The Company's annualized return on average assets was .67% and return on average equity was 10.50% compared to .58% and 9.10% respectively, for the same period in the prior year.

For the nine-month period ended June 30, 2008, net income was $3.26 million, or $1.07 per share (diluted), compared to $2.93 million or $.96 per share (diluted) in the prior year period. Annualized return on assets was .59% and return on equity was 9.22% for the fiscal 2008 period, compared to .53% and 8.60%, respectively, for the same period in the prior year.

Net interest income before provision for loan losses increased $661,000 or 18.4% to $4.26 million for the three-month period ended June 30, 2008, compared to $3.60 million in the prior year period. For the nine months ended June 30, 2008, net interest income before provision for loan losses increased $1.53 million or 14.4% to $12.18 million, compared to $10.65 million in the prior year period.

The provision for loan losses increased to $350,000 for the quarter ended June 30, 2008 compared to $100,000 for the quarter ended June 30, 2007, and increased to $740,000 for the nine-months ended June 30, 2008, compared to $425,000 in the prior year period. Non-performing loans and foreclosed real estate were 1.65% of total assets at June 30, 2008, and the allowance for loan losses was 28.11% of non-performing loans at that date.

Other income increased $57,000 or 6.4% to $954,000 for the quarter ended June 30, 2008 compared to $897,000 for the same period last year. For the nine months ended June 30, 2008, other income was $2.43 million, a decrease of $168,000 or 6.5% over the prior year period. The increase for the current quarter primarily reflects an increase in loan service charges and fees of $56,000, an increase in the gain on the sales of loans of $33,000, and an increase in deposit service charges and fees of $35,000, partially offset by a decrease in the gain on the sales of investment securities of $32,000, and a decrease in other operating income of $35,000. The decrease for the nine- month period ended June 30, 2008 primarily relates to the $322,000 impairment charge taken on a security in its investment portfolio, partially offset by an increase in loan service charges and fees of $131,000, an increase in the gain on the sales of loans of $58,000, and an increase in deposit service charges and fees of $153,000.

Operating expenses for the quarter ended June 30, 2008, increased $212,000 or 7.0% to $3.25 million compared to $3.04 million for the comparable prior year period. The operating expense increase for the three-month period ended June 30, 2008 is attributed to an increase in compensation and benefits expense of $118,000, an increase in service bureau expense of $49,000 and an increase in other operating expenses of $82,000, partially offset by a decrease in depreciation and amortization of $22,000 and a decrease in foreclosed real estate expense of $23,000. For the nine-month period in this fiscal year, operating expenses increased $391,000 or 4.2% to $9.62 million, compared to $9.23 million in the prior year period. The operating expense increase for the nine-month period ended June 30, 2008 is primarily attributed to an increase in compensation and benefits expense of $161,000, an increase in service bureau expense of $136,000, and an increase in other operating expenses of $252,000, partially offset by decreases in office occupancy and equipment expense of $36,000, depreciation and amortization of $45,000, and losses on the sales of foreclosed real estate of $60,000.

Provision for income taxes increased $79,000 or 25.2% to $393,000 for the quarter ended June 30, 2008 compared to $314,000 for same period last year. For the nine months ended June 30, 2008, the provision for income taxes increased $242,000 or 31.9% to $1.0 million compared to $758,000 for the same period last year.

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

Total assets were $723.8 million at June 30, 2008, a decrease of $2.7 million or .4% compared to September 30, 2007, and a decrease of $3.1 million or .4% compared to June 30, 2007. Net loans outstanding decreased $7.1 million or 1.6% to $451.8 million at June 30, 2008 as compared to September 30, 2007, and decreased $3.5 million or .8% as compared to June 30, 2007. Deposits decreased $10.1 million to $423.5 million at June 30, 2008 as compared to September 30, 2007, and decreased $9.9 million or 2.3% as compared to June 30, 2007. Short-term borrowings decreased $19.5 million to $4.1 million at June 30, 2008 as compared to September 30, 2007, and decreased $14.3 million as compared to June 30, 2007. Long-term debt increased $24.8 million at June 30, 2008 as compared to September 30, 2007, and increased $14.8 million as compared to June 30, 2007. Stockholders' equity was $45.2 million at June 30, 2008, compared to $46.5 million at September 30, 2007 and $45.9 million at June 30, 2007. -- Fidelity Bancorp, Inc.