<PAGE>
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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, 1998
Commission file number 1-12753
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 2,840,468 shares of common stock, par value $.01, outstanding as of
April 17, 1998.
===============================================================================
<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, 1998 (unaudited) and September 30, 1997 1
Consolidated Statements of Earnings for the three and six
months ended March 31, 1998 and 1997 (unaudited) 2
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended March 31, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows for the six months
ended March 31, 1998 and 1997 (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> 1
FIDELITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS March 31, September 30,
1998 1997
(unaudited)
<S> <C> <C>
Cash and due from banks $ 1,791 436
Interest-bearing deposits 1,038 2,314
Federal funds sold 100 100
Investment in dollar-denominated mutual funds, at
fair value - 3,154
FHLB of Chicago stock 5,700 5,700
Mortgage-backed securities held to maturity, at
amortized cost (approximate fair value of $15,104
at March 31, 1998 and $17,124 at September 30, 1997) 14,902 16,875
Investment securities available for sale, at fair value 62,006 70,297
Loans receivable, net of allowance for loan losses of $468
at March 31, 1998 and $460 at September 30, 1997 389,844 388,262
Accrued interest receivable 3,130 3,445
Real estate in foreclosure 671 215
Premises and equipment 3,931 3,593
Deposit base intangible 85 107
Other assets 1,142 1,136
------- -------
$ 484,340 495,634
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits 330,445 323,443
Borrowed funds 92,700 113,400
Advance payments by borrowers for taxes and insurance 2,808 2,197
Other liabilities 6,143 6,977
------- -------
Total liabilities 432,096 446,017
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; 2,821,530 and 2,794,978 shares
outstanding at March 31, 1998 and September 30, 1997 38 38
Additional paid-in capital 37,725 37,494
Retained earnings, substantially restricted 29,370 27,939
Treasury stock, at cost (960,820 and 987,372 shares at
March 31, 1998 and September 30, 1997, respectively) (13,483) (13,855)
Common stock acquired by Employee Stock Ownership Plan (1,092) (1,662)
Common stock acquired by Bank Recognition and Retention Plans (340) (471)
Unrealized gain on investment securities available for sale,
less applicable taxes 26 134
------- -------
TOTAL STOCKHOLDERS' EQUITY 52,244 49,617
Commitments and contingencies
$ 484,340 495,634
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.<PAGE>
<PAGE> 2
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,
1998 1997 1998 1997
-------------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable $ 7,425 7,064 14,901 14,030
Investment securities 1,206 1,470 2,487 2,975
Mortgage-backed securities 272 359 561 735
Interest earning deposits 18 9 46 19
Federal funds sold 2 2 12 5
Investment in mutual funds - 40 17 82
------ ------ ------ ------
8,923 8,944 18,024 17,846
Interest Expense:
Deposits 3,977 3,924 8,087 7,798
Borrowed funds 1,327 1,305 2,785 2,777
------ ------ ------ ------
5,304 5,229 10,872 10,575
Net interest income before provision
for loan losses 3,619 3,715 7,152 7,271
Provision for loan losses 15 - 61 39
------ ------ ------ ------
Net interest income after provision
for loan losses 3,604 3,715 7,091 7,232
Non-Interest Income:
Fees and commissions 79 90 169 202
Insurance and annuity commissions 156 189 336 290
Other 15 16 29 28
------ ------ ------ ------
250 295 534 520
Non-Interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,466 1,394 2,807 2,673
Office occupancy and equipment 307 302 598 598
Data processing 125 127 252 241
Advertising and promotions 40 173 152 338
Federal deposit insurance premiums 55 50 109 208
Other 350 335 634 699
------ ------ ------ -----
Total general and administrative expenses 2,343 2,381 4,552 4,757
Amortization of intangible 11 14 22 28
------ ------ ------ ------
2,354 2,395 4,574 4,785
------ ------ ------ ------
Income before income taxes 1,500 1,615 3,051 2,967
Income tax expense 540 618 1,114 1,136
------ ------ ------ ------
Net income $ 960 997 1,937 1,831
====== ====== ====== ======
Earnings per share - basic $ 0.36 0.38 0.72 0.70
Earnings per share - diluted $ 0.34 0.36 0.68 0.66
====== ====== ====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 3
FIDELITY BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
Six months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Common Common on 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, 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) $49,521
=== ====== ======= ====== ====== ===== ==== =======
Balance at
September 30, 1997 38 37,494 27,939 (13,855) (1,662) (471) 134 49,617
Net income - - 1,937 - - - - 1,937
Cash dividends ($.18 per
share) - - (506) - - - - (506)
Amortization of award of
BRRP's stock - - - - - 131 - 131
Cost of ESOP shares released - - - - 570 - - 570
Exercise of stock options
and reissuance of treasury
shares (26,552 shares) - (106) - 372 - - - 266
Tax benefit related to
stock options exercised - 39 - - - - - 39
Market adjustment for
committed ESOP shares - 298 - - - - - 298
Change in unrealized gain
on investment securities
available for sale - - - - - - (108) (108)
--- ------ ------- ------ ------ ----- ---- ------
Balance at March 31, 1998 $38 37,725 29,370 (13,483) (1,092) (340) 26 $52,244
=== ====== ======= ====== ====== ===== ==== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
FIDELITY BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended March 31, 1998 1997
------ ------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,937 1,831
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 177 173
Deferred income taxes - 13
Provision for loan losses 61 39
Net amortization and accretion of premiums and discounts (3) 12
Amortization of cost of stock benefit plans 131 128
Principal payment on ESOP loan 570 416
Market adjustment for committed ESOP shares 298 138
Deferred loan fees, net of amortization (35) (290)
Amortization of deposit base intangible 22 28
Decrease in accrued interest receivable 315 26
Decrease (increase)in other assets (10) 198
Decrease in other liabilities (770) (1,167)
------ ------
Net cash provided by operating activities 2,693 1,545
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 26,023 -
Purchase of investment securities available for sale (19,980) -
Loans originated for investment (57,643) (43,682)
Proceeds from sale of real estate owned - 101
Purchase of premises and equipment (515) (7)
Principal repayments collected on loans receivable 55,576 26,657
Principal repayments collected on investment securities 2,092 2,667
Principal repayments collected on mortgage-backed securities 1,967 1,773
------ ------
Net cash provided by(used in) investing activities 7,520 (12,491)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 7,002 27,449
Repayments of FHLB advances (20,700) (18,200)
Net increase in advance payments
by borrowers for taxes and insurance 611 1,455
Purchase of treasury stock - (1,389)
Payment of common stock dividends (506) (391)
Proceeds from exercise of stock options 305 79
------ ------
Net cash provided by (used in) financing activities (13,288) 9,003
------ ------
Net change in cash and cash equivalents (3,075) (1,943)
Cash and cash equivalents at beginning of period 6,004 7,419
------ ------
Cash and cash equivalents at end of period $ 2,929 5,476
====== ======
CASH PAID DURING THE PERIOD FOR:
Interest $ 10,892 10,535
Income taxes 1,290 200
NON-CASH INVESTING ACTIVITIES -
Loans transferred to real estate in foreclosure 1,032 -
====== ======
</TABLE> See accompanying notes to unaudited consolidated financial statements.
<PAGE> 5
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,
1998 are not necessarily indicative of results that may be expected for the
entire fiscal year ended September 30, 1998.
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
In February 1997, the FASB issued Statement 128, "Earnings Per Share."
Statement 128 supersedes APB Opinion No. 15, "Earnings Per Share," and
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. It replaces the presentations of primary EPS with the
presentation of basic EPS, and replaces fully diluted EPS with diluted EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures, and requires
a reconciliation of the numerator and dominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Statement 128 is
effective for financial statements for both interim and annual periods ending
after December 15, 1997.
Earnings per share of common stock for the three and six months ended March 31,
1998 has been calculated according to the guidelines of Statement 128 and
earnings per share of common stock for the three and six months ended March 31,
1997 has been restated to conform with Statement 128.
Diluted earnings per share for the three months ended March 31, 1998 and 1997
are computed by dividing net income by the weighted average number of shares of
common stock and potential common stock outstanding for the period which were
2,863,747 and 2,766,324, respectively. Diluted earnings per share of common
stock for the six months ended March 31, 1998 and 1997 has been determined by
dividing net income by 2,852,615 and 2,772,393, the weighted average number of
shares of common stock and potential common stock outstanding. Stock options
are the only potential common stock and are therefore considered in the diluted
earnings per share calculations. Potential common stock are computed using the
treasury stock method.
(3) COMMITMENTS AND CONTINGENCIES
At March 31, 1998, the Bank had outstanding commitments to originate loans of
<PAGE> 6
$7.7 million, of which $5.6 million were fixed rate, with rates ranging from
6.625% to 8.125%, and $2.14 million were adjustable rate commitments.
(4) PENDING ACCOUNTING CHANGES
Statement 130, "Reporting Comprehensive Income," established standards for
reporting and presentation of comprehensive income and its components in a full
set of general-purpose financial statement. Statement 130 is effective for
both interim and annual periods beginning after December 15, 1997, and is not
expected to have a material impact on the consolidated financial statements.
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
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, 1998 of
$960,000, compared with $997,000 for the same quarter a year ago, a decrease of
3.7%. Earnings per diluted share for the quarter and six months ended were
$0.34 and $0.68 per share, respectively.
The Company also announced that its board of directors declared a quarterly
dividend of $0.10 per share, payable May 15, 1998 to shareholders of record as
of April 30, 1998.
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
<PAGE> 7
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.
YEAR 2000 COMPLIANCE
The Company utilizes and is dependent upon data processing systems and software
to conduct its business. The data processing systems and software include
those developed and maintained by the Company's third-party data processing
vendor such as teller and platform systems, and purchased software such as
spreadsheet and word processing programs which run on in-house computer
networks. The Company does not have any internally developed computer programs
and does not have any programming staff. During fiscal 1997 the Company
initiated a review and assessment of all hardware and software to confirm that
it will function properly in the year 2000.
The results of that review show good remediation efforts on the part of our
software suppliers, with continuing communication concerning their progress at
least quarterly. Remediation efforts are expected to be largely complete by
December 1998, with time thereafter for testing. The costs associated with
these efforts are not expected to have a significant impact on the Company's
ongoing results of operations.
LIQUIDITY & CAPITAL RESOURCES
Liquidity management for the Bank 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. The Bank
generally 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 FHLB advances.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. During a portion of the first quarter, OTS regulations required the
Bank to maintain, for each calendar month, an average daily balance of liquid
assets (including cash, certain time deposits, bankers acceptances, and
specified United States Government, state or federal agency obligations) equal
to at least 5% of the average daily balance of its liquidity base , defined as
net withdrawable accounts plus short-term borrowings (i.e., those repayable in
12 months or less) during the preceding calendar month. During a portion of
the first quarter, OTS regulations also required the Bank to maintain, for each
calendar month, an average daily balance of short-term liquid assets (generally
<PAGE> 8
liquid assets having maturities of 12 months or less) equal to at least 1% of
the average daily balance of its net withdrawable accounts plus short-term
borrowings during the preceding calendar month. Penalties may be imposed for
failure to meet liquidity ratio requirements.
Pursuant to amendments adopted by the OTS effective November 24, 1997, the
minimum liquidity requirement has been reduced to 4% of the liquidity base, the
short-term liquidity requirement has been eliminated, liquidity requirements
will be determined quarterly, rather than monthly, and savings associations
have the option of calculating their liquidity requirements either on the basis
of (i) their liquidity base at the end of the preceding quarter or (ii) the
average daily balance of their liquidity base during the preceding quarter.
The amended regulations also provide, however, that savings associations must
maintain liquidity in excess of the minimum requirement if necessary to insure
safe and sound operations. At March 31, 1998, the Bank was in compliance with
OTS liquidity requirements, with a liquidity ratio of 13.76%.
The Company'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 provided by operating activities,
consisting primarily of interest and dividends received less interest paid on
deposits, were $2.6 million for the six months ended March 31, 1998. Investing
activities for the six month period provided the Bank $7.5 million. Maturing
investment securities and principal repayments received from loans, investment
securities and mortgage-backed securities more than covered the financing of
loan originations and investment purchases. Net cash used in financing
activities amounted to $13.3 million for the six months ended March 31, 1998.
Financing activities used to repay FHLB advances of $20.7 million were only
partially offset by financing resources received from a net increase in
deposits and advance payments for borrowers for taxes and insurance.
At March 31, 1998, the Bank had outstanding loan commitments of $7.7 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, 1998 totalled $159.5 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 is subject to regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a material impact on the Company's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the entity's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting purposes. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
The most recent notification, May 1997, from the federal banking agencies
categorized the Company and the Bank as well capitalized under the regulatory
framework for prompt corrective action. Quantitative measures established by
regulation to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios of tangible equity to tangible assets of 2%, Tier 1 capital
(leverage capital) to adjusted total assets of 5%, Tier 1 risk-based capital to
risk-weighted assets of 6%, and of Total risk-based capital to risk-weighted
<PAGE> 9
assets of 10%. There are no conditions or events since that notification that
have changed the Company's or the Bank's category.
The Bank's Tangible Equity ratio at March 31, 1998 was 9.22%. The Tier 1
Capital ratio was 9.22%, the Tier 1 Risk-based ratio was 19.41%, and the Total
Risk-Based Capital ratio was 19.61%.
CHANGES IN FINANCIAL CONDITION
Total assets at March 31, 1998 were $484.3 million, compared to $495.6 million
at September 30, 1997. Loans receivable, net of allowance for loan losses,
grew $1.6 million, after $55.6 million in repayments received during the six
month period. The Company continues to offer various loan products, and prices
them competitively. Current year multi-family originations accounted for $12.3
million, or 21.3% of mortgage originations. The Company's total loan
originations were $57.6 million for the six months ended March 31, 1998, an
increase of 32.0% or $14.0 million above the 1997 six month originations of
$43.7 million.
Deposits grew at an annualized growth rate of 2.3%, ending the first six months
at $330.5 million, compared to $323.4 at September 30, 1997. Growth in
deposits came primarily from transaction accounts, which increased $11.9
million during the six month period ended March 31, 1998. Through maturing
investments and loan repayments, the Bank was able to fund current loan
origination obligations in addition to repaying $20.7 million of FHLB advances.
FHLB advances decreased 18.3% from $113.4 million at September 30, 1997 to
$92.7 million at March 31, 1998.
Book value per share on March 31, 1998 was $18.52, compared with $17.75 at
September 30, 1997.
ASSET QUALITY
As of March 31, 1998, the Company had non-performing assets of $1.4 million.
The Bank's non-performing assets at March 31, 1998 included its investment in
commercial leases of $177,000, three real estate owned single-family
residences, as well as non-performing loans. Classified loans of $713,000 were
categorized as substandard, consisting of three residential mortgage loans, two
multi-family properties, and two consumer loans. 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.
The decrease of $630,000 in non-performing assets from September 30, 1997 to
March 31, 1998 resulted from management's ongoing monitoring and follow-up
procedures of delinquent customers. A review of the foreclosed real estate has
established specific allowances were necessary, management does not expect any
material losses from the non-performing loans.
<PAGE> 10
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
1998 1997 March 31,1998
------------------------ ----------------------- ----------------------
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 $389,816 7,425 7.62% 366,018 7,064 7.72% 389,285 14,901 7.66%
Mortgage-backed securities 15,416 272 7.06% 20,458 359 7.02% 15,915 561 7.05%
Interest-earning deposits 1,363 18 5.28% 908 9 3.96% 1,616 46 5.69%
Investment securities,
mutual funds, and
federal funds sold 68,109 1,208 7.09% 86,100 1,510 7.02% 71,081 2,516 7.08%
------- ----- ----- ------ --- ----- ------- ----- -----
Total interest-earning
assets 474,704 8,923 7.52% 473,484 8,942 7.55% 477,897 18,024 7.54%
Non-interest earning
assets 12,872 10,896 12,499
------- ------ -------
Total assets $487,576 484,380 490,396
======= ======= =======
Interest-bearing liabilities:
Deposits:
Passbook & NOW accounts 121,621 1,123 3.69% 106,342 565 2.13% 118,636 2,206 3.72%
Money market account 17,885 188 4.20% 18,643 195 4.18% 17,681 377 4.26%
Certificate accounts 184,781 2,666 5.77% 199,925 3,164 6.33% 187,875 5,504 5.86%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total deposits 324,287 3,977 4.91% 324,910 3,924 4.83% 324,192 8,087 4.99%
Borrowed funds 93,633 1,327 5.67% 93,998 1,305 5.55% 97,814 2,785 5.69%
------- ----- ----- ------- ---- ----- ------- ----- -----
Total interest-bearing
liabilities 417,920 5,304 5.08% 418,908 5,229 4.99% 422,006 10,872 5.15%
Non-interest bearing
deposits 5,696 4,723 5,434
Other liabilities 11,254 10,363 11,059
------- ------ -------
Total liabilities 434,870 433,994 438,499
Stockholders' equity 52,706 50,386 51,897
Total liabilities and
stockholders' equity $487,576 484,380 490,396
======= ======= =======
Net interest
income/interest rate
spread (1) 3,619 2.44% 3,713 2.56% 7,152 2.39%
Net earning assets/net
interest margin (2) $ 56,784 3.05% 54,576 3.14% 55,891 2.99%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.14x 1.13x 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> 11
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
MARCH 31, 1997
GENERAL. Net income for the three months ended March 31, 1998 was $960,000, a
decrease of $37,000 from the net income of $997,000 for the three months ended
March 31, 1997. The 3.7% decrease in earnings for the quarter was primarily
due to slightly lower net interest income combined with lower non-interest
income.
INTEREST INCOME. Income from loans receivable, the chief contributor to
interest income, was $7.4 million for the quarter ended March 31, 1998, up
5.1% from the prior year. The average balance of loans increased 6.5% to
$389.8 million compared to the average for the second quarter one year ago of
$366.0 million. The yield on loans decreased 10 basis points. The increase in
loan interest income was a result of higher loan volumes. Interest income from
the investment portfolio decreased $382,000, which was the result of maturing
investments as well as the change in the composition of the portfolio. Gross
interest income totalled $8.9 million for each of the three month periods ended
March 31, 1998 and 1997.
INTEREST EXPENSE. Interest expense from deposits for the quarter increased
$53,000, from $3.9 million the previous year to $4.0 million. The slight
increase is a direct result of the 8 basis point increase in the weighted
average deposit cost. The Company reduced its FHLB of Chicago advances during
the quarter, however the average outstanding advances remained stable at
approximately $93.6 million. The weighted average cost increased 12 basis
points, causing the interest expense on borrowed funds to increase only 1.7% to
$1.3 million.
PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses in
the 1998 second quarter of $15,000. 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, 1998, the cumulative allowance for
loan losses was $468,000, or 65.6% of non-performing loans. The ratio of the
allowance for loan losses to net loans receivable stands at 0.12%.
NON-INTEREST INCOME. Non-interest income decreased 15.3% to $250,000 for the
second quarter. Insurance and annuity commissions produced $156,000, a 17.5%
decrease compared to the same period in 1997.
NON-INTEREST EXPENSE. Non-interest expense for the six months ended March 31,
1998 and 1997 totalled $2.4 million. The decrease in advertising expenditures
of $133,000 was offset partially by the increase in compensation and benefits,
which is increased due to stock-related benefits adjusted for the current
market price.
INCOME TAXES. Income taxes increased $78,000 for the three months ended March
31, 1998 to $540,000 compared to $618,000 for the prior year due to decreased
taxable income.
<PAGE> 12
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND
MARCH 31, 1997
GENERAL. Net income for the six months ended March 31, 1998 was $1.9 million,
an increase of $106,000 from the net income of $1.8 million for the six months
ended March 31, 1997. This 5.8% increase can be attributed to an increase in
fee income and a decrease in general and administrative expenses.
INTEREST INCOME. Interest income remained steady at approximately $18.0
million for the six months ended March 31, 1998 and 1997. Interest income from
loans receivable increased $871,000 to $14.9 million, from $14.0 million one
year ago. The average loans outstanding increased $26.4 million to $389.3
million for the current period. The weighted average loan yields for the six
months ended March 31, 1998 decreased 7 basis points. Weighted average
investment portfolio yields remained at 7.0%, while the average balance in the
portfolio decreased $19.6 million.
INTEREST EXPENSE. Interest expense on deposits totalled $8.1 million, a
$289,000 increase from the March 31, 1997 expense of $7.8 million. Average
interest-bearing deposits increased $4.9 million to $324.2 million for the six
month period in 1998 compared to 1997. The weighted average cost of deposits
remained stable at 4.9%. Interest expense on borrowed funds remained at $2.8
million.
PROVISION FOR LOAN LOSSES. The Company recorded a $61,000 provision for loan
losses in the first six months of fiscal 1998, compared to a $39,000 provision
in 1997. 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.
NON-INTEREST INCOME. Non-interest income increased $14,000 to $534,000 for the
six months ended March 31, 1998 from $520,000 for the same period in 1997.
Included in non-interest income are commissions from INVEST financial
corporation. The Company noted a general slow-down of commission generating
activity in the second quarter, however high volume experienced in the first
quarter contributed to the net increase of $46,000 for the six month period.
NON-INTEREST EXPENSE. Non-interest expense for 1998 totalled $4.6 million, a
decrease of $211,000 or 4.4%, from $4.8 million for the six months ended March
31, 1997. The decline can be attributed to decreases in advertising expenses,
federal deposit insurance premiums and other expenses. As a result, the
Company's ratio of operating expenses to average assets reflected continued
improvement in the first half of fiscal 1998, falling to 1.87 percent, from
1.98 percent the previous year.
INCOME TAXES. Income taxes decreased $22,000 for the six months ended March
31, 1998 to $1.1 million.<PAGE>
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and the Bank are not engaged in any legal proceedings of
a material nature at the present time.
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 28, 1998.
(b) The directors elected at the Annual Meeting are as follows:
For Withheld
Bonnie Stolarczyk 2,321,346 59,437
Paul Bielat 2,321,646 59,137
The directors whose term of office continued after the Annual
Meeting are as follows:
Thomas E. Bentel
Patrick J. Flynn
Raymond J. Horvat
Raymond S. 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, 1998.
For Against Abstain
2,361,738 9,875 9,170
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
<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 21, 1998 /s/ RAYMOND S. STOLARCZYK
-----------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: April 21, 1998 /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, 1998
(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-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 1791
<INT-BEARING-DEPOSITS> 1038
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62006
<INVESTMENTS-CARRYING> 20602
<INVESTMENTS-MARKET> 20804
<LOANS> 390312
<ALLOWANCE> 468
<TOTAL-ASSETS> 484340
<DEPOSITS> 330445
<SHORT-TERM> 9700
<LIABILITIES-OTHER> 8951
<LONG-TERM> 83000
0
0
<COMMON> 38
<OTHER-SE> 52206
<TOTAL-LIABILITIES-AND-EQUITY> 484340
<INTEREST-LOAN> 14901
<INTEREST-INVEST> 3048
<INTEREST-OTHER> 75
<INTEREST-TOTAL> 18024
<INTEREST-DEPOSIT> 8087
<INTEREST-EXPENSE> 10872
<INTEREST-INCOME-NET> 7152
<LOAN-LOSSES> 61
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4574
<INCOME-PRETAX> 3051
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1937
<EPS-PRIMARY> .72
<EPS-DILUTED> .68
<YIELD-ACTUAL> 2.44
<LOANS-NON> 713
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 460
<CHARGE-OFFS> 5
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 468
<ALLOWANCE-DOMESTIC> 468
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
