Fidelity D & D's Net Interest Margin Widens to 3.30%
Net interest income reached $21.8 million in the third quarter as FTE net interest margin expanded 35 bps year over year to 3.30%.
Fidelity D & D Bancorp (FDBC), a Scranton-based community bank, reported net interest income of $21.8 million for the three months ended September 30, 2026, up 18% from a year earlier, as the fully-taxable-equivalent net interest margin widened to 3.30%.
The $3.4 million year-over-year increase in net interest income came from higher average loan balances, a 4 bps rise in FTE loan yields, and lower funding costs. Average loans increased $237.3 million versus the third quarter of 2025. The average rate paid on interest-bearing deposits fell 29 bps, more than offsetting a $76.4 million increase in average interest-bearing deposit balances.
The FTE yield on interest-earning assets was 4.95%, 12 bps higher than a year earlier. The cost of interest-bearing liabilities was 2.26%. The FTE net interest spread was 2.69%.
Sequentially, the margin had already been expanding. FTE net interest margin was 3.22% in the second quarter after a 14 bps sequential expansion from 3.08% in the first quarter. The third-quarter 8 bps sequential expansion to 3.30% continued that path.
Net interest income rose $1.1 million sequentially from $20.8 million in the second quarter, after a $1.4 million sequential increase from $19.4 million in the first quarter. Average loans and leases were $2.13 billion in the third quarter, up $89.5 million from $2.04 billion in the second quarter. Period-end loans and leases were $2.18 billion.
Net income was $8.9 million, or $1.53 a share, a 21% increase from $7.3 million, or $1.27 a share, a year earlier. President and Chief Executive Officer Daniel J. Santaniello called the results record third-quarter earnings, with total assets of $3.0 billion.
The provision for credit losses on loans was $1.1 million, compared with $200 thousand a year earlier. The company said the increase primarily reflected growth in the loan portfolio. The bank recorded a $50 thousand net benefit on unfunded commitments, which it attributed to a reduction in unfunded construction commitments.
Non-interest income was $6.1 million. The company cited $0.4 million of higher wealth management revenue, a $0.3 million gain on the sale of bank property, and $0.2 million of commercial loan fee income including a prepayment penalty.
Non-interest expense was $16.1 million, up 10% from a year earlier. The company attributed the increase to $0.6 million of added salaries and benefits, $0.4 million of premises and equipment costs, and $0.3 million of donations including a one-time charitable contribution. The efficiency ratio improved to 56.11% from 60.17%.
Period-end total deposits were $2.61 billion, including $593.3 million of non-interest-bearing deposits. Short-term borrowings were $132.7 million at September 30, 2026. Total assets were $3.03 billion.
Non-performing assets were $2.6 million, or 0.08% of total assets. Past due and non-accrual loans were 0.19% of total loans. Net charge-offs to average total loans were 0.01%.
Tier 1 capital was 9.64% of total average assets. Total risk-based capital was 14.10% of risk-weighted assets and Tier 1 risk-based capital was 12.97%. Tangible book value per share was $39.06. Tangible common equity was 7.54% of total assets.
Santaniello said the company remains confident in its position as it enters the fourth quarter and looks ahead to 2027.
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