets		1.13	%			1.13	%			1.16	%			1.05	%			1.28	%
Allowance for credit loss/Total loans		0.68	%			0.65	%			0.66	%			0.66	%			1.04	%
Allowance for credit loss/Non-performing loans		78.68	%			76.76	%			70.56	%			63.20	%			76.28	%
Capital Ratios
Total equity/Total assets		9.56	%			9.19	%			8.93	%			8.86	%			7.69	%
Tangible equity/Tangible assets		8.18	%			7.83	%			7.57	%			7.46	%			7.68	%
Tier 1 leverage ratio		9.22	%			8.80	%			8.75	%			8.42	%			9.06	%
Common equity tier 1 risk-based capital ratio		10.78	%			10.24	%			9.71	%			9.59	%			10.50	%
Tier 1 risk based capital ratio		11.88	%			11.32	%			10.75	%			10.65	%			12.06	%
Total risk based capital ratio		13.79	%			13.15	%			12.56	%			12.48	%			14.72	%
Wealth Management Assets under care*	$	246,294			$	232,707			$	224,490			$	214,170			$	210,800
*Wealth Management Assets under care includes assets under management, administration, supervision and brokerage.

DNB Financial Corporation
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
	Three Months Ended
	Sept 30,				June 30,				Mar 31,				Dec 31,				Sept 30,
	2017				2017				2017				2016				2016
EARNINGS:
Interest income	$	10,989			$	10,661			$	10,494			$	10,617			$	6,277
Interest expense		1,483				1,382				1,262				1,206				760
Net interest income		9,506				9,279				9,232				9,411				5,517
Provision for credit losses		375				585				325				100				100
Non-interest income		1,236				1,300				1,226				1,279				1,142
Gain from insurance proceeds		-				-				80				-				30
Gain on sale of investment securities		-				25				-				-				197
Gain on sale of SBA loans		35				97				-				-				-
Loss (gain) on sale / write-down of OREO and ORA		7				115				(1	)			480				160
Due diligence & merger expense		-				26				51				280				1,498
Non-interest expense		6,983				6,943				6,695				6,587				5,046
Income before income taxes		3,412				3,032				3,468				3,243				82
Income tax expense		1,001				746				1,027				930				81
Net income	$	2,411			$	2,286			$	2,441			$	2,313			$	1
Net income per common share, diluted	$	0.56			$	0.53			$	0.57			$	0.55			$	-
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
	Sept 30,				June 30,				Mar 31,				Dec 31,				Sept 30,
	2017				2017				2017				2016				2016
FINANCIAL POSITION:
Cash and cash equivalents	$	19,490			$	36,189			$	44,068			$	22,103			$	30,442
Investment securities		175,148				177,149				178,422				182,206				195,477
Loans held for sale		350				-				200				-				-
Loans and leases		819,753				816,525				816,363				817,529				509,475
Allowance for credit losses		(5,594	)			(5,267	)			(5,418	)			(5,373	)			(5,303	)
Net loans and leases		814,159				811,258				810,945				812,156				504,172
Premises and equipment, net		8,898				9,099				9,203				9,243				9,033
Goodwill		15,525				15,525				15,525				15,590				-
Other assets		32,113				32,240				31,576				29,387				31,148
Total assets	$	1,065,683			$	1,081,460			$	1,089,939			$	1,070,685			$	770,272
Demand	$	198,399			$	181,529			$	176,199			$	173,467			$	146,731
NOW		195,455				209,355				218,133				224,219				169,400
Money market		217,870				240,434				221,356				184,783				160,312
Savings		81,030				84,820				84,700				86,176				73,867
Core deposits		692,754				716,138				700,388				668,645				550,310
Time deposits		136,759				147,110				177,335				187,256				71,920
Brokered deposits		41,815				29,811				28,045				29,286				23,313
Total deposits		871,328				893,059				905,768				885,187				645,543
FHLB advances		51,047				49,869				50,972				55,332				20,000
Repurchase agreements		15,383				15,700				11,474				11,889				19,483
Subordinated debt		9,750				9,750				9,750				9,750				9,750
Other borrowings		9,658				9,672				9,685				9,697				9,710
Other liabilities		6,633				4,005				5,002				3,990				6,569
Stockholders' equity		101,884				99,405				97,288				94,840				59,217
Total liabilities and stockholders' equity	$	1,065,683			$	1,081,460			$	1,089,939			$	1,070,685			$	770,272

DNB Financial Corporation
Condensed Consolidated Statements of Financial Condition - Quarterly Average Balances (Unaudited)
(Dollars in thousands)
		Sept 30,				June 30,				Mar 31,				Dec 31,				Sept 30,
		2017				2017				2017				2016				2016
FINANCIAL POSITION:
Cash and cash equivalents	$	20,673			$	46,629			$	27,406			$	37,239			$	25,208
Investment securities		182,930				182,124				185,676				192,359				217,593
Loans held for sale		49				10				41				137				87
Loans and leases		818,800				817,148				815,028				815,470				498,627
Allowance for credit losses		(5,388	)			(5,557	)			(5,432	)			(5,512	)			(5,344	)
Net loans and leases		813,412				811,591				809,596				809,958				493,283
Premises and equipment, net		9,032				9,188				9,267				9,218				8,844
Goodwill		15,525				15,525				15,589				15,590				-
Other assets		24,839				24,785				24,046				22,457				19,829
Total assets	$	1,066,460			$	1,089,852			$	1,071,621			$	1,086,958			$	764,844
Demand	$	188,804			$	183,329			$	172,984			$	181,415			$	137,437
NOW		199,311				209,433				218,357				224,101				176,704
Money market		223,448				232,662				197,615				177,885				156,412
Savings		82,971				84,946				85,348				87,096				74,652
Core deposits		694,534				710,370				674,304				670,497				545,205
Time deposits		142,846				166,459				180,819				186,287				72,324
Brokered deposits		35,474				26,709				28,326				27,406				23,307
Total deposits		872,854				903,538				883,449				884,190				640,836
FHLB advances		50,827				50,634				55,420				64,846				20,000
Repurchase agreements		16,070				12,551				12,858				18,972				18,381
Subordinated debt		9,750				9,750				9,750				9,750				9,750
Other borrowings		9,996				9,684				9,748				9,799				10,383
Other liabilities		5,433				4,353				4,070				5,592				5,367
Stockholders' equity		101,530				99,342				96,326				93,809				60,127
Total liabilities and stockholders' equity	$	1,066,460			$	1,089,852			$	1,071,621			$	1,086,958			$	764,844

For further information, please contact:
Gerald F. Sopp CFO/Executive Vice-President
484.359.3138
gsopp@dnbfirst.com

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.