Delanco Bancorp, Inc.

 On December 22, 2017 federal tax law changes contained in H.R. 1 were passed into law. These changes included a reduction in the federal corporate tax rates, lowering them from 35% to 21%. Due to the date of the enactment, even though the tax rate changes do not come into effect until 2018, the analysis and measurement of our deferred tax asset as of December 31, 2017, had to take these changes into account. This resulted in a one-time $428 thousand charge, or $0.46 per diluted share, of additional income tax expense.

Loans. At December 31, 2017, total loans, net, were $83.7 million, or 65.3% of total assets. Overall loans decreased by $712 thousand during the nine months ended December 31, 2017, primarily due to payoffs and normal amortizations in the residential mortgage portfolio as well as the transfer of one residential mortgage loan in the amount of $410 thousand to real estate owned, net pay downs in the home equity line of credit portfolio of $426 thousand, the conversion of $629 thousand in residential construction loans into permanent residential mortgages and a decrease in home equity loans by $157 thousand. These decreases were offset by increases in commercial loans by $996 thousand and commercial and multi-family real estate loans by $608 thousand.

Total nonperforming loans at December 31, 2017 decreased $360 thousand from March 31, 2017 primarily due to the sale of a non-performing commercial mortgage in the amount of $253 thousand and various other improvements during the period.

Financial Highlights.  The net loss for the three and nine months ended December 31, 2017 was $479 thousand and $325 thousand, respectively, as compared to net income of $3 thousand and $81 thousand for the same prior year periods. The decrease in net income for the nine months ended December 31, 2017 was primarily the result of an increase in income tax expense due to the change in the federal corporate tax rates that impacted the deferred tax asset calculation plus merger related expenses. The change in the corporate tax rate resulted in a one-time additional federal income tax expense of $428 thousand. In this current quarter the company recognized $221 thousand of merger related expenses associated with the previously mentioned Agreement and Plan of Reorganization which provides for the acquisition of the Company by First Bank. Pretax income without the merger related expenses for the three and nine months ended December 31, 2017 were $165 thousand and $487 thousand, respectively, as compared to $5 thousand and $156 thousand for the same prior year periods.

Net Interest Income.   Net interest income increased $44 thousand to $931 thousand for the three months and increased $107 thousand to $2.8 million for the nine months ended December 31, 2017. The Bank saw an increase in the interest rate spread (11 basis point) and an increase in net interest margin (12 basis points) for the nine month period. Total interest income increased $42 thousand or 4.1% for the three months ending December 31, 2017 compared to the three months ended December 31, 2016. Interest income increased $86 thousand or 2.8% for the nine months ending December 31, 2017 compared to the nine months ended December 31, 2016. Total interest expense decreased by $2 thousand or 1.5% between the three month period and $21 thousand or 5.2% for the nine month period ending December 31, 2017.

Provision for Loan Losses.  The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio.  We evaluate the need to establish allowances against losses on loans on a quarterly basis.  When additional allowances are necessary, a provision for loan losses is charged to earnings.  There was a recapture from loan loss reserve of $25 thousand in the three months and a recapture of $110 thousand in the nine months ended December 31, 2017 compared to a provision of $26 thousand in the three months and a recapture of $22 thousand in the nine months ended December 31, 2016.  We had zero charge-offs in the three months and $50 thousand in the nine months ended December 31, 2017, compared to $77 thousand and $173 thousand in charge-offs in the same prior year periods. We had recoveries to the allowance of $20 thousand in the three months and $165 thousand in the nine months ended December 31, 2017 as compared to $25 thousand and $112 thousand in recoveries in the same prior year period. This resulted in net recoveries of $20 thousand and $115 thousand for the three month and nine month periods ended December 31, 2017 as compared to net charge-offs of $52 thousand and $61 thousand in the same prior year periods .