10-Q 1 dec1202.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 December 31, 2002 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 January 31, 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 December 31, 2002 (unaudited) and September 30, 2002 1 Consolidated Statements of Earnings for the three months ended December 31, 2002 and 2001 (unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity for the three months ended December 31, 2002 and 2001 (unaudited) 3 Consolidated Statements of Cash Flows for the three months Ended December 31, 2002 and 2001 (unaudited) 4-5 Notes to Unaudited Consolidated Financial Statements (unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-14 Item 3. Quantitative and Qualitative Disclosures about Market Risks 14-15 Itme 4. Controls and Procedures 16 Part II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signature Page 17 1 FIDELITY BANCORP and SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited) Dollars in thousands

~~June~~December 3031, September 30, ASSETS 2002 ~~2001~~2002 Cash and due from banks $ 64,~~707~~254 73,~~107~~828 Interest-earning deposits ~~3,021~~107 1,~~397~~045 Federal funds sold 100 100 ------- -------- Cash and cash equivalents 94,~~828~~461 84,~~604~~973 FHLB of Chicago stock, at cost 3132,~~665~~375 1831,~~055~~972 Mortgage-backed securities available for sale ~~179~~253,~~264~~916 ~~127~~216,~~685~~505 Securities available for sale 3528,~~856~~444 4222,~~006~~396 Loans held for sale 167 83 ~~41,219~~ Loans receivable, net of allowance for loan losses of $1,~~678~~917 at ~~June~~December 3031, 2002 and $1,~~236~~826 at September 30, ~~2001~~2002 ~~427~~401,~~857~~788 ~~422~~414,~~980~~685 Accrued interest receivable 3,~~581~~847 3,~~650~~637 Premises and equipment 3,~~634~~559 3,~~850~~410 Other assets 1,~~211~~298 ~~657~~1,254 ------- ------- $ ~~692~~729,~~979~~855 ~~668~~698,~~706~~915 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits ~~435~~463,~~739~~273 ~~399~~434,~~619~~134 Borrowed funds ~~157~~187,~~220~~025 ~~187~~180,~~345~~650 Advance payments by borrowers for taxes and insurance 43,~~292~~522 76,~~193~~158 Due to broker 359,~~374~~331 1413,~~918~~169 Other liabilities 68,~~896~~725 108,~~247~~813 ------- ------- Total liabilities ~~639~~671,~~521~~876 ~~619~~642,~~322~~924 STOCKHOLDERS' EQUITY Preferred stock - - Common stock 57 3857 Additional paid-in capital 38,~~450~~410 38,~~636~~410 Retained earnings, substantially restricted 4649,~~185~~448 4047,~~926~~864 Treasury stock, ~~at cost~~ (30,~~932~~808) (3130,~~540~~932) Common stock acquired by Bank Recognition and Retention Plans (~~159~~138) (~~178~~149) Accumulated other comprehensive income ~~(loss) (143)~~ 1,~~502~~010 741 ------- ------- TOTAL STOCKHOLDERS' EQUITY 5357,~~458~~979 4955,~~384~~991 ------- ------- $ ~~692~~729,~~979~~855 ~~668~~698,~~706~~915 ======= =======

See accompanying notes to unaudited consolidated financial statements. 2 FIDELITY BANCORP and SUBSIDIARY CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Dollars in thousands (except per share data)

Three ~~Months~~months ended ~~Nine~~December ~~Months ended June 30~~31, ~~June 30,~~ 2002 2001 ~~2002 2001~~ ------~~--------------~~ ------~~-----------~~ ~~(unaudited)~~ Interest Income: Loans receivable $ 76,~~665~~977 98,~~532~~270 ~~23,729 29,825~~ Securities ~~995~~882 ~~1,385~~916 ~~2,999 4,544~~ Mortgage-backed securities 2,~~524~~017 ~~251 6~~2,~~669~~195 ~~357~~ Other interest income 86 1710 ~~26 48~~ ------ ------ ~~------ ------ 11~~9,~~192~~882 11,~~185~~391 ~~33,423 34,774~~ Interest Expense: Deposits 32,~~283~~930 43,~~760~~822 ~~10,642 14,737~~ Borrowed funds 21,~~091~~970 2,~~808~~535 ~~6,736 9,467~~ ------ ------ 4,900 6,357 ------ ------ ~~5,374 7,568 17,378 24,204~~ Net interest income before provision for loan losses 54,~~818~~982 35,~~617~~034 ~~16,045 10,570~~ Provision for loan losses ~~200~~94 70140 ~~450 180~~ ------ ------ ~~------ ------~~ Net interest income after provision for loan losses 54,~~618~~888 34,~~547~~894 ~~15,595 10,390~~ Non-~~Interest~~interest Income: Fees and commissions ~~195~~153 ~~118~~143 ~~495 351~~ Insurance and annuity commissions ~~208~~217 ~~222~~220 ~~638 625~~ Gain on sale of securities ~~239~~271 7772 ~~534 202~~ Gain on sale of loans 1043 14541 ~~676 14~~ Other 119 139 ~~31 149~~ ------ ------ ~~------~~693 ~~------~~985 ~~663 444 2,374 1,341~~ Non-~~Interest~~interest Expense: General and administrative expenses: Salaries and employee benefits 1,~~569~~540 1,~~299~~699 ~~4,844 4,103~~ Office occupancy and equipment ~~527~~367 ~~392~~370 ~~1,403 1,145~~ Data processing ~~109~~118 98132 ~~371 375~~ Advertising and promotions ~~135~~182 ~~123~~158 ~~449 327~~ Other ~~456~~394 ~~345~~412 ~~1,312 1,100~~ ------ ------ ~~------ ------~~ 2,~~796~~601 2,~~257~~771 ~~8,379 7,050 ------ ------ ------ ------~~ Income before income taxes 32,~~485~~980 13,~~734~~108 ~~9,590 4,681~~ Income tax expense 1,~~262~~088 ~~647 3,544~~ 1,~~682~~163 ------ ------ ~~------ ------~~ Net income $ 21,~~223~~892 1,~~087~~945 ~~6,046 2,999~~ ====== ====== ~~====== ======~~ Earnings per share - basic (1) $ 0.7261 0.3664 ~~1.97~~====== ~~0.99~~====== Earnings per share - diluted (1) $ 0.6958 0.3461 ~~1.89 0.95~~ ====== ====== ~~====== ======~~ Comprehensive income (loss) $ 52,~~342~~161 ~~855~~(928) ~~4,401 4,081~~ ====== ====== ~~====== ======~~

(1) Adjusted for the February 28, 2002 3-for-2 stock split which was effected in the form of a stock dividend. 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 per share data)

Three months ended December 31, 2002 and 2001 Accumulated ~~Common~~Other Common ~~Other~~Comprehen- Additional Stock ~~Stock~~sive ~~Comprehensive~~ Common Paid-In Retained Treasury Acquired ~~Acquired~~ Income Stock Capital Earnings Stock by ~~ESOP by~~ BRRP's (Loss) Total --- ------ ------- ------- ------ ------ ---- ---~~----~~ Balance at September 30, ~~2000~~2001 $ 38 38,~~780~~636 3740,~~022~~926 (31,~~391~~540) (~~189~~178) ~~(191) (~~1,~~266)~~502 $42 49,~~803~~384 Net income - - 21,~~999~~945 - - - ~~- 2~~1,~~999~~945 Change in accumulated other comprehensive ~~loss~~income 1- - - - - (2,~~082~~873) 1(2,~~082~~873) --- ------ ------- ------- ------ ------ ---- ---~~----~~ Total comprehensive income ~~4,081 Purchase of treasury stock~~ (~~43,200 shares~~928) ~~- - - (562) - - - (562)~~ Cash dividends ($0.2408 per share) - - (~~726~~243) - - - - (~~726~~243) Amortization of award of BRRP's stock - - - - 2 - 102 -Exercise 10of ~~Cost~~stock options and reissuance of ~~ESOP~~treasury shares ~~released~~(2,500 -shares) - -(20) - ~~189~~44 - - ~~189~~24 ~~Exercise~~Tax ofbenefit related to stock options ~~and~~exercised ~~reissuance~~- of7 ~~treasury~~- ~~shares~~- - - 7 --- ------ ------- ------- ----- ----- ------- Balance at December 31, 2001 $ 38 38,623 42,628 (2831,~~275~~496) ~~shares~~(176) -(1,371) $ 48,246 === ====== ======= ======= ===== ====== ======= Balance at September 30, 2002 57 38,410 47,864 (~~143~~30,932) (149) 741 $ 55,991 Net income - ~~317~~- 1,892 - - - ~~174~~1,892 ~~Tax~~Change ~~benefit~~in ~~related~~accumulated toother ~~stock~~comprehensive ~~options~~income ~~exercised~~- - 54- - - 269 269 --- ------ ------- 54------- ~~Market~~----- ~~adjustment~~----- ~~for~~------- ~~committed~~Total ~~ESOP~~comprehensive ~~shares~~income -2,161 38Cash dividends ($0.10 per share) - - (308) - - - 38(308) Amortization of award of BRRP's stock - - - - 11 - 11 Exercise of stocks options reissuance of treasury shares (10,025 shares) - - - 124 - - 124 --- ------ ------- ------- ----- ----- ------- Balance at ~~June~~December 3031, ~~2001~~2002 $38 57 38,~~729~~410 3949,~~295~~448 (3130,~~636~~808) - (~~181~~138) ~~(184)~~1,010 $46 57,~~061~~979 === ====== ======= ======= ====== ===== =~~===~~ ======= ~~(continued)~~

See accompanying notes to unaudited consolidated financial statements. 4 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Cash Flows (unaudited) Dollars in thousands

~~Accumulated~~Three ~~Common~~months ~~Other~~ended ~~Common~~December ~~Stock~~31, ~~Additional~~2002 ~~Stock~~2001 ~~Comprehensive~~-------- ~~Par Paid~~-In----- ~~Retained~~CASH ~~Treasury~~FLOWS ~~Acquired~~FROM ~~Income~~OPERATING ~~Shares~~ACTIVITIES: ~~Value~~Net ~~Capital~~income ~~Earnings~~$ ~~Stock~~1,892 1,945 Adjustments to reconcile net income to net cash provided by ~~BRRP's~~operating ~~(Loss)~~activities: ~~Total~~Depreciation ~~---~~74 ~~------~~94 ~~-------~~Provision ~~-------~~for ~~------~~loan ~~------~~losses ~~----~~94 ~~-------~~140 ~~Balance~~Net atamortization ~~September~~and ~~30,~~accretion ~~2001~~of ~~3,782,350~~premiums $and 38discounts 381,~~636~~240 40136 Amortization of cost of stock benefit plans 11 2 Deferred loan costs,~~926~~ net of amortization (~~31,540~~61) 97 Stock dividend from FHLB of Chicago (~~178~~403) (175) Loans originated for sale (2,010) (1,~~502~~740) $Proceeds ~~49,384~~from ~~Net~~loans ~~income~~originated -for -sale -1,969 61,~~046~~203 -Gain on sale of securities and loans (314) (613) Gain on sale of real estate owned (55) - Amortization of deposit base intangible - ~~6,046~~1 ~~Change~~Decrease (increase) in ~~accumulated~~accrued ~~other~~interest ~~comprehensive~~receivable ~~income~~(210) -24 -Increase -in -other -assets -(95) (~~1,645~~98) Decrease in other liabilities (~~1,645~~254) (829) --------- ------ ~~-------~~Net ~~------~~cash ~~------~~provided ~~-----~~by ~~------~~operating ~~-------~~activities ~~Total~~1,878 ~~comprehensive~~187 ~~income~~CASH ~~4,401~~FLOWS ~~Cash~~FROM ~~dividends~~INVESTING ~~($0.26~~ACTIVITIES: ~~per~~Proceeds ~~share)~~from -sale -of -real ~~(787)~~estate -owned -187 - ~~(787)~~Proceeds ~~Amortization~~from maturities of ~~award~~securities ofavailable ~~BRRP's~~for ~~stock~~sale - -20,000 -Proceeds -from -sales 19of -securities 19available ~~Exercise~~for ofsale ~~stock~~97,412 ~~options~~26,894 ~~and~~Proceeds ~~reissuance~~from sale of ~~treasury~~loans ~~shares~~- ~~(34~~22,~~000~~468 ~~shares)~~Purchase -of mortgage-backed ~~(266)~~securities -available ~~608~~for -sale -(159,869) ~~342~~(78,560) ~~Tax~~Purchase ~~benefit~~of ~~related~~securities toavailable ~~stock~~for ~~options~~sale ~~exercised~~(7,291) -(11,649) -Loans ~~101~~originated -for -investment -(32,957) -(49,166) ~~101~~Loans ~~3-for-2~~purchased ~~stock~~(8,769) ~~split~~- ~~effected~~Participations insold ~~the~~500 ~~form~~- Purchase of apremises ~~50%~~and ~~stock~~equipment ~~dividend~~(223) ~~and~~(42) ~~payment~~Principal ofrepayments ~~cash~~collected ~~for~~on ~~fractional~~loans ~~shares~~receivable 154,~~891~~008 42,~~175~~623 19Principal ~~(21)~~repayments -collected -on mortgage-backed -securities ~~(2)~~21,918 ~~---------~~7,426 ------ --~~-----~~ ------ ~~------~~Net ~~-----~~cash ~~------~~used ~~-------~~in ~~Balance~~investing atactivities ~~June 30, 2002 5,673,525 $ 57 38,450 46,185~~ (3035,~~932~~084) (~~159~~20,006) (~~143~~continued) ~~$ 53,458 ========= ====== ======= ====== ======= ====== ======= =======~~

5 FIDELITY BANCORP and SUBSIDIARY Consolidated Statements of Cash Flows (continued) Dollars in thousands

~~Nine~~Three months ended ~~June~~December 3031, 2002 2001 ------- ------ CASH FLOWS FROM ~~OPERATING~~FINANCING ACTIVITIES: Net ~~income~~increase $in 6deposits 29,~~046~~139 218,~~999~~750 ~~Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 461 286 Provision for loan losses 450 180~~ Net ~~amortization~~increase ~~and~~in ~~accretion~~borrowed offunds ~~premiums and discounts 281 (74) Amortization of cost of stock benefit plans 19 10 ESOP -- 227 Deferred loan fees~~6,375 ~~net of amortization 106 250 Stock dividend from FHLB of Chicago (910) (~~585) ~~Loans~~Net ~~originated~~decrease ~~for~~in ~~sale~~advance ~~(4,349)~~payments --by ~~Proceeds~~borrowers ~~from loans originated~~ for ~~sale~~taxes ~~4,422 -- Gain on ales of securities, mortgage-backed securities~~ and ~~loans~~insurance (12,~~209~~636) (~~216~~2,949) ~~Gain~~Payment ~~on sale~~ of ~~real~~common ~~estate~~stock ~~owned~~dividends (11308) ~~5 Amortization of deposit base intangible 2 9 Decrease in accrued interest receivable 69 465 Decrease~~ (~~increase~~243) inProceeds ~~other~~from ~~assets~~exercise ~~(149)~~of ~~679~~stock ~~Increase~~options ~~(decrease)~~124 in24 ~~other liabilities (2,205) 1,959~~ -------- ------ Net cash provided by ~~operating~~financing activities 332,~~023~~694 616,~~194~~167 ~~CASH~~-------- ~~FLOWS~~------ ~~FROM~~Net ~~INVESTING~~change ~~ACTIVITIES:~~in ~~Purchase~~cash ofand ~~mortgage-backed~~cash ~~securities~~equivalents (~~191,603~~512) (303,~~322~~652) ~~Purchase~~Cash ofand ~~securities~~cash ~~(53,941)~~equivalents ~~(38,647)~~at ~~Purchase~~beginning of ~~FHLB~~period of4,973 ~~Chicago stock (107~~8,~~100)~~604 ~~(229)~~-------- ~~Proceeds~~------ ~~from~~Cash ~~maturities~~and ofcash ~~securities~~equivalents ~~20,000~~at ~~20,000~~end ~~Proceeds from sale~~ of ~~securities~~period ~~and~~$ ~~mortgage-backed securities 176~~4,~~548~~461 264,~~568~~952 ~~Proceeds~~======== ~~from~~====== ~~sale~~CASH ofPAID ~~real~~DURING ~~estate~~THE ~~owned~~PERIOD ~~110~~FOR: ~~280~~Interest ~~Proceeds~~$ ~~from redemption of FHLB of Chicago stock 94~~4,~~400~~864 ~~-- Loans originated for investments (131~~6,~~624)~~404 ~~(93,752)~~Income ~~Proceeds~~taxes ~~from~~700 ~~sale of loans 37,829~~ 1,~~280~~567 ~~Purchase~~NON-CASH ofINVESTING ~~premises~~ACTIVITIES: ~~and~~Loans ~~equipment~~transferred ~~(245)~~to ~~(301)~~real ~~Principal~~estate ~~repayments~~in ~~collected~~foreclosure on148 ~~loans~~398 ~~receivable~~Due ~~129,598~~to ~~112,242~~broker ~~Principal~~for ~~repayments collected on mortgage-backed~~ securities ~~21,582~~transactions ~~1,185 ------ ------ Net cash used in investing activities~~ (49,~~446~~331) (114,~~696~~918) ======== ======

See accompanying notes to consolidated financial statements. 6 NOTES TO 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 months ended December 31, 2002 are not necessarily indicative of results that may be expected for the entire fiscal year ending 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) COMMON STOCK On January 22, 2002, the Company's Board of Directors approved a 3-for-2 stock split to be effected in the form of a stock dividend to common stockholders of record as of February 6, 2002 with a payment date of February 28, 2002. Earnings and dividends per share for all periods have been restated to reflect the 3-for-2 stock split. (3) EARNINGS PER SHARE Basic earnings per share for the three months ended December 31, 2002 and 2001 were computed by dividing net income by the weighted average number of shares of common stock outstanding for the periods, which were 3,087,451 and 3,033,119, respectively. Shares held in the Company's ESOP are considered outstanding for the calculation unless unearned. Diluted earnings per share for the three months ended December 31, 2002 and 2001 were computed by dividing net income by the weighted average number of shares of common stock and potential common stock outstanding for the periods, which were 3,249,448 and 3,184,572 respectively. Diluted earnings per share include the dilutive effects of additional potential issuable common stock under stock options. (4) 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. 7 (5) COMMITMENTS AND CONTINGENCIES At December 31, 2002, the Bank had outstanding commitments to originate loans of $9.0 million, of which $4.8 million were at fixed rates ranging from 5.875% to 7.25% and $4.2 million were adjustable rate commitments. In addition to the outstanding commitments there are twelve construction and development loan commitments for a total of $20.7 million with floating rates based on prime plus a margin. Draws on these construction and development loan commitments totaled $12.9 million through December 31, 2002. (6) NEW ACCOUNTING PRONOUNCEMENTS New accounting standards on asset retirement obligations, restructuring activities and exit costs, operating leases, and early extinguishment of debt were issued in 2002. Management determined that these new accounting standards do not have a material impact on the Company's financial condition or results of operations. FASB Statement (FAS) 148, Accounting for Stock-Based Compensation - Transition and Disclosure was issued in December 2002. Management is currently studying the requirements of FAS 148. It applies to annual financial statements for fiscal years ending after December 15, 2002 and to interim financial statements for interim periods beginning after December 15, 2002. FAS 148: * requires more prominent disclosure of how an entity's accounting policy for compensation affects net income; * amends FAS 123 to provide three choices regarding how to adopt FAS 123; and * amends APB 28, Interim Financial Reporting, to require companies still using APB Opinion 25 for stock-based compensation to provide tabular disclosure in interim financial statements of the effects that using FAS 123 would have on compensation expense, net income, and earnings per share. (7) SUBSEQUENT EVENT 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 will be recorded in the second quarter of fiscal 2003. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 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"). 8 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's earnings per diluted share decreased $0.03 to $0.58 for the first fiscal quarter ended December 31, 2002, from $0.61 for the same period in 2001. Net income for the quarter was $1.9 million, essentially unchanged from the same period in 2001. RECENT DEVELOPMENTS 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 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 report contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "plan," " "may," "would," "could," 9 "should" or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors, which could have a material adverse, affect on the operations and future prospects of the Company and the subsidiaries include, but are not limited to: * 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 third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers. * 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. 10 * 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 filings with the Securities and Exchange Commission. 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 on Form 10-K and the Company's other filings with the Securities 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 December 31, 2002, cash and cash equivalents totaled $4.5 million. Mortgage-backed securities and securities available for sale represent a secondary source of liquidity to the Bank and the Company. The market value of these securities fluctuates with interest rate movements. Net interest income in the 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 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. The Company's cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Cash flows provided by operating activities, consisting primarily of interest and dividends received less interest paid on deposits, were $1.9 million for the three months ended December 31, 2002. Net cash used in investing activities was $35.1 million for the three month period ended December 31, 2002. During the period investing activities consisted of loans originated for investment and purchases of mortgage-backed securities, largely offset by principal collections on loans, proceeds from maturities of securities and proceeds from sales of securities and loans. Cash flows provided by financing activities amounted to $32.7 million for the three months ended December 31, 2002. The increases of $29.1 million in deposits and $6.4 million in borrowed funds during the first quarter of fiscal 2003 were only partially offset by the decrease in advance payments from borrowers of $2.6 million. 11 At December 31, 2002, the Bank had outstanding commitments to originate loans of $9.0 million and undrawn construction and loan commitments of $7.8 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 December 31, 2002 totaled $208.1 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 December 31, 2002, the Company and the Bank met the capital adequacy requirements to which they are subject. The Bank's Tangible Equity ratio at December 31, 2002 was 7.84%. The Tier 1 Capital ratio was 7.84%, the Tier 1 Risk-based ratio was 16.85%, and the Total Risk-Based Capital ratio was 17.42%. The most recent notification from the federal banking agencies categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and 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 Company's or the Bank's category. CHANGES IN FINANCIAL CONDITION Total assets at December 31, 2002 were $729.9 million, compared to $698.9 million at September 30, 2002. Mortgage-backed securities classified as available for sale were $253.9 million at December 31, 2002. The period purchases were funded from heavy refinance activity in the Bank's loan portfolio, sales of other mortgage-backed securities, and principal payments received on mortgage-backed securities. Net loans receivable at December 31, 2002 were $401.8 million, down $12.9 million or 3% from September 30, 2002. Demand for loan products were offset by continued high loan repayments, resulting in the decrease in loans receivable. New loans closed, including multi-family and commercial mortgages and loans secured by commercial leases, totaled $33.0 million for the quarter ended December 31, 2002. In addition to originations, the Bank purchased $8.8 million of one- to four-family adjustable jumbo loans during the quarter. Loan repayments totaled $54.0 million for the quarter ended December 31, 2002, compared with $42.6 million for the same period in 2001. 12 Deposits grew to $463.3 million at December 31, 2002, up 7% 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 $6.4 million increase in checking accounts. Borrowed Funds (FHLB advances) increased 4% to $187.0 million at December 31, 2002. Book value per share on December 31, 2002 was $18.75, compared with $18.17 at September 30, 2002. The increase in book value per share was primarily attributable to the quarter's earnings plus the increase in unrealized market value in the mortgage-backed securities and securities available for sale portfolios. Book value per share, excluding accumulated other comprehensive income, was $18.43 at December 31, 2002, an increase of 3%, compared to $17.93 at September 30, 2002. INVESTMENT ACTIVITIES The Company is the holder of certain subordinated notes (the "Notes") issued by Cole Taylor Financial Group, Inc. The Notes have a par value and cost basis of $3.0 million. The Notes were acquired by the Company in 1994, when Cole Taylor Financial Group, Inc. was the parent company for both a consumer finance company and a Chicago area bank. In fiscal 1997, Cole Taylor's bank subsidiary was "spun-off" to certain Cole Taylor shareholders in exchange for stock and certain assets. The Notes remained as obligations of the surviving company, which became known as Reliance Acceptance Group, Inc. ("RAG") and remained the parent company for the consumer finance company. On November 14, 1997, RAG filed a Form 10-Q with the SEC in which RAG reported, among other things, substantial additions to its loan loss reserves, increasing delinquencies and repossession losses, a severe decline in its net interest margin, continuing defaults under senior credit agreements, a lack of future funding sources, and the imposition of substantial restrictions by senior lenders. During the fourth quarter of the fiscal year ended September 30, 1997 the Company evaluated the information that was then available about RAG's circumstances and future prospects in an effort to assess impairment and to place a value on the Notes in the context of a possible RAG liquidation, sale and/or bankruptcy. The Company concluded that the impairment was other than temporary, and that a complete write-down of the Notes was appropriate and , accordingly, the Company wrote the Notes down $3.0 million. RAG subsequently filed a bankruptcy petition in the United States Bankruptcy Court in Delaware. The Company actively participated on the Official Committee of the Unsecured Creditors of RAG and in the formulation of a plan for RAG's bankruptcy liquidation. Further, the Estate Representative for RAG, with the support of the Company and other holders of RAG subordinated notes, filed two lawsuits against a number of RAG insiders, certain legal and accounting firms and others in the United States District Court for the District of Delaware. On October 31, 2002, Taylor Capital Group, Inc announced that it completed offerings of common stock and trust preferred securities for $82.1 million of gross proceeds. It had previously announced its intent to fund the settlement of the outstanding litigation with the proceeds from these offerings. On January 28, 2003 the Company received $3.3 million. The funds represent an amount in excess of a full recovery from the previously charged-off asset. 13 ASSET QUALITY As of December 31, 2002, the Company had non-performing assets of $2.8 million. The non-performing assets at December 31, 2002 included three single-family homes in real estate in judgment, two multi-unit buildings, seven single-family residences, one commercial loan secured by a lease and one consumer loan. There were no assets classified as doubtful. At September 30, 2002, management considered a $909,000 commercial loan secured by lease to be impaired, under which K-Mart Corporation was the lessee, which is included in the non-performing asset number above. 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 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 0.38% ratio of non-performing assets to total assets is virtually unchanged from the ratio reported as of September 30, 2002. Following management's review of the foreclosed residential properties, the Company has determined that no specific allowances were necessary for the quarter ended December 31, 2002. 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.

~~Nine~~Three months ended ~~June~~December 3031, 2002 2001 ~~------~~Average ~~------~~Average ~~CASH~~Average ~~FLOWS~~Yield/ ~~FROM~~Average ~~FINANCING~~Yield/ ~~ACTIVITIES:~~Balance ~~Net~~Interest ~~increase~~Cost(3) Balance Interest Cost(3) (dollars in ~~deposits~~thousands) 36Interest-earning assets: Loans receivable,~~120~~ 7net $ 402,~~720~~780 ~~Net~~6,977 ~~decrease~~6.93% in$ ~~borrowed~~454,845 ~~funds~~8,270 ~~(30~~7.27% Mortgage-backed securities 214,~~125)~~848 ~~(14~~2,~~890)~~017 ~~Net~~3.76% ~~increase~~144,457 ~~(decrease)~~2,195 in6.08% ~~advance~~Interest-bearing ~~payments~~deposits by1,761 ~~borrowers~~6 1.36% 1,570 10 1.78% Securities available for ~~taxes~~sale and ~~insurance~~federal (2funds sold 67,~~901)~~393 3882 5.23% 53,~~410~~644 ~~Purchase~~916 of6.85% ~~treasury~~-------- ~~stock~~----- ----- ~~(562)~~------- ~~Payment~~------ of----- ~~common~~Total ~~stock~~interest-earning ~~dividends~~assets ~~(787)~~686,782 ~~(726)~~9,882 ~~Payment~~5.76% of654,516 ~~fractional~~11,391 ~~shares~~6.96% ~~for~~Non-interest 3earning assets 14,337 15,782 -~~for~~------- ------- Total assets $ 701,119 $ 670,298 ======== ======= Interest-bearing liabilities: Deposits: Passbook & NOW accounts 163,256 735 1.80% 156,178 1,085 2.78% ~~stock~~Money ~~split~~market (accounts 20,477 106 2).07% --12,566 ~~Proceeds~~99 ~~from~~3.15% ~~exercise~~Certificate ofaccounts ~~stock~~247,092 ~~options~~2,089 ~~342~~3.38% ~~228~~223,339 2,638 4.72% -------- ----- ----- ~~Net~~------- ~~cash~~----- ~~provided~~----- byTotal ~~(used~~deposits ~~in)~~430,825 ~~financing~~2,930 ~~activities~~ 2.72% 392,~~647~~083 (3,822 3.90% Borrowed funds 186,057 1,970 4.24% 197,~~820)~~510 2,535 5.13% -------- ----- ----- ~~Net~~------- ~~change~~----- in----- ~~cash~~Total ~~and~~interest-bearing ~~cash~~liabilities ~~equivalents~~616,882 14,~~224~~900 ~~(322)~~3.18% ~~Cash~~589,593 ~~and~~6,357 ~~cash~~4.31% ~~equivalents~~Non-interest atbearing ~~beginning~~deposits of14,548 ~~period~~14,326 8Other liabilities 12,~~604~~668 615,~~195~~811 -------- ------- ~~Cash~~Total ~~and~~liabilities ~~cash~~644,098 ~~equivalents~~619,730 atStockholders' ~~end~~equity of57,021 ~~period~~50,568 -------- ------- Total liabilities and stockholders' equity $ 9701,~~828~~119 5$ 670,~~873~~298 ======== ======= ~~CASH~~Net ~~PAID~~interest ~~DURING~~income/interest ~~THE~~rate ~~PERIOD~~spread ~~FOR:~~(1) ~~Interest $ 17~~4,~~660~~982 ~~24,266~~2.58% ~~Income taxes~~ 5,~~055~~034 ~~1,464~~2.65% ~~NON-CASH~~===== ~~INVESTING~~===== ~~ACTIVITIES~~===== -===== ~~Loans~~Net ~~transferred~~earning toassets/net ~~real~~interest ~~estate~~margin in(2) ~~foreclosure~~$ ~~546~~69,900 ~~277~~2.90% ~~Due~~$ ~~from~~64,923 ~~broker~~3.08% ~~20,456~~======== --===== ======= ===== Ratio of interest-earning assets to interest-bearing liabilities 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 month periods are annualized for presentation purposes. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001 GENERAL. For the quarter ended December 31, 2002, earnings per diluted share decreased $0.03 to $0.58 from $0.61 for the same period in 2001. Net income of $1.9 million for the current quarter was $53,000 less than the same period in 2001. Earnings per share and net income decreased primarily as a result of a decrease in non-interest income. The Company's net interest margin, the primary driver of its earnings, decreased from 3.08% for the quarter ended December 31, 2001 to 2.90% for that same period in 2002. Net interest income, before provision for loan losses, was $5.0 million for the quarter ended December 31, 2002, essentially unchanged from the same period in 2001. The decrease in interest income was essentially offset by a decrease in interest expense when comparing the quarter ended December 31, 2002 to the same period in 2001. INTEREST INCOME. Income from loans receivable, the chief contributor to interest income, was $7.0 million for the quarter ended December 31, 2002, down 16% from the prior year period. Income from loans receivable fell primarily as a result of a decline in the quarterly outstanding average balances; $402.8 million for the quarter ended December 31, 2002, compared with $454.8 million for the period one year earlier. Repayments from the first quarter totaled $54.0 million, compared to $42.6 million for the same quarter 2001. The average balance of the securities available for sale portfolios, including mortgage-backed securities, increased to $282.2 million for the quarter ended December 31, 2002, from $198.1 million the same quarter last year. Interest generated from mortgage-backed and investment securities for the quarter ended December 31, 2002 was $2.9 million, a decrease of $0.2 million from the quarter ended December 31, 2001. INTEREST EXPENSE. Total interest expense for the quarter ended December 31, 2002 was $4.9 million, down $1.5 million or 23% from $6.4 million for the same quarter one year ago. For the quarter ended December 31, 2002, interest expense on deposits was $2.9 million, compared with $3.8 million for the same quarter a year ago, down $892,000, or 23%. Despite significant cuts in interest rates, especially on some promotionally priced certificates of deposit, average deposits increased $38.7 million, from $392.1 million for the quarter ended December 31, 2001 to $430.8 million for the 2002 quarter. Interest expense on borrowed funds declined 22%, to $2.0 million for the quarter ended December 31, 2002, from $2.5 million for the same period in 2001. The improvement is a combination of a smaller average outstanding balance (the average balance decreased $11.5 million to $186.1 million for the quarter ended December 31, 2002) as well as an improved interest cost. The cost of borrowed funds decreased 89 basis points in the first quarter of fiscal 2002 compared to the same period last year. 16 PROVISION FOR LOAN LOSSES. The Company recorded provisions for loan losses of $94,000 and $140,000, respectively, for the quarters ended December 31, 2002 and 2001. The decrease was a result of the high repayments experienced and is also attributable to high provisions made in the first quarter of fiscal 2002 as a result of the increase in commercial loans secured by leases and commercial real estate loans. The provision for loan losses reflects management's on-going evaluation of probable losses on loans and the adequacy of the allowance for loan losses based on all pertinent considerations, including, but not limited to, the overall economic conditions. 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 December 31, 2002, the allowance for loan losses was $1.9 million. The ratio of the allowance for loan losses to net loans receivable was 0.48% at December 31, 2002. NON-INTEREST INCOME. Non-interest income decreased $292,000, to $693,000 for the quarter ended December 31, 2002, from $985,000 in the year earlier period. The decrease was primarily related to a $541,000 before tax gain on the sale of $23.1 million of loans held for sale recorded in the prior year period. This change was partially offset by an increase of $199,000 from gains on sales of securities in the current year's quarter. NON-INTEREST EXPENSE. Non-interest expense decreased to $2.6 million for the quarter ended December 31, 2002, compared with $2.8 million in the same period in 2001, a decrease of 6%. Salaries and employee benefits decreased $159,000, is a result of management's continued efforts to control operating expenses. INCOME TAXES. Income taxes decreased $75,000 for the three months ended December 31, 2002 to $1.1 million compared to $1.2 million for the prior year. The Company's effective income tax rate was 36.5% for the first quarter of 2003 compared to 37.4% for the first quarter of 2002. 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 in 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. 17 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. 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 September 30, 2002 interest rate sensitivity of NPV, the most recent available from the OTS. Due to the abnormally low prevailing interest rate environment, the OTS report did not provide NPV estimated for the -200 and -300 basis points.

~~Three~~Net ~~Months~~Portfolio ~~Ended~~Value ~~June~~as ~~30,~~a ~~Nine~~% ~~Months~~Net ~~Ended~~Portfolio ~~2002~~Value ~~2001~~of ~~June~~Present ~~30,~~Value ~~2002~~of Assets ------------------------ ------ ----------------- ---------~~-------------~~ ~~Inter-~~Change ~~Average~~in ~~Inter-~~Rates ~~Average~~$ ~~Inter-~~Amount ~~Average~~$ ~~Average~~Change ~~est~~% ~~Yield(3)~~Change ~~Average~~NPV ~~est~~Ratio ~~Yield(3)~~Change ~~Average est Yield(3) (dollars in thousands)~~ ---------- ---------~~-----~~ -------- --------~~-------~~ --------- ---------~~----~~ ~~Interest-earning~~+ ~~assets:~~300 ~~Loans~~bp ~~receivable~~41,563 ~~net $426~~(43,~~345~~933) ~~7,665 7.19~~(51)% ~~511,930 9,532 7~~6.4510% ~~438,199~~- ~~23,729~~522 ~~7.22%~~bp ~~Mortgage-backed~~+ ~~securities~~200 ~~168,082~~bp 256,524 ~~6.01% 14~~(28,~~863~~972) ~~251 6.76~~(34)% ~~470,188 6,669 6~~8.0408% ~~Interest~~-~~bearing~~ ~~deposits~~354 ~~1,215~~bp 5+ ~~1.65%~~100 1bp 70,~~458~~491 (15 ~~4.12% 1~~,~~458~~005) (18)% 19.6583% ~~Investment~~- ~~securities~~179 ~~and~~bp ~~federal~~0 ~~funds~~bp ~~64,907 998 6.15% 80,938 1,387 6.~~85~~% 66~~,~~120~~496 ~~3,007 6~~11.0662% -~~------~~ ~~-----~~100 ~~-----~~bp ~~------ ----- ----- ------- ----- ----- Total interest-earning assets 660~~83,~~549~~603 11(1,~~192~~893) ~~6.78~~(2)% ~~609,189~~ 11~~,185 7~~.~~34% 652,965~~ 33~~,423 6.82~~% ~~Non~~-~~interest~~ ~~earning~~29 ~~assets~~bp ~~13,530~~- ~~13,907~~200 ~~14,274~~bp -~~------~~ -~~-----~~ -~~------~~ ~~Total~~% ~~assets $674,079 623,096 667,239 ======= ======= ======= Interest~~-~~bearing liabilities: Deposits: Passbook & NOW accounts 166,185 923 2.22~~% ~~138,579 1,128 3.26% 162,939 2,999 2.45% Money market account 17,734 113 2.55% 11,642 104 3.57% 15,089 313 2.77% Certificate accounts 233,454 2,247 3.85% 227,689 3,528 6.20% 230,489 7,330 4.24%~~ -~~------~~ ~~-----~~bp -~~----~~ ~~-------~~300 ~~-----~~bp -~~----~~ -~~------~~ -~~----~~ ~~----- Total deposits 417,373 3,283 3.15~~% ~~377,910 4,760 5.04~~-% ~~408,517 10,642 3.47% Borrowed funds 181,531 2,091 4.61% 176,886 2,808 6.35% 181,644 6,736 4.94%~~ -~~------~~ ~~-----~~bp ----- ------- ----- ----- ------- ----- ----- ~~Total interest~~-~~bearing liabilities 598,904 5,374 3.59% 554,796 7,568 5.46% 590,161 17,378 3.93% Non~~-~~interest bearing deposits 13,192 9,155 13,894 Other liabilities 10,387 12,738 12,311~~ ------- ------- ------- ~~Total liabilities 622,483 576,689 616,366 Stockholders' equity 51,596 46,407 50,873~~ ------- ------- ------- Total liabilities and stockholders' equity $674,079 623,096 667,239 ======= ======= ======= Net interest income/interest rate spread (1) 5,818 3.19% 3,617 1.89% 16,045 2.89% Net earning assets/net interest margin (2) $ 61,645 3.52% 54,393 2.37% 62,804 3.28% Ratio of interest-earning assets to interest-bearing liabilities 1.10x 1.10x 1.11x

18 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. 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 None Item 5. OTHER INFORMATION None. 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.) 19 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) 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) 20 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) 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 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 On October 15, 2002, Fidelity Bancorp, Inc. announced the date of its annual meeting of stockholders to be January 22, 2003. On November 27, 2002, Fidelity Bancorp, Inc. announced the new date for its annual meeting of stockholders to be February 12, 2003. On December 17, 2002, Fidelity Bancorp, Inc. announced that it has agreed to be acquired to MAF Bancorp, Inc. 21 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: February 10, 2003 /s/ RAYMOND S. STOLARCZYK ----------------- -------------------------- Raymond S. Stolarczyk Chairman and Chief Executive Officer Dated: February 10, 2003 /s/ ELIZABETH A. DOOLAN ----------------- -------------------------- Elizabeth A. Doolan Senior Vice President and Chief Financial Officer 22 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 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: February 10, 2003 By: /s/ Raymond S. Stolarczyk Title: Chairman and Chief Executive Officer 23 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; 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): (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: February 10, 2003 By: /s/ Elizabeth A. Doolan Title: Senior Vice President and Chief Financial Officer

Net Portfolio Value as a % Net Portfolio Value of Present Value of Assets ------------------------------ -------------------------- Changes in Rates $ Amount $ Change % Change NPV Ratio Change ---------- --------- -------- -------- --------- --------- + 300 bp 39,292 (43,299) (52)% 5.89% - 555 bp + 200 bp 53,746 (28,846) (35)% 7.85% - 360 bp + 100 bp 68,270 (14,322) (17)% 9.71% - 174 bp 0 bp 82,592 11.44% - 100 bp 92,526 9,934 12 % 12.57% + 113 bp - 200 bp -- -- -- % --% -- bp - 300 bp -- -- -- % --% -- bp ----------------------------------------------------------------- --------------

Filing Compare · FIDELITY BANCORP INC /DE/