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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Transition period from ______ to __________.
Commission File No. 0-22880
Fidelity Federal Bancorp
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(Exact name of registrant as specified in its charter)
Indiana 35-1894432
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18 North West Fourth Street, PO Box 1347, Evansville, Indiana 47706-1347
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (812) 424-0921
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$1 Stated Value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
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 reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
--- ---
The aggregate market value of voting stock held by non-affiliates of the
Registrant (for purposes of such calculation, included are persons who are not
directors, executive officers, or holders of more than 10% of the registrant's
common stock) based on the average bid and asked prices of such stock at June
30, 2003 was approximately $4,749,103.
The number of shares outstanding of the registrant's common stock as of February
25, 2004 was 9,618,658 shares, with a $1 stated value.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Part of Form 10-K into which Incorporated
- --------- -----------------------------------------
Portions of the 2003 Annual Report
to Shareholders Part II
Portions of the Definitive Proxy Statement
for the Annual Meeting of Shareholders
to be held April 28, 2004. Part III
Exhibit Index is on page 19
FIDELITY FEDERAL BANCORP
Index
PART I
Page
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ITEM 1 - Business 3
ITEM 2 - Properties 13
ITEM 3 - Legal Proceedings 13
ITEM 4 - Submission of Matters to a Vote of Security Holders 13
PART II
ITEM 5 - Market for Registrant's Common Equity
and Related Shareholder Matters 13
ITEM 6 - Selected Financial Data 14
ITEM 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operation 14
ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk 14
ITEM 8 - Financial Statements and Supplementary Data 14
ITEM 9 - Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 14
ITEM 9A - Controls and Procedures
PART III
ITEM 10 - Directors and Executive Officers of the Registrant 15
ITEM 11 - Executive Compensation 15
ITEM 12 - Security Ownership of Certain Beneficial
Owners and Management and Related Shareholder
Matters 15
ITEM 13 - Certain Relationships and Related Transactions 15
ITEM 14 - Principal Accountant Fees and Services 15
PART IV
ITEM 15 - Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 16
SIGNATURES 18
2
PART I
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ITEM 1. BUSINESS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements that are subject to
risks and uncertainties and includes information about possible or assumed
future results of operations. Many possible events or factors could affect our
future financial results and performance. This could cause results or
performance to differ materially from those expressed in our forward-looking
statements. Words such as "expects", "anticipates", "may", "could", "intends",
"projects", "believes", "estimates", and variations of such words and other
similar expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in, or implied by, such forward-looking statements. Investors and
readers should not rely solely on or place undue reliance on the forward-looking
statements and should consider all uncertainties and risks discussed throughout
this report. These statements are representative only on the date hereof.
Possible events or factors that could affect our future financial results and
performance include the following: the restrictions imposed by the Supervisory
Agreement between the OTS and our savings bank subsidiary, United Fidelity Bank;
the dependence of our loan growth and funding on economic conditions, as well as
various discretionary factors, such as decisions to sell or purchase certain
loans or loan portfolios; participations of loans; retention of residential
mortgage loans; and the management of a borrower. The rate of charge-offs and
loan and letter of credit loss provisions can be affected by local, regional and
international economic and market conditions, concentrations of borrowers,
industries, products and geographic locations, the mix of the loan portfolio and
management's judgments regarding the collectibility of loans. Liquidity
requirements may change as a result of fluctuations in assets and liabilities
and off-balance sheet exposures, which will impact our capital and debt
financing needs and the mix of funding sources. Decisions to purchase, hold or
sell securities are also dependent on liquidity requirements and market
volatility, as well as on and off-balance sheet positions. Factors that may
impact interest rate risk include local, regional and international economic
conditions, levels, mix, maturities, yields or rates of assets and liabilities,
and the wholesale and retail funding sources of United Fidelity Bank. We are
also exposed to the potential of losses arising from adverse changes in market
rates and prices which can adversely impact the value of financial products,
including securities, loans, deposits, debt and derivative financial
instruments, such as futures, forwards, swaps, options, and other financial
instruments with similar characteristics.
In addition, the banking industry in general is subject to various monetary and
fiscal policies and regulations, which include those determined by the Federal
Reserve Board, the Office of the Comptroller of the Currency, the FDIC, state
regulators and the Office of Thrift Supervision, whose policies and regulations
could affect our results. Other factors that may cause actual results to differ
from the forward-looking statements include the following: competition with
other local, regional and international banks, thrifts, credit unions and other
nonbank financial institutions, such as investment banking firms, investment
advisory firms, brokerage firms, investment companies and insurance companies,
as well as other entities which offer financial services, located both within
and outside the United States, and through alternative delivery channels such as
the Internet; interest rate, market and monetary fluctuations; inflation; market
volatility; general economic conditions and economic conditions in the
geographic regions and industries in which we operate; introduction and
acceptance of new banking-related products, services and enhancements; fee
pricing strategies; mergers and acquisitions; and our ability to manage these
and other risks.
Overview
Fidelity Federal Bancorp ("Fidelity"), incorporated in 1993 under the laws of
the State of Indiana, is a registered savings and loan holding company with its
principal office in Evansville, Indiana. Fidelity's savings bank subsidiary,
United Fidelity Bank, fsb ("United"), was organized in 1914 and is a
federally-chartered stock savings bank located in Evansville, Indiana.
United is primarily engaged in the business of attracting savings deposits from
the general public, Federal Home Loan Bank advances and other wholesale funding
savings, and investing such funds in loans served by one-to-four family
residential real estate located primarily in Vanderburgh and the surrounding
counties in southern Indiana. United originates consumer loans on a direct basis
in its offices, and on a indirect basis, through automobile dealers for the
purchase of automobiles. United's indirect automobile dealer territory includes
southern Indiana, western Kentucky, southern Illinois and southeast Missouri. In
addition, United originates commercial loans secured by real estate in addition
to nonresidential real estate, other types of consumer loans, commercial and
home equity. United also invests in interest-bearing deposits in other banks,
mortgage-backed securities and other investments permitted by applicable law.
3
United conducts business from its main office in Evansville, Indiana and from
four full-service branch offices. Three of United's offices are located in
Evansville. The fourth office is located in Warrick County which is adjacent to
Vanderburgh County. United's primary retail market area consists of the Indiana
counties of Vanderburgh, Posey, Gibson and Warrick.
United's subsidiary, Village Capital Corporation, has earned fees in the past by
providing real estate mortgage banking services, and currently records income on
a rate cap/floor agreement on a credit extension to an unrelated borrower that
was completed in 1995.
United, in 2001, formed a new subsidiary, United Fidelity Finance, for purposes
of acquiring, owning, purchasing, holding, selling, transferring, pledging and
otherwise dealing with automobile loan receivables. United Fidelity Finance was
utilized during 2002 to complete an automobile loan securitization transaction
and held no assets as of December 31, 2003.
Fidelity had consolidated total assets of $175.4 million and total shareholders'
equity of $13.4 million as of December 31, 2003.
Fidelity's subsidiaries at December 31, 2003 are listed below:
Subsidiary Principal Office Year Organized Assets (in thousands)
- ---------- ---------------- -------------- ---------------------
United Fidelity Bank, fsb Evansville, IN 1914 $173,124
Subsidiaries of United Fidelity Bank, fsb:
Village Capital Corporation Evansville, IN 1994 $296
United Fidelity Finance Evansville, IN 2001 $0
Fidelity's home office is located at 18 North West Fourth Street, Evansville,
Indiana, 47708, and its telephone number is (812) 424-0921.
Personnel
As of December 31, 2003, Fidelity had 62 full-time equivalent employees. The
employees are not represented by any collective bargaining unit. Fidelity
believes its relations with its employees are good.
Fidelity maintains group life, hospital, surgical, dental, major medical, and
long-term disability programs for full-time employees. Fidelity also
participates in a defined benefit pension plan covering all eligible employees,
as well as a defined contribution 401(k) plan. As of January 1, 2004, Fidelity`s
defined benefit pension plan was amended to freeze the plan. As a result, the
annual retirement benefit payable to a participant at age 65 will not increase
after January 1, 2004.
LENDING ACTIVITIES
General
United's lending activities include the origination of permanent loans and
construction loans secured by one-to-four family homes located in United's
primary market area, commercial real estate loans secured primarily by
one-to-four family homes, consumer loans, including primarily indirect
automobile loans, direct automobile loans, and other types of consumer loans,
which include loans secured by deposit accounts, home equity lines of credit and
unsecured loans. United also originates commercial loans other than those
secured by real estate. United's net loan portfolio was approximately $100.4
million at December 31, 2003, and represented 57.2% of total assets.
4
The following table presents certain information in respect of the composition
of United's loan portfolio at the dates specified:
At December 31,
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2003 2002 2001 2000 1999
------------------- ------------------ ----------------- ------------------ ------------------
Percent Percent Percent Percent Percent
Amount of Amount of Amount of Amount of Amount of
total total total total total
loans loans loans loans loans
--------- --------- --------- -------- -------- -------- -------- --------- -------- ---------
Real estate mortgage loans
First mortgage loans
Conventional $41,754 41.27% $36,157 48.91% $43,929 41.22% $47,809 43.56% $48,845 49.37%
Construction 2,042 2.01 1,909 2.58 513 0.48 1,274 1.16 1,867 1.89
Commercial 9,144 9.04 5,645 7.64 6,114 5.74 6,873 6.26 8,576 8.67
Multi-family loans 213 0.21 3,083 4.17 3,856 3.62 4,350 3.96 3,629 3.67
Home equity loans 5,067 5.01 4,586 6.20 4,577 4.29 5,274 4.80 5,567 5.63
First mortgage real estate
loans purchased 778 0.77 627 0.85 745 0.70 1,753 1.60 1,899 1.92
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58,998 58.31 52,007 70.35 59,734 56.05 67,333 61.34 70,383 71.14
Commercial loans, other than
secured by real estate 3,138 3.10 2,210 2.99 1,848 1.73 2,305 2.10 4,154 4.20
Consumer loans 39,038 38.59 19,707 26.66 44,988 42.21 40,125 36.56 24,403 24.66
---------------------------------------------------------------------------------------------
Total loans 101,174 100.00 73,924 100.00 106,570 100.00 109,763 100.00 98,940 100.00%
Allowance for loan losses (737) (837) (2,138) (1,921) (2,021)
-------- -------- ------- ------- -------
Net loans 100,437 73,087 104,432 107,842 96,919
======== ======== ======= ======= =======
Total assets 175,390 132,290 159,659 166,466 171,457
======== ======== ======= ======= =======
Total loans to total
assets 57.7% 55.9% 66.7% 65.9% 57.7%
======== ======== ======= ======= =======
Residential Mortgage Loans
A substantial portion of United's lending activity involves the origination of
loans secured by residential real estate consisting of single-family dwelling
units. The residential mortgage loans included in United's portfolio are
primarily conventional fixed-rate loans with a maturity of up to 30 years, which
represent approximately a third of the portfolio.
United also offers adjustable-rate mortgage loans, which account for the
remainder of the portfolio. Currently, these loans generally have interest rates
that adjust (up or down) every year. Generally, these loans provide for a
maximum adjustment of 6% over the life of the loans, with a maximum adjustment
of 2% during any given year. Adjustments are based upon an index established at
the time the commitments are issued by United. The index used for most loans is
tied to the applicable United States Treasury security index. While
adjustable-rate mortgage loans assist United in maintaining a positive spread
during periods of high interest rates, it is not expected that adjustments in
interest rates on adjustable-rate mortgages will precisely match changes in
United's cost of funds. The majority of the adjustable rate mortgages originated
by United have limitations on the amount (generally 6%) and frequency of
interest rate changes.
During the year ended December 31, 2003, United originated $45.7 million of
residential loans, of which $30.2 million were five-to-30-year fixed-rate
mortgages and $15.5 million of which were adjustable-rate loans. The rates
offered on United's adjustable rate residential mortgage loans are generally
competitive with the rates offered by other thrift and financial institutions in
United's market area and are based upon United's cost of funds and rate of
return United can receive on comparable investments. Fixed-rate loans are
originated only under terms and conditions, using documentation which permit
their sale in the secondary market, and at rates which are generally competitive
with rates offered by other financial institutions in United's market areas.
During 2003, United sold most of its fixed rate mortgages in the secondary
market.
Substantially all of United's residential mortgages include so called "due on
sale" clauses, which are provisions giving United the right to declare a loan
immediately due and payable in the event that, among other things, the borrower
sells or otherwise disposes of the real property subject to the mortgage, and
the loan is not repaid.
Generally, United will not lend more than 80% of the appraisal value of
residential property which is owner occupied unless the borrower obtains private
mortgage insurance reducing the uninsured portion of the loan to 75% or less of
the appraised value. If private mortgage insurance is obtained, United's policy
is to lend up to 103% of the value of the property securing the loan.
5
Construction Loans
United offers residential construction loans both to owner-occupants and to
persons building residential property. Construction loans are usually offered
with rates of interest that remain fixed during construction. Generally,
construction loans have terms ranging from six to 12 months at fixed rates over
the construction period. Construction loan documents generally provide for a
transition to permanent loans at the end of the construction period.
Construction loans represented 2% of total loans at December 31, 2003.
Commercial Real Estate Loans
United also originates commercial real estate loans. Commercial real estate
loans increased from $5.6 million at December 31, 2002 to $9.1 million at
December 31, 2003. United resumed commercial lending activities in February of
2002 and has continued to increase the portfolio in 2003 with loans secured
primarily with one-to-four family real estate and owner-occupied commercial
property.
Generally, commercial real estate loans involve greater risk to United than do
residential loans, but usually provide for a higher rate of interest and
increased fee income than do residential loans. Commercial real estate loans
typically involve larger loan balances to single borrowers or groups of related
borrowers. In addition, the payment experience on loans secured by income
producing properties is typically dependent on the successful operation of the
related project and thus may be subject to a greater extent to adverse
conditions in the real estate market or in the economy in general.
Multifamily Loans
Multifamily lending is generally considered to involve a higher degree of risk
because the borrower typically depends upon income generated by the project to
cover operating expenses and debt service. The profitability of a project can be
affected by economic conditions, government policies and other factors beyond
the control of the borrower. Multifamily loans have decreased from $3.1 million
at December 31, 2002 to $213,000 at December 31, 2003.
Home Equity Loans
Home equity lines of credit are originated for terms of up to ten years. Such
loans are secured by a first or second mortgage on the borrower's principal
residence. Home equity loans totaled $5.1 million or 5.0% of Fidelity's total
loans outstanding at December 31, 2003.
Commercial Loans
Commercial loans totaled $3.1 million at December 31, 2003, compared to $2.2
million at December 31, 2002 and represents 3.1% of Fidelity's loan portfolio.
Commercial lending entails significant risks when compared to mortgage lending.
Such loans are subject to greater risk of default during periods of adverse
economic conditions.
Because such loans are secured by non-real estate assets, such as rolling stock,
equipment, inventory and accounts receivable, the collateral may not be
sufficient to ensure full payment of the loan in the event of a default.
Fidelity and United attempt to minimize such risks through prudent underwriting
practices.
Consumer Loans
United offers and makes various types of consumer loans, including automobile
loans, loans made to depositors on the security of their deposit accounts, and
other secured and unsecured personal loans. Consumer loans are generally made at
fixed rates of interest for terms of up to seven years. Automobile loans are
originated by United directly and indirectly in conjunction with automobile
dealers in Indiana, Illinois, Kentucky and Missouri. During 2003, of the $74.3
million in automobile originations, approximately 97.3% of the automobile loans
originated by United were originated in conjunction with automobile dealers.
When loans are originated in such manner, the dealer takes the loan application
and receives a fee if the loan is approved by United.
Consumer loans, particularly consumer loans which are unsecured or secured by
rapidly depreciating assets such as automobiles, may entail greater risk than do
residential mortgage loans. Repossessed collateral for a defaulted consumer loan
may not provide an adequate source of repayment of the outstanding loan balance.
The cost of collecting a remaining deficiency is often disproportionate to the
amount of the deficiency. In addition, consumer loan collection is dependent on
the borrowers continuing financial stability and is, therefore, more likely to
be adversely affected by job loss, divorce, illness or personal bankruptcy. The
risk of default on consumer loans increases during periods of recession, high
unemployment and other adverse economic conditions. Despite the increased risks
associated with consumer lending, consumer loans
6
typically provide a higher rate of return than real estate loans and have
shorter terms to maturity, thereby increasing profitability and assisting United
in managing the interest-rate sensitivity of its assets and liabilities.
Competition
Fidelity and United face strong direct competition for deposits, loans and
other financial-related services. United competes in Indiana, Kentucky and
Illinois with other thrifts, commercial banks, credit unions, stockbrokers,
finance companies and insurance companies. Some of these competitors are local,
while others are statewide or national. United competes for deposits principally
by offering depositors a variety of deposit programs, convenient office
locations and hours, and other services, and for loan originations primarily
through competitive interest rates and fees, efficiency and quality of service
and the variety of loan products offered. Some of the non-bank financial
institutions and financial services organizations with which United competes are
not subject to the same degree of regulation as that imposed on federal savings
banks, thrifts, or thrift-holding companies. As a result, such competitors may
have advantages over United in providing certain services. As of February 25,
2004, approximately three locally based banks (and several others with branch or
loan production offices), two thrifts, (including United) and nine credit unions
operated in the Evansville, Indiana metropolitan area. Many competitors are
substantially larger or have significantly greater capital resources than
United. Due to recently enacted legislation to allow unlimited interstate
branching, Fidelity and United may experience heightened competition from
existing competitors and other major financial institutions seeking to expand
their regional banking presence in Indiana.
SUPERVISION AND REGULATION
In addition to the general provisions discussed below, Fidelity and United are
also subject to the provisions of the Supervisory Agreement entered into with
the OTS in February 1999, as amended on November 18, 2003, which also impacts
the operations of Fidelity and United. The footnote entitled "Other
Restrictions" in the audited financial statements provides further details.
Regulation of the Company
Fidelity is a savings and loan holding company within the meaning of the Home
Owners' Loan Act of 1933 ("HOLA"). Fidelity is registered with the Office of
Thrift Supervision and is subject to OTS regulations, examinations, supervision
and reporting requirements.
The Home Owners' Loan Act generally prohibits a savings and loan holding
company, without prior approval of the OTS, from (i) acquiring control of any
other savings association or savings and loan holding company; or (ii) acquiring
more than 5% of the voting shares of a savings association or savings and loan
holding company which is not a subsidiary. Except with the prior approval of the
OTS, no director or officer of a savings and loan holding company or person
owning or controlling more than 25% of such company's stock, may acquire control
of any savings association, other than a subsidiary association, or any other
savings and loan holding company.
Fidelity operates as a unitary savings and loan holding company. There are
generally no restrictions on the activities of a unitary savings and loan
holding company. However, if the OTS determines that there is reasonable cause
to believe that an activity of a savings and loan holding company constitutes a
serious risk to the financial safety, soundness, or stability of its subsidiary
savings association, the OTS may impose restrictions it considers necessary to
address such risk, which may include a limitation on the payment of dividends.
If the savings association subsidiary of a unitary savings and loan holding
company fails to meet the Qualified Thrift Lender Test ("QTL test"), as
discussed below, then the holding company would be required to register as, and
become subject to the activities restrictions applicable to, bank holding
companies.
If Fidelity were to acquire control of another savings association it would
become a multiple savings and loan holding company. In general, the activities
of Fidelity and any of its subsidiaries (other than United or other subsidiary
savings associations) would be subject to further restrictions. The Home Owners'
Loan Act generally provides that, among other things, no multiple savings and
loan holding company or subsidiary which is not a savings association may engage
in any business activity other than (i) furnishing or performing management
services for a subsidiary savings association, (ii) conducting an insurance
agency or escrow business, (iii) holding, managing or liquidating assets owned
by or acquired from a subsidiary savings association, (iv) holding or managing
properties used or occupied by a subsidiary savings association, (v) acting as
trustee under deeds of trust, (vi) those activities previously directly
authorized by regulation as of March 5, 1987, to be engaged in by multiple
savings and loan holding companies, or (vii) those activities authorized by
regulation of the Board of Governors of the Federal Reserve System as
permissible for bank holding companies, unless the OTS by regulation prohibits
or limits such activities for savings and loan holding companies. Those
activities described in (vii) above must also be approved by the OTS prior to
being engaged in by a multiple savings and loan holding company.
No company may acquire control of an insured savings association after May 4,
1999, unless that company either (i) engages only in the financial activities
permissible for a financial holding company or (ii) is a grandfathered, unitary
savings and loan
7
holding company. Generally, any company that was a unitary savings and loan
holding company on May 4, 1999 is grandfathered. Such a company may continue to
operate under present law as long as (i) the company continues to control only
one savings institution or its successor (excluding supervisory acquisitions)
that it controlled on May 4, 1999 and (ii) each controlled institution meets the
qualified thrift lender test. Fidelity is a grandfathered unitary savings and
loan holding company.
The OTS may also approve acquisitions resulting in the formation of a multiple
savings and loan holding company which controls savings associations in more
than one state. Generally, this may only occur if the state in which the
association to be acquired is located specifically permits associations to be
acquired by state-chartered associations or savings and loan holding companies
located in the state where the acquiring entity is located or by a holding
company that controls that state-chartered savings association.
Indiana law permits federal and state savings association holding companies with
their home offices located outside of Indiana to acquire savings associations
whose home offices are located in Indiana and savings and loan holding companies
with their principal place of business in Indiana. Indiana savings and loan
holding companies also may acquire savings associations with their home offices
located outside of Indiana and savings association holding companies with their
principal place of business located outside of Indiana.
Savings Bank Regulation
General. As a federally chartered, SAIF-insured savings association, United is
subject to extensive regulation by the OTS and the FDIC. The OTS periodically
examines the books and records of United and, in conjunction with the FDIC in
certain situations, has examination and enforcement powers. This supervision and
regulation are intended primarily for the protection of depositors and federal
deposit insurance funds.
United's activities and operations are subject to a number of detailed, complex
and sometimes overlapping federal and state laws and regulations. These include
state usury and consumer credit laws, state laws relating to fiduciaries, the
Federal Truth-In-Lending Act and Regulation Z, the Federal Equal Credit
Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Community
Reinvestment Act, anti-redlining legislation and antitrust laws. The earnings of
financial institutions are also affected by general economic conditions and
prevailing interest rates, both domestic and foreign and by the monetary and
fiscal policies of the United States Government and its various agencies,
particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking industry
is often considered by Congress, state legislatures and various regulatory
agencies. It cannot be predicted with certainty whether such legislation or
administrative action will be enacted or the extent to which the banking
industry in general or Fidelity and United in particular would be affected.
Financial institutions, including United, are generally prohibited from
disclosing nonpublic personal financial information to third parties unless
customers have the opportunity to "opt out" of the disclosure and have not
chosen to "opt out" of such disclosure.
Qualified Thrift Lender Requirement. In order for United to exercise the powers
granted to federally-chartered savings associations, it must be a "qualified
thrift lender", or a "QTL". A savings association is a QTL if its qualified
thrift investments equal or exceed 65% of the savings association's portfolio
assets on a monthly basis in 9 out of every 12 months. Qualified thrift
investments generally consist of (i) various housing related loans and
investments (such as residential construction and mortgage loans, home
improvement loans, manufactured housing loans, home equity loans and
mortgage-backed securities), (ii) certain obligations of the FSLIC, the FDIC,
the FSLIC Resolution Fund and the Resolution Trust Corporation (for limited
periods), and (iii) shares of stock issued by any Federal Home Loan Bank, the
Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association. At December 31, 2003, the qualified thrift investment percentage
test for United was 91.4%.
Loans-to-One-Borrower Limitations. The Home Owners' Loan Act generally requires
savings associations to comply with the loans-to-one-borrower limitations
applicable to national banks. In general, national banks may make loans to one
borrower in amounts up to 15% of the bank's unimpaired capital and surplus, plus
an additional 10% of capital and surplus for loans secured by readily marketable
collateral. At December 31, 2003, United's loan-to-one-borrower limitation was
approximately $ 3.0 million and no loans to a single borrower exceeded that
amount, except as provided herein. Under certain conditions, a savings
association may make loans to one borrower for residential housing developments
in amounts up to 30% of the bank's unimpaired capital and surplus provided that
all loans made in reliance upon the increased lending limit do not, in the
aggregate, exceed 150% of the bank's unimpaired capital and surplus. At December
31, 2003, United had made $ 6.1 million such loans under this higher lending
limit.
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Commercial Real Property Loans. The Home Owners' Loan Act limits the aggregate
amount of commercial real estate loans that a federal savings association may
make to an amount not in excess of 400% of the savings association's capital.
Consumer Loans. The Home Owners' Loan Act limits the aggregate amount of
consumer loans that a federal savings association may make to an amount not in
excess of 35% of the savings association's total assets. Under the terms of the
Supervisory Agreement with the OTS, United must continue to comply with its
approved strategic plan which sets forth a consumer loan concentration limit of
27.5% of total assets. At December 31, 2003, Consumer loans represented 22.5% of
United's total assets.
Limitation on Capital Distributions. Under OTS regulations, a savings
association must file an application with the OTS for a capital distribution,
including cash dividends, if (i) it is not eligible for expedited treatment of
its application, (ii) the proposed capital distribution, plus all other capital
distributions of the savings association during the calendar year, exceeds its
net income for that year to date plus its retained net income for the preceding
two years, (iii) it would not be at least adequately capitalized, as defined in
the prompt corrective action regulations of the OTS, or (iv) the proposed
distribution would be in violation of any applicable law, regulation, or
agreement with the OTS. A savings association has no restrictions on capital
distributions as long as, after the distribution, it is still classified as
adequately capitalized. Although no application is required, a prior notice must
be filed with the OTS if the savings association would not be well capitalized
after the distribution, or if the savings association is a subsidiary of a
savings and loan holding company. United is currently restricted by the terms of
the Supervisory Agreement with the OTS from paying dividends.
Insurance of Deposits. The FDIC is an independent federal agency that insures
the deposits, up to $100,000 per depositor subject to aggregation rules, of
banks and thrifts and safeguards the safety and soundness of the banking and
thrift industries. The FDIC administers two separate insurance funds, the Bank
Insurance Fund (the "BIF") for commercial banks and state savings banks and the
SAIF for savings associations such as United. The FDIC is required to maintain
designated levels of reserves in each fund.
The FDIC is authorized to establish separate annual assessment rates for deposit
insurance for members of the BIF and members of the SAIF. The FDIC has
established a risk-based assessment system for both SAIF and BIF members. Under
this system, assessments vary depending on the risk the institution poses to its
deposit insurance fund. An institution's risk level is determined based on its
capital level and the FDIC's level of supervisory concern about the institution.
Annual deposit insurance premiums range between $0.00 and $0.27 per $100 of
deposits and are in effect, based on the assessment determined in accordance
with the risk-assessment system discussed above.
The Financing Corporation ("FICO") assessment to service the interest on its
bond obligations is separate from the SAIF assessment. As part of the deposit
insurance assessments, institutions pay a FICO assessment for debt service
requirements. The FICO assessment rate is subject to change on a quarterly
basis, depending on the debt service requirements. In 2003, United paid $.004
per $100 of deposits to comply with this assessment. The total deposit insurance
expense paid was $51,000, $57,000, and $248,000 for 2003, 2002, and 2001,
respectively.
Commonly Controlled Banks and Savings Associations. Subject to certain
exceptions, commonly controlled banks and savings associations must reimburse
the FDIC for any losses suffered in connection with a failed bank or savings
association affiliate. Institutions are commonly controlled if one is owned by
another or if both are owned by the same holding company.
Community Reinvestment Act. Ratings of depository institutions under the
Community Reinvestment Act of 1977 ("CRA") must be disclosed. The disclosure
includes both a four-tier descriptive rating using terms such as "outstanding,"
"satisfactory," "needs to improve," or "substantial non-compliance" and a
written evaluation of each institution's performance. United received a
satisfactory rating from the OTS in its most recent CRA examination. Also, the
Federal Housing Finance Board has adopted regulations establishing standards of
community investment and service for members of the FHLB System to meet to be
eligible for long-term advances. These regulations take into account a savings
association's CRA record and the member's record of lending to first-time
homebuyers.
Brokered Deposits. Pursuant to the FDIC regulations, well capitalized
institutions are subject to no brokered deposits limitations, while adequately
capitalized institutions are able to accept, renew or rollover brokered deposits
only (i) with a waiver from the FDIC, and (ii) subject to certain restrictions
on payment of rates. Undercapitalized institutions are not permitted to accept
brokered deposits and may not solicit deposits by offering an effective yield
that significantly exceeds the prevailing effective yields on insured deposits
of comparable maturity in the institution's normal market area or in which such
deposits are being solicited.
Enforcement. The OTS has primary enforcement responsibility over savings
associations and has the authority to bring enforcement action against all
"institution-affiliated parties," including shareholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured
9
institution. Civil penalties cover a wide range of violations and actions and
range up to $25,000 per day unless a finding of reckless disregard is made, in
which case penalties may be as high as $1 million per day. In addition,
regulators are provided with flexibility to impose enforcement action on an
institution that fails to comply with its regulatory requirements, particularly
with respect to the capital requirements. Possible enforcement action ranges
from the imposition of a capital directive to receivership, conservatorship or
the termination of deposit insurance. The FDIC has the authority to recommend to
the OTS that enforcement action to be taken with respect to a particular savings
institution. If action is not taken by the OTS, the FDIC has authority to take
such action under certain circumstances.
Standards for Safety and Soundness. The federal banking agencies have prescribed
for all insured depository institutions safety and soundness standards in the
form of guidelines, relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
risk exposure, asset quality and growth, earnings, and compensation, fees and
benefits, and safekeeping customer information. If an insured depository
institution fails to meet any of the standards described above, it will be
required to submit to the appropriate federal banking agency a plan specifying
the steps that will be taken to cure the deficiency. If an institution fails to
submit an acceptable plan or fails to implement the plan, the appropriate
federal banking agency will issue an order requiring the institution to take
immediate steps to correct a safety and soundness deficiency.
Real Estate Lending Standards. OTS regulations require savings associations to
establish and maintain written internal real estate lending policies. Each
association's lending policies must be consistent with safe and sound banking
practices and appropriate to the size of the association and the nature and
scope of its operations. The policies must establish loan portfolio
diversification standards; establish prudent underwriting standards, including
loan-to-value limits that are clear and measurable; establish loan
administration procedures for the association's real estate portfolio; and
establish documentation, approval, and reporting requirements to monitor
compliance with the association's real estate lending policies. The
association's written real estate lending policies must be reviewed and approved
by the association's Board of Directors at least annually. Further, each
association is expected to monitor conditions in its real estate market to
ensure that its lending policies continue to be appropriate for current market
conditions.
Prompt Corrective Regulatory Action. The Federal Deposit Insurance Act
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, the banking regulators are
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
capitalization.
Under the OTS prompt corrective action regulation, generally, a savings
association that has a total risk-based capital of less than 8.0% or a tier 1
risk-based capital ratio or leverage ratio of less than 4.0% is considered to be
undercapitalized. A savings association that has a total risk-based capital of
less than 6.0%, a tier 1 risk-based capital ratio of less than 3%, or a leverage
ratio that is less than 3.0% is considered to be "significantly
undercapitalized" and a savings association that has a tangible capital to
assets ratio equal to or less than 2% is deemed to be "critically
undercapitalized." Generally, a capital restoration plan must be filed with the
OTS within 45 days of the date an association receives notice that it is
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized". In addition, numerous mandatory supervisory actions become
immediately applicable to the associations, including, but not limited to,
restrictions on growth, investment activities, capital distributions, and
affiliate transactions. The OTS could also take any one of a number of
discretionary supervisory actions, including the issuance of a capital directive
and the replacement of senior executive officers and directors.
Capital Requirements. The OTS has adopted capital standards under which savings
associations must maintain (i) "core capital" in an amount not less than 3% of
total adjusted assets for a savings association with a composite rating of 1,
and not less than 4% for all other savings associations, (ii) "tangible capital"
in an amount not less than 1.5% of total adjusted assets, and (iii) a level of
risk-based capital equal to 8.0% of risk-weighted assets.
Under OTS regulations "core capital" includes common shareholders' equity,
noncumulative perpetual preferred stock and related surplus, and minority
interests in the equity accounts of consolidated subsidiaries, less
nonqualifying intangible assets. In determining compliance with the capital
standards, a savings association must deduct from capital its entire investment
in and loans to any subsidiary engaged in activities not permissible for a
national bank, other than subsidiaries (i) engaged in such non-permissible
activities solely as agent for their customers; (ii) engaged in mortgage banking
activities; or (iii) that are themselves savings associations or companies, the
only investment of which is another savings association, acquired prior to May
1, 1989.
Capital requirements higher than the generally applicable minimum requirement
may be established for a particular savings association if the OTS determines
that the association's capital was or may become inadequate in view of its
particular circumstances. Individual minimum capital requirements may be
appropriate where the savings association is receiving special supervisory
attention, has a high degree of exposure to interest rate risk, losses resulting
in capital inadequacy, poor liquidity or cash flow, or poses other safety or
soundness concerns.
10
In determining compliance with the risk-based capital requirements, a savings
association must determine its interest rate risk and, if such risk exceeds a
certain level, it must deduct an interest rate risk component in calculating its
total capital for purposes of determining whether it meets its risk-based
capital requirements. An association's interest rate risk (IRR) is measured by
the decline in the net portfolio value resulting from a 200 basis point increase
or decrease in market interest rates. If an association's measured IRR exposure
exceeds 2%, it must then deduct an IRR component from total capital for
determining its risk-based capital requirement.
The Savings Bank's Subsidiaries. The OTS regulations permit federal savings
associations to invest in the capital stock, obligations or specified types of
securities of subsidiaries known as "service corporations" and as "operating
subsidiaries". Operating subsidiaries may engage in any activity in which the
savings association may engage. There is no limit as to the amount of the
investment in an operating subsidiary. A service corporation may engage in
certain specified activities. The savings association may make loans to a
service corporation and joint ventures in which a service corporation is a
participant in an aggregate amount not exceeding 3% of an association's assets,
provided any investment over 2% is used for specified community or inner-city
development purposes. The FDIC may, after consultation with the OTS, prohibit
specific activities if it determines such activities pose a serious threat to
SAIF.
Assessments. Savings associations are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS. The general assessment
is computed upon the savings association's total assets, condition, and
complexity of its operations, including consolidated subsidiaries, as reported
in United's latest quarterly Thrift Financial Report. United's total assessment
for the year ended December 31, 2003 was $62,000.
Acquisitions and Branching
The Bank Holding Company Act specifically authorizes a bank holding company,
upon receipt of appropriate regulatory approvals, to acquire control of any
savings association or holding company thereof wherever located. Similarly, a
savings and loan holding company may acquire control of a bank. Moreover,
federal savings associations may acquire or be acquired by any insured
depository institution. Regulations promulgated by the Federal Reserve Board
restrict the branching authority of savings associations acquired by bank
holding companies.
The OTS has adopted regulations which permit nationwide branching to the extent
permitted by federal statute. Federal statutes permit federal savings
associations to branch outside of their home state if the association meets the
domestic building and loan test in Section 7701(a)(19) of the Internal Revenue
Code or the asset composition test of Section7701(c) of the Internal Revenue
Code. Branching that would result in the formation of a multiple savings and
loan holding company controlling savings associations in more than one state is
permitted if the law of the state in which the savings association to be
acquired is located specifically authorizes acquisitions of its state-chartered
associations by state-chartered associations or their holding companies in the
state where the acquiring association or holding company is located. Moreover,
Indiana banks and savings associations are permitted to acquire other Indiana
banks and savings associations and to establish branches throughout Indiana.
Transactions with Affiliates
Pursuant to the Home Owners' Loan Act, transactions engaged in by a savings
association or one of its subsidiaries with affiliates of the savings
association generally are subject to the affiliate transaction restrictions
contained in Sections 23A and 23B of the Federal Reserve Act and Regulation W in
the same manner and to the same extent as such restrictions now apply to
transactions engaged in by a member bank or one of its subsidiaries with
affiliates of the member bank. Section 23A of the Federal Reserve Act imposes
both quantitative and qualitative restrictions on transactions engaged in by a
member bank or one of its subsidiaries with an affiliate, while Section 23B of
the Federal Reserve Act requires, among other things, that all transactions with
affiliates be on terms substantially the same, and at least as favorable to the
member bank or its subsidiary, as the terms that would apply to or would be
offered in a comparable transaction with an unaffiliated party. Such
restrictions would be applicable to any transactions engaged in by United and
any of its affiliates, including any bank controlled by Pedcor Bancorp or any of
its affiliates. Loans to executive officers, directors, and principal
shareholders must comply with Section 22(h) of the Federal Reserve Act, which
requires these loans be made on terms substantially the same as offered in
comparable transactions to other persons. United was in compliance with these
rules at December 31, 2003. In connection with the Supervisory Agreement, United
must obtain prior written approval from the OTS before selling any asset to an
affiliated party. United shall not engage in any transactions with or distribute
any funds to (including, but not limited to covered transactions) Fidelity or
its subsidiaries, without the prior written approval of the OTS.
11
Federal Home Loan Bank System
United is a member of the Federal Home Loan Bank of Indianapolis. The Federal
Home Loan Bank System consists of 12 regional Federal Home Loan Banks ("FHLBs"),
each subject to supervision and regulation by the Federal Housing Finance Board
(the "FHFB"). The FHLBs provide a central credit facility for members. As a
member of the FHLB of Indianapolis, United is required to own shares of capital
stock in the FHLB in an amount at least equal to 1% of the aggregate principal
amount of its unpaid residential mortgage loans, home purchase contracts, and
similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB, whichever is greater. As of December 31, 2003,
United was in compliance with this requirement.
Sarbanes-Oxley Act
On July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley
Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act implements a
broad range of corporate governance and accounting measures for public companies
designed to promote honesty and transparency in corporate America and better
protect investors from corporate and accounting scandals that have occurred
during the previous years. The Sarbanes-Oxley Act's principal legislation
includes:
o the creation of an independent accounting oversight board;
o auditor independence provisions which restrict non-audit services that
accountants may provide to their audit clients;
o additional corporate governance and responsibility measures, including
the requirement that the chief executive officer and chief financial
officer certify financial statements;
o the forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer's securities by directors and senior
officers in the twelve month period following initial publication of
any financial statements that later require restatement;
o an increase in the oversight of, and enhancement of certain
requirements relating to audit committees of public companies and how
they interact with the company's independent auditors;
o requirements that audit committee members must be independent and are
absolutely barred from accepting consulting, advisory or other
compensatory fees from the issuer;
o requirements that companies disclose whether at least one member of the
committee is a "financial expert" (as such term will be defined by the
Securities and Exchange Commission) and if not, why not;
o expanded disclosure requirements for corporate insiders, including
accelerated reporting of stock transactions by insiders and a
prohibition on insider trading during pension blackout periods;
o a prohibition on personal loans to directors and officers, except
certain loans made by insured financial institutions;
o disclosure of a code of ethics and filing a Form 8-K for a change or
waiver of such code;
o mandatory disclosure by analysts of potential conflicts of interest;
and
o a range of enhanced penalties for fraud and other violations.
We anticipate that we will incur additional expense in complying with the
provisions of the Sarbanes-Oxley Act and the resulting regulations. The
financial impact on our results of operations or financial condition is not yet
determinable.
Fidelity's Board of Directors has discussed the desirability of taking steps to
delist its shares of common stock from NASDAQ and to terminate its reporting
obligations under the Securities Exchange Act of 1934. At this time, the Board
has come to no conclusions regarding this matter and is not able to predict when
it may do so. The Board has engaged in an analysis of this possibility due to
the costs incurred in connection with new requirements imposed by the
Sarbanes-Oxley Act.
12
USA Patriot Act
On October 26, 2001, President George W. Bush signed the United and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (the "USA Patriot Act"). The USA Patriot Act is
intended to strengthen the ability of U. S. Law Enforcement to combat terrorism
on a variety of fronts. The potential impact of the USA Patriot Act on financial
institutions is significant and wide-ranging. The USA Patriot Act contains
sweeping anti-money laundering and financial transparency laws and requires
financial institutions to implement additional policies and procedures with
respect to, or additional measures designed to address, any or all of the
following matters, among others: money laundering, suspicious activities and
currency transaction reporting; and currency crimes.
In addition to the general provisions discussed below, Fidelity and United are
also subject to the provisions of the Supervisory Agreement entered into with
the OTS in February 1999, as amended on November 18, 2003, which also impacts
the operations of Fidelity and the United. The footnote entitled "Other
Restrictions" in the audited financial statement provides further details.
ITEM 2. PROPERTIES
Fidelity, through United, currently operates its business from its home office
in Evansville and from four additional locations in Vanderburgh and Warrick
Counties, Indiana. The following table sets forth the location of Fidelity's
savings bank offices, which are all owned by United, as well as certain
additional information relating to these offices as of December 31, 2003.
- -------------------------------------------------------------------------------------------
Office Location Year Facility Opened Net Book Value
- -------------------------------------------------------------------------------------------
Home Office 1974 $852,000
18 NW Fourth Street
Evansville, IN 47708
- -------------------------------------------------------------------------------------------
Eastside Branch 1997 1,604,000
700 S. Green River Rd
Evansville, IN 47715
- -------------------------------------------------------------------------------------------
Northside Branch 1976 75,000
4441 First Avenue
Evansville, IN 47710
- -------------------------------------------------------------------------------------------
Westside Branch 1979 76,000
4801 W. Lloyd Expressway
Evansville, IN 47712
- -------------------------------------------------------------------------------------------
Bell Oaks Branch 2001 467,000
8533 Bell Oaks Drive
Newburgh, IN 47630
- -------------------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
- -------
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the Registrant's business, to which the Registrant or
its subsidiaries is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------
No matter was submitted to a vote of the Registrant's security holders during
the fourth quarter of the year ended December 31, 2003.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS
- ------ MATTERS
The discussion concerning the market for the registrant's common equity and
related shareholder matters appears under the heading "Market Summary" included
in Fidelity's 2003 Annual Report to Shareholders on page 4 and is incorporated
herein by reference. Cash dividends by quarter for the current and previous year
appear under the heading "Quarterly Results of Operations" included in
Fidelity's 2003 Annual Report to Shareholders on page 30 and is incorporated
herein by reference. As of February 25, 2004, Fidelity had 429 shareholders of
record.
13
ITEM 6. SELECTED FINANCIAL DATA
- -------
Selected Financial Data and other data included in Fidelity's 2003 Annual Report
to Shareholders on page 4 are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ RESULTS OF OPERATION
Management's Discussion and Analysis of Financial Condition and Results of
Operation included in Fidelity's 2003 Annual Report to Shareholders on pages 5
through 30 is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------
The discussion concerning quantitative and qualitative disclosures about market
risk appears under the heading "Asset/Liability Management" included in
Fidelity's 2003 Annual Report to Shareholders on pages 21and 22 and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------
Financial Statements and Supplementary Data included in Fidelity's 2003 Annual
Report to Shareholders on pages 31 through 67 are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ FINANCIAL DISCLOSURES
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
- --------
(a) Evaluation of Disclosure Controls and Procedures. Fidelity's Principal
Executive Officer and Principal Financial Officer have concluded that
Fidelity's disclosure controls and procedures (as defined in Rule
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended), based on their evaluation of these controls and procedures as
of the end of the period covered by this Form 10-K, are effective.
(b) Changes in Internal Controls. There have been no significant changes in
Fidelity's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the
evaluation thereof, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Limitations of the Effectiveness of Controls. Fidelity's management, including
its Principal Executive Officer and Principal Financial Officer, does not expect
that Fidelity's disclosure controls and procedures and other internal controls
will prevent all error and fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within Fidelity have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control.
The design of any system of controls is also based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote; over time, control may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and may not be detected.
14
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------
The information to be provided under this Item is incorporated by reference to
the information under the heading "Information Concerning Nominees, Directors
and Executive Officers" on pages 3 through 5 up to, but exclusive of, the
information presented under the caption "Certain Transactions and Other Matters
Between Management and Fidelity", under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 14, (up to, but exclusive of, the
information presented under the caption "Item 2. Ratification of Independent
Auditors of Fidelity") and under the caption "Additional Information" on page
16, (up to, but exclusive of, the information presented under the caption "Other
Matters") of Fidelity's Definitive Proxy Statement dated March 26, 2004, as
filed with the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
- --------
The information to be provided under this Item is incorporated by reference to
the information under the heading "Executive Compensation and Other Information"
on pages 7 through 12 of Fidelity's Definitive Proxy Statement dated March 26,
2004, as filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
- ------- RELATED SHAREHOLDER MATTERS
The information to be provided under this Item is incorporated by reference to
the information under the heading "Beneficial Ownership" on page 2 and under the
heading "Security Ownership of Management" on pages 13 and 14 (up to, but
exclusive of, the information presented under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance") of Fidelity's Definitive Proxy
Statement dated March 26, 2004, as filed with the Securities and Exchange
Commission pursuant to regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------
The information to be provided under this Item is incorporated by reference to
the information under the heading "Certain Transactions and Other Matters
Between Management and Fidelity" on page 5 (up to, but exclusive of, the
information presented under the caption "Directors Independence") of Fidelity's
Definitive Proxy Statement dated March 26, 2004, as filed with the Securities
and Exchange Commission pursuant to Regulation 14A.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
- --------
The information to be provided under this Item is incorporated by reference to
the information under the heading "Fees to Independent Auditor For Fiscal Years
2003 and 2002" on pages 15 and 16, (up to, but exclusive of the information
presented under the caption "Shareholder Proposals") of Fidelity's Definitive
Proxy Statement dated March 26, 2004, as filed with the Securities and Exchange
Commission pursuant to Regulation 14A.
15
PART IV
-------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------
(a) (1) The following consolidated financial statements are incorporated
by reference in Item 8:
Page Numbers in
Annual Report
-------------
Independent Auditor's Report on
Consolidated Financial Statements 31
Consolidated Balance Sheet
December 31, 2003 and 2002 32
Consolidated Statement of Income-
For the years ended December 31, 2003, 2002 and 2001 33-34
Consolidated Statement of Changes in Shareholders' Equity -
For the years ended December 31, 2003, 2002 and 2001 35
Consolidated Statement of Cash Flows -
For the years ended December 31, 2003, 2002 and 2001 36-37
Notes to consolidated Financial Statements 38-67
(2) See response to Item 15(a)(1). All other financial statement
schedules have been omitted because they are not applicable, or the required
information is shown in the consolidated financial statements or notes thereto.
(3) List of Exhibits
Exhibit Number Description
-------------- -----------
3(i)(a) Articles of Incorporation of Fidelity, filed as exhibit
3(a) to Fidelity's 1995 Annual Report on Form 10-K, are
incorporated herein by reference.
3(i)(b) Articles of Amendment of the Articles of
Incorporation of Fidelity, filed as exhibit 4.1 with
Fidelity's Registration Statement on Form S-3 (file
no. 333-53668), are incorporated herein by reference.
3(ii) By-Laws of Fidelity, filed as exhibit 4.2 with
Fidelity's Registration Statement on Form S-3 (file
no. 333-53668), are incorporated herein by reference.
10(a) The 1993 Director's Stock Option Plan, filed as
exhibit 10(d) to Fidelity's 1995 Annual Report on
Form 10-K, is incorporated herein by reference.
10(b) The 1995 Key Employee's Stock Option Plan, filed as
exhibit 10(c) to Fidelity's 1996 Annual Report on
Form 10-K, is incorporated herein by reference.
10(c) Employment Agreement between Fidelity and Donald R.
Neel, filed as exhibit 10(d) to Fidelity's 2000
Annual Report on Form 10-K, is incorporated herein by
reference.
13 2003 Annual Report to Shareholders (Except for the
pages and information expressly incorporated by
reference in this Form 10-K, The Annual Report to
Shareholders is provided solely for the information of
the Securities and Exchange Commission and is not
deemed "filed" as part of this Form 10-K)
14 Code of Ethics for Senior Financial Officers of
Fidelity Federal Bancorp
21 Subsidiaries of Fidelity Federal Bancorp
31(a) Certification for Annual Report on Form 10-K by
Principal Executive Officer
31(b) Certification for Annual Report on Form 10-K by
Principal Financial Officer
16
32(a) Certification of Principal Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32(b) Certification of Principal Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
Fidelity Federal Bancorp filed the following Forms 8-K:
Form 8-K filed on October 30, 2003 announcing Fidelity's third quarter
earnings
Form 8-K filed on January 23, 2004 announcing Fidelity's fourth quarter
earnings
Form 8-K filed on January 29, 2004 announcing the appointment of a new
director
(c) Exhibits
The response to this portion of Item 15 is submitted as a separate
section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 15 is submitted as a separate
section of this report.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 29 day of March,
2004.
FIDELITY FEDERAL BANCORP
(Registrant)
By /S/ DONALD R. NEEL
---------------------------------
Donald R. Neel
President and CEO
(Principal Executive Officer)
By /S/ MARK A. ISAAC
---------------------------------
Mark A. Isaac, Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 29, 2004, by the following persons on behalf of
the registrant and in the capacities indicated.
By /S/ JACK CUNNINGHAM
--------------------------------------
Jack Cunningham,
Chairman
By /S/ BRUCE A. CORDINGLEY
--------------------------------------
Bruce A. Cordingley, Director
By /S/ WILLIAM R. BAUGH
--------------------------------------
William R. Baugh, Director
By /S/ PAUL E. BECKER
--------------------------------------
Paul E. Becker, Director
By /S/ MICHAEL A. ELLIOTT
--------------------------------------
Michael A. Elliott, Director
By /S/ DONALD R. NEEL
--------------------------------------
Donald R. Neel, Director
By /S/ GERALD K. PEDIGO
--------------------------------------
Gerald K. Pedigo, Director
By /S/ BARRY A. SCHNAKENBURG
--------------------------------------
Barry A. Schnakenburg, Director
By /S/ PHILLIP J. STOFFREGEN
--------------------------------------
Phillip J. Stoffregen, Director
18
INDEX TO EXHIBITS
-----------------
Page Exhibit Number Exhibit
- --------------------------------------------------------------------------------
13 2003 Annual Report to Shareholders
14 Code of Ethics for Senior Financial Officers of
Fidelity Federal Bancorp
21 Subsidiaries of Fidelity Federal Bancorp
31(a) Certification for Annual Report on Form 10-K by
Principal Executive Officer
31(b) Certification for Annual Report on Form 10-K by
Principal Financial Officer
32(a) Certification of Principal Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32(b) Certification of Principal Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
19