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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission file number 0-22826
Fidelity Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3915246
(State of Incorporation) (I.R.S. Employer Identification No.)
5455 W. Belmont, Chicago, Illinois, 60641
(Address of principal executive offices)
(773) 736-4414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of common
stock, was 2,814,809 shares of common stock, par value $.01, outstanding as of
January 16, 1998.
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FIDELITY BANCORP, INC.
FORM 10-Q
INDEX
Part I. FINANCIAL INFORMATION PAGE(S)
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of December 31, 1997 (unaudited) and September 30, 1997 1
Consolidated Statements of Earnings for the three
months ended December 31, 1997 and 1996 (unaudited) 2
Consolidated Statements of Changes in Stockholders'
Equity for the three months ended December 31, 1997
and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the three
months Ended December 31, 1997 and 1996 (unaudited) 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page 11
1
FIDELITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
ASSETS December 31, September 30,
1997 1997
(unaudited)
Cash and due from banks $ 1,985 436
Interest-bearing deposits 1,142 2,314
Federal funds sold 100 100
Investment in dollar-denominated mutual funds, at
fair value - 3,154
FHLB of Chicago stock 5,700 5,700
Mortgage-backed securities held to maturity, at
amortized cost (approximate fair value of $16,051
at December 31, 1997 and $17,124 at September 30, 1997) 15,814 16,875
Investment securities available for sale, at fair value 62,860 70,297
Loans receivable, net of allowance for loan losses of $503
at December 31, 1997 and $460 at September 30, 1997 392,999 388,262
Accrued interest receivable 2,976 3,445
Real estate in foreclosure 1,068 215
Premises and equipment 3,703 3,593
Deposit base intangible 96 107
Other assets 1,230 1,136
------- -------
$ 489,673 495,634
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits 329,920 323,443
Borrowed funds 97,300 113,400
Advance payments by borrowers for taxes and insurance 4,646 2,197
Other liabilities 6,538 6,977
------- -------
Total liabilities 438,404 446,017
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized 2,500,000
shares; none outstanding - -
Common stock, $.01 par value; authorized 8,000,000 shares;
issued 3,782,350 shares; 2,813,709 and 2,794,978 shares
outstanding at December 31, 1997 and September 30, 1997 38 38
Additional paid-in capital 37,590 37,494
Retained earnings, substantially restricted 28,691 27,939
Treasury stock, at cost (968,641 and 987,372 shares at
December 31, 1997 and September 30, 1997, respectively) (13,592) (13,855)
Common stock acquired by Employee Stock Ownership Plan (1,092) (1,662)
Common stock acquired by Bank Recognition and Retention Plans (403) (471)
Unrealized loss on investment securities available for sale,
less applicable taxes 37 134
------- -------
TOTAL STOCKHOLDERS' EQUITY 51,269 49,617
Commitments and contingencies
$ 489,673 495,634
======= =======
See accompanying notes to unaudited consolidated financial statements.
2
FIDELITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
Three months ended December 31, 1997 and 1996
1997 1996
(unaudited)
Interest Income:
Loans receivable $ 7,476 6,966
Investment securities 1,259 1,505
Mortgage-backed securities 289 376
Interest earning deposits 28 10
Federal funds sold 10 3
Investment in mutual funds 17 42
------ ------
9,079 8,902
Interest Expense:
Deposits 4,110 3,874
Borrowed funds 1,458 1,472
------ ------
5,568 5,346
------ ------
Net interest income before provision for loan losses 3,511 3,556
Provision for loan losses 46 39
------ ------
Net interest income after provision for loan losses 3,465 3,517
Non-Interest Income:
Fees and commissions 90 112
Insurance and annuity commissions 180 101
Other 14 12
------ ------
284 225
Non-Interest Expense:
General and administrative expenses:
Salaries and employee benefits 1,341 1,279
Office occupancy and equipment 291 296
Data processing 127 114
Advertising and promotions 112 165
Federal deposit insurance premiums 54 158
Other 284 364
------ ------
Total general and administrative expenses 2,209 2,376
Amortization of intangible 11 14
Recovery of loss on impairment of investment
securities available for sale (22) -
------ ------
2,198 2,390
Income before income taxes 1,551 1,352
Income tax expense 574 518
------ ------
Net income $ 977 834
====== ======
Basic earnings per share $ 0.36 0.31
Diluted earnings per share $ 0.34 0.30
====== ======
See accompanying notes to unaudited consolidated financial statements.
3
FIDELITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
Three months ended December 31, 1997 and 1996
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, 1996 38 37,079 27,851 (12,619) (2,078) (708) (735) 48,828
Net income - - 834 - - - - 834
Purchase of treasury stock
(82,030 shares) - - - (1,389) - - - (1,389)
Cash dividends ($.06 per
share) - - (168) - - - - (168)
Amortization of award of
BRRP's stock - - - - - 64 - 64
Cost of ESOP shares released - - - - 416 - - 416
Exercise of stock options
and reissuance of treasury
shares (2,500 shares) - (10) - 35 - - - 25
Tax benefit related to
stock options exercised - 3 - - - - - 3
Market adjustment for
committed ESOP shares - 37 - - - - - 37
Change in unrealized loss
on investment securities
available for sale - - - - - - 586 586
--- ------ ------- ------- ------ ----- ------- -------
Balance at
December 31, 1996 $ 38 37,109 28,517 (13,973) (1,662) (644) (149) $ 49,236
=== ====== ======= ====== ====== ====== ==== =======
Balance at
September 30, 1997 38 37,494 27,939 (13,855) (1,662) (471) 134 49,617
Net income - - 977 - - - - 977
Cash dividends ($.08 per
share) - - (225) - - - - (225)
Amortization of award of
BRRP's stock - - - - - 68 - 68
Cost of ESOP shares released - - - - 570 - - 570
Exercise of stock options
and reissuance of treasury
shares (18,731 shares) - (76) - 263 - - - 187
Tax benefit related to
stock options exercised - 29 - - - - - 29
Market adjustment for
committed ESOP shares - 143 - - - - - 143
Change in unrealized gain
(loss) on investment
securities available
for sale - - - - - - (97) (97)
--- ------ ------- ------- ------ ----- ------- -------
Balance at
December 31, 1997 $ 38 37,590 28,691 (13,592) (1,092) (403) 37 $ 51,269
=== ====== ======= ======= ====== ===== ======= =======
See accompanying notes to unaudited consolidated financial statements.
4
FIDELITY BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Three months ended December 31, 1997 1996
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 977 834
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 89 89
Provision for loan losses 46 39
Net amortization and accretion of premiums and discounts 1 2
Amortization of cost of stock benefit plans 68 64
Principal payment on ESOP loan 570 416
Market adjustment for committed ESOP shares 143 37
Deferred loan costs (fees), net of amortization 66 (169)
Amortization of deposit base intangible 11 14
Sale of real estate owned 137 -
Decrease in accrued interest receivable 469 167
Decrease (increase)in other assets (97) 169
Decrease in current taxes and other liabilities (353) (1,515)
-------- ------
Net cash provided by operating activities 2,127 147
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 16,000 -
Purchase of investment securities (9,990) -
Recovery of loss on impairment of investment
securities available for sale (22) -
Loans originated for investment (28,826) (22,939)
Purchase of premises and equipment (199) -
Principal repayments collected on loans receivable 22,990 11,827
Principal repayments collected on investment securities 1,297 1,543
Principal repayments collected on mortgage-backed
securities 1,058 679
-------- ------
Net cash used in investing activities 2,308 (8,890)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 6,477 24,507
Decrease in FHLB advances (16,100) (17,700)
Net increase in advance payments by borrowers
for taxes and insurance 2,449 2,178
Purchase of treasury stock - (1,389)
Payment of common stock dividends (225) (168)
Proceeds from exercise of stock options 187 25
-------- ------
Net cash provided by financing activities (7,212) 7,453
-------- ------
Net change in cash and cash equivalents (2,777) (1,290)
Cash and cash equivalents at beginning of period 6,004 4,273
-------- ------
Cash and cash equivalents at end of period $ 3,227 2,983
======== ======
CASH PAID DURING THE PERIOD FOR:
Interest $ 5,580 5,036
Income taxes 320 200
NON-CASH INVESTING ACTIVITIES-
Loans transferred to real estate in foreclosure $ 990 -
======== ======
See accompanying notes to unaudited consolidated financial statements.
5
FIDELITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion
of management, all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation have been included.
The results of operations and other data for the three months ended December
31, 1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ended September 30, 1998.
The unaudited consolidated financial statements include the accounts of
Fidelity Bancorp, Inc. (the Company) and its wholly-owned subsidiary, Fidelity
Federal Savings Bank and subsidiaries (the Bank). All intercompany accounts
and transactions have been eliminated in consolidation.
(2) Earnings Per Share
In February 1997, the FASB issued Statement 128, "Earnings Per Share."
Statement 128 supersedes APB Opinion No. 15, "Earnings Per Share," and
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. It replaces the presentations of primary EPS with the
presentation of basic EPS, and replaces fully diluted EPS with diluted EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures, and requires
a reconciliation of the numerator and dominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Statement 128 is
effective for financial statements for both interim and annual periods ending
after December 15, 1997.
Earnings per share of common stock for the quarter ended December 31, 1997 has
been calculated according to the guidelines of Statement 128 and earnings per
share of common stock for the quarter ended December 31, 1996 has been restated
to conform with Statement 128.
Basic earnings per share are computed by dividing net income for the period by
the weighted average number of shares of common stock outstanding for the
period which were, 2,683,282 and 2,640,513, for the quarters ended December 31,
1997 and 1996, respectively. Diluted earnings per share of common stock for
the quarter ended December 31, 1997 has been determined by dividing net income
by 2,884,253, the weighted average number of shares of common stock and common
stock equivalents outstanding. Diluted earnings per share of common stock for
the quarter ended December 31, 1996 has been determined by dividing net income
by 2,807,947, the weighted average number of shares of common stock and common
stock equivalents outstanding. Stock options are the only common stock
equivalents and are therefore considered in the diluted earnings per share
calculations. Common stock equivalents are computed using the treasury stock
method.
(3) Commitments and Contingencies
6
At December 31, 1997, the Company had outstanding commitments to originate
loans of $3.7 million, of which $1.4 million were fixed rate, with rates
ranging from 7.00% to 8.125%, and $2.4 million were adjustable rate
commitments.
(4) Pending Accounting Changes
Statement 130, "Reporting Comprehensive Income," established standards for
reporting and presentation of comprehensive income and its components in a full
set of general-purpose financial statement. Statement 130 is effective for
both interim and annual periods beginning after December 15, 1997, and is not
expected to have a material impact on the consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
GENERAL
The Company's results of operations are dependent on net interest income which
is the difference between interest earned on its loan and investment
portfolios, and its cost of funds, consisting of interest paid on deposits and
borrowed money. The Company also generates non-interest income such as
transactional fees, loan servicing fees, and fees and commissions from the
sales of insurance products and securities through its subsidiary. Operating
expenses primarily consist of employee compensation, occupancy expenses,
federal deposit insurance premiums and other general and administrative
expenses. The results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities.
The Company reported earnings for the first quarter ended December 31, 1997 of
$977,000 compared with $834,000 for the same quarter a year ago, an increase of
17.1%. Earnings per diluted share for the quarter were $0.34 per share, up
$0.04 per share, or 13.3% from the first quarter of fiscal 1997.
On January 20, 1998, the Company also announced that its board of directors
declared a quarterly dividend of $0.10 per share, payable on February 13, 1998
to shareholders of record as of January 30, 1998.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such forward-
looking statements to be covered by the safe harbor provisions for forward-
looking statements contained in the Private Securities Reform Act of 1995, and
is including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
7
uncertain. Factors which could have a material adverse affect on the
operations and future prospects of the Company and the subsidiaries include,
but are not limited to, changes in: interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal
Reserve Board, the quality or composition of the loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial
services in the Company's market area and accounting principles, policies and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the Securities and
Exchange Commission.
YEAR 2000 COMPLIANCE
The Company utilizes and is dependent upon data processing systems and software
to conduct its business. The data processing systems and software include
those developed and maintained by the Company's third-party data processing
vendor and purchased software which is run on in-house computer networks.
During fiscal 1997 the Company initiated a review and assessment of all
hardware and software to confirm that it will function properly in the year
2000. To date, those vendors which have been contacted have indicated that
their hardware or software is or will be Year 2000 compliant in time frames
that meet regulatory requirements. The costs associated with the compliance
efforts are not expected to have a significant impact on the Company's ongoing
results of operations.
LIQUIDITY & CAPITAL RESOURCES
Liquidity management for the Bank is both a daily and long-term function of
management's strategy. The Company's primary sources of funds are deposits and
borrowings, amortization and prepayment of loan principal and mortgage-backed
securities, maturities of investment securities and operations. While maturing
investments and scheduled loan repayments are relatively predictable, deposit
flows and loan prepayments are greatly influenced by interest rates, floors and
caps on loan rates, general economic conditions and competition. The Bank
generally manages the pricing of its deposits to be competitive and increase
core deposit relationships, but has from time to time decided not to pay
deposit rates that are as high as those of its competitors and, when necessary,
to supplement deposits with FHLB advances.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. During a portion of the first quarter, OTS regulations required the
Bank to maintain, for each calendar month, an average daily balance of liquid
assets (including cash, certain time deposits, bankers acceptances, and
specified United States Government, state or federal agency obligations) equal
to at least 5% of the average daily balance of its liquidity base , defined as
net withdrawable accounts plus short-term borrowings (i.e., those repayable in
12 months or less) during the preceding calendar month. During a portion of
the first quarter, OTS regulations also required the Bank to maintain, for each
calendar month, an average daily balance of short-term liquid assets (generally
liquid assets having maturities of 12 months or less) equal to at least 1% of
8
the average daily balance of its net withdrawable accounts plus short-term
borrowings during the preceding calendar month. Penalties may be imposed for
failure to meet liquidity ratio requirements.
Pursuant to amendments adopted by the OTS effective November 24, 1997, the
minimum liquidity requirement has been reduced to 4% of the liquidity base, the
short-term liquidity requirement has been eliminated, liquidity requirements
will be determined quarterly, rather than monthly, and savings associations
have the option of calculating their liquidity requirements either on the basis
of (i) their liquidity base at the end of the preceding quarter or (ii) the
average daily balance of their liquidity base during the preceding quarter.
The amended regulations also provide, however, that savings associations must
maintain liquidity in excess of the minimum requirement if necessary to insure
safe and sound operations. At December 31, 1997, the Bank was in compliance
with OTS liquidity requirements, with a liquidity ratio of 5.55%.
The Company's cash flows are comprised of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Cash flows provided by operating activities,
consisting primarily of interest and dividends received less interest paid on
deposits, were $2.0 million for the quarter ended December 31, 1997. During
the quarter, investing activities provided the Bank $2.5 million. Maturing
investment securities and principal repayments received from loans, investment
securities and mortgage-backed securities more than covered the financing of
loan originations and investment purchases. Net cash used in financing
activities amounted to $7.2 million for the quarter ended December 31, 1997.
Financing activities used to repay FHLB advances of $16.1 million were only
partially offset by financing resources received from a net increase in
deposits and advance payments for borrowers for taxes and insurance.
At December 31, 1997, the Bank had outstanding loan commitments of $3.7
million. Management anticipates that it will have sufficient funds available
to meet its current loan commitments. Certificates of deposit scheduled to
mature in one year or less from December 31, 1997 totalled $164.2 million.
Management believes that a significant portion of such deposits will remain
with the Bank.
The Bank's Tangible and Core (leverage) Capital of $44.0 million at December
31, 1997 was 9.0% of Adjusted Tangible Assets. This exceeded the Tangible
Capital and Core Capital requirements of 1.5% and 3% by $36.6 and $29.3 million
respectively. The Bank's Risk-based Capital of $44.5 million was 19.1% of
Total Risk-Weighted Assets at December 31, 1997 which exceeded the Risk-based
Capital requirement of 8% by $25.9 million.
CHANGES IN FINANCIAL CONDITION
Total assets at December 31, 1997 decreased $6.0 million to $489.7 million from
$495.6 at September 30, 1997. Net loans receivable totalled $393.0, an increase
of $4.7 million, or an annualized growth of 4.8%, over the balance at September
30, 1997. Loan originations in the first quarter amounted to $28.8 million.
Total deposits increased $6.5 million to $329.9 million at December 31, 1997
compared to $323.4 million at September 30, 1997. Growth in deposits came
primarily from transaction accounts, while some higher-cost certificates of
deposit were allowed to roll off. Through maturing investments and loan
repayments, the Bank was able to fund current loan origination obligations in
addition to repaying FHLB advances $16.1 million. FHLB advances decreased
9
14.2% from $113.4 million at September 30, 1997 to $97.3 million at December
31, 1997.
Book value per share on December 31, 1997 increased to $18.22, a $0.47 increase
over $17.75 at September 30, 1997.
ASSET QUALITY
As of December 31, 1997, the Company had non-performing assets of $1.7 million.
The Bank's non-performing assets at December 31, 1997 included its investment
in commercial leases of $276,000, one real estate owned property (a single-
family residence), four properties in real estate in judgement as well as non-
performing loans. Classified loans and real estate in judgement of $1.4
million were categorized as substandard, consisting of four residential
mortgage loans, two multi-family properties, and one commercial loan. In
addition to the mortgage and consumer portfolio, the Company classified its
investment in commercial leases as substandard. There were no assets
classified as doubtful.
Management has considered the composition of its non-performing assets in its
loan allowance valuation and does not anticipate any material losses on the
future sale of these properties. The decrease of $320,000 in non-performing
assets from September 30, 1997 to December 31, 1997 resulted from management's
ongoing monitoring and follow-up procedures of delinquent customers.
Management does not expect any material losses from the non-performing loans.
10
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or labilities,
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 December 31,
At December 31, 1997 1997 1996
Average Average
Yield/ Average Int- Yield/ Average Int- Yield/
Balance Cost Balance erest Cost Balance erest Cost
(dollars in thousands)
Interest-earning assets:
Loans, net $ 392,999 7.78% 388,765 7,476 7.69% 359,777 6,966 7.74%
Mortgage-backed securities 15,814 7.20% 16,402 289 7.05% 21,359 376 7.04%
Interest-bearing deposits 1,142 5.76% 1,860 28 6.02% 778 10 5.14%
Investment securities,
mutual funds, and
federal funds sold 68,660 6.93% 73,989 1,286 6.95% 86,860 1,550 7.14%
-------- ----- ------- ----- ---- ------- ----- -----
Total interest-earning assets 478,615 7.63% 481,016 9,079 7.55% 468,774 8,902 7.60%
Non-interest earning assets 11,058 12,133 11,936
-------- ------- -------
Total assets $ 489,673 493,149 480,710
======== ======= =======
Interest-bearing liabilities:
Deposits:
Passbook & NOW accounts 118,297 3.68% 115,716 1,083 3.74% 83,310 609 2.92%
Money market accounts 17,983 4.22% 17,483 189 4.32% 18,769 196 4.18%
Certificate accounts 187,737 5.93% 190,901 2,838 5.95% 211,693 3,069 5.80%
-------- ----- ------- ----- ---- ------- ----- -----
Total deposits 324,017 5.01% 324,100 4,110 5.07% 313,772 3,874 4.94%
Borrowed funds 97,300 5.62% 101,904 1,458 5.72% 103,645 1,472 5.68%
-------- ----- ------- ----- ---- ------- ----- -----
Total interest-bearing
liabilities 421,317 5.15% 426,004 5,568 5.23% 417,417 5,346 5.12%
Non-interest bearing deposits 5,903 5,171 4,530
Other liabilities 11,184 10,869 9,462
-------- ------- -------
Total liabilities 438,404 442,044 431,409
Stockholders' equity 51,269 51,105 49,301
-------- ------- -------
Total liabilities and
stockholders' equity $ 489,673 493,149 480,710
Net interest income/interest
rate spread (1) 2.48% 3,511 2.32% 3,556 2.48%
Net earning assets/net
interest margin (2) $ 57,298 55,012 2.92% 51,357 3.03%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.14x 1.13x 1.12x
(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.
11
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
AND DECEMBER 31, 1996
GENERAL. Net income for the three months ended December 31, 1997 was $977,000,
compared with $834,000 in the first quarter of last year. The increase of
17.1% is a result of higher average loans outstanding resulting in higher
interest income and offset by an increase in interest expense, as well an
increase in fee income and a decrease in general and administrative expenses.
INTEREST INCOME. Total interest income remained fairly stable at $9.1 million
for the fiscal 1998 first quarter compared to $8.9 million in fiscal 1997.
Interest on loans receivable increased 7.3% to $7.5 million from $7.0 million
the prior year. The average balance of loans receivable increased 8.1% to
$388.8 million compared to the average $359.8 million for the first quarter one
year ago. The yield on loans, including non-performing commercial leases,
decreased 5 basis points.
INTEREST EXPENSE. Interest expense also remained relatively flat from quarter
to quarter. For the quarter ended December 3, 1997, interest expense amounted
to $5.6 million, compared to $5.3 million the previous year. As the result of
higher average deposits outstanding, $324.1 million in 1998 compared to $313.8
million in 1997, combined with higher average costs, 5.07% for the quarter
ended December 31, 1997 versus 4.94% in fiscal 1997, interest expense for the
quarter ended December 31, 1997 was $4.1 million, compared with $3.9 million
the previous year. During the first quarter of fiscal 1998, the Bank reduced
its FHLB of Chicago advances by a net $16.1 million, while the average advances
outstanding decreased $1.7 million to $101.9 million. The average cost to the
Bank of the outstanding advances increased 4 basis points. The Bank was able
to maintain a steady average borrowing rate due to the utilization of FHLB
Community Investment Program advances and other term advances.
PROVISION FOR LOAN LOSSES. The Company recorded a $46,000 provision for loan
losses in the first quarter of 1998, as compared to a $39,000 provision in its
comparable period of fiscal 1997. The provision for loan losses reflects
management's on-going evaluation of losses on loans and the adequacy of the
allowance for loan losses based on all pertinent considerations, including
current market conditions.
NON-INTEREST INCOME. Fee income from sales of annuities and insurance grew in
the first quarter, rising to $180,000 as of December 31, 1997, compared with
$101,000 in 1996, a 78.2% increase. Income generated from sales of these
products helped increase non-interest income 26.2% to $284,000 at December 31,
1997, compared with $225,000 in 1996.
NON-INTEREST EXPENSE. Non-interest expense for the first quarter 1998
decreased $192,000 to $2.2 million from $2.4 million the decline can be
attributed to decreases in advertising expenses, federal deposit insurance
premiums and other expenses. As a result, the company's ratio of operating
expenses to average assets reflected continued improvement in the first
quarter, falling to 1.78 percent, from 1.99 percent the previous year.
INCOME TAXES. Income taxes increased $56,000 for the three months ended
December 31, 1997 to $574,000 versus $518,000 for the prior year due to a 14.7%
increase in pre-tax income.
12
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company and the Bank are not engaged in any legal proceedings of a
material nature at the present time.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
13
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: January 23, 1998 /s/ RAYMOND S. STOLARCZYK
---------------- --------------------------
Raymond S. Stolarczyk
Chairman and Chief Executive Officer
Dated: January 23, 1998 /s/ JAMES R. KINNEY
---------------- --------------------------
James R. Kinney
Sr. V. P. and Chief Financial Officer