UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to______________________

Commission file number: 001-38229

FIDELITY D & D BANCORP, INC.

STATE OF INCORPORATION: IRS EMPLOYER IDENTIFICATION NO:

Pennsylvania 23-3017653

Address of principal executive offices:

Blakely & Drinker St.

Dunmore, Pennsylvania 18512

TELEPHONE: 570-342-8281

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common stock, without par value	FDBC	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subjected to such filing requirements for the past 90 days. [X] YES [ ] NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] YES [ ] NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Non-accelerated filer x Accelerated filer o Smaller reporting company x Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] YES [X] NO

The number of outstanding shares of Common Stock of Fidelity D & D Bancorp, Inc. on April 30, 2022, the latest practicable date, was 5,659,068 shares.

FIDELITY D & D BANCORP, INC.

Form 10-Q March 31, 2022

Index

Part I. Financial Information		Page
Item 1.	Financial Statements (unaudited):
	Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
	Consolidated Statements of Income for the three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	57
Item 4.	Controls and Procedures	63
Part II. Other Information
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
Signatures		67

‎

2

PART I – Financial Information

Item 1: Financial Statements

Fidelity D & D Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)	March 31, 2022		December 31, 2021
Assets:
Cash and due from banks	$	37,695	$	27,317
Interest-bearing deposits with financial institutions		59,708		69,560
Total cash and cash equivalents		97,403		96,877
Available-for-sale securities		711,583		738,980
Restricted investments in bank stock		3,231		3,206
Loans and leases, net (allowance for loan losses of
$16,081 in 2022; $15,624 in 2021)		1,456,797		1,417,504
Loans held-for-sale (fair value $6,315 in 2022, $32,013 in 2021)		6,236		31,727
Foreclosed assets held-for-sale		151		434
Bank premises and equipment, net		31,336		29,310
Leased property under finance leases, net		1,292		1,307
Right-of-use assets		8,903		9,006
Cash surrender value of bank owned life insurance		53,065		52,745
Accrued interest receivable		7,424		7,526
Goodwill		19,628		19,628
Core deposit intangible, net		1,834		1,942
Other assets		21,891		8,912
Total assets	$	2,420,774	$	2,419,104
Liabilities:
Deposits:
Interest-bearing	$	1,610,508	$	1,579,582
Non-interest-bearing		599,497		590,283
Total deposits		2,210,005		2,169,865
Accrued interest payable and other liabilities		14,090		15,943
Finance lease obligation		1,309		1,320
Operating lease liabilities		9,555		9,627
Secured borrowings		10,572		10,620
Total liabilities		2,245,531		2,207,375
Shareholders' equity:
Preferred stock authorized 5,000,000 shares with no par value; none issued		-		-
Capital stock, no par value (10,000,000 shares authorized; shares issued and outstanding; 5,659,068 at March 31, 2022; and 5,645,687 at December 31, 2021)		114,666		114,108
Retained earnings		103,074		97,442
Accumulated other comprehensive (loss) income		(42,497)		179
Total shareholders' equity		175,243		211,729
Total liabilities and shareholders' equity	$	2,420,774	$	2,419,104
See notes to unaudited consolidated financial statements

‎

3

Fidelity D & D Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(dollars in thousands except per share data)	March 31, 2022		March 31, 2021
Interest income:
Loans and leases:
Taxable	$	14,367	$	12,188
Nontaxable		409		320
Interest-bearing deposits with financial institutions		33		21
Restricted investments in bank stock		31		33
Investment securities:
U.S. government agency and corporations		1,508		700
States and political subdivisions (nontaxable)		1,381		854
States and political subdivisions (taxable)		449		224
Total interest income		18,178		14,340
Interest expense:
Deposits		822		864
Secured borrowings		65		-
FHLB advances		-		26
Total interest expense		887		890
Net interest income		17,291		13,450
Provision for loan losses		525		800
Net interest income after provision for loan losses		16,766		12,650
Other income:
Service charges on deposit accounts		799		566
Interchange fees		1,176		949
Service charges on loans		441		511
Fees from trust fiduciary activities		617		494
Fees from financial services		267		175
Fees and other revenue		380		178
Earnings on bank-owned life insurance		319		296
Gain (loss) on write-down, sale or disposal of:
Loans		712		2,347
Premises and equipment		(157)		-
Total other income		4,554		5,516
Other expenses:
Salaries and employee benefits		6,714		5,226
Premises and equipment		1,925		1,642
Data processing and communication		712		603
Advertising and marketing		781		901
Professional services		719		937
Merger-related expenses		-		523
Automated transaction processing		369		292
Office supplies and postage		179		113
PA shares tax		160		50
Loan collection		35		50
Other real estate owned		(25)		25
FDIC assessment		237		111
FHLB prepayment fee		-		369
Other		848		614
Total other expenses		12,654		11,456
Income before income taxes		8,666		6,710
Provision for income taxes		1,144		1,043
Net income	$	7,522	$	5,667
Per share data:
Net income - basic	$	1.33	$	1.14
Net income - diluted	$	1.32	$	1.13
Dividends	$	0.33	$	0.30
See notes to unaudited consolidated financial statements

‎

4

Fidelity D & D Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income	Three months ended
(Unaudited)	March 31,
(dollars in thousands)	2022		2021
Net income	$	7,522	$	5,667
Other comprehensive loss, before tax:
Unrealized holding loss on available-for-sale debt securities		(54,020)		(9,860)
Reclassification adjustment for net gains realized in income		-		-
Net unrealized loss		(54,020)		(9,860)
Tax effect		11,344		2,071
Unrealized loss, net of tax		(42,676)		(7,789)
Other comprehensive loss, net of tax		(42,676)		(7,789)
Total comprehensive loss, net of tax	$	(35,154)	$	(2,122)
See notes to unaudited consolidated financial statements

‎

5

Fidelity D & D Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2022 and 2021
(Unaudited)							Accumulated
							other
	Capital stock				Retained		comprehensive
(dollars in thousands)	Shares		Amount		earnings		income (loss)		Total
Balance, December 31, 2020		4,977,750	$	77,676	$	80,042	$	8,952	$	166,670
Net income						5,667