Unaudited Pro Forma Per Share Data

For The Three Months Ended March 31, 2021





Fidelity Historical

Landmark
Historical

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

Pro Forma Equivalent Landmark Share (4)

For the three months ended March 31, 2021:

Earnings per share

Net income per share (basic)

$

$

$

$

Net income per share (diluted)



Cash dividends per share

$

$

$

$



Book value per common share as of March 31, 2021

$

$

$

$



Tangible book value per common share as of March 31, 2021

$

$

$

$

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 Landmark 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 Landmark and is subject to adjustment as additional information becomes available and as 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. 

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 Landmark after-tax charges currently of $567 thousand and Fidelity after-tax estimated charges of $3.2 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 shareholders’ equity of Fidelity and Landmark divided by total pro forma common shares of the combined entity.

4)

Pro forma equivalent Landmark per share amount is calculated by multiplying the Fidelity pro forma combined per share amount by the exchange ratio of 0.272 in accordance with the reorganization agreement.



Unaudited Pro Forma Per Share Data

For The Twelve Months Ended December 31, 2020





Fidelity Historical

Landmark
Historical

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

Pro Forma Equivalent Landmark Share (4)

For the twelve months ended December 31, 2020:

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, 2020

$

$

$

$



Tangible book value per common share as of December 31, 2020

$

$

$

$

1)

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

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 Landmark after-tax charges currently of $567 thousand and Fidelity after-tax estimated charges of $3.2 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 shareholders’ equity of Fidelity and Landmark divided by total pro forma common shares of the combined entity. It is noted that to calculate December 31, 2020 pro forma book value per share and tangible book value per share, the March 31, 2021 estimated transaction adjustments were applied to calculate the pro forma book value per share and tangible book value per share as of December 31, 2020.

4)

Pro forma equivalent Landmark per share amount is calculated by multiplying the pro forma combined per share amount by the exchange ratio of 0.272 in accordance with the reorganization agreement.



Unaudited Combined Pro Forma Balance Sheets as of March 31, 2021

($ In Thousands, Except Per Share Data)





Fidelity D&D Bancorp, Inc.

Landmark Bancorp, Inc.

Transaction Accounting Adjustments

Pro Forma
Combined
Fidelity D&D Bancorp, Inc.

Assets:



Cash and due from banks

$

$

$

 -

$

Interest-bearing deposits with financial institutions

(1)

   Cash and cash equivalents



Securities available-for-sale, at fair value

 -

(3)

Restricted investments in bank stock

 -

Loans receivable

(4)

Allowance for loan losses

(5)

Loans held for sale

 -

 -

Foreclosed assets held-for-sale

 -

Bank premises and equipment, net

(6)

Leased property under finance leases, net

(7)

Right-of-use assets

(8)

Cash surrender value of bank owned life insurance

 -

Accrued interest receivable

 -

Goodwill

 -

(1)

Core deposit intangible, net

 -

(9)

Other assets

(10)

   Total assets

$

$

$

$





Liabilities:

Deposits:

Interest-bearing

$

$

$

(11)

$

Demand, non-interest-bearing

 -

Total deposits



Accrued interest payable and other liabilities

(12)(13)

Finance lease obligation

(7)

Operating lease liabilities

(8)

Short-term borrowings

 -

 -

Obligations under secured borrowing arrangements

 -

(14)

FHLB advances and borrowings under PPPLF

 -

(15)

Total liabilities



Shareholders' equity:

Capital stock

(1)(2)

Retained earnings

(2)(13)

Accumulated other comprehensive income

(2)

Total shareholders' equity

Total liabilities and shareholders' 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 three months ended March 31, 2021

($ In Thousands, Except Per Share Data)





Fidelity D&D
Bancorp, Inc.

Landmark Bancorp, Inc.

Transaction Accounting Adjustments

Pro Forma Combined

Interest income:

Loan receivable, including fees

$

$

$

(4)

$

Investment securities

(3)

Other

 -

Total interest income



Interest expense:

Deposits

(11)

Borrowings

(14)(15)

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

 -

Service charges on loans

 -

Fees from trust fiduciary activities

 -

 -

Fees from financial services

 -

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

 -

 -

Other real estate owned

 -

 -

Total other income

 -



Other expenses:

Salaries and employee benefits

 -

Premises and equipment

 -

(6)

Data processing and communication

 -

Advertising and marketing

 -

Professional services

 -

Merger related expenses

(13)

 -

Automated transaction processing

 -

 -

Office supplies and postage

 -

PA shares tax

 -

Loan collection

 -

Other real estate owned

 -

FDIC assessment

 -

FHLB prepayment fee

 -

 -

Other expenses

(9)

Total other expenses



Income before Income Taxes



Provision for income taxes

(10)

Net income

$

$

$

$



Earnings per common share:

Basic

$

$

$

Diluted

$

$

$



Weighted average common shares outstanding:

Basic

(1,734,583)

(1)

Diluted

(1,736,946)

(1)



Unaudited Pro Forma Combined Statement of Operations for twelve months ended December 31, 2020

($ In Thousands, Except Per Share Data)





Fidelity D&D Bancorp, Inc.

Landmark Bancorp, Inc.

Transaction Accounting Adjustments

Pro Forma Combined

Interest income:

Loan receivable, including fees

$

$

$

(4)

$

Investment securities

(3)

Other

 -

Total interest income



Interest expense:

Deposits

(11)

Borrowings

(14)(15)

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

 -

Service charges on loans

 -

Fees from trust fiduciary activities

 -

 -

Fees from financial services

 -

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

 -

Premises and equipment

 -

Total other income

 -



Other expenses:

Salaries and employee benefits

 -

Premises and equipment

(6)

Data processing and communication

 -

Advertising and marketing

 -

Professional services

 -

Merger-related expenses

 -

(13)

 -

Automated transaction processing

 -

 -

Office supplies and postage

 -

PA shares tax

 -

Loan collection

 -

Other real estate owned

 -

FDIC assessment

 -

FHLB prepayment fee

 -

 -

Other

(9)

Total other expenses



Income before income taxes



Provision for income taxes

(10)

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 Landmark’s shareholders. The pro forma information is based upon the assumption that the total number of shares of Landmark common stock outstanding immediately prior to the completion of the merger will be 2,382,695, the number of shares outstanding as of March 31, 2021.  Pursuant to the terms of the reorganization agreement, shareholders of Landmark will receive 0.272 shares of Fidelity common stock for each share of Landmark stock they own and $3.26 in cash.



Summary of GAAP Purchase Price Calculation, Goodwill Resulting from Merger and

Reconciliation of Pro Forma Shares Outstanding at March 31, 2021

($ In Thousands, Except Per Share Data)





March 31, 2021



Purchase Price Consideration in Common Stock

Landmark common shares settled for stock

Exchange Ratio

Fidelity shares to be issued

Value assigned to Fidelity common share (closing price as of 6/30/2021)

$



Purchase price assigned to Landmark common shares exchanged for Fidelity common shares

$



Purchase Price Consideration in Cash

Landmark common shares outstanding

Purchase price assigned to cash consideration

$

Cash consideration



Purchase Price assigned to cash in lieu of fractional shares



Purchase Price Consideration - Cash payout for stock options

Landmark stock options outstanding

In-the-money value for Landmark stock options settled for cash

$

Purchase price assigned to Landmark stock options settled for cash

Total Purchase Price for Accounting Purposes



Net Assets Acquired:

Landmark shareholders' equity

$



Estimated adjustments to reflect assets acquired at fair value:

Loans ASC 310-20 interest rate fair value

Loans ASC 310-20 - general credit fair value

Loans ASC 310-30 acquired with deteriorated credit quality

Loans - deferred fees/cost

Allowance for loan losses

Core deposit intangible

Premises and equipment

Right-of-use assets

Leased property under finance leases, net

Deferred tax assets



Estimated adjustments to reflect liabilities acquired at fair value:

Time deposits

FHLB borrowings

Obligations from secured borrowings

Operating lease liabilities

Finance lease obligation

Miscellaneous liabilities

Seller transaction merger liabilities accrued

Net assets acquired

Goodwill resulting from merger

$





Reconcilement of Pro Forma Shares Outstanding

Landmark shares outstanding

Exchange ratio

Fidelity shares to be issued to Landmark shareholders

Fidelity shares outstanding at 3/31/2021

Pro Forma Fidelity shares outstanding

Percentage ownership by Fidelity historical shareholders

Percentage ownership by Landmark historical shareholders

2)

Reflects the issuance of shares of Fidelity common stock with no par value per share in connection with the acquisition and the adjustments to shareholders’ equity for the reclassification of Landmark 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 March 31, 2021 therefore no balance sheet adjustment was 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, which is expected to decrease investment securities interest income by $63 thousand in the first year following consummation.   An additional other interest income adjustment was made to reflect lost interest income related to the payment of the cash consideration of $7.8 million at a rate of 0.07%, the March 31, 2021 federal funds rate.  

4)

Loan and lease adjustment includes ASC 310-20 interest rate fair value discount of $1.9 million based on current discount rates of similar loans, ASC 310-20 $7.9 million fair value general credit risk loan discount, ASC 310-30 $1.1 million fair value discount and $779 thousand ASC 310-20 deferred loan fees net reversal. The ASC 310-20 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 loan receivable interest income by $2.2 million in the first year following consummation.   No earnings impact was assumed from the ASC 310-30 non-accretable discount or ASC 310-20 loan fee reversals.

5)

Reversal of the Landmark allowance for loan losses in accordance with acquisition method of accounting to reflect the acquired loans at fair value.

6)

Reflects fair value write down adjustments of $389 thousand for owned premise, $27 thousand for obsolete equipment and $73 thousand for fixed assets held for sale. The fair value adjustment of $36 thousand for buildings will decrease pro forma expenses by $1 thousand in the first year following consummation.

7)

Reflects the adjustment to measure Landmark’s finance lease as if Fidelity acquired this lease on the date of acquisition. The result was a write up of the net leased property under finance leases, net by $557 thousand and an adjustment to the finance lease obligation for $174 thousand as of the date of acquisition. 

8)

Reflects the adjustment to measure Landmark’s operating lease as if Fidelity acquired this lease on the date of acquisition. The result was a write up of the right-of-use assets and the corresponding operating lease liabilities by $447 thousand.

9)

Adjustment to core deposit intangible assets to reflect the fair value of $597 thousand for the acquired core deposit intangible asset and the related amortization adjustment based upon an expected life of 10 years. The amortization of the new core deposit intangible is expected to increase other expense by $108 thousand in the first year following consummation.

10)

Reflects the increase in net deferred tax assets, assuming a rate of 21%, of $1.2 million related to fair value adjustments and a $677 thousand tax benefit applied to other assets related to one-time merger charges.  Provision for income taxes was applied on income statement adjustments using an effective tax rate of 21%. It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible. 

11)

Adjustments to reflect a fair value premium of $96 thousand for Landmark’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 $48 thousand in the first year following consummation.

12)

Reflects the accrual for unfunded commitments of $7 thousand.

13)

Reflects the accrual for unrecognized one-time merger-related charges for Fidelity and Landmark: (a) Landmark pre-tax charges are estimated at $667 thousand ($567 thousand after-tax) and are included as a pro forma fair value liability accrual, and (b) Fidelity pre-tax charges are estimated at $4.0 million ($3.2 million after-tax) and are included as a pro forma liability accrual with the after-tax cost as reduction to retained earnings.  The March 31, 2021 and December 31, 2020 income statements include an adjustment to exclude period merger related

expenses. It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible.

14)

Adjustments to reflect a fair value premium of $230 thousand for Landmark’s obligations from secured borrowings. These adjustments will be recognized using a level yield method based upon the expected cash flows of the obligations from secured borrowings. These adjustments are expected to decrease pro forma pre-tax interest expense by $59 thousand in the first year following consummation.

15)

Adjustment to reflect a $102 thousand fair value premium for FHLB Borrowings. The Company decided to pay off the borrowings post-closing therefore no amortization is warranted.