SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1999
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 [NO FEE REQUIRED]
    For the transaction period from ___________________ to _____________________


                         Commission File Number: 0-29040
                                                 -------

                           FIDELITY BANKSHARES, INC.
             -------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

           Delaware                                    65-0717085
-------------------------------                   ------------------------
(State or Other Jurisdiction of                     (I.R.S. Employer
Incorporation or Organization)                    Identification Number)

218 Datura Street, West Palm Beach, Florida               33401
--------------------------------------------             -------
(Address of Principal Executive Offices)               (Zip Code)

                                 (561) 659-9900
                ------------------------------------------------
               (Registrant's Telephone Number including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                      ----

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.10 per share
               ---------------------------------------------------
                                (Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was  required  to file  reports)  and (2) has been  subject  to such
requirements for the past 90 days.
YES    X      NO
     -----       -----

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. [X]

     As of March 3, 2000, there were issued and outstanding  6,835,768 shares of
the  Registrant's  Common Stock. The aggregate value of the voting stock held by
non-affiliates  of the Registrant,  computed by reference to the average bid and
asked prices of the Common Stock as of March 3, 2000 ($14.875) was $36,735,969.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Sections  of Annual  Report  to  Stockholders  for the  fiscal  year  ended
     December 31, 1999 (Parts II and IV).
2.   Proxy  Statement for the 2000 Annual Meeting of  Stockholders  (Parts I and
     III).


<PAGE>




ITEM 8.   FINANCIAL STATEMENTS
------------------------------

     This  Amendment to the Company's  Form 10-K is being filed in order to file
the Company's consolidated financial statements.




Independent Auditors' Report





Board of Directors of
Fidelity Bankshares, Inc.:




We have audited the accompanying  consolidated  statements of financial position
of Fidelity  Bankshares,  Inc. (the "Company") and its wholly-owned  subsidiary,
Fidelity Federal Savings Bank of Florida,  as of December 31, 1998 and 1999, and
the related  consolidated  statements of operations,  comprehensive  operations,
changes in  stockholders'  equity and cash flows for each of the three  years in
the period ended December 31, 1999. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of Fidelity  Bankshares,  Inc. and
subsidiary at December 31, 1998 and 1999 and the results of their operations and
their cash flows for each of the three years in the period  ended  December  31,
1999, in conformity with generally accepted accounting principles.



/s/ Deloitte & Touche LLP


Certified Public Accountants
West Palm Beach, FL
February 14, 2000



<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AT DECEMBER 31, 1998 AND 1999
-------------------------------------------------------------------------------------------------------------------



                                                                                               1998                  1999
                                                                                         ===========          ===========
ASSETS (In Thousands, except share data) CASH AND CASH EQUIVALENTS:
<S>                                                                                      <C>                  <C>
     Cash and amounts due from depository institutions........................           $    27,951          $    41,736
     Interest-bearing deposits................................................                32,075               19,065
                                                                                         -----------          -----------
         Total cash and cash equivalents......................................                60,026               60,801
                                                                                         -----------          -----------
ASSETS AVAILABLE FOR SALE (At Fair Value):
     Municipal bonds and government and agency securities.....................                18,824               29,059
     Mortgage-backed securities...............................................               389,263              336,212
     Corporate debt securities................................................                44,488               38,959
                                                                                         -----------          -----------
         Total assets available for sale......................................               452,575              404,230
LOANS RECEIVABLE, Net of allowance for loan losses - 1998 $3,226
OFFICE PROPERTIES AND EQUIPMENT...............................................                37,708               44,982
FEDERAL HOME LOAN BANK STOCK, At cost.........................................                15,658               13,354
REAL ESTATE OWNED, Net........................................................                   907                  775
ACCRUED INTEREST RECEIVABLE...................................................                 7,549                8,330
DEFERRED INCOME TAX ASSET.....................................................                 1,443                4,924
OTHER ASSETS                                                                                  13,895               17,116
                                                                                         -----------          -----------
TOTAL ASSETS                                                                             $ 1,566,927          $ 1,718,933
                                                                                         ===========          ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
DEPOSITS .....................................................................           $ 1,120,746          $ 1,321,510
OTHER BORROWED FUNDS..........................................................                 6,981               14,656
ADVANCES FROM FEDERAL HOME LOAN BANK..........................................               303,140              247,073
ADVANCES BY BORROWERS FOR TAXES AND INSURANCE.................................                 3,081                4,010
DRAFTS PAYABLE................................................................                 9,605                6,533
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
OTHER LIABILITIES.............................................................                 9,625               13,097
                                                                                         -----------          -----------
     TOTAL LIABILITIES........................................................             1,481,928            1,635,629
                                                                                         -----------          -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
PREFERRED STOCK, 2,000,000 shares authorized, none issued.....................                     -                    -
COMMON STOCK ($.10 par value) 8,200,000 authorized shares:
ADDITIONAL PAID IN CAPITAL....................................................                40,535               40,937
RETAINED EARNINGS - substantially restricted..................................                52,018               57,343
TREASURY STOCK - at cost
     394,029 and 488,806 shares at December 31, 1998 and 1999, respectively...                (7,258)              (9,232)
COMMON STOCK PURCHASED BY:
     Employee stock ownership plan............................................                  (658)                (329)
ACCUMULATED OTHER COMPREHENSIVE LOSS
     TOTAL STOCKHOLDERS' EQUITY...............................................                84,999               83,304
                                                                                         -----------          -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................           $ 1,566,927          $ 1,718,933
                                                                                         ===========          ===========
</TABLE>


See Notes to Consolidated Financial Statements.

<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999




<TABLE>
<CAPTION>

                                                                                   1997            1998           1999
                                                                             =============================================
                                                                                       (In Thousands, except share data)
Interest income:
<S>                                                                           <C>             <C>               <C>
     Loans.............................................................       $  58,386       $   71,996        $   81,290
     Investment securities.............................................             758            1,048             2,215
     Other investments.................................................           1,969            3,482             3,109
     Mortgage-backed and corporate debt securities.....................          11,159           21,794            24,311
                                                                              ---------       ----------        ----------
         Total interest income.........................................          72,272           98,320           110,925
                                                                              ---------       ----------        ----------
Interest expense:
     Deposits..........................................................          33,856           45,128            51,578
     Advances from Federal Home Loan Bank and
         Total interest expense........................................          41,606           64,992            72,255
                                                                              ---------       ----------        ----------

Net interest income....................................................          30,666           33,328            38,670

Provision for loan losses..............................................             170               77               463
                                                                              ---------       ----------        ----------

Net interest income after provision for loan losses....................          30,496           33,251            38,207
                                                                              ---------       ----------        ----------
Other income:
     Service charges on deposit accounts...............................           2,061            2,519             3,222
     Fees for other banking services...................................           1,545            2,079             2,284
     Net gain on sale of loans, mortgage-backed securities and                      190            2,502               420
     Gain on sale of property..........................................               -                -             5,100
     Miscellaneous.....................................................           1,114            1,590             1,901
                                                                              ---------       ----------        ----------
         Total other income............................................           4,910            8,690            12,927
                                                                              ---------       ----------        ----------
Operating expense:
     Employee compensation and benefits................................          13,900           16,422            21,214
     Occupancy and equipment...........................................           4,908            6,231             7,256
     Gain on real estate owned.........................................            (153)             (72)             (234)
     Marketing.........................................................             633              767               916
     Federal deposit insurance premium.................................             464              556               672
     Miscellaneous.....................................................           4,483            5,783             6,530
                                                                              ---------       ----------        ----------
         Total operating expense.......................................          24,235           29,687            36,354
                                                                              ---------       ----------        ----------

Income before provision for income taxes...............................          11,171           12,254            14,780
                                                                              ---------       ----------        ----------
Provision (benefit) for income taxes:
     Current...........................................................           5,573            5,579             5,604
     Deferred..........................................................            (820)            (737)               62
                                                                              ---------       ----------        ----------
         Total provision for income taxes..............................           4,753            4,842             5,666
                                                                              ---------       ----------        ----------

              Net income...............................................       $   6,418       $    7,412        $    9,114
                                                                              =========       ==========        ==========

Earnings per share:
     Basic.............................................................       $     .96       $     1.12        $     1.42
                                                                              =========       ==========        ==========
     Diluted...........................................................       $     .95       $     1.10        $     1.40
                                                                              =========       ==========        ==========
</TABLE>



See Notes to Consolidated Financial Statements.


<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
--------------------------------------------------------------------------------------------------------------------------

                                                                                1997             1998                1999
                                                                         ==================================================
                                                                                          (In Thousands)

<S>                                                                        <C>               <C>                <C>
Net Income...............................................................  $     6,418       $     7,412        $     9,114
Other comprehensive income, net of tax:
     Unrealized gains (losses) on assets available for sale:
         Unrealized holding gains (losses) arising during period.........          623              (910)            (5,689)
         Less: reclassification adjustment for gains realized in                     -              (813)               (91)
                                                                           -----------       -----------        -----------

Comprehensive income.....................................................  $     7,041       $     5,689        $     3,334
                                                                           ===========       ===========        ===========
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
-------------------------------------------------------------------------------------------------------------------

                                                                                                    Accumulated
                                                                   Retained               Employee     Other
                                                        Additional Earnings-               Stock    Comprehen
                                               Common    Paid In  Substantially Treasury  Ownership -sive Income
                                                Stock    Capital   Restricted    Stock     Plan      (Loss)       Total
                                               ===========================================================================
                                                                            (In Thousands)

<S>                                             <C>       <C>       <C>          <C>       <C>       <C>          <C>
Balance - December 31, 1996........             $   675   $37,397   $44,184      $    -    $(1,315)  $   782      $81,723

Net Income for the year ended
     December 31, 1997.............                   -         -     6,418           -         -          -        6,418
Stock Options exercised............                   4       525         -           -         -          -          529
Common Stock retired...............                  (1)     (142)        -           -         -          -         (143)
Recognition of unrealized increase in fair
Amortization of deferred compensation -
Cash dividends declared............                   -         -    (2,659)          -         -          -       (2,659)
                                               ---------------------------------------------------------------------------

Balance - December 31, 1997........                 678    38,347    47,943           -      (986)     1,405       87,387

Net Income for the year ended
     December 31, 1998.............                   -         -     7,412           -         -          -        7,412
Stock Options exercised............                   2       323         -           -         -          -          325
Common Stock retired...............                   -      (115)        -           -         -          -         (115)
Purchase of treasury stock.........                   -         -         -      (5,752)        -          -       (5,752)
Reclassification of common stock held
Recognition of unrealized decrease in fair
Amortization of deferred compensation -
Cash dividends declared............                   -         -    (3,337)          -         -          -       (3,337)
                                               ---------------------------------------------------------------------------

Balance - December 31, 1998........                 680    40,535    52,018      (7,258)     (658)      (318)      84,999

Net Income for the year ended
     December 31, 1999.............                   -         -     9,114           -         -          -        9,114
Stock Options exercised............                   3       190         -           -         -          -          193
Common Stock retired...............                   -       (22)        -           -         -          -          (22)
Purchase of treasury stock.........                   -         -         -      (1,906)        -          -       (1,906)
Reclassification of common stock held
Recognition of unrealized decrease in fair
Amortization of deferred compensation -
Cash dividends declared............                   -         -    (3,789)          -         -          -       (3,789)
                                               ---------------------------------------------------------------------------

Balance - December 31, 1999........             $   683   $40,937   $57,343      $(9,232)  $ (329)   $(6,098)     $83,304
                                               ===========================================================================
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
--------------------------------------------------------------------------------------------------------------------------------


                                                                                        1997             1998              1999
                                                                                    ============================================
                                                                                                  (In Thousands)
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
<S>                                                                                <C>               <C>              <C>
Net Income.............................................................            $  6,418          $  7,412         $  9,114
Adjustments to reconcile net income to net cash provided by (used for)
   Depreciation........................................................               1,258             1,796            2,301
   ESOP and Recognition and Retention Plan compensation expense........                 765               803              487
   Accretion of discounts, amortization of premiums and goodwill, and                  (414)            1,405            1,558
   Provision for loan losses...........................................                 170                77              463
   Provisions for losses and net (gains) losses on sales of real estate                (189)              (48)            (230)
   Net (gain) loss on sale of:
         Loans.........................................................                (190)           (1,147)            (273)
         Corporate debt securities.....................................                   -              (109)              (5)
         Mortgage-backed securities....................................                   -            (1,246)            (140)
         Office properties and equipment...............................                   -                43           (5,053)
         Other assets..................................................                (702)                -                -
Increase in accrued interest receivable................................              (1,507)           (1,145)            (780)
Increase in other assets...............................................              (3,409)           (1,654)          (2,942)
Increase (decrease) in drafts payable..................................               2,392             4,256           (3,072)
Increase (decrease) in deferred income taxes...........................                (387)              673              (41)
Increase in other liabilities..........................................                 661               566            2,918
                                                                                   --------          --------         --------
         Net cash from operating activities............................               4,866            11,682            4,305
                                                                                   --------          --------         --------
CASH FLOW FROM (FOR) INVESTING ACTIVITIES:
Loan originations and principal payments on loans......................            (125,911)         (125,997)        (175,275)
Principal payments received on mortgage-backed securities..............              22,325           125,105           89,810
Purchases of:
   Loans...............................................................             (35,647)          (45,157)         (28,401)
   Mortgage-backed securities..........................................            (131,956)         (310,581)         (57,285)
   Corporate debt securities...........................................                   -           (55,343)               -
   Federal Home Loan Bank stock........................................             (13,566)           (5,347)            (687)
   Investment securities...............................................              (5,283)           (4,974)         (40,837)
   Office properties and equipment.....................................              (4,724)          (18,277)         (11,335)
Proceeds from sales of:
   Loans...............................................................              11,824            54,850           16,006
   Federal Home Loan Bank stock........................................                   -             1,271            2,991
   Corporate debt securities...........................................                   -             9,843            4,958
   Real estate acquired in settlement of loans and held for investment.               1,647             1,470            2,127
   Mortgage-backed securities available for sale.......................                   -            27,290           10,054
   Office properties and equipment.....................................                   -                 -            6,675
   Other assets........................................................                 798                 -                -
Proceeds from maturities of investment securities......................               7,000             2,660           29,890
Cash used to purchase BankBoynton, a Federal Savings Bank
         net of cash received relating to purchase.....................              (4,367)                -                -
Other..................................................................               2,004             1,465             (117)
                                                                                   --------          --------         --------
         Net cash used for investing activities........................             (275,856)        (341,722)        (151,426)
                                                                                   ---------         -------- -       --------
CASH FLOW FROM (FOR) FINANCING ACTIVITIES:
Gross proceeds from the sale of common stock...........................                 308                79              274
Purchase of treasury stock.............................................                   -            (5,752)          (1,906)
Sale of subordinated debentures, net...................................                   -            27,277                -
Cash dividends paid....................................................              (2,566)           (3,316)          (3,773)
Net increase (decrease) in:
   NOW accounts, demand deposits and savings accounts..................              27,858            58,568          109,143
   Certificates of deposit.............................................             108,033           189,838           91,621
   Advances from Federal Home Loan Bank................................             147,874            64,049          (56,067)
   Other borrowed funds................................................               3,780             3,201            7,675
   ESOP Loan...........................................................              (1,104)                -                -
   Advances by borrowers for taxes and insurance.......................                 211               298              929
                                                                                   --------          --------         --------
         Net cash from financing activities............................             284,394           334,242          147,896
                                                                                   --------          --------         --------
NET INCREASE IN CASH AND CASH EQUIVALENTS..............................              13,404             4,202              775
CASH AND CASH EQUIVALENTS, Beginning of year...........................              42,420            55,824           60,026
                                                                                   --------          --------         --------
CASH AND CASH EQUIVALENTS, End of year.................................            $ 55,824          $ 60,026         $ 60,801
                                                                                   ========          ========         ========
</TABLE>


See Notes to Consolidated Financial Statements.


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
--------------------------------------------------------------------------------

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fidelity Bankshares,  Inc. (the "Company") became the parent of Fidelity Federal
Savings  Bank of Florida  (the  "Bank") on January  29,  1997,  as a result of a
tax-free  reorganization,  accounted  for in the same  manner  as a  pooling  of
interests merger. Consequently, the Bank is now a wholly-owned subsidiary of the
Company.


The Bank's lending markets are primarily  concentrated in Palm Beach, Martin and
St. Lucie counties in Southeast Florida.


The accounting and reporting policies of the Company and its subsidiary conform,
in all material  respects,  to generally  accepted  accounting  principles.  The
following summarizes the more significant of these policies:


Principles of Consolidation - The consolidated  financial statements include the
accounts  of the  Company,  the Bank and the Bank's  wholly-owned  subsidiaries,
Fidelity Realty and Appraisal Services,  Inc. ("FRAS") and Florida  Consolidated
Agency, Inc. ("Fidelity Insurance").  All significant  intercompany balances and
transactions have been eliminated.  Neither the Bank nor its subsidiaries are or
have been involved in any joint ventures during any periods presented.


FRAS,  principally,  performs  appraisals for and sells real estate owned by the
Bank.  Fidelity Insurance,  an insurance agency,  sells a full line of insurance
products.


Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting principles
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.


Cash Equivalents - For presentation purposes in both the consolidated statements
of financial position and the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.


Assets  Available  for Sale - Securities  available for sale are carried at fair
value, based upon market  quotations.  Deferred income taxes are provided on any
unrealized  appreciation  or decline in value.  Such  appreciation or decline in
value,  net of deferred  taxes is reflected as an adjustment of equity.  Gain or
loss on sale of such securities is based on the specific  identification method.
Debt  securities  are  classified  as  either  available  for  sale or held  for
investment based on management's intent.


Interest Rate Risk - The Bank is engaged principally in providing first mortgage
loans (both  adjustable rate and fixed rate mortgage loans) to individuals  (See
Note 5 for the  composition  of the mortgage loan portfolio at December 31, 1998
and 1999).  Mortgage loans and investment  securities are funded  primarily with
short-term  liabilities  which have  interest  rates that vary with market rates
over time.  Net  interest  income and the market  value of net  interest-earning
assets  will  fluctuate  based on changes in  interest  rates and changes in the
levels of  interest-sensitive  assets and  liabilities.  The actual  duration of
interest-earning   assets   and   interest-bearing    liabilities   may   differ
significantly  from  the  stated  duration  as a  result  of  prepayment,  early
withdrawals, and similar factors.


Provisions  for Loan Losses -  Provisions  for loan losses,  which  increase the
allowance for loan losses, are established by charges to income.  Such allowance
represents the amounts which, in management's  judgment,  are adequate to absorb
charge-offs  of existing loans which may become  uncollectible.  The adequacy of
the allowance is determined by  management's  continuing  evaluation of the loan
portfolio in light of past loss  experience,


<PAGE>

present economic conditions, and other factors considered relevant by management
at the financial  statement date.  Anticipated changes in economic factors which
may influence the level of the  allowance  are  considered in the  evaluation by
management when the likelihood of the changes can be reasonably  determined.  In
estimating the allowance for possible  losses,  consideration  is given to asset
performance,  the  financial  condition of borrowers or  guarantors,  additional
collateral provided,  current and anticipated  economic conditions,  appraisals,
cost of disposal,  and holding costs. While management uses the best information
available to make such evaluations,  future  adjustments to the allowance may be
necessary,  which may be material,  if economic conditions differ  substantially
from the  assumptions  used in the  evaluation.  If  additions  to the  original
estimate of the  allowance  for loan losses are deemed  necessary,  they will be
reported in earnings in the period in which they become reasonably estimable.


The Bank considers that a loan is impaired  when,  based on current  information
and events,  it is probable  that the Bank will be unable to collect all amounts
due  according  to the  contractual  terms of the loan  agreement.  Individually
identified  impaired  loans are measured  based on the present value of payments
expected  to be  received,  using the  historical  effective  loan  rates as the
discount rate. Alternatively, measurement may also be based on observable market
prices,  or for loans that are solely dependent on the collateral for repayment,
measurement may be based on the fair value of the collateral.  Loans that are to
be foreclosed  are measured  based on the fair value of the  collateral.  If the
recorded  investment in the impaired  loan exceeds the measure of fair value,  a
valuation is required as a component of the allowance  for loan losses.  Changes
to the valuation allowance are recorded as a component of the provision for loan
losses.


Uncollected  Interest - The Bank reverses all accrued  interest against interest
income when a loan is more than 90 days delinquent and ceases accruing  interest
thereafter.  Such  interest  ultimately  collected  is credited to income in the
period of recovery.


Real Estate Owned - Properties acquired through  foreclosure,  or a deed in lieu
of foreclosure  are carried at the lower of fair value less  estimated  costs to
sell, or cost.  If the fair value less the estimated  cost to sell an individual
property  declines  below the cost of such  property,  a provision for losses is
charged to operations.


Subsequent  costs  relating to the  improvement  of property are  capitalized in
amounts not to exceed the property's  fair value.  Costs relating to holding the
property are charged to expense when incurred.


The  amounts  the Bank  could  ultimately  recover  from  property  acquired  by
foreclosure or deed in lieu of  foreclosure,  could differ  materially  from the
amounts  used in arriving  at the net  carrying  value of the assets  because of
future  market  factors  beyond  the  Bank's  control  or  changes in the Bank's
strategy for recovering its investment.


Office Properties and Equipment - Office properties and equipment are carried at
cost less  accumulated  depreciation.  Land is carried at cost.  Depreciation is
computed on the  straight-line  method over the  estimated  useful  lives of the
assets, which range from three to fifty years for buildings and improvements and
three to ten years for furniture and equipment.


Goodwill  -  Goodwill  resulting  from  the  acquisition  of  deposits  from the
Resolution Trust Corporation ("RTC") is being amortized on a straight-line basis
over five years.  Goodwill resulting from the acquisition of BankBoynton in 1997
is being amortized on a straight-line  basis over fifteen years,  while goodwill
arising  for the  acquisition  of Dunn & Noel in  1999,  which  became  Fidelity
Insurance,  is being  amortized  on a  straight-line  basis over ten years.  The
balance of goodwill,  included in other assets at December 31, 1998 and 1999 was
$ 2,394,000 and $ 2,758,000, respectively.


Drafts  Payable - Drafts payable  represent  checks drawn by the Bank on a third
party payer, for savings account withdrawals and payment of the Bank's expenses.
Under the agreement  between the Bank and its third party payer,  the Bank funds
the checks written on the day following their issuance.

<PAGE>


Loan  Origination  Fees and Costs - Loan  origination  fees and  certain  direct
origination  costs are  capitalized and recognized as an adjustment of the yield
of the related  loan.  Deferred loan fees and costs are amortized to income over
the estimated life of the loans using the interest method.


Unearned  discounts on consumer loans are amortized to income using the interest
method.


Commitment  Fees -  Non-refundable  fees  received  for  commitments  to make or
purchase  loans  in  the  future,  net  of  direct  costs  of  underwriting  the
commitments,  are deferred and, if the commitment is exercised,  recognized over
the  life of the loan as an  adjustment  of  yield.  If the  commitment  expires
unexercised, income is recognized upon expiration of the commitment. Direct loan
origination  costs  incurred to make a commitment to originate a loan are offset
against any related commitment fee and the net amount recognized.


Pension and  Retirement  Plans - Benefits are accounted  for in accordance  with
SFAS No. 87, entitled "Employers' Accounting for Pensions." Net periodic pension
costs (income) are actuarially determined.


Income  Taxes - The Company and its  subsidiary  file  consolidated  federal and
state income tax returns (See Note 12).


Deferred income taxes are provided on items  recognized for financial  reporting
purposes  in periods  different  than such items are  recognized  for income tax
purposes.


Earnings  Per Common  Share - Basic  earnings  per common  share is  computed by
dividing income available to common  stockholders by the weighted average number
of common  shares  outstanding  during  the  period  less the  weighted  average
unallocated ESOP shares of common stock.


The  computation of diluted  earnings per share is similar to the computation of
basic earnings per share except that the denominator is increased to include the
number of  additional  common  shares  that would have been  outstanding  if the
dilutive potential common shares had been issued.


Impact of New  Accounting  Issues - In June 1998,  the FASB  issued SFAS No. 133
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting and reporting  standards for derivative  instruments and
for hedging  activities.  The Statement  requires  that an entity  recognize all
derivatives  as either assets or liabilities in the balance sheet at fair value.
If certain conditions are met, a derivative may be specifically  designated as a
fair value hedge, a cash flow hedge, or a foreign  currency hedge.  Entities may
reclassify    securities   from   the    held-to-maturity    category   to   the
available-for-sale  category at the time adopting SFAS No. 133. In June of 1999,
FASB issued SFAS No. 137 "Deferral of the Effective  Date of FASB  Statement No.
133," which makes SFAS 133  effective  for all fiscal  quarters of fiscal  years
beginning  after June 15,  2000 and,  accordingly,  would  apply to the  Company
beginning on April 1, 2001. The Company plans to adopt the standard at that time
and does not presently intend to reclassify  securities between categories.  The
Company has not engaged in derivatives and hedging activities covered by the new
standard and does not expect to do so in the  foreseeable  future.  Accordingly,
SFAS  No.  133 is not  expected  to  have a  material  impact  on the  Company's
financial statements.


Reclassifications - Certain amounts in the 1997 and 1998 consolidated  financial
statements have been reclassified to conform to the 1999 presentation.



<PAGE>


2.       MUNICIPAL BONDS AND GOVERNMENT AND AGENCY SECURITIES
         AVAILABLE FOR SALE

Securities available for sale are summarized as follows:



<TABLE>
<CAPTION>

                                                             -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                             Amortized        Unrealized      Unrealized          Fair
                                                                Cost            Gains           Losses           Value
                                                             =============================================================
                                                                                 (Dollars in Thousands)
December 31, 1998:
<S>                                                           <C>               <C>             <C>             <C>
     Municipal Bonds................................          $  2,883          $     25        $       8       $   2,900
     United States Government and agency securities.            15,795               129                -          15,924
                                                              --------          --------        ---------       ---------
     Total..........................................          $ 18,678          $    154        $       8       $  18,824
                                                              ========          ========        =========       =========
     Weighted average interest rate.................              6.02%
                                                              ========

December 31, 1999:
     Municipal Bonds................................          $  2,786          $      -        $      44       $   2,742
     United States Government and agency securities.            26,832                 -              515          26,317
                                                              --------          --------        ---------       ---------
     Total..........................................          $ 29,618          $      -        $     559       $  29,059
                                                              ========          ========        =========       =========
     Weighted average interest rate.................              5.94%
                                                              ========
</TABLE>

The following table sets forth the contractual maturity of the Bank's securities
available for sale at December 31, 1998 and 1999.


<TABLE>
<CAPTION>
                                                                   December 31, 1998               December 31, 1999
                                                             -----------------------------------------------------------
                                                              Amortized       Estimated          Amortized      Estimated
                                                                Cost         Fair Value            Cost        Fair Value
                                                             ===========================================================
                                                                                      (In Thousands)

<S>                                                           <C>              <C>              <C>             <C>
Due in one year or less.............................          $ 12,897         $13,006          $  2,666        $  2,665
Due after one year..................................             5,781           5,818            26,952          26,394
                                                              --------         -------          --------        --------
     Total..........................................          $ 18,678         $18,824          $ 29,618        $ 29,059
                                                              ========         =======          ========        ========
</TABLE>



The Bank had total Government and Agency  securities  available for sale pledged
at  December  31,  1998  and  1999  of  $  15.4  million  and  $  19.0  million,
respectively.  Of the $ 19.0 million of securities pledged at December 31, 1999,
$ 2.0 million was pledged for customer  accounts that exceeded $ 100,000,  $ 2.0
million was pledged as collateral  for Treasury Tax and Loan  ("TT&L")  accounts
held for the benefit of the federal government, and the remaining $ 15.0 million
was pledged as collateral to secure borrowings from the Federal Reserve Bank for
year 2000  contingency  purposes,  although no borrowings were drawn by the Bank
for such purposes.


There were no sales of government and agency  securities  during the years ended
December 31, 1997, 1998 and 1999.



<PAGE>


3.   MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE

Mortgage-backed  securities available for sale at December 31, 1998 and 1999 are
summarized as follows:

<TABLE>
<CAPTION>

                                       --------------------------------------------------------------------------------
                                                                  Gross                Gross               Estimated
                                         Amortized             Unrealized            Unrealized               Fair
                                            Cost                  Gains                Losses                Value
                                       =============== ====== ============== ====== ============= ======= =============
                                                                         (In Thousands)
December 31, 1998:
<S>                                      <C>                    <C>                    <C>                  <C>
   FHLMC-fixed rate.................     $  64,255              $     378              $    412             $  64,221
   FNMA-fixed rate..................        64,115                    577                   141                64,551
   GNMA-fixed rate..................        20,311                    112                    29                20,394
   FHLMC CMO-fixed rate.............        58,243                     29                    29                58,243
   FHLMC-adjustable rate............        11,213                    151                    57                11,307
   FNMA-adjustable rate.............        11,485                    157                    13                11,629
   GNMA-adjustable rate.............           996                      -                     1                   995
   FNMA CMO-adjustable rate.........        44,867                    246                   253                44,860
   FHLMC CMO-adjustable rate........        91,630                    387                   569                91,448
   FHLMC CMO-fixed rate.............        21,642                     38                    65                21,615
                                         ---------              ---------              --------             ---------
      Total.........................     $ 388,757              $   2,075              $  1,569             $ 389,263
                                         =========              =========              ========             =========


December 31, 1999:
   FHLMC-fixed rate.................     $  44,540              $      15              $  1,252             $  43,303
   FNMA-fixed rate..................        52,312                      8                 1,542                50,778
   GNMA-fixed rate..................        14,371                      -                   486                13,885
   FHLMC CMO-fixed rate.............        70,522                      -                 3,081                67,441
   FHLMC-adjustable rate............         4,147                      2                    35                 4,114
   FNMA-adjustable rate.............         4,565                      -                   105                 4,460
   GNMA-adjustable rate.............        11,187                      -                   104                11,083
   FNMA CMO-fixed rate..............        35,083                      -                 1,261                33,822
   FHLMC CMO-adjustable rate........        69,167                    776                   340                69,603
   FNMA CMO-adjustable rate.........        37,636                    319                   232                37,723
                                         ---------              ---------              --------             ---------
      Total.........................     $ 343,530              $   1,120              $  8,438             $ 336,212
                                         =========              =========              ========             =========
</TABLE>



There were no sales of  mortgage-backed  securities  classified as available for
sale  during  1997.  There  were $ 26.0  million  in  sales  of  mortgage-backed
securities  classified as available for sale during the year ended  December 31,
1998  resulting in proceeds of $ 27.3  million,  gross  realized  gains of $ 1.2
million  and no gross  realized  losses.  There  were $ 9.9  million in sales of
mortgage-backed  securities  classified  as  available  for sale during the year
ended December 31, 1999 resulting in proceeds of $ 10.0 million,  gross realized
gains of $ 142,000 and gross realized losses of $ 2,000.


At December 31, 1999 the Bank had $ 108.3 million of mortgage-backed  securities
pledged to the State of Florida as collateral for certificates of deposit.



<PAGE>


4.       CORPORATE DEBT SECURITIES AVAILABLE FOR SALE

Investment  grade,  adjustable  rate and  trust  preferred  securities  of other
financial institutions at December 31, 1998 and 1999 are summarized as follows:
<TABLE>
<CAPTION>

                                                             -------------------------------------------------------------
                                                                                Gross            Gross         Estimated
                                                             Amortized        Unrealized      Unrealized          Fair
                                                                Cost            Gains           Losses           Value
                                                             =============================================================
                                                                                 (Dollars in Thousands)
December 31, 1998
<S>                                                           <C>               <C>             <C>             <C>
     Total..........................................          $ 45,653          $      -        $   1,165       $  44,488
                                                              ========          ========        =========       =========
     Weighted average interest rate.................              6.34%
                                                              ========
</TABLE>


<TABLE>
<CAPTION>

                                                             ----------- ---- ----------- --- ------------ --- -----------
                                                                                Gross            Gross         Estimated
                                                             Amortized        Unrealized      Unrealized          Fair
                                                                Cost            Gains           Losses           Value
                                                             =========== ==== =========== === ============ === ===========
                                                                                 (Dollars in Thousands)
December 31, 1999
<S>                                                           <C>               <C>             <C>             <C>
     Total..........................................          $ 40,741          $      -        $   1,782       $  38,959
                                                              ========          ========        =========       =========
     Weighted average interest rate.................              6.83%
                                                              ========
</TABLE>


All of the corporate debt securities  available for sale contractually mature in
the years 2027 or 2028.

During 1997 there were no sales of corporate debt securities.


During  1998 there  were $ 9.7  million in sales of  corporate  debt  securities
classified as available for sale  resulting in gross  proceeds of $ 9.8 million,
gross realized gains of $ 109,000 and no gross realized losses.


During  1999 there  were $ 5.0  million in sales of  corporate  debt  securities
classified as available for sale  resulting in gross  proceeds of $ 5.0 million,
gross realized gains of $ 5,000 and no gross realized losses.


At  December  31,  1999,  the  Bank's  entire  investment  of $ 39.0  million of
corporate debt securities was pledged as collateral for other borrowed funds.


During 1998,  the Bank began to diversify  its  investments  in  mortgage-backed
securities by purchasing  investment grade rated,  floating rate trust preferred
securities of other financial institutions. In doing so, the Bank was relying on
regulations which permit an investment of up to 35% of its assets in "commercial
paper and corporate debt  securities." In November of 1998, the Office of Thrift
Supervision ("OTS") issued TB-73, which among other matters stated concerns over
institutions'  investment  in  trust  preferred  securities,   citing  increased
interest  rate risks as a result of the  predominant  fixed rate  nature of such
securities  and that  some of  these  securities  could  have  their  maturities
extended at the issuer's option. As a result, the OTS adopted limitations on the
investment of such securities to 15% of a regulated  institution's  equity,  but
adopted  a method  by which an  institution  could  appeal  the  limitation.  At
December 31, 1999, the Bank's investment in trust preferred  securities was 2.3%
of its assets and 35.1% of its regulatory capital.  The Bank appealed to the OTS
to permit it to continue its investment at current levels.  The OTS has approved
the Bank  maintaining  its current  investment  in these  securities  but not to
increase its investment.



<PAGE>



5.       LOANS RECEIVABLE

Loans receivable at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
                                                                                   1998              1999
                                                                            ===============================
                                                                                     (In Thousands)

<S>                                                                           <C>              <C>
One-to-four single family, residential real estate mortgages.........         $  828,929       $  925,384
Commercial and multi-family real estate mortgages....................             74,671          118,262
Real estate construction-primarily residential.......................             53,515           63,589
Land loans-primarily residential.....................................              8,583            9,763
                                                                              ----------       ----------
Total first mortgage loans...........................................            965,698        1,116,998
Consumer Loans.......................................................             48,270           60,281
Commercial business loans............................................             46,958           94,157
                                                                              ----------       ----------
Total gross loans....................................................          1,060,926        1,271,436
Less:
     Undisbursed portion of loans in process.........................             84,155          106,232
     Unearned discounts, premiums and deferred loan fees (costs), net             (3,621)          (2,826)
     Allowance for loan losses.......................................              3,226            3,609
                                                                              ----------       ----------

Loans receivable-net.................................................         $  977,166       $1,164,421
                                                                              ==========       ==========
</TABLE>


The amount of loans on which the Bank has ceased  accruing  interest or does not
charge interest  aggregated  approximately  $ 3,845,000 and $ 2,743,000,  net of
specific valuation  allowances of $ 162,000 and $ 101,000,  at December 31, 1998
and 1999,  respectively.  The amount of  interest  not  accrued  relating to non
accrual loans was  approximately $ 168,000,  $ 203,000 and $ 123,000 at December
31, 1997,  1998 and 1999,  respectively.  Management  believes the allowance for
possible loan losses is adequate.

An analysis of the changes in the  allowance for loan losses for the years ended
December 31, 1997, 1998 and 1999 is as follows.  There were no recoveries during
the years presented.


<TABLE>
<CAPTION>
                                                                         1997                1998               1999
                                                                 ====================================================
                                                                                   (In Thousands)

<S>                                                               <C>                 <C>                <C>
Balance at beginning of period..............................      $     2,263         $     3,294        $     3,226
Increase in allowance due to purchase of BankBoynton........            1,167                   -                  -
Current provision...........................................              170                  77                463
Charge-offs.................................................             (306)               (145)               (80)
                                                                  -----------         -----------        -----------

Ending balance..............................................      $     3,294         $     3,226        $     3,609
                                                                  ===========         ===========        ===========
</TABLE>



The Bank originates both adjustable and fixed rate mortgage loans.  The Bank had
no loans held for sale at December 31, 1999. Loans held for sale at December 31,
1998  amounted to $ 5.5  million.  These loans held for sale are recorded at the
lower of cost or market.



<PAGE>


A loan is considered  impaired when, based on current information and events, it
is probable that the Bank will be unable to collect all amounts due according to
the  contractual  terms of the  loan  agreement.  An  analysis  of the  recorded
investment  in impaired  loans owned by the Bank at December 31, 1997,  1998 and
1999 and the related allowance for those loans is as follows:


<TABLE>
<CAPTION>

                                                           1997                    1998                     1999
                                                  ======================================================================
                                                                              (In Thousands)

                                                     Loan      Related       Loan       Related       Loan      Related
                                                   Balance    Allowance     Balance    Allowance    Balance    Allowance
Impaired loan balances and related allowances:
<S>                                                <C>         <C>         <C>          <C>         <C>         <C>
Loans with related allowance for loan losses.....  $     500   $     235   $     324    $     162   $    569    $    101
Loans without related allowance for loan losses..      2,730           -       3,685            -      3,726           -
                                                       -----   ---------   ---------    ---------   --------    --------
                                                   $   3,230   $     235   $   4,009    $     162   $  4,295    $    101
                                                   =========   =========   =========    =========   ========    ========

Average balance of impaired loans................  $   3,301               $   3,620                $  4,152
                                                   =========               =========                ========
</TABLE>


No interest income was recorded on impaired loans during the impairment  periods
shown.


The Bank's policy on interest income on impaired loans is to reverse all accrued
interest  against interest income if a loan becomes more than 90 days delinquent
and cease accruing interest  thereafter.  Any interest  ultimately  collected is
credited to income in the period of recovery.


At December  31,  1999,  the  composition  and maturity or repricing of the loan
portfolio,  net of the  undisbursed  portion of loans in  process  is  presented
below:


<TABLE>
<CAPTION>

 ..........................Fixed Rate........................      ........................Adjustable Rate..................
Term of Maturity                                    Book Value      Term to Rate Adjustment                      Book Value
                                                (In Thousands)                                               (In Thousands)


<S>                                                <C>              <C>                                          <C>
1 year or less                                     $     6,669      1 year or less                               $  387,242
1 year-3 years                                          21,275      1 year-3 years                                   92,035
3 years-5 years                                         26,844      3 years-5 years                                  64,162
5 years-10 years                                        64,999      5 years-10 years                                 63,112
10 years-20 years                                      199,596      10 years-20 years                                     -
Over 20 years                                          239,270      Over 20 years                                         -
                                                   -----------                                                   ----------

Total                                              $   558,653      Total                                        $  606,551
                                                   ===========                                                   ==========
</TABLE>



<PAGE>



Commercial  Real Estate Lending - The Bank  originates and purchases  commercial
real estate loans,  which totaled $ 74,671,000 and $ 118,262,000 at December 31,
1998 and 1999,  respectively.  These loans are considered by management to be of
somewhat  greater  risk of  uncollectibility  due to the  dependency  on  income
production  or  future  development  of  the  real  estate.  Accordingly,   Bank
management  establishes  greater  provisions for probable but not yet identified
losses  on these  loans  than on less  risky  residential  mortgage  loans.  The
composition  of  commercial  real  estate  loans and its primary  collateral  at
December 31, 1998 and 1999 are approximately as follows:

<TABLE>
<CAPTION>
                                                                1998              1999
                                                            ===========================
                                                                  (In Thousands)

<S>                                                      <C>              <C>
    Office buildings...............................      $     8,756      $     15,477
    Retail buildings...............................            8,749             7,898
    Warehouses.....................................           10,043             7,338
    Multi family...................................           15,653            23,772
    Hotels and motels..............................              404             2,077
    Land...........................................           16,261            17,713
    Other property improvements....................           14,805            43,987
                                                         -----------      ------------

    Total..........................................      $    74,671      $    118,262
                                                         ===========      ============
</TABLE>


Under the Financial  Institutions  Reform,  Recovery and Enforcement Act of 1989
("FIRREA"),  a  federally  chartered  savings and loan  association's  aggregate
commercial  real estate  loans may not exceed 400% of its capital as  determined
under  the  capital  standards  provisions  of  FIRREA.  The  Bank is  federally
chartered and subject to this limitation. FIRREA does not require divestiture of
any loan that was lawful when it was originated.  At December 31, 1999, the Bank
estimates  that,  while  complying with this  limitation,  it could originate an
additional  $ 214 million of  commercial  real estate  loans,  though the Bank's
current business plan indicates no intentions to do so.


Loans to One  Borrower  Limitation  - The Bank may not make real estate loans to
one borrower in excess of 15% of its  unimpaired  capital and surplus.  This 15%
limitation  results in a dollar  limitation of  approximately  $ 16.6 million at
December 31, 1999.  At December 31, 1999,  the Bank was in  compliance  with the
loans to one borrower limitation under currently existing regulations.


Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
consolidated  statements  of financial  position.  The unpaid  balances of these
loans at  December  31, 1998 and 1999 were $ 72.1  million  and $ 74.1  million,
respectively.  Custodial  escrow  balances  maintained  in  connection  with the
foregoing  loan  servicing were $ 339,800 and $ 395,600 at December 31, 1998 and
1999, respectively.


The  Bank  offers  loans  to  its  employees,  including  Directors  and  Senior
Management  at prevailing  market  interest  rates.  These loans are made in the
ordinary course of business and on  substantially  the same terms and collateral
requirements as those of comparable transactions prevailing at the time.


The loans to  Directors,  Executive  Officers,  and  associates  of such persons
amounted  to $  2,525,000  and $  3,064,000  at  December  31,  1998  and  1999,
respectively, which did not exceed 5% of stockholders' equity.


Collateral  for  Advances  from the  Federal  Home  Loan  Bank - The  terms of a
security  agreement with the FHLB include a blanket  floating lien that requires
the Bank to maintain qualifying first mortgage loans as pledged collateral in an
amount equal to the advances,  when  discounted  at 75% of the unpaid  principal
balances (See Note 10).



<PAGE>


6.       OFFICE PROPERTIES AND EQUIPMENT

Office  properties and equipment at December 31, 1998 and 1999 are summarized as
follows:

<TABLE>
<CAPTION>

                                                                    1998             1999
                                                                 ==========================
                                                                         (In Thousands)

<S>                                                              <C>              <C>
Land.....................................................        $   8,534        $   9,624
Buildings and improvements...............................           29,386           34,043
Furniture and equipment..................................           10,963           13,371
                                                                 ---------        ---------
Total....................................................           48,883           57,038
Less accumulated depreciation............................           11,175           12,056
                                                                 ---------        ---------
Office properties and equipment - net....................        $  37,708        $  44,982
                                                                 =========        =========
</TABLE>


During the year ended  December  31, 1999 the Bank sold its  downtown  West Palm
Beach property with a carrying value of $ 1.6 million,  for a sale price, net of
selling cost, of $ 6.7 million resulting in a gain of $ 5.1 million.




7.       REAL ESTATE OWNED

Real estate owned at December 31, 1998 and 1999 consists of the following:


<TABLE>
<CAPTION>
                                                                   1998              1999
                                                               ============================
                                                                       (In Thousands)

<S>                                                            <C>             <C>
Real estate owned........................................      $      907      $        775
Valuation allowance......................................               -                 -
                                                               ----------      ------------
Real estate owned - net..................................      $      907      $        775
                                                               ==========      ============
</TABLE>




8.       ACCRUED INTEREST RECEIVABLE

Accrued  interest  receivable  at  December  31,  1998 and 1999  consists of the
following:


<TABLE>
<CAPTION>
                                                             1998               1999
                                                         =================================
                                                                  (In Thousands)

<S>                                                          <C>                <C>
  Loans..............................................        4,649             5,444
  Investments........................................          584               804
  Mortgage-backed securities.........................        2,316             2,082
                                                             -----             -----
  Accrued interest receivable........................        7,549             8,330
                                                             =====             =====
</TABLE>



<PAGE>


9.       DEPOSITS

The  weighted-average  interest  rates on deposits at December 31, 1998 and 1999
were 4.42% and 4.30%, respectively. Deposit accounts, by type and range of rates
at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
                        Account Type and Rate                         1998           1999
                                                                  ========================
                                                                      (In Thousands)

<S>                                                               <C>           <C>
Non-interest-bearing NOW accounts..........................       $ 57,002      $ 65,203
NOW, Super NOW and funds transfer accounts
Passbook and statement accounts
Variable-rate money market accounts

Total non-certificate accounts.............................        323,825       432,968
                                                                  --------      --------

Certificates:
     1.01% - 2.00%.........................................          1,018           663
     2.01% - 3.00%.........................................              -             -
     3.01% - 4.00%.........................................              6             -
     4.01% - 5.00%.........................................        125,019       199,817
     5.01% - 6.00%.........................................        564,002       573,903
     6.01% - 7.00%.........................................        106,719       114,007
     7.01% - 8.00%.........................................            157           152
                                                                  --------      --------

Total certificates.........................................        796,921       888,542
                                                                  --------      --------

Total......................................................       $1,120,746    $1,321,510
                                                                  ==========    ==========
</TABLE>


Individual  deposits  greater  than $  100,000  at  December  31,  1998 and 1999
aggregated approximately $ 237.3 million and $ 255.5 million, respectively.


Interest  on deposit  accounts,  presented  in the  consolidated  statements  of
operations,  is net of interest  forfeited by depositors on early  withdrawal of
certificate accounts of approximately $ 128,000, $ 160,000 and $ 133,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.



Scheduled maturities of certificate accounts are as follows:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                -------------------------------------------
                                                                 1998                               1999
                                                           ------------------                  ----------------
                                                        Amount           Percent           Amount          Percent
                                                    ===============================================================
         Maturity                                                       (Dollars in Thousands)

<S>                                                <C>                   <C>           <C>                  <C>
         Less than 1 year.................          $  254,281            31.91%        $ 698,415           78.60%
         1 year-2 years...................             257,954            32.37           115,848            13.04
         2 years-3 years..................             175,171            21.98            52,333             5.89
         3 years-4 years..................              18,207             2.28            15,500             1.74
         4 years-5 years..................              90,120            11.31             5,321              .60
         Thereafter.......................               1,188              .15             1,125              .13
                                                    ----------          -------         ----------         -------

         Total............................          $  796,921           100.00%        $  888,542          100.00%
                                                    ==========          =======         ==========         =======
</TABLE>




<PAGE>




Under  FIRREA,  any  insured  depository  institution  that  does  not  meet its
applicable  minimum capital  requirements may not accept brokered deposits after
December 7, 1992. This prohibition  includes  renewals and rollovers of existing
brokered deposits and deposit  solicitations at higher than prevailing  interest
rates paid by  institutions  in the Bank's normal  market area.  Even though the
Bank meets all of the applicable  minimum  capital  requirements at December 31,
1999, the Bank had no brokered deposits.


Interest  expense on deposits  consists of the following  during the years ended
December 31, 1997, 1998 and 1999:


<TABLE>
<CAPTION>
                                                1997             1998              1999
                                              ===========================================
                                                             (In Thousands)

<S>                                        <C>               <C>               <C>
Passbook accounts................          $   1,892         $   2,184         $   1,149
NOW accounts.....................                730             3,194             4,929
Money market accounts............                901               877               734
Certificate accounts.............             30,333            38,873            44,766
                                           ---------         ---------         ---------

Total............................          $  33,856         $  45,128         $  51,578
                                           =========         =========         =========
</TABLE>


10.      ADVANCES FROM FEDERAL HOME LOAN BANK

The Bank had outstanding  advances from the FHLB of $ 303,140,000  with interest
rates ranging from 4.78% to 8.21% and $ 247,073,000  with interest rates ranging
from 5.01% to 7.37% at December 31, 1998 and 1999, respectively. The advances at
December 31, 1999 are repayable as follows:




      Years Ending
      December 31,             Amount
   ==================== ==================
                         (In Thousands)

       2000               $      65,008
       2001                       3,368
       2002                     112,500
       2003                       5,111
       2004                      11,086
    Thereafter                   50,000
                          -------------

Total                      $    247,073



11.      GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY DEBENTURES

On  January  21,  1998  the  Company  issued  $  28.75  million  of  mandatorily
redeemable,  Preferred Securities out of a grantor trust, Fidelity Capital Trust
I, a Delaware  statutory  trust,  which was created by the Company for this sole
purpose.  As its only  asset,  the  trust  owns $ 28.75  million  of  Guaranteed
Preferred Beneficial Interests in the Company's Debentures due January 31, 2028,
purchased with the proceeds of the preferred securities issuance.  Interest from
the Company's debentures is payable quarterly at a rate of 8.375%, annually. The
interest will be used to fund  distributions on the preferred  securities.  As a
result of the above, the Preferred  Securities of the trust are considered fully
and unconditionally guaranteed by the Company.


Distributions on the preferred  securities are cumulative and are payable at the
same rate as the Company's  debentures described above. The Company's debentures
are  redeemable in whole,  in the event the  Company's  mutual  holding  company
parent  converts to stock form  beginning  January 31, 2000 at 107% of principal
amount  and in any event the  debentures  are  redeemable  at 100% of  principal
amount  in  whole  or in  part,  commencing


<PAGE>

January 31, 2003. The preferred securities are subject to mandatory  redemption,
in whole or in part as  applicable,  upon the repayment of the  debentures.  The
proceeds  from the  securities,  to the extent  invested in common  stock of the
Bank, are considered to be Tier 1 capital for  regulatory  purposes.  Of the net
proceeds  of $ 27.3  million  from the  sale of the  preferred  securities,  the
Company  invested  $ 25  million  in  common  stock of the Bank.  The  preferred
securities  are traded on the Nasdaq  National  Market  system  under the symbol
"FFFLP."


12.      INCOME TAXES

Deferred income tax assets and liabilities are computed annually for differences
between  financial  statement and tax basis of assets and liabilities  that will
result in taxable or deductible  amounts in the future based on enacted tax laws
and rates  applicable to periods in which the differences are expected to affect
taxable income. Valuation allowances are established,  when necessary, to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period  adjusted for the change during the
period in deferred tax assets and liabilities.


The  components of the  provisions for income taxes for the years ended December
31, 1997, 1998 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                1997            1998              1999
                                                             ==========================================
                                                                            (In Thousands)

<S>                                                         <C>               <C>              <C>
Current - federal...................................        $  4,872          $ 4,902          $ 5,103
Current - state.....................................             701              677              501
                                                            --------          -------          -------
Total current.......................................           5,573            5,579            5,604

Deferred - federal and state........................            (820)            (737)              62
                                                            --------          -------          -------
Total...............................................        $  4,753          $ 4,842          $ 5,666
                                                            ========          =======          =======
</TABLE>



The Company's  provision for income taxes differs from the amounts determined by
applying the statutory federal income tax rate to income before income taxes for
the following reasons:

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                1997                      1998                       1999
                                         --------------------     ---------------------       -------------------
                                           Amount            %       Amount            %       Amount            %
                                      ===========================================================================
                                                                 (Dollars in Thousands)
<S>                                     <C>             <C>       <C>             <C>       <C>             <C>
Tax at federal tax rate............     $   3,910       35.0%     $   4,289       35.0%     $   5,173       35.0%
State income taxes, net of federal
Benefit of graduated rates.........          (101)      (0.9)           (92)      (0.8)           (87)      (0.6)
Employee stock ownership plan......           190        1.7            184        1.5             74        0.5
Other..............................           379        3.4            111        0.9            175        1.2
                                        ---------    -------      ---------    -------      ---------    -------

Total provision and effective tax       $   4,753       42.5%     $   4,842       39.5%     $   5,666       38.3%
rate                                    =========    =======      =========    =======      =========    =======
</TABLE>




<PAGE>


The tax effect of temporary  differences  which give rise to deferred tax assets
and deferred tax liabilities are presented below:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                ---------------------------
                                                                                    1998              1999
                                                                                ========= =================
                                                                                       (In Thousands)
Deferred tax liabilities:
<S>                                                                             <C>              <C>
Depreciation........................................................            $    878         $  1,007
Loan fee income.....................................................               1,515            1,565
FHLB stock dividends................................................               1,160              952
Excess of tax bad debt reserve over book reserve....................                 227                -
Deferred state taxes................................................                  62               84
                                                                                --------         --------
Gross deferred tax liabilities......................................               3,842            3,608
                                                                                --------         --------

Deferred tax assets:
Excess of tax bad debt reserve over book reserve....................                   -              184
Executive death benefit.............................................                 461              430
Amortization........................................................                 368              388
Retirement plan.....................................................               3,131            2,368
Deferred compensation...............................................                 939            1,178
Unrealized depreciation in securities...............................                 195            3,738
Other...............................................................                 191              246
                                                                                --------         --------
Gross deferred tax assets...........................................               5,285            8,532
Less valuation allowances for deferred tax assets...................                   -                -
                                                                                --------         --------

Gross deferred tax assets...........................................               5,285            8,532
                                                                                --------         --------
Net deferred tax liabilities (assets)...............................            $ (1,443)        $ (4,924)
                                                                                ========         ========
</TABLE>




During 1996, a law was enacted that repealed Section 593 of the Internal Revenue
Code for taxable years  beginning  after December 31, 1995.  Section 593 allowed
thrift institutions, including the Bank, to use the percentage-of-taxable income
bad debt  accounting  method,  if more  favorable  than the specific  charge-off
method, for Federal income tax purposes. The excess reserves (deduction based on
the  percentage-of-taxable  income  less the  deduction  based  on the  specific
charge-off method)  accumulated  post-1987 are required to be recaptured ratably
over a six year period  beginning in 1996.  The  recapture  has no effect on the
Company's  statement of  operations as taxes were provided for in prior years in
accordance with SFAS No. 109,  "Accounting for Income Taxes." The timing of this
recapture  may be delayed  for a one or two year  period to the extent  that the
Bank originates more residential loans than the average originations in the past
six  years.  The Bank met the  origination  requirement  for 1996 and 1997  and,
therefore,  delayed the recapture  until the six year period  beginning in 1998.
The  recapture  amount  of $ 3.7  million  will  result in  payments  to the IRS
totaling $ 1.4 million which has been previously  accrued.  The same legislation
forgave the tax liability on pre-1987  accumulated bad debt reserves which would
have penalized any thrift choosing to adopt a bank charter because the tax would
have  become  due and  payable.  The  unrecorded  potential  liability  that was
forgiven approximated $ 2.9 million.


13.      PENSION AND EMPLOYEE BENEFIT PLANS

Pension Plan - The Bank's employees  participate in the Bank's qualified defined
benefit pension plan covering  substantially  all employees.  The plan calls for
benefits to be paid to eligible  employees at retirement  based  primarily  upon
years of service with the Bank and  compensation  rates during those years.  The
Bank's policy is to fund the qualified  retirement  plan in an amount that falls
between the minimum  contribution  required by the  Employee  Retirement  Income
Security Act and the maximum tax  deductible  contribution.  Plan assets consist
primarily of common stock,  U.S.  Government  obligations  and  certificates  of
deposit.



<PAGE>


PENSION AND EMPLOYEE BENEFIT PLANS (continued)

Components of the Bank's Pension Plan are as follows:


<TABLE>
<CAPTION>
                                                                                               1998                  1999
                                                                                         =====================================
                                                                                                    (In Thousands)
CHANGE IN BENEFIT OBLIGATIONS
<S>                                                                                      <C>                  <C>
     Benefit obligation, beginning of period..................................           $     7,967          $    10,140
     Service cost.............................................................                   552                  795
     Interest cost............................................................                   582                  720
     Actuarial loss...........................................................                 1,132                  564
     Benefit paid.............................................................                   (93)                (559)
                                                                                         -----------          -----------
     Benefit obligation, end of period........................................           $    10,140          $    11,660
                                                                                         ===========          ===========

CHANGE IN PLAN ASSETS
     Fair value of plan assets, beginning of period...........................           $     7,804          $     9,672
     Actual return on plan assets.............................................                   978                  590
     Employer's contribution..................................................                   983                1,441
     Benefits paid............................................................                   (93)                (559)
                                                                                         -----------          -----------
     Fair value of plan assets, end of period.................................           $     9,672          $    11,144
                                                                                         ===========          ===========

FUNDED STATUS
     Funded status............................................................           $      (468)         $      (516)
     Unrecognized net actuarial loss..........................................                   737                1,568
     Unrecognized prior service cost..........................................                  (184)                (154)
                                                                                         -----------          -----------
     Net amount recognized....................................................           $        85          $       898
                                                                                         ===========          ===========
</TABLE>



Components of net periodic benefit cost are as follows:

<TABLE>
<CAPTION>
                                                           For the Years Ended December 31,
                                                           ----------------------------------
                                                              1997         1998         1999
                                                           ==================================
                                                                     (In Thousands)

<S>                                                          <C>          <C>           <C>
Service cost...........................................      $  498       $  552        $  795
Interest cost..........................................         575          582           720
Return on assets.......................................      (1,154)        (978)         (590)
Amortization of prior service cost.....................         (30)         (30)          (30)
Recognition of net actuarial loss/(gain)...............         681          345          (267)
                                                             ------       ------        ------

Net periodic benefit cost..............................      $  570       $  471        $  628
                                                             ======       ======        ======
</TABLE>


For the years ended December 31, 1997,  1998 and 1999,  pension  expense amounts
were based upon actuarial computations.

The  assumptions  used in computing the present  value of the projected  benefit
obligation and the net periodic pension expense are as follows:

<TABLE>
<CAPTION>
                                                              1997         1998         1999
                                                            =================================


<S>                                                           <C>          <C>           <C>
Discount rate in determining benefit obligation........       7.25%        6.75%         7.75%

Rate of increase in future compensation levels for

Expected return on plan assets.........................       8.00%        8.00%         9.00%
</TABLE>

The Bank funded $ 405,000,  $ 983,000 and $ 1,441,000  as required for the 1997,
1998 and 1999 plan years.



<PAGE>


Savings  Plan - Effective  January 1, 1988,  the Board of  Directors  approved a
401(k) deferred savings plan for all Bank employees who are 21 years of age with
one or more years of service.  The 401(k) deferred savings plan allows qualified
employees  to save from 1% to 15% of their  income.  Presently,  one-half  of an
employee's  contribution  is  matched  by the Bank,  up to 3% of the  employee's
salary. The Bank's matching  percentage will be determined annually by the Board
of Directors after taking into  consideration such factors as profit performance
and ability to meet capital  requirements.  The Bank's  contribution to the plan
totaled $ 183,000,  $ 210,000  and $ 291,000 for the years  ended  December  31,
1997, 1998 and 1999, respectively.


Retirement  Plans - During  1989,  the Bank  established  non-qualified  defined
benefit plans for certain  officers and directors.  The  director's  plan became
effective on January 1, 1991.  For the years ended  December 31, 1997,  1998 and
1999, the net periodic pension expense for the Supplemental Executive Retirement
Plan for Officers totaled $ 951,000, $ 1,090,000 and $ 1,104,000,  respectively.
The projected benefit obligation as of December 31, 1998 and 1999, was estimated
at $  6,560,000  and  $  7,113,000,  respectively.  For  1997,  1998  and  1999,
respectively,   the  discount  rates  used  to  measure  the  projected  benefit
obligation  were  7.25%,  6.75%  and  7.75%.  The  rate of  increase  in  future
compensation levels in 1997 was 5.00%, in 1998 was 4.50% and 1999 was 5.50%.


For the years ended December 31, 1997,  1998 and 1999, the net periodic  pension
expense for the Retirement Plan for the Directors  totaled $ 227,000,  $ 171,000
and $ 106,000, respectively. The projected benefit obligation for the Retirement
Plan for Directors as of December 31, 1998 and 1999 was estimated at $ 1,503,000
and $ 1,525,000,  respectively. For 1997, 1998 and 1999, the discount rates used
to measure  that  projected  benefit  obligation  were  7.25%,  6.75% and 7.75%,
respectively.  For the years ended December 31, 1997, 1998 and 1999, the rate of
increase in future compensation levels for the Retirement Plan for Directors was
5.00%,  4.50% and 5.50%,  respectively.  The  provisions  of SFAS No. 87 require
recognition  in the statement of financial  position of the  additional  minimum
liability and related  intangible  asset for a retirement plan with  accumulated
benefits in excess of plan assets.  This resulted in the recognition at December
31, 1998 and 1999,  of an  additional  liability  and an  intangible  asset of $
25,000 and $ 0,  respectively.  There was no material effect on earnings or cash
requirements  to fund the  retirement  plans.  These  additional  liability  and
intangible  asset  amounts as of December  31, 1998 and 1999 are recorded in the
account balances captioned other liabilities and other assets, respectively,  in
the accompanying consolidated statements of financial position.


Incentive Program - The Bank also has a Senior Management  Performance Incentive
Award Program  ("SMPIAP") to provide the opportunity for those  executives to be
rewarded  in  future  earnings  growth.  A  designated  percentage  of income at
December 31 of each year is used to determine the award fund contribution.  This
percentage  will be determined  annually by the Board of Directors  after taking
into  consideration  such  factors  as profit  performance  and  ability to meet
capital  requirements.  Awards amounting to $ 229,000,  $ 252,000 and $ 310,000,
were made during the years 1997, 1998 and 1999,  respectively,  for distribution
in subsequent  years. The assets of the SMPIAP are held in a Rabbi trust for the
benefit of senior management.  The SMPIAP participants may elect to invest their
awards in either Company stock or other third party investment options. Pursuant
to the  provisions of Emerging  Issues Task Force Issue No. 97-14 ("EITF 97-14")
which became  effective  during 1998, the assets of the Rabbi trust are included
in the  accompanying  financial  statements  and are  accounted as follows:  (1)
Assets, other than Company stock, (primarily trading securities) are included in
other  assets  at  fair  value  ($  885,000  at  December  31,  1999)  with  the
corresponding  obligation  to the  employees of a like amount  included in other
liabilities.  Changes in the fair value of the assets and  changes in the amount
of the liability are included in earnings; and (2) Company stock (148,806 shares
at December  31,  1999) is carried at cost ($ 1.6 million at December  31, 1999)
and  included  in  treasury  stock  with  the  corresponding  obligation  to the
employees  (which can only be settled through  delivery of the shares) of a like
amount  included in additional  paid-in  capital.  Prior to the adoption of EITF
97-14,  the assets of the Rabbi  trust and the  corresponding  obligations  were
carried  at  cost  and   included  in  other   assets  and  other   liabilities,
respectively.  The  changes in  accounting  as a result of the  adoption of EITF
97-14 had no effect on net income or earnings per share.



<PAGE>


Employee  Stock  Ownership  Plan - On January 7, 1994,  in  connection  with the
Bank's Plan of Reorganization into a Mutual Holding Company,  the Bank adopted a
tax qualified Employee Stock Ownership Plan ("ESOP") for all eligible employees.
The  ESOP  purchased  193,200  shares  of the  Bank's  stock  at the date of the
Reorganization. The funds used to purchase the shares were borrowed from a third
party lender. Effective June 30, 1997, the loan was purchased and is now held by
Fidelity Bankshares,  Inc. and therefore has been eliminated in consolidation at
December  31, 1998 and 1999.  The Bank will  contribute  to the ESOP  sufficient
funds to pay the principal and interest on this loan over seven years.  Benefits
generally  become 100% vested  after five years of  credited  service.  However,
contributions to the ESOP and shares allocated among  participants  proportional
to repayment of the seven year ESOP loan will be allocated among participants on
the basis of  compensation  in the year of  allocation,  subject  to  regulatory
maximum limitations.  The Bank recognized $ 765,000, $ 802,000 and $ 495,000, by
a charge against income in 1997, 1998 and 1999, respectively, under this plan.


14.      STOCK OPTION PLAN

The Bank has adopted stock option plans which  granted  options with an exercise
price equal to the market value of the stock at the date of grant,  to Directors
and officers.  The  Directors  may exercise  their options at any time up to ten
years,  while officer's  options are exercisable at a rate of twenty percent per
year,  not to exceed ten years.  Under  these  plans the Bank  reserved  303,600
shares of  authorized  but  unissued  common  stock  for  future  issuance.  The
following table shows a summary of transactions.


<TABLE>
<CAPTION>
                                                                                    Options Price
                                                                      --------------------------------------------
                                                                                        Average
                                                                        Number of      Exercise
                                                                         Options       Price Per     Aggregate
                                                                       Outstanding       Share         Price
                                                                      =============== ============= ==============
                 Options Outstanding

<S>                                                                       <C>         <C>            <C>
                 Balance - December 31, 1996........................      222,533     $      9.09    $ 2,022,824
                                                                        ---------     -----------    -----------
                      Granted.......................................            -               -              -
                      Exercised.....................................      (47,101)           9.09       (428,148)
                      Canceled......................................       (1,595)           9.09        (14,499)
                                                                        ---------     -----------   ------------

                 Balance - December 31, 1997........................      173,837            9.09      1,580,177
                                                                        ---------     -----------   ------------
                      Granted.......................................            -               -              -
                      Exercised.....................................      (21,414)           9.09       (194,653)
                      Canceled......................................         (440)           9.09         (4,000)
                                                                        ---------     -----------   ------------

                 Balance - December 31, 1998........................      151,983            9.09      1,381,524
                                                                        ---------     -----------   ------------
                      Granted.......................................            -               -              -
                      Exercised.....................................      (32,576)           9.09       (296,116)
                      Canceled......................................            -               -              -
                                                                        ---------     -----------   ------------
                 Balance - December 31, 1999........................      119,407     $      9.09    $ 1,085,408
                                                                        =========     ===========    ===========
</TABLE>


<PAGE>


15.      REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital  requirements  administered by
the  Office of Thrift  Supervision  ("OTS").  Failure  to meet  minimum  capital
requirements can initiate certain mandatory and possible  discretionary  actions
by regulators  that, if undertaken,  could have a direct  material effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classifications are also
subject to qualitative judgments by regulators about components,  risk-weighting
and other factors.


Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios of Tangible  capital of
not less than 1.5% of adjusted  total  assets,  Total  capital to  risk-weighted
assets of not less than 8%,  Tier I  capital  of not less than 3.0% of  adjusted
total assets, and Tier I capital to risk-weighted  assets of 4.0% (as defined in
the  regulations).  As of December 31, 1999, the Bank meets all capital adequacy
requirements to which it is subject.


As of December 31, 1999, the most recent  notification  from the OTS categorized
the Bank as "Well Capitalized" under the framework for prompt corrective action.
To be considered well capitalized under Prompt Corrective Action Provisions, the
Bank must maintain  total  risk-based,  Tier 1  risk-based,  and Tier 1 leverage
ratios as set forth in the  following  table.  There are no conditions or events
since  that  notification  that  management  believes  have  changed  the Bank's
categorization.


As reported in the  Company's  1998 Annual  Report,  in November of 1988 the OTS
issued TB-73,  which among other  matters,  stated  concerns over  institution's
investment in trust preferred  securities,  citing increased interest rate risks
due to the  fixed  rate  nature  of such  securities  and  that  some  of  these
securities could have their maturities extended at the option of the issuer. The
OTS  adopted  limitations  on the  investment  of  such  securities  to 15% of a
regulated  institution's  equity,  but adopted a method by which an  institution
could  appeal  the  limitation.  The Bank  appealed  to the OTS to  permit it to
continue  its  investment  at current  levels  and noted in its appeal  that its
investments  had floating rates and the issuer did not have the option to extend
the maturities. The OTS has approved the Bank maintaining its current investment
in these  securities but not to increase its  investment.  These  securities are
shown  on  the  Company's  Consolidated  Statements  of  Financial  Position  as
Corporate Debt Securities.




<PAGE>



The Bank's  actual  capital  amounts and ratios are  presented in the  following
table:

<TABLE>
<CAPTION>
                                                                                                     To be Considered
                                                                           Minimum for               Well Capitalized
                                                                        Capital Adequacy           for Prompt Corrective
                                                   Actual                   Purposes                 Action Provisions
                                        ------------------------------------------------------------------------------------
                                             Ratio      Amount         Ratio         Amount        Ratio         Amount
                                        ------------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)

As of December 31, 1998 Stockholders'
<S>                                            <C>      <C>           <C>           <C>           <C>           <C>
     Equity and ratio to total assets          6.8%     $106,244
                                          ========

Unrealized increase in market value
     of assets available for sale (net
     of applicable income taxes).....                        318
Goodwill.............................                     (2,394)
Disallowed servicing assets..........                        (53)
                                                        --------
Tangible capital and ratio to
     adjusted total assets...........          6.7%     $104,115         1.5%       $  23,472
                                          ========    ==========      ======        =========
Tier I (core) capital and ratio to
     adjusted total assets...........          6.7%     $104,115         3.0%       $  46,943        5.0%       $  78,239
                                          ========      ========      ======        =========     ======        =========
Tier I (core) capital and ratio to
     risk-weighted total assets......         12.0%     $104,115         4.0%       $  34,814        6.0%       $  52,221
                                          ========                    ======        =========     ======        =========
Allowable Tier 2 capital:
General loan valuation allowances ...                      2,352
Equity investments...................                          -
                                                        --------
Total risk-based capital and ratio to
     risk-weighted total assets......         12.2%     $106,467        8.0%        $  69,628       10.0%       $ 87,036
                                          ========      ========      =====         =========     ======        ========

Total assets.........................                   $1,566,900
                                                        ==========

Adjusted total assets................                   $1,564,771
                                                        ==========

Risk-weighted assets.................                   $870,355
                                                        ========

As of December 31, 1999 Stockholders'
     Equity and ratio to total assets          6.5%     $110,972
                                          ========

Unrealized decrease in market value of
   assets available for sale (net
   applicable income taxes)..........                      6,098
Goodwill.............................                     (2,758)
Disallowed servicing assets..........                        (52)
                                                        --------

Tangible capital and ratio to
     adjusted total assets...........          6.6%     $114,260         1.5%       $  25,867
                                          ========    ==========      ======        =========
Tier I (core) capital and ratio to
     adjusted total assets...........          6.6%     $114,260         3.0%       $  51,734        5.0%       $  86,224
                                          ========      ========      ======        =========     ======        =========
Tier I (core) capital and ratio to
     risk-weighted total assets......         11.9%     $114,260         4.0%       $  38,397        6.0%       $  57,595
                                          ========                    ======        =========     ======        =========

Allowable Tier 2 capital:
General loan valuation allowances ...                      2,797
Equity investments...................                          -
                                                        --------
Total risk-based capital and ratio to
     risk-weighted total assets......         12.2%     $117,057         8.0%       $  76,794       10.0%       $  95,992
                                          ========      ========      ======        =========     ======        =========

Total assets.........................                   $1,717,452
                                                        ==========

Adjusted total assets................                   $1,724,478
                                                        ==========

Risk-weighted assets.................                   $959,923
                                                        ========

</TABLE>



<PAGE>


At periodic intervals, both the OTS and the FDIC routinely examine the Company's
and  the  Bank's  financial  statements  as  part of  their  legally  proscribed
oversight of the savings and loan  industry.  Based on these  examinations,  the
regulators  can direct that the  financial  statements be adjusted in accordance
with their findings.


During the year ended  December  31,  1999,  an OTS  examination  resulted in no
significant adjustments to the consolidated financial statements.


16.      COMMITMENTS AND CONTINGENCIES

In the normal course of business,  the Bank makes  commitments to extend credit.
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. The interest
rates on both fixed and variable rate mortgage loans are generally  based on the
market rates in effect on the date the loan  application  is taken.  Commitments
generally  have  fixed  expiration  dates of no  longer  than 60 days and  other
termination  clauses  and  may  require  payment  of a fee.  Since  some  of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amounts do not necessarily  represent future cash  requirements.  The
Bank evaluates each customer's  creditworthiness  on a case-by-case  basis.  The
amount of collateral  obtained by the Bank upon  extension of credit is based on
management's  credit evaluation of the customer.  Collateral held varies but may
include   single-family  homes,   marketable   securities  and  income-producing
residential and commercial  properties.  Credit losses may occur when one of the
parties  fails to  perform in  accordance  with the terms of the  contract.  The
Bank's exposure to credit risk is represented by the  contractual  amount of the
commitments to extend credit.  At December 31, 1999, the Bank had commitments to
extend  credit for or purchase  loans of $ 73.0  million ($ 8.0 million in fixed
rate  commitments  and the balance of commitments in either variable rate or for
which  rates had not yet been  set).  The Bank also has a  pre-approval  program
which commits dollar  amounts to potential loan customers  based on their credit
history. This program,  however, does not commit to locked in rates. No fees are
received in connection with such commitments.



<PAGE>

The Bank leases  various  property  for  original  periods  ranging  from one to
fifty-one  years.  Rent expense for the years ended December 31, 1997,  1998 and
1999, was  approximately $ 638,000,  $ 658,000 and $ 830,000,  respectively.  At
December 31, 1999,  future minimum lease payments under these  operating  leases
are as follows:


         Years Ending December 31,                               Amount
-------------------------------------------------------------------------
                                                         (In Thousands)

                    2000                                   $      1,126
                    2001                                            939
                    2002                                            911
                    2003                                            939
                    2004                                            555
                 Thereafter                                       2,284
                                                            -----------

                    Total                                   $     6,754
                                                            ===========


The Bank has  entered  into a three  year  employment  agreement  with its Chief
Executive  Officer.  This  agreement,  among other  matters,  would  provide for
severance  payments of up to three years salary in the event of termination  for
reasons  other than cause.  In  addition,  the Bank has entered  into  severance
agreements with four of its executive officers.  The severance  agreements would
provide for payments of up to three years salary for these executives,  but only
in the event of change of control of the Bank.


17.      SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    For the Years Ended December 31,
                                                                               --------------------------------------------
                                                                                   1997             1998             1999
                                                                               ============================================
                                                                                             (In Thousands)
        Supplemental Disclosure of Cash Flow Information:
<S>                                                                           <C>               <C>               <C>
        Cash paid for income taxes.................................           $  5,016          $  5,916          $  3,508
                                                                              ========          ========          ========
        Cash paid for interest on deposits and other borrowings....           $ 41,782          $ 63,196          $ 72,686
                                                                              ========          ========          ========

        Supplemental Schedule of Noncash Investing and Financing
        Real estate acquired in settlement of loans................           $  2,403          $  1,542          $  1,678
                                                                              ========          ========          ========
</TABLE>


18.      EARNINGS PER SHARE

The  weighted-average  number  of shares  used to  calculate  basic and  diluted
earnings  per share,  including  the  adjustments  for the Bank's ESOP and stock
options for the years ended December 31, 1997, 1998 and 1999, are as follows:


<TABLE>
<CAPTION>
                                  For the Year Ended December    For the Year Ended December     For the Year Ended December
                                           31, 1997                        31, 1998                        31, 1999
                                 ---------------------------------------------------------------------------------------------
                                 Income     Shares   Per-Share   Income     Shares   Per-Share   Income    Shares    Per-Share
                                   (1)       (2)      Amount       (1)       (2)      Amount      (1)        (2)      Amount
                                ==============================================================================================
                                                             (In Thousands, except per share data)

<S>                             <C>         <C>      <C>        <C>        <C>       <C>       <C>        <C>       <C>
 Net income.................    $6,418,000                      $7,412,000                     $9,114,000
 Basic EPS:
 Income available to
      common stockholders...    $6,418,000 6,661,401 $     0.96 $7,412,000 6,644,096 $    1.12 $9,114,000 6,435,357 $       1.42
                                                     ==========                      =========                      ============
 Effect of diluted shares:
      Common stock options..                 104,760                          91,881                         56,451
                                           ---------                       ---------                      ---------
 Diluted EPS:
 Income available to
      common stockholders...    $6,418,000 6,766,161 $     0.95 $7,412,000 6,735,977 $    1.10 $9,114,000 6,491,808 $        1.40
                                ========== ========= ===================== ========= =============================== ============
</TABLE>

 (1) Numerator
 (2) Denominator


<PAGE>


Weighted  average shares  outstanding  for the year ended December 31, 1999 were
reduced for  treasury  shares held by the Bank's  SMPIAP and  increased  for the
corresponding liability for settlement to the Bank's employees. (See Note 13).


19.      OTHER COMPREHENSIVE INCOME

An analysis of the changes in  Accumulated  Other  Comprehensive  Income for the
years ended December 31, 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                      1997               1998             1999
                                                                ------------------------------------------------------
                                                                                     Unrealized
                                                                                   Gains (Losses)
                                                                                    on Securities
                                                                ======================================================
                                                                                   (In Thousands)

<S>                                                          <C>               <C>                <C>
  Beginning Balance...................................           $     782         $   1,405          $    (318)
  Current-period change...............................                 623            (1,723)            (5,780)
                                                                 ---------         ---------          ---------
  Ending balance......................................           $   1,405         $    (318)         $  (6,098)
                                                                 =========         =========          =========
</TABLE>



An analysis of the related tax effects allocated to Other  Comprehensive  Income
is as follows:




<TABLE>
<CAPTION>
                                    December 31, 1997                   December 31, 1998                   December 31, 1999
                              -------------------------------    --------------------------------    -------------------------------

                                           Tax                                 Tax                                 Tax
                              Before-tax (Expense) Net-of-Tax    Before-tax (Expense)  Net-of-Tax    Before-tax (Expense) Net-of-Tax
                               Amount    Benefit    Amount        Amount     Benefit    Amount        Amount     Benefit    Amount
                              ======================================================================================================
                                                                          (In Thousands)
Unrealized gain (loss) on
 assets available for sale:
Unrealized holding gains
 (losses) arising during
<S>                            <C>        <C>       <C>           <C>        <C>        <C>           <C>        <C>        <C>
  period...................... $ 1,055    $  (432)  $   623       $(1,539)   $   629    $  (910)      $(9,176)   $ 3,487    $(5,689)
Less: reclassification
  adjustment for gains
  realized in net income......       -          -         -        (1,355)       542       (813)         (147)        56        (91)
                               -------    -------   -------       -------    -------    -------       -------    -------    -------
Other comprehensive income.... $ 1,055    $ (432)  $   623        $(2,894)   $ 1,171    $(1,723)      $(9,323)   $ 3,543    $(5,780)
                               =======    =======  ========        =======    =======    =======       =======    =======    =======
</TABLE>


20.      DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of  Financial  Instruments  - The fair value of the Bank's  financial
instruments at December 31, 1998 and 1999 is as follows:



<TABLE>
<CAPTION>
                                                                  December 31, 1998                December 31, 1999
                                                             ---------------------------- --- ----------------------------
                                                              Carrying           Fair          Carrying           Fair
                                                               Amount           Value           Amount           Value
                                                             =========== ==== =========== === ============ === ===========
                                                                                    (In Thousands)
Assets:
<S>                                                         <C>               <C>              <C>               <C>
  Cash and amounts due from depository institutions.        $  27,951         $ 27,951         $  41,736         $ 41,736
  Interest-bearing deposits.........................           32,075           32,075            19,065           19,065
  Assets available for sale.........................          452,575          452,575           404,230          404,230
  Loans receivable (net)............................          977,166         1,152,248        1,164,421         1,128,620
Liabilities:
  Deposits..........................................        1,120,746         1,130,266        1,321,510         1,315,118
  Other borrowed funds..............................            6,981            6,977            14,656           14,647
  Advances from the Federal Home Loan Bank..........          303,140          306,989           247,073          243,315
  Guaranteed Preferred Beneficial Interests
     in Company's Debentures........................           28,750           31,268            28,750           26,995
</TABLE>


<PAGE>


The following  methods and assumptions  were used to estimate fair value of each
major class of financial instrument at December 31, 1998 and 1999.


Cash and Amounts due from Depository Institutions and Interest-Bearing  Deposits
- The carrying  amount of these  assets is a  reasonable  estimate of their fair
value.


Assets  Available  for Sale - The fair  value of these  securities  are based on
quoted market prices.


Loans  Receivable  - The fair value of loans is  estimated  by  discounting  the
future cash flows of the loans using the current  rates at which  similar  loans
would be made to borrowers  with similar  credit  rating for the same  remaining
maturities.


Deposits - The fair value of demand deposits,  savings accounts and money market
accounts are equal to the amount  payable on demand at the reporting  date.  The
fair values of fixed maturity  certificate accounts are estimated by discounting
the future cash flows of the  certificates  using the current rates for advances
from the Federal Home Loan Bank with similar maturities.


Other Borrowed Funds - Fair value is estimated using rates currently offered for
advances from the Federal Home Loan Bank with similar maturities.


Advances  from the Federal Home Loan Bank - The fair value of these  advances is
estimated  by  discounting  the future  cash flows of these  advances  using the
current rates at which similar term advances could be obtained.


Guaranteed  Preferred  Beneficial  Interests in Company's  Debentures - The fair
value is  estimated  by  discounting  the future cash flows of these  debentures
using the yield for 30 year Treasury Bond plus 250 basis points.


Commitments  to Extend Credit and Standby  Letters of Credit - The fair value of
these commitments is insignificant.


Although management uses its best judgment in estimating the fair value of these
financial  instruments,   there  are  inherent  limitations  in  any  estimation
technique.  Therefore,  the  fair  value  estimates  presented  herein  are  not
necessarily  indicative of the amounts which the Bank could realize in a current
transaction.



<PAGE>


21.      CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The  following  condensed  statements  of financial  position as of December 31,
1998,  and 1999 and the condensed  statement of operations and statement of cash
flows for the three  years then  ended  should be read in  conjunction  with the
consolidated  financial  statements and related notes. Since the organization of
the  parent  company  was  accounted  for in a manner  similar  to a pooling  of
interests,  these statements have been presented as if the parent company was in
existence for all periods covered by the consolidated financial statements.

                                                                December 31,
                                                         ---------------------
                                                             1998       1999
                                                         =====================
                                                              (In Thousands)
STATEMENT OF FINANCIAL CONDITION
   Assets:
      Cash and cash equivalents....................      $   6,122 $       141
      ESOP loan receivable.........................          509           276
      Investment in and advances to Bank...........          106,482   110,972
      Other assets.................................          1,437       1,884
                                                         --------- -----------
   Total assets                                          $   114,55$   113,273
                                                         =====================

   Liabilities.....................................      $   29,551$    29,969
   Stockholders' equity............................          84,999     83,304
                                                         ---------------------
   Total liabilities and stockholders' equity......      $   114,55$   113,273
                                                         =====================


<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                             -----------------------------------------------------------------
                                                                        1997                  1998                  1999
                                                             =================================================================
                                                                                      (In Thousands)
STATEMENT OF OPERATIONS
   Income:
<S>                                                               <C>                   <C>                   <C>
      Income...........................................           $        42           $       173           $        85
      Expenses.........................................                   541                 2,753                 2,896
                                                                  -----------           -----------           -----------
      Loss before income taxes and equity in earnings of                 (499)               (2,580)               (2,811)
      Income tax benefit...............................                   204                   983                 1,068
                                                                  -----------           -----------           -----------
      Loss before equity in earnings of Bank...........                  (295)               (1,597)               (1,743)
      Equity in earnings of Bank.......................                 6,713                 9,009                10,857
                                                                  -----------           -----------           -----------
      Net income.......................................           $     6,418           $     7,412           $     9,114
                                                                  ===========           ===========           ===========

STATEMENT OF CASH FLOWS
   Cash flow from (for) operating activities:
   Net income..........................................           $     6,418           $     7,412           $     9,114
   Adjustments to reconcile net income to
      net cash used for operating activities
         Equity in earnings of Bank....................                (6,713)               (9,009)              (10,857)
   Other...............................................                  (148)                1,024                   301
                                                                  -----------           -----------           -----------
   Net cash used for operating activities..............                  (443)                 (573)               (1,442)
                                                                  -----------           -----------           -----------

   Cash flow from (for) investing activities:
   Dividends received from Bank........................                 3,554                11,600                   350
   Purchase of ESOP loan...............................                  (966)                    -                     -
   Principal payments on ESOP loan.....................                   138                   319                   233
   Investment in subsidiary............................                     -               (25,000)                    -
   Other...............................................                   386                 1,077                   283
                                                                  -----------           -----------           -----------
   Net cash from (used for) investing activities.......                 3,112               (12,004)                  866
                                                                  -----------           -----------           -----------

   Cash flow from (for) financing activities:
   Proceeds from the sale of stock.....................                   308                    79                   274
   Purchase of treasury stock..........................                     -                (5,752)               (1,906)
   Sale of Guaranteed Preferred Beneficial
   Cash dividends paid.................................                (2,566)               (3,316)               (3,773)
                                                                  -----------           -----------           -----------
   Net cash (used for) from financing activities.......                (2,258)               18,288                (5,405)
                                                                  -----------           -----------           -----------

   Net increase (decrease) in cash and cash equivalents                   411                 5,711                (5,981)
   Cash and cash equivalents, Beginning of year........                     -                   411                 6,122
                                                                  -----------           -----------           -----------
   Cash and cash equivalents, End of year..............           $       411           $     6,122           $       141
                                                                  ===========           ===========           ===========
</TABLE>


<PAGE>


22.      QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                                First          Second             Third           Fourth
                                                               Quarter         Quarter           Quarter          Quarter
                                                            ==============================================================
                                                                                     (In Thousands)
Year ended December 31, 1998:
<S>                                                         <C>               <C>               <C>              <C>
     Interest income...............................         $  22,820         $ 24,461          $  25,502        $ 25,537
     Interest expense..............................            14,280           16,110             17,055          17,547
                                                            ---------         --------          ---------        --------
         Net interest income.......................             8,540            8,351              8,447           7,990
                                                            ---------         --------          ---------        --------

     Provision for loan losses.....................              (69)                20                 6             120
     Non-interest income...........................             1,914            2,287              2,426           2,063
     Non-interest expenses.........................             7,013            7,333              7,369           7,972
     Income taxes..................................             1,417            1,292              1,358             775
                                                            ---------         --------          ---------        --------
         Net Income................................         $   2,093         $  1,993          $   2,140        $  1,186
                                                            =========         ========          =========        ========



                                                                 First         Second             Third           Fourth
                                                                Quarter        Quarter           Quarter          Quarter
                                                             ===============================================================
                                                                                     (In Thousands)
Year ended December 31, 1999:
     Interest income...............................         $  26,054         $ 26,970          $  28,622        $ 29,279
     Interest expense..............................            17,426           17,597             18,515          18,717
                                                            ---------         --------          ---------        --------
         Net interest income.......................             8,628            9,373             10,107          10,562
                                                            ---------         --------          ---------        --------

     Provision for loan losses.....................                34                73               161             195
     Non-interest income...........................             1,811            1,900              1,912           7,304
     Non-interest expenses.........................             8,418            8,706              9,199          10,031
     Income taxes..................................               770              957              1,019           2,920
                                                            ---------         --------          ---------        --------
         Net Income................................         $   1,217         $  1,537          $   1,640        $  4,720
                                                            =========         ========          =========        ========
</TABLE>

<PAGE>

                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                  REPORTS ON FORM 8-K
---------------------------------------------------------------

          The exhibits and financial statement schedules filed as a part of this
          Form 10-K/A are as follows:

         (a)(1)   Financial Statements
                  --------------------

o    Independent Auditors' Report
o    Consolidated Statements of Financial Condition,
         December 31, 1998 and 1999
o    Consolidated Statements of Operations,
         Years Ended December 31, 1997, 1998 and 1999
o    Consolidated  Statements of Changes in  Stockholders'  equity,
         Years Ended December 31, 1997, 1998 and 1999
o    Consolidated  Statements of Cash Flows,
         Years Ended December 31, 1997, 1998 and 1999
o    Notes to Consolidated Financial Statements.




<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      FIDELITY BANKSHARES, INC.



Date: April 4, 2000                   By:  /s/Vince A. Elhilow
                                           -------------------
                                           Vince A. Elhilow
                                           President and Chief Executive Officer

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



By:  /s/Vince A. Elhilow                By: /s/Richard D. Aldred
     --------------------------------       ------------------------------------
     Vince A. Elhilow, President            Richard D. Aldred, Executive
       and Chief Executive Officer             Vice President, Chief Financial
     (Principal Executive Officer)             Officer and Treasurer
                                            (Principal Financial and
                                             Accounting Officer)

Date: April 4, 2000                     Date: April 4, 2000



By:  /s/Joseph B. Shearouse, Jr.        By: /s/Keith D. Beaty
     --------------------------------       ------------------------------------
     Joseph B. Shearouse, Jr.,              Keith D. Beaty, Director
     Chairman of the Board
Date: April 4, 2000                     Date: April 4, 2000



By:  /s/F. Ted Brown, Jr.               By: /s/Donald E. Warren
     --------------------------------       ------------------------------------
     F. Ted Brown, Jr., Director            Donald E. Warren, Director

Date: April 4, 2000                     Date: April 4, 2000