DNBF DNB Financial Corporation

DNB Financial Corporation (Nasdaq:DNBF), today reported net income available to common stockholders of $1.4 million, or $0.48 per diluted share, for the quarter ending December 31, 2015, compared with $1.4 million, or $0.50 per diluted share, for the same quarter, in 2014.  Net income for the prior year quarter included gains on the sale of securities of $435,000, or $0.10 per share (after-tax), versus only $4,000 of gains on the sale of securities for the quarter ending December 31, 2015.  Net income available to common shareholders for the year ending December 31, 2015 was $5.2 million, or $1.79 per diluted share, compared with $4.7 million or $1.66 per diluted share, for 2014. 

DNB Financial Corporation (the “Company”) is the parent of DNB First, National Association, one of the first nationally-chartered community banks to serve the greater Philadelphia region.

William J. Hieb, President and CEO, stated, "On January 11th, we announced the passing of Bill Latoff, our Chairman and CEO.  The loss of Bill is very difficult for everyone at DNB, but our team remains committed to building long-term shareholder value, through a continued focus on our strategic plan and corporate values.  Our operating results for the year and quarter clearly indicate that we have kept our focus on the business and the long-term success of DNB. We are particularly pleased with our loan growth, credit quality, and wealth management business."

Fourth Quarter and Full Year Highlights

• Wealth management assets under care increased 16.9% to $191.5 million as of December 31, 2015, from $163.8 million at year-end 2014. 
• Total loans increased 5.7% on a year-over-year basis and 2.4% (not annualized) on a sequential quarter basis. 
• Asset quality remained strong.  As of December 31, 2015, non-performing loans were only 1.06% of total loans compared with 1.50% as of December 31, 2014.
• The net interest margin remained fairly stable through 2015 and was 3.14% for the fourth quarter.  Core deposits increased slightly in 2015, and were 86.1% of total deposits as of December 31, 2015.
• The Company paid a quarterly cash dividend of $0.07 to common shareholders on December 21, 2015. 
• On December 31, 2015, the Company redeemed the remaining 3,250 shares of Non-Cumulative Perpetual Preferred Stock ($1,000 per share) that was issued to the U.S. Treasury Department in connection with the Small Business Lending Fund (SBLF) program.

Income Statement Summary

The Company’s performance resulted in a return on average assets of 0.74% and 0.69% for the fourth quarter and 12 months ending December 31, 2015, respectively.  The return on average equity was 9.3% and 8.7% for the same periods, respectively.

Total interest income for the three months ending December 31, 2015 was $6.2 million, which represented a $178,000 or 3.0% increase from the quarter ending December 31, 2014, and a $29,000, or 0.5% (not annualized), increase from $6.2 million for the three months ending September 30, 2015.  Total interest expense increased to $717,000 for the fourth quarter of 2015, compared with $561,000 for the comparable quarter of 2014, and $711,000 for the three months ending September 30, 2015.  The year-over-year increase was primarily due to the issuance of $9.8 million of subordinated debt at the end of the first quarter of 2015.  The weighted average cost of funds remained at a historically low level.  The proceeds from the subordinated debt were used for the partial redemption of the preferred stock issued in connection with the SBLF program.

The net interest margin for the fourth quarter of 2015 was 3.14%, compared with 3.25% for the fourth quarter of 2014 and 3.13% for the third quarter of 2015.  On a consecutive quarter basis, the Company's net interest margin was relatively stable, despite continuing pressure due to the low-interest rate environment and intense pricing competition for quality lending business.  As of December 31, 2015, the loan-to-deposit ratio was 79.5%, which indicates that the Company is largely core-funded. 

Total non-interest income for the fourth quarter of 2015 was $1.3 million, compared with $1.5 million for the prior year quarter.  The decrease was largely due to reduced gains from the sale of investment securities, which totaled $4,000 for the fourth quarter of 2015 compared with $435,000 for the same quarter, last year.  This decrease during the quarter ending December 31, 2015 was partially offset by a gain from insurance proceeds of $120,000 associated with a fire at one of the Bank’s locations.  Wealth management fees were $394,000 for the fourth quarter of 2015 compared with $335,000 for the quarter ending December 31, 2014 and $317,000 for the quarter ending September 30, 2015.  Wealth management fees represented nearly one-third of total fee income. 

Non-interest expense was $4.7 million for the fourth quarter of 2015, which represented a slight decrease from that of the corresponding quarter last year, reflecting management’s disciplined expense controls.  Annual increases in salary and employee benefit costs were largely offset by declines in occupancy expense, as well as professional and consulting fees.

The effective tax rate for the quarter ending December 31, 2015 was 21.5%, compared with 28.1% for the corresponding quarter in 2014.  The primary reason for the lower effective tax rate was an increase in tax exempt loans to municipalities and tax exempt municipal investment securities.

Balance Sheet Summary

As of December 31, 2015, total assets were $748.8 million compared with $741.9 million as of September 30, 2015, and $723.3 million as of December 31, 2014.  Total assets grew $6.9 million, or 1.0% (not annualized), on a sequential quarter basis largely due to loan growth, which was partially offset by a $7.2 million decrease in investment securities.  On a year-over-year basis, total assets increased $25.5 million, or 3.5%, primarily due to the solid loan growth, which reflected the Company’s commercial banking initiatives and attractive market areas.  Total deposits remained relatively stable throughout 2015.  As of December 31, 2015, total shareholders’ equity was $55.5 million, compared with $63.9 million as of December 31, 2014.  The $8.4 million decrease was primarily due to the full redemption of $13.0 million of preferred stock that had been issued in connection with the SBLF Program.  Tangible book value per share was $19.58 as of December 31, 2015, compared with $19.57 as of September 30, 2015, and $18.26 as of year-end, 2014.

Total loans grew $26.2 million, or 5.7%, to $481.8 million as of December 31, 2015, from $455.6 million as of December 31, 2014.  On a sequential quarter basis, total loans increased 2.4% (not annualized) from $470.4 million as of September 30, 2015.  As of December 31, 2015, total loans were 64.3% of total assets compared with 63.0% as of December 31, 2014.  Loan growth has been prudent; and the Company remains challenged to grow commercial-oriented loans in a competitive market, while maintaining its conservative underwriting standards.

On a year-over basis, total core deposits increased $3.7 million to $521.8 million as of December 31, 2015.  On a sequential quarter basis, total core deposits grew $1.7 million.  Core deposits were 86.1% of total deposits as of December 31, 2015.  Total deposits were $606.3 million as of December 31, 2015, compared with $608.5 million as of September 30, 2015 and $605.1 million as of December 31, 2014.

Capital ratios continue to exceed minimum regulatory standards for well capitalized institutions.  At December 31, 2015, the Tier 1 leverage ratio was 8.94%, Tier 1 risk-based capital was 12.08%, and total risk based capital ratio was 14.79%. As of the same date, the tangible common equity-to-tangible assets ratio was 7.40%. 

Asset Quality Summary

Asset quality remained strong.  Net charge-offs were only 0.07% of total average loans for the quarter ending December 31, 2015, compared with 0.41% for the quarter ending September 30, 2015. The net charge-off ratio for fiscal 2015 was 0.23% compared with 0.19% for fiscal 2014.  Total non-performing assets, including loans and other real estate property, were $7.7 million as of December 31, 2015 compared with $7.8 million for December 31, 2014 and $6.5 million as of September 30, 2015.  The ratio of non-performing assets to total assets was 1.02% and non-performing loans were 1.06% of total loans as of December 31, 2015.  As of the same date, the allowance for loan losses to total loans ratio was 1.02%.

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. DNB has an Asset Liability Management Committee that actively monitors and manages the Company’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.

DNB Financial Corporation is a bank holding company whose bank subsidiary, DNB First, National Association, is a community bank headquartered in Downingtown, Pennsylvania with 12 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

DNB Financial Corporation (the "Company"), may from time to time make written or oral "forward-looking statements," including statements contained in the Corporation's filings with the Securities and Exchange Commission including this press release and in its reports to stockholders and in other communications by the Corporation, which are made in good faith by the Corporation pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

These forward-looking statements include statements with respect to the Corporation'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 the Corporation'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. The following factors, among others, could cause the Corporation's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Corporation conducts 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 recent 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 of the Corporation 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 the Corporation's products and services; the success of the Corporation 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; acquisitions; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms; and the success of the Corporation at managing the risks involved in the foregoing.

The Corporation 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 the Corporation on its website or otherwise. The Corporation 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 the Corporation 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 Securities and Exchange Commission, 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								Twelve Months Ended
	December 31,								December 31,
		2015				2014				2015				2014
EARNINGS:
Interest income	$	6,190			$	6,012			$	24,478			$	23,596
Interest expense		717				561				2,712				2,311
Net interest income		5,473				5,451				21,766				21,285
Provision for credit losses		290				200				1,105				1,130
Non-interest income		1,107				1,063				4,447				4,100
Gain from insurance proceeds		120				0				120				0
Gain on sale of investment securities		4				435				78				858
Gain on sale of SBA loans		68				0				484				0
(Gain) loss on sale / write-down of OREO and ORA		(20	)			0				134				7
Non-interest expense		4,742				4,732				18,895				18,625
Income before income taxes		1,760				2,017				6,761				6,481
Income tax expense		378				566				1,503				1,677
Net income		1,382				1,451				5,258				4,804
Preferred stock dividends and accretion of discount		8				32				50				135
Net income available to common stockholders	$	1,374			$	1,419			$	5,208			$	4,669
Net income per common share, diluted	$	0.48			$	0.50			$	1.79			$	1.66
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
	December 31,				December 31,
		2015				2014
FINANCIAL POSITION:
Cash and cash equivalents	$	21,119			$	12,504
Investment securities		220,208				231,656
Loans held for sale		0				617
Loans		481,758				455,603
Allowance for credit losses		(4,935	)			(4,906	)
Net loans		476,823				450,697
Premises and equipment, net		6,806				7,668
Other assets		23,862				20,188
Total assets	$	748,818			$	723,330
Deposits	$	606,275			$	605,083
FHLB advances		30,000				20,000
Repurchase agreements		32,416				19,221
Other borrowings		9,743				9,784
Subordinated debt		9,750				0
Other liabilities		5,146				5,334
Stockholders' equity		55,488				63,908
Total liabilities and stockholders' equity	$	748,818			$	723,330

DNB Financial Corporation
Selected Financial Data (Unaudited)
(In thousands, except per share data)
	Quarterly
		2015				2015				2015				2015				2014
	4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr
Earnings and Per Share Data
Net income available to common stockholders	$	1,374			$	1,261			$	1,227			$	1,226			$	1,419
Basic earnings per common share	$	0.49			$	0.45			$	0.44			$	0.44			$	0.51
Diluted earnings per common share	$	0.48			$	0.45			$	0.43			$	0.43			$	0.50
Dividends per common share	$	0.07			$	0.07			$	0.07			$	0.07			$	0.07
Book value per common share	$	19.65			$	19.64			$	19.04			$	18.91			$	18.32
Tangible book value per common share	$	19.58			$	19.57			$	18.96			$	18.83			$	18.26
Average common shares outstanding		2,812				2,807				2,802				2,786				2,776
Average diluted common shares outstanding		2,857				2,852				2,848				2,833				2,822
Performance Ratios
Return on average assets		0.74	%			0.68	%			0.66	%			0.69	%			0.82	%
Return on average equity		9.32	%			8.71	%			8.75	%			8.13	%			9.04	%
Return on average tangible equity		9.35	%			8.75	%			8.79	%			8.15	%			9.06	%
Net interest margin		3.14	%			3.13	%			3.11	%			3.14	%			3.25	%
Efficiency ratio		68.27	%			68.09	%			67.29	%			69.87	%			70.45	%
Wtd average yield on earning assets		3.53	%			3.52	%			3.48	%			3.48	%			3.57	%
Asset Quality Ratios
Net charge-offs to average loans		0.07	%			0.41	%			0.43	%			0.01	%			0.16	%
Non-performing loans/Total loans		1.06	%			0.90	%			0.98	%			1.47	%			1.50	%
Non-performing assets/Total assets		1.02	%			0.87	%			0.88	%			1.03	%			1.07	%
Allowance for credit loss/Total loans		1.02	%			1.01	%			1.08	%			1.12	%			1.08	%
Allowance for credit loss/Non-performing loans		96.91	%			111.32	%			110.29	%			76.24	%			71.59	%
Capital Ratios
Total equity/Total assets		7.41	%			7.87	%			7.49	%			7.51	%			8.84	%
Tangible equity/Tangible assets		7.40	%			7.85	%			7.48	%			7.49	%			8.82	%
Tangible common equity/Tangible assets		7.40	%			7.42	%			7.05	%			7.06	%			7.02	%
Tier 1 leverage ratio		8.94	%			9.23	%			9.02	%			8.98	%			10.55	%
Common equity tier 1 risk-based capital ratio		10.45	%			10.46	%			10.17	%			10.28	%		n/a
Tier 1 risk-based capital ratio		12.08	%			12.74	%			12.43	%			12.63	%			14.90	%
Total risk-based capital ratio		14.79	%			15.46	%			15.21	%			15.51	%			15.92	%
Wealth Management
Assets under care*	$	191,529				184,535				189,411				178,339				163,807
*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
	Dec 31,				Sept 30,				June 30,				Mar 31,				Dec 31,
		2015				2015				2015				2015				2014
EARNINGS:
Interest income	$	6,190			$	6,161			$	6,131			$	5,996			$	6,012
Interest expense		717				711				678				606				561
Net interest income		5,473				5,450				5,453				5,390				5,451
Provision for credit losses		290				100				415				300				200
Non-interest income		1,107				1,027				1,142				1,051				1,063
Gain from insurance proceeds		120				0				0				0				0
Gain on sale of investment securities		4				10				11				53				435
Gain on sale of SBA loans		68				0				185				231				0
(Gain) loss on sale / write-down of OREO and ORA		(20	)			154				0				0				0
Non-interest expense		4,742				4,605				4,724				4,824				4,732
Income before income taxes		1,760				1,628				1,652				1,601				2,017
Income tax expense		378				359				417				349				566
Net income		1,382				1,269				1,235				1,252				1,451
Preferred stock dividends and accretion of discount		8				8				8				26				32
Net income available to common stockholders	$	1,374			$	1,261			$	1,227			$	1,226			$	1,419
Net income per common share, diluted	$	0.48			$	0.45			$	0.43			$	0.43			$	0.50
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
	Dec 31,				Sept 30,				June 30,				Mar 31,				Dec 31,
		2015				2015				2015				2015				2014
FINANCIAL POSITION:
Cash and cash equivalents	$	21,119			$	18,959			$	27,493			$	28,335			$	12,504
Investment securities		220,208				227,363				231,712				232,958				231,656
Loans held for sale		0				0				0				0				617
Loans and leases		481,758				470,396				472,335				464,100				455,603
Allowance for credit losses		(4,935	)			(4,729	)			(5,108	)			(5,190	)			(4,906	)
Net loans and leases		476,823				465,667				467,227				458,910				450,697
Premises and equipment, net		6,806				6,630				6,629				7,490				7,668
Other assets		23,862				23,272				22,882				20,747				20,188
Total assets	$	748,818			$	741,891			$	755,943			$	748,440			$	723,330
Demand Deposits	$	125,581			$	120,018			$	122,642			$	113,419			$	102,107
NOW		185,973				189,502				209,606				215,799				205,816
Money markets		137,555				139,213				145,283				144,648				143,483
Savings		72,660				71,316				73,461				70,363				66,634
Core Deposits		521,769				520,049				550,992				544,229				518,040
Time deposits		66,018				69,744				56,729				72,784				76,805
Brokered deposits		18,488				18,665				18,655				10,248				10,238
Total Deposits		606,275				608,458				626,376				627,261				605,083
FHLB advances		30,000				20,000				20,000				20,000				20,000
Repurchase agreements		32,416				30,501				28,211				20,316				19,221
Subordinated debt		9,750				9,750				9,750				0				0
Other borrowings		9,743				9,754				9,764				19,524				9,784
Other liabilities		5,146				5,060				5,218				5,166				5,334
Stockholders' equity		55,488				58,368				56,624				56,173				63,908
Total liabilities and stockholders' equity	$	748,818			$	741,891			$	755,943			$	748,440			$	723,330

DNB Financial Corporation
Condensed Consolidated Statements of Financial Condition - Quarterly Average Balances (Unaudited)
(Dollars in thousands)
	Dec 31,				Sept 30,				June 30,				Mar 30,				Dec 31,
	2015				2015				2015				2015				2014
FINANCIAL POSITION:
Cash and cash equivalents	$	19,532			$	19,820			$	26,909			$	18,037			$	24,709
Investment securities		227,936				230,402				239,364				237,697				209,700
Loans held for sale		61				74				96				66				61
Loans and leases		473,643				469,896				459,464				460,585				450,040
Allowance for credit losses		(4,831	)			(5,182	)			(5,280	)			(5,000	)			(4,983	)
Net loans and leases		468,812				464,714				454,184				455,585				445,057
Premises and equipment, net		6,609				6,587				7,461				7,607				7,797
Other assets		19,415				20,021				17,339				17,006				17,199
Total assets	$	742,365			$	741,618			$	745,353			$	735,998			$	704,523
Demand Deposits	$	122,235			$	118,282			$	114,458			$	108,452			$	108,736
NOW		183,129				197,802				210,677				211,875				184,505
Money markets		140,136				144,115				144,927				143,976				144,649
Savings		71,637				71,740				71,762				68,238				65,812
Core Deposits		517,137				531,939				541,824				532,541				503,702
Time deposits		68,731				56,702				70,079				74,618				79,233
Brokered deposits		18,638				18,658				11,543				10,241				10,224
Total Deposits		604,506				607,299				623,446				617,400				593,159
FHLB advances		22,391				20,000				20,000				20,000				13,913
Repurchase agreements		31,914				31,732				20,614				17,812				19,354
Subordinated Debt		9,750				9,750				9,750				2,925				0
Other borrowings		9,875				10,000				9,791				10,214				9,915
Other liabilities		5,070				5,073				5,156				5,161				4,499
Stockholders' equity		58,859				57,764				56,596				62,486				63,683
Total liabilities and stockholders' equity	$	742,365			$	741,618			$	745,353			$	735,998			$	704,523

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