Business Context and Reporting Period
Fidelity D & D Bancorp, Inc. (FDBC) is a Pennsylvania-based bank holding company operating The Fidelity Deposit and Discount Bank. The company serves Lackawanna, Luzerne, and Northampton counties in Pennsylvania. This Form 10-K covers the fiscal year ended December 31, 2025. The company is classified as an accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Net Income | $28.2 million | $20.8 million |
| Earnings Per Share (Diluted) | $4.86 | $3.60 |
| Total Assets | $2.75 billion | $2.58 billion |
| Total Deposits | $2.47 billion | $2.34 billion |
| Net Interest Income (GAAP) | $72.7 million | $61.9 million |
| Net Interest Margin (FTE) | 2.95% | 2.72% |
| Return on Average Assets (ROA) | 1.05% | 0.83% |
| Return on Average Equity (ROE) | 12.88% | 10.58% |
| Efficiency Ratio (Non-GAAP) | 60.30% | 66.19% |
| Allowance for Credit Losses | $20.2 million | $19.7 million |
| Non-Performing Assets to Total Assets | 0.08% | 0.30% |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased 36% to $28.2 million, driven primarily by a $10.8 million increase in net interest income and a $1.6 million increase in non-interest income.
- Asset Growth: Total assets grew 6% to $2.75 billion, fueled by a $111.9 million increase in the loan portfolio, particularly in commercial and industrial (C&I) and commercial real estate (CRE) segments.
- Deposit Expansion: Total deposits increased 5% to $2.47 billion, with significant growth in money market accounts ($92.8 million) and certificates of deposit ($14.1 million).
- Asset Quality Improvement: Non-performing assets dropped significantly from 0.30% to 0.08% of total assets, largely due to a $5.5 million decline in non-accrual loans.
- Expense Management: Non-interest expenses rose 6% to $58.8 million, primarily due to increased salaries and benefits, yet the efficiency ratio improved to 60.30% due to higher revenue.
Guidance, Outlook, and Risks
Outlook: Management anticipates a moderately declining interest rate environment in 2026, with consensus forecasts suggesting one to two 25 basis point rate cuts. The company expects net interest margin to improve as loan growth outpaces deposit growth and deposit rates reprice lower. Loan pipelines remain robust in both northern and southern market areas.
Key Risks:
- Interest Rate Risk: The company maintains an asset-sensitive position (positive gap), which could negatively impact net interest income if rates fall faster than anticipated.
- Credit Risk: While asset quality is strong, the company monitors commercial real estate volatility, particularly in the office sector, and local economic conditions in Northeastern Pennsylvania.
- Cybersecurity: The company faces evolving cyber threats; while no material losses have been incurred, a breach could result in significant financial and reputational damage.
- Regulatory Capital: Basel III requirements may necessitate higher capital levels, potentially limiting investment opportunities.
Investor Verification Checklist
- Loan Concentration: Verify the specific exposure to commercial real estate (CRE) and the impact of the office sector on the non-owner occupied portfolio.
- Deposit Stability: Confirm the retention rates of uninsured deposits (39% of total) and the cost of funds as rates decline in 2026.
- Headquarters Project: Monitor the completion and cost overruns of the new corporate headquarters in Scranton, expected in mid-2026, which has incurred $21.8 million in costs to date.
- Security Portfolio: Review the unrealized losses on available-for-sale securities ($36.4 million) and the impact of interest rate changes on the fair value of the investment portfolio.
- Unemployment Trends: Track local unemployment rates in Scranton-Wilkes-Barre-Hazleton and Allentown-Bethlehem-Easton, which rose to 4.3% and 3.9% respectively in 2025.