Fidelity D & D Bancorp(US:FDBC)2025-05-09 20:11Financial Performance - For the three months ended March 31, 2025, net income was $6.0 million, or $1.03 diluted earnings per share, an 18% increase compared to $5.1 million, or $0.88 diluted earnings per share, for the same period in 2024[138]. - Net interest income increased by $2.1 million, contributing to the overall increase in net income, while non-interest income rose by $0.4 million[150]. - The efficiency ratio improved to 61.67% for the three months ended March 31, 2025, compared to 67.56% for the same period in 2024[144]. - Return on average assets (ROA) increased to 0.93% in Q1 2025 from 0.83% in Q1 2024, while return on average shareholders' equity (ROE) rose to 11.66% from 10.71%[151]. - Total non-interest income rose by $0.4 million (9%) to $5.0 million in Q1 2025, driven by increases in wealth management fees and interchange fees[167]. - Non-interest expenses increased by $0.9 million (6%) to $14.6 million in Q1 2025, primarily due to higher salaries and benefits expenses[168]. - The effective tax rate increased to 15.4% in Q1 2025 from 12.1% in Q1 2024, influenced by a $1.3 million increase in income before taxes[169]. - Total shareholders' equity increased by $7.7 million, or 4%, primarily due to a net income of $6.0 million and an improvement in accumulated other comprehensive income[267]. Asset and Liability Management - The total assets as of March 31, 2025, were $2,711,310, compared to $2,468,896 as of March 31, 2024[145]. - The Company maintained $211.2 million in cash and cash equivalents and had a total available borrowing capacity of $1.8 billion, representing 67% of total assets[266]. - The Company has $185.0 million in unpledged securities as of March 31, 2025, to manage seasonal deposit volatility[262]. - The Company had no FHLB advances as of March 31, 2025, with the ability to borrow up to $752.5 million if needed[258]. - The Company executed a $100 million interest rate swap to hedge against rising interest rates, with $1.2 million recorded in accrued interest payable as of March 31, 2025[176]. - The Asset Liability Management (ALM) team is actively addressing interest rate risk and developing strategies to enhance net interest income performance[157]. - The company utilizes computerized net interest income simulation modeling to quantify interest rate risk exposure[284]. Loan Portfolio and Credit Quality - Gross loans and leases totaled $1.8 billion as of March 31, 2025, reflecting an increase of $17 million, or 1%, compared to December 31, 2024[192]. - The commercial portfolio increased by $24.9 million, or 2%, to $1.0 billion, driven by growth in commercial and industrial loans and commercial real estate loans[196]. - The composition of the loan portfolio included $510.8 million in residential real estate loans, accounting for 28.1% of total gross loans as of March 31, 2025[195]. - The allowance for credit losses increased by $0.3 million, or 2%, to $20.0 million from $19.7 million, based on a provisioning of $0.5 million partially offset by net charge-offs of $0.1 million[220]. - The net charge-offs for the three months ended March 31, 2025, were $104, compared to $465 for the same period in 2024[218]. - Non-performing assets decreased to $6,102 thousand as of March 31, 2025, down 22% from $7,805 thousand at December 31, 2024, primarily due to a decline in non-accrual loans[233]. - The commercial real estate loan portfolio accounted for 46% of the total allowance for credit losses as of March 31, 2025, up 1 percentage point from December 31, 2024[226]. Interest Income and Rates - Net interest income for Q1 2025 was $17.0 million, a 14% increase from $14.9 million in Q1 2024, driven by a $2.7 million rise in interest income[152]. - The FTE yield on interest-earning assets increased to 4.73% in Q1 2025, up 21 basis points from 4.52% in Q1 2024[153]. - The net interest spread (FTE) improved to 2.24% in Q1 2025, an increase of 23 basis points from 2.01% in Q1 2024[154]. - The net interest margin (FTE) rose to 2.89% in Q1 2025, compared to 2.69% in Q1 2024, due to growth in the loan and lease portfolio[154]. - The cost of interest-bearing liabilities decreased to 2.49% in Q1 2025 from 2.51% in Q1 2024, aided by a reduction in average short-term borrowings[155]. - The company expects to operate in a moderately declining interest rate environment for the remainder of 2025, with anticipated rate cuts of 50 to 75 basis points[154]. - A simulation of a 200 basis points increase in interest rates could lead to a 2.4% increase in net interest income and a 5.9% increase in net income[291]. Economic Environment - The unemployment rate in the primary market area was 4.6% in March 2025, an increase of 0.8 percentage points from December 2024[137]. - Median home values in the Scranton-Wilkes-Barre-Hazleton metro and Allentown-Bethlehem-Easton metro increased by 7.1% and 4.5%, respectively, from a year ago[137]. - The Company continues to focus on diversifying earning assets and increasing relationship core deposits, particularly in commercial lending and ancillary business products[136]. Deposits and Funding - Total deposits increased by $116.6 million, or 5%, to $2.5 billion as of March 31, 2025, compared to $2.3 billion at December 31, 2024[249]. - Money market accounts grew by $54.1 million, driven by existing account balance growth and targeted marketing efforts[249]. - Interest-bearing checking accounts rose by $27.6 million, primarily due to increases in existing account balances[249]. - As of March 31, 2025, total uninsured deposits were estimated at $959.1 million, or 39% of total deposits[251]. - Approximately 69% of the certificates of deposit (CDs) are scheduled to mature in 2025, with a weighted-average interest rate of 4.25%[254].