Unaudited Pro Forma Per Share Data

For The Twelve Months Ended December 31, 2019

($ in Thousands, Except Per Share Data)





Fidelity Historical

MNB
Historical

Pro Forma Combined (1)(2)(3)

Pro Forma Equivalent MNB Share (4)

For The Twelve Months Ended December 31, 2019:

Earnings per share

Net income per share (Basic)

$

$

$

$

Net income per share (Diluted)



Cash Dividends Per Share

$

$

$

$



Book Value per common share as of December 31, 2019

$

$

$

$



Tangible Book Value per common share as of December 31, 2019

$

$

$

$

1)

The pro forma combined basic earnings and diluted earnings per share of Fidelity common stock are based on the pro forma combined net income for Fidelity and MNB divided by the pro forma common shares or diluted common shares of the combined entities. The pro forma information includes adjustments related to the fair value of assets and liabilities of MNB and is subject to adjustment as additional information becomes available and as a final merger date analyses are performed.

2)

The pro forma earnings do not include anticipated cost savings or revenue enhancements, nor do they  include one-time merger-related expenses which will be expensed against income. Fidelity and MNB currently anticipate potential fully integrated annual pre-tax cost savings following the merger will be approximately $3.1 million, with 75.0% expected to be realized in year 1 after the merger, but there is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all.

3)

The pro forma combined book value and tangible book value per share data does include the impact of merger-related expenses.  Such expenses are currently estimated to consist of MNB after-tax charges currently of $364 thousand and Fidelity after-tax estimated charges of $2.3 million. The pro forma combined book value and tangible book value per share of Fidelity common stock is based on the pro forma combined common stockholders’ equity of Fidelity and MNB divided by total pro forma common shares of the combined entity.

4)

Pro forma equivalent MNB per share amount is calculated by multiplying the pro forma combined per share amount by the exchange ratio of 1.039 in accordance with the reorganization agreement.



Unaudited Combined Pro Forma Balance Sheets as of December 31, 2019

($ In Thousands, Except Per Share Data)





Fidelity D&D Bancorp, Inc.

MNB Corporation

Pro Forma Adjustments

Pro Forma Combined

ASSETS



Cash and due from banks

$

$

$

 -

$

Interest-bearing deposits with financial institutions

 -

   Total cash and cash equivalents

 -



Available-for-sale securities

 -

(3)

Held-to-maturity securities

 -

 -

 -

 -

Restricted regulatory equity

 -

Loans and leases

(4)

Allowance for loan losses

(5)

    Loans, net of allowance for loan losses

Loans held-for-sale

 -

Foreclosed assets held-for-sale

 -

 -

0

Bank premises and equipment

(6)

Leased property under finance leases, net

 -

 -

Right-of-use assets

 -

Cash surrender value of bank owned life insurance

 -

Accrued interest receivable

 -

Goodwill

 -

(1)

Intangible Assets

 -

 -

(7)

Other assets

(8)

   Total Assets

$

$

$

$



LIABILITIES AND STOCKHOLDERS' EQUITY



LIABILITIES

Deposits:

Interest-bearing

$

$

$

(9)

$

Non-interest-bearing

 -

Total Deposits



Accrued interest payable and other liabilities

(10)

Finance lease obligation

 -

 -

Operating lease liabilities

 -

0

Short-term borrowings

 -

0

FHLB advances

(11)

Total Liabilities



STOCKHOLDERS' EQUITY

Preferred stock

 -

 -

 -

 -

Capital stock no par value

(1)(2)

Additional paid-in capital

 -

(2)

 -

Retained earnings

(2)(9)

Treasury stock

 -

(2)

 -

Accumulated other comprehensive income (loss)

(2)

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

$

$

$

$



Per Share Data

Common Shares Outstanding

(1)

Book Value per Share

$

$

$

Tangible Book Value per Share

$

$

$



Unaudited Pro Forma Combined Statement of Operations for twelve months ended December 31, 2019

($ In Thousands, Except Per Share Data)





Fidelity D&D
Bancorp, Inc.

MNB Corporation

Pro Forma Adjustments

Pro Forma Combined

INTEREST AND DIVIDEND INCOME

Loans and leases

$

$

$

(4)

$

Interest-bearing deposits with financial institutions

 -

Restricted regulatory securities

 -

Investment securities

(3)

Total Interest Income



INTEREST EXPENSE

Deposits

(9)

Securities sold under repurchase agreements

 -

 -

 -

 -

Other short-term borrowings and other

 -

FHLB advances

 -

(11)

Total Interest Expense

Net Interest Income



PROVISION FOR LOAN LOSSES

 -



Net Interest Income after Provision for Loan Losses



OTHER INCOME

Service charges on deposit accounts

 -

Interchange fees

 -

Fees from trust fiduciary activities

 -

 -

Fees from financial services

 -

Service charges on loans

 -

 -

Fees and other revenue

 -

Earnings on bank-owned life insurance

 -

Gain (loss) on write-down, sale or disposal of:

 -

 -

Loans

 -

Available-for-sale debt securities

 -

Equity securities

 -

 -

 -

 -

Other

 -

 -

Total Other Income

 -



OTHER EXPENSES

Salaries and employee benefits

 -

Premises and equipment

(6)

Advertising and marketing

 -

Professional services

 -

Data processing and communication

 -

Automated transaction processing

 -

 -

Merger related expenses

(10)

 -

Office supplies and postage

 -

FDIC assessment

 -

PA shares tax

 -

Intangible asset amortization

 -

 -

(8)

Loan collection

 -

 -

Other real estate owned

 -

 -

Other

 -

Total Other Expenses



Income before Income Taxes



PROVISION FOR INCOME TAXES

(9)

Net income

$

$

$

$



Earnings per common share:

Basic

$

$

$

$

Diluted

$

$

$

$



Weighted average common shares outstanding:

Basic

(1)

Diluted

(1)

1)

The acquisition will be effected by the issuance of shares of Fidelity common stock to MNB’s shareholders. The pro forma information is based upon the assumption that the total number of shares of MNB common stock outstanding immediately prior to the completion of the merger will be 1,132,873, the number of shares outstanding as of December 31, 2019.  Pursuant to the terms of the reorganization agreement, shareholders of MNB will receive 1.039 shares of Fidelity common stock for each share of MNB stock they own. 



Summary of Purchase Price Calculation and Goodwill Resulting from Merger

Reconciliation of Pro Forma Shares Outstanding at December 31, 2019

($ in Thousands, Except Per Share Data)







12/31/2019

Purchase Price Consideration in Common Stock

MNB common shares settled for stock

Exchange Ratio

Fidelity shares to be issued

Value assigned to Fidelity common shares (closing price as of 04/30/20)

$

Purchase price assigned to Fidelity common shares exchanged for MNB stock

$



Net Assets Acquired:

MNB stockholders’ equity

$

MNB goodwill and intangibles

 -



Estimated adjustments to reflect assets acquired at fair value:

Loan - ASC 310-20 interest rate fair value

Loan - ASC 310-20 general credit fair value

Loan - ASC 310-30 acquired with deteriorated credit quality

ASC 310-20 deferred loan expense, net

Allowance for loan losses

Core deposit intangible

Premises

Deferred tax assets



Estimated adjustments to reflect liabilities acquired at fair value:

Time deposits

FHLB borrowings

Seller transaction merger liabilities accrued at closing

Net assets acquired

Goodwill resulting from merger

$





Reconcilement of Pro Forma Shares Outstanding

MNB shares outstanding

Exchange ratio

Fidelity shares to be issued to MNB

Fidelity shares outstanding

Pro Forma Fidelity shares outstanding

Percentage ownership for Fidelity

Percentage ownership for MNB

2)

Balance sheet adjustment to reflect the issuance of shares of Fidelity common stock with no par value of per share in connection with the acquisition and the adjustments to shareholders’ equity for the reclassification of MNB historical equity accounts (common stock, accumulated other comprehensive loss, and undivided profits) into surplus and adjustment for goodwill created in the transaction.

3)

Securities available-for-sale were recorded at fair value at December 31, 2019 therefore no balance sheet adjustment is necessary. Income statement adjustment includes prospective reclassification of existing available-for-sale securities fair value adjustment to an amortizing premium which will be amortized into income based

on the expected life.  This investment adjustment is expected to decrease pro forma pre-tax interest income by $125 thousand in the first year following consummation.   

4)

Balance sheet adjustment includes fair value premium of $3.3 million based on current discount rates of similar loans, $6.9 million fair value general credit risk loan discount, $1.5 million ASC 310-30 fair value specific credit discount and $578 thousand ASC 310-20 deferred loan expenses, net reversal. The interest rate and general credit adjustments and the ASC 310-30 accretable yield will be substantially recognized over the expected life of the loans and is expected to increase pro forma pre-tax interest income by $873 thousand in the first year following consummation.      No pro forma earnings impact was assumed from the ASC 310-20 deferred loan expenses, net reversals.

5)

Balance sheet adjustment for the reversal of the MNB allowance for loan losses in accordance with acquisition method of accounting to reflect the acquired loans at fair value.  

6)

Balance sheet adjustment to reflect a $67 thousand fair value write-up of bank premises amortized over the estimated life. These adjustments are expected to increase pro forma expense by $12 thousand in the first year following consummation.  

7)

Balance sheet and income statement adjustments to reflect a fair value premium of $254 thousand for MNB’s certificates of deposit. These adjustments will be recognized using an amortization method based upon the maturities of the deposit liabilities. These adjustments are expected to decrease pro forma pre-tax interest expense by $246 thousand in the first year following consummation.

8)

Balance sheet and income statement adjustment to intangible assets to reflect the fair value of $2.0 million for acquired core deposit intangible asset and the related amortization adjustment based upon its expected life. The amortization of the new core deposit intangible is expected to increase pro forma pre-tax expense by $659 thousand in the first year following consummation.

9)

Balance sheet and income statement adjustment to reflect an effective tax rate of 21.00%.

10)

Balance sheet adjustment to reflect the accrual of unrecognized one-time merger-related charges for Fidelity and MNB: (a) MNB pre-tax charges are estimated at $420 thousand ($364 thousand after-tax) and are included as a pro forma fair value liability accrual, and (b) Fidelity pre-tax charges are estimated at $2.7 million ($2.3 million after-tax) and are included as a pro forma liability accrual with the after-tax cost as reduction to retained earnings.  The 2019 income statement includes an adjustment to exclude period merger related expenses for both Fidelity and MNB.  It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible.     Fidelity and MNB currently anticipate potential annual pre-tax cost savings following the merger will be approximately $3.1 million, with 75.0% expected to be realized in year 1 after the merger, but there is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all.

11)

Balance sheet adjustment to reflect a $327 thousand fair value premium for FHLB Borrowings.  The Company decided to pay off the borrowings post-closing therefore no amortization is warranted.