Fidelity Bancorp, Inc. Announces First Quarter Earnings for Fiscal 2010

Jan 27, 2010, 16:01 ET from Fidelity Bancorp, Inc.

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: rspencer@fidelitybank-pa.com

SOURCE Fidelity Bancorp, Inc.



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