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 Fourth Quarter and Full-Year 2016 Results

Downingtown PA., January 24, 2017 (GLOBENEWSIRE)– DNB Financial Corporation (Nasdaq: DNBF), today reported net income available to common stockholders in accordance with generally accepted accounting principles (“GAAP”) of $2.3 million, or $0.55 per diluted share, for the quarter ending December 31, 2016, compared with $1.4 million, or $0.48 per diluted share for the same quarter, in 2015.  For the year ending December 31, 2016, net income available to common shareholders was $5.0 million, or $1.55 per share, compared with $5.1 million, or $1.79 per share for the corresponding prior year period.

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"), which added approximately $311 million in loans, and $226 million in deposits.  The system integration and rebranding was successfully completed on November 4, 2016. 

On a core basis, the Company reported net income available to common stockholders of $2.0 million, or $0.48 per diluted share, for the quarter ending December 31, 2016, compared with $1.3 million, or $0.45 per share, for the corresponding prior year quarter.  Core earnings, which is a non-GAAP measure of net income, excludes merger-related expenses of $280,000, purchase accounting adjustments of $761,000, amortization of intangible assets of $27,000, and an associated income tax adjustment of $165,000 for the three months ending December 31, 2016.  Core earnings were $5.5 million, or $1.70 per diluted share, for the year ending December 31, 2016, compared with $4.9 million, or $1.74 per diluted share, for the same period, in 2015.  Please see the Reconciliation of Non-GAAP Financial Measures on page 6 of the release.  Non-GAAP financial measures include references to the terms “core” or “operating”.

William J. Hieb, President and CEO, commented, “2016 was another year of strong operating performance highlighted by the successful acquisition and integration of East River Bank in the fourth quarter.  Core earnings remained solid throughout the year and we are particularly pleased with our strong credit quality and continued growth of our wealth management business.” 



Highlights











Income Statement Summary

Based on core earnings of $2.0 million, the Company’s performance for the quarter ending December 31, 2016 generated a return on average assets (“ROAA”) and return on average tangible common equity (“ROTCE”) of 0.74% and 10.34%, respectively.  The core ROAA and ROTCE for the same quarter last year were 0.69% and 8.67%, respectively.  Please see the “Reconciliation of Non-GAAP Financial Measures” on page 6 of the release.

Total interest income for the three months ending December 31, 2016 was $10.6 million, which represented a $4.3 million increase from the quarter ending September 30, 2016, and a $4.4 million increase for the three months ending December 31, 2015.  The year-over-year increase was primarily due to a 72.8% rise in total average loans and a 57 basis point increase in the yield on earning assets for the quarter ending December 31, 2016.  The main driver for the increase in both volume and rate was the East River acquisition.  The weighted average yield on total interest-earning assets included purchase accounting fair value adjustments.  On a core basis, which excludes the purchase accounting adjustments, the net interest margin was 3.33% for the three months ended December 31, 2016.

Total interest expense was $1.2 million for the three months ending December 31, 2016, compared with $760,000 for the third quarter of 2016, and $717,000 for the fourth quarter of 2015.  The year-over-year increase was primarily due to a higher amount of interest-bearing liabilities, largely due to the East River acquisition, as the weighted average cost of funds remains at historically low levels.

The loan loss provision was $100,000 for the most recent quarter compared with $290,000 for the three months ended December 31, 2015.  As of December 31, 2016, the Company’s allowance for loan losses was $5.4 million and represented 0.66% of total loans.  Loans acquired in connection with the purchase of East River have been 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 loan losses. 

At December 31, 2016, the allowance for loan losses as a percentage of originated loans, which represents all loans other than those acquired, was 1.04%. 

Total non-interest income for the fourth quarter of 2016 was $1.3 million, compared with $1.3 million for the same quarter, in 2015.  Total non-interest income for the fourth quarter of 2015, included a $120,000 gain from the insurance proceeds associated with a fire at one of the Bank’s locations. Wealth management fees were $403,000 for the fourth quarter of 2016, compared with $393,000 for the third quarter of 2016, and $394,000 for the quarter ending December 31, 2015. 

Non-interest expense was $7.3 million for the fourth quarter of 2016, compared with $6.7 million for the third quarter of 2016, and $4.7 million for the quarter ending December 31, 2015.  Non-interest expense for the quarter ending December 31, 2016 included merger-related costs of $280,000 and $480,000 for the write down of OREO property to its net realizable value. Compared to the third quarter of 2016, in addition to the write down of OREO property mentioned above, the increase in non interest expense was largely due to the East River acquisition. Compared to the fourth quarter of 2015, increases were largely due to addition of East River staff, offices and equipment as well as related due diligence and merger expense and the write down of OREO property mentioned above.

Balance Sheet Summary

Balance sheet growth, including intangible assets, on both a sequential quarter basis and year-over-year basis was largely attributable to the acquisition of East River. As of December 31 2016, total assets were $1.1 billion compared with $748.8 million as of December 31, 2015.  On a sequential quarter basis, total assets increased $301.1 million, or 39.1% (not annualized). 

On a sequential quarter basis, total loans increased $308.1 million, or 60.1% (not annualized), to $817.5 million as of December 31, 2016.  As of the same date, total loans were 76.3% of total assets.  The loan growth occurred primarily in the commercial real estate loan category.  As of December 31, 2016, the loan-to-deposit ratio was 92.3%.

Total deposits were $885.2 million as of December 31, 2016, compared with $606.3 million as of December 31, 2015, an increase of $278.9 million or 46.0%, and increased $239.6 million, or 37.1% (not annualized), on a sequential quarter basis. As of December 31, 2016, total shareholders’ equity was $94.8 million, compared with $55.5 million as of December 31, 2015.  Tangible book value per share was $18.56 as of December 31, 2016. Intangible assets were $16.1 million as of December 31, 2016, including goodwill of $15.5 million. 

Capital ratios continue to exceed minimum regulatory standards for well-capitalized institutions.  As of December 31, 2016, the tier 1 leverage ratio was 8.42%, the tier 1 risk-based capital was 10.65%, the common equity tier 1 risk-based capital ratio was 9.59% and the total risk-based capital ratio was 12.48%. As of the same date, the tangible common equity-to-tangible assets ratio was 7.46%. 

Asset Quality Summary

Asset quality remained solid as net charge-offs were only 0.01% of total average loans for the quarter ending December 31, 2016, compared with 0.03% for the quarter ending September 30, 2016, and 0.07% for the quarter ending December 31, 2015.  Total non-performing assets, including loans and other real estate property, were $12.1 million as of December 31, 2016, or 1.13% of total assets, compared with $9.9 million as of September 31, 2016, or 1.36% of total assets. The total amount of non-performing assets increased due to loans and other assets acquired with the East River acquisition.  The ratio of non-performing loans to total loans was 1.14% as of December 31, 2016. 

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.





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