DNB Financial Corporation
Annual Report 2012

Plain-text annual report

FINANCIAL CORPORATION 2012 Annual Report Growing Stronger for our Customers and Communities Branching Out for Greater Convenience To remain a strong community financial institution in challenging economic times, DNB First must continually look for new ways to increase value to our customers and to the shareholders who fuel our success. In 2012, we continued to leverage strong core earnings and capital growth and further expanded into Delaware County with the purchase of a branch in Boothwyn. This strategic acquisition helped boost low- cost core deposits for our shareholders, while expanding our footprint in Delaware County to offer our customers a higher level of convenience. Additionally, with the area’s strong business presence and influx of upper middle class and high-net-worth individuals, the expansion in this area will pave the way for additional sources of revenue in business lending and wealth management. Dear Valued Shareholders, Customers, and Employees: We are especially proud of our success in achieving record growth and earnings in 2012, despite a difficult ongoing environment in which banks had to operate. However, the most pleasing aspect of our success has been our continued ability to give back to the communities we serve through scholarships, educational programs, and the sponsorship of local community events. Our commitment to the communities we serve is not a motto or cliché. When DNB First succeeds, so too do the very stakeholders we serve — our shareholders, customers, and employees. Despite being a publicly traded company, many of these individuals reside in the banking markets we serve, and we are proud to have them as our neighbors. It is with great pleasure that we present the 2012 Annual Report for DNB Financial Corporation. Our company has achieved many successes and experienced many milestones throughout our 153-year history. Despite record low interest rates, increased regulatory constraints, and slow economic expansion, DNB First delivered steady growth and record earnings in 2012. Highlights of the year include: ■ Net income of $5.2 million, up 6.87 % from $4.9 million in 2011. ■ Return on assets of .84% and a return on equity of 9.61%. ■ Total stockholders’ equity increased 11.06% from $51.1 million in 2011 to $56.7 million. ■ Book value per share climbed 13.72% to $16.08 compared with $14.14 in 2011. ■ Total assets increased $32.5 million or 5.35% to $639.6 million, up from $607.1 million in 2011. ■ Tier 1 leverage ratio at 10.50% and Tier 1 risk-based capital ratio at 14.60% exceeded regulatory definitions for a well- capitalized institution. Our path to success in 2012 was not an easy or unique one. Through it all, we continued to follow the same guiding principles that have served us well in both challenging and prosperous economic times: making prudent decisions to preserve our capital and control our expenses. Though our financial performance was strong in 2012, significant challenges still remain. National and global economic uncertainty coupled with low interest rates will require us to continue to control expenses and manage liquidity. To navigate these challenges, we will continue to build upon the strategies that have served us well in the past. While we cannot control these outside influences, there are ways we can innovate and diversify our revenue mix. For example, our increase in fee-based income in 2012 provides a glimpse of what we can do with a sound strategy and the right personnel. We will continue to look for ways to increase value for customers by investing in products and services, infrastructure, and technology as we did during the past year. In 2012, we purchased a new branch in Boothwyn to further expand our footprint in Delaware County, and to offer our customers greater convenience. We also employed new measures to deepen customer relationships by investing in innovative technologies and enhancing our product offerings. Our wealth management growth initiatives are ongoing, as we added staff and enhanced these services to give customers the distinct advantage of managing their wealth where they bank. Our ability to achieve success and growth is not only important for our business customers, but also for the individuals, families, and employees who have put their trust in us, and the non-profit organizations that have relied on us to help them carry out their missions. We thank you for the trust you have placed in us and the integral role you have played in our success. Growing the value of our franchise is our utmost focus and we look forward to continuing to serve you for many years to come. Sincerely, William S. Latoff Chairman and CEO William J. Hieb President and Chief Risk & Credit Officer Strengthening Businesses As DNB First grew in 2012, so too did our commitment to serving the needs of businesses of all sizes. We continued to provide the lending solutions, support, and personal attention these businesses need to manage cash flow and expand for the future. Highlighting our commitment to business is our support of events at Chambers of Commerce throughout Chester and Delaware Counties. Our ongoing presence at these events allows us to not only connect with business owners across a wide range of industries, but also to show them that as a community bank, DNB First is committed to, and invested in, their success. All Riders Up is a non-profit organization dedicated to providing riding instructions to those with special needs. “I came to DNB First when I started my business. At the time, I had very little experience running a business or a non-profit and not only needed a loan, but also needed some professional advice and guidance. DNB First was so supportive on both fronts. In addition, they’ve helped me network with other business owners in the community and even got us a donation from the Rotary Club that allowed us to get a ramp to help our clients.” Marcia Laver, Executive Director, All Riders Up (pictured left, with Donna Reeves, branch manager) “We used to bank with a large bank where personnel was constantly changing. We felt like no one really understood our business. With DNB First, we work with people we know, get things done faster, and deal with a lot less bureaucracy. I would highly recommend DNB First to other business owners.” Robert P. Barker, President, Penflex “Making the change to DNB First was one of the best decisions we’ve made for our company. While our relationship with them is relatively new, we’ve had a tremendously positive experience thus far. Our team at DNB First is always accessible and resourceful in adapting to our unique needs. We could not be happier with the services they’ve provided.” Jerry Lee, President/Owner, B101 Radio Station “I’m old fashioned in that I like to bank in person. I see the branch staff every few days and they are always so friendly and easy to do business with. They really know you and care about your business. That’s why I do all of my business and personal banking with DNB First.” Bruce Taylor, Owner and CEO, Whitford Land Transfer Company (pictured with his team) “We were introduced to DNB First at a time when the lending market was very difficult. They really stepped up and provided the loan we needed. They offer competitive rates and excellent service, and most importantly, they have confidence in our practice.” Dr. Peter Schatzberg, Owner, Philadelphia Pain Management “We used to bank with a community bank that was purchased twice. We needed a bank that cared about us and knew who we were. That’s DNB First. They are so easy to deal with and they have all the services we need. They are not just a bank in the community; they are the community.” Michael Rubinstein, Owner, Rubinstein’s Office Supplies and Furniture (pictured left with his son, Marc, the fourth generation to run the business) “Without continual growth and progress, such words as improvement, achievement, and success have no meaning.” ~ Benjamin Franklin Extending our Reach Through Technology Growth cannot be achieved without progress. In 2012, DNB First continued to invest in progressive systems to improve service, increase efficiency, enhance security, and deepen relation- ships with our valued customers to ensure they stay with us. One key initiative involved investing in a new telecommunications infrastructure that will allow us to cost effectively manage our data needs as we grow. Enhancing Online and Mobile Banking In 2012, we built on our commitment to offer our customers greater online banking convenience. As part of these efforts, we created new screens designed to facilitate navigation. We also enhanced bill payment by migrating to a new system that allows customers to pay bills on the date they are due and receive bills electronically, thereby eliminating the need for paper bills. We also laid the groundwork to upgrade our mobile banking service to include an application that will make it easier for our customers to get balances, make transfers, pay bills, and perform their everyday banking from their smart phones or tablets. Lastly, we installed Popmoney,® a payment platform similar to PayPal,® that offers our customers greater flexibility when paying individuals. Understanding the needs of our customers To deepen relationships with our valued customers, we upgraded our core processing system in order to gain a complete view of customer relationships. This enhancement will help frontline staff better understand the needs of our customers, and deliver a higher level of service and value. Strengthening relationships with our existing customers With a lower rate environment and increased competition, it’s critical that financial institutions look for new ways to build revenue. At DNB First, we sought to generate revenue by deepening relationships with our valued customers by offering relationship-driven checking products that allow our customers to experience value-added benefits, including discounts on loans. Additionally, in 2012, we utilized technology to reach out to customers to determine our performance in meeting their goals and expectations. This valuable feedback allowed us to enhance our products, further train our employees, and continually improve upon the service we deliver. This focus on improvement will allow us to increase profitability for our stock- holders and provide better service to our valued customers — key strategic initiatives to help us grow in the years ahead. Expanding our Wealth Management Capabilities DNB First recognizes that with increased uncertainty in the financial marketplace, individuals, businesses, and institutions need a financial services provider on which they can rely. This is especially important when it comes to managing wealth, and why in 2012, the Corporation continued to make significant investments in our wealth management personnel and service programs. Additionally, we continued our commitment to use state-of-the-art technology to further enhance our investment management process and provide technical training for our advisors in order to deliver a better overall experience to our valued clients. A wealth of knowledge from local advisors To provide a higher level of service and expertise, we made significant investments in our Wealth Management team. “Over the years, I’ve referred many clients to DNB First Wealth Management. I’ve never been disappointed. They provide a level of personal service and attention that is so hard to find today. They truly care about their clients and the community, and have made some dramatic upgrades that have allowed them to provide expert service to people from a wide range of financial backgrounds.” Jerry L. Johnson, Esquire (center) pictured with Cheryl Burkey and Richard Weber of DNB First Wealth Management left: Jennifer Calabro, Financial Advisor - qualified for the Cetera Investment Services, LLC, President’s Club for 2012 right: Steve McGann, Wealth Management Advisor – became President of the Chester County Planning Council Wealth Management Advisory Board Top row, left to right: Bottom row, left to right: Jay G. Fischer, Esq., Partner, Valocchi & Fischer John McKenna, Esq., Shareholder/Director, Frank Hayes, Esq., Partner, Hayes & Romero Suzanne R. Jackson, CPA, Owner, SR Jackson, LLC Jerry L. Johnson, Esq., Attorney at Law Donald B. Lynn, Jr., Esq., Partner, Larmore Scarlett, LLP MacElree Harvey, Ltd. Anthony Morris, Esq., Partner, Buckley, Brion, McGuire, Morris & Sommer, LLP Stephen J. Olsen, Esq., Gawthrop Greenwood, PC Richard C. Weber, Board Chair, Managing Director Wealth Management, DNB First Stacey Willits-McConnell, Esq., Partner, Lamb McErlane, PC Developing Employees – and Stronger Communities One of the ways we continue to support our community is through our dedicated and talented workforce. We understand how valuable our employees are in helping us carry out our mission to serve our customers and communities, and we are dedicated to investing in their success. In 2012, we were proud to have an employee participate in Leadership Chester County, a partnership of United Way of Chester County, West Chester University, and the Chester County Chamber of Business and Industry designed to help train people to serve on non-profit boards. “The Chester County Leadership Council really helped me see the community from a different perspective – from the perspective of those in need and the non- profits that struggle to help them. The experience provided through the program is almost like a toolbox for making a difference in the community. It’s exciting to me that so many people will be given these tools. It can only mean good things for Chester County.” Katie Decker, Events/Sponsorship Manager, program participant Rising Up to Meet the Needs of the Community DNB First’s growth in 2012 is reflected not just by impressive numbers on our financial statements, but also by the marked impact our success has had in our local communities. Our strong financial performance allowed us to continue our more than 150-year tradition of giving back to the communities we serve. In 2012, we were proud to support education through our participation in Pennsylvania’s Educational Tax Credit program, providing $400,000 to fund museums, schools, and other educational institutions. Additionally, we provided charitable donations, sponsorships, scholarships, and employee volunteers at events that bring our communities together. Some of the organizations and initiatives we were proud to support in 2012 include: ■ Alex’s Lemonade Stand ■ Armand Taraschi Scholarship ■ BLOCS (Business Leadership Organized for Catholic Schools) ■ Boy Scouts of America ■ Caln Athletic Association Camps ■ Chambers of Commerce ■ Chester County Economic Development Council ■ Chester County Food Bank ■ Chester County Historical Society ■ Delaware County Family Services ■ Delaware Country Historical Society ■ Disabled Veterans ■ Downingtown Senior Center ■ Friends Association ■ Good Neighbor Day ■ Habitat for Humanity ■ Handi-Crafters ■ Historic Yellow Springs Art Show ■ Housing Partnership of Chester County ■ Lions Club ■ Little League ■ Main Line Animal Rescue ■ March of Dimes ■ Pathways ■ Police/Fire/Ambulance companies ■ Rotary Clubs ■ SPCA ■ SCORE (Society Corps of Retired Executives) ■ West Chester University In 2012, DNB First was proud to support local events that bring our communities together. (top left) We built upon our long-standing tradition of supporting West Chester Chamber’s Old Fashioned Christmas by co-sponsoring the “Welcome Home Vets” float with the West Chester Rotary Club. Riding on the float were local veterans and their families. (top right) We also reached out to the community to support Downingtown’s Good Neighbor Day, an annual event that raises funds for local ambulance and rescue companies. (bottom left) As part of our commitment to creating healthier communities, we were proud to be the lead sponsor of the March of Dimes’ March for Babies walk. (bottom middle) To help fight hunger, employees volunteered to pick tomatoes during an evening gleaning event for the Chester County Food Bank. (bottom right) To help prevent identity theft, we were once again the sole sponsor of a shredding event across five municipalities. DNB Financial Corporation — Selected Financial Data Results of Operations Interest income Interest expense Net interest income Provision for credit losses Non-interest income Non-interest expense Income before income taxes Income tax expense Net income 2012 2011 2010 2009 2008 $25,729 $26,174 $26,050 $25,948 $28,262 3,755 21,974 1,455 4,088 4,644 21,530 1,480 3,643 7,062 18,988 2,216 5,430 10,629 15,319 1,325 4,507 13,048 15,214 2,018 4,408 17,262 16,725 16,903 16,590 16,731 7,345 2,106 6,968 2,066 5,299 1,629 1,911 362 $5,239 $4,902 $3,670 $1,549 873 64 $809 — $809 2008 $0.31 0.31 0.46 11.53 Preferred stock dividends & accretion of discount 332 779 618 Net income available to common stockholders $4,907 $4,123 $3,052 Per Share Data Basic earnings Diluted earnings Cash dividends Book value 2012 $1.81 1.79 0.20 16.08 2011 $1.54 1.53 0.12 14.14 2010 $1.16 1.16 0.12 12.55 567 $982 2009 $0.38 0.38 0.23 11.88 Weighted average Common shares outstanding — basic 2,710,819 2,674,716 2,635,549 2,606,596 2,602,902 Financial Condition Total assets Loans and leases, gross Allowance for credit losses Deposits Borrowings Stockholders’ equity Selected Ratios Return on average stockholders’ equity Return on average assets Average equity to average assets Loans to deposits Dividend payout ratio 2012 2011 2010 2009 2008 $639,568 $607,099 $602,332 $634,248 $533,447 396,498 403,684 396,171 359,427 336,454 6,838 6,164 5,884 5,477 4,586 530,424 497,545 492,746 507,347 408,470 46,864 56,705 53,647 51,056 60,230 45,208 79,450 42,876 90,123 30,058 2012 2011 9.61% 10.01% 0.84 8.98 74.75 11.17 0.80 7.99 81.14 7.84 2010 8.03% 0.59 7.40 80.40 10.37 2009 3.76% 0.26 6.87 70.84 59.68 2008 2.51% 0.15 5.98 82.37 146.56 At or for the year ended December 31 (Dollars in thousands, except share data) DNB Financial Corporation shares are traded on the Nasdaq Capital Market under the symbol: DNBF Board of Directors DNB Financial Corporation Standing, left to right: Thomas A. Fillippo, Director; President, Devault Foods Gerard F. Griesser, Director; Principal, Prudential Fox & Roach/Trident William J. Hieb, Director; President, Chief Risk & Credit Officer James J. Koegel, Director; President, Jones Motor Group, Inc. Sitting, left to right: James H. Thornton, Director; President, Thornton Consulting William S. Latoff, Chairman and Chief Executive Officer Mildred C. Joyner, Director; President of the Council on Social Work Education Advisory Board Members DNB Financial Corporation Top row, left to right: Eli Silberman, Board Chair; President, TSG, Inc. Peter R. Barsz, CPA, Partner, Merves, Amon & Barsz, LLC Joseph E. Brion, Esq., Partner, Buckley, Brion, McGuire, Morris & Sommer LLP Jeffrey P. Brown, President, General InsurCorp, Inc. Joseph J. DellaVecchia, III, President, DellaVecchia, Reilly, Smith & Boyd Funeral Home Vincent T. Donohue, Esq., Shareholder, Lamb McErlane PC Charles A. Hackett, CPA, President, Bliss & Co., Ltd. Rosaria Hawkins, PhD, President, Take Charge Consultants, Inc. Bottom row, left to right: Matthew D. Kelly, Partner, Carnegie Wealth Management James A. Mellon, Jr., President, Mellon Certified Restoration A. Joseph Rubino, President, KSL Corporation Charles E. Swope, Jr., Swope Lees Commercial Real Estate, LLC Cuyler H. Walker, Esq., Partner, Pepper Hamilton, LLP Joan Walsh, Co-Owner, Kashbox Consulting Greg R. Weisenstein, Ed.D., President, West Chester University George C. Zumbano, Esq., Shareholder, Gawthorp Greenwood, PC Executive Management Team and Officers Left to right: Frank S. Monterosso, Senior Vice President, Director of Operations Gerald F. Sopp, Executive Vice President, Chief Financial Officer & Corporate Secretary Catherine H. Hall, Senior Vice President, Director of Marketing Christopher M. Breslin, Director of Retail Services William S. Latoff, Chairman and Chief Executive Officer Richard C. Weber, Managing Director of Wealth Management William J. Hieb, President and Chief Risk & Credit Officer Albert J. Melfi, Jr., Executive Vice President, Chief Lending Officer Bruce E. Moroney, Executive Vice President, Chief Accounting Officer Building Employment Opportunities for All “From what we get, we can make a living; what we give, however, makes a life.” ~ Arthur Ashe “We are very grateful for the long and rewarding relationship we’ve had with DNB First. They manage our Foundation’s assets and are a generous sponsor of our annual fundraising event, which we greatly appreciate, especially in these challenging economic times. The money we raise helps us provide services to people who have no governmental funding. It’s also allowed us to extend our programs to serve those with other disabilities, including mental illness. In addition to providing employment opportunities, we also offer retirement programs and independent housing solutions. To understand fully what we do, you have to come in for a tour. You’ll see workers who are not only happy to be at work, but also having a good time.” Amy Rice, Executive Director, Handi-Crafters (left) Robert Spatola, Trustee (right) At DNB First, we have always strived to not only serve our customers, but also to serve a greater good by helping advance the missions of the non-profit organizations that work to help make life better for all of us. To build employment opportunities, we were pleased to support Handi-Crafters, one of the largest employment and support service programs in southeast Pennsylvania. Through meaningful work, independent living, and retire- ment opportunities, Handi-Crafters empowers individuals with disabilities to realize their true potential and experience personal fulfillment. In addition to providing financial contributions and participating in fundraising and community events, DNB First Wealth Management has been managing the Foundation endowment funds since 2006. Matt Kelly, Chairman of the Foundation, also recently joined the DNB First Advisory Board. “DNB First understands how important employment is to helping those with differences live successful and independent lives and is proud to support the work of Handi-Crafters, which helps remove the barriers to employment,” said William S. Latoff, DNB First Chairman and CEO. DNB First Branch locations Boothwyn 3915 Chichester Avenue Boothwyn, PA 19061 Caln 1835 East Lincoln Highway Coatesville, PA 19320 Chadds Ford 300 Oakland Road West Chester, PA 19382 Downingtown/East End 701 East Lancaster Avenue Downingtown, PA 19335 Downingtown/Main 4 Brandywine Avenue Downingtown, PA 19335 Exton 410 Exton Square Parkway Exton, PA 19341 Kennett Square 215 East Cypress Street Kennett Square, PA 19348 Lionville 891 North Pottstown Pike Exton, PA 19341 Little Washington 104 Culbertson Run Road Downingtown, PA 19335 Ludwig’s Corner 1030 North Pottstown Pike Chester Springs, PA 19425 Media 323 West State Street Media, PA 19063 West Chester 2 North Church Street West Chester, PA 19380 West Goshen 1115 West Chester Pike West Chester, PA 19380 FINANCIAL CORPORATION DNB First n 4 Brandywine Avenue n Downingtown, PA 19335 

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