UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q


QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


FOR QUARTER ENDED MARCH 31, 2004


COMMISSION FILE NUMBER: 333-90273


FIDELITY D & D BANCORP, INC.


STATE OF INCORPORATION:	IRS EMPLOYER IDENTIFICATION NO:
PENNSYLVANIA	23-3017653


PRINCIPAL OFFICE:
BLAKELY & DRINKER ST.
DUNMORE, PENNSYLVANIA 18512


TELEPHONE:
570-342-8281

The Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

X	YES		NO

The Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

	YES	X	NO

The number of outstanding shares of Common Stock of Fidelity D & D Bancorp, Inc. at April 30, 2004, the latest practicable date, was 1,828,266 shares.

FIDELITY D & D BANCORP, INC.

Form 10-Q March 31, 2004

Index


PART I. FINANCIAL INFORMATION		Page

ITEM 1. FINANCIAL STATEMENTS (Unaudited):

	Consolidated Balance Sheet as of March 31, 2004
	and December 31, 2003	3
	Consolidated Statement of Income for the three
	months ended March 31, 2004 and 2003	4
	Consolidated Statement of Changes in Shareholders' Equity
	for the three months ended March 31, 2003 and 2004	5
	Consolidated Statement of Cash Flows for the three months
	ended March 31, 2004 and 2003	6
	Notes to Consolidated Financial Statements	7

ITEM 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	9

ITEM 3.	Quantitative and Qualitative Disclosure about Market Risk	22


ITEM 4.	Controls and Procedures	26


PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	26

ITEM 2.	Changes in Securities, Use of Proceeds and Issuer Purchases or Equity Securities	26

ITEM 3.	Defaults upon Senior Securities	27

ITEM 4.	Submission of Matters to a Vote of Security Holders	27

ITEM 5.	Other Information	27

ITEM 6.	Exhibits and Reports on Form 8-K	27

Signatures		29

Exhibit Index		30

FIDELITY D & D BANCORP, INC.
CONSOLIDATED BALANCE SHEET
As of March 31, 2004 and December 31, 2003

	March 31, 2004 (unaudited)		December 31, 2003 (audited)
ASSETS
Cash and due from banks	$ 11,687,749		$ 13,148,199
Interest-bearing deposits with financial institutions	534,152		6,083,402
Total cash and cash equivalents	12,221,901		19,231,601
Held-to-maturity securities	4,325,925		4,712,142
Available-for-sale securities	133,853,667		139,695,232
Loans and leases, net (allowance for loan losses of
$5,776,375 in 2004 and $4,996,966 in 2003)	366,265,860		366,981,640
Loans available-for-sale (fair value $20,300,713 in
2004; $20,500,507 in 2003)	19,657,819		19,863,577
Accrued interest receivable	2,151,887		1,807,081
Bank premises and equipment, net	11,806,706		12,091,937
Foreclosed assets held for sale	320,764		467,166
Cash surrender value of bank owned life insurance	7,378,167		7,293,538
Other assets	2,695,713		3,071,552
Total assets	$ 560,678,409		$ 575,215,466
LIABILITIES
Deposits
Non-interest bearing	$ 65,519,553		$ 64,398,658
Certificates of deposit of $100,000 or more	103,378,214		112,857,420
Other interest-bearing deposits	213,738,398		224,186,468
Total deposits	382,636,165		401,442,546
Accrued interest payable and other liabilities	2,897,200		3,208,009
Short-term borrowings	58,109,334		54,756,978
Long-term debt	71,688,929		71,876,034
Total liabilities	515,331,628		531,283,567
SHAREHOLDERS' EQUITY
Preferred stock authorized 5,000,000 shares with no par
value; none issued	--		--
Capital stock authorized 10,000,000 shares with no par
value; issued and outstanding 1,828,266 shares in
2004 and 1,828,270 shares in 2003	9,689,807		9,698,879
Treasury stock, at cost	(3,456	)	(196,048	)
Retained earnings	34,865,454		34,641,976
Accumulated other comprehensive income (loss)	794,976		(212,908	)
Total shareholders' equity	45,346,781		43,931,899
Total liabilities and shareholders' equity	$ 560,678,409		$ 575,215,466

FIDELITY D & D BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	Three Months Ended
	March 31, 2004		March 31, 2003
Interest Income
Interest and fees on loans:
Taxable	$ 5,412,352		$ 5,922,083
Nontaxable	84,088		105,672
Leases	49,420		91,734
Interest-bearing deposits with financial institutions	1,115		1,905
Investment securities:
US Government agencies	1,218,595		1,311,770
States and political subdivisions (nontaxable)	135,378		111,770
Other securities	52,167		73,841
Federal funds sold	10,210		18,973
Total interest income	6,963,325		7,637,748
Interest expense
Certificates of deposit of $100,000 or more	890,671		1,288,182
Other deposits	1,050,649		1,462,436
Securities sold under repurchase agreements	102,861		164,429
Other short- and long-term borrowings and other	986,199		890,733
Total interest expense	3,030,380		3,805,780
Net interest income	3,932,945		3,831,968
Provision for loan losses	850,000		300,000
Net interest income, after provision for loan losses	3,082,945		3,531,968
Other income:
Service charges on deposit accounts	525,929		384,635
Gain on sale of:
Investment securities	9,497		81,551
Loans	23,611		68,101
Loss on leased assets	(93,266	)	--
Loss on foreclosed assets held for sale	--		(3,528	)
Fees, other service charges and other income	480,646		426,226
Total other income	946,417		956,985
Other operating expenses:
Salaries and employee benefits	1,744,516		1,660,629
Premises and equipment	719,411		697,206
Advertising	60,507		74,267
Other	750,593		862,825
Total other expenses	3,275,027		3,294,927
Income before provision for income taxes	754,335		1,194,026
Provision for income taxes	129,428		306,726
Net income	$ 624,907		$ 887,300
Per share data:
Net income - basic	$ 0.34		$ 0.49
Net income - diluted	$ 0.34		$ 0.49
Dividends	$ 0.22		$ 0.22

FIDELITY D & D BANCORP, INC.
Consolidated Staements of Changes in Shareholders' Equity
For the three months ended March 31, 2003 and 2004

	Capital Stock				Treasury Stock				Retained		Accumulated other comprehensive
	Shares		Amount		Shares		Amount		earnigns		income (losses)		Total

Balance, December 31, 2002 (audited)	1,825,363		$ 9,590,142		(5,987	)	$(221,559	)	$34,600,626		$ 1,265,224		$45,234,433

Comprehensive income:
Net income									887,300				887,300
Change in net unrealized holding gains
(losses) on available-for-sale securities, net
net of reclassification adjustments											(237,868	)	(237,868	)

Comprehensive income													649,432

Issuance of common stock through
Employee Stock Purchase Plan					1,264		42,654						42,654
Dividends reinvested through Dividend
Reinvestment Plan	71		2,684		3,317		125,374						128,058
Stock options exercised					800		29,800						29,800
Dividends declared									(400,716	)			(400,716	)

Balance, March 31, 2003 (unaudited)	1,825,434		$ 9,592,826		(606	)	$(23,731	)	$35,087,210		$ 1,027,356		$45,683,661

Balance, December 31, 2003 (audited)	1,828,270		$ 9,698,879		(5,227	)	$(196,048	)	$34,641,976		$ (212,908	)	$43,931,899

Comprehensive income:
Net income									624,907				624,907
Change in net unrealized holding gains
(losses) on available-for-sale securities, net
net of reclassification adjustments											1,007,884		1,007,884

Comprehensive income													1,632,791

Reissued treasury stock through
Employee Stock Purchase Plan	--		(8,329	)	1,635		61,370						53,041
Dividends reinvested through Dividend
Reinvestment Plan	--		(633	)	(3,496	)	131,222						130,589
Fractional shares repurchased	(4	)	(110	)									(110	)
Dividends declared									(401,429	)			(401,429	)

Balance, March 31, 2004 (unaudited)	1,828,266		$ 9,689,807		(96	)	$ (3,456	)	$34,865,454		$ 794,976		$45,346,781

FIDELITY D & D BANCORP, INC.
Consolidated Statements of Cash Flows
(unaudited)

	Three Months Ended
	March 31, 2004		March 31, 2003
Cash flows from operating activities:
Net income	$ 624,907		$ 887,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation	309,540		311,122
Amortization of securities (net of accretion)	143,131		419,651
Provision for loan losses	850,000		300,000
Deferred income tax	(10,258	)	(119,439	)
Write-down of foreclosed assets held-for-sale	46,098		--
Increase in cash surrender value of life insurance	(84,629	)	(23,147	)
Gain on sale of investment securities	(9,497	)	(81,551	)
Gain on sale of loans	(23,611	)	(68,101	)
(Gain) loss on sale of foreclosed assets held- for-sale	(2,726	)	3,528
Loss on sale of leased assets	93,266		--
Loss on sale of equipment	2,541		--
Amortization of loan servicing rights	23,965		47,615
Net (increase) decrease in accrued interest receivable	(344,806	)	1,136
Net (increase) decrease in other assets	(164,980	)	728,507
Net decrease in accrued interest payable and other liabilities	(310,809	)	(272,834	)
Net cash provided by operating activities	1,142,132		2,133,787
Cash flows from investing activities:
Held-to-maturity securities:
Proceeds from maturities, calls and paydowns	382,321		1,722,327
Available-for-sale securities:
Proceeds from sales	4,659,462		12,093,723
Proceeds from maturities, calls and paydowns	9,386,214		18,611,438
Purchases	(6,806,752	)	(35,820,487	)
Proceeds from sale of loans available-for-sale	1,671,411		939,929
Net increase in loans and leases	(2,018,977	)	(4,726,322	)
Purchase of life insurance policies	--		(7,000,000	)
Proceeds from sale of leased assets	274,616		--
Acquisition of bank premises and equipment	(26,851	)	(217,474	)
Proceeds from sale of credit card receivables	--		2,977,526
Proceeds from sale of foreclosed assets held-for-sale	185,763		313,673
Net cash provided by (used in) investing activities	7,707,207		(11,105,667	)
Cash flows from financing activities:
Net increase (decrease) in noninterest-bearing deposits	1,120,896		(3,995,644	)
Net (decrease) increase in certificates of deposit of $100,000 or more	(9,479,206	)	5,591,199
Net decrease in other interest-bearing deposits	(10,448,071	)	(5,389,693	)
Net increase in short-term borrowings	3,352,356		4,286,524
Repayment of long-term debt	(187,105	)	--
Dividends paid, net of dividend reinvestment	(270,951	)	(272,659	)
Proceeds from exercise of stock options	--		29,800
Proceeds from employee stock purchase plan	53,042		42,654
Net cash (used in) provided by financing activities	(15,859,039	)	292,181
Net decrease in cash and cash equivalents	(7,009,700	)	(8,679,699	)
Cash and cash equivalents, beginning	19,231,601		26,219,247
Cash and cash equivalents, ending	$ 12,221,901		$ 17,539,548

FIDELITY D & D BANCORP, INC.

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of operations and critical accounting policies

Principles of consolidation

The accompanying unaudited consolidated financial statements of Fidelity D&D Bancorp, Inc., and its wholly owned subsidiary, The Fidelity Deposit and Discount Bank (the “Bank”), (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial condition and results of operations for the periods have been included. All significant inter-company balances and transactions have been eliminated in consolidation. Prior period amounts are reclassified when necessary to conform to the current period’s presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. For additional information and disclosures required under GAAP, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Nature of operations

The Bank is a commercial bank chartered in the Commonwealth of Pennsylvania and a wholly owned subsidiary of the Company. Having commenced operations in 1903, the Bank provides a full range of traditional banking services, trust services and alternative financial products from its main office located in Dunmore and other branches throughout Lackawanna and Luzerne counties.

Management is responsible for the fairness, integrity and objectivity of the unaudited financial statements included in this report. Management prepared the unaudited financial statements in accordance with GAAP. In meeting its responsibility for the financial statements, management depends on the Company’s accounting systems and related internal controls. These systems and controls are designed to provide reasonable, but not absolute, assurance that the financial records accurately reflect the transactions of the Company, the Company’s assets are safeguarded and that financial statements present fairly the financial condition and results of operations of the Company.

In the opinion of management, the consolidated balance sheets as of March 31, 2004 and December 31, 2003 and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three month periods ended March 31, 2004 and March 31, 2003 present fairly the financial condition and results of operations of the Company. All material adjustments required for a fair presentation have been made. These adjustments are of a normal recurring nature. There have been no material changes in accounting principles, practices or in the method of application and there have been no retroactive adjustments during these periods. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2003 and the notes included therein, included within the Company’s Annual Report filed on Form 10-K.

Critical accounting policies

The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.

A material estimate that is particularly susceptible to significant change is the determination of the allowance for loan losses. Management believes that the allowance for loan losses, as of March 31, 2004, is adequate and reasonable. Given the subjective nature of identifying and valuing loan losses, it is likely that well-informed individuals could make materially different assumptions, and could, therefore calculate a materially different allowance value. While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revisions in the future. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments of information available to them at the time of their examination.

Another material estimate is the calculation of fair values of the Company’s investment securities. The Company receives estimated fair values of investment securities from an independent valuation service. In developing these fair values, the valuation service uses estimates of cash flows based on historical performance of similar instruments in similar interest rate environments. Based on experience, management is aware that estimated fair values of investment securities tend to vary among valuation services. Accordingly, when selling investment securities, management typically obtains price quotes from more than one source. The majority of the Company’s investment securities are classified as available-for-sale. Available-for-sale securities are carried at fair market value on the consolidated balance sheet, with unrealized gains and losses, net of income tax, reported as a separate component of shareholders’ equity in accumulated other comprehensive income (loss).

The fair market value of residential mortgage loans, classified as available-for-sale (AFS), is obtained from the Federal National Mortgage Association (Fannie Mae). The fair value of Small Business Administration (SBA) loans, classified as AFS, is obtained from an outside pricing source. To determine the fair market value of student loans, classified as AFS, the Bank uses the pricing obtained from the most recent student loans sold from its AFS portfolio. The market to which the Bank sells mortgage and other loans is restricted and price quotes from other sources are not typically obtained.

2. Earnings per share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted- average number of common shares outstanding plus the number of incremental shares that would be outstanding after giving effect to the assumed exercise of stock options.

The following data illustrates the amounts used in computing EPS and the effects on income and the weighted-average number of shares of potentially dilutive common stock for the three months ended March 31, 2004 and 2003:

March 31, 2004	Income numerator	Weighted-average common shares denominator	EPS
Basic EPS	$ 624,907	1,824,766	$ 0	.34
Dilutive effect of potential common stock:
Stock options:
Exercise of outstanding options		10,600