U.S. Securities and Exchange Commission


                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

   For the transition period from ____________________ to ____________________ 

                         Commission file number 0-22288

                             Fidelity Bancorp, Inc.
                             ---------------------- 
        (Exact name of small business issuer as specified in its charter)

  Pennsylvania                                          25-1705405  
  ------------                                          ---------- 
 (State  or  other  jurisdiction  of          (IRS Employer Identification No.)
 incorporation  or organization
 
               1009 Perry Highway, Pittsburgh, Pennsylvania 15237
              --------------------------------------------------- 
              (Address of principal executive offices) (Zip code)

                                  412-367-3300
                                  ------------ 
                           (Issuer's telephone number) 

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days. Yes [ X ] No
[ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS


     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes [  ] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS


         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,973,987 shares, par value
$0.01, at July 31, 1998

         Transitional Small Business Disclosure Format (Check one):
                             Yes [   ];  No  [ X ].
<PAGE>


                     FIDELITY BANCORP, INC. AND SUBSIDIARIES

                                      Index


Part I - Financial Information
 
Item 1.  Financial Statements

          Statements of Financial Condition as of September 30, 1997
               and June 30, 1998 (Unaudited)   

          Statements of Income (Unaudited) for the Three and Nine Month Periods
               Ended June 30, 1997 and 1998  

          Statements of Cash Flows (Unaudited) for the Nine Months Ended
               June 30, 1997 and 1998
        
          Statement of Changes in Stockholders' Equity (Unaudited) for the Nine
               Months Ended June 30, 1997 and 1998    

          Notes to Financial Statements       

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations  


Part II - Other Information

Item 1.  Legal Proceedings  

Item 2.  Changes in Securities    

Item 3.  Defaults Upon Senior Securities   

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

Item 5.  Other Information   

Item 6.  Exhibits and Reports on Form 8-K   

Signatures
<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
                         FIDELITY BANCORP, INC. AND SUBSIDIARIES
                            Statements of Financial Condition
                                      (in thousands)


                                                                June 30,   September 30,
                                                                  1998         1997
                                                                --------     --------
                                                               (Unaudited)
                         Assets
<S>                                                             <C>          <C>     
Cash and amounts due from depository institutions .........     $  5,820     $  3,731
Interest-earning demand deposits with other institutions ..        1,859          243
Investment securities held-to-maturity ....................       11,339        8,541
Investment securities available-for-sale ..................       46,760        4,573
Loans receivable, net (Notes 6 and 7) .....................      206,494      182,869
Mortgage-backed securities, held-to-maturity ..............       23,872       34,065
Mortgage-backed securities available-for-sale .............       82,950       93,851
Real estate owned, net ....................................           21         --   
Federal Home Loan Bank stock - at cost ....................        5,050        4,885
Accrued interest receivable, net ..........................        2,572        2,415
Office premises and equipment, net ........................        3,303        3,467
Deferred tax asset ........................................          684          852
Prepaid expenses and sundry assets ........................        5,456        1,472
                                                                --------     --------

       Total Assets .......................................     $396,180     $380,964
                                                                ========     ========

     Liabilities and Net worth

Liabilities:
   Savings deposits .......................................     $260,734     $244,192
   Federal Home Loan Bank advances ........................       90,000       96,700
   Reverse repurchase agreements ..........................        2,202        1,183
   Advance deposits by borrowers for
      taxes and insurance .................................        2,870        1,097
   Accrued interest on savings and other deposits .........           76          159
   Accrued interest on trust preferred securities .........          211          211
   Accrued income taxes payable ...........................          215          204
   Other accrued expenses and sundry liabilities ..........        1,540        1,087
   Guaranteed preferred beneficial interest in
       Company's debentures (Note 8) ......................       10,250       10,250
                                                                --------     --------

       Total Liabilities ..................................      368,098      355,083
                                                                --------     --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         FIDELITY BANCORP, INC. AND SUBSIDIARIES
                            Statements of Financial Condition
                                      (in thousands)
                                        (continued)


                                                                June 30,   September 30,
                                                                  1998         1997
                                                                --------     --------
                                                               (Unaudited)                         
<S>                                                             <C>          <C>     
Stockholders' equity (Notes 4 and 5):
   Common Stock, $0.01 par value per share,
      10,000,000 shares authorized; 1,973,987 and
      1,943,469 shares issued and outstanding, respectively           20           15
   Additional paid-in capital .............................       14,040       13,811
   Retained earnings - substantially restricted ...........       13,427       11,822
   Unrealized gain (loss) on securities available-for-sale           595          233
                                                                --------     --------
       Total Stockholders' Equity .........................       28,082       25,881
                                                                --------     --------
       Total Liabilities and Stockholders' Equity .........     $396,180     $380,964
                                                                ========     ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                              FIDELITY BANCORP, INC. AND SUBSIDIARIES
                                 Statements of Income (Unaudited)
                                          (in Thousands)


                                                     Three Months Ended        Nine Months Ended
                                                          June 30,                 June 30,
                                                    --------------------      -------------------
                                                      1998        1997         1998         1997
                                                    -------      -------      -------     -------
<S>                                                 <C>          <C>          <C>         <C>    
Interest income:
   Loans ......................................     $ 4,231      $ 3,464      $12,175     $ 9,861
   Mortgage-backed securities .................       1,877        1,726        5,914       4,893
   Investment securities:
       Taxable ................................         627          591        1,937       1,791
        Tax-exempt ............................         342          184          870         698
   Deposits with other institutions ...........          12            2           44           7
                                                    -------      -------      -------     -------
      Total interest income ...................       7,089        5,967       20,940      17,250
                                                    -------      -------      -------     -------

Interest expense:
   Savings deposits ...........................       2,766        2,381        8,161       7,054
   Guaranteed preferred beneficial interest
    in subordinated debt (Note 8) .............         256          137          768         137
   Borrowed funds .............................       1,351          914        4,056       2,587
                                                    -------      -------      -------     -------
      Total interest expense ..................       4,373        3,432       12,985       9,778
                                                    -------      -------      -------     -------

Net interest income before provision
   for loan losses ............................       2,716        2,535        7,955       7,472
Provision for loan losses .....................          90          130          315         365
                                                    -------      -------      -------     -------
Net interest income after provision
   for loan losses ............................       2,626        2,405        7,640       7,107
                                                    -------      -------      -------     -------

Other income:
   Service fee income .........................          29           21           93          57
   Gain (loss) on sale of investment and
      mortgage-backed securities, net .........          60            6           68          27
   Gain (loss) on sale of loans ...............          (3)          11            6          16
   Other operating income .....................         230          184          674         530
                                                    -------      -------      -------     -------
      Total other income ......................         316          222          841         630
                                                    -------      -------      -------     -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                              FIDELITY BANCORP, INC. AND SUBSIDIARIES
                                 Statements of Income (Unaudited)
                                          (in Thousands)
                                            (continued)


                                                     Three Months Ended        Nine Months Ended
                                                          June 30,                 June 30,
                                                    --------------------      -------------------
                                                      1998        1997         1998         1997
                                                    -------      -------      -------     -------
<S>                                                 <C>          <C>          <C>         <C>    
Operating expenses:
   Compensation and employee benefits .........       1,097          924        3,143       2,687
   Occupancy and equipment expense ............         167          151          467         439
   Depreciation and amortization ..............         132          119          382         355
   Federal insurance premiums .................          39           38          115          76
   (Gain) loss on real estate owned, net ......           2          (16)          11          36
   Amortization of intangibles ................        --           --           --            44
   Other operating expenses ...................         421          394        1,252       1,130
                                                    -------      -------      -------     -------
      Total operating expenses ................       1,858        1,610        5,370       4,767
                                                    -------      -------      -------     -------

Income before income tax provision ............       1,084        1,017        3,111       2,970

Income tax provision ..........................         349          361        1,043       1,054
                                                    -------      -------      -------     -------
Net income ....................................     $   735      $   656      $ 2,068     $ 1,916
                                                    =======      =======      =======     =======
Basic earnings per common share (Notes 3&4) ...     $  0.37      $  0.34      $  1.06     $  1.00
                                                    =======      =======      =======     =======
Diluted earnings per common share (Notes 3&4)       $  0.36      $  0.33      $  1.02     $  0.97
                                                    =======      =======      =======     =======

Dividends per common share (Note 4) ...........     $   .09      $ .072       $  .234     $  .196 
                                                    =======      =======      =======     =======
</TABLE>
See accompanying notes to financial statements 
<PAGE>
<TABLE>
<CAPTION>
                               FIDELITY BANCORP, INC. AND SUBSIDIARIES
                                Statements of Cash Flows (Unaudited)
                                           (in thousands)

                                                                                   Nine Months
                                                                                  Ended June 30,
                                                                              ----------------------
                                                                                 1998          1997
                                                                              --------      --------
<S>                                                                           <C>           <C>     
Operating Activities:
     Net income .........................................................     $  2,068      $  1,916
     Adjustments to reconcile net income to net
     cash provided by operating activities:
         Provision for loan losses ......................................          315           365
         Loss on real estate owned ......................................           11            36       
         Depreciation and amortization ..................................          382           355          
         Deferred loan fee amortization .................................         (137)         (123)         
         Amortization of investment and mortgage-backed securities
          discounts/premiums, net .......................................          315           234
         Amortization of intangibles ....................................           --            44
         Net (gain) loss on sale of investment securities ...............         (186)          (57)      
         Net (gain) loss on sale of mortgage-backed securities ..........          118            30        
         Net (gain) loss  on sale of loans ..............................           (6)          (16)          
         Origination of loans held-for-sale .............................          (80)         (552)        
         Proceeds from sale of loans held-for-sale ......................           81           560
         (Increase) decrease in interest receivable .....................         (157)         (318)
         (Increase) decrease in deferred tax asset ......................          168           335
         Increase (decrease) in accrued income taxes ....................           11           976
         Increase (decrease) in interest payable ........................          (83)           71
         SAIF assessment ................................................         --          (1,530)
         Other changes, net .............................................        3,835          (545)
                                                                              --------      --------

        Net cash provided (used) by operating activities ................        6,655         1,781
                                                                              --------      --------
Investing Activities:

     Proceeds from sales of investment securities available-for-sale ....       16,322        15,192
     Proceeds from maturities and principal repayments of
        investment securities available-for-sale ........................        2,005         2,000
     Purchases of investment securities available-for-sale ..............      (20,261)       (8,011)
     Proceeds from sales of mortgage-backed securities available-for-sale       40,145         8,588
     Proceeds from maturities and principal repayments of  mortgage-
        backed securities available-for-sale ............................       14,467         5,680
     Purchases of mortgage-backed securities available-for-sale .........      (43,544)      (38,895)
     Proceeds from maturities and principal repayments of investment
        securities held-to-maturity .....................................        5,202         1,408
     Purchases of investment securities held-to-maturity ................       (7,997)       (2,625)
     Purchases of mortgage-backed securities held-to-maturity ...........         --          (5,053)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               FIDELITY BANCORP, INC. AND SUBSIDIARIES
                                Statements of Cash Flows (Unaudited)
                                           (in thousands)
                                             (continued)
                                                                                   Nine Months
                                                                                  Ended June 30,
                                                                              ----------------------
                                                                                 1998          1997
                                                                              --------      --------
<S>                                                                           <C>           <C>     
     Proceeds from principal repayments of mortgage-backed
       securities held-to-maturity ......................................       10,054         3,763
     Principal repayments on first mortgage loans .......................       18,278        11,964
     Principal repayments on other loans ................................       24,690        15,345
     First mortgage loans originated and disbursed ......................      (40,350)      (25,867)
     Other loans originated .............................................      (34,431)      (27,459)
     Proceeds from sale of other loans ..................................          460           319
     Additions to office premises and equipment .........................         (235)         (529)
  Net purchases of FHLB Stock ...........................................         (165)       (1,359)        
                                                                              --------      --------
  Net cash provided (used) by investing activities ......................      (15,360)      (45,539)
                                                                              --------      --------
Financing Activities:
Net increase (decrease) in savings deposits                                     16,542         4,360
Increase in advance payments by borrowers for taxes and insurance                1,773         1,412
Increase (decrease) in reverse repurchase agreements                             1,019           971
FHLB advance repayments                                                       (861,715)   (1,165,525)
FHLB advances                                                                  855,015     1,192,575
Cash dividends paid                                                               (459)         (376)
Stock options exercised                                                            150           266
Proceeds from sale of stock                                                         84            57
Proceeds from guaranteed preferred beneficial interest in
  subordinated debt                                                                  0        10,250
                                                                              --------      --------
Net cash provided (used) by financing activities                                12,409        43,990
                                                                              --------      --------

Increase (decrease) in cash and cash equivalents                                 3,704           232

Cash and cash equivalents at beginning of period                                 3,975         4,762
                                                                              --------      --------

Cash and cash equivalents at end of period                                    $  7,679      $  4,994
                                                                              ========      ======== 
Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
  Interest on deposits and other borrowings                                  $  12,970      $  9,537
  Income taxes                                                               $   1,025      $     78
                                                                             ---------      --------

Transfer of loan to REO                                                      $      21      $    120
                                                                             ---------      -------- 
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                         FIDELITY BANCORP, INC. AND SUBSIDIARIES
                                      Statement of Changes in Stockholders' Equity
                                                     (in thousands)

                                            Additional                                Unrealized Gain/
                                              Common        Paid-in     Retained    (Loss) on Securities
                                               Stock        Capital      Earnings    Available-for-Sale          Total
                                               -----        -------      --------    ------------------          -----
<S>                                          <C>           <C>           <C>               <C>                 <C>         
Balance at September 30, 1996 ..........     $     14      $ 10,437      $ 12,523          $ (1,196)           $ 21,778    
                                                                                                                           
Net income .............................                                    1,916                                 1,916    
                                                                                                                           
  Cash dividends paid (4) ..............                                     (375)                                 (375)   
                                                                                                                           
  10% stock dividend on common                                                                                             
     stock .............................            1         2,902        (2,903)                                  -0-    
                                                                                                                           
  Cash paid on stock dividend in lieu of                                                                                   
     fractional shares .................                                       (1)                                   (1)   
                                                                                                                           
  Net change in unrealized gain                                                                                            
    (loss) on securities available-                                                                                        
    for-sale, net of taxes .............                                                        896                 896    
                                                                                                                           
  Sale of stock through Dividend                                                                                           
    Reinvestment Plan ..................                         57                                                  57    
                                                                                                                           
  Stock options exercised ..............                   $    266                                            $    266    
                                             --------      --------      --------          --------            --------    
Balance at June 30, 1997 ...............     $     15      $ 13,662      $ 11,160          $   (300)           $ 24,537    
                                             ========      ========      ========          ========            ========    
                                                                                                                           
                                                                                                                           
Balance at September 30, 1997 ..........     $     16      $ 13,810      $ 11,822          $    233            $ 25,881    
                                                                                                                           
Net income .............................                                    2,068                                 2,068    
                                                                                                                           
  Cash dividends paid (4) ..............                                     (459)                                 (459)   
                                                                                                                           
  5/4 Stock Split ......................            4            (4)                                                -0-    
                                                                                                                           
  Cash paid on stock split in lieu of                                                                                      
    fractional shares ..................                                       (4)                                   (4)   
                                                                                                                           
  Net change in unrealized gain                                                                                            
    (loss) on securities available-                                                                                        
    for-sale, net of taxes .............                                                        362                 362    
                                                                                                                           
  Sale of stock through Dividend                                                                                           
    Reinvestment Plan ..................                         150                                                150    
                                                                                                                           
  Stock options exercised ..............                   $     84                                            $     84    
                                             --------      --------      --------          --------            -------- 
Balance at June 30, 1998 ...............     $     20      $ 14,040      $ 13,427          $    595            $ 28,082    
                                             ========      ========      ========          ========            ======== 
</TABLE>
<PAGE>
                     FIDELITY BANCORP, INC. AND SUBSIDIARIES
                          Notes to Financial Statements
                                   (Unaudited)
                      September 30, 1997 and June 30, 1998

(1) Consolidation
The audited and unaudited consolidated financial statements contained herein for
Fidelity Bancorp, Inc. (the "Company") include the accounts of Fidelity Bancorp,
Inc. and its wholly-owned subsidiaries,  Fidelity Bank, PaSB (the "Bank") and FB
Capital  Trust  (the  "Trust").  All  significant   inter-company  balances  and
transactions have been eliminated.

(2) Basis of Presentation
The accompanying  consolidated  financial statements were prepared in accordance
with instructions to Form 10-QSB, and therefore,  do not include  information or
footnotes necessary for a complete  presentation of financial position,  results
of operations and cash flows in conformity  with generally  accepted  accounting
principles.  However, all normal recurring  adjustments which, in the opinion of
management,  are necessary for a fair presentation of the financial  statements,
have been included.  These  financial  statements  should be read in conjunction
with  the  audited  financial  statements  and the  accompanying  notes  thereto
included in the Company's Annual Report for the period ended September 30, 1997.
The  results  for the three and nine month  periods  ended June 30, 1998 are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending September 30, 1998.

(3) Earnings Per Share

In February 1997, the Financial  Accounting  Standards Board ("FASB") issued FAS
No. 128, "Earnings per Share". FAS No. 128 provides revised reporting  standards
for earnings per share ("EPS") and is effective for financial  statement periods
ending after December 15, 1997. FAS No. 128 eliminates primary and fully diluted
EPS  disclosures  and adds new  disclosures  of basic and diluted EPS. Basic EPS
excludes  dilution  and is  computed  by  dividing  income  available  to common
stockholders by the weighted average number of common shares outstanding for the
period.  Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the earnings of the Company.  The Company  adopted FAS No. 128 as of December
31,  1997 and all  prior  period  per share  amounts  have  been  restated.  The
following  table sets forth the  computation  of basic and diluted  earnings per
share (amounts in thousands, except per share data):
<PAGE>
<TABLE>
<CAPTION>
                                          Three Months Ended      Nine Months Ended
                                                June 30,              June 30,
                                           -----------------     ------------------
Numerator:                                   1998       1997       1998        1997
                                           ------     ------     ------      ------ 

<S>                                        <C>        <C>        <C>         <C>   
Net income ...........................     $  735     $  656     $2,068      $1,916
                                           ------     ------     ------      ------

   Numerator for basic and
    diluted earnings per share .......     $  735     $  656     $2,068      $1,916
                                           ------     ------     ------      ------

Denominator:
Denominator for basic earnings
   per share - weighted average shares      1,970      1,931      1,959       1,912
Effect of dilutive securities:
   Employee stock options ............         77         62         71          62
                                           ------     ------     ------      ------

Denominator for diluted earnings
   per share - weighted average
   shares and assumed conversions ....      2,047      1,993      2,030       1,974
                                           ======     ======     ======      ======

Basic earnings per share .............     $  .37     $  .34     $ 1.06      $ 1.00
                                           ======     ======     ======      ======

Diluted earnings per share ...........     $  .36     $  .33     $ 1.02      $  .97
                                           ======     ======     ======      ======
</TABLE>
 

(4) Per share amounts have been restated to give  retroactive  effect to the 10%
common stock dividend  declared by the Company's  Board of Directors and paid on
May 28, 1997, and the five for four stock split paid on March 31, 1998.

(5) Securities
The Company accounts for investments in debt and equity securities in accordance
with FAS No. 115, which requires that  investments be classified as either:  (1)
Securities   Held-to-  Maturity  -  reported  at  amortized  cost,  (2)  Trading
Securities  - reported at fair value,  or (3)  Securities  Available-for-Sale  -
reported at fair value.  Unrealized gains and losses for trading  securities are
reported  in  earnings  while   unrealized   gains  and  losses  for  securities
available-for-sale  are reported as a separate  component of equity.  Unrealized
gains of $595,000,  net of tax, on investments  classified as available-for-sale
are recorded as a separate component of equity at June 30, 1998.
<PAGE>
(6) Loans Receivable

     Loans  receivable  are  comprised  of  the  following  (dollar  amounts  in
thousands):


                                                      June 30,     September 30,
                                                        1998            1997
                                                     ---------        ---------

First mortgage loans:
         Conventional:
                  1-4 family dwellings .......         111,790        $  97,698
                  Multi-family dwellings .....           4,090            4,165
         Commercial ..........................          21,610           19,976
         Construction ........................          14,400            7,614
                                                     ---------        ---------
                                                       151,890          129,453
                                                     ---------        ---------
Less:
         Loans in process ....................         (10,959)          (3,695)
         Unearned discounts and fees .........          (1,047)            (912)
                                                     ---------        ---------
                                                       139,884          124,846
                                                     ---------        ---------
Installment loans:
         Home equity .........................          41,177           37,271
         Mobile home loans ...................              19               68
         Consumer loans ......................           2,411            2,579
         Other ...............................           4,183            3,163
                                                     ---------        ---------
                                                        47,790           43,081
                                                     ---------        ---------
Commercial loans:
         Commercial business loans ...........          17,856           16,325
         Lease loans .........................           3,163              548
                                                     ---------        ---------
                                                        21,019           16,873
                                                     ---------        ---------

Less: Allowance for possible loan losses .....          (2,199)          (1,931)
                                                     ---------        ---------

         Loans receivable, net ...............       $ 206,494        $ 182,869
                                                     =========        =========

(7) Changes in the  allowance for loan losses for the nine months ended June 30,
1998 and 1997 are as follows (dollar amounts in thousands):

                                                          1998            1997
                                                        -------         -------
Balance at beginning of the fiscal year ........        $ 1,931         $ 1,530
Provision for loan losses ......................            315             365
Charge-offs ....................................            (53)           (117)
Recoveries .....................................              6              22
                                                        -------         -------

Balance at June 30, ............................        $ 2,199         $ 1,800
                                                        =======         =======
<PAGE>
The  provision  for loan  losses  charged to expense is based upon past loan and
loss  experience  and an  evaluation  of  potential  losses in the current  loan
portfolio,  including the  evaluation  of impaired  loans under FAS Nos. 114 and
118. A loan is considered to be impaired  when,  based upon 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. An insignificant  shortfall
in payments does not necessarily  result in a loan being identified as impaired.
For this purpose, delays less than 90 days are considered to be insignificant.

Impairment  losses are included in the provision  for loan losses.  FAS Nos. 114
and 118 do not apply to large groups of smaller balance,  homogeneous loans that
are collectively  evaluated for impairment,  except for those loans restructured
under a troubled debt restructuring. Loans collectively evaluated for impairment
include  consumer loans and residential  real estate loans, and are not included
in the following data.

At June 30, 1998,  there are no loans that are  considered to be impaired  under
FAS No. 114. The average  recorded  investment in impaired loans during the nine
months ended June 30, 1998,  was zero.  For the nine months ended June 30, 1998,
the Company  recognized no interest  income on those impaired  loans,  using the
cash basis of income recognition.

(8) On May 13,  1997,  the Trust,  a  statutory  business  trust  created  under
Delaware law that is a subsidiary of the Company,  issued $10.25 million,  9.75%
Preferred   Securities   ("Preferred   Securities")  with  a  stated  value  and
liquidation  preference  of $10 per share.  The  Trust's  obligations  under the
Preferred  Securities  issued are fully and  unconditionally  guaranteed  by the
Company.  The proceeds  from the sale of the  Preferred  Securities of the Trust
were  utilized  by the  Trust to  invest  in  $10.25  million  of  9.75%  Junior
Subordinated  Debentures (the  "Debentures") of the Company.  The Debentures are
unsecured  and  rank   subordinate  and  junior  in  right  of  payment  to  all
indebtedness,  liabilities  and  obligations  of  the  Company.  The  Debentures
represent the sole assets of the Trust.  Interest on the Preferred Securities is
cumulative  and  payable  quarterly  in  arrears.  The  Company has the right to
optionally redeem the Debentures prior to the maturity date of July 15, 2027, on
or after July 15, 2002, at 100% of the stated liquidation  amount,  plus accrued
and unpaid  distributions,  if any, to the redemption date. Under the occurrence
of  certain  events,  the  Company  may  redeem in whole,  but not in part,  the
Debentures  prior  to  July  15,  2002.  Proceeds  from  any  redemption  of the
Debentures  would cause a mandatory  redemption of the Preferred  Securities and
the  common  securities  having an  aggregate  liquidation  amount  equal to the
principal amount of the Debentures redeemed.

On July 17, 1997, on behalf of the Trust, the Company  requested relief from the
Office of Chief Counsel of the Division of Corporation Finance of the Securities
and Exchange Commission,  exempting the Trust from the reporting requirements of
the Securities  Exchange Act of 1934. The Trust is a wholly-owned  subsidiary of
the Company, has no independent  operations and issued securities that contained
a full and unconditional  guarantee of its parent,  the Company.  On January 29,
1998, the Company received  notification  from the Division  exempting the Trust
from the reporting requirements.
<PAGE>
(9) The Company has adopted a plan to address Year 2000 data processing  issues.
The plan  includes the  assessment  of all internal  systems,  programs and data
processing  applications as well as those provided to the Company by third-party
vendors.  In  addition,  a program to  ascertain  the  readiness of key customer
systems has been undertaken. The Company is utilizing both internal and external
resources  for  this  project.  A  significant  portion  of the  Company's  data
processing  software is provided by  third-party  vendors from which the Company
has received confirmation that they expect to be compliant with Year 2000 issues
on a timely  basis.  The Company is  coordinating  with  third-party  vendors to
perform testing of all significant applications.  This testing is expected to be
substantially  completed by December 31, 1998. The Company is also  developing a
contingency  plan that would be implemented  should any  applications or systems
fail  to  be  Year  2000  compliant.  However,  based  on  representations  from
third-party vendors,  the Company believes all significant  applications will be
compliant. The Company currently estimates that the cost to address these issues
will be  approximately  $300,000  to  $400,000,  but will not be material to the
Company's results of operations in any one quarter or fiscal year. This estimate
includes the cost, and resulting  depreciation,  of accelerating the replacement
of computer equipment that is currently fully depreciated, or would have been by
the year 2000,  that would have been replaced in the ordinary course of business
over the next two years.  Year 2000 remediation costs are not expected to have a
material  adverse impact on the long-term  results of  operations,  liquidity or
consolidated financial position of the Company.
<PAGE>
                     FIDELITY BANCORP, INC. AND SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Comparison of Financial Condition at September 30, 1997 and June 30, 1998

Total assets of the Bank  increased  $15.2 million or 4.0% to $396.2  million at
June 30, 1998 from $381.0 million at September 30, 1997.  Significant changes in
individual  categories  were  increases in loans  receivable  of $23.6  million,
investment   securities   held-to-maturity  of  $2.8  million,  and  investments
available-for-sale of $2.2 million, and decreases in mortgage-backed  securities
held-to-maturity    of   $10.2    million   and    mortgage-backed    securities
available-for-sale of $10.9 million.

Total  liabilities  of the Bank  increased  by $13.0  million  or 3.7% to $368.1
million at June 30, 1998 from $355.1 million at September 30, 1997. The increase
reflects a $16.5 million  increase in savings  deposits,  partially  offset by a
decrease in Federal Home Loan Bank advances outstanding of $6.7 million.

Stockholders' equity increased $2.2 million or 8.5% to $28.1 million at June 30,
1998,  compared to September 30, 1997. The net increase  reflects net income for
the nine month period ended June 30, 1998 of $2.1  million,  proceeds from stock
options exercised of $150,000,  and proceeds from the Dividend Reinvestment Plan
of $84,000,  as well as an increase in  unrealized  holding  gains on securities
available-for-sale of $362,000 and common stock cash dividends paid of $459,000.

Non-Performing Assets

The following table sets forth information  regarding non-accrual loans and real
estate  owned  by the  Bank at the  dates  indicated.  The Bank did not have any
accruing  loans  which  were 90 days or more  overdue  or any loans  which  were
classified as troubled debt restructuring during the periods presented.  (Dollar
amounts in thousands):
<TABLE>
<CAPTION>
                                                          June 30,        September 30,
                                                           1998               1997
                                                           ----               ----
<S>                                                       <C>                <C>     
Non-accrual residential real
  estate loans (one-to-four-family) ...................   $  554             $   94 
Non-accrual construction, multi-family                                              
  residential and commercial real estate loans ........       --                 751 
Non-accrual installment and                                                         
  commercial business loans ...........................       90                271 
                                                          ------             ------ 
                                                                                    
Total non-performing loans ............................   $  644             $1,116 
                                                          ======             ======      
Total non-performing loans as                                                       
  a percent of net loans receivable ...................      .31%               .61%
                                                          ======             ======    
Total real estate owned,                                                            
  net of related reserves .............................   $   21             $   --   
                                                          ======             ======  
Total non-performing loans and real estate                                          
  owned as a percent of total assets ..................      .17%               .29%
                                                          ======             ====== 
</TABLE>
<PAGE>
Included  in  non-performing  loans  at  June  30,  1998  are  15  single-family
residential real estate loans totaling  $554,000,  27 installment loans totaling
$52,000,  and  two  commercial  business  loans  totaling  $38,000.  Of  the  15
non-performing single-family residential real estate loans, the largest amounted
to $199,000.

The 27  installment  loans  total  $52,000  and  consist of various  secured and
unsecured consumer loans and credit card loans. The largest loan is for $13,000.

The  commercial  business loans are for $10,000,  which  represents a bankruptcy
situation in which the bankruptcy  trustee is continuing to make  payments,  and
for $28,000, which is partially guaranteed by the Small Business Administration.

At June 30,  1998,  the Bank had an allowance  for possible  loan losses of $2.2
million or 1.06% of net loans  receivable,  as compared to an  allowance of $1.9
million or 1.06% of net loans  receivable at September  30, 1997.  The allowance
for possible loan losses equals 341% of non-performing loans at June 30, 1998.

Management has evaluated these  non-performing  loans and the overall  allowance
for possible loan losses and is satisfied that the allowance for possible losses
on loans at June 30, 1998 is adequate.  In that regard,  consideration was given
to the increase in the level of the  allowance  from  September 30, 1997 to June
30, 1998, as well as the coverage of non-performing loans the allowance provides
at June 30, 1998.

Real estate  owned at June 30, 1998  consists of one  single-family  residential
property located in Pittsburgh,  Pennsylvania  totaling $21,000. The property is
currently  for sale and  management  believes  that  the  carrying  value of the
property at June 30, 1998 approximates the net realizable value of the property.
However,  while  management  uses the best  information  available  to make such
determinations, future adjustments may become necessary.

                       Comparison of Results of Operations
           for the Three and Nine Months Ended June 30, 1998 and 1997

Net Income

Net income for the three  months  ended June 30, 1998 was  $735,000  compared to
$656,000  for the same  period in 1997,  an  increase  of $79,000 or 12.1%.  The
increase  reflects  an increase in net  interest  income of $181,000 or 7.1%,  a
decrease in the  provision  for loan losses of $40,000 or 30.8%,  an increase in
other  income of  $94,000 or 42.3% and a decrease  in the  provision  for income
taxes of $12,000 or 3.3%.  Partially offsetting these factors was an increase in
operating expenses of $248,000 or 15.4%.

Net income for the nine months ended June 30, 1998 was $2.1 million  compared to
$1.9 million for the same period in 1997,  an increase of $152,000 or 7.9%.  The
increase  reflects  an increase in net  interest  income of $484,000 or 6.5%,  a
decrease in the  provision  for loan losses of $50,000 or 13.7%,  an increase in
other  income of $210,000 or 33.4% and a decrease  in the  provision  for income
taxes of $11,000 or 1.0%.  Partially offsetting these factors was an increase in
operating expenses of $603,000 or 12.7%.
<PAGE>
Interest Rate Spread

The  Bank's   interest   rate  spread,   the   difference   between   yields  on
interest-earning  assets and the cost of funds,  decreased to 2.77% in the three
months ended June 30, 1998 from 2.94% in the same period in 1997.  The following
table shows the average yields earned on the Bank's  interest-earning assets and
the  average  rates paid on its  interest-bearing  liabilities  for the  periods
indicated,   the  resulting  interest  rate  spreads,  and  the  net  yields  on
interest-earning assets.
<TABLE>
<CAPTION>

                                                       Three Months Ended June 30,
                                                           1998          1997
                                                           ----          ----
Average yield on:
<S>                                                        <C>           <C>  
   Mortgage loans ..................................       7.96%         8.05%
   Mortgage-backed securities ......................       6.39          6.27
   Installment loans ...............................       8.63          8.50
   Commercial business loans and leases ............       9.71          9.20
   Interest-earning deposits with other
     institutions, investment securities,
     and FHLB stock (1) ............................       6.97          6.94
                                                           ----          ----
   Total interest-earning assets ...................       7.49          7.39
                                                           ----          ----

Average rates paid on:
   Savings deposits ................................       4.23          4.06
   Borrowed funds ..................................       5.91          5.68
                                                           ----          ----
   Total interest-bearing liabilities ..............       4.72          4.45
                                                           ----          ----

Average interest rate spread .......................       2.77%         2.94%
                                                           ====          ====

Net yield on interest-earning assets ...............       2.96%         3.21%
                                                           ====          ====
</TABLE>


(1) Interest income on tax free investments has been adjusted for federal income
    tax purposes using a rate of 34%.


<PAGE>
The Bank's interest rate spread decreased to 2.72% in the nine months ended June
30, 1998 from 3.07% in the same period in fiscal 1997. The following table shows
the average yields earned on the Bank's  interest-earning assets and the average
rates paid on its  interest-bearing  liabilities for the periods indicated,  the
resulting interest rate spreads, and the net yields on interest-earning assets.
<TABLE>
<CAPTION>
                                                       Nine Months Ended June 30,
                                                           1998          1997
                                                           ----          ----
Average yield on:
<S>                                                        <C>           <C>  
   Mortgage loans ..................................       7.99%         8.03%
   Mortgage-backed securities ......................       6.46          6.28
   Installment loans ...............................       8.43          8.29
   Commercial business loans and leases ............       9.97          9.72
   Interest-earning deposits with other
     institutions, investment securities,
     and FHLB stock (1) ............................       6.96          7.02
                                                           ----          ----
   Total interest-earning assets ...................       7.48          7.38
                                                           ----          ----

Average rates paid on:
   Savings deposits ................................       4.25          4.03
   Borrowed funds ..................................       5.97          5.28
                                                           ----          ----
   Total interest-bearing liabilities ..............       4.76          4.31
                                                           ----          ----

Average interest rate spread .......................       2.72%         3.07%
                                                           ====          ====
Net yield on interest-earning assets ...............       2.92%         3.27%
                                                           ====          ====
</TABLE>

(1) Interest income on tax free investments has been adjusted for federal income
    tax purposes using a rate of 34%.


Interest Income

Interest  on loans  increased  $767,000  or 22.1% to $4.2  million for the three
months ended June 30, 1998, compared to the same period in 1997. The increase is
attributable  primarily to an increase in the average  loan balance  outstanding
during the 1998  period,  as well as an  increase  in the yield  earned on these
assets in the 1998 period as compared to the same period in 1997.  The  increase
in the average balance of the loan portfolio in the fiscal 1998 periods reflects
management's continued strategy of emphasizing and increasing loans.

Interest on loans  increased $2.3 million or 23.5% to $12.2 million for the nine
months ended June 30, 1998, compared to the same period in 1997. The increase is
attributable  primarily to an increase in the average  loan balance  outstanding
during the 1998  period,  as well as an  increase  in the yield  earned on these
assets in the fiscal 1998 period as compared to the same period in fiscal 1997.
<PAGE>
Interest  on  mortgage-backed  securities  increased  $152,000  or  8.8% to $1.9
million and $1.0  million or 20.9% to $5.9  million for the three and nine month
periods  ended June 30, 1998,  respectively,  as compared to the same periods in
1997. The increase for both the three and nine month periods primarily  reflects
an increase in the average  balance of  mortgage-backed  securities  held in the
1998 periods, as well as an increase in the yield earned on the portfolio.

Interest on  interest-earning  deposits with other  institutions  and investment
securities  increased  $204,000 or 26.2% to $981,000  for the three month period
ended June 30,  1998,  as  compared  to the same  period in 1997.  The  increase
reflects an increase in the average balance of such securities and deposits,  as
well as an increase in the yield earned on these investments. For the nine month
period ended June 30, 1998,  interest on  interest-earning  deposits  with other
institutions  and  investment  securities  increased  $355,000  or 14.2% to $2.9
million,  as  compared  to the same  period  in the  prior  year.  The  increase
primarily reflects an increase in the average balance of investments held in the
1998 period, partially offset by a lower yield earned on these investments.

Interest Expense

Interest on savings  deposits  increased  $384,000 or 16.1% to $2.8  million and
$1.1 million or 15.7% to $8.2 million for the three and nine month periods ended
June 30, 1998, respectively, as compared to the same periods in fiscal 1997. The
increase for both the three and nine month periods in fiscal 1998 as compared to
fiscal 1997  reflects  both an increase in the average  balance of deposits,  as
well as an increase in the average cost of deposits.

Interest on borrowed funds increased  $437,000 or 47.8% to $1.4 million and $1.5
million or 56.8% to $4.1 million for the three and nine month periods ended June
30, 1998,  respectively,  as compared to the same  periods in fiscal  1997.  The
increases  for both the three and nine month  periods in fiscal 1998 as compared
to fiscal  1997  reflects  both an  increase  in the  average  balance  of funds
borrowed during the 1998 periods,  as well as an increase in the average cost of
borrowing  during the 1998  periods.  The Bank  continued  to rely on  wholesale
funding  sources  throughout  fiscal 1998 as an  additional  way to fund growth.
These  funding  sources  are  primarily  Federal  Home Loan  Bank of  Pittsburgh
advances.

Interest  on  guaranteed  preferred  beneficial  interest in  subordinated  debt
increased  $119,000 or 86.8% to $256,000  and $631,000 or 460.5% to $768,000 for
the three and nine month  periods  ended  June 30,  1998,  compared  to the same
periods in the prior  year.  As  discussed  more fully in Note 8, the  Preferred
Securities were issued in May 1997.

Net Interest Income Before Provision for Loan Losses

The Bank's net  interest  income  before  provision  for loan  losses  increased
$181,000 or 7.1% to $2.7 million for the three  months  ended June 30, 1998,  as
compared  to the same  period in 1997,  and  increased  $484,000 or 6.5% to $8.0
million for the nine months ended June 30, 1998,  as compared to the same period
in fiscal 1997. The increase for both the three and nine month periods  reflects
an increase in  interest-earning  assets in the fiscal 1998  periods,  partially
offset by a decrease in the spread earned.
<PAGE>
Provision for Loan Losses

The provision for loan losses decreased  $40,000 or 30.8% to $90,000 and $50,000
or 13.7% to $315,000 for the three and nine month  periods  ended June 30, 1998,
respectively,  as compared to the same periods in fiscal 1997. The provision for
both years  reflects  management's  evaluation  of the loan  portfolio,  current
economic  conditions,  and other factors as described  below.  The allowance for
possible  loan losses has  increased  from $1.8 million at June 30, 1997 to $2.2
million at June 30, 1998.

A monthly  review is conducted by management to determine that the allowance for
possible loan losses is adequate to absorb estimated loan losses. In determining
the level of  allowances  for possible  loan losses,  consideration  is given to
general economic conditions, the diversification and size of the loan portfolio,
historical loss experience,  identified credit problems,  delinquency levels and
the  adequacy  of  collateral.  Although  management  believes  that the current
allowance  for loan losses is adequate,  future  additions to the reserve may be
necessary due to changes in economic conditions. In addition, various regulatory
agencies  review the adequacy of the  allowance for loan losses as part of their
examination  process and may require  additions to the allowance  based on their
judgment.

Other Income

Total  non-interest or other income  increased  $94,000 or 42.3% to $316,000 and
$210,000 or 33.4% to $841,000  for the three and nine month  periods  ended June
30, 1998, respectively, as compared to the same periods in fiscal 1997.

Service  fee  income,  which  includes  late  charges  on loans,  fees for loans
serviced for others and other miscellaneous loan fees, increased $8,000 or 35.7%
to $29,000 and $36,000 or 62.6% to $92,000 for the three and nine month  periods
ended June 30,  1998,  respectively,  as compared to the same  periods in fiscal
1997.  For the three month period the increase is primarily  attributable  to an
increase  in late  charges on  mortgages,  as well as the  imposition  of a late
charge fee on credit cards. For the nine month period, the increase is primarily
attributable  to an increase in late charges on all loans,  the  imposition of a
late charge on credit  cards,  and the  collection of a fee related to a program
whereby  customers  could skip their  regular loan  payment  over the  Christmas
holidays.

Gain on the sale of investment and mortgage-backed  securities increased $54,000
or 836.4% to $60,000  and  $41,000  or 153.6% to $68,000  for the three and nine
month periods ended June 30, 1998, respectively, as compared to the same periods
in 1997.  All  sales  were  made from the  available-for-sale  portfolio  in the
periods and were done to reflect current economic conditions and asset/liability
management strategies, as well as changing market conditions.

Loss on sale of loans was $3,000 for the three month period ended June 30, 1998,
as compared to a gain of $11,000 in the same period in fiscal 1997. For the nine
month periods ended June 30, 1998 and 1997, the gain on sale of loans was $6,000
and $16,000,  respectively.  The Bank sells  education loans to the Student Loan
Marketing Association ("SLMA"). Such sales generally result in some gain or loss
being realized and are done to reduce the Bank's position in these loans,  which
are  generally  lower  yielding and subject to extensive  and costly  government
regulation.  The Bank does not intend to originate  additional student loans for
its portfolio,  except those that will be sold to and serviced by SLMA.  Results
generally reflect the timing of such sales.
<PAGE>
Other operating  income includes  miscellaneous  sources of income which consist
primarily of various fees  related to checking  accounts,  fees from the sale of
cashiers  checks and money  orders,  and safe deposit box rental  income.  Other
operating income increased $47,000 or 25.6% to $231,000 and $144,000 or 27.1% to
$674,000 for the three and nine month  periods  ended June 30, 1998, as compared
to the same  periods in fiscal  1997.  The  increase for both the three and nine
month  periods  is  primarily  due to debit card fees and  earnings  on the cash
surrender value of life insurance  policies on certain  executive  officers.  In
addition,  for the three month  period  ended June 30,  1998,  a  surcharge  was
imposed  on  nonbank  customers  for  the  use of the  Bank's  automated  teller
machines.  Partially offsetting these increases in both the three and nine month
periods were decreased fees related to the sale of accident and health insurance
on loans and decreased fees on checks returned for non-sufficient funds.

Other Expenses

Total  operating  expenses  increased  $248,000  or  15.4% to $1.9  million  and
$603,000  or 12.7% to $5.4  million for the three and nine month  periods  ended
June 30, 1998, respectively, as compared to the same period in fiscal 1997.

Compensation,  payroll  taxes and fringe  benefits,  the  largest  component  of
operating expenses,  increased $173,000 or 18.7% to $1.1 million and $456,000 or
17.0% to $3.1 million for the three and nine month  periods ended June 30, 1998,
respectively,  compared to the same periods in fiscal 1997. Factors contributing
to the increase for both periods were normal salary increases,  resulting higher
payroll taxes,  higher bonuses awarded in fiscal 1998, an increase in the number
of employees on the payroll,  particularly  professionals related to the lending
area and an increase in retirement  and health care expenses.  In addition,  the
Bank plans to begin  offering  brokerage  and  insurance  services in early July
1998,  and  additional  staffing and personnel  costs were incurred in the three
month period ended June 30, 1998, to establish this function.

Office occupancy and equipment expense increased $17,000 or 11.1% and $27,000 or
6.3% to $167,000 and $467,000  for the three and nine month  periods  ended June
30, 1998, respectively, compared to the same periods in fiscal 1997. In both the
three and nine month  periods,  increases in rent expense on the  Company's  new
loan center were partially offset by decreased equipment maintenance costs.

Depreciation and amortization increased $13,000 or 10.7% to $132,000 and $27,000
or 7.6% to $382,000  for the three and nine month  periods  ended June 30, 1998,
respectively,  compared to the same periods in fiscal 1997. The results  reflect
the purchase of new equipment, primarily for back room operations, as well as an
automatic teller machine for the Washington Road branch.

Federal  insurance  premiums  increased $1,000 or 3.6% to $39,000 and $39,000 or
51.9% to  $115,000  for the three and nine month  periods  ended June 30,  1998,
respectively,  compared to the same periods in fiscal  1997.  As a result of the
Deposit  Insurance  Funds Act of 1996 and the  resulting  payment  of a one-time
special  assessment in 1996,  the Savings  Association  Insurance Fund was fully
capitalized to the level required by law. The FDIC then determined that, for the
quarter ended December 31, 1996, no deposit insurance premiums would be due from
many  institutions,  including  the Bank.  Thus there was no  deposit  insurance
expense for the three months ended December 31, 1996.  For  subsequent  periods,
the amount of the premium is based on the average amount of deposits outstanding
and is currently approximately 6.10 basis points.
<PAGE>
Net loss on real  estate  owned was $1,000 for the three  months  ended June 30,
1998,  as compared to a net gain of $16,000 in the  comparable  period in fiscal
1997.  Net loss on real estate  owned was $11,000 and $36,000 for the nine month
periods  ended June 30,  1998 and 1997,  respectively.  Results  for the periods
reflect the sale of property  held as real estate owned.  At June 30, 1998,  the
Bank had one single family property valued at $21,000  classified as real estate
owned.

Amortization  of intangibles was zero for the three month periods ended June 30,
1998 and 1997.  Amortization  was zero and  $44,000  for the nine month  periods
ended June 30, 1998 and 1997,  respectively.  The  intangibles  generated by the
three branch acquisitions that occurred in November 1991 were being amortized on
a straight-line basis over five years. These intangibles were fully amortized in
November 1996.

Other operating expenses,  which consists of check processing costs,  consulting
fees, legal and audit fees, advertising,  bank charges, and other administrative
expenses,  increased  $27,000 or 6.7% to $421,000  and $122,000 or 10.8% to $1.3
million for the three and nine month periods ended June 30, 1998,  respectively,
as compared to the same periods in fiscal 1997.  Significant  variations between
both the three and nine month  periods in fiscal  1998,  as  compared  to fiscal
1997,  include  increases in  advertising,  stationary and supplies,  consulting
fees,  and costs  related  to the  introduction  of a new credit  card  program.
Partially offsetting these increases was a decrease in legal expense.

Income Taxes

Income taxes  decreased  $12,000 or 3.3% to $349,000 and $11,000 or 1.0% to $1.0
million for the three and nine month periods ended June 30, 1998,  respectively,
compared to the same periods in fiscal 1997.  The decrease in taxes for both the
three and nine month  periods  results from a decrease in the effective tax rate
to  33.5%  for both the  three  and nine  month  periods  ended  June 30,  1998,
respectively, as compared to 35.5% for the comparable periods in the prior year,
partially  offset by an increase in taxable  income in both fiscal 1998 periods.
The decreased  effective tax rate  primarily  results from the Bank's  increased
purchases of tax-free investments.

Capital Requirements

The Federal Reserve Board measures capital  adequacy for bank holding  companies
on the basis of a risk-based capital framework and a leverage ratio. The minimum
ratio of total risk-based  capital to risk-weighted  assets is 8%. At least half
of the total capital must be common  stockholders'  equity (not inclusive of net
unrealized  gains and losses on  available-for-sale  securities)  and  perpetual
preferred stock, less goodwill and other nonqualifying  intangible assets ("Tier
1 capital").  The remainder (i.e. , the "Tier 2 risk-based capital") may consist
of hybrid capital  instruments,  perpetual debt, term  subordinated  debt, other
preferred  stock and a limited amount of the allowance for loan losses.  At June
30, 1998, the Company had Tier 1 capital as a percentage of risk-weighted assets
of 16.8% and total risk-based capital as a percentage of risk-weighted assets of
18.3%.

In addition,  the Federal Reserve Board has established  minimum  leverage ratio
guidelines for bank holding companies.  These guidelines currently provide for a
minimum  ratio or Tier 1 capital as a  percentage  of average  total assets (the
"Leverage  Ratio") of 3% for bank holding  companies that meet certain criteria,
including that they maintain the highest regulatory rating. The minimum leverage
ratio for all other bank holding  companies is 4%. At June 30, 1998, the Company
had a Leverage Ratio of 9.1%.
<PAGE>
The FDIC has issued regulations that require insured  institutions,  such as the
Bank, to maintain  minimum levels of capital.  In general,  current  regulations
require a leverage  ratio of Tier 1 capital to average  total assets of not less
than 3% for the most highly rated  institutions  and an  additional 1% to 2% for
all other  institutions.  At June 30, 1998,  the Bank  complied with the minimum
leverage  ratio  having  Tier 1 capital  of 6.4% of  average  total  assets,  as
defined.

The Bank is also  required to maintain a ratio of  qualifying  total  capital to
risk-weighted assets and off-balance sheet items of a minimum of 8%. At June 30,
1998, the Bank's total capital to  risk-weighted  assets ratio  calculated under
the FDIC capital requirement was 12.8%.

A reconciliation of Stockholders' Equity to Regulatory Capital is as follows:

Total Stockholder's equity at June 30, 1998 (1) ............         $25,433,082
Less: Unrealized securities gains ..........................             556,426
                                                                     -----------
Tier 1 Capital at June 30, 1998 ............................          24,876,656
Plus: Qualifying loan loss allowance .......................           2,199,287
                                                                     -----------
Total capital at June 30, 1998 .............................         $27,075,943
                                                                     ===========

(1) Represents  equity  capital  of the  Bank as  reported  to the  FDIC and the
    Pennsylvania Department of Banking on Form 032.

Liquidity

The Bank's  primary  sources of funds have  historically  consisted of deposits,
amortization and prepayments of outstanding  loans,  borrowings from the FHLB of
Pittsburgh and other sources,  including  sales of securities  and, to a limited
extent, loans. At June 30, 1998, the total of approved loan commitments amounted
to $5.3 million.  In addition,  the Bank had $11.0 million of  undisbursed  loan
funds at that date. The amount of savings  certificates  which mature during the
next twelve months totals approximately $110.3 million, a substantial portion of
which management believes, on the basis of prior experience,  will remain in the
Bank.
<PAGE>


Part II - Other Information


Item. 1  Legal Proceedings

             The Bank is not  involved in any pending  legal  proceedings  other
             than  non-material  legal  proceedings  undertaken  in the ordinary
             course of business.


Item 2.  Changes in Securities

             None

Item 3.  Defaults Upon Senior Securities

             Not Applicable


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

             None

Item 5.  Other Information

             None


Item 6.  Exhibits and Reports on Form 8-K

             None

<PAGE>



Pursuant  to the  requirements  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 BANK



Date:  August 14 1998                       By:   /s/ William L. Windisch
                                                  -----------------------
                                                  William L. Windisch
                                                  President and Chief Executive
                                                  Officer


Date:  August 14, 1998                      By:   /s/ Richard G. Spencer
                                                  ----------------------
                                                  Richard G. Spencer
                                                  Vice President and Chief
                                                  Financial Officer