FFFL Fidelity Bankshares

Company Reports Assets of $4.2B; Deposits $3.4B WEST PALM BEACH, Fla., July 18 /PRNewswire-FirstCall/ -- Fidelity Bankshares, Inc. (NASDAQ:FFFL) announced today that net income for the second fiscal quarter ended June 30, 2006 was $8.7 million or $0.35 basic and $0.34 diluted earnings per share. This compared with net income of $8.6 million, or $0.35 basic and diluted earnings per share for the second quarter of 2005. During the quarter, the company terminated certain leases of office properties. This resulted in a pre-tax charge against income of $243,000 for early termination of a lease and write-off of unamortized leasehold improvements. Net income for the six months ended June 30, 2006 was $16.5 million, or $0.67 basic and $0.65 diluted earnings per share, compared to $15.5 million or $0.64 basic and $0.63 diluted earnings per share for the six months ended June 30, 2005. The net interest margin for the quarter ended June 30, 2006 was 3.67%, compared to 3.83% for the quarter ended June 30, 2005. On a consecutive-quarter basis, the net interest margin for the quarter ended March 31, 2006 was 3.49% and for the quarter ended December 31, 2005 was 3.68%. Fidelity Bankshares Chairman and CEO Vince Elhilow said, "During the quarter our deposits decreased by $310.1 million from March 31, 2006. We were able to partially offset this with an increase of $113.5 million in our repurchase agreements or collateralized sweep accounts, which are used by our commercial customers. Therefore, in the aggregate, our customer accounts declined by a net of $196.6 million. Of this net decline, $63.4 million was attributable to a decrease in certificates of deposit. In Boca Raton, we opened our 52nd branch during the quarter and we are moving ahead with plans to open four new offices, which are currently under construction. "Due to the relatively high market rates for certificates of deposit, money market and savings deposits, we are going to continue to use short-term borrowings from the Federal Home Loan Bank to fund loan growth and operations, pending the opening of the four new branches. These short-term borrowings will be repaid from deposits generated by the new branch openings. Our core deposits, which exclude all certificates of deposit as well as the sweep accounts mentioned above, were 77.4% of total deposits at the end of the quarter, up from 74.5% of total deposits at the end of last year. At the end of the second quarter a year ago, core deposits were 75.8% of total deposits. This is good progress," Elhilow said. The company's board of directors declared a cash dividend of $0.08 per share for stockholders of record on June 30, 2006. This distribution was paid on July 14, 2006. At June 30, 2006, Fidelity Bankshares, Inc., through its subsidiary Fidelity Federal Bank & Trust, had assets of $4.2 billion and deposits of $3.4 billion and operates in Florida through 52 offices in Palm Beach, Broward, Martin and St. Lucie counties. An investment profile on Fidelity Bankshares may be found on http://www.hawkassociates.com/fidelitybankshares/profile.php . 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/ . 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/ . Fidelity Bankshares, Inc. Financial Highlights (Unaudited) Three Three Six Six Year Months Months Months Months Ended Ended Ended Ended Ended June 30, June 30, June 30, June 30, December 31, 2006 2005 2006 2005 2005 FOR THE PERIOD (In Thousands) Interest income $64,621 $50,076 $126,286 $95,400 $206,551 Interest expense 28,703 17,093 56,141 32,344 76,211 Net interest income 35,918 32,983 70,145 63,056 130,340 Chargeoffs 7 96 97 97 330 Recoveries 2 -- 2 -- 1 Gain on sale of loans 109 121 224 473 728 Net income 8,651 8,647 16,527 15,463 32,082 PER COMMON SHARE Net Income: Basic EPS $0.35 $0.35 $0.67 $0.64 $1.32 Diluted EPS 0.34 0.35 0.65 0.63 1.28 Dividends declared 0.08 0.08 0.16 0.16 0.32 Book value 11.66 10.95 11.66 10.95 11.34 Stock price: High 33.81 26.98 35.05 28.85 34.20 Low 30.79 22.27 30.79 22.27 22.27 Close 31.82 26.52 31.82 26.52 32.70 AVERAGE FOR THE PERIOD (In Thousands) Total assets $4,211,354 $3,685,764 $4,205,581 $3,595,145 $3,762,083 Loans receivable, net 3,245,922 2,609,769 3,177,984 2,559,305 2,723,586 Securities available for sale 374,635 489,232 390,478 492,040 467,603 Securities held to maturity 233,627 276,790 236,656 228,736 242,217 Deposits 3,487,591 3,080,406 3,575,957 2,950,947 3,132,413 Borrowed funds 353,653 292,771 279,823 320,175 294,572 Stockholders' equity 293,140 267,856 291,069 261,392 270,217 SELECTED RATIOS Return on average assets 0.82% 0.94% 0.79% 0.86% 0.85% Return on average equity 11.80% 12.91% 11.36% 11.83% 11.87% Interest rate spread on average assets for the period 3.62% 3.81% 3.54% 3.74% 3.70% Net yield on average interest earning assets for the period 3.67% 3.83% 3.58% 3.77% 3.74% Ratio of interest earning assets to interest bearing liabilities at end of period 117.01% 115.68% 117.01% 115.68% 114.89% Ratio of non performing assets to total assets 0.25% 0.16% 0.25% 0.16% 0.22% Ratio of valuation allowances to non performing assets 159.28% 258.10% 159.28% 258.10% 176.94% Ratio of valuation allowances to loans receivable, net 0.51% 0.57% 0.51% 0.57% 0.53% Stockholders' equity as a percentage of assets 6.95% 7.23% 6.95% 7.23% 6.98% PERIOD END (In Thousands, except for share data) Total assets $4,234,980 $3,797,288 $4,234,980 $3,797,288 $4,082,611 Interest earning cash 26,269 5,207 26,269 5,207 39,283 Securities available for sale 349,473 467,764 349,473 467,764 410,473 Securities held to maturity 263,600 270,278 263,600 270,278 242,497 Loans receivable, net 3,272,228 2,718,696 3,272,228 2,718,696 3,036,710 Federal Home Loan Bank stock 20,365 12,847 20,365 12,847 11,398 Foreclosed assets, net 1 7 1 7 1,793 Loan loss reserve 16,703 15,519 16,703 15,519 16,171 All other assets 303,044 322,489 303,044 322,489 340,457 Deposits 3,357,367 3,197,784 3,357,367 3,197,784 3,540,874 Borrowed funds 514,903 255,129 514,903 255,129 200,085 Common shares outstanding 25,247,626 25,097,604 25,247,626 25,097,604 25,114,716 Stockholders' equity 294,467 274,478 294,467 274,478 284,768 Certain amounts in prior year have been reclassified to conform with the June 30, 2006 presentation. Fidelity Bankshares Inc. Selected Unaudited Operating Data Three Six Months Months Ended Ended June 30, June 30, 2006 2005 2006 2005 (In Thousands, except (In Thousands, except for share and per share for share and per share data) data) Selected Operating Data: Interest income $64,621 $50,076 $126,286 $95,400 Interest expense 28,703 17,093 56,141 32,344 Net interest income before provision for loan losses 35,918 32,983 70,145 63,056 Provision for loan losses 186 422 626 994 Net interest income after provision for loan losses 35,732 32,561 69,519 62,062 Other income Service charges on deposit accounts 3,099 2,799 6,116 5,300 Fees for other banking services 2,491 2,342 4,777 4,575 Net gain on sale of loans 109 121 224 473 Other income 435 457 849 844 Total other income 6,134 5,719 11,966 11,192 Operating expense Compensation and benefits 14,967 13,814 30,465 27,422 Occupancy and equipment 4,297 3,461 8,069 6,811 Data processing 1,733 1,568 3,572 3,006 All other operating expense 6,868 5,503 12,619 11,043 Total operating expense 27,865 24,346 54,725 48,282 Income before taxes 14,001 13,934 26,760 24,972 Provision for income taxes 5,350 5,287 10,233 9,509 Net income $8,651 $8,647 $16,527 $15,463 Earnings per share: Basic $0.35 $0.35 $0.67 $0.64 Diluted $0.34 $0.35 $0.65 $0.63 Shares used for EPS computations: Basic 24,681,186 24,436,475 24,649,759 24,139,049 Diluted 25,329,066 24,995,395 25,305,543 24,176,758 Certain amounts in prior year have been reclassified to conform with the June 30, 2006 presentation. Fidelity Bankshares Inc. Selected Unaudited Financial Data June 30, December 31, 2006 2005 (In Thousands) Assets Cash and interest earning deposits $121,798 $189,940 Securities available for sale 349,473 410,473 Securities held to maturity 263,600 242,497 Loans: Residential mortgage 1,669,488 1,523,740 Commercial mortgage 1,167,675 1,082,719 Consumer 308,909 295,622 Commercial business 146,083 153,916 Gross loans 3,292,155 3,055,997 Less: Deferred fees (costs), net 3,224 3,116 Allowance for loan losses 16,703 16,171 Loans, net 3,272,228 3,036,710 Office properties and equipment 93,888 91,164 FHLB stock 20,365 11,398 Foreclosed assets, net 1 1,793 Goodwill 14,256 14,256 Core deposit intangible 6,147 6,528 All other assets 93,224 77,852 Total assets $4,234,980 $4,082,611 Liabilities and Equity Liabilities: Deposits: Checking, savings and money market accounts $2,599,742 $2,638,794 Certificates of deposit 757,625 902,080 Total deposits 3,357,367 3,540,874 Repurchase agreements 190,613 54,113 Borrowings from FHLB 270,682 92,364 Subordinated debentures 53,608 53,608 All other liabilities 68,243 56,884 Total liabilities 3,940,513 3,797,843 Stockholders' equity 294,467 284,768 Total liabilities and equity $4,234,980 $4,082,611 DATASOURCE: Fidelity Bankshares, Inc. CONTACT: Vince A. Elhilow, Chairman and CEO, or Richard D. Aldred, Chief Financial Officer, +1-561-803-9900, both of Fidelity Bankshares, Inc.; or Frank Hawkins or Julie Marshall, both of Hawk Associates, Inc., +1-305-451-1888, or , for Fidelity Bankshares, Inc. Web site: http://www.fidelityfederal.com/ http://www.hawkassociates.com/ http://www.hawkassociates.com/fidelitybankshares/profile.php

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