<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 0-22826
Fidelity Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3915246
(State of Incorporation) (I.R.S. Employer Identification No.)
5455 W. Belmont, Chicago, Illinois, 60641
(Address of principal executive offices)
(773) 736-4414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports 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 report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of common
stock, was 2,791,978 shares of common stock, par value $.01, outstanding as of
April 24, 1997.
===============================================================================
<PAGE>
FIDELITY BANCORP, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE(S)
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of March 31, 1997 (unaudited) and September 30, 1996 1
Consolidated Statements of Earnings for the three and six
months ended March 31, 1997 and 1996 (unaudited) 2
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended March 31, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the six months
ended March 31, 1997 and 1996 (unaudited) 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-14
SIGNATURE PAGE 15
<PAGE>
FIDELITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS March 31, September 30,
1997 1996
(unaudited)
<S> <C> <C>
Cash and due from banks $ 1,194 3,848
Interest-bearing deposits 933 225
Federal funds sold 200 200
Investment in dollar-denominated mutual funds, at
fair value 3,149 3,146
FHLB of Chicago stock 5,795 5,795
Mortgage-backed securities held to maturity, at
amortized cost (approximate fair value of $19,897
at March 31, 1997 and $21,766 at September 30, 1996) 19,891 21,673
Investment securities available for sale, at fair value 75,227 78,104
Loans receivable, net of allowance for loan losses of $843
at March 31, 1997 and $810 at September 30, 1996 371,530 354,255
Accrued interest receivable 3,173 3,199
Real estate in foreclosure - 97
Premises and equipment 3,614 3,780
Deposit base intangible 130 158
Other assets 1,174 1,382
------- -------
$ 486,010 475,862
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits 330,383 302,934
Borrowed funds 97,100 115,300
Advance payments by borrowers for taxes and insurance 3,408 1,953
Other liabilities 5,598 6,847
------- -------
Total liabilities 436,489 427,034
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized 2,500,000
shares; none outstanding - -
Common stock, $.01 par value; authorized 8,000,000 shares;
issued 3,782,350 shares; 2,791,978 and 2,866,108 shares
outstanding at March 31, 1997 and September 30, 1996 38 38
Additional paid-in capital 37,198 37,079
Retained earnings, substantially restricted 29,291 27,851
Treasury stock, at cost (990,372 and 916,242 shares at
March 31, 1997 and September 30, 1996, respectively) (13,897) (12,619)
Common stock acquired by Employee Stock Ownership Plan (1,662) (2,078)
Common stock acquired by Bank Recognition and Retention Plans (580) (708)
Unrealized loss on investment securities available for sale,
less applicable taxes (867) (735)
------- -------
TOTAL STOCKHOLDERS' EQUITY 49,521 48,828
Commitments and contingencies
$ 486,010 475,862
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.<PAGE>
<PAGE>
FIDELITY BANCORP, INC.
Consolidated Statements of Earnings
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months ended Six Months ended
March 31, March 31,
1997 1996 1996 1997
-------------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable $ 7,064 5,710 14,030 11,183
Investment securities 1,470 1,314 2,975 2,743
Mortgage-backed securities 359 437 735 895
Interest earning deposits 9 18 19 40
Federal funds sold 2 11 5 33
Investment in mutual funds 40 3 82 6
------ ------ ------ ------
8,944 7,493 17,846 14,900
Interest Expense:
Deposits 3,924 3,532 7,798 6,994
Borrowed funds 1,305 665 2,777 1,431
------ ------ ------ ------
5,229 4,197 10,575 8,425
Net interest income before provision
for loan losses 3,715 3,296 7,271 6,475
Provision for loan losses - 80 39 80
------ ------ ------ ------
Net interest income after provision
for loan losses 3,715 3,216 7,232 6,395
Non-Interest Income:
Fees and commissions 90 100 202 196
Insurance and annuity commissions 189 162 290 296
Other 16 14 28 21
------ ------ ------ ------
295 276 520 513
Non-Interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,394 1,200 2,673 2,419
Office occupancy and equipment 302 296 598 595
Data processing 127 116 241 226
Advertising and promotions 173 108 338 239
Federal deposit insurance premiums 50 168 208 329
Other 335 307 699 590
------ ------ ------ -----
Total general and administrative expenses 2,381 2,195 4,757 4,398
Amortization of intangible 14 16 28 32
------ ------ ------ ------
2,395 2,211 4,785 4,430
------ ------ ------ ------
Income before income taxes 1,615 1,281 2,967 2,478
Income tax expense 618 497 1,136 962
------ ------ ------ ------
Net income $ 997 784 1,831 1,516
====== ====== ====== ======
Earnings per share - primary $ 0.36 0.26 0.66 0.48
Earnings per share - fully diluted $ 0.36 0.26 0.65 0.48
====== ====== ====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
FIDELITY BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
Six months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
Unrealized
Loss on
Common Common Investment
Additional Stock Stock Securities
Common Paid-In Retained Treasury Acquired Acquired Available
Stock Capital Earnings Stock by ESOP by BRRP's For Sale Total
--- ------ ------- ------- ------ ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1995 $38 36,795 26,449 (5,978) (2,494) (963) (55) $53,792
Net income - - 1,516 - - - - 1,516
Purchase of treasury stock
(196,244 shares) - - - (3,060) - - - (3,060)
Cash dividends ($.10 per
share) - - (381) - - - - (381)
Amortization of award of
BRRP's stock - - - - - 127 - 127
Cost of ESOP shares released - - - - 416 - - 416
Exercise of stock options
and reissuance of treasury
shares (2,200 shares) - (6) - 28 - - - 22
Tax benefit related to
stock options exercised - 2 - - - - - 2
Market adjustment for
committed ESOP shares - 108 - - - - - 108
Change in unrealized loss
on investment securities
available for sale - - - - - - 380 380
--- ------ ------- ------ ------ ------ ---- -------
Balance at March 31, 1996 $38 36,899 27,584 (9,010) (2,078) (836) (435) $52,162
=== ====== ======= ====== ====== ======= ==== =======
Balance at
September 30, 1996 38 37,079 27,851 (12,619) (2,078) (708) (735) 48,828
Net income - - 1,831 - - - - 1,831
Purchase of treasury stock
(82,030 shares) - - - (1,389) - - - (1,389)
Cash dividends ($.14 per
share) - - (391) - - - - (391)
Amortization of award of
BRRP's stock - - - - - 128 - 128
Cost of ESOP shares released - - - - 416 - - 416
Exercise of stock options
and reissuance of treasury
shares (2,200 shares) - (32) - 111 - - - 79
Tax benefit related to
stock options exercised - 13 - - - - - 13
Market adjustment for
committed ESOP shares - 138 - - - - - 138
Change in unrealized loss
on investment securities
available for sale - - - - - - (132) (132)
--- ------ ------- ------ ------ ----- ---- ------
Balance at March 31, 1997 $38 37,198 29,291 (13,897) (1,662) (580) (867) $49,521
=== ====== ======= ====== ====== ===== ==== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
FIDELITY BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended March 31, 1997 1996
------ ------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,831 1,516
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 173 190
Deferred income taxes 13 2
Provision for loan losses 39 80
Net amortization and accretion of premiums and discounts 12 200
Amortization of cost of stock benefit plans 128 127
Principal payment on ESOP loan 416 416
Market adjustment for committed ESOP shares 138 108
Deferred loan fees, net of amortization (290) (481)
Amortization of deposit base intangible 28 32
Decrease (increase) in accrued interest receivable 26 (156)
Decrease in other assets 198 79
Increase (decrease) in other liabilities (1,167) 25
------ ------
Net cash provided by operating activities 1,545 2,138
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities - 39,000
Purchase of mutual funds (3) 36
Purchase of Federal Home Loan Bank of Chicago stock - (824)
Purchase of investment securities available for sale - (45,000)
Loans originated for investment (43,682) (62,892)
Proceeds from sale of real estate owned 101 -
Purchase of premises and equipment (7) (58)
Principal repayments collected on loans receivable 26,657 26,105
Principal repayments collected on investment securities 2,667 3,923
Principal repayments collected on mortgage-backed securities 1,773 2,162
------ ------
Net cash used in investing activities (12,494) (37,548)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 27,449 25,522
Proceeds from (repayments of) FHLB advances (18,200) 18,518
Net increase (decrease) in advance payments
by borrowers for taxes and insurance 1,455 (2,832)
Purchase of treasury stock (1,389) (3,060)
Payment of common stock dividends (391) (381)
Proceeds from exercise of stock options 79 22
------ ------
Net cash provided by financing activities 9,003 37,789
------ ------
Net change in cash and cash equivalents (1,946) 2,379
Cash and cash equivalents at beginning of period 4,273 4,115
------ ------
Cash and cash equivalents at end of period $ 2,327 6,494
====== ======
CASH PAID DURING THE PERIOD FOR:
Interest $ 10,535 8,345
Income taxes 200 851
NON-CASH INVESTING ACTIVITIES -
Loans transferred to real estate in foreclosure - 70
====== ======
</TABLE> See accompanying notes to unaudited consolidated financial statements.
<PAGE>
FIDELITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation have been included.
The results of operations and other data for the six months ended March 31,
1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ended September 30, 1997.
The unaudited consolidated financial statements include the accounts of
Fidelity Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
Fidelity Federal Savings Bank and subsidiaries (the "Bank"). All material
intercompany accounts and transactions have been eliminated in consolidation.
(2) EARNINGS PER SHARE
Earnings per share of common stock for the three and six months ended March 31,
1997 has been determined by dividing net income by 2,805,859 and 2,811,928,
respectively, the weighted average number of shares of common stock and common
stock equivalents outstanding. Earnings per share information for the three
and six months ended March 31, 1996 were determined by dividing net income by
3,027,001 and 3,075,326, respectively, the weighted average number of shares of
common stock and common stock equivalents outstanding. Stock options are
regarded as common stock equivalents and are therefore considered in the
earnings per share calculations. Common stock equivalents are computed using
the treasury stock method.
(3) COMMITMENTS AND CONTINGENCIES
At March 31, 1997, the Bank had outstanding commitments to originate loans of
$7.1 million, of which $282,000 were fixed rate, with rates ranging from 7.50%
to 7.625%, and $6.86 million were adjustable rate commitments.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The Company's results of operations are dependent on net interest income which
is the difference between interest earned on its loan and investment
portfolios, and its cost of funds, consisting of interest paid on deposits and
borrowed money. The Company also generates non-interest income such as
transactional fees, loan servicing fees, and fees and commissions from the
sales of insurance products and securities through its subsidiary. Operating
expenses primarily consist of employee compensation, occupancy expenses,
federal deposit insurance premiums and other general and administrative
<PAGE>
expenses. The results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities.
The Company reported earnings for the second quarter ended March 31, 1997 of
$997,000, compared with $784,000 for the same quarter a year ago, an increase
of 27.2%. Earnings per fully diluted share for the quarter were $0.36 per
share, up $0.10 per share, or 38.5% from the second quarter of 1996.
For the first six months of the fiscal year, the Company reported similar gains
in net income and earnings per share. For the six months ended March 31, 1997,
Fidelity's net income was $1.8 million, compared with $1.5 million for the
first six months of 1996. Earnings per fully diluted share for the first six
months were $0.65 per share, up 32.7% from the six-month period one year ago.
The Company also announced that its board of directors declared a quarterly
dividend of $0.08 per share, payable May 15, 1997 to shareholders of record as
of April 30, 1997.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such forward-
looking statements to be covered by the safe harbor provisions for forward-
looking statements contained in the Private Securities Reform Act of 1995, and
is including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on the
operations and future prospects of the Company and the subsidiaries include,
but are not limited to, changes in: interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal
Reserve Board, the quality or composition of the loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial
services in the Company's market area and accounting principles, policies and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the Securities and
Exchange Commission.
LIQUIDITY & CAPITAL RESOURCES
Liquidity management is both a daily and long-term function of management's
strategy. The Company's primary sources of funds are deposits and borrowings,
amortization and prepayment of loan principal and mortgage-backed securities,
maturities of investment securities and operations. While maturing investments
and scheduled loan repayments are relatively predictable, deposit flows and
loan prepayments are greatly influenced by interest rates, floors and caps on
loan rates, general economic conditions and competition. Management generally
<PAGE>
manages the pricing of its deposits to be competitive and increase core deposit
relationships, but has from time to time decided not to pay deposit rates that
are as high as those of its competitors and, when necessary, to supplement
deposits with Federal Home Loan Bank ("FHLB") advances.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. This requirement, which may be varied at the direction of the Office
of Thrift Supervision ("OTS") depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
current required ratio is 5.0%. The Bank has historically maintained its
liquidity ratio for regulatory purposes at levels in excess of those required.
At March 31, 1997, the Bank's liquidity ratio was 7.71%.
The Bank's cash flows are comprised of three classifications: cash flows from
operating activities, cash flows from investing activities, and cash flows from
financing activities. Cash flows from operating activities, consisting
primarily of interest and dividends received less interest paid on deposits,
were $1.7 million for the six months ended March 31, 1997. A one-time special
assessment charge of $1.6 million was recorded on September 30, 1996 as the
result of legislation regarding the Savings Association Insurance Fund (the
"SAIF"). During the six month period ended March 31, 1997, the Company paid
the SAIF special assessment, thereby reducing the net cash provided by
operating activities. Net cash used in investing activities was $12.6 million
for the six months ended March 31, 1997. Investing activities consisted
primarily of disbursements for loan originations and principal collected on
loans. Net cash provided by financing activities amounted to $9.0 million for
the six months ended March 31, 1997. The $27.4 million in increased deposits
was offset by net repayments of $18.2 million in FHLB advances.
At March 31, 1997, the Bank had outstanding loan commitments of $7.1 million.
Management anticipates that it will have sufficient funds available to meet its
current loan commitments. Certificates of deposit scheduled to mature in one
year or less from March 31, 1997 totalled $160.9 million. Consistent with
historical experience, management believes that a significant portion of such
deposits will remain with the Bank, and that their maturity and repricing will
not have a material adverse impact on the operating results of the Company.
The Bank's Tangible and Leverage Capital ratio at March 31, 1997 was 8.5%.
This exceeded the Tangible Capital requirement of 1.5% of adjusted assets and
the Core ("Leverage") Capital requirement of 3% of adjusted assets by $33.8
million and $26.6 million, respectively. The Bank's Risk-based Capital ratio
was 18.3% at March 31, 1997 which exceeded the Risk-based Capital requirement
of 8% of Risk-weighted assets by $23.3 million.
CHANGES IN FINANCIAL CONDITION
Total assets at March 31, 1997 were $486.0 million, compared to $475.9 million
at September 30, 1996. Loans receivable, net of allowance for loan losses,
grew at an annualized growth rate of 9.8% during the first half of fiscal 1997
to $371.5 million at March 31, 1997. The Company continues to offer various
loan products, and prices them competitively. Current year multi-family and
commercial originations accounted for $8.6 million, or 19.7% of all
originations. The Company's total loan originations were $43.7 million for the
six months ended March 31, 1997.
Deposits grew at an annualized growth rate of 18.1%, ending the first six
months at $330.4 million. Growth in deposits for the quarter was the result of
the promotion of transaction accounts, including the introduction of a new line
<PAGE>
of checking accounts. Management continues to utilize FHLB advances when they
are a cost effective source to fund loan activity. During the six month period
ending March 31, 1997, the Company has repaid a net $18.2 million in FHLB
advances.
Book value per share on March 31, 1997 was $17.74, compared with $17.04 at
September 30, 1996.
ASSET QUALITY
As of March 31, 1997, the Company had non-performing assets of $3.4 million.
Classified loans of $1.4 million were categorized as substandard, consisting of
7 residential mortgage loans, 2 commercial loans, and 2 unsecured lines of
credit. In addition to the mortgage and consumer portfolio, the Company
classified its investment in commercial leases as substandard. There were no
assets classified as doubtful.
From October 1994 through January 1995, the Company purchased 454 full-payout
commercial equipment leases located in various parts of the country with
original aggregate outstanding principal balances of $3.0 million. Since that
time normal lease payments had reduced the aggregate outstanding balance to
$2.0 million at February 29, 1996. These leases were all originated by,
serviced by, and financially guaranteed by Bennett Funding Group of Syracuse,
New York ("BFG"). On March 29, 1996 it was reported that BFG was the target of
a civil complaint filed by the Securities and Exchange Commission. On that
same date, BFG filed a Chapter 11 bankruptcy petition in the Northern District
of New York and halted payments on the lease agreements. The Bankruptcy
Trustee is currently collecting the lease payments from the lessees and holding
them in escrow pending the outcome of the litigation concerning BFG, its
creditors, and related issues. This disruption of payment flows from the
servicer, BFG, has caused the Company to classify all the leases as
substandard, place them on non-accrual status and to categorize them as non-
performing and impaired.
The Company is vigorously pursuing available legal remedies in an attempt to
protect and collect amounts due under the terms of the underlying leases. The
substance of the Company's claims center on the assertion that it has a
perfected security interest in the leases and the proceeds thereof. The
Trustee disagrees. The opinion of the Company's bankruptcy counsel at this
time is that the Company's position should ultimately prevail. There can be no
assurance, however, of the actual results of this legal process or the extent
of the Company's recovery, if any.
Management has estimated what is believed to be the realizable value of the
leases and established a valuation allowance of $406,000. In the event that
the outcome of the litigation is not favorable, i.e. the Company's status is
that of an unsecured creditor, the recovery may be substantially smaller. Any
recovery by the Company of less than the net book value of the leases will
cause additional losses to the Company.
STOCK REPURCHASE
On November 26, 1996, the Company completed its sixth repurchase program. As
a component of its strategy to build shareholder value, the Company has
repurchased 1,002,472 shares, at an average cost of $14.03 through March 31,
1997.
<PAGE>
RECENT REGULATORY DEVELOPMENTS
Legislation has been introduced in the Congress that would eliminate the
federal thrift charter by requiring each federal thrift to convert to a
national bank or to a state bank or state thrift. One of the pending bills
would require the conversion to occur by January 1, 1998 while the other would
require conversion by June 30, 1998. Under the proposed legislation, state
thrift institutions would be regulated for purposes of federal law as state
banks. The bills would allow a converting federal thrift to retain
nonconforming investments and activities for a period of two years following
conversion (subject to extension by the converted bank's primary federal
regulator for up to two additional one year periods). The pending legislation
would allow savings and loan holding companies that become bank holding
companies as a result of a charter conversion pursuant to the legislation to
continue to engage in any activity in which they are currently allowed to
engage, provided that they remain "qualified bank holding companies." In order
to be deemed a qualified bank holding company, each depository institution
subsidiary of the holding company that was previously a thrift institution must
continue to satisfy the qualified thrift lender test and comply with all
investment limitations to which the institution was subject as a thrift
institution. Further, the proposed legislation imposes certain restrictions on
the ability of a qualified bank holding company to acquire other depository
institutions or to be acquired. If a savings and loan holding company failed
to remain a qualified bank holding company, the company would become subject to
all of the nonbanking activities restrictions generally applicable to bank
holding companies.
The Congress is also considering legislation that would allow bank holding
companies to engage in a wider range of nonbanking activities, including
greater authority to engage in securities and insurance activities. While the
scope of permissible nonbanking activities and the conditions under which the
new powers could be exercised varies among the bills, the expanded powers
generally would be available to a bank holding company only if the bank holding
company and its bank subsidiaries remain well-capitalized and well-managed.
The bills also impose various restrictions on transactions between the
depository institution subsidiaries of bank holding companies and their nonbank
affiliates. These restrictions are intended to protect the depository
institutions from the risks of the new nonbanking activities permitted to such
affiliates.
At this time, the Company is unable to predict whether any of the pending bills
will be enacted and, therefore, is unable to predict the impact such
legislation may have on the operations of the Company and the Bank.<PAGE>
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived from average
daily balances. The yields and costs include fees, which are considered
adjustments to yields.
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended
1997 1996 March 31,1997
------------------------ ----------------------- ----------------------
Inter- Average Inter- Average Inter- Average
Average est Yield Average est Yield Average est Yield
(dollars in thousands)
------------------------ ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $366,018 7,064 7.72% 287,881 5,710 7.93% 362,863 14,030 7.73%
Mortgage-backed securities 20,458 359 7.02% 25,005 437 6.99% 20,913 735 7.03%
Interest-bearing deposits 908 9 3.96% 1,313 18 5.48% 1,086 19 3.50%
Investment securities,
mutual funds, and
federal funds sold 86,100 1,512 7.02% 79,166 1,328 6.71% 86,242 3,062 7.10%
------- ----- ----- ------ --- ----- ------- ----- -----
Total interest-earning
assets 473,484 8,944 7.56% 393,365 7,493 7.62% 471,104 17,846 7.68%
Non-interest earning
assets 10,896 12,149 11,421
------- ------ -------
Total assets $484,380 405,514 482,525
======= ======= =======
Interest-bearing liabilities:
Deposits:
Savings accounts 67,935 502 2.96% 82,017 644 3.14% 68,699 1,025 2.98%
Money market account 32,790 258 3.15% 34,308 267 3.11% 32,729 539 3.29%
Certificate accounts 224,185 3,164 5.65% 173,749 2,621 6.03% 217,870 6,234 5.72%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total deposits 324,910 3,924 4.83% 290,074 3,532 4.87% 319,298 7,798 4.88%
Borrowed funds 93,998 1,305 5.55% 47,678 665 5.58% 98,874 2,777 5.62%
------- ----- ----- ------- ---- ----- ------- ----- -----
Total interest-bearing
liabilities 418,908 5,229 4.99% 337,752 4,197 4.97% 418,172 10,575 5.06%
Non-interest bearing
deposits 4,723 5,686 4,608
Other liabilities 10,363 8,657 9,907
------- ------ -------
Total liabilities 433,994 352,095 432,687
Stockholders' equity 50,386 53,419 49,838
Total liabilities and
stockholders' equity $484,380 405,514 482,525
======= ======= =======
Net interest
income/interest rate
spread (1) 3,715 2.56% 3,296 2.65% 7,271 2.52%
Net earning assets/net
interest margin (2) $ 54,576 3.14% 55,613 3.35% 52,932 3.09%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.13x 1.16x 1.13x
</TABLE>
(1) Interest rate spread represents the difference between the average rate
on interest-earning assets and the average cost of interest bearing
liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
(3) Average yields and costs for the three and six month periods are annual-
ized for presentation purposes.
<PAGE>
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31,
1997 AND MARCH 31, 1996
GENERAL. Net income for the three months ended March 31, 1997 was $997,000, an
increase of $213,000 from the net income of $784,000 for the three months ended
March 31, 1996. The 27.2% increase in earnings for the quarter was primarily
due to greater net interest income.
INTEREST INCOME. Income from loans receivable, the chief contributor to
interest income, was $7.1 million for the quarter ended March 31, 1997, up
23.7% from the prior year. The average balance of loans increased 27.1% to
$366.0 million compared to the average for the second quarter one year ago of
$287.9 million. The yield on loans, including non-performing commercial leases
of $2.0 million, decreased only 21 basis points. The increase in loan interest
income was a result of higher loan volumes. Gross interest income totalled
$8.9 million for the three months ended March 31, 1997.
INTEREST EXPENSE. The increase in deposits contributed to greater interest
expense on deposits for the quarter, which was $3.9 million, compared with $3.5
million the previous year. Savings interest costs remained stable at 4.8%.
The Company reduced its FHLB of Chicago advances during the quarter, however
the average advances outstanding almost doubled compared to the same quarter
one year ago, thus contributing to the 96.2% increase in interest expense on
borrowed funds.
PROVISION FOR LOAN LOSSES. The Company recorded no provision for loan losses
in the 1997 second quarter. The provision for loan losses reflects
management's on-going evaluation of losses on loans and the adequacy of the
allowance for loan losses based on all pertinent considerations, including
current market conditions. As of March 31, 1997, the cumulative allowance for
loan losses was $843,000, or 24.7% of non-performing assets. The ratio of the
allowance for loan losses to net loans receivable stands at 0.23%. See
discussion regarding non-performing assets in the "Asset Quality" section of
the Management's Discussion and Analysis of Financial Condition. Management
believes that its allowance for loan losses is adequate to provide for
potential foreseeable losses.
NON-INTEREST INCOME. Non-interest income increased 6.9% to $295,000 for the
second quarter. Insurance and annuity commissions produced $189,000, a 16.7%
increase compared to the same period in 1996.
NON-INTEREST EXPENSE. Non-interest expense for 1997 totalled $2.4 million, an
increase of $184,000, or 8.3%, from $2.2 million for the three months ended
March 31, 1996. Advertising expenditures have increased 60.2% in a planned
effort to introduce new products to the community. The results of this effort
are reflected in the increased deposits. Federal deposit insurance premiums
have decreased $118,000 or 70.2% as a result of the recently passed
legislation.
INCOME TAXES. Income taxes increased $121,000 for the three months ended March
31, 1997 to $618,000 compared to $497,000 for the prior year due to increased
taxable income.
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 1997
AND MARCH 31, 1996
GENERAL. Net income for the six months ended March 31, 1997 was $1.8 million,
an increase of $315,000 from the net income of $1.5 million for the six months
ended March 31, 1996. This 20.8% increase can be attributed to a 12.3%
increase in net interest income before provision for loan losses.
INTEREST INCOME. Interest income increased $2.9 million, or 19.8%, to $17.8
million in the 1997 period from $14.9 million for the 1996 period. The
increase is attributable to a 25.5% increase in loan receivable income.
Average loan volume increase of 37.0% more than compensated for the 24 basis
point decrease in weighted average loan yields for the six months ended March
31, 1997 compared to the same period ended March 31, 1996.
INTEREST EXPENSE. In addition to the increase in interest income, interest
expense has also grown along with the increasing deposit base. Interest
expense on deposits totalled $7.8 million, a $804,000 increase from the March
31, 1996 expense of $7.0 million. Average interest-bearing deposits increased
$34.9 million to $319.3 million for the six month period in 1997 compared to
1996. The weighted average cost of deposits remained stable at 4.9%. Average
borrowings nearly doubled, thus increasing interest expense by $1.4 million.
PROVISION FOR LOAN LOSSES. The Company recorded a $39,000 provision for loan
losses in the first six months of fiscal 1997, compared to a $80,000 provision
in 1996. The adequacy of the loan loss provision is analyzed on a monthly
basis. Management considers the changes in the type and volume of the loan
portfolio, the specific delinquent loans, the historical loss experience, and
the current economic trends, as well as loan growth and other factors deemed
appropriate when evaluating the allowance for loan losses. See discussion
regarding non-performing assets in the "Asset Quality" section of the
Management's Discussion and Analysis of Financial Condition.
NON-INTEREST INCOME. Non-interest income remained level at as compared to the
same period in the prior year. Included in non-interest income are commissions
through INVEST financial corporation, the Company noted a general slow-down of
transaction activity through the first quarter, however, activity increased in
the second quarter, thus keeping the six month results stable.
NON-INTEREST EXPENSE. Non-interest expense for 1997 totalled $4.8 million, an
increase of $355,000 or 8.0%, from $4.4 million for the six months ended March
31, 1996. Salaries and employee benefits continued to increase due to
additional personnel and market adjustments for the ESOP shares to be released
December 31, 1997. In addition to compensation, advertising increased due to
the introduction of new products to customers. Legislation passed September
30, 1996 regarding FDIC premiums had a noticeable impact with a $121,000
decrease in insurance premiums.
INCOME TAXES. Income taxes increased $174,000 for the six months ended March
31, 1997 to $1.1 million compared to $962,000 for the prior year due to
increased taxable income.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank is involved in legal proceedings regarding the Bennett Funding Group
("BFG") bankruptcy proceedings, in which the Bank has an investment in
commercial leases guaranteed by BFG. The Bankruptcy Trustee has filed an
adversary complaint against the Bank for claimed violations of the automatic
stay provisions of the bankruptcy code with respect to post-petition collection
efforts of the Bank. The monies collected by the Bank, aggregating
approximately $60,000, have since been remitted to the Trustee's escrow account
after obtaining assurances from the court that the funds would be protected
pending the outcome of the litigation. The Trustee's claim for $10 million for
sanctions and actual damages based on the Bank's post-petition collection
activity is also being vigorously contested. The Trustee has also filed an
adversary proceeding against 60 banks, including the Bank, asserting various
causes of action. The results of these adversary proceeding are not expected
to have a material adverse impact on the Company.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on
January 29, 1997.
(b) The directors elected at the Annual Meeting are as follows:
For Withheld
Raymond S. Stolarczyk 2,457,435 18,880
Thomas E. Bentel 2,457,435 18,880
The directors whose term of office continued after the Annual
Meeting are as follows:
Paul Bielat
Patrick J. Flynn
Raymond J. Horvat
Bonnie Stolarczyk
(c) A brief description of each other matter voted on and the
number votes cast:
(i) Ratification of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending September 30, 1997.
For Against Abstain
2,450,245 4,180 21,890
ITEM 5. OTHER INFORMATION
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
On February 21, 1997, the Company announced under Item 5 of
Form 8-K that it adopted a Stockholders' Rights Plan and
amended its Bylaws.
<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 thereunto duly authorized.
Fidelity Bancorp, Inc.
Dated: April 24, 1997 /s/ RAYMOND S. STOLARCZYK
-----------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: April 24, 1997 /s/ JAMES R. KINNEY
-----------------------------
James R. Kinney
Sr. V. P. and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Condition at March 31, 1997 (unaudited) and the
Consolidated Statement of Earnings for the six months ended March 31, 1997
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 1194
<INT-BEARING-DEPOSITS> 933
<FED-FUNDS-SOLD> 200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78376
<INVESTMENTS-CARRYING> 25686
<INVESTMENTS-MARKET> 25692
<LOANS> 372373
<ALLOWANCE> 843
<TOTAL-ASSETS> 486010
<DEPOSITS> 330383
<SHORT-TERM> 59100
<LIABILITIES-OTHER> 9006
<LONG-TERM> 38000
0
0
<COMMON> 38
<OTHER-SE> 49483
<TOTAL-LIABILITIES-AND-EQUITY> 486010
<INTEREST-LOAN> 14030
<INTEREST-INVEST> 3710
<INTEREST-OTHER> 106
<INTEREST-TOTAL> 17846
<INTEREST-DEPOSIT> 7798
<INTEREST-EXPENSE> 10575
<INTEREST-INCOME-NET> 7271
<LOAN-LOSSES> 39
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4785
<INCOME-PRETAX> 2967
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1831
<EPS-PRIMARY> .66
<EPS-DILUTED> .65
<YIELD-ACTUAL> 2.52
<LOANS-NON> 3415
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 810
<CHARGE-OFFS> 16
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 843
<ALLOWANCE-DOMESTIC> 843
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
