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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, 2003
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
May 12, 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 March 31, 2003 (unaudited) and September 30, 2002 1
Consolidated Statements of Earnings for the three and six
months ended March 31, 2003 and 2002 (unaudited) 2
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended March 31, 2003 and 2002 (unaudited) 3-4
Consolidated Statements of Cash Flows for the six months
ended March 31, 2003 and 2002 (unaudited) 5-6
Notes to Consolidated Financial Statements (unaudited) 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-18
Item 3. Quantitative and Qualitative Disclosure about Market Risks 19-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE PAGE 24
1
FIDELITY BANCORP and SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
Dollars in thousands
March 31, September 30,
ASSETS 2003 2002
Cash and due from banks $ 4,291 3,828
Interest-earning deposits 656 1,045
Federal funds sold 100 100
------- --------
Cash and cash equivalents 5,047 4,973
FHLB of Chicago stock, at cost 33,273 31,972
Mortgage-backed securities available for sale 271,634 216,505
Securities available for sale 22,932 22,396
Loans held for sale 82 83
Loans receivable, net of allowance for loan losses of $2,015
at March 31, 2003 and $1,826 at September 30, 2002 380,929 414,685
Accrued interest receivable 3,320 3,637
Premises and equipment 3,490 3,410
Due from broker 1,079 -
Other assets 1,413 1,254
------- -------
$ 723,199 698,915
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits 458,325 434,134
Borrowed funds 194,000 180,650
Advance payments by borrowers for taxes and insurance 2,161 6,158
Due to broker - 13,169
Other liabilities 7,098 8,813
------- -------
Total liabilities 661,584 642,924
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 57 57
Additional paid-in capital 38,122 38,410
Retained earnings, substantially restricted 53,739 47,864
Treasury stock, at cost (30,328) (30,932)
Common stock acquired by Bank Recognition and Retention Plans (127) (149)
Accumulated other comprehensive income 152 741
------- -------
TOTAL STOCKHOLDERS' EQUITY 61,615 55,991
------- -------
$ 723,199 698,915
======= =======
See accompanying notes to unaudited consolidated financial statements.
2
FIDELITY BANCORP and SUBSIDIARY
Consolidated Statements of Earnings (unaudited)
Dollars in thousands (except for earnings per share)
Three Months ended Six Months ended
March 31, March 31,
2003 2002 2003 2002
-------------------- -----------------
(unaudited)
Interest Income:
Loans receivable $ 6,662 7,794 13,639 16,064
Securities 801 1,088 1,683 2,004
Mortgage-backed securities 2,286 1,950 4,303 4,145
Other interest income 4 8 10 18
------ ------ ------ ------
9,753 10,840 19,635 22,231
Interest Expense:
Deposits 2,850 3,537 5,780 7,359
Borrowed funds 1,898 2,110 3,868 4,645
------ ------ ------ ------
4,748 5,647 9,648 12,004
Net interest income before provision
for loan losses 5,005 5,193 9,987 10,227
Provision for loan losses 94 110 188 250
------ ------ ------ ------
Net interest income after provision
for loan losses 4,911 5,083 9,799 9,977
Non-Interest Income:
Fees and commissions 111 157 264 300
Insurance and annuity commissions 209 210 426 430
Gain on sale of securities 483 223 754 295
Gain on sale of loans 18 125 61 666
Recovery of impairment of securities
available for sale 3,324 -- 3,324 --
Other 20 11 29 20
------ ------ ------ ------
4,165 726 4,858 1,711
Non-Interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,656 1,576 3,196 3,275
Office occupancy and equipment 401 506 768 876
Data processing 122 130 240 262
Advertising and promotions 132 156 314 314
Other 431 444 825 856
------ ------ ------ ------
2,742 2,812 5,343 5,583
------ ------ ------ ------
Income before income taxes 6,334 2,997 9,314 6,105
Income tax expense 1,727 1,119 2,815 2,282
------ ------ ------ ------
Net income $ 4,607 1,878 6,499 3,823
====== ====== ====== ======
Earnings per share - basic $ 1.46 0.61 2.08 1.25
Earnings per share - diluted $ 1.41 0.59 2.00 1.20
====== ====== ====== ======
Comprehensive income (loss) $ 3,749 (13) 5,910 (941)
====== ====== ====== ======
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 for earnings per share)
Six months ended March 31, 2003 and 2002
Accumulated
Common Other
Common Stock Additional Stock Comprehensive
Par Paid-In Retained Treasury Acquired Income
Shares Value Capital Earnings Stock by BRRP's (Loss) Total
--- ------ ------- ------- ------ ------ ---- -------
Balance at
September 30, 2001 3,782,350 $ 38 38,636 40,926 (31,540) (178) 1,502 $ 49,384
Net income - - - 3,823 - - - 3,823
Change in accumulated
other comprehensive
income (loss) - - - - - - (4,764) (4,764)
--------- ------ ------- ------ ------ ----- ------ -------
Total comprehensive income (941)
Cash dividends ($0.17 per
share) - - - (510) - - - (510)
Amortization of award of
BRRP's stock - - - - - 8 - 8
Exercise of stock options
and reissuance of treasury
shares (34,000 shares) - - (266) - 608 - - 342
Tax benefit related to
stock options exercised - - 101 - - - - 101
3-for-2 stock split
effected in the form
of a 50% stock dividend
and payment of cash for
fractional shares 1,891,175 19 (21) - - - - (2)
--------- ------ ------- ------ ------ ----- ------ -------
Balance at
March 31, 2002 5,673,525 $ 57 38,450 44,239 (30,932) (170) (3,262) $ 48,382
========= ====== ======= ====== ======= ====== ======= =======
Balance at
September 30, 2002 5,673,464 $ 57 38,410 47,864 (30,932) (149) 741 $ 55,991
Net income - - - 6,499 - - - 6,499
Change in accumulated
other comprehensive
income (loss) - - - - - - (589) (589)
--------- ------ ------- ------ ------ ----- ------ -------
Total comprehensive income 5,910
Cash dividends ($0.20 per
share) - - - (624) - - - (624)
Amortization of award of
BRRP's stock - - - - - 22 - 22
Exercise of stock options
and reissuance of treasury
shares (78,063 shares) - - (465) - 604 - - 139
Tax benefit related to
stock options exercised - - 177 - - - - 177
--------- ------ ------- ------ ------ ----- ------ -------
Balance at
March 31, 2003 5,673,464 $ 57 38,122 53,739 (30,328) (127) 152 $ 61,615
========= ====== ======= ====== ======= ====== ======= =======
See accompanying notes to unaudited consolidated financial statements.
4
FIDELITY BANCORP and SUBSIDIARY
Consolidated Statements of Cash Flows (unaudited)
Dollars in thousands
Six months ended March 31, 2003 2002
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,499 3,823
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 159 265
Provision for loan losses 188 250
Net amortization and accretion of premiums and discounts 2,596 296
Amortization of cost of stock benefit plans 22 8
Deferred loan fees, net of amortization 34 141
Stock dividend from FHLB of Chicago (1,301) (439)
Loans originated for sale (2,577) (3,980)
Proceeds from loans originated for sale 2,638 4,042
Gain on sales of securities, mortgage-backed
securities and loans (815) (961)
Gain on sale of real estate owned (55) (11)
Amortization of deposit base intangible -- 2
Decrease (increase) in accrued interest receivable 317 (426)
Increase in other assets (32) (109)
Decrease in other liabilities (1,178) (2,266)
------ ------
Net cash provided by operating activities 6,495 635
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage-backed securities (306,327) (167,720)
Proceeds from sales of securities and mortgage-backed
securities 198,677 90,264
Proceeds from sale of real estate owned 187 110
Proceeds from maturities of securities 2,150 20,000
Proceeds from sale of loans -- 37,829
Purchase of securities (14,379) (40,061)
Purchase of FHLB of Chicago stock -- (51,200)
Proceeds from redemption of FHLB of Chicago stock -- 55,500
Loans originated for investments (57,168) (93,755)
Loans purchased (8,769) --
Particiapations sold 500 --
Purchase of premises and equipment (239) (193)
Principal repayments collected on loans receivable 98,712 92,888
Principal repayments collected on mortgage-backed
securities 47,176 14,792
------ ------
Net cash used in investing activities (39,480) (41,546)
(continued)
5
FIDELITY BANCORP and SUBSIDIARY
Consolidated Statements of Cash Flows (unaudited) (continued)
Dollars in thousands
Six months ended March 31, 2003 2002
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 24,191 34,334
Net increase in borrowed funds 13,350 8,785
Net decrease in advance payments by borrowers
for taxes and insurance (3,997) (4,989)
Payment of common stock dividends (624) (510)
Payment of fractional shares for 3-for-2 stock split -- (2)
Proceeds from exercise of stock options 139 342
------ ------
Net cash provided by financing activities 33,059 37,960
------ ------
Net change in cash and cash equivalents 74 (2,951)
Cash and cash equivalents at beginning of period 4,973 8,604
------ ------
Cash and cash equivalents at end of period $ 5,047 5,653
====== ======
CASH PAID DURING THE PERIOD FOR:
Interest $ 9,617 12,013
Income taxes 2,931 3,780
NON-CASH INVESTING ACTIVITIES -
Loans transferred to real estate in foreclosure 349 546
Due to (from) broker 1,079 (14,918)
====== ======
See accompanying notes to unaudited consolidated financial statements.
6
FIDELITY BANCORP, INC.
NOTES TO UNAUDITED 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 and six months ended
March 31, 2003 are not necessarily indicative of results that may be expected
for the entire fiscal year ended 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) EARNINGS PER SHARE
Basic earnings per share for the three months ended March 31, 2003 and 2002
were computed by dividing net income by the weighted average number of shares
of common stock outstanding for the periods, which were 3,148,919 and 3,080,588
respectively. Basic earnings per share for the six months ended March 31, 2003
and 2002 were computed by dividing net income by 3,118,185 and 3,056,853, the
weighted average number of shares of common stock outstanding.
Diluted earnings per share for the three months ended March 31, 2003 and 2002
were computed by dividing net income by the weighted average number of shares
of common stock and potential common stock outstanding for the periods that
were 3,271,069 and 3,207,453, respectively. Diluted earnings per share for the
six months ended March 31, 2003 and 2002 were computed by dividing net income
by 3,254,627 and 3,195,652, the weighted average number of shares of common
stock and potential common stock outstanding. Diluted earnings per share
include the dilutive effects of additional potential issuable shares under
stock options.
(3) 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.
(4) COMMITMENTS AND CONTINGENCIES
At March 31, 2003 the Bank had outstanding commitments to originate new loans
of $5.5 million, of which $1.6 million were fixed rate, with rates ranging from
5.625% to 7.00%, and $3.9 million were adjustable rate commitments.
Additionally, the Bank has thirteen construction and development loan
7
commitments currently totaling $18.2 million with floating rates based on prime
plus a margin. Net draws on these construction and development loan
commitments totaled $15.6 million through March 31, 2003.
(5) RECLASSIFICATIONS
Certain reclassifications have been made in prior year's financial statements
to conform to the current year's presentation.
(6) STOCK OPTIONS
The Company applies Accounting Principles Board (APB) Opinion 25 and related
interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized at the date of grant. Had compensation
cost been determined based on the fair value at the grant dates for awards
under the plan consistent with the method of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the
Company's net income and earnings per share would have been reduced to the pro
forma amounts in the table below. For purposes of pro forma disclosure, the
estimated fair value of the options is amortized to expense over the options'
vesting period.
Three Months ended Six Months ended
March 31, March 31,
2003 2002 2003 2002
-------------------- -----------------
(unaudited)
Net income:
As reported $ 4,607 1,878 6,499 3,823
Pro forma 4,577 1,878 6,450 3,820
Earnings per share as reported:
As reported 1.46 0.61 2.08 1.25
Pro forma 1.41 0.59 2.00 1.20
Pro forma earnins per share:
As reported 1.45 0.61 2.07 1.25
Pro forma 1.40 0.59 1.98 1.20
The Black-Scholes option pricing valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock options.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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").
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 reported earnings for the second fiscal quarter ended March 31,
2003 of $4.6 million, compared with $1.9 million for the same quarter a year
ago. Earnings per diluted share for the quarter ended March 31, 2003 were
$1.41 per share, an increase of $0.82 per share from $0.59 per share for the
same period in 2002. For the first six months of the fiscal year, earnings per
diluted share were $2.00, an increase of $0.80 per share from $1.20 per share
for the six-month period in 2002. Net income for the first six months of 2003
was $6.5 million, compared with $3.8 million in 2002. Earnings per share and
net income for the quarter and year to date were up from the previous year's
results primarily due to a recovery of impairment of a security available for
sale of $3.3 million.
The Company also announced that its board of directors declared a quarterly
dividend of $0.10 per share, payable May 15, 2003 to shareholders of record as
of April 30, 2003.
MERGER AGREEMENT
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
9
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 document (including information incorporated by reference) contains, and
future oral and written statements of the Company and its management may
contain, forward-looking statements, within the meaning of such term in the
Private Securities Litigation Reform Act of 1995, with respect to the financial
condition, results of operations, plans, objectives, future performance and
business of the Company. Forward-looking statements, which may be based upon
beliefs, expectations and assumptions of the Company's management and on
information currently available to management, are generally identifiable by
the use of words such as "believe," "expect," "anticipate," "plan," "intend,"
"estimate," "may," "will," "would," "could," "should" or other similar
expressions. Additionally, all statements in this document, including
forward-looking statements, speak only as of the date they are made, and the
Company undertakes no obligation to update any statement in light of new
information or future events.
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 effect on the operations and future prospects of the Company and its
subsidiary include, but are not limited to, the following:
- - 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 second party vendors, which may be more difficult or more expensive
than anticipated or which may have unforeseen consequences to the Company and
its customers.
10
- - 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.
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 Form 10-K and the Company's
filings with the Securities and 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 March 31, 2003, cash and cash
equivalents totaled $5.0 million.
Mortgage-backed securities and securities available for sale represent a
secondary source of liquidity to the Company. The market value of these
securities fluctuates with interest rate movements. Net interest income in
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 of 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.
Federal regulations require the Bank to maintain sufficient liquidity to ensure
its safe and sound operation. At March 31, 2003, the Bank believes it was in
compliance with OTS liquidity requirements.
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
11
deposits for the six months ended March 31, 2003, were $6.5 million. Net cash
used in investing activities for the six-month period ended March 31, 2003 was
$39.5 million. During the period investing activities consisted of loans
originated for investment and purchases of mortgage-backed securities and
securities, partially offset by principal collections on loans, proceeds from
maturities of securities and proceeds from sales of securities, mortgage-backed
securities and loans. Cash flows provided by financing activities amounted to
$33.1 million for the six months ended March 31, 2003. The increases of $24.2
million in deposits and $13.4 million in borrowed funds during the first six
months of fiscal 2003 were only partially offset by the decrease in advance
payments from borrowers of $4.0 million.
At March 31, 2003, the Bank had outstanding commitments to originate loans of
$5.5 million and undrawn construction and development loan commitments of $2.6
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, 2003 totaled $234.1 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 March 31, 2003, the Company and the
Bank met the capital adequacy requirements to which they are subject. The
Bank's Tangible Equity ratio at March 31, 2003 was 7.88%. The Tier 1 Capital
ratio was 7.88%, the Tier 1 Risk-Based ratio was 17.20% and the Total
Risk-Based Capital ratio was 17.81%.
The most recent notification from the federal banking agencies categorized the
Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, 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 Bank's
category.
CHANGES IN FINANCIAL CONDITION
Total assets at March 31, 2003 were $723.2 million, compared to $698.9 million
at September 30, 2002.
12
Mortgage-backed securities classified as available for sale were $271.6 million
at March 31, 2003. The period purchases were funded from heavy refinance
activity in the Bank's loan portfolio, sales of other mortgage-backed
securities, principal payments received on mortgage-backed securities, new
deposits and borrowed funds.
Loans receivable, net of allowance for loan losses, decreased $33.8 million to
$380.9 million at March 31, 2003. While loan demand has remained steady, the
low interest rate environment has produced increased repayments. New loans
closed, including multi-family and commercial mortgages and loans secured by
commercial leases, totaled $57.2 million for the six months ended March 31,
2003. Loan repayments totaled $98.7 million for the six months ended March 31,
2003, compared with $92.9 million for the same period in 2002. The Company
continues to offer various loan products, and prices them competitively.
Deposits were $458.3 million at March 31, 2003, up 5.6% 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 $1.6 million
increase in checking accounts. Borrowed funds (FHLB advances) increased 7.4%
to $194.0 million at March 31, 2003.
Book value per share on March 31, 2003 was $19.50, compared with $18.17 at
September 30, 2002. The increase in book value per share was attributable to
earnings retained, offset by dividends paid and a decline in the unrealized
market value of the mortgage-backed securities and securities available for
sale portfolios.
INVESTMENT ACTIVITIES
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 was recorded in the second quarter of fiscal 2003.
ASSET QUALITY
As of March 31, 2003, the Bank had classified assets of $2.7 million.
Classified loans of $2.1 million were categorized as substandard, consisting of
4 residential mortgage loans, 5 multi-family loans, and 1 commercial loan
secured by a lease and 1 equity loan. There were no assets classified as
doubtful.
At March 31, 2003, management considered a $781,000 commercial loan secured by
lease to be impaired, under which K-Mart Corporation was the lessee. 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
13
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
Company's ratio of non-performing loans to net loans receivable was 0.54% at
March 31, 2003. Following management's review of the foreclosed residential
properties, the Company has determined that no specific allowances were
necessary for the quarter ended March 31, 2003.
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 March 31, Six Months Ended
2003 2002 March 31, 2003
------------------------ ----------------------- ----------------------
Inter- Average Inter- Average Inter- Average
Average est Yield/ Average est Yield/ Average est Yield/
Balance Cost(3) Balance Cost(3) Balance Cost(3)
(dollars in thousands)
------------------------ ----------------------- ----------------------
Interest-earning assets:
Loans receivable, net $404,229 6,662 6.59% 433,168 7,794 7.20% 412,095 13,639 6.62%
Mortgage-backed securities 243,547 2,286 3.75% 133,886 1,950 5.83% 222,845 4,303 3.86%
Interest-bearing deposits 1,457 3 0.82% 1,355 6 1.77% 1,661 8 0.96%
Securities and federal
funds 65,531 802 4.90% 75,141 1,090 5.80% 63,351 1,685 5.32%
------- ----- ----- ------ ----- ----- ------- ----- -----
Total interest-earning
assets 714,764 9,753 5.46% 643,550 10,840 6.74% 699,952 19,635 5.61%
Non-interest earning
assets 12,774 13,415 13,545
------- ------ -------
Total assets $727,538 656,965 713,497
======= ======= =======
Interest-bearing liabilities:
Deposits:
Passbook & NOW accounts 168,802 627 1.49% 166,570 991 2.38% 166,001 1,319 1.59%
Money market account 21,483 178 3.31% 14,996 102 2.72% 20,975 327 3.12%
Certificate accounts 259,910 2,045 3.15% 234,799 2,444 4.16% 253,408 4,134 3.26%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total deposits 450,195 2,850 2.53% 416,365 3,537 3.40% 440,384 5,780 2.62%
Borrowed funds 191,935 1,898 3.96% 165,171 2,110 5.11% 189,001 3,868 4.09%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total interest-bearing
liabilities 642,130 4,748 2.96% 581,536 5,647 3.88% 629,385 9,648 3.07%
Non-interest bearing
deposits 12,043 14,382 13,309
Other liabilities 11,816 10,626 11,990
------- ------- -------
Total liabilities 665,989 606,544 654,684
Stockholders' equity 61,549 50,421 58,813
------- ------- -------
Total liabilities and
stockholders' equity $727,538 656,965 713,497
======= ======= =======
Net interest
income/interest rate
spread (1) 5,005 2.50% 5,193 2.85% 9,987 2.54%
Net earning assets/net
interest margin (2) $ 72,634 2.80% 62,014 3.23% 70,567 2.85%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.11x 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 and six month periods are annual-
ized for presentation purposes.
16
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND
MARCH 31, 2002
GENERAL. For the quarter ended March 31, 2003, earnings per diluted share
increased $0.82 to $1.41, from $0.59 for the same period in fiscal 2002. Net
income of $4.6 million for the current quarter increased $2.7 million from $1.9
million for the second quarter of fiscal 2002. Net income and earnings per
share for the current quarter increased over the previous year primarily due to
a recovery of the impairment of a security available for sale previously
written off in the fourth quarter of fiscal 1997 of $3.3 million, or $0.83 per
diluted share. Additionally, the actions of the Federal Reserve to lower
interest rates continues to result in gradually reducing interest income from
loans and investments, and the interest cost of both deposits and the borrowed
funds of the Company.
INTEREST INCOME. Total interest income decreased $1.1 million, to $9.8
million, for the three months ended March 31, 2003, from the prior year's
second quarter. Interest income from loans receivable was $6.7 million for the
quarter ended March 31, 2003, down from $7.8 million in the previous year's
second quarter. The average balance of loans outstanding decreased to $404.2
million from $433.2 million, comparing the quarters ending March 31, 2003 to
March 31, 2002, due primarily to high repayment volume. The average yield on
loans decreased 61 basis points to 6.59% from 7.20%, also due to significant
refinance activity over the past year.
The average balance of the securities available for sale portfolios, including
mortgage-backed securities, increased to $309.1 million for the quarter ended
March 31, 2003, from $209.0 million for the same quarter last year. The
average yield on the mortgage-backed securities portfolio decreased to 3.75%,
from 5.83%, and average yield on securities available for sale and federal
funds decreased to 4.90%, from 5.80%, comparing the quarters ended March 31,
2003 to March 31, 2002. Interest income generated from securities for the
quarter ended March 31, 2003 was $3.1 million, an increase of $49,000 over the
quarter ended March 31, 2002. The Company has been actively managing the loan
and investment portfolios in an effort to preserve total interest income in the
current interest environment.
INTEREST EXPENSE. Total interest expense for the quarter decreased $0.9
million from $5.6 million the previous quarter ended March 31, 2002 to $4.7
million for the same quarter in 2003. Interest expense on deposits decreased
from $3.5 million in the previous year's second quarter, to $2.9 million for
the current quarter. The weighted average interest rate on deposit accounts
for the quarter ended March 31, 2003, was 2.53%, a decrease of 87 basis points
from 3.40% in the prior year's second quarter.
The Company uses FHLB advances as a reasonable cost source of funds for lending
and investment opportunities. The average borrowed funds for the quarter ended
March 31, 2003 increased to $191.9 million from $165.2 million for the quarter
ended March 31, 2002. Interest expense on borrowed funds decreased from $2.1
million the previous year to $1.9 million for the quarter ended March 31, 2003.
The average cost of borrowed funds decreased 115 basis points to 3.96% in the
second quarter of fiscal 2003, compared to 5.11% in the same period last year.
PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses of
$94,000 and $110,000 for the quarters ended March 31, 2003 and 2002,
respectively. 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 economic conditions.
17
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 March 31, 2003, the allowance for loan losses
was $2.0 million. The ratio of total non-performing loans to total loans was
0.54%, and the ratio of the allowance for loan losses to net loans receivable
was 0.53% at March 31, 2003.
NON-INTEREST INCOME. Non-interest income increased $3.4 million to $4.2
million for the second quarter of fiscal 2003. Included in fiscal 2003's
non-interest income is $3.3 million from the recovery of impairment of a
security available for sale. The second quarter of fiscal 2003 also includes
gains on sales of loans and investments totaling $501,000, compared to $348,000
in the prior year's second quarter.
NON-INTEREST EXPENSE. Non-interest expense for the three months ended March
31, 2003 decreased $70,000 to $2.7 million compared to $2.8 million in fiscal
2002. Salaries and employee benefits for the current quarter increased
$80,000, or 5.1% over the prior year's second quarter, as a result of normal
annual salary increases combined with the costs associated with additional
personnel and higher group health insurance premiums. Office occupancy and
equipment expense decreased $105,000, primarily due to lower equipment
depreciation in the current period. Management has continued its efforts to
control operating expenses.
INCOME TAXES. Income taxes increased $608,000 for the three months ended March
31, 2003 to $1.7 million, compared to $1.1 million one-year ago. The increase
is primarily due to increased net income from the recovery of impairment of a
security available for sale. The Company's effective income tax rate decreased
to 27.3% for the three months ended March 31, 2003, from 37.3% for the quarter
ended March 31, 2002. The lower effective income tax rate in the current
quarter was due to the tax effect on the impairment recovery.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 2003 AND
MARCH 31, 2002
GENERAL. For the first six months of the 2003 fiscal year, earnings per
diluted share were $2.00, up $0.80 per share from $1.20 per share for the first
six-months of fiscal 2002. Net income for the first six months of fiscal 2003
was $6.5 million, compared with $3.8 million in fiscal 2002. Net income and
earnings per share for the first six months of fiscal 2003 increased over the
previous year primarily due to a recovery of impairment of a security available
for sale previously written off in the fourth quarter of fiscal 1997 of $3.3
million, or $0.83 per diluted share.
INTEREST INCOME. The Company continues to strive to preserve total interest
income in the current fiscal year, in spite of the low interest rate
environment and continued high loan turnover. Total interest income was $19.6
million for the six months ended March 31, 2003, down $2.6 million or 11.7%
from $22.2 million in fiscal 2002.
Income from loans receivable, the chief contributor to interest income, was
$13.6 million for the six-months ended March 31, 2003, down 15.1% from the
prior year's comparable period. Income from loans receivable fell primarily as
a result of a decline in the outstanding average balances to $412.1 million for
the six-month period ended March 31, 2003, from $444.1 million one year
earlier. High repayments and loan sales that took place in 2002 and continues
into 2003 adversely affected both volume and yield. Repayments of loans from
18
the first two quarters of fiscal 2003 totaled $98.8 million, compared to $92.9
million for the same period in fiscal 2002.
The average balance of the securities available for sale portfolios, including
mortgage-backed securities increased to $286.2 million for the six-month period
ended March 31, 2003, from $203.4 million the same period last fiscal year.
Interest generated from mortgage-backed and securities available for sale and
federal funds for the six-month period ended March 31, 2003 was $6.0 million,
compared to $6.1 million for the six-month period ended March 31, 2002. The
Company has been actively managing the loan and investment portfolios in an
effort to preserve total interest income in the current interest environment.
INTEREST EXPENSE. Total interest expense for the six months ended March 31,
2003 was $9.6 million, down $2.4 million or 19.6% from $12.0 million for the
same period in fiscal 2002.
For the six-months ended March 31, 2003, interest expense on deposits was $5.8
million, down $1.6 million or 21.5% from $7.4 million in fiscal 2002. Average
interest-bearing deposits increased $36.3 million, or 9.0%, to $440.4 million
for the six-month period in fiscal 2003 compared to $404.1 million in fiscal
2002, however, the weighted average cost of deposits decreased 102 basis points
to 2.62% from 3.64% comparing the six months ending March 31, 2003 to March 31,
2002.
Interest expense on borrowed funds declined 16.7% to $3.9 million for the six
months ended March 31, 2003, compared with $4.6 million in fiscal 2002. The
decline was due to maturing borrowed funds being replaced with funds borrowed
at lower rates. The weighted average cost of borrowed funds decreased 102
basis points to 4.09% from 5.11%, comparing the six months ending March 31,
2003 to March 31, 2002.
PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses of
$188,000 during the first six months of fiscal 2003, compared to a $250,000
provision in fiscal 2002. 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. The
allowance for loan losses of $2.0 million at March 31, 2003, represents 0.53%
of loans receivable, net.
NON-INTEREST INCOME. Non-interest income increased to $4.9 million for the
six-month period ended March 31, 2003 from $1.7 million in fiscal 2002.
Included in fiscal 2003's non-interest income is $3.3 million from the recovery
of impairment of investment securities available for sale. During the first
six months of fiscal 2003, the sale of loans and investments produced a
$815,000 pre-tax gain, compared with a $961,000 pre-tax gain in the comparable
fiscal 2002 period.
NON-INTEREST EXPENSE. Non-interest expense decreased by $240,000, or 4.3%, to
$5.3 million for the six months ended March 31, 2003, compared with $5.6
million in the same period in fiscal 2002. The ratio of operating expenses to
average assets improved to 1.50% for the six months ended March 31, 2003,
compared with 1.68% in 2002. Office occupancy and equipment expense decreased
$108,000, primarily due to lower equipment depreciation in the current period.
Management has continued its efforts to control operating expenses.
19
INCOME TAXES. Income taxes increased $533,000 for the six-months ended March
31, 2003 to $2.8 million compared to $2.3 million for the prior year. The
Company's effective income tax rate decreased to 30.2% for the six-month period
ended March 31, 2003 from 37.4% in the comparable fiscal 2002 period. The
lower effective income tax rate in the current year's period was due to the tax
effect on the impairment recovery.
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 to 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.
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.
20
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 most recent interest rate sensitivity
of NPV, as of December 31, 2002. We would not expect March 31, 2003's results
to differ significantly from December 31, 2002's.
Net Portfolio Value as a %
Net Portfolio Value of Present Value of Assets
------------------------------ --------------------------
Changes in
Rates $ Amount $ Change % Change NPV Ratio Change
- ---------- --------- -------- -------- --------- ---------
+ 300 bp 39,919 (43,063) (52)% 5.63% - 524 bp
+ 200 bp 55,986 (26,997) (33)% 7.68% - 319 bp
+ 100 bp 71,932 (11,051) (13)% 9.61% - 126 bp
0 bp 82,983 10.87%
- 100 bp 86,068 3,085 4 % 11.17% + 30 bp
- 200 bp -- -- -- % -- % -- bp
- 300 bp -- -- -- % - % -- bp
- -------------------------------------------------------------------------------
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.
21
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
February 12, 2003.
(b) The directors whose terms of office continued after the annual
meeting are as follows:
For Against
Thomas E. Bentel 2,715,266 181,704
Raymond S. Stolarczyk 2,724,482 172,488
The directors whose terms of office continued after the annual
meeting are as follows:
Paul J. Bielat
Richard J. Kasten
Edward J. Burda
Patrick J. Flynn
(c) A brief description of each other matter voted on and the
number of votes cast:
(i) Ratification of Crowe Chizek and Company LLP as
independent auditors for the fiscal year ending
September 30, 2003.
For Against Abstain
2,888,095 6,175 2,700
ITEM 5. OTHER INFORMATION
None
22
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.)
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)
23
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)
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)
21.0 Subsidiary information is incorporated herein by reference to
"Part II - Subsidiaries"
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
24
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
1. On February 12, 2003. Fidelity Bancorp, Inc.submitted a
script prepared for by Mr. Raymond Stolarczyk at the 2002
annual meeting for stockholders held on February 12, 2003,
discussing financial results for the fiscal year ended
September 30, 2002, and the first quarter ended December
31, 2002.
25
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: May 15, 2003 /s/ RAYMOND S. STOLARCZYK
-----------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: May 15, 2003 /s/ ELIZABETH A. DOOLAN
-----------------------------
Elizabeth A. DOOLAN
Sr. V. P. and Chief Financial Officer
26
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
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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: May 15, 2003
By: /s/ Raymond S. Stolarczyk
Name: Raymond S. Stolarczyk
Title: Chairman and Chief Executive Officer
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;
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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):
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(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: May 15, 2003
By: /s/ Elizabeth A. Doolan
Name: Elizabeth A. Doolan
Title: Senior Vice President and Chief Financial Officer