FFFL Fidelity Bankshares

Fidelity Bankshares Q1 Net Income Up 20%, Net Interest Margin Increases for Fourth Consecutive Quarter Assets Reach $3.51B; Deposits $2.87B WEST PALM BEACH, Fla., April 19 /PRNewswire-FirstCall/ -- Fidelity Bankshares, Inc. (NASDAQ:FFFL) announced today that net income for the first quarter ended March 31, 2005 rose 19.8% to $6.8 million or $0.29 basic and $0.28 diluted earnings per share compared with $5.7 million or $0.26 basic and $0.25 diluted earnings per share in the first quarter of 2004. The company's net interest margin increased for the fourth consecutive quarter. At March 31, 2005, the company's net interest margin was 3.65%. This represented an improvement of 56 basis points since March 31, 2004 and was the primary reason for the company's improvement in net income. Core deposits, excluding all certificates of deposit, increased by $89.0 million from December 31, 2004 to March 31, 2005. This was offset by a decline in certificate of deposit balances of $36.1 million, resulting in a net increase in the bank's total deposits of $52.9 million. Compared to the first quarter of 2004, total deposits increased by $226.2 million. At March 31, 2005, core deposits comprised 79.2% of the bank's total deposits, while certificates of deposit comprised 20.8%. Core deposits represented 74.4% of the bank's total deposits at March, 31, 2004. The company closed on the acquisition of First Community Bancorp on April 1, 2005. The company had originally intended to close on the transaction early in the first quarter. However, due to Sarbanes/Oxley considerations, the closing was delayed until April 1. The closing added $137.7 million of deposits to Fidelity. Of these deposits, $20.4 million were certificates of deposit, while $117.3 million or 85.2% were core deposits, including $45.1 million of non-interest bearing checking deposits. The company expects to incur approximately $1 million in merger-related expenses in the second quarter related to the transaction and expects the acquisition to be accretive to net income thereafter. Fidelity Bankshares Chairman and CEO Vince Elhilow said, "This was another quarter of solid performance and, in fact, was our fourth consecutive quarter of net interest margin improvement. Although we have a cautious view regarding the magnitude and speed of the Federal Reserve's continuing upward revision of interest rates, we expect the net interest margin to benefit from our payoff of $100 million worth of Federal Home Loan bank borrowings during the second quarter. We also are delighted to welcome First Community Bancorp to Fidelity. The acquisition will not only strengthen our position in the western portion of Palm Beach County and boost our balance sheet, but it also adds some excellent people to our staff." The board approved a cash dividend of $0.08 per share for stockholders of record on March 31, 2005. This distribution was paid on April 15, 2005. In the continuing effort by the board of directors to strengthen the company's corporate governance practices and procedures, the independent members of the board have elected Donald E. Warren, M.D., as lead director. In this capacity, Warren will be available to consult with the CEO regarding concerns of the board and consult with senior executives about any concerns they may have. At March 31, 2005, Fidelity Bankshares, Inc., through its subsidiary Fidelity Federal Bank & Trust, had assets of $3.51 billion and deposits of $2.87 billion and operates in Florida through 42 offices in Palm Beach, Martin and St. Lucie counties. The acquisition of First Community added five new offices. An investment profile on Fidelity Bankshares may be found on the website http://www.hawkassociates.com/fffl/profile.htm . Financial statements for the quarter follow. 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 investor relations information 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 Three Months Months Year Ended Ended Ended March 31, March 31, December 31, 2005 2004 2004 FOR THE PERIOD (In Thousands) Interest income $45,324 $38,062 $164,664 Interest expense 15,251 14,149 59,864 Net interest income 30,073 23,913 104,800 Chargeoffs 1 67 252 Recoveries -- 4 25 Gain on sale of loans 352 105 619 Gain (loss) on sale of mortgage- backed and investment securities -- 587 407 Net income 6,816 5,687 22,897 PER COMMON SHARE Net Income (1): Basic EPS $0.29 $0.26 $1.04 Diluted EPS 0.28 0.25 1.01 Dividends declared (1) 0.08 0.07 0.28 Book value (1) 10.32 8.53 10.29 Stock price (1): High 28.85 25.63 28.85 Low 22.35 20.83 20.41 Close 22.98 24.45 28.51 AVERAGE FOR THE PERIOD (In Thousands) Assets $3,483,063 $3,127,984 $3,336,797 Loans receivable, net 2,508,282 2,227,308 2,424,354 Mortgage-backed securities 609,098 467,053 466,035 Investments 121,800 208,358 227,328 Deposits 2,819,875 2,507,224 2,665,929 Borrowed funds 347,883 357,119 400,498 Stockholders' equity 252,576 189,084 199,273 SELECTED RATIOS Return on average assets 0.78% 0.73% 0.69% Return on average equity 10.79% 12.03% 11.49% Interest rate spread on average assets for the period 3.67% 3.27% 3.33% Net yield on average interest earning assets for the period 3.71% 3.30% 3.36% Net yield on interest earning assets at end of period 3.65% 3.09% 3.59% Interest rate spread at end of period 3.60% 3.09% 3.53% Ratio of interest earning assets to interest bearing liabilities at end of period 102.36% 99.88% 103.16% Ratio of non-performing assets to total assets 0.20% 0.32% 0.19% Ratio of valuation allowances to non-performing assets 203.65% 112.97% 211.85% Ratio of valuation allowances to loans receivable, net 0.58% 0.51% 0.53% Stockholders' equity as a percentage of assets 7.18% 5.94% 7.24% PERIOD END (In Thousands) Total assets $3,509,292 $3,240,786 $3,470,539 Interest earning cash and investment securities 100,139 335,463 106,238 Mortgage-backed securities 702,039 360,961 529,640 Loans receivable, net 2,449,695 2,280,624 2,556,700 Federal Home Loan Bank Stock 16,968 13,055 17,399 Real estate owned and held for investment 7 17 -- Loan loss reserve 14,198 11,652 13,628 All other assets 240,444 250,666 260,562 Borrowed funds 325,886 352,256 350,560 Common shares outstanding, net of treasury shares (1) 24,427,375 22,605,387 24,425,050 Stockholders' equity 251,982 192,684 251,283 (1) Reflects 3 for 2 stock split distributed in form of a stock dividend paid on January 15, 2005 to stockholders of record on December 31, 2004. Certain amounts in prior year have been reclassified to conform with the March 31, 2005 presentation. Fidelity Bankshares Inc. Selected Unaudited Operating Data Three Months Ended March 31, 2005 2004 (In Thousands) Selected Operating Data: Interest income $45,324 $38,062 Interest expense 15,251 14,149 Net interest income before provision for loan losses 30,073 23,913 Provision for loan losses 572 596 Net interest income after provision for loan losses 29,501 23,317 Other income Fees on deposit accounts 2,501 2,839 Fees for other banking services 2,896 2,672 All other income 739 952 Total other income 6,136 6,463 Operating expense Compensation and benefits 13,949 11,944 Occupancy and equipment 4,788 4,010 All other operating expense 5,862 4,512 Total operating expense 24,599 20,466 Income before taxes 11,038 9,314 Provision for income taxes 4,222 3,627 Net income $6,816 $5,687 Earnings per share (1): Basic $.29 $.26 Diluted $.28 $.25 Shares used for EPS computations (1): Basic 23,838,307 21,927,343 Diluted 24,571,457 22,674,753 (1) Reflects 3 for 2 stock split distributed in the form of a stock dividend paid on January 15, 2005 to stockholders of record on December 31, 2004. Certain amounts in prior year have been reclassified to conform with the March 31, 2005 presentation. Fidelity Bankshares Inc. Selected Unaudited Financial Data March 31, December 31, 2005 2004 (In Thousands) Assets Cash and interest earning deposits $117,194 $149,409 Assets available for sale 480,730 505,629 Assets held to maturity 285,685 89,167 Loans: Residential mortgage 1,584,259 1,715,636 Commercial mortgage 976,469 972,546 Consumer 245,170 231,333 Commercial business 122,587 125,791 Gross loans 2,928,485 3,045,306 Less: Loans in process 461,838 472,324 Deferred costs (income) 2,754 2,654 Allowance for loan losses 14,198 13,628 Loans, Net 2,449,695 2,556,700 Office properties and equipment 85,300 83,439 FHLB stock 16,968 17,399 REO 7 -- All other assets 73,713 68,796 Total assets $3,509,292 $3,470,539 Liabilities and Equity Liabilities: Deposits: Checking, savings and money market accounts $2,271,016 $2,182,020 Certificates of deposit 596,553 632,650 Total deposits 2,867,569 2,814,670 Repurchase agreements 49,818 46,097 Borrowings from FHLB 222,460 250,855 Subordinated debentures 53,608 53,608 All other liabilities 63,855 54,026 Total liabilities 3,257,310 3,219,256 Stockholders' equity 251,982 251,283 Total liabilities and equity $3,509,292 $3,470,539 Certain amounts in prior year have been reclassified to conform with the March 31, 2005 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 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/fffl/profile.htm http://www.hawkassociates.com/

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