PITTSBURGH, April 22 /PRNewswire-FirstCall/ -- Fidelity Bancorp, Inc. of Pittsburgh, Pennsylvania (Nasdaq: FSBI), the holding company for Fidelity Bank, today announced second quarter earnings for the three-month period ended March 31, 2009. Fidelity recorded a net loss of $129,000 or ($0.08) per share (diluted) for the period, compared to net income of $1.2 million or $.38 per share (diluted) in the prior year quarter. The $1.3 million decrease in net income primarily reflects charges of $1.6 million for other-than-temporary impairment ("OTTI") on certain investment securities. Excluding the impairment charges, net income would have been $1.4 million or $0.39 per share (diluted). The Company's annualized return on average assets was -0.07% (.74% excluding the OTTI charges) and return on average equity was -1.09% (11.44% excluding the OTTI charges) compared to .64% and 9.79% respectively, for the same period in the prior year. For the six-month period ended March 31, 2009, net income was $1.6 million, or $.45 per share (diluted), compared to $2.0 million or $.67 per share (diluted) in the prior year period. Excluding impairment charges of $1.7 million, net income would have been $3.0 million or $0.92 per share (diluted). Annualized return on assets was .42% (.83% excluding the OTTI charges) and return on equity was 6.93% (13.52% excluding the OTTI charges) for the fiscal 2009 period, compared to .56% and 8.56%, respectively, for the same period in the prior year.

Net interest income before provision for loan losses increased $463,000 or 11.2% to $4.6 million for the three-month period ended March 31, 2009, compared to $4.1 million in the prior year period. For the six months ended March 31, 2009, net interest income before provision for loan losses increased $1.3 million or 16.9% to $9.3 million, compared to $7.9 million in the prior year period.

The provision for loan losses was $320,000 for the three-months ended March 31, 2009 compared to $210,000 in the prior year quarter. The provision for loan losses increased to $875,000 for the six-months ended March 31, 2009, compared to $390,000 in the prior year period. 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. An evaluation of the loan portfolio, current economic conditions and other factors is performed each month at the balance sheet date. Non-performing loans and foreclosed real estate were 0.92% of total assets at March 31, 2009, compared to .81% at September 30, 2008. The allowance for loan losses was 57.9% of non-performing loans at March 31, 2009, compared to 59.8% at September 30, 2008.

Other income, excluding the OTTI charges, increased $46,000 or 5.1% to $943,000 for the quarter ended March 31, 2009 compared to $897,000 for the same period last year. The increase for the current quarter primarily relates to an increase in loan service charges and fees of $26,000, an increase in the gains on the sales of loans of $80,000, and an increase in deposit service charges and fees of $16,000, partially offset by a decrease in other operating income of $69,000 (primarily attributed to a decrease in non-insured investment product income of $51,000). For the six months ended March 31, 2009, other income, excluding the OTTI charges, was $1.8 million, relatively flat over the prior year period. While other income, excluding OTTI charges, was relatively unchanged for the six-month period ended March 31, 2009, changes during the period included increases in loan service charges and fees, gains on the sales of loans, and deposit service charges and fees of $38,000, $97,000, and $6,000, respectively, offset by a decrease in other operating income of $139,000.

OTTI charges were $1.6 million during the three-month period ending March 31, 2009; there were no similar charges in the prior fiscal period. The impairment charges relate to the Company's holdings of the AMF Ultra Short Mortgage Fund and its investment in a pooled trust preferred security. A $1.2 million non-cash impairment charge on the AMF Ultra Short Mortgage Fund resulted from the continuing uncertainty in spreads in the bond market for mortgage related securities. This uncertainty has negatively impacted the market value of the securities in the fund and thus the net asset value of the fund itself. Management of the Company has deemed the impairment of the fund to be other-than-temporary based upon the duration and extent to which the market value has been less than cost, the limitations placed on fund redemptions, and the inability to forecast a recovery in the market value. A $412,000 non-cash impairment charge on an investment in a pooled trust preferred security resulted from several factors, including a downgrade in its credit rating, its failure to pass its principal coverage test, indications of a break in yield, and the decline in the net present value of its projected cash flows. Management of the Company has deemed the impairment on the trust preferred security to be other-than-temporary based upon these factors and the duration and extent to which the market value has been less than cost, the inability to forecast a recovery in market value, and other factors concerning the issuers in the pooled security. OTTI charges were $1.7 million during the six-month period ending March 31, 2009, compared to $322,000 during the prior year period. The impairment charges in the prior year period related to the Company's holding of the AMF Ultra Short Mortgage Fund.

Operating expenses for the quarter ended March 31, 2009, increased $136,000 or 4.1% to $3.4 million compared to $3.3 million for the comparable prior year period. For the six-month period in this fiscal year, operating expenses increased $281,000 or 4.4% to $6.7 million, compared to $6.4 million in the prior year period. The operating expense increase for the three-month period ended March 31, 2009 is primarily attributed to an increase in compensation and benefits expense of $52,000 and an increase in service bureau expenses of $38,000. The operating expense increase for the six-month period ended March 31, 2009 is primarily attributed to an increase in compensation and benefits expense of $107,000, an increase in federal deposit insurance premiums of $69,000, an increase in service bureau expense of $76,000, and an increase in other operating expenses of $75,000, partially offset by a decrease in office occupancy and equipment of $10,000, a decrease in depreciation and amortization of $17,000 and a decrease in foreclosed real estate expense of $21,000.

Provision for income taxes decreased to $269,000 for the three-months ended March 31, 2009, compared to $354,000 in the prior year quarter. For the six months ended March 31, 2009, the provision for income taxes decreased to $244,000 compared to $607,000 for the same period last year. The tax provision for the current fiscal year was significantly impacted by the impairment charges during the fiscal year ended September 30, 2008. On October 3, 2008, the Emergency Economic Stabilization Act was enacted which includes a provision permitting banks to recognize losses relating to FNMA and FHLMC preferred stock as an ordinary loss, thereby allowing the Company to recognize a tax benefit on the losses. Consequently, the Company recognized this additional tax benefit in the quarter ending December 31, 2008.

Total assets were $720.0 million at March 31, 2009, a decrease of $6.9 million or 1.0% compared to September 30, 2008, and a decrease of $18.7 million or 2.5% compared to March 31, 2008. Net loans outstanding decreased $3.9 million or .84% to $456.9 million at March 31, 2009 as compared to September 30, 2008, and decreased$336,000 or .07% as compared to March 31, 2008. Deposits increased $14.6 million to $431.0 million at March 31, 2009 as compared to September 30, 2008, and increased $8.4 million as compared to March 31, 2008. Short-term borrowings decreased $32.1 million to $126,000 at March 31, 2009 as compared to September 30, 2008, and decreased $19.3 million as compared to March 31, 2008. Long-term debt decreased $128,000 to $118.7 million at March 31, 2009 as compared to September 30, 2008, and decreased $10.3 million as compared to March 31, 2008. Stockholders' equity was $49.0 million at March 31, 2009, compared to $42.2 million at September 30, 2008 and $47.4 million at March 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.

QUARTERLY DIVIDEND

The Board of Directors of Fidelity Bancorp, Inc. yesterday declared a quarterly cash dividend of $.07 per share on the Company's common stock. The dividend is payable May 29, 2009 to stockholders of record May 15, 2009. While the cash dividend is a reduction from the prior quarterly dividend rate of $.14 per share, it represents the 83rd uninterrupted quarterly cash dividend paid to stockholders.

President Spencer commented on the dividend, "The Company's Board considered very carefully this action and believes it is the appropriate step to take in this uncertain economic environment. We believe that preserving capital is paramount at this time and estimate that this dividend adjustment will retain approximately $850,000 in capital annually."

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 thirteen 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.

    Mr. Richard G. Spencer
    President and Chief Executive Officer
    (412) 367-3300
    E-mail: rspencer@fidelitybank-pa.com


    Fidelity Bancorp, Inc. and Subsidiaries
    Income Statement for the Three and Six Months Ended
    March 31, 2009 and 2008 - Unaudited
    (In thousands, except per share data)

                                   Three Months Ended   Six Months Ended
                                        March 31,           March 31,
                                        ---------           ---------
                                     2009      2008      2009       2008
                                     ----      ----      ----       ----
    Interest income:
       Loans                       $6,871    $7,156   $13,945    $14,484
       Mortgage-backed securities   1,009       977     2,146      1,917
       Investment securities        1,474     1,832     3,041      3,755
       Deposits with other
        institutions                    2         7         4         12
                                        -         -         -         --
          Total interest income     9,356     9,972    19,136     20,168
                                    -----     -----    ------     ------

    Interest expense:
       Deposits                     2,177     3,040     4,528      6,419
       Borrowed funds               2,495     2,707     5,146      5,586
       Subordinated debt              102       106       206        243
                                      ---       ---       ---        ---
          Total interest expense    4,774     5,853     9,880     12,248
                                    -----     -----     -----     ------

    Net interest income before
     provision for loan losses      4,582     4,119     9,256      7,920
    Provision for loan losses         320       210       875        390
                                      ---       ---       ---        ---
    Net interest income after
     provision for loan losses      4,262     3,909     8,381      7,530
                                    -----     -----     -----      -----
    Other income:
       Loan service charges and fees  140       114       266        228
       Gain on sale of investment
        and mortgage-backed
        securities                      -         7         -          7
       Impairment charge on
        securities                 (1,645)        -    (1,720)      (322)
       Gain on sale of loans          124        44       154         57
       Deposit service charges and
        fees                          342       326       730        724
       Other operating income         337       406       643        782
                                      ---       ---       ---        ---
          Total other income         (702)      897        73      1,476
                                     ----       ---        --      -----
    Operating expenses:
       Compensation and benefits    2,091     2,039     4,018      3,911
       Office occupancy and
        equipment                     276       289       512        522
       Depreciation and amortization  120       129       242        259
       Federal insurance premiums      75        12        94         25
       Loss on foreclosed real estate   5         -        10          5
       Foreclosed real estate expense   1         3         2         23
       Intangible amortization          6         7        12         15
       Service bureau expense         113        75       219        143
       Other operating expenses       733       730     1,543      1,468
                                      ---       ---     -----      -----
          Total operating expenses  3,420     3,284     6,652      6,371
                                    -----     -----     -----      -----

    Income before income tax
     provision                        140     1,522     1,802      2,635
    Income tax provision              269       354       244        607
                                      ---       ---       ---        ---
    Net Income (Loss)                (129)    1,168     1,558      2,028
    Preferred stock dividend          106         -       106          -
    Amortization of preferred stock
     discount                          15         -        15          -
                                       --       ---        --        ---
    Net Income (Loss) available
     to common stockholders         $(250)   $1,168    $1,437     $2,028
                                    =====    ======    ======     ======
    Basic earnings per common
     share                         $(0.08)    $0.39     $0.47      $0.67
                                   ======     =====     =====      =====
    Diluted earnings per common
     share                         $(0.08)    $0.38     $0.45      $0.67
                                   ======     =====     =====      =====



    Balance Sheets - Unaudited
    (In thousands, except share data)

                           March 31, 2009  September 30, 2008  March 31, 2008
                           --------------  ------------------  --------------
    Assets:
       Cash and due from banks    $6,854           $6,701          $8,553
       Interest-earning demand
        deposits                   7,465            4,071             530
       Securities available-for-
        sale                     144,523          146,680         167,815
       Securities held-to-
        maturity                  66,498           75,404          73,175
       Loans receivable, net     456,914          460,786         457,250
       Loans held-for-sale           561              225             891
       Foreclosed real estate, net   106              170             309
       Federal Home Loan Bank
        stock, at cost            10,034            7,943           7,830
       Accrued interest
        receivable                 3,192            3,512           3,701
       Office premises and
        equipment                  7,553            6,949           5,653
       Other assets               16,645           14,769          13,322
                                  ------           ------          ------
          Total assets          $720,345         $727,210        $739,029
                                ========         ========        ========

    Liabilities and
     Stockholders' Equity:
    Liabilities:
       Deposits                 $431,047         $416,414        $422,629
       Short-term borrowings         126           32,258          19,450
       Subordinated notes
        payable                    7,732            7,732           7,732
       Securities sold under
        agreement to
        repurchase               105,390          104,003         106,165
       Advance payments by
        borrowers for taxes
        and insurance              2,998            1,483           3,096
       Long-term debt            118,672          118,800         128,926
       Other liabilities           5,392            4,365           3,641
                                   -----            -----           -----
          Total liabilities      671,357          685,055         691,639
                                 -------          -------         -------
    Stockholders' equity:
       Preferred stock, $.01
        par value per share,
        5,000,000 shares
        authorized, 7,000
        shares issued              6,655                -               -
       Common stock, $.01 par
        value per share,
        10,000,000 shares
        authorized, 3,662,488,
        3,647,854, and 3,641,327
        shares issued                 37               36              36
       Treasury stock, 619,129,
        619,129, and 619,129
        shares                   (10,382)         (10,382)        (10,382)
       Additional paid-in
        capital                   46,330           45,931          45,795
       Retained earnings          12,335           12,268          14,302
       Accumulated other
        comprehensive loss,
        net of tax                (5,987)          (5,698)         (2,361)
                                  ------           ------          ------
          Total stockholders'
           equity                 48,988           42,155          47,390
                                  ------           ------          ------
          Total liabilities
           and stockholders'
           equity               $720,345         $727,210        $739,029
                                ========         ========        ========



    Other Data:
                                     At or For the Three Month Period Ended
                                                    March 31,
                                              2009            2008
                                              ----            ----
    Annualized return on average assets      -0.07%           0.64%
    Annualized return on average equity      -1.09%           9.81%
    Equity to assets                          6.80%           6.41%
    Interest rate spread (tax equivalent)     2.41%           2.12%
    Net interest margin (tax equivalent)      2.71%           2.44%
    Non-interest expense to average assets    1.86%           1.80%
    Loan loss allowance to gross loans        0.82%           0.70%
    Non-performing loans and real estate
     owned to total assets at end-of-period   0.92%           1.67%

                                      At or For the Six Month Period Ended
                                                    March 31,
                                              2009            2008
                                              ----            ----
    Annualized return on average assets       0.42%           0.56%
    Annualized return on average equity       6.93%           8.57%
    Equity to assets                          6.80%           6.41%
    Interest rate spread (tax equivalent)     2.47%           2.04%
    Net interest margin (tax equivalent)      2.73%           2.35%
    Non-interest expense to average assets    1.81%           1.74%
    Loan loss allowance to gross loans        0.82%           0.70%
    Non-performing loans and real estate
     owned to total assets at end-of-period   0.92%           1.67%

SOURCE Fidelity Bancorp, Inc.