EXHIBIT 99.1
Contacts: Donald R. Neel, President and CEO (812) 429-0550, ext. 3301
Mark A. Isaac, VP and CFO (812) 429-0550, ext. 3319
For Immediate Release: February 20, 2003
FIDELITY FEDERAL BANCORP REPORTS FOURTH QUARTER RESULTS
(Evansville, IN) Fidelity Federal Bancorp (the "Company") (NASDAQ: FFED), the
holding company of United Fidelity Bank, fsb (the "Bank"), reported that during
the quarter ended December 31, 2002 it incurred certain non-cash charges and
recorded a net loss for the quarter of $1.976 million, or $0.30 per share on a
basic and diluted basis. These results compare to net income of $77,000, or
$0.01 per share on a basic and diluted basis for the quarter ended December 31,
2001. For the fiscal year ended December 31, 2002, the Company reported a net
loss of $4.395 million or $0.71 on a basic and diluted basis, compared to net
income of $224,000, or $0.04 for the same period last year.
The non-cash charges recorded during the fourth quarter of 2002 relate primarily
to reserves established for the Company's income tax receivable and to certain
asset impairment charges. The Company recorded a valuation allowance and certain
other tax-related charges that reduced the carrying value of its income tax
receivable by approximately $1.2 million. These charges were primarily due to a
change in current estimates of the realizability of certain tax losses and tax
credit carryforwards, and sales of assets that resulted in capital gains for tax
purposes. The Company also recorded charges of approximately $455,000 to adjust
premiums on mortgage-backed securities and mortgage servicing rights to their
current estimated realizable values, primarily as a result of the effect of the
historically low interest rate environment. In addition, the Company recorded a
charge of approximately $708,000 to adjust its retained interests in securitized
assets. This charge was primarily as a result of lower than expected interest
rates which resulted in the Company securitizing loans at lower interest rates
than originally estimated and experiencing faster than expected prepayment
speeds on the seasoned portion of the securitized loans. These charges were
partially offset in the fourth quarter by a pre-tax gain recorded of
approximately $223,000 related to the sale of the Company's affordable housing
interests.
Capital ratios at the Bank remain well above regulatory "well-capitalized"
minimums. Risk-based capital at December 31, 2002 was 12.53%, compared to 14.39%
at December 31, 2001. The Bank's tangible capital ratio was 8.52% at December
31, 2002 compared to 8.48% at December 31, 2001. The Bank's Tier 1 risk-based
capital to assets was 9.95% at December 31, 2002, compared to 10.71% at December
30, 2001.
A decrease in consumer loan sales for the quarter and for the year caused
non-interest income to decline compared to last year. Total non-interest income
was $727,000 for the quarter compared to $1.1 million last year, and totaled
$2.9 million for 2002 compared to $3.6 million in 2001. Non-interest expense
increased to $3.6 million for the fourth quarter of 2002 compared to $1.7
million last year. For the year-to-date period, non-interest expense increased
to $11.3 million in 2002 compared to $5.7 million in 2001, primarily due to
charges recorded in the third and fourth quarters of 2002.
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The Company's net interest margin for the quarter decreased to 1.77%, down from
2.31% last year. The decline was primarily caused by a reduction of the loan
portfolio resulting from consumer loan sales in the third and fourth quarters.
However, increased consumer loans outstandings during the first half of the
year, increased commercial lending volume this year, and a continued decline in
funding costs positively impacted net interest margin for 2002 resulting in an
increase in net interest margin to 2.40% compared to 2.03% for the same period
last year.
Total classified assets decreased to $6.0 million at December 31, 2002 compared
to $7.7 million at December 31, 2001. The Company and Bank have successfully
reduced their respective classified or problem assets, utilizing both a
non-recourse, FHA multifamily loan program, and non-recourse financing obtained
from traditional financial institutions. The allowance for loan loss and
valuation allowance for letters of credit to total loans and letters of credit
at December 31, 2002 and 2001 was 1.24% and 1.87%, respectively. Non-performing
assets as a percentage of total assets were 2.35% at December 31, 2002 compared
to 2.43% at December 31, 2001.
President and CEO Donald R. Neel noted, "We are pleased that the Company met its
strategic goal of significantly reducing its risk profile. During 2002 we were
able to further reduce classified assets; execute an agreement to sell a
property which, if completed, will reduce total classified assets by an
additional 50%; dispose of the Company's affordable housing portfolio; implement
alternative funding sources for the Company's consumer lending business; and
maintain capital ratios at well above regulatory minimums." Neel stated, "We
believe that with these accomplishments in 2002, the Company is better
positioned for future growth. However, the process of improving core earnings,
and thus increasing the value of the Company's core franchise, is a long-term
proposition requiring a disciplined approach focused on community banking
fundamentals." Neel also noted, "Despite our disappointment concerning 2002
results, most of the charges recorded during the fourth quarter and for the year
were non-cash and non-recurring in nature and are not expected to have an
adverse impact on the Company's future operations."
This news release contains forward-looking statements that are based upon the
Company's current expectations, but are subject to certain risks and
uncertainties that may cause actual results to differ materially. Among the
risks and uncertainties that could cause actual results to vary materially is
the impact of the Bank's Supervisory Agreement with the Office of Thrift
Supervision. Other risks and uncertainties include economic conditions generally
and in the market areas of the Company and the Bank, overall loan demand, and
increased competition in the financial services industry. Actions by the Federal
Reserve Board and changes in interest rates, loan prepayments by, and the
financial health of, the Bank's borrowers, and other factors described in the
reports filed by the Company with the Securities and Exchange Commission could
also impact current expectations.
The Company is a unitary savings and loan holding company based in Evansville,
Indiana. Its savings bank subsidiary, United Fidelity Bank, fsb, maintains five
locations, four in Evansville and one in Warrick County. The Company's stock,
which is quoted on NASDAQ under the symbol FFED, most recently traded at $1.44.
Information on FFED is available on the Internet at
http://www.unitedfidelity.com
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FIDELITY FEDERAL BANCORP
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
OPERATIONS: 2002 2001 2002 2001
- ----------- ----------- ----------- ----------- -----------
Interest income $ 1,828 $ 2,648 $ 9,337 $ 11,455
Interest expense 1,281 1,816 6,022 8,501
----------- ----------- ----------- -----------
Net interest income 547 832 3,315 2,954
Provision for loan losses 40 202 (360) 1,349
Non-interest income 727 1,083 2,939 3,608
Non-interest expense 3,564 1,712 11,339 5,698
----------- ----------- ----------- -----------
Income (loss) before income tax (2,330) 1 (4,725) (485)
Income taxes (354) (76) (243) (513)
----------- ----------- ----------- -----------
Income before extraordinary item (1,976) 77 (4,482) 28
Gain on extraordinary item, net of tax -- -- 87 196
----------- ----------- ----------- -----------
Net income (loss) $ (1,976) $ 77 $ (4,395) $ 224
=========== =========== =========== ===========
PER SHARE:
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Basic net income (loss) $ (0.30) $ 0.01 $ (0.71) $ 0.04
Diluted net income (loss) (0.30) 0.01 (0.71) 0.04
Book value at period end 1.42 1.99
Market price (bid) at period end 1.47 2.30
Average common and common
equivalent shares outstanding 6,649,664 5,735,483 6,183,269 5,146,726
AVERAGE BALANCES:
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Total assets $ 144,878 $ 162,288 $ 159,625 $ 165,592
Total earning assets 122,813 142,750 138,033 145,342
Total loans 72,935 110,666 94,821 111,572
Total deposits 109,808 120,522 119,085 125,853
Total stockholders' equity 10,968 11,432 11,936 10,288
FHLB advances 9,466 13,758 13,561 10,926
Borrowings 11,012 12,915 11,998 13,525
PERFORMANCE RATIOS:
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Return on average assets -5.41% 0.19% -2.75% 0.14%
Return on average equity -71.50% 2.67% -36.82% 2.18%
Net interest margin 1.77% 2.31% 2.40% 2.03%
LOAN QUALITY RATIOS:
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Net charge-offs to average loans and letters of credit 0.68% -0.30% 0.77% 0.60%
Allowance for loan and letter of credit losses to total
loans and letters of credit at end of period 1.24% 1.87%
Non-performing loans to total loans 1.30% 3.46%
Non-performing assets to total assets 2.35% 2.43%
SAVINGS BANK CAPITAL RATIOS:
- ----------------------------
Tangible equity to assets at end of period 8.52% 8.48%
Risk-based capital ratios:
Tier 1 capital 9.95% 10.71%
Total capital 12.53% 14.39%
AT PERIOD END:
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Total assets $ 132,290 $ 159,659
Total earning assets 113,879 141,868
Total loans 73,924 106,570
Total deposits 106,791 120,155
Total stockholders' equity 9,588 11,895
FHLB Advances 3,000 12,333
Borrowings 10,586 12,317
Common shares outstanding 6,740,883 5,987,009