For further information, please contact:

Gerald F. Sopp CFO/Executive Vice-President

484.359.3138FOR IMMEDIATE RELEASE 

gsopp@dnbfirst.com (NasdaqCM: DNBF)

DNB Financial Corporation Reports First Quarter 2018 Results

Downingtown PA., April 24, 2018 (GLOBE NEWSWIRE)– DNB Financial Corporation (Nasdaq: DNBF), today reported net income of $2.6 million, or $0.61 per diluted share, for the quarter ended March 31, 2018, compared with $2.4 million, or $0.57 per diluted share, for the same quarter 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. 

William J. Hieb, President and CEO, commented, “Our first quarter results represented a good start to the new year.  Our performance included solid loan, deposit, and wealth management growth along with disciplined expense management.”  Mr. Hieb continued, “Despite our solid commercial loan and core deposit growth, margin pressure continued as we contend with the flatter yield curve and better position our balance sheet for rising short-term interest rates.” 

Highlights 

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Income Statement Summary

Net income of $2.6 million for the first quarter of 2018, generated a return on average assets (“ROAA”) and return on average tangible common equity (“ROTCE”) of 0.97% and 12.1%, respectively. 

Net interest income for the three months ending March 31, 2018 was $9.0 million, which represents a $621,000 decrease from the quarter ended December 31, 2017, and a $205,000 decrease from the quarter ended March 31, 2017.  The year-over-year decline was primarily due to a 16 basis point decrease in the net interest margin to 3.51% for the quarter ended March 31, 2018.  The drop in the net interest margin resulted chiefly from a $379,000 net reduction in purchase accounting marks and the higher cost of interest-bearing liabilities, partially offset by a $21.14 million rise in total average interest-earning assets. For the first quarters of 2018 and 2017, the weighted average yields on total interest-earning assets were 4.24% and 4.16%, respectively, which included purchase accounting adjustments. 

Total interest expense was $1.9 million for the three months ending March 31, 2018, compared with $1.6 million for the three months ending December 31, 2017, and $1.3 million for the first quarter of 2017.  The weighted average rate paid for interest-bearing liabilities was 0.78%, 0.66% and 0.53% for the quarters ending March 31, 2018, December 31, 2017 and March 31, 2017, respectively.  The rise in the weighted average rate year-over-year was primarily due to a $196,000 reduction in purchase accounting marks and an overall increase in market interest rates.

The provision for credit losses was $375,000 for the first quarter of 2018, compared with $325,000 for the same quarter last year.  As of March 31, 2018, the allowance for credit losses was $6.1 million and represented 0.71% of total loans.  Loans acquired in connection with the purchase of East River in 2016 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. 

Total non-interest income for the first quarter of 2018 was $1.3 million, compared with $1.2 million for the same quarter last year.  Wealth management fees were $435,000 for the first quarter of 2018, compared with $374,000 for the first quarter of 2017. Wealth management fees represented approximately 34% of total fee income. 

Non-interest expense was $6.7 million for the first quarter of 2018, which was stable compared with the first quarter of 2017. 

The enactment of the Tax Cuts and Jobs Act in December 2017 provided significant changes including a reduction of the federal corporate tax rate to 21% from 34%, effective January 1, 2018.  The Company’s tax rate for the quarter ended March 31, 2018 was 18.2%, compared with 29.6% for the same quarter, last year.

Balance Sheet Summary

As of March 31, 2018, total assets were $1.1 billion.  Since December 31, 2017, total assets increased 1.7%, primarily due to total loan growth of $18.4 million, or 2.2%.  Total deposits increased $30.6 million, or 3.6%, on a sequential quarter basis mainly due to growth in core deposits.  As of March 31, 2018, total shareholders’ equity was $103.7 million, compared with $101.9 million as of December 31, 2017.  Tangible book value per share was $20.44 as of March 31, 2018, compared with $20.06 as of December 31, 2017.

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As of March 31, 2018, total loans were $864.3 million, or 78.6% of total assets.  Over the past 3 months, total commercial loans increased $19.1 million, or 2.8%.  Commercial mortgage loans increased $13.6 million, or 2.8%, commercial business loans grew $1.6 million, or 1.2%, and commercial construction loans increased $3.8 million, or 5.1%.  As of March 31, 2018, commercial loans totaled $708.5 million and represented 82% of total loans.  Consumer loans, however, declined over the quarter as overall loan demand appeared fairly restrained. The Company’s loan originations have been prudent and conservative underwriting standards have been maintained. 

On a sequential quarter basis, total core deposits increased $36.1 million, or 5.3%, and were 80.2% of total deposits as of March 31, 2018.  As of the same date, noninterest-bearing deposits were 19.3% of total deposits.  Core deposit growth in the first quarter of 2018, was primarily attributable to an increase in money market accounts.  The planned decrease in time deposits was partially offset by an increase in brokered deposits due to the more favorable rates and maturities available during the first quarter of 2018.

Capital ratios continue to exceed all regulatory guidelines.  As of March 31, 2018, the Tier 1 leverage ratio was 9.33%, the Tier 1 risk-based capital was 11.67%, the common equity Tier 1 risk-based capital ratio was 10.63% and the total risk based capital ratio was 13.56%.  As of the same date, the tangible common equity-to-tangible assets ratio was 8.09%.  Intangible assets and goodwill totaled $15.9 million as of March 31, 2018. 

Asset Quality Summary

Asset quality remained strong as net charge-offs were 0.04% (annualized) of total average loans for the quarter ended March 31, 2018.  Total non-performing assets, including loans and other real estate property, were $13.4 million as of March 31, 2018, compared with $12.6 million as of December 31, 2017, and $12.7 million as of March 31, 2017.  The ratio of non-performing loans to total loans was 0.97% as of March 31, 2018, versus 0.89% as of December 31, 2017.    

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 continue to show moderate liability sensitivity to rising rates in 100, 200, 300 and 400 basis point shock scenarios, but risk is increasing. Rate changes ramped in over 24 months also show moderate liability sensitivity.

Non-GAAP Based Financial Measures

The income statement summary and selected financial data contains non-GAAP financial measures calculated using non-GAAP amounts. These measures are tangible book value per common share, return on average tangible equity and tangible equity to tangible assets. Tangible book value per share adjusts the numerator by the amount of Goodwill and Other Intangible Assets (reduction of Shareholders' Equity). Return on average tangible equity adjusts the denominator by the amount of Goodwill and Other Intangible Assets (reduction of Shareholders’ Equity). Tangible equity to tangible assets adjusts the numerator by the amount of Goodwill and Other Intangible Assets (reduction of Shareholders’ Equity)

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and adjust the denominator by the amount of Goodwill and Other Intangible Assets (reduction of Total Assets). Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of non-GAAP measures provides additional clarity when assessing our financial results and use of equity. Disclosures of this type should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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. 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: 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. Further, DNB’s expectations with respect to the effects of the new tax law could be affected by future clarifications, amendments, and interpretations of such law. Annualized, pro forma, projected and estimated numbers presented herein are presented for illustrative purpose only, are not forecasts and may not reflect actual results.



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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.



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