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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 June 30, 1996
Commission file number 0-22826
Fidelity Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3915246
(State of Incorporation) (I.R.S. Employer Identification No.)
5545 W. Belmont, Chicago, Illinois, 60641
(Address of principal executive offices)
(312) 736-4414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of common
stock, was 2,930,608 shares of common stock, par value $.01, outstanding as of
July 15, 1996.
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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 June 30, 1996 (unaudited) and September 30, 1995 1
Consolidated Statements of Earnings for the months ended
June 30, 1996 and 1995 (unaudited) 2
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended June 30, 1996 and 1995 (unaudited) 3
Consolidated Statements of Cash Flows for the nine months
Ended June 30, 1996 and 1995 (unaudited) 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-13
SIGNATURE PAGE 14
FIDELITY BANCORP, INC.
Consolidated Statements of Financial Condition
(Dollars in thousands)
Assets June 30, September 30,
1996 1995
(unaudited)
-------- ------------
Cash and due from banks $ 2,570 2,649
Interest-bearing deposits 1,894 1,266
Federal funds sold 200 200
Investment in mutual funds, at fair value 3,143 227
FHLB of Chicago stock 5,610 3,000
Mortgage-backed securities held to maturity, at
amortized cost (approximate market value of
$23,149 at June 30, 1996 and $26,769 at
September 30, 1995) 23,107 26,484
Investment securities available for sale, at fair value 79,101 84,579
Loans receivable, net of allowance for loan losses of
$488 at June 30, 1996 and $403 at September 30, 1995 332,928 266,735
Accrued interest receivable 2,908 2,910
Real estate in foreclosure 112 -
Premises and equipment 3,795 3,988
Deposit base intangible 171 219
Other assets 1,357 1,407
-------- --------
$ 456,896 393,664
======== ========
Liabilities and Stockholders' Equity
Liabilities
Deposits 285,940 275,993
Borrowed funds 112,050 54,032
Advance payments by borrowers for taxes and insurance 4,186 4,908
Other liabilities 4,919 4,939
-------- --------
Total liabilities 407,095 339,872
Stockholders' Equity
Preferred stock, $.01 par value; authorized 2,500,000 shares;
none outstanding - -
Common stock, $.01 par value; authorized 8,000,000 shares;
issued 3,782,350 shares and outstanding 2,930,608 and
3,278,894 shares at June 30, 1996 and September 30, 1995,
respectively 38 38
Additional paid-in capital 36,962 36,795
Retained earnings, substantially restricted 28,236 26,449
Treasury stock, at cost (851,742 and 503,456 shares at
June 30, 1996 and September 30, 1995, respectively) (11,523) (5,978)
Common stock acquired by Employee Stock Ownership Plan (2,078) (2,494)
Common stock acquired by Bank Recognition and Retention Plans (772) (963)
Unrealized loss on investment securities available for sale,
less applicable taxes (1,062) (55)
-------- --------
Total stockholders' equity 49,801 53,792
-------- --------
$ 456,896 393,664
======== ========
See accompanying notes to unaudited consolidated financial statements.
FIDELITY BANCORP, INC.
Consolidated Statements of Earnings
(Dollars in thousands)
Three Months ended Nine Months ended
June 30, June 30,
1996 1995 1996 1995
(unaudited)
-------------------- -----------------
Interest Income:
Loans receivable $ 6,076 4,926 17,259 14,147
Investment securities 1,519 999 4,262 2,811
Mortgage-backed securities 415 609 1,310 1,829
Interest earning deposits 13 15 53 44
Federal funds sold 3 3 36 21
Investment in mutual funds 27 4 33 216
------ ------ ------ ------
8,053 6,556 22,953 19,068
Interest Expense:
Deposits 3,471 2,995 10,465 7,715
Borrowed funds 1 178 618 2,609 1,975
------ ------ ------ ------
4,649 3,613 13,074 9,690
Net interest income before provision for loan losses 3,404 2,943 9,879 9,378
Provision for loan losses 10 90 90 192
------ ------ ------ ------
Net interest income after provision for loan losses 3,394 2,853 9,789 9,186
Non-Interest Income:
Gain on sale of investment securities available for sale - 271 - 274
Fees and commissions 87 87 283 295
Insurance and annuity commissions 105 164 401 417
Other 18 10 39 27
------ ------ ------ ------
210 532 723 1,013
Non-Interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,215 1,178 3,634 3,385
Office occupancy and equipment 302 265 897 902
Data processing 110 98 336 303
Advertising and promotions 94 139 333 392
Federal deposit insurance premiums 170 140 499 424
Other 342 285 932 827
------ ------ ------ -----
Total general and administrative expenses 2,233 2,105 6,631 6,233
Amortization of intangible 16 17 48 54
Recapture of credit enhancement losses (10) (90) (10) (90)
------ ------ ------ ------
2,239 2,032 6,669 6,197
------ ------ ------ ------
Income before income taxes 1,365 1,353 3,843 4,002
Income tax expense 530 542 1,492 1,600
------ ------ ------ ------
Net income $ 835 811 2,351 2,402
====== ====== ====== ======
Earnings per share - primary $ 0.28 0 .25 0.78 0.73
Earnings per share - fully diluted 0.28 0 .25 0.77 0.72
====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements.
FIDELITY BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
Nine months ended June 30, 1996 and 1995
Unrealized
Loss on
Common Common Investment
Additional Stock Stock Securities
Common Paid-In Retained Treasury Acquired Acquired Available
Stock Capital Earnings Stock by ESOP by BRRP's For Sale Total
--- ------ ------- ------- ------ ------ ---- -------
Balance at
September 30, 1994 $38 36,642 23,780 (2,045) (2,909) (1,219) (810) $53,477
Net income - - 2,402 - - - - 2,402
Purchase of treasury stock
(202,161 shares) - - - (2,319) - - - (2,319)
Cash dividends ($.08 per
share) - - (280) - - - - (280)
Amortization of award of
BRRP's stock - - - - - 193 - 193
Cost of ESOP shares released - - - - 415 - - 415
Market adjustment for
committed ESOP shares - 86 - - - - - 86
Change in unrealized loss
on investment securities
available for sale - - - - - - 734 734
--- ------ ------- ------- ------ ------ ---- -------
Balance at June 30, 1995 $ 38 36,728 25,902 (4,364) (2,494) (1,026) (76) $54,708
=== ====== ======= ====== ====== ======= ==== =======
Balance at
September 30, 1995 38 36,795 26,449 (5,978) (2,494) (963) (55) 53,792
Net income - - 2,351 - - - - 2,351
Purchase of treasury stock
(350,466 shares) - - - (5,573) - - - (5,573)
Cash dividends ($.16 per
share) - - (564) - - - - (564)
Amortization of award of
BRRP's stock - - - - - 191 - 191
Cost of ESOP shares released - - - - 416 - - 416
Exercise of stock options
and reissuance of
treasury shares
(2,200 shares) - (6) - 28 - - - 22
Tax benefit related to
stock options exercised - 2 - - - - - 2
Market adjustment for
committed ESOP shares - 171 - - - - - 171
Change in unrealized loss
on investment securities
available for sale - - - - - - (1,007) (1,007)
--- ------ ------- ------- ------ ----- ------- -------
Balance at June 30, 1996 $38 36,962 28,236 (11,523) (2,078) (772) (1,062) $49,801
=== ====== ======= ======= ====== ===== ======= =======
See accompanying notes to unaudited consolidated financial statements.
FIDELITY BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Nine months ended June 30, 1996 1995
(unaudited)
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,351 2,402
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation 287 261
Deferred income taxes 2 -
Provision for loan losses 90 192
Recapture of credit enhancement losses (10) (90)
Net amortization and accretion of premiums and discounts 211 594
Amortization of cost of stock benefit plans 191 193
Principal payment on ESOP loan 416 415
Market adjustment for committed ESOP shares 171 86
Deferred loan fees, net of amortization (862) (162)
Amortization of deposit base intangible 48 54
Gain on sale of investment securities available for sale - (274)
Sale of real estate owned - 161
Decrease (increase) in accrued interest receivable 2 (89)
Decrease (increase) in other assets 60 (60)
Increase (decrease) in other liabilities 617 792
------ ------
Net cash provided by operating activities 3,574 4,475
CASH FLOWS FROM INVESTING ACTIVITIES:
Stock dividends on Federal Home Loan Bank of Chicago stock - (40)
Proceeds from maturities of investment securities 63,000 10,686
Proceeds from redemption of mutual funds 40 8,552
Redemption of Federal Home Loan Bank of Chicago stock 179 -
Proceeds from sale of investment securities available for sale - 14,627
Purchase of mutual funds (2,956) (9)
Purchase of Federal Home Loan Bank of Chicago stock (2,789) (429)
Purchase of investment securities available for sale (65,000) (20,000)
Purchase of mortgage-backed securities - (14,450)
Loans originated for investment (107,216) (58,556)
Purchase of loans receivable - (3,000)
Purchase of premises and equipment (94) (1,855)
Principal repayments collected on loans receivable 41,653 17,950
Principal repayments collected on investment securities available for sale 5,671 6,843
Principal repayments collected on mortgage-backed securities 3,359 2,426
------ ------
Net cash used in investing activities (64,153) (37,255)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 9,947 31,716
Proceeds from FHLB advances 58,018 1,550
Net increase (decrease) in advance payments
by borrowers for taxes and insurance (722) 2,577
Purchase of treasury stock (5,573) (2,319)
Payment of common stock dividends (564) (280)
Proceeds from exercise of stock options 22 -
------ ------
Net cash provided by financing activities 61,128 33,244
Net change in cash and cash equivalents 549 464
Cash and cash equivalents at beginning of period 4,115 3,555
------ ------
Cash and cash equivalents at end of period $4,664 4,019
====== ======
Cash paid during the period for:
Interest $10,440 7,746
Income taxes 1,076 1,181
Non-cash investing activities - Loans transferred to real estate in foreclosure 112 121
====== ======
See accompanying notes to unaudited consolidated financial statements.
FIDELITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation have been included.
The results of operations and other data for the nine months ended June 30,
1996 are not necessarily indicative of results that may be expected for the
entire fiscal year ended September 30, 1996.
The unaudited consolidated financial statements include the accounts of
Fidelity Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
Fidelity Federal Savings Bank and subsidiaries (the "Bank"). All material
intercompany accounts and transactions have been eliminated in consolidation.
(2) Change in Accounting Principle
On October 1, 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, Accounting by Creditors for Impairment of a Loan as amended
by Statement No. 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure. The Company's non-performing loan policies, which
address nonaccrual loans and any other loans where the Company may be unable to
collect all amounts due according to the contractual terms of the loan, meet
the definition set forth for impaired loans in Statement No. 114. Commercial
equipment leases meeting the above criteria are reported as impaired loans for
disclosure purposes, see additional discussion regarding non-performing assets
in the "Asset Quality" section of the Management's Discussion and Analysis of
Financial Condition.
On October 1, 1995, the Company had no impaired loans under the guidelines of
Statement No. 114. At June 30, 1996, the recorded investment in loans
considered to be impaired under Statement No. 114 was $2.0 million (see Asset
Quality - Bennett Leases). The average recorded investment in impaired loans
during the five month period of October 1, 1995 through February 29, 1996 was
$0. For the most recent four month period, March 1, 1996 through June 30,
1996, the average recorded investment in impaired loans was $2.0 million. The
related allowance for impaired loans was $102,000 at June 30, 1996. For the
nine month period ended June 30, 1996, the Company's income recognition for
these loans was limited to actual cash received, prior to the Bennett
bankruptcy filing, which amounted to $88,000. The recognition of and
subsequent charges to the allowance for loan losses for impaired loans did not
materially impact the financial results of the Company.
(3) Earnings Per Share
Earnings per share of common stock for the quarter and nine months ended June
30, 1996 have been determined by dividing net income by 2,944,771 and
3,039,841, respectively, the weighted average number of shares of common stock
and common stock equivalents outstanding. Earnings per share information for
the three and nine months ended June 30, 1995 were determined by dividing net
income by 3,238,234 and 3,299,623, respectively, the weighted average number of
shares of common stock and common stock equivalents outstanding. Stock options
are regarded as common stock equivalents and are therefore considered in the
earnings per share calculations. Common stock equivalents are computed using
the treasury method.
(4) Commitments and Contingencies
At June 30, 1996, the Bank had outstanding commitments to originate mortgage
loans of $7.4 million, of which all were adjustable rate commitments.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The Bank'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 Bank 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 subsidiaries. The Bank's operating
expenses primarily consist of employee compensation, occupancy expenses,
federal deposit insurance premiums and other general and administrative
expenses. The Bank's 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.
Liquidity & Capital Resources
Liquidity management for the Bank is both a daily and long-term function of
management's strategy. The Company's primary sources of funds are deposits and
borrowings, amortization and prepayment of loan principal and mortgage-backed
securities, maturities of investment securities and operations. While maturing
investments and scheduled loan repayments are relatively predictable, deposit
flows and loan prepayments are greatly influenced by interest rates, floors and
caps on loan rates, general economic conditions and competition. The Bank
generally manages the pricing of its deposits to be competitive and increase
core deposit relationships, but has from time to time decided not to pay
deposit rates that are as high as those of its competitors and, when desirable,
to supplement deposits with less expensive alternative sources of funds.
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which may be varied at the direction of the
OTS depending upon economic conditions and deposit flows, is based upon a
percentage of deposits and short-term borrowings. The required ratio is
currently 5.0%. At June 30, 1996 the Bank's liquidity ratio was 5.14%. The
Company's primary sources of funds are deposits, proceeds from principal and
interest payments on loans, and FHLB advances.
The Bank's most liquid assets are cash and cash equivalents, which include
investments in highly liquid, short-term investments and interest-bearing
deposits. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. Cash and
cash equivalents totalled $6.5 million at March 31, 1996, an increase of $4.1
million from September 30, 1995. The increase is a combination of increased
deposits, advances, short-term investments, and loan amortization payments
offset by loan originations and investment purchases.
The Bank's cash flows are comprised of three classifications: cash flows from
operating activities, cash flows from investing activities, and cash flows from
financing activities. Cash flows from operating activities, consisting
primarily of interest and dividends received less interest paid on deposits,
were $3.6 million for the nine months ended June 30, 1996. Net cash used in
investing activities were $64.2 million for the nine months ended June 30,
1996. Investment activity for the nine months ended June 30, 1996 consists
primarily of disbursements for loan originations offset by principal collected
on loans. Investment securities activity was limited to maturities and re-
investment of those proceeds. Net cash provided by financing activities
amounted to $61.1 million for the nine months ended June 30, 1996. Proceeds
from FHLB advances to fund mortgage commitments contributed 78% of the total
cash provided by financing activity. Increased deposit activity provided $9.9
million of financing funds. The largest source of cash outflows for the nine
month period consists of continued stock repurchase programs.
At June 30, 1996 the Bank had outstanding loan commitments of $7.4 million.
The Bank anticipates that it will have sufficient funds or borrowing capacity
available to meet its current commitments. Certificates of deposit scheduled
to mature in one year or less from June 30, 1996 totalled $103.1 million.
Based on the Bank's experience to date, management projects 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.
The Bank's Tangible and Leverage Capital ratio at June 30, 1996 was 8.49%.
This exceeded the Tangible Capital requirement of 1.5% of adjusted assets and
the Core ("Leverage") Capital requirement of 3% of adjusted assets by $31.3
million and $24.6 million, respectively. The Bank's Risk-based Capital ratio
was 18.04% at June 30, 1996 which exceeds the Risk-based Capital requirement of
8% of Risk-weighted assets by $21.3 million.
Changes in Financial Condition
Total assets at June 30, 1996 were $456.9 million, compared to $393.7 million
at September 30, 1995. Net loans receivable increased 24.8% to $332.9 million
at June 30, 1996. A portion of the increase in loans resulted from the Bank's
efforts to diversify its lending program by making loans on income-producing
properties. The Bank originated $107.2 million in loans for the nine months
ended June 30, 1996, a 83.1% increase over prior year originations of $58.6
million.
Total deposits increased $9.9 million to $285.9 million at June 30, 1996
compared to the balance of $276.0 million at September 30, 1995. Increases in
deposits result primarily from an increase of $9.1 million in transaction
accounts. During the quarter, a significant number of higher-rate certificates
of deposit matured, with more than 75% retained at local market rates. The
outflow of the most rate-sensitive deposits and the downward re-pricing of
retained deposits will positively impact the bank's net interest margin in the
future.
Book value per share on June 30, 1996 was $16.99, compared with $16.41 at
September 30, 1995.
Asset Quality
The loan and asset portfolios, exclusive of the commercial equipment leases
described below, continue to exhibit very low delinquency statistics.
Specifically non-performing mortgages and consumer loans amounted to $631,000
or 0.14% of total assets, compared to $617,000 at September 30, 1995. Total
non-performing assets, including commercial leases, were $2.8 million or 0.61%
of total assets.
During the period from October 1994 thru January 1995 the bank purchased 454
full-payout commercial equipment leases located in various parts of the country
with original aggregate outstanding principal balances of $3.0 million. Since
that time normal lease payments have reduced the aggregate outstanding balance
to $2.0 million. These leases were all originated by, serviced by, and
financially guaranteed by Bennett Funding Group ("Bennett") of Syracuse, New
York. On March 29, 1996 it was reported that Bennett was the target of a civil
complaint filed by the Securities and Exchange Commission. On that same date
Bennett filed a Chapter 11 bankruptcy petition in the Northern District of New
York and halted payments on lease agreements.
This disruption of payment flows from our servicer, Bennett, has caused us to
classify all the leases as substandard, place them on non-accrual status,
categorize them as non-performing and impaired, and provide a loss reserve
equal to 5 percent of the aggregate outstanding balance on these leases
($101,600) based on the substandard classification. There can be no assurance
that losses will not be incurred in connection with the Bennett leases.
Stock Repurchase
On March 25, 1996, the company received regulatory approval from the OTS to
begin its fifth program. The fifth program allowed for the repurchase of up to
5% of the company's outstanding stock, or 154,242 shares of its common stock
over the twelve month period ending March 31, 1997. The fifth repurchase
program began on April 22, 1996. As of June 4, 1996, the Company completed the
program, purchasing 154,242 shares at an average price of $16.291. The
company has recently applied to the OTS for permission to begin its sixth stock
repurchase. The price, timing of purchases and actual number of shares
repurchased will be dependent on current market conditions. Such repurchases
are consistent with the Company's commitment to enhancing shareholder value.
Federal Deposit Insurance
The Bank's insurance premium assessment rate for fiscal 1995 was 23 basis
points and the premium paid for this period was $564,000. A significant
increase in SAIF insurance premiums or a significant special assessment to
recapitalize the SAIF would likely have an adverse effect on the operating
expenses and results of operations of the Bank. Based on the Bank's deposit
insurance assessment base as of September 30, 1995, an 85 basis to 90 basis
point fee to recapitalize the SAIF would result in a $1.4 to $1.5 million
charge on an after-tax basis.
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.
Three Months Ended June 30, Nine Months Ended
1996 1995 June 30,1996
------------------------ ----------------------- ----------------------
Inter- Average Inter- Average Inter- Average
Average est Yield Average est Yield Average est Yield
(dollars in thousands)
------------------------ ----------------------- ----------------------
Interest-earning assets:
Mortgage loans, net $301,303 5,800 7.70% 231,862 4,620 7.97% 276,963 16,356 7.87%
Other loans, net (4) 15,029 276 7.35% 14,518 306 8.43% 14,977 903 8.04%
Mortgage-backed
securities 23,732 415 6.99% 33,859 609 7.19% 24,955 1,310 7.00%
Interest-bearing
deposits 981 13 5.30% 1,129 15 5.31% 1,309 53 5.40%
Investment securities,
mutual funds, federal
funds sold and FHLB
stock 88,793 1,549 6.98% 68,544 1,006 5.87% 84,564 4,331 6.83%
------- ----- ----- ------ ----- ----- ------- ----- -----
Total interest-earning
assets 429,838 8,053 7.49% 349,912 6,556 7.49% 402,768 22,953 7.60%
Non-interest earning
assets 12,164 13,149 12,937
------- ------- -------
Total assets $442,002 363,061 415,705
======= ======= =======
Interest-bearing liabilities:
Deposits:
NOW accounts 14,798 79 2.14% 14,112 89 2.52% 15,224 250 2.19%
Regular savings account 82,805 651 3.14% 86,857 643 2.96% 81,523 1,891 3.09%
Money market accounts 20,805 213 4.10% 9,721 99 4.07% 19,637 629 4.27%
Certificate accounts 172,029 2,528 5.88% 147,655 2,164 5.86% 170,198 7,695 6.03%
------- ----- ----- ------ --- ----- ------- ----- -----
Total deposits 290,437 3,471 4.78% 258,345 2,995 4.64% 286,582 10,465 4.87%
Borrowed funds 85,470 1,178 5.51% 39,009 618 6.34% 61,516 2,609 5.65%
------- ----- ----- ------ --- ----- ------- ----- -----
Total interest-bearing
liabilities 375,907 4,649 4.95% 297,354 3,613 4.86% 348,098 13,074 5.01%
Non-interest bearing
deposits 5,519 3,917 5,668
Other liabilities 8,596 6,903 8,844
------- ------ -------
Total liabilities 390,022 308,174 362,610
Stockholders' equity 51,998 54,887 53,095
------- ------ -------
Total liabilities and
stockholders' equity $442,020 363,061 415,705
======= ======= =======
Net interest
income/interest rate
spread (1) 3,404 2.55% 2,943 2.63% 9,879 2.59%
Net earning
assets/net interest
margin (2) $53,931 3.17% 52,558 3.36% 54,670 3.27%
Ratio of interest-
earning assets to
interest-bearing
liabilities 1.14x 1.18x 1.16x
(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
annualized for presentation purposes.
(4) The consumer loan receivable portfolio includes $2.0 million of Bennett
Funding Group commercial leases for which there has been no interest
recorded since February 1996.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
General. Net income for the three months ended June 30, 1996 was $835,000, an
increase of $24,000 from the net income of $811,000 for the three months ended
June 30, 1995. Prior year earnings for the three month period include income
from the sale of mortgage-backed securities available for sale totaling
$271,000, an event which was not repeated in 1996.
Interest Income. Interest income increased $1.50 million, or 22.8% to $8.05
million in the 1996 period from $6.56 million for the 1995 period. The
increase in interest income is the result of a steady overall average yield
earned on a 22.8% larger interest-earning asset base. Loan yield averages
remained stable, 7.41% in 1995 compared to 7.68% for the 1996 quarter. Due to
greater originations and lower pay-offs, the mortgage loan portfolio increased
29.9% to $301.30 million. The decreased average balance of mortgage-backed
securities is a result of a sale in 1995, coupled with continued monthly
repayments. The average investment portfolio increased 29.5% or $20.25 million
to $88.79 million. The increased investments, earning 111 basis points more
than the same quarter a year ago, also contributed to increased interest
income.
Interest Expense. Increasing deposit rates combined with 12.4% larger average
deposit base caused interest expense on savings to increase by $476,000, or
15.9% for the three months ended June 30, 1996. The deposit growth came
largely from promotions done in conjunction with offices opened in late 1995.
The cost of borrowed funds increased $560,000 from the previous year's quarter
because of increased utilization of FHLB advances. The cost of these advances
has decreased 83 basis points, thereby partially mitigating the effect of the
increase in actual FHLB advance balances.
Provision for Loan Losses and Credit Enhancement Loss. The Company recorded a
$10,000 provision for loan losses in the third quarter as compared to an
$90,000 provision for loan losses in the 1995 period. Management believes that
the allowance is adequate to provide for potential foreseeable losses given the
increased loan volumes. As of June 30, 1996, the cumulative allowance for loan
losses was $488,000, or 18.3% of non-performing loans. The ratio of the
allowance for loan losses to net loans receivable stands at 0.15%. See
discussion regarding non-performing assets in the "Asset Quality" section of
the Management's Discussion and Analysis of Financial Condition.
During the quarter the Company also recaptured its remaining $10,000 credit
enhancement loss provision on the Century Point credit enhancement. The
related bonds were paid in full on May 1, 1996. At that time the Bank was
released from all obligations pertaining to the enhancement.
Non-Interest Income. Non-interest income, excluding gain on sale of assets
available for sale declined slightly. Insurance and annuity commissions
decreased $59,000 due to slower sales activity. During the prior year June
quarter the Company recorded a $271,000 non-recurring gain on sale of mortgage-
backed securities available for sale.
Non-Interest Expense. Non-interest expense for 1996 and 1995 include a
recapture of the credit enhancement losses. During 1995, the Company reduced
its provision for loss on the Century Point credit enhancement by $90,000, and
during 1996, the balance of $10,000 was recaptured. As the Bank continues to
grow its households and branches, the corresponding administrative expenses
have also risen, but not in proportion to asset growth. Operating expenses to
average assets has declined from 2.24% for the three months ended June 30, 1995
to 2.03% for 1996. Federal deposit insurance premiums have increased $30,000
or 21.4% due to the increase in the Bank's deposit base.
Income Taxes. Income taxes decreased $12,000 for the three months ended June
30, 1996 to $530,000 compared to $542,000 for the prior year due to slight
changes in the effective tax rate.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
General. Net income for the nine months ended June 30, 1996 was $2.35 million,
a decrease of $51,000 from the net income of $2.40 million for the nine months
ended June 30, 1995. The gains on sale of assets available for sale recorded
in fiscal 1995 were offset in the current year by a $501,000 increase in net
interest income before provision.
Interest Income. Interest income increased $3.89 million, or 20.4%, to $22.95
million in the 1996 period from $19.07 million for the 1995 period. The
increase is attributable primarily to increased interest income from loans
receivable. Improved market conditions and successful originations account for
the $55.3 million increase in average loans receivable. The increased volume,
offset by the 13 basis point decrease in weighted average loan yields, accounts
for the 22.0% increase in loan receivable interest income. Also contributing
to the increase was the $1.45 million increase in income generated from the
investment portfolio. The average volume of investments increased $11.90
million, while the yields increased 124 basis point increase over the prior
year, contributing to the greater than 50% growth in interest income from
investment securities.
Interest Expense. Interest expense increased $2.75 million, or 35.6%, to
$10.47 million for the nine months ended June 30, 1996. Increased deposit
rates and a $41.17 million increase in the average deposit balance account for
the increase in deposit interest cost. Interest expense on borrowed funds
reflects the 31 basis point increase in the weighted average rate from June 30,
1996 to June 30, 1995. The current quarter average balance of $51.52 million
in borrowed funds increased 39.2% from the one year prior average balance of
$44.21 million.
Provision for Loan Losses. The Company recorded an $90,000 provision for loan
losses in the first nine months of fiscal 1996, as compared to a $192,000
provision in its comparable period one year ago. The provision for the loan
losses reflect management's on-going evaluation of losses on loans and the
adequacy of the allowance for loan losses based on all pertinent
considerations, including current market conditions. See discussion regarding
non-performing assets in the "Asset Quality" section of the Management's
Discussion and Analysis of Financial Condition.
Non-Interest Income. Non-interest income generated from recurring transactions
remained stable in the nine month periods ending June 30, 1996 and 1995. The
1995 gain on sale, primarily related to the sale of mortgage-backed securities,
had no counterpart in the current period.
Non-Interest Expense. Salaries and employee benefits, federal deposit
insurance premiums, and other general and administrative expenses increased
over the prior year due to increased deposit growth, the addition of two
branches in 1995, increased loan originations, and the corresponding need to
efficiently process the increased volume. Non-interest expense for 1996
totalled $6.67 million, an increase of $472,000 or 7.6%, from $6.20 million for
the nine months ended June 30, 1995.
Income Taxes. Income taxes decreased $108,000 for the nine months ended June
30, 1996 to $1.49 million compared to $1.60 million for the prior year due to
decreased income.
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 with the exception of the
collection efforts underway with respect to the Bennett leases
described under ASSET QUALITY in PART I.
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
3.1 Restated Certificate of Incorporation of Fidelity
Bancorp Inc. *
3.2 Bylaws of Fidelity Bancorp Inc. *
4.0 Stock Certificate of Fidelity Bancorp Inc. *
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
_______________________________
* Incorporated herein by reference from the exhibits to Form S-1
Registration Statement as amended, originally filed on October 28, 1993,
Registration Statement number 33-68670.
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: July 18, 1996 /s/ RAYMOND S. STOLARCZYK
-----------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: July 18, 1996 /s/ JAMES R. KINNEY
-----------------------------
James R. Kinney
Sr. V. P. and Chief Financial Officer