Exhibit 13    2004 Annual Report to Shareholders

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                               2004 Annual Report
                                    Contents


                                                                   Page
---------------------------------------------------------------------------


Financial Highlights                                                 2

Market Summary                                                       3

Selected Statistical Information                                     4

Management's Discussion and Analysis                                 5

Independent Auditor's Report                                        32

Consolidated Balance Sheets                                         33

Consolidated Statements of Income                                   34

Consolidated Statements of Changes in Stockholders' Equity          37

Consolidated Statements of Cash Flows                               38

Notes to Consolidated Financial Statements                          40






                                       1
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                              Financial Highlights
             (Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
                                                            December 31,  December 31,
                                                                2004          2003           Change
----------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>                <C>
Per Share
   Basic net income                                           $   0.54     $   0.29           86.21%
   Diluted net income                                             0.54         0.29           86.21
   Book value at year end                                        17.74        16.68            6.35
   Market price (bid) at year end                                22.32        19.44           14.81

For the Year
   Net interest income                                        $  4,479     $  2,823           58.66%
   Provision for loan losses                                       448           13        3,346.15
   Non-interest income                                           2,495        3,878          (35.66)
   Non-interest expense                                          6,120        6,694           (8.57)
   Net income                                                      472          214          120.56

At Year End
   Total assets                                               $200,558     $175,390           14.35%
   Loans (net)                                                 110,771      100,437           10.29
   Total deposits                                              127,701      120,680            5.82
   Total stockholders' equity                                   16,261       13,367           21.65

Averages
   Total assets                                               $195,959     $149,577           31.01%
   Total earning assets                                        178,274      131,080           36.00
   Total loans                                                 109,050       82,553           32.10
   Total deposits                                              128,238      111,888           14.61
   Total stockholders' equity                                   15,274       12,668           20.57

Profitability Ratios
   Return on average assets                                       0.24%        0.14%
   Return on average stockholders' equity                         3.09         1.69
   Net interest margin                                            2.51         2.15

Loan Quality Ratios
   Net charge offs to average loans                               0.39%        0.14%
   Allowance for loan losses to loans at end of period            0.68         0.73
   Valuation allowance for letters of
      credit to total letters of credit                           1.02         1.05

Savings Bank Capital Ratios
   Tangible capital to adjusted total assets                      7.22%        6.87%
   Risk-based capital ratios
     Tier I capital                                              10.52         9.16
     Total risk-based capital                                    14.48        13.62

Other Data
   Average common and common equivalent shares outstanding     874,432      744,340
   Number of full-time equivalent employees at year end             52           62
   Number of banking offices                                         5            5
</TABLE>

                                       2
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                                 MARKET SUMMARY
             MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Until March 1, 2005 Fidelity's common stock was traded on the NASDAQ System
under the symbol FFED. The stock is not currently traded on any stock exchange
or on the NASDAQ system, and there is no established public trading market for
the stock. The following table sets forth, for the periods indicated, the high
and low bid prices per share as reported by NASDAQ. The bid prices represent
prices between dealers, do not include retail mark-up, mark-down, or commissions
and may not represent actual transactions. The stock prices have been adjusted
for the reverse and forward stock split on March 1, 2005.

                                   2004                          2003
                         ------------------------------------------------------
                          Common Stock Bid Prices       Common Stock Bid Prices
                         ------------------------------------------------------
Year Ended December 31     High              Low         High              Low
-------------------------------------------------------------------------------

First quarter              $25.32          $18.60        $21.00          $14.52
Second quarter              24.60           16.44         18.36           13.44
Third quarter               21.24           16.92         21.00           15.00
Fourth quarter              24.96           17.16         22.56           18.00

We did not pay any cash dividends on our common stock in 2004 or 2003.
Fidelity's dividend policy is to pay cash or distribute stock dividends when the
Board of Directors deems it to be appropriate, taking into account Fidelity's
financial condition and results of operations, economic and market conditions,
industry standards, and other factors, including regulatory capital requirements
of its savings bank subsidiary. We do not anticipate paying cash dividends in
the foreseeable future. As of February 28, 2005, shares were held of record by
approximately 419 shareholders.



                                       3
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                        Selected Statistical Information
             (Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
                                               December 31,   December 31,   December 31,   December 31,   December 31,
Selected Financial Data as of                      2004           2003           2002           2001           2000
-----------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>            <C>            <C>
   Total assets                                 $ 200,558      $ 175,390      $ 132,290      $ 159,659      $ 166,466
   Interest-bearing deposits                        3,633          1,263          2,369         14,605         14,718
   Investment securities available for sale        65,192         52,208         34,912         18,074         21,001
   Loans, net                                     110,771        100,437         73,087        104,432        107,842
   Deposits                                       127,701        120,680        106,791        120,155        126,944
   Borrowings                                      10,460          8,077         10,586         12,317         13,939
   Federal Home Loan Bank advances                 44,090         31,550          3,000         12,333          9,903
   Stockholders' equity                            16,261         13,367          9,588         11,895          8,775

Selected Operations Data for Year Ended
   Interest income                              $   8,483      $   6,650      $   9,034      $  11,455      $  12,100
   Interest expense                                 4,004          3,827          6,022          8,501          8,457
                                                ---------------------------------------------------------------------
   Net interest income                              4,479          2,823          3,012          2,954          3,643
   Provision for loan losses                          448             13           (360)         1,349            670
                                                ---------------------------------------------------------------------
   Net interest income after provision for
     loan losses                                    4,031          2,810          3,372          1,605          2,973
   Non-interest income                              2,495          3,878          3,507          3,933          1,816
   Non-interest expense                             6,120          6,694          9,927          5,698          7,314
                                                ---------------------------------------------------------------------
   Income (loss) from continuing operations
     before tax                                       406             (6)        (3,048)          (160)        (2,525)
   Income tax benefit                                 (66)          (220)          (641)          (384)        (1,369)
                                                ---------------------------------------------------------------------
   Income (loss) from continuing operations           472            214         (2,407)           224         (1,156)
                                                ---------------------------------------------------------------------
   Loss from discontinued operations before
     tax                                               --             --         (1,537)
   Income tax expense                                  --             --            451
                                                ---------------------------------------------------------------------
   Loss from discontinued operations                   --             --         (1,988)
                                                ---------------------------------------------------------------------
   Net income (loss)                            $     472      $     214      $  (4,395)     $     224      $  (1,156)
                                                =====================================================================

Selected Financial Ratios
   Return on average assets                          0.24%          0.14%         (2.75)%         0.14%         (0.71)%
   Return on stockholders' equity                    3.09           1.69         (36.82)          2.18         (16.14)
   Net interest margin                               2.51           2.15           2.18           2.03           2.49
   Net interest spread                               2.42           2.11           2.23           2.12           2.33
   Tangible equity to assets at year end             7.22           6.87           8.52           8.48           8.42
   Allowance for loan losses to loans                0.68           0.73           1.13           2.01           1.75
   Allowance for loan losses to
     non-performing loans                           74.48          49.33          91.48          55.90         222.27
   Dividend payout ratio                              N/A            N/A            N/A            N/A            N/A

Per Share Data
   Diluted net income (loss) from continuing
     operations                                 $    0.54      $    0.29      $   (4.67)     $    0.52      $   (3.42)
   Diluted net income (loss) from
     discontinued operations                                                      (3.86)
   Diluted net income (loss)                         0.54           0.29          (8.53)          0.52          (3.42)
   Basic net income (loss) from continuing
     operations                                      0.54           0.29          (4.67)          0.52          (3.42)
   Basic net income (loss) from discontinued
     operations                                                                   (3.86)
   Basic net income (loss)                           0.54           0.29          (8.53)          0.52          (3.42)
   Cash dividends declared
   Book value at year end                           17.74          16.68          17.07          23.84          22.85
   Closing market price (bid) at year end           22.32          19.44          17.64          27.60          15.72
   Number of average common and common
     equivalent shares outstanding                874,432        744,340        515,272        428,894        338,097
</TABLE>

                                       4
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Termination of Registration Requirements

On November 10, 2004, Fidelity announced a plan to terminate registration of its
common stock. The Board of Directors unanimously approved a 1-for 30,000 reverse
stock split in order to terminate the registration of its common stock with the
Securities and Exchange Commission and result in the delisting of its shares on
the NASDAQ. The reverse stock split was immediately followed by a 2,500-for-1
stock split. The effective dates for both the reverse and forward stock splits
was February 28, 2005. On March 11, 2005, Fidelity filed Form 15 with the
Securities and Exchange Commission notifying it of the completion of the reverse
stock split and delisting of its shares on NASDAQ. Approximately $3.2 million
will be paid out to fractional shareholders as a result of the reverse stock
split in 2005 thus reducing shareholder's equity and cash. Additional details
regarding this transaction may be found in the Schedule 13E-3 as filed with the
Securities and Exchange Commission.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of Fidelity Federal. The information contained in this
section should be read in conjunction with the consolidated financial statements
and accompanying notes contained in this report.

Portions of this Management's Discussion and Analysis, as well as the notes to
the consolidated financial statements and the Letter To Our Shareholders,
contains or incorporates by reference certain forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995, about our
financial condition, results of operations and business that are based on our
current and future expectations. You can find many of these statements by
looking for words such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue,"
or the negative of such terms and other comparable terminology. Such statements
reflect our current views with respect to future events and are subject to risks
and uncertainties, including those discussed in the Management Discussion and
Analysis, notes to the consolidated financial statements and the Letter to
Shareholders, that could cause actual results to differ materially from those
contemplated in such forward-looking statements. A few uncertainties which could
affect our future performance include, without limitation, the effects of
competition, technological changes and regulatory developments; changes in
fiscal, monetary and tax policies; market, economic conditions, either
nationally or regionally, resulting in, among other things, credit quality
deterioration; and changes in the securities markets. Investors should consider
these risks, uncertainties, and other factors in addition to those mentioned by
us in other filings from time to time when considering any forward-looking
statement.

We believe it is important to communicate our expectations to our investors.
However, you are cautioned that no forward-looking statement is a guarantee of
future performance and you should not place undue reliance on these
forward-looking statements, which speak only as of the date of this annual
report. There may be events in the future that we are not able to predict
accurately or over which we have no control. We do not undertake any obligation
to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this annual report or to reflect the
occurrence of unanticipated events which may cause actual results to differ from
those expressed or implied by the forward-looking statements contained in this
annual report.

General

Fidelity Federal Bancorp ("Fidelity"), incorporated in 1993 under the laws of
the State of Indiana, is a registered savings and loan holding company with its
principal office in Evansville, Indiana. Fidelity's savings bank subsidiary,
United Fidelity Bank, fsb ("United"), was organized in 1914, is a
federally-chartered stock savings bank located in Evansville, Indiana, and is
regulated by the Office of Thrift Supervision ("OTS"). Fidelity, through its
savings bank subsidiary, is engaged in the business of obtaining funds in the
form of savings deposits and other borrowings and investing such funds in
consumer, commercial, and mortgage loans, and in investment securities.

                                       5
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Operating Strategy

Fidelity's strategy is to continue to operate as an independent,
community-oriented financial institution dedicated to meeting the financial
needs of consumers and businesses in its market area. Fidelity prides itself in
meeting or exceeding customer expectations. Fidelity's emphasizes on mortgage
and commercial lending activities, as well as increasing its portfolio of
consumer loans. The strategy also includes continued management of its portfolio
of mortgage-backed securities, and to increase core deposit growth to support
growth in loans and investments.

Performance Overview

The primary source of Fidelity's revenue is net interest income from loans and
deposits, fees generated from loan sales and fees from financial services
provided to customers. Economic factors, such as interest rates, business
spending and consumer confidence, in addition to competition, influences loan
and deposit volume that is generated by Fidelity.

Fidelity's earnings increased $258,000 over 2003. Net interest income increased
$1.7 million and noninterest expense decreased $574,000 from the prior year.
Offsetting a portion of these increases was a decrease of $1.4 million in
noninterest income and a $435,000 increase in provision for loan losses.

Net income per share was $0.54 compared to $0.29 in 2003. Return on assets and
return on equity for 2004 were 0.24% and 3.09%, respectively, compared to 0.14%
and 1.69% for 2003, respectively.

Fidelity's balance sheet increased from $175.4 million at December 31, 2003 to
$200.6 million at December 31, 2004. This increase was attributed to growth in
the investment and loan portfolios. This growth was funded primarily by
increases in certificate of deposits, and Federal Home Loan Bank advances.
Fidelity also raised $2.5 million through a rights offering of equity in which
1.4 million shares were registered. A portion of these proceeds were used to
increase regulatory capital during 2004 which supported balance sheet expansion.

Fidelity increased its commercial real estate and commercial loans by 66% in
2004. The primary collateral sources on these loans have been income-producing
residential properties, and owner-occupied commercial real estate. Fidelity's
investment portfolio also increased 24.9% in 2004 primarily through purchases of
mortgage-backed securities.

Fidelity's classified assets have continued to decrease over the past several
years. Total classified assets have declined from $6.0 million at December 31,
2002 to $1.5 million at December 31, 2004.

Comparison of Financial Condition at December 31, 2004 and December 31, 2003

Total assets at December 31, 2004 increased $25.2 million to $200.6 million from
$175.4 million in December 2003, primarily due to the increases in
mortgage-backed securities available for sale of $13.0 million and an increase
in net loans of $10.3 million. Average assets for the year ended December 31,
2004 increased by $46.4 million from $149.6 million at December 31, 2003 to
$196.0 million at December 31, 2004. The increase in total average assets is
primarily due to an increase in the automobile loan category of $16.8 million.
Average investment securities grew $20.2 million in 2004 when compared to 2003
and total average commercial and commercial real estate loans grew by $7.4
million when compared to the prior year.

Total assets at December 31, 2003 increased $43.1 million to $175.4 million from
$132.3 million in December 2002, primarily due to the increases in
mortgage-backed securities available for sale of $17.3 million and an increase
in net loans of $27.4 million. Average assets for the year ended December 31,
2003 decreased by $10.0 million from $159.6 million at December 31, 2002 to
$149.6 million at December 31, 2003. The decrease in total average assets is
primarily due to decreases in the consumer loan category resulting from the
$49.5 million loan securitization transaction completed in late 2002. As a
result, average consumer loan outstandings for 2003 decreased $12.0 million from
the prior year. In addition, loan workout activities reduced foreclosed assets
held for sale from an average of $1.8 million in 2002 to $920,000 for December
31, 2003.

                                       6
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition
Loans

The following table shows the composition of Fidelity's loan portfolio:
<TABLE>
<CAPTION>
                                               December       December       December       December       December
                                                 2004           2003           2002           2001           2000
-------------------------------------------------------------------------------------------------------------------
                                                              (In Thousands)
<S>                                           <C>            <C>            <C>            <C>            <C>
Real estate mortgage loans
First mortgage loans
Conventional                                  $  38,226      $  41,754      $  36,157      $  43,929      $  47,809
Construction                                      4,471          2,042          1,909            513          1,274
Commercial                                       16,251          9,144          5,645          6,114          6,873
Multi-family loans                                  594            213          3,083          3,856          4,350
Home equity loans                                 6,144          5,067          4,586          4,577          5,274
First mortgage real estate loans purchased          385            778            627            745          1,753
                                              ---------------------------------------------------------------------
                                                 66,071         58,998         52,007         59,734         67,333
Commercial and industrial                         4,136          3,138          2,210          1,848          2,305
Consumer loans                                   41,320         39,038         19,707         44,988         40,125
                                              ---------------------------------------------------------------------
Total loans                                     111,527        101,174         73,924        106,570        109,763
Allowance for loan losses                          (756)          (737)          (837)        (2,138)        (1,921)
                                              ---------------------------------------------------------------------

Net loans                                     $ 110,771      $ 100,437      $  73,087      $ 104,432      $ 107,842
                                              =====================================================================

Total assets                                  $ 200,558      $ 175,390      $ 132,290      $ 159,659      $ 166,466
                                              =====================================================================

Total loans to total assets                        55.6%          57.7%          55.9%          66.7%          65.9%
</TABLE>

Total conventional real estate mortgages decreased by $3.5 million in 2004, due
to an overall decline in originations in 2004 as compared to 2003.

Total commercial real estate loans outstanding have increased by approximately
$7.1 million in 2004 and total commercial and industrial loans have increased by
approximately $1.0 million as compared to 2003. Continued growth is expected in
these two loan categories in 2005.

Consumer loans increased by $2.3 million to $41.3 million at December 31, 2004.
The portfolio is primarily composed of prime automobile loans previously
generated through a network of automobile dealers in Indiana, Kentucky, Illinois
and Missouri. During the third quarter of 2004, United exited the indirect
automobile market and focused its resources on more traditional community bank
products. The portfolio is expected to decline in 2005.

Fidelity has no loans to foreign governments, foreign enterprises, foreign
operations of domestic companies or highly leveraged transactions, nor any
concentration to borrowers engaged in the same or similar industries that exceed
ten percent of total loans.

Loan Maturities
The following table sets forth the remaining maturities for commercial loans as
of December 31, 2004:

                              Within One    One to Five    After Five
                                 Year          Years          Years       Total
                             ---------------------------------------------------
                                                 (In Thousands)

Predetermined interest rates     $   52        $1,240        $  198       $1,490
Floating interest rates           1,055           202         1,389        2,646
                             ---------------------------------------------------

                                 $1,107        $1,442        $1,587       $4,136
                             ===================================================

                                       7
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Non-Performing Loans

Fidelity discontinues the accrual of interest income on loans when, in the
opinion of management, there is reasonable doubt as to the timely collectibility
of interest or principal. When a loan reaches a ninety day or more past due
status, the asset is generally repossessed or sold, if applicable, or the
foreclosure process is initiated and the loan is re-classified to other real
estate owned to be sold. A loan could be placed in a nonaccrual status sooner
than ninety days if management knows the customer has abandoned the collateral
and has no intention of repaying the loan.

Typically, when a loan reaches nonaccrual status, the accrued interest is
reversed from income, unless strong evidence exists that the value of the
collateral would support the collection of interest in a foreclosure situation.
Nonaccrual loans are returned to an accrual status when, in the opinion of
management, the financial position of the borrower indicates that there is no
longer any reasonable doubt as to the timely payment of principal and interest.
Income received on nonaccrual and restructured loans was $65,000 for the year
ended December 31, 2004, $43,000 for the year ended December 31, 2003 and
$23,000 for the year ended December 31, 2002. Additional interest income of
approximately $53,000, $19,000 and $63,000 for the years ended December 31,
2004, 2003 and December 31, 2002, respectively, would have been recorded had
income on nonaccruing and restructured loans been considered collectible and
accounted for on an accrual basis.

The following table provides information on Fidelity's non-performing loans.
<TABLE>
<CAPTION>
                                              December 31,    December 31,    December 31,    December 31,    December 31,
                                                 2004            2003            2002            2001            2000
                                             -----------------------------------------------------------------------------
                                                                        (Dollars In Thousands)
<S>                                             <C>             <C>             <C>             <C>             <C>
Non-accrual loans
   Real estate mortgage                         $  273          $  788          $  356          $  130
   Home equity                                     196             127
   Consumer                                        108             233             131             116
   Multi-family                                                                                                 $  148
   Commercial                                      178             267             388           3,291             472
                                                ----------------------------------------------------------------------
Total non-accrual loans                            755           1,415             875           3,537             620
Restructured
   Consumer                                                                         39             190             115
   Commercial                                                                                       53             119
                                                ----------------------------------------------------------------------
Total restructured loans                                                            39             243             234
90 days or more past due and accruing
   Consumer                                        133              54                              23              10
   Commercial                                      126             233                              22
   Mortgage                                                                          1
                                                ----------------------------------------------------------------------
Total 90 days or more past due and accruing        259             287               1              45              10

                                                ----------------------------------------------------------------------
       Total non-performing loans               $1,014          $1,702          $  915          $3,825          $  864
                                                ======================================================================

Ratio of non-performing loans to total loans      0.91%           1.68%           1.24%           3.59%           0.79%
                                                ======================================================================
</TABLE>

The decrease in non-performing loans in 2004 is primarily due to one residential
real estate loan totaling $451,000 on which accrual of interest income was
ceased during the first quarter of 2003. The property was in the foreclosure
process at the end of 2003 and sold during the first quarter of 2004. Proceeds
were sufficient to repay principal, accrued interest, and other expenses.
Approximately $170,000 of the $178,000 in commercial non-accrual loans is
associated with one property that represents a small portion of a larger
participated loan. Management believes that reserves for this loan are adequate.

                                       8
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Analysis of Allowance for Loan Losses and Letter of Credit Valuation Allowance

Fidelity establishes its provision for loan losses and letter of credit
valuation provision and evaluates the adequacy of the allowance for loan losses
and its letter of credit valuation reserve based on management's evaluation of
the performance of its loan and letter of credit portfolios. United's review of
all loans and letters of credit for which full collectibility may not be
reasonably assured, considers among other matters, the present value of expected
cash flows, the estimated fair value of the underlying collateral, economic
conditions, historical loss experience, the composition of the portfolios and
other factors that warrant recognition in providing for an adequate loan loss
allowance and letters of credit valuation allowance. This evaluation is
performed on a quarterly basis and is designed to ensure that all relevant
matters affecting collectibility will consistently be identified in a detailed
review and that the outcome of the review will be considered in a disciplined
manner by management in determining the necessary allowances and related
provisions. The amounts actually reported in each period will vary with the
outcome of this detailed review.

Classified Assets and Letters of Credit
(in thousands)
                                  December 31,    December 31,    December 31,
                                      2004            2003            2002
                                ----------------------------------------------

Classified assets                   $1,521          $1,757          $6,024
Classified letters of credit
                                ----------------------------------------------

     Total classified assets        $1,521          $1,757          $6,024
                                ==============================================

Classified assets and letters of credit of Fidelity totaled $1.5 million at
December 31, 2004 compared to $1.8 million at December 31, 2003 and $6.0 million
at December 31, 2002, a decrease of 74.8%. In addition to the classified assets
and letters of credit, there are other assets and letters of credit totaling
$6.1 million at December 31, 2004 for which management was closely monitoring
the borrowers' abilities to comply with payment terms.

Impaired loans are those that management believes will not perform in accordance
with the original loan terms. At December 31, 2004 and December 31, 2003,
Fidelity had impaired loans totaling $679,000 and $775,000 respectively. The
allowances for loan losses on such impaired loans totaled $130,000 and $169,000,
which were included in Fidelity's allowance for loan losses at December 31, 2004
and December 31, 2003 respectively. Using similar guidelines for impaired loans,
impaired letters of credit at December 31, 2004 and December 31, 2003 totaled
$0. Impaired loans do not include large groups of homogeneous loans that are
collectively evaluated for impairment, such as residential mortgage and consumer
installment loans.

Foreclosed Assets

Foreclosed assets owned, consisting of one-to-four family dwellings, totaled
$316,000 at December 31, 2004, compared to zero at December 31, 2003.

                                       9
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Allowance for Loan Losses

The following table sets forth loan charge-offs and recoveries by the type of
loan and an analysis of the allowance for loan losses for the years ended
December 31, 2004, 2003, 2002 and 2001:
<TABLE>
<CAPTION>
                                        December 31,     December 31,     December 31,     December 31,    December 31,
                                            2004             2003             2002             2001            2000
-----------------------------------------------------------------------------------------------------------------------
                                                                   (In Thousands)
<S>                                      <C>              <C>              <C>              <C>             <C>
Allowance for loan losses
   at beginning of period                $     737        $     837        $   2,138        $   1,921       $   2,021
                                         ----------------------------------------------------------------------------
Loan charge offs
   Real estate mortgage                                           2                                                80
   Multi-family                                                                  469              606             683
   Commercial                                   71                             1,158              354              12
   Consumer                                    499              234              327              441             391
                                         ----------------------------------------------------------------------------
     Total loan charge offs                    570              236            1,954            1,401           1,166
                                         ----------------------------------------------------------------------------
Loan recoveries
   Real estate mortgage                                                                             7
   Multi-family                                                  24              937              200             317
   Commercial                                                                                                      20
   Consumer                                    141               99               76               62              59
                                         ----------------------------------------------------------------------------
     Total loan recoveries                     141              123            1,013              269             396
                                         ----------------------------------------------------------------------------
Net charge offs                                429              113              941            1,132             770
Provision for loan losses
 transferred to held for sale                 (114)            (479)            (564)
Provision for loan losses                      562              492              204            1,349             670
                                         ----------------------------------------------------------------------------
Total net provision for loan losses            448               13             (360)           1,349             670
                                         ----------------------------------------------------------------------------
Allowance for loan losses
   at end of period                      $     756        $     737        $     837        $   2,138       $   1,921
                                         ============================================================================
Ratio of net charge offs to
   average loans outstanding
   during period                              0.39%            0.14%            0.99%            1.02%           0.72%
                                         ============================================================================
Ratio of provision for loan
   losses to average loans
   outstanding during period                  0.41%            0.02%           (0.38)%           1.21%           0.63%
                                         ============================================================================
Ratio of allowance for loan
   losses to total loans
   outstanding at year end                    0.68%            0.73%            1.13%            2.01%           1.75%
                                         ============================================================================
Average amount of loans
   outstanding for the period            $ 109,050        $  82,553        $  94,821        $ 111,572       $ 106,599
                                         ============================================================================
Amount of loans outstanding
   at end of period                      $ 111,527        $ 101,174        $  73,924        $ 106,570       $ 109,763
                                         ============================================================================
</TABLE>

                                       10
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

During the year ended December 31, 2004, 2003 and 2002 net charge-offs consisted
primarily of consumer loans. Consumer loan charge-offs of $499,000 were
recognized in 2004 compared to $234,000 in 2003 and $327,000 in 2002. Consumer
loan recoveries of $141,000 were received in 2004 compared to $99,000 in 2003
and $76,000 in 2002. Charge-offs of $469,000 were recorded on multifamily loans
in 2002 compared to zero in 2003 and 2004. During 2002 a subsidiary of United
held general partnership interest in seventeen partnerships. Under the terms of
the partnership agreement, the general partner was obligated to fund certain
cash flow deficits of the particular partnership, or risk defaulting on loans. A
default could have had a negative impact for the partners, including the
company-owned general partner, such as causing recapture of tax credits. As
such, funds would be loaned to the various partnerships to meet obligations. At
the time the loans were made, they were fully reserved through additional
provisions to the allowance for loan loss, due to the performance of the
partnerships and the assessment of the quality of the credit. The loans were
then charged-off.

Recoveries of $937,000 were received on multifamily loans in 2002, compared to
$24,000 in 2003 and none in 2004. Due to the poor performance of certain
multifamily loans in prior periods and management's assessment of allowances
necessary to reflect the credit quality of these loans, specific reserves were
created and certain charge-offs recorded. Several of these loans were refinanced
through third parties during the past three years. The refinancing activities
generally created additional cash flow because of reduced interest rates. As
these loans were paid off, the reserves previously established for these loans
were reversed or recorded recoveries to the extent that the payments received
exceeded the charged down balances.

The provision for loan losses increased from $492,000 in 2003 to $562,000 in
2004 due to the $10.4 million increase in total loans outstanding. In 2002,
operating deficit guarantees provided by Pedcor resulted in payments being made
to Fidelity in the event that cash flows from properties were negative, based on
a pre-determined computation. These guarantees and contingent liabilities were
terminated upon the sale of the partnerships during the fourth quarter of 2002.

Fidelity's letter of credit valuation allowance was $232,000 at December 31,
2004 compared to $291,000 at December 31, 2003. The decrease is primarily due to
the reduction in classified letters of credit, primarily due to efforts to
refinance the credits on a non-recourse basis since 2001. Multi-family letters
of credit, an off-balance sheet item, carry the same risk characteristics as
conventional loans and totaled $22.7 million at December 31, 2004 compared to
$27.8 million at December 31, 2003 and $29.7 million at December 31, 2002. The
valuation allowance for letters of credit totaled 1.02% of outstanding letters
of credit at December 31, 2004 compared to 1.0% at December 31, 2003. The
allowance for loan losses and letters of credit to total loans and letters of
credit at December 31, 2004 and 2003 was 0.74% and 0.80%, respectively.
Management is not currently aware of any additional letters of credit that are
expected to be called or funded. Management considers the allowance for loan
losses and valuation allowance for letters of credit adequate to meet losses
inherent in the loan and letter of credit portfolios at December 31, 2004.

The provision for consumer loans was credited in connection with consumer loans
transferred to held for sale for $114,000 for 2004 compared to a credit of
$479,000 in 2003. The credit during 2004 and 2003 is primarily attributable to
the reduction in allocated reserves previously set aside for consumer loans as a
result of completing consumer loan sales during each year. Fidelity will
generally complete consumer loan sales during the month the loans are identified
for sale, therefore no consumer loans were identified as held for sale at
December 31, 2004.

Allocation of Allowance for Loan Losses

The allocation for loan losses and the percentage of loans within each category
to total loans at December 31, 2004, 2003, 2002, and 2001 are as follows:
<TABLE>
<CAPTION>
                                                        Allocation of Amount
                       ------------------------------------------------------------------------------------
                        December 31,      December 31,     December 31,      December 31,     December 31,
                            2004              2003             2002              2001             2000
-----------------------------------------------------------------------------------------------------------
                                                          (In Thousands)
<S>                         <C>              <C>               <C>              <C>              <C>
Real estate mortgage        $    62          $    64           $    91          $    80          $     49
Home equity                      16               39                23               23                53
Multi-family                      6                2               150              258               514
Consumer                        414              363               247              505               628
Commercial                      258              269               326            1,272               677
                       ------------------------------------------------------------------------------------

     Total                   $  756           $  737            $  837           $2,138            $1,921
                       ====================================================================================

                                                     Percentage of Loans to Total Loans
                       ------------------------------------------------------------------------------------
                        December 31,      December 31,     December 31,      December 31,     December 31,
                            2004              2003             2002              2001             2000
-----------------------------------------------------------------------------------------------------------
Real estate mortgage          38.6%            43.0%             52.3%            42.4%             45.2%
Home equity                    5.5              5.0               6.2              4.3               4.8
Multi-family                   0.5              0.2               4.2              3.6               3.4
Consumer                      37.1             38.7              26.7             42.2              36.6
Commercial                    18.3             13.1              10.6              7.5              10.0
                       ------------------------------------------------------------------------------------
     Total                   100.0%           100.0%            100.0%           100.0%            100.0%
                       ====================================================================================
</TABLE>

                                       11
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Investment Securities

United's investment policy is reviewed annually by its Board of Directors. Any
significant changes to the policy must be approved by the Board. The Board has
an interest rate risk management committee, which is responsible for keeping the
investment policy current.

At December 31, 2004, the investment portfolio represented 32.5% of Fidelity's
assets, compared to 29.8% at December 31, 2003 and 26.4% at December 31, 2002,
and is managed in a manner designed to meet the Board's investment policy
objectives. The primary objectives, in order of priority, are to further the
safety and soundness of Fidelity, to provide for the liquidity necessary to meet
day to day, cyclical, and long-term changes in the mix of Fidelity's assets and
liabilities and to provide for diversification of risk and management of
interest rate and economic risk. At December 31, 2004, the entire investment
portfolio was classified as available for sale. The net unrealized loss at
December 31, 2004, which is included as a component of stockholders' equity, was
$261,000 and was comprised of gross unrealized gains of $59,000 and gross
unrealized losses of $480,000 and tax expense of $160,000. The change in the
unrealized loss from December 31, 2003, was caused primarily by market interest
rate changes during the period. Although the entire portfolio is classified as
available for sale, management has not identified specific investments for sale
in future periods. The following table sets forth the components of United's
available-for-sale investment portfolio as of December 31, 2003, 2002, and 2001:
<TABLE>
<CAPTION>
                                                                    December 31,    December 31,     December 31,
                                                                       2004            2003             2002
-----------------------------------------------------------------------------------------------------------------
                                                                                (dollars in thousands)
<S>                                                                   <C>             <C>              <C>
   Federal Home Loan Mortgage Corporation
      mortgage-backed securities                                      $11,075         $ 6,739          $17,148
   Federal National Mortgage Association mortgage-backed securities    32,812          25,203            3,382
   Government National Mortgage Association
      mortgage-backed securities                                       21,305          20,266           14,382

                                                                    ---------------------------------------------
       Total securities available for sale                            $65,192         $52,208          $34,912
                                                                    =============================================
</TABLE>

The following table sets forth the contractual maturities of investment and
mortgage-backed securities as of December 31, 2004, and the weighted average
yields of such securities. The contractual maturities of mortgage-backed
securities are not typically indicative of the actual holding period for such
investments, as pre-payments on the underlying mortgage loans will reduce the
average life of the investment, based on prevailing market interest rates.
<TABLE>
<CAPTION>
                           -----------------------------------------------------------------------------------------
                                               After One But     After Five But
                            Within One Year  Within Five Years  Within Ten Years    Over Ten Years         Total
--------------------------------------------------------------------------------------------------------------------
                             Amount   Yield   Amount    Yield    Amount    Yield    Amount   Yield    Amount   Yield
--------------------------------------------------------------------------------------------------------------------
<S>                            <C>    <C>         <C>   <C>       <C>      <C>     <C>       <C>     <C>       <C>
Federal Home Loan Mortgage
   Corporation                                                     1,218   3.75%   $ 9,857   3.96%   $11,075   4.12%
Federal National Mortgage
   Association                                                    $4,088   3.89%    28,724   4.15     32,812   3.94
Government National Mortgage
   Association                                                                      21,305   2.87     21,305   2.87
                             --------         --------           -------          ---------         ---------

     Total                     $ 0                $0              $5,306   3.86%   $59,886   3.66%   $65,192   3.68%
                             ========         ========           =======          =========         =========

     Percent of total         0.00%             0.00%              8.14%            91.86%           100.00%
                             ========         ========           =======          =========         =========
</TABLE>

                                       12
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Funding Sources

Deposits

Fidelity attracts both short-term and long-term deposits from the retail market
by offering a wide assortment of accounts with different terms and different
interest rates. These deposit alternatives include checking accounts, regular
savings accounts, money market deposit accounts, fixed rate certificates with
varying maturities, variable interest rate certificates, negotiable rate jumbo
certificates ($99,000 or more), and variable rate IRA certificates.

Average deposits increased by $16.4 million for the year ended December 31,
2004. The primary categories affecting the decrease are as follows:

     o    Average retail certificate of deposits increased by $1.2 million, or
          1.5% due to increased marketing efforts and rates offered during 2004.
     o    Average money market accounts increased $778,000, or 11.5%.
     o    Average demand deposits increased $1.8 million due to growth in
          commercial loan business accounts.
     o    Average savings increased $321,000 or 5.9%.
     o    Average agent-acquired certificates of deposit increased $13.0 million
          to assist Fidelity in funding balance sheet growth.

The following table sets forth the average balances of and the average rate paid
on deposits by deposit category for the years ended December 31, 2004, 2003 and
2002.
<TABLE>
<CAPTION>
                                 December 31,              December 31,                December 31,
                                     2004                      2003                        2002
                          ----------------------------------------------------------------------------------
Average Deposits              Amount       Rate        Amount         Rate        Amount          Rate
------------------------------------------------------------------------------------------------------------
                                                          (In Thousands)
<S>                            <C>           <C>         <C>           <C>         <C>            <C>
Demand                         $  7,379                 $   5,564                 $   4,964
NOW accounts                     12,998      0.31%         13,793      0.49%         12,720       0.90%
Money market accounts             7,521      0.73           6,743      0.86           9,664       1.42
Savings accounts                  5,791      0.50           5,470      0.62           4,958       0.75
Certificates of deposit          81,364      2.59          80,121      3.39          86,531       4.71
Brokered deposits                13,185      2.34             197      3.55             248       6.05
                          ---------------           ---------------           ----------------

         Totals                $128,238      1.98%       $111,888      2.58%       $119,085       3.68%
                          ===============           ===============           ================
</TABLE>

The current interest rate environment and local market conditions presented
significant repricing opportunities during 2004 and 2003, resulting in an
overall average yield of 1.98% on the deposit portfolio compared to 2.58% in
2003 and 3.68% in 2002.

Deposits at December 31, 2004 were $127.7 million compared to $120.7 million at
December 31, 2003. This increase is primarily associated with the use of public
and agent-acquired certificates of deposit to assist in balance sheet growth
during 2004.

                                       13
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

The following table summarizes certificates of deposit in amounts of $100,000 or
more by maturity as of the following dates:

                           December 31,    December 31,    December 31,
                              2004            2003            2002
                           ------------    ------------    ------------
                                          (In Thousands)

Three months or less         $ 8,852         $18,168         $ 5,486
Three to six months            9,777           6,929           4,591
Six to twelve months           3,132           1,565           1,139
Over twelve months             3,491           2,727           3,955
                             -------         -------         -------
     Total                   $25,252         $29,389         $15,171
                             =======         =======         =======

Federal Home Loan Bank advances

Fidelity's investment and loan growth in 2004 was also facilitated by utilizing
FHLB advances. FHLB advances outstanding increased from $31.6 million at
December 31, 2003 to $44.1 million at December 31, 2004. To the extent that
funding through deposits and other sources is not sufficient, United will
continue to utilize FHLB advances to fund additional growth.

Borrowings

Fidelity's borrowings consisted primarily off FHLB advances, senior notes,
junior notes and unsecured notes. Of the $54.6 million outstanding at December
31, 2004, $44.1 million were FHLB advances.

Fidelity's borrowings, other than FHLB advances, increased $2.4 million to $10.5
million at December 31, 2004.

     o    During the first half of 2004, Fidelity utilized funds received from
          its debt and equity offerings that were completed to repay a $1.0
          million unsecured note to a related party and repay $1.8 million in
          10% senior subordinated notes maturing in June 2005.
     o    These decreases were offset by a rights offering which raised $2.4
          million in senior subordinated notes bearing interest at 9.00%.
          Fidelity also raised $3.1 million in trust preferred securities in
          2004. The proceeds are anticipated to service debt and cash out
          fractional shareholders upon the completion of the reverse stock split
          in connection with Fidelity going private.

Capital Resources

Fidelity's stockholders' equity increased $2.9 million to $16.3 million at
December 31, 2004, compared to $13.4 million at December 31, 2003. The change in
stockholders' equity was accounted for by net income of $472,000, an increase in
the net unrealized loss on securities available for sale of $52,000, and $2.5
million attributable to the issuance of stock in connection with the equity
offering that was completed on May 18, 2004.

                                       14
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Total capital, as defined for regulatory purposes, for United consists of Tier I
capital plus the allowance for loan losses. Minimum capital levels are 4% for
the leverage ratio, which is, defined as Tier I capital as a percentage of total
assets less goodwill and other identifiable intangible assets; 4% for Tier I to
risk-weighted assets; and 8% for total capital to risk-weighted assets.

                                  Tangible      Core       Tier 1    Risk-based
                                   Capital     Capital     Capital     Capital
                                -----------------------------------------------
Regulatory capital                 $14,077     $14,122     $13,129     $18,079
Minimum capital requirement          2,925       7,801       4,992       9,985
                                -----------------------------------------------
Excess capital                     $11,152      $6,321      $8,137      $8,094
                                ===============================================

Regulatory capital                    7.22%       7.25%      10.52%      14.49%
Required capital requirement          1.50        4.00        4.00        8.00
                                -----------------------------------------------
Excess over minimum                   5.72%       3.25%       6.52%       6.49%
                                ===============================================


The capital rating assigned to an entity can also be affected by qualitative
judgments made by regulatory agencies about the risk inherent in the entity's
activities that are not part of the calculated ratios. At December 31, 2004 and
2003, the Bank is categorized as well capitalized.

Liquidity

The primary sources of funds from operations are principal and interest payments
on loans, deposits from customers, and sales and maturities of investment
securities. Fidelity's entire investment portfolio is classified as "available
for sale" and totaled $65.2 million at December 31, 2004 and is available assist
in liquidity management. In addition, United is authorized to borrow money from
the Federal Home Loan Bank or draw on $12.4 million secured lines of credit with
other financial institutions. At December 31, 2004, United's gross borrowing
capacity is $75.0 million with the Federal Home Loan Bank with approximately
$6.9 million available to draw upon based on current assets pledged.

Fidelity has $500,000 available on a line of credit with another financial
institution and can draw on this line until the expiration in November 2005.
Fidelity's liquidity position may be further improved by the potential issuance
of additional stock, additional trust preferred or debt financing, or dividends
from United to Fidelity.

Subsequent to year end, United obtained a $10.0 million secured line of credit
and an additional $9.8 million in unsecured lines of credit with other financial
institutions. These additional lines plus the above liquidity alternatives will
assist Fidelity in meeting the future liquidity needs and growth.

Contractual Obligations and Commitments

The company 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 originate loans, standby letters of
credit and unadvanced loans and lines of credit.

                                       15
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

The instruments involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the balance sheets. The contract amounts of these
instruments reflect the extent of involvement the company has in the particular
classes of financial instruments.

The following table summarizes the contractual obligations including interest
and commitments at December 31, 2004.
<TABLE>
<CAPTION>
                                                                 Payments Due by Period
                                                        Less than         2 - 3          4 - 5        After 5
($ in thousands)                          Total           1 Year          Years          Years         Years
------------------------------------   ------------    -------------    -----------     ---------    ----------
<S>                                      <C>              <C>            <C>              <C>        <C>
Contractual Cash Obligations:
   FHLB advances                         $45,689          $28,862         $11,558         $5,269
   Junior Subordinate notes               11,398              308             616          1,310      $9,164
   Senior Subordinate notes                3,271              213             426          2,632
   Other borrowings                        7,464              146             292            292       6,734
                                       ------------    -------------    -----------     ---------    ----------
     Total contractual obligations       $67,822          $29,529        $ 12,892         $9,503     $15,898
                                       ============    =============    ===========     =========    ==========


                                                                 Payments Due by Period
Other commitments:                                      Less than         2 - 3          4 - 5        After 5
                                          Total           1 Year          Years          Years         Years
                                       ------------    -------------    -----------     ---------    ----------
   Unadvanced loans and lines             $11,272          $4,309                                     $6,963
   Standby letters of credit               22,724          22,724                          -             -
   Commitments to originate loans           6,678           6,678           -              -             -
   Commitments to sell loans                  413             413           -              -             -
                                       ------------    -------------    -----------     ---------    ----------
     Total commitments                    $41,087         $34,124           $0             $0         $6,963
                                       ============    =============    ===========     =========    ==========
</TABLE>

For additional information regarding Contractual Obligations and Commitments,
see note, "Commitments and Contingent Liabilities", to the consolidated
financial statements.

Effect of Inflation and Changing Prices.

Fidelity's Consolidated Financial Statements and related financial data
presented have been prepared in accordance with accounting principles generally
accepted in the United States of America, which require the measurement of
financial position and operating results in terms of historical dollars, without
considering the change in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of
Fidelity's operations and in increased loan amounts and in increased interest
rates (which must include a real rate of return and an additional amount to
reflect expected inflation over the term of the loan). Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have a
more significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

                                       16
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Off-Balance Sheet Arrangements

In the normal course of business, to meet the financing needs of its customers,
Fidelity is a party to financial instruments with off-balance sheet risk. These
financial instruments include commitments to extend credit and standby letters
of credit. Fidelity's exposure to credit loss in the event of nonperformance by
the other party to these financial instruments is represented by the contractual
amount of the instruments. Fidelity uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. Fidelity generally requires collateral or other security to support
the financial instruments with credit risk. The amount of collateral or other
security is determined based on management's credit evaluation of the
counterparty. Fidelity evaluates each customer's creditworthiness on a
case-by-case basis.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Letters of
credit are conditional commitments issued by Fidelity to guarantee the
performance of a customer to a third party. Letters of credit and other
commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the letters of credit and
commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. For
further information about these arrangements, see Commitments and Contingent
Liabilities of the Notes to Consolidated Financial Statements included elsewhere
in this report.

Application of Critical Accounting Policies

Fidelity's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America and reporting
practices followed within the banking industry. The application of these
principles requires management to make estimates, assumptions, and judgments
that affect the amounts reported in the financial statements and accompanying
notes. These estimates, assumptions, and judgments are based on information
available as of the date of the financial statements; as this information
changes, the financial statements could reflect different estimates,
assumptions, and judgments.

Reserve for Credit Losses: Fidelity maintains a range of reserve estimates to
absorb probable loan losses inherent in the portfolio. The reserve for credit
losses is maintained between a minimum and maximum level Fidelity considers to
be adequate to absorb probable loan losses inherent in the portfolio and is
based on ongoing quarterly assessments and evaluations of the collectibility and
historical loss experience of loans. Credit losses are charged and recoveries
are credited to the reserve. Provisions for credit losses are based on
Fidelity's review of the historical credit loss experience and such factors
that, in management's judgment, deserve consideration under existing economic
conditions in estimating probable credit losses. In determining the appropriate
range of reserves, Fidelity estimates losses using a range derived from "base"
and "conservative" estimates. Fidelity's methodology for assessing the
appropriate reserve range levels consists of several key elements, as discussed
below. Fidelity's strategy for credit risk management includes a combination of
conservative exposure limits significantly below legal lending limits, and
conservative underwriting, documentation and collection standards. The strategy
also emphasizes diversification on a geographic, industry and customer level,
regular credit examinations and quarterly management reviews of large credit
exposures and loans experiencing deterioration of credit quality.

Larger commercial loans that exhibit probable or observed credit weaknesses are
subject to individual review. Where appropriate, reserves are allocated to
individual loans based on management's estimate of the borrower's ability to
repay the loan given the availability of collateral, other sources of cask flow
and legal options available to Fidelity. Included in the review of individual
loans are those that are impaired as provided in SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." Any reserves for impaired loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or fair value of the underlying collateral.
Fidelity evaluates the collectibility of both principal and interest when
assessing the need for a loss accrual. Historical loss rates are applied to
other commercial loans not subject to specific reserve allocations.

                                       17
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                    Management's Discussion and Analysis
                of Results of Operations and Financial Condition


Homogenous loans, such as consumer installment, residential mortgage loans, and
automobile leases are not individually risk graded. Rather, standard credit
scoring systems and delinquency monitoring are used to assess credit risks. A
minimum and maximum range of reserves are established for each pool of loans
based on the expected net charge-offs for one year. Loss rates are based on the
average net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for
significant factors that, in management's judgment, reflect the impact of any
current conditions on loss recognition. Factors that management consider in the
analysis include the effects of the national and local economies, trends in the
nature and volume of loans (delinquencies, charge-offs and nonaccrual loans),
changes in mix, credit score migration comparisons, asset quality trends, risk
management and loan administration, changes in the internal lending policies and
credit standards, collection practices and examination results from bank
regulatory agencies and Fidelity's external credit examiners.

An unallocated reserve range of estimates is maintained to recognize the
imprecision in estimating and measuring loss when evaluating reserves for
individual loans or pools of loans. Reserves on individual loans and historical
loss rates are reviewed quarterly and adjusted as necessary based on changing
borrower and/or collateral conditions and actual collection and charge-off
experience.

Fidelity, has not substantively changed any aspect of its overall approach in
the determination of the reserve for loan and lease losses. There have been no
material changes in assumptions or estimation techniques as compared to prior
periods that impacted the determination of the current year reserve for loan
losses.

Based on the procedures discussed above, management is of the opinion that the
reserve of $756,000 was adequate, but not excessive, to absorb estimated credit
losses associated with the loan portfolio at December 31, 2004.

Valuation of Servicing Rights: When Fidelity sells loans through either
securitizations or Freddie Mac, it may retain one or more subordinated tranches,
servicing rights, interest-only strips, credit recourse, other residual
interests, all of which are considered retained interests in the securitized or
sold loans. Gain or loss on sale or securitization of the loans depends in part
on the previous carrying amount of the financial assets sold or securitized,
allocated between the assets sold and the retained interests based on their
relative fair value at the date of sale or securitization. To obtain fair
values, quoted market prices are used if available. If quotes are not available
for retained interests, Fidelity calculates fair value based on the present
value of future expected cash flows using both management's best estimates and
third-party data sources for the key assumptions - credit losses, prepayment
speeds, forward yield curves and discount rates commensurate with the risks
involved. Gain or loss on sale or securitization of loans is reported as a
component of other operating income in the Consolidated Statements of Income.
Retained interests from securitized or sold loans, excluding servicing rights,
are carried at fair value. Adjustments to fair value for retained interests are
included in other operating income in the Consolidated Statements of Income if
the fair value has declined below the carrying amount and such decline has been
determined to be other-than-temporary. See "Automobile Loan Securitization" in
the footnotes to the consolidated financial statements for projected adverse
changes in assumptions and the impact on the fair value.


                                       18
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Servicing rights resulting from loan sales are amortized in proportion to and
over the period of estimated net servicing revenues. Servicing rights are
assessed for impairment quarterly, based on fair value, with temporary
impairment recognized through a valuation allowance and permanent impairment
recognized through a write-off of the servicing asset and related valuation
reserve. Key economic assumptions used in measuring any potential impairment of
the servicing rights include the prepayment speed of the underlying loans, the
weighted-average life of the loan, the discount rate and the weighted-average
default rate, as applicable. The primary risk of material changes to the value
of the servicing rights resides in the potential volatility in the economic
assumptions used, particularly the prepayment speed. Fidelity monitors this risk
and adjusts its valuation allowance as necessary to adequately reserve for any
probable impairment in the portfolio. For purposes of measuring impairment, the
mortgage servicing rights are stratified based on financial asset type and
interest rates. Fees received for servicing loans owned by investors are based
on a percentage of the outstanding monthly principal balance of such loans and
are included in operating income as loan payment are included in operating
income as loan payments are received. Costs of servicing loans are charged to
expense as incurred. See "Loan Servicing" in the footnotes to the consolidated
financial statements.

Income Taxes: Fidelity accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amount of existing assets and liabilities and their
respective tax bases. Such differences can relate to differences in accounting
for credit losses, deprecation timing differences, unrealized gains and losses
on investment securities, deferred compensation and leases, which are treated as
operating leases for tax purposes and loans for financial statement purposes.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

The determination of current and deferred income taxes is based on complex
analyses of many factors including interpretation of Federal and state income
tax laws, the difference between tax and financial reporting basis of assets and
liabilities (temporary differences), estimates of amounts due or owed, the
timing of reversals of temporary differences and current financial accounting
interpretations used in determining the current and deferred income tax
liabilities.

Fidelity has a net deferred tax asset of $6.2 million at December 31, 2004. The
realization of the recorded deferred tax assets ultimately resets upon
Fidelity's ability to generate taxable income to utilize the net operating loss
carryforwards and low income housing tax credits that make up the majority of
the recorded deferred tax asset. To determine that it is more likely than not
that these carryforwards and tax credits will be utilized prior to their
expiration, management utilizes a model that projects the utilization of the
carryforwards and credits based upon the estimated future taxable income of
Fidelity. The most significant assumption used in the model is pre-tax income
estimated by management.

Consideration of the need for a valuation allowance for the deferred tax asset
was made at December 31, 2004 after projecting the reversal of the deferred
items. These analyses were based on projected operating income in future years,
action plans developed and partially implemented included in Fidelity's business
plan and cost reductions. These analyses showed that not all carryforwards would
be utilized within the carryforward periods (federal and state) and a valuation
allowance would be necessary. The analyses assume that Fidelity will execute
approximately 50% of the initiatives included within its current business plan
and then achieve 10% growth in annual earnings thereafter. The conservative
level of earnings contemplated by these analyses, if achieved, will constitute
for the majority of the carryforward periods, earnings levels that are below
other thrift holding companies included within Fidelity's peer group. Due to
capital gains generated as a result of the sale of two Company subsidiaries, and
a level of projected profitability for 2002 being less than originally
anticipated, Fidelity established a valuation allowance of $600,000 until such
time that Fidelity meets its future period profitability forecasts. Fidelity has
set forth reasonable plans, and exceeded its 2004 and 2003 strategic plan
indicating that future period profitability will increase and be more in line
with its recently approved strategic plan, the ultimate outcome of this
uncertainty on net income or earnings per share, if any, is unknown.


                                       19
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Additional details on Fidelity's deferred tax asset and model assumption may be
found under the heading "Income Tax" in the notes to the consolidated financial
statements and under the heading "Income Tax Expense (Benefit)" in the
Management Discussion and Analysis.

Additional accounting policies followed by Fidelity and United are presented in
Note 1 to the financial statements. These policies, along with the disclosures
presented in the other financial statement notes and in this financial review,
provide information on how significant assets and liabilities are valued in the
financial statements and how those values are determined.

New Accounting Pronouncements

In December, 2004, the Financial Accounting Standards Board (FASB) issued an
amendment to SFAS 123 Accounting for Stock-Based Compensation (SFAS 123R) which
eliminates the ability to account for share-based compensation transactions
using Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and generally requires that such transactions be accounted for using
a fair value-based method. SFAS 123R will be effective for the Company beginning
January 1, 2006. SFAS123R applies to all awards granted after the required
effective date and to awards modified, repurchased, or cancelled after that date
as well as for the unvested portion of awards existing as of the effective date.

As of the required effective date, the Company will apply SFAS 123R using a
modified version of prospective application. Under that transition method,
compensation cost is recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service has not yet been
rendered, based on the grant-date fair value of those awards calculated under
SFAS 123 for pro forma disclosures. For periods before the required effective
date, a company may elect to apply a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis consistent with the pro forma disclosures required for those periods by
SFAS 123.

Based on the awards outstanding at December 31, 2004, management has estimated
that approximately $12,000 of compensation expense related to those awards will
be recognized during the year ended December 31, 2006.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation
of Variable Interest Entities." This Interpretation clarifies the application of
ARB No. 51, "Consolidated Financial Statements," for certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated support from other parties. This
Interpretation requires variable interest entities (VIE's) to be consolidated by
the primary beneficiary which represents the enterprise that will absorb the
majority of the VIE's expected losses if they occur, receive a majority of the
VIE's residual returns if they occur, or both. Qualifying Special Purpose
Entities (QSPE) are exempt from the consolidation requirements of FIN 46. This
Interpretation was effective for VIE's created after January 31, 2003 and for
VIE's in which an enterprise obtains an interest after that date. In December
2003, the FASB issued Staff Interpretation No. 46R (FIN 46R), "Consolidation of
Variable Interest Entities - an interpretation of ARB 51 (revised December
2003)," which replaces FIN 46. FIN 46R was primarily issued to clarify the
required accounting for interests in VIE's. Additionally, this Interpretation
exempts certain entities from its requirements and provides for special
effective dates for enterprises that have fully or partially applied FIN 46 as
of December 24, 2003. Application of FIN 46R is required in financial statements
of public enterprises that have interests in structures that are commonly
referred to as special-purpose entities, or SPE's, for periods ending after
December 15, 2003. Application by public enterprises, other than small business
issuers, for all other types of VIE's (i.e., non-SPE's) is required in financial
statements for periods ending after March 15, 2004, with earIier adoption
permitted. Adoption of this Interpretation did not have a material effect on
Fidelity's Consolidated Financial Statements.


                                       20
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Asset/Liability Management

Fidelity is subject to interest rate risk to the degree that its
interest-bearing liabilities, primarily deposits with short and medium term
maturities, mature or reprice at different rates than its interest-earning
assets. Although having liabilities that mature or reprice less frequently than
average assets will be beneficial in times of rising interest rates, such an
asset/liability structure will result in lower net income during periods of
declining interest rates such as those experienced in 2003 and 2002, unless
offset by other factors. Balance sheet growth and rising rates attributed to
higher net interest income in 2004.

The OTS utilizes a model, the "Office of Thrift Supervision Net Portfolio Value"
("NPV") model, which uses a net market value methodology to measure the interest
rate risk exposure of savings associations. Under this model, an institution's
"normal" level of interest rate risk in the event of an assumed change in
interest rates is a decrease in the institution's NPV in an amount not exceeding
2% of the present value of its assets. Savings associations with over $300
million in assets or less than a 12% risk-based capital ratio are required to
file OTS Schedule CMR. Data from Schedule CMR is used by the OTS to calculate
changes in NPV (and the related "normal" level of interest rate risk) based upon
certain interest rate changes (discussed below). Associations which do not meet
either of the filing requirements are not required to file OTS Schedule CMR, but
may do so voluntarily. United is not required to file a CMR since it exceeds the
risk-based capital requirement and its assets are less than $300 million, but
does so on a voluntary basis.

Presented below, at December 31, 2004 and December 31, 2003, is an analysis
performed by the OTS of United's interest ate risk as measured by changes in NPV
for instantaneous and sustained parallel shifts in the yield curve, in 100 basis
point increments, up 300 basis points and down 100 basis points. During the
fourth quarter of 2004, the yield on the three month Treasury bill was below
2.00% and the information would not be meaningful. As a result, the NPV model
did not produce results for the minus 200 or 300 basis points scenarios for the
quarter ending December 31, 2004. The decrease in interest rate risk from
December 31, 2003 to December 31, 2004 is due to interest rate changes and a
change in United's balance sheet mix.

                        Interest Rate Risk as of December 31, 2004
<TABLE>
<CAPTION>
                                                                        NPV as Percent of Present
                                  Net Portfolio Value                        Value of Assets
                   --------------------------------------------------------------------------------
       Change          Dollar           Dollar          Percentage
      in Rates         Amount           Change            Change      NPV Ratio             Change
---------------------------------------------------------------------------------------------------
<S>     <C>              <C>             <C>               <C>          <C>                <C>
        + 200 bp         18,172          (3,782)           (17)          9.30              - 157 bp
        - 100 bp         22,668             714              3          11.11                 24 bp

                        Interest Rate Risk as of December 31, 2003

                                                                        NPV as Percent of Present
                                  Net Portfolio Value                        Value of Assets
                   --------------------------------------------------------------------------------
       Change          Dollar           Dollar          Percentage
      in Rates         Amount           Change            Change      NPV Ratio             Change
---------------------------------------------------------------------------------------------------

        + 200 bp         12,006          (4,151)           (26)          7.10              - 214 bp
        - 100 bp         17,114             958              6           9.68                 44 bp
</TABLE>

                                       21
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

As with any method of measuring interest rate risk, certain shortcomings are
inherent in the methods of analysis presented above. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market rates. Also,
the interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Additionally, certain assets, such as
adjustable-rate loans, have features, which restrict changes in interest rates
on a short-term basis and over the life of the assets. Further, in the event of
a change in interest rates, expected rates of prepayments on loans and early
withdrawals from certificates could likely deviate significantly from those
assumptions used in calculating the table.

Results of Operations

General

Fidelity recorded net income of $472,000 for the year ended December 31, 2004,
an increase in net income of $258,000 over the previous year. Net interest
income increased $1.7 million and the provision for loan losses increased
$448,000. Noninterest income decreased $1.4 million while non-interest expense
decreased $574,000.

Overview

         Income

Fidelity generates two sources of pre-tax income. The first is net interest
income. Net interest income is the difference between interest income - which is
the income that Fidelity earns on its loans and investments - and interest
expense - which is the interest that Fidelity pays on its deposits and
borrowings.

Fidelity's second source of pre-tax income is noninterest income. This includes
fee income - the compensation we receive from providing products and services -
and gains on sales of loans. Most of Fidelity's fee income comes from loan
sales, letter of credit fees, service charges and overdraft fees.

Fidelity may occasionally recognize a gain or loss as a result of the sale of
investment securities or foreclosed real estate. These gains and losses are not
a regular part of Fidelity's income.

         Expenses

The expenses Fidelity incurs in operating its business consist of salaries and
employee benefits, occupancy and equipment expenses, deposit insurance premiums,
data processing fees and other miscellaneous expenses.

Salaries and employee benefits consist primarily of the salaries and wages paid
to our employees, as well as expenses for retirement and other employee
benefits.

Occupancy and equipment expenses, the fixed and variable costs of building and
equipment, consist primarily of depreciation of property and equipment, real
estate taxes, maintenance and insurance.

Deposit insurance premiums are calculated as a percentage of assessable
deposits.

Data processing fees depend on the number of accounts and transaction volume.

Other expenses consist of professional fees, advertising and promotions,
printing, supplies, postage and other miscellaneous operating expenses.

                                       22
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition



In addition to operating expenses noted above, Fidelity also occasionally
recognizes expense that is not anticipated by management to be recurring. Such
expenses that occurred in 2002 were changes in estimated useful lives of
intangible assets, prepayment fees on FHLB advances, start up costs associated
with United's first securitization transaction and other expenses incurred in
connection with the sale of two of its subsidiaries.

Net Interest Income

Net interest income, Fidelity's largest component of income, represents the
difference between interest and fees earned on loans, investments and other
interest-earning assets, and interest paid on interest-bearing liabilities. It
also measures how effectively management has balanced and allocated Fidelity's
interest rate-sensitive assets and liabilities. In addition, certain external
factors such as the overall condition of the economy, credit demand strength,
Federal Reserve Board monetary policy, changes in tax laws, and the Supervisory
Agreement that United currently operates under can also have significant effects
on changes in net interest income from one period to another.

The net interest margin is determined by dividing net interest income by average
interest earning assets. The net interest spread is the difference between the
average yield earned on interest earning assets and the average rate paid on
interest-bearing liabilities.

The following table details average balances, interest income/expense and
average rates/yield for Fidelity's earning assets and interest bearing
liabilities for the years ended December 31, 2004, 2003 and 2002.


                                       23
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]
<TABLE>
<CAPTION>
                                         Average Balance Sheet and Net Interest Analysis
                                   (Dollars In Thousands on Fully Taxable Equivalent Basis)

                                    December 2004                   December 2003                   December 2002
                            ------------------------------------------------------------------------------------------------
                             Average              Average    Average              Average    Average             Average
Year Ended:                 Balances   Interest    Rates    Balances   Interest    Rates    Balances   Interest    Rates
----------------------------------------------------------------------------------------------------------------------------
<S>                         <C>        <C>         <C>      <C>        <C>         <C>     <C>         <C>          <C>
Assets
   Federal funds sold and
     other short-term
     investments            $  1,031   $     14    1.36%    $  3,542   $     47    1.33%   $   6,371   $    114     1.79%
   Investment securities
     available for
     sale-taxable             61,871      2,089    3.38       41,658      1,421    3.41       32,191      1,427     4.43
   Loans held for sale         2,769        171    6.18          572         39    6.82        2,016        137     6.80
   Federal Home Loan Bank
     Stock                     3,553        155    4.36        2,755        141    5.12        2,634        160     6.07
   Loans (1) (2)
     Commercial loans          4,157        229    5.51        2,478        130    5.25        2,223        133     5.98
     Multi-family loans       14,802        929    6.28        9,097        592    6.51        8,733        799     9.15
     Home equity loans         5,490        259    4.72        4,795        224    4.67        4,563        245     5.37
     Real estate mortgages    41,192      2,170    5.27       39,553      2,266    5.73       40,700      2,852     7.01
     Consumer loans           43,409      2,467    5.68       26,630      1,790    6.72       38,602      3,167     8.20
                           ----------------------------------------------------------------------------------------------
       Total loans           109,050      6,054    5.55       82,553      5,002    6.06       94,821      7,196     7.59
                           ----------------------------------------------------------------------------------------------
       Total earning assets  178,274      8,483    4.76      131,080      6,650    5.07      138,033      9,034     6.54
                                       ----------------               -----------------               -------------------
   Allowance for loan losses    (751)                           (775)                         (1,135)
   Cash and due from banks     2,028                           2,191                           2,435
   Premises and equipment      4,565                           4,774                           5,810
   Other assets               11,839                          12,307                          14,482
                           -----------                     -----------                     -----------

       Total assets         $195,955                        $149,577                        $159,625
                           ===========                     ===========                     ===========

Liabilities
   Interest-bearing
     deposits
     Interest-bearing
       checking             $ 12,998    $    40    0.31     $ 13,792    $    67    0.49     $ 12,720    $   115     0.90
     Money market accounts     7,521         55    0.73        6,743         58    0.86        9,664        137     1.42
     Savings accounts          5,791         29    0.50        5,470         34    0.62        4,958         37     0.75
     Certificates of deposit  94,549      2,414    2.55       80,319      2,727    3.40       86,779      4,096     4.72
                           --------------------            --------------------            --------------------
       Total interest-bearing
          deposits           120,859      2,538    2.10      106,324      2,886    2.71      114,121      4,385     3.84
   Federal funds purchased     5,148         87    1.69                                          156          3     1.92
   Other borrowings            7,624        532    6.98        7,611        659    8.66       11,842      1,096     9.26
   Federal Home Loan Bank
       advances               37,650        847    2.25       15,172        282    1.86       13,561        538     3.97
                           --------------------            --------------------            --------------------
       Total
         interest-bearing
           liabilities       171,281      4,004    2.34      129,107      3,827    2.96      139,680      6,022     4.31
                                        -------                         -------                         -------
   Non-interest bearing
     demand deposits           7,379                           5,564                           4,964
   Advances by borrowers
     for taxes and
      insurance                  261                             285                             309
   Other liabilities           1,760                           1,953                           2,736
                           ----------                      ----------                      ----------
     Total liabilities       180,681                         136,909                         147,689

Stockholders' Equity          15,274                          12,668                          11,936
                           ----------                      ----------                      ----------

   Total liabilities and
      stockholders' equity  $195,955                        $149,577                        $159,625
                           ==========                      ==========                      ==========
   Recap: (3)
       Interest income                    8,483    4.76                   6,650    5.07                   9,034     6.54%
       Interest expense                   4,004    2.25                   3,827    2.92                   6,022     4.36
                                        -----------------               -----------------               ------------------
       Net interest
          Income/margin                  $4,479    2.51%                 $2,823    2.15%                 $3,012     2.18%
                                        =================               =================               ==================
Interest rate spread                               2.42%                           2.11%                            2.23%
Average interest-bearing
   assets to average
    interest-bearing
     liabilities                                 104.08%                         101.53%                           98.82%
</TABLE>
----------------------------
(1)  Nonaccrual loans have been included in the average balances.
(2)  Loan income includes interest and fees on loans.
(3)  Interest rate spread is calculated by subtracting combined weighted average
     interest rate cost from combined weighted average interest rate earned for
     the period indicated.

                                       24
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Net interest income increased $1.7 million for the year ended December 31, 2004,
compared to December 31, 2003. The net interest margin increased from 2.15% at
December 31, 2003 to 2.51% at December 31, 2004. Lower interest rates and an
increase in earning assets in 2004 impacted the margin positively by
approximately $111,000 and $1.5 million, respectively, resulting in a net
increase of $1.7 million.

     o    Consumer loan interest income increased $1.1 million in 2004 due to an
          increase in average loans but was partially offset by $451,000
          decrease in rate. The yield on consumer loans decreased from 6.72% at
          December 31, 2003 to 5.68% due to lower rates.

     o    The yield on average mortgage loans decreased from 5.73% to 5.27%
          during 2004 due to refinancing activity in the portfolio and growth of
          the adjustable-rate mortgage (ARM) portfolio, which carried a lower
          yield in 2004. This resulted in a $96,000 decrease in mortgage loan
          interest income, of which $190,000 was due to lower rates in 2004, but
          partially offset by a $94,000 increase due to higher outstandings.

     o    Commercial and multifamily loans interest income increased $436,000
          from the prior year primarily due the increase in average loans of
          $7.4 million.

     o    Average investment securities increased $20.2 million during 2004
          which attributed to additional interest income of $689,000. However
          this interest income was slightly offset by a decrease in the yield on
          the investment portfolio resulting in a $21,000 decrease in interest
          income. A lower interest rate environment contributed to a lower
          reinvestment yield in 2003 and early 2004.

Interest expense increased $177,000 at December 31, 2004 when compared to
December 31, 2003. Average interest-bearing liabilities increased $42.2 million
from December 31, 2003 to $171.3 million at December 31, 2004. This increase
accounted for $907,000 of increase in interest expense. The primary factors
affecting the increase of interest expense were:

     o    Average certificates of deposit increased $14.2 million and the
          corresponding interest expense associated with the volume change
          increased $483,000.
     o    Average other borrowings and Federal Home Loan Bank advances increased
          $22.5 million during 2004 which accounted for $418,000 of the increase
          in other borrowings interest expense.

The yield on interest bearing liabilities decreased from 2.96% in 2003 to 2.34%
in 2004. The change in rate accounted for $730,000 decrease in interest expense.
Other factors in the decrease of interest due to the yield on interest-bearing
liabilities were:

     o    The average rate on certificates of deposit decreased from 3.40% at
          December 31, 2003 to 2.55% at December 31, 2004. This decrease
          accounted for $796,000 of the decrease in interest expense.

     o    The average yield on FHLB advances increased from 1.86% to 2.25% in
          2004 due to repricing in a higher interest rate environment. This
          increase in yield accounted for approximately $147,000 increase in
          interest expense.

Net interest income decreased $189,000 for the year ended December 31, 2003,
compared to December 31, 2002. The net interest margin decreased slightly from
2.18% at December 31, 2002 to 2.15% at December 31, 2003. Lower interest rates
in 2003 impacted the margin negatively by approximately $199,000, while the
change in volume during 2003 impacted the margin favorably by approximately
$10,000, resulting in a net decrease of $189,000.

                                       25
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

United completed a $49.5 consumer loan securitization transaction at the end of
the fourth quarter of 2002. The elimination of these higher earning assets and
replacement with lower earning assets in 2003 negatively impacted interest
income on a year-to-year comparison. Consumer loan interest income decreased
$982,000 due to the decrease in average loans and an additional $395,000 due to
a decrease in the overall yield on the consumer loan portfolio. The yield on
consumer loans decreased from 8.20% at December 31, 2002 to 6.72% due to the
completion of the securitization transaction and replacement of the sold loans
with other loans at lower rates.

The yield on average mortgage loans decreased from 7.01% to 5.73% during 2003
due to refinancing activity in the portfolio and growth of the adjustable-rate
mortgage (ARM) portfolio, which carried a lower yield in 2003. This resulted in
a $586,000 decrease in mortgage loan interest income, of which $506,000 was due
to lower rates in 2003.

During 2003, the Company sold $2.6 million in classified multifamily loans
bearing an interest rate that was higher than market. These loans were
effectively replaced with higher-quality, but lower yielding commercial real
estate loans, resulting in a decrease in interest income of $207,000 from 2002.

Average investment securities increased $9.5 million during 2003 which
attributed to additional interest income of $420,000. However this interest
income was offset by a decrease in the yield on the investment portfolio
resulting in a $426,000 decrease in interest income. Sales and increased
prepayment speeds on United's mortgage-backed portfolio and a lower interest
rate environment contributed to a lower reinvestment yield in 2003.

Interest expense decreased $2.2 million at December 31, 2003 when compared to
December 31, 2002. Average interest-bearing liabilities decreased $10.6 million
from December 31, 2002 to $129.1 million at December 31, 2003. This decrease
accounted for $663,000 of the $2.2 million decrease in interest expense. Other
factors in the decrease of interest expense were:

     o    Average certificates of deposit decreased $6.5 million and the
          corresponding interest expense associated with the volume change
          decreased $305,000.
     o    Average other borrowings decreased $4.2 million during 2003 which
          accounted for $392,000 of the $437,000 decrease in other borrowings
          interest expense.

The yield on interest bearing liabilities decreased from 4.31% in 2002 to 2.96%
in 2003. The change in rate accounted for $1.5 million of the $2.2 million
decrease in interest expense. Other factors in the decrease of interest due to
the yield on interest-bearing liabilities were:

     o    The average rate on certificates of deposit decreased from 4.72% at
          December 31, 2002 to 3.40% at December 31, 2003. This decrease
          accounted for $1.1 million of the decrease in interest expense.

     o    The average yield on FHLB advances decreased from 3.97% to 1.86% in
          2003 due to repricing opportunities in a lower interest rate
          environment and the prepayment of higher interest bearing advances in
          2002. This decrease in yield accounted for approximately $320,000
          reduction in interest expense.

                                       26
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Rate/Volume Analysis

The following table sets forth an analysis of volume and rate changes in
interest income and interest expense of Fidelity's average earning assets and
average interest-bearing liabilities. The table distinguishes between the
changes related to average outstanding balances of assets and liabilities
(changes in volume holding the initial interest rate constant) and the changes
related to average interest rates (changes in average rate holding the initial
outstanding balance constant). The change in interest due to both volume and
rate has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
                                                       December 31, 2004                      December 31, 2003
                                                 Compared to December 31, 2003          Compared to December 31, 2002
                                                  Increase (Decrease) Due To              Increase (Decrease) Due To
                                           ----------------------------------------------------------------------------

                                                Volume         Rate        Total       Volume       Rate        Total
-----------------------------------------------------------------------------------------------------------------------
                                                                       (Dollars In Thousands)
<S>                                             <C>           <C>         <C>            <C>     <C>          <C>
Interest income on average earning assets:
   Loans                                        $1,605        $(553)      $1,052         $(931)  $(1,263)     $(2,194)
   Investment securities                           689          (21)         668           420      (426)          (6)
   Loans held for sale                             150          (18)         132           (98)        -          (98)
   Federal Home Loan Bank stock                     41          (27)          14             7       (26)         (19)
   Federal funds sold and other  short-term
     investments                                   (33)           -          (33)          (51)      (16)         (67)
                                            ---------------------------------------------------------------------------
       Total interest income                     2,452         (619)       1,833          (653)   (1,731)      (2,384)
                                            ---------------------------------------------------------------------------

Interest expense on average interest-bearing
     liabilities:
   Now accounts                                     (4)         (23)         (27)           10       (58)         (48)
   Money market deposit accounts                     7          (10)          (3)          (41)      (38)         (79)
   Savings accounts                                  2           (7)          (5)            4        (7)          (3)
   Certificates of deposit                         483         (796)        (313)         (305)   (1,064)      (1,369)
   Federal funds purchased                           -           87           87            (3)        -           (3)
   Other borrowings                                  1         (128)        (127)         (392)      (45)        (437)
   Federal Home Loan Bank advances                 418          147          565            64      (320)        (256)
                                            ---------------------------------------------------------------------------
       Total interest expense                      907         (730)         177          (663)   (1,532)      (2,195)
                                            ---------------------------------------------------------------------------

Changes in net interest income                  $1,545        $ 111       $1,656         $  10   $  (199)     $  (189)
                                            ===========================================================================
</TABLE>

Provision for Loan Losses and Letter of Credit Reserves

Fidelity makes provisions for loan losses in amounts estimated to be sufficient
to maintain the allowance for loan losses at a level considered necessary by
management to absorb losses in the loan portfolios. Specific reserves are
assigned to certain credits. The reserves are determined by management's
evaluation of those credits, which include evaluations of borrower's ability to
repay outstanding debt, as well as the value of supporting collateral. The
results of internal loan reviews, previous regulatory reviews, and past events
assist Fidelity in making that evaluation. The independent support for the
allowance for loan losses and letter of credit valuation reserve includes
documentation that supports the amount of recorded reserves for these credits.

                                       27
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

General reserves for loans and letters of credit not specifically reserved are
also determined. Fidelity computes general reserves for the commercial,
commercial mortgage, residential mortgage and consumer loan portfolios by
utilizing historical information and information currently available about the
loans within those portfolios that provides information as to the likelihood of
loss. The potential effect of current economic conditions is also considered
with respect to establishing general reserve amounts.

The provision for loan losses for the year ended December 31, 2003 was $448,000
compared to $13,000 for the year ended December 2003, an increase of $435,000.
The increase was due to growth in United's loan portfolio.

During 2002, Fidelity completed a securitization of automobile loans in addition
to a loan sale which resulted in a net reversal of the provision for loan losses
of $360,000.

The ratio of allowance for loan losses to non-performing loans was 44.4% at
December 31, 2004 compared to 49.3% at December 31, 2003. The primary reason for
the increase in non-performing loans was due to one residential real estate loan
totaling $451,000. This credit was paid off in full in the first quarter of
2004. The largest remaining non-accrual loan has a balance of $170,000 and is a
purchased participation. Management believes that the reserves for the loan are
adequate at December 31, 2004.

Non-Interest Income

Non-interest income for the year ended December 31, 2004 decreased by $1.4
million or 35.7% compared to December 31, 2003.

Net gains on the sale of loans decreased $415,000 from the prior year due
primarily to a decrease in the amount of mortgage loans sold. Fidelity recorded
a $353,000 in gains on sales of available for sale securities in 2003 compared
to $47,000 in 2004. During 2002, Fidelity liquidated a $500,000 senior note for
$360,000 and recorded a gain of $140,000. A gain of $359,000 was recognized on
the sale of three foreclosed properties during 2003, or substantially all of the
real estate owned portfolio compared to zero in 2004. An increase in early
payoffs on automobile loans previously sold resulted in the repayment of dealer
interest totaling $203,000 from auto dealers, compared to $299,000 in 2003.
Income of $118,000 was recognized on the retained interests in securitized
assets compared to $182,000 in 2003.

Non-interest income for the year ended December 31, 2003 increased by $371,000
or 10.6% compared to December 31, 2002.

Net gains on the sale of loans decreased $558,000 from the prior year due
primarily to a decrease in volume of automobile loans sold. Fidelity recorded a
$353,000 in gains on sales of available for sale securities in 2003 compared to
$73,000 in 2002. Declining interest rates and increased prepayment speeds made
it advantageous to sell certain securities in 2003. Servicing fees on loans sold
increased $131,000 over the prior year due to the increased size of the mortgage
and consumer loan servicing portfolios. Gain on sales of assets was $15,000 for
2003 compared to $574,000 in 2002. A non recurring gain of $574,000 was
recognized in the fourth quarter of 2002 in connection with the sale of certain
affordable housing assets to a related party. During 2002, Fidelity liquidated a
$500,000 senior note for $360,000 and recorded a gain of $140,000. A gain of
$359,000 was recognized on the sale of three foreclosed properties during 2003,
or substantially all of the real estate owned portfolio. An increase in early
payoffs on automobile loans previously sold resulted in the repayment of dealer
interest totaling $299,000 from auto dealers, compared to $66,000 in 2002.
Income of $182,000 was recognized on the retained interests in securitized
assets compared to $90,000 in 2002.

                                       28
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Non-Interest Expense

Non-interest expense decreased $574,000 or 8.6% for the year ended December 31,
2004, compared to December 31, 2003.

Salaries and employee benefits decreased $269,000 during 2004 when compared to
2003, due to a reduction in full-time equivalent employees. Data processing
expense increased $76,000 over 2003 due to increased volume of mortgage and
consumer loans serviced when compared to the same period in 2003, in addition to
the introduction of internet banking in 2003. Advertising increased $48,000 over
2003 due to increased product promotions. Printing, postage and office supplies
decreased $69,000 in 2004 due to cost control measures and the termination of
indirect lending late in the third quarter of 2004. Dealer promotional expenses
decreased $63,000 in 2004 due primarily to a decrease in automobile originations
in the current year and the termination of indirect lending. Professional
liability insurance expense decreased $89,000 from the prior year due to market
rate decreases and improvement in bank earnings.

Non-interest expense decreased $3.2 million or 32.6% for the year ended December
31, 2003, compared to December 31, 2002.

Salaries and employee benefits decreased $289,000 during 2003 when compared to
2002, due to a reduction in full-time equivalent employees. Data processing
expense increased $100,000 over 2002 due to increased volume of mortgage and
consumer loans serviced when compared to the same period in 2002, in addition to
the introduction of internet banking in 2003. Legal and professional fees
decreased $48,000 from the prior year due to a decrease in loan workout
activities. Dealer promotional expenses decreased $60,000 in 2003 due primarily
to a decrease in automobile originations in the current year. Professional
liability insurance expense increased $108,000 over the prior year due to market
rate increases.

During 2003, the valuation allowance for letters of credit was reduced by
$170,000 compared to none in 2002 and $1.5 million in 2001 to reflect a
reduction in loss exposure achieved. The $170,000 in 2003 was effectively
reclassified between the letter of credit valuation and allowance for loan
losses offsetting the impact on net income.

Fidelity records its percentage share of losses for its limited partner
investments in various affordable housing partnerships under the equity method
of accounting. These losses were $40,000, $160,000, and $304,000 for 2003, 2002
and 2001, respectively. During the fourth quarter of 2002, Fidelity completed
the sale of a subsidiary that held general partnership interests in seventeen
affordable housing projects. See "Related Party" footnote for additional
details.

Other real estate owned expenses of $247,000 were recognized in 2002 compared to
only $34,000 in 2003 due to a foreclosure on one large commercial real estate
loan in 2002.

Non-recurring expenses were incurred during 2002 for various reasons, the
following non-recurring items are included in non-interest expense: Changes in
the estimated useful lives of intangible assets created additional expense of
$864,000 and are discussed in the "Related Party" footnote. Prepayment fees on
FHLB advances of $504,000 were recognized in 2002 compared to none in 2003 or
2001. United repaid long-term FHLB advances that had substantially higher
interest rates than the current market. The completion of the securitization
transaction created liquidity which was used to payoff these higher interest
bearing liabilities. These higher cost borrowings were replaced with deposits
and borrowings at a much lower rate. This is expected to result in a much lower
overall cost of funds for Fidelity in the future.

                                       29
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Income Tax Expense (Benefit)

Fidelity reported a pretax income of $406,000 compared to the prior year pretax
loss of $6,000. An income tax benefit of $66,000 was recorded on the pretax
income which was primarily generated by the current year tax credits. In 2002,
an income tax benefit of approximately $1.2 million was recorded on the $3.0
million pretax loss but was reduced by additional tax expense resulting from a
capital gain, which reduced the benefit to $641,000. The additional tax expense
was primarily the result of the capital gain for tax purposes on the sale of
Fidelity's subsidiaries and the additional $600,000 tax valuation allowance
established in connection with Fidelity's deferred tax asset. Included in the
tax benefit are tax credits for 2004 and 2003 of $222,000. The 2004 and 2003 tax
credits were received from Fidelity's remaining investment as a limited partner
in affordable housing properties and are a component of the overall return on
these investments.

The assumptions used to help consider the need for a valuation allowance for the
deferred tax asset are subject to certain risks and uncertainties that could
impact the final determination regarding the amount of the valuation allowance.
These risks include the failure to implement the business plan targets for
increased revenues, cost reductions, the potential loss of key employees,
ability to maintain projected interest rate margins, and the potential
disruption of activities in key income-producing areas.

Loss on Discontinued Operations

During the fourth quarter of 2002, Fidelity completed the sale of the assets
connected to their affordable housing activities that began in the mid-1990's to
Pedcor Funding Corporation ("Pedcor"). The assets consisted of the stock of
Village Housing Corporation (a wholly-owned subsidiary of United Fidelity Bank),
the stock of Village Affordable Housing Corporation (a wholly-owned subsidiary
of Fidelity Federal), an interest rate swap, and notes from affordable housing
limited partnerships in which Village Housing Corporation is the general
partner.

The Company determined to pursue the sale of these assets in order to further
focus on its community banking activities. It also determined that the
elimination of the contingent liabilities associated with the ownership of the
affordable housing general partnerships interests would improve its overall risk
profile.

The purchaser, Pedcor Funding Corporation ("Pedcor"), is a company controlled by
Bruce A. Cordingley, Gerald K. Pedigo, and Phillip J. Stoffregen, directors of
Fidelity Federal and members of a group which beneficially owns, including stock
options and warrants at the time of the transaction, approximately 69.9% of
Fidelity Federal's issued and outstanding stock. Because of the relationship
between Pedcor and Fidelity Federal, Messrs. Cordingley, Pedigo, and Stoffregen
did not participate in either the discussion or the vote by the boards of
directors of Fidelity Federal and United Fidelity Bank regarding the sale. The
sale was unanimously approved by all other members of the respective Boards of
Directors of Fidelity Federal and United Fidelity Bank and was completed
following receipt of all necessary regulatory approvals and a fairness opinion.
The fairness opinion was rendered by Crowe Chizek & Co., an independent,
non-affiliated entity which has never performed services for Messrs. Cordingley,
Pedigo, or Stoffregen or any entity they control (other than Fidelity Federal or
United Fidelity Bank), and has not performed services within the last five years
for Fidelity Federal or United Fidelity Bank.

The sale price for the all-cash transaction was approximately $1.7 million, thus
the sale provided the Company with additional liquidity. Because a portion of
the assets sold had been previously eliminated from regulatory capital, the sale
resulted in an increase in the regulatory capital of United Fidelity Bank.
Additional regulatory capital provides the Bank future capacity to increase
earning assets, which could then increase net interest income.

                                       30
<PAGE>

                       [LOGO OF FIDELITY FEDERAL BANCORP]

                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition


Net loss on operations from these subsidiaries totaled $2.0 million of which
$1.5 million was associated with the completion of the sale and $451,000
associated with the income tax expense impact. Net income or loss from prior
years were immaterial and not included as a separate component. See the
"Discontinued Operations" footnote for additional details.

<TABLE>
<CAPTION>
Quarterly Results of Operations                                      (Dollars in  thousands)

                                          March 31          June 30       September 30      December 31         Total
----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>              <C>              <C>              <C>
December 31, 2004
   Interest income                         $ 2,042          $ 2,050          $ 2,189          $ 2,202          $ 8,483
   Interest expense                            982              977              998            1,047            4,004
                                    ----------------------------------------------------------------------------------
     Net interest income                     1,060            1,073            1,191            1,155            4,479
   Provision for loan losses                   170               39              134              105              448
   Non-interest income                         701              659              579              556            2,495
   Non-interest expense                      1,586            1,602            1,523            1,409            6,120
                                    ----------------------------------------------------------------------------------
   Income before income tax                      5               91              113              197              406
   Income tax expense (benefit)                (60)             (19)              (8)              21              (66)
                                    ----------------------------------------------------------------------------------
   Net income                              $    65          $   110          $   121          $   176          $   472
                                    ==================================================================================

   Net income (loss) per share

     Diluted net income                    $  0.01          $  0.01          $  0.01          $  0.02          $  0.04
     Basic net income                         0.01             0.01             0.01             0.02             0.04
     Cash dividends*

December 31, 2003
   Interest income                         $ 1,602          $ 1,596          $ 1,616          $ 1,836          $ 6,650
   Interest expense                          1,158              980              833              856            3,827
                                    ----------------------------------------------------------------------------------
     Net interest income                       444              616              783              980            2,823
   Provision for loan losses                  (104)             (18)              99               36               13
   Non-interest income                       1,218            1,106              914              640            3,878
   Non-interest expense                      1,761            1,658            1,662            1,613            6,694
                                    ----------------------------------------------------------------------------------
   Income (loss) before income tax               5               82              (64)             (29)              (6)
   Income tax benefit                          (50)             (21)             (90)             (59)            (220)
                                    ----------------------------------------------------------------------------------
   Net income                              $    55          $   103          $    26          $    30          $   214
                                    ==================================================================================

     Net income (loss) per share

     Diluted net income                    $  0.10          $  0.13          $  0.03          $  0.04          $  0.29
     Basic net income                         0.10             0.13             0.03             0.04             0.29
     Cash Dividends*
</TABLE>
*No cash dividends were paid for the years ended December 31, 2004 and 2003.

                                       31
<PAGE>

[LOGO OF BKD LLP]

             Report of Independent Registered Public Accounting Firm




Stockholders and Board of Directors
Fidelity Federal Bancorp
Evansville, Indiana


We have audited the accompanying consolidated balance sheets of Fidelity Federal
Bancorp as of December 31, 2004 and 2003, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2004. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 Federal
Bancorp as of December 31, 2004 and 2003, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2004, in conformity with accounting principles generally accepted in the United
States of America.


/s/ BKD LLP

Evansville, Indiana
January 14, 2005

                                       32
<PAGE>

                            FIDELITY FEDERAL BANCORP

                           Consolidated Balance Sheets
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31                                                                        2004         2003
-------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>
Assets
   Cash and cash equivalents                                                    $     989     $   1,705
   Interest-bearing demand deposits                                                 3,633         1,263
                                                                             --------------------------
       Cash and cash equivalents                                                    4,622         2,968
   Investment securities available for sale                                        65,192        52,208
   Loans, net of allowance for loan losses of $756 and $737
     (also includes loans to related parties of $169 and $177                     110,771       100,437
   Premises and equipment                                                           4,646         4,620
   Federal Home Loan Bank of Indianapolis stock                                     3,627         3,466
   Deferred income tax                                                              6,192         6,093
   Foreclosed assets held for sale, net of allowance of $20 and $0                    316
   Interest receivable and other assets                                             5,192         5,598
                                                                             --------------------------

       Total assets                                                             $ 200,558     $ 175,390
                                                                             ==========================

Liabilities
   Deposits
     Non-interest bearing (includes related party deposits
       of $2,179 and $854)                                                      $   8,250     $   6,903
     Interest bearing (including related party time deposits of $364 and $0)      119,451       113,777
                                                                             --------------------------
       Total deposits                                                             127,701       120,680
   Federal Home Loan Bank advances                                                 44,090        31,550
   Borrowings (includes borrowings from a related party
     of $0 and $1,000)                                                             10,460         8,077
   Valuation allowance for letters of credit                                          232           291
   Other liabilities                                                                1,814         1,425
                                                                             --------------------------
       Total liabilities                                                          184,297       162,023
                                                                             --------------------------

Commitments and Contingent Liabilities

Stockholders' Equity
   Preferred stock, no par or stated value
     Authorized and unissued--5,000,000 shares
   Common stock, $12 stated value
     Authorized--1,250,000 shares
     Issued and outstanding--916,656 and 801,555 shares                            11,000         9,619
   Additional paid-in capital                                                      17,727        16,634
   Stock warrants                                                                     261           261
   Accumulated deficit                                                            (12,466)      (12,938)
   Accumulated other comprehensive loss                                              (261)         (209)
                                                                             --------------------------
       Total stockholders' equity                                                  16,261        13,367
                                                                             --------------------------

       Total liabilities and stockholders' equity                               $ 200,558     $ 175,390
                                                                             ==========================
</TABLE>
See notes to consolidated financial statements.

                                       33
<PAGE>

                            FIDELITY FEDERAL BANCORP

                        Consolidated Statements of Income
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Year Ended December 31                                        2004       2003       2002
-----------------------------------------------------------------------------------------
<S>                                                         <C>        <C>        <C>
Interest Income
   Loans receivable                                         $ 6,054    $ 5,002    $ 7,196
   Loans held for sale                                          171         39        137
   Investment securities--taxable                             2,089      1,421      1,427
   Deposits with financial institutions                          14         47        114
   Other dividend income                                        155        141        160
                                                          -------------------------------
         Total interest income                                8,483      6,650      9,034
                                                          -------------------------------

Interest Expense
   Deposits                                                   2,539      2,886      4,385
   Short-term borrowings                                         96         18         64
   Long-term debt                                             1,369        923      1,573
                                                          -------------------------------
         Total interest expense                               4,004      3,827      6,022
                                                          -------------------------------

Net Interest Income                                           4,479      2,823      3,012
   Provision for loan losses                                    448         13       (360)
                                                          -------------------------------

Net Interest Income After Provision for
   Loan Losses                                                4,031      2,810      3,372
                                                          -------------------------------

Other Income
   Service charges on deposit accounts                          457        436        439
   Net gains on loan sales (includes a $223 gain on sale
     to a related party in 2002)                                310        725      1,283
   Net gains on sales of securities available for sale           47        353         73
   Letter of credit fees                                        491        491        501
   Servicing fees on loans sold                                 351        292        161
   Gain on sale of assets                                                   15        574
   Gain on early extinguishment of debt                                               140
   Gain on sale of foreclosed assets                                       359
   Dealer interest recovery                                     203        299         66
   Income from I/O STRIP                                        118        182         90
   Other income (includes a $72 gain on sale of interest
     rate swap to a related party in 2002)                      518        726        180
                                                          -------------------------------
         Total non-interest income                            2,495      3,878      3,507
                                                          ===============================
</TABLE>

                                       34
<PAGE>

                            FIDELITY FEDERAL BANCORP

                        Consolidated Statements of Income
                        (In Thousands, Except Share Data)
                                   (Continued)
<TABLE>
<CAPTION>
Year Ended December 31                                  2004      2003        2002
-------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>
Other Expenses
   Salaries and employee benefits                     $ 3,058     $ 3,327     $ 3,616
   Net occupancy expenses                                 362         343         371
   Equipment expenses                                     360         393         350
   Data processing fees                                   513         437         337
   Deposit insurance expense                               55          51          57
   Legal and professional fees                            268         250         298
   Advertising                                            204         156         142
   Promotional expense                                     95         158         218
   Printing, postage, and office supplies expenses        136         205         229
   Professional liability insurance expense               195         284         176
   Fee on prepayment of FHLB advances                                             504
   Letter of credit valuation provision                   (77)       (170)
   Loss on investment in partnerships                      30          40         160
   Amortization of intangible assets                                              917
   Correspondent bank charges                             145         147         132
   Loss on securitization                                                         976
   Other real estate owned expenses                        26          34         247
   Bond issuance expense                                   36         110          63
   Other expense                                          714         929       1,134
                                                   ----------------------------------
         Total non-interest expense                     6,120       6,694       9,927
                                                   ----------------------------------

Income (Loss) From Continuing Operations
   Before Income Tax                                      406          (6)     (3,048)
   Income tax benefit                                     (66)       (220)       (641)
                                                   ----------------------------------

Income (Loss) From Continuing Operations                  472         214      (2,407)
                                                   ----------------------------------

Discontinued Operations
   Loss from operations of VHC and VAHC (including
     loss on sale of $1,517 to a related party)                                (1,537)
   Income tax expense                                                             451
                                                   ----------------------------------

         Loss on discontinued operations                                       (1,988)
                                                   ----------------------------------

Net Income (Loss)                                     $   472     $   214     $(4,395)
                                                   ==================================
</TABLE>

                                       35
<PAGE>

                            FIDELITY FEDERAL BANCORP

                        Consolidated Statements of Income
                        (In Thousands, Except Share Data)
                                   (Continued)
<TABLE>
<CAPTION>
Year Ended December 31                                            2004        2003        2002
-----------------------------------------------------------------------------------------------
<S>                                                              <C>         <C>        <C>
Basic Earnings (Loss) Per Share From Continuing Operations       $0.54       $0.29      $(4.67)

Basic Loss Per Share from Discontinued Operations                                       $(3.86)

Basic Earnings (Loss) Per Share                                  $0.54       $0.29      $(8.53)

Diluted Earnings (Loss) Per Share From Continuing Operations     $0.54       $0.29      $(4.67)

Diluted Loss Per Share from Discontinued Operations                                     $(3.86)

Diluted Earnings (Loss) Per Share                                $0.54       $0.29      $(8.53)
</TABLE>








See notes to consolidated financial statements.


                                       36
<PAGE>

                            FIDELITY FEDERAL BANCORP

           Consolidated Statements of Changes in Stockholders' Equity
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                                                                             Accumulated
                                               Common Stock                       Comprehensive                 Other
                                           -------------------- Paid-in    Stock     Income     Accumulated  Comprehensive
                                             Shares    Amount   Capital   Warrants   (Loss)       Deficit    Income (Loss)   Total
                                           ----------------------------------------------------------------------------------------
<S>                                         <C>       <C>       <C>         <C>     <C>          <C>             <C>        <C>
Balances, January 1, 2002                   498,917   $ 5,987   $14,692     $ 11                 $  (8,757)      $ (38)     $11,895

   Comprehensive loss
     Net loss                                                                        $(4,395)       (4,395)                  (4,395)
     Other comprehensive income, net of tax
       Unrealized gain on securities                                                     417                       417          417
                                                                                  -------------
   Comprehensive loss                                                                $(3,978)
                                                                                  =============
   Sale of stock                             62,823       754       667                                                       1,421
   Issuance of stock warrants                                                250                                                250
                                           ---------------------------------------             ------------------------------------

Balances, December 31, 2002                 561,740     6,741    15,359      261                   (13,152)        379        9,588

   Comprehensive income
     Net income                                                                        $ 214           214                      214
     Other comprehensive loss, net of tax
       Unrealized loss on securities                                                    (588)                     (588)        (588)
                                                                                  -------------
   Comprehensive loss                                                                  $(374)
                                                                                  =============
   Sale of stock                            239,815     2,878     1,275                                                       4,153
                                           ---------------------------------------             ------------------------------------

Balances, December 31, 2003                 801,555     9,619    16,634      261                   (12,938)       (209)      13,367

   Comprehensive income
     Net income                                                                         $472           472                      472
     Other comprehensive loss, net of tax
       Unrealized loss on securities                                                     (52)                      (52)         (52)
                                                                                  -------------
   Comprehensive income                                                                 $420
                                                                                  =============
   Sale of stock                            115,101     1,381     1,093                                                       2,474
                                           ---------------------------------------             ------------------------------------

Balances, December 31, 2004                 916,656    $11,000  $17,727     $261                  $(12,466)      $(261)     $16,261
                                           =======================================             ====================================
</TABLE>
See notes to consolidated financial statements.

                                       37
<PAGE>

                            FIDELITY FEDERAL BANCORP

                      Consolidated Statements of Cash Flows
                                 (In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31                                                  2004         2003         2002
---------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>          <C>
Operating Activities
   Net income (loss)                                                  $    472     $    214     $ (4,395)
   Adjustments to reconcile net income (loss) to net cash provided
     (used) by operating activities
     Provision for loan losses                                             448           13         (360)
     Provision for losses on foreclosed assets                              20
     Letter of credit valuation provision                                  (77)        (170)
     Gain on early extinguishment of debt                                                           (140)
     Net gain on sales of securities available for sale                    (47)        (353)         (73)
     Net gain on sale of loans                                            (310)        (725)
     Net gain on sale of foreclosed assets                                             (359)
     Loss on impairment of assets held for sale and changes in
       estimated useful lives of intangible assets                                                 1,769
     Depreciation and amortization                                         418          438        1,334
     Amortization of premiums and discounts, net                           484          399          348
     Valuation allowance--affordable housing investments                                              40
     Mortgage loans originated for sale                                 (9,557)     (25,827)     (22,954)
     Proceeds from sale of mortgage loans                                9,760       26,349       23,129
     Consumer loan originations transferred to held for sale           (19,621)     (36,829)      (5,145)
     Proceeds from consumer loan sales                                  19,728       37,032        5,145
     Deferred income tax                                                   (66)        (220)        (641)
     Changes in
       Interest payable and other liabilities                              406         (439)        (564)
       Interest receivable and other assets                                389         (465)        (617)
                                                                     -----------------------------------
         Net cash provided (used) by operating activities                2,447         (942)      (3,124)
                                                                     -----------------------------------

Investing Activities
   Purchases of securities available for sale                          (36,246)     (60,298)     (34,125)
   Proceeds from maturities of securities available for sale            20,185       19,455       12,607
   Proceeds from sales of securities available for sale                  2,555       22,530        5,053
   Purchases of FHLB stock                                                (161)        (792)         (54)
   Proceeds from sale of foreclosed assets                                            2,772
   Proceeds from sale of note receivable to a related party                                         (235)
   Net change in loans                                                 (11,126)     (30,145)      29,510
   Net change in loans to related parties                                    8        2,605          166
   Purchase of premises and equipment                                     (444)        (123)        (218)
   Proceeds from sales of premises and equipment                                                     783
   Funding on outstanding letters of credit                                 18                      (239)
                                                                     -----------------------------------
         Net cash provided (used) by investing activities              (25,211)     (43,996)      13,248
                                                                     -----------------------------------
</TABLE>

                                       38
<PAGE>

                            FIDELITY FEDERAL BANCORP

                      Consolidated Statements of Cash Flows
                                 (In Thousands)
                                   (Continued)
<TABLE>
<CAPTION>
Year Ended December 31                                          2004          2003          2002
---------------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>           <C>
Financing Activities
   Net change in
   Noninterest-bearing, interest-bearing
     demand and savings deposits (includes changes to
     related party of $1,325, $235 and $30)                  $   2,876     $   1,995     $  (3,753)
   Certificates of deposit (includes changes to related
     party of $364, $0 and $0)                                   4,145        11,894        (9,611)
   Proceeds from borrowings                                      5,558         4,275         4,858
   Repayment of borrowings                                      (2,175)       (7,784)       (6,449)
   Proceeds of borrowings from a related party                                 1,000
   Repayment of borrowings from a related party                 (1,000)
   Proceeds of FHLB advances                                   123,235        68,500        60,300
   Repayment of FHLB advances                                 (110,695)      (39,950)      (69,633)
   Sale of stock                                                 2,474         4,153         1,421
   Sale of stock warrants                                                                      250
                                                          ----------------------------------------
         Net cash provided (used) by financing activities       24,418        44,083       (22,617)
                                                          ----------------------------------------

Net Change in Cash and Cash Equivalents                          1,654          (855)      (12,493)

Cash and Cash Equivalents, Beginning of Period                   2,968         3,823        16,316
                                                          ----------------------------------------

Cash and Cash Equivalents, End of Period                     $   4,622     $   2,968     $   3,823
                                                          ========================================

Additional Cash Flows Information
   Interest paid                                             $   3,859     $   3,754     $   6,256
   Real estate acquired in settlement of loans                     752           192         2,123
</TABLE>

See notes to consolidated financial statements.


                                       39
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


>>       Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of Fidelity Federal Bancorp (Fidelity) and
its wholly-owned subsidiaries conform to accounting principles generally
accepted in the United States of America and reporting practices followed by the
thrift industry. The more significant of the policies are described below.

The preparation of 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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Fidelity is a registered thrift holding company whose principal activity is the
ownership and management of United Fidelity Bank, fsb (United). United operates
under a national thrift charter and provides full banking services. As a
federally chartered thrift, United is subject to regulation by the Office of
Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation.

United generates mortgage, consumer and commercial loans and receives deposits
from customers located primarily in Vanderburgh County, Indiana and surrounding
counties. Fidelity's loans are generally secured by specific items of collateral
including real property, consumer assets and business assets. Village Capital
Corporation previously earned fees by providing real estate mortgage banking
services to unaffiliated borrowers. Village Capital has not provided any new
banking services for the past three years, but records fee income on
transactions previously completed. Another United subsidiary, Village Insurance
Corporation, is engaged in the business of selling credit life and accident
health insurance in conjunction with United's lending activities. Village
Insurance was merged into Village Capital Corporation during 2003. United formed
a new subsidiary, United Fidelity Finance, LLC, during the fourth quarter of
2001, which was utilized to complete an auto loan securitization transaction
during 2002.

Consolidation-- The consolidated financial statements include the accounts of
Fidelity and its subsidiaries after elimination of all material intercompany
transactions.

Use of estimates-- The preparation of 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 reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses and
the valuation of foreclosed assets held for sale, management obtains independent
appraisals for significant properties.

                                       40
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Cash equivalents-- Fidelity considers all liquid investments with original
maturities of three months or less to be cash equivalents.

Securities available for sale are carried at fair value, with unrealized gains
and losses reported separately in accumulated other comprehensive income, net of
tax.

Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net security
gains (losses). Gains and losses of securities are recorded on the
specific-identification method.

Loans held for sale are carried at the lower of aggregate cost or market value.
Market is determined using the aggregate method. Net unrealized losses, if any,
are recognized through a valuation allowance by charges to income, based on the
difference between estimated sales proceeds and aggregate cost.

Loans held for sale at any point in time normally consist of blocks of consumer
loans designated for sale to unrelated financial institutions or individual 1-4
family mortgage loans originated for sale into the secondary market. The amounts
of loans held for sale at December 31, 2004 and 2003, were not significant and
have been included with total loans on the consolidated balance sheets.

Loans are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. The accrual of interest on impaired
loans is discontinued when, in management's opinion, the borrower may be unable
to meet payments as they become due. When interest accrual is discontinued, all
unpaid accrued interest is reversed when considered uncollectible. Interest
income is subsequently recognized only to the extent cash payments are received.
Certain loan fees and related direct costs are being deferred and amortized over
the lives of the loans as an adjustment of yield on the loans.

Allowance for loan losses is maintained for credit losses to absorb losses
inherent in the loan portfolio. The valuation allowance for letters of credit is
maintained for losses related to letters of credit, which are off-balance sheet
instruments. The allowances are based on ongoing quarterly assessments of the
probable estimated losses inherent in the loan and letter of credit portfolios.
The allowance for loan losses is increased by the provision for credit losses,
which is charged against current period operating results and decreased by the
amount of chargeoffs, net of recoveries. The valuation allowance for letters of
credit is maintained in a separate liability account and changes in the
valuation allowance are included in current year operations. Fidelity's
methodology for assessing the appropriateness of the allowance for loan losses
consists of several key elements, which include the formula allowance, specific
allowances for identified problem loans and the unallocated allowance.

The formula allowance is calculated by applying loss factors to outstanding
loans and certain unused commitments, in each case based on the internal risk
grade of such loans, pools of loans or commitments. Changes in risk grades of
both performing and nonperforming loans affect the amount of the formula
allowance. Loss factors are based on historical loss experience and may be
adjusted for significant factors that, in management's judgment, affect the
collectibility of the portfolio as of the evaluation date.

Specific loan and letter of credit valuation reserves are established in cases
where management has identified significant conditions or circumstances related
to a loan or letter of credit that management believes indicate the probability
that a loss has been incurred in excess of the amount determined by the
application of, in the case of the allowance for loan losses, the formula
allowance.

                                       41
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

The unallocated allowance for loan losses is based upon management's evaluation
of various conditions, the effects of which are not directly measured in the
determination of the formula and specific allowances. The evaluation of the
inherent loss with respect to these conditions is subject to a higher degree of
uncertainty because they are not identified with specific credits. The
conditions evaluated in connection with the unallocated allowance for loan
losses and the letter of credit valuation reserve may include existing general
economic and business conditions affecting Fidelity's key lending areas, credit
quality trends, collateral values, loan volumes and concentrations, seasoning of
the loan and letter of credit portfolios, specific industry conditions within
portfolio segments, recent loss experience in particular segments of the
portfolios, duration of the current business cycle, regulatory examination
results and findings of an independent third party conducting quarterly reviews
of the loan and letter of credit portfolios.

The allowance for loan losses also incorporates the results of measuring
impaired loans as provided in SFAS No. 114 and SFAS No. 118. A loan is
considered impaired when management determines that it is probable that the bank
will be unable to collect all amounts due according to the original contractual
terms of the loan agreement. Impairment is measured by the difference between
the recorded investment in the loan and the estimated present value of total
expected future cash flows, discounted at the loan's effective rate, or the fair
value of the collateral of the loan, if collateral dependent. Impairment is
recognized by adjusting an allocation of the existing allowance for loan losses.

The determination of the adequacy of the allowance for loan losses and the
letter of credit valuation allowance is based on estimates that are particularly
susceptible to significant changes in the economic environment and market
conditions. Management believes that, as of December 31, 2004, the allowance for
loan losses and the letter of credit valuation allowance were adequate based on
information currently available. A worsening or protracted economic decline in
the area within which Fidelity operates could affect the possibility of
additional losses due to credit and market risks and could create the need for
additional loss reserves.

Automobile Loan Securitizations--In 2002, United used the securitization of
automobile loans as a source of funding and as a mechanism to reduce its volume
of automobile loans. Automobile loans were transferred into a qualifying special
purpose entity (SPE) then to a trust in a transaction which is effective under
applicable banking rules and regulations to legally isolate the assets from
United. Where the transferor is a depository institution such as United, legal
isolation is accomplished through compliance with specific rules and regulations
of the relevant regulatory authorities. SFAS 140 requires, for certain
transactions completed after the initial adoption date, a "true sale" analysis
of the treatment of the transfer under state law as if United were a debtor
under the bankruptcy code. A "true sale" legal analysis includes several legally
relevant factors, such as the nature and level of recourse to United and the
nature of retained servicing rights. The analytical conclusion as to a true sale
is never absolute and unconditional, but contains qualifications based on the
inherent equitable powers of a bankruptcy court, as well as the unsettled state
of the common law. Once the legal isolation test has been met under SFAS 140,
other factors concerning the nature and extent of United's control over the
transferred assets are taken into account in order to determine whether
derecognition of assets is warranted, including whether the SPE has complied
with rules concerning qualifying special purpose entities.

                                       42
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

A legal opinion was obtained for the automobile loan securitization transaction
in 2002, which was structured as a two-step securitization. While noting the
transaction fell within the meaning of a "securitization" under the FDIC
regulation, "Treatment by the Federal Deposit Insurance Corporation as
Conservator or Receiver of Financial Assets Transferred by an Insured Depository
Institution in Connection with a Securitization or Participation" (the
"Securitization Rule"), in accordance with accounting guidance, an analysis was
also rendered under state law as if United was a debtor under the bankruptcy
code. The "true sale" opinion provides reasonable assurance the purchased assets
would not be characterized as the property of United's receivership or
conservatorship estate in the event of insolvency and also states United would
not be required to substantively consolidate the assets and liabilities of the
purchaser SPE with those of United upon such event.

In a securitization, the trust issues beneficial interests in the form of senior
and subordinated asset-backed securities backed or collateralized by the assets
sold to the trust. The senior classes of the asset-backed securities typically
receive investment grade credit ratings at the time of issuance. These ratings
are generally achieved through the acquisition of a financial guarantee policy,
the creation of lower-rated subordinated classes of asset-backed securities, as
well as subordinated interests retained by an affiliate of United. In all cases,
United or its affiliate retains interests in the securitized assets, which may
take the form of seller certificates, subordinated tranches, cash reserve
balances, servicing assets and interest-only strips representing the cash flows
generated by the assets in excess of the contractual cash flows required to be
paid to the investors and for other obligations such as servicing fees.

In accordance with SFAS 140, securitized automobile loans are removed from the
balance sheet and a net gain or loss is recognized in income at the time of
initial sale and each subsequent sale when the combined net sales proceeds and,
if applicable, retained interests differ from the loans' allocated carrying
amount. Net gains or losses resulting from securitizations are recorded in
noninterest income or expense.

Retained interests in the subordinated tranches and interest-only strips are
recorded at their fair value and accounted for as available-for-sale securities
with subsequent adjustments to fair value recorded through other comprehensive
income within stockholders' equity or in other noninterest expense in the income
statement if the fair value has declined below the carrying amount and such
decline has been determined to be other than temporary. United uses assumptions
and estimates in determining the fair value allocated to the retained interests
at the time of sale and each subsequent sale in accordance with SFAS 140. These
assumptions and estimates include projections concerning rates charged to
customers, the expected life of the receivables, credit loss experience, loan
repayment rates, the cost of funds and discount rates commensurate with the
risks involved.

On a quarterly basis, management reviews the historical performance of the
retained interest and the assumptions used to project future cash flows. If past
performance and future expectations dictate, assumptions are revised and the
present value of future cash flows is recalculated. Refer to the automobile loan
securitization footnote for further analysis of the assumptions used in the
determination of fair value.

The retained interest represents United's maximum loss exposure with respect to
securitization vehicles. The investors in the debt securities issued by the SPEs
have no further recourse against United if cash flows generated by the
securitized automobile loans are inadequate to service the obligations of the
SPEs.

Transaction costs associated with the automobile loan securitization were
recognized as a component of the gain or loss at the time of sale.

                                       43
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Premises and equipment are carried at cost, net of accumulated depreciation.
Depreciation is computed using the straight-line method based principally on the
estimated useful lives of the assets. Maintenance and repairs are expensed as
incurred while major additions and improvements are capitalized. Gains and
losses on dispositions are included in current operations.

Federal Home Loan Bank (FHLB) stock is a required investment for institutions
that are members of the FHLB system. The required investment in the common stock
is based on a predetermined formula.

Foreclosed assets held for sale-- Assets acquired through, or in lieu of, loan
foreclosure are held for sale and are initially recorded at fair value at the
date of foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets are carried
at the lower of carrying amount or fair value less cost to sell. Revenue and
expenses from operations and changes in the valuation allowance are included in
net income or expense from foreclosed assets.

Income tax in the consolidated statements of income includes deferred income tax
provisions or benefits for all significant temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. Fidelity
files consolidated income tax returns with its subsidiaries.

Servicing rights on originated loans that have been sold, including those
transferred as part of securitizations, are capitalized by allocating the total
cost of the mortgage or consumer loans between the servicing rights and the
loans based on their relative fair values. Capitalized servicing rights are
amortized in proportion to and over the period of estimated servicing revenues.
Impairment of mortgage and consumer loan-servicing rights is assessed based on
the fair value of those rights. Fair values are estimated using discounted cash
flows based on a current market interest rate. For purposes of measuring
impairment, the rights are stratified based on the predominant risk
characteristics of the underlying loans. The predominant characteristic
currently used for stratification is type of loan. The amount of impairment
recognized is the amount by which the capitalized servicing rights for a stratum
exceed their fair value.

Stock options and Fidelity's stock-based incentive compensation plans are
discussed more fully in the Stock Option Plans footnote. The Company accounts
for these 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 cost is reflected in net income, as all
options granted under those plans had an exercise price that was equal to or
greater than the market value of the underlying common stock on the grant date.
The following table illustrates the effect on net income and earnings per share
if Fidelity had applied the fair value provisions of FASB statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.
<TABLE>
<CAPTION>
Year Ended December 31                                            2004       2003       2002
----------------------------------------------------------------------------------------------
<S>                                                              <C>        <C>      <C>
                                                                  $472       $214     $(4,395)
Net income (loss), as reported
Less:  Total stock-based compensation cost determined
       under the fair value based method, net of income taxes       18         31          73
                                                                ------------------------------
                                                                  $454       $183     $(4,468)
Pro forma net income (loss)
                                                                ==============================
                                                                 $0.54      $0.29      $(8.54)
Basic earnings (loss) per share - as reported
Basic earnings (loss) per share - pro forma                      $0.52      $0.25      $(8.68)
Diluted earnings (loss) per share - as reported                  $0.54      $0.29      $(8.54)
Diluted earnings (loss) per share - pro forma                    $0.52      $0.25      $(8.68)
</TABLE>

                                       44

<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Earnings per share have been computed based upon the weighted-average common
shares outstanding during the year. The effect of outstanding options and
warrants are included in diluted earnings per share if they are not
anti-dilutive.

Reclassification of certain amounts in the 2003 and 2002 consolidated financial
statements has been made to conform to the 2004 presentation.


>>       Restriction on Cash and Due From Banks

United is required to maintain reserve funds in cash and/or on deposit with the
Federal Reserve Bank. The reserve required at December 31, 2004 was $19.

United maintains cash in bank deposit accounts, which at times, may exceed
federally insured limits. United has not experienced any losses in such
accounts. Management does not believe United is exposed to any significant risk.


>>       Investment Securities Available for Sale

                                                 Gross        Gross
                                  Amortized    Unrealized   Unrealized   Fair
                                    Cost         Gains        Losses     Value
                                ------------------------------------------------

December 31, 2004
   Mortgage-backed securities      $65,613        $59         $(480)    $65,192
                                ================================================

December 31, 2003
   Mortgage-backed securities      $52,544        $50         $(386)    $52,208
                                ================================================

Securities with a carrying value of $65,191 and $52,207 were pledged at December
31, 2004 and 2003, respectively, to secure certain deposits, outstanding Federal
Home Loan Bank advances, secured federal funds purchased line of credit ,
repurchased lines of credit, and for other purposes as permitted or required by
law.

Gross gains of $47, $353 and $73 resulting from sales of available-for-sale
securities were realized for 2004, 2003 and 2002, respectively. Taxes of $18,
$134 and $28 were recorded on the gains, respectively.

Certain investments in debt securities are reported in the financial statements
at an amount less than their historical cost. Total fair value of these
investments at December 31, 2004 and 2003, was $55,161 and $34,400,
respectively, which is approximately 85% and 66% of Fidelity's
available-for-sale investment portfolio. These declines primarily resulted from
recent increases in market interest rates.

Based on evaluation of available evidence, including recent changes in market
interest rates and information obtained from regulatory filings, management
believes the declines in fair value for these securities are temporary.

                                       45
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Should the impairment of any of these securities become other than temporary,
the cost basis of the investment will be reduced and the resulting loss
recognized in net income in the period the other-than-temporary impairment is
identified.

The following table shows our 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:
<TABLE>
<CAPTION>
                                  Less than 12 Months           12 Months or More                  Total
                               -----------------------------------------------------------------------------------
   Description of Securities   Fair Value     Unrealized   Fair Value      Unrealized   Fair Value      Unrealized
                                                Losses                       Losses                       Losses
------------------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>          <C>             <C>          <C>             <C>
 December 31, 2004
    Mortgage-backed securities  $41,037         $(270)       $14,124         $(210)       $55,161         $(480)
                               ===================================================================================

 December 31, 2003
    Mortgage-backed securities  $34,281         $(384)       $   119         $  (2)       $34,400         $(386)
                               ===================================================================================
</TABLE>


>>       Loans and Allowance
<TABLE>
<CAPTION>
December 31                                                                                2004             2003
------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>              <C>
Real estate mortgage loans
   First mortgage loans
     Conventional                                                                        $ 38,226         $ 41,754
     Construction                                                                           4,471            2,042
     Commercial                                                                            16,251            9,144
     Multi-family                                                                             594              213
     Home equity loans                                                                      6,144            5,067
     Purchased loans                                                                          385              778
Commercial loans--other than secured by real estate                                         4,136            3,138
Consumer loans                                                                             41,320           39,038
                                                                                        --------------------------
         Total loans                                                                      111,527          101,174

   Allowance for loan losses                                                                 (756)            (737)
                                                                                        --------------------------

         Total loans, net of the allowance for loan losses                               $110,771         $100,437
                                                                                        ==========================
</TABLE>

                                       46
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


Year Ended December 31                     2004        2003        2002
------------------------------------------------------------------------

Allowance for Loan Losses
   Balances, beginning of period         $   737     $   837     $ 2,138
   Provision for losses                      562         492         204
   Loans transferred to held for sale       (114)       (479)       (564)
   Recoveries on loans                       141         123       1,013
   Loans charged off                        (570)       (236)     (1,954)
                                       ---------------------------------

         Balances, end of period         $   756     $   737     $   837
                                       =================================

Information on impaired loans is summarized below:

December 31                                  2004    2003
-----------------------------------------------------------

Impaired loans with an allowance             $671    $765

Impaired loans without an allowance             8      10
                                          ---------------
Total impaired loans                         $679    $775
                                          ===============
Allowance for impaired loans
  (included in allowance for loan losses)    $130    $169
                                          ===============


Year Ended December 31                           2004      2003      2002
--------------------------------------------------------------------------

Average balance of impaired loans               $  725    $  924    $3,656
Interest income recognized on impaired loans        26        13       312
Cash-basis interest included above                  26        16       333

At December 31, 2004 and 2003, accruing loans delinquent 90 days or more totaled
$259 and $287, respectively. Non-accruing loans at December 31, 2004 and 2003,
were $755 and $1,415, respectively.


>>       Letter of Credit Valuation Allowance

Reserves related to letters of credit issued by Fidelity and United relate to
the permanent financing for certain affordable housing projects. Multi-family
housing letters of credit, an off-balance sheet item, carry the same risk
characteristics as conventional loans and totaled $22,724 and $27,774 at
December 31, 2004 and 2003, respectively.

                                       47
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


Year Ended December 31                          2004      2003      2002
-------------------------------------------------------------------------

Letter of credit valuation allowance
   Balances, beginning of year                 $ 291     $ 445     $ 665
   Provision                                     (77)     (170)
   Recoveries                                     18        16        19
   Funding of outstanding letters of credit                         (239)
                                              --------------------------

     Balances, end of year                     $ 232     $ 291     $ 445
                                              ==========================


>>       Automobile Loan Securitization

United completed an automobile loan securitization transaction in 2002. The
transaction resulted in the sale of $49 million of rated class A notes.
Financial Security Assurance (FSA) provided a financial guaranty policy on the
class A notes. The transaction also resulted in the sale of $500,000 in
non-rated class B notes. The transaction was effected through a wholly-owned
subsidiary, United Fidelity Finance, LLC.

A summary of the components of managed loans, which represents both owned and
securitized loans, follow. The automobile loans presented represent the managed
portfolio of indirect prime automobile loans.

                                                                     Loans Past
                                                      Principal       Due Over
As of December 31, 2004                                Balance        30 Days
-------------------------------------------------------------------------------

 Total managed automobile loans                        $ 86,240        $1,128
 Less: Automobile loans securitized                     (11,493)         (261)
 Automobile loans serviced for others                   (35,179)         (222)
                                                     --------------------------

 Total automobile loans held in portfolio              $ 39,568        $  645
                                                     ==========================


Certain cash flows received from the securitization trust follow:

Year Ended December 31                     2004        2003       2002
------------------------------------------------------------------------

 Proceeds from securitization                                    $48,939
 Servicing fees received                   $186        $329          138

United estimates the fair value of the retained interest at the date of the
transfer and during the period of the transaction based on a discounted cash
flow analysis. United receives annual servicing fees based on the loan balances
outstanding, the rights to future cash flows arising after investors in the
securitization trust have received their contractual return and after certain
administrative costs of operating the trust. These cash flows are estimated over
the life of the loans using prepayment, default and interest rate assumptions
that market participants would use for financial instruments subject to similar
levels of prepayment, credit and interest rate risk.

                                       48
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)



A summary of the fair values of the interest-only strips and servicing assets
retained, key economic assumptions used to arrive at the fair values and the
sensitivity of the December 31, 2004, fair values to immediate 10% and 20%
adverse changes in those assumptions follows. Actual credit losses experienced
through year end 2004 on the pool of automobile loans securitized have been
consistent with initial projections. As such, the expected static pool loss
assumption would perform consistently with that disclosed in the sensitivity
analysis. The sensitivities are hypothetical. Changes in fair value may not be
linear. Also, the effect of a variation in a particular assumption on the fair
value of the retained interests is calculated without changing any other
assumption; in reality, changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and increased credit losses), which might either magnify or counteract the
sensitivities.

<TABLE>
<CAPTION>
                                                      Weighted-     Monthly     Expected
                                                       Average    Prepayment   Cumulative     Annual     Weighted-
                                           Fair         Life         Speed       Credit      Discount     Average
                                          Value      (in months)    (% ABS)      Losses        Rate        Coupon
                                        -----------------------------------------------------------------------------
<S>                                        <C>             <C>        <C>          <C>          <C>          <C>
Interest-only strip
   As of the date of securitization        $2,707           39         1.50%        1.50%        15.0%        8.75%
   As of December 31, 2004                  1,114            7         0.67         1.50         15.0         8.41
   Decline in fair value of 10%
     adverse change                                                    $  2           $3         $  9
   Decline in fair value of 20%
     adverse change                                                      17            7           17

Servicing asset
   As of the date of securitization        $  362           39         1.50%        1.50%        15.0%
   As of December 31, 2004                      0            7         0.67         1.50         15.0
</TABLE>


>>       Foreclosed Assets Held for Sale

Activity in the allowance for losses on foreclosed assets was as follows:

Year Ended December 31                            2004              2003
-------------------------------------------------------------------------

 Balance, beginning of year                        $ 0             $ 100
 Provision charged to expense                       20
 Charge-offs, net of recoveries                                     (100)
                                                ------------------------

   Balance, end of year                            $20             $   0
                                                ========================

                                       49
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

>>       Premises and Equipment

December 31                           2004         2003
                                   ---------------------

Land                                 $   935     $   935
Building and land improvements         5,892       5,590
Furniture, fixtures and equipment      2,357       2,214
                                   ---------------------
       Total cost                      9,184       8,739
Accumulated depreciation              (4,538)     (4,119)
                                   ---------------------

Net                                  $ 4,646     $ 4,620
                                   =====================


>>       Other Assets and Investments in Limited Partnerships

Included in other assets at December 31, 2004 and 2003, are investments of $327
and $358, respectively, in limited partnerships which are organized to build,
own and operate apartment complexes. The carrying amounts of these investments
approximate Fidelity's equity in the net assets of the partnerships. The
investments at December 31, 2004 and 2003, were as follows:

                                          Amount of                Number of
                                          Investment             Partnerships
Percentage and Type of               ------------------------------------------
 Partnership Interest                 2004          2003       2004        2003
-------------------------------------------------------------------------------

     31%--Limited                    $   0         $   0         1           1
     26%--Limited                       45            45         1           1
     10%--Limited                      187           217         1           1
     10%--Limited                       95            95         1           1

Fidelity records income on the equity method in the income and losses of the
limited partnerships, which resulted in losses of $0, $22 and $38 during the
years ended December 31, 2004, 2003 and 2002, respectively. In addition to
recording its equity in the losses of these projects, Fidelity has recorded the
benefit of low-income housing tax credits of $222, $222 and $185 for the years
ended December 31, 2004, 2003 and 2002, respectively. In certain cases, Fidelity
could reduce the carrying value of its investments in and related loans to these
partnerships, should its share of net losses materially exceed the net
investments in and loans to these partnerships. Combined condensed financial
statements as of December 31, 2004 and 2003, have not been presented because the
investments in limited partnerships were not considered material at that date.

Fidelity reduced the recorded value of its investment in limited partnerships,
in addition to the losses recorded, by $30, $18 and $122 during the years ended
December 31, 2004, 2003 and 2002, respectively, based on the performance of the
underlying real estate operations.

                                       50
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


Included in other assets is interest receivable as follows:

December 31                                                2004     2003
------------------------------------------------------------------------

Interest receivable on loans                               $336     $333
Interest receivable on investment securities and other      306      231
                                                        ----------------

       Total interest receivable                           $642     $564
                                                        ================


>>       Deposits

December 31                                                2004        2003
-----------------------------------------------------------------------------

Non-interest bearing transaction accounts               $  8,250    $  6,903
Interest-bearing transaction accounts                     12,903      12,981
Money market deposit accounts                              8,219       6,798
Savings accounts                                           5,720       5,533
Certificates of $100 or more                              25,252      29,389
Other certificates and time deposits                      67,357      59,076
                                                        --------------------

       Total deposits                                   $127,701    $120,680
                                                        ====================

Certificates maturing in years ending December 31:

   2005                                                 $61,746
   2006                                                  21,640
   2007                                                   8,587
   2008                                                     476
   2009                                                     104
   Thereafter                                                56
                                                        -------

                                                        $92,609
                                                        =======

Time deposits at December 31, 2004 and 2003, included brokered deposits of
approximately $14,438 and $2,873, respectively.

                                       51
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

>>       Federal Home Loan Bank Advances and Borrowings
<TABLE>
<CAPTION>
December 31                                                                       2004          2003
-------------------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C>
Subordinated Debenture- Trust Preferred Securities, 4.72%,
   interest paid quarterly, due December 2034, unsecured                         $ 3,093
Junior subordinated notes, 9.00%, interest paid semi-annually,
   due February 2009, unsecured                                                    1,002      $  1,002
Senior subordinated notes, 9.00%, interest paid semi-annually,
   due April 2009, unsecured                                                       2,365
Senior subordinated notes, 10.00%, interest paid semi-annually,
   due June 2005, unsecured                                                                      1,800
Federal Home Loan Bank advances, due at various dates through
   2008 (weighted-average rates of 2.37% and 2.08% at December 31,
   2004 and 2003, respectively)                                                   44,090        31,550
Note payable, 6.25%, interest paid monthly, due November 2005,
   secured by United guarantee                                                                     275
Junior subordinated notes, 5.41%, adjusted quarterly, interest paid
   quarterly, due September 2033, unsecured, with call option                      4,000         4,000
Note payable, 9.00%, interest paid quarterly, due June 2004, unsecured                           1,000
                                                                              -------------------------

       Total long-term debt                                                      $54,550       $39,627
                                                                              =========================
</TABLE>

Fidelity and Fidelity Federal Bancorp Statuary Trust I-2004 (Trust) entered into
an agreement to issue and sell 3,000 of Floating Rate TruPS(R) of the Trust,
having a stated liquidation amount of $1,000 per capital security and bearing a
per annum rate of interest, reset quarterly, equal to the three month LIBOR plus
2.25%. The Junior Subordinated Debentures due in 2034 were issued by Fidelity to
the Trust. Fidelity has fully and unconditionally guaranteed all of the Issuer's
obligations under trust preferred securities issued by the Trust. The Junior
Subordinated Debentures qualify as Tier 1 Capital for regulatory capital
purposes.

The terms of a security agreement with the FHLB require United to pledge as
collateral qualifying first mortgage loans in an amount equal to at least 125%
of these advances and all stock in the FHLB or eligible securities with a market
value in an amount equal to at least 110% of these advances, in addition to
first mortgage loans pledged of $30,964. Fidelity had $52,824 of investment
securities pledged at December 31, 2004. Certain advances are subject to
restrictions or penalties in the event of prepayment.

All long-term debt, except for Federal Home Loan Bank advances and the $4,000
note payable noted above, are the debt of the parent company and totaled $6,460
at December 31, 2004, as compared to $4,077 at December 31, 2003.

                                       52
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


The scheduled principal reduction of borrowings in years ended December 31 are:

   2005                                                       $28,090
   2006                                                         6,500
   2007                                                         4,500
   2008                                                         1,000
   2009                                                         7,367
   Thereafter                                                   7,093
                                                             --------

                                                              $54,550
                                                             ========


>>       Loan Servicing

Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage loans
serviced for others totaled $54,658, $55,413 and $57,368 at December 31, 2004,
2003 and 2002, respectively.

The aggregate fair value of capitalized mortgage servicing rights at December
31, 2004 and 2003, approximated $628 and $639, respectively. Comparable market
values and a valuation model that calculates the present value of future cash
flows were used to estimate fair value. For purposes of measuring impairment,
risk characteristics including product type, investor type and interest rates,
were used to stratify the originated mortgage servicing rights.

Year Ended December 31                   2004       2003       2002
-------------------------------------------------------------------

Mortgage servicing rights
   Balances, beginning of period        $ 639      $ 514      $ 632
   Servicing rights capitalized            95        258        232
   Amortization of servicing rights      (106)      (285)      (198)
                                     ------------------------------
                                          628        487        666
   Change in valuation allowance                     152       (152)
                                     ------------------------------

     Balances, end of period            $ 628      $ 639      $ 514
                                     ==============================

The entire valuation allowance of $152 at December 31, 2002, was added in the
fourth quarter of 2002. The valuation allowance was reduced by $152 during 2003
leaving a balance of $0 in the valuation allowance at December 31, 2003 and
2004.

Consumer loans are also serviced for others and are not included in the
accompanying consolidated balance sheets. The unpaid principal balances of
consumer loans serviced for others totaled $46,672 and $56,136 at December 31,
2004 and 2003, respectively.


                                       53
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

The aggregate fair value of capitalized consumer loan servicing rights at
December 31, 2004 and 2003, approximated $45 and $223, respectively. As with
mortgage servicing rights, comparable market values and a valuation model that
calculates the present value of future cash flows were used to estimate fair
value.

Year Ended December 31                   2004       2003
---------------------------------------------------------

Consumer loan servicing rights
   Balances, beginning of period        $ 223      $ 409
   Servicing rights capitalized            26         96
   Amortization of servicing rights      (204)      (282)
                                     -------------------

     Balances, end of period            $  45      $ 223
                                     ===================


>>       Income Tax
<TABLE>
<CAPTION>
Year Ended December 31                                          2004         2003         2002
------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>
Income tax benefit
   Deferred
     Federal                                                  $   (99)     $  (228)     $(1,028)
     State                                                         33            8         (213)
     Change in valuation allowance                                                          600
                                                            -----------------------------------
       Total income tax benefit                               $   (66)     $  (220)     $  (641)
                                                            ===================================

Reconciliation of federal statutory to actual tax benefit
   Federal statutory income tax at 34%                        $   138      $    (2)     $(1,036)
   Effect of state income taxes                                    22            5          (53)
   Nondeductible expenses                                           8            8            8
   Changes in the deferred tax asset valuation allowance                                    600
   Affordable housing tax credits and other                      (222)        (211)        (222)
   Other                                                          (12)         (20)          62
                                                            -----------------------------------
       Actual tax benefit                                     $   (66)     $  (220)     $  (641)
                                                            ===================================
</TABLE>

                                       54
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

The components of the deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31                                                       2004         2003
-------------------------------------------------------------------------------------
<S>                                                              <C>          <C>
Assets
   Allowance for loan losses                                     $   751      $   744
   Valuation for letters of credit                                    88          111
   Unrealized loss on available-for-sale securities                  159          128
   Alternative minimum tax credit                                     81           81
   Low income housing credit carryforward                          1,868        1,563
   State net operating loss carryforward                             972          974
   Federal net operating loss carryforward                         3,530        3,530
   State income tax                                                   20           14
   Differences in accounting for certain accrued liabilities           4
   Valuation for interest-only strip obligation                      173          173
   Other                                                              13            8
                                                               ----------------------
         Total assets                                              7,659        7,326
                                                               ----------------------

Liabilities
   Depreciation and amortization                                      (8)         (28)
   Differences in accounting for certain accrued liabilities                       (5)
   Differences in basis of FHLB stock                               (178)        (117)
   Basis differential on certain partnership interests              (245)        (155)
   Differences in accounting for loan servicing rights              (256)        (328)
                                                               ----------------------
         Total liabilities                                          (687)        (633)
                                                               ----------------------

         Net deferred tax asset before valuation allowance         6,972        6,693
                                                               ----------------------

Valuation Allowance
   Beginning balance                                                (600)        (600)
   Increase during the period                                       (180)
                                                               ----------------------

         Ending balance                                             (780)        (600)
                                                               ----------------------

         Net deferred tax asset                                  $ 6,192      $ 6,093
                                                               ======================
</TABLE>

At December 31, 2004, Fidelity has federal net operating loss carryforwards for
tax purposes totaling $10,382. These loss carryforwards expire in varying
amounts through the year 2022. Fidelity has state net operating loss
carryforwards for tax purposes of $11,435. These loss carryforwards expire in
varying amounts through the year 2016. Fidelity has affordable housing credit
carryforwards of $1,868. These carryforwards expire in varying amounts through
the year 2022. In addition, Fidelity has an alternative minimum tax credit
carryforward of $81.

                                       55
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

>>        Other Comprehensive Income (Loss)

Other comprehensive income components and related taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31                                          2004       2003       2002
------------------------------------------------------------------------------------------
<S>                                                            <C>        <C>        <C>
Unrealized gains (losses) on securities available for sale     $ (38)     $(602)     $ 755
Reclassification for realized amount included in income          (47)      (353)       (73)
                                                             -----------------------------
  Other comprehensive income (loss), before tax effect           (85)      (955)       682
Tax expense (benefit)                                            (33)      (367)       265
                                                             -----------------------------

  Other comprehensive income (loss)                            $ (52)     $(588)     $ 417
                                                             =============================
</TABLE>

>>       Commitments and Contingent Liabilities

In the normal course of business, there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included in the accompanying consolidated financial
statements. Fidelity's exposure to credit loss in the event of nonperformance by
the other party to the financial instruments for commitments to extend credit
and standby letters of credit is represented by the contractual or notional
amount of those instruments. Fidelity uses the same credit policies in making
such commitments as it does for instruments that are included on the
consolidated balance sheets.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Fidelity evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by Fidelity upon extension of credit, is based on management's credit
evaluation. Collateral held varies, but may include residential real estate,
income-producing commercial properties or other assets of the borrower. At
December 31, 2004 and 2003, commitments to extend credit, which represent
financial instruments whose contract amount represents credit risk, were $6,678
and $12,099, respectively.

Lines of credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer's creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate and residential real estate. Management uses
the same credit policies in granting lines of credit as it does for
on-balance-sheet instruments. At December 31, 2004 and 2003, Fidelity and United
had granted unused lines of credit to borrowers aggregating approximately
$11,272 and $12,839, respectively.

Fidelity has issued standby letters of credit on affordable housing developments
in which the borrowers are not affiliated with Fidelity. The letters of credit
secure tax-exempt bond issues and other permanent financing of limited
partnerships. The amount outstanding on the letters of credit at December 31,
2004 and 2003, was $22,724 and $27,774, respectively.

                                       56
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


Fidelity, in its previous role as general partner on various affordable housing
developments through its subsidiaries, was committed to advance certain amounts
to limited partnerships. These previous commitments potentially included
short-term loans to the limited partners or an increase in the general partner's
equity investment. Upon the sale of Village Housing Corporation in the fourth
quarter of 2002, these commitments were extinguished.

Fidelity has entered into change in control agreements with one of its employees
which provide for the continuation of a multiple of the employee's existing
salary and certain benefits for a two-year period of time under certain
conditions following a change in control. The agreement becomes effective if
there is a change in control that is accompanied by a significant change in job
responsibilities and/or compensation.

Fidelity entered into an agreement with another institution in conjunction with
a consumer loan sale that guaranteed to the purchaser that Fidelity would
repurchase any consumer loans that exceeded a 60-day delinquency status. The
original amount of the loans sold was $5.0 million and remaining amount
outstanding totaled $745 at December 31, 2004. Over the past year, Fidelity has
repurchased a total of $81 that exceeded the 60-day delinquency status.

Fidelity and its subsidiaries are also subject to claims and lawsuits that arise
primarily in the ordinary course of business. It is the opinion of management
that the disposition or ultimate resolution of such claims and lawsuits will not
have a material adverse effect on the consolidated financial position of
Fidelity.


>>       Dividend and Capital Restrictions

Fidelity's dividend policy is to pay cash or distribute stock dividends when its
board of directors deems it to be appropriate, taking into account Fidelity's
financial condition and results of operations, economic and market conditions,
industry standards and other factors, including regulatory capital requirements
of its savings bank subsidiary. Fidelity is not subject to any regulatory
restrictions on payments to its stockholders. Fidelity's primary source of
income is dividends from United.

United was previously under a Supervisory Agreement (Agreement) with the OTS
which restricted the payments of dividends from United to Fidelity without prior
written OTS approval. The Agreement and restriction were terminated on October
29, 2004. Fidelity is uncertain when it will pay dividends in the future and the
amount of such dividends, if any.


>>       Regulatory Capital

United 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 United's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, United must meet specific capital
guidelines that involve quantitative measures of United's assets, liabilities
and certain off-balance-sheet items as calculated under regulatory accounting
practices. United's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.


                                       57
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


Quantitative measures established by regulation to ensure capital adequacy
require United to maintain minimum amounts and ratios (set forth in the table
below). Management believes, as of December 31, 2004 and 2003, that United meets
all capital adequacy requirements to which it is subject.

As of December 31, 2004, the most recent notification from United's federal
regulators categorized United as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, United must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed United's category.

United's actual and required capital amounts and ratios were as follows:
<TABLE>
<CAPTION>
                                                                    Required for         To Be Well         Required per
                                                   Actual         Adequate Capital      Capitalized        Strategic Plan
                                            ---------------------------------------------------------------------------------
                                              Amount     Ratio     Amount    Ratio    Amount     Ratio    Amount    Ratio
                                            ---------------------------------------------------------------------------------
<S>                                            <C>         <C>        <C>       <C>      <C>       <C>     <C>       <C>
As of December 31, 2004
   Total risk-based capital (to risk-
     weighted assets)                         $18,079      14.5%     $9,985     8.0%   $12,481    10.0%    N/A         N/A
   Tier 1 capital (to risk-weighted assets)    13,129      10.5       4,992     4.0      7,489     6.0     N/A         N/A
   Core capital (to adjusted total assets)     14,122       7.2       7,801     4.0      9,752     5.0     N/A         N/A
   Core capital (to adjusted tangible
     assets)                                   14,122       7.2       3,901     2.0        N/A     N/A     N/A         N/A
   Tangible capital (to adjusted total
     assets)                                   14,077       7.2       2,925     1.5        N/A     N/A     N/A         N/A

As of December 31, 2003
   Total risk-based capital (to risk-
     weighted assets)                         $15,294      13.6%     $8,984     8.0%   $11,230    10.0%    $12,353    11.0%
   Tier 1 capital (to risk-weighted assets)    10,292       9.2       4,492     4.0      6,738     6.0       9,265     8.3
   Core capital (to adjusted total assets)     11,869       7.0       6,787     4.0      8,484     5.0      10,605     6.3
   Core capital (to adjusted tangible
     assets)                                   11,869       7.0       3,394     2.0        N/A     N/A     N/A         N/A
   Tangible capital (to adjusted total
     assets)                                   11,646       6.9       2,542     1.5        N/A     N/A     N/A         N/A
</TABLE>

>>       Stockholders' Equity and Capital Infusion

All information in this footnote agrees to information in registration
statements previously filed by Fidelity. Therefore, share and per share data in
this footnote has not been restated for the stock splits discussed in the
footnote titled "Subsequent Events".

In March 2004, Fidelity filed a registration statement for a stockholder rights
offering with the Securities and Exchange Commission. A total of 1.4 million
shares were registered in this filing. For every 6.9 shares of Fidelity held on
the record date, shareholders could subscribe to purchase one share of Fidelity
at $1.81. The rights offering was completed on May 14, 2004. Fidelity raised
$2.5 million net of costs associated with the offering. The shares purchased by
shareholders with these funds were issued in May 2004.

                                       58
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

In April 2003, Fidelity issued 2.8 million shares of common stock for $4.0
million in cash through the exercise of an option help by Pedcor Financial, LLC
(Pedcor Financial) and affiliates. The exercise price per share was $1.44, and
was determined under a formula included in the shareholder-approved stock
purchase agreement effective May 19, 2000. The proceeds of the option exercise
were utilized to reduce Fidelity's long-term debt outstanding. The remaining
options expired on May 19, 2003. Pedcor Financial is a member of a group of
companies which is controlled by Bruce A. Cordingley, Gerald K. Pedigo and
Phillip J. Stoffregen directors of Fidelity. Following the option exercise in
April 2003, Pedcor Financial and group beneficially owned approximately 67.75%
of Fidelity's issued and outstanding stock.

In July 2002, Fidelity filed a registration statement for a stockholder rights
offering with the Securities and Exchange Commission. A total of 750,000 shares
were registered in this filing. For every 8.1 shares of Fidelity held on the
record date, shareholders could subscribe to purchase one share of Fidelity at
$2.00. The rights offering was completed in September 2002. Fidelity raised $770
net of costs associated with the offering. The shares purchased by shareholders
with these funds were issued in September 2002.

During the third quarter of 2002, Pedcor Investments, LLC (Investments)
exercised a portion of its option that was granted under the stock purchase
agreement in May 2000, and purchased $259 in common stock resulting in 137,765
shares being issued.

In December 2001, Fidelity filed a registration statement for a debt and equity
rights offering with the Securities and Exchange Commission. Subscription rights
were distributed to persons who owned common stock as of the close of business
on December 19, 2001, to purchase $1.5 million of 9.00% unsecured junior
subordinated notes due February 28, 2009, and 500,000 warrants representing the
right to purchase shares of common stock at $3.00 per share, less the purchase
price of $0.50 per warrant. The offering was completed on February 28, 2002.
Fidelity issued approximately $1.0 million in 9% notes and all of the 500,000
warrants, raising an additional $250.

In connection with Fidelity's debt and equity offering completed on January 31,
1995, Fidelity reserved 346,500 shares of its common stock for issuance upon
exercise of 1,500 outstanding warrants. Each warrant represents the right to
purchase 231 shares of common stock. The warrants were valued at $100 per
warrant, carrying an exercise price of $8.93 per share and expire on January 31,
2005. At December 31, 2004, a total of 337,029 of the shares originally reserved
had been issued and 9,471 remained reserved and unissued.


>>       Discontinued Operations, Including Fourth Quarter Charges

On September 30, 2002, Fidelity signed a definitive agreement to sell the stock
of its wholly owned affordable housing subsidiary, Village Affordable Housing
Corporation and the stock of United's wholly owned affordable housing
subsidiary, Village Housing Corporation and certain other related affordable
housing assets to Pedcor Funding Corporation (Funding). Funding is a company
controlled by three directors of Fidelity and are members of a group that
beneficially owns approximately 60.7% of Fidelity's issued and outstanding stock
at time of transaction.

                                       59
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

The sale price was approximately $1.7 million in cash and was consummated during
the fourth quarter of 2002. The sale resulted in a consolidated pre-tax loss
under generally accepted accounting principles of approximately $201, which
consists of a gain from the sale of the affordable housing assets held by
Fidelity and United of $574 offset by a loss from the sale of the subsidiaries
of $775. The gain is recorded as gain on sale of assets in the other income
section of the consolidated statements of income.

The subsidiaries were sold as part of Fidelity's plan to end its active
involvement in the affordable housing business. Accordingly, the results of
operations for the two subsidiaries, which include impairment charges recorded
upon signing the definitive agreement of $742, has been classified as
discontinued operations in Fidelity's consolidated statement of income for
December 31, 2002. The $742 combined with the $775 loss noted in the paragraph
above total the $1,517 listed in the income statement as the loss on sale of
discontinued operations. The results of operations of the two subsidiaries for
the years ended December 31, 2001 and 2000, were not material and have,
therefore, not been segregated.

The sale was consummated in the fourth quarter of 2002. Certain charges were
recorded in the third quarter because it was determined that some of the assets
held for sale were impaired or their estimated useful lives had changed. Third
quarter charges totaled approximately $1,000, net of tax, including
approximately $860 in write-downs of intangible assets whose useful lives were
reduced. In the fourth quarter, in addition to recording the amounts discussed
in the second paragraph of this note, tax provisions of approximately $800 were
recorded to account for the basis difference on the stock that was sold.


>>       Benefit Plans

Fidelity is a participant in the Financial Institutions Retirement Fund (FIRF).
This defined-benefit plan is a multi-employer plan; separate actuarial
valuations are not made with respect to each participating employer. Effective
January 1, 2004, the plan was frozen to reduce future cash outlay and expense.
An estimated normal cost on an ongoing basis for a frozen plan is $14 per year.
According to FIRF administrators, the market value of the fund's assets did not
exceed the value of vested benefits in the aggregate as of June 30, 2004, the
date of the latest actuarial valuation. Plan expense of $0 was recognized during
2004, and $0 in 2003 compared to $110 in 2002. The plan provides pension
benefits for substantially all of Fidelity's employees.

Fidelity has a retirement savings 401(k) plan in which substantially all
employees may participate. Fidelity matches employees' contributions at the rate
of 25% up to 6% of the participant's salary. Fidelity's expense for the plan was
$19, $20 and $21 for the years ended December 31, 2004, 2003 and 2002,
respectively.


>>       Related Party Transactions

Fidelity has entered into transactions with certain directors, executive
officers, significant stockholders and their affiliates and associates. Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features.

                                       60
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

The aggregate amount of loans, as defined, to such related parties was as
follows:

December 31                                              2004          2003
-----------------------------------------------------------------------------
Balances, beginning of year                              $177        $ 2,782
   Composition change                                                    (33)
   Loans charged off
   Recoveries
   New loans, including renewals
   Payments, etc., including renewals                      (8)        (2,572)
                                                     ------------------------
Balances, end of year                                    $169        $   177
                                                     ========================

Deposits from related parties held by Fidelity at December 31, 2004 and 2003,
totaled $2.5 million and $854, respectively.

During the second quarter of 2003, Fidelity sold two classified notes totaling
$2.6 million in connection with two first mortgages held by Fidelity on certain
multifamily housing partnerships to a related party. The instruments were
acquired by Pedcor Bancorp at par and assisted Fidelity in reducing its
classified assets.

During the fourth quarter of 2003, Fidelity entered into a $1.0 million
unsecured term loan note with Pedcor Bancorp which matures on June 30, 2004.
These funds were contributed to United's capital prior to the end of the year.
This note was paid off on March 11, 2004.

During the first quarter of 2002, Fidelity sold two notes held in conjunction
with advances made by Fidelity to certain multifamily housing partnerships to a
related party. The advances were made to facilitate refinancing activities and
resulted in loans subordinated to the first mortgage loans. The advances had
been previously charged off and had no value on Fidelity's books. The gain on
the note sale totaled $223. Fidelity also sold a position in an interest rate
swap for a $72 gain. These gains are included in gains on sales of loans in the
consolidated statements of income. The instruments were acquired by Pedcor
Funding Corporation and the purchase price consisted of a 20% down payment with
the remainder financed by a 10 year note totaling $235 at a rate of 5.25% for
five years and 6.50% for the last five years with principal paid annually and
interest paid quarterly.

As noted in the discontinued operations footnote, Village Housing Corporation
and Village Affordable Housing Corporation, along with certain affordable
housing assets, were sold to Pedcor Funding Corporation in the fourth quarter of
2002.

Pedcor had also been providing management services to the partnerships in which
Fidelity was a general partner at no cost since May 2000, in accordance with the
provisions of the sale of stock to Pedcor in May 2000. Upon completion of the
Village Housing Corporation sale noted in the discontinued operations note,
these services were no longer necessary.

                                       61
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

>>       Stock Option Plans

Under Fidelity's stock option plans, Fidelity grants stock option awards which
vest and become exercisable at various dates. During the years ended December
31, 2004 and 2002, Fidelity authorized the grant of options for up to 2,292 and
8,292 shares, respectively, of its common stock. No options were granted in
2003. The exercise price of each option, which has a 10-year life, was greater
than the market price of Fidelity's stock on the date of grant; therefore, no
compensation expense was recognized.

Although Fidelity has elected to follow APB No. 25, SFAS No. 123 requires pro
forma disclosures of net income and earnings per share as if Fidelity had
accounted for its employee stock options under that Statement. The fair value of
each option grant was estimated on the grant date using an option-pricing model
with the following assumptions:

<TABLE>
<CAPTION>
Year Ended December 31                                            2004         2003         2002
---------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>          <C>
Risk-free interest rates                                            4.3%         4.2%          5.1%
Dividend yields                                                     0.0%         0.0%          0.0%
Volatility factors of expected market price of common stock        39.1%        39.7%         40.3%

Weighted-average expected life of the options                   10 years     10 years     10 years
</TABLE>

The following is a summary of the status of the Fidelity's stock option plans
and changes in the plans as of and for the years ended December 31, 2004, 2003
and 2002.

Directors' Plan
Fidelity has a non-qualified stock option plan (Directors' Plan) which provides
for the grant of non-qualified stock options to individuals who are directors of
Fidelity, or any of its subsidiaries. The Directors' Plan provides for the grant
of non-qualified stock options to acquire shares of common stock of Fidelity for
the price of not less than $24 above the average of the high and low bid
quotations, as reported by NASDAQ, for the common stock of Fidelity for the five
trading days immediately preceding the date the option is granted. The plan has
expired; however, as of December 31, 2004, there were options for 9,895 shares
outstanding.

<TABLE>
<CAPTION>
December 31                                          2004         2003           2002
--------------------------------------------------------------------------------------
<S>                                                 <C>          <C>            <C>
Shares under option
   Outstanding at beginning of year                 16,548       16,548         11,964
   Granted                                                                       4,584
   Forfeited/expired                                (6,653)
                                 -----------------------------------------------------
                                                     9,895       16,548         16,548
   Outstanding at end of year
                                 =====================================================
                                                     9,895       16,548         16,548
   Exercisable at end of year
                                 =====================================================
Weighted option price per share
   Exercisable                                     $ 75.96      $ 75.48         $75.48
   Granted                                                                       53.04
Weighted-average fair value of options granted
   during the year                                                              $12.60
</TABLE>


                                       62
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


The following table summarizes information about stock options under the
Directors' Plan outstanding at December 31, 2004:

<TABLE>
<CAPTION>
                                    Options Outstanding                        Options Exercisable
                        ----------------------------------------------------------------------------------
                                      Weighted-Average
  Range of Exercise       Number         Remaining       Weighted-Average     Number      Weighted-Average
      Prices            Outstanding   Contractual Life    Exercise Price    Exercisable    Exercise Price
----------------------------------------------------------------------------------------------------------
<S>                        <C>           <C>                  <C>             <C>              <C>
$ 51.72  to  $ 55.20       7,183         6.6 years            $ 53.04         7,183            $ 53.04
$116.88  to  $141.72       2,712         2.3 years            $136.44         2,712            $136.44
</TABLE>


1995 Key Employees' Stock Option Plan
The 1995 Key Employees' Stock Option Plan (1995 Plan) provides for the granting
of either incentive stock options (ISOs) pursuant to Section 422A of the
Internal Revenue Code of 1986, as amended (Code), or stock options which do not
qualify as ISOs, or any combination thereof. Options may be granted to key
employees and officers of Fidelity and its subsidiaries.

The option price per share for ISOs will not be less than the fair market value
of a share on the date the option is granted. The option price per share for
ISOs granted to an employee owning 10 percent or more of the common stock of
Fidelity will be not less than 110 percent of the fair market value of a share
on the date the option is granted. The option price per share for ISOs will be
determined by the compensation committee, but may not be less than 100 percent
of the fair market value on the date of grant. A total of 19,708 shares have
been reserved for issuance under the 1995 Plan.

At December 31, 2004, there were 5,431 options available for grant. A summary of
the stock options activity for the 1995 Plan was as follows:

<TABLE>
<CAPTION>
December 31                                           2004          2003          2002
---------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>
Shares under option
   Outstanding at beginning of year                  12,785        15,285        15,554
   Granted                                            2,292                       3,708
   Forfeited/expired                                   (833)       (2,500)       (3,810)
   Exercised                                                                       (167)
                                                  -------------------------------------

   Outstanding at end of year                        14,244        12,785        15,285
                                                  =====================================

   Exercisable at end of year                        11,677        10,702       128,423
                                                  =====================================

Weighted option price per share
   Exercisable                                     $  44.52      $  46.08      $  46.20
   Granted                                            18.90                       38.04

Weighted-average fair value of options granted
   during the year                                 $  10.68                    $  16.44
</TABLE>

                                       63
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


The following table summarizes information about stock options under the 1995
Plan outstanding at December 31, 2004:
<TABLE>
<CAPTION>
                                 Options Outstanding                       Options Exercisable
                     ---------------------------------------------------------------------------------
                                   Weighted-Average
 Range of Exercise     Number         Remaining       Weighted-Average     Number     Weighted-Average
      Prices         Outstanding   Contractual Life    Exercise Price    Exercisable   Exercise Price
------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>                  <C>              <C>             <C>
$ 18.36 to $ 48.00     13,535        6.4 years            $ 38.76          10,968          $ 75.00
  $129.72                 709        2.8 years            $129.72             709          $129.72
</TABLE>


>>       Earnings Per Share

Earnings per share (EPS) were computed as follows:
<TABLE>
<CAPTION>
Year Ended December 31                 2004                             2003                             2002
-----------------------------------------------------------------------------------------------------------------------------
                                     Weighted-    Per                Weighted-    Per                Weighted-    Per
                                      Average    Share                Average    Share                Average    Share
                            Income    Shares     Amount     Income    Shares     Amount     Income    Shares     Amount
                         ----------------------------------------------------------------------------------------------
<S>                          <C>      <C>        <C>          <C>     <C>        <C>        <C>        <C>       <C>
Income from continuing
   operations                $472                             $214                          $(2,407)
                         ===========                      ===========                     ===========
Basic earnings per share

   Income available to
     common stockholders     $472     874,201    $0.54        $214    744,340    $0.29      $(2,407)   514,658   $(4.67)
                                                ======                           ======                          =======
   Effect of dilutive
     securities
     Stock options                        232
                         --------------------             -------------------             --------------------
Diluted earnings per
   share

   Income available to
     common stockholders
     and assumed
     conversions             $472     874,433    $0.54        $214    744,340    $0.29      $(2,407)   514,658   $(4.67)
                         ===============================================================================================
</TABLE>

Options to purchase 21,572 shares of common stock at prices ranging from $21.48
to $141.72 per share, as well as stock warrants representing the right to
purchase 42,456 shares of common stock at prices ranging from $36.00 to $107.16
per share were outstanding at December 31, 2004, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.

                                       64
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Options to purchase 29,333 shares of common stock at prices ranging from $18.36
to $141.72 per share, as well as stock warrants representing the right to
purchase 43,979 shares of common stock at prices ranging from $36.00 to $107.16
per share were outstanding at December 31, 2003, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.

Options to purchase 31,833 shares of common stock at prices ranging from $18.36
to $141.72 per share, as well as stock warrants representing the right to
purchase 43,979 shares of common stock at prices ranging from $36.00 to $107.16
per share were outstanding at December 31 2002, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.


>>       Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:

Cash and Cash Equivalents--The fair value of cash and cash equivalents
approximates carrying value.

Interest-Bearing Time Deposits--The fair value of interest-bearing time deposits
approximates carrying value.

Investment Securities--Fair values are based on quoted market prices.

Loans--For both short-term loans and 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 certain mortgage loans, including one-to-four family
residential, are based on quoted market prices of similar loans sold in
conjunction with securitization transactions, adjusted for differences in loan
characteristics. The fair value for other loans is estimated using discounted
cash flow analyses using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.

Interest Receivable/Payable--The fair values of interest receivable/payable
approximate carrying values.

FHLB Stock--The fair value is estimated to be the carrying value, which is par.
All transactions in the capital stock of the FHLB of Indianapolis are executed
at par.

Deposits--The fair values of non-interest-bearing, interest-bearing demand and
savings accounts are equal to the amount payable on demand at the balance sheet
date. The carrying amounts for variable rate, fixed-term certificates of deposit
approximate their fair values at the balance sheet date. 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
to a schedule of aggregated expected monthly maturities on such time deposits.

Long-Term Debt--The fair value of these borrowings is estimated using a
discounted cash flow calculation based on current rates for similar debt.
Long-term debt consists of adjustable instruments tied to a variable market
interest rate.

                                       65
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

Off-Balance-Sheet Commitments--Commitments include commitments to purchase and
originate mortgage loans, commitments to sell mortgage loans and standby letters
of credit and are generally of a short-term nature. The fair value of the loan
commitments is 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 of the commitments to
purchase and originate mortgage loans and to sell mortgage loans, which are
immaterial, are reasonable estimates of the fair value of these financial
instruments. The carrying amount of the standby letters of credit, which consist
of a letter of credit valuation allowance of $232 and $291 at December 31, 2004
and 2003, respectively, is a reasonable estimate of the fair value of those
off-balance sheet items.

The estimated fair values of Fidelity's financial instruments were as follows:
<TABLE>
<CAPTION>
                                                           2004                           2003
                                                --------------------------------------------------------
                                                 Carrying        Fair           Carrying        Fair
December 31                                       Amount         Value           Amount         Value
--------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>              <C>           <C>
Assets
   Cash and cash equivalents                     $   4,622     $   4,622        $   2,968     $   2,968
   Investment securities available for sale         65,192        65,192           52,208        52,208
   Loans, net                                      110,771       112,275          100,437       102,462
   Interest receivable                                 642           642              564           564
   FHLB stock                                        3,627         3,627            3,466         3,466

Liabilities
   Deposits                                        127,701       127,457          120,680       121,782
   FHLB advances and borrowings                     54,550        53,991           39,627        39,723
   Interest payable                                    485           485              339           339
   Standby letters of credit                           232           232              291           291
</TABLE>


>>       New Accounting Pronouncements

In December, 2004, the Financial Accounting Standards Board (FASB) issued an
amendment to SFAS 123 Accounting for Stock-Based Compensation, (SFAS 123R) which
eliminates the ability to account for share-based compensation transactions
using Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and generally requires that such transactions be accounted for using
a fair value-based method. SFAS 123R will be effective for the Company beginning
January 1, 2006. SFAS 123R applies to all awards granted after the required
effective date and to awards modified, repurchased, or cancelled after that date
as well as for the unvested portion of awards existing as of the effective date.

As of the required effective date, the Company will apply SFAS 123R using a
modified version of prospective application. Under that transition method,
compensation cost is recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service has not yet been
rendered, based on the grant-date fair value of those awards calculated under
SFAS 123 for pro forma disclosures. For periods before the required effective
date, a company may elect to apply a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis consistent with the pro forma disclosures required for those periods by
SFAS 123.

Based on the awards outstanding at December 31, 2004, management has estimated
that approximately $12 of compensation expense related to those awards will be
recognized during the year ended December 31, 2006.


                                       66
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)


>>       Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position,
results of operations and cash flows of Fidelity:

                            Condensed Balance Sheets

December 31                                            2004         2003
-------------------------------------------------------------------------

Assets
   Cash and cash equivalents                          $ 3,265     $    39
   Investment in common stock of subsidiaries          16,681      14,889
   Loans, net                                             381         421
   Income tax receivable                                2,291       2,063
   Other assets                                           228          94
                                                  -----------------------

       Total assets                                   $22,846     $17,506
                                                  =======================

Liabilities
   Long-term debt                                     $ 6,460     $ 4,077
   Other liabilities                                      125          62
                                                  -----------------------
       Total liabilities                                6,585       4,139

Stockholders' Equity                                   16,261      13,367
                                                  -----------------------

       Total liabilities and stockholders' equity     $22,846     $17,506
                                                  =======================


                                       67
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

                         Condensed Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31                                                 2004         2003         2002
------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>
Income
   Interest income                                                   $    19      $   232      $   560
   Other income                                                           15          102          614
                                                                    ----------------------------------
       Total income                                                       34          334        1,174
                                                                    ----------------------------------

Expense
   Interest expense                                                      345          610        1,113
   Provision for loan losses                                              25          (73)        (400)
   Letter of credit valuation provision                                               (61)
   Other expenses                                                        264          350        1,526
                                                                    ----------------------------------
       Total expense                                                     634          826        2,239
                                                                    ----------------------------------

Loss Before Income Tax and Equity in
   Undistributed (Distributions in Excess of)
   Income of Subsidiaries                                               (600)        (492)      (1,065)

Income Taxes (Benefit)                                                  (228)        (187)         976
                                                                    ----------------------------------

Loss Before Equity in Undistributed (Distributions in Excess of)
   Income of Subsidiaries                                               (372)        (305)      (2,041)

Equity in Undistributed (Distributions in Excess of) Income of
   Subsidiaries                                                          844          519       (2,354)
                                                                   -----------------------------------

Net Income (Loss)                                                    $   472      $   214      $(4,395)
                                                                   ===================================
</TABLE>

                                       68
<PAGE>

                            FIDELITY FEDERAL BANCORP

                   Notes to Consolidated Financial Statements
                (Dollar Amounts in Thousands, Except Share Data)

                       Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31                                               2004         2003         2002
----------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>          <C>
Operating Activities
   Net income (loss)                                               $   472      $   214      $(4,395)
   Adjustments to reconcile net income (loss) to net
     cash used by operating activities
     Depreciation and amortization                                       1            5            6
     Provision for loan losses                                          25          (73)        (400)
     Letter of credit valuation provision                                           (61)
     Funding on outstanding letters of credit                                                   (239)
     Gain on early extinguishment of debt                                                       (140)
     Loss on impairment of assets held for sale and changes in
       estimated useful lives of intangible assets                                             1,096
     Loss on sale of subsidiary                                                                   64
     Undistributed net income (loss) of subsidiaries                  (844)        (519)       2,374
     (Increase) decrease in other assets                              (363)         (87)         921
     (Increase) decrease in other liabilities                           64         (173)        (498)
                                                                 -----------------------------------
       Net cash used by operating activities                          (645)        (694)      (1,211)
                                                                 -----------------------------------

Investing Activities
   Capital contributions to subsidiaries                            (1,000)      (1,000)          (8)
   Proceeds from sale of subsidiary                                                              461
   Principal payments received on notes from subsidiaries                         1,500        1,375
   Net change in loans                                                  14        2,466          (97)
                                                                 -----------------------------------
       Net cash provided (used) by investing activities               (986)       2,966        1,731
                                                                 -----------------------------------

Financing Activities
   Repayment of long-term debt                                      (3,075)      (7,784)      (3,928)
   Proceeds from issuance of long-term debt                          5,458        1,275        1,858
   Sale of common stock                                              2,474        4,153        1,421
   Sale of stock warrants                                                                        250
                                                                 -----------------------------------
       Net cash provided (used) by financing activities              4,857       (2,356)        (399)
                                                                 -----------------------------------

Change in Cash and Cash Equivalents                                  3,226          (84)         121

Cash and Cash Equivalents, Beginning of Period                          39          123            2
                                                                 -----------------------------------

Cash and Cash Equivalents, End of Period                           $ 3,265      $    39      $   123
                                                                 ===================================
</TABLE>


>>       Subsequent Event

On February 28, 2005, the board of directors unanimously approved and Fidelity
executed a 1-for-30,000 reverse stock split. The reverse stock split was
immediately followed by a 2,500-for-1 forward stock split. Fidelity then
terminated the registration of its common stock by filing Form 15E with the
Securities and Exchange Commission. This resulted in the delisting of its shares
on the NASDAQ. All share and per share data in the accompanying financial
statements has been adjusted for the above stock splits.

                                       69