-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UmFmjHXmmXY3O4Gm0LyhorJpYxb5PW81mn4wtDH7A0rzpAwyjsKl4BYVSswrqfZU Cw9PCux2gYKkjKQf8gwN0g== 0000912219-98-000004.txt : 19980422 0000912219-98-000004.hdr.sgml : 19980422 ACCESSION NUMBER: 0000912219-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980421 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY BANCORP INC /DE/ CENTRAL INDEX KEY: 0000912219 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 363915246 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12753 FILM NUMBER: 98597885 BUSINESS ADDRESS: STREET 1: 5455 WEST BELMONT AVENUE CITY: CHICAGO STATE: IL ZIP: 60641 BUSINESS PHONE: 3127364414 MAIL ADDRESS: STREET 1: 5455 WEST BELMONT AAVENUE CITY: CHICAGO STATE: IL ZIP: 60641 10-Q 1 FIDELITY BANCORP, INC. FORM 10-Q, 3/31/98 =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 Commission file number 1-12753 Fidelity Bancorp, Inc. (Exact name of registrant as specified in its charter) Delaware 36-3915246 (State of Incorporation) (I.R.S. Employer Identification No.) 5455 W. Belmont, Chicago, Illinois, 60641 (Address of principal executive offices) (773) 736-4414 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all the reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. YES X NO The number of shares outstanding of each of the issuer's classes of common stock, was 2,840,468 shares of common stock, par value $.01, outstanding as of April 17, 1998. =============================================================================== FIDELITY BANCORP, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION PAGE(S) Item 1. Financial Statements Consolidated Statements of Financial Condition as of March 31, 1998 (unaudited) and September 30, 1997 1 Consolidated Statements of Earnings for the three and six months ended March 31, 1998 and 1997 (unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity for the six months ended March 31, 1998 and 1997 (unaudited) 3 Consolidated Statements of Cash Flows for the six months ended March 31, 1998 and 1997 (unaudited) 4 Notes to Unaudited Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12-14 SIGNATURE PAGE 15 1 FIDELITY BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except per share data)
ASSETS March 31, September 30, 1998 1997 (unaudited) Cash and due from banks $ 1,791 436 Interest-bearing deposits 1,038 2,314 Federal funds sold 100 100 Investment in dollar-denominated mutual funds, at fair value - 3,154 FHLB of Chicago stock 5,700 5,700 Mortgage-backed securities held to maturity, at amortized cost (approximate fair value of $15,104 at March 31, 1998 and $17,124 at September 30, 1997) 14,902 16,875 Investment securities available for sale, at fair value 62,006 70,297 Loans receivable, net of allowance for loan losses of $468 at March 31, 1998 and $460 at September 30, 1997 389,844 388,262 Accrued interest receivable 3,130 3,445 Real estate in foreclosure 671 215 Premises and equipment 3,931 3,593 Deposit base intangible 85 107 Other assets 1,142 1,136 ------- ------- $ 484,340 495,634 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits 330,445 323,443 Borrowed funds 92,700 113,400 Advance payments by borrowers for taxes and insurance 2,808 2,197 Other liabilities 6,143 6,977 ------- ------- Total liabilities 432,096 446,017 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; authorized 2,500,000 shares; none outstanding - - Common stock, $.01 par value; authorized 8,000,000 shares; issued 3,782,350 shares; 2,821,530 and 2,794,978 shares outstanding at March 31, 1998 and September 30, 1997 38 38 Additional paid-in capital 37,725 37,494 Retained earnings, substantially restricted 29,370 27,939 Treasury stock, at cost (960,820 and 987,372 shares at March 31, 1998 and September 30, 1997, respectively) (13,483) (13,855) Common stock acquired by Employee Stock Ownership Plan (1,092) (1,662) Common stock acquired by Bank Recognition and Retention Plans (340) (471) Unrealized gain on investment securities available for sale, less applicable taxes 26 134 ------- ------- TOTAL STOCKHOLDERS' EQUITY 52,244 49,617 Commitments and contingencies $ 484,340 495,634 ======= =======
See accompanying notes to unaudited consolidated financial statements. 2 FIDELITY BANCORP, INC. Consolidated Statements of Earnings (Dollars in thousands, except per share data)
Three Months ended Six Months ended March 31, March 31, 1998 1997 1998 1997 -------------------- ----------------- (unaudited) Interest Income: Loans receivable $ 7,425 7,064 14,901 14,030 Investment securities 1,206 1,470 2,487 2,975 Mortgage-backed securities 272 359 561 735 Interest earning deposits 18 9 46 19 Federal funds sold 2 2 12 5 Investment in mutual funds - 40 17 82 ------ ------ ------ ------ 8,923 8,944 18,024 17,846 Interest Expense: Deposits 3,977 3,924 8,087 7,798 Borrowed funds 1,327 1,305 2,785 2,777 ------ ------ ------ ------ 5,304 5,229 10,872 10,575 Net interest income before provision for loan losses 3,619 3,715 7,152 7,271 Provision for loan losses 15 - 61 39 ------ ------ ------ ------ Net interest income after provision for loan losses 3,604 3,715 7,091 7,232 Non-Interest Income: Fees and commissions 79 90 169 202 Insurance and annuity commissions 156 189 336 290 Other 15 16 29 28 ------ ------ ------ ------ 250 295 534 520 Non-Interest Expense: General and administrative expenses: Salaries and employee benefits 1,466 1,394 2,807 2,673 Office occupancy and equipment 307 302 598 598 Data processing 125 127 252 241 Advertising and promotions 40 173 152 338 Federal deposit insurance premiums 55 50 109 208 Other 350 335 634 699 ------ ------ ------ ----- Total general and administrative expenses 2,343 2,381 4,552 4,757 Amortization of intangible 11 14 22 28 ------ ------ ------ ------ 2,354 2,395 4,574 4,785 ------ ------ ------ ------ Income before income taxes 1,500 1,615 3,051 2,967 Income tax expense 540 618 1,114 1,136 ------ ------ ------ ------ Net income $ 960 997 1,937 1,831 ====== ====== ====== ====== Earnings per share - basic $ 0.36 0.38 0.72 0.70 Earnings per share - diluted $ 0.34 0.36 0.68 0.66 ====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements. 3 FIDELITY BANCORP, INC. Consolidated Statements of Changes in Stockholders' Equity (Dollars in thousands) Six months ended March 31, 1998 and 1997
Unrealized Gain (Loss) Common Common on Investment Additional Stock Stock Securities Common Paid-In Retained Treasury Acquired Acquired Available Stock Capital Earnings Stock by ESOP by BRRP's For Sale Total --- ------ ------- ------- ------ ------ ---- ------- Balance at September 30, 1996 38 37,079 27,851 (12,619) (2,078) (708) (735) 48,828 Net income - - 1,831 - - - - 1,831 Purchase of treasury stock (82,030 shares) - - - (1,389) - - - (1,389) Cash dividends ($.14 per share) - - (391) - - - - (391) Amortization of award of BRRP's stock - - - - - 128 - 128 Cost of ESOP shares released - - - - 416 - - 416 Exercise of stock options and reissuance of treasury shares (2,200 shares) - (32) - 111 - - - 79 Tax benefit related to stock options exercised - 13 - - - - - 13 Market adjustment for committed ESOP shares - 138 - - - - - 138 Change in unrealized loss on investment securities available for sale - - - - - - (132) (132) --- ------ ------- ------ ------ ----- ---- ------ Balance at March 31, 1997 $38 37,198 29,291 (13,897) (1,662) (580) (867) $49,521 === ====== ======= ====== ====== ===== ==== ======= Balance at September 30, 1997 38 37,494 27,939 (13,855) (1,662) (471) 134 49,617 Net income - - 1,937 - - - - 1,937 Cash dividends ($.18 per share) - - (506) - - - - (506) Amortization of award of BRRP's stock - - - - - 131 - 131 Cost of ESOP shares released - - - - 570 - - 570 Exercise of stock options and reissuance of treasury shares (26,552 shares) - (106) - 372 - - - 266 Tax benefit related to stock options exercised - 39 - - - - - 39 Market adjustment for committed ESOP shares - 298 - - - - - 298 Change in unrealized gain on investment securities available for sale - - - - - - (108) (108) --- ------ ------- ------ ------ ----- ---- ------ Balance at March 31, 1998 $38 37,725 29,370 (13,483) (1,092) (340) 26 $52,244 === ====== ======= ====== ====== ===== ==== =======
See accompanying notes to unaudited consolidated financial statements. 4 FIDELITY BANCORP, INC. Consolidated Statements of Cash Flows (Dollars in thousands)
Six months ended March 31, 1998 1997 ------ ------ (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,937 1,831 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation 177 173 Deferred income taxes - 13 Provision for loan losses 61 39 Net amortization and accretion of premiums and discounts (3) 12 Amortization of cost of stock benefit plans 131 128 Principal payment on ESOP loan 570 416 Market adjustment for committed ESOP shares 298 138 Deferred loan fees, net of amortization (35) (290) Amortization of deposit base intangible 22 28 Decrease in accrued interest receivable 315 26 Decrease (increase)in other assets (10) 198 Decrease in other liabilities (770) (1,167) ------ ------ Net cash provided by operating activities 2,693 1,545 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities 26,023 - Purchase of investment securities available for sale (19,980) - Loans originated for investment (57,643) (43,682) Proceeds from sale of real estate owned - 101 Purchase of premises and equipment (515) (7) Principal repayments collected on loans receivable 55,576 26,657 Principal repayments collected on investment securities 2,092 2,667 Principal repayments collected on mortgage-backed securities 1,967 1,773 ------ ------ Net cash provided by(used in) investing activities 7,520 (12,491) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 7,002 27,449 Repayments of FHLB advances (20,700) (18,200) Net increase in advance payments by borrowers for taxes and insurance 611 1,455 Purchase of treasury stock - (1,389) Payment of common stock dividends (506) (391) Proceeds from exercise of stock options 305 79 ------ ------ Net cash provided by (used in) financing activities (13,288) 9,003 ------ ------ Net change in cash and cash equivalents (3,075) (1,943) Cash and cash equivalents at beginning of period 6,004 7,419 ------ ------ Cash and cash equivalents at end of period $ 2,929 5,476 ====== ====== CASH PAID DURING THE PERIOD FOR: Interest $ 10,892 10,535 Income taxes 1,290 200 NON-CASH INVESTING ACTIVITIES - Loans transferred to real estate in foreclosure 1,032 - ====== ======
See accompanying notes to unaudited consolidated financial statements. 5 FIDELITY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation have been included. The results of operations and other data for the six months ended March 31, 1998 are not necessarily indicative of results that may be expected for the entire fiscal year ended September 30, 1998. The unaudited consolidated financial statements include the accounts of Fidelity Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Fidelity Federal Savings Bank and subsidiaries (the "Bank"). All material intercompany accounts and transactions have been eliminated in consolidation. (2) EARNINGS PER SHARE In February 1997, the FASB issued Statement 128, "Earnings Per Share." Statement 128 supersedes APB Opinion No. 15, "Earnings Per Share," and specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. It replaces the presentations of primary EPS with the presentation of basic EPS, and replaces fully diluted EPS with diluted EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and dominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Statement 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earnings per share of common stock for the three and six months ended March 31, 1998 has been calculated according to the guidelines of Statement 128 and earnings per share of common stock for the three and six months ended March 31, 1997 has been restated to conform with Statement 128. Diluted earnings per share for the three months ended March 31, 1998 and 1997 are computed by dividing net income by the weighted average number of shares of common stock and potential common stock outstanding for the period which were 2,863,747 and 2,766,324, respectively. Diluted earnings per share of common stock for the six months ended March 31, 1998 and 1997 has been determined by dividing net income by 2,852,615 and 2,772,393, the weighted average number of shares of common stock and potential common stock outstanding. Stock options are the only potential common stock and are therefore considered in the diluted earnings per share calculations. Potential common stock are computed using the treasury stock method. (3) COMMITMENTS AND CONTINGENCIES At March 31, 1998, the Bank had outstanding commitments to originate loans of 6 $7.7 million, of which $5.6 million were fixed rate, with rates ranging from 6.625% to 8.125%, and $2.14 million were adjustable rate commitments. (4) PENDING ACCOUNTING CHANGES Statement 130, "Reporting Comprehensive Income," established standards for reporting and presentation of comprehensive income and its components in a full set of general-purpose financial statement. Statement 130 is effective for both interim and annual periods beginning after December 15, 1997, and is not expected to have a material impact on the consolidated financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's results of operations are dependent on net interest income which is the difference between interest earned on its loan and investment portfolios, and its cost of funds, consisting of interest paid on deposits and borrowed money. The Company also generates non-interest income such as transactional fees, loan servicing fees, and fees and commissions from the sales of insurance products and securities through its subsidiary. Operating expenses primarily consist of employee compensation, occupancy expenses, federal deposit insurance premiums and other general and administrative expenses. The results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities. The Company reported earnings for the second quarter ended March 31, 1998 of $960,000, compared with $997,000 for the same quarter a year ago, a decrease of 3.7%. Earnings per diluted share for the quarter and six months ended were $0.34 and $0.68 per share, respectively. The Company also announced that its board of directors declared a quarterly dividend of $0.10 per share, payable May 15, 1998 to shareholders of record as of April 30, 1998. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward- looking statements to be covered by the safe harbor provisions for forward- looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Company and the subsidiaries include, but are not limited to, changes in: interest rates, general economic 7 conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission. YEAR 2000 COMPLIANCE The Company utilizes and is dependent upon data processing systems and software to conduct its business. The data processing systems and software include those developed and maintained by the Company's third-party data processing vendor such as teller and platform systems, and purchased software such as spreadsheet and word processing programs which run on in-house computer networks. The Company does not have any internally developed computer programs and does not have any programming staff. During fiscal 1997 the Company initiated a review and assessment of all hardware and software to confirm that it will function properly in the year 2000. The results of that review show good remediation efforts on the part of our software suppliers, with continuing communication concerning their progress at least quarterly. Remediation efforts are expected to be largely complete by December 1998, with time thereafter for testing. The costs associated with these efforts are not expected to have a significant impact on the Company's ongoing results of operations. LIQUIDITY & CAPITAL RESOURCES Liquidity management for the Bank is both a daily and long-term function of management's strategy. The Company's primary sources of funds are deposits and borrowings, amortization and prepayment of loan principal and mortgage-backed securities, maturities of investment securities and operations. While maturing investments and scheduled loan repayments are relatively predictable, deposit flows and loan prepayments are greatly influenced by interest rates, floors and caps on loan rates, general economic conditions and competition. The Bank generally manages the pricing of its deposits to be competitive and increase core deposit relationships, but has from time to time decided not to pay deposit rates that are as high as those of its competitors and, when necessary, to supplement deposits with FHLB advances. Federal regulations require the Bank to maintain minimum levels of liquid assets. During a portion of the first quarter, OTS regulations required the Bank to maintain, for each calendar month, an average daily balance of liquid assets (including cash, certain time deposits, bankers acceptances, and specified United States Government, state or federal agency obligations) equal to at least 5% of the average daily balance of its liquidity base , defined as net withdrawable accounts plus short-term borrowings (i.e., those repayable in 12 months or less) during the preceding calendar month. During a portion of the first quarter, OTS regulations also required the Bank to maintain, for each calendar month, an average daily balance of short-term liquid assets (generally 8 liquid assets having maturities of 12 months or less) equal to at least 1% of the average daily balance of its net withdrawable accounts plus short-term borrowings during the preceding calendar month. Penalties may be imposed for failure to meet liquidity ratio requirements. Pursuant to amendments adopted by the OTS effective November 24, 1997, the minimum liquidity requirement has been reduced to 4% of the liquidity base, the short-term liquidity requirement has been eliminated, liquidity requirements will be determined quarterly, rather than monthly, and savings associations have the option of calculating their liquidity requirements either on the basis of (i) their liquidity base at the end of the preceding quarter or (ii) the average daily balance of their liquidity base during the preceding quarter. The amended regulations also provide, however, that savings associations must maintain liquidity in excess of the minimum requirement if necessary to insure safe and sound operations. At March 31, 1998, the Bank was in compliance with OTS liquidity requirements, with a liquidity ratio of 13.76%. The Company's cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Cash flows provided by operating activities, consisting primarily of interest and dividends received less interest paid on deposits, were $2.6 million for the six months ended March 31, 1998. Investing activities for the six month period provided the Bank $7.5 million. Maturing investment securities and principal repayments received from loans, investment securities and mortgage-backed securities more than covered the financing of loan originations and investment purchases. Net cash used in financing activities amounted to $13.3 million for the six months ended March 31, 1998. Financing activities used to repay FHLB advances of $20.7 million were only partially offset by financing resources received from a net increase in deposits and advance payments for borrowers for taxes and insurance. At March 31, 1998, the Bank had outstanding loan commitments of $7.7 million. Management anticipates that it will have sufficient funds available to meet its current loan commitments. Certificates of deposit scheduled to mature in one year or less from March 31, 1998 totalled $159.5 million. Consistent with historical experience, management believes that a significant portion of such deposits will remain with the Bank, and that their maturity and repricing will not have a material adverse impact on the operating results of the Company. The Bank is subject to regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a material impact on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the entity's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting purposes. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The most recent notification, May 1997, from the federal banking agencies categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of tangible equity to tangible assets of 2%, Tier 1 capital (leverage capital) to adjusted total assets of 5%, Tier 1 risk-based capital to risk-weighted assets of 6%, and of Total risk-based capital to risk-weighted 9 assets of 10%. There are no conditions or events since that notification that have changed the Company's or the Bank's category. The Bank's Tangible Equity ratio at March 31, 1998 was 9.22%. The Tier 1 Capital ratio was 9.22%, the Tier 1 Risk-based ratio was 19.41%, and the Total Risk-Based Capital ratio was 19.61%. CHANGES IN FINANCIAL CONDITION Total assets at March 31, 1998 were $484.3 million, compared to $495.6 million at September 30, 1997. Loans receivable, net of allowance for loan losses, grew $1.6 million, after $55.6 million in repayments received during the six month period. The Company continues to offer various loan products, and prices them competitively. Current year multi-family originations accounted for $12.3 million, or 21.3% of mortgage originations. The Company's total loan originations were $57.6 million for the six months ended March 31, 1998, an increase of 32.0% or $14.0 million above the 1997 six month originations of $43.7 million. Deposits grew at an annualized growth rate of 2.3%, ending the first six months at $330.5 million, compared to $323.4 at September 30, 1997. Growth in deposits came primarily from transaction accounts, which increased $11.9 million during the six month period ended March 31, 1998. Through maturing investments and loan repayments, the Bank was able to fund current loan origination obligations in addition to repaying $20.7 million of FHLB advances. FHLB advances decreased 18.3% from $113.4 million at September 30, 1997 to $92.7 million at March 31, 1998. Book value per share on March 31, 1998 was $18.52, compared with $17.75 at September 30, 1997. ASSET QUALITY As of March 31, 1998, the Company had non-performing assets of $1.4 million. The Bank's non-performing assets at March 31, 1998 included its investment in commercial leases of $177,000, three real estate owned single-family residences, as well as non-performing loans. Classified loans of $713,000 were categorized as substandard, consisting of three residential mortgage loans, two multi-family properties, and two consumer loans. In addition to the mortgage and consumer portfolio, the Company classified its investment in commercial leases as substandard. There were no assets classified as doubtful. The decrease of $630,000 in non-performing assets from September 30, 1997 to March 31, 1998 resulted from management's ongoing monitoring and follow-up procedures of delinquent customers. A review of the foreclosed real estate has established specific allowances were necessary, management does not expect any material losses from the non-performing loans. 10 AVERAGE BALANCE SHEET The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields and costs include fees, which are considered adjustments to yields.
Three Months Ended March 31, Six Months Ended 1998 1997 March 31,1998 ------------------------ ----------------------- ---------------------- Inter- Average Inter- Average Inter- Average Average est Yield Average est Yield Average est Yield (dollars in thousands) ------------------------ ----------------------- ---------------------- Interest-earning assets: Loans receivable, net $389,816 7,425 7.62% 366,018 7,064 7.72% 389,285 14,901 7.66% Mortgage-backed securities 15,416 272 7.06% 20,458 359 7.02% 15,915 561 7.05% Interest-earning deposits 1,363 18 5.28% 908 9 3.96% 1,616 46 5.69% Investment securities, mutual funds, and federal funds sold 68,109 1,208 7.09% 86,100 1,510 7.02% 71,081 2,516 7.08% ------- ----- ----- ------ --- ----- ------- ----- ----- Total interest-earning assets 474,704 8,923 7.52% 473,484 8,942 7.55% 477,897 18,024 7.54% Non-interest earning assets 12,872 10,896 12,499 ------- ------ ------- Total assets $487,576 484,380 490,396 ======= ======= ======= Interest-bearing liabilities: Deposits: Passbook & NOW accounts 121,621 1,123 3.69% 106,342 565 2.13% 118,636 2,206 3.72% Money market account 17,885 188 4.20% 18,643 195 4.18% 17,681 377 4.26% Certificate accounts 184,781 2,666 5.77% 199,925 3,164 6.33% 187,875 5,504 5.86% ------- ----- ----- ------- ----- ----- ------- ----- ----- Total deposits 324,287 3,977 4.91% 324,910 3,924 4.83% 324,192 8,087 4.99% Borrowed funds 93,633 1,327 5.67% 93,998 1,305 5.55% 97,814 2,785 5.69% ------- ----- ----- ------- ---- ----- ------- ----- ----- Total interest-bearing liabilities 417,920 5,304 5.08% 418,908 5,229 4.99% 422,006 10,872 5.15% Non-interest bearing deposits 5,696 4,723 5,434 Other liabilities 11,254 10,363 11,059 ------- ------ ------- Total liabilities 434,870 433,994 438,499 Stockholders' equity 52,706 50,386 51,897 Total liabilities and stockholders' equity $487,576 484,380 490,396 ======= ======= ======= Net interest income/interest rate spread (1) 3,619 2.44% 3,713 2.56% 7,152 2.39% Net earning assets/net interest margin (2) $ 56,784 3.05% 54,576 3.14% 55,891 2.99% Ratio of interest-earning assets to interest-bearing liabilities 1.14x 1.13x 1.13x
(1) Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest bearing liabilities. (2) Net interest margin represents net interest income divided by average interest-earning assets. (3) Average yields and costs for the three and six month periods are annual- ized for presentation purposes. 11 COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 GENERAL. Net income for the three months ended March 31, 1998 was $960,000, a decrease of $37,000 from the net income of $997,000 for the three months ended March 31, 1997. The 3.7% decrease in earnings for the quarter was primarily due to slightly lower net interest income combined with lower non-interest income. INTEREST INCOME. Income from loans receivable, the chief contributor to interest income, was $7.4 million for the quarter ended March 31, 1998, up 5.1% from the prior year. The average balance of loans increased 6.5% to $389.8 million compared to the average for the second quarter one year ago of $366.0 million. The yield on loans decreased 10 basis points. The increase in loan interest income was a result of higher loan volumes. Interest income from the investment portfolio decreased $382,000, which was the result of maturing investments as well as the change in the composition of the portfolio. Gross interest income totalled $8.9 million for each of the three month periods ended March 31, 1998 and 1997. INTEREST EXPENSE. Interest expense from deposits for the quarter increased $53,000, from $3.9 million the previous year to $4.0 million. The slight increase is a direct result of the 8 basis point increase in the weighted average deposit cost. The Company reduced its FHLB of Chicago advances during the quarter, however the average outstanding advances remained stable at approximately $93.6 million. The weighted average cost increased 12 basis points, causing the interest expense on borrowed funds to increase only 1.7% to $1.3 million. PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses in the 1998 second quarter of $15,000. The provision for loan losses reflects management's on-going evaluation of losses on loans and the adequacy of the allowance for loan losses based on all pertinent considerations, including current market conditions. As of March 31, 1998, the cumulative allowance for loan losses was $468,000, or 65.6% of non-performing loans. The ratio of the allowance for loan losses to net loans receivable stands at 0.12%. NON-INTEREST INCOME. Non-interest income decreased 15.3% to $250,000 for the second quarter. Insurance and annuity commissions produced $156,000, a 17.5% decrease compared to the same period in 1997. NON-INTEREST EXPENSE. Non-interest expense for the six months ended March 31, 1998 and 1997 totalled $2.4 million. The decrease in advertising expenditures of $133,000 was offset partially by the increase in compensation and benefits, which is increased due to stock-related benefits adjusted for the current market price. INCOME TAXES. Income taxes increased $78,000 for the three months ended March 31, 1998 to $540,000 compared to $618,000 for the prior year due to decreased taxable income. 12 COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 GENERAL. Net income for the six months ended March 31, 1998 was $1.9 million, an increase of $106,000 from the net income of $1.8 million for the six months ended March 31, 1997. This 5.8% increase can be attributed to an increase in fee income and a decrease in general and administrative expenses. INTEREST INCOME. Interest income remained steady at approximately $18.0 million for the six months ended March 31, 1998 and 1997. Interest income from loans receivable increased $871,000 to $14.9 million, from $14.0 million one year ago. The average loans outstanding increased $26.4 million to $389.3 million for the current period. The weighted average loan yields for the six months ended March 31, 1998 decreased 7 basis points. Weighted average investment portfolio yields remained at 7.0%, while the average balance in the portfolio decreased $19.6 million. INTEREST EXPENSE. Interest expense on deposits totalled $8.1 million, a $289,000 increase from the March 31, 1997 expense of $7.8 million. Average interest-bearing deposits increased $4.9 million to $324.2 million for the six month period in 1998 compared to 1997. The weighted average cost of deposits remained stable at 4.9%. Interest expense on borrowed funds remained at $2.8 million. PROVISION FOR LOAN LOSSES. The Company recorded a $61,000 provision for loan losses in the first six months of fiscal 1998, compared to a $39,000 provision in 1997. The adequacy of the loan loss provision is analyzed on a monthly basis. Management considers the changes in the type and volume of the loan portfolio, the specific delinquent loans, the historical loss experience, and the current economic trends, as well as loan growth and other factors deemed appropriate when evaluating the allowance for loan losses. NON-INTEREST INCOME. Non-interest income increased $14,000 to $534,000 for the six months ended March 31, 1998 from $520,000 for the same period in 1997. Included in non-interest income are commissions from INVEST financial corporation. The Company noted a general slow-down of commission generating activity in the second quarter, however high volume experienced in the first quarter contributed to the net increase of $46,000 for the six month period. NON-INTEREST EXPENSE. Non-interest expense for 1998 totalled $4.6 million, a decrease of $211,000 or 4.4%, from $4.8 million for the six months ended March 31, 1997. The decline can be attributed to decreases in advertising expenses, federal deposit insurance premiums and other expenses. As a result, the Company's ratio of operating expenses to average assets reflected continued improvement in the first half of fiscal 1998, falling to 1.87 percent, from 1.98 percent the previous year. INCOME TAXES. Income taxes decreased $22,000 for the six months ended March 31, 1998 to $1.1 million. 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and the Bank are not engaged in any legal proceedings of a material nature at the present time. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company held its Annual Meeting of Stockholders on January 28, 1998. (b) The directors elected at the Annual Meeting are as follows: For Withheld Bonnie Stolarczyk 2,321,346 59,437 Paul Bielat 2,321,646 59,137 The directors whose term of office continued after the Annual Meeting are as follows: Thomas E. Bentel Patrick J. Flynn Raymond J. Horvat Raymond S. Stolarczyk (c) A brief description of each other matter voted on and the number votes cast: (i) Ratification of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending September 30, 1998. For Against Abstain 2,361,738 9,875 9,170 ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.0 Financial Data Schedule (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Fidelity Bancorp, Inc. Dated: April 21, 1998 /s/ RAYMOND S. STOLARCZYK ----------------------------- Raymond S. Stolarczyk Chairman and Chief Executive Officer Dated: April 21, 1998 /s/ JAMES R. KINNEY ----------------------------- James R. Kinney Sr. V. P. and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Consolidated Statement of Condition at March 31, 1997 (unaudited) and the Consolidated Statement of Earnings for the six months ended March 31, 1998 (unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS SEP-30-1997 MAR-31-1998 1791 1038 100 0 62006 20602 20804 390312 468 484340 330445 9700 8951 83000 0 0 38 52206 484340 14901 3048 75 18024 8087 10872 7152 61 0 4574 3051 0 0 0 1937 .72 .68 2.44 713 0 0 0 460 5 0 468 468 0 0
-----END PRIVACY-ENHANCED MESSAGE-----