FFFL Fidelity Bankshares

Fidelity Bankshares Second Quarter Net Income Up 52%, Net Interest Rate Spread Widens for Fifth Consecutive Quarter WEST PALM BEACH, Fla., July 18 /PRNewswire-FirstCall/ -- Fidelity Bankshares, Inc. (NASDAQ:FFFL), the holding company for Fidelity Federal Bank & Trust, announced today that net income for the second quarter ended June 30, 2005 rose 52% to $8.6 million or $0.35 basic and diluted earnings per share, compared with $5.7 million or $0.26 basic and $0.25 diluted earnings per share for the quarter ended June 30, 2004. Net income for the six months ended June 30, 2005 rose 36% to $15.5 million or $0.64 basic and $0.63 diluted earnings per share, compared to $11.4 million or $0.52 basic and $0.50 diluted earnings per share for the six months ended June 30, 2004. The company's net interest rate spread increased for the fifth consecutive quarter. On June 30, 2005, the company's net interest rate spread was 3.63%. This represented an improvement of 54 basis points since March 31, 2004 and was the primary reason for the company's improvement in net income for the quarter and six months ended June 30, 2005, compared to the quarter and six months ended June 30, 2004. Core deposits, excluding all certificates of deposit, increased by $152.6 million in the second quarter and $241.6 million for the six months ended June 30, 2005. Of these increases, $117.2 million was attributable to the acquisition of First Community Bancorp, which closed on April 1, 2005. Certificate of deposit balances increased by $177.6 million for the quarter and $141.5 million for the first six months of 2005. Compared to the first quarter, total deposits increased by $330.2 million, of which $137.7 million resulted from the acquisition of First Community. At June 30, 2005, core deposits comprised 75.8% of the bank's deposits, while certificates of deposit comprised 24.2%. Through June 30, 2005, the company's loan production increased by 9.3%, compared to the same six-month period in 2004. Consumer loan production, which includes home equity lines of credit, with rates tied to the prime rate, increased by 19.6% for the six months ended June 30, 2005, compared to the six months ended June 30, 2004. Fidelity Bankshares Chairman and CEO Vince A. Elhilow said, "We are pleased with the financial performance of First Community Bancorp during its initial quarter as part of Fidelity. As anticipated, the addition of First Community strengthened our balance sheet and our position in the western part of Palm Beach County. We had expected to incur as much as $1 million in expenses relating to the acquisition and integration of First Community. These expenses, largely severance, retention and stay bonuses for employees of First Community, did not materialize as that company, prior to closing, reduced employees through attrition, with the result that Fidelity absorbed all remaining employees. All other acquisition costs were minimal." The board approved a cash dividend of $0.08 per share for stockholders of record on June 30, 2005. This distribution was paid on July 15, 2005. On June 30, 2005, Fidelity Bankshares, Inc., through its subsidiary Fidelity Federal Bank & Trust, had assets of $3.8 billion and deposits of $3.2 billion and operates in Florida through 47 offices in Palm Beach, Martin and St. Lucie counties. An investment profile on Fidelity Bankshares may be found on http://www.hawkassociates.com/fffl/profile.htm . Financial statements for the quarter follow. For more information, contact Chairman and CEO Vince A. Elhilow or Chief Financial Officer Richard D. Aldred at (561) 803-9900, or Frank Hawkins or Julie Marshall, Hawk Associates, Inc., at (305) 451-1888, e-mail: . Information about Fidelity Bankshares, Inc. can be found on 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 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 Ended Ended June 30, June 30, 2005 2004 FOR THE PERIOD (In Thousands) Interest income $50,076 $39,091 Interest expense 17,344 14,506 Net interest income 32,732 24,585 Chargeoffs 96 32 Recoveries -- -- Gain on sale of loans 121 151 Gain (loss) on sale of mortgage- backed and investment securities -- 467 Net income 8,647 5,688 PER COMMON SHARE Net Income: (1) Basic EPS $0.35 $0.26 Diluted EPS 0.35 0.25 Dividends declared (1) 0.08 0.07 Book value (1) 10.96 8.33 Stock price: (1) High 26.98 24.73 Low 22.27 20.41 Close 26.52 23.63 AVERAGE FOR THE PERIOD (In Thousands) Assets $3,685,764 $3,317,404 Loans receivable, net 2,609,769 2,365,533 Mortgage-backed securities 692,585 439,250 Investments 113,669 268,536 Deposits 3,080,406 2,654,778 Borrowed funds 292,771 395,366 Stockholders' equity 267,856 191,213 SELECTED RATIOS Return on average assets 0.94% 0.69% Return on average equity 12.91% 11.90% Interest rate spread on average assets for the period 3.81% 3.19% Net yield on average interest earning assets for the period 3.83% 3.20% Net yield on interest earning assets at end of period 3.64% 3.33% Interest rate spread at end of period 3.63% 3.32% Ratio of interest earning assets to interest bearing liabilities at end of period 100.63% 100.41% Ratio of non performing assets to total assets 0.16% 0.31% Ratio of valuation allowances to non performing assets 258.10% 117.09% Ratio of valuation allowances to loans receivable, net 0.57% 0.51% Stockholders' equity as a percentage of assets 7.24% 5.56% PERIOD END (In Thousands) Total assets $3,797,106 $3,402,619 Interest earning cash and investment securities 70,024 192,278 Mortgage-backed securities 673,226 503,254 Loans receivable, net 2,718,696 2,448,022 Federal Home Loan Bank Stock 12,847 19,905 Real estate owned and held for investment 7 7 Loan loss reserve 15,519 12,436 All other assets 322,306 239,153 Borrowed funds 255,129 474,650 Common shares outstanding, net of treasury shares (1) 25,097,604 22,695,039 Stockholders' equity 275,019 189,113 Six Months Six Months Year Ended Ended Ended June 30, June 30, December 31, 2005 2004 2004 FOR THE PERIOD (In Thousands) Interest income $95,400 $77,153 $164,664 Interest expense 32,595 28,655 59,864 Net interest income 62,805 48,498 104,800 Chargeoffs 97 99 252 Recoveries -- 25 25 Gain on sale of loans 473 257 619 Gain (loss) on sale of mortgage- backed and investment securities -- 1,053 407 Net income 15,463 11,375 22,897 PER COMMON SHARE Net Income: (1) Basic EPS $0.64 $0.52 $1.04 Diluted EPS 0.63 0.50 1.01 Dividends declared (1) 0.16 0.13 0.28 Book value (1) 10.96 8.33 10.29 Stock price: (1) High 28.85 25.63 28.85 Low 22.27 20.41 20.41 Close 26.52 23.63 28.51 AVERAGE FOR THE PERIOD (In Thousands) Assets $3,595,145 $3,220,109 $3,336,797 Loans receivable, net 2,559,305 2,296,421 2,424,354 Mortgage-backed securities 651,071 453,152 466,035 Investments 117,712 238,446 227,328 Deposits 2,950,947 2,581,122 2,665,929 Borrowed funds 320,175 376,242 400,498 Stockholders' equity 261,392 189,786 199,273 SELECTED RATIOS Return on average assets 0.86% 0.71% 0.69% Return on average equity 11.83% 11.99% 11.49% Interest rate spread on average assets for the period 3.74% 3.23% 3.33% Net yield on average interest earning assets for the period 3.77% 3.25% 3.36% Net yield on interest earning assets at end of period 3.64% 3.33% 3.59% Interest rate spread at end of period 3.63% 3.32% 3.53% Ratio of interest earning assets to interest bearing liabilities at end of period 100.63% 100.41% 100.12% Ratio of non performing assets to total assets 0.16% 0.31% 0.19% Ratio of valuation allowances to non performing assets 258.10% 117.09% 211.85% Ratio of valuation allowances to loans receivable, net 0.57% 0.51% 0.53% Stockholders' equity as a percentage of assets 7.24% 5.56% 7.24% PERIOD END (In Thousands) Total assets $3,797,106 $3,402,619 $3,470,539 Interest earning cash and investment securities 70,024 192,278 106,238 Mortgage-backed securities 673,226 503,254 529,640 Loans receivable, net 2,718,696 2,448,022 2,556,700 Federal Home Loan Bank Stock 12,847 19,905 17,399 Real estate owned and held for investment 7 7 -- Loan loss reserve 15,519 12,436 13,628 All other assets 322,306 239,153 260,562 Borrowed funds 255,129 474,650 350,560 Common shares outstanding, net of treasury shares (1) 25,097,604 22,695,039 24,425,050 Stockholders' equity 275,019 189,113 251,283 (1) Reflects 3 for 2 stock split distributed in form of a stock dividend paid on January 14, 2005 to stockholders of record on December 31, 2004. Certain amounts in prior year have been reclassified to conform with the June 30, 2005 presentation. Fidelity Bankshares Inc. Selected Unaudited Operating Data Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 (In Thousands) (In Thousands) Selected Operating Data: Interest income $50,076 $39,091 $95,400 $77,153 Interest expense 17,344 14,506 32,595 28,655 Net interest income before provision for loan losses 32,732 24,585 62,805 48,498 Provision for loan losses 422 794 994 1,391 Net interest income after provision for loan losses 32,310 23,791 61,811 47,107 Other income Fees on deposit accounts 2,799 2,795 5,300 5,634 Fees for other banking services 3,226 2,997 6,122 5,669 Gain on sale of loans 121 151 473 257 Gain on sale of securities -- 467 -- 1,053 All other income 457 747 844 1,007 Total other income 6,603 7,157 12,739 13,620 Operating expense Compensation and benefits 14,215 12,521 28,164 24,466 Occupancy and equipment 5,029 3,943 9,817 7,953 All other operating expense 5,735 5,083 11,597 9,594 Total operating expense 24,979 21,547 49,578 42,013 Income before taxes 13,934 9,401 24,972 18,714 Provision for income taxes 5,287 3,713 9,509 7,339 Net income $8,647 $5,688 $15,463 $11,375 Earnings per share: (1) Basic $.35 $.26 $.64 $.52 Diluted $.35 $.25 $.63 $.50 Shares used for EPS computations:(1) Basic 24,436,475 21,995,924 24,139,048 21,958,122 Diluted 24,995,395 22,714,866 24,716,758 22,699,404 (1) Reflects 3 for 2 stock split distributed in the form of a stock dividend paid on January 14, 2005 to stockholders of record on December 31, 2004. Certain amounts in prior year have been reclassified to conform with the June 30, 2005 presentation. Fidelity Bankshares Inc. Selected Unaudited Financial Data June 30, December 31, 2005 2004 (In Thousands) Assets Cash and interest earning deposits $139,816 $149,409 Assets available for sale 467,764 505,629 Assets held to maturity 270,278 89,167 Loans: Residential mortgage 1,715,212 1,715,636 Commercial mortgage 1,102,415 972,546 Consumer 275,010 231,333 Commercial business 133,327 125,791 Gross loans 3,225,964 3,045,306 Less: Loans in process 488,688 472,324 Deferred costs (income) 3,061 2,654 Allowance for loan losses 15,519 13,628 Loans, Net 2,718,696 2,556,700 Office properties and equipment 91,543 83,439 FHLB stock 12,847 17,399 REO 7 -- All other assets 96,155 68,796 Total assets $3,797,106 $3,470,539 Liabilities and Equity Liabilities: Deposits: Checking, savings and money market accounts $2,423,638 $2,182,020 Certificates of deposit 774,146 632,650 Total deposits 3,197,784 2,814,670 Repurchase agreements 77,358 46,097 Borrowings from FHLB 124,163 250,855 Subordinated debentures 53,608 53,608 All other liabilities 69,174 54,026 Total liabilities 3,522,087 3,219,256 Stockholders' equity 275,019 251,283 Total liabilities and equity $3,797,106 $3,470,539 Certain amounts in prior year have been reclassified to conform with the June 30, 2005 presentation. DATASOURCE: Fidelity Bankshares, Inc. CONTACT: Vince A. Elhilow, Chairman and CEO, or Richard D. Aldred, Chief Financial Officer, both of Fidelity Bankshares, +1-561-803-9900; or Frank Hawkins or Julie Marshall, both of Hawk Associates, Inc., +1-305-451-1888, or , for Fidelity Bankshares Web site: http://www.fidelityfederal.com/ http://www.hawkassociates.com/fffl/profile.htm http://www.hawkassociates.com/

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