REPORTS FIRST QUARTER (Form 8-K)

REPORTS FIRST QUARTER 2026 FINANCIAL RESULTS



Dunmore, PA - Fidelity D & D Bancorp, Inc. (NASDAQ: FDBC) and its banking subsidiary, The Fidelity Deposit and Discount Bank, announced its unaudited, consolidated financial results for the three-month period ended March 31, 2026.



Unaudited Financial Information



Net income for the quarter ended March 31, 2026 was $7.5 million, or $1.28 per diluted share, compared to $6.0 million, or $1.03 per diluted share, for the quarter ended March 31, 2025. The $1.5 million, or 25%, increase in net income resulted primarily from a $2.4 million increase in net interest income coupled with a $0.2 million increase in non-interest income. This was partially offset by a $0.6 million increase in non-interest expense and a $0.6 million increase in the provision for credit losses on the growth of loans and unfunded commitments.

"We are pleased to report strong first quarter results for 2026," said Daniel J. Santaniello, President and Chief Executive Officer. "Fidelity Bank reached quarter-end assets of $2.9 billion, delivering a 25% year-over-year increase in net income to $7.5 million and a 24% increase in diluted earnings per share. These results reflect solid asset growth, consistent operational execution, and continued strength across our core businesses. I am grateful to our bankers whose expertise, collaboration, and commitment continue to drive our performance and support our shared success as we carry this momentum forward."

Consolidated First Quarter Operating Results Overview



Net interest income was $19.4 million for the first quarter of 2026, representing a 14% increase over the $17.0 million earned for the first quarter of 2025. The $2.4 million increase in net interest income resulted from the increase of $2.2 million in interest income primarily due to a $160.6 million increase in the average balance of interest-earning assets and a 4 basis point increase in fully-taxable equivalent ("FTE") (non-GAAP measurement) yields. The loan portfolio had the most significant impact, producing a $2.0 million increase in FTE interest income from $132.8 million in higher quarterly average balances and an increase of 5 basis points in FTE loan yields. Additionally, the Company experienced an increase of $0.6 million in interest earned from interest-bearing deposits with other financial institutions from $77.3 million in higher average balances. The increase in interest income was coupled with a $0.2 million decrease in interest expense due to a 22 basis points decrease in rates paid on interest-bearing deposits which more than offset the increase from $138.0 million in higher average balances compared to the first quarter of 2025.

The FTE yield on interest-earning assets was 4.77% for the first quarter of 2026, an increase of 4 basis points from 4.73% for the first quarter of 2025. The overall cost of interest-bearing liabilities was 2.27% for the first quarter of 2026, a decrease of 22 basis points from the 2.49% for the first quarter of 2025. The cost of funds decreased 16 basis points from 1.93% to 1.77% for the first quarters of 2025 and 2026, respectively. The Company's FTE net interest spread was 2.50% for the first quarter of 2026, an increase of 26 basis points from 2.24% recorded for the first quarter of 2025. FTE net interest margin increased to 3.08% for the three months ended March 31, 2026 from 2.89% for the same period of 2025.

For the three months ended March 31, 2026, the provision for credit losses on loans was $875 thousand and the provision for credit losses on unfunded commitments was $90 thousand, compared to a $455 thousand provision for credit losses on loans and a $85 thousand net benefit in the provision for credit losses on unfunded loan commitments for the three months ended March 31, 2025. For the three months ended March 31, 2026, the increase in the provision for credit losses on loans compared to the prior year period was due to significantly higher loan growth. For the three months ended March 31, 2026, the increase in the provision for credit losses on unfunded commitments compared to the prior period was due to the originated growth in the portfolio, specifically in commercial construction commitments.

Total non-interest income increased $0.2 million, or 4%, to $5.2 million for the first quarter of 2026 compared to $5.0 million for the first quarter of 2025. The increase in non-interest income was primarily attributed to increases of $0.4 million in fees from commercial loans with interest rate hedges and $0.3 million in wealth management revenue with the largest contributor being personal trust fees. These increases were partially offset by a $0.6 million lower gain on sold loans due to a $0.5 million gain on the sale of a commercial loan during the first quarter of 2025. Additionally, the Company saw an increase of $0.2 million in commercial loan late fees due to two substandard loans that were paid off in the first quarter of 2026.

Non-interest expenses increased $0.6 million, or 4%, for the first quarter of 2026 to $15.2 million from $14.6 million for the same quarter of 2025. The increase in non-interest expenses was attributed to the increases in salaries and benefits expense of $0.4 million primarily due to an increase in the number of bankers and incentive-based compensation throughout the quarter.

The provision for income taxes decreased $0.1 million during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to a $0.5 million discount recognized in the provision from utilizing/applying purchased renewable energy tax credits in the first quarter of 2026.

Consolidated Balance Sheet & Asset Quality Overview



The Company's total assets had a balance of $2.9 billion as of March 31, 2026, an increase of $111.2 million from December 31, 2025. The increase resulted from $111.9 million of growth in the loans and leases portfolio as of March 31, 2026 compared to December 31, 2025. Cash and cash equivalents increased $6.9 million and premises and equipment increased $3.8 million over the same period. Asset growth was offset by a decrease of $11.6 million in the investment portfolio primarily due to the sale of $5.8 million in available-for-sale securities and $5.1 million in paydowns.

During the same time period, total liabilities increased $105.4 million, or 4%. Deposit growth of $109.1 million was utilized to fund loan growth and increase interest-bearing cash balances. For interest-bearing deposit accounts, the Company experienced increases of $63.5 million in money market deposits, $19.6 million in interest-bearing checking accounts, and $10.6 million in savings and clubs; these increases were partially offset by a $6.7 million decrease in time deposits. Additionally, the Company experienced an increase of $22.2 million in non-interest-bearing checking accounts. As of March 31, 2026, the ratio of insured and collateralized deposits to total deposits was approximately 73%.

Shareholders' equity increased $5.8 million, or 2%, to $244.7 million at March 31, 2026 from $238.9 million at December 31, 2025. The increase was caused by $4.9 million higher retained earnings from net income of $7.5 million plus a $0.4 million, after tax, improvement in accumulated other comprehensive income, partially offset by $2.5 million in cash dividends paid to shareholders. An additional $0.5 million was recorded from the issuance of common stock under the Company's stock plans and restricted stock activity. At March 31, 2026, there were no credit losses on available-for-sale and held-to-maturity debt securities. Accumulated other comprehensive income (loss) is excluded from regulatory capital ratios. The Company remains well capitalized with Tier 1 capital at 9.38% of total average assets as of March 31, 2026. Total risk-based capital was 14.45% of risk-weighted assets and Tier 1 risk-based capital was 13.33% of risk-weighted assets as of March 31, 2026. Tangible book value per share was $38.67 at March 31, 2026 compared to $37.88 at December 31, 2025. Tangible common equity decreased to 7.91% of total assets at March 31, 2026 compared to 8.01% at December 31, 2025 due to a 4% increase in total tangible assets compared to a 3% increase in tangible common equity.

Asset Quality



Total non-performing assets were $2.4 million, or 0.09% of total assets, at March 31, 2026, compared to $2.2 million, or 0.08% of total assets, at December 31, 2025. Past due and non-accrual loans to total loans were 0.28% at March 31, 2026 compared to 0.26% at December 31, 2025. Net charge-offs to average total loans were 0.02% at March 31, 2026 compared to 0.03% at December 31, 2025.

About Fidelity D & D Bancorp, Inc. and The Fidelity Deposit and Discount Bank

Fidelity D & D Bancorp, Inc. has built a strong history as trusted financial advisor to the clients served by The Fidelity Deposit and Discount Bank ("Fidelity Bank"). Fidelity Bank continues its mission of exceeding client expectations through a unique banking experience. It operates 21 full-service offices throughout Lackawanna, Luzerne, Lehigh and Northampton Counties and a Fidelity Bank Wealth Management Office in Schuylkill County. Fidelity Bank provides a digital banking experience online at www.bankatfidelity.com, through the Fidelity Mobile Banking app, and in the Client Care Center at 1-800-388-4380. Additionally, the Bank offers full-service Wealth Management & Brokerage Services, a Mortgage Center, and a full suite of personal and commercial banking products and services. Part of the Company's vision is to serve as the best bank for the community, which was accomplished by having provided over 6,190 hours of volunteer time and over $1.5 million in donations to non-profit organizations directly within the markets served throughout 2025. Fidelity Bank's deposits are insured by the Federal Deposit Insurance Corporation up to the full extent permitted by law.

Non-GAAP Financial Measures



The Company uses non-GAAP financial measures to provide information useful to the reader in understanding its operating performance and trends, and to facilitate comparisons with the performance of other financial institutions. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The Company's non-GAAP financial measures and key performance indicators may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to measure their performance and trends. Non-GAAP financial measures should be supplemental to GAAP used to prepare the Company's operating results and should not be read in isolation or relied upon as a substitute for GAAP measures. Adjusted non-interest income used in the calculation of certain non-GAAP performance measures excludes gains and losses on securities sales in order to enhance comparability between reporting periods. Reconciliations of non-GAAP financial measures to GAAP are presented in the tables below.

Interest income was adjusted to recognize the income from tax exempt interest-earning assets as if the interest was taxable, fully-taxable equivalent ("FTE"), in order to calculate certain ratios within this document. This treatment allows a uniform comparison among yields on interest-earning assets. Interest income was FTE adjusted, using the corporate federal tax rate of 21% for 2026 and 2025. FTE adjustments affect interest income and related ratios only and do not impact reported GAAP net income.