Filed by MAF Bancorp, Inc. pursuant to
Rule 425 under the Securities Act of 1933.
Subject Company: Fidelity Bancorp, Inc.
(Commission File No. 1-12753)
MAF BANCORP, INC. ISSUED THE FOLLOWING NEWS RELEASE ON APRIL 22, 2003:
FOR IMMEDIATE RELEASE
- ---------------------
For: MAF Bancorp, Inc. Contacts: Jerry A. Weberling, Chief
55th Street & Holmes Avenue Financial Officer
Clarendon Hills, IL 60514 Michael J. Janssen, Senior
Vice President
www.mafbancorp.com (630) 325-7300
MAF BANCORP REPORTS FIRST QUARTER EARNINGS OF $.81 PER DILUTED SHARE
Clarendon Hills, Illinois, April 22, 2003 - MAF Bancorp, Inc. (MAFB) announced
today that earnings per share for the first quarter ended March 31, 2003 totaled
$.81 per diluted share, up 15.7% from the $.70 per diluted share reported for
the first quarter of 2002.
The first quarter earnings per share improvement compared to last year resulted
primarily from substantially higher net interest income and gains from the sale
of loans and mortgage-backed securities. These increases were partially offset
by lower income from real estate development operations, higher amortization
expense of mortgage servicing rights, writedowns of two investment securities
and higher non-interest expenses.
FIRST QUARTER HIGHLIGHTS
o Diluted EPS of $.81, up 15.7% from last year's first quarter;
o Net income of $19.3 million, up 15.9% from a year ago;
o Net interest margin of 2.94%, 21 basis points ahead of a year
ago;
o Return on average equity of 15.10% for the quarter;
o Return on average assets of 1.30% for the current period;
o Strong loan origination volume of $1.1 billion;
o Loan sale volume of $478 million, generating gains of $7.5
million;
o Completion of the purchase of a branch office on Chicago's
west side.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the current quarter totaled $41.1 million compared to
$36.0 million for last year's first quarter, an increase of 14.2%. The net
interest margin was 2.94% in the current period, 13 basis points lower than the
3.07% reported for the quarter ended December 31, 2002, but considerably higher
than last year's first quarter net interest margin of 2.73%. The margin decline
during the past three months was primarily due to a decline in the Company's
average yield on interest-earning assets, which outpaced the drop in funding
costs during the quarter.
The average yield on interest-earning assets fell to 5.53% for the quarter ended
March 31, 2003 compared to 5.93% reported for the quarter ended December 31,
2002, primarily due to the lower interest rate environment. Low mortgage
interest rates continued to stimulate loan refinancing activity, with the
Company's yield on loans receivable declining to 5.95%, compared to 6.29% three
months ago. The 50 basis point easing by the Federal Reserve in December 2002
also negatively impacted the yield on loans receivable due to the Bank's growing
portfolio of floating-rate equity lines of credit and the yield on the Bank's
higher balances of short-term liquidity investments. Lower returns on investment
and mortgage-backed securities, a function of the general interest rate
environment, and a decrease in the dividend rate on Federal Home Loan Bank stock
also contributed to lower overall asset yields.
The average cost of interest-bearing liabilities declined by 28 basis points to
2.88% in the current quarter, compared to 3.16% for the quarter ended December
31, 2002. The decline in the cost of interest-bearing liabilities during the
past three months was largely the result of continued lower deposit liability
costs. The cost of deposits declined to 1.95% for the quarter compared to 2.25%
in the last quarter of 2002. The lower deposit costs were principally due to the
downward repricing of core deposits and certificates of deposit and the success
the Company has had in gathering and retaining low-cost core deposits.
Average interest-earning assets in the current quarter remained stable during
the past three months, totaling $5.59 billion for the current quarter, compared
to $5.60 billion reported for the quarter ended December 31, 2002. Average loans
receivable balances declined $116 million during the quarter while the average
balances of securities and liquid investments increased by approximately the
same amount.
LENDING PRODUCTION
Loan origination volume totaled $1.06 billion in the current quarter, more than
55% ahead of the $678.0 million reported for the quarter ended March 31, 2002
and only slightly behind the loan volume of $1.19 billion reported for the
quarter ended December 31, 2002. Historically low mortgage interest rates
continued to generate large refinancing volumes. Long-term fixed-rate loans
remained attractive to consumers and loan sale activity in the quarter was
strong, as the Company generally sells fixed-rate loans into the secondary
market. The Company continued to have success in marketing its home equity loan
products, with balances increasing to $447.4 million at March 31, 2003 compared
to $324.9 million at March 31, 2002.
NON-INTEREST INCOME
Non-interest income increased to $16.0 million in the current quarter, compared
to $13.7 million reported for the quarter ended March 31, 2002. Substantially
higher gains on sales of loans and mortgage-backed securities were partially
offset by higher amortization expense of mortgage servicing rights, lower income
from real estate development operations and writedowns on two investment
securities. Higher deposit account service fees and brokerage fee revenue also
contributed to the overall improvement.
LOAN/MBS SALES AND LOAN SERVICING. Although the heavy loan refinancing activity
in the current quarter reduced asset yields, the Bank's strong asset-generation
capabilities allowed it to reinvest these loan prepayments in new loans,
contributing to strong loan sale profits. Loan sale volume in the current
quarter increased to $477.6 million compared to $364.5 million in last year's
first quarter and $469.2 million for the quarter ended December 31, 2002. With
this increased sales volume, along with higher margins, gains on sales of
mortgage loans more than tripled compared to the quarter ended March 31, 2002,
totaling $7.5 million in the current quarter compared to $2.3 million a year
ago.
During the quarter, the Company swapped into mortgage-backed securities, a total
of $85.3 million of prepayment-protected fixed-rate mortgage loans. The Company
sold these securities along with an additional $60.9 million of similar
mortgage-backed securities for gains totaling $5.4 million. These sales were
undertaken to improve the Company's interest rate risk position by lengthening
its asset duration to better match the Company's increased liability duration,
as the average lives of these loans and related mortgage-backed securities had
become very short due to high prepayment speeds. Higher loan refinancings led to
increased amortization of mortgage servicing rights resulting in $1.4 million of
loan servicing fee expense, net of servicing fees, compared to $40,000 of net
expense last year.
INVESTMENT SECURITIES SALES AND WRITEDOWNS. During the quarter, the Company took
aggregate writedowns of $8.1 million on two floating-rate debt securities having
an aggregate amortized cost of $18.8 million prior to the writedowns. One of the
securities is collateralized by aircraft leased to numerous different airlines
and the other is a collateralized bond obligation secured by various less than
investment grade high yield securities. These securities are current as to
payment of principal and interest. However, the estimated market values of these
securities have been negatively impacted by weak economic conditions and the
current difficulties in the airline industry. Additionally, the Company sold
various fixed-rate debt and equity securities during the quarter for aggregate
proceeds of $35.0 million, resulting in gains totaling $2.4 million.
DEPOSIT ACCOUNT SERVICE FEES. Deposit account service fees totaled $5.4 million
for the current quarter, up 12.7% from the $4.8 million reported in the first
quarter of 2002. The continued growth in deposit account fee income was driven
by fee increases and expansion of the Bank's checking account base through new
branch openings during the past year and internal sales efforts. Checking
accounts totaled 157,700 at March 31, 2003, 9.5% higher than a year ago.
REAL ESTATE DEVELOPMENT OPERATIONS. The Company's real estate development
operations contributed $1.6 million to non-interest income in the current
quarter compared to $2.9 million in last year's first quarter. The real estate
income for the current quarter resulted primarily from the first closings in the
Company's new 326-lot Shenandoah subdivision in Plainfield, IL. A total of 54
lots closed in this development during the quarter, generating profits of $1.5
million. The remaining income was generated from the TallGrass of Naperville
subdivision, where 48 lots remain from the original 952 lots available in this
development. At March 31, 2003, 68 lots and 4 lots were under contract in the
Shenandoah and TallGrass developments, respectively.
NON-INTEREST EXPENSE
The ratio of total non-interest expense to average assets was 1.80% for the
current quarter, compared to 1.69% in the first quarter of 2002 and 1.75% for
the quarter ended December 31, 2002. The Company's efficiency ratio, a measure
of the amount of expense needed to generate each dollar of revenue, was 46.5%
for the current quarter, compared to 48.0% in last year's first quarter and
43.1% for the quarter ended December 31, 2002.
Non-interest expense totaled $26.7 million in the current quarter, compared to
$23.6 million reported for the quarter ended March 31, 2002. Compensation and
benefits expense totaled $15.6 million in the current quarter, compared to $14.2
million a year ago. This increase was primarily due to normal salary increases,
higher payroll taxes and medical costs, and increased staffing. Occupancy
expenses increased
by $664,000 in the current quarter compared to the comparable
period a year ago, primarily due to higher depreciation and rent expenses and
general maintenance costs. Other non-interest expense increased by $954,000 in
the current quarter compared to last year's first quarter. The largest
components of this increase were higher professional expenses, larger bad check
losses and increased postage, telephone and loan expenses.
Income tax expense totaled $11.1 million in the current quarter, equal to an
effective income tax rate of 36.5%, compared to $9.4 million or an effective tax
rate of 36.1% for the quarter ended March 31, 2002.
ASSET QUALITY
Non-performing assets increased during the past three months to $37.1 million,
or .62% of total assets, compared to $27.8 million or .47% of total assets at
December 31, 2002. The increase in non-performing assets over the past three
months is due to two aircraft-related asset-backed investment securities,
totaling $9.8 million, being put on non-accrual status. The Company recorded
$12,000 of net charge-offs of loans during the quarter and did not record a
provision for loan losses. The Bank's allowance for loan losses was $19.5
million at March 31, 2003, equal to 77% of total non-performing loans and .45%
of total loans receivable. At March 31, 2003, 87% of the Company's loan
portfolio consisted of loans secured by one-to-four family residential
properties, including 10% relating to home equity loans and equity lines of
credit. A total of 93% of non-performing loans consisted of loans secured by
one-to-four family residential properties.
BALANCE SHEET & CAPITAL
Total assets at March 31, 2003, were $5.98 billion, approximately $48 million
higher than the level reported at December 31, 2002. Loan balances, which
totaled $4.40 billion at March 31, 2003, were $135 million lower than the $4.53
billion balance three months ago. This modest decline was attributable to heavy
loan refinancings and the sale of fixed-rate mortgage loans. Loan balance
decreases, along with declines in securities balances, were offset by increases
in cash and cash equivalent balances. Total deposits increased to $3.81 billion,
$64 million higher than the $3.75 billion reported at December 31, 2002. The
Bank continues to be successful in its efforts to grow its core deposits. At
March 31, 2003, core deposits, comprised of checking, savings and money market
accounts, accounted for 57.5% of total deposits.
Borrowed funds totaled $1.50 billion at March 31, 2003 down modestly from $1.56
billion reported three months earlier. Total stockholders' equity increased by
$15.6 million over the past three months, totaling $517.0 million at March 31,
2003. The book value per share at March 31, 2003 was $22.18.
The Company previously announced a 500,000 share repurchase plan during the
third quarter of 2001 of which 466,200 shares are remaining under the
authorization. During the current quarter, the Company did not repurchase any
shares of its common stock. The Bank's tangible, core and risk-based capital
percentages of 6.87%, 6.87% and 12.13%, respectively, at March 31, 2003 exceeded
all minimum regulatory capital requirements.
OUTLOOK FOR 2003
The Company is reiterating its previous outlook for calendar 2003, and currently
expects earnings to be in the range of $3.30-$3.35 per diluted share.
The Company's projections for 2003 assume modest balance sheet growth over 2002,
and a relatively unchanged yield curve from the current level. The Company
currently expects loan origination activity to decline modestly in the second
half of the year as loan refinancing activity is expected to ease, with total
origination volume for the year to be down 5-10% compared to 2002. Loan sale
volume for 2003 is expected to be comparable to 2002 levels. Based on the
Company's expectation that the economy remains sluggish and the Federal Reserve
does not begin tightening monetary policy until early 2004, management expects
the net interest margin for 2003 to be in a range of 2.82%-2.90%. The Company
expects to report continued growth in fee income in 2003 and is currently
projecting income from real estate development operations in the range of
$12-$13 million for 2003. The projections also assume continued strong housing
and mortgage activity in the Bank's markets and good credit quality.
On March 28, 2003, the Company completed the purchase of a branch office on the
west side of the city of Chicago. Deposits at the branch office totaled
approximately $8 million at closing. The Company has also received regulatory
approval to open a new branch facility in a neighborhood on the near southwest
side of Chicago's central business district and expects to open this office
later in 2003.
On December 17, 2002, the Company announced it had reached an agreement to
acquire Fidelity Bancorp in an all-stock transaction valued at approximately
$101 million on the date of announcement. As previously disclosed, the Company
expects this transaction to close in mid-2003. At December 31, 2002, Fidelity
had assets of $730 million, deposits of $463 million and five branch offices in
the Chicago area.
MAF Bancorp is the parent company of Mid America Bank, a federally chartered
stock savings bank. The Bank operates a network of 34 retail banking offices
primarily in Chicago and its western suburbs. The Company's common stock trades
on the Nasdaq Stock Market under the symbol MAFB.
Forward-Looking Information
-----------------------------
Statements contained in this news release that are not historical facts
constitute forward-looking statements (within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended), which involve significant risks
and uncertainties. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, and is including this
statement for purposes of invoking these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Company, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
"plan," or similar expressions. The Company's ability to predict results or the
actual effect of future plans or strategies is inherently uncertain and actual
results may differ from those predicted. The Company undertakes no obligation to
update these forward-looking statements in the future. Factors which could have
a material adverse effect on operations and could affect management's outlook or
future prospects of the Company and its subsidiaries include, but are not
limited to, difficulties in achieving anticipated cost savings related to the
operation of the acquired banking offices of Fidelity Bancorp or higher than
expected costs related to the Fidelity transaction, unanticipated changes in
interest rates or flattening of the yield curve, deteriorating economic
conditions which could result in increased delinquencies in MAF's or Fidelity's
loan portfolio, legislative/regulatory developments, 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 MAF's or Fidelity's loan or
investment portfolios, or further deterioration in the value of investment
securities, demand for loan products, secondary mortgage market conditions,
deposit flows, competition, demand for financial services and residential real
estate in MAF's and Fidelity's market areas, unanticipated slowdowns in real
estate lot sales or problems in closing pending real estate contracts, delays in
real estate development projects, the possible short-term dilutive effect of
other
potential acquisitions, if any, and changes in 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.
NOTE: The following notice is included to meet certain legal requirements.
-------------------------------------------------------------------------
MAF has filed a registration statement containing a proxy statement/prospectus
and other documents regarding the proposed transaction with Fidelity Bancorp,
Inc. with the Securities and Exchange Commission. Fidelity shareholders are
urged to read the proxy statement/prospectus when it becomes available, because
it will contain important information about MAF and Fidelity, and the proposed
transaction. When available, copies of the proxy statement/prospectus will be
mailed to Fidelity shareholders, and it and other documents filed by MAF or
Fidelity with the SEC may be obtained free of charge at the SEC's web site at
http://www.sec.gov, or by directing a request to MAF at 55th Street & Holmes
Avenue, Clarendon Hills, IL 60514 or Fidelity at 5455 West Belmont Avenue,
Chicago, Illinois 60641.
MAF BANCORP, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
THREE MONTHS ENDED
MARCH 31,
2003 2002
---- ----
(UNAUDITED)
Interest income $77,026 81,556
Interest expense 35,971 45,592
------ ------
Net interest income 41,055 35,964
Provision for loan losses - -
------ ------
Net interest income after provision for loan losses 41,055 35,964
Non-interest income:
Gain (loss) on sale or writedown of:
Loans receivable held for sale 7,548 2,340
Mortgage-backed securities 5,352 -
Investment securities (5,712) 465
Foreclosed real estate (69) 27
Income from real estate operations 1,635 2,897
Deposit account service charges 5,439 4,824
Loan servicing fee expense, net (1,376) (40)
Brokerage commissions 731 603
Other 2,466 2,558
------ ------
Total non-interest income 16,014 13,674
Non-interest expense:
Compensation and benefits 15,638 14,226
Office occupancy and equipment 3,531 2,867
Data processing 973 999
Advertising and promotion 1,321 1,187
Amortization of core deposit intangibles 379 424
Other 4,832 3,878
------ ------
Total non-interest expense 26,674 23,581
------ ------
Income before income taxes 30,395 26,057
Income taxes 11,107 9,415
------ ------
Net income $19,288 16,642
====== ======
Basic earnings per share $ .83 .72
====== ======
Diluted earnings per share .81 .70
====== ======
MAF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
MARCH 31, DECEMBER 31,
2003 2002
---- ----
ASSETS
- ------
Cash and due from banks $ 133,324 134,265
Interest-bearing deposits 163,187 28,210
Federal funds sold 196,812 100,205
------- -------
Total cash and cash equivalents 493,323 262,680
Investment securities available for sale, at fair value 289,004 308,235
Stock in Federal Home Loan Bank of Chicago, at cost 204,413 169,708
Mortgage-backed securities available for sale, at fair value 304,966 365,638
Loans receivable held for sale 68,076 167,780
Loans receivable, net of allowance for losses of $19,471 and $19,483 4,327,498 4,363,152
Accrued interest receivable 22,630 27,513
Foreclosed real estate 2,127 2,366
Real estate held for development or sale 20,451 14,938
Premises and equipment, net 74,449 72,492
Other assets 60,891 67,753
Goodwill, net of accumulated amortization of $12,480 95,346 94,796
Intangibles 21,756 20,130
--------- ---------
$5,984,930 $5,937,181
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits 3,814,744 3,751,237
Borrowed funds 1,501,500 1,556,500
Advances by borrowers for taxes and insurance 38,152 37,700
Accrued expenses and other liabilities 113,516 90,286
--------- ---------
Total liabilities 5,467,912 5,435,723
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; authorized
5,000,000 shares; none outstanding - -
Common stock, $.01 par value;
80,000,000 shares authorized; 25,420,650 shares issued;
23,310,396 and 23,252,815 shares outstanding 254 254
Additional paid-in capital 204,839 204,710
Retained earnings, substantially restricted 357,841 342,790
Stock in Gain Deferral Plan; 237,431 and 236,401 shares 887 851
Accumulated other comprehensive income, net of tax 3,865 4,819
Treasury stock, at cost; 2,110,254 and 2,167,835 shares (50,668) (51,966)
--------- ---------
Total stockholders' equity 517,018 501,458
--------- ---------
$5,984,930 $5,937,181
========= =========
MAF BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In thousands, except share data)
(Unaudited)
MARCH 31, DECEMBER 31, MARCH 31,
2003 2002 2002
---- ---- ----
Book value per share $ 22.18 $ 21.57 $ 19.50
Stockholders' equity to total assets 8.64% 8.45% 8.01%
Tangible capital ratio (Bank only) 6.87 6.78 6.73
Core capital ratio (Bank only) 6.87 6.78 6.73
Risk-based capital ratio (Bank only) 12.13 11.85 11.98
Common shares outstanding:
Actual 23,310,396 23,252,815 23,093,234
Basic (weighted average) 23,300,671 23,282,750 23,014,821
Diluted (weighted average) 23,852,184 23,802,094 23,576,020
Non-performing loans $ 25,243 $ 25,394 $ 25,217
Non-performing assets 37,113 27,760 27,387
Allowance for loan losses 19,471 19,483 19,554
Non-performing loans to total loans .58% .58% .59%
Non-performing assets to total assets .62 .47 .49
Allowance for loan losses to total loans .45 .44 .46
Mortgage loans serviced for others $ 2,261,784 $ 2,021,512 $ 1,646,806
Mortgage servicing rights, net 14,881 12,960 12,957
THREE MONTHS ENDED
MARCH 31,
------------------
2003 2002
---- ----
Average balance data:
Total assets $5,925,958 $5,586,629
Loans receivable 4,504,911 4,353,404
Interest-earning assets 5,586,324 5,268,610
Deposits 3,533,951 3,352,212
Interest-bearing liabilities 5,057,895 4,792,649
Stockholders' equity 511,077 442,536
Performance ratios (annualized):
Return on average assets 1.30% 1.19%
Return on average equity 15.10 15.04
Average yield on interest-earning assets 5.53 6.20
Average cost of interest-bearing liabilities 2.88 3.86
Interest rate spread 2.65 2.34
Net interest margin 2.94 2.73
Average interest-earning assets to average
interest-bearing liabilities 110.45 109.93
Non-interest expense to average assets 1.80 1.69
Non-interest expense to average assets
and loans serviced for others 1.33 1.33
Efficiency ratio (1) 46.45 47.96
Loan originations and purchases $1,055,901 $ 678,040
Loans sold 477,618 364,521
Cash dividends declared per share .18 .15
<FN>
(1) The efficiency ratio is calculated by dividing non-interest expense by the
sum of net interest income and non-interest income, excluding net gain/(loss) on
sale and writedown of mortgage-backed and investment securities.
</FN>