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: October 29, 2003
FIDELITY FEDERAL BANCORP REPORTS INCREASED EARNINGS
(Evansville, IN) Fidelity Federal Bancorp (the "Company") (NASDAQ: FFED), the
holding company of United Fidelity Bank, fsb (the "Bank"), reported net income
for the quarter ended September 30, 2003 of $25,000 or $0.00 per share on a
basic and diluted basis. The results are compared to net loss of $2.5 million,
or ($0.41) per share on a basic and diluted basis for the quarter ended
September 30, 2002. For the year-to-date period ended September 30, 2003, the
Company reported net income of $184,000, or $0.02 on a basic and diluted basis
compared to a total loss of $2.4 million, or ($0.40) for the same period last
year.
Return on equity was 1.97% for the year-to-date ended September 30, 2003,
compared to -26.35% for the same period ended September 30, 2002. Return on
assets for the year-to-date period ended September 30, 2003 was 0.17% compared
to -1.96% for the same period ended September 30, 2002. For the quarter, return
on assets and equity were 0.07% and 0.72%, respectively, compared to -6.11% and
- -81.50% for the same period last year.
For the quarter, the Company's net interest margin was 2.31%, compared to 2.52%
last year. During the second half of 2002, the Company completed a loan
securitization transaction resulting in a sale of loans. As of the end of the
third quarter, these loans have not yet been fully replaced on the balance
sheet. On a sequential quarter basis, net interest margin increased from 1.99%
in the second quarter of 2003 to 2.31%, primarily due to efforts to increase
loans outstanding during the periods. For the year-to-date period ended
September 30, 2003, net interest margin was 1.97% compared to 2.58% for the same
period last year.
Capital ratios at the Bank remain well above regulatory "well-capitalized"
minimums. Risk-based capital at September 30, 2003 was 13.87%, compared to
12.58% at September 30, 2002. The increase, despite a higher level of assets,
was primarily caused by the issuance of $4.0 million in subordinated debt by the
Bank during the third quarter that qualifies as regulatory capital and net
income. The subordinated debt currently has a 4.09% interest rate. The Bank's
ratio of tangible equity to assets was 7.15% at September 30, 2003 compared to
8.49% at September 30, 2002. The Bank's Tier 1 risk-based capital to assets was
9.00% at September 30, 2003, compared to 10.06% at September 30, 2002.
Subordinated debt issued by the Bank is not included in tangible equity or Tier
1 risk-based capital. As such, asset growth contributed to a decrease in these
capital ratios as compared to the same quarter last year.
Non-interest income increased 8.0% to $915,000 for the quarter from $845,000
last year primarily due to gains on sales of foreclosed assets, a significant
increase in mortgage loan volume, and an increase in the estimated value of
mortgage-servicing assets. Non-interest income for the year-to-date increased
25.0% to $3.2 million compared to $2.6 million for the same period in 2002.
Non-interest expense decreased 54.0% to $1.7 million for the third quarter of
2003 compared to $3.6 million last year. For the year-to-date period,
non-interest expense decreased 30.0% to $5.1 million in 2003 compared to $7.2
million in 2002. The decrease from last year is due to the recording of
significant impairment charges for certain assets, as well as penalties to
prepay borrowings with the Federal Home Loan Bank in the third quarter of last
year.
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Total classified assets decreased by 51.2% to $2.0 million at September 30, 2003
compared to $4.1 million at September 30, 2002. The Company and Bank sold $4.4
million in classified assets in the second quarter of 2003 at or above book
value, causing the overall level of problem assets to decline compared to last
year. The allowance for loan loss and valuation allowance for letters of credit
to total loans and letters of credit at September 30, 2003 and 2002 was 0.88%
and 1.40%, respectively. The decrease was due to the elimination of required
reserves for problem assets sold earlier in the year. Non-performing assets as a
percentage of total assets was 1.33% at September 30, 2003 compared to 1.85% at
September 30, 2002.
President and CEO Donald R. Neel noted, "Third quarter 2003 results reflect
substantial improvements in non-interest income and asset quality. These
improvements partially offset the year-over-year decline in net interest margin
resulting from the securitization of approximately $50 million in automobile
loans last year, which effectively removed these assets from the balance sheet."
Neel also stated, "The issuance of $4.0 million in qualifying subordinated debt
late in the third quarter provides the Bank additional regulatory capital, and
thus an opportunity for the Bank to increase earning assets and net interest
income." Neel further noted, "The Bank continued to benefit from a reduced cost
of funds resulting from the continuing maturity of higher-rate certificates of
deposit in the third quarter, which had a positive impact on margins." Neel
finally stated, "Origination fees from mortgage lending and gains on asset sales
drove the increase in non-interest income during the quarter, but rising
interest rates may result in lower mortgage volume in the foreseeable future.
Despite these recent increases in interest rates, consumer lending activity
remained relatively stable during the third quarter, while commercial lending
activity increased."
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 are
economic conditions generally and in the market areas of the Company and the
Bank, overall loan demand, increased competition in the financial services
industry which could negatively impact the Company's ability to increase total
earning assets, retention of key personnel, and the impact of the Bank's
Supervisory Agreement with the Office of Thrift Supervision. 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 $1.65.
Information on FFED is available on the Internet at
http://www.unitedfidelity.com
-- END --
[LOGO OF FIDELITY FEDERAL BANCORP]
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Unaudited) (Unaudited)
OPERATIONS: 2003 2002 2003 2002
- ----------------------------------- ----------- ----------- ----------- -----------
Interest income $ 1,615 $ 2,426 $ 4,814 $ 7,509
Interest expense 832 1,509 2,971 4,741
----------- ----------- ----------- -----------
Net interest income 783 917 1,843 2,768
Provision for loan losses 99 (400) (23) (400)
Non-interest income 915 845 3,238 2,588
Non-interest expense 1,663 3,616 5,081 7,248
----------- ----------- ----------- -----------
Income before income tax (64) (1,454) 23 (1,492)
Income taxes (89) 562 (161) 394
----------- ----------- ----------- -----------
Income (loss) from continuing operations $ 25 $ (2,016) $ 184 $ (1,886)
Net loss on discontinued operations -- (533) -- (533)
----------- ----------- ----------- -----------
Net income (loss) $ 25 $ (2,549) $ 184 $ (2,419)
=========== =========== =========== ===========
PER SHARE:
- -----------------------------------
Basic net income (loss) $ 0.00 $ (0.41) $ 0.02 $ (0.40)
Diluted net income (loss) 0.00 (0.41) 0.02 (0.40)
Book value at period end 1.39 1.42
Market price (bid) at period end 1.54 2.15
Average common and common
equivalent shares outstanding 9,618,658 6,167,681 8,700,711 6,087,925
AVERAGE BALANCES:
- -----------------------------------
Total assets $ 152,369 $ 165,552 $ 143,746 $ 164,600
Total earning assets 134,474 144,369 125,019 143,162
Total loans 84,924 100,127 76,899 102,036
Total deposits 111,642 126,475 109,309 122,210
Total stockholders' equity 13,984 12,407 12,443 12,270
FHLB advances 19,773 12,578 11,993 14,940
Borrowings 4,911 11,514 7,683 12,332
PERFORMANCE RATIOS:
- -----------------------------------
Return on average assets 0.07% -6.11% 0.17% -1.96%
Return on average equity 0.72% -81.50% 1.97% -26.35%
Net interest margin 2.31% 2.52% 1.97% 2.58%
LOAN QUALITY RATIOS:
- -----------------------------------
Net charge-offs to average loans and letters of credit 0.07% 0.26% 0.06% 0.79%
Allowance for loan and letter of credit losses to total
loans and letters of credit at end of period 0.88% 1.40%
Non-performing loans to total loans 2.03% 1.18%
Non-performing assets to total assets 1.33% 1.85%
SAVINGS BANK CAPITAL RATIOS:
- -----------------------------------
Tangible equity to assets at end of period 7.15% 8.49%
Risk-based capital ratios:
Tier 1 capital 9.00% 10.06%
Total capital 13.87% 12.58%
AT PERIOD END:
- -----------------------------------
Total assets $ 156,894 $ 144,418
Total earning assets 139,614 123,553
Total loans 92,623 71,535
Total deposits 116,154 117,794
Total stockholders' equity 13,405 11,108
FHLB Advances 17,000 --
Borrowings 8,302 10,860
Common shares outstanding 9,618,658 6,607,423