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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission File Number: 0-29040

FIDELITY BANKSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

(561) 803-9900

(Registrant’s Telephone Number including area code)

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

None

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

Common Stock, par value $.10 per share

(Title of Class)

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

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  YES  x  NO  ¨

As of June 30, 2003, there were issued and outstanding 15,015,197 shares of the Registrant’s Common Stock. The aggregate value of the voting stock held by non-affiliates of the Registrant, computed by reference to the average bid and asked prices of the Common Stock as of June 30, 2003 ($22.25) was $266,388,000.

DOCUMENTS INCORPORATED BY REFERENCE

1. Sections of Annual Report to Stockholders for the fiscal year ended December 31, 2003 (Parts II and IV).

2. Proxy Statement for the 2004 Annual Meeting of Stockholders (Parts I and III).

PART I

Fidelity Bankshares, Inc.

Fidelity Bankshares, Inc. is a Delaware corporation which, on May 15, 2001, became the holding company parent of Fidelity Federal Bank & Trust, following the completion of the “second step” mutual-to-stock conversion of Fidelity Bankshares, MHC. Prior to completion of the “second step” conversion, Fidelity Federal Bank & Trust’s mid-tier stock holding company parent was also called Fidelity Bankshares, Inc. References to Fidelity Bankshares, Inc. includes references before and after the “second step” conversion. As a result of the “second step” conversion, we raised $79.5 million in net proceeds, of which $40.9 million was infused into Fidelity Federal Bank & Trust and $38.6 million was retained by us. At December 31, 2003, the only significant asset of Fidelity Bankshares, Inc. was its ownership of all of the outstanding stock of Fidelity Federal Bank & Trust. Our corporate office is located at 205 Datura Street, West Palm beach, Florida 33401. Our telephone number is (561) 803-9900.

The conversion was accounted for as a change in corporate form with no subsequent change in the historical basis of the Company’s assets, liabilities and equity. All references in the consolidated financial statements and notes thereto to share data (including number of shares and per-share amounts) have been restated giving retroactive recognition to the exchange rate.

In 1998, we sold $29.6 million of cumulative trust preferred securities through Fidelity Capital Trust I, a special purpose subsidiary of Fidelity Bankshares, Inc. The cumulative trust preferred securities have a yield of 8.375% and are scheduled to mature on January 31, 2028. The cumulative trust preferred securities may be redeemed in whole or in part after January 31, 2003, in which case, holders of the cumulative trust preferred securities will receive the accrued but unpaid interest to the date fixed for redemption plus 100% of the principal amount.

In 2003, we sold an additional $22.7 million of cumulative trust preferred securities through Fidelity Capital Trust II, a special purpose subsidiary of Fidelity Bankshares, Inc. The cumulative trust preferred securities have a floating yield of 285 basis points above the three month LIBOR rate and are scheduled to mature on January 23, 2034. The cumulative trust preferred securities may be redeemed in whole, or in part, after January 23, 2009, in which case, holders of the cumulative trust preferred securities will receive the accrued but unpaid interest to the date fixed for redemption plus 100% of the principal amount.

The additional capital raised through the cumulative trust preferred stock issuances provided additional capital to support our asset growth.

At December 31, 2003, the Company had consolidated assets and consolidated stockholders’ equity of $3.0 billion and $184.5 million, respectively. Through the Bank, the Company has deposits totaling $2.5 billion.

Fidelity Federal Bank & Trust

Fidelity Federal Bank & Trust was originally chartered as a federal mutual savings and loan association in 1952. In January 1994, the Bank reorganized from a mutual savings bank to the stock form of ownership as part of its mutual holding company reorganization. In July 1999, we began offering insurance and investment products through our wholly owned subsidiary – Florida Consolidated Agency, Inc. In February 2000, we began offering trust services, and at December 31, 2003, we had $63.7 million of trust assets under administration, including $47.3 million under trust management.

2

We are primarily engaged in the business of attracting deposits from the general public in our market area, and investing such deposits, together with other sources of funds, in loans secured by one- to four-family residential real estate. In recent years, we have increased our commercial real estate lending, and our consumer and commercial business lending activities. Our goal over the next several years is to continue to increase the origination of these loans, consistent with our standards of safety and soundness. To a lesser extent, we also originate multi-family loans, construction loans and land loans for single-family properties, and we invest in mortgage-backed securities issued or guaranteed by the United States Government or agencies thereof. In addition, we invest a portion of our assets in securities issued by the United States Government, cash and cash equivalents, including deposits in other financial institutions, corporate securities and Federal Home Loan Bank stock. Our principal sources of funds are deposits and principal and interest payments on loans. Principal sources of income are interest received from loans and investment securities. Our principal expense is interest paid on deposits and employee compensation and benefits.

Since 1998, we have expanded our branch network throughout our market area. From December 1998 through December 31, 2003 we have opened 19 new branches.

Market Area

We are headquartered in West Palm Beach, Florida, and conduct our business primarily in Palm Beach, Martin, and St. Lucie Counties in Florida. To a lesser extent, we conduct business in Indian River and Broward Counties. At December 31, 2003, we had 41 offices in our market area, of which 36 were located in Palm Beach County, three were located in Martin County and two were located in St. Lucie County. Palm Beach, Martin and St. Lucie Counties are located in southeastern Florida, an area that has experienced considerable growth and development since the 1960s. This three-county area had a total population of 1.5 million as of December 31, 2003.

Our market area includes a mix of rural and urban areas. The strength of the southeast Florida economy depends significantly upon government, foreign trade, tourism, and its attraction as a retirement area. Major employers in our market area include Tenet Health Care, Florida Power and Light, BellSouth and the Palm Beach County School Board.

Competition

Our market area in southeast Florida has a large number of financial institutions. All of these financial institutions compete with us to varying degrees, and many of them are significantly larger and have greater financial resources than we have. As a result, we encounter strong competition both in attracting deposits and in originating real estate and other loans. Our most direct competition for deposits historically has come from commercial banks, securities brokerage firms, other savings associations, and credit unions, and we expect continued strong competition from these financial institutions in the foreseeable future. Our market area includes branches of several commercial banks that are substantially larger than Fidelity Federal Bank & Trust in terms of state-wide deposits. We compete for deposits by offering customers a high level of personal service and expertise, and a wide range of financial services.

The competition for real estate and other loans comes principally from commercial banks, mortgage banking companies, credit unions and other savings associations. This competition for loans has increased substantially in recent years as a result of the number of institutions competing in our market area, as well as the increased efforts by commercial banks to expand mortgage loan originations.

3

We compete for loans primarily through the interest rates and loan fees we charge, and the efficiency and quality of services we provide to borrowers, real estate brokers, and builders. Factors that also affect competition include general and local economic conditions, current interest rate levels, and volatility of the mortgage markets.

Fidelity Bankshares, Inc. is the sixth largest financial institution holding company headquartered in Florida, and the largest headquartered in Palm Beach, Martin and St. Lucie counties based on total assets. Fidelity Federal Bank & Trust’s share of deposits in Palm Beach County increased from 3.1% in 1995 to 8.1% at June 30, 2003. Our 7.5% share of deposits in Palm Beach, Martin and St. Lucie counties ranked us fourth among financial institutions in the three county area at June 30, 2003, the most recent date for which market share data are available.

Lending Activities

General. Historically, our principal lending activity has been the origination of fixed rate and adjustable rate mortgage loans collateralized by one- to four-family residential properties located in our market area. We currently originate both fixed rate mortgage loans and adjustable rate mortgage (“ARM”) loans for retention in our loan portfolio. The majority of our mortgage loans are eligible for sale in the secondary mortgage market. We also originate loans secured by commercial real estate and multi-family residential real estate, construction loans, commercial business loans and consumer loans. In recent years, we have increased our commercial real estate, commercial business and consumer lending.

In an effort to manage interest rate risk, we make our interest-earning assets more interest-rate sensitive by originating adjustable rate loans, such as ARM loans and short- and medium-term consumer loans, including home equity loans. We also purchase both fixed rate and adjustable rate mortgage-backed securities. At December 31, 2003, approximately $1.3 billion, or 59.5%, of our total loan portfolio, and $131.2 million, or 27.8%, of our mortgage-backed securities portfolio, consisted of loans or securities with adjustable interest rates. We originate fixed rate mortgage loans generally with 15- to 30-year terms to maturity, collateralized by one- to four-family residential properties. One- to four-family fixed rate and adjustable rate residential mortgage loans generally are originated and underwritten according to standards that allow us to resell such loans in the secondary mortgage market for the purpose of managing interest rate risk and liquidity. We periodically sell both, on a servicing released and servicing retained basis and without recourse to us, a portion of our residential loans which have terms to maturity of fifteen years and greater. Generally, we retain in our portfolio all consumer, commercial real estate and multi-family residential real estate loans.

4

Composition of Loan Portfolio. Set forth below are selected data relating to the composition of our loan portfolio by type of loan as of the dates indicated. Also set forth below is the aggregate amount of our investment in mortgage-backed securities at the dates indicated.

5

Loan and Mortgage-Backed Securities Contractual Terms to Maturity. The following table sets forth certain information as of December 31, 2003, regarding the dollar amount of loans and mortgage-backed securities maturing in our portfolio based on their contractual terms to maturity. The amounts shown represent outstanding principal balances, less loans in process, and are not adjusted for premiums, discounts, reserves, and unearned fees. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. Adjustable and floating rate loans and mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust rather than in which they contractually mature, and fixed rate loans and mortgage-backed securities are included in the period in which the final contractual repayment is due. Fixed rate mortgage-backed securities are assumed to mature in the period in which the final contractual payment is due on the underlying mortgage.

The following table sets forth at December 31, 2003, the dollar amount of all fixed rate and adjustable rate loans and mortgage-backed securities due or repricing after December 31, 2004.