SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 4, 1998
FIDELITY FEDERAL BANCORP
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Indiana 0-22880 35-1894432
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
700 South Green River Road, Suite 2000, Evansville, Indiana 47715
----------------------------------------------------------- --------
(Address of Principal Executive Offices) Zip Code
(812) 469-2100
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
On September 4, 1998, Fidelity Federal Bancorp (the "Registrant") issued
the press release as set forth herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
99 Press release of the Registrant issued on September 4, 1998.
* * *
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIDELITY FEDERAL BANCORP
(Registrant)
Date: September 4, 1998 By: /s/ M. BRIAN DAVIS
------------------
M. Brian Davis
President
3
EXHIBIT 99
FIDELITY FEDERAL BANCORP LETTERHEAD
CONTACTS: M. BRIAN DAVIS, PRESIDENT AND CEO (812)471-8141
DONALD R. NEEL, EXEC. VP AND CFO (812)469-2100, EXT. 14
FOR IMMEDIATE RELEASE SEPTEMBER 4, 1998
FIDELITY FEDERAL BANCORP RELEASES YEAR END RESULTS AND RESTATES
THIRD QUARTER EARNINGS; SUSPENDS QUARTERLY DIVIDEND
(Evansville, Indiana) Fidelity Federal Bancorp (the "Company")
(NASDAQ NMS:FFED), the holding company of United Fidelity Bank, fsb (the
"Bank"), reported a loss for the fiscal year ending June 30, 1998 of $6.8
million or $2.30 per share on a basic and diluted basis, compared to net
income the previous fiscal year of $113,000 or $0.05 per share on a basic per
share basis and $0.04 on a diluted basis. The 1998 year end results reflect a
restatement of the third quarter earnings for an additional $1.4 million
provision for loan losses, bringing the total provision for loan losses in the
third quarter to $4.3 million, and an increase in third quarter non-interest
expense of $8.7 million, bringing the non-interest expense for the third
quarter to $11.1 million. The third quarter charges were taken primarily in
connection with the Company's Internal Revenue Code ("IRC") Section 42
tax-credit real estate development program (the "Section 42 projects") which
was primarily in operation between 1993 and 1996 and followed an examination
of the Bank and the Company by the Company's primary regulator, the Office of
Thrift Supervision. The methodology used by the OTS to compute the allowance
for loan losses and to establish reserves for letters of credit in connection
with the Section 42 projects was different than those previously used by the
Company and was adopted by management. The Section 42 projects continue to
comply with the requirements of IRC Section 42 and have not sustained any
tax-credit recapture.
Net income for the fourth quarter was $411,000 or $0.13 per share on
a diluted basis, compared to $314,000, or $0.12 per share on a diluted basis.
Excluding charges taken in the third quarter, the Company's net income would
have been approximately $1.4 million for the year or $0.46 per share on a
diluted basis.
Net interest income decreased $396,000 for the fourth quarter and
$845,000 for the year compared to the same periods last year. Average earning
assets for the fourth quarter and year decreased $51.8 million and $37.2
million, respectively, primarily the reason for the decrease in net interest
income. The net interest margin increased to 2.79% for the year compared to
2.72% last year. The fourth quarter net interest margin decreased slightly to
2.92% compared to 2.96% for the same period last year. Net interest income
decreased $242,000 for the third quarter, primarily due to quarterly average
earning assets decreasing $44.7 million compared to last year. The net
interest margin continued to increase for the third quarter to 2.73% compared
to 2.64% for the same period last year. The year to date net interest margin
at March 31, 1998 increased
<PAGE>
10 basis to 2.74% compared to last year.
The additional $8.7 million in non-interest expense in the third
quarter reflects (i) additional specific reserves related to letters of credit
issued by the Company and the Bank in the Section 42 projects of $6.8 million,
(ii) a charge-off of the equity investments in the Section 42 projects by the
Bank's subsidiary, Village Housing Corporation, and (iii) and the charge-off
of receivables related to management fees, investment banking fees, letter of
credit fees, and development fees in connection with the Section 42 projects.
These charge-offs reflect the lower-than-projected occupancy rates, rent
amounts and cash flows of the Section 42 projects. Current occupancy rates are
significantly improved over the levels in which the charge-offs were based
currently average in excess of 90%.
The additional $1.4 million provision for loan losses in the third
quarter reflects a charge-off of Section 42 loans classified as loss and an
increase in the provision for the remaining Section 42 loans which are
classified substandard or doubtful. Year to date provision for loan losses at
June 30, 1998 was $4.5 million compared to $975,000 at June 30, 1997. This
increase is primarily the result of the third quarter provision which is
discussed above. The fourth quarter provision for loan losses was $20,000
compared to $60,000 for the same period last year.
Due to the above provision, the allowance for loan losses to total
loans at June 30, 1998 was 1.91% compared to 0.87% last fiscal year. Net
charge-offs to average loans for the fourth quarter was 0.15% compared to
0.12% for the same period last year. On a year to date basis, net charge-offs
to average loans were 1.81% and 0.12% for fiscal 1998 and 1997. Specific
reserves for letters of credit to total letters of credit were 12.21%,
representing specific reserves set aside for off balance sheet letters of
credit. The allowance for loan losses to total loans at March 31, 1998
increased to 1.89% compared to 0.85% last year.
Return on average assets for the fourth quarter was 0.84% compared to
0.51% for the same period last year. Year to date return on average assets was
- -3.12% compared to 0.04% last year resulting from the third quarter charges.
Return on equity for the fourth quarter was 22.75% compared to 9.46% for the
fourth quarter 1997. Return on equity for the year was -50.68% compared to
0.83 % last year.
The Company has ceased originating, participating, or investing in
new or additional Section 42 projects. It is currently pursuing a plan to
refinance its Section 42 projects which, if successful, could result in
reversal of a portion of the additional charges taken to non-interest expense.
The availability of such refinancing depends upon numerous factors, including,
among other things, interest rates, third-party appraisals, and occupancy
levels in the Section 42 projects.
Capital ratios at the Bank decreased primarily due to the third
quarter loss. Tangible equity to assets at June 30, 1998 was 6.31% compared to
6.93% last year. Risk-based capital was 10.79% at June 30, 1998 compared to
10.74% last year, above the "well capitalized" level.
<PAGE>
Tangible equity to assets at March 31, 1998 decreased to 6.11% from 6.63% a
year ago. Risk-based capital decreased from 10.89% at March 31, 1997 to 10.61%
at March 31, 1998, also above the regulatory "well capitalized" level.
In conjunction with these results, the Company announced that it was
suspending the payment of dividends, and that future dividends may be subject
to regulatory approval. In addition, the Company is exploring entering into
discussions regarding an affiliation with other financial institutions.
This news release contains forward-looking statements that are based
upon the Company's current expectations, but are subject to certain risks and
uncertainties which may cause actual results to differ materially. Among the
risks and uncertainties that could cause actual results to vary materially are
economic conditions generally and in the market areas of the Company and the
Bank, increased competition in the financial services industry, actions by the
Federal Reserve Board and changes in interest rates, loan prepayments by, and
the financial health of, the Bank's borrowers, and other factors described in
the reports filed by the Company with the Securities and Exchange Commission.
The Company is a unitary savings and loan holding company based in
Evansville, Ind. Its savings bank subsidiary, United Fidelity Bank, fsb,
maintains four locations in Evansville. Its other wholly owned subsidiary,
Village Securities Corporation, is a deep discount stock and bond brokerage
firm that was recently activated. The Bank participates in various real estate
activities including mortgage banking and finance, as well as owning,
developing, building, renting and managing housing developments through its
wholly-owned subsidiaries: Village Capital Corporation, Village Community
Development Corporation, Village Housing Corporation, and Village Management
Corporation. The Bank also offers an array of insurance products through
Village Insurance Corporation.
Information on FFED is available on the Internet at
http://www.ufb-ffed.com
<PAGE>
FIDELITY FEDERAL BANCORP
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
OPERATIONS: 1998 1997 1998 1997
- --------------------------------------------- --------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Interest income $ 3,993 $ 4,935 $ 13,334 $ 15,224
Interest expense 2,700 3,400 9,042 10,484
--------------- -------------- -------------- -------------
Net interest income 1,293 1,535 4,292 4,740
Provision for loan losses 4,298 60 4,523 915
Non-interest income 590 1,209 2,414 3,054
Non-interest expense 11,070 1,963 14,417 7,400
--------------- -------------- -------------- -------------
Income (loss) before income tax (13,485) 721 (12,234) (521)
Income taxes (5,363) 192 (5,029) (321)
--------------- -------------- -------------- -------------
Net income (loss) (8,122) 529 (7,205) (200)
=============== ============== ============== =============
PER SHARE:
- ---------------------------------------------
Basic net income (loss) $ (2.60) $ 0.21 $ (2.49) $ (0.08)
Diluted net income (loss) (2.60) 0.20 (2.49) (0.08)
Cash dividends declared 0.10 0.10 0.30 0.50
Book value at period end 2.33 5.17
Market price (bid) at period end 9.38 8.25
Average common and common
equivalent shares outstanding 3,127,240 2,630,667 2,899,348 2,686,040
AVERAGE BALANCES:
- ---------------------------------------------
Total assets $ 207,914 $ 252,743 $ 225,287 $ 256,260
Total earning assets 192,352 237,038 208,873 240,682
Total loans 172,115 210,426 186,708 216,102
Total deposits 153,973 186,048 169,766 184,549
Total stockholders' equity 15,984 13,014 15,283 13,675
Federal funds purchased 30 10 1,200
FHLB advances 18,677 30,372 19,921 35,259
Borrowings 17,240 21,653 17,831 19,358
PERFORMANCE RATIOS:
- ---------------------------------------------
Return on average assets -15.84% 0.85% -4.26% -0.10%
Return on average equity -206.07% 16.48% -62.80% -1.95%
Net interest margin 2.73% 2.64% 2.74% 2.64%
LOAN QUALITY RATIOS:
- ---------------------------------------------
Net charge-offs to average loans 7.07% 0.22% 2.29% 0.12%
Allowance for loan losses to total
loans at end of period 1.89% 0.85%
Non-performing loans to total loans 0.46% 0.16%
Classified loans and letters of credit to
total loans and letters of credit 2.65% 0.13%
Specific reserves for letters of credit to total 12.20%
letters of credit
SAVING'S BANK CAPITAL RATIOS:
- ---------------------------------------------
Tangible equity to assets at end of period 6.11% 6.63%
Risk-based capital ratios:
Tier 1 capital 6.61% 7.75%
Total capital 10.61% 10.89%
AT PERIOD END:
- ---------------------------------------------
Total assets $ 199,684 $ 250,285
Total earning assets 183,586 235,219
Total loans 163,297 210,360
Total deposits 146,672 185,803
Total stockholders' equity 7,273 12,865
FHLB Advances 18,627 27,604
Borrowings 17,166 21,282
Common shares outstanding 3,127,210 2,490,110
</TABLE>
<PAGE>
FIDELITY FEDERAL BANCORP
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED EXCLUDING
FOURTH QUARTER ENDED JUNE 30: 1998 1997 1998 1997 CHARGES
- -------------------------------------------- ----------- ------------ ------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 3,859 $ 5,058 $ 17,192 $ 20,282 $ 17,192
Interest expense 2,544 3,347 11,586 13,831 11,586
----------- ------------ ------------ ---------------------------
Net interest income 1,315 1,711 5,606 6,451 5,606
Provision for loan losses 20 60 11,321 975 357
Non-interest income 611 803 3,025 3,856 3,025
Non-interest expense 1,660 2,074 9,298 9,474 6,585
----------- ------------ ------------ ---------------------------
Income before income tax 246 380 (11,988) (142) 1,689
Income taxes (165) 66 (5,194) (255) 241
----------- ------------ ------------ ---------------------------
Net income $ 411 $ 314 $ (6,794) $ 113 $ 1,448
=========== ============ ============ ===========================
PER SHARE:
- --------------------------------------------
Basic net income $ 0.13 $ 0.13 $ (2.30) $ 0.05 0.49
Diluted net income 0.13 0.12 (2.30) 0.04 0.48
Cash dividends declared 0.05 0.10 0.35 0.60 0.35
Book value at period end 2.40 5.20 5.03
Market Price (bid) at period end 6.50 8.75
Average common and common
equivalent shares outstanding 3,147,007 2,583,945 2,956,157 2,655,181
AVERAGE BALANCES:
- --------------------------------------------
Total assets $ 191,769 $ 247,853 $ 216,036 $ 254,130
Total earning assets 179,107 231,680 200,451 238,438
Total loans 162,810 210,221 179,748 213,793
Total deposits 143,948 181,231 163,422 183,706
Total stockholders' equity 11,810 13,297 13,406 13,596
Federal funds purchased 436 3,648 116 1,810
FHLB Advances 17,239 26,740 19,253 33,136
Borrowings 17,199 20,585 17,673 19,664
PERFORMANCE RATIOS:
- --------------------------------------------
Return on average assets 0.86% 0.51% -3.15% 0.04% 0.67%
Return on average equity 13.95% 9.46% -50.68% 0.83% 10.80%
Net interest margin 2.93% 2.98% 2.80% 2.72%
LOAN QUALITY RATIOS:
- --------------------------------------------
Net charge-offs to average loans 0.15% 0.12% 3.57% 0.12%
Allowance for loan losses to total
loans at end of period 4.27% 0.87%
Non-performing loans to total loans 0.14%
SAVING'S BANK CAPITAL RATIOS:
- --------------------------------------------
Tangible equity to assets at end of period 6.41% 6.93%
Risk-based capital ratios:
Tier 1 capital 6.79% 7.64%
Total capital 10.82% 10.74%
AT PERIOD END:
- --------------------------------------------
Total assets $ 190,268 $ 240,001
Total earning assets 176,633 224,438
Total loans 156,594 204,964
Total deposits 148,939 181,787
Total stockholders' equity 7,514 12,936
FHLB Advances 14,783 23,337
Borrowings 17,236 19,943
Common shares outstanding 3,127,208 2,487,385
</TABLE>
<PAGE>
FIDELITY FEDERAL BANCORP
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
JUNE 30 JUNE 30
OPERATIONS: 1998 1997 1998 1997
- --------------------------------------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Interest income 3,859 5,058 17,192 20,282
Interest expense 2,544 3,347 11,586 13,831
------------- --------------- -------------- -------------
Net interest income 1,315 1,711 5,606 6,451
Provision for loan losses 20 60 4,543 975
Non-interest income 611 803 3,025 3,856
Non-interest expense 1,660 2,074 16,076 9,474
------------- --------------- -------------- -------------
Income (loss) before income tax 246 380 (11,988) (142)
Income taxes (165) 66 (5,194) (255)
------------- --------------- -------------- -------------
Net income (loss) $ 411 $ 314 $ (6,794) $ 113
============= =============== ============== =============
PER SHARE:
- ---------------------------------------------
Basic net income (loss) $ 0.13 $ 0.13 $ (2.30) $ 0.05
Diluted net income (loss) 0.13 0.12 (2.30) 0.04
Cash dividends declared 0.05 0.10 0.35 0.60
Book value at period end 2.40 5.20
Market price (bid) at period end 6.50 8.75
Average common and common
equivalent shares outstanding 3,127,210 2,583,945 2,956,157 2,655,181
AVERAGE BALANCES:
- ---------------------------------------------
Total assets $ 196,038 $ 247,853 $ 217,726 $ 254,130
Total earning assets 179,851 231,680 201,233 238,438
Total loans 163,554 210,221 180,530 213,793
Total deposits 143,948 181,231 163,422 183,706
Total stockholders' equity 7,245 13,297 13,406 13,596
Federal funds purchased 436 3,648 116 1,810
FHLB advances 17,239 26,740 19,253 33,136
Borrowings 17,199 20,585 17,673 19,664
PERFORMANCE RATIOS:
- ---------------------------------------------
Return on average assets 0.84% 0.51% -3.12% 0.04%
Return on average equity 22.75% 9.46% -50.68% 0.83%
Net interest margin 2.92% 2.96% 2.79% 2.72%
LOAN QUALITY RATIOS:
- ---------------------------------------------
Net charge-offs to average loans 0.15% 0.12% 1.81% 0.12%
Allowance for loan losses to total
loans at end of period 1.91% 0.87%
Non-performing loans to total loans 0.36% 0.14%
Classified loans and letters of credit to
total loans and letters of credit 2.70% 0.11%
Specific reserves for letters of credit to total
letters of credit 12.21%
SAVINGS BANK CAPITAL RATIOS:
- ---------------------------------------------
Tangible equity to assets at end of period 6.31% 6.93%
Risk-based capital ratios:
Tier 1 capital 6.78% 7.64%
Total capital 10.79% 10.74%
AT PERIOD END:
- ---------------------------------------------
Total assets $ 197,046 $ 240,001
Total earning assets 179,772 224,438
Total loans 159,732 204,964
Total deposits 148,939 181,787
Total stockholders' equity 7,514 12,936
FHLB Advances 14,783 23,337
Borrowings 17,236 19,943
Common shares outstanding 3,127,208 2,487,385
</TABLE>
<PAGE>
FIDELITY FEDERAL BANCORP
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED EXCLUDING
FOURTH QUARTER ENDED JUNE 30: 1998 1997 1998 1997 CHARGES
- --------------------------------------------- ----------- ----------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 3,859 $ 5,058 $ 17,192 $ 20,282 $ 17,192
Interest expense 2,544 3,347 11,586 13,831 11,586
----------- ----------- ------------ ---------------------------
Net interest income 1,315 1,711 5,606 6,451 5,606
Provision for loan losses 20 60 11,321 975 357
Non-interest income 611 803 3,025 3,856 3,025
Non-interest expense 1,660 2,074 9,298 9,474 6,585
----------- ----------- ------------ ---------------------------
Income before income tax 246 380 (11,988) (142) 1,689
Income taxes (165) 66 (5,194) (255) 241
----------- ----------- ------------ ---------------------------
Net income $ 411 $ 314 $ (6,794) $ 113 $ 1,448
=========== =========== ============ ===========================
PER SHARE:
- ---------------------------------------------
Basic net income $ 0.13 $ 0.13 $ (2.30) $ 0.05 0.49
Diluted net income 0.13 0.12 (2.30) 0.04 0.48
Cash dividends declared 0.05 0.10 0.35 0.60 0.35
Book value at period end 2.40 5.20 5.03
Market Price (bid) at period end 6.50 8.75
Average common and common
equivalent shares outstanding 3,147,007 2,583,945 2,956,157 2,655,181
AVERAGE BALANCES:
- ---------------------------------------------
Total assets $ 191,769 $ 247,853 $ 216,036 $ 254,130
Total earning assets 179,107 231,680 200,451 238,438
Total loans 162,810 210,221 179,748 213,793
Total deposits 143,948 181,231 163,422 183,706
Total stockholders' equity 11,810 13,297 13,406 13,596
Federal funds purchased 436 3,648 116 1,810
FHLB Advances 17,239 26,740 19,253 33,136
Borrowings 17,199 20,585 17,673 19,664
PERFORMANCE RATIOS:
- ---------------------------------------------
Return on average assets 0.86% 0.51% -3.15% 0.04% 0.67%
Return on average equity 13.95% 9.46% -50.68% 0.83% 10.80%
Net interest margin 2.93% 2.98% 2.80% 2.72%
LOAN QUALITY RATIOS:
- ---------------------------------------------
Net charge-offs to average loans 0.15% 0.12% 3.57% 0.12%
Allowance for loan losses to total
loans at end of period 4.27% 0.87%
Non-performing loans to total loans 0.14%
SAVING'S BANK CAPITAL RATIOS:
- ---------------------------------------------
Tangible equity to assets at end of period 6.41% 6.93%
Risk-based capital ratios:
Tier 1 capital 6.79% 7.64%
Total capital 10.82% 10.74%
AT PERIOD END:
- ---------------------------------------------
Total assets $ 190,268 $ 240,001
Total earning assets 176,633 224,438
Total loans 156,594 204,964
Total deposits 148,939 181,787
Total stockholders' equity 7,514 12,936
FHLB Advances 14,783 23,337
Borrowings 17,236 19,943
Common shares outstanding 3,127,208 2,487,385
</TABLE>
