Exhibit 99.(c)(2)
November 2004
FAIR VALUE APPRAISAL
Fidelity Federal Bancorp
================================================================================
FAIR VALUE APPRAISAL
================================================================================
FIDELITY FEDERAL BANCORP
EVANSVILLE, INDIANA
November 2004
FAIR VALUE APPRAISAL
FIDELITY FEDERAL BANCORP
TABLE OF CONTENTS
===============================================================================
Tab Page
1 APPRAISAL LETTER..................................................1
2 COMPANY BACKGROUND................................................3
3 ECONOMIC OUTLOOK
National Economy..................................................6
Current State of the Industry.....................................9
Demographic and Economic Analysis................................11
4 COMPETITIVE MARKET OVERVIEW......................................15
5 FINANCIAL REVIEW.................................................20
6 METHODOLOGY......................................................35
Transaction Value Method.........................................38
Asset Value Method...............................................39
Adjusted Book Value Method.......................................40
Investment Value Method..........................................43
Earnings Method..................................................46
Acquisition Comparable Method....................................49
7 CONCLUSION.......................................................52
8 FIRM QUALIFICATIONS
Professional Bank Services, Inc..................................55
Resumes..........................................................56
Code of Conduct..................................................59
9 EXHIBITS
1 - Projected Financial Data for Fidelity Federal Bancorp........60
2 - Recent Company Common Stock Trading Activity.................61
Evansville, Indiana
Professional Bank Services, The 1000 Building
Incorporated 6200 Dutchman's Lane, Suite 305
Louisville, Kentucky 40205
Atlanta, Chicago,
Louisville, Nashville, 502 451-6633
Ocala 502 451-6755 (FAX)
800-523-4778 (WATS)
Consultants to the
Financial Industry
[LOGO OF PROFESSIONAL BANK SERVICES]
November 9, 2004
Board of Directors
Fidelity Federal Bancorp
18 North West Fourth Street
P.O. Box 1347
Evansville, Indiana 47706
To The Directorate:
You have requested a fair value appraisal of the common stock of Fidelity
Federal Bancorp, Evansville, Indiana (the "Company"). The purpose and intended
use of the appraisal is to determine the cash fair value of the Company's common
shares relative to fractional shares created by the Company's proposed reverse
stock split and going private transaction (the "Going Private Transaction"). In
addition, you have requested our opinion as investment bankers as to the
fairness of the cash value to be paid to the holders of those fractional shares
which will be exchanged as a result of the Going Private Transaction, as well as
to the remaining unaffiliated shareholders from a financial point of view. The
appraisal and our opinion are based on a review of the financial condition and
history of the Company, regulatory and audit reports, and other such summary
information available and deemed appropriate. The date of this appraisal is as
of November 9, 2004.
Professional Bank Services, Inc. ("PBS") has performed stock appraisals for
numerous financial institutions located throughout the United States. Our
knowledge of the financial industry evolves from an experienced staff and a
history as consultants and financial advisors to the banking industry. The
firm's wholly owned subsidiary, Investment Bank Services, Inc., is a registered
Broker/Dealer with the Securities and Exchange Commission.
For purposes of this appraisal and our opinion, we have reviewed and analyzed
the historical performance of the Company including among other things: (i)
Audited consolidated financial statements for the Company for the years ending
December 31, 2001, 2002 and 2003; (ii) all Forms 10-Q, 10-K and 8-K and other
reports for 2003 and year to date 2004 filed by the Company with the Securities
and Exchange Commission (the "SEC"); (iii) September 30, 2004 internal Company
consolidated financial statements;
Fidelity Federal Bancorp
November 9, 2004
Page Two
(iv) the 2003 Strategic Plan of the Company's wholly owned subsidiary United
Fidelity Bank FSB (the "Thrift"); (v) the Thrift's 2004 budget; (vi) various
most recent month end internal asset quality reports, loan production reports,
cash flow and Board of Directors earnings reports and funding and interest rate
sensitivity reports of the Company and the Thrift; and (vii) the historical
common stock trading activity of the Company.
Financial projections have been prepared and analyzed as well as other financial
studies, analyses and investigations as deemed relevant for the purposes of this
appraisal. In review of the aforementioned information, we have taken into
account our assessment of general market and financial conditions, our
experience in other transactions, and our knowledge of the banking industry
generally.
We have not compiled or audited the financial statements of the Company, nor
have we independently verified any of the information reviewed; we have relied
upon such information as being complete and accurate in all material respects.
We have not made an independent evaluation of the assets of the Company.
PBS, its officers, and its staff have no present business interest in the
Company. No benefits will accrue to PBS as a result of this review, other than
the professional fees previously agreed to by the Company. Fees paid to PBS for
the preparation of this review are neither dependent or contingent upon any
transaction or upon the results of the review.
Based on the foregoing, and all other factors deemed relevant and assuming
accuracy and completeness of information provided by the Company, it is our
opinion as an independent appraiser, that the fair value of the common stock of
the Company, as of the date of this letter, is $1.85 per common share.
In addition, based on the foregoing, and all other factors deemed relevant and
assuming accuracy and completeness of information provided by the Company, it is
our opinion, as investment bankers that the $1.85 per common share to be paid to
Company common shareholders owning less than 30,000 Company common shares under
the terms of the proposed Going Private Transaction is fair to the those
shareholders as well as to the remaining unaffiliated shareholders from a
financial perspective.
Very truly yours,
/s/ PROFESSIONAL BANK SERVICES, INC.
PROFESSIONAL BANK SERVICES, INC.
-2-
COMPANY BACKGROUND
- --------------------------------------------------------------------------------
Fidelity Federal Bancorp, Evansville, Indiana (the "Company") was incorporated
in 1993 under the laws of the State of Indiana and is a registered savings and
loan holding company. The Company's wholly owned savings bank subsidiary, United
Fidelity Bank, FSB (the "Thrift") was organized in 1914 and is a
federally-chartered stock savings bank located in Evansville, Indiana. The
Thrift is primarily engaged in the business of attracting savings deposits from
the general public, Federal Home Loan Bank advances and other wholesale funding
sources, and investing such funds in loans. The Thrift originates consumer loans
on a direct basis in its offices. In addition, the Thrift originates commercial
loans secured by real estate in addition to nonresidential real estate, other
types of consumer loans, commercial loans and home equity loans. The Thrift also
invests in interest-bearing deposits in other banks, mortgage-backed securities
and other investments permitted by applicable law. The Thrift operates from five
full-service offices, four in Evansville and one in neighboring Warrick County.
(The Thrift's primary retail market area consists of the Indiana counties of
Vanderburgh, Posey, Gibson and Warrick.)
The Thrift's subsidiary, Village Capital Corporation records income on a rate
cap/floor agreement on a credit extension to an unrelated borrower that was
completed in 1995. In addition in 2001, the Thrift formed a new subsidiary,
United Fidelity Finance, for purposes of acquiring, owning, purchasing, holding,
selling, transferring, pledging and otherwise dealing with automobile loan
receivables. United Fidelity Finance was utilized during 2002 to complete an
automobile loan securitization transaction and holds no assets as of September
30, 2004.
During the fourth quarter of 2002, the Company completed the sale of the assets
connected to their affordable housing activities to Pedcor Funding Corporation
("Funding"). The assets consisted of the stock of Village Housing Corporation (a
wholly-owned subsidiary of the Thrift), the stock of Village Affordable Housing
Corporation (a wholly-owned subsidiary of the Company), an interest rate swap,
and notes from affordable housing limited partnerships in which Village Housing
Corporation is the general partner. The Company decided to pursue the sale of
these assets in order to further focus on its community banking activities. It
also determined that the elimination of the contingent liabilities associated
with the ownership of the affordable housing general partnerships interests
would improve its overall risk profile.
-3-
The Company is a savings and loan holding company within the meaning of the Home
Owners' Loan Act of 1933 ("HOLA"). Fidelity is registered with the Office of
Thrift Supervision (the "OTS") and is subject to OTS regulations, examinations,
supervision and reporting requirements.
As a federally chartered, SAIF-insured savings association, the Thrift is
subject to extensive regulation by the OTS and the FDIC. The OTS periodically
examines the books and records of the Thrift and, in conjunction with the FDIC
in certain situations, has examination and enforcement powers. This supervision
and regulation are intended primarily for the protection of depositors and
federal deposit insurance funds.
The Thrift entered into a supervisory agreement with the OTS on February 3,
1999. The supervisory agreement (the "Supervisory Agreement"), as amended on
November 18, 2003, required the Thrift to:
o Refrain from paying dividends without OTS approval.
o Continue to comply with its strategic plan, including its capital targets,
consistent with the Thrift's business plan as approved by the OTS.
o Refrain from engaging in any transaction with or distribution of funds to
the Company or its subsidiaries or selling any assets to an affiliate
without OTS approval.
o Not engage in new activities not included in its strategic plan without OTS
approval.
After the close of the market on October 28, 2004, the Company announced the OTS
had terminated the Supervisory Agreement between the Thrift and the OTS in its
entirety.
While management has indicated the Company discontinued originating indirect
automobile credits in September 2004 and is currently in the process of exiting
this business line the Company currently still has a significant exposure to
these indirect auto loans.
In April 2003, the Company issued 2.8 million shares of common stock for $4.0
million in cash through the exercise of an option held by Pedcor Financial, LLC
("Pedcor Financial") and affiliates. The exercise price per share was $1.44, and
was determined under a formula included in the shareholder-approved stock
purchase agreement effective May 19, 2000. The proceeds of the option exercise
were utilized to reduce Fidelity's long-term debt outstanding. The remaining
options expired on May 19, 2003.
-4-
Pedcor Financial is a member of a group of companies which is controlled by
three directors of the Company.
In March 2004, the Company filed a registration statement for a shareholder
rights offering with the SEC. A total of 1.4 million shares were registered in
the filing. For every 6.9 shares of the Company held on the record date,
shareholders could subscribe to purchase one share of Company common stock at
$1.81. The rights offering was completed on May 14, 2004. The Company raised
$2.5 million net of cost associated with the offering. The shares purchased by
shareholders with these funds were issued in May 2004.
Pedcor Financial purchased approximately 252,042 shares in the rights offering.
As of July 7, 2004 Pedcor Financial and its affilitates disclosed aggregate
beneficial ownership of 7,958,220 shares, or 72.35%, of the Company's common
stock outstanding.
-5-
NATIONAL ECONOMY
- --------------------------------------------------------------------------------
According to estimates released by the Bureau of Economic Analysis, the U.S.
economy experienced a decrease in growth during the second quarter of 2004
compared to the first quarter of 2004. Second quarter 2004 real Gross Domestic
Product ("GDP") increased at a 2.8% annual rate compared to first quarter 2004
real GDP annualized growth of 4.5%.
The increase in real GDP during the second quarter reflects an increase in
personal consumption expenditures, an increase in government spending as well as
private inventory investment, and residential fixed investment. These positive
trends were partially offset by a deceleration in exports and in personal
consumption expenditures. Imports, which are subtracted from GDP, increased in
the second quarter of 2004.
Personal consumption expenditures increased 1.6% for the second quarter of 2004,
compared with an increase of 4.1% in the first quarter of 2003. Nonresidential
fixed investment increased 12.1% for the second quarter of 2004, compared to a
first quarter increase of 4.2%. Residential investment increased 14.7% for the
second quarter of 2004 compared to a 7.3% decrease in the first quarter of 2004.
Exports of goods and services increased 6.1% for the second quarter of 2004
compared to an increase of 7.3% for the second quarter of 2004. Imports of goods
and services increased 14.1% for the second quarter of 2004 compared to an
increase of 10.6%. Government consumption expenditures and gross investment
increased 2.7% for the second quarter of 2004 compared to 7.1% for the first
quarter of 2004.
In light of the continued stagnation in the economy, lingering fears of slipping
into another recession, the events of September 11, 2001, and the decline in the
equity markets, the FOMC reduced the Federal Funds rate by 500 basis points
since year-end 2000. Recent robust economic growth and early signs of inflation
have begun to outweigh deflationary and stagnation fears indicating a
significant potential for interest rates to begin rising. At the June 30, 2004
meeting the FOMC raised the targeted Fed Funds rate by 25 basis points to 1.25%
compared to a high of 6.50% at year-end 2000. At the September 21, 2004 meeting
of the FOMC the committee increased the targeted Federal Funds rate by 25 basis
a third time points to 1.75%.
The 10-year Treasury rate, which strongly correlates to macro interest rates and
bank profitability, fell from 5.12% at year end 2000 to below 4% during 2003 and
2004.
-6-
Recent economic growth and inflation expectations have caused an increase in the
10-year Treasury rate. At March 31, 2004 the 10-year Treasury was 3.86% and has
now increased to 4.22% at November 8, 2004.
On November 8, 2004 the S&P 500 Index closed at 1,164.89 compared to 1,111.92
December 31, 2003, 879.82 at December 31, 2002, 1,148.08 at December 31, 2001,
1,320.28 at December 31, 2000 and 330.22 at December 31, 1990. In terms of
fundamental valuation levels, the market capitalization weighted absolute price
to earnings ratio at September 30, 2004 equaled 18.62X compared to 21.51X
December 31, 2003, 19.42X at December 31, 2002, 24.71X at December 31, 2001, and
13.73X at December 31, 1990.
Given the available economic and market data, it has become evident the US
economy has entered a new expansion phase. However, continued turmoil in the
Middle East has cast a shadow over consumer and business sentiment. The equity
markets, while rebounding significantly from 2002 year-end index values, remain
characterized by a significant degree of uncertainty and volatility. On November
8, 2004, the NASDAQ Index closed at 2,039.25 which is an increase of 1.79% from
the December 31, 2003 NASDAQ Index closing value of 2,003.37 and a increase of
52.69% from the December 31, 2002 closing value of 1,335.51. The November 8,
2004 NASDAQ closing value of 2,039.25 still represents a decline of 3,009.37 or
59.61% from its all-time high close of 5,048.62 reached on March 10, 2000. On
November 8, 2004, the SNL Securities Thrift Index closed at 1,525.80
representing an increase of 2.93% from the December 31, 2003 closing value of
1,482.32.
-7-
CURRENT ECONOMIC OUTLOOK
- -----------------------------------------------------------------------------------------------------------------------------
Real Gross Domestic Product and Related Measures: Percent Change From Preceding Period
[Quarters seasonally adjusted at annual rates]
2001 2002 2003 2003:Q3 2003:Q4 2004:Q1/r 2004:Q2/r
- -----------------------------------------------------------------------------------------------------------------------------
Gross domestic product (GDP). 0.8 1.9 3.0 7.4 4.2 4.5 2.8
Personal consumption expenditures... 2.5 3.1 3.3 5.0 3.6 4.1 1.6
Durable goods..................... 4.3 6.5 7.4 16.5 3.9 2.2 0.0
Nondurable goods.................. 2.0 2.6 3.7 6.9 5.1 6.7 0.4
Services.......................... 2.4 2.6 2.2 1.9 2.8 3.3 2.5
Gross private domestic investment... -7.9 -2.4 4.4 22.4 13.9 12.3 17.3
Fixed investment.................. -3.0 -4.9 5.1 18.0 10.5 4.5 13.0
Nonresidential.................. -4.2 -8.9 3.3 15.7 11.0 4.2 12.1
Structures.................... -2.3 -17.8 -5.6 -1.3 7.9 -7.6 7.1
Equipment and software........ -4.9 -5.5 6.4 21.7 12.0 8.0 13.6
Residential..................... 0.4 4.8 8.8 22.4 9.6 5.0 14.7
Change in private inventories..... -- -- -- -- -- -- --
Net exports of goods and services... -- -- -- -- -- -- --
Exports........................... -5.4 -2.3 1.9 11.3 17.5 7.3 6.1
Goods........................... -6.1 -4.1 2.2 10.1 16.1 9.1 5.0
Services........................ -3.7 1.8 1.4 14.1 20.6 3.4 8.7
Imports........................... -2.7 3.4 4.4 2.8 17.1 10.6 14.1
Goods........................... -3.2 3.7 4.7 0.0 18.4 12.7 13.6
Services........................ -0.3 1.9 3.1 17.9 11.1 1.2 16.4
Government consumption expenditures
and gross investment............... 3.4 4.4 2.8 0.1 1.6 2.5 2.4
Federal........................... 3.9 7.5 6.6 -3.3 4.8 7.1 2.7
National defense................ 3.9 7.7 9.0 -7.7 11.6 10.6 1.9
Nondefense...................... 3.9 7.1 2.4 5.8 -7.5 0.2 4.5
State and local................... 3.2 2.8 0.7 2.2 -0.1 0.0 2.2
Addenda:
Final sales of domestic product... 1.6 1.4 3.1 6.8 3.7 3.3 2.1
Gross domestic purchases.......... 0.9 2.5 3.3 6.4 4.7 5.0 4.0
Final sales to domestic
purchasers....................... 1.8 2.1 3.4 5.9 4.2 3.9 3.4
Gross national product (GNP)...... 0.8 1.7 3.3 7.6 5.5 3.9 1.4
Disposable personal income........ 1.9 3.1 2.3 8.2 1.4 2.4 2.5
Current-dollar measures:
GDP............................. 3.2 3.5 4.9 8.8 5.7 7.4 6.1
Final sales of domestic product. 4.1 3.1 5.1 8.4 5.4 6.1 5.4
Gross domestic purchases........ 2.9 4.0 5.4 8.1 5.9 8.6 7.6
Final sales to domestic
purchasers..................... 3.8 3.6 5.5 7.7 5.7 7.4 7.0
GNP............................. 3.2 3.4 5.2 9.0 7.0 6.8 4.6
Disposable personal income...... 4.1 4.6 4.2 9.9 2.6 5.8 5.7
-8-
CURRENT STATE OF THE INDUSTRY (March 31, 2004)
- --------------------------------------------------------------------------------
FDIC - insured institutions set an earnings record during the first quarter of
2004. The record-high earnings during the first quarter were attributed to
continued strength in mortgage lending and reduced loan loss expenses. Net
income in the first quarter increased 2.8% over the fourth quarter totaling
$31.9 billion for all insured financial institutions. Net income from
international operations increased from $1.1 billion during the fourth quarter
2003 to $2.7 billion in the first quarter of 2004. The average return on assets
("ROA") for the industry remained an all-time quarterly record of 1.38% from the
fourth quarter. The industry is experiencing the lowest percentage of
unprofitable institutions since 1998. Nearly half of all institutions reported
higher ROAs than a year ago.
Gains on sales of securities and other assets created $2.6 billion in earnings
during the first quarter up from $736 million during the fourth quarter 2003.
This compares to $3.7 billion recorded in the first quarter of 2003. However,
the first quarter showed continued shrinking in net interest margins due
primarily to weak growth in net interest income of only $1.1 billion. This marks
the seventh drop in net interest margins over the last eight quarters. A $2.2
billion drop in servicing fees was the primary contributor to a $1.7 billion
drop in non-interest income. Credit-card lenders saw improvement in margins
while mortgage lenders and international banks felt the most margin compression.
Industry loan loss provisions declined in the first quarter with provisions
dropping again for the fourth time in five quarters. Non-current loans and net
loan charge-offs showed continued improvements during the first quarter with
non-current loans dropping $4.6 billion and charge-offs dropping $1.9 billion.
Non-current loans dropped for the sixth consecutive quarter and net loan
charge-offs have declined four of the last five quarters.
For the first quarter of 2004, the industry's total assets increased $302
billion or 3.3%. Mortgage-backed securities increased $121 billion while home
equity loans and residential mortgage loans combined increased by $93 billion
during the first quarter. Equity capital increased $55.2 billion during the
first quarter.
During the first quarter of 2004, the total number of insured financial
institutions declined from 9,181 to 9,116 institutions. Three insured
institutions failed during the first quarter, while 91 were absorbed in mergers.
There were 27 new charters reporting
-9-
financial results. The overall number of financial institutions on the FDIC's
"Problem List" fell to 114 from the third quarter 2003 number of 116. (Source:
The FDIC Quarterly Banking Profile, First Quarter 2004)
-10-
BANKING MARKET PROFILE
- --------------------------------------------------------------------------------
Demographic and Economic Review
- -------------------------------
Fidelity Federal Bancorp, Evansville, Indiana (the "Company"), through its
subsidiary, operates from its main office and three branch offices located in
Vanderburgh County, and one branch office located in Warrick County, Indiana.
The following data is a review of the demographics and economics of the market
areas in which the Company operates.
The table below lists the population of Vanderburgh and Warrick Counties and the
State of Indiana.
- ------------------------------------------------------------------------------
POPULATION TRENDS
Estimate
2000 2004 2009
- ------------------------------------------------------------------------------
Vanderburgh County, IN 171,922 172,173 172,433
Percent Change 0.15% 0.15%
Warrick County, IN 52,383 54,716 57,614
Percent Change 4.45% 5.30%
State of Indiana 6,080,485 6,223,030 6,399,622
Percent Change 2.34% 2.84%
- ------------------------------------------------------------------------------
Source: SNL Securities, L.P. Claritas
The Warrick County banking market has shown an increase in population over the
period reviewed above that of the State of Indiana. Vanderburgh County has shown
minimal growth in population below both Warrick County and the State of Indiana.
Warrick County has grown 4.45% since 2000 compared to 2.34% of the State of
Indiana and 0.15% of Vanderburgh County.
-11-
- -------------------------------------------------------------------------------
2004 AGE DISTRIBUTION
Vanderburgh County Warrick County State of Indiana
- -------------------------------------------------------------------------------
Population 172,173 54,716 6,223,030
0 - 14 19.00% 21.00% 21.00%
15 - 34 28.00% 24.00% 28.00%
35 - 54 28.00% 32.00% 29.00%
55+ 25.00% 22.00% 22.00%
- -------------------------------------------------------------------------------
The age distribution of Warrick County reflects a mature population base, which
is concentrated (32.00%) in the 35-54 age group, compared to 29.00% for the
State of Indiana in the same age group. Vanderburgh County reflects a population
base concentrated between the 15-34 age group and the 35-54 age group.
- --------------------------------------------------------------------------------
INCOME TRENDS
Percent Percent
Change Estimate Change
2000 2004 00 - 04 2009 04 - 09
- --------------------------------------------------------------------------------
Vanderburgh County
Median HH Income $37,153 $40,164 8.10% $44,660 11.19%
Per Capita $20,655 $22,568 9.26% $25,241 11.84%
Warrick County
Median HH Income $48,998 $54,335 10.89% $61,168 12.58%
Per Capita $21,893 $24,938 13.91% $28,572 14.57%
State of Indiana
Median HH Income $42,187 $45,373 7.55% $49,501 9.10%
Per Capita $20,397 $22,543 10.52% $25,323 12.33%
- --------------------------------------------------------------------------------
The median and per-capita household income levels for Vanderburgh County are
below those exhibited by the State of Indiana, while the Warrick County levels
are above that of the State of Indiana. The Warrick County median household
income and per capita income are expected to reach $61,168 and $28,572,
respectively, by 2009. This compares to the State of Indiana with $49,501 and
$25,323, respectively, and Vanderburgh County with $44,660 and $25,241 for 2009,
respectively, expected median household income and per capita income levels.
-12-
The tables below present household growth trends and the 2004 income
distribution levels for Vanderburgh County, Warrick County and the State of
Indiana.
- ------------------------------------------------------------------------------
NUMBER OF HOUSEHOLDS
Percent Percent
Change Estimate Change
2000 2004 00 - 04 2009 04 - 09
- ------------------------------------------------------------------------------
Vanderburgh County 70,623 70,712 0.13% 70,802 0.13%
Warrick County 19,438 20,523 5.58% 21,905 6.73%
State of Indiana 2,336,306 2,403,575 2.88% 2,488,259 3.52%
- ------------------------------------------------------------------------------
The number of households in both banking markets is projected to increase from
2004 to 2009. The number of households in the Warrick County banking market has
increased from 19,438 to 20,523 since year 2000. This represents a growth rate
of 5.58% compared to the State of Indiana with 2.88% and Vanderburgh County with
0.13% over the same period reviewed.
-13-
- -----------------------------------------------------------------------------
2004 HOUSEHOLD INCOME DISTRIBUTION
Vanderburgh Warrick State of
County County Indiana
- -----------------------------------------------------------------------------
Households 70,712 20,523 2,403,306
$ 0 - 24K 30.00% 18.00% 28.00%
$25 - 49K 31.00% 28.00% 32.00%
$50K+ 39.00% 54.00% 41.00%
- -----------------------------------------------------------------------------
In 2004, 39.0% of the households in Vanderburgh County earn more than $50,000
per year compared to 54.0% for Warrick County and 41.00% for the State of
Indiana. This indicates a high level of affluence exists in the Company's
primary banking markets. In addition, projected 2009 income distribution data
reflects an even greater level of affluence for the Company's banking markets.
- -----------------------------------------------------------------------------
2009 HOUSEHOLD INCOME DISTRIBUTION
Vanderburgh Warrick State of
County County Indiana
- -----------------------------------------------------------------------------
Households 70,802 21,905 2,488,259
$ 0 - 24K 27.00% 16.00% 22.00%
$25 - 49K 29.00% 25.00% 28.00%
$50K+ 44.00% 60.00% 49.00%
- -----------------------------------------------------------------------------
-14-
COMPETITIVE MARKET OVERVIEW
- --------------------------------------------------------------------------------
Fidelity Federal Bancorp, Evansville, Indiana (the "Company"), through its
subsidiary, United Fidelity Bank, FSB (the Thrift") operates from its main
office, its three branch offices located in Vanderburgh County, and one branch
office located in Warrick County, Indiana.
The total deposit base of Vanderburgh County as of June 30, 2003 equals $3.7
billion and has exhibited a two year compound rate of -2.68%. At June 30, 2003,
Vanderburgh County is serviced by 17 financial institutions. As of June 2003 the
Company maintains a total deposit base of $104.8 million, representing a 2.82%
market share position. The Company's total Vanderburgh County deposits have
decreased $25.52 million since 2001, representing a two year compound rate of
- -10.33%.
The total deposit base of Warrick County as of June 30, 2003 equals $672.4
million and has exhibited a two year compound growth rate of 2.84%. At June 30,
2003, Warrick County is serviced by 10 financial institutions. As of June 2003
the Company maintains a total deposit base of $5.6 million, representing a 0.84%
market share position. The Company's total Warrick County deposits have
increased $1.8 million since 2001, representing a two year compound growth rate
of 20.68%.
The following charts present a detailed summary of the Company's growth and
market share position within its market areas as of June 30, 2003.
-15-
VANDERBURGH COUNTY, INDIANA DEPOSIT MARKET SHARE ANALYSIS
Branch
-----------------------------------
Holding Company Institution Type Address City
- ---------------------------------------------------------------------------------------------------
Old National Bancorp Old National Bank Bank 2121 W Franklin St Evansville
Old National Bancorp Old National Bank Bank 1925 Lincoln Ave Evansville
Old National Bancorp Old National Bank Bank 961 Washington Ave Evansville
Old National Bancorp Old National Bank Bank 2521 Washington Ave Evansville
Old National Bancorp Old National Bank Bank 13221 Darmstadt Rd Evansville
Old National Bancorp Old National Bank Bank 416-420 Main St Evansville
Old National Bancorp Old National Bank Bank 4500 Washington Ave Evansville
Old National Bancorp Old National Bank Bank 3888 First Ave Evansville
Old National Bancorp Old National Bank Bank 2230 Hwy 41 N Evansville
Old National Bancorp Old National Bank Bank 6245 Vogel Rd Evansville
Old National Bancorp Old National Bank Bank 4920 Vogel Rd Evansville
Old National Bancorp Old National Bank Bank 5124 Pearl Dr Evansville
Old National Bancorp Old National Bank Bank 800 N Green River Rd Evansville
Old National Bancorp Old National Bank Bank 420 Main St Evansville
Old National Bancorp Old National Bank Bank 100 N Main St Evansville
Fifth Third Bancorp Fifth Third Bank Bank 115 N Weinbach Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 7312 Eagle Crest Blvd Evansville
Fifth Third Bancorp Fifth Third Bank Bank 691 E Diamond Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 661 S Green River Rd Evansville
Fifth Third Bancorp Fifth Third Bank Bank 2350 Washington Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 415 Lincoln Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 201 N Fulton Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 1250 N Green River Rd Evansville
Fifth Third Bancorp Fifth Third Bank Bank 11201 E Upr Mt Vernon Rd Evansville
Fifth Third Bancorp Fifth Third Bank Bank 12626 Us 41 Evansville
Fifth Third Bancorp Fifth Third Bank Bank 2300 W Franklin St Evansville
Fifth Third Bancorp Fifth Third Bank Bank 4700 University Dr Evansville
Fifth Third Bancorp Fifth Third Bank Bank 4209 Washington Ave Evansville
6/03
Two Yr. Pct of Deposits Deposits Deposits
Comp. List 6/03 6/02 6/01
Holding Company Growth (%) ($000) ($000) ($000)
- ------------------------------------------------------------------------------------
Old National Bancorp -1.13% 2.85 106,009 106,811 108,437
Old National Bancorp 9.40% 1.57 58,357 50,825 48,761
Old National Bancorp -1.49% 0.55 20,349 21,513 20,970
Old National Bancorp -3.33% 0.92 34,121 37,179 36,511
Old National Bancorp 5.39% 1.41 52,408 51,868 47,184
Old National Bancorp NA NA NA NA 1,078,917
Old National Bancorp -1.54% 3.70 137,610 145,183 141,948
Old National Bancorp -4.84% 2.79 103,595 119,348 114,400
Old National Bancorp 1.88% 1.59 59,020 60,747 56,858
Old National Bancorp 9.85% 0.67 24,894 23,225 20,630
Old National Bancorp 7.62% 1.86 69,259 70,341 59,795
Old National Bancorp 1.08% 1.32 49,192 52,771 48,147
Old National Bancorp NA NA NA NA 7,244
Old National Bancorp 260.84% 22.23 826,109 719,486 63,448
Old National Bancorp -10.31% 1.27 47,183 49,566 58,656
---- ------ ------ ------
-8.86% 42.73 1,588,106 1,508,863 1,911,906
Fifth Third Bancorp -9.83% 1.18 43,812 48,425 53,882
Fifth Third Bancorp 15.83% 0.57 21,302 17,881 15,876
Fifth Third Bancorp -8.35% 1.05 39,055 42,072 46,494
Fifth Third Bancorp -8.51% 1.94 72,103 78,424 86,148
Fifth Third Bancorp -6.60% 1.00 37,143 39,830 42,575
Fifth Third Bancorp NA NA NA NA 1,264
Fifth Third Bancorp -8.05% 0.76 28,166 31,812 33,314
Fifth Third Bancorp 3.65% 1.40 52,155 51,595 48,545
Fifth Third Bancorp -5.51% 0.40 14,944 15,266 16,738
Fifth Third Bancorp NA 0.10 3,783 NA NA
Fifth Third Bancorp -4.03% 1.60 59,528 82,169 64,626
Fifth Third Bancorp -3.29% 0.63 23,485 23,958 25,112
Fifth Third Bancorp -8.60% 0.70 26,173 28,049 31,329
-16-
VANDERBURGH COUNTY, INDIANA DEPOSIT MARKET SHARE ANALYSIS
Branch
-----------------------------------
Holding Company Institution Type Address City
- ---------------------------------------------------------------------------------------------------
Fifth Third Bancorp Fifth Third Bank Bank 4550 First Ave Evansville
Fifth Third Bancorp Fifth Third Bank Bank 3150 E Lynch Rd Evansville
Fifth Third Bancorp Fifth Third Bank Bank 20 Nw 3rd St Evansville
Integra Bank Corp. Integra Bank NA Bank 12500 Hwy 41 N Evansville
Integra Bank Corp. Integra Bank NA Bank 1718 N Fares Ave Evansville
Integra Bank Corp. Integra Bank NA Bank 1020 N Burkhardt Evansville
Integra Bank Corp. Integra Bank NA Bank 111 S Red Bank Rd Evansville
Integra Bank Corp. Integra Bank NA Bank 500 N Green River Rd Evansville
Integra Bank Corp. Integra Bank NA Bank 961 S Hebron Evansville
Integra Bank Corp. Integra Bank NA Bank 227 Main St Evansville
Integra Bank Corp. Integra Bank NA Bank 401 N Main St Evansville
Integra Bank Corp. Integra Bank NA Bank 4659 First Ave Evansville
Integra Bank Corp. Integra Bank NA Bank 130 N St Joseph Ave Evansville
Evansville Teachers FCU Evansville Teachers FCU C U 4401 Theater Dr Evansville
Diamond Valley FCU Diamond Valley FCU C U 840 Diamond Ave Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 4615 University Dr Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 2200 W Franklin St Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 2028 Division St Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 1001 N Green River Rd Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 4601 Bellemeade Ave Evansville
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 4451 N First Ave Evansville
6/03
Two Yr. Pct of Deposits Deposits Deposits
Comp. List 6/03 6/02 6/01
Holding Company Growth (%) ($000) ($000) ($000)
- -------------------------------------------------------------------------------------
Fifth Third Bancorp -8.59% 2.35 87,232 97,052 104,402
Fifth Third Bancorp -6.99% 0.84 31,115 33,861 35,970
Fifth Third Bancorp -12.80% 5.40 200,504 185,509 263,679
---- ------- ------- -------
-7.74% 19.92 740,500 775,903 869,954
Integra Bank Corp. 334.81% 0.03 1,210 691 64
Integra Bank Corp. -0.71% 0.72 26,858 23,707 27,246
Integra Bank Corp. NA 0.19 6,961 1,646 NA
Integra Bank Corp. NA 0.23 8,716 3,031 NA
Integra Bank Corp. 9.87% 0.33 12,442 9,905 10,307
Integra Bank Corp. 7.40% 1.77 65,700 53,460 56,961
Integra Bank Corp. 5.66% 6.96 258,696 199,635 231,726
Integra Bank Corp. -7.89% 0.41 15,249 15,178 17,973
Integra Bank Corp. 0.75% 0.71 26,385 23,858 25,993
Integra Bank Corp. -18.06% 0.56 20,894 24,914 31,118
---- ------ ------ ------
5.07% 11.91 443,111 356,025 401,388
Evansville Teachers FCU 14.85% 10.06 373,652 312,974 283,279
Diamond Valley FCU 10.31% 3.14 116,649 105,011 95,867
First Bancorp of Indiana Inc. 3.52% 0.35 13,044 12,445 12,172
First Bancorp of Indiana Inc. -7.27% 0.95 35,281 39,981 41,027
First Bancorp of Indiana Inc. -9.43% 0.58 21,539 23,299 26,255
First Bancorp of Indiana Inc. -10.22% 0.27 9,869 11,091 12,245
First Bancorp of Indiana Inc. -0.21% 0.58 21,520 21,490 21,609
First Bancorp of Indiana Inc. 0.77% 0.32 11,745 11,505 11,567
---- ------ ------ ------
-4.87% 3.05 112,998 119,811 124,875
-17-
VANDERBURGH COUNTY, INDIANA DEPOSIT MARKET SHARE ANALYSIS
Branch
-----------------------------------
Holding Company Institution Type Address City
- ---------------------------------------------------------------------------------------------------
Fidelity Federal Bancorp United Fidelity Bank FSB Thrift 18 Nw 4th St Evansville
Fidelity Federal Bancorp United Fidelity Bank FSB Thrift 700 S Green River Rd Evansville
Fidelity Federal Bancorp United Fidelity Bank FSB Thrift 4441 N First Ave Evansville
Fidelity Federal Bancorp United Fidelity Bank FSB Thrift 4801 W Lloyd Expy Evansville
Bank of Evansville NA Bank of Evansville NA Bank 530 N Saint Joseph Ave Evansville
Bank of Evansville NA Bank of Evansville NA Bank 4424 Vogel Rd Evansville
Evansville FCu Evansville FCu C U Po Box 651 Evansville
Sterling United FCU Sterling United FCU C U 1330 W Franklin St Evansville
Regions Financial Corp. Union Planters Bank NA Bank 7400 Eagle Crest Blvd Evansville
Centurion FCU Centurion FCU C U Po Box 3787 Evansville
Evansville IN Frmns FCU Evansville IN Frmns FCU C U 312 N 4th Ave Evansville
Gas & Electric Emps FCU Gas & Elect. Emps FCU C U 1118 W Franklin Evansville
First Eldorado Bkshrs Inc. First National Bk of Dana Bank 1010 W Buena Vista Rd Evansville
Deaconess Hsptl EmpsFCU Deaconess Hsptl EmpsFCU C U 600 Mary St Evansville
Seaboard Gateway FCU Seaboard Gateway FCU C U 2710 Dixie Flyer Rd Evansville
Aggregate:
6/03
Two Yr. Pct of Deposits Deposits Deposits
Comp. List 6/03 6/02 6/01
Holding Company Growth (%) ($000) ($000) ($000)
- -------------------------------------------------------------------------------------
Fidelity Federal Bancorp 30.90% 0.77 28,717 30,681 16,759
Fidelity Federal Bancorp -19.10% 1.01 37,369 47,284 57,098
Fidelity Federal Bancorp -16.85% 0.59 21,920 24,503 31,702
Fidelity Federal Bancorp -17.65% 0.45 16,821 19,801 24,802
---- ------ ------ ------
-10.33% 2.82 104,827 122,269 130,361
Bank of Evansville NA NA 0.90 33,597 15,876 NA
Bank of Evansville NA NA 1.63 60,429 55,461 NA
---- ------ ------ --
NA 2.53 94,026 71,337 0
Evansville FCu 15.08% 0.95 35,281 29,311 26,640
Sterling United FCU 15.92% 0.84 31,387 27,903 23,357
Regions Financial Corp. 9.32% 0.73 26,964 23,165 22,564
Centurion FCU 18.96% 0.48 17,750 15,119 12,543
Evansville IN Frmns FCU 11.02% 0.37 13,700 12,281 11,116
Gas & Electric Emps FCU 14.94% 0.14 5,065 4,645 3,834
First Eldorado Bkshrs Inc. NA 0.13 4,832 NA NA
Deaconess Hsptl EmpsFCU 18.76% 0.13 4,808 3,978 3,409
Seaboard Gateway FCU 5.04% 0.05 1,720 1,500 1,559
Aggregate: -2.68% 100.00 3,715,376 3,490,095 3,922,652
-18-
WARRICK COUNTY, INDIANA DEPOSIT MARKET SHARE ANALYSIS
Branch
-------------------------------
Holding Company Institution Type Address City
- ---------------------------------------------------------------------------------------------------
Heritage Federal Credit Union Heritage Federal Credit Union C U 5388 Old State Rd 66 Newburgh
Old National Bancorp Old National Bank Bank 8577 Ruffian Ln Newburgh
Old National Bancorp Old National Bank Bank 224 W Main St Boonville
Old National Bancorp Old National Bank Bank 705 State St Newburgh
Peoples Bancshares Peoples Trust & Savings Bank Bank 132 S 3rd St Boonville
Peoples Bancshares Peoples Trust & Savings Bank Bank 7199 Parker Dr Newburgh
Fifth Third Bancorp Fifth Third Bank Bank 8422 Bell Oaks Rd Newburgh
LNB Community Bancorp Lynnville National Bank Bank 114 W Lincoln Ave Chandler
LNB Community Bancorp Lynnville National Bank Bank 215 Main St Lynnville
Boonville FSB Boonville FSB Thrift 123 N 3rd St Boonville
Elberfeld State Bank Elberfeld State Bank Bank Main St Elberfeld
Integra Bank Corp. Integra Bank NA Bank 7833 Hwy 66 Newburgh
Fidelity Federal Bancorp United Fidelity Bank FSB Thrift 8533 Bell Rd Newburgh
First Bancorp of Indiana Inc. First Federal Savings Bank Thrift 8388 Bell Oaks Dr Newburgh
Aggregate:
6/03
Two Yr. Pct of Deposits Deposits Deposits
Comp. List 6/03 6/02 6/01
Holding Company Growth (%) ($000) ($000) ($000)
- ----------------------------------------------------------------------------
Heritage Federal Credit Union 11.77% 31.99 215,083 193,354 172,157
Old National Bancorp 8.60% 9.74 65,514 60,316 55,553
Old National Bancorp -18.47% 9.88 66,431 68,385 99,932
Old National Bancorp 11.42% 7.86 52,870 42,781 42,587
---- ------ ------ ------
-3.40% 27.48 184,815 171,482 198,072
Peoples Bancshares -0.40% 9.33 62,762 63,283 63,268
Peoples Bancshares 69.96% 1.52 10,206 6,761 3,533
---- ------ ----- -----
4.51% 10.85 72,968 70,044 66,801
Fifth Third Bancorp -4.74% 9.40 63,210 79,617 69,660
LNB Community Bancorp -0.69% 2.27 15,261 13,859 15,473
LNB Community Bancorp 5.77% 5.66 38,057 44,422 34,016
---- ------ ------ ------
3.80% 7.93 53,318 58,281 49,489
Boonville FSB 3.97% 5.22 35,121 33,343 32,490
Elberfeld State Bank -1.29% 4.35 29,217 29,694 29,984
Integra Bank Corp. -5.59% 1.51 10,154 11,910 11,392
Fidelity Federal Bancorp 20.68% 0.84 5,617 3,431 3,857
First Bancorp of Indiana Inc. 22.63% 0.43 2,892 2,234 1,923
Aggregate: 2.84% 100.00 672,395 653,390 635,825
-19-
FINANCIAL HISTORY AND CONDITION
- --------------------------------------------------------------------------------
Fidelity Federal Bancorp is a thrift holding company whose primary assets are
its investment in its subsidiary savings bank, United Fidelity Bank, FSB (the
"Thrift"). The following review presents a synopsis of the financial highlights
and operating performance for the Company as contained within the SNL Securities
Financial DataSource.
- --------------------------------------------------------------------------------
Financial Highlights
Fidelity Federal Bancorp
(Dollars in Thousands)
2001 Y 2002 Y 2003 Y YTD 6/30/04
- --------------------------------------------------------------------------------
Balance Sheet
Total Assets 159,659 132,290 175,390 192,757
Total Net Loans 104,432 73,087 100,437 107,104
Deposits 120,155 106,791 120,680 120,401
Total Equity 11,895 9,588 13,367 15,578
Profitability (%)
Net Income ($000) 224 -4,395 214 175
Return on Average Assets 0.14 -2.75 0.14 0.18
Core ROAA -0.56 -0.64 -0.01 0.15
Return on Average Equity 2.18 -36.82 1.69 2.40
Core ROAE -9.04 -8.55 -0.12 1.98
Net Interest Margin 2.03 2.18 2.15 2.46
As Reported Net Interest Margin 2.03 2.18 2.15 NA
Efficiency Ratio 106.02 97.77 111.20 92.48
Noninterest Inc/ Operating Rev 52.80 50.99 52.86 38.10
- --------------------------------------------------------------------------------
-20-
- --------------------------------------------------------------------------------
Financial Highlights
Fidelity Federal Bancorp
(Dollars in Thousands)
YTD
2001 Y 2002 Y 2003 Y 6/30/04
- --------------------------------------------------------------------------------
Balance Sheet Ratios/ Capital (%)
Loans/ Deposits 88.69 69.22 83.84 89.54
Securities/ Assets 12.96 28.41 31.74 32.96
Total Equity/ Total Assets 7.45 7.25 7.62 8.08
Tangible Equity/ Tangible Assets 6.92 7.25 7.62 8.08
Tier 1 Ratio 10.71 9.95 9.16 9.82
Total Capital Ratio 14.39 12.53 13.62 13.85
Leverage Ratio (Bank, BHC only) 8.50 8.50 NA NA
Core Cap/Tang Assets (OTS Only) 8.48 8.80 7.00 7.08
Asset Quality (%)
Nonperforming Assets/ Assets 2.37 2.31 0.82 0.39
NPAs + Lns 90/ Assets 2.40 2.31 0.99 0.53
NPAs/ Loans + OREO 3.55 4.02 1.43 0.69
NCOs/ Avg Loans 1.01 0.97 0.14 0.46
Reserves/ Loans 2.01 1.13 0.73 0.65
Reserves/ NPAs 56.56 27.36 51.00 93.45
Loan Loss Provision/ NCO 119.17 -38.26 11.50 84.62
Per Share Information ($)
Common Shares Outstanding (Actual) 5,987,009 6,740,883 9,618,658 10,999,871
Avg Shares, Diluted EPS 5,146,726 6,183,269 8,932,084 10,311,675
Book Value Per Share 1.99 1.42 1.39 1.42
Tangible BV Per Share 1.84 1.42 1.39 1.42
Dividends 0.0000 0.0000 0.0000 0.0000
Diluted EPS after Extraordinary 0.04 -0.71 0.02 0.02
EPS Growth (year over year) (%) NM NM NM 0.0
Core EPS -0.17 -0.16 0.00 0.02
Core EPS Growth (year over year) (%) NM NM NM NM
Core Cash Basis EPS 0.08 -0.56 0.02 0.02
- --------------------------------------------------------------------------------
The graphs that follow illustrate the Company's various performance trends in
comparison to that of a comparable peer group. The Company's peer group consists
of publicly traded non-mutual holding company thrifts which are not
headquartered in the states of California or Florida and had as of June 30, 2004
total consolidated total assets between $100 million and $350 million and a last
twelve month ("LTM") core return on average assets (ROAA) between 0.0% and 1.0%
and are not under an agreement to be acquired. In addition, for comparability
purposes only institutions which like the Company have December fiscal year-ends
are included in the peer group.
-21-
The following tables represent the thrift institutions included in the peer
group and summary performance measures.
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP CUSTOM PEER GROUP
(As of June 30, 2004)
Total
Assets
YTD
Ticker Company Name City State ($000)
- --------------------------------------------------------------------------------
AABC Access Anytime Bancorp, Inc. Albuquerque NM 285,340
AMFC AMB Financial Corp. Munster IN 154,364
BRBI Blue River Bancshares, Inc. Shelbyville IN 204,480
CFSB Citizens First Financial Corp. Bloomington IL 334,225
ESBK Elmira Savings Bank, FSB Elmira NY 313,560
FBTC First BancTrust Corporation Paris IL 221,229
FFBI First Federal Bancshares, Inc. Colchester IL 307,723
FFHS First Franklin Corporation Cincinnati OH 272,770
GTPS Great American Bancorp, Inc. Champaign IL 157,261
GSLA GS Financial Corp. Metairie LA 209,496
HCFC Home City Financial Corporation Springfield OH 153,259
LSBI LSB Financial Corp. Lafayette IN 342,713
MCBF Monarch Community Bancorp, Inc. Coldwater MI 291,925
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 225,099
PFED Park Bancorp, Inc. Chicago IL 270,785
PBNC PFS Bancorp, Inc. Aurora IN 124,784
SSFC South Street Financial Corp. Albemarle NC 211,671
STBI Sturgis Bancorp, Inc. Sturgis MI 314,126
UCBC Union Community Bancorp Crawfordsville IN 261,540
Median: 261,540
FFED Fidelity Federal Bancorp Evansville IN 192,757
Percentile Ranking: 20.80%
- --------------------------------------------------------------------------------
-22-
- -------------------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP CUSTOM PEER GROUP
(As of June 30, 2004)
Equity/ Loans/ Core Core Efficiency
Assets Deposits ROAA ROAE Ratio
YTD YTD YTD YTD YTD
Ticker Company Name (%) (%) (%) (%) (%)
- -------------------------------------------------------------------------------------------
AABC Access Anytime Bancorp, Inc. 5.62 82.79 0.54 7.83 71.32
AMFC AMB Financial Corp. 8.31 109.54 0.61 7.09 73.48
BRBI Blue River Bancshares, Inc. 7.84 95.06 0.10 1.23 91.40
CFSB Citizens First Financial Corp. 10.07 102.02 0.82 8.47 61.31
ESBK Elmira Savings Bank, FSB 6.44 78.47 0.83 11.50 67.06
FBTC First BancTrust Corporation 11.64 71.29 0.47 3.98 78.24
FFBI First Federal Bancshares, Inc. 7.00 49.33 0.34 2.95 76.51
FFHS First Franklin Corporation 8.64 91.38 0.28 3.21 80.20
GTPS Great American Bancorp, Inc. 10.79 91.46 0.79 7.19 76.44
GSLA GS Financial Corp. 13.55 61.85 0.27 1.99 85.69
HCFC Home City Financial Corporation 8.08 120.03 0.45 5.67 73.62
LSBI LSB Financial Corp. 8.43 126.32 0.88 10.28 60.63
MCBF Monarch Community Bancorp, Inc. 14.39 124.86 0.18 1.03 83.53
NEIB Northeast Indiana Bancorp, Inc. 11.78 127.50 0.74 6.12 71.07
PFED Park Bancorp, Inc. 11.03 98.96 0.83 7.38 63.63
PBNC PFS Bancorp, Inc. 21.76 126.51 0.72 3.24 64.34
SSFC South Street Financial Corp. 12.01 78.03 0.36 3.00 81.12
STBI Sturgis Bancorp, Inc. 8.99 112.70 0.53 5.46 75.74
UCBC Union Community Bancorp 12.96 116.23 0.65 4.79 65.83
Median: 10.07 98.96 0.54 5.46 73.62
FFED Fidelity Federal Bancorp 8.08 89.54 0.15 1.98 92.51
Percentile Ranking: 22.20% 32.10% 3.40% 11.00% 100.00%
- -------------------------------------------------------------------------------------------
-23-
The Company's assets have increased approximately $33.1 million since year-end
2001 or at a compound growth rate of 7.83%. The majority of the increase in
assets, of $43.1 million, occurred during 2003. During 2002 the Company's assets
declined approximately $27.4 million due primarily to the securitization and
sale of indirect auto loans.
[FIDELITY FEDERAL BANCORP GROWTH CHART APPEARS HERE]
Assets Deposits Net Loans
2001 $159,659 $120,155 $104,432
2002 $132,290 $106,791 $73,087
2003 $175,390 $120,680 $100,437
6/30/04 $192,757 $120,401 $107,104
As indicated above, total deposits of $120.4 million at June 30, 2004 have
increased only $246 thousand since year-end 2001, resulting in a compound rate
of 0.08%. The composition of the Company's deposit base since 2001 has
demonstrated an increasing reliance on transaction accounts and certificates of
deposit greater than $100,000 ("Jumbo CDs"). Over the period reviewed, the
Company's transaction accounts have increased slightly from approximately 13.26%
of total deposits to 15.45% while MMDAs have declined from 11.19% to 5.28% and
Jumbo CDs have increased from 11.97% to 17.25%. Over the period reviewed the
Company's time deposits under $100,000 have also declined from 59.76% of total
deposits to 57.15%. Overall the Company has increased brokered deposits from
approximately $248 thousand at December 31, 2001 to $13.3 million as of June 30,
2004. In addition the Company's total deposit accounts have declined from
approximately 13,725 accounts at December 31, 2001 to 11,954 at June 30, 2004.
-24-
Since year-end 2001, the Company's net loans have increased $2.7 million
representing a compound growth rate of 1.02%. Due primarily to the previously
mentioned securitization and sale of the indirect auto loans during 2002, the
Company experienced a decline in net loans of approximately $32.6 million. Over
the period examined the Company's total 1-4 family mortgage loans have declined
from approximately 41.92% of total loans to 36.05% of total loans. While
multi-family real estate loans have declined from 3.62% of total loans, the
Company's commercial real estate loans have increased from approximately 5.74%
of total loans to 12.76%. Consumer related credits, which comprise the Company's
single largest credit portfolio have declined slightly from 46.51% of total
loans at December 31, 2001 to $42.5 million or 44.64% of total loans at June 30,
2004.
Overall at June 30, 2004 the Company has total managed automobile loans of
approximately $90.4 million which includes $16.7 million in securitized auto
loans, $38.9 million in auto loans serviced for others and $40.9 million of auto
loans in the Company's loan portfolio. In addition, at June 30, 2004 the Company
has approximately $27.0 million in off-balance sheet multifamily letters of
credit.
[FIDELITY FEDERAL BANCORP EQUITY/ ASSET CHART APPEARS HERE]
BANK PEER
2001 7.45% 10.19%
2002 7.25% 11.07%
2003 7.62% 11.06%
06/30/04 8.08% 10.07%
The Company has historically maintained a higher degree of leverage with an
equity to asset ratio below peer. However, the Company's equity to asset ratio
has been
-25-
increasing since year-end 2002 due primarily to the previously
mentioned option exercises in 2003 and subsequent rights offering in 2004. As of
June 30, 2004, the Company maintains a total equity to asset ratio of 8.08%,
compared to peer of 10.07%. In addition as of June 30, 2004 the Company's core
capital to tangible asset ratio as calculated for the OTS equals 7.08%.
[FIDELITY FEDERAL BANCORP RETURN ON AVERAGE ASSETS CHART APPEARS HERE]
BANK PEER
2001 0.14% 0.73%
2002 -2.75% 0.69%
2003 0.14% 0.78%
YTD 6/30/2004 0.18% 0.54%
Over the period reviewed the Company has experienced significantly below peer
earnings performance. During 2002, the Company reported a loss on continuing
operations of $2.4 million net of tax and a loss on discontinued operations of
$2.0 million net of tax. As part of the loss on continuing operations
experienced during 2002 the Company reported non-recurring losses of $2.35
million. Excluding these non-recurring losses the Company's core return on
average assets equaled -0.58% during 2002. Since 2002 the Company's performance
while improving slightly has remained significantly below peer. Over the first
six months of 2004 the Company's total net income equals $175,000 representing
an annualized return on average assets and average equity of 0.18% and 2.40%,
respectively. On a core earnings basis, excluding gains on sales of securities,
over the first six months of 2004 the Company's net income equals $144,000 which
represents an annualized core ROAA and ROEA of 0.15% and 1.98%, respectively.
-26-
[FIDELITY FEDERAL BANCORP RETURN ON AVERAGE EQUITY CHART APPEARS HERE]
BANK PEER
2001 2.18% 6.04%
2002 -36.82% 6.11%
2003 1.69% 6.45%
YTD 6/30/2004 2.40% 5.46%
[FIDELITY FEDERAL BANCORP EFFICIENCY RATIO CHART APPEARS HERE]
BANK PEER
2001 100.76% 69.26%
2002 95.70% 65.06%
2003 111.20% 68.34%
YTD 6/30/2004 92.51% 73.62%
Over the period reviewed the Company has reported a significantly higher
efficiency ratio compared to peer. The Company's excessive efficiency ratio can
primarily be attributed to a significantly below peer net interest margin and an
above peer level of non-interest expense.
-27-
[FIDELITY FEDERAL BANCORP TOTAL LOANS AND LEASES TO DEPOSITS CHART APPEARS HERE]
BANK PEER
2001 88.69% 110.83%
2002 69.22% 98.32%
2003 83.84% 96.52%
06/30/04 89.54% 98.96%
[FIDELITY FEDERAL BANCORP NET INTEREST/AVERAGE
EARNING ASSETS CHART APPEARS HERE]
BANK PEER
2001 2.03% 2.87%
2002 2.18% 3.30%
2003 2.15% 3.21%
YTD 6/30/2004 2.46% 3.19%
The Company's net interest margin has remained below peer throughout the period
reviewed. Over the six months ending June 30, 2004, the Company's net interest
margin has increased 31 basis points to 2.46% versus the peer level of 3.19%.
The primary contributors to the Company's below peer net margin are a below peer
loan to deposit ratio and a significantly below peer yield on earning assets.
Through the second
-28-
quarter of 2004 the Company's yield on total loans equals 5.56% versus the
median of the peer group of 6.27%. In addition, the Company's yield on its
securities portfolio equals 3.38% versus 3.63% for peer. Overall, over the first
six months of 2004, the Company's yield on earning assets equals 4.73% versus
peer of 5.54%.
Over the period reviewed the Company has increasingly relied on borrowings and
other non-core funding mechanisms to fund its balance sheet activities. As of
June 30, 2004, the Company's total borrowings equal $55.3 million and represent
28.67% of total assets compared to the peer group median of borrowing position
of 15.97% of total assets.
[FIDELITY FEDERAL BANCORP NON-INTEREST INCOME/AVERAGE
ASSETS CHART APPEARS HERE]
BANK PEER
2001 2.38% 0.55%
2002 2.15% 0.58%
2003 2.12% 0.74%
YTD 6/30/2004 1.37% 0.56%
The Company's non-interest income as a percentage of average assets has remained
well above peer over the period reviewed. A considerable portion of non-interest
income was derived from gains on sale of loans, servicing fees on loans sold and
fees on letters of credit. Over the first six months of 2004, the Company's
total non-interest income equals $1.36 million and represents 1.37% of average
assets on an annualized basis.
-29-
[FIDELITY FEDERAL BANCORP NON-INTEREST EXPENSE/AVERAGE
ASSETS CHART APPEARS HERE]
BANK PEER
2001 4.32% 2.36%
2002 4.75% 2.34%
2003 4.24% 2.46%
YTD 6/30/2004 3.34% 2.49%
Over the period reviewed the Company's non-interest expense to average assets
has remained significantly above peer. A contributing factor to the Company's
above peer non-interest expense is the Company's high level of compensation
expense compared to that of peer. Over the six months ending June 30, 2004, the
Company's total compensation expense equals 45.81% of total revenues compared to
the median peer level of 37.62%. Overall, for the six months ending June 30,
2004 the Company's non-interest expense is 3.34% compared to peer of 2.49%.
The Company's level of non-performing assets has been improving over the period
presented. As of June 30, 2004, the Company has $638,000 in non-accrual loans,
$268,000 in loans 90 + days past due and still accruing and $110,000 in other
real estate owned. As of June 30, 2004 total non-performing assets represent
0.53% of total assets compared to 0.99% at year-end 2003. The Company's level of
non-performing loans, of 0.59% of total gross loans, has declined to below peer
level as of June 30, 2004. As mentioned previously the Company has a significant
level of consumer loans which consist primarily of indirect and new and used
auto credits. As of June 30, 2004, the Company's total consumer loans represent
44.64% of total loans compared to the peer group median of 13.92%. Company
management has indicated the Company ceased originations of indirect auto
credits in September 2004 and is in the process of exiting this business.
-30-
[FIDELITY FEDERAL BANCORP NON-PERFORMING LOANS/GROSS LOANS CHART APPEARS HERE]
BANK PEER
2001 3.55% 1.11%
2002 1.24% 0.93%
2003 1.40% 1.07%
06/30/04 0.59% 0.81%
The Company experienced a high level of charge-offs and non-performing loans
during 2001 and 2002. For the years ending December 31, 2001 and 2002 the
Company experienced net loan charge-offs of approximately $1.1 million or 1.01%
of average loans and $941,000 or 0.97% of average loans, respectively. The
Company has significantly reduced its level of net charge-offs and
non-performing loans since 2002. As of June 30, 2004 the Company's
non-performing loans to gross loans equal 0.59% compared to peer of 0.81%.
[FIDELITY FEDERAL BANCORP NET LOAN CHARGEOFFS/AVERAGE LOANS CHART APPEARS HERE]
BANK PEER
2001 1.01% 0.12%
2002 0.97% 0.16%
2003 0.14% 0.05%
06/30/04 0.46% 0.23%
-31-
[FIDELITY FEDERAL BANCORP LOAN LOSS RESERVES/TOTAL LOANS CHART APPEARS HERE]
BANK PEER
2001 2.01% 0.59%
2002 1.13% 0.73%
2003 0.73% 0.85%
06/30/04 0.65% 0.72%
As of June 30, 2004, the Company's allowance for loan losses equals $699,000 or
0.65% of total loans and 77.2% of non-performing loans. In addition, the
Company's valuation allowance for multi-family letters of credit totals $300,000
at June 30, 2004 and represents 1.11% of the $27.0 million in outstanding
off-balance sheet multi-family letters of credit. Over the six months ending
June 30, 2004, the Company's gross loan loss provision expense equals $323,000
which was reduced by a $114,000 credit to the loan loss provision due to the
sale of consumer loans out of portfolio. Based on the asset quality indicators
above, the Company's allowance for loan and lease losses appears adequate to
absorb any reasonably anticipated charge-offs within the loan portfolio.
While the Company's asset quality has improved significantly and appears
satisfactory, the Company's overall risk profile is nevertheless significantly
above peer. The Company's increasing reliance on non-core funding, below peer
equity to asset ratio, significant exposure to indirect auto loans (which the
Company ceased originating in September 2004) and multi-family letters of credit
coupled with a low level of earnings and high efficiency ratio increase the
risks associated with the Company.
-32-
[FIDELITY FEDERAL BANCORP PRICE TO BOOK RATIO CHART APPEARS HERE]
BANK PEER
2001 122.6 80.9
2002 105.6 92.7
2003 113.7 115.1
06/30/04 102.8 121.5
[FIDELITY FEDERAL BANCORP PRICE EARNINGS RATIO CHART APPEARS HERE]
BANK PEER
2001 61.00 13.40
2002 NM 12.20
2003 NM 28.10
YTD 6/30/2004 36.50 24.10
-33-
[FIDELITY FEDERAL BANCORP PRICE TO CORE EARNINGS RATIO CHART APPEARS HERE]
BANK PEER
2001 NM 14.90
2002 NM 14.70
2003 NM 20.00
06/30/04 95.90 21.00
The Company experienced core earnings losses during the 2001 to 2003 period.
Over the first six months of 2004, the Company's pre-tax income equals $96,000
and its after-tax income equals $175,000. It should be noted during the period
the Company experienced an income tax benefit of $79,000. Included in the tax
benefit are income tax credits of $111,000 from the Company's investment in
affordable housing limited partnership interests. In addition, for the
year-ending 2003 the Company experienced a pre-tax loss of $6,000 which was
offset by income tax benefits of $220,000.
At December 31, 2003, the Company had a deferred tax asset of $4.9 million for
the expected benefit to be realized from the federal and state net operating
loss carryovers. In addition, the Company also had a deferred tax asset of $1.6
million for low income housing tax credits. The Company's ability to utilize
these tax credits depends on the generation of sufficient taxable income before
the expiration of the carryover periods. At December 31, 2002, the Company
established a valuation allowance of $600,000 against the deferred tax assets
because the Company believed it was more likely than not that future earnings
will be insufficient to realize the entire amount of the loss carryforwards and
tax credits. The valuation allowance was established to reduce the deferred tax
assets to the amounts the Company believed will more likely than not be
realized.
-34-
METHODOLOGY
- --------------------------------------------------------------------------------
In order to determine the fair value of a common stock in relation to the
assets, earnings and equity of a company it requires a comprehensive analysis of
the company, its markets, future growth prospects and the micro and macro
economic environment in which it operates. The concept of fair value requires
explicit utilization of valuation methods normally considered by analysts and
the courts to determine fair value. The Transaction Value Method of valuing a
share of common stock is determined by examining a limited number of
transactions which are assumed to have occurred at arm's length. The Asset Value
Method is based on adjusted value of net assets. The Adjusted Book Value Method
evaluates prevailing market conditions for companies by comparing the market
price to book value ratios of comparable publicly traded organizations to the
subject company. The Investment Value Method relates investor's perception of
comparable publicly traded organizations by comparing the market price to
earnings per share of these organizations to the subject company. The Earnings
Value Method relates value to the earnings capacity of the Company.
In addition to the above valuation methodologies, some courts have held that the
appraiser should also consider control premiums in the determination of fair
value. The appraiser must use extreme care in employing whole bank acquisition
transactions as a proxy for control premiums and fair value. In utilizing
acquisition comparables in the determination of fair value, the appraiser must
be cautious in the selection of comparable banks and transactions. The
acquisition market is dynamic and influenced by significantly more factors than
simply comparing transactions to a subject company. There are three major issues
of concern which can have a dramatic impact on acquisition transactions. The
following presents the three primary factors to be considered when and if
acquisition comparables are utilized:
Utilizing Stock Transactions in Comparables
- -------------------------------------------
It is a very common practice when a bank acquires another bank to trade shares
of common stock. In these transactions, the acquiring bank issues new shares to
the shareholders of the selling bank in exchange for their common shares. What a
bank can pay for another bank utilizing common stock, in most cases, is
significantly different than what an acquirer may or could pay in cash. There
are many factors that influence
-35-
the price a bank can sell for in a stock transaction that have nothing to do
with the selling entity. These would include the price of the acquiring
company's shares, the bank stock market, the price-to-earnings and
price-to-equity ratios of the acquiring company and the current and projected
level of earnings of the acquirer. These factors have nothing to do with the
acquired company, but these factors comprise at least one-half of the factors
that determine what a bank may sell for in a stock transaction.
In a transaction such as the Company's proposed Going Private Transaction, the
fractional shares will receive cash in return for their shares. Comparing a cash
based transaction to a stock exchange merger is like comparing apples to
oranges.
Acquisition Accounting
- ----------------------
Prior to June 30, 2001, acquisitions were accounted for utilizing two different
accounting methods. Transactions that were not substantially all common stock of
the acquiring company were, in most instances, accounted for under the purchase
method of accounting for business combinations. Transactions where the acquired
company received their entire sale price in the acquiring company's common stock
were typically accounted for under the pooling of interest method of accounting.
Experts should agree that the accounting and financial impact of stock pooling
of interest transactions produced superior financial results when compared to
the purchase method of accounting utilized in reporting cash transactions.
Synergies/Cost Savings
- ----------------------
The majority of bank acquisition transactions involve transactions in which the
acquiring entity is also a bank. Because of the banking industry's uniformity in
operations and ability to realize economies of scale in consolidation, an
acquiring bank is able to pay a premium due to the potential for cost savings
from employee lay-offs, branch closings and consolidation of operations. It is
these actions that allow an acquirer to significantly increase the earnings of
the acquired institution and justify paying a control premium.
If acquisition comparables are utilized, they must be acquisitions where the
seller receives cash and there should be a minimum of synergies between the
companies that are being combined. While most opinions regarding fair value are
focused on making sure that shareholders are treated fairly, the improper
utilization of acquisition
-36-
comparables can be extremely damaging to the corporation and produce an
unrealistic valuation level.
The following discusses each method in determining the fair value of the
Company's common shares.
For purposes of this appraisal the Company's shareholders' equity, net income
and shares outstanding have been adjusted as follows.
VALUATION ADJUSTMENTS
- ------------------------------------------------------------------------------
September 30, 2004 Shareholders' Common Equity $16,171,000
9/30/04 Stated Nine Month Pre-tax Income $209,000
Less: Gain on Sale of Securities (47,000)
-----------
9/30/04 Adjusted Pre-tax Net Income $162,000
Tax Effect @ 35% (57,000)
-----------
9/30/04 Nine Month Core Net Income $105,000
9/30/04 Nine Month Affordable Housing Tax Credits 166,000
-----------
Adjusted 9/30/04 Core Nine Month Net Income $271,000
Annualized Adjusted 9/30/04 Core Nine Month Net Income $361,000
October 15, 2004 Common Shares Outstanding 10,999,871
- ------------------------------------------------------------------------------
It should be noted the Company has a total of 374,496 options outstanding with a
weighted average strike price of $5.07 per option. In addition, the Company has
warrants outstanding to purchase 527,753 Company common shares at a weighted
average exercise price of $3.22 per share.
-37-
TRANSACTION VALUE METHOD
- --------------------------------------------------------------------------------
The Transaction Value represents the price(s) at which shares of common stock in
the Company have exchanged hands between a willing buyer and seller. A market
value can be determined based on a limited number of transactions. As of
November 9, 2004, the Company has 10,999,871 common shares outstanding. Trading
in the Company's common shares has been relatively active. As of November 8,
2004, 4,200 shares of the Company's common stock were reported traded and the
Company's common shares closed trading on the NASDAQ at $1.71 per share. Over
the last thirty business days ending on November 8, 2004, the Company has had
98,900 of its common shares trade on NASDAQ with closing prices between $1.43
and $1.95 per common share. Over this period, the average and median closing
price of the Company's common shares equals $1.59 and $1.57 per common share,
respectively. Further, over the last thirty trading days the Company's average
daily trading volume as reported on NASDAQ equals 3,297 shares and the weighted
average closing price of the Company's common shares over this period equals
$1.61. In addition, the median and average closing price of the Company's common
shares since January 1, 2004 equals $1.70 and $1.74, respectively, and the
weighted average closing price during this period equals $1.75 per common share.
Further, as mentioned previously, after the close of the market on October 28,
2004, the Company announced the Office of Thrift Supervision ("OTS") had
terminated the Supervisory Agreement between the Thrift and the OTS in its
entirety. The Company's weighted average closing price since October 28, 2004
equals $1.69 per common share and its median closing price during this timeframe
equals $1.70 per common share. Based on this information summarized below the
Transaction price in the Company's common stock is $1.71 per common share.
Transaction Value
- -------------------------------------------------------------------------------
Closing Price Per Share on November 8, 2004 $1.71
Multiple of 9/30/04 Book Value 1.16X
30 Day Weighted Average Closing Price $1.61
Multiple of 9/30/04 Book Value 1.10X
Median Closing Price Since January 1, 2004 $1.70
Multiple of 9/30/04 Book Value 1.16X
Year-to-date Weighted Average Closing Price $1.75
Multiple of 9/30/04 Book Value 1.19X
Weighted Average Closing Price Since 10/28/04 $1.69
Multiple of 9/30/04 Book Value 1.15X
- -------------------------------------------------------------------------------
-38-
ASSET VALUE METHOD
- --------------------------------------------------------------------------------
The Asset Value Method considers the value of assets based on information
available. The valuation is based on "market adjusted" book value. Analysis of
the Company's financial statements as of September 30, 2004 indicates the
Company has a net deferred tax asset equal approximately to $4,300,000. The
following presents the Asset Value based on adjustments derived from the
Company's internal September 30, 2004 financial statements and September 30,
2004 form 8-K filed by the Company with the SEC.
- -------------------------------------------------------------------------------
Shareholders' Common Equity (9/30/04) $16,171,000
Deferred Tax Asset of Net Loss Carryovers (4,300,000)
-----------
Net Market Adjusted Book Value $11,871,000
===========
Per Common Share $1.08
Multiple of Book Value 0.73X
- -------------------------------------------------------------------------------
-39-
ADJUSTED BOOK VALUE METHOD
- --------------------------------------------------------------------------------
The adjusted book value method adjusts the shareholders' equity (book value) of
the Company to reflect investors perceptions of future returns of the Company. A
multiple is applied due to book value not accurately reflecting these investor
perceptions which help determine the fair value of the Company. The factor
applied to book value reflects current market conditions and is the median ratio
of the market price to book value for the previously established set of
comparable thrift institutions.
The Company's peer group (the "Comparable Thrift Group") consists of publicly
traded non-mutual holding company thrifts not under an announced agreement to
merge which are not headquartered in the states of California or Florida and
have total consolidated total assets between $100 million and $350 million and a
last twelve month ("LTM") core return on average assets (ROAA) between 0.0% and
1.0%. In addition, for comparability purposes only institutions which like the
Company have December fiscal year-ends are included in the peer group.
The following section presents the determination of the Comparable Thrift Group
median multiple of market price-to-book value and the application of this
multiple to the September 30, 2004 book value of the Company.
-40-
Comparable Thrift Group
- -----------------------
The following table provides detailed analysis of the market price-to-book value
per share multiple of the Comparable Thrift Group.
Ratio of Market Price-To-Book Value Per Share
November 8, 2004
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP COMPARABLE THRIFT GROUP
(As of November 8, 2004)
Price/
Ticker Company Name City State Book Value
- --------------------------------------------------------------------------------
AABC Access Anytime Bancorp, Inc. Albuquerque NM 1.04 X
AMFC AMB Financial Corp. Munster IN 1.04
BRBI Blue River Bancshares, Inc. Shelbyville IN 1.12
ESBK Elmira Savings Bank, FSB Elmira NY 1.45
FBTC First BancTrust Corporation Paris IL 1.11
FFBI First Federal Bancshares, Inc. Colchester IL 1.28
FFHS First Franklin Corporation Cincinnati OH 1.39
GTPS Great American Bancorp, Inc. Champaign IL 1.08
GSLA GS Financial Corp. Metairie LA 0.74
HCFC Home City Financial Corporation Springfield OH 1.05
MCBF Monarch Community Bancorp, Inc. Coldwater MI 0.90
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 1.19
SSFC South Street Financial Corp. Albemarle NC 1.13
STBI Sturgis Bancorp, Inc. Sturgis MI 1.41
UCBC Union Community Bancorp Crawfordsville IN 1.05
WEFC Wells Financial Corp. Wells MN 1.25
Median 1.12
- --------------------------------------------------------------------------------
Source: Financial information supplied by SNL Financial L.P. DataSource. Pricing
as of November 8, 2004
-41-
The following presents the application of the median multiple to the Company's
September 30, 2004 shareholders' equity.
- -------------------------------------------------------------------------------
September 30, 2004 Shareholders' Equity $16,171,000
Peer Group Multiple 1.12X
-----------
Adjusted Book Value $18,112,000
===========
Per Common Share $1.65
Multiple of Book Value 1.12X
- -------------------------------------------------------------------------------
-42-
INVESTMENT VALUE METHOD
- --------------------------------------------------------------------------------
The Investment Value Method establishes a proxy for value based on the core
earnings capacity of a company. This technique is based on the premise that
investors' value shares of stock by analyzing the earnings of the organization
and subsequently apply a multiple that reflects future growth prospects.
A price/core earnings multiple is computed by utilizing the median price/core
earnings multiples of the previously established Comparable Thrift Group. This
multiple reflects investor perceptions of the future earnings capacity and
market value of the Comparable Thrift Group.
-43-
Comparable Thrift Group
- -----------------------
The median multiple for the Comparable Thrift Group is derived in the following
table.
Ratio of Market Price to Annualized Core Earnings Per Share
November 8, 2004
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP COMPARABLE THRIFT GROUP
(As of November 8, 2004)
Price/
Ticker Company Name City State Core EPS
- --------------------------------------------------------------------------------
AABC Access Anytime Bancorp, Inc. Albuquerque NM 16.32 X
AMFC AMB Financial Corp. Munster IN 15.40
BRBI Blue River Bancshares, Inc. Shelbyville IN 88.00
ESBK Elmira Savings Bank, FSB Elmira NY 13.36
FBTC First BancTrust Corporation Paris IL 26.69
FFBI First Federal Bancshares, Inc. Colchester IL 37.13
FFHS First Franklin Corporation Cincinnati OH 45.23
GTPS Great American Bancorp, Inc. Champaign IL 14.83
GSLA GS Financial Corp. Metairie LA 27.75
HCFC Home City Financial Corporation Springfield OH 19.23
MCBF Monarch Community Bancorp, Inc. Coldwater MI 87.50
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 19.29
SSFC South Street Financial Corp. Albemarle NC 35.96
STBI Sturgis Bancorp, Inc. Sturgis MI 26.00
UCBC Union Community Bancorp Crawfordsville IN 19.85
WEFC Wells Financial Corp. Wells MN 18.17
Median 22.93
- --------------------------------------------------------------------------------
Source: Financial information supplied by SNL Financial L.P. DataSource. Pricing
as of November 8, 2004.
Applying the median price-to-annualized core earnings multiple of the Comparable
Thrift Group to the Company's adjusted September 30, 2004 annualized core net
income results in the Investment Value for the Company.
-44-
- --------------------------------------------------------------------------------
Adjusted 9/30/04 Annualized Company Core Net Income $ 361,000
Price/Earnings Multiple 22.93X
----------
Investment Value $8,278,000
==========
Per Common Share $0.75
Multiple of Book Value 0.51X
- --------------------------------------------------------------------------------
-45-
EARNINGS METHOD
- --------------------------------------------------------------------------------
The Earnings Method is based on the premise that common stock value is
equivalent to that price at which its future dividends and residual earnings
will produce a particular yield. The yield or discount rate utilized in the
appraisal is 13 percent based on analysis of available market information and
consideration of risk factors including those specific to the Company.
The following is an analysis and disaggregation of the discount rate for all
publicly traded thrift institutions as of November 8, 2004 which are not mutual
holding companies, are not being acquired and which have positive net income on
a year-to-date basis.
Discount Rate Analysis Publicly Traded Thrift Institutions
- --------------------------------------------------------------------------------
Median Core P/E Ratio Publicly Traded Thrift Institutions 17.70X
Median Core E/P Ratio Publicly Traded Thrift Institutions 5.65%
Median Dividend Payout Ratio Publicly Traded Thrift Institutions 34.30%
Median Retention Ratio Publicly Traded Thrift Institutions 65.70%
Median Return on Average Equity Publicly Traded Thrifts 10.04%
1) Sustainable Growth Rate 6.60%
Implied Median Discount Rate all Public 12.25%
- --------------------------------------------------------------------------------
1) Sustainable Growth is equal to the median Core ROAE times the median
retention ratio.
The median required return is equal to the E/P ratio plus the median sustainable
growth rate. The disaggregation of the P/E ratio demonstrates the required
return for publicly traded thrifts, as of November 8, 2004, equals 12.25%. As
previously mentioned, while the Company's asset quality has improved
significantly and appears satisfactory, the Company's overall risk profile is
nevertheless significant. The Company's increasing reliance on non-core funding,
low equity to asset ratio, significant exposure to indirect auto loans and
multi-family letters of credit coupled with a low level of earnings and high
efficiency ratio increase the risks associated with the Company. Based on the
above information, a discount rate of 13.00% will be utilized for the purposes
of this appraisal.
-46-
Two earnings methods are established:
1. Short-term value based on 5 years projections and cash flows;
2. Long-term value based on 20 year projections and cash flows.
The September 30, 2004 average asset and ending equity levels are used as the
basis for the projections. An asset growth rate of 7% is utilized in the
short-term and 5% in the long-term. The Company's return on average assets is
projected to begin at 0.20% and increase to 0.55% by year 5 and then increase
five basis points per year until it reaches 1.30% in year 20. Dividends are not
projected to be paid in years 1 through 5 and then beginning in year 6 dividends
will equal 35.0% of net income. The net income at the end of the fifth year, for
the short-term, and the end of the twentieth year, for the long-term, are given
a terminal value equal to the Comparable Thrift Group median price to earnings
multiple of 22.93 times ending income.
5 Year Summary Projected Data
- --------------------------------------------------------------------------
Year Assets Net Income Dividends Equity
- --------------------------------------------------------------------------
1 $207,696 $415 $0 $16,586
2 222,234 556 0 17,142
3 237,791 832 0 17,974
4 254,436 1,145 0 19,119
5 272,247 1,497 0 20,617
- --------------------------------------------------------------------------
Financial Ratios
- --------------------------------------------------------------------------
Year Return on Assets Return on Equity Equity/Assets
- --------------------------------------------------------------------------
1 0.20% 2.50% 7.99%
2 0.25 3.24 7.71
3 0.35 4.63 7.56
4 0.45 5.99 7.51
5 0.55 7.26 7.57
- --------------------------------------------------------------------------
-47-
Value of the Company in the short-term method is derived by applying a terminal
value equal to 22.93 times the ending net income. The use of the 22.93 multiple
reflects the median price to earnings ratio of the publicly traded Comparable
Thrift Group previously discussed in the Methodology Section.
The short-term valuation analysis is presented below:
- ----------------------------------------------------------------------------
Short-term Value $18,635,000
===========
Per Common Share $1.69
Multiple of Book Value 1.15X
- ----------------------------------------------------------------------------
Utilizing the five-year projections prepared for the short-term valuation as a
base, twenty-year projections are prepared. Assumptions utilized in the
long-term projections are:
o Return on assets will increase from 0.20% in year 1 to 0.55% in 5 and
then increase 5 basis points per year thereafter until it reaches
1.25% in year 19.
o Dividends will not be paid in years 1 through 5 and then increase to
35% of net income in years 6 through 20.
Based on these assumptions and a terminal value equal to 22.93 times ending
adjusted income, the long-term valuation analysis is presented below:
- ----------------------------------------------------------------------------
Long-term Value $18,070,000
===========
Per Common Share $1.64
Multiple of Book Value 1.12X
- ----------------------------------------------------------------------------
-48-
ACQUISITION COMPARABLE METHOD
- --------------------------------------------------------------------------------
PBS performed an analysis of bank and thrift acquisition transactions in the
United States where the seller's assets were under $500 million excluding
California, Florida and Texas (the "Comparable Acquisition Group"). In order to
limit some of the potential concerns discussed in the methodology section
concerning the utilization of acquisition comparable transactions in determining
fair value, the analysis utilized cash transactions where the acquirer was a
newly formed holding company formed for the purpose of acquiring the seller. In
addition, the search was limited to acquisition transactions announced since
June 30, 2001 when transaction accounting rules were changed.
As previously discussed, all acquisition pricing usually contains some element
of the synergistic effect of the combination of two companies. We are unaware of
a method of completely isolating or excluding these effects from the overall
price. To somewhat mitigate this concern, all of the acquirers contained in the
Acquisition Comparable Group were new holding companies formed by investor
groups for the purpose of acquiring the seller. These companies would typically
be unable to realize the degree of cost savings and synergies available in most
transactions where the acquirer is an existing financial institution. As
mentioned previously, it is the cost savings and synergies in operations that
allow acquirers to pay a higher price than would otherwise be possible. The
following table demonstrates the results of this analysis:
-49-
- -------------------------------------------------------------------------------------------------------------------------
PRIVATE ACQUISITION COMPARABLES
Total
Assets
Buyer Name Target Name Target City State Type Date ($000)
- -------------------------------------------------------------------------------------------------------------------------
Investor group Western Dakota Holding Company Timber Lake SD Bank 04/06/2004 16,915
Investor Group Strategic Capital Bancorp Inc. Champaign IL Bank 01/03/2004 187,272
Investor group Superior Financial Holding Corp Two Harbors MN Bank 12/17/2003 70,984
NS&L Acquisition Corp. NS&L Bancorp, Inc. Neosho MO Thrift 05/23/2003 68,382
Investor group Clayton Bankshares Inc. Clayton WI Bank 12/07/2002 16,739
Investor group N.B.C. Bancshares in Pawhuska, Inc Pawhuska OK Bank 10/21/2002 43,108
Investor group Financial Services of Lowry, Inc Lowry MN Bank 07/10/2002 20,196
Private Investor First Bancorp of Oklahoma, Inc. Tonkawa OK Bank 06/13/2002 54,165
Investor group North Star Holding Company, Inc. Jamestown ND Bank 06/10/2002 114,400
First Southern Bancshares Shawnee Bancshares,Inc. Grand Tower IL Bank 04/29/2002 20,374
Berkshire Financial Holdings, Inc. USABancShares.com, Inc. Philadelphia PA Thrift 03/11/2002 283,249
Marshall Bancorp Inc. Norkitt Bancorp, Inc. Hallock MN Bank 11/05/2001 51,116
Folkston Investors LLC First National Corporation Folkston GA Bank 08/13/2001 30,830
Community State Bancshares Bradley Corporation Bradley AR Bank 08/07/2001 14,339
Chickasaw Banc Holding Co. First Bancorp in Davidson, Inc Davidson OK Bank 07/23/2001 8,172
Median 43,108
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRIVATE ACQUISITION COMPARABLES
Equity/
Buyer Name Target Name Target City State Assets ROAA ROAE
- -------------------------------------------------------------------------------------------------------------------------
Investor group Western Dakota Holding Company Timber Lake SD 12.22 0.67 5.49
Investor Group Strategic Capital Bancorp Inc. Champaign IL 8.36 NA NA
Investor group Superior Financial Holding Corp Two Harbors MN 3.34 -4.71 -82.94
NS&L Acquisition Corp. NS&L Bancorp, Inc. Neosho MO 10.25 0.49 4.44
Investor group Clayton Bankshares Inc. Clayton WI 9.28 0.96 10.57
Investor group N.B.C. Bancshares in Pawhuska, Inc Pawhuska OK 7.86 0.81 10.65
Investor group Financial Services of Lowry, Inc Lowry MN 10.10 1.46 14.98
Private Investor First Bancorp of Oklahoma, Inc. Tonkawa OK 9.01 -0.43 -4.85
Investor group North Star Holding Company, Inc. Jamestown ND 9.32 1.18 12.69
First Southern Bancshares Shawnee Bancshares,Inc. Grand Tower IL 7.60 1.15 16.83
Berkshire Financial Holdings, Inc. USABancShares.com, Inc. Philadelphia PA 1.06 -2.31 -160.04
Marshall Bancorp Inc. Norkitt Bancorp, Inc. Hallock MN 15.94 1.09 7.10
Folkston Investors LLC First National Corporation Folkston GA 11.51 0.53 4.50
Community State Bancshares Bradley Corporation Bradley AR 10.44 1.15 11.13
Chickasaw Banc Holding Co. First Bancorp in Davidson, Inc Davidson OK 7.48 -0.30 -3.91
Median 9.28 0.74 6.30
- -------------------------------------------------------------------------------------------------------------------------
-50-
- -----------------------------------------------------------------------------------------------------
PRIVATE ACQUISITION COMPARABLES
Deal Price/ Price/
Value LTM EPS Book
Buyer Name Target Name ($M) (x) (%)
- -----------------------------------------------------------------------------------------------------
Investor group Western Dakota Holding Company 3.0 17.50 142.07
Investor Group Strategic Capital Bancorp Inc. 24.9 32.62 159.20
Investor group Superior Financial Holding Corp 3.0 NM 135.12
NS&L Acquisition Corp. NS&L Bancorp, Inc. 10.6 31.20 151.43
Investor group Clayton Bankshares Inc. 2.1 15.00 136.01
Investor group N.B.C. Bancshares in Pawhuska, Inc 2.7 23.11 119.96
Investor group Financial Services of Lowry, Inc 2.8 10.23 147.03
Private Investor First Bancorp of Oklahoma, Inc. 5.5 NM 133.03
Investor group North Star Holding Company, Inc. 15.8 11.72 154.99
First Southern Bancshares Shawnee Bancshares,Inc. 0.9 NM 121.74
Berkshire Financial Holdings, Inc. USABancShares.com, Inc. 3.4 NM 111.11
Marshall Bancorp Inc. Norkitt Bancorp, Inc. 13.6 20.03 114.05
Folkston Investors LLC First National Corporation 3.4 22.17 157.63
Community State Bancshares Bradley Corporation 1.9 14.43 141.79
Chickasaw Banc Holding Co. First Bancorp in Davidson, Inc 0.7 14.15 129.13
Median 3.0 17.50 136.01
- -----------------------------------------------------------------------------------------------------
Applying the above median price to book value and price to earnings to the
Company results in the following Comparable Acquisition Group Values:
Comparable Acquisition Group
(Median Multiples)
- -----------------------------------------------------------------------------
Multiple of Book Value $21,993,000
===========
Per Common Share $2.00
Multiple of Book Value 1.36X
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Multiple of Earnings $6,318,000
==========
Per Common Share $0.57
Multiple of Book Value 0.39X
- -----------------------------------------------------------------------------
-51-
CONCLUSION
- --------------------------------------------------------------------------------
The following table presents a summary of previously derived methodologies.
- -------------------------------------------------------------------------------
Value Per Share Multiple of Book
- -------------------------------------------------------------------------------
Transaction Value $1.71 1.16X
Asset Value Method 1.08 0.73
Adjusted Book Value:
Comparable Thrift Group 1.65 1.12
Investment Value:
Comparable Thrift Group 0.75 0.51
Earnings Value:
Short Term 1.69 1.15
Long Term 1.64 1.12
Acquisition Comparables:
Multiple of Book Value 2.00 1.36
Multiple of Earnings 0.57 0.39
Average $1.39 0.95X
Median $1.65 1.12X
- -------------------------------------------------------------------------------
The average and median of the above values are $1.39 and $1.65, respectively,
including the Asset Value Method and the Acquisition Comparable Method. The
Asset Value Method is more of a liquidation value and while considered it is not
included in our opinion of value. In addition, due to the Company's poor
earnings performance, the values derived utilizing comparative multiples of
earnings produce ranges of value which are significantly below the book value or
potential liquidation value of the Company, therefore while investors and
acquirers will typically price an individual financial institution stock, or a
financial institution as a whole, based on earnings and
-52-
earnings growth potential we are of the opinion, and market reality dictates,
the value of bank and thrift stocks will not typically decline to significantly
below book value or liquidation value unless an institution is in eminent danger
of failure.
As previously discussed, all acquisition pricing usually contains some element
of the synergistic effect of the combination of two companies. We are unaware of
a method of completely isolating or excluding these effects from the overall
price. These cost savings and synergies in operations allow acquirers to pay a
higher price then would otherwise be possible. It is our opinion that the fair
value of the Company, without the possibility of recognizing potential cost
savings through employee lay-offs, branch closings and savings from
consolidation of operations, would be less than the value indicated utilizing
the price to book value multiple of the Acquisition Comparables.
The values derived from the above market comparable methodologies assume that
the Company's operating attributes equal the median of the Comparable Thrift
Group and will also meet our financial projections. In determining the fair
value of the Company's common shares we have also considered the following
factors for difference in operating performance, dividends and other performance
characteristics:
o Premium to the Comparable Thrift Group Adjusted Book Value for lower
capitalization. As of the most recently reported period the median of the
Comparable Thrift Group's equity to asset ratio was 10.04% compared to the
Company's equity to asset ratio of 8.01%.
o Discount for financial performance below the Comparable Thrift Group. A
discount on the Company's common shares could be justified due to its
financial performance when compared to the Comparable Thrift Group. For
example, the median core return on average equity for the Comparable Thrift
Group year-to-date period equals 5.18% compared to 2.27% for the Company.
In addition, the Company's efficiency ratio over the first nine months of
2004 equals 90.32% which is higher than all of the institutions in the
Comparable Thrift Group and well above the median efficiency ratio of the
Comparable Thrift Group of 75.41%.
-53-
o Discount from the Community Thrift Group for a higher overall risk profile.
A discount on the Company's common shares could be justified based on the
overall risk characteristics of the Company as compared to the Comparable
Thrift Group. In our opinion the Company's overall risk profile is
significantly above the Comparable Thrift Group. The Company's increasing
reliance on non-core funding, below peer equity to asset ratio, significant
exposure to indirect auto loans (which the Company discontinued originating
in September 2004) and multi-family letters of credit coupled with a low
level of earnings and high efficiency ratio increases the risks associated
with the Company and its common stock as compared to the Comparable Thrift
Group.
o Discount from the Community Thrift Group for lack of payment of dividends.
The Company currently does not pay cash dividends and there is no assurance
the Company will begin paying dividends in the near term. On a year to date
basis, the median Community Thrift Group dividend payout ratio equals
50.70%.
Based on the foregoing and all other factors deemed relevant and assuming
accuracy and completeness of information provided by the Company, it is our
opinion as an independent appraiser that the fair value of the Company's common
stock is $1.85 per common share taking into consideration potential control
premiums for the Company and without the application of any marketability
discounts.
-54-
PROFESSIONAL BANK SERVICES, INC.
INVESTMENT BANKING ENGAGEMENTS
- --------------------------------------------------------------------------------
Professional Bank Services, Inc. ("PBS"), a consulting firm for financial
institutions with offices in Orlando, FL., New York, NY, Louisville, KY. and
Nashville, TN. was established in 1978. Since its inception, the firm has
assisted over 1,000 institutions in various capacities. One area of
specialization is the firm's appraisal services. The company is continually
engaged to provide assistance with corporate expansion, holding company
formation, and to perform fairness opinions and stock appraisals. PBS' wholly
owned subsidiary, Investment Bank Services, Inc., is a registered Broker Dealer
with the Securities and Exchange Commission ("S.E.C.").
The firm's stock appraisals have been recognized by various courts and
regulatory agencies in settling dissenting shareholder suits. In addition to
appraisal valuations, the firm also specializes in valuations that facilitate
the merger or acquisition process. The firm has valued institutions with assets
totaling over $5.0 billion and fair market values over $600 million.
PBS utilizes proven industry accepted methods in providing common stock
appraisals. The appraisal and support documents are prepared in a fashion that
is easily understood and are often accompanied by professional presentation. The
appraisals have been used for reverse common stock splits, consummation of
interim bank mergers and valuing stock for Employee Stock Ownership Plans, as
well as other traditional purposes.
-55-
CHRISTOPHER L. HARGROVE
Chairman & CEO
Professional Bank Services, Inc.
Mr. Hargrove has an in-depth understanding of the acquisition process. As a
senior analyst for a major mid-south bank holding company, Mr. Hargrove assisted
in the successful acquisition of several commercial banks with assets totaling
over $2.0 billion. Mr. Hargrove is also experienced in analyzing financial data
concerning common stock and other securities. His expertise includes:
Acquisition Strategy Designing and implementing plans for continual growth
through acquisition to ensure the client remains competitive in
an industry of transition.
Capital Analysis Determining the optimal use of a bank's capital
resources in order to accurately plan for growth and
profitability.
Common Stock Appraisal Determining through market and fundamental
analyses the value of common stock for the purpose of preparing
fairness opinions and special actions called for by management.
PROFESSIONAL EXPERIENCE
- --------------------------------------------------------------------------------
Professional Bank Services, Inc. 1996 - Present
Louisville, Kentucky President and Senior Consultant
Professional Bank Services, Inc. 1989 - 1996
Louisville, Kentucky Vice President and Senior Consultant
Professional Bank Services, Inc. 1985 - 1989
Nashville, Tennessee Senior Consultant
Investment Bank Services, Inc. 1987 - Present
Louisville, Kentucky President
Investment Bank Services, Inc. 1986 - 1987
Louisville, Kentucky Vice President
First American Corporation 1982 - 1985
Nashville, Tennessee Senior Financial Analyst
EDUCATIONAL EXPERIENCE
- --------------------------------------------------------------------------------
Middle Tennessee State University B.B.A. Finance
Murfreesboro, Tennessee 1980
M.A. Finance
1982
National Association of Registered Representative
Securities Dealers 1987
Washington, D.C.
National Association of Registered Principal
Securities Dealers 1988
Washington, D.C.
-56-
SUSAN S. RAPIER
Senior Consultant
Professional Bank Services, Inc.
Ms. Rapier has a strong finance and accounting background that allows her to
bring a broad-based analytical and financial approach to assignments. She has
assisted clients in evaluating candidates for acquisitions and mergers and has
provided database analysis on costs and profitability. Her expertise includes:
Fairness Opinions Evaluating proposed mergers and acquisitions for
acquired institutions to ensure fair and equitable treatment to
shareholders.
Common Stock Appraisals Appraising majority and minority interests in
the ownership of banks and holding companies, thereby improving
management's knowledge of the value of the institution.
Financial Analysis Analyses and recommendations to financial institutions
regarding profitability, expansion, capital and long-range
strategic planning.
PROFESSIONAL EXPERIENCE
- --------------------------------------------------------------------------------
Professional Bank Services, Inc. October 1990 - Present
Louisville, Kentucky Senior Consultant
Investment Bank Services, Inc. May 1992 - Present
Louisville, Kentucky Director/Secretary
EDUCATIONAL EXPERIENCE
- --------------------------------------------------------------------------------
University of Kentucky B.S. Accounting
Lexington, Kentucky 1990
National Association of Registered Representative
Securities Dealers 1991
Washington, D.C.
National Association of State Agent Exam
Securities Dealers 1991
Washington, D.C.
National Association of Registered Principal
Securities Dealers 1992
Washington, D.C.
-57-
PAUL D. REESE, CFA
Managing Director
Professional Bank Services, Inc.
Mr. Reese has a strong background in finance and bank accounting, excellent
familiarity with the capital markets in general, and the banking industry in
particular. Skilled in the development of macro and micro economic forecasts and
models, as well as, company and industry fundamental and technical analysis. His
expertise includes:
Valuation Analysis Valuation analysis for minority and majority stock
transactions, ESOPs, mergers and acquisitions, and the long-term
effect of these transactions on strategic shareholder value.
Security and Market Analysis
Analysis of publicly traded securities and markets. In-depth
knowledge of financial institution common stock valuation
techniques and forecasting for publicly traded securities.
Experienced in fixed income securities valuation.
Financial Forecasting Skilled in short and long term economic and financial
forecasting. Development of spreadsheet models, interest rate
forecasts and micro and macro economic forecasts.
PROFESSIONAL EXPERIENCE
- --------------------------------------------------------------------------------
Professional Bank Services, Inc. October 1995 - Present
Louisville, Kentucky Current Title: Managing Director
SNL Securities March 1994 - October 1995
Charlottesville, Virginia Financial Analyst
ESOP Services, Inc. March 1994 - December 1994
Scottsville, Virginia Financial Analyst
EDUCATIONAL EXPERIENCE
- --------------------------------------------------------------------------------
University of Virginia B.S. Finance
McIntire School of Commerce 1992
Charlottesville, Virginia
Completed Level I
Chartered Financial Analyst Exam June 1995
Completed Level II
Chartered Financial Analyst Exam June 1996
Completed Level III
Chartered Financial Analyst Exam June 1997
National Association of Registered Representative 1997
Securities Dealers Registered Principal 2003
Washington, D.C.
-58-
CODE OF PROFESSIONAL CONDUCT
Professional Bank Services, Inc. ("PBS"), is a consulting firm whose mission is
the provision of quality business advice, and superior service to the financial
industry. Our services reflect the firm's extensive experience in the financial
industry, its keen awareness of a financial institution's special position of
trust, and acknowledge of financial and regulatory issues.
The firm and its employees are committed to the highest standards of
professional conduct.
Conflicts of Interest
The firm shall not represent a client if its ability to consider, recommend or
carry out a course of action on behalf of the client could be adversely affected
by its responsibilities to another client, a third party, its own interests or
those of its principals. Neither the firm nor its employees shall acquire an
equity interest in or become indebted to any organization where such
relationship creates a conflict of interest. The firm shall use its best efforts
to avoid even the appearance of a conflict of interest.
The Client
When engaged by a financial institution, the firm's sole duty of loyalty shall
be to the welfare and the best interests of the institution, as distinct from
the sometimes inconsistent interests of employees, management, directors or
shareholders.
When engaged by an individual or other party, the firm's duty of loyalty shall
be to that individual or other party. PBS is often engaged to carry out
difficult and challenging assignments in situations where conflict with third
parties is inevitable. Such engagements will be conducted efficiently, fairly
and in the best interest of the client, with a view towards constructive
management of conflict.
Duty of Competence
The firm shall provide competent services to its clients and decline to render
advice in matters for which it is not qualified. The firm shall not provide
legal advice and when appropriate shall request that the client seek the
services of other qualified professionals.
The firm's consultants shall continue to develop their skill and knowledge
through ongoing programs of continuing education and professional development.
The firm's consultants shall not violate or in any way participate in the
violation of any law, regulation or technical standard applicable to financial
institutions, their directors, officers or shareholders.
Engagement Letters and Fees
Each engagement of the firm shall be described in an engagement letter which
specifies the services which the firm shall perform and which has been approved
by the client or the client's board of directors or authorized officer. Each
engagement letter shall set forth an estimate of the fees for services to be
rendered and the basis for determination of those fees. The firm's fees shall,
except in unusual circumstances and when otherwise agreed, be based on the
firm's usual and customary rates. Fees for services take into account (a) the
nature of the particular services to be performed, (b) the novelty and
difficulty of the matter, (c) the skill, standing and experience of the
consultants performing the work, and (d) the urgency of the matter.
Nature of Advice
The firm shall always keep clients reasonably informed about all matters
relevant to its professional services. In matters requiring action by a client,
the firm shall explain all aspects of a matter and alternate courses of action
as reasonably necessary to permit the client to make informed decisions.
Integrity of Communications
The firm shall never disclose any confidential or other information about a
client to any other party except with the consent of the client and in the
course of providing its services. When dealing with third parties, the firm
shall always identify its clients except when clearly inappropriate to do so.
Code of Professional Conduct
This Code of Professional Conduct shall be prominently displayed in the firm's
informational material and included as part of engagement letters.
PROFESSIONALBANKSERVICES
-59-
EXHIBIT 1
BEGINNING EQUITY 16,171 (9/30/2004)
BEGIN AVE ASSETS $194.108 (9/30/2004)
SHORT TERM GROWTH RATE 7.00%
LONG TERM GROWTH RATE 5.00%
DISCOUNT RATE 13.00%
DIVIDEND SHORT TERM 0.00%
DIVIDEND LONG TERM (Beginning in Year 6) 35.00%
MULTIPLE OF EARNINGS 22.93 X
COMMON SHARES 10,999.871
FIDELITY FEDERAL BANCORP
STATUS QUO
SHORT-TERM EARNINGS VALUATION
NET PRESENT EQUITY/
PD YEAR EQUITY INCOME ASSETS DIVS. PVIF VALUE ROE ROA ASSETS
- ---------------------------------------------------------------------------------------------------------
1.0 1 16,586 415 207,696 - 0.88 - 2.50% 0.20% 7.99%
2.0 2 17,142 556 222,234 - 0.78 - 3.24% 0.25% 7.71%
3.0 3 17,974 832 237,791 - 0.69 - 4.63% 0.35% 7.56%
4.0 4 19,119 1,145 254,436 - 0.61 - 5.99% 0.45% 7.51%
5.0 5 20,617 1,497 272,247 - 0.54 - 7.26% 0.55% 7.57%
TERMINAL VALUE 34,334 54.28% 18,635
-------
PRESENT VALUE WITH TERMINAL VALUE EQUAL
TO 22.93X ENDING EARNINGS $18,635
=======
PER COMMON SHARE $ 1.69
=======
MULTIPLE OF BOOK VALUE 1.15
STATUS QUO
LONG-TERM EARNINGS VALUATION
NET PRESENT EQUITY/
PD YEAR EQUITY INCOME ASSETS DIVS. PVIF VALUE ROE ROA ASSETS
- -----------------------------------------------------------------------------------------------------------
1.0 1 $16,586 $415 $207,696 $0 88.50% $0 2.50% 0.20% 7.99%
2.0 2 17,142 556 222,234 0 78.31% 0 3.24% 0.25% 7.71%
3.0 3 17,974 832 237,791 0 69.31% 0 4.63% 0.35% 7.56%
4.0 4 19,119 1,145 254,436 0 61.33% 0 5.99% 0.45% 7.51%
5.0 5 20,617 1,497 272,247 0 54.28% 0 7.26% 0.55% 7.57%
6.0 6 21,731 1,715 285,859 600 48.03% 288 7.89% 0.60% 7.60%
7.0 7 23,000 1,951 300,152 683 42.51% 290 8.48% 0.65% 7.66%
8.0 8 24,434 2,206 315,159 772 37.62% 290 9.03% 0.70% 7.75%
9.0 9 26,047 2,482 330,917 869 33.29% 289 9.53% 0.75% 7.87%
10.0 10 27,854 2,780 347,463 973 29.46% 287 9.98% 0.80% 8.02%
11.0 11 29,869 3,101 364,836 1,085 26.07% 283 10.38% 0.85% 8.19%
12.0 12 32,110 3,448 383,078 1,207 23.07% 278 10.74% 0.90% 8.38%
13.0 13 34,594 3,821 402,232 1,337 20.42% 273 11.05% 0.95% 8.60%
14.0 14 37,339 4,223 422,344 1,478 18.07% 267 11.31% 1.00% 8.84%
15.0 15 40,366 4,656 443,461 1,630 15.99% 261 11.54% 1.05% 9.10%
16.0 16 43,695 5,122 465,634 1,793 14.15% 254 11.72% 1.10% 9.38%
17.0 17 47,350 5,623 488,916 1,968 12.52% 246 11.87% 1.15% 9.68%
18.0 18 51,354 6,160 513,361 2,156 11.08% 239 12.00% 1.20% 10.00%
19.0 19 55,734 6,738 539,029 2,358 9.81% 231 12.09% 1.25% 10.34%
20.0 20 60,332 7,075 565,981 2,476 8.68% 215 11.73% 1.25% 10.66%
TERMINAL VALUE 162,224 8.68% 14,078
-------
PRESENT VALUE WITH TERMINAL VALUE EQUAL
TO 22.93X ENDING EARNINGS $18,070
=======
PER COMMON SHARE $ 1.64
=======
MULTIPLE OF BOOK VALUE 1.12
-60-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
LAST 30 TRADING DAYS
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
8-Nov-04 $1.72 $1.72 $1.59 $1.71 4,200 $1.71
5-Nov-04 1.95 1.95 1.70 1.90 2,700 1.90
4-Nov-04 1.72 2.00 1.72 1.95 2,200 1.95
3-Nov-04 1.70 1.70 1.70 1.70 0 1.70
2-Nov-04 1.70 1.70 1.70 1.70 0 1.70
1-Nov-04 1.59 1.77 1.59 1.70 20,400 1.70
29-Oct-04 1.56 1.60 1.56 1.60 17,600 1.60
28-Oct-04 1.50 1.50 1.50 1.50 100 1.50
27-Oct-04 1.50 1.51 1.50 1.51 800 1.51
26-Oct-04 1.51 1.51 1.51 1.51 0 1.51
25-Oct-04 1.51 1.51 1.51 1.51 0 1.51
22-Oct-04 1.52 1.52 1.51 1.51 500 1.51
21-Oct-04 1.58 1.58 1.58 1.58 0 1.58
20-Oct-04 1.58 1.58 1.58 1.58 0 1.58
19-Oct-04 1.58 1.58 1.58 1.58 0 1.58
18-Oct-04 1.55 1.58 1.55 1.58 1,500 1.58
15-Oct-04 1.51 1.51 1.51 1.51 300 1.51
14-Oct-04 1.59 1.59 1.50 1.50 10,200 1.50
13-Oct-04 1.56 1.62 1.56 1.60 1,000 1.60
12-Oct-04 1.53 1.53 1.53 1.53 100 1.53
11-Oct-04 1.56 1.56 1.55 1.55 4,000 1.55
8-Oct-04 1.51 1.51 1.50 1.50 1,000 1.50
7-Oct-04 1.65 1.66 1.53 1.54 2,600 1.54
6-Oct-04 1.51 1.65 1.51 1.65 1,000 1.65
5-Oct-04 1.50 1.72 1.46 1.48 8,400 1.48
4-Oct-04 1.59 1.74 1.57 1.64 8,300 1.64
1-Oct-04 1.54 1.75 1.43 1.75 4,100 1.75
30-Sep-04 1.48 1.70 1.43 1.43 5,400 1.43
29-Sep-04 1.50 1.53 1.45 1.53 1,300 1.53
28-Sep-04 1.44 1.52 1.44 1.50 1,200 1.50
MEDIAN $1.56 $1.59 $1.53 $1.57 1,100 $1.57
AVERAGE $1.57 $1.63 $1.55 $1.59 3,297 $1.59
WEIGHTED AVERAGE $1.61
HIGH $1.95 $2.00 $1.72 $1.95 20,400 $1.95
LOW $1.44 $1.50 $1.43 $1.43 0 $1.43
-61-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
8-Nov-04 $1.72 $1.72 $1.59 $1.71 4,200 $1.71
5-Nov-04 1.95 1.95 1.70 1.90 2,700 1.90
4-Nov-04 1.72 2.00 1.72 1.95 2,200 1.95
3-Nov-04 1.70 1.70 1.70 1.70 0 1.70
2-Nov-04 1.70 1.70 1.70 1.70 0 1.70
1-Nov-04 1.59 1.77 1.59 1.70 20,400 1.70
29-Oct-04 1.56 1.60 1.56 1.60 17,600 1.60
28-Oct-04 1.50 1.50 1.50 1.50 100 1.50
27-Oct-04 1.50 1.51 1.50 1.51 800 1.51
26-Oct-04 1.51 1.51 1.51 1.51 0 1.51
25-Oct-04 1.51 1.51 1.51 1.51 0 1.51
22-Oct-04 1.52 1.52 1.51 1.51 500 1.51
21-Oct-04 1.58 1.58 1.58 1.58 0 1.58
20-Oct-04 1.58 1.58 1.58 1.58 0 1.58
19-Oct-04 1.58 1.58 1.58 1.58 0 1.58
18-Oct-04 1.55 1.58 1.55 1.58 1,500 1.58
15-Oct-04 1.51 1.51 1.51 1.51 300 1.51
14-Oct-04 1.59 1.59 1.50 1.50 10,200 1.50
13-Oct-04 1.56 1.62 1.56 1.60 1,000 1.60
12-Oct-04 1.53 1.53 1.53 1.53 100 1.53
11-Oct-04 1.56 1.56 1.55 1.55 4,000 1.55
8-Oct-04 1.51 1.51 1.50 1.50 1,000 1.50
7-Oct-04 1.65 1.66 1.53 1.54 2,600 1.54
6-Oct-04 1.51 1.65 1.51 1.65 1,000 1.65
5-Oct-04 1.50 1.72 1.46 1.48 8,400 1.48
4-Oct-04 1.59 1.74 1.57 1.64 8,300 1.64
1-Oct-04 1.54 1.75 1.43 1.75 4,100 1.75
30-Sep-04 1.48 1.70 1.43 1.43 5,400 1.43
29-Sep-04 1.50 1.53 1.45 1.53 1,300 1.53
28-Sep-04 1.44 1.52 1.44 1.50 1,200 1.50
27-Sep-04 1.49 1.54 1.49 1.50 300 1.50
24-Sep-04 1.46 1.46 1.46 1.46 0 1.46
23-Sep-04 1.49 1.67 1.46 1.46 5,100 1.46
22-Sep-04 1.50 1.70 1.46 1.46 3,800 1.46
21-Sep-04 1.70 1.70 1.54 1.66 5,800 1.66
20-Sep-04 1.57 1.70 1.52 1.54 4,100 1.54
17-Sep-04 1.52 1.52 1.52 1.52 200 1.52
16-Sep-04 1.59 1.69 1.54 1.56 700 1.56
15-Sep-04 1.56 1.56 1.55 1.55 2,300 1.55
14-Sep-04 1.65 1.65 1.65 1.65 0 1.65
-62-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
13-Sep-04 1.58 1.72 1.58 1.65 2,400 1.65
10-Sep-04 1.58 1.76 1.52 1.60 6,400 1.60
9-Sep-04 1.52 1.74 1.52 1.55 5,300 1.55
8-Sep-04 1.83 1.85 1.54 1.66 14,300 1.66
7-Sep-04 1.50 1.50 1.50 1.50 1,300 1.50
3-Sep-04 1.54 1.54 1.54 1.54 0 1.54
2-Sep-04 1.55 1.68 1.54 1.54 2,100 1.54
1-Sep-04 1.54 1.54 1.54 1.54 0 1.54
31-Aug-04 1.55 1.68 1.54 1.54 2,100 1.54
30-Aug-04 1.55 1.73 1.55 1.60 5,500 1.60
27-Aug-04 1.58 1.63 1.58 1.63 700 1.63
26-Aug-04 1.62 1.65 1.55 1.55 2,700 1.55
25-Aug-04 1.55 1.55 1.55 1.55 0 1.55
24-Aug-04 1.55 1.55 1.55 1.55 0 1.55
23-Aug-04 1.63 1.63 1.55 1.55 600 1.55
20-Aug-04 1.58 1.58 1.58 1.58 0 1.58
19-Aug-04 1.59 1.66 1.58 1.58 2,400 1.58
18-Aug-04 1.68 1.68 1.55 1.58 6,800 1.58
17-Aug-04 1.61 1.73 1.61 1.70 4,700 1.70
16-Aug-04 1.54 1.79 1.51 1.65 7,400 1.65
13-Aug-04 1.57 1.76 1.47 1.48 3,400 1.48
12-Aug-04 1.77 1.77 1.57 1.57 5,100 1.57
11-Aug-04 1.53 1.67 1.53 1.67 1,000 1.67
10-Aug-04 1.72 1.84 1.52 1.59 5,200 1.59
9-Aug-04 1.77 1.79 1.77 1.79 800 1.79
6-Aug-04 1.74 1.79 1.74 1.79 800 1.79
5-Aug-04 1.53 1.75 1.53 1.68 1,600 1.68
4-Aug-04 1.60 1.72 1.45 1.72 6,600 1.72
3-Aug-04 1.75 1.75 1.60 1.69 10,600 1.69
2-Aug-04 1.54 1.62 1.47 1.55 5,900 1.55
30-Jul-04 1.59 1.73 1.59 1.61 2,300 1.61
29-Jul-04 1.73 1.73 1.58 1.71 3,100 1.71
28-Jul-04 1.68 1.77 1.59 1.77 4,100 1.77
27-Jul-04 1.61 1.74 1.61 1.74 4,100 1.74
26-Jul-04 1.75 1.75 1.66 1.70 3,400 1.70
23-Jul-04 1.69 1.80 1.50 1.54 5,200 1.54
22-Jul-04 1.70 1.70 1.41 1.58 7,500 1.58
21-Jul-04 1.69 1.74 1.66 1.69 4,500 1.69
20-Jul-04 1.61 1.76 1.60 1.66 8,000 1.66
19-Jul-04 1.49 1.70 1.49 1.65 6,300 1.65
-63-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
16-Jul-04 1.52 1.79 1.40 1.59 4,500 1.59
15-Jul-04 1.57 1.69 1.43 1.63 5,400 1.63
14-Jul-04 1.40 1.67 1.40 1.59 2,100 1.59
13-Jul-04 1.54 1.58 1.50 1.50 3,300 1.50
12-Jul-04 1.54 1.72 1.54 1.56 3,500 1.56
9-Jul-04 1.58 1.58 1.58 1.58 0 1.58
8-Jul-04 1.58 1.58 1.58 1.58 1,600 1.58
7-Jul-04 1.51 1.51 1.51 1.51 300 1.51
6-Jul-04 1.58 1.59 1.58 1.59 500 1.59
2-Jul-04 1.58 1.59 1.50 1.58 9,700 1.58
1-Jul-04 1.43 1.56 1.42 1.56 3,000 1.56
30-Jun-04 1.46 1.56 1.32 1.46 1,700 1.46
29-Jun-04 1.41 1.56 1.32 1.50 5,800 1.50
28-Jun-04 1.50 1.52 1.45 1.52 3,200 1.52
25-Jun-04 1.49 1.69 1.46 1.46 1,800 1.46
24-Jun-04 1.46 1.50 1.36 1.47 7,500 1.47
23-Jun-04 1.55 1.60 1.47 1.47 8,700 1.47
22-Jun-04 1.75 1.75 1.47 1.50 8,000 1.50
21-Jun-04 1.74 1.74 1.74 1.74 0 1.74
18-Jun-04 1.74 1.74 1.74 1.74 800 1.74
17-Jun-04 1.79 1.79 1.79 1.79 1,000 1.79
16-Jun-04 1.74 1.74 1.74 1.74 5,200 1.74
15-Jun-04 1.75 1.75 1.75 1.75 0 1.75
14-Jun-04 1.75 1.75 1.75 1.75 100 1.75
10-Jun-04 1.75 1.79 1.74 1.75 5,200 1.75
9-Jun-04 1.75 1.75 1.75 1.75 0 1.75
8-Jun-04 1.74 1.75 1.74 1.75 3,200 1.75
7-Jun-04 1.74 1.79 1.74 1.78 1,600 1.78
4-Jun-04 1.70 1.70 1.70 1.70 0 1.70
3-Jun-04 1.70 1.70 1.70 1.70 0 1.70
2-Jun-04 1.70 1.70 1.70 1.70 0 1.70
1-Jun-04 1.70 1.70 1.70 1.70 100 1.70
28-May-04 1.63 1.68 1.63 1.68 400 1.68
27-May-04 1.68 1.68 1.68 1.68 0 1.68
26-May-04 1.75 1.75 1.65 1.68 3,400 1.68
25-May-04 1.66 1.75 1.63 1.64 5,100 1.64
24-May-04 1.65 1.76 1.64 1.76 6,500 1.76
21-May-04 1.68 1.80 1.65 1.80 3,500 1.80
20-May-04 1.87 1.87 1.66 1.76 3,500 1.76
19-May-04 1.70 1.80 1.66 1.66 5,100 1.66
-64-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
18-May-04 1.81 1.82 1.69 1.77 10,200 1.77
17-May-04 1.75 1.82 1.70 1.75 3,000 1.75
14-May-04 1.70 1.81 1.69 1.75 2,900 1.75
13-May-04 1.85 1.85 1.70 1.72 2,900 1.72
12-May-04 1.71 1.79 1.71 1.76 2,300 1.76
11-May-04 1.72 1.85 1.70 1.85 2,500 1.85
10-May-04 1.80 1.84 1.69 1.84 5,800 1.84
7-May-04 1.80 1.80 1.80 1.80 1,700 1.80
6-May-04 1.74 1.74 1.74 1.74 200 1.74
5-May-04 1.74 1.74 1.74 1.74 0 1.74
4-May-04 1.74 1.74 1.74 1.74 100 1.74
3-May-04 1.79 1.86 1.75 1.75 2,000 1.75
30-Apr-04 1.74 1.81 1.74 1.81 200 1.81
29-Apr-04 1.71 1.71 1.71 1.71 200 1.71
28-Apr-04 1.90 1.92 1.70 1.70 2,000 1.70
27-Apr-04 1.77 1.90 1.77 1.90 900 1.90
26-Apr-04 1.73 1.90 1.70 1.78 4,200 1.78
23-Apr-04 1.76 1.82 1.76 1.82 600 1.82
22-Apr-04 1.78 1.94 1.70 1.71 4,600 1.71
21-Apr-04 1.76 1.76 1.75 1.75 700 1.75
20-Apr-04 1.78 1.80 1.78 1.80 2,300 1.80
19-Apr-04 1.76 1.81 1.76 1.81 3,400 1.81
16-Apr-04 1.80 1.88 1.80 1.85 1,700 1.85
15-Apr-04 2.00 2.00 1.80 1.93 2,000 1.93
14-Apr-04 1.96 2.03 1.77 1.80 12,800 1.80
13-Apr-04 1.93 1.96 1.90 1.96 2,200 1.96
12-Apr-04 2.06 2.06 1.96 1.96 1,300 1.96
8-Apr-04 2.15 2.15 1.97 2.01 4,200 2.01
7-Apr-04 2.03 2.20 1.92 1.97 6,200 1.97
6-Apr-04 1.93 1.93 1.93 1.93 0 1.93
5-Apr-04 2.19 2.39 1.93 1.93 14,100 1.93
2-Apr-04 2.01 2.01 2.01 2.01 100 2.01
1-Apr-04 1.98 2.01 1.98 2.01 2,900 2.01
31-Mar-04 2.00 2.04 1.90 1.92 2,100 1.92
30-Mar-04 2.00 2.15 1.99 1.99 2,500 1.99
29-Mar-04 1.99 1.99 1.99 1.99 5,000 1.99
26-Mar-04 1.94 2.10 1.90 1.90 3,700 1.90
25-Mar-04 2.08 2.08 1.99 1.99 10,000 1.99
24-Mar-04 2.05 2.06 1.99 1.99 3,100 1.99
23-Mar-04 2.10 2.10 1.96 2.00 6,200 2.00
-65-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
22-Mar-04 1.99 1.99 1.99 1.99 2,400 1.99
19-Mar-04 2.00 2.10 1.90 1.99 5,900 1.99
18-Mar-04 1.99 1.99 1.99 1.99 1,500 1.99
17-Mar-04 2.05 2.15 2.00 2.00 9,700 2.00
16-Mar-04 2.10 2.10 2.09 2.09 3,100 2.09
15-Mar-04 2.11 2.14 2.05 2.14 4,200 2.14
12-Mar-04 2.11 2.11 2.05 2.05 5,300 2.05
11-Mar-04 2.14 2.14 2.11 2.11 5,000 2.11
10-Mar-04 2.14 2.15 2.07 2.07 6,500 2.07
9-Mar-04 1.82 2.15 1.82 2.15 1,500 2.15
8-Mar-04 2.05 2.15 2.02 2.12 3,200 2.12
5-Mar-04 2.16 2.16 2.01 2.01 2,900 2.01
4-Mar-04 2.16 2.16 1.81 2.00 5,100 2.00
3-Mar-04 2.19 2.19 1.95 2.04 4,800 2.04
2-Mar-04 1.96 2.20 1.96 2.20 2,200 2.20
1-Mar-04 1.95 2.55 1.72 2.10 13,700 2.10
27-Feb-04 1.95 1.95 1.89 1.95 1,300 1.95
26-Feb-04 1.90 2.00 1.78 1.78 7,400 1.78
25-Feb-04 2.00 2.00 1.79 1.79 2,800 1.79
24-Feb-04 2.00 2.00 2.00 2.00 500 2.00
23-Feb-04 1.85 2.00 1.85 2.00 800 2.00
20-Feb-04 1.88 2.00 1.88 2.00 2,300 2.00
19-Feb-04 1.89 1.97 1.85 1.85 2,300 1.85
18-Feb-04 2.03 2.03 1.92 2.00 5,600 2.00
17-Feb-04 1.95 2.10 1.89 2.10 2,700 2.10
13-Feb-04 2.00 2.15 1.85 1.95 6,200 1.95
12-Feb-04 1.82 1.82 1.82 1.82 100 1.82
11-Feb-04 2.00 2.15 2.00 2.15 1,500 2.15
10-Feb-04 1.99 2.15 1.98 2.15 2,800 2.15
9-Feb-04 2.00 2.16 2.00 2.07 3,700 2.07
6-Feb-04 2.09 2.10 2.09 2.10 3,100 2.10
5-Feb-04 2.07 2.28 2.00 2.00 11,400 2.00
4-Feb-04 1.84 2.05 1.84 2.05 2,800 2.05
3-Feb-04 2.04 2.04 2.04 2.04 0 2.04
2-Feb-04 2.08 2.08 1.78 2.04 1,900 2.04
30-Jan-04 1.65 2.04 1.65 2.04 1,000 2.04
29-Jan-04 2.09 2.10 1.84 2.00 5,900 2.00
28-Jan-04 1.79 2.25 1.79 2.10 3,400 2.10
27-Jan-04 1.73 1.79 1.73 1.79 800 1.79
26-Jan-04 1.56 1.74 1.56 1.73 5,900 1.73
-66-
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
NASDAQ SYMBOL FFED
YEAR TO DATE TRADING ACTIVITY
Date Open High Low Close Volume Closing Price
- --------------------------------------------------------------------------------
23-Jan-04 1.59 1.60 1.59 1.60 3,900 1.60
22-Jan-04 1.70 1.70 1.70 1.70 200 1.70
21-Jan-04 1.59 1.74 1.58 1.59 7,200 1.59
20-Jan-04 1.61 1.73 1.61 1.73 3,900 1.73
16-Jan-04 1.61 1.61 1.61 1.61 0 1.61
15-Jan-04 1.61 1.61 1.61 1.61 400 1.61
14-Jan-04 1.75 1.75 1.75 1.75 0 1.75
13-Jan-04 1.75 1.75 1.75 1.75 800 1.75
12-Jan-04 1.71 1.75 1.71 1.75 6,000 1.75
9-Jan-04 1.59 1.59 1.59 1.59 0 1.59
8-Jan-04 1.59 1.59 1.59 1.59 0 1.59
7-Jan-04 1.59 1.59 1.59 1.59 2,600 1.59
6-Jan-04 1.78 1.78 1.60 1.65 1,400 1.65
5-Jan-04 1.59 1.59 1.59 1.59 0 1.59
2-Jan-04 1.60 1.61 1.59 1.59 1,500 1.59
MEDIAN $1.70 $1.75 $1.65 $1.70 2,500 $1.70
AVERAGE $1.73 $1.80 $1.68 $1.74 3,277 $1.74
WEIGHTED AVERAGE $1.75
HIGH $2.19 $2.55 $2.11 $2.20 20,400 $2.20
LOW $1.40 $1.46 $1.32 $1.43 0 $1.43
-67-