DNB Financial Corporation Announces 2011 Second Quarter Earnings


DOWNINGTOWN, Pa., July 21, 2011 (GLOBE NEWSWIRE) -- DNB Financial Corporation (Nasdaq:DNBF) ("DNB"), parent of DNB First, National Association, the oldest National Bank in the greater Philadelphia region, reported a 36.01% increase in net income and a 70.82% increase in core earnings for the second quarter of 2011, compared to the same period in 2010. Net income for the three months ended June 30, 2011 was $1.3 million compared to $947,000 for the same period in 2010. Earnings per common share for the second quarter of 2011 were $0.42 on a fully diluted basis compared to $0.30 for the same period in 2010.

Core earnings, which is a non-GAAP measure of net income excluding gains and losses on the sale of securities and prepayment penalties on FHLB advances, for the three months ended June 30, 2011 was $1.3 million compared to $754,000 for the same period in 2010. The Financial Statement section in this report includes a reconciliation of core earnings to the corresponding GAAP financial measure.

William S. Latoff, Chairman and CEO said, "Our increased revenues and lower costs have us well positioned to consistently generate higher core earnings. In addition, loan growth has been steady, the net interest margin continues to increase and non-interest expenses remain under control."

During the three months ended June 30, 2011, net interest income rose to $5.4 million, compared to $4.8 million for the same period in 2010. The increase was due to higher levels of average loan balances combined with a reduction in interest expense. The reduction in interest expense was due to lower rates on liabilities. The net interest margin for the three months ended June 30, 2011 was 3.65%, a 42 basis point increase over the same period in 2010.

Non-interest income for the three months ended June 30, 2011 increased $73,000 or 8.36% to $946,000 compared to the same period in 2010.

Non-interest expense for the three months ended June 30, 2011 declined $54,000 or 1.30% compared to the same period in 2010. The decline can mainly be attributed to a decrease in FDIC insurance premiums and lower professional and consulting expenses offset by higher salaries and benefits and marketing costs.

Loan demand has remained steady through June 30, 2011 as loans grew 5.38% or $21.3 million compared to December 31, 2010. Total assets grew 4.59% or $27.7 million compared to December 31, 2010 and reflect the growth in loans, investment securities and cash and cash equivalents.

Deposits increased by $25.9 million or 5.25% to $518.6 million at June 30, 2011 compared to $492.7 million at December 31, 2010. Core deposits, i.e., demand deposits, money market accounts, NOW and savings accounts, increased $36.9 million in aggregate or 10.40%, while time deposits declined $11.0 million or 7.95%. DNB's composite cost of funds for the second quarter of 2011 dropped 40 basis points to 0.86% compared to 1.26% for the three months ended June 30, 2010.

Capital remained strong at the end of the second quarter of 2011, as DNB's tier 1 leverage ratio stood at 9.42% and its total risk-based capital ratio stood at 14.77%. Management feels that these levels of capital are appropriate for current market conditions. Stockholders' equity increased $3.5 million to $48.7 million at June 30, 2011 compared to $45.2 million at December 31, 2010, reflecting solid earnings growth.

Non-performing loans to total loans was 1.65% at June 30, 2011 down from 2.41% a year earlier and 1.82% at December 31, 2010. During the second quarter of 2011 and 2010, DNB provided $426,000 and $400,000 respectively, for credit losses. The allowance for credit losses was $6.4 million at June 30, 2011 compared to $5.9 million at December 31, 2010. This improved our coverage ratio, defined as the allowance for credit losses as a percentage of non-performing loans, from 81.46% on December 31, 2010 to 93.52% on June 30, 2011.

William J. Hieb, President and Chief Risk & Credit Officer said, "We are pleased that asset quality has remained sound throughout this economic downturn. We will continue to remain diligent in our efforts to maintain strict underwriting standards."

Net income for the six months ended June 30, 2011 was $2.3 million compared to $1.6 million for the same period in 2010. Earnings per common share for the first six months of 2011 were $0.69 on a fully diluted basis compared to $0.50 for the same period in 2010. Core earnings, defined above, improved to $2.3 million for the six months ended June 30, 2011, compared to $1.3 million for the same period in 2010.

Chairman Latoff concluded, "At a time when dramatic changes have occurred in the national and local banking landscape, DNB remained steadfast in its commitment to our customers and communities. We will continue to exercise sound financial management so that as the oldest national bank in the greater Philadelphia region, we continue to be the premier community bank on which our customers rely."

DNB Financial Corporation is a bank holding company whose bank subsidiary, DNB First, National Association, is a community bank headquartered in Downingtown, Pennsylvania with 13 locations. Founded in 1860, DNB First is the oldest National Bank in the greater Philadelphia region. In addition to providing a broad array of consumer and business banking products, DNB offers brokerage and insurance services through DNB Financial Services, and trust services through DNB Advisors. 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 http://www.dnbfirst.com. DNB's Investor Relations Site can be found at http://investor.dnbfirst.com/.

The DNB Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5968

This press release contains statements which, to the extent that they are not recitations of historical fact may constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include financial and other projections as well as statements regarding the Corporation's future plans, objectives, performance, revenues, growth, profits, operating expenses or the Corporation's underlying assumptions. The words "may", "would", "could", "will", "likely", "expect", "anticipate", "intend", "estimate", "plan", "forecast", "project" and "believe" or other similar words and phrases may identify forward-looking statements. Persons reading this press release are cautioned that such statements are only predictions, and that the Corporation's actual future results or performance may be materially different.

Such forward-looking statements involve known and unknown risks, uncertainties. A number of factors, many of which are beyond the Corporation's control, could cause our actual results, events or developments, or industry results, to be materially different from any future results, events or developments expressed, implied or anticipated by such forward-looking statements, and so our business and financial condition and results of operations could be materially and adversely affected. Such factors include, among others, our need for capital; the impact of economic conditions on our business; changes in banking regulation and the possibility that any banking agency approvals we might require for certain activities will not be obtained in a timely manner or at all or will be conditioned in a manner that would impair our ability to implement our business plans; our ability to attract and retain key personnel; competition in our marketplace; and other factors as described in our securities filings. All forward-looking statements and information made herein are based on our current expectations as of the date hereof and speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements.

For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, as well as any changes in risk factors that we may identify in our quarterly or other reports filed with the SEC.

DNB Financial Corporation
Condensed Consolidated Statement of Income (Unaudited)
(Dollars in thousands, except per share data)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2011 2010 2011 2010
 EARNINGS:        
 Interest income $6,634 $6,526 $13,086 $13,177
 Interest expense 1,211 1,772 2,484 4,018
 Net interest income 5,423 4,754 10,602 9,159
 Provision for credit losses 426 400 852 826
 Non-interest income 946 873 1,906 1,746
 Gain on sale of investment securities 1 279 2 975
 Non-interest expense 4,092 4,146 8,346 8,748
 Income before income taxes 1,852 1,360 3,312 2,306
 Income tax expense  564 413 1,009 684
 Net income  1,288 947 2,303 1,622
 Preferred stock dividends and accretion of discount 154 155 309 309
 Net income available to common stockholders $1,134 $792 $1,994 $1,313
 Net income per common share, diluted $0.42 $0.30 $0.69 $0.50
         
         
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
         
   Three Months Ended Six Months Ended
   June 30, June 30,
   2011 2010 2011 2010
          
 GAAP net income  $1,288 $947 $2,303 $1,622
 Gains on sales of securities (1) (279) (2) (975)
 Prepayment penalties on FHLB advances 0 0 0 560
 Income tax adjustment 1 86 1 132
 Non-GAAP net income (Core earnings) $1,288 $754 $2,302 $1,339
         
         
Condensed Consolidated Statement of Financial Condition (Unaudited)
(Dollars in thousands)
         
  June 30, December 31, June 30,  
  2011 2010 2010  
 FINANCIAL POSITION:        
 Cash and cash equivalents  $ 30,479  $ 26,360  $ 28,539  
 Investment securities 155,629 150,592 196,958  
 Loan and leases 417,473 396,171 370,184  
 Allowance for credit losses (6,443) (5,884) (6,028)  
 Net loan and leases 411,030 390,287 364,156  
 Premises and equipment, net 8,073 8,248 8,427  
 Other assets 24,786 26,845 20,957  
 Total assets  $ 629,997  $ 602,332  $ 619,037  
         
 Deposits 518,620 492,746 501,378  
 FHLB advances 20,000 25,000 30,000  
 Repurchase agreements 29,196 23,349 27,435  
 Other borrowings 9,889 11,881 9,911  
 Other liabilities 3,596 4,148 4,484  
 Stockholders' equity 48,696 45,208 45,829  
 Total liabilities and stockholders' equity  $ 629,997  $ 602,332  $ 619,037  
 
DNB Financial Corporation
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)
           
  Quarterly
  2011 2011 2010 2010 2010
  2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Earnings and Per Share Data          
 Net income available to common stockholders $1,134 $860 $900 $839 $792
 Basic earnings per common share $0.42 $0.32 $0.34 $0.32 $0.30
 Diluted earnings per common share $0.42 $0.32 $0.34 $0.32 $0.30
 Dividends per common share $0.03 $0.03 $0.03 $0.03 $0.03
 Book value per common share $13.80 $12.95 $12.55 $13.32 $12.91
 Tangible book value per common share $13.73 $12.90 $12.49 $13.25 $12.84
 Average common shares outstanding 2,670 2,664 2,650 2,640 2,632
 Average diluted common shares outstanding 2,690 2,698 2,655 2,641 2,632
           
Performance Ratios          
 Return on average assets 0.84% 0.68% 0.69% 0.64% 0.62%
 Return on average equity 10.78% 8.95% 8.80% 8.39% 8.53%
 Return on average tangible equity 10.83% 8.99% 8.84% 8.42% 8.56%
 Net interest margin 3.65% 3.61% 3.32% 3.34% 3.23%
 Efficiency ratio 64.25% 69.30% 70.99% 70.78% 69.79%
           
Asset Quality Ratios          
 Net charge-offs to average loans 0.28% 0.00% 1.04% 0.56% 0.23%
 Non-performing loans/Total loans 1.65% 1.67% 1.82% 2.24% 2.41%
 Allowance for credit loss/Total loans 1.54% 1.54% 1.49% 1.59% 1.63%
 Allowance for credit loss/Non-performing loans 93.52% 92.25% 81.46% 70.88% 67.71%
           
Capital Ratios          
Total equity/Total assets 7.73% 7.60% 7.51% 7.74% 7.40%
Tangible common equity/Tangible assets 7.70% 7.57% 7.51% 7.74% 7.40%
Tier 1 leverage ratio 9.42% 9.47% 9.25% 9.03% 8.88%
Tier 1 risk-based capital ratio 13.51% 13.33% 13.03% 13.63% 13.65%
Total risk-based capital ratio 14.77% 14.59% 14.28% 14.88% 14.90%


            

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