Filed Pursuant to Rule 424(b)(3)
Registration File No. 333-56600
PROSPECTUS
$1,476,000
FIDELITY FEDERAL BANCORP
OFFER TO EXCHANGE
ALL OUTSTANDING
9-1/8% JUNIOR SUBORDINATED NOTES DUE 2001
FOR
12% JUNIOR SUBORDINATED NOTES DUE 2004
MATERIAL TERMS OF THE EXCHANGE OFFER
o We are offering to exchange all old notes that are validly tendered
and not validly withdrawn for an equal principal amount of the new
notes which have substantially similar terms to the old notes, except
that the new notes have an extended maturity, increased interest rate
and different redemption terms.
o The exchange offer will expire at midnight, Evansville time, May 14,
2001, unless extended.
o The exchange of the old notes for the new notes in the exchange offer
will be a taxable event for U.S. federal income tax purposes, but you
will not realize any gain if your purchase price for your old notes
was equivalent to their principal balance.
THE NEW NOTES
o Interest on the new notes accrues at the rate of 12% per year, payable
in cash or by check every May 1 and November 1, with the first payment
on November 1, 2001.
o The new notes will mature on April 30, 2004.
o We have the option to redeem the new notes in whole or in part at any
time after May 1, 2001 and prior to maturity, at face value plus
accrued but unpaid interest. If we redeem the new notes between May 1,
2001 and April 30, 2002, we also will pay a redemption premium equal
to 1% of the principal amount of the new notes that have been
redeemed.
-----------------------
Investing in the new notes to be issued in the exchange offer involves risks.
Please consider carefully the 'Risk Factors' beginning on page 9 of this
prospectus.
-----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes to be distributed in the
exchange offer, or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is April 16, 2001
TABLE OF CONTENTS
SUMMARY ....................................................................3
RISK FACTORS ................................................................9
Risk Factors Related to the Exchange Offer..........................9
Risk Factors Related to Fidelity Federal...........................11
ABOUT THIS PROSPECTUS.......................................................13
WHERE YOU CAN FIND MORE INFORMATION.........................................13
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION..................14
FIDELITY FEDERAL BANCORP ...................................................15
THE EXCHANGE OFFER..........................................................16
DESCRIPTION OF THE NEW NOTES................................................22
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................25
LEGAL MATTERS...............................................................25
EXPERTS ...................................................................25
SUMMARY
This summary highlights selected information from this prospectus to
help you understand the terms of this exchange offer and the new notes. It
likely does not contain all the information that is important to you or that you
should consider in making a decision to exchange the old notes for the new
notes. To understand all of the terms of this exchange offer and the new notes
and to attain a more complete understanding of our business and financial
situation, you should carefully read this entire prospectus and the information
we have incorporated by reference herein.
In this prospectus, we refer to our 9-1/8% Junior Subordinated Notes
due 2001 as the "old notes," and to our 12% Junior Subordinated Notes due 2004
offered hereby as the "new notes." We collectively refer to the old notes and
the new notes as the "notes."
FIDELITY FEDERAL BANCORP
We are a savings and loan holding company which owns all of the issued
and outstanding stock of United Fidelity Bank, its federally-chartered savings
bank subsidiary. United Fidelity Bank maintains four locations in Evansville,
Indiana, and opened a fifth location in nearby Warrick County in March 2001.
United Fidelity Bank also participates in certain real estate activities,
including owning housing developments through its wholly-owned subsidiaries.
In February 1999, United Fidelity Bank entered into a supervisory
agreement with its regulator, the Office of Thrift Supervision, because of the
then-deteriorating capital and financial condition of United Fidelity Bank and
Fidelity Federal. This deterioration was caused primarily by:
o our dwindling cash reserves,
o low net interest margins,
o our high level of debt which required debt service,
o high non-interest expenses, and
o a decline in the quality of United Fidelity Bank's and
Fidelity Federal's multifamily housing loan and letter of
credit portfolio.
These factors caused significant losses and reductions of capital in
1998 and 1999. The majority of the multifamily housing portfolio consisted of
letters of credit which backed bonds issued by governmental authorities. Some of
these letters of credit were issued by us and had fixed expiration dates. If the
bonds were not successfully re-sold at these maturity dates, we would have been
required to fund the letters of credit. The total letters of credit
significantly exceeded the amount of our available cash, creating, when coupled
with the inability of United Fidelity Bank to pay dividends, significant
liquidity risk for us. The letters of credit issued by United Fidelity Bank were
collateralized in favor of the Federal Home Loan Bank by mortgage loans
originated by United Fidelity Bank. The use of these mortgage loans as
collateral substantially reduced the ability of United Fidelity Bank to borrow
funds from the Federal Home Loan Bank in the event a liquidity shortfall
occurred at United Fidelity Bank.
In January 2000, United Fidelity Bank and Fidelity Federal adopted a
plan to substantially reduce United Fidelity Bank's expenses, reduce Fidelity
Federal's high level of outstanding debt, and increase United Fidelity Bank's
net interest margin. At that point, United Fidelity Bank had accumulated
approximately 15% of its total assets in cash and cash equivalents,
significantly improving its liquidity position. In May 2000, we raised $3
million by issuing one million shares of common stock to Pedcor Investments, a
limited liability company, and changed top management of United Fidelity Bank.
In addition to the cash received for shares, Pedcor also agreed to provide $1.5
million in operating deficit guarantees on a portion of Fidelity Federal's and
United Fidelity Bank's multifamily housing portfolio, and to manage that portion
of the portfolio, in exchange for 460,000 shares of our common stock.
As a part of this transaction, we also changed the management of
Village Housing Corporation, a subsidiary of United Fidelity that owns general
partnership interests in a portion of the multifamily housing portfolio. Village
Housing's new management has been instrumental in obtaining commitments for
alternative sources of financing for a
3
portion of the portfolio, which we anticipate will, when completed,
significantly reduce the level of classified assets of and further improve
United Fidelity Bank's liquidity situation based on the release of the
outstanding letters of credit and the mortgage loan collateral. Village Housing
is also pursuing alternative sources of financing for letters of credit issued
by us, which management expects, when completed, to significantly improve our
asset quality and reduce our liquidity risk.
The supervisory agreement which United Fidelity entered into with the
OTS imposes operating restrictions on United Fidelity Bank and restricts its
ability to grow and pay dividends without prior approval of the OTS. United
Fidelity currently is in compliance with the supervisory agreement, including
the capital targets established in its strategic plan. United Fidelity was not
in compliance with the requirement that it reduce its level of classified assets
to core capital and allowance for loan and lease losses to 50% or less by
December 31, 1999, but this deadline was extended by the OTS to March 31, 2001.
United Fidelity was in full compliance on March 31, 2001.
Our principal executive offices are located at 18 N.W. Fourth Street,
Evansville, Indiana 47708, and our telephone number at that address is (812)
424-0921.
SUMMARY OF THE EXCHANGE OFFER
In the exchange offer, you are entitled to exchange your old notes for
the new notes, which have substantially similar terms, except the new notes have
an extended maturity, increased interest rate and different redemption terms.
You should read the discussion under the heading "Description of the New Notes"
beginning on page 22 for further information about the new notes. After the
exchange offer is complete, you will no longer be entitled to any exchange
rights for your old notes.
We have summarized the terms of the exchange offer below. You should
read the discussion under the heading "The Exchange Offer" beginning on page 16
for further information about the exchange offer.
The Exchange Offer.................. We are offering to exchange up to
$1,476,000 principal amount of the new
notes for up to $1,476,000 principal
amount of the old notes. The old notes
may only be exchanged in $1,000
increments. The terms of the new notes
are substantially similar in all
material respects to those of the old
notes, except the new notes have an
extended maturity, an increased interest
rate and different redemption terms.
The old notes that are not tendered for
exchange will continue to have the same
maturity, interest rate and redemption
terms.
Terms of the New Notes.............. The new notes have an increased interest
rate of 12% per annum and mature on
April 30, 2004. In addition, we have
the option to redeem the new notes in
whole or in part at any time after May
1, 2001 and prior to maturity, at face
value plus accrued but unpaid interest.
If we redeem the new notes between May
1, 2001 and April 30, 2002, we also will
pay a redemption premium equal to 1% of
the principal amount of the new notes
that have been redeemed.
If we redeem the new notes in part, we
will select the new notes for redemption
on a pro rata basis, by lot or by such
other method as we in our sole
discretion deem fair and appropriate.
Expiration Date..................... The exchange offer will expire at
midnight, Evansville time, on May 14,
2001, or such later date and time to
which we may extend it. Please read "The
Exchange Offer--Extensions, Delay in
Acceptance, Termination or Amendment" on
page 16 for more information about an
extension of the
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expiration date. The exchange will
occur promptly after the expiration of
the exchange offer.
Conditions to the
Exchange Offer...................... We will not be required to accept the
old notes for exchange:
o if the exchange offer would be
unlawful or would violate any
interpretation of the staff of
the SEC, or
o if any legal action has been
instituted or threatened that
would impair our ability to
proceed with the exchange
offer.
The exchange offer is not conditioned
upon any minimum aggregate principal
amount of the old notes being tendered.
Please read "The Exchange
Offer--Conditions to the Exchange Offer"
on page 17 for more information about
the conditions to the exchange offer.
Procedures for Tendering
Your Old Notes...................... If you want to tender your old notes in
the exchange offer, you should do one of
the following:
o If you hold physical certificates
evidencing your old notes,
complete, sign and date the letter
of transmittal in accordance with
the instructions in that document,
have your signature guaranteed if
required by the letter of
transmittal, and mail or deliver
your manually signed letter of
transmittal, together with the
certificates evidencing the old
notes being tendered and any other
required documents, to the exchange
agent prior to the expiration date;
or
o If you own a beneficial interest in
the old notes that are registered
in the name of a broker, dealer,
commercial bank, trust company or
other nominee and you wish to
tender the old notes in the
exchange offer, please contact the
registered holder as soon as
possible and instruct the
registered holder to tender on your
behalf and to comply with our
instructions described in this
prospectus.
Withdrawal of Tenders............... You may withdraw your tender of the old
notes at any time prior to the
expiration date. We will return to you,
without charge, promptly after the
expiration or termination of the
exchange offer any old notes that you
tendered but that were not accepted for
exchange.
Material U.S. Federal Income Tax
Considerations...................... Provided that you paid a purchase price
equivalent to the principal balance of
the old notes, the exchange of the old
notes for new notes will not result in
any gain or loss for federal income tax
purposes. Please read "Material Federal
Income Tax Consequences" on page 25.
Use of Proceeds..................... We will not receive any cash proceeds
from the issuance of the new notes in
the exchange offer.
Appraisal or Dissenters'
Rights.............................. You will have no appraisal or
dissenters' rights in connection with
the exchange offer.
5
Exchange Agent...................... The exchange agent for the exchange
offer is Fidelity Federal Bancorp. The
address, telephone number and facsimile
number of the exchange agent are set
forth in "The Exchange Offer--The
Exchange Agent" on page 20 and in the
letter of transmittal.
6
SELECTED FINANCIAL DATA
The information in the following table is based on historical financial
information included in our prior filings with the SEC, including our annual
report on Form 10-K for the fiscal year ended December 31, 2000. The following
summary financial information should be read in connection with this historical
financial information, including the notes that accompany such financial
information. This historical financial information is considered a part of this
document. See "Where You Can Find More Information." Our audited historical
financial statements as of December 31, 2000 and December 31, 1999 and for the
year ended December 31, 2000, the six months ended December 31, 1999 and the
year ended June 30, 1999 were audited by Olive LLP, independent public
accountants. You should not assume that the results of operations below are
indicative of the financial results we can achieve in the future.
Selected Statistical Information
(Dollars in Thousands, Except Share and Per Share Data)
Six months
ended
December 31, December 31, June 30, June 30, June 30,
Selected Financial Data as of 2000 1999 1999 1998 1997
---------------------------------------------------------------------------
Total assets $ 166,466 $ 171,457 $ 172,253 $ 197,046 $ 240,819
Interest-bearing deposits 14,718 22,911 14,668 6,266 1,765
Investment securities available for sale 21,001 24,305 27,325 9,854 13,790
Loans, net 107,842 96,919 110,436 156,683 203,183
Deposits 126,944 135,016 128,596 148,939 181,787
Short-term borrowings 28 89 128 2,531 5,191
Long-term debt 23,842 23,504 29,149 29,488 38,089
Stockholders' equity 8,775 5,427 7,814 7,515 12,936
Selected Operations Data for Year Ended
Interest income $ 12,100 $ 6,019 $ 14,094 $ 17,192 $ 20,282
Interest expense 8,457 4,268 9,730 11,586 13,831
---------------------------------------------------------------------------
Net interest income 3,643 1,751 4,364 5,606 6,451
Provision for loan losses 670 1,345 (138) 4,543 975
---------------------------------------------------------------------------
Net interest income after 4,502 1,063 5,476
provision for loan losses 2,973 406
Non-interest income 1,816 1,001 2,663 3,025 3,856
Non-interest expense 7,314 5,148 6,878 16,076 9,474
---------------------------------------------------------------------------
Income (loss) before income tax (2,525) (3,741) 287 (11,988) (142)
Income tax expense (benefit) (1,369) (1,671) (338) (5,194) (255)
---------------------------------------------------------------------------
Net income (loss) $ (1,156) $ (2,070) $ 625 $ (6,794) $ 113
===========================================================================
Selected Financial Ratios
Return on average assets (.71)% (2.41)% .33% (3.12)% .04%
Return on stockholders' equity (16.14) (51.37) 7.58 (50.68) .83
Net interest margin 2.49 2.24 2.48 2.79 2.72
Net interest spread 2.38 2.05 2.24 2.62 2.57
Tangible equity to assets at year end 8.42 6.78 8.49 6.31 6.93
Allowance for loan losses to loans 1.75 2.04 3.09 1.91 .87
Allowance for loan losses to
non-performing loans 222.27 179.96 69.57 532.11 624.91
Dividend payout ratio N/A N/A N/A N/A 1,500.00
Per Share Data
Diluted net income (loss) $ (.29) $ (0.66) $ .20 $ (2.30) $ .04
Basic net income (loss) (.29) (0.66) .20 (2.30) .05
Cash dividends declared .35 .60
Book value at period end 1.90 1.72 2.48 2.40 5.20
Closing market price (bid) at period end 1.31 1.25 2.88 6.50 8.75
Number of average common and
common equivalent shares outstanding 4,057,168 3,147,662 3,143,179 2,956,157 2,655,181
7
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings
by fixed charges. For this purpose, "earnings" include pretax income from
continuing operations plus fixed charges. "Fixed charges" include interest,
whether expensed or capitalized, amortization of debt expense and the portion of
rental expense that represents the interest factor in these rentals. The
following table presents the ratio of earnings to fixed charges of Fidelity
Federal for each of the fiscal years 1996 through 2000, and the six months ended
December 31, 1999.
Year Six Months Year Ended
Ended Ended
------------------------------------------------------------------------------------
December 31, December 31, June 30, June 30, June 30, June 30,
2000 1999 1999 1998 1997 1996
------------------------------------------------------------------------------------
Ratio of Earnings to
Fixed Charges 0.70x 0.12x 1.03x (0.03)x 0.99x 1.33x
8
RISK FACTORS
You should carefully consider the risks and uncertainties described
below and the other information in this prospectus before deciding whether to
participate in the exchange offer. Additional risks and uncertainties not
presently known to us or that we currently deemed immaterial may also impair our
business operations. If any of the following risks identified actually occur,
our business, financial condition and operating results could be materially
adversely affected.
Risk Factors Related to the Exchange Offer
We may not be able to pay interest on or repay the notes.
a. We are a holding company and our operating company has no
obligations to the holders of the notes.
We conduct substantially all of our business through our
operating company, United Fidelity Bank. Our cash flow and,
consequently, our ability to pay interest in cash to service our debt,
including the notes, are dependent upon the cash flow of United
Fidelity Bank and the payment of funds by United Fidelity Bank to us.
United Fidelity Bank is separate and a distinct legal entity and has no
obligation, contingent or otherwise, to pay any amounts due on the
notes or to make cash available for that purpose.
b. Our operating company is restricted in making dividends to us.
The Office of Thrift Supervision has not permitted United
Fidelity Bank to pay us dividends under the terms of a Supervisory
Agreement entered into in February 1999. The OTS may agree to allow the
payment of dividends from United Fidelity Bank to us to assist in debt
service, although it has no obligation to do so and we cannot and do
not offer any assurances that the OTS will do so. Also, the OTS could,
if it considers necessary for the safety and soundness of United
Fidelity Bank, continue to prohibit the payment of dividends to us in
the future. If we do not receive any dividends from United Federal
Bank, we may not be able to make payments on the notes.
c. Our substantial amount of indebtedness could adversely
affect our ability to repay the notes.
We currently have a substantial amount of debt in relation to
our shareholders' equity. At December 31, 2000, Fidelity Federal, on a
non-consolidated basis, had total unsecured debt outstanding of $9.97
million, representing 113.55% of our total capitalization, and total
shareholders' equity of $8.78 million.
Our high level of debt could affect our future prospects
adversely by:
o impairing our ability to borrow additional money,
o requiring us to use a substantial portion of our cash
flows from operations to pay interest or repay debt
which will reduce the funds available to us for our
operations, capital expenditures and any acquisition
opportunities, and
o making us more vulnerable in the event of a downturn
in general economic conditions.
We cannot assure you that we will be able to meet our debt
obligations. If we are unable to generate sufficient cash to meet our
obligations or if we fail to satisfy the requirements of our debt
agreements, we will be in default. A default would permit certain debt
holders to require payment before the scheduled due date of the debt,
resulting in further financial strain on us and causing additional
defaults under our other indebtedness.
Our ability to meet our debt and other obligations and to
reduce our total debt depends on our future operating performance and
on economic, financial, competitive, regulatory and other factors. In
addition, we
9
may need to incur additional indebtedness in the future. Many of these
factors are beyond our control. Although we believe that our existing
current assets combined with working capital from our operations and
proceeds of future equity or debt financings will be adequate to meet
our existing financial obligations, we cannot assure you that our
business will generate sufficient cash flow or that future financings
will be available to provide sufficient proceeds to meet these
obligations.
d. If we are unable to refinance our existing indebtedness, we
may not be able to pay interest and to make principal
repayments on the new notes.
We currently have substantial debt obligations that will
mature before the maturity of the new notes, which may affect our
ability to make required payments on the new notes. We may not be able
to generate sufficient funds from operations to meet our debt service
requirements or to repay all of those obligations as they are currently
scheduled to become due. Accordingly, it may be necessary to refinance
some of those obligations at or before their respective maturities. Our
ability to refinance these obligations will depend on, among other
factors, our financial condition at the time of the refinancing, any
restrictions contained in financing agreements and market conditions.
We may not be able to refinance those obligations. If we are unable to
refinance those obligations, or are unable to obtain satisfactory
terms, there could be an adverse effect on us, including on our ability
to pay interest, and to make scheduled principal repayments on our
indebtedness, including the new notes.
The exchange offer is a taxable event for U.S. federal income tax purposes.
If you participate in the exchange offer, this will be a taxable event
for U.S. federal income tax purposes. You will not, however, realize any gain if
you paid a purchase price equivalent to the principal balance of the old notes.
Please read "Material Federal Income Tax Considerations" on page 25.
Our secured and other unsecured debt and the liabilities of our operating
company are effectively senior to the notes.
Our secured and other unsecured debt and all of the debt of United
Fidelity Bank are effectively senior to the notes. United Fidelity Bank has no
obligation to pay amounts due on the notes. At December 31, 2000, we had about
$9.97 million of long-term, unsecured indebtedness. We and United Fidelity Bank
may incur additional debt, subject to limitations, and that additional debt will
rank senior to the notes. United Fidelity Bank may use the earnings it
generates, as well as its existing assets, to fulfill its own direct debt
service requirements, particularly because certain agreements may restrict its
ability to pay dividends to us or because the debt of United Fidelity Bank may
be secured by its assets.
Holders of the old notes must ensure compliance with exchange offer procedures.
You are responsible for complying with all exchange offer procedures.
You will receive the new notes in exchange for your old notes only if, before
the expiration date, you deliver to the exchange agent:
o the letter of transmittal, preferably completed and duly executed
by you, together with any required signature guarantees, and
o any other documents required by the letter of transmittal.
You should allow sufficient time to ensure that the exchange agent
receives all required documents before the exchange offer expires. Neither we
nor the exchange agent has any duty to inform you of defects or irregularities
with respect to the tender of your old notes for exchange.
There is no public market for the notes.
There is no existing market for the old notes. We cannot be sure that
any trading market for the new notes will develop. If such a market were to
develop, the new notes could trade at a discount from their initial offering
price, depending on prevailing interest rates, the market for similar securities
and other factors, including general economic conditions and our financial
condition, performance and prospects.
10
Risk Factors Related to Fidelity Federal
We must achieve sufficient earnings in order to realize our $7.1 million
deferred income tax receivable.
We currently have a deferred income tax receivable of approximately
$7.1 million. In order to utilize this asset within the federal and state
carryforward periods, we must execute our current business plan and achieve
sufficient annual earnings. If we are unable to achieve a sufficient level of
net income and subsequent increases, we may need to establish a valuation
allowance for this deferred tax asset. This allowance would be the estimate of
future expirations of existing federal and state tax carryforwards. Such an
allowance would reduce the receivable and increase our expenses, thus reducing
our earnings.
United Fidelity Bank is subject to the restrictions and conditions of a
Supervisory Agreement with Office of Thrift Supervision that could negatively
impact our ability to repay the notes.
United Fidelity Bank entered into a Supervisory Agreement with the OTS
on February 3, 1999, which requires it to take certain actions and restricts
certain of its operations, including its ability to pay dividends. If United
Fidelity is unable to comply with the terms and conditions of the Supervisory
Agreement, the OTS could take additional regulatory action, including the
issuance of a cease and desist order requiring further corrective action. Such
corrective action could include, among other things, increasing the allowance
for loan and lease losses, obtaining additional or new management, and further
restrictions on dividends. Because we are dependent upon United Fidelity Bank
for our income, this could negatively impact our ability to repay the notes.
Our accomplishments are largely dependent upon the skill and experience of our
senior management team.
The success of our business will depend upon the services of our senior
management team. Our business may suffer if we lose the services of any of these
individuals, including Bruce A. Cordingley and Donald R. Neel. We have entered
into a three-year employment agreement with Mr. Neel. Mr. Cordingley's role with
Fidelity Federal is not full time. He receives board fees, but he has no
employment agreement with us, does not receive a salary, and has substantial
business interests other than Fidelity Federal. Our future success also depends
on our ability to identify, attract and retain qualified senior officers and
other employees in our identified market. On September 29, 2000 we announced
that M. Brian Davis would cease to serve as our president and chief executive
officer. The executive committee of the Board is currently functioning as
interim chief executive officer until a permanent replacement is appointed,
which we anticipate will occur by the fourth quarter of 2001. Because the main
activity of Fidelity Federal is to own the stock of United Fidelity Bank, we do
not believe that the timing of this should adversely impact us.
Anti-takeover provisions in our charter documents may delay or prevent a
takeover of Fidelity Federal.
Certain provisions of our charter documents may make it more difficult
for a third party to acquire control of us, even on terms that a stockholder
might consider favorable. Our amended and restated certificate of incorporation
authorizes our board of directors to issue preferred stock without stockholder
approval. The issuance of preferred stock could make it more difficult for a
third party to acquire us because the preferred stock could have dividend,
redemption, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of holders of our common stock. Our
board of directors does not currently have any intent to issue shares of
preferred stock.
The existence of controlling shareholders may limit your ability to influence
the outcome of matters requiring stockholder approval and could discourage
potential acquisitions of our business by third parties.
As of February 28, 2001, Bruce A. Cordingley , who is a director of
Fidelity Federal, beneficially owned or controlled approximately 54.66% of our
issued and outstanding shares of common stock, including options and warrants
for the purchase of common stock. As of February 28, 2001, our remaining
directors, together with their respective affiliates, beneficially owned
approximately 17.55% of our outstanding common stock. Although we are not aware
of any arrangement or understanding, contractual or otherwise, that obligates
our directors to act in concert with respect to Fidelity Federal, the level of
stock ownership held by the directors may allow them to elect all of their
designees to the
11
board of directors and to control the outcome of virtually all matters submitted
for a vote of our shareholders. Either the equity interests of Mr. Cordingley
and his affiliates, or the combined equity interests of all of the directors in
Fidelity Federal, could have the effect of delaying or preventing a change in
control or otherwise discouraging a potential acquirer from attempting to obtain
control of Fidelity Federal, even on terms that a stockholder might consider
favorable. This in turn could harm the market price of our common stock. In
addition, sales of a substantial amount of our common stock in the public
market, by our principal shareholders or otherwise, or the perception that these
sales may occur, could materially adversely affect the market price of our
common stock and impair our ability to raise funds in additional stock
offerings.
We compete with many larger financial institutions that have far greater
financial resources than we have.
We encounter strong competition from other financial institutions
operating in our market and elsewhere. We compete with other competitors which
are larger than us and have greater financial and personnel resources than we
have. Because of this competition, we may have to pay higher rates of interest
to attract deposits. In addition, because of our smaller size, the amount we can
loan to one borrower is less than that for most of our competitors. This may
impact our ability to seek relationships with larger businesses in our market
area. Trends toward the consolidation of the banking industry and the lifting of
interstate banking and branching restrictions may make it more difficult for us
to compete effectively with large national and super-regional banking
institutions.
United Fidelity Bank's consumer loan concentration increases the risk of
defaults by our borrowers.
United Fidelity Bank makes various types of loans. Currently,
approximately 25% of our assets are comprised of consumer loans. These types of
loans are more risky than residential mortgage lending because of the impact on
these types of loans of unemployment rates and the general economy. For example,
delinquencies are typically low on these types of loans when unemployment rates
are low, and increase when unemployment rates increase. Because of this, the OTS
may require United Fidelity Bank to maintain a higher level of capital than a
similarly sized institution with a smaller exposure to this type of loan.
12
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we have filed with
the SEC. We are submitting this prospectus to holders of the old notes so that
they can consider exchanging the old notes for the new notes. You should rely
only on the information contained or incorporated by reference in this
prospectus. We have not authorized anyone to provide you with additional or
different information. If anyone provides you with additional or different
information, you should not rely on it. We are not making an offer to exchange
and issue the new notes in any jurisdiction where the offer or exchange is not
permitted. You should assume that the information contained in this prospectus
is accurate only as of the date on the front cover of this prospectus and that
any information we have incorporated by reference is accurate only as of the
date of the document incorporated by reference.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and at 7 World Trade Center, Suite 1300, New York, New York
10048. You may obtain further information regarding the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also
available to the public on the SEC's Internet site located at
http://www.sec.gov.
This prospectus is accompanied by a copy of our latest annual report on
Form 10-K for the fiscal year ended December 31, 2000, which contains additional
information about us.
The SEC allows us to "incorporate by reference" into this prospectus
information we file with the SEC. This means we can disclose important
information to you by referring you to the documents containing the information.
The information we incorporate by reference is considered to be part of this
prospectus, unless we update or supersede that information by the information
contained in this prospectus or information we file subsequently that is
incorporated by reference into this prospectus. We are incorporating by
reference into this prospectus the following documents that we have filed with
the SEC, and our future filings with the SEC (Commission File No. 0-22880) under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the offering of the new notes is completed:
o our annual report on Form 10-K for the fiscal year ended December
31, 2000, and
o our definitive proxy statement filed March 29, 2001 in connection
with our 2001 annual shareholder meeting.
This prospectus is part of a registration statement we have filed with
the SEC relating to the new notes. As permitted by SEC rules, this prospectus
does not contain all of the information included in the registration statement
and the accompanying exhibits and schedules we file with the SEC. You should
read the registration statement and the exhibits and schedules for more
information about us and the new notes. The registration statement, exhibits and
schedules are also available at the SEC's Public Reference Room or through its
Internet site.
This document incorporates by reference important business, financial
and other information about us that is not included in or delivered with this
document. Documents incorporated by reference and any other copies of our
filings with the SEC are available from us without charge, excluding all
exhibits unless specifically incorporated by reference as exhibits in this
document. Written and telephone requests for any of these documents should be
directed to us as indicated below:
Fidelity Federal Bancorp
18 N.W. Fourth Street
Evansville, Indiana 47708
Attn.: Mark A. Isaac, Vice President, Controller
Telephone: (812) 424-0921
13
If you would like to request copies of these documents, please do so by
May 8, 2001 in order to receive them before the expiration of the exchange
offer. In the event that the exchange offer period is extended by us, you must
submit your request no later than five business days before the expiration date,
as extended by us.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains certain forward-looking statements that are
subject to risks and uncertainties and includes information about possible or
assumed future results of operations. Many possible events or factors could
affect our future financial results and performance. This could cause results or
performance to differ materially from those expressed in our forward-looking
statements. Words such as "expects", "anticipates","believes", "estimates",
variations of such words and other similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in, or implied by, such
forward-looking statements. Readers of this prospectus should not rely solely on
the forward-looking statements and should consider all uncertainties and risks
discussed throughout this prospectus. These statements are representative only
on the date hereof.
The possible events or factors include the following: our loan growth
is dependent on economic conditions, as well as various discretionary factors,
such as decisions to securitize, sell or purchase certain loans or loan
portfolios; syndications or participations of loans; retention of residential
mortgage loans; and the management of borrower, industry, product and geographic
concentrations and the mix of the loan portfolio. The rate of charge-offs and
provision expense can be affected by local, regional and international economic
and market conditions, concentrations of borrowers, industries, products and
geographic locations, the mix of the loan portfolio and management's judgments
regarding the collectibility of loans. Liquidity requirements may change as a
result of fluctuations in assets and liabilities and off-balance sheet
exposures, which will impact our capital and debt financing needs and the mix of
funding sources. Decisions to purchase, hold or sell securities are also
dependent on liquidity requirements and market volatility, as well as on- and
off-balance sheet positions. Factors that may impact interest rate risk include
local, regional and international economic conditions, levels, mix, maturities,
yields or rates of assets and liabilities, utilization and effectiveness of
interest rate contracts and the wholesale and retail funding sources of Fidelity
Federal and United Fidelity Bank. We are also exposed to the potential of losses
arising from adverse changes in market rates and prices which can adversely
impact the value of financial products, including securities, loans, deposits,
debt and derivative financial instruments, such as futures, forwards, swaps,
options and other financial instruments with similar characteristics.
In addition, the banking industry in general is subject to various
monetary and fiscal policies and regulations, which include those determined by
the Federal Reserve Board, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, state regulators and the OTS, whose
policies and regulations could affect our results. Other factors that may cause
actual results to differ from the forward-looking statements include the
following: competition with other local, regional and international banks,
thrifts, credit unions and other nonbank financial institutions, such as
investment banking firms, investment advisory firms, brokerage firms, investment
companies and insurance companies, as well as other entities which offer
financial services, located both within and outside the United States and
through alternative delivery channels such as the World Wide Web; interest rate,
market and monetary fluctuations; inflation; market volatility; general economic
conditions and economic conditions in the geographic regions and industries in
which we operate; introduction and acceptance of new banking-related products,
services and enhancements; fee pricing strategies, mergers and acquisitions and
our ability to manage these and other risks.
14
FIDELITY FEDERAL BANCORP
Fidelity Federal, incorporated in 1993 under the laws of the State of
Indiana, is a registered savings and loan holding company with its principal
office in Evansville, Indiana. Our savings bank subsidiary, United Fidelity
Bank, was organized in 1914 and is a federally-chartered stock savings bank
located in Evansville, Indiana. We, through our savings bank subsidiary, are
engaged in the business of obtaining funds in the form of savings deposits and
other borrowings and investing such funds in consumer, commercial and mortgage
loans and in investment and money market securities.
Subsidiaries
United Fidelity Bank, Village Affordable Housing Corporation and
Village Securities Corporation are three of our subsidiaries. Village Affordable
Housing Corporation was formed during 1998 for the purpose of owning interests
in real estate housing and is currently inactive. Village Securities Corporation
is also currently inactive, and is in the process of being dissolved.
United Fidelity Bank's subsidiaries, Village Housing Corporation,
Village Management and Village Capital Corporation have been involved in various
aspects of financing, owning, developing and managing affordable housing
projects. Currently, they are involved only in the business of owning affordable
housing properties. As of May 19, 2000, a subsidiary of Pedcor Holdings, LLC,
starting providing management and certain accounting services for the properties
previously managed by Village Management Corporation. Village Management
completed this transition by the end of June 2000 and is currently inactive.
Village Capital has not provided any new banking services for the past two
years, but records fee income on transactions previously completed. Another
subsidiary of United Fidelity Bank, Village Insurance Corporation, receives fee
income for credit life and accident health insurance sales.
Fidelity Federal had consolidated total assets of $166.5 million and
total shareholders' equity of $8.8 million as of December 31, 2000.
Competition
We face strong direct competition for deposits, loans and other
financial-related services. United Fidelity Bank competes in Indiana, Kentucky
and Illinois with other thrifts, commercial banks, credit unions, stockbrokers,
finance companies and insurance companies. Some of these competitors are local,
while others are statewide or national. United Fidelity Bank competes for
deposits principally by offering depositors a variety of deposit programs,
convenient office locations, hours and other services, and for loan originations
primarily through competitive interest rates and fees, the efficiency and
quality of service provided and the variety of loan products offered. Some of
the non-bank financial institutions and financial services organizations with
which United Fidelity Bank competes are not subject to the same degree of
regulation as that imposed on federal savings banks, thrifts or thrift-holding
companies. As a result, such competitors may have advantages over United
Fidelity Bank in providing certain services.
Many competitors are substantially larger or have significantly greater
capital resources than United Fidelity Bank. Due to recently enacted legislation
to allow unlimited interstate branching, we may experience heightened
competition from existing competitors and other major financial institutions
seeking to expand their regional banking presence in Indiana. We have
discontinued development activities pertaining to the affordable housing
industry and multifamily development in part because of increased levels of
competition, and significant losses taken in recent years.
15
THE EXCHANGE OFFER
Terms of the Exchange Offer
Upon the terms and subject to the conditions described in this
prospectus and in the letter of transmittal, we will accept for exchange any old
notes properly tendered and not withdrawn prior to the expiration date of the
exchange offer. We will issue $1,000 principal amount of the new notes in
exchange for each $1,000 principal amount of the old notes surrendered under the
exchange offer. The old notes may be tendered only in integral multiples of
$1,000. The exchange offer is not conditioned upon any minimum aggregate
principal amount of the old notes being tendered for exchange.
As of the date of this prospectus, $1,476,000 principal amount of the
old notes are outstanding. This prospectus and the letter of transmittal are
being sent to all registered holders of the old notes. There will be no fixed
record date for determining registered holders of the old notes entitled to
participate in the exchange offer. We intend to conduct the exchange offer in
accordance with the applicable requirements of the Securities Act and the
Securities Exchange Act and the rules and regulations of the SEC.
The old notes that are not tendered for exchange in the exchange offer:
o will remain outstanding, and
o will continue to accrue interest at 9-1/8% per annum.
We will be deemed to have accepted for exchange properly tendered old
notes when we have given oral or written notice of the acceptance to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the new notes from us.
If you tender the old notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of the
old notes. We will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the exchange offer. It is important
that you read "The Exchange Offer -- Fees and Expenses" for more details about
the fees and expenses incurred in the exchange offer. We will return any old
notes that we do not accept for exchange for any reason without expense to the
tendering holder as promptly as practicable after the expiration or termination
of the exchange offer.
Expiration Date
The exchange offer will expire at midnight, Evansville time, on May 14,
2001, unless, in our sole discretion, we extend it. The exchange will occur
promptly after the expiration of the exchange offer.
Extensions, Delay in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or at various times, to
extend the period of time during which the exchange offer is open. We may delay
acceptance for exchange of any old notes by giving oral or written notice of the
extension to their holders. During any such extensions, all old notes you have
previously tendered will remain subject to the exchange offer, and we may accept
them for exchange. To extend the exchange offer, we will notify the exchange
agent orally or in writing of any extension. We also will make a public
announcement of the extension no later than 9:00 a.m., Evansville time, on the
next business day after the previously scheduled expiration date.
If any of the conditions described below under "The Exchange Offer --
Conditions to the Exchange Offer" have not been satisfied with respect to the
exchange offer, we reserve the right, in our sole discretion:
o to delay accepting for exchange any old notes,
o to extend the exchange offer, or
o to terminate the exchange offer.
16
We will give oral or written notice of such delay, extension or
termination to the exchange agent. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders of the old notes. If we amend
the exchange offer in a manner that we determine to constitute a material
change, we will promptly disclose that amendment by means of a prospectus
supplement. We will distribute the supplement to the registered holders of the
old notes. Depending upon the significance of the amendment and the manner of
disclosure to the registered holders, we will extend the exchange offer if the
exchange offer would otherwise expire during such period. Without limiting the
manner in which we may choose to make public announcements of any delay in
acceptance, extension, termination or amendment of the exchange offer, we have
no obligation to publish, advertise or otherwise communicate any such public
announcement, other than by making a timely release to an appropriate news
agency.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required
to accept for exchange, or exchange any new notes for any old notes, and we may
terminate the exchange offer as provided in this prospectus before accepting any
old notes for exchange, if in our reasonable judgment:
o the exchange offer, or the making of any exchange by a holder of
old notes, would violate applicable law or any applicable
interpretation of the staff of the SEC, or
o any action or proceeding has been instituted or threatened in any
court or by or before any governmental agency with respect to the
exchange offer that, in our judgment, would reasonably be
expected to impair our ability to proceed with that exchange
offer.
In addition, we will not be obligated to accept for exchange the old
notes of any holder that has not made to us:
o the representations contained in the letter of transmittal, and
o such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations.
We expressly reserve the right to amend or terminate the exchange
offer, and to reject for exchange any old notes not previously accepted for
exchange in the exchange offer, upon the occurrence of any of the conditions to
the exchange offer specified above. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the old
notes as promptly as practicable. These conditions are for our sole benefit, and
we may assert them or waive them in whole or in part at any time or at various
times in our sole discretion. Our failure at any time to exercise any of these
rights will not mean that we have waived our rights. Each right will be deemed
an ongoing right that we may assert at any time or at various times.
Procedures for Tendering
Only a holder of the old notes may tender such old notes in the
exchange offer. To tender in the exchange offer, a holder must comply with the
procedures for physical tender. To complete a physical tender, a holder must:
o complete, sign and date the letter of transmittal,
o have the signature on the letter of transmittal guaranteed if the
letter of transmittal so requires,
o mail or deliver the letter of transmittal to the exchange agent
prior to the expiration date, and
o deliver the old notes to the exchange agent prior to the
expiration date.
To be tendered effectively, the exchange agent must receive any
physical delivery of the letter of transmittal and other required documents at
its address provided below under "The Exchange Offer -- The Exchange Agent"
prior to the expiration date.
The method of delivery of the old notes, the letter of transmittal and
all other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date
17
You may request your broker, dealer, commercial bank, trust company or other
nominee to effect the above transactions for you.
How to Tender if you are a Beneficial Owner
If you beneficially own the old notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder as soon as
possible and instruct the registered holder to tender on your behalf. If you are
a beneficial owner and wish to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal and delivering your old
notes, either:
o make appropriate arrangements to register ownership of the old
notes in your name, or
o obtain a properly completed bond power from the registered holder
of your old notes.
The transfer of registered ownership may take considerable time and may
not be completed prior to the expiration date.
Signatures and Signature Guarantees
We require that you must have signatures on a letter of transmittal or
a notice of withdrawal described below on page 19 under "The Exchange Offer --
Withdrawal of Tenders" guaranteed by an eligible institution unless the old
notes are tendered:
o by a registered holder who has not completed the annexes entitled
'Special Issuance Instructions' or 'Special Delivery
Instructions' attached to the letter of transmittal, or
o for the account of an eligible institution.
An eligible institution is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act.
When Endorsements or Bond Powers are Needed
If a person other than the registered holder of any old notes signs the
letter of transmittal, the old notes must be endorsed or accompanied by a
properly completed bond power. The registered holder must sign the bond power as
the registered holder's name appears on the old notes. An eligible institution
must guarantee that signature. If the letter of transmittal or any old notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, those persons should so indicate when signing.
Unless we waive this requirement, they also must submit evidence satisfactory to
us of their authority to deliver the letter of transmittal.
Determinations Under the Exchange Offer
We will determine in our sole discretion all questions as to the
validity, form, eligibility, time of receipt, acceptance of tendered old notes
and withdrawal of tendered old notes. Our determination will be final and
binding. We reserve the absolute right to reject any old notes not properly
tendered or any old notes our acceptance of which, in the opinion of our
counsel, might be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of the exchange offer as to particular old notes.
Our interpretation of the terms and conditions of the exchange offer, including
the instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of the old notes must be cured within such time as we determine. Neither we, the
exchange agent nor any other person will be under any duty to give notification
of defects or irregularities with respect to tenders of the old notes, nor will
we or those persons incur any liability for failure to give such notification.
Tenders of the old notes will not be deemed made until such defects or
irregularities have been cured or waived. Any old notes received by the exchange
agent that are not properly tendered and as to which the defects or
irregularities have not
18
been cured or waived will be returned to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
When we will Issue New Notes
In all cases, we will issue the new notes for the old notes that we
have accepted for exchange in the exchange offer only after the exchange agent
timely receives:
o the old notes, and
o a properly completed and duly executed letter of transmittal and
all other required documents.
Return of the Old Notes Not Accepted or Exchanged
If we do not accept any tendered old notes for exchange for any reason
described in the terms and conditions of the exchange offer or if the old notes
are submitted for a greater principal amount than the holder desires to
exchange, we will return the unaccepted or non-exchanged old notes without
expense to their tendering holder. These actions will occur as promptly as
practicable after the expiration or termination of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to midnight, Evansville time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at the address listed below under "The Exchange Offer --
The Exchange Agent."
Any notice of withdrawal must:
o specify the name of the person who tendered the old notes to be
withdrawn,
o identify the old notes to be withdrawn, including the
registration number or numbers and the principal amount of such
old notes,
o be signed by the person who tendered the old notes in the same
manner as the original signature on the letter of transmittal
used to deposit those old notes or be accompanied by documents of
transfer sufficient to permit the exchange agent to register the
transfer in the name of the person withdrawing the tender, and
o specify the name in which such old notes are to be registered, if
different from that of the person who tendered the old notes.
We will deem any old notes so withdrawn not to have been validly
tendered for exchange for purposes of the exchange offer. Any old notes that
have been tendered for exchange but that are not exchanged for any reason will
be returned to their holder without cost to the holder. This return or crediting
will take place as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. You may retender properly withdrawn old notes
by following one of the procedures described under "The Exchange Offer --
Procedures for Tendering" on page 17 at any time on or prior to midnight,
Evansville time, on the expiration date.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make additional solicitation
by facsimile, e-mail, telephone or in person by our officers and regular
employees and those of our affiliates. In addition, we have retained City
Securities, Inc. in connection with the exchange offer and will make payments to
City Securities, Inc. in connection with soliciting the beneficial owners of the
old notes for which it is the record holder. We may also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this prospectus, letters of
transmittal and related documents to the beneficial owners of the old notes and
in handling or forwarding tenders for exchange. We will pay the cash expenses to
be incurred in connection with the exchange offer. They include:
o SEC and state registration fees for the new notes,
19
o fees and expenses of City Securities, Inc.,
o accounting and legal fees,
o printing costs, and
o related fees and expenses.
Transfer Taxes
If you tender your old notes for exchange, you will not be required to
pay any transfer taxes. We will pay all transfer taxes, if any, applicable to
the exchange of the old notes in the exchange offer. The tendering holder will,
however, be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:
o certificates representing the new notes or the old notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person
other than the registered holder of the old notes tendered,
o tendered old notes are registered in the name of any person other
than the person signing the letter of transmittal, or
o a transfer tax is imposed for any reason other than the exchange
of the old notes for the new notes in the exchange offer. If
satisfactory evidence of payment of any transfer taxes payable by
a tendering holder is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed
directly to that tendering holder. The exchange agent will retain
possession of the new notes with a face amount equal to the
amount of the transfer taxes due until it receives payment of the
taxes.
The Exchange Agent
We will serve as the exchange agent for the exchange offer. Please
direct questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal to the exchange agent at the
phone number listed below. You should send the letter of transmittal and any
other required documents to the exchange agent as follows:
By Hand, Courier or Mail (Registered or Certified):
Fidelity Federal Bancorp
Attn.: Deb Fritz
18 N.W. Fourth Street
Evansville, Indiana 47708
By Facsimile Transmission (Only Eligible Institutions as defined in
Instruction 4 of the letter of transmittal):
(812) 429-0574
Deb Fritz
Confirm by Telephone:
(812) 424-0921
Deb Fritz
Use of Proceeds
We will not receive any cash proceeds from the issuance of the new
notes. In consideration for issuing the new notes, we will receive in exchange a
like principal amount of the old notes. The old notes surrendered in exchange
for the new notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the new notes will not result in any change in our
capitalization.
Accounting Treatment
We will amortize our expenses of the exchange offer over the term of
the new notes under generally accepted accounting principles.
20
Other
Participation in the exchange offer is voluntary, and you should
carefully consider whether to accept. You are urged to consult your financial
and tax advisors in making your decision on what action to take. In the future,
we may seek to acquire untendered old notes in privately negotiated
transactions, through subsequent exchange offers or otherwise. We have no
present plan to acquire any old notes that are not tendered in the exchange
offer.
21
DESCRIPTION OF THE NEW NOTES
The following description is a summary of the material provisions of
the new notes. This summary is not complete and is qualified in its entirety by
reference to the new notes, a form of which we have filed with this registration
statement.
Distinction Between the Old Notes and the New Notes
The general terms of the new notes are substantially similar to those
of the old notes, except for:
o an extension of the maturity from April 30, 2001 to April 30,
2004,
o an increase in the interest rate from 9-1/8% to 12%, and
o different redemption terms, as described below.
Principal, Interest Rate and Maturity
The new notes will mature on April 30, 2004. The new notes are
initially limited to $1,000,000 aggregate principal amount, subject to an
increase of up to $1,500,000 aggregate principal amount. However, we may issue
additional notes from time to time, without the consent of the holders of the
new notes.
Interest on the new notes will:
o accrue at the rate of 12% per year,
o be payable semiannually, in arrears, on each May 1 and November
1, with the initial interest payment payable on November 1, 2001,
and
o be payable to the person in whose name the new notes are
registered at the close of business on April 15 and October 15
preceding the applicable interest payment date, which we refer to
as "regular record dates."
Optional Redemption
We may redeem the new notes, in whole or in part, at our option at any
time upon not less than 15 and not more than 30 days' notice, on any date after
May 1, 2001 and prior to maturity, at face value plus accrued and unpaid
interest. If we redeem the new notes, in whole or in part, between May 1, 2001
and April 30, 2002, we also will pay a redemption premium equal to 1% of the
principal amount of the new notes that have been redeemed.
If we redeem the new notes in part, we will select the new notes for
redemption on a pro rata basis, by lot or by such other method as we in our sole
discretion deem fair and appropriate. We will only redeem the new notes in
multiples of $1,000 in original principal amount. A new note in principal amount
equal to the unredeemed portion of the original note will be issued upon the
cancellation of the original note.
Ranking of the New Notes
The new notes rank pari passu with the old notes which means they rank
proportionately, similarly and at an equal level. In addition, the new notes are
unsecured obligations of Fidelity Federal and fully subordinated to all other
indebtedness of Fidelity Federal, including any future issues of subordinated
notes or debentures of Fidelity Federal but not to common stock or preferred
stock of Fidelity Federal.
22
We presently have the following unsecured debt as of December 31, 2000:
Junior subordinated notes, 9.125%, interest paid $1,476,000
semi-annually, due April 2001, unsecured
Junior subordinated notes, 9.25%, interest paid 1,494,000
semi-annually, due January 2002, unsecured
Senior subordinated notes, 10.00%, interest paid 7,000,000
----------
semi-annually, due January 2005, unsecured
Total unsecured debt $9,970,000
==========
The new notes are not directly subordinated to indebtedness of United
Fidelity Bank or its subsidiaries. However, there are no contractual limitations
on the amount of indebtedness which may be incurred by United Fidelity Bank or
its subsidiaries which could impact the ability of United Fidelity Bank to pay
dividends to us, from which we would make payments on the new notes.
Sinking Fund
We are not obligated to make mandatory redemption or sinking fund
payments with respect to the new notes.
Payment
We will pay interest on the new notes to the persons in whose names the
new notes are registered at the close of business on the regular record date for
each interest payment. However, we will pay the interest payable on the new
notes at their stated maturity to the persons to whom we pay the principal
amount of the new notes. The initial payment of interest on the new notes will
be payable on November 1, 2001.
We will pay principal, premium, if any, and interest on the new notes
at the offices of Fidelity Federal or at any other office maintained by us for
such purposes. We may pay interest by cash or by check mailed to the address of
the person entitled to the payment as it appears in the security register.
Non-Payment
If we fail to pay the interest on, or principal of the new notes when
due, the principal and interest of the new notes may be declared due and payable
by the holder and payment may be enforced in accordance with Indiana law.
Waiver
No holder of any new note and no director, officer, employee, agent,
manager, partner or other interest holder of Fidelity Federal shall have any
liability for any obligation of Fidelity Federal under the new notes or for any
claim based on, in respect of or by reason of such obligations. Each holder, by
accepting a new note, waives and releases all such liability. Such waiver and
release shall be part of the consideration for the issuance of the new notes.
Notwithstanding the foregoing, this shall not be construed as a waiver or
release of any claim under the federal securities laws.
Payment for Warrant Exercise
23
The holders of the new notes, like the holders of the old notes, will
be able to surrender the new notes at the face amount of their new notes
surrendered, plus accrued interest, in payment of the exercise price of the
warrants issued in connection with the 1994 rights offering.
Form, Exchange and Transfer of the New Notes
We will issue the new notes in registered form, without coupons. We
will only issue the new notes in denominations of integral multiples of $1,000.
Holders may present the new notes for exchange or for registration of
transfer at our principal executive offices or at any other office or agency
maintained by Fidelity Federal for such purpose. We will exchange or transfer
the new notes if the new notes are duly endorsed by, or accompanied by a written
instrument of transfer in a form satisfactory to us. We will not charge a
service charge for any exchange or registration of transfer of the new notes.
However, we may require payment of a sum sufficient to cover any tax or other
governmental charge payable for the registration of transfer or exchange.
Title
We may treat the person in whose name a new note is registered on the
applicable record date as the owner of the new note for all purposes, whether or
not it is overdue.
24
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Because the new notes to be received in exchange for the old notes
likely will not qualify as "securities" for federal income tax purposes, the
exchange will be a taxable event for United States federal income tax purposes.
However, because the principal amount of the new notes to be received in the
exchange is the same as the principal amount of the old notes given up, there
will be no income tax gain or loss as a result of the exchange. The holding
period for determining capital gains or losses for the new notes received in the
exchange will begin on the day after the exchange.
LEGAL MATTERS
The validity of the new notes of the exchange has been passed upon for
us by Krieg DeVault Alexander & Capehart, LLP, Indianapolis, Indiana.
EXPERTS
Olive LLP, independent auditors, have audited our financial statements
included in our annual report on Form 10-K for the year ended December 31, 2000,
as set forth in their report, which is incorporated by reference into this
prospectus and elsewhere in the registration statement. Our financial statements
are incorporated by reference in reliance on Olive LLP's report, given on their
authority as experts in accounting and auditing.
25
$1,476,000
FIDELITY FEDERAL BANCORP
OFFER TO EXCHANGE
ALL OUTSTANDING
9-1/8% JUNIOR SUBORDINATED NOTES DUE 2001
FOR
12% JUNIOR SUBORDINATED NOTES DUE 2004
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PROSPECTUS
April 16, 2001
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