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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 December 31, 2002
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES___ NO X_
There were 3,159,553 shares of common stock, par value $.01, outstanding as of
January 31, 2003.
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FIDELITY BANCORP, INC.
FORM 10-Q
INDEX
Part I. FINANCIAL INFORMATION PAGE(S)
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of December 31, 2002 (unaudited) and September 30, 2002 1
Consolidated Statements of Earnings for the three
months ended December 31, 2002 and 2001 (unaudited) 2
Consolidated Statements of Changes in Stockholders'
Equity for the three months ended December 31, 2002
and 2001 (unaudited) 3
Consolidated Statements of Cash Flows for the three
months Ended December 31, 2002 and 2001 (unaudited) 4-5
Notes to Unaudited Consolidated Financial Statements
(unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-14
Item 3. Quantitative and Qualitative Disclosures
about Market Risks 14-15
Itme 4. Controls and Procedures 16
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
1
FIDELITY BANCORP and SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
Dollars in thousands
December 31, September 30,
ASSETS 2002 2002
Cash and due from banks $ 4,254 3,828
Interest-earning deposits 107 1,045
Federal funds sold 100 100
------- --------
Cash and cash equivalents 4,461 4,973
FHLB of Chicago stock, at cost 32,375 31,972
Mortgage-backed securities available for sale 253,916 216,505
Securities available for sale 28,444 22,396
Loans held for sale 167 83
Loans receivable, net of allowance for loan losses of $1,917
at December 31, 2002 and $1,826 at September 30, 2002 401,788 414,685
Accrued interest receivable 3,847 3,637
Premises and equipment 3,559 3,410
Other assets 1,298 1,254
------- -------
$ 729,855 698,915
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits 463,273 434,134
Borrowed funds 187,025 180,650
Advance payments by borrowers for taxes and insurance 3,522 6,158
Due to broker 9,331 13,169
Other liabilities 8,725 8,813
------- -------
Total liabilities 671,876 642,924
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 57 57
Additional paid-in capital 38,410 38,410
Retained earnings, substantially restricted 49,448 47,864
Treasury stock (30,808) (30,932)
Common stock acquired by Bank Recognition and Retention Plans (138) (149)
Accumulated other comprehensive income 1,010 741
------- -------
TOTAL STOCKHOLDERS' EQUITY 57,979 55,991
------- -------
$ 729,855 698,915
======= =======
See accompanying notes to unaudited consolidated financial statements.
2
FIDELITY BANCORP and SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Dollars in thousands (except per share data)
Three months ended December 31, 2002 2001
------ ------
Interest Income:
Loans receivable $ 6,977 8,270
Securities 882 916
Mortgage-backed securities 2,017 2,195
Other interest income 6 10
------ ------
9,882 11,391
Interest Expense:
Deposits 2,930 3,822
Borrowed funds 1,970 2,535
------ ------
4,900 6,357
------ ------
Net interest income before provision for loan losses 4,982 5,034
Provision for loan losses 94 140
------ ------
Net interest income after provision for loan losses 4,888 4,894
Non-interest Income:
Fees and commissions 153 143
Insurance and annuity commissions 217 220
Gain on sale of securities 271 72
Gain on sale of loans 43 541
Other 9 9
------ ------
693 985
Non-interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,540 1,699
Office occupancy and equipment 367 370
Data processing 118 132
Advertising and promotions 182 158
Other 394 412
------ ------
2,601 2,771
Income before income taxes 2,980 3,108
Income tax expense 1,088 1,163
------ ------
Net income $ 1,892 1,945
====== ======
Earnings per share - basic (1) $ 0.61 0.64
====== ======
Earnings per share - diluted (1) $ 0.58 0.61
====== ======
Comprehensive income (loss) $ 2,161 (928)
====== ======
(1) Adjusted for the February 28, 2002 3-for-2 stock split which was effected
in the form of a stock dividend.
See accompanying notes to unaudited consolidated financial statements.
3
FIDELITY BANCORP and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
Dollars in thousands (except per share data)
Three months ended December 31, 2002 and 2001 Accumulated
Other
Common Comprehen-
Additional Stock sive
Common Paid-In Retained Treasury Acquired Income
Stock Capital Earnings Stock by BRRP's (Loss) Total
--- ------ ------- ------- ------ ---- -------
Balance at
September 30, 2001 $ 38 38,636 40,926 (31,540) (178) 1,502 $ 49,384
Net income - - 1,945 - - - 1,945
Change in accumulated other
comprehensive income - - - - - (2,873) (2,873)
--- ------ ------- ------- ----- ----- -------
Total comprehensive income (928)
Cash dividends ($0.08 per
share) - - (243) - - - (243)
Amortization of award of
BRRP's stock - - - - 2 - 2
Exercise of stock options
and reissuance of treasury
shares (2,500 shares) - (20) - 44 - - 24
Tax benefit related to
stock options exercised - 7 - - - - 7
--- ------ ------- ------- ----- ----- -------
Balance at
December 31, 2001 $ 38 38,623 42,628 (31,496) (176) (1,371) $ 48,246
=== ====== ======= ======= ===== ====== =======
Balance at
September 30, 2002 57 38,410 47,864 (30,932) (149) 741 $ 55,991
Net income - - 1,892 - - - 1,892
Change in accumulated other
comprehensive income - - - - - 269 269
--- ------ ------- ------- ----- ----- -------
Total comprehensive income 2,161
Cash dividends ($0.10 per
share) - - (308) - - - (308)
Amortization of award of
BRRP's stock - - - - 11 - 11
Exercise of stocks options
reissuance of treasury
shares (10,025 shares) - - - 124 - - 124
--- ------ ------- ------- ----- ----- -------
Balance at
December 31, 2002 $ 57 38,410 49,448 (30,808) (138) 1,010 $ 57,979
=== ====== ======= ======= ===== ====== =======
See accompanying notes to unaudited consolidated financial statements.
4
FIDELITY BANCORP and SUBSIDIARY
Consolidated Statements of Cash Flows (unaudited)
Dollars in thousands
Three months ended December 31, 2002 2001
-------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,892 1,945
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 74 94
Provision for loan losses 94 140
Net amortization and accretion of premiums and discounts 1,240 136
Amortization of cost of stock benefit plans 11 2
Deferred loan costs, net of amortization (61) 97
Stock dividend from FHLB of Chicago (403) (175)
Loans originated for sale (2,010) (1,740)
Proceeds from loans originated for sale 1,969 1,203
Gain on sale of securities and loans (314) (613)
Gain on sale of real estate owned (55) -
Amortization of deposit base intangible - 1
Decrease (increase) in accrued interest receivable (210) 24
Increase in other assets (95) (98)
Decrease in other liabilities (254) (829)
-------- ------
Net cash provided by operating activities 1,878 187
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate owned 187 -
Proceeds from maturities of securities available for sale - 20,000
Proceeds from sales of securities available for sale 97,412 26,894
Proceeds from sale of loans - 22,468
Purchase of mortgage-backed securities available for sale (159,869) (78,560)
Purchase of securities available for sale (7,291) (11,649)
Loans originated for investment (32,957) (49,166)
Loans purchased (8,769) -
Participations sold 500 -
Purchase of premises and equipment (223) (42)
Principal repayments collected on loans receivable 54,008 42,623
Principal repayments collected on
mortgage-backed securities 21,918 7,426
-------- ------
Net cash used in investing activities (35,084) (20,006)
(continued)
5
FIDELITY BANCORP and SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
Dollars in thousands
Three months ended December 31, 2002 2001
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 29,139 18,750
Net increase in borrowed funds 6,375 585
Net decrease in advance payments by borrowers
for taxes and insurance (2,636) (2,949)
Payment of common stock dividends (308) (243)
Proceeds from exercise of stock options 124 24
-------- ------
Net cash provided by financing activities 32,694 16,167
-------- ------
Net change in cash and cash equivalents (512) (3,652)
Cash and cash equivalents at beginning of period 4,973 8,604
-------- ------
Cash and cash equivalents at end of period $ 4,461 4,952
======== ======
CASH PAID DURING THE PERIOD FOR:
Interest $ 4,864 6,404
Income taxes 700 1,567
NON-CASH INVESTING ACTIVITIES:
Loans transferred to real estate in foreclosure 148 398
Due to broker for securities transactions (9,331) (14,918)
======== ======
See accompanying notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America ("GAAP") and conform to general practices within the banking
industry 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 three months ended December
31, 2002 are not necessarily indicative of results that may be expected for the
entire fiscal year ending September 30, 2003.
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 intercompany
accounts and transactions have been eliminated in consolidation.
(2) COMMON STOCK
On January 22, 2002, the Company's Board of Directors approved a 3-for-2 stock
split to be effected in the form of a stock dividend to common stockholders of
record as of February 6, 2002 with a payment date of February 28, 2002.
Earnings and dividends per share for all periods have been restated to reflect
the 3-for-2 stock split.
(3) EARNINGS PER SHARE
Basic earnings per share for the three months ended December 31, 2002 and 2001
were computed by dividing net income by the weighted average number of shares
of common stock outstanding for the periods, which were 3,087,451 and
3,033,119, respectively. Shares held in the Company's ESOP are considered
outstanding for the calculation unless unearned.
Diluted earnings per share for the three months ended December 31, 2002 and
2001 were computed by dividing net income by the weighted average number of
shares of common stock and potential common stock outstanding for the periods,
which were 3,249,448 and 3,184,572 respectively. Diluted earnings per share
include the dilutive effects of additional potential issuable common stock
under stock options.
(4) COMPREHENSIVE INCOME
The Company's comprehensive income includes net income and other comprehensive
income (loss) comprised entirely of unrealized gains or losses on securities
available for sale, net of tax effects, which are also recognized as separate
components of equity.
7
(5) COMMITMENTS AND CONTINGENCIES
At December 31, 2002, the Bank had outstanding commitments to originate loans
of $9.0 million, of which $4.8 million were at fixed rates ranging from 5.875%
to 7.25% and $4.2 million were adjustable rate commitments. In addition to the
outstanding commitments there are twelve construction and development loan
commitments for a total of $20.7 million with floating rates based on prime
plus a margin. Draws on these construction and development loan commitments
totaled $12.9 million through December 31, 2002.
(6) NEW ACCOUNTING PRONOUNCEMENTS
New accounting standards on asset retirement obligations, restructuring
activities and exit costs, operating leases, and early extinguishment of debt
were issued in 2002. Management determined that these new accounting standards
do not have a material impact on the Company's financial condition or results
of operations.
FASB Statement (FAS) 148, Accounting for Stock-Based Compensation - Transition
and Disclosure was issued in December 2002. Management is currently studying
the requirements of FAS 148. It applies to annual financial statements for
fiscal years ending after December 15, 2002 and to interim financial statements
for interim periods beginning after December 15, 2002. FAS 148:
* requires more prominent disclosure of how an entity's accounting policy for
compensation affects net income;
* amends FAS 123 to provide three choices regarding how to adopt FAS 123; and
* amends APB 28, Interim Financial Reporting, to require companies still using
APB Opinion 25 for stock-based compensation to provide tabular disclosure in
interim financial statements of the effects that using FAS 123 would have on
compensation expense, net income, and earnings per share.
(7) SUBSEQUENT EVENT
On January 28, 2003 the Company received a cash payment in the amount of $3.3
million representing the recovery of a previously charged-off asset (at the
rate of 110% of the original amount invested by the Company). This asset was a
$3.0 million subordinated note investment in Cole Taylor Financial Group, Inc.,
a company that later underwent a reorganization and changed its name to
Reliance Acceptance Group, Inc. In the fourth quarter of the fiscal year ended
September 30, 1997, the Company charged-off the full value of the investment
because of the uncertainty surrounding the collectibility of the note. The
recovery will be recorded in the second quarter of fiscal 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
GENERAL
Fidelity Bancorp, Inc. (the "Company"), is a savings and loan holding company
incorporated under the laws of the state of Delaware and is primarily engaged
in the retail banking business through its wholly-owned subsidiary, Fidelity
Federal Savings Bank (the "Bank").
8
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, data
processing, advertising and promotions 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's earnings per diluted share decreased $0.03 to $0.58 for the first
fiscal quarter ended December 31, 2002, from $0.61 for the same period in 2001.
Net income for the quarter was $1.9 million, essentially unchanged from the
same period in 2001.
RECENT DEVELOPMENTS
On December 17, 2002, the Company announced that it has agreed to be acquired
by MAF Bancorp, Inc. ("MAF") in an all-stock transaction with a fixed exchange
ratio. Based on the closing price of MAF's common stock on December 16, 2002,
the transaction is valued at $101.4 million. Pursuant to an Agreement and Plan
of Reorganization ("Merger Agreement") between the two companies, the Company
will merge into MAF, with MAF to be the surviving corporation. As a result of
the merger, each issued and outstanding share of the Company's common stock
will be converted into the right to receive 0.89 shares of MAF common stock.
The transaction, which is subject to regulatory approvals and approval by a
majority of the holders of the Company's common stock as well as other
conditions, is structured to be tax-free to stockholders of the Company.
Subject to the terms and conditions of the Merger Agreement, if, during a
period prior to closing, (1) the average trading price of MAF common stock
drops more than 17.5% compared to the closing price of MAF common stock next
determined after the announcement of the transaction, and (2) such drop in MAF
common stock trading price exceeds by more than 17.5 percentage points the
change in value of a weighted-average index of financial institution holding
company stocks over comparable periods, the Company may terminate the
agreement. In the event the merger is not consummated under certain
circumstances, the Company has agreed to pay MAF a termination fee of $4.5
million. MAF has agreed to pay the Company a termination fee of $1 million if
Fidelity exercises rights to terminate under certain circumstances.
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," "plan," " "may," "would," "could,"
9
"should" 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:
* The strength of the United States economy in general and the strength of the
local economies in which the Company conducts its operations which may be less
favorable than expected and may result in, among other things, a deterioration
in the credit quality and value of the Company's assets.
* The economic impact of past and any future terrorist attacks, acts of war or
threats thereof and the response of the United States to any such threats and
attacks.
* The effects of, and changes in, federal, state and local laws, regulations
and policies affecting banking, securities, insurance and monetary and
financial matters.
* The effects of changes in interest rates (including the effects of changes
in the rate of prepayments of the Company's assets) and the policies of the
Board of Governors of the Federal Reserve System.
* The ability of the Company to compete with other financial institutions as
effectively as the Company currently intends due to increases in competitive
pressures in the financial services sector.
* The inability of the Company to obtain new customers and to retain existing
customers.
* The timely development and acceptance of products and services, including
products and services offered through alternative delivery channels such as the
Internet.
* Technological changes implemented by the Company and by other parties,
including third party vendors, which may be more difficult or more expensive
than anticipated or which may have unforeseen consequences to the Company and
its customers.
* The ability of the Company to develop and maintain secure and reliable
electronic systems.
* The ability of the Company to retain key executives and employees and the
difficulty that the Company may experience in replacing key executives and
employees in an effective manner.
* Consumer spending and saving habits which may change in a manner that
affects the Company's business adversely.
* Business combinations and the integration of acquired businesses, which may
be more difficult or expensive than expected.
* The costs, effects and outcomes of existing or future litigation.
* Changes in accounting policies and practices, as may be adopted by state and
federal regulatory agencies and the Financial Accounting Standards Board.
* The ability of the Company to manage the risks associated with the foregoing
as well as anticipated.
10
* Additional information concerning the Company and its business, including
other factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Additional information concerning the Company and its business,
including other factors that could materially affect the Company's financial
results, is included in the Company's Annual Report on Form 10-K and the
Company's other filings with the Securities Exchange Commission.
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, proceeds from principal and interest on loans and mortgage-backed
securities. While maturities and scheduled amortization of loan and mortgage
prepayments are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by interest rate cycles and economic
conditions. The Bank generally manages the pricing of its deposits to be
competitive and to increase core deposit relationships. The Bank utilizes
particular sources of funds based on comparative costs and availability.
The Company's most liquid assets are cash and cash equivalents, which include
federal funds and interest-bearing deposits. The level of these assets is
dependent on the Company's operating, financing, lending, and investing
activities during the given period. At December 31, 2002, cash and cash
equivalents totaled $4.5 million.
Mortgage-backed securities and securities available for sale represent a
secondary source of liquidity to the Bank and the Company. The market value of
these securities fluctuates with interest rate movements. Net interest income
in the future periods may be adversely impacted to the extent interest rates
increase and these securities are not sold with the proceeds reinvested at
higher market rates. The decision whether to sell the available for sale
mortgage-backed securities and securities available for sale or not, is based
on a number of factors, including projected funding needs, reinvestment
opportunities and the relative cost of alternative liquidity sources.
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 $1.9 million for the three months ended December 31, 2002. Net
cash used in investing activities was $35.1 million for the three month period
ended December 31, 2002. During the period investing activities consisted of
loans originated for investment and purchases of mortgage-backed securities,
largely offset by principal collections on loans, proceeds from maturities of
securities and proceeds from sales of securities and loans. Cash flows
provided by financing activities amounted to $32.7 million for the three months
ended December 31, 2002. The increases of $29.1 million in deposits and $6.4
million in borrowed funds during the first quarter of fiscal 2003 were only
partially offset by the decrease in advance payments from borrowers of $2.6
million.
11
At December 31, 2002, the Bank had outstanding commitments to originate loans
of $9.0 million and undrawn construction and loan commitments of $7.8 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 December 31, 2002 totaled $208.1 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 its assets, liabilities, and
certain off-balance sheet items as calculated for 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.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets and of
tangible capital to average assets. As of December 31, 2002, the Company and
the Bank met the capital adequacy requirements to which they are subject. The
Bank's Tangible Equity ratio at December 31, 2002 was 7.84%. The Tier 1
Capital ratio was 7.84%, the Tier 1 Risk-based ratio was 16.85%, and the Total
Risk-Based Capital ratio was 17.42%.
The most recent notification from the federal banking agencies categorized the
Company and the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Company
and the Bank must maintain minimum total risk-based, Tier 1 risk-based, and
Tier 1 leverage ratios. There are no conditions or events since that
notification that have changed the Company's or the Bank's category.
CHANGES IN FINANCIAL CONDITION
Total assets at December 31, 2002 were $729.9 million, compared to $698.9
million at September 30, 2002.
Mortgage-backed securities classified as available for sale were $253.9 million
at December 31, 2002. The period purchases were funded from heavy refinance
activity in the Bank's loan portfolio, sales of other mortgage-backed
securities, and principal payments received on mortgage-backed securities.
Net loans receivable at December 31, 2002 were $401.8 million, down $12.9
million or 3% from September 30, 2002. Demand for loan products were offset by
continued high loan repayments, resulting in the decrease in loans receivable.
New loans closed, including multi-family and commercial mortgages and loans
secured by commercial leases, totaled $33.0 million for the quarter ended
December 31, 2002. In addition to originations, the Bank purchased $8.8
million of one- to four-family adjustable jumbo loans during the quarter. Loan
repayments totaled $54.0 million for the quarter ended December 31, 2002,
compared with $42.6 million for the same period in 2001.
12
Deposits grew to $463.3 million at December 31, 2002, up 7% from $434.1 million
at September 30, 2002. Deposit growth came from promotional certificates of
deposit put in place to retain maturing money combined with a $6.4 million
increase in checking accounts. Borrowed Funds (FHLB advances) increased 4% to
$187.0 million at December 31, 2002.
Book value per share on December 31, 2002 was $18.75, compared with $18.17 at
September 30, 2002. The increase in book value per share was primarily
attributable to the quarter's earnings plus the increase in unrealized market
value in the mortgage-backed securities and securities available for sale
portfolios. Book value per share, excluding accumulated other comprehensive
income, was $18.43 at December 31, 2002, an increase of 3%, compared to $17.93
at September 30, 2002.
INVESTMENT ACTIVITIES
The Company is the holder of certain subordinated notes (the "Notes") issued by
Cole Taylor Financial Group, Inc. The Notes have a par value and cost basis of
$3.0 million. The Notes were acquired by the Company in 1994, when Cole Taylor
Financial Group, Inc. was the parent company for both a consumer finance
company and a Chicago area bank. In fiscal 1997, Cole Taylor's bank subsidiary
was "spun-off" to certain Cole Taylor shareholders in exchange for stock and
certain assets. The Notes remained as obligations of the surviving company,
which became known as Reliance Acceptance Group, Inc. ("RAG") and remained the
parent company for the consumer finance company.
On November 14, 1997, RAG filed a Form 10-Q with the SEC in which RAG reported,
among other things, substantial additions to its loan loss reserves, increasing
delinquencies and repossession losses, a severe decline in its net interest
margin, continuing defaults under senior credit agreements, a lack of future
funding sources, and the imposition of substantial restrictions by senior
lenders.
During the fourth quarter of the fiscal year ended September 30, 1997 the
Company evaluated the information that was then available about RAG's
circumstances and future prospects in an effort to assess impairment and to
place a value on the Notes in the context of a possible RAG liquidation, sale
and/or bankruptcy. The Company concluded that the impairment was other than
temporary, and that a complete write-down of the Notes was appropriate and ,
accordingly, the Company wrote the Notes down $3.0 million.
RAG subsequently filed a bankruptcy petition in the United States Bankruptcy
Court in Delaware. The Company actively participated on the Official Committee
of the Unsecured Creditors of RAG and in the formulation of a plan for RAG's
bankruptcy liquidation. Further, the Estate Representative for RAG, with the
support of the Company and other holders of RAG subordinated notes, filed two
lawsuits against a number of RAG insiders, certain legal and accounting firms
and others in the United States District Court for the District of Delaware.
On October 31, 2002, Taylor Capital Group, Inc announced that it completed
offerings of common stock and trust preferred securities for $82.1 million of
gross proceeds. It had previously announced its intent to fund the settlement
of the outstanding litigation with the proceeds from these offerings.
On January 28, 2003 the Company received $3.3 million. The funds represent an
amount in excess of a full recovery from the previously charged-off asset.
13
ASSET QUALITY
As of December 31, 2002, the Company had non-performing assets of $2.8 million.
The non-performing assets at December 31, 2002 included three single-family
homes in real estate in judgment, two multi-unit buildings, seven single-family
residences, one commercial loan secured by a lease and one consumer loan.
There were no assets classified as doubtful.
At September 30, 2002, management considered a $909,000 commercial loan secured
by lease to be impaired, under which K-Mart Corporation was the lessee, which
is included in the non-performing asset number above. This loan is a direct
financing lease included in the Company's commercial loans secured by leases
portion of the loan portfolio. K-Mart filed for bankruptcy protection on
January 22, 2002. The K-Mart lease loan is secured by revenue producing
equipment with an original cost of $1.5 million that was purchased and
installed during the second half of 2001. Subsequent to filing for bankruptcy
protection, K-Mart closed a number of its retail stores, including some in
which this equipment was located. K-Mart informed the Bank that the equipment
located in closed stores had been moved to stores that will remain open. While
the K-Mart commercial loan secured by lease is currently performing in
accordance with its terms, no assurance can be given that this will continue to
be the case and such performance may depend on the terms of the reorganization
plan for K-Mart. No assurances can be made that a loss related to these loans
will not be incurred.
The Company's ratio of non-performing loans to net loans receivable remains
below industry standards as well as our national and regional peers. The 0.38%
ratio of non-performing assets to total assets is virtually unchanged from the
ratio reported as of September 30, 2002. Following management's review of the
foreclosed residential properties, the Company has determined that no specific
allowances were necessary for the quarter ended December 31, 2002.
14
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 and costs.
Three months ended December 31,
2002 2001
Average Average
Average Yield/ Average Yield/
Balance Interest Cost(3) Balance Interest Cost(3)
(dollars in thousands)
Interest-earning assets:
Loans receivable, net $ 402,780 6,977 6.93% $ 454,845 8,270 7.27%
Mortgage-backed securities 214,848 2,017 3.76% 144,457 2,195 6.08%
Interest-bearing deposits 1,761 6 1.36% 1,570 10 1.78%
Securities available for sale
and federal funds sold 67,393 882 5.23% 53,644 916 6.85%
-------- ----- ----- ------- ------ -----
Total interest-earning assets 686,782 9,882 5.76% 654,516 11,391 6.96%
Non-interest earning assets 14,337 15,782
-------- -------
Total assets $ 701,119 $ 670,298
======== =======
Interest-bearing liabilities:
Deposits:
Passbook & NOW accounts 163,256 735 1.80% 156,178 1,085 2.78%
Money market accounts 20,477 106 2.07% 12,566 99 3.15%
Certificate accounts 247,092 2,089 3.38% 223,339 2,638 4.72%
-------- ----- ----- ------- ----- -----
Total deposits 430,825 2,930 2.72% 392,083 3,822 3.90%
Borrowed funds 186,057 1,970 4.24% 197,510 2,535 5.13%
-------- ----- ----- ------- ----- -----
Total interest-bearing
liabilities 616,882 4,900 3.18% 589,593 6,357 4.31%
Non-interest bearing deposits 14,548 14,326
Other liabilities 12,668 15,811
-------- -------
Total liabilities 644,098 619,730
Stockholders' equity 57,021 50,568
-------- -------
Total liabilities and
stockholders' equity $ 701,119 $ 670,298
======== =======
Net interest income/interest
rate spread (1) 4,982 2.58% 5,034 2.65%
===== ===== ===== =====
Net earning assets/net
interest margin (2) $ 69,900 2.90% $ 64,923 3.08%
======== ===== ======= =====
Ratio of interest-earning
assets to interest-bearing
liabilities 1.11x 1.11x
==== ====
15
(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 month periods are annualized for
presentation purposes.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002
AND DECEMBER 31, 2001
GENERAL. For the quarter ended December 31, 2002, earnings per diluted share
decreased $0.03 to $0.58 from $0.61 for the same period in 2001. Net income of
$1.9 million for the current quarter was $53,000 less than the same period in
2001. Earnings per share and net income decreased primarily as a result of a
decrease in non-interest income. The Company's net interest margin, the primary
driver of its earnings, decreased from 3.08% for the quarter ended December 31,
2001 to 2.90% for that same period in 2002. Net interest income, before
provision for loan losses, was $5.0 million for the quarter ended December 31,
2002, essentially unchanged from the same period in 2001. The decrease in
interest income was essentially offset by a decrease in interest expense when
comparing the quarter ended December 31, 2002 to the same period in 2001.
INTEREST INCOME. Income from loans receivable, the chief contributor to
interest income, was $7.0 million for the quarter ended December 31, 2002, down
16% from the prior year period. Income from loans receivable fell primarily as
a result of a decline in the quarterly outstanding average balances; $402.8
million for the quarter ended December 31, 2002, compared with $454.8 million
for the period one year earlier. Repayments from the first quarter totaled
$54.0 million, compared to $42.6 million for the same quarter 2001.
The average balance of the securities available for sale portfolios, including
mortgage-backed securities, increased to $282.2 million for the quarter ended
December 31, 2002, from $198.1 million the same quarter last year. Interest
generated from mortgage-backed and investment securities for the quarter ended
December 31, 2002 was $2.9 million, a decrease of $0.2 million from the quarter
ended December 31, 2001.
INTEREST EXPENSE. Total interest expense for the quarter ended December 31,
2002 was $4.9 million, down $1.5 million or 23% from $6.4 million for the same
quarter one year ago. For the quarter ended December 31, 2002, interest
expense on deposits was $2.9 million, compared with $3.8 million for the same
quarter a year ago, down $892,000, or 23%. Despite significant cuts in
interest rates, especially on some promotionally priced certificates of
deposit, average deposits increased $38.7 million, from $392.1 million for the
quarter ended December 31, 2001 to $430.8 million for the 2002 quarter.
Interest expense on borrowed funds declined 22%, to $2.0 million for the
quarter ended December 31, 2002, from $2.5 million for the same period in 2001.
The improvement is a combination of a smaller average outstanding balance (the
average balance decreased $11.5 million to $186.1 million for the quarter ended
December 31, 2002) as well as an improved interest cost. The cost of borrowed
funds decreased 89 basis points in the first quarter of fiscal 2002 compared to
the same period last year.
16
PROVISION FOR LOAN LOSSES. The Company recorded provisions for loan losses of
$94,000 and $140,000, respectively, for the quarters ended December 31, 2002
and 2001. The decrease was a result of the high repayments experienced and is
also attributable to high provisions made in the first quarter of fiscal 2002
as a result of the increase in commercial loans secured by leases and
commercial real estate loans. The provision for loan losses reflects
management's on-going evaluation of probable losses on loans and the adequacy
of the allowance for loan losses based on all pertinent considerations,
including, but not limited to, the overall economic conditions. This
evaluation is inherently subjective, as it requires estimates that are
susceptible to significant revisions as more information becomes available or
as future events occur. As of December 31, 2002, the allowance for loan losses
was $1.9 million. The ratio of the allowance for loan losses to net loans
receivable was 0.48% at December 31, 2002.
NON-INTEREST INCOME. Non-interest income decreased $292,000, to $693,000 for
the quarter ended December 31, 2002, from $985,000 in the year earlier period.
The decrease was primarily related to a $541,000 before tax gain on the sale of
$23.1 million of loans held for sale recorded in the prior year period. This
change was partially offset by an increase of $199,000 from gains on sales of
securities in the current year's quarter.
NON-INTEREST EXPENSE. Non-interest expense decreased to $2.6 million for the
quarter ended December 31, 2002, compared with $2.8 million in the same period
in 2001, a decrease of 6%. Salaries and employee benefits decreased $159,000,
is a result of management's continued efforts to control operating expenses.
INCOME TAXES. Income taxes decreased $75,000 for the three months ended
December 31, 2002 to $1.1 million compared to $1.2 million for the prior year.
The Company's effective income tax rate was 36.5% for the first quarter of 2003
compared to 37.4% for the first quarter of 2002.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The OTS requires all regulated thrift institutions to calculate the estimated
change in the Bank's net portfolio value ("NPV") assuming instantaneous,
parallel shifts in the Treasury yield curve of 100 to 300 basis points either
up or down in 100 basis point increments. The NPV is defined as the present
value of expected cash flows from existing assets less the present value of
expected cash flows from existing liabilities plus the present value of net
expected cash inflows from existing off-balance sheet contracts.
The OTS provides all institutions that file a Consolidated Maturity/Rate
schedule (CMR) as a part of their quarterly Thrift Financial Report with an
interest rate sensitivity report of NPV. The OTS simulation model uses a
discounted cash flow analysis and an option-based pricing approach in measuring
the interest rate sensitivity of NPV. The OTS model estimates the economic
value of each type of asset, liability, and off-balance sheet contract under
the assumption that the Treasury yield curve shifts instantaneously and
parallel up and down 100 to 300 basis points in 100 basis point increments.
The OTS provides thrifts the results of their interest rate sensitivity model,
which is based on information provided by the Bank, to estimate the sensitivity
of NPV.
17
The OTS model utilizes an option-based pricing approach to estimate the
sensitivity of mortgage loans. The most significant embedded option in these
types of assets is the prepayment option of the borrowers. The OTS model uses
various price indications and prepayment assumptions to estimate sensitivity of
mortgage loans.
In the OTS model, the value of deposit accounts appears on the asset and
liability side of the NPV analysis. In estimating the value of certificate of
deposit accounts, the liability portion of the CD is represented by the implied
value when comparing the difference between the CD face rate and available
wholesale CD rates. On the asset side of the NPV calculation, the value of the
"customer relationship" due to the rollover of retail CD deposits represents an
intangible asset in the NPV calculation.
Other deposit accounts such as transaction accounts, money market deposit
accounts, passbook accounts, and non-interest bearing accounts also are
included on the asset and liability side of the NPV calculation in the OTS
model. The accounts are valued at 100% of the respective account balances on
the liability side. On the assets side of the analysis, the value of the
"customer relationship" of the various types of deposit accounts is reflected
as a deposit intangible.
The NPV sensitivity of borrowed funds is estimated by the OTS model based on a
discounted cash flow approach. The cash flows are assumed to consist of
monthly interest payments with principal paid at maturity.
The OTS model is based only on the Bank's balance sheet. The assets and
liabilities at the parent company level are short-term in nature, primarily
cash and equivalents, and were not considered in the analysis because they
would not have a material effect on the analysis of NPV sensitivity. The
following table sets forth the Company's September 30, 2002 interest rate
sensitivity of NPV, the most recent available from the OTS. Due to the
abnormally low prevailing interest rate environment, the OTS report did not
provide NPV estimated for the -200 and -300 basis points.
Net Portfolio Value as a %
Net Portfolio Value of Present Value of Assets
------------------------------ --------------------------
Change in
Rates $ Amount $ Change % Change NPV Ratio Change
- ---------- --------- -------- -------- --------- ---------
+ 300 bp 41,563 (43,933) (51)% 6.10% - 522 bp
+ 200 bp 56,524 (28,972) (34)% 8.08% - 354 bp
+ 100 bp 70,491 (15,005) (18)% 9.83% - 179 bp
0 bp 85,496 11.62%
- 100 bp 83,603 (1,893) (2)% 11.33% - 29 bp
- 200 bp - - - % -% - bp
- 300 bp - - - % -% - bp
- -------------------------------------------------------------------------------
18
CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures (as defined
in Securities Exchange Act Rules 13a-14(c) and 15d-14(c)) are effective to
ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the foregoing evaluation.
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
None
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization dated December 16, 2002
between Fidelity Bancorp, Inc. and MAF Bancorp, Inc.
(Incorporated by reference to Exhibit 4.1 of the Current
Report on Form 8-K dated December 17, 2002.)
3.1 Restated Certificate of Incorporations of Fidelity Bancorp,
Inc. (Incorporated herein by reference into this document
from the exhibits to Form S-1, Registration statement as
amended, originally filed on October 28, 1993, Registration
No. 33-68670.)
3.2 Bylaws of Fidelity Bancorp, Inc., as amended (Incorporated
herein by reference into this document from the exhibits to
Form S-1, Registration statement as amended, originally
filed on October 28, 1993, Registration No. 33-68670.)
4.0 Stock Certificate of Fidelity Bancorp, Inc. (Incorporated
herein by reference into this document from the exhibits to
Form S-1, Registration statement as amended, originally
filed on October 28, 1993, Registration No. 33-68670.)
19
4.1 Rights Agreement between the Company and Harris Trust and
Savings Bank, as trustee (including the related certificate
of designations) (Incorporated herein by reference into
this document from the exhibits to Form 8-A, filed on
February 19, 1997.)
4.2 Amendment No. 1 to Rights Agreement dated as of December 16,
2002 between Fidelity Bancorp, Inc. and Computershare
Investor Services LLC (Incorporated by reference to Exhibit
4.1 of the Current Report on Form 8-K dated December 17,
2002).
10.1 Form of Employment Agreement, as amended, between the
Fidelity Bancorp, Inc. and Raymond S. Stolarczyk and Thomas
E. Bentel. (Incorporated by reference to Exhibit 10.1 of
the Current Report on Form 10-Q dated August 14, 2002)
10.2 Form of Employment Agreement, as amended, between the
Fidelity Federal Savings Bank and Raymond S. Stolarczyk and
Thomas E. Bentel. (Incorporated by reference to Exhibit
10.1 of the Current Report on Form 10-Q dated August 14,
2002)
10.3 Form of Special Termination Agreement between the Bank and
the Fidelity Bancorp, Inc. and Elizabeth Doolan and various
officers (Incorporated by reference to Exhibit 10.1 of the
Current Report on Form 10-Q dated August 14, 2002)
10.4 Form of Special Termination Agreement between the Bank and
the Fidelity Federal Savings Bank. and Elizabeth Doolan and
various officers (Incorporated by reference to Exhibit 10.1
of the Current Report on Form 10-Q dated August 14, 2002)
10.5 Form of Special Termination Agreement between the Bank and
the Fidelity Bancorp, Inc. and Richard Burns (Incorporated
by reference to Exhibit 10.1 of the Current Report on Form
10-Q dated August 14, 2002)
10.6 Form of Special Termination Agreement between the Bank and
the Fidelity Federal Savings Bank and Richard Burns
(Incorporated by reference to Exhibit 10.1 of the Current
Report on Form 10-Q dated August 14, 2002)
10.7 Employee Stock Ownership Plan and Trust (Incorporated
herein by reference into this document from the exhibits to
Form 10-K filed on December 9, 1994.)
10.8 Fidelity Federal Savings Bank Recognition and Retention Plan
and Trust (Incorporated herein by reference into this
document from the exhibits to Form S-1, Registration
statement as amended, originally filed on October 28, 1993,
Registration No. 33-68670.)
10.9 Amendment dated March 18, 2002 to the Fidelity Federal
Savings Bank Recognition and Retention Plan. (Incorporated
by reference to Exhibit 10.1 of the Current Report on Form
10-Q dated August 14, 2002)
10.10 Incentive Stock Option Plan . (Incorporated herein by
reference into this document from the exhibits to Form S-8,
Registration statement filed on April 20,1994, Registration
No. 33-78000.)
10.11 Amendment dated March 18, 2002 to the Fidelity Bancorp,
Inc., 1993 Incentive Stock Option Plan (Incorporated by
reference to Exhibit 10.1 of the Current Report on Form 10-Q
dated August 14, 2002)
20
10.12 Fidelity Bancorp, Inc. 1993 Stock Option Plan for Outside
Directors (Incorporated herein by reference into this
document from the exhibits to Form S-8, Registration
statement filed on April 20,1994, Registration No.
33-78000.)
10.13 Amendment dated March 18, 2002 to the Fidelity Bancorp, Inc.
1993 Stock Option Plan for Outside Directors (Incorporated
by reference to Exhibit 10.1 of the Current Report on Form
10-Q dated August 14, 2002)
10.14 Fidelity Federal Savings Bank Employee Severance
Compensation Plan (Incorporated by reference to Exhibit
10.1 of the Current Report on Form 10-Q dated August 14,
2002)
99.1 Chief Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Chief Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On October 15, 2002, Fidelity Bancorp, Inc. announced the date of
its annual meeting of stockholders to be January 22, 2003.
On November 27, 2002, Fidelity Bancorp, Inc. announced the new
date for its annual meeting of stockholders to be February 12,
2003.
On December 17, 2002, Fidelity Bancorp, Inc. announced that it
has agreed to be acquired to MAF Bancorp, Inc.
21
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: February 10, 2003 /s/ RAYMOND S. STOLARCZYK
----------------- --------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: February 10, 2003 /s/ ELIZABETH A. DOOLAN
----------------- --------------------------
Elizabeth A. Doolan
Senior Vice President and Chief
Financial Officer
22
CERTIFICATIONS
I, Raymond S. Stolarczyk, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Fidelity Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 10, 2003
By: /s/ Raymond S. Stolarczyk
Title: Chairman and Chief Executive Officer
23
I, Elizabeth A. Doolan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Fidelity Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 10, 2003
By: /s/ Elizabeth A. Doolan
Title: Senior Vice President and Chief Financial Officer