FFFL Fidelity Bankshares

Fidelity Bankshares 2004 Net Income $22.9 Million, EPS $1.01; Q4 Net Income $5.3 Million, EPS $0.23 Assets Reach $3.47 Billion; Deposits $2.81 Billion WEST PALM BEACH, Fla., Jan. 19 /PRNewswire-FirstCall/ -- Fidelity Bankshares, Inc. (NASDAQ:FFFL), the holding company for Fidelity Federal Bank & Trust, announced today that the company's net income for the fourth quarter ended December 31, 2004 was $5.3 million or $0.24 basic and $0.23 diluted earnings per share of common stock. This compared with net income for the fourth quarter of 2003 of $3.5 million or $0.16 basic and diluted earnings per share of common stock. Per share amounts for all periods discussed reflect, retroactively, the company's three-for-two stock split distributed in the form of a stock dividend on January 14, 2005 to stockholders of record on December 31, 2004. Net income for the year ended December 31, 2004 increased by 27.8% to $22.9 million or $1.04 basic and $1.01 diluted earnings per share of common stock versus $17.9 million or $0.82 basic and $0.81 diluted earnings per share of common stock in 2003. In the fourth quarter of 2004, the company recorded losses from securities sales of $728,000 compared to losses of $2.4 million in the fourth quarter 2003. The company redeemed trust-preferred securities bearing interest at a fixed rate of 8.375% and replaced them with floating rate trust-preferred securities indexed to the three-month LIBOR rate. As a result of this redemption of trust-preferred securities, during the fourth quarter of 2004, the company wrote off $1.1 million of deferred issuance costs on these securities. Consulting, accounting and audit fees were $551,000 higher in the fourth quarter of 2004 than in the fourth quarter of 2003. Approximately $456,000 of this amount was associated with Sarbanes-Oxley compliance. Results for the fourth quarter of 2004 also reflect a $250,000 expense representing the company's portion of a lawsuit settlement related to the bankruptcy of a former customer. The company's net interest margin increased for the third consecutive quarter. At March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004, the company's net interest margin was 3.09%, 3.33%, 3.45% and 3.59%, respectively. Fidelity Bankshares Chairman and CEO Vince Elhilow said, "Our continued margin expansion was attributed in large measure to the ongoing growth of core deposits that have less interest rate sensitivity. These deposits increased during the quarter by $127.1 million. Core deposits, consisting of checking, money market and savings accounts, represented 77.5% of the company's deposits at year end while certificates of deposit accounted for 22.5% of total deposits." The company's assets increased by $422.0 million in 2004 even though two hurricanes strongly impacted its area of operations. Core deposits increased by $407.8 million during the year but were offset by declines in certificates of deposit of $53.2 million. The company announced the acquisition of First Community Bancorp, a Palm Beach County bank with $163 million in assets. Anticipated to close late in the first quarter or early in the second quarter of 2005, the acquisition is expected to be accretive in the first 12 months. On December 15, 2004, the company successfully completed a secondary stock offering of 1.15 million shares of its common stock. The offering raised $44 million of additional capital, which will be used to continue the company's expansion. The company's board of directors also approved a three-for-two stock split, in the form of a stock dividend, to stockholders of record on December 31, 2004. In addition, the board approved a cash dividend of $0.08 per share, including the shares distributed as a stock dividend, for stockholders of record on December 31, 2004. Both distributions were paid on January 14, 2005. Fidelity Bankshares, Inc., through its subsidiary Fidelity Federal Bank & Trust, has assets of $3.47 billion and deposits of $2.81 billion and operates in Florida through 43 offices in Palm Beach, Martin and St. Lucie counties. An investment profile on Fidelity Bankshares may be found on the website http://www.hawkassociates.com/fffl/profile.htm . Financial statements for the quarter are attached. For more information, contact Vince A. Elhilow, chairman, CEO and president, or Chief Financial Officer Richard D. Aldred at (561) 803-9900, or Frank Hawkins or Julie Marshall, Hawk Associates, Inc., at (305) 852-2383, e- mail: . Information about Fidelity Bankshares, Inc. can be found on the website http://www.fidelityfederal.com/ . Copies of Fidelity Bankshares press releases, SEC filings, current price quotes, stock charts and other valuable information for investors may be found on the website http://www.hawkassociates.com/ . Forward-Looking Statements: When used in this report, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the company's market area and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The company wishes to advise readers that the factors listed above could affect the company's financial performance and could cause the company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. Fidelity Bankshares, Inc. Financial Highlights (Unaudited) Three Months Three Months Year Year Ended Ended Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 FOR THE PERIOD (In Thousands) Interest income $44,525 $37,088 $164,664 $143,683 Interest expense 15,963 14,097 59,864 57,164 Net interest income 28,562 22,991 104,800 86,519 Chargeoffs 5 5 253 322 Recoveries -- 1 25 1 Gain on sale of loans 228 428 619 4,159 Gain (loss) on sale of mortgage-backed and investment securities (728) (2,364) 407 (2,364) Net income 5,340 3,487 22,897 17,921 PER COMMON SHARE Net Income: (1) Basic EPS $0.24 $0.16 $1.04 $0.82 Diluted EPS 0.23 0.16 1.01 0.81 Dividends declared (1) 0.08 0.07 0.28 0.27 Book value (1) 10.26 8.19 10.26 8.19 Stock price: (1) High 28.85 21.67 28.85 21.67 Low 24.24 17.55 20.41 11.49 Close 28.51 20.93 28.51 20.93 AVERAGE FOR THE PERIOD (In Thousands) Assets $3,491,085 $2,980,415 $3,336,797 $2,798,378 Loans receivable, net 2,600,046 2,129,779 2,424,354 2,037,993 Mortgage-backed securities 458,718 481,885 466,035 399,898 Investments 222,708 173,099 227,328 174,896 Deposits 2,810,154 2,410,633 2,665,929 2,235,207 Borrowed funds 386,959 335,177 400,498 335,832 Stockholders' equity 216,287 181,333 199,273 176,477 SELECTED RATIOS Return on average assets 0.61% 0.47% 0.69% 0.64% Return on average equity 9.88% 7.69% 11.49% 10.15% Interest rate spread on average assets for the period 3.43% 3.27% 3.33% 3.28% Net yield on average interest earning assets for the period 3.48% 3.30% 3.36% 3.31% Net yield on interest earning assets at end of period 3.59% 3.30% 3.59% 3.30% Interest rate spread at end of period 3.53% 3.29% 3.53% 3.29% Ratio of interest earning assets to interest bearing liabilities at end of period 103.16% 100.54% 103.16% 100.54% Ratio of non performing assets to total assets 0.19% 0.32% 0.19% 0.32% Ratio of valuation allowances to non performing assets 211.85% 114.12% 211.85% 114.12% Ratio of valuation allowances to loans receivable, net 0.53% 0.51% 0.53% 0.51% Stockholders' equity as a percentage of assets 7.22% 6.05% 7.22% 6.05% PERIOD END (In Thousands) Total assets $3,470,234 $3,048,222 $3,470,234 $3,048,222 Interest earning cash and investment securities 106,238 156,528 106,238 156,528 Mortgage-backed and corporate debt securities 529,640 471,228 529,640 471,228 Loans receivable, net 2,556,700 2,191,696 2,556,700 2,191,696 Federal Home Loan Bank Stock 17,399 13,322 17,399 13,322 Real estate owned and held for investment -- -- -- -- Loan loss reserve 13,628 11,119 13,628 11,119 All other assets 260,257 215,448 260,257 215,448 Borrowed funds 350,560 358,970 350,560 358,970 Common shares outstanding, net of treasury shares (1) 24,425,050 22,536,972 24,425,050 22,536,972 Stockholders' equity 250,546 184,509 250,546 184,509 (1) Reflects 3-for-2 stock split distributed in form of a stock dividend. Certain amounts in prior year have been reclassified to conform with the December 31, 2004 presentation. Fidelity Bankshares Inc. Selected Unaudited Operating Data Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 (In Thousands) (In Thousands) Selected Operating Data: Interest income $44,525 $37,088 $164,664 $143,683 Interest expense 15,963 14,097 59,864 57,164 Net interest income before provision for loan losses 28,562 22,991 104,800 86,519 Provision for loan losses 562 1,081 2,736 3,122 Net interest income after provision for loan losses 28,000 21,910 102,064 83,397 Other income Fees on deposit accounts 2,674 2,984 11,048 10,045 Fees for other banking services 2,657 2,376 11,156 9,788 All other income (23) (1,744) 2,969 2,683 Total other income 5,308 3,616 25,173 22,516 Operating expense Compensation and benefits 12,899 11,167 50,475 44,802 Occupancy and equipment 4,256 3,943 16,612 14,476 All other operating expense 7,405 4,713 22,563 17,235 Total operating expense 24,560 19,823 89,650 76,513 Income before taxes 8,748 5,703 37,587 29,400 Provision for income taxes 3,408 2,216 14,690 11,479 Net income $5,340 $3,487 $22,897 $17,921 Earnings per share: (1) Basic $.24 $.16 $1.04 $.82 Diluted $.23 $.16 $1.01 $.81 Shares used for EPS computations: (1) Basic 22,288,494 21,847,519 22,068,136 21,747,880 Diluted 23,040,191 22,423,363 22,747,417 22,063,321 (1) Reflects 3-for-2 stock split distributed in the form of a stock dividend. Certain amounts in prior year have been reclassified to conform with the December 31, 2004 presentation. Fidelity Bankshares Inc. Selected Unaudited Financial Data December 31, December 31, 2004 2003 (In Thousands) Assets Cash and interest earning deposits $149,409 $109,887 Assets available for sale 505,629 593,959 Assets held to maturity 89,167 -- Loans: Residential mortgage 1,715,636 1,509,249 Commercial mortgage 972,546 753,890 Consumer 231,333 185,450 Commercial business 125,791 131,292 Gross loans 3,045,306 2,579,881 Less: Loans in process 472,324 374,974 Deferred costs (income) 2,654 2,092 Allowance for loan losses 13,628 11,119 Loans, Net 2,556,700 2,191,696 Office properties and equipment 83,439 73,553 FHLB stock 17,399 13,322 REO -- -- All other assets 68,491 65,805 Total assets $3,470,234 $3,048,222 Liabilities and Equity Liabilities: Deposits: Checking, savings and money market accounts $2,182,020 $1,774,222 Certificates of deposit 632,650 685,879 Total deposits 2,814,670 2,460,101 Repurchase agreements 46,097 42,089 Borrowings from FHLB 250,855 264,561 Subordinated debentures 53,608 52,320 All other liabilities 54,458 44,642 Total liabilities 3,219,688 2,863,713 Stockholders' equity 250,546 184,509 Total liabilities and equity $3,470,234 $3,048,222 Certain amounts in prior year have been reclassified to conform with the December 31, 2004 presentation. DATASOURCE: Fidelity Bankshares, Inc. CONTACT: Vince A. Elhilow, chairman, CEO and president, or Richard D. Aldred, Chief Financial Officer, both of Fidelity Bankshares, Inc., +1-561-803-9900; or Investors, Frank Hawkins or Julie Marshall, both of Hawk Associates, Inc., +1-305-852-2383, or , for Fidelity Bankshares, Inc. Web site: http://www.fidelityfederal.com/ http://www.hawkassociates.com/ http://www.hawkassociates.com/fffl/profile.htm

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