Fidelity Bancorp, Inc. Announces First Quarter Earnings for Fiscal 2010
PITTSBURGH, Jan. 27 /PRNewswire-FirstCall/ -- Fidelity Bancorp, Inc. (Nasdaq: FSBI) the holding company for Fidelity Bank, PaSB of Pittsburgh, Pennsylvania (the "Company") today announced first quarter earnings for the three-month period ended December 31, 2009. Net income for the period was $232,000 or $0.04 per share (diluted), as compared to net income of $1.7 million or $0.53 per share (diluted) in the prior year quarter. The $1.5 million decrease in net income primarily reflects charges of $1.2 million for other-than-temporary impairment ("OTTI") on certain investment securities. Annualized return on assets was 0.13% and return on equity was 1.97% for the fiscal 2010 period, compared to 0.91% and 15.66%, respectively, for the same period in the prior year.
The Company's net interest income before provision for loan losses decreased $1.0 million or 22.2% to $3.6 million for the quarter ended December 31, 2009, compared to $4.7 million in the prior year period. The decrease primarily reflects a decrease in the interest rate spread. The Company's tax equivalent interest rate spread decreased to 2.04% for the three months ended December 31, 2009 compared to 2.52% in the prior year.
The provision for loan losses decreased to $300,000 for the quarter ended December 31, 2009, compared to $555,000 in the prior year quarter. The provision for loan losses is charged to operations to bring the total allowance for loan losses to a level that reflects management's best estimates of the losses inherent in the portfolio. When determining the provision for loan losses, the company considers a number of factors some of which include specific credit reviews, non-performing, delinquency and charge-off trends, concentrations of credit, loan volume trends and broader local and national economic trends. Net charge-offs for the three-months ended December 31, 2009 were $39,000 compared to $394,000 in the prior year period. Non-performing assets and foreclosed real estate were 2.22% of total assets at December 31, 2009, and the allowance for loan losses was 36.7% of non-performing loans and 1.46% of gross loans at that date. Non-performing assets and foreclosed real estate were 1.24% of total assets at December 31, 2008, and the allowance for loan losses was 39.6% of non-performing loans and 0.75% of gross loans at that date.
Included in non-performing loans as of December 31, 2009 were the following loans which were identified as such in prior periods but subsequent to December 31, 2008:
- A $3.5 million commercial participation loan to a borrower in the restaurant industry. The Company restructured the loan at its maturity by entering into a forbearance agreement with the borrower to make reduced payments over a six-month period. The Company has never had any payment delinquency with this borrower who is performing in accordance with the terms of the forbearance agreement. In response to the Shared National Credit Examination, this loan was transferred to non-accrual status as of September 30, 2009.
- Two commercial real estate loans totaling $5.0 million to the same borrower for the acquisition of land with two commercial-zoned buildings. The borrower filed for bankruptcy in August 2009, however the Company is currently receiving monthly rental payments from the corresponding tenants which exceed the current monthly debt requirement. The Company had the properties appraised in September 2009 and the appraised value exceeds the principal balance owed.
- A $2.3 million commercial loan to a borrower for the acquisition of a commercial property which is partially vacant at this time. The Company is currently receiving monthly rental payments from the tenants, however, there remains a cash flow shortage. Furthermore, an updated appraisal was completed in September 2009 indicating a collateral shortfall.
Loan loss reserves of $1.0 million have been allocated specifically for the aforementioned commercial loans.
Other income, excluding gains on sales of securities and impairment charges on securities, increased $218,000 or 25.6% to $1.1 million for the quarter ended December 31, 2009, compared to $850,000 in the prior year. The increase relates to an increase in loan service charges and fees of $25,000, an increase in gains on sales of loans of $104,000, and an increase in other operating income of $91,000. Gains on sales of securities were $650,000 for the quarter ended December 31, 2009. There were no similar gains recognized during the prior year period. Impairment charges on securities were $1.2 million for the quarter ended December 31, 2009, compared to $75,000 in the prior year. The impairment charges for the current period relate to the Company's holdings of five pooled trust preferred securities, whereas the impairment charges for the prior year period relate to the Company's holdings of Freddie Mac preferred stock. The impairment charges incurred during the current period resulted from several factors, including downgrades on their credit ratings, failure to pass their principal coverage tests, indications of a break in yield, and the decline in the net present value of their projected cash flows. Management of the Company has deemed the impairment on the trust preferred securities to be other-than-temporary based upon these factors and the duration and extent to which their market values have been less than cost, the inability to forecast a recovery in their market values, and other factors concerning the issuers in the pooled securities. At December 31, 2009, the Company had holdings in 20 different trust preferred offerings, with a book value of $19.0 million. The unrealized loss on these securities amounted to $7.3 million at December 31, 2009.
Operating expenses increased $468,000 or 14.5% to $3.7 million for the quarter ended December 31, 2009, compared to $3.2 million in the prior year period. Changes within operating expenses include increases in compensation and benefits expense, occupancy and equipment, depreciation and amortization, federal deposit insurance premiums, and service bureau expense, of $131,000, $18,000, $12,000, $289,000 and $57,000, respectively. These increases were offset by a decrease in other operating expenses of $33,000. The increase in federal deposit insurance premiums is attributed to recent increases in the base assessment rate and the assessment rate imposed on the Bank for its election to participate in the Transaction Account Guarantee Program under the FDIC's Temporary Liquidity Guarantee Program which provides unlimited insurance coverage for non-interest bearing transaction accounts.
For the three-months ended December 31, 2009, the provision for income taxes decreased $88,000 to a benefit of $113,000 compared to a benefit of $25,000 for the same period last year. The tax benefit for the current period was significantly impacted by the impairment charges during the period.
Total assets were $736.0 million at December 31, 2009, an increase of $6.0 million or 0.82% compared to September 30, 2009, and a decrease of $5.3 million or .71% compared to December 31, 2008. Net loans outstanding decreased $8.2 million or 2.0% to $401.6 million at December 31, 2009 as compared to September 30, 2009, and decreased $71.5 million or 15.1% as compared to December 31, 2008. Deposits increased $6.7 million or 1.5% to $450.6 million at December 31, 2009 as compared to September 30, 2009, and increased $39.3 million or 9.6% as compared to December 31, 2008. Short-term borrowings increased to $249,000 at December 31, 2009 as compared to $104,000 at September 30, 2009, and decreased from $44.7 million at December 31, 2008. Long-term debt was relatively unchanged at $118.5 million at December 31, 2009 as compared to September 30, 2009, and decreased $260,000 as compared to December 31, 2008. Stockholders' equity was $47.0 million at December 31, 2009, compared to $47.1 million at September 30, 2009 and $46.7 million at December 31, 2008. On December 12, 2008, the Company sold $7 million in preferred stock to the U.S. Department of Treasury as a participant in the federal government's TARP Capital Purchase Program. In connection with the investment, the Company also issued a warrant to the Treasury, which permits the Treasury to purchase up to 121,387 shares of its common stock at an exercise price of $8.65 per share. The Treasury Department's TARP Capital Purchase Program is a voluntary program for healthy U.S. financial institutions designed to encourage these institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.
The Company's filings with the Securities and Exchange Commission are available on-line through the Company's Internet website at www.fidelitybancorp-pa.com.
Fidelity Bancorp, Inc. is the holding company for Fidelity Bank, a Pennsylvania-chartered, FDIC-insured savings bank conducting business through fourteen offices in Allegheny and Butler counties.
Statements contained in this news release which are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by Fidelity Bancorp, Inc. with the Securities and Exchange Commission from time to time.
Fidelity Bancorp, Inc. and Subsidiaries
Income Statements for the Three Months Ended
December 31, 2009 and 2008 - Unaudited
(In thousands, except per share data)
Three Months Ended
------------------
December 31,
------------
2009 2008
---- ----
Interest income:
Loans $5,803 $7,074
Mortgage-backed securities 781 1,137
Investment securities 1,225 1,567
Deposits with other institutions 12 2
-- --
Total interest income 7,821 9,780
----- -----
Interest expense:
Deposits 1,582 2,351
Borrowed funds 2,501 2,650
Subordinated debt 103 105
--- ---
Total interest expense 4,186 5,106
----- -----
Net interest income before provision
for loan losses 3,635 4,674
Provision for loan losses 300 555
--- ---
Net interest income after provision
for loan losses 3,335 4,119
----- -----
Other income:
Loan service charges and fees 152 127
Gain on sale of investment and
mortgage-backed securities 650 -
Impairment charge on securities (1,234) (75)
Gain on sale of loans 134 30
Deposit service charges and fees 386 388
Other operating income 396 305
--- ---
Total other income 484 775
--- ---
Operating expenses:
Compensation and benefits 2,058 1,927
Office occupancy and equipment 254 236
Depreciation and amortization 134 122
Federal insurance premiums 308 19
Service bureau expense 163 106
Other operating expenses 783 822
--- ---
Total operating expenses 3,700 3,232
----- -----
Income before income tax benefit 119 1,662
Income tax benefit (113) (25)
Net income 232 1,687
Preferred stock dividend (88) -
Amortization of preferred stock discount (15) -
Net income available to common ---- ------
stockholders $129 $1,687
==== ======
Basic earnings per common share $0.04 $0.56
===== =====
Diluted earnings per common share $0.04 $0.53
===== =====
Balance Sheets - Unaudited
(In thousands, except share data)
December 31, September 30, December 31,
2009 2009 2008
----------- ------------ -----------
Assets:
Cash and due from banks $43,049 $20,601 $6,163
Interest-earning demand
deposits 2,972 21,879 1,473
Securities available-
for-sale 160,388 166,115 143,515
Securities held-to-maturity 83,553 72,448 79,177
Loans receivable, net 401,566 409,787 473,107
Loans held-for-sale 414 694 443
Foreclosed real estate, net 305 103 157
Federal Home Loan Bank stock,
at cost 10,034 10,034 10,034
Accrued interest receivable 2,732 2,900 3,392
Office premises and equipment 9,122 8,470 7,037
Other assets 21,896 17,000 16,810
------ ------ ------
Total assets $736,031 $730,031 $741,308
======== ======== ========
Liabilities and Stockholders'
Equity:
Liabilities:
Deposits $450,568 $443,880 $411,244
Short-term borrowings 249 104 44,729
Subordinated notes payable 7,732 7,732 7,732
Securities sold under
agreement to repurchase 105,247 106,244 103,762
Advance payments by borrowers
for taxes and insurance 2,485 1,274 2,989
Long-term debt 118,476 118,541 118,736
Other liabilities 4,291 5,144 5,408
----- ----- -----
Total liabilities 689,048 682,919 694,600
------- ------- -------
Stockholders' equity:
Preferred stock, $.01 par
value per share, 5,000,000
shares authorized, 7,000
shares issued 6,758 6,743 6,640
Common stock, $.01 par value
per share, 10,000,000 shares
authorized, 3,665,639,
3,664,947, and 3,658,714
shares issued 37 37 36
Treasury stock 619,129
shares (10,382) (10,382) (10,382)
Additional paid-in capital 46,417 46,390 46,289
Retained earnings 8,752 8,685 13,011
Accumulated other comprehensive
loss, net of tax (4,599) (4,361) (8,886)
------ ------ ------
Total stockholders' equity 46,983 47,112 46,708
------ ------ ------
Total liabilities and
stockholders' equity $736,031 $730,031 $741,308
======== ======== ========
Other Data:
At or For the Three Month
Period Ended
December 31,
------------
2009 2008
---- ----
Annualized return on assets 0.13% 0.91%
Annualized return on equity 1.97% 15.66%
Equity to assets 6.38% 6.30%
Interest rate spread (tax equivalent) 2.04% 2.52%
Net interest margin (tax equivalent) 2.23% 2.75%
Non-interest expense to average assets 2.02% 1.75%
Loan loss allowance to net loans 1.48% 0.76%
Non-performing loans and foreclosed real
estate to total assets at end-of-period 2.22% 1.24%
CONTACT:
Mr. Richard G. Spencer
President and Chief Executive Officer
(412) 367-3300
E-mail: [email protected]
SOURCE Fidelity Bancorp, Inc.
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