Fidelity D & D Bancorp(FDBC) - 2025 Q3 - Quarterly Report

Financial Performance - For the nine months ended September 30, 2025, net income was $20.3 million, or $3.50 diluted earnings per share, a 35% increase compared to $15.0 million, or $2.59 diluted earnings per share for the same period in 2024[136] - Net income for Q3 2025 was $7.3 million, a 48% increase from $5.0 million in Q3 2024, resulting in earnings per diluted share of $1.27 compared to $0.86[148] - For the nine months ended September 30, 2025, net income was $20.3 million, a 35% increase from $15.0 million in the same period of 2024, with earnings per diluted share rising from $2.59 to $3.50[149] - Net interest income for Q3 2025 was $18.4 million, a 19% increase from $15.4 million in Q3 2024, driven by a $3.4 million increase in interest income[151] - For the nine months ended September 30, 2025, net interest income was $53.4 million, up from $45.5 million in the same period of 2024, reflecting a $9.8 million increase in interest income[153] - Total non-interest income for the nine months ended September 30, 2025 was $15.4 million, an increase of $1.2 million, or 9% from $14.2 million for the same period in 2024[172] - Non-interest expenses increased to $43.9 million for the nine months ended September 30, 2025, an increase of $2.8 million, or 7% from $41.1 million for the same period in 2024[174] Asset and Equity Growth - As of September 30, 2025, tangible common book value per share was $36.23, up from $32.55 as of September 30, 2024, primarily due to an increase in retained earnings from net income[137] - The tangible common equity ratio as of September 30, 2025, was 7.69%, up from 7.19% as of September 30, 2024[143] - Shareholders' equity rose to $219,925, up from $198,794, reflecting a growth of 10.6% year-over-year[161] - Total assets as of September 30, 2025, were $2.736 billion, an increase from $2.616 billion as of September 30, 2024[143] - The Company’s total assets increased by $152.1 million to $2.7 billion as of September 30, 2025, driven by a $113.5 million growth in the loans and leases portfolio[180] Loan Portfolio and Credit Quality - The total loan portfolio increased to $1,915.6 million, up from $1,800.7 million at December 31, 2024, representing a growth of 6.4%[204] - The growth in the loan portfolio was attributed to a $130.0 million increase in the commercial portfolio, including significant loans to a single borrower totaling $30.6 million[202] - The allowance for credit losses reflects management's best estimate of expected credit losses, with a formal review conducted quarterly[222] - The total non-performing assets decreased by $4.8 million, or 61%, to $3.02 million as of September 30, 2025, from $7.8 million on December 31, 2024[244] - Non-accrual loans amounted to $2.6 million as of September 30, 2025, down from $7.3 million on December 31, 2024[245] Interest Income and Rate Management - Interest income adjusted to fully-taxable equivalent (FTE) for the nine months ended September 30, 2025, was $91.071 million, compared to $81.235 million for the same period in 2024, reflecting a growth of 12.7%[141] - The FTE yield on interest-earning assets was 4.83% for Q3 2025, up 15 basis points from 4.68% in Q3 2024, while the overall cost of interest-bearing liabilities decreased to 2.55% from 2.70%[152] - The Company's FTE net interest spread increased to 2.28% in Q3 2025, a 30 basis point improvement from 1.98% in Q3 2024[152] - The FTE net interest margin increased to 2.92% for the nine months ended September 30, 2025, up 22 basis points from 2.70% in the same period of 2024[154] - The Company expects to operate in a moderately declining interest rate environment, with anticipated federal funds rate cuts of 25 basis points in December 2025 and an additional 50 basis points by the end of 2026[156] Operational Efficiency - The efficiency ratio for the nine months ended September 30, 2025, improved to 61.00% from 66.44% for the same period in 2024, indicating better cost management[142] - The Company continues to focus on growing its core business of retail and business lending while maintaining strong asset quality and controlling operating expenses[134] - The Company plans to grow its loan portfolio by utilizing excess cash holdings and managing deposit costs to maintain a reasonable spread[156] Deposits and Funding - Total deposits grew by $126.1 million, which was utilized to fund loan growth and maintain excess in interest-bearing cash[180] - As of September 30, 2025, total deposits increased by $126.1 million, or 5%, to $2.5 billion from $2.3 billion at December 31, 2024[259] - Total uninsured deposits were estimated at $961.7 million, or 39% of total deposits, as of September 30, 2025[261] Interest Rate Risk Management - The Company has established procedures and policy guidelines to manage interest rate risk effectively[290] - The Asset/Liability Committee (ALCO) meets quarterly to monitor interest rate risk and ensure compliance with internal policies[291] - Interest rate risk is monitored using static gap analysis, earnings at risk simulation, and economic value at risk simulation[292] - The Company has a derivative policy in place for managing interest rate risks, with quarterly monitoring by the ALCO Committee[304]