SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended December 31, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _______________ to ______________________
Commission File Number 000-29040
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A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Savings Plan for Employees of Fidelity Federal Bank & Trust
B: Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Fidelity Bankshares, Inc.
205 Datura Street
West Palm Beach, Florida 33401
Savings Trust for Employees of Fidelity Federal Bank & Trust
Financial Statements
Years Ended December 31, 2003 and 2002,
Supplemental Schedule
for the Year Ended December 31, 2003,
and Report of Independent Registered Public Accounting Firm
SAVINGS TRUST FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
TABLE OF CONTENTS
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Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:
Schedule H, Part IV, Line 4i--Supplemental Schedule of
Assets Held for Investment Purposes 9
Schedules not filed herewith are omitted because of the absence of conditions
under which they are required.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Participants of the Savings Trust for Employees of
Fidelity Federal Bank & Trust
We have audited the accompanying statements of net assets available for benefits
of the Savings Trust for Employees of Fidelity Federal Bank & Trust (the "Plan")
as of December 31, 2003 and 2002, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 2003 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
June 18, 2004
SAVINGS TRUST FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
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2003 2002
ASSETS:
Cash $ 171,255 $ 109,842
Investments--at fair value:
Fidelity Bankshares, Inc. common stock
(cost--$8,259,263 in 2003 and $7,512,307 in 2002) 25,508,261 14,605,290
Mutual funds (cost--$6,899,308 in 2003
and $5,814,657 in 2002) 7,451,998 4,819,159
Charles Schwab Money Funds
(at cost which approximates fair value) 899,314 591,476
Participants' notes receivable 986,443 808,571
Contribution Receivable 110,937 --
Accrued income receivable 80,873 81,594
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Total assets 35,209,081 21,015,932
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LIABILITIES:
Miscellaneous liabilities 22,221 327
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Total liabilities 22,221 327
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NET ASSETS AVAILABLE FOR BENEFITS $35,186,860 $21,015,605
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See notes to financial statements.
2
SAVINGS TRUST FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003 AND 2002
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2003 2002
ADDITIONS:
Investment income:
Dividends and interest $ 458,805 $ 445,128
Net appreciation in fair value of investments 12,401,030 437,273
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Total investment income 12,859,835 882,401
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Contributions:
Participants 2,040,810 1,796,686
Employer 830,470 564,912
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Total contributions 2,871,280 2,361,598
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Total additions 15,731,115 3,243,999
DEDUCTIONS:
Benefit payments 1,559,860 253,487
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NET INCREASE IN NET ASSETS 14,171,255 2,990,512
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 21,015,605 18,025,093
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NET ASSETS AVAILABLE FOR BENEFITS--End of year $35,186,860 $21,015,605
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See notes to financial statements
3
SAVINGS TRUST FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
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1. DESCRIPTION OF THE PLAN
The following description of the Savings Trust for Employees of Fidelity
Federal Bank & Trust (the "Plan") provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the provisions.
General--The Plan was established, effective January 1, 1988, by the Board
of Directors of Fidelity Federal Bank & Trust. The purpose of the Plan is
to receive, hold and administer all monies and properties and to implement
the provisions relating to the Plan.
The Plan was formed for substantially all employees ("Participants") of
Fidelity Federal Bank & Trust and subsidiaries (the "Employer"). The Plan
was established as a defined contribution plan exempt from income taxes
under Section 401(a) of the Internal Revenue Code and has received a
favorable determination of exempt status from the U.S. Treasury
Department. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). Membership in the Plan
is voluntary for employees who have attained age 21 and have earned 90
days of vesting service.
In December 2000, a "Company Pension Contribution" provision was added to
the Plan for eligible employees hired subsequent to December 31, 2000, as
these employees are not eligible for participation in the Retirement Plan
for the Employees of Fidelity Federal Bank & Trust, a defined benefit plan
which is available only to employees hired prior to January 1, 2001.
Participant and Employer Matching Contributions--All eligible employees
may contribute between 1% and 25% of their base compensation to the Plan
("Participants' Contributions") during the year, subject to certain
limitations. The Participants' Contributions are not subject to state or
federal income taxes until withdrawn in the future. For all eligible
Participants actively employed at the end of each calendar quarter during
the year, the Employer provides a matching contribution equal to 50% of
the Participant's Contribution for that quarter, up to the lesser of the
Participant's Contribution, 6% of base salary, or an aggregate of $12,000
for the year. Contributions in excess of 6% of the Participant's annual
compensation are not eligible for Employer matching contributions. The
Employer begins providing matching contributions to a Participant's
account on the first January 1 or July 1 coinciding with or next following
the Participant's completion of 1,000 hours of service.
4
Company Pension Contributions--Since eligible employees hired subsequent
to December 31, 2000 cannot participate in the above noted defined benefit
plan, the Employer provides an additional Company Pension Contribution
equal to a percentage of the Participant's earnings based on years of
service according to the following schedule:
Contribution
Years of Service Percentage
Less than 7 years 3 %
7 years but less than 14 years 4 %
14 or more years 5 %
The contribution percentage is changed annually on January 1 of each Plan
year based on the years of service earned by the Participant as of
December 31 of the immediately prior Plan year. To receive a Company
pension contribution for the Plan year, the Participant must (1) be
eligible to receive Company pension contributions, (2) be employed on
December 31 of such Plan year, and (3) have completed at least 1,000
service hours in the Plan year, terminated employment by reason of death
or long-term disability, or terminated employment with the Company after
attainment of age 55 and completion of at least five years of service.
Participant Accounts--The Plan provides for Participant directed accounts
into an employer stock fund, several mutual funds, or Charles Schwab Money
Funds. Each Participant's account is credited with the Participant's
Contribution and an allocation of (a) the Employer matching contribution,
(b) the Company pension contribution, (c) Plan earnings, and (d)
forfeitures of terminated Participants' nonvested accounts. Allocations
are based on Participant earnings and account balances, as defined. The
benefit to which a Participant is entitled is the benefit that can be
provided from the Participant's vested account.
Investments--Participants may elect that their contributions be invested,
in increments of 1% of the total, in 1 of 24 funds, including Fidelity
Bankshares, Inc. common stock, Artisan Midcap Fund, Columbia Acorn Fund
Class Z, Columbia Contrarian Income Fund Class A, Dodge & Cox Stock Fund,
Europacific Growth Fund, Federated Kaufmann Fund Class K, First Eagle
Sogen Overseas Fund, Growth Fund of America, Heartland Value Fund, Janus
Advisor Core Equity Fund, Janus Twenty Fund, Janus Worldwide Fund, MFS
Value Fund Class A, Oakmark Fund, Pimco Renaissance Fund Class B, Strong
Advisor Small-Cap Value Fund Class Z, Strong Government Securities Fund, T
Rowe Price Growth Stock Fund, Vanguard F-1 Securities Short-Term Federal
Fund, Vanguard Index Trust 500 Portfolio, Vanguard Wellington Fund, Schwab
Institutional Advantage Money Fund and Schwab Value Advantage Money Fund.
Participants may change their investment options at any time.
Participants' Notes Receivable--Participants may borrow from their
accounts a minimum of $1,000 and a maximum equal to the lesser of $50,000
or 50% of their vested account balance. Loan transactions are treated as a
transfer to (from) the investment fund from (to) the Participants' loan
fund. Loan terms range from one to five years, unless for the purchase of
a primary residence, in which case the term may extend to 15 years. The
loans are secured by the balance in the Participant's account and bear
interest at prime rate plus 1/2% at the beginning of the quarter the loan
is made. Principal and interest are paid ratably through payroll
deductions. At December 31, 2003, 165 Participants had outstanding loans
classified as notes receivable totaling $986,443 at interest rates ranging
from 4.50%-10.00%. At December 31, 2002, 101 Participants had outstanding
loans classified as notes receivable totaling $808,571 at interest rates
ranging from 4.75%-10.00%.
Administration--The Administrative Committee, as appointed by the Board of
Directors of the Employer, is the Plan's governing body and is responsible
for administration of the Plan and all
5
questions concerning the interpretation and application of the Plan. The
Employer pays only the costs of operating the Plan.
Distributions--Distributions of Participant account balances are made upon
attainment of normal or early retirement age, termination of employment,
total and permanent disability or death. Terminated Participants with less
than 60 months of service receive the value of their contributions and
their vested percentage of Employer matching contributions; the balance of
the account is forfeited and applied to the Employer matching contribution
for all other Plan Participants in that year.
Vesting--Participants' own contributions to the Plan and their related
investment earnings are fully vested at all times. Participants become
vested in Employer matching contributions and Company pension
contributions, and their related investment earnings according to the
following schedule:
Vested
Years of Service Percent
Employer matching contribution:
Less than 1 year 0 %
1 year 20 %
2 years 40 %
3 years 60 %
4 years 80 %
5 years or more 100 %
Company pension contribution:
Less than 5 years 0 %
5 years or more 100 %
Years of service for vesting are calendar years in which Participants are
credited with at least 1,000 hours of service, counted from date of
employment. Employer matching contributions and Company pension
contributions automatically become fully vested upon retirement at age 65,
death or disability prior to age 65, or termination of the Plan.
Plan Termination--The Plan may be amended or terminated at any time. In
the event of termination, all account balances become fully vested.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
Basis of Presentation--The accompanying financial statements are presented
on the accrual basis of accounting.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Investments--Investments are carried at fair value. Gains or losses on
sales of investments are determined by the specific identification method
and are recognized as of the trade date. The cost of the
6
temporary investment accounts, Schwab Institutional Advantage Money Fund
and Schwab Value Advantage Money Fund, approximate fair value due to their
liquid nature. The fair values of the mutual funds and common stock were
determined using closing market quotations at year-end. Participant loans
are recorded at the loan balance, which approximates fair value.
Gain or loss on sales of investments is based on specific identification
and is included in the net appreciation of investments. Dividend income is
recorded on the ex-dividend date. Interest income is recorded as earned on
an accrual basis. Benefits are recorded when paid.
Income Taxes--The Internal Revenue Service has determined and informed the
Employer by a letter dated December 17, 2002 that the Plan and related
trust are designed in accordance with applicable sections of the Internal
Revenue Code ("IRC"). The Plan has been amended since receiving the
determination letter; however, the Plan administrator and the Plan's tax
counsel believe that the Plan is designed and is currently being operated
in compliance with the applicable requirements of the IRC. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
Benefits Payable--As of December 31, 2003 and 2002, benefits of $863,676
and $589,288, respectively, were due to Participants who have withdrawn
from participation in the Plan.
Forfeitures--During the years ended December 31, 2003 and 2002,
Participants who were not fully vested and incurred a break in service
forfeited nonvested benefits. Forfeited amounts totaled $12,235 and $9,780
for the years ended December 31, 2003 and 2002, respectively. These
forfeitures were used to reduce Employer matching contributions.
Miscellaneous Liabilities--Miscellaneous liabilities include (1)
miscellaneous liabilities of the Plan to the Participants and (2) the
Plan's obligation to purchase investments where the trade date is prior
to, and the settlement date is subsequent to, the closing of the reporting
period.
3. INVESTMENTS
Investments in excess of five percent of net assets available for benefits
at December 31, 2003 and 2002, valued at fair value, are as follows:
Description 2003 2002
Fidelity Bankshares, Inc. common stock $ 25,508,261 $ 14,605,290
During 2003 and 2002, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated in value by $12,401,030 and $437,273, respectively, as
follows:
2003 2002
Fidelity Bankshares, Inc. common stock $ 10,874,065 $ 1,389,767
Mutual funds 1,526,965 (952,494)
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$ 12,401,030 $ 437,273
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4. RELATED PARTY TRANSACTIONS
At December 31, 2003, the Plan owned 812,365 shares of common stock of
Fidelity Bankshares, Inc., which had a cost and fair value of $8,259,263
and $25,508,261, respectively. During the years ended December 31, 2003
and 2002, dividend income of $324,695 and $318,388, respectively, was
earned on these investments.
******
8
SAVINGS TRUST FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
SCHEDULE H, PART IV, LINE 4i--SUPPLEMENTAL SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2003
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Shares Current
Identity of Issuer Description Held Cost** Value
* Fidelity Bankshares, Inc. Common stock 812,365 $ 25,508,261
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Artisan Midcap Fund Mutual fund 613 15,808
Columbia Acorn Fund Class Z Mutual fund 1,862 42,013
Columbia Contrarian Income Fund Class A Mutual fund 40,056 441,817
Dodge & Cox Stock Fund Mutual fund 807 91,799
Europacific Growth Fund Mutual fund 481 14,389
Federated Kaufmann Fund Class K Mutual fund 116,341 577,050
First Eagle Sogen Overseas Fund Mutual fund 12,097 219,805
Growth Fund of America Mutual fund 450 10,996
Heartland Value Fund Mutual fund 19,295 986,746
Janus Advisor Core Equity Fund Mutual fund 14,103 233,271
Janus Twenty Fund Mutual fund 10,045 363,333
Janus Worldwide Fund Mutual fund 20,304 802,811
MFS Value Fund Class A Mutual fund 874 17,775
Oakmark Fund Mutual fund 24,546 921,454
Pimco Renaissance Fund Class B Mutual fund 6,846 158,208
Strong Advisor Small-Cap Value Fund Class Z Mutual fund 533 14,680
Strong Government Securities Fund Mutual fund 1,781 19,381
T Rowe Price Growth Stock Fund Mutual fund 2,301 55,987
Vanguard F-1 Securities Short-Term Federal Fund Mutual fund 2,375 25,126
Vanguard Index Trust 500 Portfolio Mutual fund 12,811 1,315,316
Vanguard Wellington Fund Mutual fund 39,022 1,124,233
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Total mutual funds 7,451,998
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* Schwab Institutional Advantage Money Fund Money funds 6,196 6,196
* Schwab Value Advantage Money Fund Money funds 893,118 893,118
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Total money funds 899,314
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Participants' Notes
Loan Fund Receivable 986,443 986,443
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Total investments $ 34,846,016
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* Party-in-interest
** Cost information is not required for participant-directed investments
and therefore is not included
9
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAVINGS PLAN FOR EMPLOYEES OF
FIDELITY FEDERAL BANK & TRUST
FIDELITY FEDERAL BANK & TRUST
PLAN ADMINISTRATOR
Date: June 26, 2004 By: /s/ Robert L. Fugate
---------------------------------
Name: Robert L. Fugate
Title: Executive Vice President