-----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, RBeus2jsBPiBR0nb4FoU7yJA01aQLHpqipE/im+5dbMchlXj3JtxgqCSR/UbFm4v /kSvW2IL3MRN4LoQqvtk1A== 0000912219-03-000005.txt : 20030515 0000912219-03-000005.hdr.sgml : 20030515 20030515173634 ACCESSION NUMBER: 0000912219-03-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 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: 1934 Act SEC FILE NUMBER: 001-12753 FILM NUMBER: 03706341 BUSINESS ADDRESS: STREET 1: 5455 WEST BELMONT AVENUE CITY: CHICAGO STATE: IL ZIP: 60641 BUSINESS PHONE: 7737364414 MAIL ADDRESS: STREET 1: 5455 WEST BELMONT AVENUE CITY: CHICAGO STATE: IL ZIP: 60641 10-Q 1 march303.txt QUARTERLY FORM 10-Q =============================================================================== 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, 2003 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 _____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES___ NO X_ There were 3,159,553 shares of common stock, par value $.01, outstanding as of May 12, 2003. =============================================================================== 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, 2003 (unaudited) and September 30, 2002 1 Consolidated Statements of Earnings for the three and six months ended March 31, 2003 and 2002 (unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity for the six months ended March 31, 2003 and 2002 (unaudited) 3-4 Consolidated Statements of Cash Flows for the six months ended March 31, 2003 and 2002 (unaudited) 5-6 Notes to Consolidated Financial Statements (unaudited) 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-18 Item 3. Quantitative and Qualitative Disclosure about Market Risks 19-20 PART II. OTHER INFORMATION Item 1. Legal Proceedings 21 Item 2. Changes in Securities 21 Item 3. Defaults upon Senior Securities 21 Item 4. Submission of Matters to a Vote of Security Holders 21 Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURE PAGE 24 1 FIDELITY BANCORP and SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited) Dollars in thousands
March 31, September 30, ASSETS 2003 2002 Cash and due from banks $ 4,291 3,828 Interest-earning deposits 656 1,045 Federal funds sold 100 100 ------- -------- Cash and cash equivalents 5,047 4,973 FHLB of Chicago stock, at cost 33,273 31,972 Mortgage-backed securities available for sale 271,634 216,505 Securities available for sale 22,932 22,396 Loans held for sale 82 83 Loans receivable, net of allowance for loan losses of $2,015 at March 31, 2003 and $1,826 at September 30, 2002 380,929 414,685 Accrued interest receivable 3,320 3,637 Premises and equipment 3,490 3,410 Due from broker 1,079 - Other assets 1,413 1,254 ------- ------- $ 723,199 698,915 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits 458,325 434,134 Borrowed funds 194,000 180,650 Advance payments by borrowers for taxes and insurance 2,161 6,158 Due to broker - 13,169 Other liabilities 7,098 8,813 ------- ------- Total liabilities 661,584 642,924 STOCKHOLDERS' EQUITY Preferred stock - - Common stock 57 57 Additional paid-in capital 38,122 38,410 Retained earnings, substantially restricted 53,739 47,864 Treasury stock, at cost (30,328) (30,932) Common stock acquired by Bank Recognition and Retention Plans (127) (149) Accumulated other comprehensive income 152 741 ------- ------- TOTAL STOCKHOLDERS' EQUITY 61,615 55,991 ------- ------- $ 723,199 698,915 ======= =======
See accompanying notes to unaudited consolidated financial statements. 2 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Earnings (unaudited) Dollars in thousands (except for earnings per share)
Three Months ended Six Months ended March 31, March 31, 2003 2002 2003 2002 -------------------- ----------------- (unaudited) Interest Income: Loans receivable $ 6,662 7,794 13,639 16,064 Securities 801 1,088 1,683 2,004 Mortgage-backed securities 2,286 1,950 4,303 4,145 Other interest income 4 8 10 18 ------ ------ ------ ------ 9,753 10,840 19,635 22,231 Interest Expense: Deposits 2,850 3,537 5,780 7,359 Borrowed funds 1,898 2,110 3,868 4,645 ------ ------ ------ ------ 4,748 5,647 9,648 12,004 Net interest income before provision for loan losses 5,005 5,193 9,987 10,227 Provision for loan losses 94 110 188 250 ------ ------ ------ ------ Net interest income after provision for loan losses 4,911 5,083 9,799 9,977 Non-Interest Income: Fees and commissions 111 157 264 300 Insurance and annuity commissions 209 210 426 430 Gain on sale of securities 483 223 754 295 Gain on sale of loans 18 125 61 666 Recovery of impairment of securities available for sale 3,324 -- 3,324 -- Other 20 11 29 20 ------ ------ ------ ------ 4,165 726 4,858 1,711 Non-Interest Expense: General and administrative expenses: Salaries and employee benefits 1,656 1,576 3,196 3,275 Office occupancy and equipment 401 506 768 876 Data processing 122 130 240 262 Advertising and promotions 132 156 314 314 Other 431 444 825 856 ------ ------ ------ ------ 2,742 2,812 5,343 5,583 ------ ------ ------ ------ Income before income taxes 6,334 2,997 9,314 6,105 Income tax expense 1,727 1,119 2,815 2,282 ------ ------ ------ ------ Net income $ 4,607 1,878 6,499 3,823 ====== ====== ====== ====== Earnings per share - basic $ 1.46 0.61 2.08 1.25 Earnings per share - diluted $ 1.41 0.59 2.00 1.20 ====== ====== ====== ====== Comprehensive income (loss) $ 3,749 (13) 5,910 (941) ====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements. 3 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Changes in Stockholders' Equity (unaudited) Dollars in thousands (except for earnings per share) Six months ended March 31, 2003 and 2002
Accumulated Common Other Common Stock Additional Stock Comprehensive Par Paid-In Retained Treasury Acquired Income Shares Value Capital Earnings Stock by BRRP's (Loss) Total --- ------ ------- ------- ------ ------ ---- ------- Balance at September 30, 2001 3,782,350 $ 38 38,636 40,926 (31,540) (178) 1,502 $ 49,384 Net income - - - 3,823 - - - 3,823 Change in accumulated other comprehensive income (loss) - - - - - - (4,764) (4,764) --------- ------ ------- ------ ------ ----- ------ ------- Total comprehensive income (941) Cash dividends ($0.17 per share) - - - (510) - - - (510) Amortization of award of BRRP's stock - - - - - 8 - 8 Exercise of stock options and reissuance of treasury shares (34,000 shares) - - (266) - 608 - - 342 Tax benefit related to stock options exercised - - 101 - - - - 101 3-for-2 stock split effected in the form of a 50% stock dividend and payment of cash for fractional shares 1,891,175 19 (21) - - - - (2) --------- ------ ------- ------ ------ ----- ------ ------- Balance at March 31, 2002 5,673,525 $ 57 38,450 44,239 (30,932) (170) (3,262) $ 48,382 ========= ====== ======= ====== ======= ====== ======= ======= Balance at September 30, 2002 5,673,464 $ 57 38,410 47,864 (30,932) (149) 741 $ 55,991 Net income - - - 6,499 - - - 6,499 Change in accumulated other comprehensive income (loss) - - - - - - (589) (589) --------- ------ ------- ------ ------ ----- ------ ------- Total comprehensive income 5,910 Cash dividends ($0.20 per share) - - - (624) - - - (624) Amortization of award of BRRP's stock - - - - - 22 - 22 Exercise of stock options and reissuance of treasury shares (78,063 shares) - - (465) - 604 - - 139 Tax benefit related to stock options exercised - - 177 - - - - 177 --------- ------ ------- ------ ------ ----- ------ ------- Balance at March 31, 2003 5,673,464 $ 57 38,122 53,739 (30,328) (127) 152 $ 61,615 ========= ====== ======= ====== ======= ====== ======= =======
See accompanying notes to unaudited consolidated financial statements. 4 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Cash Flows (unaudited) Dollars in thousands
Six months ended March 31, 2003 2002 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,499 3,823 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 159 265 Provision for loan losses 188 250 Net amortization and accretion of premiums and discounts 2,596 296 Amortization of cost of stock benefit plans 22 8 Deferred loan fees, net of amortization 34 141 Stock dividend from FHLB of Chicago (1,301) (439) Loans originated for sale (2,577) (3,980) Proceeds from loans originated for sale 2,638 4,042 Gain on sales of securities, mortgage-backed securities and loans (815) (961) Gain on sale of real estate owned (55) (11) Amortization of deposit base intangible -- 2 Decrease (increase) in accrued interest receivable 317 (426) Increase in other assets (32) (109) Decrease in other liabilities (1,178) (2,266) ------ ------ Net cash provided by operating activities 6,495 635 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of mortgage-backed securities (306,327) (167,720) Proceeds from sales of securities and mortgage-backed securities 198,677 90,264 Proceeds from sale of real estate owned 187 110 Proceeds from maturities of securities 2,150 20,000 Proceeds from sale of loans -- 37,829 Purchase of securities (14,379) (40,061) Purchase of FHLB of Chicago stock -- (51,200) Proceeds from redemption of FHLB of Chicago stock -- 55,500 Loans originated for investments (57,168) (93,755) Loans purchased (8,769) -- Particiapations sold 500 -- Purchase of premises and equipment (239) (193) Principal repayments collected on loans receivable 98,712 92,888 Principal repayments collected on mortgage-backed securities 47,176 14,792 ------ ------ Net cash used in investing activities (39,480) (41,546)
(continued) 5 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Cash Flows (unaudited) (continued) Dollars in thousands
Six months ended March 31, 2003 2002 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 24,191 34,334 Net increase in borrowed funds 13,350 8,785 Net decrease in advance payments by borrowers for taxes and insurance (3,997) (4,989) Payment of common stock dividends (624) (510) Payment of fractional shares for 3-for-2 stock split -- (2) Proceeds from exercise of stock options 139 342 ------ ------ Net cash provided by financing activities 33,059 37,960 ------ ------ Net change in cash and cash equivalents 74 (2,951) Cash and cash equivalents at beginning of period 4,973 8,604 ------ ------ Cash and cash equivalents at end of period $ 5,047 5,653 ====== ====== CASH PAID DURING THE PERIOD FOR: Interest $ 9,617 12,013 Income taxes 2,931 3,780 NON-CASH INVESTING ACTIVITIES - Loans transferred to real estate in foreclosure 349 546 Due to (from) broker 1,079 (14,918) ====== ======
See accompanying notes to unaudited consolidated financial statements. 6 FIDELITY BANCORP, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and conform to general practices within the banking industry 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 three and six months ended March 31, 2003 are not necessarily indicative of results that may be expected for the entire fiscal year ended September 30, 2003. 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 intercompany accounts and transactions have been eliminated in consolidation. (2) EARNINGS PER SHARE Basic earnings per share for the three months ended March 31, 2003 and 2002 were computed by dividing net income by the weighted average number of shares of common stock outstanding for the periods, which were 3,148,919 and 3,080,588 respectively. Basic earnings per share for the six months ended March 31, 2003 and 2002 were computed by dividing net income by 3,118,185 and 3,056,853, the weighted average number of shares of common stock outstanding. Diluted earnings per share for the three months ended March 31, 2003 and 2002 were computed by dividing net income by the weighted average number of shares of common stock and potential common stock outstanding for the periods that were 3,271,069 and 3,207,453, respectively. Diluted earnings per share for the six months ended March 31, 2003 and 2002 were computed by dividing net income by 3,254,627 and 3,195,652, the weighted average number of shares of common stock and potential common stock outstanding. Diluted earnings per share include the dilutive effects of additional potential issuable shares under stock options. (3) COMPREHENSIVE INCOME The Company's comprehensive income includes net income and other comprehensive income (loss) comprised entirely of unrealized gains or losses on securities available for sale, net of tax effects, which are also recognized as separate components of equity. (4) COMMITMENTS AND CONTINGENCIES At March 31, 2003 the Bank had outstanding commitments to originate new loans of $5.5 million, of which $1.6 million were fixed rate, with rates ranging from 5.625% to 7.00%, and $3.9 million were adjustable rate commitments. Additionally, the Bank has thirteen construction and development loan 7 commitments currently totaling $18.2 million with floating rates based on prime plus a margin. Net draws on these construction and development loan commitments totaled $15.6 million through March 31, 2003. (5) RECLASSIFICATIONS Certain reclassifications have been made in prior year's financial statements to conform to the current year's presentation. (6) STOCK OPTIONS The Company applies Accounting Principles Board (APB) Opinion 25 and related interpretations in accounting for its stock option plan. Accordingly, no compensation cost has been recognized at the date of grant. Had compensation cost been determined based on the fair value at the grant dates for awards under the plan consistent with the method of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts in the table below. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the options' vesting period.
Three Months ended Six Months ended March 31, March 31, 2003 2002 2003 2002 -------------------- ----------------- (unaudited) Net income: As reported $ 4,607 1,878 6,499 3,823 Pro forma 4,577 1,878 6,450 3,820 Earnings per share as reported: As reported 1.46 0.61 2.08 1.25 Pro forma 1.41 0.59 2.00 1.20 Pro forma earnins per share: As reported 1.45 0.61 2.07 1.25 Pro forma 1.40 0.59 1.98 1.20
The Black-Scholes option pricing valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Fidelity Bancorp, Inc. (the "Company"), is a savings and loan holding company incorporated under the laws of the State of Delaware and is primarily engaged in the retail banking business through its wholly-owned subsidiary, Fidelity Federal Savings Bank (the "Bank"). 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, data processing, advertising and promotions 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 fiscal quarter ended March 31, 2003 of $4.6 million, compared with $1.9 million for the same quarter a year ago. Earnings per diluted share for the quarter ended March 31, 2003 were $1.41 per share, an increase of $0.82 per share from $0.59 per share for the same period in 2002. For the first six months of the fiscal year, earnings per diluted share were $2.00, an increase of $0.80 per share from $1.20 per share for the six-month period in 2002. Net income for the first six months of 2003 was $6.5 million, compared with $3.8 million in 2002. Earnings per share and net income for the quarter and year to date were up from the previous year's results primarily due to a recovery of impairment of a security available for sale of $3.3 million. The Company also announced that its board of directors declared a quarterly dividend of $0.10 per share, payable May 15, 2003 to shareholders of record as of April 30, 2003. MERGER AGREEMENT On December 17, 2002, the Company announced that it has agreed to be acquired by MAF Bancorp, Inc. ("MAF") in an all-stock transaction with a fixed exchange ratio. Based on the closing price of MAF's common stock on December 16, 2002, the transaction is valued at $101.4 million. Pursuant to an Agreement and Plan of Reorganization ("Merger Agreement") between the two companies, the Company will merge into MAF, with MAF to be the surviving corporation. As a result of the merger, each issued and outstanding share of the Company's common stock will be converted into the right to receive 0.89 shares of MAF common stock. The transaction, which is subject to regulatory approvals and approval by a majority of the holders of the Company's common stock as well as other conditions, is structured to be tax-free to stockholders of the Company. Subject to the terms and conditions of the Merger Agreement, if, during a period prior to closing, (1) the average trading price of MAF common stock drops more than 17.5% compared to the closing price of MAF common stock next determined after the announcement of the transaction, and (2) such drop in MAF 9 common stock trading price exceeds by more than 17.5 percentage points the change in value of a weighted-average index of financial institution holding company stocks over comparable periods, the Company may terminate the agreement. In the event the merger is not consummated under certain circumstances, the Company has agreed to pay MAF a termination fee of $4.5 million. MAF has agreed to pay the Company a termination fee of $1 million if Fidelity exercises rights to terminate under certain circumstances. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. 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 effect on the operations and future prospects of the Company and its subsidiary include, but are not limited to, the following: - - The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company's assets. - - The economic impact of past and any future terrorist attacks, acts of war or threats thereof and the response of the United States to any such threats and attacks. - - The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters. - - The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company's assets) and the policies of the Board of Governors of the Federal Reserve System. - - The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector. - - The inability of the Company to obtain new customers and to retain existing customers. - - The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet. - - Technological changes implemented by the Company and by other parties, including second party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers. 10 - - The ability of the Company to develop and maintain secure and reliable electronic systems. - - The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner. - - Consumer spending and saving habits which may change in a manner that affects the Company's business adversely. - - Business combinations and the integration of acquired businesses which may be more difficult or expensive than expected. - - The costs, effects and outcomes of existing or future litigation. - - Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board. - - The ability of the Company to manage the risks associated with the foregoing as well as anticipated. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company's financial results, is included in the Company's Annual Report Form 10-K and the Company's filings with the Securities and Exchange Commission. 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, proceeds from principal and interest on loans and mortgage-backed securities. While maturities and scheduled amortization of loan and mortgage prepayments are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by interest rate cycles and economic conditions. The Bank generally manages the pricing of its deposits to be competitive and to increase core deposit relationships. The Bank utilizes particular sources of funds based on comparative costs and availability. The Company's most liquid assets are cash and cash equivalents, which include federal funds and interest-bearing deposits. The level of these assets is dependent on the Company's operating, financing, lending, and investing activities during the given period. At March 31, 2003, cash and cash equivalents totaled $5.0 million. Mortgage-backed securities and securities available for sale represent a secondary source of liquidity to the Company. The market value of these securities fluctuates with interest rate movements. Net interest income in future periods may be adversely impacted to the extent interest rates increase and these securities are not sold with the proceeds reinvested at higher market rates. The decision of whether to sell the available for sale mortgage-backed securities and securities available for sale or not, is based on a number of factors, including projected funding needs, reinvestment opportunities and the relative cost of alternative liquidity sources. Federal regulations require the Bank to maintain sufficient liquidity to ensure its safe and sound operation. At March 31, 2003, the Bank believes it was in compliance with OTS liquidity requirements. 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 11 deposits for the six months ended March 31, 2003, were $6.5 million. Net cash used in investing activities for the six-month period ended March 31, 2003 was $39.5 million. During the period investing activities consisted of loans originated for investment and purchases of mortgage-backed securities and securities, partially offset by principal collections on loans, proceeds from maturities of securities and proceeds from sales of securities, mortgage-backed securities and loans. Cash flows provided by financing activities amounted to $33.1 million for the six months ended March 31, 2003. The increases of $24.2 million in deposits and $13.4 million in borrowed funds during the first six months of fiscal 2003 were only partially offset by the decrease in advance payments from borrowers of $4.0 million. At March 31, 2003, the Bank had outstanding commitments to originate loans of $5.5 million and undrawn construction and development loan commitments of $2.6 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, 2003 totaled $234.1 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 its assets, liabilities, and certain off-balance sheet items as calculated for 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. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets and of tangible capital to average assets. As of March 31, 2003, the Company and the Bank met the capital adequacy requirements to which they are subject. The Bank's Tangible Equity ratio at March 31, 2003 was 7.88%. The Tier 1 Capital ratio was 7.88%, the Tier 1 Risk-Based ratio was 17.20% and the Total Risk-Based Capital ratio was 17.81%. The most recent notification from the federal banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios. There are no conditions or events since that notification that have changed the Bank's category. CHANGES IN FINANCIAL CONDITION Total assets at March 31, 2003 were $723.2 million, compared to $698.9 million at September 30, 2002. 12 Mortgage-backed securities classified as available for sale were $271.6 million at March 31, 2003. The period purchases were funded from heavy refinance activity in the Bank's loan portfolio, sales of other mortgage-backed securities, principal payments received on mortgage-backed securities, new deposits and borrowed funds. Loans receivable, net of allowance for loan losses, decreased $33.8 million to $380.9 million at March 31, 2003. While loan demand has remained steady, the low interest rate environment has produced increased repayments. New loans closed, including multi-family and commercial mortgages and loans secured by commercial leases, totaled $57.2 million for the six months ended March 31, 2003. Loan repayments totaled $98.7 million for the six months ended March 31, 2003, compared with $92.9 million for the same period in 2002. The Company continues to offer various loan products, and prices them competitively. Deposits were $458.3 million at March 31, 2003, up 5.6% from $434.1 million at September 30, 2002. Deposit growth came from promotional certificates of deposit put in place to retain maturing money combined with a $1.6 million increase in checking accounts. Borrowed funds (FHLB advances) increased 7.4% to $194.0 million at March 31, 2003. Book value per share on March 31, 2003 was $19.50, compared with $18.17 at September 30, 2002. The increase in book value per share was attributable to earnings retained, offset by dividends paid and a decline in the unrealized market value of the mortgage-backed securities and securities available for sale portfolios. INVESTMENT ACTIVITIES On January 28, 2003 the Company received a cash payment in the amount of $3.3 million representing the recovery of a previously charged-off asset (at the rate of 110% of the original amount invested by the Company). This asset was a $3.0 million subordinated note investment in Cole Taylor Financial Group, Inc., a company that later underwent a reorganization and changed its name to Reliance Acceptance Group, Inc. In the fourth quarter of the fiscal year ended September 30, 1997, the Company charged-off the full value of the investment because of the uncertainty surrounding the collectibility of the note. The recovery was recorded in the second quarter of fiscal 2003. ASSET QUALITY As of March 31, 2003, the Bank had classified assets of $2.7 million. Classified loans of $2.1 million were categorized as substandard, consisting of 4 residential mortgage loans, 5 multi-family loans, and 1 commercial loan secured by a lease and 1 equity loan. There were no assets classified as doubtful. At March 31, 2003, management considered a $781,000 commercial loan secured by lease to be impaired, under which K-Mart Corporation was the lessee. This loan is a direct financing lease included in the Company's commercial loans secured by leases portion of the loan portfolio. K-Mart filed for bankruptcy protection on January 22, 2002. The K-Mart lease loan is secured by revenue producing equipment with an original cost of $1.5 million that was purchased and installed during the second half of 2001. Subsequent to filing for bankruptcy protection, K-Mart closed a number of its retail stores, including some in which this equipment was located. K-Mart informed the Bank that the 13 equipment located in closed stores had been moved to stores that will remain open. While the K-Mart commercial loan secured by lease is currently performing in accordance with its terms, no assurance can be given that this will continue to be the case and such performance may depend on the terms of the reorganization plan for K-Mart. No assurances can be made that a loss related to these loans will not be incurred. The Company's ratio of non-performing loans to net loans receivable remains below industry standards as well as our national and regional peers. The Company's ratio of non-performing loans to net loans receivable was 0.54% at March 31, 2003. Following management's review of the foreclosed residential properties, the Company has determined that no specific allowances were necessary for the quarter ended March 31, 2003. 14 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 and costs.
Three Months Ended March 31, Six Months Ended 2003 2002 March 31, 2003 ------------------------ ----------------------- ---------------------- Inter- Average Inter- Average Inter- Average Average est Yield/ Average est Yield/ Average est Yield/ Balance Cost(3) Balance Cost(3) Balance Cost(3) (dollars in thousands) ------------------------ ----------------------- ---------------------- Interest-earning assets: Loans receivable, net $404,229 6,662 6.59% 433,168 7,794 7.20% 412,095 13,639 6.62% Mortgage-backed securities 243,547 2,286 3.75% 133,886 1,950 5.83% 222,845 4,303 3.86% Interest-bearing deposits 1,457 3 0.82% 1,355 6 1.77% 1,661 8 0.96% Securities and federal funds 65,531 802 4.90% 75,141 1,090 5.80% 63,351 1,685 5.32% ------- ----- ----- ------ ----- ----- ------- ----- ----- Total interest-earning assets 714,764 9,753 5.46% 643,550 10,840 6.74% 699,952 19,635 5.61% Non-interest earning assets 12,774 13,415 13,545 ------- ------ ------- Total assets $727,538 656,965 713,497 ======= ======= ======= Interest-bearing liabilities: Deposits: Passbook & NOW accounts 168,802 627 1.49% 166,570 991 2.38% 166,001 1,319 1.59% Money market account 21,483 178 3.31% 14,996 102 2.72% 20,975 327 3.12% Certificate accounts 259,910 2,045 3.15% 234,799 2,444 4.16% 253,408 4,134 3.26% ------- ----- ----- ------- ----- ----- ------- ----- ----- Total deposits 450,195 2,850 2.53% 416,365 3,537 3.40% 440,384 5,780 2.62% Borrowed funds 191,935 1,898 3.96% 165,171 2,110 5.11% 189,001 3,868 4.09% ------- ----- ----- ------- ----- ----- ------- ----- ----- Total interest-bearing liabilities 642,130 4,748 2.96% 581,536 5,647 3.88% 629,385 9,648 3.07% Non-interest bearing deposits 12,043 14,382 13,309 Other liabilities 11,816 10,626 11,990 ------- ------- ------- Total liabilities 665,989 606,544 654,684 Stockholders' equity 61,549 50,421 58,813 ------- ------- ------- Total liabilities and stockholders' equity $727,538 656,965 713,497 ======= ======= ======= Net interest income/interest rate spread (1) 5,005 2.50% 5,193 2.85% 9,987 2.54% Net earning assets/net interest margin (2) $ 72,634 2.80% 62,014 3.23% 70,567 2.85% Ratio of interest-earning assets to interest-bearing liabilities 1.11x 1.11x 1.11x
15 (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. 16 COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002 GENERAL. For the quarter ended March 31, 2003, earnings per diluted share increased $0.82 to $1.41, from $0.59 for the same period in fiscal 2002. Net income of $4.6 million for the current quarter increased $2.7 million from $1.9 million for the second quarter of fiscal 2002. Net income and earnings per share for the current quarter increased over the previous year primarily due to a recovery of the impairment of a security available for sale previously written off in the fourth quarter of fiscal 1997 of $3.3 million, or $0.83 per diluted share. Additionally, the actions of the Federal Reserve to lower interest rates continues to result in gradually reducing interest income from loans and investments, and the interest cost of both deposits and the borrowed funds of the Company. INTEREST INCOME. Total interest income decreased $1.1 million, to $9.8 million, for the three months ended March 31, 2003, from the prior year's second quarter. Interest income from loans receivable was $6.7 million for the quarter ended March 31, 2003, down from $7.8 million in the previous year's second quarter. The average balance of loans outstanding decreased to $404.2 million from $433.2 million, comparing the quarters ending March 31, 2003 to March 31, 2002, due primarily to high repayment volume. The average yield on loans decreased 61 basis points to 6.59% from 7.20%, also due to significant refinance activity over the past year. The average balance of the securities available for sale portfolios, including mortgage-backed securities, increased to $309.1 million for the quarter ended March 31, 2003, from $209.0 million for the same quarter last year. The average yield on the mortgage-backed securities portfolio decreased to 3.75%, from 5.83%, and average yield on securities available for sale and federal funds decreased to 4.90%, from 5.80%, comparing the quarters ended March 31, 2003 to March 31, 2002. Interest income generated from securities for the quarter ended March 31, 2003 was $3.1 million, an increase of $49,000 over the quarter ended March 31, 2002. The Company has been actively managing the loan and investment portfolios in an effort to preserve total interest income in the current interest environment. INTEREST EXPENSE. Total interest expense for the quarter decreased $0.9 million from $5.6 million the previous quarter ended March 31, 2002 to $4.7 million for the same quarter in 2003. Interest expense on deposits decreased from $3.5 million in the previous year's second quarter, to $2.9 million for the current quarter. The weighted average interest rate on deposit accounts for the quarter ended March 31, 2003, was 2.53%, a decrease of 87 basis points from 3.40% in the prior year's second quarter. The Company uses FHLB advances as a reasonable cost source of funds for lending and investment opportunities. The average borrowed funds for the quarter ended March 31, 2003 increased to $191.9 million from $165.2 million for the quarter ended March 31, 2002. Interest expense on borrowed funds decreased from $2.1 million the previous year to $1.9 million for the quarter ended March 31, 2003. The average cost of borrowed funds decreased 115 basis points to 3.96% in the second quarter of fiscal 2003, compared to 5.11% in the same period last year. PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses of $94,000 and $110,000 for the quarters ended March 31, 2003 and 2002, respectively. 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 economic conditions. 17 This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available or as future events occur. As of March 31, 2003, the allowance for loan losses was $2.0 million. The ratio of total non-performing loans to total loans was 0.54%, and the ratio of the allowance for loan losses to net loans receivable was 0.53% at March 31, 2003. NON-INTEREST INCOME. Non-interest income increased $3.4 million to $4.2 million for the second quarter of fiscal 2003. Included in fiscal 2003's non-interest income is $3.3 million from the recovery of impairment of a security available for sale. The second quarter of fiscal 2003 also includes gains on sales of loans and investments totaling $501,000, compared to $348,000 in the prior year's second quarter. NON-INTEREST EXPENSE. Non-interest expense for the three months ended March 31, 2003 decreased $70,000 to $2.7 million compared to $2.8 million in fiscal 2002. Salaries and employee benefits for the current quarter increased $80,000, or 5.1% over the prior year's second quarter, as a result of normal annual salary increases combined with the costs associated with additional personnel and higher group health insurance premiums. Office occupancy and equipment expense decreased $105,000, primarily due to lower equipment depreciation in the current period. Management has continued its efforts to control operating expenses. INCOME TAXES. Income taxes increased $608,000 for the three months ended March 31, 2003 to $1.7 million, compared to $1.1 million one-year ago. The increase is primarily due to increased net income from the recovery of impairment of a security available for sale. The Company's effective income tax rate decreased to 27.3% for the three months ended March 31, 2003, from 37.3% for the quarter ended March 31, 2002. The lower effective income tax rate in the current quarter was due to the tax effect on the impairment recovery. COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002 GENERAL. For the first six months of the 2003 fiscal year, earnings per diluted share were $2.00, up $0.80 per share from $1.20 per share for the first six-months of fiscal 2002. Net income for the first six months of fiscal 2003 was $6.5 million, compared with $3.8 million in fiscal 2002. Net income and earnings per share for the first six months of fiscal 2003 increased over the previous year primarily due to a recovery of impairment of a security available for sale previously written off in the fourth quarter of fiscal 1997 of $3.3 million, or $0.83 per diluted share. INTEREST INCOME. The Company continues to strive to preserve total interest income in the current fiscal year, in spite of the low interest rate environment and continued high loan turnover. Total interest income was $19.6 million for the six months ended March 31, 2003, down $2.6 million or 11.7% from $22.2 million in fiscal 2002. Income from loans receivable, the chief contributor to interest income, was $13.6 million for the six-months ended March 31, 2003, down 15.1% from the prior year's comparable period. Income from loans receivable fell primarily as a result of a decline in the outstanding average balances to $412.1 million for the six-month period ended March 31, 2003, from $444.1 million one year earlier. High repayments and loan sales that took place in 2002 and continues into 2003 adversely affected both volume and yield. Repayments of loans from 18 the first two quarters of fiscal 2003 totaled $98.8 million, compared to $92.9 million for the same period in fiscal 2002. The average balance of the securities available for sale portfolios, including mortgage-backed securities increased to $286.2 million for the six-month period ended March 31, 2003, from $203.4 million the same period last fiscal year. Interest generated from mortgage-backed and securities available for sale and federal funds for the six-month period ended March 31, 2003 was $6.0 million, compared to $6.1 million for the six-month period ended March 31, 2002. The Company has been actively managing the loan and investment portfolios in an effort to preserve total interest income in the current interest environment. INTEREST EXPENSE. Total interest expense for the six months ended March 31, 2003 was $9.6 million, down $2.4 million or 19.6% from $12.0 million for the same period in fiscal 2002. For the six-months ended March 31, 2003, interest expense on deposits was $5.8 million, down $1.6 million or 21.5% from $7.4 million in fiscal 2002. Average interest-bearing deposits increased $36.3 million, or 9.0%, to $440.4 million for the six-month period in fiscal 2003 compared to $404.1 million in fiscal 2002, however, the weighted average cost of deposits decreased 102 basis points to 2.62% from 3.64% comparing the six months ending March 31, 2003 to March 31, 2002. Interest expense on borrowed funds declined 16.7% to $3.9 million for the six months ended March 31, 2003, compared with $4.6 million in fiscal 2002. The decline was due to maturing borrowed funds being replaced with funds borrowed at lower rates. The weighted average cost of borrowed funds decreased 102 basis points to 4.09% from 5.11%, comparing the six months ending March 31, 2003 to March 31, 2002. PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses of $188,000 during the first six months of fiscal 2003, compared to a $250,000 provision in fiscal 2002. 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. The allowance for loan losses of $2.0 million at March 31, 2003, represents 0.53% of loans receivable, net. NON-INTEREST INCOME. Non-interest income increased to $4.9 million for the six-month period ended March 31, 2003 from $1.7 million in fiscal 2002. Included in fiscal 2003's non-interest income is $3.3 million from the recovery of impairment of investment securities available for sale. During the first six months of fiscal 2003, the sale of loans and investments produced a $815,000 pre-tax gain, compared with a $961,000 pre-tax gain in the comparable fiscal 2002 period. NON-INTEREST EXPENSE. Non-interest expense decreased by $240,000, or 4.3%, to $5.3 million for the six months ended March 31, 2003, compared with $5.6 million in the same period in fiscal 2002. The ratio of operating expenses to average assets improved to 1.50% for the six months ended March 31, 2003, compared with 1.68% in 2002. Office occupancy and equipment expense decreased $108,000, primarily due to lower equipment depreciation in the current period. Management has continued its efforts to control operating expenses. 19 INCOME TAXES. Income taxes increased $533,000 for the six-months ended March 31, 2003 to $2.8 million compared to $2.3 million for the prior year. The Company's effective income tax rate decreased to 30.2% for the six-month period ended March 31, 2003 from 37.4% in the comparable fiscal 2002 period. The lower effective income tax rate in the current year's period was due to the tax effect on the impairment recovery. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The OTS requires all regulated thrift institutions to calculate the estimated change in the Bank's net portfolio value (NPV) assuming instantaneous, parallel shifts in the Treasury yield curve of 100 to 300 basis points either up or down in 100 basis point increments. The NPV is defined as the present value of expected cash flows from existing assets less the present value of expected cash flows from existing liabilities plus the present value of net expected cash inflows from existing off-balance sheet contracts. The OTS provides all institutions that file a Consolidated Maturity/Rate schedule (CMR) as a part of their quarterly Thrift Financial Report with an interest rate sensitivity report of NPV. The OTS simulation model uses a discounted cash flow analysis and an option-based pricing approach to measuring the interest rate sensitivity of NPV. The OTS model estimates the economic value of each type of asset, liability, and off-balance sheet contract under the assumption that the Treasury yield curve shifts instantaneously and parallel up and down 100 to 300 basis points in 100 basis point increments. The OTS provides thrifts the results of their interest rate sensitivity model, which is based on information provided by the Bank, to estimate the sensitivity of NPV. The OTS model utilizes an option-based pricing approach to estimate the sensitivity of mortgage loans. The most significant embedded option in these types of assets is the prepayment option of the borrowers. The OTS model uses various price indications and prepayment assumptions to estimate sensitivity of mortgage loans. In the OTS model, the value of deposit accounts appears on the asset and liability side of the NPV analysis. In estimating the value of certificate of deposit accounts, the liability portion of the CD is represented by the implied value when comparing the difference between the CD face rate and available wholesale CD rates. On the asset side of the NPV calculation, the value of the "customer relationship" due to the rollover of retail CD deposits represents an intangible asset in the NPV calculation. Other deposit accounts such as transaction accounts, money market deposit accounts, passbook accounts, and non-interest bearing accounts also are included on the asset and liability side of the NPV calculation in the OTS model. The accounts are valued at 100% of the respective account balances on the liability side. On the assets side of the analysis, the value of the "customer relationship" of the various types of deposit accounts is reflected as a deposit intangible. The NPV sensitivity of borrowed funds is estimated by the OTS model based on a discounted cash flow approach. The cash flows are assumed to consist of monthly interest payments with principal paid at maturity. 20 The OTS model is based only on the Bank's balance sheet. The assets and liabilities at the parent company level are short-term in nature, primarily cash and equivalents, and were not considered in the analysis because they would not have a material effect on the analysis of NPV sensitivity. The following table sets forth the Company's most recent interest rate sensitivity of NPV, as of December 31, 2002. We would not expect March 31, 2003's results to differ significantly from December 31, 2002's.
Net Portfolio Value as a % Net Portfolio Value of Present Value of Assets ------------------------------ -------------------------- Changes in Rates $ Amount $ Change % Change NPV Ratio Change - ---------- --------- -------- -------- --------- --------- + 300 bp 39,919 (43,063) (52)% 5.63% - 524 bp + 200 bp 55,986 (26,997) (33)% 7.68% - 319 bp + 100 bp 71,932 (11,051) (13)% 9.61% - 126 bp 0 bp 82,983 10.87% - 100 bp 86,068 3,085 4 % 11.17% + 30 bp - 200 bp -- -- -- % -- % -- bp - 300 bp -- -- -- % - % -- bp - -------------------------------------------------------------------------------
CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation within 90 days prior to the filing date of this report, that the Company's disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-14(c) and 15d-14(c)) are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the foregoing evaluation. 21 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 February 12, 2003. (b) The directors whose terms of office continued after the annual meeting are as follows: For Against Thomas E. Bentel 2,715,266 181,704 Raymond S. Stolarczyk 2,724,482 172,488 The directors whose terms of office continued after the annual meeting are as follows: Paul J. Bielat Richard J. Kasten Edward J. Burda Patrick J. Flynn (c) A brief description of each other matter voted on and the number of votes cast: (i) Ratification of Crowe Chizek and Company LLP as independent auditors for the fiscal year ending September 30, 2003. For Against Abstain 2,888,095 6,175 2,700 ITEM 5. OTHER INFORMATION None 22 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 2.1 Agreement and Plan of Reorganization dated December 16, 2002 between Fidelity Bancorp, Inc. and MAF Bancorp, Inc. (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K dated December 17, 2002.) 3.1 Restated Certificate of Incorporations of Fidelity Bancorp, Inc. (Incorporated herein by reference into this document from the exhibits to Form S-1, Registration statement as amended, originally filed on October 28, 1993, Registration No. 33-68670.) 3.2 Bylaws of Fidelity Bancorp, Inc.. as amended (Incorporated herein by reference into this document from the exhibits to Form S-1, Registration statement as amended, originally filed on October 28, 1993, Registration No. 33-68670.) 4.0 Stock Certificate of Fidelity Bancorp, Inc. (Incorporated herein by reference into this document from the exhibits to Form S-1, Registration statement as amended, originally filed on October 28, 1993, Registration No. 33-68670.) 4.1 Rights Agreement between the Company and Harris Trust and Savings Bank, as trustee (including the related certificate of designations) (Incorporated herein by reference into this document from the exhibits to Form 8-A, filed on February 19, 1997.) 4.2 Amendment No. 1 to Rights Agreement dated as of December 16, 2002 between Fidelity Bancorp, Inc. and Computershare Investor Services LLC (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K dated December 17, 2002). 10.1 Form of Employment Agreement, as amended, between the Fidelity Bancorp, Inc. and Raymond S. Stolarczyk and Thomas E. Bentel. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.2 Form of Employment Agreement, as amended, between the Fidelity Federal Savings Bank and Raymond S. Stolarczyk and Thomas E. Bentel. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.3 Form of Special Termination Agreement between the Bank and the Fidelity Bancorp, Inc. and Elizabeth Doolan and various officers (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.4 Form of Special Termination Agreement between the Bank and the Fidelity Federal Savings Bank. and Elizabeth Doolan and various officers (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 23 10.5 Form of Special Termination Agreement between the Bank and the Fidelity Bancorp, Inc. and Richard Burns (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.6 Form of Special Termination Agreement between the Bank and the Fidelity Federal Savings Bank and Richard Burns (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.7 Employee Stock Ownership Plan and Trust (Incorporated herein by reference into this document from the exhibits to Form 10-K filed on December 9, 1994.) 10.8 Fidelity Federal Savings Bank Recognition and Retention Plan and Trust (Incorporated herein by reference into this document from the exhibits to Form S-1, Registration statement as amended, originally filed on October 28, 1993, Registration No. 33-68670.) 10.9 Amendment dated March 18, 2002 to the Fidelity Federal Savings Bank Recognition and Retention Plan. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.10 Incentive Stock Option Plan . (Incorporated herein by reference into this document from the exhibits to Form S-8, Registration statement filed on April 20,1994, Registration No. 33-78000.) 10.11 Amendment dated March 18, 2002 to the Fidelity Bancorp, Inc., 1993 Incentive Stock Option Plan (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.12 Fidelity Bancorp, Inc. 1993 Stock Option Plan for Outside Directors (Incorporated herein by reference into this document from the exhibits to Form S-8, Registration statement filed on April 20,1994, Registration No. 33-78000.) 10.13 Amendment dated March 18, 2002 to the Fidelity Bancorp, Inc. 1993 Stock Option Plan for Outside Directors (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 10.14 Fidelity Federal Savings Bank Employee Severance Compensation Plan (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 10-Q dated August 14, 2002) 21.0 Subsidiary information is incorporated herein by reference to "Part II - Subsidiaries" 99.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 24 99.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K 1. On February 12, 2003. Fidelity Bancorp, Inc.submitted a script prepared for by Mr. Raymond Stolarczyk at the 2002 annual meeting for stockholders held on February 12, 2003, discussing financial results for the fiscal year ended September 30, 2002, and the first quarter ended December 31, 2002. 25 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: May 15, 2003 /s/ RAYMOND S. STOLARCZYK ----------------------------- Raymond S. Stolarczyk Chairman and Chief Executive Officer Dated: May 15, 2003 /s/ ELIZABETH A. DOOLAN ----------------------------- Elizabeth A. DOOLAN Sr. V. P. and Chief Financial Officer 26 CERTIFICATIONS I, Raymond S. Stolarczyk, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Fidelity Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 27 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 By: /s/ Raymond S. Stolarczyk Name: Raymond S. Stolarczyk Title: Chairman and Chief Executive Officer I, Elizabeth A. Doolan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Fidelity Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 26 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): 28 (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 By: /s/ Elizabeth A. Doolan Name: Elizabeth A. Doolan Title: Senior Vice President and Chief Financial Officer EX-99 2 march991.txt CEO CERTIFICATION Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Fidelity Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report), I, Raymond S. Stolarczyk, chief executive officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ RAYMOND S. STOLARCZYK - ------------------------- Raymond S. Stolarczyk Chief Executive Officer May 15, 2003 EX-99 3 march992.txt CFO CERITIFICATION Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Fidelity Bancorp, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report), I, Elizabeth A. Doolan, chief financial officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ ELIZABETH A. DOOLAN - ----------------------- Elizabeth A. Doolan Chief Financial Officer May 15, 2003 -----END PRIVACY-ENHANCED MESSAGE-----