10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2007

- or -

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission Number:   0-22288

FIDELITY BANCORP, INC.

(Exact name of Registrant as specified in its Charter)

Pennsylvania	25-1705405
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1009 Perry Highway, Pittsburgh, Pennsylvania	15237
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:   (412) 367-3300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common stock, $.01 par value	Nasdaq Global Market
Preferred Share Purchase Rights	Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o YES      x NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o YES      x NO

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 day .         x Yes      o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   o Accelerated filer   o Non-accelerated filer   x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) o Yes      x No

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing sales price of the Registrant’s Common Stock reported on the Nasdaq Global Market on March 30, 2007 was $44.6 million. Solely for purposes of this calculation, the term “affiliate” includes all directors and executive officers of the Registrant and all beneficial owners of more than 5% of the Registrant’s voting securities.

As of December 18, 2007, the Registrant had outstanding 3,010,717 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of the Registrant's definitive Proxy Statement for the 2008 Annual Meeting of Stockholders.  (Part III)

FIDELITY BANCORP, INC.

ANNUAL REPORT ON FORM 10-K

for the fiscal year ended September 30, 2007

INDEX

		PAGE
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	26
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	32
Item 3.	Legal Proceedings	33
Item 4.	Submission of Matters to a Vote of Security Holders	33
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	92
Item 9A.	Controls and Procedures	92
Item 9B.	Other Information	92
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	92
Item 11.	Executive Compensation	92
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	93
Item 13.	Certain Relationships and Related Transactions and Director Independence	94
Item 14.	Principal Accountant Fees and Services	94
PART IV
Item 15.	Exhibits, Financial Statement Schedules	94
SIGNATURES

2

PART I

Fidelity Bancorp, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Annual Report on Form 10-K and the exhibits thereto), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others (including those listed under Item 1A. Risk Factors) could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rates, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks resulting from these factors.

The Company cautions that the listed factors are not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Item 1. Business.

The Company, a Pennsylvania corporation headquartered in Pittsburgh, Pennsylvania, provides a full range of banking services through its wholly owned banking subsidiary, Fidelity Bank, PaSB (the “Bank”). The Company conducts no significant business or operations of its own other than holding all the outstanding stock of the Bank. Because the primary activities of the Company are those of the Bank, references to the Bank used throughout this document, unless the context indicates otherwise, generally refer to the consolidated entity.

The Bank is a Pennsylvania-chartered stock savings bank which is headquartered in Pittsburgh, Pennsylvania. Deposits in the Bank are insured to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh. The Bank, incorporated in 1927, conducts business from thirteen full-service offices located in Allegheny and Butler counties, two of five Pennsylvania counties which comprise the metropolitan and suburban areas of greater Pittsburgh. The Bank’s wholly owned subsidiary, FBIC, Inc., was incorporated in the State of Delaware in July 2000. FBIC, Inc. was formed to hold and manage the Bank’s fixed-rate residential mortgage loan portfolio which may include engaging in mortgage securitization transactions. FBIC, Inc. has not completed any mortgage securitization transactions to date. Total assets of FBIC, Inc. as of September 30, 2007 were $93.3 million.

The Company’s executive offices are located at 1009 Perry Highway, Pittsburgh, Pennsylvania 15237 and its telephone number is (412) 367-3300. The Company maintains a website at www.fidelitybancorp-pa.com.

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Competition

The Bank is one of many financial institutions serving its market area. The competition for deposit products and loan originations comes from other depository institutions such as commercial banks, thrift institutions and credit unions in the Bank’s market area. Competition for deposits also includes insurance products sold by local agents and investment products such as mutual funds and other securities sold by local and regional brokers. The Bank competes for loans with a variety of non-depository institutions such as mortgage brokers, finance companies and insurance companies. Based on data compiled by the FDIC, the Bank had a 0.69% share of all FDIC-insured deposits in the Pittsburgh Metropolitan Statistical Area as of June 30, 2007, the latest date for which such data was available, ranking it 15th among 62 FDIC-insured institutions. This data does not reflect deposits held by credit unions with which the Bank also competes.

Lending Activities

The Bank’s principal lending activity is the origination of loans secured primarily by first mortgage liens on existing single-family residences in the Pittsburgh Metropolitan Statistical Area. At September 30, 2007, the Bank’s loan portfolio included $184.2 million of residential loans, $51.1 million of residential construction loans, $79.4 million of commercial and multi-family real estate loans, and $24.4 million of commercial construction loans. The Bank also engages in consumer installment lending primarily in the form of home equity loans. At September 30, 2007, the Bank had $92.6 million in home equity loans in the portfolio. Substantially all of the Bank’s borrowers are located in the Pittsburgh Metropolitan Statistical Area and would be expected to be affected by economic and other conditions in this area. The Company does not believe that there are any other concentrations of loans or borrowers exceeding 10% of total loans.

Loan Portfolio Composition. The following table sets forth the composition of the Company’s loan portfolio by loan type in dollar amounts and in percentages of the total portfolio at the dates indicated.

	At September 30,
	2007					2006					2005					2004					2003
	$			%		$			%		$			%		$			%		$			%
Real estate loans:
Residential:
Single-family (1-4 units)	$	184,168		38.7	%	$	190,040		41.7	%	$	156,889		42.2	%	$	109,524		34.5	%	$	98,283		35.4	%
Multi-family (over 4 units)		239		0.1			259		0.1			275		0.1			290		0.1			368		0.1
Construction:
Residential		51,077		10.7			42,252		9.3			24,060		6.5			23,749		7.5			10,349		3.7
Commercial		24,363		5.1			19,147		4.2			11,164		3.0			11,703		3.7			2,108		0.8
Commercial		79,206		16.7			72,171		15.8			67,889		18.2			63,681		20.1			63,278		22.8
Total real estate loans		339,053		71.3			323,869		71.1			260,277		70.0			208,947		65.9			174,386		62.8
Installment loans		95,628		20.1			93,306		20.5			79,780		21.4			75,990		24.0			67,332		24.2
Commercial business loans and leases		40,953		8.6			38,166		8.4			32,028		8.6			32,082		10.1			35,975		13.0
Total loans receivable		475,634		100.0	%		455,341		100.0	%		372,085		100.0	%		317,019		100.0	%		277,693		100.0	%
Less:
Loans in process		(13,752	)				(13,369	)				(23,070	)				(23,409	)				(9,499	)
Unamortized discounts and fees		74					(28	)				(343	)				(612	)				(691	)
Allowance for loan losses		(3,027	)				(2,917	)				(2,596	)				(2,609	)				(3,091	)
Net loans receivable	$	458,929				$	439,027				$	346,076				$	290,389				$	264,412

4

Loan Portfolio Sensitivity. The following table sets forth the estimated maturity of the Company’s loan portfolio at September 30, 2007. The table does not include prepayments or scheduled principal repayments. Prepayments and scheduled principal repayments on loans totaled $118.4 million for the year ended September 30, 2007. All loans are shown as maturing based on contractual maturities. Demand loans, loans which have no stated maturity and overdrafts are shown as due in one year or less.

	Due		Due after		Due
	within		1 through		after
	1 year		5 years		5 years		Total
	(In thousands)
Real estate loans:
Residential	$	269	$	1,713	$	182,425	$	184,407
Commercial		3,759		20,152		55,295		79,206
Construction		11,079		5,237		59,124		75,440
Installment loans		15,390		7,211		73,027		95,628
Commercial business loans and leases		12,331		18,773		9,849		40,953
Total	$	42,828	$	53,086	$	379,720	$	475,634

The following table sets forth the dollar amount of all loans at September 30, 2007, due after September 30, 2008, which have fixed interest rates and floating or adjustable interest rates.

	Fixed		Floating or
	Rates		Adjustable Rates		Total
	(In thousands)
Real estate loans:
Residential	$	97,481	$	86,657	$	184,138
Commercial		28,431		47,016		75,447
Construction		33,412		30,949		64,361
Installment loans		77,351		2,887		80,238
Commercial business loans and leases		14,415		14,207		28,622
Total	$	251,090	$	181,716	$	432,806

Contractual principal repayments of loans do not necessarily reflect the actual term of the Bank’s loan portfolio. The average lives of mortgage loans are substantially less than their contractual maturities because of loan payments and prepayments and because of enforcement of due-on-sale clauses, which generally give the Bank the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells the real property subject to the mortgage and the loan is not repaid. The average lives of mortgage loans, however, tend to increase when current mortgage loan rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when current mortgage loan rates are substantially lower than rates on existing mortgage loans.

Residential Real Estate Lending. The Bank originates single-family residential loans and residential construction loans which provide for periodic interest rate adjustments. The adjustable-rate residential mortgage loans offered by the Bank in recent years have 10, 15, 20, or 30-year terms and interest rates which adjust every one, three, five, seven, or ten years generally in accordance with the index of average yield on U.S. Treasury Securities adjusted to a constant maturity of the applicable time period. There is generally a two percentage point cap or limit on any increase or decrease in the interest rate per year with a five or six percentage point limit on the amount by which the interest rate can increase over the life of the loan. The Bank has not engaged in the practice of using a cap on the payments that could allow the loan balance to increase rather than decrease, resulting in negative amortization. At September 30, 2007 approximately $86.8 million or 47.1% of the residential mortgage loans in the Bank’s loan portfolio consisted of loans which provide for adjustable rates of interest.

5

The Bank also originates fixed-rate, single-family residential loans with terms of 10, 15, 20 or 30 years in order to provide a full range of products to its customers, but generally only under terms, conditions and documentation which permit the sale of these loans in the secondary market. Additionally, the Bank also offers a 10-year balloon loan with payments based on 30-year amortization. At September 30, 2007, approximately $97.7 million or 52.9% of the residential mortgage loans in the Bank’s loan portfolio consisted of loans which provide for fixed rates of interest. Although these loans provide for repayments of principal over a fixed period of up to 30 years, it is the Bank’s experience that such loans have remained outstanding for a substantially shorter period of time. The Bank’s policy is to enforce the “due-on-sale” clauses contained in most of its fixed-rate, adjustable-rate, and conventional mortgage loans, which generally permit the Bank to require payment of the outstanding loan balance if the mortgaged property is sold or transferred and, thus, contributes to shortening the average lives of such loans.

The Bank will lend generally up to 80% of the appraised value of the property securing the loan (referred to as the loan-to-value ratio) up to a maximum amount of $417,000 but will lend up to 95% of the appraised value up to the same amount if the borrower obtains private mortgage insurance on the portion of the principal amount of the loan that exceeds 80% of the value of the property securing the loan. The Bank also originates residential mortgage loans in amounts over $417,000. The Bank will generally lend up to 80% of the appraised value of the property securing such loans. These loans may have terms of up to 30 years, but frequently have terms of 10 or 15 years or are 10-year balloon loans with payments based on 15-year to 30-year amortization. Generally, such loans will not exceed a maximum loan amount of $1.0 million, although the Bank may consider loans above that limit on a case-by-case basis.

The Bank also, in recent years, has developed single-family residential mortgage loan programs targeted to the economically disadvantaged and minorities in the Bank’s primary lending area. Under these programs, the Bank will lend up to 97% of the appraised value of the property securing the loan as well as reducing the closing costs the borrower is normally required to pay. The Bank does not believe that these loans pose a significantly greater risk of non-performance than similar single-family residential mortgage loans underwritten using the Bank’s normal criteria.

The Bank requires the properties securing mortgage loans it originates and purchases to be appraised by independent appraisers who are approved by or who meet certain prescribed standards established by the Board of Directors. The Bank also requires title, hazard and (where applicable) flood insurance in order to protect the properties securing its residential and other mortgage loans. Borrowers are subject to employment verification and credit evaluation reports, and must meet established underwriting criteria with respect to their ability to make monthly mortgage payments.

Commercial and Multi-family Real Estate Lending. In addition to loans secured by single-family residential real estate, the Bank also originates, to a lesser extent, loans secured by commercial real estate and multi-family residential real estate. Over 95% of this type of lending is done within the Bank’s primary market area. At September 30, 2007, the Bank’s portfolio included $79.2 million of commercial real estate and $239,000 of multi-family residential real estate loans.

Although terms vary, commercial and multi-family residential real estate loans are generally made for terms of up to 10 years with a longer period for amortization and in amounts of up to 80% of the lesser of appraised value or sales price. These loans may be made with adjustable rates of interest, but the Bank also will make fixed-rate commercial or multi-family real estate loans on a 10 or 7 year payment basis, with the period of amortization negotiated on a case-by-case basis.

Commercial and multi-family mortgage loans generally are larger and are considered to entail significantly greater risk than one-to-four family real estate lending. The repayment of these loans typically is dependent on the successful operations and income stream of the borrower and the real estate securing the loan as collateral. These risks can be significantly affected by economic conditions. In addition, non-residential real estate lending generally requires substantially greater evaluation and oversight efforts compared to residential real estate lending.

6

Construction Lending. The Bank also engages in loans to finance the construction of one-to-four family dwellings. This activity is generally limited to individual units and may, to a limited degree, include speculative construction by developers. The inspections, for approval of payment vouchers, are performed by third parties and are based on stages of completion. Applications for construction loans primarily are received from former borrowers and builders who have worked with the Bank in the past. Construction loans are originated with permanent financing terms consistent with the Bank’s residential loan products; however, construction loans require only interest payments for the first six months. Beginning in the seventh month, monthly payments of both interest and principal are required for the remaining term (e.g., 29 ½ years for a 30 year term).

Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing of residential properties. If the estimate of construction cost proves to be inaccurate, the Bank may be compelled to advance additional funds to complete the construction with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Bank is forced to foreclose on a project prior to completion, there is no assurance that it will be able to recover all of the unpaid portion of the loan. In addition, the Bank may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time.

Installment Lending. The Bank offers a wide variety of installment loans, including home equity loans and consumer loans. At September 30, 2007, home equity loans amounted to $92.6 million or 96.8% of the Bank’s total installment loan portfolio. These loans are made on the security of the unencumbered equity in the borrower’s residence. Home equity loans are made at fixed and adjustable rates for terms of up to 20 years, and home equity lines of credit are made at variable rates. Home equity loans generally may not exceed 80% of the value of the security property when aggregated with all other liens, although a limited number of loans up to 100% value may be made at increased rates.

Consumer loans consist of motor vehicle loans, other types of secured consumer loans and unsecured personal loans. At September 30, 2007, these loans amounted to $640,000, which represented 0.7% of the Bank’s total installment loan portfolio. At September 30, 2007, motor vehicle loans amounted to $168,000 and unsecured loans and loans secured by property other than real estate amounted to $472,000.

The Bank also makes other types of installment loans such as savings account loans, personal lines of credit and overdraft loans. At September 30, 2007, these loans amounted to $2.4 million or 2.5% of the total installment loan portfolio. That total consisted of $649,000 of savings account loans, $1.7 million of personal lines of credit and $54,000 of overdraft loans.

Consumer and overdraft loans and, to a lesser extent, home equity loans may involve a greater risk of nonpayment than traditional first mortgage loans on single-family residential dwellings. Consumer loans may be unsecured or secured by depreciating collateral which may not provide an adequate source for repayment in the event of default. However, such loans generally provide a greater rate of return, and the Bank underwrites the loans in conformity to standards adopted by its Board of Directors.

Commercial Business Loans and Leases. Commercial business loans of both a secured and unsecured nature are made by the Bank for business purposes to incorporated and unincorporated businesses. Typically, these are loans made for the purchase of equipment, to finance accounts receivable, and to finance inventory, as well as other business purposes. At September 30, 2007, these loans amounted to $41.0 million or 8.9% of the total net loan portfolio. In addition, the Bank makes commercial leases to businesses, typically for the purchase of equipment. All leases are funded as capital leases and the Bank does not assume any residual risk at the end of the lease term. At September 30, 2007, commercial leases amounted to $98,000 or 0.02% of the total net loan portfolio.

Loan Servicing and Sales. In addition to interest earned on loans, the Bank receives income through the servicing of loans and loan fees charged in connection with loan originations and modifications, late payments, changes of property ownership, and for miscellaneous services related to its loans. Income from these activities varies from period to period with the volume and type of loans made. The Bank recognized loan servicing fees of $1,000 for the year ended September 30, 2007. As of September 30, 2007, there were no outstanding loans serviced for others.

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The Bank charges loan origination fees which are calculated as a percentage of the amount loaned. The fees received in connection with the origination of conventional, single-family, residential real estate loans have generally amounted to one to three points (one point being equivalent to 1% of the principal amount of the loan). In addition, the Bank typically receives fees of one half to one point in connection with the origination of conventional, multi-family residential loans, and commercial real estate loans. Loan fees and certain direct costs are deferred, and the net fee or cost is amortized into income using the interest method over the expected life of the loan.

The Bank sells fixed-rate residential mortgage loans in the secondary market through an arrangement with several investors. This program allows the Bank to offer more attractive rates in its highly competitive market. The Bank does not service those loans sold in the secondary market. Customers may choose to have their loan serviced by the Bank, however, the loan is priced slightly higher and retained in the Bank’s loan portfolio. For the year ended September 30, 2007, the Bank sold $8.3 million of fixed-rate mortgage loans.

Loan Approval Authority and Underwriting. Applications for all types of loans are taken at the Bank’s home office and branch offices by branch managers and loan originators and forwarded to the administrative office for processing. In most cases, an interview with the applicant is conducted at the branch office by a branch manager. Residential and commercial real estate loan originations are primarily attributable to walk-in and existing customers, real estate brokers, and mortgage loan brokers. Installment loans are primarily obtained through existing and walk-in customers. The Board of Directors has delegated authority to the Loan Committee, consisting of the Chairman, President, and Chief Lending Officer, to approve first mortgages on single-family residences of up to $750,000, commercial first mortgages of up to $750,000, home equity loans of up to $300,000, secured consumer loans of up to $75,000, unsecured consumer loans of up to $50,000 and commercial loans up to $500,000. Any loan in excess of those amounts must be approved by the Board of Directors. The Board of Directors has further delegated authority to the Bank’s President to approve first mortgages on single-family residences, commercial first mortgages, home equity, secured consumer, unsecured consumer and commercial loans up to the FNMA conforming loan limit (currently $417,000), $200,000, $200,000, $75,000, $50,000, and $200,000, respectively. The terms of the delegation also permit the President to delegate authority to any other Bank officer under the same or more limited terms. Pursuant to this authority, the President has delegated to the Chief Lending Officer, subject to certain conditions, the authority to approve motor vehicle loans, secured personal loans and unsecured personal loans up to $75,000, $75,000, and $50,000, respectively; to approve one-to-four family first mortgage loans up to the FNMA conforming loan limit (currently $417,000); to approve home equity loans up to $200,000 if the amount of the loan plus prior indebtedness is not in excess of an 80% loan-to-value ratio; to approve home equity loans up to $100,000 if the amount of the loan plus prior indebtedness is in excess of 80%; to approve commercial loans up to $200,000; to approve education loans up to levels approved by the Pennsylvania Higher Education Assistance Agency; and to approve checking account overdraft protection loans that conform to the parameters of the program.

Classified Assets. Federal examiners require insured depository institutions to use a classification system for monitoring their problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection of principal in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets that do not expose the Company to risk sufficient to warrant classification in one of the above categories, but which possess some weakness, are required to be designated “special mention” by management.

When an insured depository institution classifies problem assets as either “substandard” or “doubtful,” it may establish allowances for loan losses in an amount deemed prudent by management. When an insured institution classifies problem assets as “loss,” it is required either to establish an allowance for losses equal to 100% of that portion of the assets so classified or to charge off such amount. An institution’s determination as to the classification of its assets and the amount of its allowances is subject to review by the FDIC which may order the establishment of additional loss allowances.

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Included in non-accrual loans at September 30, 2007 are thirteen single-family residential real estate loans totaling $831,000, three commercial real estate loans totaling $5.6 million, twenty one home equity and installment loans totaling $340,000, and nine commercial business loans totaling $1.9 million. Certain other loans, while performing as of September 30, 2007, were classified as substandard, doubtful or loss. Performing loans which were classified as of September 30, 2007, included two commercial business loans totaling $278,000. While these loans are currently performing, they have been classified for one of the following reasons: other loans to the borrower are non-performing; internal loan review has identified a deterioration of the borrower’s financial capacity or a collateral shortfall. See “-- Nonperforming Loans and Foreclosed Real Estate.”

Included in non-accrual loans at September 30, 2006 are seven single-family residential real estate loans totaling $403,000, one commercial real estate loan totaling $344,000, eighteen home equity and installment loans totaling $238,000, and seven commercial business loans totaling $1.7 million. Certain other loans, while performing as of September 30, 2006, were classified as substandard, doubtful or loss. Performing loans which were classified as of September 30, 2006, included two commercial business loans totaling $220,000. While these loans were performing, they have been classified for one of the following reasons: the loan was previously nonperforming but will retain its classification status until the loan continues to perform for at least a six-month period; internal loan review has identified a deterioration of the borrower’s financial capacity or a collateral shortfall. See “-- Nonperforming Loans and Foreclosed Real Estate.”

At September 30, 2005, non-accrual loans consisted of ten single-family residential real estate loans totaling $533,000, two commercial real estate loans totaling $179,000, twelve home equity and installment loans totaling $188,000, and eight commercial business loans totaling $1.4 million. Certain other loans, while performing as of September 30, 2005, were classified as substandard, doubtful or loss. Performing loans which were classified as of September 30, 2005, included one single-family residential real estate loan totaling $38,000; one commercial real estate loan totaling $70,000; two equity loans totaling $85,000 and seven commercial business loans totaling $397,000. While these loans are currently performing, they have been classified for one of the following reasons: other loans to the borrower are non-performing; the loan was previously nonperforming but will retain its classification status until the loan continues to perform for at least a six-month period; internal loan review has identified a deterioration of the borrower’s financial capacity or a collateral shortfall or the loan is past its contractual maturity date and pending renewal (commercial time notes and commercial lines of credit). See “-- Nonperforming Loans and Foreclosed Real Estate.”

At September 30, 2004, non-accrual loans consisted of nine single-family residential real estate loans totaling $777,000, three commercial real estate loans totaling $269,000, thirty one home equity and installment loans totaling $530,000, and twenty commercial business loans totaling $2.1 million. Certain other loans, while performing as of September 30, 2004, were classified as substandard, doubtful or loss. Performing loans which were classified as of September 30, 2004, included one single-family residential real estate loan totaling $41,000; one commercial real estate loan totaling $75,000; four equity loans totaling $142,000 and four commercial business loans totaling $402,000. While these loans were performing, they have been classified for one of the following reasons: other loans to the borrower are non-performing; the loan was previously nonperforming but will retain its classification status until the loan continues to perform for at least a six-month period; or the loan is past its contractual maturity date and pending renewal (commercial time notes and commercial lines of credit). See “-- Nonperforming Loans and Foreclosed Real Estate.”

At September 30, 2003, non-accrual loans consisted of fifteen single-family residential real estate loans totaling $795,000, three commercial real estate loans totaling $367,000, thirty home equity and installment loans totaling $615,000, and twelve commercial business loans totaling $1.2 million. Certain other loans, while performing as of September 30, 2003, were classified as substandard, doubtful or loss. Performing loans which were classified as of September 30, 2003, included one single-family residential real estate loan totaling $91,000; two commercial real estate loans totaling $727,000; and thirteen commercial business loans totaling $2.1 million. Such nonperforming loans consisted of all substandard, doubtful and loss classified assets. See “-- Nonperforming Loans and Foreclosed Real Estate.”

9

The following table sets forth the Company’s classified assets in accordance with its classification system.

	At September 30,
	2007		2006		2005		2004			2003
	(In thousands)
Special Mention	$	1,324	$	1,030	$	2,688	$	3,269	$	709
Substandard		9,015		2,552		2,865		4,270		5,862
Doubful		—		352		45		14		6
Loss		9		1		—		23		23
	$	10,348	$	3,935	$	5,598	$	7,576	$	6,600

The increase in classified assets during fiscal 2007 is primarily attributed to two commercial real estate loans totaling $5.3 million which were placed on non-accrual, classified as substandard, and deemed impaired during 2007; however, management believes both loans are adequately collateralized.

Nonperforming Loans and Foreclosed Real Estate. When a borrower fails to make a required payment on a loan, the Bank attempts to cause the default to be cured by contacting the borrower. In general, contacts are made after a payment is more than 15 days past due, and a late charge is assessed at that time. In most cases, defaults are cured promptly. If the delinquency on a mortgage loan exceeds 90 days and is not cured through the Bank’s normal collection procedures or an acceptable arrangement is not worked out with the borrower, the Bank will normally institute measures to remedy the default, including commencing a foreclosure action or, in special circumstances, accepting from the mortgagor a voluntary deed of the secured property in lieu of foreclosure.

The remedies available to a lender in the event of a default or delinquency with respect to residential mortgage loans, and the procedures by which such remedies may be exercised, are subject to Pennsylvania laws and regulations. Under Pennsylvania law, a lender is prohibited from accelerating the maturity of a residential mortgage loan, commencing any legal action (including foreclosure proceedings) to collect on such loan, or taking possession of any loan collateral until the lender has first provided the delinquent borrower with at least 30 days’ prior written notice specifying the nature of the delinquency and the borrower’s right to correct such delinquency. Additionally, a lender is restricted in exercising any remedies it may have with respect to loans for one- and two-family principal residences located in Pennsylvania (including the lender’s right to foreclose on such property) until the lender has provided the delinquent borrower with written notice detailing the borrower’s rights to seek consumer credit counseling and state financial assistance.

Loans are placed on non-accrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual, generally when a loan is ninety days or more delinquent. When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income.  The President, Chief Lending Officer, Chief Financial Officer, Vice President of Residential Lending, Compliance Officer and the Collection Manager meet monthly to review non-performing assets and any other assets that may require classification or special consideration. Adjustments to the carrying values of such assets are made as needed and a detailed report is submitted to the Board of Directors on a monthly basis.

Foreclosed real estate is recorded at fair value less estimated cost to sell. Costs relating to development and improvement of the property are capitalized, whereas costs of holding such real estate are expensed as incurred. Additional write downs are charged to income, and the carrying value of the property reduced, when the carrying value exceeds fair value less estimated cost to sell.

The following table sets forth information regarding the Company’s non-accrual loans and foreclosed real estate at the dates indicated. The Company had no loans categorized as troubled debt restructurings within the meaning of the Statement of Financial Accounting Standards (“SFAS”) No. 15 at the dates indicated. The Company had accruing loans past due 90 days or more of $150,000, $255,000, and $53,000, at September 30, 2007, 2006 and 2005, respectively. Such loans consisted of commercial lines of credit which were outstanding past their contractual maturity dates. In each case, such loans were otherwise current in accordance with their terms and the Company does not consider them nonperforming. The recorded investment in loans that are considered to be impaired under SFAS 114, as amended by SFAS 118, was $7.8

10

million at September 30, 2007, for which the related allowance for credit losses was $50,000. Interest income that would have been recorded and collected on loans accounted for on a non-accrual basis under the original terms of such loans was $347,000 for the year ended September 30, 2007. During the year ended September 30, 2007, $312,000 in interest income was recorded on such loans.

	At September 30,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Non-accrual loans:
Residential real
estate loans (1-4 family)	$	831		$	403		$	533		$	777		$	795
Construction, multi—family
and commercial real estate		5,628			344			179			269			367
Installment loans		340			238			188			530			615
Commercial business loans
and leases		1,947			1,700			1,419			2,071			1,151
Total nonperforming loans	$	8,746		$	2,685		$	2,319		$	3,647		$	2,928
Total nonperforming loans as a
percent of net loans receivable		1.91	%		0.61	%		0.67	%		1.26	%		1.11	%
Total foreclosed real estate, net	$	52		$	215		$	789		$	1,517		$	675
Total nonperforming loans and
foreclosed real estate as a
percent of total assets		1.21	%		0.40	%		0.46	%		0.82	%		0.58	%

The increased non-performing loan balance at September 30, 2007 is primarily attributed to two commercial real estate loans totaling $5.3 million both of which we believe are adequately collateralized.

At September 30, 2007, the Company did not have any potential problem loans that were not reflected in the above table where known information about possible credit problems of borrowers caused management to have serious doubts about the ability of such borrowers to comply with present repayment terms.

11

The following table sets forth the roll forward of the Bank’s allowance for loan losses.

	Year Ended September 30,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Balance at beginning of period	$	2,917		$	2,596		$	2,609		$	3,091		$	3,056
Allowance for loan losses from
acquisition of First Pennsylvania
Savings Association		—			—			—			—			40
Provision for loan losses		575			600			600			275			555
Charge offs:
Residential real estate		(11	)		(7	)		(41	)		(70	)		(15	)
Commercial real estate		(14	)		(9	)		—			(334	)		—
Installment		(135	)		(252	)		(295	)		(222	)		(125	)
Commercial		(362	)		(58	)		(334	)		(193	)		(484	)
Total		(522	)		(326	)		(670	)		(819	)		(624	)
Recoveries:
Residential real estate		7			—			3			—			3
Commercial real estate		9			—			—			—			—
Installment		24			39			42			30			10
Commercial		17			8			12			32			51
Total		57			47			57			62			64
Net charge-offs		(465	)		(279	)		(613	)		(757	)		(560	)
Balance at end of period	$	3,027		$	2,917		$	2,596		$	2,609		$	3,091
Ratio of net charge-offs during
the period to average loans
outstanding during the period		0.10	%		0.07	%		0.19	%		0.27	%		0.19	%

Allocation of the Allowance for Loan Losses. The following table sets forth the allocation of the allowance by category and the percent of loans in each category to total loans, which management believes can be allocated only on an approximate basis. The allocation of the allowance to each category is not necessarily indicative of future loss and does not restrict the use of the allowance to absorb losses in any category.

	At September 30,
	2007				2006				2005				2004				2003
	$		%		$		%		$		%		$		%		$		%
	(Dollars in thousands)
Residential real estate loans	$	452	38.8	%	$	369	41.8	%	$	483	42.3	%	$	287	34.6	%		502	35.5	%
Commercial real estate loans		743	16.7			723	15.8			645	18.2			828	20.1			1,089	22.8
Construction loans		150	15.8			256	13.5			177	9.5			228	11.2			122	4.5
Installment loans		226	20.1			263	20.5			302	21.4			389	24			461	24.2
Commercial business loans
and leases		1,456	8.6			1,306	8.4			989	8.6			877	10.1			917	13.0
Total	$	3,027	100.0	%	$	2,917	100.0	%	$	2,596	100.0	%	$	2,609	100.0	%	$	1,091	100.0	%

12

Investment Activities

The Bank is required to maintain a sufficient level of liquid assets (including specified short-term securities and certain other investments), as determined by management and defined and reviewed for adequacy by the FDIC during its regular examinations. The FDIC, however, does not prescribe by regulation a minimum amount or percentage of liquid assets. The level of liquid assets varies depending upon several factors, including: (i) the yields on investment alternatives, (ii) management’s judgment as to the attractiveness of the yields then available in relation to other opportunities, (iii) expectation of future yield levels, and (iv) management’s projections as to the short-term demand for funds to be used in loan origination and other activities. Securities, including mortgage-backed securities, are classified at the time of purchase, based upon management’s intentions and abilities, as securities held to maturity or securities available for sale. Debt securities acquired with the intent and ability to hold to maturity are classified as held to maturity and are stated at cost and adjusted for amortization of premium and accretion of discount, which are computed using the level yield method and recognized as adjustments of interest income. All other debt securities are classified as available for sale to serve principally as a source of liquidity.

Current regulatory and accounting guidelines regarding securities (including mortgage-backed securities) require us to categorize securities as “held to maturity,” “available for sale” or “trading.” At September 30, 2007, the Bank had securities classified as “held to maturity” and “available for sale” in the amount of $74.6 million and $152.2 million, respectively and had no securities classified as “trading.” Securities classified as “available for sale” are reported for financial reporting purposes at fair value with net changes in the market value from period to period included as a separate component of stockholders’ equity, net of income taxes. At September 30, 2007, the Company’s securities available for sale had an amortized cost of $154.7 million and fair value of $152.2 million. The changes in fair value in our available for sale portfolio reflect normal market conditions and vary, either positively or negatively, based primarily on changes in general levels of market interest rates relative to the yields of the portfolio. Additionally, changes in the fair value of securities available for sale do not affect our income nor does it affect the Bank’s regulatory capital requirements or its loans-to-one borrower limit.

At September 30, 2007, the Bank’s investment portfolio policy allowed investments in instruments such as: (i) U.S. Treasury obligations; (ii) U.S. federal agency or federally sponsored agency obligations; (iii) municipal obligations; (iv) mortgage-backed securities and collateralized mortgage obligations; (v) banker’s acceptances; (vi) certificates of deposit; (vii) investment grade corporate bonds and commercial paper; (viii) real estate mortgage investment conduits; (ix) equity securities and mutual funds; and (x) trust preferred securities. The Board of Directors may authorize additional investments.

As a source of liquidity and to supplement its lending activities, the Bank has invested in residential mortgage-backed securities. Mortgage-backed securities can serve as collateral for borrowings and, through repayments, as a source of liquidity. Mortgage-backed securities represent a participation interest in a pool of single-family or other type of mortgages. Principal and interest payments are passed from the mortgage originators, through intermediaries (generally quasi-governmental agencies) that pool and repackage the participation interests in the form of securities, to investors, like us. The quasi-governmental agencies, which include GinnieMae, FreddieMac, and FannieMae, guarantee the payment of principal and interest to investors.

Mortgage-backed securities typically are issued with stated principal amounts. The securities are backed by pools of mortgages that have loans with interest rates that are within a set range and have varying maturities. The underlying pool of mortgages can be composed of either fixed-rate or adjustable-rate mortgage loans. Mortgage-backed securities are generally referred to as mortgage participation certificates or pass-through certificates. The interest rate risk characteristics of the underlying pool of mortgages (i.e., fixed-rate or adjustable-rate) and the prepayment risk, are passed on to the certificate holder. The life of a mortgage-backed pass-through security is equal to the life of the underlying mortgages. Expected maturities will differ from contractual maturities due to scheduled repayments and because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Mortgage-backed securities issued by GinnieMae, FreddieMac, and FannieMae make up a majority of the pass-through certificates market.

13

The Bank also invests in mortgage-related securities, primarily collateralized mortgage obligations, issued or sponsored by GinnieMae, FreddieMac, and FannieMae, as well as private issuers. Investments in private issuer collateralized mortgage obligations are made because these issues generally are higher yielding than agency sponsored collateralized mortgage obligations with similar average life and payment characteristics. All such investments are rated “AAA” by a nationally recognized credit rating agency. Collateralized mortgage obligations are a type of debt security that aggregates pools of mortgages and mortgage-backed securities and creates different classes of collateralized mortgage obligations securities with varying maturities and amortization schedules as well as a residual interest with each class having different risk characteristics. The cash flows from the underlying collateral are usually divided into “tranches” or classes whereby tranches have descending priorities with respect to the distribution of principal and interest repayment of the underlying mortgages and mortgage backed securities as opposed to pass through mortgage backed securities where cash flows are distributed pro rata to all security holders. Unlike mortgage backed-securities from which cash flow is received and prepayment risk is shared pro rata by all securities holders, cash flows from the mortgages and mortgage-backed securities underlying collateralized mortgage obligations are paid in accordance with a predetermined priority to investors holding various tranches of such securities or obligations. A particular tranche or class may carry prepayment risk which may be different from that of the underlying collateral and other tranches. Collateralized mortgage obligations attempt to moderate reinvestment risk associated with conventional mortgage-backed securities resulting from unexpected prepayment activity.

As a Pennsylvania savings bank, the Bank has the authority to invest in the debt or equity securities of any corporation or similar entity existing under the laws of the United States, any state or the District of Columbia subject to the “prudent man” rule. Aggregate equity investments may not exceed the lesser of 7 ½% of the book value of the Bank’s assets or 75% of its capital and surplus. The aggregate investment in the equity securities of any one issuer may not exceed 1% of the book value of the Bank’s assets or more than 5% of the total outstanding shares of the issuer. Under FDIC regulations, the Bank may only invest in listed equity securities or mutual funds.

14

Investment and Mortgage-Backed Securities Portfolio

Investment Securities

The following tables set forth the composition and amortized cost of the Bank’s investment and mortgage-backed securities at the dates indicated.

	At September 30,
	2007		2006		2005
	(In thousands)
Available-for-sale:
U.S. government and agency	$	26,454	$	23,625	$	27,001
Municipal obligations		16,414		20,760		20,721
Corporate obligations		12,584		11,107		10,120
Mutual funds (1)		13,324		12,778		12,247
FreddieMac preferred stock		1,408		1,409		1,409
Equity securities		4,071		4,037		4,304
Trust preferred securities		26,481		27,969		25,434
Total	$	100,736	$	101,685	$	101,236
Held-to-maturity:
U.S. government and agency	$	16,985	$	21,984	$	25,972
Municipal obligations		21,007		22,648		22,662
Corporate obligations		3,487		4,993		6,717
Total	$	41,479	$	49,625	$	55,351

 

⁽¹⁾ Consists of investments in the AMF Ultra Short Mortgage Fund, Access Capital Fund, the CRA Qualified Investment Fund and Legg Mason Value Trust Fund.

 

At September 30, 2007, non-U.S. Government and U.S. Government agency or corporation securities that exceeded ten percent of stockholders’ equity are as follows. The AMF Ultra Short Mortgage Fund invests solely in mortgage-backed securities issued or guaranteed by U.S. government agencies or government-sponsored enterprises or which are rated in the two highest investment grades. The AMF Ultra Short Mortgage Fund is rated “AAAf” by Standard & Poor’s.

Issuer	Book Value		Fair Value
	(In thousands)
The AMF Ultra Short Mortgage Funds	$	11,056	$	10,723

15

Mortgage-Backed Securities

	At September 30,
	2007		2006		2005
	(In thousands)
Available-for-sale:
GinnieMae	$	933	$	1,216	$	3,140
FannieMae		15,226		19,012		27,747
FreddieMac		18,300		23,014		27,609
FannieMae Remic		3,407		5,245		4,145
FreddieMac Remic		7,855		8,047		8,195
Collateralized mortgage obligations		8,247		9,480		11,470
Total	$	53,968	$	66,014	$	82,306
Held-to-maturity:
GinnieMae	$	385	$	448	$	1,096
FannieMae		9,212		11,170		15,534
FreddieMac		9,190		11,075		15,371
FannieMae Remic		1,405		1,837		2,682
FreddieMac Remic		4,918		5,883		8,062
Collateralized mortgage obligations		7,964		5,841		7,220
Total	$	33,074	$	36,254	$	49,965

16

The following tables set forth the amortized cost of each category of investment securities of the Bank at September 30, 2007 which mature during each of the periods indicated and the weighted average yield for each range at maturities. The yields on the tax-exempt investments have been adjusted to their pre-tax equivalents, assuming a 34% tax rate.

	One Year or Less				After One Year Through Five Years				After Five Years Through Ten Years				After Ten Years				Total
	Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield
		(Dollars in housands)
Available-for-sale:
U.S. government and agency	$	11,995	3.43	%	$	6,955	3.73	%	$	5,507	5.13	%	$	1,997	4.67	%	$	26,454	3.96	%
Municipal obligations		—	—			—	—			1,413	3.73			15,001	4.14			16,414	4.10
Corporate obligations		—	—			5,096	5.59			4,496	5.58			2,992	6.98			12,584	5.92
Mutual funds1		13,324	4.99			—	—			—	—			—	—			13,324	4.99
FreddieMac preferred stock		1,408	5.80			—	—			—	—			—	—			1,408	5.80
Equity securities		4,071	4.24			—	—			—	—			—	—			4,071	4.24
Trust preferred securities		—	—			—	—			15,357	6.54			11,124	6.61			26,481	6.57
Total	$	30,798	4.32	%	$	12,051	4.52	%	$	26,773	5.94	%	$	31,114	5.33	%	$	100,736	5.09	%
Held-to-maturity:
U.S. government and agency	$	3,000	3.65	%	$	4,000	3.95	%	$	5,994	4.05	%	$	3,991	4.92	%	$	16,985	4.16	%
Municipal obligations		965	3.01			1,833	4.32			4,067	4.34			14,142	4.83			21,007	4.61
Corporate obligations		1,499	6.40			1,988	4.48			—	—			—	—			3,487	5.31
Total	$	5,464	4.29	%	$	7,821	4.17	%	$	10,061	4.17	%	$	18,133	4.85	%	$	41,479	4.48	%

⁽¹⁾ Consists of investments in the AMF Ultra Short Mortgage Fund, Access Capital Fund, the CRA Qualified Investment Fund and Legg Mason Value Trust Fund

.

17

 

Information regarding the contractual maturities and weighted average yield of the Bank’s mortgage-backed securities portfolio at September 30, 2007 is presented below.

	Amounts at September 30, 2007 Which Mature In
				After			After
	One Year			One to Five			Five to 10			Over 10
	or less			Years			Years			Years			Total
	(Dollars in thousands)
Available-for-sale:
GinnieMae	$	—		$	—		$	594		$	339		$	933
FannieMae		—			—			2,957			12,269			15,226
FreddieMac		—			4,729			1,411			12,160			18,300
FannieMae Remic		—			—			1,691			1,716			3,407
FreddieMac Remic		—			—			—			7,855			7,855
Collateralized mortgage obligations		—			—			—			8,247			8,247
Total	$	—		$	4,729		$	6,653		$	42,586		$	53,968
Weighted average yield		—	%		4.54	%		4.28	%		5.01	%		4.88	%
Held-to-maturity:
GinnieMae	$	—		$	—		$	—		$	385		$	385
FannieMae		—			—			2,884			6,328			9,212
FreddieMac		—			4,510			2,964			1,716			9,190
FannieMac Remic		—			—			1,405			—			1,405
FreddieMac Remic		—			—			—			4,918			4,918
Collateralized mortgage obligations		—			—			—			7,964			7,964
Total	$	—		$	4,510		$	7,253		$	21,311		$	33,074
Weighted average yield		—	%		3.81	%		3.86	%		5.04	%		4.61	%

Sources of Funds

General. Savings deposits obtained through the home office and branch offices have traditionally been the principal source of the Bank’s funds for use in lending and for other general business purposes. The Bank also derives funds from scheduled amortizations and prepayments of outstanding loans and mortgage-backed securities and sales of securities available-for-sale. The Bank also may borrow funds from the FHLB of Pittsburgh and other sources. Borrowings generally may be used on a short-term basis to compensate for seasonal or other reductions in savings deposits or other inflows at less than projected levels, as well as on a longer-term basis to support expanded lending activities.

Deposits. The Bank’s current savings deposit products include passbook savings accounts, demand deposit accounts, NOW accounts, money market deposit accounts and certificates of deposit. Terms on interest-bearing deposit accounts range from three months to ten years. Included among these savings deposit products are Individual Retirement Account (“IRA”) certificates and Keogh Plan retirement certificates (collectively “retirement accounts”).

The Bank’s deposits are obtained primarily from residents of Allegheny and Butler Counties. The principal methods used by the Bank to attract deposit accounts include the offering of a wide variety of services and accounts, competitive interest rates and convenient office locations and service hours. The Bank does not currently pay, nor has it in the past paid, fees to brokers to obtain its savings deposits.

18

The following table shows the distribution of, and certain other information relating to the Bank’s deposits by type as for the periods indicated.

	Year Ended September 30,
	2007				2006				2005
	Average		Average		Average		Average		Average		Average
	Balance		Rate		Balance		Rate		Balance		Rate
	(Dollars in thousands)
Checking accounts:
Non-interest-bearing	$	33,080	—	%	$	30,819	—	%	$	30,652	—	%
Interest-bearing		39,815	0.65			41,056	0.54			45,438	0.46
Passbook and club accounts		58,221	1.10			70,133	1.12			89,825	1.15
Money market accounts		110,737	4.15			82,383	4.06			28,585	2.20
Certificate accounts		177,397	4.48			167,494	3.89			167,483	3.46
Total	$	419,250	3.21	%	$	391,885	2.77	%	$	361,983	2.12	%

In recent years, the Bank has been required by market conditions to rely increasingly on newly-authorized types of short-term certificate accounts and other savings deposit alternatives that are more responsive to market interest rates than passbook accounts and regulated fixed-rate, fixed-term certificates that were historically the Bank’s primary source of savings deposits. As a result of deregulation and consumer preference for shorter term, market-rate sensitive accounts, the Bank has, like most financial institutions, experienced a significant shift in savings deposits towards relatively short-term, market-rate accounts. In recent years, the Bank has been successful in attracting retirement accounts which have provided the Bank with a relatively stable source of funds. As of September 30, 2007, the Bank’s total retirement funds were $47.2 million or 10.9% of its total deposits.

The Bank attempts to control the flow of savings deposits by pricing its accounts to remain generally competitive with other financial institutions in its market area, but does not necessarily seek to match the highest rates paid by competing institutions. In this regard, the senior officers of the Bank meet weekly to determine the interest rates which the Bank will offer to the general public.

Rates established by the Bank are also affected by the amount of funds needed by the Bank on both a short-term and long-term basis, alternative sources of funds and the projected level of interest rates in the future. The ability of the Bank to attract and maintain savings deposits and the Bank’s cost of funds have been, and will continue to be, significantly affected by economic and competitive conditions.

Certificates of Deposits. Maturities of certificates of deposit of $100,000 or more that were outstanding as of September 30, 2007 are summarized as follows:

Maturity	Amount
	(In thousands)
3 months or less	$	9,161
Over 3 months through 6 months		4,291
Over 6 months through 12 months		10,193
Over 12 months		16,591
Total	$	40,236

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Borrowings. The Bank is eligible to obtain advances from the FHLB of Pittsburgh upon the security of the common stock it owns in that bank, securities owned by the Bank and held in safekeeping by the FHLB and certain of its residential mortgages, provided certain standards related to credit worthiness have been met. Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. FHLB advances are generally available to meet seasonal and other withdrawals of deposit accounts and to expand lending, as well as to aid the effort of members to establish better asset and liability management through the extension of maturities of liabilities. At September 30, 2007, the Bank had $126.8 million of advances outstanding, including $104.0 million in long-term advances and $22.8 million in short-term borrowings. Original maturities of long-term debt range from three to ten years. Short-term borrowings represent overnight and three month advances.

The Bank also, from time to time, enters into sales of securities under agreements to repurchase (“repurchase agreements”). Such repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as liabilities in the statement of financial condition. At September 30, 2007, the Bank had $105.5 million in repurchase agreements outstanding, including $10.5 million in retail repurchase agreements and $95.0 million in wholesale structured repurchase agreements.

During fiscal 2006, the Bank began using structured repurchase agreements to replace various FHLB borrowings. The Bank has eight separate repurchase agreements with PNC Bank, N.A. (“PNC”) and Citigroup Global Markets, Inc. (“CGMI”). Each agreement is structured as the sale of a specified amount of identified securities to the counterparty which the Bank has agreed to repurchase five to seven years after the initial sale. The underlying securities consist of various U.S. Government and agency obligations and mortgage-backed securities which continue to be carried as assets of the Bank and the Bank is entitled to receive interest and principal payments on the underlying securities. The Bank is required to post additional collateral if the market value of the securities subject to repurchase falls below 105% of principal amount. While the repurchase agreements are in effect, the Bank is required to pay interest quarterly at the rate specified in the agreement. Seven of the agreements provide an initial fixed or floating interest rate that converts to a floating or fixed rate at the end of six months to one year. The counterparty has the option of terminating the seven repurchase agreements at the conversion date and quarterly thereafter. The Bank also has one fixed rate agreement that does not convert. The counterparty may terminate this agreement at the end of six months. The counterparty may also terminate any of the repurchase agreements upon certain events of default including the Bank’s failure to maintain well capitalized status. Upon termination, the Bank would be required to repurchase the securities. At September 30, 2007, the Bank had $55.0 million outstanding with PNC and $40.0 million outstanding with CGMI.

At September 30, 2007, the Company had outstanding subordinated debt in the amount of $7.7 million. The debentures were issued on September 20, 2007 and initially bore a fixed interest rate of 7.05% per annum through December 15, 2007. The rate thereafter adjusts quarterly to the three-month LIBOR plus a margin of 136 basis points. The debentures mature on December 15, 2037 and are callable in whole or in part at par on or after December 15, 2012. The Company has the right to defer payments of interest on the debentures for up to five years. The debt was issued to a Delaware statutory business trust, FB Capital Statutory Trust III, established by the Company for this purpose. The trust purchased the debentures using funds from the sale of trust preferred securities on substantially the same terms as the subordinated debt.

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The following table sets forth certain information regarding the short-term borrowings (due within one year or less) of the Bank at the dates or for the periods indicated.

	At or for the Year Ended September 30,
	2007			2006			2005
	(Dollars in thousands)
Retail repurchase agreements:
Average balance outstanding	$	9,339		$	7,146		$	6,715
Maximum amount outstanding at any month-end during the period		12,121			9,282			8,811
Weighted average interest rate during the period		4.96	%		4.44	%		2.33	%
Balance outstanding at end of period	$	10,537		$	8,638		$	6,674
Weighted average interest rate at end of period		4.50	%		4.99	%		3.49	%
Federal funds purchased:
Average balance outstanding	$	9,619		$	3,329		$	—
Maximum amount outstanding at any month-end during the period		12,000			7,500			—
Weighted average interest rate during the period		5.28	%		5.11	%		—	%
Balance outstanding at end of period	$	—		$	7,500		$	—
Weighted average interest rate at end of period		—	%		5.41	%		—	%
FHLB Advances:
Average balance outstanding	$	4,247		$	73,111		$	79,860
Maximum amount outstanding at any month-end during the period		50,000			131,520			110,800
Weighted average interest rate during the period		5.42	%		4.60	%		2.88	%
Balance outstanding at end of period	$	—		$	—		$	110,800
Weighted average interest rate at end of period		—	%		—	%		3.84	%
FHLB Revolving Line of Credit
Average balance outstanding	$	29,427		$	14,546		$	—
Maximum amount outstanding at any month-end during the period		79,719			73,611			—
Weighted average interest rate during the period		5.33	%		5.35	%		—	%
Balance outstanding at end of period	$	22,760		$	70,768		$	—
Weighted average interest rate at end of period		5.11	%		5.30	%		—	%
Total average short-term borrowings	$	52,632		$	98,132		$	86,575
Average interest rate of total short-term borrowings		4.92	%		5.28	%		3.82	%

Employees

At September 30, 2007, the Company had 130 full-time and 32 part-time employees. None of these employees are represented by a collective bargaining agent, and the Company believes that it enjoys good relations with its personnel.

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SUPERVISION AND REGULATION

Set forth below is a brief description of certain laws which relate to the regulation of the Company and the Bank. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.

Regulation of the Company

General. The Company, as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and by the Pennsylvania Department of Banking. The Company is also required to file annually a report of its operations with the Federal Reserve and the Pennsylvania Department of Banking. This regulation and oversight is generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of the Bank.

Under the Bank Holding Company Act, the Company must obtain the prior approval of the Federal Reserve before it may acquire control of another bank or bank holding company, merge or consolidate with another bank holding company, acquire all or substantially all of the assets of another bank or bank holding company, or acquire direct or indirect ownership or control of any voting shares of any bank or bank holding company if, after such acquisition, the Company would directly or indirectly own or control more than 5% of such shares. In addition, the Company must obtain the prior approval of the Pennsylvania Department of Banking in order to acquire control of another bank located in Pennsylvania.

Federal statutes impose restrictions on the ability of a bank holding company and its nonbank subsidiaries to obtain extensions of credit from its subsidiary bank, on the subsidiary bank’s investments in the stock or securities of the holding company, and on the subsidiary bank’s taking of the holding company’s stock or securities as collateral for loans to any borrower. A bank holding company and its subsidiaries are also prevented from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services by the subsidiary bank.

A bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve policy that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve regulations, or both.

Non-Banking Activities. The business activities of the Company, as a bank holding company, are restricted by the Bank Holding Company Act. Under the Bank Holding Company Act and the Federal Reserve’s bank holding company regulations, the Company may only engage in, or acquire or control voting securities or assets of a company engaged in, (1) banking or managing or controlling banks and other subsidiaries authorized under the Bank Holding Company Act and (2) any non-banking activity the Federal Reserve has determined to be so closely related to banking or managing or controlling banks to be a proper incident thereto. These include any incidental activities necessary to carry on those activities, as well as a lengthy list of activities that the Federal Reserve has determined to be so closely related to the business of banking as to be a proper incident thereto.

Financial Modernization. The Gramm-Leach-Bliley Act, which became effective in March 2000, permits greater affiliation among banks, securities firms, insurance companies, and other companies under a new type of financial services company known as a “financial holding company.” A financial holding company essentially is a bank holding company with significantly expanded powers. Financial holding companies are authorized by statute to engage in a number of financial activities previously impermissible for bank holding companies, including securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant

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banking activities. The Act also permits the Federal Reserve and the Treasury Department to authorize additional activities for financial holding companies if they are “financial in nature” or “incidental” to financial activities. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized, well managed, and has at least a “satisfactory” CRA rating. A financial holding company must provide notice to the Federal Reserve within 30 days after commencing activities previously determined by statute or by the Federal Reserve and Department of the Treasury to be permissible. The Company has not submitted notice to the Federal Reserve of our intent to be deemed a financial holding company.

Regulatory Capital Requirements. The Federal Reserve has adopted capital adequacy guidelines under which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the Bank Holding Company Act. The Federal Reserve’s capital adequacy guidelines are similar to those imposed on the Bank by the FDIC. See “ -- Regulation of the Bank - Regulatory Capital Requirements.”

Restrictions on Dividends. The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus (retained earnings) is at least equal to contributed capital. The Bank has not declared or paid any dividends that have caused its retained earnings to be reduced below the amount required. Finally, dividends may not be declared or paid if the Bank is in default in payment of any assessment due the Federal Deposit Insurance Corporation.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the federal prompt corrective action regulations, the Federal Reserve may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Regulation of the Bank

General. As a Pennsylvania chartered savings bank with deposits insured by the FDIC, the Bank is subject to extensive regulation and examination by the Pennsylvania Department of Banking and by the FDIC, which insures its deposits to the maximum extent permitted by law. The federal and state laws and regulations applicable to banks regulate, among other things, the scope of their business, their investments, the reserves required to be kept against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans. The laws and regulations governing the Bank generally have been promulgated to protect depositors and not for the purpose of protecting stockholders. This regulatory structure also gives the federal and state banking agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Pennsylvania Department of Banking, the FDIC or the United States Congress, could have a material impact on us and our operations.

Federal law provides the federal banking regulators, including the FDIC and the Federal Reserve, with substantial enforcement powers. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

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Pennsylvania Savings Bank Law. The Pennsylvania Banking Code (“Code”) contains detailed provisions governing the organization, location of offices, rights and responsibilities of trustees, officers, and employees, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The Code delegates extensive rule-making power and administrative discretion to the Pennsylvania Department of Banking so that the supervision and regulation of state-chartered savings banks may be flexible and readily responsive to changes in economic conditions and in savings and lending practices.

The Code also provides state-chartered savings banks with all of the powers enjoyed by federal savings and loan associations, subject to regulation by the Pennsylvania Department of Banking. The Federal Deposit Insurance Act, however, prohibits a state-chartered bank from making new investments, loans, or becoming involved in activities as principal and equity investments which are not permitted for national banks unless (1) the FDIC determines the activity or investment does not pose a significant risk of loss to the Deposit Insurance Fund and (2) the bank meets all applicable capital requirements. Accordingly, the additional operating authority provided to us by the Code is significantly restricted by the Federal Deposit Insurance Act.

Federal Deposit Insurance. The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. Previously, the FDIC administered two separate insurance funds, the Bank Insurance Fund, which generally insured commercial bank and state savings bank deposits, and the Savings Association Insurance Fund, which generally insured savings association deposits. The Bank, which was previously a state savings association, remained a member of the Savings Association Insurance Fund and its deposit accounts are insured by the FDIC, up to prescribed limits.

Under the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”), which was signed into law on February 15, 2006: (i) the Bank Insurance Fund and the Savings Association Insurance Fund were merged into a new combined fund, called the Deposit Insurance Fund effective March 31, 2006, (ii) the current $100,000 deposit insurance coverage will be indexed for inflation (with adjustments every five years, commencing January 1, 2011); and (iii) deposit insurance coverage for retirement accounts has been increased to $250,000 per participant subject to adjustment for inflation. The FDIC has also been given greater latitude in setting the assessment rates for insured depository institutions which could be used to impose minimum assessments.

The FDIC is authorized to set the reserve ratio for the Deposit Insurance Fund annually at between 1.15% and 1.50% of estimated insured deposits. If the Deposit Insurance Fund’s reserves exceed the designated reserve ratio, the FDIC is required to pay out all or, if the reserve ratio is less than 1.50%, a portion of the excess as a dividend to insured depository institutions based on the percentage of insured deposits held on December 31, 1996 adjusted for subsequently paid premiums. Insured depository institutions that were in existence on December 31, 1996 and paid assessments prior to that date (or their successors) are entitled to a one-time credit against future assessments based on their past contributions to the BIF or SAIF.

Pursuant to the Reform Act, the FDIC has determined to maintain the designated reserve ratio at its current 1.25%. The FDIC has also adopted a new risk-based premium system that provides for quarterly assessments based on an insured institution’s ranking in one of four risk categories based on their examination ratings and capital ratios.  Beginning in 2007, well-capitalized institutions with the CAMELS ratings of 1 or 2 were grouped in Risk Category I and were assessed for deposit insurance at an annual rate of between five and seven basis points with the assessment rate for an individual institution to be determined according to a formula based on a weighted average of the institution’s individual CAMEL component ratings plus either five financial ratios or the average ratings of its long-term debt. Institutions in Risk Categories II, III and IV will be assessed at annual rates of 10, 28 and 43 basis points, respectively. The Bank has been designated a Risk Category I institution with a resulting assessment rate of .0612%. The Bank was able to offset its deposit insurance premium for 2007 with its assessment credit. At September 30, 2007 the Bank had a remaining assessment credit of $287,000.

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In addition, all institutions with deposits insured by the FDIC are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, an agency of the Federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. The assessment rate for 2007 is approximately .0114% of insured deposits. These assessments will continue until the Financing Corporation bonds mature in 2017.

Regulatory Capital Requirements. The FDIC has promulgated capital adequacy requirements for state-chartered banks that, like us, are not members of the Federal Reserve System. At September 30, 2007, the Bank exceeded all regulatory capital requirements and was classified as “well capitalized.”

The FDIC’s capital regulations establish a minimum 3% Tier 1 leverage capital requirement for the most highly rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively increases the minimum Tier 1 leverage ratio for such other banks to 4% to 5% or more. Under the FDIC’s regulation, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and, in general, which are considered a strong banking organization, rated composite 1 under the Uniform Financial Institutions Rating System. Tier 1 or core capital is defined as the sum of common stockholders’ equity (including retained earnings), noncumulative perpetual preferred stock and related surplus, and minority interests in consolidated subsidiaries, minus all intangible assets other than certain mortgage and non-mortgage servicing assets and purchased credit card relationships.

The FDIC’s regulations also require that state-chartered, non-member banks meet a risk-based capital standard. The risk-based capital standard requires the maintenance of total capital (which is defined as Tier 1 capital and supplementary (Tier 2) capital) to risk weighted assets of 8%. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item. The components of Tier 1 capital for the risk-based standards are the same as those for the leverage capital requirement. The components of supplementary (Tier 2) capital include cumulative perpetual preferred stock, mandatory subordinated debt, perpetual subordinated debt, intermediate-term preferred stock, up to 45% of unrealized gains on equity securities and a bank’s allowance for loan and lease losses. Allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of supplementary capital that may be included in total capital is limited to 100% of Tier 1 capital.

A bank that has less than the minimum leverage capital requirement is subject to various capital plan and activities restriction requirements. The FDIC’s regulations also provide that any insured depository institution with a ratio of Tier 1 capital to total assets that is less than 2.0% is deemed to be operating in an unsafe or unsound condition pursuant to Section 8(a) of the Federal Deposit Insurance Act and could be subject to termination of deposit insurance.

The Bank is also subject to minimum capital requirements imposed by the Pennsylvania Department of Banking on Pennsylvania-chartered depository institutions. Under the Pennsylvania Department of Banking’s capital regulations, a Pennsylvania bank or savings bank must maintain a minimum leverage ratio of Tier 1 capital (as defined under the Federal Deposit Insurance Corporation’s capital regulations) to total assets of 4%.

In addition, the Pennsylvania Department of Banking has the supervisory discretion to require a higher leverage ratio for any institutions based on the institution’s substandard performance in any of a number of areas. The Bank was in compliance with both the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking capital requirements as of September 30, 2007.

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Affiliate Transaction Restrictions. Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies. Such transactions between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of a bank subsidiary’s capital and surplus and, with respect to such parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary’s capital and surplus. Further, loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. Federal law also requires that all transactions between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Pittsburgh, which is one of 12 regional Federal Home Loan Banks. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the FHLB system. It makes loans to members (i.e. advances) in accordance with policies and procedures established by the board of trustees of the FHLB.

As a member, it is required to purchase and maintain stock in the FHLB of Pittsburgh in an amount not less than 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of its outstanding advances from the FHLB, if any, plus 0.7% of its unused borrowing capacity, whichever is greater. At September 30, 2007, the Bank was in compliance with this requirement.

Federal Reserve System. The Federal Reserve requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking and NOW accounts) and non-personal time deposits. The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy the liquidity requirements that are imposed by the Department. At September 30, 2007, the Bank met its reserve requirements.

Loans to One Borrower. Under Pennsylvania and federal law, Pennsylvania savings banks have, subject to certain exemptions, lending limits to one borrower in an amount equal to 15% of the institution’s capital accounts. An institution’s capital account includes the aggregate of all capital, surplus, undivided profits, capital securities and general reserves for loan losses. Pursuant to the national bank parity provisions of the Pennsylvania Banking Code, the Bank may also lend up to the maximum amounts permissible for national banks, which are allowed to make loans to one borrower of up to 25% of capital and surplus in certain circumstances. As of September 30, 2007, the Bank’s loans-to-one borrower limitations were $7.5 million and $12.5 million, pursuant to the 15% and 25% limits, respectively, and it was in compliance with such limitations.

Item 1A. Risk Factors

In determining whether to invest in our securities, investors should consider, among other factors, the following:

If we experience loan losses in excess of our allowance, our earnings will be adversely affected.

The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan. Management maintains an allowance for loan losses based upon, among other things, historical experience, an evaluation of economic conditions and regular reviews of delinquencies and loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectibility of the loan portfolio and provides an allowance for loan losses based upon a percentage of the outstanding balances and for specific loans when their ultimate collectibility is considered questionable. If management’s assumptions and judgments prove to be incorrect and the allowance for loan losses is inadequate to absorb future losses, or if the bank regulatory authorities require us to increase the allowance for loan losses as a part of their examination process, our earnings and capital could be significantly and adversely affected.

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               As of September 30, 2007, our allowance for loan losses was approximately $3.0 million which represented 0.66% of net outstanding loans. At such date, we had forty-six nonperforming loans totaling $8.9 million. We actively manage our nonperforming loans in an effort to minimize credit losses. Although management believes that its allowance for loan losses is adequate, there can be no assurance that the allowance will prove sufficient to cover future loan losses. Further, although management uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the assumptions used or adverse developments arise with respect to our non-performing or performing loans. Material additions to our allowance for loan losses would result in a decrease in our net income and capital, and could have a material adverse effect on our financial condition and results of operations.

If our nonperforming loans continue to increase, our earnings will suffer.

At September 30, 2007, our non-performing loans (which consist of non-accrual loans) totaled $8.9 million, or 1.95% of the loan portfolio, which is an increase of $6.3 million, or 233.0% over nonperforming loans at September 30, 2006. At September 30, 2007, our nonperforming assets (which include foreclosed real estate) were $9.0 million, or 1.24% of assets. In addition, the Bank had approximately $10.6 million in accruing loans that were 30-89 days delinquent at September 30, 2007. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. While we believe that our allowance for loan losses was adequate at September 30, 2007, there can be no assurance that we will not have to increase our allowance based on changed circumstances that increase the risk of loss associated with nonperforming loans. In addition, the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity. The increase in nonperforming loans at September 30, 2007 was attributable primarily to two commercial real estate loans totaling $5.3 million, which were placed on non-accrual during the year. While the Company believes that the nonperformance of these loans is attributable to the individual circumstances of these borrowers, there can be no assurance that we will not experience further increases in nonperforming loans in the future.

Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.

Commercial loans are often larger and may involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation of the property or business involved, repayment of such loans may be more sensitive than other types of loans to adverse conditions in the real estate market or the economy. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may be substantially dependent on the success of the business itself and the general economic environment. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired.

Most of our loans are secured, in whole or in part, with real estate collateral which is subject to declines in value.

In addition to the financial strength and cash flow characteristics of the borrower in each case, we often secure our loans with real estate collateral. As of September 30, 2007, approximately 90.8% of our loans, including loans held for sale, had real estate as a primary or secondary component of collateral. Real estate values and real estate markets are generally affected by, among other things, changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies, and acts of nature. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower. If real estate prices in our markets decline, the value of the real estate collateral securing our loans could be reduced. If we are required to liquidate the collateral securing a loan during a period of reduced real estate values to satisfy the debt, our earnings and capital could be adversely affected.

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Our business is geographically concentrated and is subject to regional economic factors that could have an adverse impact on our business.

Substantially all of our business is with customers in our market area of Allegheny and Butler Counties. Most of our customers are consumers and small and medium-sized businesses which are dependent upon the regional economy. Adverse changes in economic and business conditions in our markets could adversely affect our borrowers, their ability to repay their loans and to borrow additional funds, and consequently our financial condition and performance.

Additionally, we often secure our loans with real estate collateral, most of which is located in Allegheny and Butler Counties. A decline in local economic conditions could adversely affect the values of such real estate. Consequently, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.

The loss of senior executive officers and certain other key personnel could hurt our business.

Our success depends, to a great extent, upon the services of Richard G. Spencer, our President and Chief Executive Officer, and Michael A. Mooney, our Executive Vice President and Chief Lending Officer. The unexpected loss of these individuals could have a material adverse effect on our operations. From time to time, we also need to recruit personnel to fill vacant positions for experienced lending and credit administration officers. Competition for qualified personnel in the banking industry is intense, and there can be no assurance that we will continue to be successful in attracting, recruiting and retaining the necessary skilled managerial, marketing and technical personnel for the successful operation of our existing lending, operations, accounting and administrative functions or to support the expansion of the functions necessary for our future growth. Our inability to hire or retain key personnel could have a material adverse effect on our results of operations.

Our legal lending limits are relatively low and restrict our ability to compete for larger customers.

At September 30, 2007, our lending limit per borrower was approximately $12.5 million, or approximately 25% of our capital. Accordingly, the size of loans that we can offer to potential borrowers is less than the size of loans that many of our competitors with larger capitalization are able to offer. We may engage in loan participations with other banks for loans in excess of our legal lending limits. However, there can be no assurance that such participations will be available at all or on terms which are favorable to us and our customers.

Risks Related to Our Common Stock

There is a limited trading market for our common stock, which may adversely impact your ability to sell your shares and the price you receive for your shares.

Although our common stock is quoted on the Nasdaq Global Market, there has been limited trading activity in our stock and an active trading market is not expected to develop. This means that there may be limited liquidity for our common stock, which may make it difficult to buy or sell our common stock, may negatively affect the price of our common stock and may cause volatility in the price of our common stock.

There are restrictions on our ability to pay cash dividends.

Although we have paid cash dividends on a quarterly basis since 1987, there is no assurance that we will continue to pay cash dividends. Future payment of cash dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board may deem relevant and will be subject to applicable federal and state laws that impose restrictions on our ability to pay dividends.

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Our common stock is not insured and you could lose the value of your entire investment.

An investment in shares of our common stock is not a deposit and is not insured against loss by the government.

Our management and significant shareholders control a substantial percentage of our stock and therefore have the ability to exercise substantial control over our affairs.

As of September 30, 2007, our directors and executive officers beneficially owned approximately 746,984 shares, or approximately 22.6% of our outstanding common stock, including options to purchase approximately 324,205 shares, in the aggregate, of our common stock at exercise prices ranging from $7.43 to $22.91 per share. Because of the large percentage of stock held by our directors and executive officers and other significant shareholders, these persons could influence the outcome of any matter submitted to a vote of our shareholders.

We may issue additional shares of common or preferred stock, which may dilute the ownership and voting power of our shareholders and the book value of our common stock.

We are currently authorized to issue up to 10,000,000 shares of common stock of which 2,987,593 shares are currently outstanding and up to 5,000,000 shares of preferred stock of which no shares are outstanding. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares and to establish the terms of any series of preferred stock. These authorized but unissued shares could be issued on terms or in circumstances that could dilute the interests of other stockholders. In addition, a total of 467,700 shares of common stock have been reserved for issuance under our stock option plans including a total of 393,600 shares of common stock have been reserved for issuance under options outstanding on September 30, 2007. As of September 30, 2007, options to purchase a total of 326,799 shares were exercisable and had exercise prices ranging from $7.43 to $22.91. Any such issuance will dilute the percentage ownership interest of shareholders and may further dilute the book value of our common stock.

Provisions of our Articles of Incorporation and the Pennsylvania Business Corporation Law could deter takeovers which are opposed by the Board of Directors.

Our articles of incorporation require the approval of 75% of our outstanding shares for any merger or consolidation unless the transaction meets certain fair price criteria or the business combination has been approved or authorized by the Board of Directors. As a Pennsylvania corporation with a class of securities registered with the Securities and Exchange Commission, the Company is governed by certain provisions of the Pennsylvania Business Corporation Law that, inter alia, permit the disparate treatment of certain shareholders; prohibit calls of special meetings by shareholders; require unanimous written consent for shareholder action in lieu of a meeting; require shareholder approval for certain transactions in which a shareholder has an interest; and impose additional requirements on business combinations with persons who are the beneficial owners of more than 20% of the Company’s stock.

Our shareholder rights plan could have the effect of deterring accumulations of our common stock.

The Company has adopted a shareholder rights plan pursuant to which the Company has distributed to each shareholder of record one right for each share held. Each right entitles the holder to purchase 1/100th of a share of the Company’s Junior Participating Preferred Stock, Series A which has voting and rights comparable to the share of common stock. The rights do not become exercisable until a person (other than an exempt person) acquires beneficial ownership of 10% or more of the Company’s outstanding common stock or commences a tender or exchange offer that would result in the person becoming a 10% or greater beneficial owner (an “Acquiring Person”). In that event, each rights holder other than the Acquiring Person will be entitled to purchase shares of the Company’s Junior Participating Preferred Stock, Series A having value equal to twice the exercise price of the rights. In the event the Company merges with an Acquiring Person or

29

an affiliate or associate of the Acquiring Person, the rights entitle holders other than the Acquiring Person to purchase a similar amount of that entity’s stock at half price. The effect of the shareholder rights plan would be to significantly dilute the ownership of an Acquiring Person which may deter persons from accumulating large positions in our common stock.

Risks Related to Our Industry

We operate in a competitive market which could constrain our future growth and profitability.

We operate in a competitive environment, competing for deposits and loans with commercial banks, savings associations and other financial entities. Competition for deposits comes primarily from other commercial banks, savings associations, credit unions, money market and mutual funds and other investment alternatives. Competition for loans comes primarily from other commercial banks, savings associations, mortgage banking firms, credit unions and other financial intermediaries. Many of the financial intermediaries operating in our market area offer certain services, such as international banking services, which we do not offer. Moreover, banks with a larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the needs of larger customers.

We are required to comply with extensive and complex governmental regulation which can adversely affect our business.

Our operations are and will be affected by current and future legislation and by the policies established from time to time by various federal and state regulatory authorities. We are subject to supervision and periodic examination by the Federal Reserve Board (the “FRB”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Pennsylvania Department of Banking. Banking regulations, designed primarily for the safety of depositors, may limit a financial institution’s growth and the return to its investors by restricting such activities as the payment of dividends, mergers with or acquisitions by other institutions, investments, loans and interest rates, interest rates paid on deposits, expansion of branch offices, and the offering of securities or trust services. We are also subject to capitalization guidelines established by federal law and could be subject to enforcement actions to the extent that we are found by regulatory examiners to be undercapitalized. It is not possible to predict what changes, if any, will be made to existing federal and state legislation and regulations or the effect that any such changes may have on our future business and earnings prospects. Further, the cost of compliance with regulatory requirements may adversely affect our ability to operate profitability.

In addition, the monetary policies of the FRB have had a significant effect on the operating results of banks in the past and are expected to continue to do so in the future. Among the instruments of monetary policy used by the FRB to implement its objectives are changes in the discount rate charged on bank borrowings and changes in the reserve requirements on bank deposits. It is not possible to predict what changes, if any, will be made to the monetary policies of the FRB or to existing federal and state legislation or the effect that such change may have on our future business and earnings prospects.

During the past several years, significant legislative attention has been focused on the regulation and deregulation of the financial services industry. Non-bank financial institutions, such as securities brokerage firms, insurance companies and money market funds, have been permitted to engage in activities which compete directly with traditional bank business.

We realize income primarily from the difference between interest earned on loans and investments and interest paid on deposits and borrowings, and changes in interest rates may adversely affect our profitability and assets.

Changes in prevailing interest rates may hurt our business. We derive our income mainly from the difference or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the larger the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.

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Interest rates affect how much money we can lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease. In addition, changes in interest rates can affect the average life of loans and investment securities. A reduction in interest rates generally results in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their debt in order to reduce their borrowing cost. This causes reinvestment risk, because we generally are not able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Changes in market interest rates could also reduce the value of our financial assets. If we are unsuccessful in managing the effects of changes in interest rates, our financial condition and results of operations could suffer.

As a public company, we are subject to numerous reporting requirements that are currently evolving and could substantially increase our operating expenses and divert management’s attention from the operation of our business.

The Sarbanes-Oxley Act of 2002 has required changes in some of our corporate governance, securities disclosure and compliance practices. In response to the requirements of that Act, the SEC has promulgated new rules covering a variety of subjects. Compliance with these new rules has significantly increased our legal and financial and accounting costs, and we expect these increased costs to continue. In addition, compliance with the requirements has taken a significant amount of management’s and the Board of Directors’ time and resources. Likewise, these developments may make it more difficult for us to attract and retain qualified members of our board of directors, particularly independent directors, or qualified executive officers.

As directed by Section 404 of the Sarbanes-Oxley Act, the SEC has adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their annual reports on Form 10-K that contains an assessment by management of the effectiveness of the company’s internal control over financial reporting beginning with fiscal years ending after December 15, 2007. In addition, the public accounting firm auditing the company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal control over financial reporting beginning with fiscal years ending after December 15, 2008. The costs associated with the implementation of this requirement, including documentation and testing, have not been estimated by us. If we are ever unable to conclude that we have effective internal control over financial reporting or, if our independent auditors are unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting for any future year-ends as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities.

Item 1B. Unresolved Staff Comments

Not applicable.

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Item 2. Properties.

At September 30, 2007, the Bank conducted its business from its main office in Pittsburgh, Pennsylvania and twelve full-service branch offices located in Allegheny and Butler counties. The following table sets forth certain information with respect to the offices of the Bank as of September 30, 2007.

		Lease Expiration
Location		Date including
Address	County	Lease to Own Options
Main Office
1009 Perry Highway	Allegheny	Own
Pittsburgh, PA 15237
Branch Offices:
3300 Brighton Road	Allegheny	Own
Pittsburgh, PA 15212
251 South Main Street	Butler	Own
Zelienople, PA 16063
312 Beverly Road	Allegheny	Lease 7/31/08
Pittsburgh, PA 15216
6000 Babcock Blvd.	Allegheny	Lease 11/30/08
Pittsburgh, PA 15237
1701 Duncan Avenue	Allegheny	Lease 01/31/10
Allison Park, PA 15101
4719 Liberty Avenue	Allegheny	Own
Pittsburgh, PA 15224
728 Washington Road	Allegheny	Own
Pittsburgh, PA 15228
2034 Penn Avenue	Allegheny	Own
Pittsburgh, PA 15222
683 Lincoln Avenue	Allegheny	Own
Bellevue, PA 15202
100 Broadway Street	Allegheny	Own
Carnegie, PA 15106
1729 Lowrie Street	Allegheny	Own
Pittsburgh, PA 15212
1339 Freedom Road	Butler	Lease 02/28/13
Cranberry Township, PA 16066
Administrative Offices:
Loan Center	Allegheny	Lease 09/30/17
1014 Perry Highway
Pittsburgh, PA 15237
Operations Center	Allegheny	Own
1015 Perry Highway
Pittsburgh, PA 15237

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Item 3. Legal Proceedings.

The Company is not involved in any legal proceedings other than legal proceedings occurring in the ordinary course of business, of which none are expected to have a material adverse effect on the Company. In the opinion of management, the aggregate amount involved in such proceedings is not material to the financial condition or results of operations of the Bank.

Items 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

PART II

Item 5. Market for the Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a) Market for Common Equity. The Registrant’s common stock is traded on the Nasdaq Global Market under the symbol: “FSBI”. The following table sets forth the quarterly high and low sales prices for the common stock as reported on the Nasdaq Global Market for the past two fiscal years along with cash dividends declared during each quarter in the same period.

	Stock Price				Cash
Quarter Ended:	High		Low		Dividends
September 30, 2007	$	17.98	$	14.83	$	0.14
June 30, 2007		19.10		17.20		0.14
March 31, 2007		19.50		17.78		0.14
December 31, 2006		19.75		18.01		0.14
September 30, 2006		19.95		17.13		0.14
June 30, 2006		20.02		17.74		0.14
March 31, 2006		20.17		18.37		0.13
December 31, 2005		20.90		18.04		0.13

As of September 30, 2007 Fidelity Bancorp, Inc. had 2,987,593 shares of stock outstanding and approximately 1,100 stockholders, including beneficial owners whose stock is held in nominee name.

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The following graph compares the cumulative total shareholder return on the Registrant’s Common Stock with that of (a) the total return index for domestic companies listed on The Nasdaq Stock Market and (b) the total return index for banks listed on The Nasdaq Stock Market. These total return indices of the Nasdaq Stock Market are computed by the Center for Research in Securities Prices (“CRSP”) at the University of Chicago. All three investment comparisons assume the investment of $100 at the market close on September 30, 2002 and the reinvestment of dividends when paid.

	09/30/2002	09/30/2003	09/30/2004	09/30/2005	09/29/2006	09/28/2007
Fidelity Bancorp, Inc.	100.0	148.5	153.9	151.6	154.2	129.6
Nasdaq Stock Market	100.0	152.4	161.9	184.7	194.8	230.6
Nasdaq Bank Stock	100.0	116.4	135.8	141.9	155.1	145.9

There can be no assurance that the Common Stock performance will continue with the same or similar trends depicted in the graph above. The Company will not make or endorse any predictions as to future stock performance.

(b) Use of Proceeds. Not applicable.

(c) Issuer Purchases of Equity Securities. Not applicable.

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Item 6. Selected Financial Data.

Financial Condition Data

	September 30,
(Dollars in Thousands)	2007		2006		2005		2004		2003
Total Assets	$	726,577	$	730,732	$	677,779	$	627,727	$	617,778
Loan receivable, net		458,929		439,027		346,076		290,389		264,412
Mortgage-backed securities and
collateralized mortgage obligations1		86,270		100,838		131,132		130,738		129,572
Investment securities and other earning assets2		147,836		159,810		169,192		176,483		193,596
Total liabilities		680,107		686,537		635,730		585,650		577,583
Savings and time deposits		433,555		414,182		366,812		359,772		366,126
Advances from FHLB
and other borrowings		240,937		266,865		264,160		221,841		207,062
Stockholders' equity		46,470		44,195		42,049		42,077		40,195

Operations Data

	Years Ended September 30,
(Dollars in Thousands, Except per Share Data)	2007			2006			2005			2004			2003
Interest income	$	40,663		$	37,373		$	31,664		$	29,325		$	32,460
Interest expense		26,394			23,814			17,823			16,005			20,195
Net interest income		14,269			13,559			13,841			13,320			12,265
Provision for loan losses		575			600			600			275			555
Net interest income after provision for loan losses		13,694			12,959			13,241			13,045			11,710
Realized gain (loss) on sale of securities, net		126			552			609			639			748
Writedown of investment securities		—			—			(43	)		—			(110	)
Gain on sale of loans		100			49			36			47			512
Service fees and other income		3,276			3,232			3,186			3,081			2,865
Operating expenses		12,660			12,086			12,153			11,475			10,711
Income before income tax provision
and extraordinary gain		4,536			4,706			4,876			5,337			5,014
Income tax provision		914			840			1,000			1,016			961
Income from continuing operations		3,622			3,866			3,876			4,321			4,053
Income from extraordinary gain, net of taxes		89			318			—			—			—
Net income	$	3,711		$	4,184		$	3,876		$	4,321		$	4,053
Diluted income from continuing operations	$	1.19		$	1.28		$	1.27		$	1.40		$	1.24
Diluted income from extraordinary gain, net of taxes		.03			.10			—			—			—
Diluted net income per share3	$	1.22		$	1.38		$	1.27		$	1.40		$	1.24
Cash dividends per share3		0.56			0.54			0.478			0.416			0.378
Dividend Payout Ratio3		45.90	%		39.13	%		37.64	%		29.71	%		30.48	%
Book value per share3	$	15.55		$	14.93		$	14.27		$	14.31		$	13.70
Average interest rate spread4		2.02	%		2.03	%		2.26	%		2.31	%		2.15	%
Return on average assets		0.51			0.59			0.59			0.69			0.66
Return on average stockholders' equity		8.13			9.89			9.24			10.62			9.45
Average equity to assets ratio		6.28			5.96			6.39			6.48			6.95
Common shares outstanding3		2,987,593			2,960,496			2,945,677			2,940,654			2,932,797

¹ Consists of mortgage-backed securities and collateralized mortgage obligations classified as held to maturity and available for sale.

² Consists of interest-bearing deposits, investment securities classified as held to maturity and available for sale, and Federal Home Loan Bank stock.

³ Per share and common shares outstanding amounts were restated to reflect the 10% stock dividends in May 2003, May 2004, and May 2005.

⁴ Tax equivalent

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company reported net income of $3.71 million or $1.22 per share on a diluted basis (including an extraordinary gain of $89,000, net of tax or $.03 per diluted share) for fiscal 2007 compared to $4.18 million or $1.38 per share on a diluted basis (including an extraordinary gain of $318,000, net of tax or $.10 per diluted share) for fiscal 2006 compared to $3.88 million or $1.27 per share on a diluted basis for fiscal 2005. Income from continuing operations for the year ended September 30, 2007 was $3.6 million ($1.19 per diluted share) compared to $3.9 million ($1.28 per diluted share) for the prior fiscal year.

Return on average equity was 8.13%, 9.89%, and 9.24% for fiscal years 2007, 2006 and 2005, respectively. Return on average assets was 0.51%, 0.59%, and 0.59% for fiscal 2007, 2006, and 2005, respectively. The ratio of other expenses to average assets for fiscal 2007 was 1.73% compared to 1.70% in fiscal 2006 and 1.85% in fiscal 2005.

Total assets of the Company totaled $726.6 million at September 30, 2007, compared to $730.7 million at September 30, 2006. Decreases were noted in securities, partially offset by increases in loans receivable and cash and cash equivalents.

The operating results of the Company depend primarily upon its net interest income, which is the difference between the yield earned on its interest earning assets and the rates paid on its interest bearing liabilities (interest-rate spread) and also the relative amounts of its interest earning assets and interest bearing liabilities. For the fiscal year ended September 30, 2007, the tax-equivalent interest-rate spread decreased to 2.02%, as compared to 2.03% in fiscal 2006. The tax-equivalent spread in fiscal 2005 was 2.26%. The ratio of average interest earning assets to average interest bearing liabilities increased to 103.2% in fiscal 2007, from 102.7% in fiscal 2006. The ratio was 102.8% in fiscal 2005. The decrease in the spread for fiscal 2007 is attributed to the average yield on total interest earning assets increasing less than the average rate paid on interest bearing liabilities. The Company’s operating results are also affected to varying degrees by, among other things, service charges and fees, gains and losses on sales of securities and loans, provision for loan losses, other operating income, operating expenses, and income taxes.

Critical Accounting Policies, Judgments and Estimates

Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. These policies are contained in Note 1 to the consolidated financial statements.

Our accounting and reporting policies conform with the accounting principles generally accepted in the United States of America and general practices within the financial services industry. Recent accounting pronouncements are contained in Note 1 to the consolidated financial statements. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurances that actual results will not differ from those estimates. If actual results are different than management’s judgments and estimates, the Company’s financial results could change, and such change could be material.

Allowance for Loan Losses. The Company considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies.

36

The balance in the allowance for loan losses is determined based on management’s review and evaluation of the loan portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions, and other pertinent factors, including management’s assumptions as to future delinquencies, recoveries and losses. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.

Valuation of Goodwill. The Company assesses the impairment of goodwill at least annually, and whenever events or significant changes in circumstances indicate that the carrying value may not be recoverable. Factors that the Company considers important in determining whether to perform an impairment review include significant underperformance relative to forecasted operating results and significant negative industry or economic trends. If the Company determines that the carrying value of goodwill may not be recoverable, then the Company will assess impairment based on a projection of undiscounted future cash flows and measure the amount of impairment based on fair value.

Accounting for Stock Options. Prior to October 1, 2005, the Company accounted for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. No stock-based employee compensation was reflected in net income, for periods ended prior to October 1, 2005 as all options granted had an exercise price equal to the market value of the underlying common stock on the grant date. However, the Company adopted SFAS No. 123R as of October 1, 2005 and stock based compensation expense is reported in net income. Stock based compensation expense is reported in net income utilizing the fair-value-based method set forth in SFAS No. 123R. The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in Note 13. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee and director terminations within the model, as well as the expected term of options granted, which represents the period of time that options granted are expected to be outstanding. Separate groups of employees and directors that have similar historical exercise behavior are considered separately for valuation purposes. Ranges result from certain groups of employees and directors exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. All of these assumptions may be susceptible to change and would impact earnings in future periods.

Securities. Securities for which the Company has the positive intent and ability to hold to maturity are reported at cost adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. Declines in the fair value of individual securities below their amortized cost that are other than temporary result in writedowns of the individual securities to their estimated fair value. Such writedowns are included in earnings as realized losses. For a discussion on the determination of an other than temporary decline, please refer to Note 1 of the consolidated financial statements. The Company recognized other than temporary writedowns of $43,000 in fiscal 2005. There were no writedowns in fiscal 2007 and 2006.

Liquidity and Capital Resources

The Company has no operating business other than that of the Bank. The Company’s principal liquidity needs are for the payment of dividends and the payment of interest on its outstanding subordinated debt. The Company’s principal sources of liquidity are earnings on its investment securities portfolio and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends. At September 30, 2007, the Bank could pay approximately $2.6 million in dividends to the Company without prior approval from regulators.

37

The Bank’s primary sources of funds have historically consisted of deposits, amortization and prepayments of outstanding loans and mortgage-backed securities, borrowings from the FHLB of Pittsburgh and other sources, including repurchase agreements and sales of investments. During fiscal 2007, the Bank used its capital resources primarily to meet its ongoing commitments to fund maturing savings certificates and savings withdrawals, fund existing and continuing loan commitments, and to maintain its liquidity. At September 30, 2007 the total of approved loan commitments amounted to $12.0 million and the Company had $13.8 million of undisbursed loan funds. Unfunded commitments under lines and letters of credit amounted to $52.6 million at September 30, 2007. The amount of savings certificates which are scheduled to mature in the twelve-month period ended September 30, 2008 is $102.8 million. Management believes that, by evaluation of competitive instruments and pricing in its market area, it can, in most circumstances, manage and control maturing deposits so that a substantial amount of such deposits are redeposited in the Company

Contractual Obligations

The following table represents the Company’s balance sheet aggregate contractual obligations to make future payments as of September 30, 2007.

	Payments Due In
					One		Three
			Less Than		Year to		Years to
			One		Three		Five		Over Five
	Total		Year		Years		Years		Years
	(Dollars in Thousands)
Long-Term Debt Obligations:
Time deposits	$	191,353	$	102,803	$	80,837	$	6,612	$	1,101
FHLB Advances		104,050		30,000		68,624		5,426		—
Structured repurchase
agreements		95,000		—		—		50,000		45,000
Subordinated debt		7,732		—		—		—		7,732
Operating leases		1,265		225		343		258		439
	$	399,400	$	133,028	$	149,804	$	62,296	$	54,272

In addition, the Company, in the conduct of ordinary business operations routinely enters into contracts for services. These contracts may require payment for services to be provided in the future and may also contain penalty clauses for the early termination of the contract. Management is not aware of any additional commitments or contingent liabilities, which may have a material adverse impact on the liquidity or capital resources of the Company.

Off-Balance Sheet Arrangements

The Company is also party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. The Company is not party to any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or resources.

Capital

At September 30, 2007, the Company had capital in excess of all applicable regulatory capital requirements. At September 30, 2007, the ratio of the Company’s Tier 1 capital to average assets was 7.20%. The Company’s ratio of Tier 1 capital to risk-weighted assets was 10.94% and its ratio of total capital to risk-weighted assets was 11.57%.

The Bank currently exceeds all regulatory capital requirements, having a leverage ratio of Tier 1 capital to total average assets of 6.52%, a ratio of Tier 1 capital to risk-weighted assets of 9.91%, and a ratio of qualifying total capital to risk-weighted assets and off-balance sheet items of 10.55% at September 30, 2007. As a result, management does not anticipate regulatory capital requirements will have a material impact on operations.

38

Financial Condition

The Company’s assets were $726.6 million at September 30, 2007, a decrease of $4.2 million or .57% from assets at September 30, 2006. Decreases were noted in securities, partially offset by increases in loans receivable and cash and cash equivalents.

Loan Portfolio

Net loans receivable increased $19.9 million or 4.5% to $458.9 million at September 30, 2007 from $439.0 million at September 30, 2006. Loans originated totaled $147.0 million in fiscal 2007, including amounts disbursed under lines of credit, versus $183.7 million in fiscal 2006. Mortgage loans originated amounted to $74.7 million, including $8.3 million originated for sale, compared to $108.5 million, including $4.4 million originated for sale, in fiscal 2007 and 2006, respectively. The Bank did not purchase any mortgage loans in fiscal 2007 or fiscal 2006. The decrease in the level of mortgage loan originations in fiscal 2007 primarily reflects a decrease in customer demand for this product in the Bank’s market area. The origination of adjustable rate mortgages (ARM’s) decreased to $14.3 million in fiscal 2007 from $53.8 million in fiscal 2006. The decrease reflected the increased popularity of fixed rate loans with customers as mortgage rates remained historically low as well as a decrease in overall customer demand as mentioned above. Primarily for asset/liability management purposes, the Company initiated a program in fiscal 2001 in which a portion of the fixed rate, single-family mortgage loans originated were sold. Gains of $100,000 were realized on these sales in fiscal 2007. Principal repayments on outstanding mortgage loans increased to $51.2 million in fiscal 2007 as compared to $40.9 million in fiscal 2006. The combination of the above factors resulted in an overall increase in mortgage loans receivable to $339.1 million at September 30, 2007 from $323.9 million at September 30, 2006.

Other loan originations, including installment loans, commercial business loans and disbursements under lines of credit totaled $72.3 million in fiscal 2007 versus $75.2 million in fiscal 2006. During fiscal 2007, the Bank continued to emphasize other loans, particularly home equity loans, equity lines of credit, and commercial business loans, since they generally have shorter terms than mortgage loans and would perform better in a rising rate environment. Installment loan originations and consumer lines of credit disbursements were $22.3 million in fiscal 2007 compared to $37.4 million in fiscal 2006. Commercial business loan originations and business line of credit disbursements were $50.0 million in fiscal 2007 compared to $37.8 million in fiscal 2006. Principal repayments on other loans were $67.2 million in fiscal 2007 compared to $55.3 million in 2006. The net result of the above factors caused the balance of installment loans to increase to $95.6 million at September 30, 2007, as compared to $93.3 million at September 30, 2006. Commercial business loans and leases were $41.0 million at September 30, 2007 versus $38.2 million at September 30, 2006.

39

Non-Performing Assets

The following table sets forth information regarding non-accrual loans and foreclosed real estate at the dates indicated. The table does not include $150,000, $255,000, and $53,000 in loans at September 30, 2007, 2006 and 2005, respectively, that were more than 90 days past maturity but were otherwise performing in accordance with their terms. The Bank did not have any loans, which were classified as troubled debt restructurings at the dates presented.

	September 30,
	2007			2006			2005
	(Dollars in Thousands)
Non-accrual residential real estate loans
(one-to-four family)	$	831		$	403		$	533
Non-accrual construction, multi-family residential and
commercial real estate loans		5,628			344			179
Non-accrual installment loans		340			238			188
Non-accrual commercial business and lease loans		1,947			1,700			1,419
Total non-performing loans	$	8,746		$	2,685		$	2,319
Total non-performing loans as a percent of net loans
receivable		1.91	%		0.61	%		0.67	%
Total foreclosed real estate, net of related reserves	$	52		$	215		$	789
Total non-performing loans and foreclosed real estate
as a percent of total assets		1.21	%		0.40	%		0.46	%

Nonperforming loans increased to $8.9 million (1.91% of net loans receivable) at September 30, 2007 compared to $2.7 million (0.61% of net loans receivable) at September 30, 2006. The increase in nonperforming loans is due to two commercial real estate loans totaling $5.3 million which were placed on non-accrual during the year. At September 30, 2007, non-accrual loans consisted of thirteen 1-4 family residential real estate loans totaling $831,000, three commercial real estate loan totaling $5.63 million, twenty one installment loans totaling $340,000, and nine commercial business loans totaling $2.14 million. The largest individual non-accrual loan is a commercial real estate loan for $2.74 million.

Management has evaluated these loans and is satisfied that the allowance for loan losses at September 30, 2007 is adequate. The allowance for loan losses was $3.027 million at September 30, 2007, $2.917 million at September 30, 2006, and $2.596 million at September 30, 2005. The balance at September 30, 2007, at 0.66% of net loans receivable and 33.9% of non-performing loans, is considered reasonable by management.

Foreclosed real estate at September 30, 2007 consists of one commercial real estate property, which is located in the Bank’s market area. Management believes that the carrying value of the property at September 30, 2007 approximates the fair value less costs to sell. However, while management uses the best information available to make such determinations, future adjustments may become necessary.

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Securities Available for Sale

Securities available for sale decreased $13.2 million or 8.0% to $152.2 million at September 30, 2007 from $165.4 million at September 30, 2006. These securities may be held for indefinite periods of time and are generally used as part of the Bank’s asset/liability management strategy. These securities may be sold in response to changes in interest rates, prepayment rates or to meet liquidity needs. These securities consist of mortgage-backed securities, collateralized mortgage obligations, U.S. Government and Agency securities, tax-exempt municipal obligations, mutual funds, Federal Home Loan Mortgage Corporation stock, corporate obligations, trust preferred securities and other equity securities. During fiscal 2007, the Company purchased $11.4 million of these securities and sold $9.9 million. Sales of these securities in fiscal 2007 resulted in a net pretax gain of $126,000. The Company does not have any collateralized debt obligations or subprime mortgage-backed securities.

Securities Held to Maturity

Securities held to maturity decreased $11.3 million or 13.2% to $74.6 million at September 30, 2007, compared to $85.9 million at September 30, 2006. These investments are comprised of mortgage-backed securities, collateralized mortgage obligations, U.S. Government and Agency securities, tax-exempt municipal securities and corporate obligations. During fiscal 2007, the Bank purchased $5.0 million of these securities.

Deposits

Deposits increased $19.4 million during fiscal 2007 to $433.6 million at September 30, 2007 compared to $414.2 million at September 30, 2006. The increase in deposits in primarily attributed to an increase in time deposits and checking accounts, partially offset by decreases in passbook accounts and money market accounts.

The increase in time deposits reflects the Bank’s attempt to retain or increase market share by offering competitive rates on these products. Although the Bank has seen a significant amount of new money in these accounts, the increase is also correlated to the decrease in passbook and money market accounts, as customers sought a higher return. In addition, the Bank faces competition for deposits from alternative sources such as the stock market and mutual funds. The increase in checking accounts reflects the increased emphasis management has placed on attracting and retaining such accounts.

Short-Term Borrowings

Short-term borrowings include Federal Home Loan Bank “RepoPlus” advances, a Federal Home Loan Bank revolving line of credit, federal funds purchased, and to a much lesser extent, treasury, tax and loan notes. These borrowings decreased $55.0 million to $23.6 million at September 30, 2007, from $78.6 million at September 30, 2006. The decrease was a result of the Bank converting some of these fundings to long-term debt and structured repurchase agreements with adjustable-rate features, as well as the increase in the Bank’s deposits. The Bank continues to utilize short-term borrowings as both a short-term funding source and as an effective means to structure borrowings to complement asset/liability management goals.

Subordinated Debt

Subordinated debt represents debt issued by the Company to FB Capital Statutory Trust III in conjunction with the issuance of trust preferred securities by the Trust. The debt is unsecured and ranks subordinated and junior in right of payment to all indebtedness, liabilities and obligations of the Company. The debt is due concurrently with the trust preferred securities. Subordinated debt decreased $2.6 million to $7.7 million at September 30, 2007 from $10.3 million at September 30, 2006. On September 26, 2007, $10.0 million of floating rate trust preferred securities bearing interest of 8.76%, with an initial capitalization in common stock of $310,000, were called. On September 20, 2007 the Company issued $7.5 million of floating rate trust preferred securities with an initial interest rate at 7.05% and with an initial capitalization in common stock of $232,000. The interest rate on the new trust preferred securities resets quarterly at 3 – month LIBOR plus 136 basis points.

41

Long-Term Debt

Long-term debt represents FHLB advances, including fixed-rate advances and “Convertible Select” advances. Long-term debt increased $9.8 million or 10.3% to $104.1 million at September 30, 2007, from $94.3 million at September 30, 2006. During fiscal 2007 the Company decided to take advantage of the lower interest rates offered on long-term debt to replace short-term borrowings consistent with asset/liability management.

Securities Sold Under Agreements To Repurchase

Securities sold under agreements to repurchase represents retail agreements and wholesale structured borrowings. Securities sold under agreement to repurchase increased $21.9 million or 26.2% to $105.5 million at September 30, 2007, from $83.6 million at September 30, 2006. As noted above, structured repurchase agreements were utilized to replace short-term borrowings consistent with asset/liability management strategies.

Stockholders’ Equity

Stockholders’ equity increased $2.3 million or 5.1% to $46.5 million at September 30, 2007 compared to September 30, 2006. This result reflects net income of $3.71 million, stock options exercised of $301,000, and a related tax benefit of $14,000, stock issued under the Dividend Reinvestment Plan of $157,000, and stock based compensation of $93,000. Offsetting these increases was an increase in unrealized holding losses, net of unrealized holding gains, on securities available for sale of $152,000, common stock cash dividends paid of $1.7 million and the purchase of treasury stock at cost for $177,000.

Results of Operations

Comparison of Fiscal Years Ended September 30, 2007, 2006, and 2005

Net income was $3.71 million ($1.22 per diluted share) for the year ended September 30, 2007 compared to $4.18 million ($1.38 per diluted share) for fiscal 2006 and $3.88 million ($1.27 per diluted share) for fiscal 2005. Fiscal 2007 and 2006 results include an extraordinary gain of $89,000 and $318,000, respectively. The gain for both periods was related to insurance proceeds received from the destructive fire that devastated the Bank’s Carnegie Branch location in October 2005. While the insurance proceeds were reinvested in the construction of the new Carnegie Branch location, the proceeds, net of the book value of the associated assets at the time of the fire, were recorded as a gain in accordance with accounting literature. There were no extraordinary items recorded in fiscal 2005. Income from continuing operations for the fiscal year ended September 30, 2007 was $3.62 million ($1.19 per diluted share) compared to $3.87 million ($1.28 per diluted share) for the fiscal year ended September 30, 2006 and $3.88 million ($1.27 per diluted share) for the fiscal year ended September 30, 2005. Factors contributing to the decrease in net income from continuing operations from fiscal 2006 include a decrease in other income of $331,000, or 8.6%, and an increase in other expenses of $574,000, or 4.7%, which offset an increase in net interest income of $710,000 or 5.2%, and a decrease in the provision for loan losses of $25,000.

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Average Balance Sheet and Analysis of Net Interest Income

The following table presents for the periods indicated the total dollar amount of interest from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The average balance of loans receivable includes non-accrual loans. Average balances are based on month-end balances. The Company does not believe that the use of month-end balances has a material impact on the information presented. Interest income on tax exempt investments has been adjusted for federal income tax purposes using an assumed rate of 34%.

		Year Ended September 30,
		2007						2006						2005
		Average			Average			Average			Average			Average			Average
		Balance		Interest	Yield/Cost			Balance		Interest	Yield/Cost			Balance		Interest	Yield/Cost
		(Dollars in thousands)
Interest-earning assets:
Mortgage loans	$	320,415	$	19,611	6.12	%	$	280,211	$	16,470	5.88	%	$	206,415	$	12,379	6.00	%
Installment loans		94,206		6,072	6.45			85,778		5,360	6.25			75,980		4,483	5.90
Commercial business and lease loans		41,096		3,116	7.58			30,555		2,609	8.54			31,762		1,997	6.29
Mortgage-backed securities		93,385		4,131	4.42			116,770		5,054	4.33			136,821		5,387	3.94
Investment securities and FHLB stock:
Taxable		112,778		5,930	5.26			122,056		5,795	4.75			136,267		5,524	4.05
Tax-exempt		39,631		2,523	6.37			45,431		2,938	6.47			40,459		2,736	6.76
Interest-earning deposits		643		33	5.12			404		35	8.66			869		8	0.91
Total interest-earning assets		702,154		41,416	5.90			681,205		38,261	5.62			628,573		32,514	5.17
Non-interest-earning assets		27,538						28,167						27,879
Total assets	$	729,692					$	709,372					$	656,452
Interest-bearing liabilities:
Deposits	$	420,398	$	13,440	3.20	%		$394,743	$	10,894	2.76	%	$	363,686	$	7,710	2.12	%
Short-term borrowings		47,901		2,356	4.92			100,368		4,707	4.69			86,913		2,507	2.88
Securities sold under agreement to
repurchase		92,127		4,195	4.55			33,685		1,352	4.01			6,715		131	1.95
Long-term debt		109,557		5,473	5.00			124,377		5,998	4.82			143,986		6,816	4.73
Subordinated debt		10,112		930	9.20			10,310		863	8.37			10,310		659	6.39
Total interest-bearing liabilities		680,095		26,394	3.88			663,483		23,814	3.59			611,610	$	17,823	2.91
Non-interest bearing liabilities		4,002						3,598						2,895
Total liabilities		684,097						667,081						614,505
Stockholders' equity		45,595						42,291						41,947
Total liabilities and stockholders' equity	$	729,692					$	709,372					$	656,452
Net interest income			$	15,022					$	14,447					$	14,691
Interest rate spread(1)					2.02	%					2.03	%					2.26	%
Net interest margin(2)					2.14	%					2.12	%					2.34	%
Ratio of average interest-earning assets
to average interest-bearing liabilities					103.24	%					102.67	%					102.77	%

 

⁽¹⁾ Interest rate spread is the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities.

   

⁽²⁾ Net interest margin is net interest income divided by average interest-earning assets.

 

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Rate/Volume Analysis

The following table presents certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in volume (change in volume multiplied by old rate), and (2) changes in rate (change in rate multiplied by old volume). Changes in rate/volume (change in rate multiplied by change in volume) have been allocated between changes in rate and changes in volume based on the absolute values of each. Interest income on tax exempt investments has been adjusted for federal income tax purposes using a rate of 34%.

	Year Ended September 30,
	2007 vs. 2006									2006 vs. 2005
	Increase (Decrease)									Increase (Decrease)
	Due to									Due to
	Volume			Rate			Net			Volume			Rate			Net
	(In thousands)
Interest income on interest-earning assets:
Mortgage loans	$	2,363		$	778		$	3,141		$	4,427		$	(336	)	$	4,091
Mortgage-backed securities		(1,012	)		89			(923	)		(788	)		455			(333	)
Installment loans		540			172			712			626			251			877
Commercial business loans and leases		900			(393	)		507			(77	)		688			611
Investment securities and other investments		(991	)		709			(282	)		(493	)		994			501
Total interest-earning assets		1,800			1,355			3,155			3,695			2,052			5,747
Interest expense on interest-bearing liabilities:
Deposits		607			1,939			2,546			548			2,636			3,184
Borrowed funds		(120	)		87			(33	)		849			1,754			2,603
Subordinated debt		(17	)		84			67			—			204			204
Total interest-bearing liabilities		470			2,110			2,580			1,397			4,594			5,991
Net change in net interest income	$	1,330		$	(755	)	$	575		$	2,298		$	(2,542	)	$	(244	)

Interest Income on Loans

Interest income on loans increased by $4.4 million or 17.8% to $28.8 million in fiscal 2007 as compared to fiscal 2006. The increase reflects both an increase in the average size of the loan portfolio and an increase in the average yield earned on the loan portfolio. The average size of the loan portfolio increased from an average balance of $396.5 million in fiscal 2006 to $455.7 million in fiscal 2007. The increase in the average balance of the loan portfolio is primarily attributed to a high level of commercial business loan originations and business line of credit disbursements in fiscal 2007.

Interest income on loans increased by $5.6 million or 29.6% to $24.4 million in fiscal 2006 as compared to fiscal 2005. The increase primarily reflects both an increase in the average size of the loan portfolio and an increase in the average yield earned on the loan portfolio. The average size of the loan portfolio increased from an average balance of $314.2 million in fiscal 2005 to $396.5 million in fiscal 2006. The increase in the average balance of the loan portfolio is primarily attributed to a record high level of residential mortgage loan originations in fiscal 2006.

Interest Income on Mortgage-Backed Securities

Interest income on mortgage-backed securities decreased by $923,000 or 18.3% to $4.1 million in fiscal 2007 from $5.1 million in fiscal 2006. The decrease reflects a decrease in the average balance of mortgage-backed securities held, partially offset by an increase in the yield earned on these securities in fiscal 2007. The average balance of mortgage-backed securities held, including mortgage-backed securities available for sale, decreased from $116.8 million in fiscal 2006 to $93.4 million in fiscal 2007. The yield earned on mortgage-backed securities is affected, to some degree, by the repayment rate of loans underlying the securities. Premiums or discounts on the securities, if any,

44

are amortized to interest income over the life of the securities using the level yield method. During periods of falling interest rates, repayments of the loans underlying the securities generally increase, which shortens the average life of the securities and accelerates the amortization of the premium or discount. Falling rates, however, also tend to increase the market value of the securities. A rising rate environment generally causes a reduced level of loan repayments and a corresponding decrease in premium/discount amortization rates. Rising rates generally decrease the market value of the securities.

Interest income on mortgage-backed securities decreased by $333,000 or 6.2% to $5.1 million in fiscal 2006 from $5.4 million in fiscal 2005. The decrease reflects a decrease in the average balance of mortgage-backed securities held, partially offset by an increase in the yield earned on these securities in fiscal 2006. The average balance of mortgage-backed securities held, including mortgage-backed securities available for sale, decreased from $136.8 million in fiscal 2005 to $116.8 million in fiscal 2006.

Interest Income on Investments

Interest income on investments (including those available for sale), which includes interest earning deposits with other institutions and FHLB stock, was $7.7 million in fiscal 2007, compared to $7.9 million in fiscal 2006. The fiscal 2007 results reflect a decrease in the average balance of such investments to $153.1 million in fiscal 2007 as compared to $167.9 million in fiscal 2006, partially offset by an increase in the average tax-equivalent yield earned in fiscal 2007 as compared to fiscal 2006.

Interest income on investments was $7.9 million in fiscal 2006 compared to $7.4 million in fiscal 2005. The fiscal 2006 results reflect a decrease in the average balance of such investments to $167.9 million in fiscal 2006 as compared to $177.6 million in fiscal 2005, partially offset by an increase in the average tax-equivalent yield earned in fiscal 2006 as compared to fiscal 2005.

Interest Expense on Deposits

Interest on deposits increased $2.5 million or 23.4% to $13.4 million in fiscal 2007 from $10.9 million in fiscal 2006. The increase reflects both an increase in the average balance of deposits, as well as an increase in the average rate paid on deposits in fiscal 2007, as compared to fiscal 2006. As noted above, the Bank has been required to pay more competitive rates to retain deposits.

Interest on deposits increased $3.2 million or 41.3% to $10.9 million in fiscal 2006 from $7.7 million in fiscal 2005. The increase reflects both an increase in the average balance of deposits, as well as an increase in the average rate paid on deposits in fiscal 2006, as compared to fiscal 2005.

Interest Expense on Short-Term Borrowings

Interest expense on short-term borrowings (including FHLB “RepoPlus” advances, FHLB revolving line of credit, federal funds purchased, and treasury, tax and loan notes) decreased $2.4 million or 50.0% to $2.4 million in fiscal 2007 compared to $4.7 million in fiscal 2006. The decrease reflects a lower level of average short-term borrowing in fiscal 2007, partially offset by an increase in the cost of these funds.

Interest expense on short-term borrowings increased $2.2 million or 87.8% to $4.7 million in fiscal 2006 compared to $2.5 million in fiscal 2005. The increase reflects both a higher level of average short-term borrowing in fiscal 2006 and an increase in the cost of these funds.

Interest Expense on Securities Sold Under Agreement to Repurchase

Interest expense on securities sold under agreement to repurchase (including retail and structured borrowings) increased $2.8 million or 210.3% to $4.2 million in fiscal 2007 compared to $1.4 million in fiscal 2006. The increase reflects both a higher level of average securities sold under agreement to repurchase in fiscal 2007 and an increase in the cost of these funds.

45

Interest expense on securities sold under agreement to repurchase increased $1.2 million or 932.1% to $1.4 million in fiscal 2006 compared to $131,000 in fiscal 2005. The increase reflects both a higher level of average securities sold under agreement to repurchase in fiscal 2006 and an increase in the cost of these funds.

Interest Expense on Long-Term Debt

Interest expense on long-term debt (including FHLB fixed rate advances, and “Convertible Select” advances ) decreased $525,000 or 8.8% to $5.5 million in fiscal 2007, compared to $6.0 million in fiscal 2006. The decrease reflects a decrease in the average balance of long-term debt, partially offset by an increase in the cost of these borrowings.

Interest expense on long-term debt decreased $818,000 or 12.0% to $6.0 million in fiscal 2006 compared to $6.8 million in fiscal 2005. The decrease reflects a decrease in the average balance of long-term debt, partially offset by an increase in the cost of these borrowings.

Provision for Loan Losses

The provision for loan losses is charged to operations to bring the total allowance for loan losses to a level that represents management’s best estimates of the losses inherent in the portfolio, based on a monthly review by management of the following factors:

• historical experience

• volume

• type of lending conducted by the Bank

• industry standards

• the level and status of past due and non-performing loans

• the general economic conditions in the Bank’s lending area

• other factors affecting the collectibility of the loans in its portfolio

Large groups of smaller balance homogenous loans, such as residential real estate, small commercial real estate and home equity and consumer loans, are evaluated in the aggregate using historical loss factors and other data. Large balance and/or more complex loans, such as multi-family and commercial real estate loans may be evaluated on an individual basis and are also evaluated in the aggregate to determine adequate reserves. As individually significant loans become impaired, specific reserves are assigned to the extent of the impairment.

The provision for loan losses was $575,000 for the fiscal year ended September 30, 2007. The provision for loan losses was $600,000 for the fiscal year ended September 30, 2006 and 2005. The provisions reflect management’s evaluation of the loan portfolio, current economic conditions, and other factors as described below. The allowance increased from $2.92 million at September 30, 2006 to $3.03 million at September 30, 2007. Loan charge-offs, net of recoveries, were $465,000 in fiscal 2007 compared to $279,000 in fiscal 2006 and $613,000 in fiscal 2005. The balance of non-performing loans has increased at September 30, 2007 compared to September 30, 2006, primarily attributed to two commercial real estate loans which management believes both to be adequately collateralized.

The allowance for loan losses is maintained at a level that represents management’s best estimate of losses in the loan portfolio at the balance sheet date. However, there can be no assurance that the allowance for losses will be adequate to cover losses, which may be realized in the future, and that additional provisions for losses will not be required.

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Other Income

The Company’s non-interest or total other income decreased by $331,000 or 8.6% to $3.50 million in fiscal 2007 compared to $3.83 million in fiscal 2006 primarily due to lower realized gains on sales of securities. Other income increased by $45,000 or 1.2% to $3.83 million in fiscal 2006 as compared to $3.79 million in fiscal 2005.

Included in non-interest income is service fee income on loans and late charges of $370,000, which increased by $76,000 in fiscal 2007. These fees were $294,000, which decreased by $69,000 in fiscal 2006. Fiscal 2007 results include increases in miscellaneous fees collected on home equity and commercial loans and an increase in title insurance fees.

The Company recorded net gains on sales of securities of $126,000, $552,000 and $566,000 in fiscal 2007, 2006, and 2005, respectively. The Company recorded net gains on available-for-sale securities of $600,000 and net losses on held-to-maturity securities of $48,000 during fiscal 2006. Sales during fiscal years 2007 and 2005 were made from the available-for-sale category only. The sales reflected normal efforts to reposition portions of the portfolio at various times during the years to reflect changing economic conditions, changing market conditions, and to carry out asset/liability management strategies. Included in the above amounts are losses resulting from the write-down of investments in equity securities for declines in value that are considered other-than-temporary of $43,000 in fiscal year 2005. There were no similar write-downs in fiscal years 2007 or 2006.

Gain on sale of loans was $100,000, $49,000, and $36,000 in fiscal years 2007, 2006 and 2005, respectively. In fiscal 2001, the Company began a program to sell, servicing released, a portion of the fixed-rate, first mortgage residential loans originated. This program is intended to allow the Company to offer competitive market rates on loans, while not retaining in its portfolio some loans that may not fit the current asset/liability strategy. In addition, such loans can generally be sold at a profit when a commitment to sell is locked in when the application is taken.

Deposit service charges and fee income was $1.27 million, $1.37 million, and $1.40 million, in fiscal 2007, 2006, and 2005, respectively. Fiscal 2007 results include a decrease in the volume of fees collected for returned checks on deposit accounts and a decrease in the service charges assessed on checking accounts in response to competition. The decrease in fiscal 2006 is primarily attributed to a decrease in service charge fees on savings and checking accounts, partially offset by an increase in fees related to returned checks.

Automated teller machine (ATM) fees were $603,000, $586,000, and $548,000 in fiscal years 2007, 2006, and 2005, respectively. The increase in fiscal 2007 and 2006 is primarily attributed to an increase in the interchange fees earned on debit card transactions.

Non-insured investment product income was $391,000, $414,000, and $376,000 in fiscal years 2007, 2006, and 2005, respectively. The decrease in fiscal 2007 is primarily attributed to a decrease in the commissions earned on the sales of these products. The increase in fiscal 2006 is primarily attributed to an increase in the commissions earned on the sales of these products.

Other operating income includes miscellaneous sources of income, which consist primarily of earnings on bank-owned life insurance, fees from the sale of cashiers checks and money orders, and safe deposit box rental income. Such income amounted to $641,000, $565,000, and $498,000 in fiscal 2007, 2006, and 2005, respectively. Fiscal 2007 results were attributed to increases in the profit on sale of fixed assets and earnings on bank-owned life insurance. The increase in fiscal 2006 primarily reflects increases in the profit on sale of fixed assets. Also, fiscal 2007 and 2006 results included recoveries relating to a customer check kiting fraud loss discovered in March 2005 attributable to one business customer.

47

Other Expenses

Other expenses increased $574,000 or 4.7% to $12.7 million in fiscal 2007 and decreased $67,000 or .6% to $12.1 million in fiscal 2006, from $12.2 million in fiscal 2005. The higher level of other expense in fiscal 2007 compared to fiscal 2006 is primarily attributable to a one-time pre-tax charge of $277,000 associated with the redemption of $10.0 million of trust preferred securities. The lower level of other expenses in fiscal 2006 compared to fiscal 2005 is primarily attributable to the fiscal 2005 loss of $430,000 due to customer fraud.

Compensation, payroll taxes and fringe benefits, the largest component of operating expenses, increased $144,000 or 1.8% to $8.0 million in fiscal 2007, and increased $408,000 or 5.5% to $7.8 million in fiscal 2006 over the respective prior years. Factors contributing to the increase in fiscal 2007 were normal salary increases, increased payroll taxes, and increased personnel expense, partially offset by lower health insurance expense. Factors contributing to the increase in fiscal 2006 were normal salary increases, increases in the cost of health insurance, increased director fees, increased payroll taxes, and increased training expenses, partially offset by decreases in personnel expense and officer’s expense.

Office occupancy and equipment expense decreased $73,000 or 6.4% to $1.07 million in fiscal 2007 and increased $72,000 or 6.7% to $1.15 million in fiscal 2006 over the respective prior years. The decrease in fiscal 2007 reflects decreases in furniture, fixtures, and equipment expense and rent expense, partially offset by an increase in office repairs and maintenance expense. The increase in fiscal 2006 primarily reflects an increase in furniture, fixtures, and equipment expense, utility expense, rent expense, and real estate taxes paid on office buildings, partially offset by a decrease in office repairs and maintenance expense. The increase in 2006 is also due to the opening of the new Carnegie branch.

Depreciation and amortization decreased $27,000 or 4.1% to $634,000 in fiscal 2007 and decreased $65,000 or 9.0% to $661,000 in fiscal 2006 over the respective prior years. The decrease in depreciation in fiscal years 2007 and 2006 reflects equipment becoming fully depreciated, partially offset by depreciation on additions in those years.

The Bank recorded net losses on the sales of foreclosed real estate of $101,000 and $58,000 in fiscal years 2007 and 2006, respectively. The Bank recorded net gains on the sales of foreclosed real estate of $103,000 in the fiscal year ended 2005. Foreclosed real estate expense was $43,000, $154,000, and $241,000 in fiscal years 2007, 2006, and 2005, respectively. The results reflect the costs associated with the holding and disposition of properties including writedowns during the periods. At September 30, 2007, the Bank had one commercial real estate property classified as foreclosed real estate.

Intangible amortization was $34,000, $40,000, and $46,000 in fiscal years 2007, 2006 and 2005, respectively. The results reflect the amortization of the intangibles generated by the acquisitions of Carnegie Financial Corporation in February 2002 and First Pennsylvania Savings Association in December 2002, on an accelerated basis over ten years.

Advertising expense was $370,000, $360,000, and $340,000 in fiscal years 2007, 2006, and 2005, respectively. The Company strives to market its products and services in a cost effective manner and incorporates a market segmentation strategy in its business plan to effectively manage its advertising dollars.

Professional fees were $295,000, $267,000, and $244,000 in fiscal years 2007, 2006, and 2005, respectively. Professional fees include legal fees, audit fees, and supervisory examination and assessment fees. The increase in fiscal 2007 is primarily attributed to an increase in legal fees and audit fees. The increase in fiscal 2006 is primarily attributed to an increase in legal fees, partially offset by a decrease in audit fees.

Included in fiscal 2007 results is a one-time pre-tax charge of $277,000 associated with the redemption of $10 million of trust preferred securities. The $10,000,000 8.76% Floating Rate Preferred Securities were called at par in whole on September 26, 2007, and the unamortized issuance costs of $277,000 were charged to expense.

Included in fiscal 2005 results is a pre-tax charge of $430,000 related to a customer check kiting fraud loss attributable to one business customer. While a portion or all of the loss may ultimately be recovered, the customer was unable to provide restitution or adequate collateral at that time. However, as of September 30, 2007 approximately $103,000 has been recovered and included in other income; $27,000 in fiscal 2006 and $76,000 in fiscal 2007.

48

Service bureau expense amounted to $152,000, $31,000, and $27,000 for fiscal years ended 2007, 2006, and 2005, respectively. The increase in fiscal 2007 is a result of the Bank converting its data processing operations from an in-house environment to an outsourced service bureau environment. The outsourced service bureau environment has reduced compensation expense and office occupancy and equipment expense.

Other operating expenses, which consist primarily of check processing costs, bank service charges, and other administrative expenses, amounted to $1.69 million in fiscal 2007, $1.52 million in fiscal 2006, and $1.69 million in fiscal 2005. Significant variations in fiscal 2007, compared to fiscal 2006, include increases in consulting fees, increases in internet banking fees, and increases in ATM expenses, partially offset by decreases in teller cash over and short expense primarily attributed to losses associated with two robberies in the fiscal 2006 period. Significant variations in fiscal 2006, compared to fiscal 2005, include decreases in consulting fees, and losses sustained from ATM disputes, partially offset by increases in checking account charge-offs and losses sustained from branch robberies.

Income Taxes

The Company generated taxable income and, as a consequence, recorded tax provisions of $914,000, $840,000, and $1.00 million for fiscal 2007, 2006 and 2005, respectively. These changes reflect the difference in the Bank’s profitability for the periods as well as differences in the effective tax rate, which was 20.1%, 17.8%, and 20.5% for fiscal 2007, 2006 and 2005, respectively.

The difference between the Company’s effective tax rate and the statutory rate is primarily attributable to the Bank’s tax-exempt income. Tax-exempt income includes income earned on certain municipal investments that qualify for state and/or federal income tax exemption; income earned by the Bank’s Delaware subsidiary, which is not subject to state income tax, and earnings on Bank-owned life insurance policies, which are exempt from federal taxation. State and federal tax-exempt income for fiscal 2007 was $8.5 million and $1.6 million, respectively, compared to $8.0 million and $1.8 million, respectively, for fiscal 2006, and $8.4 million and $1.7 million, respectively, for fiscal 2005.

Forward-Looking Statements

The Company may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission, in its reports to stockholders, and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions, that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve System (“the FRB”); inflation; interest rate, market and monetary fluctuations; the timely development of competitive new products and services by the Company and the acceptance of such products and services by customers; the willingness of customers to substitute competitors’ products and services for the Company’s products and services and vice versa; laws concerning taxes, banking, securities, and insurance; technological changes; future acquisitions; the expense savings and revenue enhancements from acquisitions being less than expected; the growth and profitability of the Company’s noninterest or fee income being less than expected; unanticipated regulatory or judicial proceedings; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing. The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company.

49

Impact of Inflation and Changing Prices

The Consolidated Financial Statements and related notes presented herein have been prepared in accordance with generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, substantially all of the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a more significant impact on the Bank’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. In the current interest rate environment, liquidity and the maturity structure of the Company’s assets and liabilities are critical to the maintenance of acceptable performance levels.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Asset and Liability Management

The Company’s vulnerability to interest rate risk exists to the extent that its interest bearing liabilities, consisting of customer deposits and borrowings, mature or reprice more rapidly or on a different basis than its interest earning assets, which consist primarily of intermediate or long-term loans and investment securities, mortgage-backed securities and collateralized mortgage obligations.

The principal determinant of the exposure of the Company’s earnings to interest rate risk is the timing difference between the repricing or maturity of the Company’s interest earning assets and the repricing or maturity of its interest bearing liabilities. If the repricing and maturities of such assets and liabilities were perfectly matched, and if the interest rates carried by its assets and liabilities were equally flexible and moved concurrently, neither of which is the case, the impact on net interest income of rapid increases or decreases in interest rates would be minimized.

The objective of interest rate risk management is to control, to the extent possible, the effects that interest rate fluctuations have on net interest income and on the net present value of the Company’s interest earning assets and interest bearing liabilities. Management and the Board are responsible for managing interest rate risk and employing risk management policies that monitor and limit exposure to interest rate risk. Interest rate risk is measured using net interest margin simulation and asset/liability net present value sensitivity analyses. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements.

The Company uses financial modeling to measure the impact of changes in interest rates on net interest margin. Assumptions are made regarding loan and mortgage-backed securities prepayments and amortization rates of passbook, money market and NOW account withdrawal rates. In addition, certain financial instruments may provide customers with a degree of “optionality,” whereby a shift in interest rates may result in customers changing to an alternative financial instrument, such as from a variable to fixed rate loan product. Thus, the effects of changes in future interest rates on these assumptions may cause actual results to differ from simulation results.

The Company has established the following guidelines for assuming interest rate risk:

Net interest margin simulation - Given a +/- 200 basis point parallel shift in interest rates, the estimated net interest margin may not change by more than 20% for a one-year period.

Portfolio equity simulation - Portfolio equity is the net present value of the Company’s existing assets and liabilities. Given a +200 basis point change in interest rates, portfolio equity may not decrease by more than 50% of total stockholders’ equity. Given a -200 basis point change in interest rates, portfolio equity may not decrease by more than 20% of total stockholders’ equity.

50

The following table illustrates the simulated impact of a 100 basis point or 200 basis point upward or downward movement in interest rates on net interest income and the change in portfolio equity. This analysis was done assuming that interest earning asset and interest bearing liability levels at September 30, 2007 remained constant. The impact of the rate movements was developed by simulating the effect of rates changing immediately from the September 30, 2007 levels.

Interest Rate Simulation Sensitivity Analysis

Movements in interest rates from September 30, 2007 rates:

	Increase		Decrease
	+ 100 bp	+ 200 bp	- 100 bp	- 200 bp
Net interest income increase (decrease)	(9.4%)	(18.8%)	5.7%	6.4%
Portfolio equity increase (decrease)	(24.3%)	(48.6%)	8.1%	9.1%

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring an institution’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between interest earning assets and interest bearing liabilities maturing or repricing within a given time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to adversely affect net interest income. The Company’s one-year gap was a negative 27.2% at September 30, 2007 compared to a negative 23.4% at September 30, 2006. The Company considers this result at September 30, 2007 to be within its acceptable target range. The increase in the negative gap position is attributed to an increase in liabilities with shorter terms, as well as long-term fundings with adjustable-rate features.

As part of its efforts to minimize the impact of changes in interest rates, the Company continues to emphasize the origination of loans with adjustable-rate features or which have shorter average lives, the purchase of adjustable-rate securities, the extension of interest bearing liabilities when market conditions permit, and the maintenance of a large portion of the investment and mortgage-backed securities portfolios in the available for sale category that could be sold in response to interest rate movements.

51

The table below shows the Bank’s gap position at September 30, 2007. Assumptions used in developing the table include cash flow and repricing projections for assets and liabilities. In developing the cash flow projections, prepayment estimates for loans and investments were also used. At September 30, 2007, these estimates anticipate a moderate rate of prepayment due to the relatively low interest rate environment that continues to exist. The assumptions used may not be indicative of the actual prepayments and withdrawals, which may be experienced by the Company.

	September 30, 2007
				Over Three
				Months			After One
	Three Months			Through			Year Through			After
	or Less			Twelve Months			Five Years			Five Years
	(Dollars in Thousands)
Interest earning assets	$	124,443		$	98,116		$	289,438		$	181,038
Deposits, escrow liabilities and borrowed funds		258,694			161,819			230,045			25,384
Interest sensitivity	$	(134,251	)	$	(63,703	)	$	59,393		$	155,654
Cumulative interest sensitivity	$	(134,251	)	$	(197,954	)	$	(138,561	)	$	17,093
Cumulative ratio as a percent of assets		(18.5	%)		(27.2	%)		(19.1	%)		2.4	%

In addition to managing the Company’s gap as discussed above, the Bank has an Asset Liability Management Committee composed of senior officers which meets periodically to review the Company’s exposure to interest rate risk resulting from other factors. Among the areas reviewed are progress on previously determined strategies, national and local economic conditions, the projected interest rate outlook, loan and deposit demand, pricing, liquidity position, capital position and regulatory developments. Management’s evaluation of these factors indicates the current strategies of emphasizing the origination and purchase of adjustable rate or shorter-term loan products, while retaining in the portfolio, a portion of the fixed rate loans originated, purchasing investments with either fixed or adjustable rates and competitively pricing deposits produces an acceptable level of interest rate risk in the current environment.

52

Item 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Fidelity Bancorp, Inc.

Pittsburgh, Pennsylvania

We have audited the accompanying consolidated statements of financial condition of Fidelity Bancorp, Inc. and subsidiary as of September 30, 2007 and 2006 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fidelity Bancorp, Inc. and subsidiary at September 30, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s / Beard Miller Company LLP

Pittsburgh, Pennsylvania

December 18, 2007

53

Consolidated Statements of Financial Condition

	September 30,
	2007			2006
	(Dollars in Thousands, Except per Share Data)
Assets
Cash and due from banks	$	10,848		$	8,480
Interest bearing demand deposits with other institutions		228			187
Cash and Cash Equivalents		11,076			8,667
Securities available for sale		152,223			165,449
Securities held to maturity, fair value 2007 $74,010; 2006 $84,851		74,553			85,879
Loans held for sale		169			40
Loans receivable, net of allowance 2007 $3,027; 2006 $2,917		458,929			439,027
Foreclosed real estate, net		52			215
Federal Home Loan Bank stock, at cost		7,102			9,132
Office premises and equipment, net		5,825			6,073
Accrued interest receivable		3,639			3,359
Other assets		13,009			12,891
Total Assets	$	726,577		$	730,732
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Non-interest bearing	$	36,367		$	32,927
Interest bearing		397,188			381,255
Total Deposits		433,555			414,182
Short-term borrowings		23,618			78,625
Subordinated debt		7,732			10,310
Securities sold under agreement to repurchase		105,537			83,638
Advance payments by borrowers for taxes and insurance		1,451			1,508
Long-term debt		104,050			94,292
Other liabilities		4,164			3,982
Total Liabilities		680,107			686,537
Stockholders’ Equity
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value per share; 10,000,000 shares authorized; issued 2007 3,606,722 shares; 2006 3,569,525 shares		36			35
Paid-in capital		45,338			44,774
Retained earnings		13,115			11,076
Accumulated other comprehensive loss, net of tax		(1,637	)		(1,485	)
Treasury stock, at cost 2007 619,129 shares; 2006 609,029 shares		(10,382	)		(10,205	)
Total Stockholders’ Equity		46,470			44,195
Total Liabilities and Stockholders’ Equity	$	726,577		$	730,732

See notes to consolidated financial statements.

54

Consolidated Statements of Income

	Years Ended September 30,
	2007		2006		2005
	(In Thousands, Except per Share Data)
Interest Income
Loans	$	28,799	$	24,439	$	18,859
Mortgage-backed securities		4,131		5,054		5,387
Investment securities:
Taxable		5,930		5,795		5,524
Tax exempt		1,770		2,050		1,886
Other		33		35		8
Total Interest Income		40,663		37,373		31,664
Interest Expense
Deposits		13,440		10,894		7,710
Short-term borrowings		2,356		4,707		2,507
Subordinated debt		930		863		659
Securities sold under agreement to repurchase		4,195		1,352		131
Long-term debt		5,473		5,998		6,816
Total Interest Expense		26,394		23,814		17,823
Net Interest Income		14,269		13,559		13,841
Provision for Loan Losses		575		600		600
Net Interest Income after Provision for Loan Losses		13,694		12,959		13,241
Other Income
Loan service charges and fees		370		294		363
Realized gain on sales of securities, net		126		552		609
Writedown of securities		—		—		(43	)
Gain on sales of loans		100		49		36
Deposit service charges and fees		1,271		1,373		1,401
ATM fees		603		586		548
Non-insured investment products		391		414		376
Other		641		565		498
Total Other Income		3,502		3,833		3,788
Other Expenses
Compensation and benefits		7,992		7,848		7,440
Office occupancy and equipment expense		1,074		1,147		1,075
Depreciation and amortization		634		661		726
Loss (gain) on sales of foreclosed real estate		101		58		(103	)
Foreclosed real estate expense		43		154		241
Amortization of intangible assets		34		40		46
Advertising		370		360		340
Professional fees		295		267		244
Debt issuance charge upon redemption		277		—		—
Customer fraud loss		—		—		430
Service bureau expense		152		31		27
Other		1,688		1,520		1,687
Total Other Expenses		12,660		12,086		12,153
Income before Provision for Income Taxes and Extraordinary Gain		4,536		4,706		4,876
Provision for Income Taxes		914		840		1,000
Income from Continuing Operations		3,622		3,866		3,876
Income from Extraordinary Gain, Net of Taxes		89		318		—
Net Income	$	3,711	$	4,184	$	3,876

See notes to consolidated financial statements.

55

Consolidated Statements of Income (Continued)

	Years Ended September 30,
	2007			2006			2005
	(In Thousands, Except per Share Data)
Earnings per Share:
Basic:
Income from Continuing Operations		$	1.21		$	1.30		$	1.32
Income from Extraordinary Gain, Net of Taxes			.03			.11			-
Net Income		$	1.24		$	1.41		$	1.32
Diluted:
Income from Continuing Operations		$	1.19		$	1.28		$	1.27
Income from Extraordinary Gain, Net of Taxes			.03			.10			-
Net Income		$	1.22		$	1.38		$	1.27

See notes to consolidated financial statements.

56

Consolidated Statements of Stockholders’ Equity

										Accumulated
	Number of									Other
	Shares		Common		Paid-in		Retained			Comprehensive			Treasury
	Issued		Stock		Capital		Earnings			Income (Loss)			Stock			Total
	(In Thousands, Except Shares and per Share Data)
Balance - October 1, 2004	3,153,617	$	32	$	35,798	$	13,595		$	1,195		$	(8,543	)	$	42,077
Comprehensive income:
Net income	-		-		-		3,876			-			-			3,876
Net unrealized losses on available for sale securities	-		-		-		-			(2,109	)		-			(2,109	)
Total Comprehensive Income																1,767
10% stock dividend distributed	319,161		3		7,577		(7,580	)		-			-			-
Stock options exercised, including tax benefit of $160	53,745		-		722		-			-			-			722
Cash dividends declared ($0.478 per share)	-		-		-		(1,405	)		-			-			(1,405	)
Treasury stock purchased (54,210 shares)	-		-		-		-			-			(1,265	)		(1,265	)
Sale of stock through Dividend Reinvestment Plan	7,109		-		153		-			-			-			153
Balance - September 30, 2005	3,533,632		35		44,250		8,486			(914	)		(9,808	)		42,049
Comprehensive income:
Net income	-		-		-		4,184			-			-			4,184
Net unrealized losses on available for sale securities	-		-		-		-			(571	)		-			(571	)
Total Comprehensive Income																3,613
Stock-based compensation expense	-		-		66		-			-			-			66
Stock options exercised, including tax benefit of $43	27,936		-		307		-			-			-			307
Cash dividends declared ($0.54 per share)	-		-		-		(1,594	)		-			-			(1,594	)
Treasury stock purchased (21,074 shares)	-		-		-		-			-			(397	)		(397	)
Sale of stock through Dividend Reinvestment Plan	7,957		-		151		-			-			-			151
Balance - September 30, 2006	3,569,525		35		44,774		11,076			(1,485	)		(10,205	)		44,195
Comprehensive income:
Net income							3,711									3,711
Net unrealized losses on available for sale securities										(152	)					(152	)
Total Comprehensive Income																3,559
Stock-based compensation expense					93											93
Stock options exercised, including tax benefit of $14	28,390		1		314											315
Cash dividends declared ($0.56 per share)							(1,672	)								(1,672	)
Treasury stock purchased (10,100 shares)													(177	)		(177	)
Sale of stock through Dividend Reinvestment Plan	8,807				157											157
Balance - September 30, 2007	3,606,722	$	36	$	45,338	$	13,115		$	(1,637	)	$	(10,382	)	$	46,470

See notes to consolidated financial statements.

57

Consolidated Statements of Cash Flows

	Years Ended September 30,
	2007			2006			2005
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	3,711		$	4,184		$	3,876
Adjustments to reconcile net income to net cash provided by operating activities:
Income from extraordinary gain, net of taxes		(89	)		(318	)		—
Provision for loan losses		575			600			600
Loss (gain) on foreclosed real estate		101			58			(103	)
Provision for depreciation and amortization		634			661			726
Deferred loan fee amortization		(54	)		(112	)		(196	)
Amortization of investment and mortgage-backed securities (discounts) premiums, net		194			500			719
Deferred income tax provision		404			73			37
Amortization of intangibles		34			40			46
Net realized gains on sales of investments		(126	)		(552	)		(609	)
Writedown of investment securities		—			—			43
Loans originated for sale		(8,293	)		(4,300	)		(2,668	)
Sales of loans held for sale		8,262			4,557			2,571
Net gains on sales of loans		(100	)		(49	)		(36	)
Earnings on cash surrender value of life insurance policies		(211	)		(196	)		(198	)
Tax benefit realized on stock-based compensation		—			—			160
Increase in interest receivable		(280	)		(258	)		(15	)
Increase (decrease) in interest payable		188			(197	)		89
Increase in accrued taxes		121			281			103
Noncash compensation expense related to stock benefit plans		93			66			—
Contribution to ESOP		(322	)		(240	)		(235	)
Debt issuance charge upon redemption		277			—			—
Changes in other assets, net		(720	)		(31	)		437
Changes in other liabilities, net		197			956			571
Net Cash Provided by Operating Activities		4,596			5,723			5,918
Cash Flows from Investing Activities
Proceeds from sales of securities available for sale		9,890			16,797			24,185
Proceeds from maturities and principal repayments of securities available for sale		14,678			19,125			41,733
Purchases of securities available for sale		(11,409	)		(19,659	)		(65,098	)
Proceeds from maturities and principal repayments of securities held to maturity		16,205			19,262			20,473
Purchases of securities held to maturity		(5,022	)		—			(16,671	)
Net increase in loans		(20,480	)		(93,474	)		(56,314	)
Proceeds from sales of foreclosed real estate		119			432			813
Additions to office premises and equipment		(481	)		(1,742	)		(641	)
Proceeds from insurance claim – Carnegie Branch		135			601			—
Proceeds from sales of office premises and equipment		137			24			—
Net redemptions (purchases) of FHLB stock		2,030			3,083			(1,059	)
Net Cash Provided by (Used in) Investing Activities	$	5,802		$	(55,551	)	$	(52,579	)

See notes to consolidated financial statements.

58

Consolidated Statements of Cash Flows (Continued)

	Years Ended September 30,
	2007			2006			2005
	(In Thousands)
Cash Flows from Financing Activities
Net increase in deposits	$	19,373		$	47,370		$	7,040
Net increase in retail repurchase agreements		1,899			1,964			1,556
Proceeds from structured repurchase agreements		20,000			75,000			—
Net (decrease) increase in short-term borrowings		(55,007	)		(32,516	)		47,035
(Decrease) increase in advances by borrowers for taxes and insurance		(57	)		83			296
Proceeds from long-term debt		20,000			15,000			20,000
Repayments of long-term debt		(10,242	)		(56,743	)		(26,272	)
Proceeds from issuance of subordinated debt		7,732			—			—
Redemption of subordinated debt		(10,310	)		—			—
Cash dividends paid		(1,672	)		(1,594	)		(1,405	)
Stock options exercised		301			264			562
Excess tax benefit realized on stock-based compensation		14			43			—
Proceeds from sale of stock through Dividend Reinvestment Plan		157			151			153
Acquisition of treasury stock		(177	)		(397	)		(1,265	)
Net Cash Provided by (Used in) Financing Activities		(7,989	)		48,625			47,700
Net Increase (Decrease) in Cash and Cash Equivalents		2,409			(1,203	)		1,039
Cash and Cash Equivalents - Beginning		8,667			9,870			8,831
Cash and Cash Equivalents - Ending	$	11,076		$	8,667		$	9,870
Supplementary Cash Flow Information
Interest paid on deposits and borrowings	$	26,206		$	24,011		$	17,734
Income taxes paid	$	795		$	753		$	350
Supplemental Schedule of Noncash Investing and Financing Activities
Transfer of loans to foreclosed real estate	$	57		$	35		$	223

See notes to consolidated financial statements.

59

Notes to Consolidated Financial Statements

Note 1 - Significant Accounting Policies

Nature of Operations

Fidelity Bancorp, Inc. (the “Company”) is a bank holding company organized under the Pennsylvania Business Corporation Law. It operates principally as a holding company for its wholly-owned subsidiary, Fidelity Bank, PaSB (the “Bank”), a Pennsylvania-chartered, FDIC-insured state savings bank. The Bank conducts full banking services through thirteen offices in Allegheny and Butler counties. FBIC, Inc. is a wholly-owned subsidiary of the Bank and was formed to hold and manage the Bank’s fixed rate residential mortgage loan portfolio. It was incorporated in the State of Delaware in July 2000.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary the Bank. Intercompany balances and transactions have been eliminated in consolidation.

Estimates

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and require disclosure of contingent assets and liabilities. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, and the evaluation of other than temporary impairment of securities.

Significant Group Concentrations of Credit Risk

Most of the Company’s activities are with customers located in the greater Pittsburgh metropolitan area. Note 2 discusses the types of securities that the Company invests in. Note 3 discusses the types of lending that the Company engages in. The Company does not have any significant concentrations to any one industry or customer.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash and cash equivalents include cash and amounts due from depository institutions and interest-bearing deposits in other financial institutions.

Securities

The Company classifies securities as either: (1) Securities Held to Maturity - debt securities that the Company has the positive intent and ability to hold to maturity and which are reported at cost, adjusted for amortization of premium and accretion of discount on a level yield basis; (2) Trading Securities - debt and equity securities bought and held principally for the purpose of selling them in the near term and which are reported at fair value, with unrealized gains and losses included in the current period earnings; or (3) Securities Available for Sale - debt and equity securities not classified as either securities held to maturity or trading securities and which are reported at fair value, with unrealized gains and losses, net of taxes, included as a separate component of accumulated other comprehensive income. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

                                                                     60

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Bank is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectibility of principal. Interest accrual resumes when the loan is no longer 90 or more days past due and the borrower, in management’s opinion, is able to meet payments as they become due.

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

The allowance consists of specific and general components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

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Foreclosed Real Estate

Foreclosed real estate is comprised of property acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure and loans classified as in-substance foreclosure. A loan is classified as in-substance foreclosure when the Bank has taken possession of the collateral regardless of whether formal foreclosure proceedings take place.

Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenues and expenses from operations and changes in the valuation allowance are included in other expenses.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. All sales are made without recourse.

Office Premises and Equipment

Office premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related assets. Office buildings are depreciated over their estimated useful life of 40 years; furniture, fixtures and equipment are depreciated over their estimated useful lives, which vary between three and ten years; and land improvements are depreciated over their estimated useful life of twenty years.

Transfer of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Goodwill and Intangible Assets

The Company follows SFAS No. 142, “Goodwill and Other Intangible Assets” for purchased intangible assets and goodwill which is no longer amortized, but tested for impairment on an annual basis. Other acquired intangible assets with finite lives, such as purchased customer accounts, are amortized over their estimated lives. Other intangible assets are amortized using an accelerated method over estimated weighted average useful lives of ten years. The Company periodically assesses whether events or changes in circumstances indicate that the carrying amounts of goodwill and other intangible assets may be impaired.

There were no changes in the carrying amount of goodwill for the years ended September 30, 2007, 2006, and 2005. Goodwill amounted to $2.65 million at September 30, 2007 and September 30, 2006.

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Amortizable intangible assets were composed of the following:

	September 30,
			2007			2006
	Gross Carrying		Accumulated
	Amount		Amortization
	(Dollars in Thousands)
Amortizable intangible assets,
acquisition of deposit accounts	$	325		$	241		$	207
Aggregate amortization expense:
For the year ended September 30, 2007	$	34
Estimated amortization expense:
For the year ending September 30, 2008	$	28
For the year ending September 30, 2009		22
For the year ending September 30, 2010		17
For the year ending September 30, 2011		11
For the year ending September 30, 2012		5

Other Assets

Financing costs related to the Company’s issuance of subordinated debt were being amortized over the life of the debentures and totaled $10,000, $11,000, and $11,000 for the years ended September 30, 2007, 2006, and 2005, respectively, with the unamortized balance included in other assets. The subordinated debt was redeemed in fiscal 2007 and the remaining unamortized finance costs as of the redemption date of $277,000 were charged to noninterest expense.

Income Taxes

Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets and liabilities are adjusted through the provision for income taxes for the effects of changes in tax laws and rates on the date of enactment.

Treasury Stock

The acquisition of treasury stock is recorded under the cost method. At the date of subsequent reissue, the treasury stock is reduced by the cost of such stock on the average cost basis.

Stock Option Plans

Prior to October 1, 2005, the Company accounted for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. No stock-based employee compensation was reflected in net income for periods ended prior to October 1, 2005 as all options granted had an exercise price equal to the market value of the underlying common stock on the grant date. However, the Company adopted SFAS No. 123R, “Share-based Payments,” as of October 1, 2005, by using the modified prospective approach, which requires recognizing expense for options granted prior to the adoption date equal to the fair value of the unvested amounts over their remaining vesting period. The portion of these options’ fair value attributable to vested awards prior to the adoption of SFAS 123R is never recognized. For unvested stock-based awards granted before October 1, 2005, the Company will expense the fair value of the awards at the grant date over their vesting period.

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                        The following table illustrates the effect on the Company’s reported net income and earnings per share for the year ended September 30, 2005, if the Company had applied the fair value recognition provision of SFAS 123 t o stock-based compensation prior to the adoption date:

								Pro Forma
				Pro Forma				if under
	As Reported			Adjustments				SFAS 123
	(Dollars in Thousands, Except per Share Data)
Income before taxes		$	4,876		$	(190	)		$	4,686
Income taxes			1,000			(65	)			935
Net Income		$	3,876		$	(125	)		$	3,751
Basic earnings per share		$	1.32		$	(.04	)		$	1.28
Diluted earnings per share		$	1.27		$	(.04	)		$	1.23

Prior to the adoption of SFAS 123R, tax benefits arising from share-based compensation arrangements were classified as operating cash flows in the Consolidated Statement of Cash Flows. However, SFAS 123R amends FASB Statement 95 “Statement of Cash Flows”, and requires excess tax benefits arising from increases in the value of equity instruments issued under share-based payment arrangements to be treated as cash inflows from financing activities.

Earnings per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The following table sets forth the computation of basic and diluted earnings per share:

	Years Ended September 30,
	2007		2006		2005
	(Dollars in Thousands, Except per Share Data)
Basic Earnings per share:
Net income	$	3,711	$	4,184	$	3,876
Weighted average shares outstanding		2,982,886		2,957,702		2,929,358
Earnings per share	$	1.24	$	1.41	$	1.32
Diluted earnings per share:
Net income	$	3,711	$	4,184	$	3,876
Weighted average shares outstanding		2,982,886		2,957,702		2,929,358
Dilutive effect of stock options		64,048		75,423		127,039
Total diluted weighted average shares outstanding		3,046,934		3,033,125		3,056,397
Earnings per share	$	1.22	$	1.38	$	1.27

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Options to purchase 2,000 shares of common stock at $19.55 per share, 2,200 shares at $21.05 per share, 30,651 shares at $22.91 per share, 49,011 shares at $21.35 per share, 13,200 shares at $20.93 per share, 39,500 shares at $18.87 per share, and 34,000 shares at $18.64 per share were outstanding during 2007, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive. Similarly options to purchase 2,000 shares of common stock at $19.55 per share, 2,200 shares at $21.05 per share, 30,651 shares at $22.91 per share, 49,966 shares at $21.35 per share and 13,200 shares at $20.93 per share were outstanding during 2006, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive. Also, options to purchase 2,200 shares of common stock at $21.05 per share, 32,301 shares at $22.91 per share, 52,301 shares at $21.35 per share, and 13,200 shares at $20.93 per share were outstanding during 2005, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income are components of comprehensive income.

The only other comprehensive income item that the Company presently has is unrealized gains (losses) on securities available for sale. The components of the change in accumulated other comprehensive income are as follows:

	Years Ended September 30,
	2007			2006			2005
	(In Thousands)
Unrealized holding losses arising during the year	$	(105	)	$	(265	)	$	(2,630	)
Less reclassification adjustment for gains included in net income		(126	)		(600	)		(566	)
Net Unrealized Losses		(231	)		(865	)		(3,196	)
Tax benefit		79			294			1,087
Net of Tax Amount	$	(152	)	$	(571	)	$	(2,109	)

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded on the balance sheet when they become payable by the borrower to the Company.

Segment Reporting

The Company acts as an independent community financial services provider, and offers traditional banking and related financial services to individual, business, and government customers. Through its branches, the Company offers a full array of commercial and retail financial services.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Company. As such, discrete financial information is not available and segment reporting would not be meaningful.

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Restrictions on Cash and Due from Bank Accounts

The Bank is required to maintain average reserve balances, in the form of cash and balances with the Federal Reserve Bank based upon deposit composition. Based on its deposit classifications in fiscal 2007 and fiscal 2006, the Bank’s average reserve requirement at September 30, 2007 was $317,000.

Federal Home Loan Bank Stock

The Bank is a member of the Federal Home Loan Bank System and, as a member, maintains an investment in the capital stock of the Federal Home Loan Bank of Pittsburgh (FHLB), at cost, in an amount not less than 1% of its outstanding home loans or 5% of its outstanding notes payable, if any, to the FHLB plus 0.7% of its unused borrowing capacity, whichever is greater. The stock is carried at cost.

Reclassifications

Certain amounts in the 2006 and 2005 financial statements have been reclassified to conform with the 2007 presentation format. These reclassifications had no effect on net income.

New Accounting Standards

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. We are currently evaluating the impact of adopting FIN 48 on our financial statements.

In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48” (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of adopting FIN 48-1 on our financial statements.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. We are currently evaluating the potential impact, if any, of the adoption of SFAS 157 on our financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158”), which amends SFAS 87 and SFAS 106 to require recognition of the overfunded or underfunded status of pension and other postretirement benefit plans on the balance sheet. Under SFAS 158, gains and losses, prior service costs and credits, and any remaining transition amounts under SFAS 87 and SFAS 106 that have not yet been recognized through net periodic benefit cost will be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic cost. The measurement date — the date at which the benefit obligation and plan assets are measured — is required to be the company’s fiscal year end. SFAS 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The adoption of this standard has not impacted the Company’s financial condition or results of operations.

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In September 2006, the FASB’s Emerging Issues Task Force (EITF) issued EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements” (“EITF 06-4”). EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The consensus highlights that the employer (who is also the policyholder) has a liability for the benefit it is providing to its employee. As such, if the policyholder has agreed to maintain the insurance policy in force for the employee’s benefit during his or her retirement, then the liability recognized during the employee’s active service period should be based on the future cost of insurance to be incurred during the employee’s retirement. Alternatively, if the policy holder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS No. 106 or Accounting Principles Board (APB) Opinion No. 12, as appropriate. For transition, an entity can choose to apply the guidance using either of the following approaches: (a) a change in accounting principle through retrospective application to all periods presented or (b) a change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption. The disclosures required in fiscal years beginning after December 15, 2007, with early adoption permitted. The Company does not believe that the implementation of this guidance will have a material impact on the Company’s consolidated financial statements.

In September 2006, the Task Force reached a conclusion on EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). The scope of EITF 06-5 consists of six separate issues relating to accounting for life insurance policies purchased by entities protecting against the loss of “key persons.” The six issues are clarifications of previously issued guidance on FASB Technical Bulletin No. 85-4. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The Company does not expect it to have a material impact on the Company’s consolidated financial statements.

In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF 06-10). EITF 06-10 provides guidance for determining a liability for the postretirement benefit obligation as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007. The Company is currently assessing the impact of EITF 06-10 on its consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for our Company October 1, 2008. The Company is evaluating the impact that the adoption of SFAS No. 159 will have on our consolidated financial statements.

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Note 2 - Securities

The amortized cost and fair value of securities are as follows:

	September 30, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Securities Available for Sale:
U.S. government and agency
obligations	$	26,454	$	72	$	164	$	26,362
Municipal obligations		16,414		17		222		16,209
Corporate obligations		12,584		64		137		12,511
Equity securities		4,071		23		348		3,746
Mutual funds		13,324		—		413		12,911
Trust preferred securities		26,481		45		634		25,892
Federal Home Loan Mortgage Corp.
preferred stock		1,408		63		76		1,395
Mortgage-backed securities and
collateralized mortgage obligations		53,968		113		884		53,197
	$	154,704	$	397	$	2,878	$	152,223
Securities Held to Maturity:
U.S. government and agency
obligations	$	16,985	$	—	$	161	$	16,824
Municipal obligations		21,007		497		36		21,468
Corporate obligations		3,487		5		61		3,431
Mortgaged-backed securities and
collateralized mortgage obligations		33,074		54		841		32,287
	$	74,553	$	556	$	1,099	$	74,010

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	September 30, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Securities Available for Sale:
U.S. government and agency
obligations	$	23,625	$	—	$	520	$	23,105
Municipal obligations		20,760		105		95		20,770
Corporate obligations		11,107		68		141		11,034
Equity securities		4,037		83		204		3,916
Mutual funds		12,778		63		328		12,513
Trust preferred securities		27,969		238		131		28,076
Federal Home Loan Mortgage Corp.
preferred stock		1,409		42		—		1,451
Mortgage-backed securities and
collateralized mortgage obligations		66,014		61		1,491		64,584
	$	167,699	$	660	$	2,910	$	165,449
Securities Held to Maturity:
U.S. government and agency
obligations	$	21,984	$	4	$	494	$	21,494
Municipal obligations		22,648		696		28		23,316
Corporate obligations		4,993		24		49		4,968
Mortgaged-backed securities and
collateralized mortgage obligations		36,254		17		1,198		35,073
	$	85,879	$	741	$	1,769	$	84,851

The amortized cost and fair value of debt securities at September 30, 2007, by contractual maturity, are shown in the following table. Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Available for Sale				Securities Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	11,995	$	11,934	$	5,464	$	5,461
Due after one year through five years		16,780		16,544		12,332		12,122
Due after five years through ten years		33,427		32,954		17,314		17,099
Due after ten years		73,699		72,738		39,443		39,328
	$	135,901	$	134,170	$	74,553	$	74,010

Gross gains of $193,000, $842,000, and $866,000 and gross losses of $67,000, $290,000, and $257,000 were realized on sales of securities in fiscal 2007, 2006, and 2005, respectively. During fiscal 2006 the Company recognized gains of $5,000 and losses of $53,000 on the sales of securities, which were classified as held-to-maturity. The held-to-maturity sales qualified as maturities for purposes of FAS 115. There were no sales of held-to-maturity securities during fiscal 2007 and 2005. In addition, losses of $43,000 resulting from the writedown of investments in equity securities that are considered other than temporary were realized in fiscal 2005. There were no writedowns of securities during fiscal 2007 and 2006.

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The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	September 30, 2007
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
Securities Available for Sale:
U.S. government and
agency obligations	$	—	$	—	$	20,291	$	164	$	20,291	$	164
Municipal obligations		13,475		196		699		26		14,174		222
Corporate obligations		498		3		3,396		134		3,894		137
Equity securities		1,535		82		1,056		266		2,591		348
Mutual funds		—		—		12,911		413		12,911		413
Trust preferred securities		18,283		626		1,244		8		19,527		634
Federal Home Loan
Mortgage Corp.,		843		76		—		—		843		76
preferred stock
Mortgage-backed
securities and
collateralized
mortgage obligations		1,675		16		43,051		868		44,726		884
Securities Held to Maturity:
U.S. government and
agency obligations		1,985		7		14,839		154		16,824		161
Municipal obligations		2,143		16		2,416		20		4,559		36
Corporate obligations		—		—		2,428		61		2,428		61
Mortgage-backed
securities and
collateralized
mortgage obligations		3,035		60		23,522		781		26,557		841
Total Temporarily Impaired
Securities	$	43,472	$	1,082	$	125,853	$	2,895	$	169,325	$	3,977

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	September 30, 2006
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
Securities Available for Sale:
U.S. government and
agency obligations	$	—	$	—	$	23,105	$	520	$	23,105	$	520
Municipal obligations		4,169		38		8,664		57		12,833		95
Corporate obligations		1,960		30		3,435		111		5,395		141
Equity securities		1,439		31		692		173		2,131		204
Mutual funds		—		—		12,356		328		12,356		328
Trust preferred securities		3,397		73		10,428		58		13,825		131
Mortgage-backed
securities and
collateralized
mortgage obligations		2,920		11		57,004		1,480		59,924		1,491
Securities Held to Maturity:
U.S. government and
agency obligations		—		—		20,492		494		20,492		494
Municipal obligations		569		3		3,324		25		3,893		28
Corporate obligations		1,007		1		1,937		48		2,944		49
Mortgage-backed
securities and
collateralized
mortgage obligations		—		—		33,705		1,198		33,705		1,198
Total Temporarily Impaired
Securities	$	15,461	$	187	$	175,142	$	4,492	$	190,603	$	4,679

Management evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Unrealized losses detailed above relate primarily to U.S. Government agency, mortgage-backed securities and collateralized mortgage obligations. The Company had 129 and 127 securities in an unrealized loss position as of September 30, 2007 and 2006, respectively. In management’s opinion, the decline in fair value is due only to interest rate fluctuations. The Company has the intent and ability to hold such investments until maturity or anticipated market price recovery. None of the individual unrealized losses are significant.

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Note 3 - Loans Receivable

Loans receivable, net are summarized as follows:

	September 30,
	2007			2006
	(In Thousands)
First mortgage loans:
Conventional:
1-4 family dwellings	$	184,168		$	190,040
Multi-family dwellings		239			259
Commercial		79,206			72,171
Construction		75,440			61,399
		339,053			323,869
Less:
Loans in process		(13,752	)		(13,369	)
		325,301			310,500
Consumer loans:
Home equity		92,557			90,263
Consumer loans		640			440
Other		2,431			2,603
		95,628			93,306
Commercial business loans and leases:
Commercial business loans		40,855			37,930
Commercial leases		98			236
		40,953			38,166
Less allowance for loan losses		(3,027	)		(2,917	)
Unearned discounts and fees		74			(28	)
Loans Receivable, Net	$	458,929		$	439,027

72

Commitments to originate loans at September  30, 2007 were approximately as follows:

	Rate	Amount
	(Dollars in Thousands)
First mortgage loans:
Fixed rate	6.375% to 7.250%	$ 3,461
Adjustable rate	6.750% to 8.250%	7,138
Other loans:
Fixed rate	6.690% to 12.875%	695
Adjustable rate	8.250% to 11.250%	668
		$11,962

The Bank conducts its business through thirteen offices located in the greater Pittsburgh metropolitan area. At September 30, 2007, the majority of the Bank’s loan portfolio was secured by properties located in this region. The Bank does not believe it has significant concentrations of credit risk to any one group of borrowers given its underwriting and collateral requirements.

Note 4 - Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

	Years Ended September 30,
	2007			2006			2005
	(In Thousands)
Balance, beginning	$	2,917		$	2,596		$	2,609
Provision for loan losses		575			600			600
Loans charged off		(522	)		(326	)		(670	)
Recoveries		57			47			57
Balance, ending	$	3,027		$	2,917		$	2,596

Non-accrual loans were approximately $8,746,000, $2,685,000, and $2,319,000 at September 30, 2007, 2006 and 2005, respectively. The foregone interest on those loans for the years ended September 30, 2007, 2006, and 2005 was $347,000, $168,000, and $176,000, respectively. The amount of interest income on such loans actually included in income in the years ended September 30, 2007, 2006, and 2005 was $312,000, $55,000, and $18,000, respectively. There are no commitments to lend additional funds to debtors in non-accrual status. Loan balances past due 90 days or more and still accruing interest, but which management expects will eventually be paid in full, amounted to $150,000 and $255,000 at September 30, 2007 and 2006, respectively.

The recorded investment in loans that are considered to be impaired under SFAS No. 114 was $7,771,000 and $2,043,000 at September 30, 2007 and 2006, respectively. Included in the 2007 amount is $284,000 of impaired loans for which the related allowance for credit losses was $50,000 and $7,487,000 of impaired loans for which there is no allowance for credit losses. Included in the 2006 amount is $322,000 of impaired loans for which the related allowance for credit losses was $322,000 and $1,721,000 of impaired loans for which there is no allowance for credit losses. The average recorded investment in impaired loans during the fiscal years ended September 30, 2007, 2006, and 2005 was approximately $3,065,000, $1,702,000, and $2,182,000, respectively. For the fiscal years ended September 30, 2007, 2006, and 2005, the Company recognized interest income on those impaired loans of $384,000, $34,000, and $45,000, respectively, using the cash basis of income recognition.

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Management believes that the allowance for losses on loans is reasonable. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for losses on loans. Such agencies may require the Bank to recognize additions to the allowance based on their judgments using information available to them at the time of examination.

Note 5 - Office Premises and Equipment

Office premises and equipment are summarized as follows:

	September 30,
	2007			2006
	(In Thousands)
Land	$	808		$	833
Office buildings		6,269			6,333
Furniture, fixtures, and equipment		2,723			2,835
Leasehold improvements		334			331
		10,134			10,332
Accumulated depreciation and amortization		(4,309	)		(4,259	)
	$	5,825		$	6,073

The Bank has operating leases with respect to four branch offices and the Bank’s Loan Center, which expire on various dates through fiscal 2017. Lease expense amounted to $250,000, $275,000, and $237,000 in fiscal years  2007, 2006, and 2005, respectively. Minimum annual lease commitments are approximately as follows (in thousands):

2008	$	225
2009		193
2010		150
2011		129
2012		129
Thereafter		439
	$	1,265

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Note 6 - Deposits

Deposit balances are summarized as follows:

		September 30,
	Weighted Average Rates	2007	2006
		(In Thousands)
Demand deposits	Noninterest bearing	$ 36,367		$ 32,927
Savings deposits:
NOW accounts	0.65% in 2007 and 0.64% in 2006	42,338		38,892
Passbooks	1.11% in 2007 and 1.12% in 2006	54,773		60,979
Money market deposit accounts	3.80% in 2007 and 4.29% in 2006	108,724		112,569
		242,202		245,367
Time deposits:
Fixed rate	Less than 1.00%	110		12
	1.00% to 2.99%	1,164		12,514
	3.00% to 4.99%	74,591		125,060
	5.00% to 6.99%	115,471		31,213
	7.00% to 8.99%	17		16
		191,353		168,815
		$433,555		$414,182

The weighted average interest rate for all deposits was 3.24% and 3.31% at September 30, 2007 and 2006, respectively. Time deposits with balances of $100,000 or more totaled $40,236,000 and $34,090,000 at September 30, 2007 and 2006, respectively.

At September 30, 2007, investment securities with a carrying value of $524,000 were pledged as required to secure deposits of public funds.

 The maturities of time deposits at September 30, 2007 are summarized as follows (in thousands):

2008	$	102,803
2009		73,807
2010		7,030
2011		4,752
2012		1,860
Thereafter		1,101
	$	191,353

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Interest expense by deposit category is as follows:

	Years Ended September 30,
	2007		2006		2005
	(In Thousands)
NOW accounts	$	258	$	220	$	209
Passbooks		644		788		1,037
Money market deposit accounts		4,594		3,343		622
Time deposits		7,944		6,543		5,842
	$	13,440	$	10,894	$	7,710

Note 7 - Borrowings

FHLB “RepoPlus” advances are short-term borrowings maturing within one day to one year, bear a fixed interest rate, and are subject to prepayment penalty. Although no specific collateral is required to be pledged for these borrowings, “RepoPlus” advances are secured under the blanket collateral pledge agreement. The Bank utilized $50,000,000 of “RepoPlus” advances during fiscal 2007. During fiscal 2006 the Bank utilized “RepoPlus” advances, ranging individually from $690,000 to $134,650,000. The daily average balance during 2007 and 2006 was $4,247,000 and $73,111,000, respectively, and the daily average interest rate was 5.42% and 4.60%, respectively. The maximum amount outstanding at any month-end during 2007 and 2006 was $50,000,000 and $131,520,000, respectively. At September 30, 2007 and 2006, there were no “RepoPlus” advances outstanding.

In fiscal 2006 the Bank established a revolving line of credit with the Federal Home Loan Bank of Pittsburgh, which carries a commitment of $125,000,000 maturing on July 16, 2010. The rate is adjusted daily by the Federal Home Loan Bank, and any borrowings on this line may be repaid at any time without penalty. The daily average balance during 2007 and 2006 was $29,427,000 and $14,546,000, respectively, and the daily average interest rate was 5.33% and 5.35%, respectively. The maximum amount outstanding at any month-end during 2007 and 2006 was $79,719,000 and $73,611,000, respectively. At September 30, 2007 and 2006 the amount outstanding on the line was $22,760,000 at an interest rate of 5.11% and $70,768,000 at an interest rate of 5.30%, respectively.

In fiscal 2007 and 2006 the Bank purchased federal funds (“fed funds”) as a short-term funding source. Fed funds purchased represent unsecured borrowings from other banks and generally mature daily. The daily average balance during 2007 and 2006 was $9,619,000 and $3,329,000, respectively, and the daily average interest rate was 5.28% and 5.11%, respectively. The maximum amount outstanding at any month-end during 2007 and 2006 was $12,000,000 and $7,500,000. At September 30, 2007, there were no fed funds outstanding. At September 30, 2006 the amount outstanding was $7,500,000 at an interest rate of 5.41%.

Also included in short-term borrowings are treasury, tax and loan balances of $858,000 and $357,000 at September 30, 2007 and 2006, respectively.

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Long-term debt consisted of the following:

				September 30,
	Interest
	Rate			2007		2006
				(In Thousands)
Fixed Rate Advances Maturing:
August 30, 2007	3.89	%	$	-	$	10,000
October 12, 2007	3.90			10,000		10,000
January 14, 2008	3.79			10,000		10,000
November 17, 2008	4.93			20,000		-
June 23, 2010	3.24			148		198
Convertible Select Advances Maturing:
February 20, 2008	5.48			10,000		10,000
December 18, 2008	5.15			10,000		10,000
January 10, 2010	3.24			739		756
January 21, 2010	3.23			1,588		1,626
February 8, 2010	3.26			1,061		1,086
March 1, 2010	3.24			1,061		1,086
March 17, 2010	6.05			20,000		20,000
March 17, 2010	3.15			850		871
April 21, 2010	3.12			529		542
May 19, 2010	5.39			1,030		1,042
June 23, 2010	3.50			218		223
August 18, 2010	3.39			538		549
August 30, 2010	5.93			10,000		10,000
September 22, 2010	3.42			541		552
September 22, 2010	3.35			321		327
October 20, 2010	3.33			426		434
November 2, 2011	4.40			5,000		5,000
Total Long-Term Debt			$	104,050	$	94,292

Contractual maturities of long-term debt at September 30, 2007 were as follows (in thousands):

Years ending September 30,:
	2008	$	30,000
	2009		30,000
	2010		38,624
	2011		426
	2012		5,000
		$	104,050

Under a blanket collateral pledge agreement, the Bank has pledged, as collateral for advances from the FHLB of Pittsburgh, all stock in the Federal Home Loan Bank and certain other qualifying collateral, such as investment securities, mortgage-backed securities and loans, with market values equal to at least 110% of the unpaid amount of outstanding advances. The remaining maximum borrowing capacity with the FHLB of Pittsburgh at September 30, 2007 was approximately $153,761,000.

77

FHLB “Convertible Select” advances are long-term borrowings with terms of up to ten years, and which have a fixed rate for the first three months to five years of the term. After the fixed rate term expires, and quarterly thereafter, the FHLB may convert the advance to an adjustable rate advance at their option. If the advance is converted to an adjustable rate advance, the Bank has the option at the conversion date, and quarterly thereafter, to prepay the advance with no prepayment fee.

Note 8 - Subordinated Debt

Subordinated debt was $7,732,000 and $10,310,000 at September 30, 2007 and 2006, respectively. The Floating Rate Preferred Securities are summarized as follows at September 30, 2007 and 2006:

	2007		2006
	(In Thousands)
Floating Rate Preferred Securities due September 26, 2032	$	-	$	10,000
Floating Rate Preferred Securities due December 15, 2037		7,500		-
	$	7,500	$	10,000

The Subordinated Debt represents obligations of the wholly-owned statutory business trust subsidiaries (the “Trusts”), which are not consolidated for financial statement purposes. The Trusts were formed with initial capitalization in common stock of $232,000 and $310,000, respectively, and for the exclusive purpose of issuing $7,500,000 and $10,000,000 of Preferred Securities, respectively, and using the total proceeds to acquire Junior Subordinated Debt Securities (“Debt Securities”) issued by the Company. The Debt Securities are unsecured and rank subordinate and junior in right of payment to all indebtedness, liabilities, and obligations of the Company. The Debt Securities are due concurrently with the Preferred Securities and bear the same rate of interest as the Preferred Securities. The Preferred Securities qualify as Tier 1 capital for regulatory capital purposes.

The $10,000,000 Floating Rate Preferred Securities were callable in whole or in part at par on September 26, 2007 and quarterly thereafter, except in certain circumstances. These Preferred Securities were called at par in whole on September 26, 2007, and unamortized issuance costs of $277,000 at the time of the call were written off and included in other expense.

The $7,500,000 Floating Rate Preferred Securities were issued on September 20, 2007 and are callable in whole or in part at par on December 15, 2012 and quarterly thereafter, except in certain circumstances. These securities mature on December 15, 2037. These securities bear a current interest rate of 7.05% through December 15, 2007, and adjust quarterly at a rate equal to three-month LIBOR plus 1.36%.

Note 9 - Securities Sold Under Agreements to Repurchase

The Bank enters into sales of securities under agreements to repurchase. Such repurchase agreements are treated as financings and the obligations to repurchase securities sold are reflected as a liability in the consolidated statements of financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. The securities sold under agreements to repurchase are collateralized by various securities that are either held in safekeeping by the FHLB or delivered to the broker/dealer who arranged the transaction. The fair value of such securities exceeds the value of the securities sold under agreements to repurchase.

Securities sold under agreements to repurchase included retail borrowings during fiscal 2007 and 2006. The daily average balance during 2007 and 2006 was $9,339,000 and $7,146,000, respectively, and the daily average interest rate was 4.96% and 4.44%, respectively. The maximum amount outstanding at any month-end during 2007 and 2006 was $12,121,000 and $9,282,000, respectively. At September 30, 2007 retail borrowings outstanding were $10,537,000 at a weighted average interest rate of 4.50%. There were $8,638,000 retail borrowings outstanding at a weighted average interest rate of 4.99% at September 30, 2006.

78

Securities underlying sales of securities under retail repurchase agreements consisted of investment securities that had an amortized cost of $13,390,000 and a fair value of $13,384,000 at September 30, 2007.

During fiscal 2006, the Bank began using structured repurchase agreements to replace various FHLB borrowings. The Bank has eight separate repurchase agreements with PNC Bank, N.A. (“PNC”) and Citigroup Global Markets, Inc. (“CGMI”). Each agreement is structured as the sale of a specified amount of identified securities to the counterparty, which the Bank has agreed to repurchase five to seven years after the initial sale. The underlying securities consist of various U.S. Government and agency obligations and mortgage-backed securities, which continue to be carried as assets of the Bank, and the Bank is entitled to receive interest and principal payments on the underlying securities. The Bank is required to post additional collateral if the market value of the securities subject to repurchase falls below 105% of principal amount. While the repurchase agreements are in effect, the Bank is required to pay interest quarterly at the rate specified in the agreement. Each of the agreements provide an initial fixed or floating interest rate that converts to a floating or fixed rate at the end of six months to one year. The Bank also has one fixed rate agreement that does not convert. The counterparty has the option of terminating the repurchase agreement at the reset date and quarterly thereafter. The counterparty may also terminate the repurchase agreement upon certain events of default including the Bank’s failure to maintain well capitalized status. Upon termination, the Bank would be required to repurchase the securities. During fiscal year 2007, the Bank used PNC to borrow $55,000,000, with a weighted average maturity of 4.60 years, and during fiscal 2006 borrowed $35,000,000, with a weighted average maturity of 4.45 years. During fiscal years 2007 and 2006 the Bank used CGMI to borrow $40,000,000, with a weighted average maturity of 5.63 years, and borrowed $40,000,000, with a weighted average maturity of 5.39 years, respectively. Securities underlying sales of securities under structured repurchase agreements consisted of investment securities that had an amortized cost of $107,566,000 and $87,843,000 and a fair value of $106,400,000 and $85,754,000 at September 30, 2007 and 2006, respectively. The Bank’s structured repurchase agreements are summarized as follows at September 30, 2007 and 2006:

	Interest		Interest
	Rate		Rate
	2007		2006		2007		2006
	(Dollars In Thousands)
Floating to fixed rate:
June 20, 2007	—	%	4.64	%	$	—	$	15,000
Feburaury 16, 2011	4.73		4.42			10,000		10,000
May 12, 2011	4.95		4.40			10,000		10,000
May 18, 2011	4.97		4.41			10,000		10,000
March 2, 2012	4.58		—			10,000		—
Fixed to floating rate:
July 24, 2013	4.44		4.65			15,000		15,000
September 13, 2013	3.80		3.98			15,000		15,000
August 8, 2014	3.40		—			15,000		—
Fixed rate:
August 31, 2012	4.44		—			10,000		—
Total Structured
Repurchase Agreements					$	95,000	$	75,000

79

Note 10 - Financial Instruments with Off-Balance Sheet Risk

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

A summary of the contractual amount of the Bank’s financial instrument commitments is as follows:

	September 30,
	2007		2006
	(In Thousands)
Commitments to grant loans	$	11,962	$	7,443
Unfunded commitments under lines of credit		51,947		43,416
Financial and performance standby letters of credit		651		218

The Bank’s customers have available lines of credit as follows: consumer, both secured and unsecured, and commercial, generally secured. The amount available at September 30, 2007 and 2006 was $23,930,000 and $21,508,000, respectively, for consumer lines of credit and $28,017,000 and $21,908,000, respectively, for commercial lines of credit. The interest rate for the consumer lines of credit range from 5.89% to 12.25%, the majority of which is at variable rates. The interest rates for the commercial lines of credit are generally variable and based on prevailing market conditions at the time of funding. The Bank’s customers also have available letters of credit. The amount available under these letters of credit at September 30, 2007 and 2006 was $651,000 and $218,000, respectively. The interest rates are generally variable and based on prevailing market conditions at the time of funding.

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. The current amount of liability as of September 30, 2007 and 2006 for guarantees under standby letters of credit issued is not material.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the borrower. The collateral consists primarily of residential real estate and personal property.

The Company does not have any off-balance sheet risk at September 30, 2007, except for the commitments referenced above.

80

Note 11 - Income Taxes

The provision for income taxes in the consolidated statements of income consists of the following:

	Years Ended September 30,
	2007		2006		2005
	(In Thousands)
Current:
Federal	$	510	$	767	$	933
State		-		-		30
		510		767		963
Deferred, federal		404		73		37
	$	914	$	840	$	1,000

The differences between the expected and actual tax provision expressed as percentages of income before tax are as follows:

	Years Ended September 30,
	2007		2006		2005
Expected federal tax rate	34.0	%	34.0	%	34.0	%
Tax—exempt interest	(10.8	)	(12.4	)	(11.4	)
State income tax, net of federal tax benefit	—		—		.1
Other items, net	(3.1	)	(3.8	)	(2.2	)
Actual Tax Rate	20.1	%	17.8	%	20.5	%

Deferred income taxes consisted of the following components:  

	September 30,
	2007			2006
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,029		$	995
Unrealized losses on securities available for sale		843			765
Office premises and equipment		53			332
Deferred compensation		437			414
Long-term debt-purchase accounting adjustments		173			241
Federal net operating loss carryforwards		66			91
State net operating loss carryforwards		488			442
AMT credit carryforward		90			154
Other		114			152
		3,293			3,586
Valuation allowance on deferred tax assets		(488	)		(442	)
Gross deferred tax assets		2,805			3,144
Deferred tax liabilities:
Loans-purchase accounting adjustments		28			34
Intangible assets		28			35
Gross deferred tax liabilities		56			69
Net deferred tax asset	$	2,749		$	3,075

81

Net operating loss carryforwards in the amount of $73,000, obtained from acquisitions, were utilized in fiscal 2007, 2006, and 2005. The federal net operating loss carryforward of $194,000 is available to offset future taxable income through 2022. The Corporation has AMT credit carryforward of $90,000 as of September 30, 2007 available to be utilized in future years. As of September 30, 2007, the Company has state net operating loss carryforwards of $7,400,000 that expire through 2017. Management does not believe that these state net operating loss carryforwards will be utilized prior to their expiration, and as such, a valuation allowance has been provided for them.

Tax basis bad debt reserves established after 1987 are treated as temporary differences on which deferred income taxes have been provided. Deferred taxes are not required to be provided on tax bad debt reserves recorded in 1987 and prior years (base year bad debt reserves). Approximately $3,404,000 of the balance in retained earnings at September 30, 2007, represent base year bad debt deductions for tax purposes only. No provision for federal income tax has been made for such amount. Should amounts previously claimed as a bad debt deduction be used for any purpose other than to absorb bad debts (which is not anticipated), tax liabilities will be incurred at the rate then in effect.

Note 12 - Stockholders’ Equity

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 2007, that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2007, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Federal Reserve Board (FRB) measures capital adequacy for bank holding companies on the basis of a risk-based capital framework and a leverage ratio. The minimum ratio of total risk-based capital to risk-weighted assets is 8%. At least half of the total capital must be common stockholders’ equity (not inclusive of net unrealized gains and losses on available for sale debt securities and net unrealized gains on available for sale equity securities) and perpetual preferred stock, less goodwill and other nonqualifying intangible assets (Tier 1 capital). The remainder (i.e., the Tier 2 risk-based capital) may consist of hybrid capital instruments, perpetual debt, term subordinated debt, other preferred stock and a limited amount of the allowance for loan losses. At September 30, 2007, the Company had Tier I capital as a percentage of risk-weighted assets of 10.9% and total risk-based capital as a percentage of risk-weighted assets of 11.6%.

In addition, the FRB has established minimum leverage ratio guidelines for bank holding companies. These guidelines currently provide for a minimum ratio of Tier 1 capital as a percentage of average total assets (the Leverage Ratio) of 3% for bank holding companies that meet certain criteria, including that they maintain the highest regulatory rating. The minimum leverage ratio for all other bank holding companies is 4%. At September 30, 2007, the Company had a leverage ratio of 7.2%.

82

The following table sets forth certain information concerning the Bank’s regulatory capital at September 30, 2007 and 2006:

											To be Well Capitalized
											Under Prompt
					For Capital Adequacy						Corrective Action
	Actual				Purposes						Provisions
	Amount		Ratio		Amount			Ratio			Amount			Ratio
	(Dollars in Thousands)
As of September 30, 2007:
Total capital (to risk-weighted assets)	$	49,880	10.6	%	$	>	37,826	>	8.0	%	$	>	47,282	>	10.0	%
Tier 1 capital (to risk-weighted assets)		46,852	9.9			>	18,913	>	4.0			>	28,369	>	6.0
Tier 1 capital (to average assets)		46,852	6.5			>	28,747	>	4.0			>	35,934	>	5.0
As of September 30, 2006:
Total capital (to risk-weighted assets)	$	48,056	10.2	%	$	>	37,556	>	8.0	%	$	>	46,945	>	10.0	%
Tier 1 capital (to risk-weighted assets)		45,139	9.6			>	18,778	>	4.0			>	28,167	>	6.0
Tier 1 capital (to average assets)		45,139	6.3			>	28,841	>	4.0			>	36,051	>	5.0

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company. The total amount of dividends, which may be paid at any date, is generally limited to the retained earnings of the Bank and loans or advances are limited to 10 percent of the Bank’s capital stock and surplus on a secured basis.

At September 30, 2007, the Bank’s retained earnings available for the payment of dividends was $2.6 million. Accordingly, $45.9 million of the Company’s equity in the net assets of the Bank was restricted at September 30, 2007. Funds available for loans or advances by the Bank to the Company amounted to $5.0 million. Any such borrowing must be on terms that would be available to unaffiliated parties and must be fully collateralized in accordance with FRB regulations. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

Note 13 - Stock Option Plans

On September 30, 2007, the Company has six share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $93,000 and $66,000 in fiscal 2007 and 2006. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $32,000 and $22,000 for fiscal 2007 and 2006.

The Company’s 2005 Stock-Based Incentive Plan (the Plan), which is shareholder-approved, permits the grant of share options and shares to its employees and non-employee directors for up to 165,000 shares of common stock. Option awards are generally granted with an exercise price equal to the market value of the common stock on the date of grant, the options generally vest over a three-year period, and have a contractual term of seven years, although the Plan permits contractual terms of up to ten years. Option awards provide for accelerated vesting if there is a change in control, as defined in the Plan. At September 30, 2007, there were 74,100 share options or share rewards, which remain available to grant. No share awards have been made under the Plan.

The Company also maintains the 1997 Employee Stock Compensation Program, which was shareholder approved. At September 30, 2007, no remaining options are available for grant under this program. Option awards under this program were granted with an exercise price equal to the market value of the common stock on the date of grant, had vesting periods of from zero to two years, and had contractual terms of from seven to ten years. Option awards under this program provided for accelerated vesting if there is a change in control, as defined in the program.

The Company also maintains the 1998 Stock Compensation Program, the 2000 Stock Compensation Plan, the 2001 Stock Compensation Plan and the 2002 Stock Compensation Plan, which provided for the grant of stock options to non-employee directors. At September 30, 2007, no remaining options are available for grant under these programs. Option

83

awards under these programs were granted with an exercise price equal to the market value of the common stock on the date of grant, were exercisable immediately, and had contractual terms of ten years.

The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee and director terminations within the model, as well as the expected term of options granted, which represents the period of time that options granted are expected to be outstanding. Separate groups of employees and directors that have similar historical exercise behavior are considered separately for valuation purposes. Ranges given below result from certain groups of employees and directors exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	2007	2006	2005
Expected volatility	22%	22% - 23%	19%
Weighted-average volatility	22%	22%	19%
Expected dividends	3.8%	3.6% - 3.8%	2.4% - 2.8%
Expected term (in years)	5.5	5.5	5.0 – 6.0
Risk-free rate	4.5%	4.2% - 4.5%	3.6% - 4.3%

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2006	389,342		$	14.89
Granted	34,000			18.64
Exercised	(28,390	)		10.56
Forfeited	(1,352	)		19.27
Outstanding at September 30, 2007	393,600		$	15.51	4.5	$	841,333
Exercisable at September 30, 2007	326,799		$	14.81	4.2	$	841,333

The weighted-average grant-date fair value of options granted during the fiscal years 2007, 2006, and 2005 was $3.31, $3.35, and $3.98, respectively. The total intrinsic value of options exercised during the fiscal years ended September 30, 2007, 2006, and 2005, was $272,000, $275,000, and $621,000, respectively.

A summary of the status of non-vested shares as of September 30, 2007, and changes during the year ended September 30, 2007 is presented below:

Non-vested Shares	Shares		Weighted Average Grant-Date Fair Value
Non-vested at September 30, 2006	51,767		$	3.37
Granted	34,000			3.31
Vested	(18,966	)		3.45
Forfeited	—			—
Non-vested at September 30, 2007	66,801		$	3.36

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As of September 30, 2007, there was $149,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.0 year. The total fair value of shares vested during the years ended September 2007, 2006, and 2005, was $65,000, $53,000, and $202,000, respectively.

Cash received from options exercised under all share-based payment arrangements for the fiscal years ended September 30, 2007, 2006, and 2005 was $301,000, $264,000 and $562,000, respectively. The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $14,000, $43,000, and $160,000 for the fiscal years ended September 30, 2007, 2006 and 2005, respectively.

The Company has a policy of issuing shares from authorized but unissued shares to satisfy share option exercises.

Note 14 - Employee Benefit Plans

Deferred Compensation - Post-Retirement Benefits

During 1998, the Bank established a non-qualified Salary Continuation Plan covering certain officers of the Bank. The Plan is unfunded and provides benefits to participants based upon amounts stipulated in the Plan agreements for a period of 15 years from normal retirement, as defined in the respective Plan agreements. Participants vest in benefits based upon years of service from Plan initiation to normal retirement age. Expense is being accrued based on the present value of future benefits in which the participant is expected to be vested. Expense recognized under the Plan for 2007, 2006, and 2005 was approximately $146,000, $180,000, and $146,000, respectively. The accrued liability under the Plan at September 30, 2007 and 2006 was approximately $1,285,000 and $1,218,000, respectively.

The Bank has entered into life insurance policies designed to offset the Bank’s contractual obligation to pay preretirement death benefits and to recover the cost of providing benefits. Participants in the Plan are the insured under the policy, and the Bank is the owner and beneficiary.

Group Term Replacement Plan

The Bank has purchased life insurance policies on the lives of certain officers of the Bank. By way of separate split dollar agreements, the policy interest is divided between the Bank and the officer. The Bank owns the policy cash surrender value, including accumulated policy earnings, and the policy death benefits over and above the cash surrender value are endorsed to the employee and beneficiary. Death benefit payments are the obligation of the insurance company. The Bank has no benefit obligation to the officer. Income recognized in 2007, 2006 and 2005 as a result of increased cash surrender value was approximately $212,000, $196,000, and $198,000, respectively.

Employee Stock Ownership Plan

The Bank maintains a non-contributory, tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of officers and employees who have met certain eligibility requirements related to age and length of service. Each year, the Bank makes a discretionary contribution to the ESOP in cash, Company common stock or a combination of cash and Company stock. Amounts charged to compensation expense were $280,000, $251,000, and $289,000 in 2007, 2006 and 2005, respectively.

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Note 15 - Selected Quarterly Financial Data (Unaudited)

	Three Month Periods Ended
	December 31		March 31		June 30		September 30
	(Dollars in Thousands, Except per Share Data)
Fiscal 2007
Interest income	$	10,173	$	10,169	$	10,133	$	10,188
Interest expense		6,723		6,568		6,531		6,572
Net interest income		3,450		3,601		3,602		3,616
Provision for loan losses		175		150		100		150
Other income		866		835		897		904
Other expenses		3,105		3,087		3,035		3,433
Income before income taxes and extraordinary gain		1,036		1,199		1,364		937
Provision for income taxes		204		240		314		156
Income from continuing operations		832		959		1,050		781
Income from extraordinary gain, net of taxes		—		89		—		—
Net income	$	832	$	1,048	$	1,050	$	781
Earnings per share:
Basic:
Income from continuing operations	$	0.28	$	0.32	$	0.35	$	0.26
Income from extraordinary gain, net of taxes		—		0.03		—		—
Net income	$	0.28	$	0.35	$	0.35	$	0.26
Diluted:
Income from continuing operations	$	0.27	$	0.31	$	0.34	$	0.27
Income from extraordinary gain, net of taxes		—		0.03		—		—
Net income	$	0.27	$	0.34	$	0.34	$	0.27

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	Three Month Periods Ended
	December 31		March 31		June 30		September 30
	(Dollars in Thousands, Except per Share Data)
Fiscal 2006
Interest income	$	8,664	$	9,139	$	9,567	$	10,003
Interest expense		5,354		5,736		6,171		6,553
Net interest income		3,310		3,403		3,396		3,450
Provision for loan losses		125		—		125		350
Other income		942		903		931		1,057
Other expenses		2,906		3,140		2,999		3,041
Income before income taxes and extraordinary gain		1,221		1,166		1,203		1,116
Provision for income taxes		257		181		234		168
Income from continuing operations		964		985		969		948
Income from extraordinary gain, net of taxes		—		—		—		318
Net income	$	964	$	985	$	969	$	1,266
Earnings per share:
Basic:
Income from continuing operations	$	0.32	$	0.33	$	0.33	$	0.32
Income from extraordinary gain, net of taxes		—		—		—		0.11
Net income	$	0.32	$	0.33	$	0.33	$	0.43
Diluted:
Income from continuing operations	$	0.32	$	0.32	$	0.32	$	0.32
Income from extraordinary gain, net of taxes		—		—		—		0.10
Net income	$	0.32	$	0.32	$	0.32	$	0.42

Note 16 - Fair Value of Financial Instruments

FASB Statement No. 107 “Disclosures about Fair Value of Financial Instruments” (FAS 107), requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial condition, for which it is practical to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments, however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

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The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.

Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The Company, in estimating its fair value disclosures for financial instruments, used the following methods and assumptions:

Cash and Due From Banks

The carrying amounts reported approximate those assets’ fair value.

Interest bearing demand deposits with other institutions

The carrying amounts reported approximate those assets’ fair value.

Securities

Fair values of securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Loans Receivable

For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans receivable were estimated using discounted cash flow analyses, using interest rates currently offered for loans with similar terms to borrowers of similar credit quality. Loans with significant collectibility concerns were fair valued on a loan-by-loan basis utilizing a discounted cash flow method or the fair market value of the underlying collateral.

Restricted Investments in Bank Stock

The carrying amounts reported approximate those assets’ fair value.

Accrued Interest Receivable and Payable

                 The carrying amount of accrued interest receivable and payable approximate their fair value.

Deposit Liabilities

The fair values disclosed for demand deposits (e.g., interest bearing and noninterest bearing checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of deposit to a schedule of aggregated expected monthly maturities on time deposits.

Short-Term Borrowings

The carrying amounts for short-term borrowings approximate the estimated fair value of such liabilities.

Securities Sold Under Agreements to Repurchase

The fair values for securities sold under agreement to repurchase were estimated using the interest rate currently available from the party that holds the existing debt.

Subordinated Debt

Fair values for subordinated debt are estimated using a discounted cash flow calculation similar to that used in valuing fixed rate certificate of deposit liabilities.

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Long-Term Debt

The fair values for long-term debt were estimated using the interest rate currently available from the party that holds the existing debt.

Off-Balance Sheet Instruments

Fair values for the Company’s off-balance sheet instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

The carrying amounts and fair values of the Company’s financial instruments are presented in the following table:

	September 30,
	2007				2006
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Financial assets:
Cash and due from banks	$	10,848	$	10,848	$	8,480	$	8,480
Interest bearing demand deposits with other institutions		228		228		187		187
Securities available for sale		152,223		152,223		165,449		165,449
Securities held to maturity		74,553		74,010		85,879		84,851
Loans receivable, net (including loans held for sale)		459,098		454,170		439,067		426,394
Federal Home Loan Bank stock		7,102		7,102		9,132		9,132
Accrued interest receivable		3,639		3,639		3,359		3,359
Financial liabilities:
Deposits		433,555		435,289		414,182		412,399
Short-term borrowings		23,618		23,618		78,625		78,625
Securities sold under agreements to repurchase		105,537		105,340		83,638		83,220
Subordinated Debt		7,732		7,732		10,310		10,310
Accrued interest payable		1,184		1,184		996		996
Long-term debt		104,050		104,090		94,292		94,634
Off-balance sheet financial instruments:
Standby letters of credit		—		—		—		—
Commitments to extend credit		—		—		—		—

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Note 17 - Fidelity Bancorp, Inc. Financial Information (Parent Company Only)

Following are condensed financial statements for the parent company:

Condensed Statements of Financial Condition

	September 30,
	2007		2006
	(In Thousands)
Assets
Cash	$	489	$	2,592
Investment in subsidiary bank		48,467		46,623
Investment in unconsolidated subsidiary trust		232		310
Securities available for sale		4,130		4,289
Other assets		901		710
Total Assets	$	54,219	$	54,524
Liabilities and Stockholders’ Equity
Liabilities:
Subordinated debentures	$	7,732	$	10,310
Other liabilities		17		19
Total Liabilities		7,749		10,329
Total Stockholders’ Equity		46,470		44,195
Total Liabilities and Stockholders’ Equity	$	54,219	$	54,524

Condensed Statements of Income

	Years Ended September 30,
	2007			2006			2005
	(In Thousands)
Dividends from subsidiary	$	2,528		$	2,239		$	8,911
Interest income		246			248			241
Interest expense		(930	)		(863	)		(659	)
Other income		207			788			572
Early extinguishment of debt		(277	)		—			—
Other expense		(221	)		(195	)		(108	)
Income Before Equity in Undistributed Net Income of Subsidiary and Income Taxes		1,553			2,217			8,957
Income tax benefit		366			35			17
Equity in(excess of) undistributed net income of subsidiary		1,792			1,932			(5,098	)
Net Income	$	3,711		$	4,184		$	3,876

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 Condensed Statements of Cash Flows

	Year Ended September 30,
	2007			2006			2005
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	3,711		$	4,184		$	3,876
Adjustments to reconcile net income to net cash provided by operating activities:
(Equity in) excess of undistributed earnings of subsidiary		(1,792	)		(1,932	)		5,098
Gain on sale of securities available for sale		(82	)		(668	)		—
Tax benefit realized on stock-based compensation		—			—			160
Decrease (increase) in interest receivable		7			(5	)		(14	)
Increase (decrease) in payable to subsidiary		—			8			(5,867	)
Debt issuance charge upon redemption		277			—			—
Other changes, net		(280	)		7			61
Net Cash Provided by Operating Activities		1,841			1,594			3,314
Cash Flows from Investment Activities
Purchase of securities available for sale		(768	)		(1,183	)		(1,801	)
Sale of securities available for sale		176			2,118			527
Maturities and principal repayments of securities available for sale		525			—			1,064
Investment in unconsolidated subsidiary trust		(232	)		—			—
Liquidation of unconsolidated subsidiary trust		310			—			—
Net Cash Provided by (Used in) Investing Activities		11			935			(210	)
Cash Flows from Financing Activities
Proceeds from issuance of subordinated debt		7,732			-			-
Redemption of subordinated debt		(10,310	)		-			-
Stock options exercised		301			264			562
Excess tax benefit realized on stock-based compensation		14			43			-
Sale of stock through Dividend Reinvestment Plan		157			151			153
Dividends paid		(1,672	)		(1,594	)		(1,405	)
Acquisition of treasury stock		(177	)		(397	)		(1,265	)
Net Cash Used in Financing Activities		(3,955	)		(1,533	)		(1,955	)
Net (Decrease) Increase in Cash and Cash Equivalents		(2,103	)		996			1,149
Cash and Cash Equivalents - Beginning		2,592			1,596			447
Cash and Cash Equivalents - Ending	$	489		$	2,592		$	1,596

Note 18 - Contingent Liabilities

The Company is subject to a number of asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, after consultation with legal counsel, the resolution of these claims will not have a material adverse effect on the Company’s financial position, liquidity or results of operations.

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Note 19 – Extraordinary Gain

During the fourth quarter of fiscal 2006, the Bank recorded an extraordinary gain of $481,000, before taxes of $163,000, related to insurance proceeds received from the destructive fire that devastated the Bank’s Carnegie Branch location in October 2005. During the second quarter of fiscal 2007, the Bank received additional insurance proceeds of $135,000, and recorded an extraordinary gain of $89,000, net of taxes. The insurance claim has been settled and no additional proceeds are expected to be recovered.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures. The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

Part III

Item 10. Directors, Executive Officers, and Corporate Governance.

The information contained under the sections captioned “Section 16(a) Beneficial Ownership Reporting Compliance”, “Proposal I -- Election of Directors”, and “Corporate Governance” in the Company’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders are incorporated herein by reference.

The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Company’s Code of Ethics is filed as Exhibit 14 to this Annual Report on Form 10-K.

Item 11. Executive Compensation.

The information contained under the sections captioned “Compensation Discussion and Analysis” – “Executive Compensation” and “Director Compensation” in the Proxy Statement is incorporated herein by reference.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a) Security Ownership of Certain Beneficial Owners

The information required by this item is incorporated herein by reference to the Section captioned “Principal Holders of Our Common Stock” in the Proxy Statement.

(b) Security Ownership of Management

The information required by this item is incorporated herein by reference to the section captioned “Proposal I -- Election of Directors” in the Proxy Statement.

(c) Changes in Control

Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

	(a)		(b)			(c)
	Number of Securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans, (excluding securities reflected in column (a))
Equity compensation plans approved by shareholders
Employee Stock Compensation Programs and Directors Stock Option Plan		309,957		$	16.07		74,100
Equity compensation plans not approved by security holders
Directors Stock Compensation Program/Plans(1)		86,643			13.45		--
TOTAL		393,600		$	15.51		74,100

 

⁽¹⁾ Pursuant to the 2002 Stock Compensation Plan and 2001 Stock Compensation Plan, shares were reserved for issuance pursuant to options granted to eligible persons. The plans provided for automatic grants of options to directors on December 31 of each year in specified amounts. No additional options may be granted under these plans.

 

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Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by this item is incorporated herein by reference to the sections captioned “ Related Party Transactions” and “Corporate Governance” of the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information called for by this item is incorporated herein by reference to the section entitled “Independent Registered Public Accounting Firm” in the Proxy Statement.

Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Annual Report on Form 10-K.

1. Financial Statements

The financial statements are set forth under Item 8 of this annual report on Form 10-K.

2. Financial Statement Schedules

None.

3. Exhibits

The following exhibits are filed with this Annual Report on Form 10-K or incorporated by reference herein:

3.1 Articles of Incorporation (1)

3.2 Amended and Restated Bylaws

4.1 Common Stock Certificate (1)

4.2 Rights Agreement, dated as of March 31, 2003, by and between Fidelity Bancorp, Inc. and Registrar and Transfer Company (3)

4.3 Amendment No. 1 to Rights Agreement (4)

4.4* Indenture, dated as of September 20, 2007, between Fidelity Bancorp, Inc. and Wilmington Trust Company

4.5* Amended and Restated Declaration of Trust, dated as of September 20, 2007, by and among Wilmington Trust Company as Institutional Trustee, Fidelity Bancorp, Inc., as Sponsor and Richard G. Spencer, Lisa L. Griffith, and Michael A. Mooney as Administrators

4.6* Guarantee Agreement, as dated as of September 20, 2007, by and between Fidelity Bancorp, Inc. and Wilmington Trust Company

10.1** Employee Stock Ownership Plan, as amended (1)

10.2** 1988 Employee Stock Compensation Program (1)

10.3** 1993 Employee Stock Compensation Program (5)

10.4** 1997 Employee Stock Compensation Program (6)

10.5** 1993 Directors’ Stock Option Plan (5)

10.6** 1998 Group Term Replacement Plan (7)

10.7** 1998 Salary Continuation Plan Agreement by and between W.L. Windisch, the Company and the Bank (7)

10.8** 1998 Salary Continuation Plan Agreement by and between R.G. Spencer, the Company and the Bank (7)

10.9** 1998 Salary Continuation Plan Agreement by and between M.A. Mooney, the Company and the Bank (7)

10.10** Salary Continuation Agreement with Lisa L. Griffith (2)

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10.11**	1998 Stock Compensation Plan (8)
10.12**	2000 Stock Compensation Plan (9)

10.13** 2001 Stock Compensation Plan (10)

10.14** 2002 Stock Compensation Plan (11)

10.15** 2005 Stock-Based Incentive Plan(12)

10.16**	Form of Directors Indemnification Agreement (13)
10.17**	Employment Agreement, dated January 1, 2002, between Fidelity Bancorp, Inc. and Fidelity Bank, PaSB and Richard G. Spencer
10.18**	Employment Agreement, dated January 1, 2000, between Fidelity Bancorp, Inc. and Fidelity Bank, PaSB and Michael A. Mooney
10.19**	Severance Agreement, dated February 10, 2004, between Fidelity Bank, PaSB and Lisa L. Griffith
10.20**	Severance Agreement, dated December 19, 1997, between Fidelity Bank, PaSB and Anthony F. Rocco.
10.21**	Severance Agreement, dated December 19, 1997, between Fidelity Bank, PaSB and Sandra L. Lee.

14 Code of Ethics (2)

20.1 Dividend Reinvestment Plan (14)

21 Subsidiaries

23.1 Consent of Beard Miller Company LLP

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32 Section 1350 Certification

* Not filed in accordance with the provisions of Item 601(b)(4)(iii) of Regulation S-K. The Company agrees to provide a copy of these documents to the Commission upon request.

** Management contract or compensatory plan or arrangement.

(1) Incorporated by reference from the exhibits attached to the Prospectus and Proxy Statement of the Company included in its Registration Statement on Form S-4 (SEC File No. 33-55384) filed with the SEC on December 3, 1992 (the “Registration Statement”).

(2) Incorporated by reference from the identically numbered exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2003.

(3) Incorporated by reference from Exhibit 1 to the Company’s Registration Statement on Form 8-A filed March 31, 2003.

(4) Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A filed March 17, 2005.

(5) Incorporated by reference from an exhibit to the Registration Statement on Form S-8 (SEC File No. 333-26383) filed with the SEC on May 2, 1997.

(6) Incorporated by reference from an exhibit to the Registration Statement on Form S-8 for the year ended September 30, 1998 (SEC File No. 333-47841) filed with the SEC on March 12, 1998.

(7) Incorporated by reference to an identically numbered exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1998 filed with the SEC on December 29, 1998.

(8) Incorporated by reference from Exhibit 4.1 to the Registration Statement on Form S-8 (SEC File No. 333-71145) filed with the SEC on January 25, 1999.

(9) Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (SEC File No. 333-53934) filed with the SEC on January 19, 2001.

(10) Incorporated by reference from Exhibit 4.1 to the Registration Statement on Form S-8 (SEC File No. 333-81572) filed with the SEC on January 29, 2002.

(11) Incorporated by reference from Exhibit 4.1 to Registration Statement on Form S-8 (SEC File No. 333-103448) filed with the SEC on February 26, 2003.

(12) Incorporated by reference from Exhibit 4.1 to Registration Statement on Form S-8 (SEC File No. 333-123168) filed with the SEC on March 7, 2005.

(13) Incorporated by reference to an identically numbered exhibit in Form 10-Q filed with the SEC on February 13, 2007.

(14) Incorporated by reference to an identically numbered exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1999 filed with the SEC on February 14, 2000.

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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.

		FIDELITY BANCORP, INC.
		By:	/s/Richard G. Spencer
Date:	December 28, 2007		Richard G. Spencer
			President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated

By:	/s/William L. Windisch	By:	/s/Richard G. Spencer
	William L. Windisch		Richard G. Spencer
	Chairman of the Board and Director		President, Chief Executive Officer and Director
			(Principal Executive Officer)
Date:	December 28, 2007	Date:	December 28, 2007
By:	/s/J. Robert Gales	By:	/s/Robert F. Kastelic
	J. Robert Gales		Robert F. Kastelic
	Director		Director
Date:	December 28, 2007	Date:	December 28, 2007
By:	/s/Oliver D. Keefer	By:	/s/Charles E. Nettrour
	Oliver D. Keefer		Charles E. Nettrour
	Director		Director
Date:	December 28, 2007	Date:	December 28, 2007
By:	/s/Joanne Ross Wilder	By:	/s/Donald J. Huber
	Joanne Ross Wilder		Donald J. Huber
	Director		Director
Date:	December 28, 2007	Date:	December 28, 2007
By:	/s/Christopher S. Green	By:	/s/Lisa L. Griffith
	Christopher S. Green		Lisa L. Griffith
	Director		Senior Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)
Date:	December 28, 2007	Date:	December 28, 2007

EX-3.(II)

AMENDED AND RESTATED BYLAWS

OF

FIDELITY BANCORP, INC.

ARTICLE I. OFFICES

1.1        Registered Office and Registered Agent. The registered office of Fidelity Bancorp, Inc. (“Corporation”) shall be located in the Commonwealth of Pennsylvania at such place as may be fixed from time to time by the Board of Directors upon filing of such notices as may be required by law, and the registered agent shall have a business office identical with such registered office.

1.2        Other Offices. The Corporation may have other offices within or outside the Commonwealth of Pennsylvania at such place or places as the Board of Directors may from time to time determine.

ARTICLE II. STOCKHOLDERS’ MEETINGS

2.1        Meeting Place. All meetings of the stockholders shall be held at the principal place of business of the Corporation, or at such other place within or without the Commonwealth of Pennsylvania as shall be determined from time to time by the Board of Directors, and the place at which any such meeting shall be held shall be stated in the notice of the meeting.

2.2        Annual Meeting Time. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on the second Tuesday of February, if not a legal holiday, and if a legal holiday, then on the day following, or at such other date as may be determined by the Board of Directors and stated in the notice of such meeting.

2.3        Organization and Conduct. Each meeting of the stockholders shall be presided over by the President, or if the President is not present, by any Vice President. The Secretary, or in her absence a temporary Secretary, shall act as secretary of each meeting of the stockholders. In the absence of the Secretary and any temporary Secretary, the chairman of the meeting may appoint any person present to act as secretary of the meeting. The chairman of any meeting of the stockholders, unless prescribed by law or regulation or unless the Board of Directors has otherwise determined, shall determine the order of the business and procedure at the meeting, including such regulation of the manner of voting and the conduct of discussions as shall be deemed appropriate by him in his sole discretion.

2.4        Special Meetings. Special meetings of the stockholders of the Corporation for any purpose may be called only as prescribed in the Corporation’s Articles of Incorporation.

2.5 Notice.

(a)       Notice of the time and place of the annual meeting of stockholders shall be given by delivering personally or by mailing a written or printed notice of the same, at least 10

days prior to the meeting, to each stockholder of record entitled to vote at such meeting. When any stockholders’ meeting, either annual or special, is adjourned for 30 days or more, or if a new record date is fixed for an adjourned meeting of stockholders, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted thereat (unless a new record date is fixed therefor), other than an announcement at the meeting at which such adjournment is taken.

(b)       At least 10 days prior to the meeting, a written or printed notice of each special meeting of stockholders, stating the place, day and hour of such meeting, and the purpose or purposes for which the meeting is called, shall be either delivered personally or mailed to each stockholder of record entitled to vote at such meeting.

2.6        Voting Record. The Corporation shall make a complete record of the stockholders entitled to vote at each meeting of the stockholders of the Corporation, or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares held by each. The record shall be kept open at the time and place of such meeting for the inspection by any stockholder.

2.7 Quorum. Except as otherwise required by law:

(a)       A quorum at any annual or special meeting of stockholders shall consist of stockholders representing, either in person or by proxy, a majority of the outstanding capital stock of the Corporation entitled to vote at such meeting.

(b) The votes of a majority in interest of those present at any properly called meeting or adjourned meeting of stockholders, at which a quorum as defined above is present, shall be sufficient to transact business.

2.8 Voting of Shares.

(a)       Except as otherwise provided in these Bylaws or to the extent that voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation, each stockholder, on each matter submitted to a vote at a meeting of stockholders, shall have one vote for each share of capital stock registered in his name on the books of the Corporation.

(b)       Directors are to be elected by a plurality of votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Stockholders shall not be permitted to cumulate their votes for the election of directors. If, at any meeting of the stockholders, due to a vacancy or vacancies or otherwise, directors of more than one class of the Board of Directors are to be elected, each class of directors to be elected at the meeting shall be elected in a separate election by a plurality vote.

2.9        Closing of Transfer Books and Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend, the Board of Directors may

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provide that the stock transfer books shall be closed for a stated period not to exceed the maximum period prescribed at the time by the laws of the Commonwealth of Pennsylvania, nor be less than 10 days preceding such meeting or payment date, and in such case, written or printed notice thereof shall be mailed at lease 10 days before the closing thereof to each stockholder of record at the address appearing on the records of the Corporation or supplied by such stockholder to the Corporation for the purpose of notice. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a record date for any such determination of stockholders, such date to be within the maximum period prescribed at the time by the laws of the Commonwealth of Pennsylvania, and, in case of a meeting of stockholders, not less than 10 days prior to the date on which the particular action requiring such determination of stockholders is to be taken.

2.10      Proxies. A stockholder may vote either in person or by proxy executed in writing by the stockholder, or his duly authorized attorney-in-fact. No proxy shall be valid after one year from the date of its execution, unless otherwise provided in the proxy.

2.11      Voting of Shares in the Name of Two or More Persons. Where shares are held jointly or as tenants in common by two or more persons as fiduciaries or otherwise, if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the Corporation shall accept as the vote of all such shares the votes cast by him or a majority of them and if in any case such persons are equally divided upon the manner of voting the shares held by them, the vote of such shares shall be divided equally among such persons, without prejudice to the rights of such joint owners or the beneficial owners thereof among themselves, except that, if there shall have been filed with the Secretary of the Corporation a copy, certified by an attorney-at-law to be correct, of the relevant portions of the agreements under which such shares are held or the instrument by which the trust or estate was created or the decree of court appointing them, or of a decree of court directing the voting of such shares, the persons specified as having such voting power in the latest such document so filed, and only such persons, shall be entitled to vote such shares but only in accordance therewith.

2.12      Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by an officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine, provided that a copy of such provisions or appointing resolution certified to be correct by an officer of such corporation is filed with the Secretary of the Corporation if requested by the Secretary of the Corporation. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee or nominee, and thereafter the pledgee or nominee shall be entitled to vote the shares so transferred.

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2.13      Judges of Election. For each meeting of stockholders, the Board of Directors may appoint one or three judges of election. If for any meeting the judge(s) appointed by the Board of Directors shall be unable to act or the Board of Directors shall fail to appoint any judge, one or three judges may be appointed at the meeting by the chairman thereof. Such judge(s) shall conduct the voting in each election of directors and, as directed by the Board of Directors or the chairman of the meeting, the voting on each matter voted on at such meeting, and after the voting shall make a certificate of the vote taken. Judges need not be stockholders.

2.14      Notice for Nominations and Proposals. Nominations for directors to be elected at an annual meeting of shareholders, except those made by the board of directors of the Corporation, must be made in accordance with the provisions set forth in the Articles of Incorporation and must also be accompanied by a certification, under oath before a notary public, by each nominee that he meets the eligibility requirements to be a director as set forth in Article IV, Section 4.19 of these Bylaws.

ARTICLE III. CAPITAL STOCK

3.1        Certificates. The shares of the Corporation’s capital stock may be represented by certificates or uncertificated. Certificates of stock shall be issued in numerical order, and shall be signed by the President or a Vice President, and the Secretary or the Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be an officer of the Corporation before the certificate is issued, it may be issued by the Corporation with the same effect as if the person were an officer on the date of issue. Each certificate of stock shall state:

(a)       that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania;

(b) the name of the person to whom issued;

(c)       the number and class of shares and the designation of the series, if any, which such certificate represents; and

(d)       the par value of each share represented by such certificate, or a statement that such shares are without par value.

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3.2        Uncertificated Shares. The Board of Directors may authorize the issuance of uncertificated shares by the Corporation, and may prescribe procedures for the issuance and registration of transfer thereof, and with respect to such other matters relating to uncertificated shares as the Board of Directors may deem appropriate. No such authorization shall affect previously issued and outstanding shares represented by certificates until such certificates shall have been surrendered to the Corporation. Within a reasonable time after the issuance or transfer of any uncertificated shares, the Corporation shall issue or cause to be issued to the holder of such shares a written statement of the information required to be included on stock certificates under the laws of the Commonwealth of Pennsylvania and these Bylaws. Notwithstanding the adoption of any resolution providing for uncertificated shares, each registered holder of stock represented by uncertificated shares shall be entitled, upon request to the custodian of the stock transfer books of the Corporation, or other person designated as the custodian of the records of uncertificated shares, to have physical certificates representing such shares registered in such holder’s name.

3.3 Transfers.

(a)       Transfers of stock shall be made only upon the stock transfer books of the Corporation, kept at the registered office of the Corporation or at its principal place of business, or at the office of its transfer agent or registrar and, in the case of certificated shares, before a new certificate is issued, the old certificate shall be surrendered for cancellation. The Board of Directors may, by resolution, open a share register in any state of the United States, and may employ an agent or agents to keep such register, and to record transfers of shares therein.

(b)       Certificated shares of stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from the certificate, or by a written power of attorney to sell, assign, and transfer the same, signed by the holder of said certificate. No certificated shares of stock shall be transferred on the books of the Corporation until the outstanding certificates therefor have been surrendered to the Corporation.

3.4       Registered Owners. Registered stockholders shall be treated by the Corporation as the holders in fact of the stock standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided below or by the laws of the Commonwealth of Pennsylvania. The Board of Directors may adopt by resolution a procedure whereby a stockholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of such stockholder are held for the account of a specified person or persons. The resolution shall set forth:

(a) The classification of stockholder who may certify;

(b) The purpose or purposes for which the certification may be made;

(c) The form of certification and information to be contained therein;

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(d)       If the certification is with respect to a record date or closing of the stock transfer books, the date within which the certification must be received by the Corporation; and

(e)       Such other provisions with respect to the procedure as are deemed necessary or desirable.

Upon receipt by the Corporation of a certification complying with the above requirements, the person specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the stockholder making the certification.

3.5        Mutilated, Lost or Destroyed Certificates. In case of any mutilation, loss or destruction of any certificate of stock, another may be issued in its place upon receipt of proof of such mutilation, loss or destruction. The Board of Directors may impose conditions on such issuance and may require the giving of a satisfactory bond or indemnity to the Corporation in such sum as they might determine, or establish such other procedures as they deem necessary.

3.6        Fractional Shares or Scrip. The Corporation may (a) issue fractions of a share which shall entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share.

3.7        Shares of Another Corporation. Shares owned by the Corporation in another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the Board of Directors may determine or, in the absence of such determination, by the President of the Corporation.

ARTICLE IV. BOARD OF DIRECTORS

4.1        Number and Powers. The management of all the affairs, property and interest of the Corporation shall be vested in a Board of Directors. The Board of Directors shall be divided into three classes as nearly equal in number as possible. The initial Board of Directors shall consist of seven persons. The classification and term of the directors shall be as set forth in the Corporation’s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein. In addition to the powers and authorities expressly conferred upon it by these Bylaws and the Articles of Incorporation, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

Each director of the Corporation must, at all times, reside in a county, city or town within the Commonwealth of Pennsylvania which is no more than 20 miles in distance from the main

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branch or nearest branch office location of the Corporation’s wholly-owned subsidiary, Fidelity Savings Bank.

4.2       Change of Number. The number of directors may at any time be increased or decreased by a vote of a majority of the Board of Directors, provided that no decrease shall have the effect of shortening the term of any incumbent director. Notwithstanding anything to the contrary contained within these Bylaws, the number of directors may be neither less than five nor more than 15.

4.3        Vacancies. All vacancies in the Board of Directors shall be filled in the manner provided in the Corporation’s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein.

4.4        Regular Meetings. Regular meetings of the Board of Directors or any committee thereof may be held without notice at the principal place of business of the Corporation or at such other place or places, either within or without the Commonwealth of Pennsylvania, as the Board of Directors or such committee, as the case may be, may from time to time designate. The annual meeting of the Board of Directors shall be held without notice immediately after the adjournment of the annual meeting of stockholders.

4.5 SpecialMeetings.

(a)       Special meetings of the Board of Directors may be called at any time by the President or by a majority of the authorized number of directors, to be held at the principal place of business of the Corporation or at such other place or places as the Board of Directors or the person or persons calling such meeting may from time to time designate. Notice of all special meetings of the Board of Directors shall be given to each director by five days’ service of the same by telegram, by letter, or personally. Such notice need specify neither the business to be transacted at, nor the purpose of, the meeting.

(b)       Special meetings of any committee may be called at any time by such person or persons and with such notice as shall be specified for such committee by the Board of Directors, or in the absence of such specification, in the manner and with the notice required for special meetings of the Board of Directors.

4.6       Quorum. A majority of the Board of Directors shall be necessary at all meetings to constitute a quorum for the transaction of business.

4.7        Waiver of Notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. A waiver of notice signed by the director or directors, whether before or after the time stated for the meeting, shall be equivalent to the giving of notice.

4.8       Registering Dissent. A director who is present at a meeting of the Board of Directors at which action on a corporate matter is taken shall be presumed to have assented to

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such action unless his dissent is entered in the minutes of the meeting, or unless he files his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or unless he delivers his dissent in writing to the Secretary of the Corporation immediately after the adjournment of such meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

4.9        Executive, Audit and Other Committees. Standing or special committees may be appointed by the Board of Directors from its own number from time to time, and the Board of Directors may from time to time invest such committees with such powers as it may see fit, subject to such conditions as may be prescribed by the Board. An Executive Committee may be appointed by resolution passed by a majority of the full Board of Directors. It shall have an exercise all of the authority of the Board of Directors, except in reference to amending the Articles of Incorporation, adopting a plan or merger or consolidation, recommending the sale, lease or exchange or other dispositions of all or substantially all the property and assets of the Corporation otherwise than in the usual and regular course of business, recommending a voluntary dissolution or a revocation thereof, or amending these Bylaws. An Audit Committee shall be appointed by resolution passed by a majority of the full Board of Directors, and at least a majority of the members of the Audit Committee shall be directors who are not also officers of the Corporation. The Audit Committee shall review the records and affairs of the Corporation to determine its financial condition, shall review the Corporation’s systems of internal control with management and the Corporation’s independent auditors and shall monitor the Corporation’s adherence in accounting and financial reporting to generally accepted accounting principles, as well as such other duties as may be added to it by the Board of Directors. All committees appointed by the Board of Directors shall keep regular minutes of the transactions of their meetings and shall cause them to be recorded in books kept for that purpose in the office of the Corporation. The designation of any such committee, and the delegation of authority thereto, shall not relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.

4.10      Remuneration. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have the authority to establish reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise, or to delegate such authority to any appropriate committee; provided, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of standing or special committees may be allowed like compensation for attending committee meetings.

4.11      Action by Directors Without a Meeting. Any action which may be taken at a meeting of the directors, or of a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken or to be taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be. Such consent shall have the same effect as a unanimous vote.

4.12      Action of Directors by Communications Equipment. Any action which may be taken at a meeting of directors, or of a committee thereof, may be taken by means of a

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conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time.

4.13      Age Limitation. No person shall be eligible for election, re-election, appointment or re-appointment to the Board of Directors of the Corporation who is, at the time of such action, more than seventy-five (75) years of age. This age limitation does not apply to a member emeritus of the Board of Directors or of an Advisory Board.

4.14      Resignation of Directors. A director may resign at any time by written resignation delivered to the Secretary of the Corporation. Unless otherwise specified in the resignation, it shall take effect upon receipt by the Secretary. More than three consecutive absences from regular meetings of the Board of Directors, unless excused by resolution of the Board of Directors, shall automatically constitute a resignation, effective upon acceptance by the Board of Directors.

4.15      Advisory Boards. The Board of Directors may establish any number of Advisory Boards and may appoint any number of individuals to such Boards. Any individual so appointed may be compensated but may not attend any meeting of the Board of Directors, except pursuant to an invitation by the Board of Directors. They shall not have any official responsibility or be subject to any liability.

4.16      Member Emeritus. The Board of Directors may appoint an individual as a member emeritus of the Board of Directors or of an Advisory Board. An individual so appointed shall serve as a member emeritus for a term determined by the Board of Directors unless he is removed by the Board or resigns. A member emeritus may be compensated but may not vote at any meeting of the Board of Directors or Advisory Board or be counted in determining a quorum. A member emeritus also shall not have any responsibility or be subject to any liability.

4.17     MinimumShare Requirement. Each director of the Corporation must be a shareholder of the Corporation and beneficially own at least 5,000 shares of the Corporation’s Common Stock. “Beneficial” ownership shall be determined in accordance with the regulations of the Securities Exchange Act of 1934.

4.18     Affiliations With Other Depository Institutions. A person is not eligible to serve as director of the Corporation if he is a “management official” of another “depository institution” or “depository holding company” as those terms are defined in 12 C.F.R. § 563f.2 of the Regulations of the Office of Thrift Supervision. If elected director of the Corporation, a person may not thereafter serve or agree to serve as a management official of a depository institution or depository holding company unless and until his term as director of the Corporation has expired.

4.19     Eligibility Requirement.  A person is not eligible to serve as director if he: (1) is under indictment for, or has ever been convicted of, a criminal offense, involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year; (2) is a person against whom a federal or state bank regulatory agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that

9

order is final and not subject to appeal; (3) has been found either by any federal or state regulatory agency whose decision is final and not subject to appeal, or by a court to have (a) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency; or (b) breached a fiduciary duty involving personal profit; or (4) has been nominated by a person who would be disqualified from serving as a director of this Corporation under Section 4.19 (1), (2) or (3).

ARTICLE V. OFFICERS

5.1        Designations. The officers of the Corporation shall be the President, a Secretary and a Treasurer, as well as such Vice Presidents (including Executive and Senior Vice Presidents), Assistant Secretaries and Assistant Treasurers as the Board may designate, who shall be elected for one year by the directors at their first meeting after the annual meeting of stockholders, and who shall hold office until their successors are elected and qualify. Any two or more offices may be held by the same person, except that the offices of President and Secretary may not be held by the same person.

5.2        Powers and Duties. The officers of the Corporation shall have such authority and perform such duties as the Board of Directors may from time to time authorize or determine. In the absence of action by the Board of Directors, the officers shall have such powers and duties as generally pertain to their respective offices.

5.3        Delegation. In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select.

5.4        Vacancies. Vacancies in any office arising from any cause may be filled by the Board of Directors at any regular or special meeting of the Board.

5.5        Other Officers. Directors may appoint such other officers and agents as it shall deem necessary or expedient, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

5.6        Term – Removal. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the whole Board of Directors, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed.

5.7        Age Limitation on Officers. No person shall be eligible for election, re-election, appointment or re-appointment to an executive management position who, at the time of such action, has reached seventy (70) years of age; provided, however, that the foregoing shall not

10

restrict the Board of Directors from establishing a compulsory retirement requirement for those officers attaining age 65 but not age 70 who fall within the definition of persons covered by Section 3(c)(1) of the Age Discrimination in Employment Act Amendments of 1978, 29 U.S.C. §631(c)(1).

ARTICLE VI. FISCAL YEAR

The fiscal year of the Corporation shall end on the 30^th of September of each year.

ARTICLE VII. DIVIDENDS AND FINANCE

7.1        Dividends. Dividends may be declared by the Board of Directors and paid by the Corporation out of the unreserved and unrestricted earned surplus of the Corporation, or out of the unrestricted capital surplus of the Corporation, subject to the conditions and limitations imposed by the laws of the Commonwealth of Pennsylvania. The stock transfer books may be closed for the payment of dividends during such periods, not in excess of the maximum period prescribed at the time by the laws of the Commonwealth of Pennsylvania, as from time to time may be fixed by the Board of Directors. The Board of Directors, however, without closing the books of the Corporation, may declare dividends payable only to the holders of record at the close of business on any business day within the maximum period prescribed at the time by the laws of the Commonwealth of Pennsylvania prior to the date on which the dividend is paid.

7.2        Reserves. Before making any distribution of earned surplus, there may be set aside out of the earned surplus of the Corporation such sum or sums as the directors from time to time in their absolute discretion deem expedient as a reserve fund to meet contingencies, or for equalizing dividends, or for maintaining any property of the Corporation, or for any other purpose. Any earned surplus of any year not distributed as dividends shall be deemed to have thus been set apart until otherwise disposed of by the Board of Directors.

7.3        Depositories. The monies of the Corporation shall be deposited in the name of the Corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out only by check or other order for payment of money signed by such persons and in such manner as may be determined by resolution of the Board of Directors.

ARTICLE VIII. PERSONAL LIABILITY OF DIRECTORS

A director of the Corporation shall not be personally liable for monetary damages for any action taken, or any failure to take any action, as a director to the extent set forth in the Corporation’s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein.

ARTICLE IX. NOTICES

Except as may otherwise be required by law, any notice to any stockholder or director may be delivered personally or by mail. If mailed, the notice shall be deemed to have been delivered

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when deposited in the United States mail, addressed to the addressee at his last known address in the records of the Corporation, with postage thereon prepaid.

ARTICLE X. SEAL

The corporate seal of the Corporation shall be such form and bear such inscription as may be adopted by resolution of the Board of Directors.

ARTICLE XI. BOOKS AND RECORDS

The Corporation shall keep correct and complete books and records of account and shall keep minutes and proceedings of meetings of its stockholders and the Board of Directors; and it shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. Any books, records and minutes may be in written form or any other form capable of being converted into written form within a reasonable time.

ARTICLE XII. AMENDMENTS

These Bylaws may be altered, amended or repealed only as set forth in the Corporation’s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein.

ARTICLE XIII. EFFECTIVE DATE

These Bylaws shall become effective October 21, 2003 and all Bylaws adopted prior thereto are repealed as of said effective date.

12

EX-10

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AGREEMENT is effective as of the lst day of January 2002, between Fidelity Bancorp, Inc. (the “Corporation”), a Pennsylvania-chartered bank holding company, and Fidelity Bank PaSB (the “Savings Bank”), a Pennsylvania-chartered savings bank and a wholly-owned subsidiary of the Corporation (collectively, the “Employers”), and Richard G. Spencer (the “Executive”).

WITNESSETH

WHEREAS, the Executive is presently an officer of the Corporation and/or the Savings Bank, and the Employers desire to be ensured of the Executive’s continued active participation in the business of the Employers; and

WHEREAS, in order to induce the Executive to remain in the employ of the Employers and in consideration of the Executive’s agreeing to remain in the employ of the Employers, the parties desire to specify the severance benefits which shall be due the Executive in the event that his employment with the Employers is terminated under specified circumstances; and

WHEREAS, this Agreement amends and restates the employment agreement entered into between the Executive and the Employers on January 1, 2000, as amended.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.          Definitions. The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)       Base Salary. “Base Salary” shall have the meaning set forth in Section 3(a) hereof.

(b)       Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order or material breach of any provision of this Agreement. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Employers.

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(c)        Change in Control of the Corporation. “Change in Control of the Corporation” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”) or any successor thereto, whether or not the Corporation is registered under the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation’s then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; (iii) the sale of all, or a material portion, of the assets of the Corporation; or (iv) the merger or recapitalization of the Corporation or whereby the Corporation is not the surviving entity.

(d) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e)        Date of Termination. “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause or for Disability, the date specified in the Notice of Termination, and (ii) if the Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or as specified in such Notice.

(f)         Disability. Termination by the Employers of the Executive’s employment based on “Disability@ shall mean termination because of any physical or mental impairment which qualifies the Executive for disability benefits under the applicable long-term disability plan maintained by the Employers or any subsidiary or, if no such plan applies, which would qualify the Executive for disability benefits under the Federal Social Security System.

(g) IRS. IRS shall mean the Internal Revenue Service.

(h)        Notice of Termination. Any purported termination of the Executive’s employment by the Employers for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, shall be communicated by written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of Executive’s employment for Cause; and (iv) is given in the manner specified in Section 10 hereof.

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(j)         Retirement. Termination by the Employers of the Executive’s employment based on “Retirement” shall mean voluntary termination by the Executive in accordance with the Employers’ retirement policies, including early retirement, generally applicable to their salaried employees.

2. Term of Employment.

(a)       The Employers hereby employ the Executive as President, Chief Operating Officer, and the Executive hereby accepts said employment and agrees to render such services to the Employers on the terms and conditions set forth in this Agreement. The term of employment under this Agreement shall be for three years, commencing on the date of this Agreement. The Board of Directors of the Employers and the Executive may mutually agree to extend the term of this Agreement for an additional one year as of each or any annual anniversary of the date of this Agreement by affirmatively approving an addendum to this Agreement at least forty-five (45) days prior to such anniversary date. At least forty-five (45) days prior to the first annual anniversary of the date of this Agreement and each annual anniversary thereafter, the Board of Directors of the Employers shall consider and review (with appropriate corporate documentation thereof, and after taking into account all relevant factors, including the Executive’s performance hereunder) an extension of the term of this Agreement. A decision to not extend the term of this Agreement on any annual anniversary date shall not preclude an extension as of any other annual anniversary date. References herein to the term of this Agreement shall refer both to the initial term and successive terms.

(b)       During the term of this Agreement, the Executive shall perform such executive services for the Employers as may be consistent with his titles and from time to time assigned to him by the Employers’s Board of Directors.

3. Compensation and Benefits.

(a)       The Employers shall compensate and pay Executive for his services during the term of this Agreement at a minimum base salary of $115,100 per year (“Base Salary”), which may be increased from time to time in such amounts as may be determined by the Board of Directors of the Employers and may not be decreased without the Executive’s express written consent. In addition to his Base Salary, the Executive shall be entitled to receive during the term of this Agreement such bonus payments as may be determined by the Board of Directors of the Employers.

(b)       During the term of the Agreement, Executive shall be entitled to participate in and receive the benefits of any pension or other retirement benefit plan, profit sharing, stock option, employee stock ownership, or other plans, benefits and privileges given to employees and executives of the Employers, to the extent commensurate with his then duties and responsibilities, as fixed by the Board of Directors of the Employers. The Employers shall not make any changes in such plans, benefits or privileges which would adversely affect Executive’s rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all

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executive officers of the Employers and does not result in a proportionately greater adverse change in the rights of or benefits to Executive as compared with any other executive officer of the Employers. Nothing paid to Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to Executive pursuant to Section 3(a) hereof.

(c)       During the term of this Agreement, Executive shall be entitled to paid annual vacation in accordance with the policies as established from time to time by the Board of Directors of the Employers, which shall in no event be less than four weeks per annum. Executive shall not be entitled to receive any additional compensation from the Employers for failure to take a vacation, nor shall Executive be able to accumulate unused vacation time from one year to the next, except to the extent authorized by the Board of Directors of the Employers.

4.          Expenses. The Employers shall reimburse Executive or otherwise provide for or pay for all reasonable expenses incurred by Executive in furtherance or in connection with the business of the Employers, including, but not by way of limitation, automobile and traveling expenses, and all reasonable entertainment expenses (whether incurred at the Executive’s residence, while traveling or otherwise), subject to such reasonable documentation and other limitations as may be established by the Board of Directors of the Employers. If such expenses are paid in the first instance by the Executive, the Employers shall reimburse the Executive therefor.

5. Termination.

(a)       The Employers shall have the right, at any time upon prior Notice of Termination, to terminate the Executive’s employment hereunder for any reason, including without limitation termination for Cause, Disability or Retirement, and the Executive shall have the right, upon prior Notice of Termination, to terminate his employment hereunder for any reason.

(b)       In the event that (i) the Executive’s employment is terminated by the Employers for Cause, Disability, or Retirement, or (ii) Executive terminates his employment hereunder, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

(c)(i) In the event that the Executive’s employment is terminated by the Employers for other than Cause, Disability, Retirement or the Executive’s death, or such employment is terminated by the Executive due to a material breach of this Agreement by the Employers which has not been cured within fifteen (15) days after a written notice of non-compliance has been given by the Executive to the Employers, and as of the Executive’s Date of Termination no Change in Control of the Corporation has occurred, no written agreement which contemplates a Change in Control of the Corporation and which still is in effect has been entered into by either or both of the Employers and no discussions and/or negotiations are being conducted which relate to the same, then the Employers shall, subject to the provisions of Section 6 hereof, if applicable:

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(A)       pay to the Executive, in twelve (12) equal monthly installments beginning with the first business day of the month following the Date of Termination, an aggregate cash severance amount equal to the Executive’s Base Salary as of his Date of Termination, and

(B)      maintain and provide for a period ending at the earlier of (i) the expiration of twelve (12) months from the Executive’s Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (B)), at no cost to the Executive, the Executive’s continued participation in all group insurance, life insurance, health and accident, disability and other employee benefit plans, programs and arrangements in which the Executive was entitled to participate immediately prior to the Date of Termination (other than stock option and restricted stock plans of the Employers), provided that in the event that the Executive’s participation in any plan, program or arrangement as provided in this subparagraph (B) is barred, or during such period any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Employers shall arrange to provide the Executive with benefits substantially similar to those which the Executive was entitled to receive under such plans, programs and arrangements immediately prior to the Date of Termination.

(C)      The severance amount and benefits required to be paid or provided to the Executive under subparagraphs (A) and (B) above may be paid to the Executive in a lump sum if the Employers and the Executive agree to such lump sum payment.

(D)      In addition, the Employers shall provide the Executive and his spouse substantially the same health insurance as the Executive was currently receiving upon his termination of employment, until both the Executive and his spouse reach age 65. The Executive or his spouse shall pay 100% of the premium costs of such insurance coverage.

(ii)       Upon a Change in Control of the Corporation, then the Employers shall, subject to the provisions of Section 6 hereof, if applicable, pay the Executive on the date of the Change in Control of the Corporation an aggregate cash severance amount in a lump sum payment equal to:

(A)      2.99 times the Executive’s average annual compensation payable by the Employers and included in the Executive’s gross income for the five taxable years ending before the date on which the Date of Termination occurs (or such portion of such period during which the Executive was employed by the Employers), and

(B)      and if the Executive elects, maintain and provide for a period ending at the earlier of (i) the expiration of thirty-six (36) months from the Executive’s Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (B)), at no cost to the Executive, the Executive’s continued participation in all group insurance, life insurance, health and accident, disability and other employee benefit plans, programs and arrangements in which the Executive was entitled to participate immediately prior to the Date of Termination (other than stock option and restricted

-5-

stock plans of the Employers), provided that in the event that the Executive’s participation in any plan, program or arrangement as provided in this subparagraph (B) is barred, or during such period any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Employers shall arrange to provide the Executive with benefits substantially similar to those which the Executive was entitled to receive under such plans, programs and arrangements immediately prior to the Date of Termination.

Any employment of the Executive with the acquiror of the Corporation after the Change in Control of the Corporation will be at the sole discretion of the acquiror of the Corporation or as specifically provided in the merger agreement.

(C)      In addition, the Employers shall provide the Executive and his spouse substantially the same health insurance as the Executive was currently receiving upon his termination of employment, until both the Executive and his spouse reach age 65. The Executive or his spouse shall pay 100% of the premium costs of such insurance coverage.

               (D)       In the event of the death of the Executive during the term of this Agreement, the Executive's estate shall be entitled to receive the compensation due the Executive through the last day of the calendar month in which Executive's death shall have occurred.

Upon the Executive's death, his surviving spouse and any dependent children shall receive medical benefits substantially similar to the coverage provided to the Executive immediately prior to his death, at no cost to the surviving spouse, for a period of 36 months after the Executive's death.

6.          Limitation of Benefits under Certain Circumstances. If the payments and benefits pursuant to Section 5 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employers, would constitute a “parachute payment” under Section 28OG of the Code, the payments and benefits pursuant to Section 5 hereof shall be reduced, in the manner determined by the Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 5 being non-deductible to either of the Employers pursuant to Section 28OG of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 5 shall be based upon the opinion of independent tax counsel selected by the Employers and paid by the Employers. Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose. Nothing contained herein shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 6, or a reduction in the payments and benefits specified in Section 5 below zero.

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7.       Mitigation; Exclusivity of Benefits.

(a)       The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b)       The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employers pursuant to employee benefit plans of the Employers or otherwise.

8.          Withholding. All payments required to be made by the Employers hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employers may reasonably determine should be withheld pursuant to any applicable law or regulation.

9.          Assignability. The Employers may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employers may hereafter merge or consolidate or to which the Employers may transfer all or substantially all of their assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employers hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

10.        Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employers: President

Fidelity Bancorp, Inc.

1009 Perry Highway

Pittsburgh, PA 15237

To the Executive: Richard G. Spencer

118 Crystal Springs Drive

Cranberry Township, PA 16066

11.        Amendment; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employers to sign on its behalf. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision

-7-

of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

12.        Governing Law. The laws of the United States shall govern the validity, interpretation, construction and performance of this Agreement where applicable and otherwise by the substantive laws of the Commonwealth of Pennsylvania.

13.        Nature of Obligations. Nothing contained herein shall create or require the Employers to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employers hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employers.

14.        Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) nearest to the home office of the Employers, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue. Further, the settlement of the dispute to be approved by the Board of Directors of the Employers may include a provision for the reimbursement by the Employers to the Executive for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, or the Board of Directors of the Employers may authorize such reimbursement of such reasonable costs and expenses by separate action upon a written action and determination of the Board of Directors following settlement of the dispute. Such reimbursement shall be paid within ten (10) days of Executive furnishing to the Employers evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by Executive.

15.        Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

16.        Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

17.        Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

18.        Regulatory Prohibition. Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. ‘Section 1828(k)) and any regulations promulgated thereunder.

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

		FIDELITY BANCORP, INC.
Attest:
/s/Annie G. McGrath	By:	/s/William L. Windisch
Annie G. McGrath		William L. Windisch
Secretary		Chairman & Chief Executive Officer
		FIDELITY BANK, PaSB
Attest:
/s/Annie G. McGrath	By:	/s/William L. Windisch
Annie G. McGrath		William L. Windisch
Secretary		Chairman & Chief Executive Officer
		/s/Richard G. Spencer
		Richard G. Spencer
		President and Chief Operating Officer

EX-10

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT is effective as of the lst day of January 2000,  between
Fidelity  Bancorp,  Inc.  (the  "Corporation"),  a  Pennsylvania-chartered  bank
holding   company,   and   Fidelity   Bank  PaSB   (the   "Savings   Bank"),   a
Pennsylvania-chartered  savings  bank  and  a  wholly-owned  subsidiary  of  the
Corporation  (collectively,   the  "Employers"),  and  Michael  A.  Mooney  (the
"Executive").

                                   WITNESSETH

         WHEREAS,  the  Executive  is  presently  an officer of the  Corporation
and/or  the  Savings  Bank,  and  the  Employers  desire  to be  ensured  of the
Executive's continued active participation in the business of the Employers; and

         WHEREAS,  in order to induce the  Executive  to remain in the employ of
the Employers and in consideration of the Executive's  agreeing to remain in the
employ of the Employers,  the parties  desire to specify the severance  benefits
which  shall be due the  Executive  in the event  that his  employment  with the
Employers is terminated under specified circumstances; and

         WHEREAS,  this Agreement  amends and restates the employment  agreement
entered  into between the  Executive  and the  Employers on January 1, 1994,  as
amended.

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
agreements herein contained, the parties hereby agree as follows:

         1.  Definitions.  The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:

          (a) Base  Salary.  "Base  Salary"  shall have the meaning set forth in
Section 3(a) hereof.

          (b) Cause. Termination of the Executive's employment for "Cause" shall
mean  termination  because  of  personal   dishonesty,   incompetence,   willful
misconduct,  breach of fiduciary duty  involving  personal  profit,  intentional
failure  to  perform  stated  duties,  willful  violation  of any  law,  rule or
regulation  (other  than  traffic  violations  or  similar  offenses)  or  final
cease-and-desist  order or material  breach of any provision of this  Agreement.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be  considered  "willful"  unless  done,  or  omitted  to be done,  by the
Executive not in good faith and without  reasonable  belief that the Executive's
action or omission was in the best interest of the Employers.

         (c)  Change in Control  of the  Corporation.  "Change in Control of the
Corporation"  shall mean a change in control of a nature  that would be required
to be  reported  in response  to Item 6(e) of  Schedule  14A of  Regulation  14A
promulgated  under the  Securities  Exchange Act of



1934, as amended ("Exchange Act") or any successor  thereto,  whether or not the
Corporation  is  registered  under the  Exchange  Act;  provided  that,  without
limitation, such a change in control shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections  13(d) and 14(d) of the Exchange Act)
is or  becomes  the  "beneficial  owner" (as  defined  in Rule  13d-3  under the
Exchange  Act),  directly  or  indirectly,  of  securities  of  the  Corporation
representing 25% or more of the combined voting power of the Corporation's  then
outstanding  securities;  (ii)  during  any  period  of two  consecutive  years,
individuals  who at the  beginning  of  such  period  constitute  the  Board  of
Directors  of the  Corporation  cease for any  reason to  constitute  at least a
majority  thereof  unless  the  election,  or the  nomination  for  election  by
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period;  (iii) the sale of all,  or a  material  portion,  of the  assets of the
Corporation;  or (iv) the  merger  or  recapitalization  of the  Corporation  or
whereby the Corporation is not the surviving entity.

         (d) Code.  "Code"  shall mean the  Internal  Revenue  Code of 1986,  as
amended.

         (e) Date of Termination.  "Date of  Termination"  shall mean (i) if the
Executive's  employment  is  terminated  for Cause or for  Disability,  the date
specified in the Notice of Termination,  and (ii) if the Executive's  employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.

         (f)  Disability.  Termination  by  the  Employers  of  the  Executive's
employment based on "Disability" shall mean termination  because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the  applicable  long-term  disability  plan  maintained by the Employers or any
subsidiary  or, if no such plan  applies,  which would qualify the Executive for
disability benefits under the Federal Social Security System.

         (g) IRS. IRS shall mean the Internal Revenue Service.

         (h) Notice of Termination. Any purported termination of the Executive's
employment by the Employers for any reason,  including  without  limitation  for
Cause,  Disability or Retirement,  or by the Executive for any reason,  shall be
communicated by written  "Notice of Termination" to the other party hereto.  For
purposes of this Agreement,  a "Notice of Termination" shall mean a dated notice
which (i) indicates the specific termination  provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Executive's employment under the provision
so indicated,  (iii)  specifies a Date of  Termination,  which shall be not less
than thirty (30) nor more than ninety (90) days after such Notice of Termination
is  given,  except  in the case of the  Employers'  termination  of  Executive's
employment  for Cause;  and (iv) is given in the manner  specified in Section 10
hereof.

                                      -2-



         (j)  Retirement.  Termination  by  the  Employers  of  the  Executive's
employment  based  on  "Retirement"  shall  mean  voluntary  termination  by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to their salaried employees.

         2. Term of Employment.

         (a) The  Employers  hereby  employ  the  Executive  as Vice  President-
Lending,  and the Executive  hereby accepts said employment and agrees to render
such  services to the  Employers on the terms and  conditions  set forth in this
Agreement. The term of employment under this Agreement shall be for three years,
commencing  on the  date  of this  Agreement.  The  Board  of  Directors  of the
Employers  and the  Executive  may  mutually  agree to  extend  the term of this
Agreement for an additional one year as of each or any annual anniversary of the
date of this Agreement by affirmatively  approving an addendum to this Agreement
at  least  forty-five  (45)  days  prior  to such  anniversary  date.  At  least
forty-five  (45) days prior to the first annual  anniversary of the date of this
Agreement and each annual anniversary thereafter,  the Board of Directors of the
Employers shall consider and review (with  appropriate  corporate  documentation
thereof,  and after  taking into  account all relevant  factors,  including  the
Executive's performance hereunder) an extension of the term of this Agreement. A
decision to not extend the term of this Agreement on any annual anniversary date
shall not  preclude  an  extension  as of any  other  annual  anniversary  date.
References  herein to the term of this Agreement shall refer both to the initial
term and successive terms.

         (b) During the term of this Agreement, the Executive shall perform such
executive  services for the Employers as may be  consistent  with his titles and
from time to time assigned to him by the Employers's Board of Directors.

         3. Compensation and Benefits.

         (a) The Employers  shall  compensate and pay Executive for his services
during the term of this  Agreement at a minimum base salary of $100,100 per year
("Base Salary"), which may be increased from time to time in such amounts as may
be  determined  by the  Board  of  Directors  of the  Employers  and  may not be
decreased  without the Executive's  express written consent.  In addition to his
Base Salary,  the Executive shall be entitled to receive during the term of this
Agreement  such bonus payments as may be determined by the Board of Directors of
the Employers.

         (b) During the term of the  Agreement,  Executive  shall be entitled to
participate  in and  receive the  benefits  of any  pension or other  retirement
benefit plan, profit sharing, stock option,  employee stock ownership,  or other
plans,  benefits  and  privileges  given  to  employees  and  executives  of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Board of Directors of the  Employers.  The  Employers  shall not
make any changes in such plans,  benefits or  privileges  which would  adversely
affect  Executive's  rights or benefits

                                      -3-



thereunder,  unless such change occurs  pursuant to a program  applicable to all
executive  officers of the  Employers  and does not result in a  proportionately
greater  adverse  change in the rights of or benefits to  Executive  as compared
with any other  executive  officer of the  Employers.  Nothing paid to Executive
under any plan or  arrangement  presently  in effect  or made  available  in the
future shall be deemed to be in lieu of the salary payable to Executive pursuant
to Section 3(a) hereof.

         (c) During the term of this  Agreement,  Executive shall be entitled to
paid annual vacation in accordance with the policies as established from time to
time by the Board of Directors of the Employers, which shall in no event be less
than four weeks per  annum.  Executive  shall not be  entitled  to  receive  any
additional  compensation from the Employers for failure to take a vacation,  nor
shall Executive be able to accumulate  unused vacation time from one year to the
next,  except  to  the  extent  authorized  by the  Board  of  Directors  of the
Employers.

         4.  Expenses.  The  Employers  shall  reimburse  Executive or otherwise
provide  for or pay  for  all  reasonable  expenses  incurred  by  Executive  in
furtherance or in connection with the business of the Employers,  including, but
not by way of limitation,  automobile and traveling expenses, and all reasonable
entertainment  expenses  (whether incurred at the Executive's  residence,  while
traveling or  otherwise),  subject to such  reasonable  documentation  and other
limitations as may be established by the Board of Directors of the Employers. If
such  expenses are paid in the first  instance by the  Executive,  the Employers
shall reimburse the Executive therefor.

         5. Termination.

         (a) The Employers  shall have the right,  at any time upon prior Notice
of  Termination,  to terminate  the  Executive's  employment  hereunder  for any
reason,  including  without  limitation  termination  for Cause,  Disability  or
Retirement,  and the  Executive  shall  have the  right,  upon  prior  Notice of
Termination, to terminate his employment hereunder for any reason.

         (b) In the event that (i) the  Executive's  employment is terminated by
the Employers for Cause, Disability, or Retirement, or (ii) Executive terminates
his  employment  hereunder,  the Executive  shall have no right pursuant to this
Agreement to  compensation or other benefits for any period after the applicable
Date of Termination.

         (c)(i) In the event that the  Executive's  employment  is terminated by
the Employers for other than Cause,  Disability,  Retirement or the  Executive's
death,  or such  employment  is  terminated  by the  Executive due to a material
breach  of this  Agreement  by the  Employers  which has not been  cured  within
fifteen (15) days after a written notice of non-compliance has been given by the
Executive to the  Employers,  and as of the  Executive's  Date of Termination no
Change in Control of the  Corporation has occurred,  no written  agreement which
contemplates a Change in Control of the Corporation and which still is in effect
has been  entered  into by either or both of the  Employers  and no  discussions
and/or  negotiations  are being  conducted  which  relate to the same,  then the
Employers shall, subject to the provisions of Section 6 hereof, if applicable:

                                      -4-



         (A) pay to the  Executive,  in twelve (12) equal  monthly  installments
beginning  with  the  first  business  day of the  month  following  the Date of
Termination,  an aggregate cash severance  amount equal to the Executive's  Base
Salary as of his Date of Termination, and

         (B) maintain and provide for a period  ending at the earlier of (i) the
expiration of twelve (12) months from the  Executive's  Date of  Termination  or
(ii)  the date of the  Executive's  full-time  employment  by  another  employer
(provided that the Executive is entitled  under the terms of such  employment to
benefits  substantially similar to those described in this subparagraph (B)), at
no cost to the Executive,  the Executive's continued  participation in all group
insurance,  life insurance,  health and accident,  disability and other employee
benefit plans,  programs and arrangements in which the Executive was entitled to
participate  immediately  prior to the Date of  Termination  (other  than  stock
option and restricted stock plans of the Employers),  provided that in the event
that the  Executive's  participation  in any plan,  program  or  arrangement  as
provided  in this  subparagraph  (B) is barred,  or during  such period any such
plan,  program or arrangement  is  discontinued  or the benefits  thereunder are
materially  reduced,  the Employers  shall arrange to provide the Executive with
benefits  substantially  similar to those which the  Executive  was  entitled to
receive under such plans,  programs and  arrangements  immediately  prior to the
Date of Termination.

         (C) The severance  amount and benefits  required to be paid or provided
to the  Executive  under  subparagraphs  (A)  and (B)  above  may be paid to the
Executive in a lump sum if the Employers  and the  Executive  agree to such lump
sum payment.

         (D) In addition,  the  Employers  shall  provide the  Executive and his
spouse  substantially  the same health  insurance as the Executive was currently
receiving upon his  termination of employment,  until both the Executive and his
spouse  reach age 65. The  Executive or his spouse shall pay 100% of the premium
costs of such insurance coverage.

         (ii) Upon a Change in Control of the  Corporation,  then the  Employers
shall,  subject to the provisions of Section 6 hereof,  if  applicable,  pay the
Executive on the date of the Change in Control of the  Corporation  an aggregate
cash severance amount in a lump sum payment equal to:

         (A) 2.99 times the Executive's average annual  compensation  payable by
the Employers and included in the Executive's  gross income for the five taxable
years ending  before the date on which the Date of  Termination  occurs (or such
portion  of  such  period  during  which  the  Executive  was  employed  by  the
Employers), and

         (B) and if the  Executive  elects,  maintain  and  provide for a period
ending at the earlier of (i) the  expiration of thirty-six  (36) months from the
Executive's  Date of Termination or (ii) the date of the  Executive's  full-time
employment by another  employer  (provided  that the Executive is entitled under
the  terms  of such  employment  to  benefits  substantially  similar  to  those
described  in  this  subparagraph  (B)),  at  no  cost  to  the  Executive,  the
Executive's  continued  participation  in all group  insurance,  life insurance,
health and accident,  disability and other employee benefit

                                      -5-



plans,  programs  and  arrangements  in which  the  Executive  was  entitled  to
participate  immediately  prior to the Date of  Termination  (other  than  stock
option and restricted stock plans of the Employers),  provided that in the event
that the  Executive's  participation  in any plan,  program  or  arrangement  as
provided  in this  subparagraph  (B) is barred,  or during  such period any such
plan,  program or arrangement  is  discontinued  or the benefits  thereunder are
materially  reduced,  the Employers  shall arrange to provide the Executive with
benefits  substantially  similar to those which the  Executive  was  entitled to
receive under such plans,  programs and  arrangements  immediately  prior to the
Date of Termination.

         Any  employment of the Executive  with the acquiror of the  Corporation
after the Change in Control of the Corporation will be at the sole discretion of
the  acquiror  of the  Corporation  or as  specifically  provided  in the merger
agreement.

         (C) In addition,  the  Employers  shall  provide the  Executive and his
spouse  substantially  the same health  insurance as the Executive was currently
receiving upon his  termination of employment,  until both the Executive and his
spouse  reach age 65. The  Executive or his spouse shall pay 100% of the premium
costs of such insurance coverage.

         (D) In the event of the death of the Executive  during the term of this
Agreement,  the Executive's estate shall be entitled to receive the compensation
due  the  Executive  through  the  last  day  of the  calendar  month  in  which
Executive's death shall have occurred.

               Upon  the  Executive's   death,  his  surviving  spouse  and  any
dependent children shall receive medical benefits  substantially  similar to the
coverage provided to the Executive immediately prior to his death, at no cost to
the surviving spouse, for a period of 36 months after the Executive's death.

         6. Limitation of Benefits under Certain Circumstances.  If the payments
and benefits  pursuant to Section 5 hereof,  either alone or together with other
payments  and  benefits  which the  Executive  has the right to receive from the
Employers,  would  constitute a "parachute  payment"  under  Section 28OG of the
Code,  the payments and benefits  pursuant to Section 5 hereof shall be reduced,
in the manner  determined by the Executive,  by the amount, if any, which is the
minimum  necessary to result in no portion of the  payments  and benefits  under
Section 5 being  non-deductible  to either of the Employers  pursuant to Section
28OG of the Code and subject to the excise tax imposed under Section 4999 of the
Code. The determination of any reduction in the payments and benefits to be made
pursuant to Section 5 shall be based upon the opinion of independent tax counsel
selected by the Employers and paid by the Employers. Such counsel shall promptly
prepare the foregoing opinion,  but in no event later than thirty (30) days from
the  Date of  Termination,  and may use such  actuaries  as such  counsel  deems
necessary or advisable for the purpose. Nothing contained herein shall result in
a reduction of any payments or benefits to which the  Executive  may be entitled
upon termination of employment under any  circumstances  other than as specified
in this Section 6, or a reduction  in the  payments  and  benefits  specified in
Section 5 below zero.

                                      -6-



         7. Mitigation; Exclusivity of Benefits.

         (a) The  Executive  shall not be required to mitigate the amount of any
benefits  hereunder by seeking  other  employment  or  otherwise,  nor shall the
amount  of any such  benefits  be  reduced  by any  compensation  earned  by the
Executive  as a result  of  employment  by  another  employer  after the Date of
Termination or otherwise.

         (b) The  specific  arrangements  referred to herein are not intended to
exclude  any other  benefits  which may be  available  to the  Executive  upon a
termination of employment with the Employers  pursuant to employee benefit plans
of the Employers or otherwise.

         8.  Withholding.  All  payments  required  to be made by the  Employers
hereunder to the Executive  shall be subject to the withholding of such amounts,
if any,  relating  to tax and other  payroll  deductions  as the  Employers  may
reasonably  determine  should be  withheld  pursuant  to any  applicable  law or
regulation.

         9.  Assignability.  The  Employers  may assign this  Agreement  and its
rights and obligations  hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the  Employers  may  hereafter  merge or
consolidate or to which the Employers may transfer all or  substantially  all of
their assets, if in any such case said  corporation,  bank or other entity shall
by  operation  of law or  expressly  in writing  assume all  obligations  of the
Employers  hereunder as fully as if it had been  originally made a party hereto,
but may not  otherwise  assign  this  Agreement  or its rights  and  obligations
hereunder. The Executive may not assign or transfer this Agreement or any rights
or obligations hereunder.

         10. Notice.  For the purposes of this Agreement,  notices and all other
communications  provided for in this Agreement  shall be in writing and shall be
deemed  to have been duly  given  when  delivered  or  mailed  by  certified  or
registered mail,  return receipt  requested,  postage prepaid,  addressed to the
respective addresses set forth below:

         To the Employers:          William L Windisch, President
                                    Fidelity Bancorp, Inc.
                                    1009 Perry Highway
                                    Pittsburgh, PA 15237

         To the Executive:          Michael A. Mooney
                                    19 Lamplighter Lane
                                    Baden, PA 15005

         11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver,  modification or discharge is agreed to
in  writing  signed by the  Executive  and such  officer or  officers  as may be
specifically  designated  by the Board of Directors of the  Employers to sign on
its behalf. No waiver by any party hereto at any time of any breach

                                      -7-



by any other party hereto of, or compliance  with, any condition or provision of
this  Agreement  to be performed by such other party shall be deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time.

         12.  Governing  Law. The  validity,  interpretation,  construction  and
performance of this Agreement shall be governed by the laws of the United States
where  applicable and otherwise by the substantive  laws of the  Commonwealth of
Pennsylvania.

         13. Nature of  Obligations.  Nothing  contained  herein shall create or
require the  Employers to create a trust of any kind to fund any benefits  which
may be payable hereunder,  and to the extent that the Executive acquires a right
to receive benefits from the Employers hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employers.

         14. Arbitration. Any controversy or claim arising out of or relating to
this  Agreement,  or the breach  thereof,  shall be settled  by  arbitration  in
accordance  with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Employers, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof,  except to the extent  that the parties  may  otherwise  reach a mutual
settlement of such issue.  Further, the settlement of the dispute to be approved
by the Board of  Directors  of the  Employers  may include a  provision  for the
reimbursement  by the Employers to the Executive  for all  reasonable  costs and
expenses,  including  reasonable  attorneys'  fees,  arising from such  dispute,
proceedings or actions, or the Board of Directors of the Employers may authorize
such reimbursement of such reasonable costs and expenses by separate action upon
a  written  action  and  determination  of  the  Board  of  Directors  following
settlement of the dispute. Such reimbursement shall be paid within ten (10) days
of Executive  furnishing  to the Employers  evidence,  which may be in the form,
among other  things,  of a canceled  check or receipt,  of any costs or expenses
incurred by Executive.

         15. Headings.  The section headings contained in this Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         16. Validity.  The invalidity or  unenforceability  of any provision of
this  Agreement  shall not affect the  validity or  enforceability  of any other
provisions of this Agreement, which shall remain in full force and effect.

         17.  Counterparts.  This  Agreement  may be  executed  in  one or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together will constitute one and the same instrument.

         18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary,  any payments made to the Executive  pursuant to this
Agreement,  or otherwise,  are subject to and conditioned  upon their compliance
with Section 18(k) of the Federal  Deposit  Insurance Act (12 U.S.C.  ss.Section
1828(k)) and any regulations promulgated thereunder.

                                      -8-



         IN WITNESS  WHEREOF,  this  Agreement  has been executed as of the date
first above written.


                                              FIDELITY BANCORP, INC.


Attest:



/s/Susan J. Lowe                              By  /s/William L. Windisch
- ------------------------------------              ------------------------------
                                                  William L. Windisch, President



                                              FIDELITY BANK, PaSB
Attest:




/s/Susan J. Lowe                              By  /s/William L. Windisch
- ------------------------------------              ------------------------------
                                                  William L. Windisch, President




                                                  /s/Michael A. Mooney
                                                  ------------------------------
                                                  Michael A. Mooney

EX-10

                      CHANGE IN CONTROL SEVERANCE AGREEMENT
                      -------------------------------------


THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement") entered into this 10th
day of February,  2004,  which Agreement is to become effective on the first day
of January 2004 ("Effective  Date"),  by and between Fidelity Bank,  Pittsburgh,
Pennsylvania (the "Bank") and Lisa L. Griffith (the "Employee").

WHEREAS,  the  Employee  is  currently  employed  by the Bank as a  Senior  Vice
President and is experienced in certain phases of the business of the Bank; and

WHEREAS,  the  parties  desire  by this  writing  to set forth  the  rights  and
responsibilities  of the Bank and Employee,  if the Bank should undergo a change
in control (as defined hereinafter in the Agreement) after the Effective Date.

NOW, THEREFORE, it is AGREED as follows:

          1.   Employment.  The  Employee is employed in the  capacity as Senior
               Vice  President  of the Bank.  The  Employee  shall  render  such
               administrative  and management  services to the Bank and Fidelity
               Bancorp,  Inc.  ("Parent") as are  currently  rendered and as are
               customarily  performed by persons situated in a similar executive
               capacity.  The Employee's other duties shall be such as the Board
               of Directors  for the Bank (the "Board of  Directors" or "Board")
               may,  from  time to time,  reasonably  direct,  including  normal
               duties as an officer of the Bank and the Parent.

          2.   Term of Agreement.  The term of this  Agreement  shall be for the
               period  commencing  on the Effective  Date and ending  thirty-six
               (36) months thereafter ("Term").  Additionally, on or before each
               annual anniversary date from the Effective Date, the Term of this
               Agreement  may be extended for an  additional  period  beyond the
               then  effective   expiration  date  upon  a   determination   and
               resolution of the Board of Directors that the  performance of the
               Employee has met the requirements and standards of the Board, and
               that the Term of such Agreement shall be extended.

          3.   Termination  of Employment in Connection  with or Subsequent to a
               Change in Control.

          (a)  Notwithstanding  any  provision  herein to the  contrary,  in the
               event of the  involuntary  termination  of Employee's  employment
               under this Agreement,  absent Just Cause, in connection  with, or
               within  twenty-four  (24) months after,  any Change in Control of
               the Bank or Parent, the Employee shall be paid an amount equal to
               two hundred percent of the taxable  compensation paid by the Bank
               to the Employee  during the most recent  completed  calendar year
               prior  to such  termination  of  employment  or the  date of such
               Change in Control, whichever is greater, and the costs associated
               with  maintaining  coverage  under the Bank 's medical and dental
               insurance  reimbursement  plans  similar to that in effect on the
               date of  termination  of  employment  for a  period  of one  year
               thereafter.  Said sum shall be paid, at the election of Employee,
               either  in one (1)  lump  sum  within  thirty  (30)  days of such
               termination or in periodic payments over the next 24 months,  and
               such payments shall be in lieu of any other future payments which
               the   Employee   would  be   otherwise   entitled   to   receive.
               Notwithstanding the forgoing, all sums payable hereunder shall be
               reduced  in  such  manner  and to  such  extent  so  that no such
               payments made hereunder,  when aggregated with all other payments
               to be made to the  Employee by the Bank or the  Parent,  shall be
               deemed an "excess

                                       1



               parachute  payment"  in  accordance  with  Section  280G  of  the
               Internal  Revenue  Code of 1986,  as amended  (the "Code") and be
               subject  to the  excise tax  provided  at Section  4999(a) of the
               Code.  The term "Change in Control"  shall refer to: (i) the sale
               of all, or a material  portion,  of the assets of the Bank or the
               Parent;  (ii) the merger or  recapitalization  of the Bank or the
               Parent,  whereby  the  Bank or the  Parent  is not the  surviving
               entity;  (iii) a change in control of the Bank or the Parent,  as
               otherwise defined or determined by the Pennsylvania Department of
               Banking or the Federal  Reserve Board or regulations  promulgated
               by  such  agencies;   or  (iv)  the   acquisition,   directly  or
               indirectly,  of the beneficial  ownership  (within the meaning of
               that  term as it is  used  in  Section  13(d)  of the  Securities
               Exchange  Act of 1934 and the rules and  regulations  promulgated
               thereunder)  of   twenty-five   percent  (25%)  or  more  of  the
               outstanding  voting  securities  of the Bank or the Parent by any
               person,  trust,  entity  or  group.  The term  "person"  means an
               individual   other   than  the   Employee,   or  a   corporation,
               partnership,  trust, association, joint venture, pool, syndicate,
               sole  proprietorship,  unincorporated  organization  or any other
               form of entity not specifically listed herein.

          (b)  Notwithstanding  any other  provision  of this  Agreement  to the
               contrary,  except as provided  in Sections 4 and 5, the  Employee
               may,  within  his/her  sole  discretion,   voluntarily  terminate
               his/her employment under this Agreement within twelve (12) months
               following  a Change in  Control  of the Bank or  Parent,  and the
               Employee  shall  thereupon be entitled to receive the payment and
               benefits described in Section 3(a) of this Agreement.

          4.   Other  Changes in  Employment  Status.  Except as provided for at
               Section 3,  herein,  the Board of  Directors  may  terminate  the
               Employee's  employment  at any time,  with or without  Just Cause
               within its sole discretion. This Agreement shall not be deemed to
               give the Employee any right to be retained in the  employment  of
               the Bank at any time. The Employee shall have no right to receive
               compensation  or other benefits for any period after  termination
               for Just  Cause.  Termination  for  "Just  Cause"  shall  include
               termination  because  of  the  Employee's  personal   dishonesty,
               incompetence,   willful  misconduct,  breach  of  fiduciary  duty
               involving personal profit,  intentional failure to perform stated
               duties,  willful  violation of any law, rule or regulation (other
               than   traffic   violations   or  similar   offenses)   or  final
               cease-and-desist  order of an applicable  banking  regulator,  or
               material breach of any provision of the Agreement.

          5.   Regulatory  Exclusions.  Notwithstanding  anything  herein to the
               contrary,  any  payments  made to the  Employee,  pursuant to the
               Agreement, or otherwise, shall be subject to and conditioned upon
               compliance  with 12 USC 1828(k) and any  regulations  promulgated
               thereunder.

          6.   Successors and Assigns.

          (a)  This Agreement shall inure to the benefit of, and be binding upon
               any corporate or other successor of the Bank which shall acquire,
               directly or  indirectly,  by merger,  consolidation,  purchase or
               otherwise, all or substantially all of the assets or stock of the
               Bank or Parent.

          (b)  The Employee  shall be  precluded  from  assigning or  delegating
               his/her rights or duties  hereunder  without first  obtaining the
               written consent of the Bank .

          7.   Amendments. No amendments or additions to this Agreement shall be
               binding upon the parties hereto unless made in writing and signed
               by  both  parties,   except  as  herein  otherwise   specifically
               provided.

                                       2



          8.   Applicable  Law. This Agreement shall be governed by all respects
               whether as to validity,  construction,  capacity,  performance or
               otherwise,  by the  laws  of the  Commonwealth  of  Pennsylvania,
               except to the extent that Federal law shall be deemed to apply.

          9.   Severability.  The provisions of this  Agreement  shall be deemed
               severable and the invalidity or unenforceability of any provision
               shall not  affect the  validity  or  enforceability  of the other
               provisions hereof.

          10.  Arbitration. Any controversy or claim arising out of, or relating
               to this  Agreement,  or the breach  thereof,  shall be settled by
               arbitration  in  accordance  with the rules then in effect of the
               district office of the American  Arbitration  Association ("AAA")
               nearest to the home  office of the Bank,  and  judgment  upon the
               award  rendered may be entered in any court  having  jurisdiction
               thereof,  except to the extent  that the  parties  may  otherwise
               reach a mutual settlement of such issue.  Further, the settlement
               of the  dispute  to be  approved  by the  Board  of the  Bank may
               include  a  provision  for the  reimbursement  by the Bank to the
               Employee  for  all  reasonable  costs  and  expenses,   including
               reasonable   attorneys'   fees,   arising   from  such   dispute,
               proceedings  or  actions,  or the Board of the Bank or the Parent
               may authorize such  reimbursement  of such  reasonable  costs and
               expenses   by  separate   action   upon  a  written   action  and
               determination  of the Board following  settlement of the dispute.
               Such  reimbursement  shall be paid  within  ten (10)  days of the
               Employee furnishing to the Bank or Parent evidence,  which may be
               in the form, among other things,  of a canceled check or receipt,
               of any costs or expenses incurred by the Employee.

          11.  Confidential  Information.  The Employee acknowledges that during
               his/her   employment   he/she  will  learn  and  have  access  to
               confidential  information  regarding  the Bank and the Parent and
               its customers and businesses  ("Confidential  Information").  The
               Employee  agrees and covenants not to disclose or use for his/her
               own benefit,  or the benefit of any other  person or entity,  any
               such  Confidential  Information  unless  or until the Bank or the
               Parent  consents to such  disclosure  or use or such  information
               becomes common knowledge in the industry or is otherwise  legally
               in the public domain.  The Employee shall not knowingly  disclose
               or reveal to any unauthorized person any Confidential Information
               relating  to the  Bank  , the  Parent,  or  any  subsidiaries  or
               affiliates, or to any of the businesses operated by them, and the
               Employee confirms that such information constitutes the exclusive
               property  of the Bank and the  Parent.  The  Employee  shall  not
               otherwise  knowingly  act or conduct  himself/herself  (a) to the
               material   detriment   of  the  Bank  or  the   Parent,   or  its
               subsidiaries, or affiliates, or (b) in a manner which is inimical
               or contrary to the interests of the Bank or the Parent.  Employee
               acknowledges  and agrees that the  existence of the Agreement and
               its terms and conditions constitutes  Confidential Information of
               the Bank , and the Employee  agrees not to disclose the Agreement
               or its contents  without the prior written  consent of the Bank .
               Notwithstanding  the foregoing,  the Bank reserves the right,  in
               its sole  discretion,  to make disclosure of this Agreement as it
               deems  necessary or appropriate in compliance with its regulatory
               reporting  requirements.  Notwithstanding  anything herein to the
               contrary,  failure by the Employee to comply with the  provisions
               of this Section may result in the  immediate  termination  of the
               Agreement  within the sole  discretion of the Bank,  disciplinary
               action against the Employee taken by the Bank, including, but not
               limited to, the  termination  of  employment  of the Employee for
               breach of the Agreement and the  provisions of this Section,  and
               other remedies that may be available in law or in equity.

          12.  Entire Agreement. This Agreement, together with any understanding
               or modifications thereof, as agreed to in writing by the parties,
               shall constitute the entire Agreement between the parties hereto.

                                       3



IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement on the day and
first hereinabove written.


                                         Fidelity Bank

ATTEST:                                  By: /s/Richard G. Spencer
                                             -----------------------------------


/s/Annie G. McGrath
- ---------------------------------
Secretary


WITNESS:

/s/Annie G. McGrath                          /s/Lisa L. Griffith
- ---------------------------------            -----------------------------------
                                             Employee

EX-10

                      CHANGE IN CONTROL SEVERANCE AGREEMENT


THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement") entered into this 19th
day of December,  1997,  which Agreement is to become effective on the first day
of January 1998 ("Effective  Date"),  by and between Fidelity Bank,  Pittsburgh,
Pennsylvania (the "Bank") and Anthony F. Rocco (the "Employee").

WHEREAS,  the  Employee  is  currently  employed  by the Bank as a  Senior  Vice
President and is experienced in certain phases of the business of the Bank; and

WHEREAS,  the  parties  desire  by this  writing  to set forth  the  rights  and
responsibilities  of the Bank and Employee,  if the Bank should undergo a change
in control (as defined hereinafter in the Agreement) after the Effective Date.

NOW, THEREFORE, it is AGREED as follows:

1.   Employment.  The  Employee  is  employed  in the  capacity  as Senior  Vice
     President of the Bank.  The Employee shall render such  administrative  and
     management  services to the Bank and Fidelity Bancorp,  Inc.  ("Parent") as
     are currently rendered and as are customarily performed by persons situated
     in a similar executive capacity.  The Employee's other duties shall be such
     as the  Board of  Directors  for the Bank  (the  "Board  of  Directors"  or
     "Board") may, from time to time, reasonably direct, including normal duties
     as an officer of the Bank and the Parent.

2.   Term of  Agreement.  The term of this  Agreement  shall  be for the  period
     commencing  on  the  Effective  Date  and  ending  thirty-six  (36)  months
     thereafter  ("Term").  Additionally,  on or before each annual  anniversary
     date from the Effective  Date,  the Term of this  Agreement may be extended
     for an additional  period beyond the then effective  expiration date upon a
     determination and resolution of the Board of Directors that the performance
     of the Employee has met the  requirements  and standards of the Board,  and
     that the Term of such Agreement shall be extended.

3.   Termination  of Employment in Connection  with or Subsequent to a Change in
     Control.

(a)  Notwithstanding  any provision herein to the contrary,  in the event of the
     involuntary  termination  of Employee's  employment  under this  Agreement,
     absent Just Cause, in connection  with, or within  twenty-four  (24) months
     after,  any Change in Control of the Bank or Parent,  the Employee shall be
     paid an amount  equal to two hundred  percent of the  taxable  compensation
     paid by the Bank to the Employee during the most recent completed  calendar
     year prior to such  termination of employment or the date of such Change in
     Control,  whichever is greater,  and the costs  associated with maintaining
     coverage under the Bank 's medical and dental insurance reimbursement plans
     similar to that in effect on the date of  termination  of employment  for a
     period of one year  thereafter.  Said sum shall be paid, at the election of
     Employee,  either  in one (1)  lump sum  within  thirty  (30)  days of such
     termination  or in  periodic  payments  over the next 24  months,  and such
     payments  shall be in lieu of any other future  payments which the Employee
     would be otherwise entitled to receive.  Notwithstanding the forgoing,  all
     sums payable  hereunder  shall be reduced in such manner and to such extent
     so that no such payments made  hereunder,  when  aggregated  with all other
     payments to be made to the  Employee  by the Bank or the  Parent,  shall be
     deemed an "excess parachute payment" in accordance with Section 280G of the
     Internal  Revenue  Code of 1986,  as amended (the "Code") and be subject to
     the excise tax provided at Section 4999(a) of the Code. The term "Change in
     Control" shall refer to: (i) the sale of all, or a material portion, of the
     assets of the Bank or the Parent;  (ii) the merger or  recapitalization  of
     the Bank or the Parent, whereby the Bank or the Parent is not the surviving
     entity;  (iii) a change in control of the Bank or the Parent,  as otherwise
     defined or  determined  by the  Pennsylvania  Department  of Banking or the
     Federal Reserve Board or regulations  promulgated by such agencies; or (iv)
     the  acquisition,  directly  or  indirectly,  of the  beneficial

                                       1



     ownership  (within the meaning of that term as it is used in Section  13(d)
     of the  Securities  Exchange  Act of 1934  and the  rules  and  regulations
     promulgated  thereunder)  of  twenty-five  percent  (25%)  or  more  of the
     outstanding  voting  securities  of the Bank or the  Parent by any  person,
     trust,  entity or group.  The term "person" means an individual  other than
     the Employee,  or a corporation,  partnership,  trust,  association,  joint
     venture, pool, syndicate, sole proprietorship,  unincorporated organization
     or any other form of entity not specifically listed herein.

(b)  Notwithstanding  any other  provision of this  Agreement  to the  contrary,
     except as provided in Sections 4 and 5, the Employee  may,  within  his/her
     sole  discretion,  voluntarily  terminate  his/her  employment  under  this
     Agreement  within  twelve (12) months  following a Change in Control of the
     Bank or Parent, and the Employee shall thereupon be entitled to receive the
     payment and benefits described in Section 3(a) of this Agreement.

4.   Other  Changes in Employment  Status.  Except as provided for at Section 3,
     herein,  the Board of Directors may terminate the Employee's  employment at
     any time,  with or without  Just Cause  within  its sole  discretion.  This
     Agreement shall not be deemed to give the Employee any right to be retained
     in the employment of the Bank at any time. The Employee shall have no right
     to receive  compensation or other benefits for any period after termination
     for Just Cause.  Termination  for "Just  Cause" shall  include  termination
     because  of  the  Employee's  personal  dishonesty,  incompetence,  willful
     misconduct, breach of fiduciary duty involving personal profit, intentional
     failure to perform  stated  duties,  willful  violation of any law, rule or
     regulation  (other than traffic  violations  or similar  offenses) or final
     cease-and-desist  order of an  applicable  banking  regulator,  or material
     breach of any provision of the Agreement.

5.   Regulatory Exclusions. Notwithstanding anything herein to the contrary, any
     payments made to the  Employee,  pursuant to the  Agreement,  or otherwise,
     shall be subject to and conditioned upon compliance with 12 USC 1828(k) and
     any regulations promulgated thereunder.

6.   Successors and Assigns.

(a)  This  Agreement  shall  inure to the  benefit  of, and be binding  upon any
     corporate or other  successor of the Bank which shall acquire,  directly or
     indirectly,  by  merger,  consolidation,  purchase  or  otherwise,  all  or
     substantially all of the assets or stock of the Bank or Parent.

(b)  The Employee shall be precluded from assigning or delegating his/her rights
     or duties  hereunder  without first  obtaining  the written  consent of the
     Bank.

7.   Amendments.  No amendments or additions to this Agreement  shall be binding
     upon the parties  hereto unless made in writing and signed by both parties,
     except as herein otherwise specifically provided.

8.   Applicable Law. This Agreement shall be governed by all respects whether as
     to validity, construction,  capacity, performance or otherwise, by the laws
     of the Commonwealth of Pennsylvania,  except to the extent that Federal law
     shall be deemed to apply.

9.   Severability.  The provisions of this Agreement  shall be deemed  severable
     and the invalidity or  unenforceability  of any provision  shall not affect
     the validity or enforceability of the other provisions hereof.

10.  Arbitration.  Any  controversy or claim arising out of, or relating to this
     Agreement,  or the  breach  thereof,  shall be settled  by  arbitration  in
     accordance  with the rules  then in effect  of the  district  office of the
     American Arbitration  Association ("AAA") nearest to the home office of the
     Bank,  and  judgment  upon the award  rendered  may be entered in any court
     having  jurisdiction  thereof,  except to the extent  that the  parties may
     otherwise reach a mutual settlement of such issue.  Further, the

                                       2


     settlement  of the  dispute  to be  approved  by the  Board of the Bank may
     include a provision for the  reimbursement  by the Bank to the Employee for
     all reasonable costs and expenses,  including  reasonable  attorneys' fees,
     arising from such dispute, proceedings or actions, or the Board of the Bank
     or the Parent may authorize such reimbursement of such reasonable costs and
     expenses by separate action upon a written action and  determination of the
     Board following settlement of the dispute. Such reimbursement shall be paid
     within  ten (10)  days of the  Employee  furnishing  to the Bank or  Parent
     evidence, which may be in the form, among other things, of a canceled check
     or receipt, of any costs or expenses incurred by the Employee.

11.  Confidential  Information.  The Employee  acknowledges  that during his/her
     employment  he/she will learn and have access to  confidential  information
     regarding  the  Bank  and the  Parent  and  its  customers  and  businesses
     ("Confidential  Information").  The Employee  agrees and  covenants  not to
     disclose or use for his/her own benefit, or the benefit of any other person
     or entity,  any such Confidential  Information  unless or until the Bank or
     the Parent consents to such disclosure or use or such  information  becomes
     common  knowledge  in the  industry or is  otherwise  legally in the public
     domain.  The  Employee  shall  not  knowingly  disclose  or  reveal  to any
     unauthorized person any Confidential Information relating to the Bank , the
     Parent,  or any  subsidiaries  or  affiliates,  or to any of the businesses
     operated  by  them,  and  the  Employee   confirms  that  such  information
     constitutes the exclusive property of the Bank and the Parent. The Employee
     shall not  otherwise  knowingly act or conduct  himself/herself  (a) to the
     material  detriment  of the Bank or the  Parent,  or its  subsidiaries,  or
     affiliates,  or (b) in a  manner  which  is  inimical  or  contrary  to the
     interests of the Bank or the Parent.  Employee acknowledges and agrees that
     the  existence of the Agreement  and its terms and  conditions  constitutes
     Confidential  Information  of the  Bank , and the  Employee  agrees  not to
     disclose the Agreement or its contents without the prior written consent of
     the Bank . Notwithstanding  the foregoing,  the Bank reserves the right, in
     its sole  discretion,  to make  disclosure  of this  Agreement  as it deems
     necessary  or  appropriate  in  compliance  with its  regulatory  reporting
     requirements.  Notwithstanding anything herein to the contrary,  failure by
     the  Employee to comply with the  provisions  of this Section may result in
     the immediate  termination of the Agreement  within the sole  discretion of
     the Bank,  disciplinary  action  against  the  Employee  taken by the Bank,
     including,  but not  limited  to,  the  termination  of  employment  of the
     Employee for breach of the  Agreement  and the  provisions of this Section,
     and other remedies that may be available in law or in equity.

12.  Entire  Agreement.  This  Agreement,  together  with any  understanding  or
     modifications  thereof,  as  agreed to in  writing  by the  parties,  shall
     constitute the entire Agreement between the parties hereto.

                                       3


IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement on the day and
first hereinabove written.


                                         Fidelity Bank

ATTEST:                                  By: /s/William L. Windisch, President
                                             -----------------------------------


/s/Lisa M. Cline
- --------------------------
Assistant Secretary




WITNESS:

/s/Richard G. Spencer                       /s/Anthony F. Rocco
- ---------------------------                 -----------------------------------
                                            Employee

EX-10

                      CHANGE IN CONTROL SEVERANCE AGREEMENT
                      -------------------------------------


THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement") entered into this 19th
day of December,  1997,  which Agreement is to become effective on the first day
of January 1998 ("Effective  Date"),  by and between Fidelity Bank,  Pittsburgh,
Pennsylvania (the "Bank") and Sandra L. Lee (the "Employee").

WHEREAS,  the  Employee  is  currently  employed  by the Bank as a  Senior  Vice
President and is experienced in certain phases of the business of the Bank; and

WHEREAS,  the  parties  desire  by this  writing  to set forth  the  rights  and
responsibilities  of the Bank and Employee,  if the Bank should undergo a change
in control (as defined hereinafter in the Agreement) after the Effective Date.

NOW, THEREFORE, it is AGREED as follows:

1.   Employment.  The  Employee  is  employed  in the  capacity  as Senior  Vice
     President of the Bank.  The Employee shall render such  administrative  and
     management  services to the Bank and Fidelity Bancorp,  Inc.  ("Parent") as
     are currently rendered and as are customarily performed by persons situated
     in a similar executive capacity.  The Employee's other duties shall be such
     as the  Board of  Directors  for the Bank  (the  "Board  of  Directors"  or
     "Board") may, from time to time, reasonably direct, including normal duties
     as an officer of the Bank and the Parent.

2.   Term of  Agreement.  The term of this  Agreement  shall  be for the  period
     commencing  on  the  Effective  Date  and  ending  thirty-six  (36)  months
     thereafter  ("Term").  Additionally,  on or before each annual  anniversary
     date from the Effective  Date,  the Term of this  Agreement may be extended
     for an additional  period beyond the then effective  expiration date upon a
     determination and resolution of the Board of Directors that the performance
     of the Employee has met the  requirements  and standards of the Board,  and
     that the Term of such Agreement shall be extended.

3.   Termination  of Employment in Connection  with or Subsequent to a Change in
     Control.

(a)  Notwithstanding  any provision herein to the contrary,  in the event of the
     involuntary  termination  of Employee's  employment  under this  Agreement,
     absent Just Cause, in connection  with, or within  twenty-four  (24) months
     after,  any Change in Control of the Bank or Parent,  the Employee shall be
     paid an amount  equal to two hundred  percent of the  taxable  compensation
     paid by the Bank to the Employee during the most recent completed  calendar
     year prior to such  termination of employment or the date of such Change in
     Control,  whichever is greater,  and the costs  associated with maintaining
     coverage under the Bank 's medical and dental insurance reimbursement plans
     similar to that in effect on the date of  termination  of employment  for a
     period of one year  thereafter.  Said sum shall be paid, at the election of
     Employee,  either  in one (1)  lump sum  within  thirty  (30)  days of such
     termination  or in  periodic  payments  over the next 24  months,  and such
     payments  shall be in lieu of any other future  payments which the Employee
     would be otherwise entitled to receive.  Notwithstanding the forgoing,  all
     sums payable  hereunder  shall be reduced in such manner and to such extent
     so that no such payments made  hereunder,  when  aggregated  with all other
     payments to be made to the  Employee  by the Bank or the  Parent,  shall be
     deemed an "excess parachute payment" in accordance with Section 280G of the
     Internal  Revenue  Code of 1986,  as amended (the "Code") and be subject to
     the excise tax provided at Section 4999(a) of the Code. The term "Change in
     Control" shall refer to: (i) the sale of all, or a material portion, of the
     assets of the Bank or the Parent;  (ii) the merger or  recapitalization  of
     the Bank or the Parent, whereby the Bank or the Parent is not the surviving
     entity;  (iii) a change in control of the Bank or the Parent,  as otherwise
     defined or  determined  by the  Pennsylvania  Department  of Banking or the
     Federal Reserve Board or regulations  promulgated by such agencies; or (iv)
     the  acquisition,  directly  or  indirectly,  of the  beneficial

                                       1


     ownership  (within the meaning of that term as it is used in Section  13(d)
     of the  Securities  Exchange  Act of 1934  and the  rules  and  regulations
     promulgated  thereunder)  of  twenty-five  percent  (25%)  or  more  of the
     outstanding  voting  securities  of the Bank or the  Parent by any  person,
     trust,  entity or group.  The term "person" means an individual  other than
     the Employee,  or a corporation,  partnership,  trust,  association,  joint
     venture, pool, syndicate, sole proprietorship,  unincorporated organization
     or any other form of entity not specifically listed herein.

(b)  Notwithstanding  any other  provision of this  Agreement  to the  contrary,
     except as provided in Sections 4 and 5, the Employee  may,  within  his/her
     sole  discretion,  voluntarily  terminate  his/her  employment  under  this
     Agreement  within  twelve (12) months  following a Change in Control of the
     Bank or Parent, and the Employee shall thereupon be entitled to receive the
     payment and benefits described in Section 3(a) of this Agreement.

4.   Other  Changes in Employment  Status.  Except as provided for at Section 3,
     herein,  the Board of Directors may terminate the Employee's  employment at
     any time,  with or without  Just Cause  within  its sole  discretion.  This
     Agreement shall not be deemed to give the Employee any right to be retained
     in the employment of the Bank at any time. The Employee shall have no right
     to receive  compensation or other benefits for any period after termination
     for Just Cause.  Termination  for "Just  Cause" shall  include  termination
     because  of  the  Employee's  personal  dishonesty,  incompetence,  willful
     misconduct, breach of fiduciary duty involving personal profit, intentional
     failure to perform  stated  duties,  willful  violation of any law, rule or
     regulation  (other than traffic  violations  or similar  offenses) or final
     cease-and-desist  order of an  applicable  banking  regulator,  or material
     breach of any provision of the Agreement.

5.   Regulatory Exclusions. Notwithstanding anything herein to the contrary, any
     payments made to the  Employee,  pursuant to the  Agreement,  or otherwise,
     shall be subject to and conditioned upon compliance with 12 USC 1828(k) and
     any regulations promulgated thereunder.

6.   Successors and Assigns.

(a)  This  Agreement  shall  inure to the  benefit  of, and be binding  upon any
     corporate or other  successor of the Bank which shall acquire,  directly or
     indirectly,  by  merger,  consolidation,  purchase  or  otherwise,  all  or
     substantially all of the assets or stock of the Bank or Parent.

(b)  The Employee shall be precluded from assigning or delegating his/her rights
     or duties  hereunder  without first  obtaining  the written  consent of the
     Bank.

7.   Amendments.  No amendments or additions to this Agreement  shall be binding
     upon the parties  hereto unless made in writing and signed by both parties,
     except as herein otherwise specifically provided.

8.   Applicable Law. This Agreement shall be governed by all respects whether as
     to validity, construction,  capacity, performance or otherwise, by the laws
     of the Commonwealth of Pennsylvania,  except to the extent that Federal law
     shall be deemed to apply.

9.   Severability.  The provisions of this Agreement  shall be deemed  severable
     and the invalidity or  unenforceability  of any provision  shall not affect
     the validity or enforceability of the other provisions hereof.

10.  Arbitration.  Any  controversy or claim arising out of, or relating to this
     Agreement,  or the  breach  thereof,  shall be settled  by  arbitration  in
     accordance  with the rules  then in effect  of the  district  office of the
     American Arbitration  Association ("AAA") nearest to the home office of the
     Bank,  and  judgment  upon the award  rendered  may be entered in any court
     having  jurisdiction  thereof,  except to the extent  that the  parties may
     otherwise reach a mutual settlement of such issue.  Further, the

                                       2


     settlement  of the  dispute  to be  approved  by the  Board of the Bank may
     include a provision for the  reimbursement  by the Bank to the Employee for
     all reasonable costs and expenses,  including  reasonable  attorneys' fees,
     arising from such dispute, proceedings or actions, or the Board of the Bank
     or the Parent may authorize such reimbursement of such reasonable costs and
     expenses by separate action upon a written action and  determination of the
     Board following settlement of the dispute. Such reimbursement shall be paid
     within  ten (10)  days of the  Employee  furnishing  to the Bank or  Parent
     evidence, which may be in the form, among other things, of a canceled check
     or receipt, of any costs or expenses incurred by the Employee.

11.  Confidential  Information.  The Employee  acknowledges  that during his/her
     employment  he/she will learn and have access to  confidential  information
     regarding  the  Bank  and the  Parent  and  its  customers  and  businesses
     ("Confidential  Information").  The Employee  agrees and  covenants  not to
     disclose or use for his/her own benefit, or the benefit of any other person
     or entity,  any such Confidential  Information  unless or until the Bank or
     the Parent consents to such disclosure or use or such  information  becomes
     common  knowledge  in the  industry or is  otherwise  legally in the public
     domain.  The  Employee  shall  not  knowingly  disclose  or  reveal  to any
     unauthorized person any Confidential Information relating to the Bank , the
     Parent,  or any  subsidiaries  or  affiliates,  or to any of the businesses
     operated  by  them,  and  the  Employee   confirms  that  such  information
     constitutes the exclusive property of the Bank and the Parent. The Employee
     shall not  otherwise  knowingly act or conduct  himself/herself  (a) to the
     material  detriment  of the Bank or the  Parent,  or its  subsidiaries,  or
     affiliates,  or (b) in a  manner  which  is  inimical  or  contrary  to the
     interests of the Bank or the Parent.  Employee acknowledges and agrees that
     the  existence of the Agreement  and its terms and  conditions  constitutes
     Confidential  Information  of the  Bank , and the  Employee  agrees  not to
     disclose the Agreement or its contents without the prior written consent of
     the Bank . Notwithstanding  the foregoing,  the Bank reserves the right, in
     its sole  discretion,  to make  disclosure  of this  Agreement  as it deems
     necessary  or  appropriate  in  compliance  with its  regulatory  reporting
     requirements.  Notwithstanding anything herein to the contrary,  failure by
     the  Employee to comply with the  provisions  of this Section may result in
     the immediate  termination of the Agreement  within the sole  discretion of
     the Bank,  disciplinary  action  against  the  Employee  taken by the Bank,
     including,  but not  limited  to,  the  termination  of  employment  of the
     Employee for breach of the  Agreement  and the  provisions of this Section,
     and other remedies that may be available in law or in equity.

12.  Entire  Agreement.  This  Agreement,  together  with any  understanding  or
     modifications  thereof,  as  agreed to in  writing  by the  parties,  shall
     constitute the entire Agreement between the parties hereto.

                                       3




IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
first hereinabove written.


                                                Fidelity Bank

ATTEST:                                    By: /s/William L. Windisch, President
                                               ---------------------------------

/s/Lisa M. Cline
- -----------------------------
Assistant Secretary



WITNESS:



/s/Richard G. Spencer                          /s/Sandra L. Lee
- -----------------------------                  ---------------------------------
                                               Employee

EX-21

SUBSIDIARIES OF THE REGISTRANT

Parent
Fidelity Bancorp, Inc.
Subsidiaries	State or Other Jurisdiction of Incorporation	Percentage Ownership
Fidelity Bank, PaSB	Pennsylvania	100%
FB Capital Statutory Trust III	Delaware	100%
Subsidiaries of Fidelity Bank, PaSB
FBIC, Inc.	Delaware	100%

EX-23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements on Form S-8 pertaining to Fidelity Bancorp, Inc.’s 1998 Stock Compensation Plan (Registration Statement No. 333-71145), 1997 Employee Stock Compensation Program (Registration Statement No. 333-47841), 1993 Employee Stock Compensation Program (Registration Statement No. 333-26383), 2000 Stock Compensation Plan (Registration Statement No. 333-53934), 2001 Stock Compensation Plan (Registration Statement No. 333-81572), 2002 Stock Compensation Plan (Registration Statement No. 333-103448), and 2005 Stock-Based Incentive Plan (Registration Statement No. 333-123168) of our report dated December 18, 2007 relating to the consolidated financial statements of Fidelity Bancorp, Inc. which appears in this Form 10-K.

/s/ Beard Miller Company LLP

Pittsburgh, Pennsylvania

December 27, 2007

EX-31

CERTIFICATION

I, Richard G. Spencer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Fidelity Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	December 28, 2007	/s/Richard G. Spencer
		Richard G. Spencer
		Chief Executive Officer

EX-31

CERTIFICATION

I, Lisa L. Griffith, certify that:

1. I have reviewed this Annual Report on Form 10-K of Fidelity Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	December 28, 2007	/s/Lisa L. Griffith
		Chief Financial Officer

EX-32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Fidelity Bancorp, Inc. (the “Company”) on Form 10-K for the year ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof, we, Richard G. Spencer, Chief Executive Officer, and Lisa L. Griffith, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)       The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/Richard G. Spencer	/s/Lisa L. Griffith
Richard G. Spencer	Lisa L. Griffith
Chief Executive Officer	Chief Financial Officer

Date: December 28, 2007