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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended June 30, 2010.

OR



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

For the transition period from  to
.

Commission File No. 0-22288





Fidelity Bancorp, Inc.

(Exact name of registrant as specified in its charter)







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

1009 Perry Highway, Pittsburgh, Pennsylvania 15237

(Address of principal executive offices)

412-367-3300

(Registrants telephone number, including area code)

Not Applicable

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





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 3,048,681 shares,
par value $0.01, at July 30, 2010.









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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Index



|                               |  |                                                                                                     |  |      
|------------------------------ |  | --------------------------------------------------------------------------------------------------- |  | -----
|                               |  | Page                                                                                               
|                               | 
|Part I - Financial Information |  |                                                                                                    
|                               |  |                                                                                                    
|Item 1.                        |  | Financial Statements (Unaudited)                                                                    |  | 3    
|                               |  |                                                                                                    
|                               |  | Consolidated Statements of Financial Condition as of June 30, 2010 and September 30, 2009           |  | 3    
|                               |  |                                                                                                    
|                               |  | Consolidated Statements of Income (Loss) for the Three and Nine Months Ended June 30, 2010 and 2009 |  | 4-5  
|                               |  |                                                                                                    
|                               |  | Consolidated Statement of Changes in Stockholders Equity for the Nine Months Ended June 30, 2010   |  | 6    
|                               |  |                                                                                                    
|                               |  | Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009              |  | 7-8  
|                               |  |                                                                                                    
|                               |  | Notes to Consolidated Financial Statements                                                          |  | 9-31 
|                               |  |                                                                                                    
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations               |  | 32-44
|                               |  |                                                                                                    
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                          |  | 44   
|                               |  |                                                                                                    
|Item 4T.                       |  | Controls and Procedures                                                                             |  | 45   
|                               | 
|Part II - Other Information    |  |                                                                                                    
|                               |  |                                                                                                    
|Item 1.                        |  | Legal Proceedings                                                                                   |  | 45   
|                               |  |                                                                                                    
|Item 1A.                       |  | Risk Factors                                                                                        |  | 45   
|                               |  |                                                                                                    
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |  | 45   
|                               |  |                                                                                                    
|Item 3.                        |  | Defaults Upon Senior Securities                                                                     |  | 45   
|                               |  |                                                                                                    
|Item 4.                        |  | [Removed & Reserved]                                                                                |  | 45   
|                               |  |                                                                                                    
|Item 5.                        |  | Other Information                                                                                   |  | 45   
|                               |  |                                                                                                    
|Item 6.                        |  | Exhibits                                                                                            |  | 46-47
|                               | 
|Signatures                     |  | 48                                                                                                 



2



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##### Table of Contents

Part I - Financial Information



|Item 1. | Financial Statements
|------- | --------------------

FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data)



|                                                                                                                            |  |              |         |   |                   |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                            |  | June 30,2010 |         |   | September 30,2009 |  
|Assets                                                                                                                      |  |              |         |   |                   |   |         |  
|Cash and due from banks                                                                                                     |  | $            | 5,554   |   |                   | $ | 20,601  |  
|Interest-bearing demand deposits with other institutions                                                                    |  |              | 20,178  |   |                   |   | 21,879  |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Cash and Cash Equivalents                                                                                                   |  |              | 25,732  |   |                   |   | 42,480  |  
|                                                                                                                            |  |             
|Securities available-for-sale (amortized cost of $177,206 and $172,229)                                                     |  |              | 172,841 |   |                   |   | 166,115 |  
|Securities held-to-maturity (fair value of $84,666 and $72,737)                                                             |  |              | 83,732  |   |                   |   | 72,448  |  
|Loans held for sale                                                                                                         |  |              | 1,797   |   |                   |   | 694     |  
|Loans receivable, net of allowance of $5,674 and $5,702                                                                     |  |              | 382,398 |   |                   |   | 409,787 |  
|Foreclosed real estate, net                                                                                                 |  |              | 226     |   |                   |   | 103     |  
|Federal Home Loan Bank stock, at cost                                                                                       |  |              | 10,034  |   |                   |   | 10,034  |  
|Office premises and equipment, net                                                                                          |  |              | 9,054   |   |                   |   | 8,470   |  
|Accrued interest receivable                                                                                                 |  |              | 2,704   |   |                   |   | 2,900   |  
|Cash surrender value of life insurance                                                                                      |  |              | 5,036   |   |                   |   | 4,872   |  
|Goodwill                                                                                                                    |  |              | 2,653   |   |                   |   | 2,653   |  
|Other assets                                                                                                                |  |              | 11,899  |   |                   |   | 9,475   |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Total Assets                                                                                                                |  | $            | 708,106 |   |                   | $ | 730,031 |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|                                                                                                                            |  |             
|Liabilities and Stockholders Equity                                                                                        |  |              |         |   |                   |   |         |  
|                                                                                                                            |  |             
|Liabilities:                                                                                                                |  |              |         |   |                   |   |         |  
|Deposits:                                                                                                                   |  |              |         |   |                   |   |         |  
|Non-interest bearing                                                                                                        |  | $            | 51,620  |   |                   | $ | 41,362  |  
|Interest bearing                                                                                                            |  |              | 394,682 |   |                   |   | 402,518 |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Total Deposits                                                                                                              |  |              | 446,302 |   |                   |   | 443,880 |  
|Securities sold under agreement to repurchase                                                                               |  |              | 105,857 |   |                   |   | 106,244 |  
|Short-term borrowings                                                                                                       |  |              | 101     |   |                   |   | 104     |  
|Long-term debt                                                                                                              |  |              | 91,713  |   |                   |   | 118,541 |  
|Subordinated debt                                                                                                           |  |              | 7,732   |   |                   |   | 7,732   |  
|Advance payments by borrowers for taxes and insurance                                                                       |  |              | 3,072   |   |                   |   | 1,274   |  
|Other liabilities                                                                                                           |  |              | 5,025   |   |                   |   | 5,144   |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Total Liabilities                                                                                                           |  |              | 659,802 |   |                   |   | 682,919 |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|                                                                                                                            |  |             
|Stockholders equity:                                                                                                       |  |              |         |   |                   |   |         |  
|Preferred stock, $0.01 par value per share, liquidation preference $1,000; 5,000,000 shares authorized; 7,000 shares
issued |  |              | 6,788   |   |                   |   | 6,743   |  
|Common stock, $0.01 par value per share, 10,000,000 shares authorized; 3,667,810 and 3,664,947 shares issued,
respectively  |  |              | 37      |   |                   |   | 37      |  
|Paid-in-capital                                                                                                             |  |              | 46,456  |   |                   |   | 46,390  |  
|Retained earnings                                                                                                           |  |              | 8,853   |   |                   |   | 8,685   |  
|Accumulated other comprehensive loss, net of tax                                                                            |  |              | (3,448  | ) |                   |   | (4,361  | )
|Treasury stock, at cost - 619,129 shares                                                                                    |  |              | (10,382 | ) |                   |   | (10,382 | )
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Total Stockholders Equity                                                                                                  |  |              | 48,304  |   |                   |   | 47,112  |  
|                                                                                                                            |  |              |         |   |                   |   |         |  
|Total Liabilities and Stockholders Equity                                                                                  |  | $            | 708,106 |   |                   | $ | 730,031 |  
|                                                                                                                            |  |              |         |   |                   |   |         |  

See accompanying notes to unaudited consolidated financial statements.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Loss) (Unaudited)

(in thousands, except per share data)



|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                       |  | Three Months EndedJune 30, |        |   | Nine Months EndedJune 30, |  
|                                                                       |  | 2010                       |        |   | 2009                      |   |        | 2010 |  |   | 2009   |  
|Interest income:                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Loans                                                                  |  | $                          | 5,340  |   |                           | $ | 6,239  |      |  | $ | 16,600 |   |  | $ | 20,184 |  
|Mortgage-backed securities                                             |  |                            | 783    |   |                           |   | 894    |      |  |   | 2,302  |   |  |   | 3,040  |  
|Investment securities-taxable                                          |  |                            | 758    |   |                           |   | 931    |      |  |   | 2,290  |   |  |   | 3,101  |  
|Investment securities-tax-exempt                                       |  |                            | 429    |   |                           |   | 435    |      |  |   | 1,318  |   |  |   | 1,306  |  
|Other                                                                  |  |                            | 13     |   |                           |   | 8      |      |  |   | 38     |   |  |   | 12     |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total interest income                                                  |  |                            | 7,323  |   |                           |   | 8,507  |      |  |   | 22,548 |   |  |   | 27,643 |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Interest expense:                                                      |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Deposits                                                               |  |                            | 1,301  |   |                           |   | 2,085  |      |  |   | 4,281  |   |  |   | 6,613  |  
|Securities sold under agreement to repurchase                          |  |                            | 1,263  |   |                           |   | 1,278  |      |  |   | 3,789  |   |  |   | 3,826  |  
|Short-term borrowings                                                  |  |                            | 2      |   |                           |   | 2      |      |  |   | 5      |   |  |   | 122    |  
|Long-term debt                                                         |  |                            | 847    |   |                           |   | 1,209  |      |  |   | 3,204  |   |  |   | 3,687  |  
|Subordinated debt                                                      |  |                            | 102    |   |                           |   | 102    |      |  |   | 305    |   |  |   | 308    |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total interest expense                                                 |  |                            | 3,515  |   |                           |   | 4,676  |      |  |   | 11,584 |   |  |   | 14,556 |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|                                                                       |  |                            |        |  
|Net interest income                                                    |  |                            | 3,808  |   |                           |   | 3,831  |      |  |   | 10,964 |   |  |   | 13,087 |  
|                                                                       |  |                            |        |  
|Provision for loan losses                                              |  |                            | 500    |   |                           |   | 270    |      |  |   | 1,100  |   |  |   | 1,145  |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|                                                                       |  |                            |        |  
|Net interest income after provision for loan losses                    |  |                            | 3,308  |   |                           |   | 3,561  |      |  |   | 9,864  |   |  |   | 11,942 |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|                                                                       |  |                            |        |  
|Non-interest income:                                                   |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Loan service charges and fees                                          |  |                            | 170    |   |                           |   | 208    |      |  |   | 448    |   |  |   | 475    |  
|Realized (loss) gain on sales of securities, net                       |  |                            | (3     | ) |                           |   |       |      |  |   | 1,034  |   |  |   |       |  
|                                                                       |  |                            |        |  
|Total other-than-temporary impairment losses                           |  |                            | (3,065 | ) |                           |   | (1,401 | )    |  |   | (9,078 | ) |  |   | (3,121 | )
|Portion of loss recognized in other comprehensive income, before taxes |  |                            | 2,153  |   |                           |   |       |      |  |   | 6,635  |   |  |   |       |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Net impairment losses recognized in earnings                           |  |                            | (912   | ) |                           |   | (1,401 | )    |  |   | (2,443 | ) |  |   | (3,121 | )
|                                                                       |  |                            |        |  
|Gain on sales of loans                                                 |  |                            | 83     |   |                           |   | 247    |      |  |   | 304    |   |  |   | 402    |  
|(Loss) gain on loan interest rate swaps                                |  |                            | (11    | ) |                           |   | 14     |      |  |   | (6     | ) |  |   | (2     | )
|Deposit service charges and fees                                       |  |                            | 351    |   |                           |   | 357    |      |  |   | 1,070  |   |  |   | 1,087  |  
|ATM fees                                                               |  |                            | 238    |   |                           |   | 192    |      |  |   | 695    |   |  |   | 548    |  
|Non-insured investment products                                        |  |                            | 45     |   |                           |   | 39     |      |  |   | 128    |   |  |   | 88     |  
|Earnings on cash surrender value of life insurance                     |  |                            | 56     |   |                           |   | 490    |      |  |   | 175    |   |  |   | 628    |  
|Other                                                                  |  |                            | 40     |   |                           |   | 36     |      |  |   | 141    |   |  |   | 149    |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total non-interest income                                              |  |                            | 57     |   |                           |   | 182    |      |  |   | 1,546  |   |  |   | 254    |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Non-interest expense:                                                  |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Compensation and benefits                                              |  |                            | 2,046  |   |                           |   | 2,061  |      |  |   | 6,125  |   |  |   | 6,078  |  
|Office occupancy and equipment expense                                 |  |                            | 251    |   |                           |   | 245    |      |  |   | 779    |   |  |   | 758    |  
|Depreciation and amortization                                          |  |                            | 131    |   |                           |   | 118    |      |  |   | 399    |   |  |   | 360    |  
|Advertising                                                            |  |                            | 100    |   |                           |   | 100    |      |  |   | 281    |   |  |   | 290    |  
|Professional fees                                                      |  |                            | 113    |   |                           |   | 93     |      |  |   | 383    |   |  |   | 350    |  
|Service bureau expense                                                 |  |                            | 120    |   |                           |   | 97     |      |  |   | 428    |   |  |   | 317    |  
|Federal deposit insurance premiums                                     |  |                            | 292    |   |                           |   | 745    |      |  |   | 923    |   |  |   | 839    |  
|Other                                                                  |  |                            | 579    |   |                           |   | 588    |      |  |   | 1,772  |   |  |   | 1,707  |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Total non-interest expense                                             |  |                            | 3,632  |   |                           |   | 4,047  |      |  |   | 11,090 |   |  |   | 10,699 |  
|                                                                       |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |        |  



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Loss) (Unaudited) (Contd.)

(in thousands, except per share data)



|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|-------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ----- | -
|                                                   |  | Three Months EndedJune 30, |       |   | Nine Months EndedJune 30, |  
|                                                   |  | 2010                       |       |   | 2009                      |   |      | 2010 |  |   | 2009 |  
|(Loss) Income before Benefit of Income Taxes       |  | $                          | (267  | ) |                           | $ | (304 | )    |  | $ | 320  |   |  | $ | 1,497 |  
|Income Tax Benefit                                 |  |                            | (215  | ) |                           |   | (542 | )    |  |   | (339 | ) |  |   | (298  | )
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|Net (Loss) Income                                  |  |                            | (52   | ) |                           |   | 238  |      |  |   | 659  |   |  |   | 1,795 |  
|Preferred stock dividend                           |  |                            | (88   | ) |                           |   | (88  | )    |  |   | (263 | ) |  |   | (193  | )
|Accretion of preferred stock discount              |  |                            | (15   | ) |                           |   | (15  | )    |  |   | (45  | ) |  |   | (30   | )
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|Net (loss) income available to common stockholders |  | $                          | (155  | ) |                           | $ | 135  |      |  | $ | 351  |   |  | $ | 1,572 |  
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|                                                   |  |                            |       |  
|Earnings per Share:                                |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|Basic earnings per common share                    |  | $                          | (0.05 | ) |                           | $ | 0.04 |      |  | $ | 0.12 |   |  | $ | 0.52  |  
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|Diluted earnings per common share                  |  | $                          | (0.05 | ) |                           | $ | 0.04 |      |  | $ | 0.12 |   |  | $ | 0.52  |  
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  
|Dividends per common share                         |  | $                          | 0.02  |   |                           | $ | 0.07 |      |  | $ | 0.06 |   |  | $ | 0.35  |  
|                                                   |  |                            |       |   |                           |   |      |      |  |   |      |   |  |   |       |  

See accompanying notes to unaudited consolidated financial statements.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders Equity (Unaudited)

(in thousands, except share data)



|                                                                                                                                   |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- |  | -------------- | ----- | ----------- | - | -------------- |  | ---------------- | ------ | ---- | ----------------------------------------- | ----- | - | ------------- | - | ------ | ----- |  | - | ------- | - | ---- | - | ------ | -
|                                                                                                                                   |  | Numberof 
CommonSharesIssued |  | PreferredStock |       | CommonStock |   | Paid-inCapital |  | RetainedEarnings |        |      | AccumulatedOtherComprehensiveIncome(Loss) |       |   | TreasuryStock |   |        | Total | 
|Balance at September 30, 2009                                                                                                      |  | 3,664,947                    |  | $              | 6,743 |             | $ | 37             |  | $                | 46,390 |      | $                                         | 8,685 |   |               | $ | (4,361 | )     |  | $ | (10,382 | ) |      | $ | 47,112 |  
|Comprehensive income:                                                                                                              |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   |        |  
|Net income                                                                                                                         |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           | 659   |   |               |   |        |       |  |   |         |   |      |   | 659    |  
|Comprehensive loss on cash flow hedges net of tax of ($16)                                                                         |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   | (30    | )     |  |   |         |   |      |   | (30    | )
|Comprehensive gain on investment securities, net of tax of $2,309                                                                  |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   | 4,410  |       |  |   |         |   |      |   | 4,410  |  
|Reclassification adjustment on investment securities, net of tax of ($361)                                                         |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   | (700   | )     |  |   |         |   |      |   | (700   | )
|Comprehensive loss on securities for which other-than-temporary impairment has been recognized in earnings, net of tax of
($2,256) |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   | (4,379 | )     |  |   |         |   |      |   | (4,379 | )
|Reclassification adjustment for other-than-temporary impairment losses on debt securities, net of tax of $831                      |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   | 1,612  |       |  |   |         |   |      |   | 1,612  |  
|                                                                                                                                   |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   |        |  
|Total comprehensive income                                                                                                         |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   | 1,572  |  
|                                                                                                                                   |  |                              |  |                |       |             |   |               
|Accretion of preferred stock discount                                                                                              |  |                              |  |                | 45    |             |   |                |  |                  |        |      |                                           | (45   | ) |               |   |        |       |  |   |         |   |      |   |       |  
|Cumulative dividends on preferred stock                                                                                            |  |                              |  |                |       |             |   |                |  |                  |        | (263 | )                                         |       |   |               |   |        |       |  |   |         |   | (263 | )
|Stock-based compensation expense                                                                                                   |  |                              |  |                |       |             |   |                |  |                  | 48     |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   | 48     |  
|Stock options exercised                                                                                                            |  | 1,000                        |  |                |       |             |   |                |  |                  | 7      |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   | 7      |  
|Cash dividends declared                                                                                                            |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           | (183  | ) |               |   |        |       |  |   |         |   |      |   | (183   | )
|Shares issued through Dividend Reinvestment Plan                                                                                   |  | 1,863                        |  |                |       |             |   |                |  |                  | 11     |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   | 11     |  
|                                                                                                                                   |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   |        |  
|                                                                                                                                   |  |                              |  |                |       |             |   |               
|Balance at June 30, 2010                                                                                                           |  | 3,667,810                    |  | $              | 6,788 |             | $ | 37             |  | $                | 46,456 |      | $                                         | 8,853 |   |               | $ | (3,448 | )     |  | $ | (10,382 | ) |      | $ | 48,304 |  
|                                                                                                                                   |  |                              |  |                |       |             |   |                |  |                  |        |      |                                           |       |   |               |   |        |       |  |   |         |   |      |   |        |  

See accompanying notes to unaudited consolidated financial statements.



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##### Table of Contents

FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)



|                                                                                    |  |                            |         |   |      |   |         |  
|----------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                    |  | Nine Months Ended June 30, |        
|                                                                                    |  | 2010                       |         |   | 2009 |  
|Operating Activities:                                                               |  |                            |         |   |      |   |         |  
|Net income                                                                          |  | $                          | 659     |   |      | $ | 1,795   |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |                            |         |   |      |   |         |  
|Provision for loan losses                                                           |  |                            | 1,100   |   |      |   | 1,145   |  
|Provision for depreciation and amortization                                         |  |                            | 399     |   |      |   | 360     |  
|Amortization of investment and mortgage-backed securities (discounts) premiums, net |  |                            | 712     |   |      |   | 82      |  
|Realized gains on sales of securities, net                                          |  |                            | (1,034  | ) |      |   |        |  
|Impairment losses on securities                                                     |  |                            | 2,443   |   |      |   | 3,121   |  
|Loans originated for sale                                                           |  |                            | (20,394 | ) |      |   | (32,033 | )
|Sales of loans held for sale                                                        |  |                            | 19,595  |   |      |   | 29,854  |  
|Net gains on sales of loans                                                         |  |                            | (304    | ) |      |   | (402    | )
|Earnings on cash surrender value of life insurance policies                         |  |                            | (175    | ) |      |   | (165    | )
|Expenses related to cash surrender value of life insurance policies                 |  |                            | 11      |   |      |   | 35      |  
|Earnings on cash surrender value of a covered executives life insurance policies   |  |                            |        |   |      |   | (463    | )
|Decrease in interest receivable                                                     |  |                            | 196     |   |      |   | 580     |  
|Decrease in interest payable                                                        |  |                            | (173    | ) |      |   | (20     | )
|Decrease (increase) in prepaid taxes                                                |  |                            | 1,141   |   |      |   | (698    | )
|Non-cash compensation expense related to stock benefit plans                        |  |                            | 48      |   |      |   | 75      |  
|Changes in other assets                                                             |  |                            | (4,040  | ) |      |   | (1,185  | )
|Changes in other liabilities                                                        |  |                            | 9       |   |      |   | 141     |  
|                                                                                    |  |                            |         |   |      |   |         |  
|                                                                                    |  |                           
|Net cash provided by operating activities                                           |  |                            | 193     |   |      |   | 2,222   |  
|                                                                                    |  |                            |         |   |      |   |         |  
|                                                                                    |  |                           
|Investing Activities:                                                               |  |                            |         |   |      |   |         |  
|Proceeds from sales of securities available-for-sale                                |  |                            | 16,316  |   |      |   |        |  
|Proceeds from maturities and principal repayments of securities available-for-sale  |  |                            | 44,980  |   |      |   | 20,230  |  
|Purchases of securities available-for-sale                                          |  |                            | (67,550 | ) |      |   | (21,056 | )
|Proceeds from maturities and principal repayments of securities held-to-maturity    |  |                            | 32,154  |   |      |   | 23,662  |  
|Purchases of securities held-to-maturity                                            |  |                            | (44,602 | ) |      |   | (13,279 | )
|Net decrease in loans                                                               |  |                            | 25,905  |   |      |   | 22,484  |  
|Proceeds from sales of foreclosed real estate                                       |  |                            | 265     |   |      |   | 180     |  
|Additions to office premises and equipment                                          |  |                            | (983    | ) |      |   | (1,477  | )
|Purchases of Federal Home Loan Bank (FHLB) stock                                    |  |                            |        |   |      |   | (2,424  | )
|Redemptions of FHLB stock                                                           |  |                            |        |   |      |   | 333     |  
|Life insurance proceeds received upon the death of a covered executive              |  |                            |        |   |      |   | 2,705   |  
|Purchases of cash surrender value life insurance                                    |  |                            |        |   |      |   | (744    | )
|                                                                                    |  |                            |         |   |      |   |         |  
|                                                                                    |  |                           
|Net cash provided by investing activities                                           |  |                            | 6,485   |   |      |   | 30,614  |  
|                                                                                    |  |                            |         |   |      |   |         |  



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##### Table of Contents

FIDELITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited) (Contd.)

(in thousands)



|                                                                         |  |                            |         |   |      |   |         |  
|------------------------------------------------------------------------ |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                         |  | Nine Months Ended June 30, |        
|                                                                         |  | 2010                       |         |   | 2009 |  
|Financing Activities:                                                    |  |                            |         |   |      |   |         |  
|Net increase in deposits                                                 |  | $                          | 2,422   |   |      | $ | 27,375  |  
|Net (decrease) increase in securities sold under agreement to repurchase |  |                            | (387    | ) |      |   | 7,623   |  
|Net decrease in short-term borrowings                                    |  |                            | (3      | ) |      |   | (32,057 | )
|Increase in advance payments by borrowers for taxes and insurance        |  |                            | 1,798   |   |      |   | 1,914   |  
|Proceeds from long-term debt                                             |  |                            |        |   |      |   | 30,000  |  
|Repayments of long-term debt                                             |  |                            | (26,828 | ) |      |   | (30,193 | )
|Cash dividends paid                                                      |  |                            | (446    | ) |      |   | (1,256  | )
|Preferred stock issued                                                   |  |                            |        |   |      |   | 6,942   |  
|Stock options exercised                                                  |  |                            | 7       |   |      |   | 1       |  
|Proceeds from sale of stock through Dividend Reinvestment Plan           |  |                            | 11      |   |      |   | 71      |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Net cash (used in) provided by financing activities                      |  |                            | (23,426 | ) |      |   | 10,420  |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Net (decrease) increase in cash and cash equivalents                     |  |                            | (16,748 | ) |      |   | 43,256  |  
|                                                                         |  |                           
|Cash and cash equivalents at beginning of period                         |  |                            | 42,480  |   |      |   | 10,772  |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Cash and cash equivalents at end of period                               |  | $                          | 25,732  |   |      | $ | 54,028  |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Supplemental Disclosure of Cash Flow Information                         |  |                            |         |   |      |   |         |  
|Cash paid during the period for:                                         |  |                            |         |   |      |   |         |  
|Interest paid on deposits and other borrowings                           |  | $                          | 11,757  |   |      | $ | 14,576  |  
|                                                                         |  |                            |         |   |      |   |         |  
|Income taxes paid                                                        |  | $                          | 25      |   |      | $ | 1,606   |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Supplemental Schedule of Noncash Investing and Financing Activities      |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Transfer of loans to foreclosed real estate                              |  | $                          | 402     |   |      | $ | 107     |  
|                                                                         |  |                            |         |   |      |   |         |  

See accompanying notes to unaudited consolidated financial statements.



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##### Table of Contents

FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)

June 30, 2010

(1) Consolidation

The consolidated
financial statements contained herein for Fidelity Bancorp, Inc. (the Company) include the accounts of Fidelity Bancorp, Inc. and its wholly-owned subsidiary, Fidelity Bank, PaSB (the Bank). All 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-Q, 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 in the United States. However, all adjustments (consisting of 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 fiscal year ended September 30, 2009. The results for the three and nine month periods ended June 30, 2010 are not necessarily indicative of the results
that may be expected for the fiscal year ending September 30, 2010 or any future interim period.

Certain amounts in the 2009 financial
statements have been reclassified to conform with the 2010 presentation format. These reclassifications had no effect on stockholders equity or net income.

(3) New Accounting Standards

In
December 2009, the FASB issued ASU 2009-16, Accounting for a Transfer of Financial Assets. ASU 2009-16 provides guidance to improve the relevance, representational faithfulness, and comparability of the information that an entity provides in
its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. ASU
2009-16 is effective for annual periods beginning after November 15, 2009 and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a significant impact on the Companys financial statements.

In January 2010, the FASB issued ASU 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash  a Consensus of the FASB Emerging Issues Task Force. ASU 2010-01 clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total
amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend. ASU 2010-01 is effective for interim and annual periods ending on or after
December 15, 2009 and should be applied on a retrospective basis. The adoption of this guidance did not have a material impact on the Companys financial position or results of operation.

In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary  a
Scope Clarification. ASU 2010-02 amends Subtopic 810-10 to address implementation issues related to changes in ownership provisions including clarifying the scope of the decrease in ownership and additional disclosures. ASU 2010-02 is effective
beginning in the period that an entity adopts Statement 160. If an entity has previously adopted Statement 160, ASU 2010-02 is effective beginning in the first interim or annual reporting period ending on or after December 15, 2009 and should
be applied retrospectively to the first period Statement 160 was adopted. The adoption of this guidance did not have a material impact on the Companys financial position or results of operation.

In January 2010, the FASB issued ASU 2010-05, Compensation  Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of
Compensation. ASU 2010-05 updates existing guidance to address the SEC staffs views on overcoming the presumption that for certain shareholders escrowed share arrangements represent compensation. ASU 2010-05 is effective January 15,
2010. The adoption of this guidance did not have a material impact on the Companys financial position or results of operation.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers disclosures about
postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a significant impact on the
Companys financial statements.

In February 2010, the FASB issued ASU 2010-08, Technical Corrections to Various Topics. ASU
2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of this guidance did not have a material impact on the Companys
financial position or results of operation.

In March 2010, the FASB issued ASU 2010-11, Derivatives and Hedging. ASU 2010-11 provides
clarification and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in ASC 815-15-15-8. ASU 2010-11 is effective at the beginning of the
first fiscal quarter beginning after June 15, 2010. The adoption of this guidance is not expected to have a significant impact on the Companys financial statements.

In April 2010, the FASB issued ASU 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted
for as a Single Asset  a consensus of the FASB Emerging Issues Task Force. ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets. Refinancing or restructuring the loan does not make it
eligible for removal from the pool, the FASB said. The amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later. The adoption of this guidance is
not expected to have a significant impact on the Companys financial statements.

In July 2010, FASB issued ASU No. 2010-20,
Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an
entitys credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010.
The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative
disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company is currently evaluating the impact the
adoption of this guidance will have on the Companys financial position or results of operations.

(4) Stock Based Compensation

On June 30, 2010, the Company had six share-based compensation plans, for which stock options and restricted stock were outstanding as of
June 30, 2010. However, the plan described below is the only plan for which stock options and restricted stock are available for grant. The compensation cost that has been charged against income for those plans was $48,000 and $75,000 for the
nine months ended June 30, 2010 and 2009, respectively.

The Companys 2005 Stock-Based Incentive Plan (the Plan), which was
shareholder-approved, permits the grant of stock options and restricted stock to its employees and non-employee directors for up to 165,000 shares of common stock, of which a maximum of 55,000 may be restricted stock. Option awards are granted with
an exercise price equal to the market value of the common stock on the date of the grant, the options vest over a three-year period, and have a contractual term of seven years, although the Plan permits contractual terms of up to ten years. Option
awards provide for accelerated vesting if there is a change in control, as defined in the Plan. Additionally, at November 30, 2008, the Company awarded 7,100 shares of restricted stock from the unallocated shares under the Plan having a market
value of approximately $49,700. Compensation expense on the restricted stock awards equals the market value of the Companys stock on the grant date and will be amortized ratably over the three-year vesting period. As of June 30, 2010,
12,850 share awards were available for grant under this program.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



As of June 30, 2010 there was approximately $50,000 of unrecognized compensation costs related to
unvested share-based compensation awards granted.

Stock option transactions for the nine months ended June 30, 2010 were as follows:



|                                         |  |         |   |  |                                         |      
|---------------------------------------- |  | ------- | - |  | --------------------------------------- | -----
|                                         |  | Options |   |  | Weighted-AverageExercisePrice Per Share
|Outstanding at the beginning of the year |  | 400,187 |   |  | $                                       | 14.77
|Granted                                  |  |        |   |  |                                         |     
|Exercised                                |  | (1,000  | ) |  |                                         | 6.23 
|Forfeited                                |  | (45,991 | ) |  |                                         | 11.74
|                                         |  |         |   |  |                                         |      
|Outstanding as of June 30, 2010          |  | 353,196 |   |  | $                                       | 15.18
|                                         |  |         |   |  |                                         |      
|Exercisable as of June 30, 2010          |  | 318,829 |   |  | $                                       | 16.06
|                                         |  |         |   |  |                                         |      

The options outstanding and exercisable as of June 30, 2010 have
a weighted average remaining term of 2.8 years and 2.5 years, respectively.

No options were granted for the nine-month period ended
June 30, 2010. The fair value of options granted for the nine-month period ended June 30, 2009 was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions:



|                                               |  |                                |           |  
|---------------------------------------------- |  | ------------------------------ | --------- | -
|                                               |  | Nine Months EndedJune 30, 2009 |          
|                                               | 
|Dividend yield                                 |  |                                | 8.99      | %
|Expected life                                  |  |                                | 5.5 years |  
|Expected volatility                            |  |                                | 31.23     | %
|Risk-free interest rate                        |  |                                | 2.08      | %
|Weighted average fair value of options granted |  | $                              | 0.62      |  

Compensation cost related to
restricted stock is recognized based on the market price of the stock at the grant date over the vesting period. Compensation expense related to restricted stock was $27,000 and $26,000 for the nine months ended June 30, 2010 and 2009,
respectively. The following table summarizes restricted stock awards for the nine months ended June 30, 2009.



|                                       |  |                                |      
|-------------------------------------- |  | ------------------------------ | -----
|                                       |  | Nine Months EndedJune 30, 2009
|Number of shares awarded               |  |                                | 7,100
|Market price of stock on date of grant |  | $                              | 7.00 



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(5) Earnings Per Share

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



|                                                                                             |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|-------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | ------------------------- | ---- | - | ----- |  | ---- | ----- |  | - | -----
|                                                                                             |  | Three Months EndedJune 30, |       | Nine Months EndedJune 30,
|                                                                                             |  | 2010                       |       |                           | 2009 |   | 2010  |  | 2009
|Numerator:                                                                                   |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Net (loss) income available to common stockholders                                           |  | $                          | (155  | )                         |      | $ | 135   |  | $    | 351   |  | $ | 1,572
|Denominator:                                                                                 |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Denominator for basic earnings per share - weighted average shares outstanding               |  |                            | 3,042 |                           |      |   | 3,034 |  |      | 3,041 |  |   | 3,030
|Effect of dilutive securities:                                                               |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Common stock equivalents                                                                     |  |                            |      |                           |      |   | 8     |  |      |      |  |   | 8    
|                                                                                             |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Denominator for diluted earnings per share - weighted average shares and assumed conversions |  |                            | 3,042 |                           |      |   | 3,042 |  |      | 3,041 |  |   | 3,038
|                                                                                             |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Basic earnings per share                                                                     |  | $                          | (0.05 | )                         |      | $ | 0.04  |  | $    | 0.12  |  | $ | 0.52 
|                                                                                             |  |                            |       |                           |      |   |       |  |      |       |  |   |      
|Diluted earnings per share                                                                   |  | $                          | (0.05 | )                         |      | $ | 0.04  |  | $    | 0.12  |  | $ | 0.52 
|                                                                                             |  |                            |       |                           |      |   |       |  |      |       |  |   |      

None of the options, restricted stock, and warrants that were
outstanding during the three months ended June 30, 2010 were included in the computation of diluted EPS because to do so would have been anti-dilutive. Similarly, options to purchase 314,675 shares of common stock at prices ranging from $11.06
to $22.91 per share, 3,200 shares of restricted stock at $13.06 per share, and warrants to acquire 121,387 shares of common stock at a price of $8.65 per share were outstanding during the three months ended June 30, 2009, but were not included
in the computation of diluted EPS because to do so would have been anti-dilutive.

None of the options, restricted stock, and warrants that
were outstanding during the nine months ended June 30, 2010 were included in the computation of diluted EPS because to do so would have been anti-dilutive. Similarly, options to purchase 314,675 shares of common stock at prices ranging from
$11.06 to $22.91 per share, 3,200 shares of restricted stock at $13.06 per share, and warrants to acquire 121,387 shares of common stock at a price of $8.65 per share were outstanding during the nine months ended June 30, 2009, but were not
included in the computation of diluted EPS because to do so would have been anti-dilutive.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(6) Securities

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



|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|------------------------------------------------------------------ |  | ------------- | ------- | --------------- | - | ---------------- |  | --------- | ------ |  | - | -------
|                                                                   |  | AmortizedCost |         | UnrealizedGains |   | UnrealizedLosses |  | FairValue
|                                                                   |  |               |         |                
|(Dollar amounts in thousands)                                      |  |               |         |                 |   |                  |  |           |        |  |   |        
|Available-for-sale:                                                |  |               |         |                 |   |                  |  |           |        |  |   |        
|As of June 30, 2010:                                               |  |               |         |                 |   |                  |  |           |        |  |   |        
|U.S. government and agency obligations                             |  | $             | 46,493  |                 | $ | 720              |  | $         | 9      |  | $ | 47,204 
|Municipal obligations                                              |  |               | 26,820  |                 |   | 1,300            |  |           | 43     |  |   | 28,077 
|Corporate obligations                                              |  |               | 8,484   |                 |   | 209              |  |           | 664    |  |   | 8,029  
|Equity securities                                                  |  |               | 3,993   |                 |   | 49               |  |           | 1,062  |  |   | 2,980  
|Mutual funds                                                       |  |               | 8,936   |                 |   | 428              |  |           |       |  |   | 9,364  
|Trust preferred securities                                         |  |               | 17,814  |                 |   | 10               |  |           | 6,959  |  |   | 10,865 
|Freddie Mac preferred stock                                        |  |               |        |                 |   | 21               |  |           |       |  |   | 21     
|Mortgage-backed securities and collateralized mortgage obligations |  |               | 64,666  |                 |   | 1,881            |  |           | 246    |  |   | 66,301 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|                                                                   |  | $             | 177,206 |                 | $ | 4,618            |  | $         | 8,983  |  | $ | 172,841
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|Held-to-maturity:                                                  |  |               |         |                 |   |                  |  |           |        |  |   |        
|As of June 30, 2010:                                               |  |               |         |                 |   |                  |  |           |        |  |   |        
|U.S. government and agency obligations                             |  | $             | 26,073  |                 | $ | 236              |  | $         |       |  | $ | 26,309 
|Municipal obligations                                              |  |               | 18,003  |                 |   | 507              |  |           | 55     |  |   | 18,455 
|Mortgage-backed securities and collateralized mortgage obligations |  |               | 39,656  |                 |   | 701              |  |           | 455    |  |   | 39,902 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|                                                                   |  | $             | 83,732  |                 | $ | 1,444            |  | $         | 510    |  | $ | 84,666 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|                                                                   |  |               |         |                
|                                                                   |  | AmortizedCost |         | UnrealizedGains |   | UnrealizedLosses |  | FairValue
|                                                                   |  |               |         |                
|(Dollar amounts in thousands)                                      |  |               |         |                 |   |                  |  |           |        |  |   |        
|Available-for-sale:                                                |  |               |         |                 |   |                  |  |           |        |  |   |        
|As of September 30, 2009:                                          |  |               |         |                 |   |                  |  |           |        |  |   |        
|U.S. government and agency obligations                             |  | $             | 50,999  |                 | $ | 1,023            |  | $         | 23     |  | $ | 51,999 
|Municipal obligations                                              |  |               | 22,708  |                 |   | 803              |  |           | 47     |  |   | 23,464 
|Corporate obligations                                              |  |               | 14,563  |                 |   | 525              |  |           | 914    |  |   | 14,174 
|Equity securities                                                  |  |               | 4,144   |                 |   |                 |  |           | 846    |  |   | 3,298  
|Mutual funds                                                       |  |               | 9,605   |                 |   | 299              |  |           | 4      |  |   | 9,900  
|Trust preferred securities                                         |  |               | 21,394  |                 |   | 157              |  |           | 8,024  |  |   | 13,527 
|Freddie Mac preferred stock                                        |  |               |        |                 |   | 91               |  |           |       |  |   | 91     
|Mortgage-backed securities and collateralized mortgage obligations |  |               | 48,816  |                 |   | 1,413            |  |           | 567    |  |   | 49,662 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|                                                                   |  | $             | 172,229 |                 | $ | 4,311            |  | $         | 10,425 |  | $ | 166,115
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|Held-to-maturity:                                                  |  |               |         |                 |   |                  |  |           |        |  |   |        
|As of September 30, 2009:                                          |  |               |         |                 |   |                  |  |           |        |  |   |        
|U.S. government and agency obligations                             |  | $             | 15,106  |                 | $ | 92               |  | $         |       |  | $ | 15,198 
|Municipal obligations                                              |  |               | 19,387  |                 |   | 644              |  |           | 66     |  |   | 19,965 
|Corporate obligations                                              |  |               | 1,718   |                 |   | 20               |  |           |       |  |   | 1,738  
|Mortgage-backed securities and collateralized mortgage obligations |  |               | 36,237  |                 |   | 483              |  |           | 884    |  |   | 35,836 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        
|                                                                   |  | $             | 72,448  |                 | $ | 1,239            |  | $         | 950    |  | $ | 72,737 
|                                                                   |  |               |         |                 |   |                  |  |           |        |  |   |        



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



The following table presents the amortized cost and fair value of debt securities by contractual
maturity dates as of June 30, 2010:



|                                       |  |                               |         |                             |   |               |  |           |        |  |   |       
|-------------------------------------- |  | ----------------------------- | ------- | --------------------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                                       |  | Securities Available-for-Sale |         | Securities Held-to-Maturity
|                                       |  | AmortizedCost                 |         | FairValue                   |   | AmortizedCost |  | FairValue
|                                       |  | (In Thousands)               
|As of June 30, 2010:                   |  |                               |         |                             |   |               |  |           |        |  |   |       
|Due in one year or less                |  | $                             | 6,194   |                             | $ | 6,281         |  | $         |       |  | $ |      
|Due after one year through five years  |  |                               | 43,187  |                             |   | 44,098        |  |           | 6,769  |  |   | 6,901 
|Due after five years through ten years |  |                               | 22,286  |                             |   | 23,139        |  |           | 31,656 |  |   | 32,035
|Due after ten years                    |  |                               | 92,610  |                             |   | 86,958        |  |           | 45,307 |  |   | 45,730
|                                       |  |                               |         |                             |   |               |  |           |        |  |   |       
|                                       |  | $                             | 164,277 |                             | $ | 160,476       |  | $         | 83,732 |  | $ | 84,666
|                                       |  |                               |         |                             |   |               |  |           |        |  |   |       

The proceeds from the sale of securities for the three months ended
June 30, 2010 were $32,000. Gross losses of $3,000 were realized on sales of securities during the three months ended June 30, 2010. There were no gains realized during the three months ended June 30, 2010. There were no sales of
securities during the three months ended June 30, 2009. The proceeds from the sales of securities for the nine months ended June 30, 2010 were $16.3 million. Gross gains of $1,057,000 and gross losses of $23,000 were realized on sales of
securities during the nine months ended June 30, 2010. There were no sales of securities during the nine months ended June 30, 2009.

The Company recognized other-than-temporary impairment losses on securities of $912,000 and $1.4 million for the three-month periods ended June 30,
2010 and 2009, respectively. The impairment charges for the three-month period ended June 30, 2010 relate to the Companys holdings of three pooled trust preferred securities and one private label mortgage-backed security. The impairment
charges for the three-month period ended June 30, 2009 relate to two pooled trust preferred securities. The Company recognized other-than-temporary impairment losses on securities of $2.4 million and $3.1 million for the nine-month period ended
June 30, 2010 and 2009, respectively. The impairment charges for the nine-month period ended June 30, 2010 relate to six pooled trust preferred securities and one private label mortgage-backed security. The impairment charges for the
nine-month period ended June 30, 2009 relate to the Companys holdings of Freddie Mac preferred stock, the AMF Ultra Short Mortgage Fund, and two pooled trust preferred securities.

At June 30, 2010, the unrealized losses on the securities portfolio were primarily attributable to wider credit spreads, reflecting market
illiquidity. The Company does not intend to sell these securities and it is not more-likely than-not that the Company will have to sell these securities.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



The following tables show the aggregate related fair value of investments with a continuous unrealized
loss position for less than twelve months and those that have been in a continuous unrealized loss position for greater than twelve months.



|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|------------------------------------------------------------------ |  | ------------------- |  | ----------------- | ------ | ---------------- | - | -------------- |  | --------- |  | ---------------- | ------ | -------------- | - | --------- |  | ---------------- |  | - | ------ |  | - | -----
|                                                                   |  | Less than 12 Months |  | 12 Months or More |        | Total           
|                                                                   |  | # ofSecurities      |  | FairValue         |        | UnrealizedLosses |   | # ofSecurities |  | FairValue |  | UnrealizedLosses |        | # ofSecurities |   | FairValue |  | UnrealizedLosses
|As of June 30, 2010:                                               |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|(Dollar amounts in thousands)                                      |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Available-for-sale:                                                |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|U.S. government and agency obligations                             |  | 1                   |  | $                 | 1,991  |                  | $ | 9              |  |          |  | $                |       |                | $ |          |  | 1                |  | $ | 1,991  |  | $ | 9    
|Municipal obligations                                              |  |                    |  |                   |       |                  |   |               |  | 2         |  |                  | 958    |                |   | 43        |  | 2                |  |   | 958    |  |   | 43   
|Corporate obligations                                              |  |                    |  |                   |       |                  |   |               |  | 2         |  |                  | 1,330  |                |   | 664       |  | 2                |  |   | 1,330  |  |   | 664  
|Equity securities                                                  |  | 1                   |  |                   | 528    |                  |   | 28             |  | 7         |  |                  | 2,246  |                |   | 1,034     |  | 8                |  |   | 2,774  |  |   | 1,062
|Trust preferred securities                                         |  | 1                   |  |                   | 491    |                  |   | 9              |  | 15        |  |                  | 9,260  |                |   | 6,950     |  | 16               |  |   | 9,751  |  |   | 6,959
|Mortgage-backed securities and collateralized mortgage obligations |  | 4                   |  |                   | 7,546  |                  |   | 26             |  | 5         |  |                  | 3,902  |                |   | 220       |  | 9                |  |   | 11,448 |  |   | 246  
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Total temporarily impaired available-for-sale securities           |  | 7                   |  |                   | 10,556 |                  |   | 72             |  | 31        |  |                  | 17,696 |                |   | 8,911     |  | 38               |  |   | 28,252 |  |   | 8,983
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Held-to-maturity:                                                  |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Municipal obligations                                              |  |                    |  |                   |       |                  |   |               |  | 4         |  |                  | 2,678  |                |   | 55        |  | 4                |  |   | 2,678  |  |   | 55   
|Mortgage-backed securities and collateralized mortgage obligations |  | 9                   |  |                   | 13,165 |                  |   | 118            |  | 4         |  |                  | 1,992  |                |   | 337       |  | 13               |  |   | 15,157 |  |   | 455  
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Total temporarily impaired held-to-maturity securities             |  | 9                   |  |                   | 13,165 |                  |   | 118            |  | 8         |  |                  | 4,670  |                |   | 392       |  | 17               |  |   | 17,835 |  |   | 510  
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      
|Total temporarily impaired securities                              |  | 16                  |  | $                 | 23,721 |                  | $ | 190            |  | 39        |  | $                | 22,366 |                | $ | 9,303     |  | 55               |  | $ | 46,087 |  | $ | 9,493
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |      



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|------------------------------------------------------------------ |  | ------------------- |  | ----------------- | ------ | ---------------- | - | -------------- |  | --------- |  | ---------------- | ------ | -------------- | - | --------- |  | ---------------- |  | - | ------ |  | - | ------
|                                                                   |  | Less than 12 Months |  | 12 Months or More |        | Total           
|                                                                   |  | # ofSecurities      |  | FairValue         |        | UnrealizedLosses |   | # ofSecurities |  | FairValue |  | UnrealizedLosses |        | # ofSecurities |   | FairValue |  | UnrealizedLosses
|As of September 30, 2009:                                          |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|(Dollar amounts in thousands)                                      |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Available-for-sale:                                                |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|U.S. government and agency obligations                             |  | 1                   |  | $                 | 3,045  |                  | $ | 23             |  |          |  | $                |       |                | $ |          |  | 1                |  | $ | 3,045  |  | $ | 23    
|Municipal obligations                                              |  | 1                   |  |                   | 408    |                  |   | 1              |  | 3         |  |                  | 1,894  |                |   | 46        |  | 4                |  |   | 2,302  |  |   | 47    
|Corporate obligations                                              |  |                    |  |                   |       |                  |   |               |  | 3         |  |                  | 1,569  |                |   | 914       |  | 3                |  |   | 1,569  |  |   | 914   
|Equity securities                                                  |  | 5                   |  |                   | 2,160  |                  |   | 428            |  | 3         |  |                  | 1,138  |                |   | 418       |  | 8                |  |   | 3,298  |  |   | 846   
|Mutual funds                                                       |  |                    |  |                   |       |                  |   |               |  | 1         |  |                  | 1,265  |                |   | 4         |  | 1                |  |   | 1,265  |  |   | 4     
|Trust preferred securities                                         |  |                    |  |                   |       |                  |   |               |  | 18        |  |                  | 11,286 |                |   | 8,024     |  | 18               |  |   | 11,286 |  |   | 8,024 
|Mortgage-backed securities and collateralized mortgage obligations |  | 5                   |  |                   | 3,054  |                  |   | 31             |  | 7         |  |                  | 5,916  |                |   | 536       |  | 12               |  |   | 8,970  |  |   | 567   
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Total temporarily impaired available-for-sale securities           |  | 12                  |  |                   | 8,667  |                  |   | 483            |  | 35        |  |                  | 23,068 |                |   | 9,942     |  | 47               |  |   | 31,735 |  |   | 10,425
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Held-to-maturity:                                                  |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Municipal obligations                                              |  | 1                   |  |                   | 353    |                  |   | 6              |  | 3         |  |                  | 2,321  |                |   | 60        |  | 4                |  |   | 2,674  |  |   | 66    
|Mortgage-backed securities and collateralized mortgage obligations |  | 8                   |  |                   | 15,315 |                  |   | 162            |  | 6         |  |                  | 3,250  |                |   | 722       |  | 14               |  |   | 18,565 |  |   | 884   
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Total temporarily impaired held-to-maturity securities             |  | 9                   |  |                   | 15,668 |                  |   | 168            |  | 9         |  |                  | 5,571  |                |   | 782       |  | 18               |  |   | 21,239 |  |   | 950   
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       
|Total temporarily impaired securities                              |  | 21                  |  | $                 | 24,335 |                  | $ | 651            |  | 44        |  | $                | 28,639 |                | $ | 10,724    |  | 65               |  | $ | 52,974 |  | $ | 11,375
|                                                                   |  |                     |  |                   |        |                  |   |                |  |           |  |                  |        |                |   |           |  |                  |  |   |        |  |   |       

The Company conducts periodic reviews to identify and evaluate each
investment that has an unrealized loss, in accordance with U.S. generally accepted accounting principles. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that
are determined to be temporary in nature are recorded, net of tax, in Accumulated Other Comprehensive Income(AOCI) for available-for-sale securities, while such losses related to held-to-maturity securities are not recorded, as these
investments are carried at their amortized cost.

Regardless of the classification of the securities as available-for-sale or
held-to-maturity, the Company has assessed each position for other than temporary impairment.

Factors considered in determining whether a
loss is temporary include:



| |  |  | the length of time and the extent to which fair value has been below cost;
| | - |  | --------------------------------------------------------------------------



| |  |  | the severity of the impairment;
| | - |  | -------------------------------



| |  |  | the cause of the impairment and the financial condition and near-term prospects of the issuer;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | activity in the market of the issuer which may indicate adverse credit conditions;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | if the Company intends to sell the investment;
| | - |  | ----------------------------------------------



| |  |  | if its more-likely-than-not the Company will be required to sell the investment before recovering its amortized cost basis; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the Company does not expect to recover the investments entire amortized cost basis (even if the Company does not intend to sell the security).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



The Companys review for impairment generally entails:



| |  |  | identification and evaluation of investments that have indications of possible impairment;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has
been in an unrealized loss position and the expected recovery period;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having
other-than-temporary impairment and those that would not support other-than-temporary impairment; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | documentation of the results of these analyses, as required under business policies.
| | - |  | ------------------------------------------------------------------------------------

For debt securities that are not deemed to be credit impaired, management performs additional analysis to assess whether it intends to sell or would
more-likely-than-not be required to sell the investment before the expected recovery of the amortized cost basis. Management has asserted that it has no intent to sell and that it believes it is more-likely-than-not that it will not be required to
sell the investment before recovery of its amortized cost basis.

Similarly, for equity securities, management considers the various factors
described above, including its intent and ability to hold the equity security for a period of time sufficient for recovery to amortized cost. Where management lacks that intent or ability, the securitys decline in fair value is deemed to be
other-than-temporary and is recorded in earnings.

For debt securities, a critical component of the evaluation for other-than-temporary
impairment is the identification of credit impaired securities, where management does not receive cash flows sufficient to recover the entire amortized cost basis of the security. The extent of the Companys analysis regarding credit quality
and the stress on assumptions used in the analysis had been refined for securities where the current fair value or other characteristics of the security warrant. The paragraphs below describe the Companys process for identifying credit
impairment in security types with the most significant unrealized losses as of June 30, 2010.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



Trust Preferred Debt Securities

Included in debt securities in an unrealized loss position at June 30, 2010 were sixteen different trust preferred offerings with an aggregate fair
value of $9,751,000 of which $9,740,000 had floating rates based on LIBOR. The unrealized losses on these debt securities amounted to $6,959,000 at June 30, 2010. Due to dislocations in the credit markets broadly, and the lack of trading and
new issuances in pooled trust preferred securities, market price indications generally reflect the lack of liquidity in the market. Prices on trust preferred securities were calculated by a third party valuation company. The valuation methodology is
based on the premise that the fair value of the securitys collateral should approximate the fair value of its liabilities. In general, the spreads for trust preferred collateral have widened by over 500 basis points since 2007. To determine
the decline in the collaterals value associated with this increase in credit spreads, the third party projected collateral cash flows for each pool using Intex, the commonly used modeling software for securities of this type. Once generated,
the cash flows for each pool were discounted at the applicable rate to arrive at the fair value of the collateral. Any declines in the resulting fair value of the collateral below the par value represents the component of loss attributed to credit
risk. The credit quality of each collateral pool was then analyzed for the purpose of projecting defaults and recoveries. Prepayment assumptions were also estimated. With these additional assumptions, cash flow projections for both the collateral
and the debt obligation were modeled and valued. The fair value of each bond was then determined by discounting the projected cash flows by an adjusted discount rate (adjusted to capture the default risk). During the three months ended June 30,
2010, the Company recognized in earnings impairment charges of $886,000 on three investments in pooled trust preferred securities resulting from several factors, including a downgrade on their credit ratings, failure to pass their principal coverage
tests, and the decline in the net present value of their projected cash flows. During the nine months ended June 30, 2010, the Company recognized in earnings impairment charges of $2.4 million on six investments in pooled trust preferred
securities resulting from several factors, including a downgrade on their credit ratings, failure to pass their principal coverage tests, indications of a break in yield, and the decline in the net present value of their projected cash flows.
Management of the Company has deemed the impairment on these six trust preferred securities to be other-than-temporary based upon these factors and the duration and extent to which the market value has been less than cost, the inability to forecast
a recovery in market value, and other factors concerning the issuers in the pooled securities. During the three and nine months ended June 30, 2009, the Company recognized impairment charges of $1.4 million and $1.8 million, respectively, on
two investments in pooled trust preferred securities resulting from several factors, including a downgrade on their credit ratings, failure to pass their principal coverage tests, indications of a break in yield, and the decline in the net present
value of their projected cash flows. Based on cash flow forecasts for the remaining securities, management expects to recover the remaining amortized cost of these securities. Furthermore, the Company does not intend to sell these securities and it
is not more-likely-than-not that the Company will be required to sell these securities before recovery of their cost basis, which may be at maturity.

Equity Securities

At June 30, 2010 the Company had $1.1 million of unrealized losses on equity securities. These securities represent investments in common equity
offerings of seven financial institutions with an aggregate fair value of $1.9 million and one investment in preferred stock of an insurance company with a fair value of $888,000. In addition to the general factors mentioned above for determining
whether the decline in market value is other than temporary, the analysis of each of these securities includes a review of the profitability of each issuer and its capital adequacy, and all data available to determine the credit quality of each
issuer. There were no impairment charges taken on these securities during the three and nine months ended June 30, 2010. During the nine months ended June 30, 2009 the Company recognized impairment charges of $1.2 million on the AMF Ultra
Short Mortgage Fund and $75,000 on the Companys holdings of Freddie Mac preferred stock. Based on the Companys detailed analysis, and because the Company has the ability and intent to hold the investments until a recovery of its
amortized cost basis, except for the investments mentioned above, the Company does not consider these remaining assets to be other-than-temporarily impaired at June 30, 2010. However, continued price declines could result in a write down of one
or more of these equity investments.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



Corporate Obligations

Included in corporate obligations in an unrealized loss position at June 30, 2010 were two different securities with an aggregate fair value of $1.3
million. The unrealized loss on these securities amounted to $664,000 at June 30, 2010. These two securities represent investments in corporate obligations issued by financial institutions and have floating rates which reset monthly based on
LIBOR. In addition to the general factors mentioned above for determining whether the decline in market value is other-than-temporary, the analysis of each of these securities included a review of the profitability of each issuer and its capital
adequacy, and all data available to determine the credit quality of each issuer. Both issuers are well-capitalized as of June 30, 2010 and the securities have an investment grade rating as rated by at least one nationally recognized credit
rating agency. Both institutions had participated in the Treasurys TARP Capital Purchase Program and have subsequently repaid the TARP proceeds. Based on the Companys detailed analysis and because the Company has the ability and intent
to hold these investments until a recovery of its amortized cost basis, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2010. There were no impairment charges on corporate obligations for the
three and nine months ended June 30, 2010 and 2009.

Mortgage-Backed Securities and Collateralized Mortgage
Obligations

Included in mortgage backed securities in an unrealized loss position at June 30, 2010 were twenty-two different
securities with an aggregate fair value of $26.6 million, of which nine securities having a fair value of $5.9 million had unrealized losses of $557,000 and have been in an unrealized loss position for twelve months or longer. A significant amount
of the unrealized losses at June 30, 2010 represents one private label mortgage-backed security. For the three and nine months ended June 30, 2010 the Company recognized $320,000 in non-credit impairment losses and $26,000 of credit
impairment losses relating to this security resulting from a downgrade in its credit rating, as well as independent third-party analysis of the underlying collateral for the bond. There were no impairment charges recognized for this security during
the three-month or nine-month period ended June 30, 2009. Based on managements analysis of the remaining securities, management determined that the price declines are strictly market and spread related and management expects to recover
the remaining amortized cost of these securities. Furthermore, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of their cost basis,
which may be at maturity.

The following is a roll forward for the nine months ended June 30, 2010 of the amounts recognized in earnings
related to credit losses on securities which the Company has recorded other-than-temporary impairment charges through earnings and other comprehensive income:



|                                                                              |  |                |      
|----------------------------------------------------------------------------- |  | -------------- | -----
|                                                                              |  | (In Thousands)
|Credit component of OTTI as of October 1, 2009                                |  | $              |     
|Additions for credit-related OTTI charges on previously unimpaired securities |  |                | 2,443
|                                                                              |  |                |      
|Credit component of OTTI as of June 30, 2010                                  |  | $              | 2,443
|                                                                              |  |                |      



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(7) Loans Receivable

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



|                                      |  |              |         |   |                   |   |         |  
|------------------------------------- |  | ------------ | ------- | - | ----------------- | - | ------- | -
|                                      |  | June 30,2010 |         |   | September 30,2009 |  
|First mortgage loans:                 |  |              |         |   |                   |   |         |  
|Conventional:                         |  |              |         |   |                   |   |         |  
|1-4 family dwellings                  |  | $            | 134,808 |   |                   | $ | 164,718 |  
|Multi-family dwellings                |  |              | 41      |   |                   |   | 82      |  
|Commercial                            |  |              | 96,270  |   |                   |   | 97,086  |  
|Construction:                         |  |              |         |   |                   |   |         |  
|Residential                           |  |              | 666     |   |                   |   | 1,707   |  
|Commercial                            |  |              | 27,902  |   |                   |   | 26,879  |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |              | 259,687 |   |                   |   | 290,472 |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |             
|Less: Loans in process                |  |              | (9,357  | ) |                   |   | (13,778 | )
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |              | 250,330 |   |                   |   | 276,694 |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |             
|Consumer loans:                       |  |              |         |   |                   |   |         |  
|Home equity                           |  |              | 74,464  |   |                   |   | 80,453  |  
|Consumer loans                        |  |              | 1,068   |   |                   |   | 1,538   |  
|Other                                 |  |              | 2,390   |   |                   |   | 2,390   |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |              | 77,922  |   |                   |   | 84,381  |  
|                                      |  |              |         |   |                   |   |         |  
|Commercial business loans and leases: |  |              |         |   |                   |   |         |  
|Commercial business loans             |  |              | 59,795  |   |                   |   | 54,329  |  
|Commercial leases                     |  |              | 200     |   |                   |   | 205     |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |              | 59,995  |   |                   |   | 54,534  |  
|                                      |  |              |         |   |                   |   |         |  
|                                      |  |             
|Less: Allowance for loan losses       |  |              | (5,674  | ) |                   |   | (5,702  | )
|                                      |  |             
|Unearned discounts and fees           |  |              | (175    | ) |                   |   | (120    | )
|                                      |  |              |         |   |                   |   |         |  
|Loans receivable, net                 |  | $            | 382,398 |   |                   | $ | 409,787 |  
|                                      |  |              |         |   |                   |   |         |  



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(8) Allowance for Loan Losses

Changes in the allowance for loan losses for the nine months ended June 30, 2010, fiscal year ended September 30, 2009, and for the nine months
ended June 30, 2009 are as follows (dollar amounts in thousands):



|                               |  |                                |        |   |                             |   |        |                                |  |   |        |  
|------------------------------ |  | ------------------------------ | ------ | - | --------------------------- | - | ------ | ------------------------------ |  | - | ------ | -
|                               |  | Nine Months EndedJune 
30,2010 |        |   | Year EndedSeptember 30,2009 |   |        | Nine Months EndedJune 
30,2009 | 
|Balance at beginning of period |  | $                              | 5,702  |   |                             | $ | 3,424  |                                |  | $ | 3,424  |  
|Provision for loan losses      |  |                                | 1,100  |   |                             |   | 5,870  |                                |  |   | 1,145  |  
|Charge-offs                    |  |                                | (1,188 | ) |                             |   | (3,713 | )                              |  |   | (1,031 | )
|Recoveries                     |  |                                | 60     |   |                             |   | 121    |                                |  |   | 90     |  
|                               |  |                                |        |   |                             |   |        |                                |  |   |        |  
|Net charge-offs                |  |                                | (1,128 | ) |                             |   | (3,592 | )                              |  |   | (941   | )
|                               |  |                                |        |   |                             |   |        |                                |  |   |        |  
|Balance at end of period       |  | $                              | 5,674  |   |                             | $ | 5,702  |                                |  | $ | 3,628  |  
|                               |  |                                |        |   |                             |   |        |                                |  |   |        |  

The provision for loan losses charged to expense is based upon past loan loss experience and an evaluation of probable
losses in the current loan portfolio, including the evaluation of impaired loans in accordance with U.S. generally accepted accounting principles. 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. U.S. generally accepted accounting
principles 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.

Included in the current amount of
impaired loans are $9.8 million of impaired loans for which the related allowance for loan losses is $1.7 million. Impaired loans of $6.0 million, of which $5.0 million are collateral dependent, do not have a related allowance for loan losses as a
result of applying impairment tests prescribed under U.S. generally accepted accounting principles. The net value of the collateral securing these loans is $7.5 million. The average recorded investment in impaired loans during the nine months ended
June 30, 2010 was $17.1 million compared to $9.6 million for the same period in the prior year. For the nine months ended June 30, 2010 and 2009, the Company recognized $383,000 and $599,000, respectively, of interest income on
impaired loans using the cash basis of income recognition.

At June 30, 2010, the recorded investment in loans that are considered to be
impaired under U.S. generally accepted accounting principles was $15.8 million compared to $15.6 million at September 30, 2009.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(9) Derivative Instruments

The Company accounts for its derivative instruments as either assets or liabilities on the balance sheet at fair value through adjustments to either the
hedged items, accumulated other comprehensive income (loss), or current earnings, as appropriate. As part of its overall interest rate risk management activities, the Company utilizes derivative instruments to manage its exposure to various types of
interest rate risk. These derivative instruments consist of interest rate swaps. There were two interest rate swap contracts outstanding as of June 30, 2010.

Entering into interest rate derivatives potentially exposes the Company to the risk of counterparties failure to fulfill their legal obligations
including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much
smaller.

During the second quarter of fiscal 2008, the Company entered into an interest rate swap contract involving the exchange of the
Companys floating rate interest rate payment on its $7.5 million in floating rate preferred securities for a fixed rate interest payment without the exchange of the underlying principal amount. This hedge relationship fails to qualify for the
assumption of no ineffectiveness (short cut method) as defined by U.S. generally accepted accounting principles. Therefore, the Company accounts for this hedge relationship as a cash flow hedge. The cumulative change in fair value of the hedging
derivative, to the extent that it is expected to be offset by the cumulative change in anticipated interest cash flows from the hedged exposure, will be deferred and reported as a component of accumulated other comprehensive income (AOCI). Any hedge
ineffectiveness will be charged to current earnings. Consistent with the risk management objective and the hedge accounting designation, management measured the degree of hedge effectiveness by comparing the cumulative change in anticipated interest
cash flows from the hedged exposure over the hedging period to the cumulative change in anticipated cash flows from the hedging derivative. Management utilizes the Hypothetical Derivative Method to compute the cumulative change in
anticipated interest cash flows from the hedged exposure. To the extent that the cumulative change in anticipated cash flows from the hedging derivative offsets from 80% to 125% of the cumulative change in anticipated interest cash flows from the
hedged exposure, the hedge will be deemed effective. The Company will use the Hypothetical Derivative Method to measure ineffectiveness. Under this method, the calculation of ineffectiveness will be done by using the change in fair value of the
hypothetical derivative. That is, the swap will be recorded at fair value on the balance sheet and other comprehensive income will be adjusted to an amount that reflects the lesser of either the cumulative change in fair value of the swap or the
cumulative change in the fair value of the hypothetical derivative instrument. Management will determine the ineffectiveness of the hedging relationship by comparing the cumulative change in anticipated interest cash flows from the hedged exposure
over the hedging period to the cumulative change in anticipated cash flows from the hedging derivative. Any difference between these two measures will be deemed hedge ineffectiveness and recorded in current earnings. As of June 30, 2010, the
hedge instrument was deemed to be effective, therefore, no amounts were charged to current earnings. The Company does not expect to reclassify any hedge-related amounts from accumulated other comprehensive income (loss) to earnings over the next
twelve months.

The pay fixed interest rate swap contract outstanding at June 30, 2010 is being utilized to hedge $7.5 million in
floating rate-preferred securities. Below is a summary of the interest rate swap contract and the terms at June 30, 2010:



|                       |  |                |       |         |      |   |                |      |   |              |            |            |   |   |  |   |    
|---------------------- |  | -------------- | ----- | ------- | ---- | - | -------------- | ---- | - | ------------ | ---------- | ---------- | - | - |  | - | ---
|(Dollars in thousands) |  | NotionalAmount |       | PayRate |      |   | ReceiveRate(*) |      |   | MaturityDate |            | Unrealized
|                       |  |                |       |         | Gain |   | Loss          
|Cash flow hedge        |  | $              | 7,500 |         | 5.32 | % |                | 1.90 | % |              | 12/15/2012 |            | $ |  |  | $ | 539



|(*) | Variable receive rate based upon contract rates in effect at June 30, 2010.
|--- | ---------------------------------------------------------------------------



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



During the first quarter of fiscal 2009, the Bank originated a $1.0 million fixed rate loan for one of
its commercial mortgage loan customers and simultaneously entered into an offsetting fixed interest rate swap contract with PNC Bank, National Association (PNC). The Bank pays PNC interest at the same fixed rate on the same notional
amount as the customer pays to the Bank on the commercial mortgage loan, and receives interest from PNC at a floating rate on the same notional amount. This interest rate hedging program helps the Bank limit its interest rate risk while at the same
time helps the Bank meet the financing needs and interest rate risk management needs of its commercial customers. The Company accounts for this hedge relationship as a fair value hedge. This interest rate swap contract was recorded at fair value
with any resulting gain or loss recorded in current period earnings. For the three and nine months ended June 30, 2010 the Company recorded a loss of $11,000 and a loss of $6,000, respectively relating to this contract. For the three and nine
months ended June 30, 2009 the Company recorded a gain of $14,000 and a loss of $2,000, respectively relating to this contract. As of June 30, 2010, the notional amount of the customer-related interest rate derivative financial instrument
was $972,000, compared to $988,000 at June 30, 2009.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(10) Comprehensive Income

In complying with U.S. generally accepted accounting principles the Company has developed the following table, which includes the tax effects of the
components of other comprehensive income (loss). Other comprehensive income (loss) consists of net unrealized gains (losses) on securities available-for-sale, non-credit impairment charges on securities, and derivatives that qualify as cash flow
hedges. Other comprehensive income (loss) and related tax effects for the indicated periods, consists of:



|                                                                                                                                                          |  |                                |        |   |                                |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ------------------------------ | - | ------ | -
|(Dollars in thousands)                                                                                                                                    |  | Three MonthsEndedJune 30, 2010 |        |   | Three MonthsEndedJune 30, 2009 |  
|Net (loss) income                                                                                                                                         |  | $                              | (52    | ) |                                | $ | 238    |  
|Comprehensive (loss) gain on cash flow hedges net of tax of ($17) in 2010 and $55 in 2009                                                                 |  |                                | (32    | ) |                                |   | 107    |  
|Comprehensive gain (loss) on investment securities, net of tax of $572 in 2010 and ($61) in 2009                                                          |  |                                | 1,038  |   |                                |   | (119   | )
|Reclassification adjustment on investment securities, net of tax of ($8) in 2010 and $0 in 2009                                                           |  |                                | (16    | ) |                                |   |       |  
|Comprehensive loss on securities for which other-than-temporary impairment has been recognized in earnings, net of tax of ($732)
in 2010 and $0 in 2009   |  |                                | (1,421 | ) |                                |   |       |  
|Reclassification adjustment for other-than-temporary impairment losses on debt securities, net of tax of $310 in 2010 and $476 in
2009                    |  |                                | 602    |   |                                |   | 925    |  
|                                                                                                                                                          |  |                                |        |   |                                |   |        |  
|Total comprehensive income                                                                                                                                |  | $                              | 119    |   |                                | $ | 1,151  |  
|                                                                                                                                                          |  |                                |        |   |                                |   |        |  
|                                                                                                                                                          |  |                               
|(Dollars in thousands)                                                                                                                                    |  | Nine 
MonthsEndedJune 30, 2010 |        |   | Nine MonthsEndedJune 30, 2009  |  
|Net income                                                                                                                                                |  | $                              | 659    |   |                                | $ | 1,795  |  
|Comprehensive loss on cash flow hedges net of tax of ($16) in 2010 and ($129) in 2009                                                                     |  |                                | (30    | ) |                                |   | (250   | )
|Comprehensive gain (loss) on investment securities, net of tax of $2,309 in 2010 and ($611) in 2009                                                       |  |                                | 4,410  |   |                                |   | (1,186 | )
|Reclassification adjustment on investment securities, net of tax of ($361) in 2010 and $0 in 2009                                                         |  |                                | (700   | ) |                                |   |       |  
|Comprehensive loss on securities for which other-than-temporary impairment has been recognized in earnings, net of tax of
($2,256) in 2010 and $0 in 2009 |  |                                | (4,379 | ) |                                |   |       |  
|Reclassification adjustment for other-than-temporary impairment losses on debt securities, net of tax of $831 in 2010 and $1,061
in 2009                  |  |                                | 1,612  |   |                                |   | 2,060  |  
|                                                                                                                                                          |  |                                |        |   |                                |   |        |  
|Total comprehensive income                                                                                                                                |  | $                              | 1,572  |   |                                | $ | 2,419  |  
|                                                                                                                                                          |  |                                |        |   |                                |   |        |  



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(11) Disclosures About Fair Value Measurements

In accordance with U.S. generally accepted accounting principles the following disclosures show the hierarchal disclosure framework associated with the
level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels defined by U.S. generally accepted accounting principles are as follows:



|            |  |                                                                                                                                                                                                                                                                                                                                                                                          
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level I -   |  | Quoted prices are available in the active markets for identical assets or liabilities as of the reported date.                                                                                                                                                                                                                                                                           
|            | 
|Level II -  |  | Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and
liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
|            | 
|Level III - |  | Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.                                                                                                                                                                                                                                                      

This hierarchy requires the use of observable market data when available.

The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of
June 30, 2010 and September 30, 2009 by level within the fair value hierarchy. As required by U.S. generally accepted accounting principles, financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.



|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|------------------------------------------------------------------ |  | -------------- | ------ | -------- | - | --------- |  | ----- | ------ |  | - | -------
|                                                                   |  | Level I        |        | Level II |   | Level III |  | Total
|                                                                   |  | (In Thousands)
|As of June 30, 2010                                                |  |                |        |          |   |           |  |       |        |  |   |        
|Assets:                                                            |  |                |        |          |   |           |  |       |        |  |   |        
|Available-for-sale securities:                                     |  |                |        |          |   |           |  |       |        |  |   |        
|U.S. government and agency obligations                             |  | $              |       |          | $ | 47,204    |  | $     |       |  | $ | 47,204 
|Municipal obligations                                              |  |                |       |          |   | 28,077    |  |       |       |  |   | 28,077 
|Corporate obligations                                              |  |                |       |          |   | 8,029     |  |       |       |  |   | 8,029  
|Equity securities                                                  |  |                | 2,980  |          |   |          |  |       |       |  |   | 2,980  
|Mutual funds                                                       |  |                | 9,364  |          |   |          |  |       |       |  |   | 9,364  
|Trust preferred securities                                         |  |                |       |          |   |          |  |       | 10,865 |  |   | 10,865 
|Federal Home Loan Mortgage Corp. preferred stock                   |  |                |       |          |   | 21        |  |       |       |  |   | 21     
|Mortgage-backed securities and collateralized mortgage obligations |  |                |       |          |   | 66,301    |  |       |       |  |   | 66,301 
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|                                                                   |  | $              | 12,344 |          | $ | 149,632   |  | $     | 10,865 |  | $ | 172,841
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|Residential loans held for sale                                    |  | $              |       |          | $ | 1,797     |  | $     |       |  | $ | 1,797  
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|Liabilities:                                                       |  |                |        |          |   |           |  |       |        |  |   |        
|Derivative instruments                                             |  | $              |       |          | $ | 666       |  | $     |       |  | $ | 666    
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|------------------------------------------------------------------ |  | -------------- | ------ | -------- | - | --------- |  | ----- | ------ |  | - | -------
|                                                                   |  | Level I        |        | Level II |   | Level III |  | Total
|                                                                   |  | (In Thousands)
|As of September 30, 2009                                           |  |                |        |          |   |           |  |       |        |  |   |        
|Assets:                                                            |  |                |        |          |   |           |  |       |        |  |   |        
|Available-for-sale securities:                                     |  |                |        |          |   |           |  |       |        |  |   |        
|U.S. government and agency obligations                             |  | $              |       |          | $ | 51,999    |  | $     |       |  | $ | 51,999 
|Municipal obligations                                              |  |                |       |          |   | 23,464    |  |       |       |  |   | 23,464 
|Corporate obligations                                              |  |                |       |          |   | 14,174    |  |       |       |  |   | 14,174 
|Equity securities                                                  |  |                | 3,298  |          |   |          |  |       |       |  |   | 3,298  
|Mutual funds                                                       |  |                | 9,900  |          |   |          |  |       |       |  |   | 9,900  
|Trust preferred securities                                         |  |                |       |          |   |          |  |       | 13,527 |  |   | 13,527 
|Federal Home Loan Mortgage Corp. preferred stock                   |  |                |       |          |   | 91        |  |       |       |  |   | 91     
|Mortgage-backed securities and collateralized mortgage obligations |  |                |       |          |   | 49,662    |  |       |       |  |   | 49,662 
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|                                                                   |  | $              | 13,198 |          | $ | 139,390   |  | $     | 13,527 |  | $ | 166,115
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|Residential loans held for sale                                    |  | $              |       |          | $ | 694       |  | $     |       |  | $ | 694    
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        
|Liabilities:                                                       |  |                |        |          |   |           |  |       |        |  |   |        
|Derivative instruments                                             |  | $              |       |          | $ | 578       |  | $     |       |  | $ | 578    
|                                                                   |  |                |        |          |   |           |  |       |        |  |   |        

At June 30, 2010, pooled trust preferred securities represent
investments in 20 different trust preferred offerings with an aggregate fair value of $10,865,000 of which $10,854,000 had floating rates based on LIBOR at June 30, 2010. Due to dislocations in the credit markets broadly, and the lack of
trading and new issuance in pooled trust preferred securities, market price indications generally reflect the lack of liquidity in the market. Prices on trust preferred securities were calculated by a third party valuation company. The valuation
methodology is based on the premise that the fair value of the securitys collateral should approximate the fair value of its liabilities. In general, the spreads for trust preferred collateral have widened by over 500 basis points since 2007.
To determine the decline in the collaterals value associated with this increase in credit spreads, the third party projected collateral cash flows for each pool using Intex, the commonly used modeling software for securities of this type. Once
generated, the cash flows for each pool were discounted at the applicable rate to arrive at the fair value of the collateral. Any declines in the resulting fair value of the collateral below the par value represents the component of loss attributed
to credit risk. The credit quality of each collateral pool was then analyzed for the purpose of projecting defaults and recoveries. Prepayment assumptions were also estimated. With these additional assumptions, cash flow projections for both the
collateral and the debt obligation were modeled and valued. The fair value of each bond was then determined by discounting the projected cash flows by an adjusted discount rate (adjusted to capture the default risk). During the three months ended
June 30, 2010 the Company recognized in earnings $886,000 of impairment charges on three pooled trust preferred securities resulting from several factors, including a downgrade in their credit ratings, failure to pass their principal coverage
tests, and the decline in the net present value of their projected cash flows. During the nine months ended June 30, 2010 the Company recognized in earnings $2.4 million of impairment charges on six pooled trust preferred securities resulting
from several factors, including a downgrade in their credit ratings, failure to pass their principal coverage tests, indications of a break in yield, and the decline in the net present value of their projected cash flows. Management of the Company
has deemed the impairment on these six trust preferred securities to be other-than-temporary based upon these factors and the duration and extent to which their market values have been less than cost, the inability to forecast a recovery in market
value, and other factors concerning the issuers in the pooled security. There were $1.4 million and $1.8 million, respectively, of impairment charges taken on these securities during the three and nine months ending June 30, 2009. Based on cash
flow forecasts for the remaining securities, management expects to recover the remaining amortized cost of these securities. Furthermore, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will
be required to sell these securities before recovery of their cost basis, which may be at maturity.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



The following table presents the changes in the Level III fair value category for the nine months ended
June 30, 2010. The Company classifies financial instruments in Level III of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to the unobservable inputs, the
valuation models for Level III financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly.

Securities Available-For-Sale (In Thousands)



|                                                               |  |   |        |  
|-------------------------------------------------------------- |  | - | ------ | -
|Beginning balance October 1, 2009                              |  | $ | 13,527 |  
|Impairment charge on securities                                |  |   | (2,417 | )
|Net change in unrealized loss on securities available-for-sale |  |   | 918    |  
|Purchases, issuances, calls, and settlements                   |  |   | (1,038 | )
|Other                                                          |  |   | (125   | )
|Transfers in and/or out of Level III                           |  |   |       |  
|                                                               |  |   |        |  
|Ending balance June 30, 2010                                   |  | $ | 10,865 |  
|                                                               |  |   |        |  

The following tables present the assets measured on a nonrecurring basis on the consolidated statements of financial
condition at their fair value as of June 30, 2010 and September 30, 2009 by level within the fair value hierarchy. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves.
Techniques used to value the collateral that secure the impaired loan include: quoted market prices for identical assets classified as Level I inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level II
inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified
as Level III inputs.



|                                         |  |                |   |          |   |           |  |       |       |  |   |       
|---------------------------------------- |  | -------------- | - | -------- | - | --------- |  | ----- | ----- |  | - | ------
|                                         |  | Level I        |   | Level II |   | Level III |  | Total
|                                         |  | (In Thousands)
|As of June 30, 2010                      |  |                |  
|Assets Measured on a Nonrecurring Basis: |  |                |   |          |   |           |  |       |       |  |   |       
|Impaired loans                           |  | $              |  |          | $ | 9,331     |  | $     | 4,849 |  | $ | 14,180
|Foreclosed real estate, net              |  |                |  |          |   | 226       |  |       |      |  |   | 226   
|                                         |  |                |   |          |   |           |  |       |       |  |   |       
|                                         |  | $              |  |          | $ | 9,557     |  | $     | 4,849 |  | $ | 14,406
|                                         |  |                |   |          |   |           |  |       |       |  |   |       
|                                         |  |                |   |         
|                                         |  | Level I        |   | Level II |   | Level III |  | Total
|                                         |  | (In Thousands)
|As of September 30, 2009                 |  |                |  
|Assets Measured on a Nonrecurring Basis: |  |                |   |          |   |           |  |       |       |  |   |       
|Impaired loans                           |  | $              |  |          | $ | 5,446     |  | $     | 8,709 |  | $ | 14,155
|Foreclosed real estate, net              |  |                |  |          |   | 103       |  |       |      |  |   | 103   
|                                         |  |                |   |          |   |           |  |       |       |  |   |       
|                                         |  | $              |  |          | $ | 5,549     |  | $     | 8,709 |  | $ | 14,258
|                                         |  |                |   |          |   |           |  |       |       |  |   |       



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(12) Disclosures About Fair Value of Financial Instruments

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

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

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

Cash and Due From Banks

The carrying amounts reported approximate those assets fair value.

Interest Bearing Demand Deposits with Other Institutions

The carrying amounts reported approximate those assets fair value.

Securities

Fair
values of securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Prices on trust preferred securities were calculated by a
third party using a discounted projected cash-flow technique. Cash flows were estimated based on credit quality and prepayment assumptions. The present value of the projected cash flows was calculated using an adjusted discount rate which reflects
higher credit spreads due to economic stresses in the marketplace and lower credit ratings.

Loans Receivable

The net loan portfolio has been valued using a present value discounted cash flow. The discount rate used in these calculations is based upon
the treasury yield curve adjusted for non-interest operating costs, credit loss, current market prices and assumed prepayment risk.

Federal Home Loan Bank Stock

The carrying amounts reported approximate those assets fair value.

Accrued Interest Receivable and Payable

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

Deposits

Deposits with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar
assets and liabilities. Deposits with no stated maturities have an estimated fair value equal to both the amount payable on demand and the recorded book balance.



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



Securities Sold Under Agreements to Repurchase

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

Short-Term Borrowings

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

Long-Term Debt

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

Subordinated Debt

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

Advance Payments by Borrowers for Taxes and Insurance

The fair value of the advance payments by borrowers for taxes and insurance approximates the carrying value of those commitments at those dates.

Interest Rate Swap Contracts

Estimated fair values of interest rate swap contracts are based on quoted market prices.

Off-Balance Sheet Instruments

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



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FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



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



|                                                         |  |                |         |                    |   |                |  |           |         |  |   |        
|-------------------------------------------------------- |  | -------------- | ------- | ------------------ | - | -------------- |  | --------- | ------- |  | - | -------
|                                                         |  | June 30, 2010  |         | September 30, 2009
|                                                         |  | CarryingAmount |         | FairValue          |   | CarryingAmount |  | FairValue
|                                                         |  | (In Thousands)
|Financial assets:                                        |  |                |         |                    |   |                |  |           |         |  |   |        
|Cash and due from banks                                  |  | $              | 5,554   |                    | $ | 5,554          |  | $         | 20,601  |  | $ | 20,601 
|Interest bearing demand deposits with other institutions |  |                | 20,178  |                    |   | 20,178         |  |           | 21,879  |  |   | 21,879 
|Securities available-for-sale                            |  |                | 172,841 |                    |   | 172,841        |  |           | 166,115 |  |   | 166,115
|Securities held-to-maturity                              |  |                | 83,732  |                    |   | 84,666         |  |           | 72,448  |  |   | 72,737 
|Loans receivable, net (including loans held for sale)    |  |                | 384,195 |                    |   | 387,840        |  |           | 410,481 |  |   | 414,988
|Federal Home Loan Bank stock                             |  |                | 10,034  |                    |   | 10,034         |  |           | 10,034  |  |   | 10,034 
|Accrued interest receivable                              |  |                | 2,704   |                    |   | 2,704          |  |           | 2,900   |  |   | 2,900  
|                                                         |  |                |         |                   
|Financial liabilities:                                   |  |                |         |                    |   |                |  |           |         |  |   |        
|Deposits                                                 |  |                | 446,302 |                    |   | 450,778        |  |           | 443,880 |  |   | 447,529
|Securities sold under agreements to repurchase           |  |                | 105,857 |                    |   | 115,111        |  |           | 106,244 |  |   | 116,280
|Short-term borrowings                                    |  |                | 101     |                    |   | 101            |  |           | 104     |  |   | 104    
|Long-term debt                                           |  |                | 91,713  |                    |   | 96,696         |  |           | 118,541 |  |   | 123,139
|Subordinated Debt                                        |  |                | 7,732   |                    |   | 7,732          |  |           | 7,732   |  |   | 7,732  
|Advance payments by borrowers for taxes and insurance    |  |                | 3,072   |                    |   | 3,072          |  |           | 1,274   |  |   | 1,274  
|Accrued interest payable                                 |  |                | 1,090   |                    |   | 1,090          |  |           | 1,263   |  |   | 1,263  
|Interest rate swap contracts                             |  |                | 666     |                    |   | 666            |  |           | 578     |  |   | 578    
|                                                         |  |                |         |                   
|Off-balance sheet financial instruments:                 |  |                |         |                    |   |                |  |           |         |  |   |        
|Standby letters of credit                                |  |                |        |                    |   |               |  |           |        |  |   |       
|Commitments to extend credit                             |  |                |        |                    |   |               |  |           |        |  |   |       

(13) Federal Home
Loan Bank (FHLB) Stock Dividends

The FHLB of Pittsburgh historically paid quarterly cash dividends, which were last paid on
November 17, 2008 at an annualized rate of 2.35%. In December 2008, the FHLB announced that it was suspending dividend payments beginning with the dividend payment that would have been payable in the March 2009 quarter in an effort to retain
capital. In addition, the historical practice of repurchasing excess capital stock from members of the FHLB was also suspended. The Banks investment in the FHLB of Pittsburgh was $10.0 million at June 30, 2010 and is valued at the par
issue amount of $100 per share.



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##### Table of Contents

FIDELITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Unaudited)(Continued)

June 30, 2010



(14) TARP Capital Purchase Program

On December 12, 2008, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the Purchase
Agreement) with the United States Department of the Treasury (Treasury) under the TARP Capital Purchase Program, pursuant to which the Company sold (i) 7,000 shares of the Companys Fixed Rate Cumulative Perpetual
Preferred Stock, Series B (the Series B Preferred Stock) and (ii) a warrant (the Warrant) to purchase 121,387 shares of the Companys common stock, par value $0.01 per share (the Common Stock), for an
aggregate purchase price of $7.0 million in cash.

The Series B Preferred Stock will qualify as Tier 1 capital and will pay cumulative
dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. Pursuant to the terms of the Purchase Agreement, the ability of the Company to declare or pay dividends or distributions on, or purchase, redeem or
otherwise acquire for consideration, shares of its Junior Stock (as defined below) and Parity Stock (as defined below) will be subject to restrictions, including a restriction against increasing dividends from the last quarterly cash dividend per
share ($0.14) declared on the Common Stock prior to December 12, 2008. The Company may redeem the Series B Preferred Stock at a price of $1,000 per share plus accrued and unpaid dividends, subject to the concurrence of the Treasury and its
federal banking regulators. Prior to December 12, 2011, unless the Company has redeemed the Series B Preferred Stock or the Treasury has transferred the Series B Preferred Stock to a third party, the consent of the Treasury will be required for
the Company to increase its Common Stock dividend or repurchase its Common Stock or other equity or capital securities, other than in certain circumstances specified in the Agreement.

The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to
$8.65 per share of the Common Stock. Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.

The Series B Preferred Stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended. Upon the request of Treasury at any time, the Company has agreed to promptly enter into a deposit arrangement pursuant to which the Series B Preferred Stock may be deposited and depositary shares (Depositary
Shares), representing fractional shares of Series B Preferred Stock, may be issued. The Company has agreed to register the Series B Preferred Stock, the Warrant, the shares of Common Stock underlying the Warrant (the Warrant
Shares) and Depositary Shares, if any, as soon as practicable after the date of the issuance of the Series B Preferred Stock and the Warrant. Neither the Series B Preferred Stock nor the Warrant will be subject to any contractual restrictions
on transfer, except that Treasury may only transfer or exercise an aggregate of one-half of the Warrant Shares prior to the earlier of the redemption of 100% of the shares of Series B Preferred Stock or December 31, 2009.

The fair value of the preferred stock and the common stock warrants was determined based on their relative fair values calculated as of their issuance
date, December 12, 2008. Based on their relative fair values, the TARP proceeds (net of issuance costs) were allocated between preferred stock and additional paid in capital (for the warrant component). The market/discount rate used when
deriving the fair value of the preferred stock was 10.00%. This rate was determined by calculating the average dividend rate of the five most recent preferred equity offerings completed by banks and thrifts. A Black-Scholes model was used to
calculate the fair value of the common stock warrants. Key assumptions input into the model included: amount of common stock, $1,050,000 (based on 15% of the gross TARP proceeds); market price of the common stock on the warrant grant date, $6.75;
exercise price of the warrant, $8.65 (20 day trailing average of the common stock as of the Treasurys approval date); number of common stock warrants issued, 121,387; expected life of the warrants, 5 years; the risk free interest rate, 1.55%;
the continuous annualized volatility of the change in the underlying common stocks price, 32.00%; and the simple annual expected cash dividend yield on common stock, 8.30%. Based on the calculations, the fair value of the preferred stock
represented 95.65% of the total fair value of the preferred stock and common stock warrants, while the fair value of the common stock warrants represented 4.35% of the total. The discount on the preferred stock is being amortized on a straight-line
basis over five years.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

FIDELITY BANCORP, INC. AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion,
the words believes, anticipates, contemplates, expects, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, risks associated with the effect of integrating newly acquired businesses, the ability to control costs and
expenses, and general economic conditions. The Company does not undertake to, and specifically disclaims any obligation to, update any such forward-looking statements.

Fidelity Bancorp, Inc.s (Fidelity or the Company) business is conducted principally through its wholly-owned subsidiary,
Fidelity Bank PaSB, (the Bank). All references to the Company refer collectively to the Company and the Bank, unless the context indicates otherwise.

Critical Accounting Policies

Note 1 on
pages 57 through 65 of the Companys 2009 Annual Report to Shareholders lists significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting
policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.

The most significant estimates in the preparation of the Companys financial statements are for the allowance for loan losses, evaluation of
investments for other-than-temporary impairment, income taxes, and accounting for stock options. Please refer to the discussion of the allowance for loan losses in Note 8, Allowance for Loan Losses, on page 21 above. In addition, further
discussion of the estimates used in determining the allowance for loan losses is contained in the discussion on Provision for Loan Losses on pages 44 and 45 of the Companys 2009 Annual Report to Shareholders. Please refer to the
discussion of other-than-temporary impairment in Note 6, Securities, on pages 13 through 19 above and in Note 2, Securities, on pages 66 through 73 of the Companys 2009 Annual Report to Shareholders. Please refer to the
discussion of income taxes on page 43 below and in Note 11, Income Taxes, on pages 83 through 85 of the Companys 2009 Annual Report to Shareholders. Stock based compensation expense is reported in net income utilizing the fair
value-based method in accordance with U.S. generally accepted accounting principles. The fair value of each option award is estimated at the date of grant using the Black-Scholes option-pricing model. Please refer to the discussion of stock based
compensation in Note 4, Stock Based Compensation, on pages 10 and 11 above. In addition, further discussion of the assumptions used in determining stock based compensation is contained in Note 14, Stock Option Plans, on pages
87 through 89 of the Companys 2009 Annual Report to Shareholders.

Comparison of Financial Condition

Total assets of the Company decreased $21.9 million, or 3.0%, to $708.1 million at June 30, 2010 from $730.0 million at September 30, 2009.
Significant changes in individual categories include decreases in cash and cash equivalents of $16.7 million and net loans of $27.4 million, partially offset by increases in securities available-for-sale of $6.7 million, securities held-to-maturity
of $11.3 million, loans held-for-sale of $1.1 million, and other assets of $2.4 million. The decrease in cash and cash equivalents is a result of the Company repaying $26.7 million in Federal Home Loan Bank advances that matured during the current
year. The decrease in net loans reflects $74.4 million of prepayments, partially offset by $42.8 million in loan originations. The increase in other assets is primarily due to the FDIC requiring all insured depository institutions to prepay their
federal deposit insurance assessment through 2012. The prepayment was due on December 30, 2009 and was based on the institutions assessment base and assessment rate as of September 30, 2009 assuming a 5% annual growth in deposits and
a three basis point increase in the assessment rate during years 2011 and 2012.



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##### Table of Contents

Total liabilities of the Company decreased $23.1 million, or 3.4%, to $659.8 million at June 30, 2010
from $682.9 million at September 30, 2009. Significant changes include a decrease in long-term debt of $26.8 million, partially offset by an increase in deposits of $2.4 million and an increase in advance payments by borrowers for taxes and
insurance of $1.8 million. As mentioned above, the decrease in long-term debt was a result of the Company repaying $26.7 million in Federal Home Loan Bank advances that matured during the current year. The increase in deposits is primarily
attributed to an increase in checking accounts of $8.9 million, an increase in savings accounts of $6.5 million, partially offset by a decrease in time deposits of $7.1 million and a decrease in money market accounts of $5.9 million.

Stockholders equity increased to $48.3 million at June 30, 2010, compared to $47.1 million at September 30, 2009. This result reflects
net income for the nine-month period ended June 30, 2010 of $659,000; stock options exercised of $7,000; stock issued under the Dividend Reinvestment Plan of $11,000; stock-based compensation expense of $48,000; and a decrease in the
accumulated other comprehensive loss of $913,000, which is a result of changes in the net unrealized losses on the available-for-sale securities, changes in non-credit losses on available-for-sale and held-to-maturity securities, and by the
unrealized loss recognized on the cash flow hedge as discussed in Note 9, Derivative Instruments, on pages 22 and 23 above. Offsetting these increases were common and preferred stock cash dividends paid of $446,000. On December 12,
2008, the Company sold $7.0 million in preferred stock to the U.S. Department of Treasury as a participant in the federal governments TARP Capital Purchase Program. In connection with the investment, the Company also issued a ten-year warrant
to the Treasury which permits the Treasury to purchase up to 121,387 shares of its common stock at an exercise price of $8.65 per share. The Series B Preferred Stock will pay dividends at the rate of 5% per annum until the fifth anniversary of
issuance and, unless redeemed earlier, at the rate of 9% thereafter. Until the third anniversary of the issuance of the Series B Preferred Stock or its earlier redemption or transfer by the Treasury Department to an unaffiliated holder, the Company
may not increase the dividend on the common stock or repurchase any shares of common stock. Approximately $3.4 million of the balances in retained earnings as of June 30, 2010 and September 30, 2009 represent base year bad debt deductions
for tax purposes only, as they are considered restricted accumulated earnings.

Non-Performing Assets

The following table sets forth information regarding non-accrual loans and foreclosed real estate held by the Company at the dates indicated. The table
does not include $795,000 and $2.4 million in loans at June 30, 2010 and September 30, 2009, respectively, that were more than 90 days past maturity but were otherwise performing in accordance with their terms. The Company did not have any
loans which were classified as troubled debt restructurings at the dates presented (dollar amounts in thousands).



|                                                                                    |  |              |        |   |                   |   |        |  
|----------------------------------------------------------------------------------- |  | ------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                    |  | June 30,2010 |        |   | September 30,2009 |  
|Non-accrual residential real estate loans (one-to-four family)                      |  | $            | 2,516  |   |                   | $ | 1,397  |  
|Non-accrual construction, multi-family residential and commercial real estate loans |  |              | 11,438 |   |                   |   | 11,772 |  
|Non-accrual installment loans                                                       |  |              | 1,057  |   |                   |   | 350    |  
|Non-accrual commercial business loans                                               |  |              | 228    |   |                   |   | 1,386  |  
|                                                                                    |  |              |        |   |                   |   |        |  
|Total non-performing loans                                                          |  | $            | 15,239 |   |                   | $ | 14,905 |  
|                                                                                    |  |              |        |   |                   |   |        |  
|Total non-performing loans as a percent of net loans receivable                     |  |              | 3.99   | % |                   |   | 3.64   | %
|                                                                                    |  |              |        |   |                   |   |        |  
|Total foreclosed real estate                                                        |  | $            | 226    |   |                   | $ | 103    |  
|                                                                                    |  |              |        |   |                   |   |        |  
|Total non-performing loans and foreclosed real estate as a percent of total assets  |  |              | 2.18   | % |                   |   | 2.05   | %
|                                                                                    |  |              |        |   |                   |   |        |  



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##### Table of Contents

Included in non-performing loans at June 30, 2010 are twenty-two single-family residential real estate
loans totaling $2.5 million, nine commercial real estate loans totaling $11.4 million, twenty installment loans totaling $1.1 million, and seven commercial business loans totaling $228,000. Non-performing loans increased $334,000 to $15.2 million at
June 30, 2010 from $14.9 million at September 30, 2009. Significant changes include thirteen residential real estate loans with an aggregate balance of $1.4 million that were placed on non-accrual during the current period, partially
offset by ten commercial business loans with an aggregate balance of $1.3 million that were removed from non-accrual during the current period.

At both June 30, 2010 and September 30, 2009, the Company had an allowance for loan losses of $5.7 million. The allowance for loan losses was
1.5% of gross loans receivable at June 30, 2010, as compared to 1.4% of gross loans receivable at September 30, 2009. The allowance for loan losses equals 37.2% of non-performing loans at June 30, 2010 compared to 38.3% at
September 30, 2009. The level of the allowance for loan losses as a percentage of non-performing loans reflects the concentration of non-performing loans in the commercial real estate category, most of which are collateral-dependent loans that
do not have a related allowance for loan losses as a result of applying impairment tests prescribed under U.S. generally accepted accounting principles (see Footnote 8). Management believes the balance in the allowance for loan losses is adequate
based on its analysis of quantitative and qualitative factors as of June 30, 2010. Management has evaluated its entire loan portfolio, including these non-performing loans, and the overall allowance for loan losses and believes that the
allowance for losses on loans at June 30, 2010 is reasonable. See also Provision for Loan Losses on pages 39 and 40. However, there can be no assurance that the allowance for loan losses is sufficient to cover possible future loan
losses.

The Company recognizes that it must maintain an Allowance for Loan and Lease Losses (ALLL) at a level that is adequate to
absorb estimated credit losses associated with the loan and lease portfolio. The Companys Board of Directors has adopted an ALLL policy designed to provide management with a systematic methodology for determining and documenting the ALLL each
reporting period. This methodology was developed to provide a consistent process and review procedure to ensure that the ALLL is in conformity with the Companys policies and procedures and other supervisory and regulatory guidelines.

The Companys ALLL methodology incorporates managements current judgments about the credit quality of the loan portfolio. The
following factors are considered when analyzing the appropriateness of the allowance: historical loss experience; volume; type of lending conducted by the Bank; industry standards; the level and status of past due and non-performing loans; the
general economic conditions in the Banks lending area; and other factors affecting the collectibility of the loans in its portfolio. The primary elements of the Banks methodology include portfolio segmentation and impairment measurement.
Management acknowledges that this is a dynamic process and consists of factors, many of which are external and out of managements control, that can change often, rapidly and substantially. The adequacy of the ALLL is based upon estimates
considering all the aforementioned factors as well as current and known circumstances and events. There is no assurance that actual portfolio losses will not be substantially different than those that were estimated.



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Comparison of Results of Operations

for the Three and Nine Months Ended June 30, 2010 and 2009

Net Income

The Company recorded a net
loss for the three months ended June 30, 2010 of $52,000 and a net loss available to common stockholders of $155,000 or $(0.05) per diluted common share compared to net income of $238,000 and net income available to common stockholders of
$135,000 or $0.04 per diluted common share for the same period in fiscal 2009. The decrease in earnings reflects a decrease in net interest income of $23,000, or 0.6%, an increase in the provision for loan losses of $230,000, a decrease in other
income (excluding other-than-temporary impairment OTTI charges) of $614,000, or 38.8%, and a decrease in income tax benefit of $327,000, partially offset by a decrease in OTTI charges on certain investment securities of $489,000 and a
decrease in operating expenses of $415,000, or 10.3%.

The Company recorded net income for the nine months ended June 30, 2010 of
$659,000 and net income available to common stockholders of $351,000 or $0.12 per diluted common share compared to net income of $1.8 million and net income available to common stockholders of $1.6 million or $0.52 per diluted common share for the
same period in fiscal 2009. Factors contributing to the decrease include a decrease in net interest income of $2.1 million, or 16.2%, and an increase in operating expenses of $391,000, or 3.7%, partially offset by a decrease in the provision for
loan losses of $45,000, a decrease in OTTI charges on certain investment securities of $678,000, an increase in other income (excluding OTTI charges) of $614,000, or 18.2%, and an increase in income tax benefit of $41,000.

The Companys net loss available to common stockholders and diluted earnings per common share for the three months ended June 30, 2010 reflects
the impact of $103,000 of preferred stock dividends and discount accretion. The Companys net income available to common stockholders and diluted earnings per common share for the nine months ended June 30, 2010 reflects the impact of
$308,000 of preferred stock dividends and discount accretion. The Companys net income available to common stockholders and diluted earnings per common share for the three and nine months ended June 30, 2009 reflects the impact of $103,000
and $223,000, respectively, of preferred stock dividends and discount accretion.



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Interest Rate Spread

The Companys interest rate spread, the difference between average yields calculated on a tax-equivalent basis on interest-earning assets and the
average cost of funds, increased to 2.11% (annualized) in the three months ended June 30, 2010 from 2.01% (annualized) in the same period in 2009. The Companys tax-equivalent interest rate spread decreased to 2.01% (annualized) in the
nine months ended June 30, 2010 from 2.31% (annualized) in the same period in 2009. The increase for the three-month period ended June 30, 2010 is the result of the average rate paid on interest-bearing liabilities decreasing more than the
average yield on interest-earning assets. The decrease for the nine-month period ended June 30, 2010 is the result of the average rate paid on interest-bearing liabilities decreasing less than the average yield on interest-earning assets. The
following table shows the average yields earned on the Company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.



|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|-------------------------------------------------------------------------------------------- |  | -------------------------- | - |  | ------------------------- | - |  | ---- | - |  | ---- | -
|                                                                                             |  | Three Months EndedJune 30, |   |  | Nine Months EndedJune 30, |  
|                                                                                             |  | 2010                       |   |  | 2009                      |   |  | 2010 |   |  | 2009 |  
|Average yield on:                                                                            |  |                            |   |  |                           |   |  |      |   |  |      |  
|Mortgage loans                                                                               |  | 5.55                       | % |  | 5.47                      | % |  | 5.60 | % |  | 5.81 | %
|Mortgage-backed securities                                                                   |  | 3.09                       |   |  | 4.20                      |   |  | 3.19 |   |  | 4.45 |  
|Installment loans                                                                            |  | 5.44                       |   |  | 5.90                      |   |  | 5.59 |   |  | 6.00 |  
|Commercial business loans and leases                                                         |  | 4.95                       |   |  | 4.97                      |   |  | 4.96 |   |  | 5.11 |  
|Interest-earning deposits with other institutions, investment securities, and FHLB stock (1) |  | 3.04                       |   |  | 3.93                      |   |  | 3.03 |   |  | 4.53 |  
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|Total interest-earning assets                                                                |  | 4.44                       |   |  | 4.98                      |   |  | 4.50 |   |  | 5.34 |  
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|Average rates paid on:                                                                       |  |                            |   |  |                           |   |  |      |   |  |      |  
|Deposits                                                                                     |  | 1.32                       |   |  | 2.12                      |   |  | 1.44 |   |  | 2.30 |  
|Securities sold under agreement to repurchase                                                |  | 4.75                       |   |  | 4.77                      |   |  | 4.79 |   |  | 4.86 |  
|Short-term borrowings                                                                        |  | 0.21                       |   |  | 0.22                      |   |  | 0.23 |   |  | 0.61 |  
|Long-term debt                                                                               |  | 3.67                       |   |  | 4.09                      |   |  | 3.98 |   |  | 4.15 |  
|Subordinated debt                                                                            |  | 5.29                       |   |  | 5.30                      |   |  | 5.28 |   |  | 5.32 |  
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|Total interest-bearing liabilities                                                           |  | 2.33                       |   |  | 2.97                      |   |  | 2.49 |   |  | 3.03 |  
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|Average interest rate spread                                                                 |  | 2.11                       | % |  | 2.01                      | % |  | 2.01 | % |  | 2.31 | %
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  
|Net yield on interest-earning assets                                                         |  | 2.36                       | % |  | 2.30                      | % |  | 2.25 | % |  | 2.59 | %
|                                                                                             |  |                            |   |  |                           |   |  |      |   |  |      |  



|(1) | Interest income on tax-exempt investments has been adjusted for federal income tax purposes using a rate of 34%. Interest income on tax-exempt investment securities was
$429,000 and $435,000 and the yield was 4.18% and 4.47%, prior to adjusting for federal income tax for the three months ended June 30, 2010 and 2009, respectively. Interest income on tax-exempt investment securities was $1.3 million for the
nine months ended June 30, 2010 and 2009. The yield was 4.21% and 4.50%, prior to adjusting for federal income tax for the nine months ended June 30, 2010 and 2009, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Interest Income

Interest on loans decreased $899,000 or 14.4% to $5.3 million for the three months ended June 30, 2010, compared to $6.2 million in the same period
in 2009. Interest on loans decreased $3.6 million or 17.8% to $16.6 million for the nine months ended June 30, 2010, compared to $20.2 million in the same period in 2009. The decrease for both periods reflects both a decrease in the average
size of the loan portfolio and a decrease in the average yield earned on the loan portfolio. For the three-month period ended June 30, 2010, the average outstanding loan balances decreased $62.3 million or 13.7% and the average yield decreased
by 5 basis points from 5.49% in the prior period to 5.44% in the current period. For the nine-month period ended June 30, 2010, the average outstanding loan balances decreased $64.3 million or 13.8% and the average yield decreased by 26 basis
points from 5.77% in the prior period to 5.51% in the current period. The average loan balances continued to decrease primarily due to increases in principal repayments mainly caused by customers refinancing their mortgage loans. Also, due to the
current low interest rate environment, for asset/liability purposes, the Bank continues to sell most of the fixed rate, single-family mortgage loans that it originates.

Interest on mortgage-backed securities decreased $111,000 or 12.4% to $783,000 for the three-month period ended June 30, 2010, compared to $894,000
in the same period in 2009. Interest on mortgage-backed securities decreased $738,000 or 24.3% to $2.3 million for the nine-month period ended June 30, 2010, compared to $3.0 million in the same period in 2009. The decrease for both periods
reflects a decrease in the average yield earned on the portfolio, partially offset by an increase in the average balance of mortgage-backed securities owned. For the three-month period ended June 30, 2010, the average balance of mortgage-backed
securities increased $16.1 million or 18.9% and the average yield decreased by 111 basis points from 4.20% in the prior period to 3.09% in the current period. For the nine-month period ended June 30, 2010, the average balance of mortgage-backed
securities increased $4.8 million or 5.3% and the average yield decreased by 126 basis points from 4.45% in the prior period to 3.19% in the current period. The yield earned on mortgage-backed securities is affected, to some degree, by the repayment
rate of loans underlying the securities. Premiums or discounts on the securities, if any, are amortized to interest income over the life of the securities using the level yield method. During periods of falling interest rates, repayments of the
loans underlying the securities generally increase, which shortens the average life of the securities and accelerates the amortization of the premium or discount. Falling rates, however, also tend to increase the market value of the securities.

Interest on interest-bearing demand deposits with other institutions and investment securities (non-tax equivalent) decreased $174,000 or
12.7% to $1.2 million for the three months ended June 30, 2010, as compared to $1.4 million in the same period in 2009. Interest on interest-bearing demand deposits with other institutions and investment securities (non-tax equivalent)
decreased $773,000 or 17.5% to $3.6 million for the nine months ended June 30, 2010, as compared to $4.4 million in the same period in 2009. The decrease for both periods reflects a decrease in the yield earned on these investments, partially
offset by an increase in the average balance of investment securities in the portfolio. For the three-month period ended June 30, 2010 the average balance of interest-bearing demand deposits with other institutions and investment securities
increased $24.1 million or 15.1% and the average tax-equivalent yield decreased by 89 basis points from 3.93% in the prior period to 3.04% in the current period. For the nine-month period ended June 30, 2010 the average balance of
interest-bearing demand deposits with other institutions and investment securities increased $40.2 million or 27.3% and the average tax-equivalent yield decreased by 150 basis points from 4.53% in the prior period to 3.03% in the current period. The
higher average balance was primarily related to purchases of lower risk municipal, government, and agency securities. The decrease in the yields are a result of the current lower interest rate environment.



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Interest Expense

Interest on deposits decreased $784,000 or 37.6% to $1.3 million for the three-month period ended June 30, 2010, as compared to $2.1 million during
the same period in 2009. Interest on deposits decreased $2.3 million or 35.3% to $4.3 million for the nine-month period ended June 30, 2010, as compared to $6.6 million in the same period in 2009. The decrease for both periods reflects a
decrease in the average cost of the deposits, partially offset by an increase in the average balance of deposits. For the three-month period ended June 30, 2010 the average balance of deposits increased $2.1 million or 0.5% and the average
yield decreased by 80 basis points from 2.12% in the prior period to 1.32% in the current period. For the nine-month period ended June 30, 2010 the average balance of deposits increased $13.5 million or 3.5% and the average yield decreased by
86 basis points from 2.30% in the prior period to 1.44% in the current period. Management continues to try to attract and retain deposit accounts. The Company manages its cost of interest bearing deposit accounts by diligently monitoring the
interest rates on its products as well as the rates being offered by its competition through bi-weekly interest rate committee meetings and utilizing rate surveys and hence subsequently adjusting rates accordingly.

Interest on securities sold under agreement to repurchase, including retail, term, and wholesale structured borrowings, decreased $15,000 or 1.2% to $1.3
million for the three-month period ended June 30, 2010, as compared to the same period in 2009. Interest on securities sold under agreement to repurchase, including retail, term, and wholesale structured borrowings, decreased $37,000 or 1.0% to
$3.8 million for the nine-month period ended June 30, 2010, as compared to the same period in 2009. The decrease for the three-month period ended June 30, 2010 reflects both a decrease in the cost of these funds and a lower level of
average securities sold under agreement to repurchase. The decrease for the nine-month period ended June 30, 2010 reflects a decrease in the cost of these funds, partially offset by a slightly higher level of average securities sold under
agreement to repurchase. For the three-month period ended June 30, 2010 the average balance of securities sold under agreement to repurchase decreased $857,000 or 0.8% and the average yield decreased by 2 basis points from 4.77% in the prior
period to 4.75% in the current period. For the nine-month period ended June 30, 2010 the average balance of securities sold under agreement to repurchase increased $598,000 or 0.6% and the average yield decreased by 7 basis points from 4.86% in
the prior period to 4.79% in the current period. The Bank had $95.0 million of wholesale structured borrowings outstanding at June 30, 2010 and 2009.

Interest on short-term borrowings, including Federal Home Loan Bank (FHLB) RepoPlus advances, FHLB revolving line of credit,
federal funds purchased, and treasury, tax and loan notes, was relatively unchanged for the three-month period ended June 30, 2010, as compared to the same period in 2009. Interest on short-term borrowings, including FHLB RepoPlus
advances, FHLB revolving line of credit, federal funds purchased, and treasury, tax and loan notes, decreased $117,000 or 95.9% to $5,000 for the nine-month period ended June 30, 2010, as compared to $122,000 in the same period in 2009. The
decrease for the nine-month period ended June 30, 2010 reflects both a decrease in the average cost of these borrowings as well as a decrease in the average balance of these borrowings. For the nine-month period ended June 30, 2010 the
average balance of short-term borrowings decreased $24.3 million or 90.6% and the average yield decreased by 38 basis points from 0.61% in the prior period to 0.23% in the current period. The decrease in average balance of short-term borrowings was
a result of the increase in average deposit balances and decrease in average net loan balances. The decrease in the rates paid reflects lower short-term market interest rates.



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Interest on long-term debt, including FHLB fixed rate advances and Convertible Select advances,
decreased $362,000 or 29.9% to $847,000 for the three-month period ended June 30, 2010, as compared to $1.2 million in the same period in 2009. Interest on long-term debt, including FHLB fixed rate advances and Convertible Select
advances, decreased $483,000 or 13.1% to $3.2 million for the nine-month period ended June 30, 2010, as compared to $3.7 million in the same period in 2009. The decrease for both periods reflects both a decrease in the average balance of the
debt and a decrease in the average cost of the debt. For the three-month period ended June 30, 2010 the average balance of long-term debt decreased $26.1 million or 22.0% and the average yield decreased by 42 basis points from 4.09% in the
prior period to 3.67% in the current period. For the nine-month period ended June 30, 2010 the average balance of long-term debt decreased $11.1 million or 9.4% and the average yield decreased by 17 basis points from 4.15% in the prior period
to 3.98% in the current period. The decrease in average balance was attributed to the Company using its excess cash to pay off $26.7 million in FHLB advances that matured during the current year. As noted above, the excess liquidity resulted from
the increase in average deposit balances and a decrease in net loan average balances resulting from increased prepayments.

Interest on
subordinated debt was relatively unchanged for the three months ended June 30, 2010, as compared to the same period in 2009. Interest on subordinated debt decreased $3,000 or 1.0% to $305,000 for the nine months ended June 30, 2010, as
compared to $308,000 in the same period in 2009. The decrease for the nine-month period ended June 30, 2010 reflects a decrease in the average cost of these floating-rate debentures while the average balance remained unchanged. For the
nine-month period ended June 30, 2010 the average cost decreased by 4 basis points from 5.32% in the prior period to 5.28% in the current period. The decrease in interest expense on subordinated debt for the nine months ended June 30, 2010
and 2009 was net of $209,000 and $116,000, respectively, in interest expense on an interest rate swap contract to hedge its interest rate exposure from the subordinated debt.

Net Interest Income

The Companys
net interest income decreased $23,000 or 0.6% to $3.8 million, for the three-month period ended June 30, 2010, as compared to the same period in 2009. The Companys net interest income decreased $2.1 million or 16.2% to $11.0 million, for
the nine-month period ended June 30, 2010, as compared to $13.1 million in the same period in 2009. Interest income decreased $1.2 million or 13.9% to $7.3 million and decreased $5.1 million or 18.4% to $22.5 million, for the three and
nine-month periods ended June 30, 2010, respectively, as compared to $8.5 million and $27.6 million in the same periods in 2009. The decrease for both periods reflects both a decrease in the average balance of interest earning assets and a
decrease in the yields earned on these assets. Interest expense decreased $1.2 million or 24.8% to $3.5 million and decreased $3.0 million or 20.4% to $11.6 million, for the three and nine-month periods ended June 30, 2010, respectively, as
compared to $4.7 million and $14.6 million in the same periods in 2009. The decrease for both periods reflects both a decrease in the average balance of interest- bearing liabilities and a decrease in the interest rates paid on interest-bearing
liabilities. For the three months ended June 30, 2010 and 2009 the ratio of average interest-earning assets to average interest-bearing liabilities was 111.8% and 110.8%, respectively. For the nine months ended June 30, 2010 and 2009 the
ratio of average interest-earning assets to average interest-bearing liabilities was 110.2% and 109.6%, respectively.

Provision for Loan
Losses

The provision for loan losses was $500,000 for the three-month period ended June 30, 2010, as compared to $270,000 for the
same period in 2009. The provision for loan losses was $1.1 million for the nine-month period ended June 30, 2010, as compared to the same period in 2009. At June 30, 2010 and September 30, 2009, the allowance for loan losses was $5.7
million. Net loan charge-offs were $313,000 for the three months ended June 30, 2010 as compared to net loan charge-offs of $399,000 for the three months ended June 30, 2009. Net loan charge-offs were $1.1 million for the nine months ended
June 30, 2010 as compared to net loan charge-offs of $941,000 for the nine months ended June 30, 2009. Significant charge-offs during the current nine-month period include five installment loans with an aggregate balance of $91,000, two
commercial real estate loans with an aggregate balance of $109,000, and seventeen commercial business loans with an aggregate balance of $867,000.

The provision for loan losses is charged to operations to bring the total allowance for loan losses to a level that represents managements best
estimates of the losses inherent in the portfolio based on a monthly review by management of factors such as historical loss experience, volume, type of lending conducted by the Bank, industry standards, the level and status of past due and
non-performing loans, the general economic conditions in the Banks lending area, and other factors affecting the collectibility of the loans in its portfolio.



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

Non-interest Income

Excluding OTTI charges of $912,000 and $2.4 million for the three and nine months ended June 30, 2010, respectively, and $1.4 million and $3.1
million for the three and nine months ended June 30, 2009, respectively, total non-interest or other income decreased $614,000 or 38.8% to $969,000 and increased $614,000 or 18.2% to $4.0 million for the three and nine month periods ended
June 30, 2010, respectively, as compared to $1.6 million and $3.4 million during the same periods in 2009. The decrease for the three-month period ended June 30, 2010 is primarily attributed to a decrease in loan service charges and fees,
a decrease in gains on sales of loans, a decrease in gains on loan interest rate swaps, and a decrease in earnings on cash surrender value of life insurance, partially offset by an increase in ATM fees. The increase for the nine-month period ended
June 30, 2010 is primarily attributed to an increase in realized gains on sales of securities, an increase in ATM fees, and an increase in non-insured investment products income, partially offset by a decrease in loan service charges and fees,
a decrease in gains on sales of loans, a decrease in deposit service charges and fees, and a decrease in earnings on cash surrender value of life insurance.

Loan service charges and fees, which includes late charges on loans and other miscellaneous loan fees, were $170,000 and $448,000 for the three and nine
months ended June 30, 2010 as compared to $208,000 and $475,000 during the same periods in 2009. The decrease for the three and nine months ended June 30, 2010 is primarily attributed to a decrease in title insurance fees and a decrease in
miscellaneous fees collected on residential mortgage loans, partially offset by an increase in loan satisfaction fees.

The Company recognized
$3,000 in net realized losses on the sales of securities for the three months ended June 30, 2010. The Company recognized $1.0 million in net realized gains on the sales of securities for the nine months ended June 30, 2010. There were no
gains or losses on sales of securities for the three and nine months ended June 30, 2009. The current period sales were made from the available-for-sale portfolio as part of managements asset/liability management strategies.

Impairment charges on securities were $912,000 and $1.4 million for the three months ended June 30, 2010 and 2009, respectively. The impairment
charges for the current period relate to the Companys investments in three pooled trust preferred securities and one private label mortgage-backed security. The trust preferred impairment charges resulted from several factors, including a
downgrade in their credit ratings, their failure to pass their principal coverage tests, and the decline in the net present value of their projected cash flows. Management of the Company has deemed the impairment on the trust preferred securities to
be other-than-temporary based upon these factors and the duration and extent to which the market value has been less than cost, the inability to forecast a recovery in market value, and other factors concerning the issuers in the pooled securities.
The private label mortgage-backed security impairment charge resulted from a downgrade in its credit rating, as well as independent third-party analysis of the underlying collateral for the bond. The impairment charges for the prior period relate to
the Companys investments in two pooled trust preferred securities. Impairment charges on securities were $2.4 million and $3.1 million for the nine months ended June 30, 2010 and 2009, respectively. The impairment charges for the current
nine-month period relate to the Companys investments in six pooled trust preferred securities and one private label mortgage-backed security. The trust preferred impairment charges resulted from several factors, including a downgrade in their
credit ratings, their failure to pass their principal coverage tests, indications of a break in yield, and the decline in the net present value of their projected cash flows. Management of the Company has deemed the impairment on the trust preferred
securities to be other-than-temporary based upon these factors and the duration and extent to which the market value has been less than cost, the inability to forecast a recovery in market value, and other factors concerning the issuers in the
pooled securities. The private label mortgage-backed security impairment charge resulted from a downgrade in its credit rating, as well as an independent third-party analysis of the underlying collateral for the bond. The impairment charges for the
prior year nine-month period relate to the Companys holdings of the AMF Ultra Short Mortgage Fund, Freddie Mac preferred stock, and its investment in two pooled trust preferred securities.



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Gains on the sales of loans were $83,000 and $304,000 for the three and nine-month period ended
June 30, 2010, respectively, as compared to gains of $247,000 and $402,000 for the same periods in fiscal 2009. The three-month period ended June 30, 2010 results reflect the sale of approximately $5.0 million of fixed-rate, single-family
mortgage loans, compared to $18.3 million of similar loan sales during the prior year period. The nine-month period ended June 30, 2010 results reflect the sale of approximately $19.6 million of fixed-rate, single-family mortgage loans,
compared to $29.9 million of similar loan sales during the prior year period. Due to the low interest rate environment, the Bank continues to sell most of the fixed rate, single-family mortgage loans it originates.

The Company recognized a loss of $11,000 and $6,000 on its loan interest rate swap for the three and nine months ended June 30, 2010, respectively.
The Company recognized a gain of $14,000 on its loan interest rate swap for the three months ended June 30, 2009 and a loss of $2,000 for the nine months ended June 30, 2009. As discussed in Note (9) above, during the first quarter of
fiscal 2009 the Company entered into a $1.0 million fixed rate loan with one of its commercial mortgage loan customers and simultaneously entered into an offsetting fixed interest rate swap contract with PNC. It remains the only loan-related swap
outstanding as of June 30, 2010.

Deposit service charges and fees decreased $6,000 or 1.7% to $351,000, and decreased $17,000 or 1.6% to
$1.1 million for the three and nine months ended June 30, 2010, respectively, as compared to the same periods in 2009.

The decrease for
both periods is attributed to a decrease in the net volume of fees collected for returned checks.

Automated teller machine (ATM) fees were
$238,000 and $695,000 for the three and nine months ended June 30, 2010 as compared to $192,000 and $548,000 during the same periods in 2009. The increase for the three and nine months ended June 30, 2010 is attributed to an increase in
the interchange fees earned on debit card transactions. The increase during the nine-month period is also due to a $45,000 incentive payment the Bank received to convert its ATM network.

Non-insured investment product income was $45,000 and $128,000 for the three and nine months ended June 30, 2010 as compared to $39,000 and $88,000
for the same periods in 2009. The increase for both periods is primarily attributed to an increase in the commissions earned on the sales of these products due to higher volumes of sales.

Earnings on cash surrender value of life insurance were $56,000 and $175,000 for the three and nine months ended June 30, 2010 as compared to
$490,000 and $628,000 in the same periods in 2009. The decrease for both periods is primarily attributed to the Company recognizing $463,000 of bank owned life insurance earnings during the prior periods due to the death of a covered executive
during the third quarter of fiscal 2009. There were no similar earnings recognized during the current periods.

Non-interest Expense

Total non-interest expense for the three-month period ended June 30, 2010 decreased to $3.6 million, as compared to $4.0 million for the
same period in 2009. Total non-interest expense for the nine-month period ended June 30, 2010 increased to $11.1 million, as compared to $10.7 million for the same period in 2009. The decrease for the three months ended June 30, 2010 is
primarily attributed to a decrease in compensation and benefits expense, a decrease in FDIC deposit insurance premiums, and a decrease in other operating expenses, partially offset by an increase in depreciation and amortization expense, an increase
in losses on sales of foreclosed real estate, an increase in professional fees, and an increase in service bureau expense. The increase for the nine months ended June 30, 2010 is primarily attributed to an increase in compensation and benefits
expense, an increase in office occupancy and equipment expense, an increase in depreciation and amortization expense, an increase in professional fees, an increase in service bureau expense, an increase in FDIC deposit insurance premiums, and an
increase in other operating expenses.



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Compensation and benefits expense was $2.0 million for the three-month period ended June 30, 2010, as
compared to $2.1 million for the same period in 2009. Compensation and benefits expense was $6.1 million for the nine-month period ended June 30, 2010, relatively unchanged as compared to the same period in 2009. The decrease for the three
months ended June 30, 2010 is attributed to a decrease in retirement fund expense and a decrease in commission expense, partially offset by an increase in life insurance expense. The increase for the nine months ended June 30, 2010 is
attributed to an increase in life insurance expense and bonus expense, partially offset by a decrease in retirement fund expense. The increase in bonus expense is due to $198,000 of accrued bonus expense that was reversed during the nine-month
period ended June 30, 2009 compared to $30,000 of bonus expense accrued during the nine-month period ended June 30, 2010. Discretionary bonuses were reduced in fiscal 2009. The increase in life insurance expense for the three and nine
months ended June 30, 2010 is attributed to the Company recognizing $188,000 of bank owned life insurance earnings during the prior periods due to the death of a covered executive during the third quarter of fiscal 2009. There were no similar
earnings during the current periods.

Office occupancy and equipment expense was $251,000 and $779,000 for the three and nine months ended
June 30, 2010 as compared to $245,000 and $758,000 for the same period in 2009. The increase for the three-month period is primarily attributed to an increase in office repairs and maintenance expense, an increase in furniture, fixtures, and
equipment expense, partially offset by a decrease in rent expense. The increase for the nine-month period is primarily attributed to an increase in office repairs and maintenance expense, an increase in furniture, fixtures, and equipment expense,
and real estate taxes paid on office buildings related to the Company opening its new Shadyside branch location in August 2009, partially offset by a decrease in rent expense.

Depreciation and amortization expense was $131,000 and $399,000 for the three and nine months ended June 30, 2010 as compared to $118,000 and
$360,000 for the same period in 2009. The increase for both periods is primarily attributed to the Company opening its new Shadyside branch location in August 2009.

Professional fees were $113,000 and $383,000 for the three and nine months ended June 30, 2010 as compared to $93,000 and $350,000 for the same
period in 2009. The increase for the three months ended June 30, 2010 is primarily attributed to an increase in legal fees. The increase for the nine months ended June 30, 2010 is primarily attributed to an increase in legal fees,
partially offset by a decrease in audit fees. The increase in legal fees is primarily related to collection efforts on delinquent loans. The decrease in audit fees for the nine-month period is primarily related to fees the Company paid to its former
audit firm to consent on the Companys Annual Report for the fiscal year ended September 30, 2008 and the related filings associated with the TARP Capital Purchase Program in December 2008. The Company paid these fees during the nine-month
period ended June 30, 2009 and did not have similar fees for the nine-month period ended June 30, 2010.

Service bureau expense was
$120,000 for the three-month period ended June 30, 2010, as compared to $97,000 for the same period in 2009. Service bureau expense was $428,000 and $317,000 for the nine-month periods ended June 30, 2010 and 2009, respectively. The
increase for both periods is a result of the Bank continually expanding technology and new products and services.

Federal deposit insurance
premiums were $292,000 and $923,000 for the three and nine months ended June 30, 2010, respectively, as compared to $745,000 and $839,000 for the same periods in 2009. The decrease for the three months ended June 30, 2010 is attributed to
the FDIC imposing a 5 basis point special assessment on each insured depository institutions assets minus Tier 1 capital as of June 30, 2009. The special assessment was collected on September 30, 2009 but an estimate of $331,000 was
recognized in the prior period ended June 30, 2009. There was no special assessment recognized in the current period. The increase for the nine months ended June 30, 2010 is attributed to recent increases in the base assessment rate and
the assessment rate imposed on the Bank for its election to participate in the Transaction Account Guarantee Program under the FDICs Temporary Liquidity Guarantee Program which provides unlimited insurance coverage for non-interest bearing
transaction accounts.



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Other operating expenses were $579,000 for the three-month period ended June 30, 2010 compared to
$588,000 for the same period in 2009. Other operating expenses were $1.8 million for the nine-month period ended June 30, 2010 compared to $1.7 million for the same period in 2009. The decrease for the three months ended June 30, 2010 is
primarily attributed to a decrease in postage expense. The increase for the nine months ended June 30, 2010 is primarily attributed to an increase in postage expense, an increase in teller cash shortage expense, and an increase in debit card
charge off expense.

Income Taxes

Total income tax benefit for the three-month period ended June 30, 2010 was $215,000, as compared to an income tax benefit of $542,000 for the
three-month period ended June 30, 2009. Total income tax benefit for the nine-month period ended June 30, 2010 was $339,000, as compared to an income tax benefit of $298,000 for the prior-year period. The tax benefits for the current
periods were significantly impacted by the OTTI charges during the respective periods. The OTTI charges recorded in the current periods caused pre-tax income to be lower than tax-exempt income, therefore a tax benefit was recorded. Tax-exempt income
includes: income earned on certain municipal investments that qualify for state and/or federal income tax exemption; income earned by the Banks Delaware subsidiary, which is not subject to state income tax; and earnings on Bank-owned life
insurance policies, which are exempt from federal taxation. State and federal tax-exempt income for the three-month period ended June 30, 2010 was $1.6 million and $391,000, respectively, compared to $1.7 million and $1.0 million, respectively,
for the three-month period ended June 30, 2009. State and federal tax-exempt income for the nine-month period ended June 30, 2010 was $5.6 million and $1.2 million, respectively, compared to $5.3 million and $1.8 million, respectively, for
the nine-month period ended June 30, 2009.

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
guidelines include the concept of Tier 1 capital and total capital. Tier 1 capital is essentially common equity, excluding net unrealized gains (losses) on securities available-for-sale, goodwill, and cash flow hedges, plus certain types of
preferred stock, including the Series B Preferred Stock, and the Preferred Securities issued by FB Statutory Trust III in 2007. The Preferred Securities may comprise up to 25% of the Companys Tier 1 capital. The Series B Preferred Stock
constitutes Tier 1 Capital for both the risk-weighted and leverage capital requirements. Total capital includes Tier 1 capital and other forms of capital such as the allowance for loan losses, subject to limitations, and subordinated debt. The
guidelines establish a minimum standard risk-based target ratio of 8%, of which at least 4% must be in the form of Tier 1 capital. At June 30, 2010, the Company had Tier 1 capital as a percentage of risk-weighted assets of 12.32% and total
risk-based capital as a percentage of risk-weighted assets of 13.57%.

In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines currently provide for a minimum ratio of Tier 1 capital as a percentage of average total assets (the Leverage Ratio) of 3% for bank holding companies that meet certain
criteria, including that they maintain the highest regulatory rating. All other bank holding companies are required to maintain a Leverage Ratio of at least 4% or be subject to prompt corrective action by the Federal Reserve. At June 30, 2010,
the Company had a leverage ratio of 7.81%.

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, 2010, the Bank complied with the minimum leverage ratio having Tier 1 capital of 7.14% 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, 2010, the Banks total capital to risk-weighted assets ratio calculated under the
FDIC capital requirement was 12.59%.



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Liquidity

The Companys primary sources of funds have historically consisted of deposits, repurchase agreements, 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, 2010, the total of approved loan commitments amounted to $3.0 million. In addition, the Company had $9.4
million of undisbursed loan funds at that date. The amount of savings certificates which mature during the next twelve months totals approximately $85.7 million, a substantial portion of which management believes, on the basis of prior experience as
well as its competitive pricing strategy, will remain in the Company.

Off Balance Sheet Commitments

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

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

A summary of the contractual amount of the Companys financial instrument commitments is as follows:



|                                                    |  |                |        |                   |   |       
|--------------------------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                                    |  | June 30,2010   |        | September 30,2009
|                                                    |  | (in thousands)
|Commitments to grant loans                          |  | $              | 2,974  |                   | $ | 12,491
|Unfunded commitments under lines of credit          |  |                | 70,154 |                   |   | 72,804
|Financial and performance standby letters of credit |  |                | 1,429  |                   |   | 1,293 

The Company does not issue any
guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third
party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires
collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under
the corresponding guarantees. The current amount of liability as of June 30, 2010 for guarantees under standby letters of credit issued is not material.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Not Applicable



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##### Table of Contents

|Item 4T. | Controls and Procedures
|-------- | -----------------------

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

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

Part II - Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

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



|Item 1A. | Risk Factors
|-------- | ------------

Not Applicable



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Not Applicable



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not
Applicable



|Item 4. | [Removed and Reserved]
|------- | ----------------------



|Item 5. | Other Information
|------- | -----------------

(a) Not applicable

(b) Not applicable



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|Item 6. | Exhibits
|------- | --------

The following exhibits are
filed as part of this Report.



|        |  |                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Articles of Incorporation (1)                                                                                                                                                                                                                                  
|        | 
|3.2     |  | Amended Bylaws (14)                                                                                                                                                                                                                                            
|        | 
|3.3     |  | Statement with Respect to Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B (15)                                                                                                                                                             
|        | 
|4.1     |  | Common Stock Certificate (1)                                                                                                                                                                                                                                   
|        | 
|4.2     |  | Rights Agreement dated as of June 30, 2003 by and between Fidelity Bancorp, Inc. and Registrar and Transfer Company (3)                                                                                                                                        
|        | 
|4.3     |  | Amendment No. 1 to Rights Agreement (4)                                                                                                                                                                                                                        
|        | 
|4.4*    |  | Indenture, dated as of September 20, 2007, between Fidelity Bancorp, Inc. and Wilmington Trust Company                                                                                                                                                         
|        | 
|4.5*    |  | Amended and Restated Declaration of Trust, dated as of September 20, 2007, by and among Wilmington Trust Company as Institutional Trustee, Fidelity Bancorp, Inc., as Sponsor and
Richard G. Spencer, Lisa L. Griffith, and Michael A. Mooney as Administrators
|        | 
|4.6*    |  | Guarantee Agreement, as dated as of September 20, 2007, by and between Fidelity Bancorp, Inc. and Wilmington Trust Company                                                                                                                                     
|        | 
|4.7     |  | Form of Certificate for the Series B Preferred Stock (15)                                                                                                                                                                                                      
|        | 
|4.8     |  | Warrant for Purchase of Shares of Common Stock (15)                                                                                                                                                                                                            
|        | 
|10.1**  |  | Employee Stock Ownership Plan, as amended (1)                                                                                                                                                                                                                  
|        | 
|10.4**  |  | 1997 Employee Stock Compensation Program (6)                                                                                                                                                                                                                   
|        | 
|10.6**  |  | 1998 Group Term Replacement Plan (7)                                                                                                                                                                                                                           
|        | 
|10.8**  |  | 1998 Salary Continuation Plan Agreement by and between R.G. Spencer, the Company and the Bank (7)                                                                                                                                                              
|        | 
|10.9**  |  | 1998 Salary Continuation Plan Agreement by and between M.A. Mooney, the Company and the Bank (7)                                                                                                                                                               
|        | 
|10.10** |  | Salary Continuation Plan Agreement with Lisa L. Griffith (2)                                                                                                                                                                                                   
|        | 
|10.11** |  | 1998 Stock Compensation Plan (8)                                                                                                                                                                                                                               
|        | 
|10.12** |  | 2000 Stock Compensation Plan (9)                                                                                                                                                                                                                               
|        | 
|10.13** |  | 2001 Stock Compensation Plan (10)                                                                                                                                                                                                                              
|        | 
|10.14** |  | 2002 Stock Compensation Plan (11)                                                                                                                                                                                                                              
|        | 
|10.15** |  | 2005 Stock-Based Incentive Plan (12)                                                                                                                                                                                                                           
|        | 
|10.16** |  | Form of Directors Indemnification Agreement (13)                                                                                                                                                                                                               
|        | 
|10.17** |  | Employment Agreement, dated January 1, 2002, between Fidelity Bancorp, Inc. and Fidelity Bank, PaSB and Richard G. Spencer (14)                                                                                                                                
|        | 
|10.18** |  | Employment Agreement, dated January 1, 2000, between Fidelity Bancorp, Inc. and Fidelity Bank, PaSB and Michael A. Mooney (14)                                                                                                                                 
|        | 
|10.19** |  | Severance Agreement, dated February 10, 2004, between Fidelity Bank, PaSB and Lisa L. Griffith (14)                                                                                                                                                            
|        | 
|10.20** |  | Severance Agreement, dated December 19, 1997, between Fidelity Bank, PaSB and Anthony F. Rocco (14)                                                                                                                                                            
|        | 
|10.21** |  | Severance Agreement, dated December 19, 1997, between Fidelity Bank, PaSB and Sandra L. Lee (14)                                                                                                                                                               
|        | 
|10.22   |  | Letter Agreement, dated December 12, 2008, between Fidelity Bancorp, Inc. and United States Department of the Treasury, with respect to the issuance and sale of the Series B
Preferred Stock and the Warrant (15)                                             
|        | 
|10.23** |  | Form of Waiver, executed by each of Messrs. Spencer, Rocco, and Mooney and Ms. Lee and Ms. Griffith (15)                                                                                                                                                       
|        | 
|10.24** |  | Form of Letter Agreement, executed by each of Messrs. Spencer, Rocco, and Mooney and Ms. Lee and Ms. Griffith (15)                                                                                                                                             
|        | 
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                                                                                                                              
|        | 
|31.2    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                                                              
|        | 
|32      |  | Section 1350 Certification                                                                                                                                                                                                                                     



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

|** | Management contract or compensatory plan or arrangement.
|-- | --------------------------------------------------------

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

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

|(3) | Incorporated by reference from Exhibit 1 to the Companys Registration Statement on Form 8-A filed June 30, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

|(14) | Incorporated by reference to an identically numbered exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2007.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to an exhibit to the Registrants Current Report on Form 8-K filed December 12, 2008.
|---- | ---------------------------------------------------------------------------------------------------------------



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SIGNATURES

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 BANCORP, INC.
|                      |  |                       
|Date: August 13, 2010 |  | By:                    |  | /S/    RICHARD G.
SPENCER                                      
|                      |  |                        |  | Richard G. Spencer
President and Chief Executive Officer       
|                      |  |                       
|Date: August 13, 2010 |  | By:                    |  | /S/    LISA L.
GRIFFITH                                        
|                      |  |                        |  | Lisa L. Griffith
Sr. Vice President and Chief Financial Officer



48