FFFL Fidelity Bankshares

Company Reports Assets of $4.4B; Deposits $3.4B WEST PALM BEACH, Fla., Oct. 18 /PRNewswire-FirstCall/ -- Fidelity Bankshares, Inc. (NASDAQ:FFFL) announced today that net income for the third quarter ended September 30, 2006 was $5.7 million, or $0.23 basic and $0.22 diluted earnings per share. For the comparable quarter a year ago, net income was $8.3 million, or $0.34 basic and $0.33 diluted earnings per share. Net income for the nine months ended September 30, 2006 was $22.2 million, or $0.90 basic and $0.87 diluted earnings per share, compared to $23.7 million, or $0.98 basic and $0.95 diluted earnings per share, for the comparable nine months in 2005. The quarterly results included $1.0 million in merger-related expenses. In addition to merger-related expense, the company's operating expense increased by $3.5 million. Net interest income did not increase due to margin compression associated with increased interest expense. The net interest margin for the quarter was 3.31%, compared to 3.74% for the same period in 2005. By comparison, the net interest margin for the quarter ended June 30, 2006 was 3.67%. Operating expense for the nine months ended September 30, 2006 increased by $9.9 million. The company's net interest income for the nine months increased by only $7.0 million, due to margin compression. The company's net interest margin for the nine-month period was 3.49%, compared to 3.76% for the same period in 2005. "The proxy materials for our stockholders to approve the acquisition of Fidelity by National City Corporation have been mailed. We will hold the stockholders meeting on November 20, 2006," said Chairman and CEO Vince Elhilow. "We are expecting overwhelming support for the merger of these two fine companies. We have been truly impressed by the professionalism, thoroughness and attention to detail of the National City integration and transition team members. Our customers can be assured of a smooth and seamless transition as well as the availability of a host of new financial products. The planning process is proceeding very smoothly." The board of directors declared a cash dividend of $0.08 per share for stockholders of record on September 29, 2006. This distribution was paid on October 13, 2006. At September 30, 2006, Fidelity Bankshares, Inc., through its subsidiary Fidelity Federal Bank & Trust, had assets of $4.4 billion and deposits of $3.4 billion. The company 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://hawkassociates.com/ffflprofile.aspx. 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 Months Three Months Ended Ended September 30, September 30, 2006 2005 FOR THE PERIOD (In Thousands) Interest income $67,466 $53,983 Interest expense 34,156 20,561 Net interest income 33,310 33,422 Chargeoffs 8 168 Recoveries 1 - Gain on sale of loans 41 170 Net income 5,652 8,259 PER COMMON SHARE Net Income: Basic EPS $0.23 $0.34 Diluted EPS 0.22 0.33 Dividends declared 0.08 0.08 Book value 11.99 11.14 Stock price: High 39.35 33.07 Low 31.65 26.21 Close 39.01 30.55 AVERAGE FOR THE PERIOD (In Thousands) Total assets $4,317,405 $3,881,085 Loans receivable, net 3,351,973 2,805,926 Securities available for sale 359,438 456,100 Securities held to maturity 259,568 262,507 Deposits 3,360,193 3,278,454 Borrowed funds 573,475 257,149 Stockholders' equity 300,173 277,408 SELECTED RATIOS Return on average assets 0.52% 0.85% Return on average equity 7.53% 11.91% Interest rate spread on average assets for the period 2.74% 3.33% Net yield on average interest earning assets for the period 3.31% 3.74% Ratio of interest earning assets to interest bearing liabilities at end of period 116.94% 118.08% Ratio of non performing assets to total assets 0.43% 0.10% Ratio of valuation allowances to non performing assets 92.51% 405.94% Ratio of valuation allowances to loans receivable, net 0.51% 0.54% Stockholders' equity as a percentage of assets 6.95% 7.10% PERIOD END (In Thousands, except for share data) Total assets $4,381,549 $3,940,354 Interest earning cash 26,658 37,098 Securities available for sale 342,425 439,257 Securities held to maturity 254,720 255,878 Loans receivable, net 3,429,229 2,896,565 Federal Home Loan Bank stock 23,127 12,694 Foreclosed assets, net 14 1,793 Loan loss reserve 17,390 15,655 All other assets 305,376 297,069 Deposits 3,424,219 3,317,792 Borrowed funds 576,218 265,070 Common shares outstanding 25,384,215 25,100,515 Stockholders' equity 304,303 279,617 Certain amounts in prior year have been reclassified to conform with the September 30, 2006 presentation. Fidelity Bankshares, Inc. Financial Highlights (Unaudited) Nine Months Nine Months Year Ended Ended Ended Sept. 30, Sept. 30, Dec. 31, 2006 2005 2005 FOR THE PERIOD (In Thousands) Interest income $193,752 $149,384 $206,551 Interest expense 90,297 52,906 76,211 Net interest income 103,455 96,478 130,340 Chargeoffs 105 266 330 Recoveries 4 - 1 Gain on sale of loans 265 643 728 Net income 22,179 23,722 32,082 PER COMMON SHARE Net Income: Basic EPS $0.90 $0.98 $1.32 Diluted EPS 0.87 0.95 1.28 Dividends declared 0.24 0.24 0.32 Book value 11.99 11.14 11.34 Stock price: High 39.35 33.07 34.20 Low 30.79 22.27 22.27 Close 39.01 30.55 32.70 AVERAGE FOR THE PERIOD (In Thousands) Total assets $4,247,371 $3,689,405 $3,762,083 Loans receivable, net 3,236,617 2,642,416 2,723,586 Securities available for sale 380,017 479,928 467,603 Securities held to maturity 244,377 240,117 242,217 Deposits 3,503,503 3,061,604 3,132,413 Borrowed funds 378,782 298,935 294,572 Stockholders' equity 294,371 266,436 270,217 SELECTED RATIOS Return on average assets 0.70% 0.86% 0.85% Return on average equity 10.05% 11.87% 11.87% Interest rate spread on average assets for the period 2.96% 3.39% 3.70% Net yield on average interest earning assets for the period 3.49% 3.76% 3.74% Ratio of interest earning assets to interest bearing liabilities at end of period 117.40% 117.78% 114.89% Ratio of non performing assets to total assets 0.43% 0.10% 0.22% Ratio of valuation allowances to non performing assets 92.51% 405.94% 176.94% Ratio of valuation allowances to loans receivable, net 0.51% 0.54% 0.53% Stockholders' equity as a percentage of assets 6.95% 7.10% 6.98% PERIOD END (In Thousands, except for share data) Total assets $4,381,549 $3,940,354 $4,082,611 Interest earning cash 26,658 37,098 39,283 Securities available for sale 342,425 439,257 410,473 Securities held to maturity 254,720 255,878 242,497 Loans receivable, net 3,429,229 2,896,565 3,036,710 Federal Home Loan Bank stock 23,127 12,694 11,398 Foreclosed assets, net 14 1,793 1,793 Loan loss reserve 17,390 15,655 16,171 All other assets 305,376 297,069 340,457 Deposits 3,424,219 3,317,792 3,540,874 Borrowed funds 576,218 265,070 200,085 Common shares outstanding 25,384,215 25,100,515 25,114,716 Stockholders' equity 304,303 279,617 284,768 Certain amounts in prior year have been reclassified to conform with the September 30, 2006 presentation. Fidelity Bankshares Inc. Selected Unaudited Operating Data Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 (In Thousands, except for (In Thousands, except for share and per share data) share and per share data) Selected Operating Data: Interest income $67,466 $53,983 $193,752 $149,384 Interest expense 34,156 20,561 90,297 52,906 Net interest income 33,310 33,422 103,455 96,478 Provision for loan losses 694 304 1,320 1,298 Net interest income after provision for loan losses 32,616 33,118 102,135 95,180 Other income: Service charges on deposit accounts 3,489 2,972 9,605 8,272 Fees for other banking services 2,554 2,375 7,331 6,950 Net gain on sale of loans 41 170 265 643 Other income 405 540 1,254 1,384 Total other income 6,489 6,057 18,455 17,249 Operating expense: Employee compensation and benefits 15,495 14,669 45,960 42,091 Occupancy and equipment 4,280 3,673 12,349 10,484 Data processing 1,916 1,811 5,487 4,817 Other operating expense 7,659 5,711 20,279 16,754 Total operating expense 29,350 25,864 84,075 74,146 Income before provision for income taxes 9,755 13,311 36,515 38,283 Provision for income taxes 4,103 5,052 14,336 14,561 Net income $5,652 $8,259 $22,179 $23,722 Earnings per share: Basic $0.23 $0.34 $0.90 $0.98 Diluted $0.22 $0.33 $0.87 $0.95 Shares used for EPS computations: Basic 24,757,741 24,538,667 24,686,148 24,273,719 Diluted 25,460,685 25,257,742 25,347,529 24,910,007 Certain amounts in prior year have been reclassified to conform with the September 30, 2006 presentation. Fidelity Bankshares Inc. Selected Unaudited Financial Data September 30, December 31, 2006 2005 (In Thousands) Assets Cash and interest-earning deposits $118,748 $189,940 Securities available for sale 342,425 410,473 Securities held to maturity 254,720 242,497 Loans receivable: Residential mortgage 1,745,470 1,523,740 Commercial mortgage 1,236,160 1,082,719 Consumer 314,561 295,622 Commercial business 153,304 153,916 Gross loans 3,449,495 3,055,997 Less: Deferred fees (costs), net 2,876 3,116 Allowance for loan losses 17,390 16,171 Loans receivable, net 3,429,229 3,036,710 Office properties and equipment, net 94,294 91,164 FHLB stock 23,127 11,398 Foreclosed assets, net 14 1,793 Goodwill 14,256 14,256 Core deposit intangibles 5,957 6,528 Other assets 98,779 77,852 Total Assets $4,381,549 $4,082,611 Liabilities and Equity Liabilities: Deposits: Checking, savings and money market accounts $2,533,052 $2,638,794 Certificates of deposit 891,167 902,080 Total deposits 3,424,219 3,540,874 Other borrowed funds 190,123 54,113 Advances from FHLB 332,487 92,364 Junior subordinated debentures 53,608 53,608 Other liabilities 76,809 56,884 Total liabilities 4,077,246 3,797,843 Stockholders' equity 304,303 284,768 Total Liabilities and Equity $4,381,549 $4,082,611 DATASOURCE: Fidelity Bankshares, Inc. CONTACT: Vince A. Elhilow, Chairman and CEO, or Richard D. Aldred, Chief Financial Officer, of Fidelity Bankshares, Inc., +1-561-803-9900; or Frank Hawkins, or Julie Marshall, of Hawk Associates, Inc., +1-305-451-1888, or Web site: http://www.fidfed.com/ http://hawkassociates.com/ffflprofile.aspx http://www.hawkassociates.com/

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