First Bell Bancorp (FBBC) 10-Q 2003 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2003
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________________ to ____________________________

Commission File Number 0-25172

FIRST BELL BANCORP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	251752651
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

300 DELAWARE AVENUE, SUITE 1704, WILMINGTON, DELAWARE	19801
(Address of principal executive offices)	(Zip Code)

(302) 427-7883

(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.

x   Yes     o   No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

x   Yes     o   No

APPLICABLE ONLY TO CORPORATE ISSUERS:

              Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,535,714 shares of common stock, par value $.01 per share, were outstanding as of August 14, 2003.

FIRST BELL BANCORP, INC.
FORM 10-Q

INDEX

		PAGE
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements	1
	Consolidated Balance Sheet June 30, 2003 and December 31, 2002 (unaudited)	2
	Consolidated Statement of Income for the Three and Six Months Ended June 30, 2003 and 2002 (unaudited)	3
	Consolidated Statement of Comprehensive Income for the Three and Six Months Ended June 30, 2003 and 2002 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2003 and 2002 (unaudited)	5
	Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements for the Three And Six Months Ended June 30, 2003 and 2002	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosure About Market Risk	17
Item 4	Controls and Procedures	17
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	18
Item 2	Changes in Securities and Use of Proceeds	18
Item 3	Defaults Upon Senior Securities	18
Item 4	Submission of Matters to a Vote of Security Holders	19
Item 5	Other Information	19
Item 6	Exhibits and Reports on Form 8-K	19
SIGNATURES		20

       PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST BELL BANCORP, INC
CONSOLIDATED BALANCE SHEET
(unaudited, in thousands)

	June 30, 2003			December 31, 2002
ASSETS
Cash and cash equivalents:
Cash on-hand	$	1,010		$	1,205
Non-interest bearing deposits		1,993			3,340
Interest-bearing deposits		46,472			30,869
Total cash and cash equivalents		49,475			35,414
Fed funds sold		11,850			10,750
Investment securities-available for sale, at fair value (cost of $323,031 and $305,538, respectively)		331,689			309,108
Mortgage-backed securities available-for-sale- at fair value (cost of $231,690 and $157,475, respectively)		234,247			158,637
Loans - Net of allowance for loan losses of $925		250,768			333,672
Properties and equipment, net		3,159			3,209
Federal Home Loan Bank stock, at cost		12,447			11,752
Bank-owned life insurance		22,609			22,096
Other assets		6,859			8,247
Total Assets	$	923,103		$	892,885
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Passbook, club and other accounts	$	186,451		$	131,497
Money market and NOW accounts		70,686			73,628
Certificate accounts		352,282			381,561
Total deposits		609,419			586,686
Borrowings		219,250			221,750
Advances by borrowers for taxes and insurance		8,003			6,995
Other liabilities		6,059			3,748
Total liabilities		842,731			819,179
Stockholders’ equity:
Preferred Stock, ($0.01 par value, 2,000,000 shares authorized; no shares issued or outstanding)		—			—
Common Stock, ($0.01 par value, 20,000,000 shares authorized: 8,596,250 issued; 4,535,714 outstanding; one stock right per share)		86			86
Additional paid in capital		63,447			63,184
Retained earnings		81,214			79,196
Unearned ESOP shares (411,263 and 426,479 shares, respectively)		(2,909	)		(3,017	)
Unearned MRP (180,845 shares)		(2,521	)		(2,521	)
Treasury stock (4,060,536 shares)		(66,346	)		(66,346	)
Accumulated other comprehensive income, net of taxes		7,401			3,124
Total Stockholders’ Equity		80,372			73,706
Total Liabilities and Stockholders’ Equity	$	923,103		$	892,885

See notes to unaudited consolidated financial statements

2

       FIRST BELL BANCORP, INC.
CONSOLDATED STATEMENT OF INCOME
(unaudited, in thousands except per share amounts)

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
Interest and dividend income:
Conventional mortgage loans	$	4,447		$	7,060		$	9,772		$	14,564
Interest-bearing deposits		108			162			215			314
Mortgage-backed securities		1,735			654			3,448			1,254
Federal funds sold		41			23			82			50
Investment securities - taxable		909			1,215			1,704			2,117
Investment securities - exempt from federal income tax		2,162			2,000			4,343			4,043
Federal Home Loan Bank stock		70			85			169			200
Total interest income		9,472			11,199			19,733			22,542
Interest expense:
Interest expense on deposits		4,242			5,072			8,699			10,590
Interest expense on borrowings		3,106			3,042			6,190			6,064
Total interest expense		7,348			8,114			14,889			16,654
Net interest income		2,124			3,085			4,844			5,888
Provision for loan losses		—			—			—			—
Net interest income after provision for loan losses		2,124			3,085			4,844			5,888
Other income:
Loan fees and service charges		357			257			712			558
Gain on sale of investments, net		7			663			9			663
Other income		258			270			516			532
Total other income		622			1,190			1,237			1,753
General and administrative expenses:
Compensation, payroll taxes and fringe benefits		827			689			1,752			1,274
Office occupancy expense		215			244			454			466
Computer services		107			80			194			162
Other expenses		481			335			855			665
Total general and administrative expenses		1,630			1,348			3,255			2,567
Net income before taxes
		1,116			2,927			2,826			5,074
Provision for income taxes:
Current:
Federal		214			697			513			881
State		27			144			108			251
Deferred credit		(438	)		(407	)		(900	)		(526	)
Total provision for income taxes		(197	)		434			(279	)		606
Net income	$	1,313		$	2,493		$	3,105		$	4,468
Basic earnings per share	$	0.33		$	0.61		$	0.79		$	1.08
Diluted earnings per share	$	0.32		$	0.59		$	0.75		$	1.05
Weighted average shares outstanding-Basic		3,939			4,122			3,935			4,132
Weighted average shares outstanding-Diluted		4,152			4,256			4,137			4,253

See notes to unaudited consolidated financial statements

3

FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited, in thousands)

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30, 2003		June 30, 2002		June 30, 2003		June 30, 2002
Net income	$	1,313	$	2,493	$	3,105	$	4,468
Unrealized gains on securities:
Unrealized holding gains arising during the period		7,696		4,154		6,489		4,819
Less: reclassification adjustment for gains realized in net income		7		663		9		663
Other comprehensive income, before taxes		9,002		5,984		9,585		8,624
Tax expense		2,614		1,187		2,203		1,413
Other comprehensive income, net of taxes	$	6,388	$	4,797	$	7,382	$	7,211

See notes to unaudited consolidated financial statements

4

FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(unaudited, in thousands)

	Number Common Stock Shares		Common Stock		Additional Paid-in Capital		Unearned ESOP Shares			Treasury Stock			MRP Stock			Accumulated Comprehensive Income, Net of Taxes			Retained Earnings			Total
Balance at December 31, 2001		4,758	$	86	$	62,854	$	(3,254	)	$	(62,030	)	$	(2,521	)	$	(1,608	)	$	72,914		$	66,441
Allocation of ESOP shares						116		93															209
Exercise of options		16									173												173
Dividend payable ($0.24)																				(992	)		(992	)
Net unrealized gain in securities available-for-sale, net of taxes of $1,413																	2,743						2,743
Net income																				4,468			4,468
Balance at June 30, 2002		4,774	$	86	$	62,970	$	(3,161	)	$	(61,857	)	$	(2,521	)	$	1,135		$	76,390		$	73,042
Balance at December 31, 2002		4,536	$	86	$	63,184	$	(3,017	)	$	(66,346	)	$	(2,521	)	$	3,124		$	79,196		$	73,706
Allocation of ESOP shares						263		108															371
Dividend payable ($0.30)																				(1,087	)		(1,087	)
Net unrealized gain in securities available-for-sale, net of taxes of $2,203																	4,277						4,277
Net income																				3,105			3,105
Balance at June 30, 2003		4,536	$	86	$	63,447	$	(2,909	)	$	(66,346	)	$	(2,521	)	$	7,401		$	81,214		$	80,372

See notes to unaudited consolidated financial statements

5

FIRST BELL BANCORP, INC.
STATEMENT OF CASH FLOWS
(unaudited, in thousands)

		Six Months Ended
CASH FLOWS FROM OPERATING ACTIVITIES:	June 30, 2003			June 30, 2002
Net income		3,105		4,468
Adjustments to reconcile net income to net cash provived by operating activities:
Depreciation		98		153
Deferred income taxes		(900	)	(526	)
Amortization of premiums and accretion of discounts		1,014		602
Compensation expense-allocation of ESOP shares		371		209
Gain on sale of investment securities, available for sale		(9	)	(663	)
Earnings on bank-owned life insurance		(513	)	(530	)
Increase or decrease in assets and liabilities:
Accrued interest receivable		381		118
Accrued interest on deposits		2,141		3,171
Accrued interest on borrowings		(62	)	(60	)
Accrued income taxes		(130	)	1,127
Other, net		63		(774	)
Net cash provided by operating activities		5,559		7,295
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of investments securities, available for sale		7,021		103,437
Purchase of mortgage-backed securities, available for sale		(103,359	)	(24,985	)
Purchase of investment securities, available for sale		(82,126	)	(133,421	)
Purchase of Federal Funds		(1,100	)	(4,900	)
Principal repayments on mortgage-backed securities, available for sale		28,305		9,151
Principal repayments on investment securities, available for sale		57,446		13,324
Net decrease in conventional loans		82,904		32,283
Purchase of Federal Home Loan Bank stock		(695	)	—
Purchase of premises and equipment		(48	)	(9	)
Net cash used in investing activities		(11,652	)	(5,120	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings accounts		52,012		17,521
Net decrease in certificate accounts		(29,279	)	(10,239	)
Net increase in advances by borrowers for taxes and insurance		1,008		2,120
Net decrease in borrowings		(2,500	)	(2,500	)
Dividend paid		(1,087	)	(992	)
Exercise of stock options		—		173
Net cash provided by financing activities		20,154		6,083
NET INCREASE IN CASH AND CASH EQUIVALENTS		14,061		8,258
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		35,414		32,198
CASH AND CASH EQUIVALENTS AT END OF PERIOD		49,475		40,456
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and advances by borrowers for taxes and insurance		6,557		7,420
Interest on borrowings		6,252		6,123
Income taxes		654		(43	)

See notes to unaudited consolidated financial statements

6

FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002

1. Principles of Consolidation

The consolidated financial statements include the accounts of First Bell Bancorp, Inc. (“First Bell” or the “Company”) and its wholly-owned subsidiary, Bell Federal Savings and Loan Association of Bellevue (“Bell Federal Savings” or the “Association”) and the Association’s wholly-owned subsidiary, 1891 Associates, Inc. All significant intercompany transactions have been eliminated in consolidation. The investment in the Association on First Bell’s financial statements and the investment in 1891 Associates, Inc. on the Association’s financial statements are carried at the parent company’s equity in the underlying net assets.

The consolidated balance sheet as of June 30, 2003 and related consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for the three and six months ended June 30, 2003 and 2002 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year.

The financial statements and notes are presented as permitted by Form 10-Q. The interim statements are unaudited and should be read in conjunction with the financial statements and notes thereto contained in First Bell’s annual report for the fiscal year ended December 31, 2002.

2. Merger Agreement

On March 11, 2003 the Company announced that it has entered into a definitive agreement whereby Northwest Bancorp will acquire the Company and the Association. Under the terms of the agreement, the shareholders of the Company will receive $26.25 in cash for each share of the Company’s common stock outstanding. The agreement has been approved by the Company’s shareholders and is pending final regulatory approvals and other conditions. This acquisition is expected to close in the fourth quarter of 2003.

3. Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (“FASB”) issued FAS No. 143, Accounting for Asset Retirement Obligations, which requires that the fair value of a liability be recognized when incurred for the retirement of a long-lived asset and the value of the asset be increased by that amount. The statement also requires that the liability be maintained at its present value in subsequent periods and outlines certain disclosures for such obligations. The adoption of this statement, which was effective January 1, 2003, did not have a material effect on the Company’s financial position or results of operations.

In April 2002, the FASB issued FAS No. 145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. FAS No. 145 rescinds FAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB

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Opinion No. 30 will now be used to classify those gains and losses. This statement also amends FAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements, which are not substantive but in some cases may change accounting practice. The provisions of this statement related to the rescission of FAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishments of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. Early adoption of the provisions of this statement related to FAS No. 13 shall be effective for transactions occurring after May 15, 2002. All other provisions of this statement shall be effective for financial statements issued on or after May 15, 2002. The adoption of this statement did not have a material effect on the Company’s financial position or results of operations.

In July 2002, the FASB issued FAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The new statement is effective for exit or disposal activities initiated after December 31, 2002. The adoption of this statement did not have a material effect on the Company’s financial position or results of operations.

On December 31, 2002, the FASB issued FAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, which amends FAS No. 123, Accounting for Stock-Based Compensation. FAS No. 148 amends the disclosure requirements of FAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of FAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a “ramp-up” effect on stock-based compensation expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported results. To address that concern, FAS No. 148 provides two additional methods of transition that reflect an entity’s full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. FAS No. 148 also improves the clarity and prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for all companies—regardless of the accounting method used—by requiring that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, the statement improves the timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. The transition guidance and annual disclosure provisions of FAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. No stock options were granted during the three months ended June 30, 2003 or 2002, and as a result, there is no proforma expense related to the stock options.

In April, 2003, the FASB issued FAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under FAS No. 133. The amendments set forth in FAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, this

8

statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in FAS No. 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. FAS No. 149 amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. This statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. The guidance should be applied prospectively. The provisions of this statement that relate to FAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, certain provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to existing contracts as well as new contracts entered into after June 30, 2003. The adoption of this statement is not expected to have a material effect on the Company’s financial position or results of operations.

In May 2003, the FASB issued FAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Such instruments may have been previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement has not and is not expected to have a material effect on the Company’s reported equity.

In November, 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation clarifies that a guarantor is required to disclose (a) the nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability, if any, for the guarantor’s obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. This interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of this interpretation did not have a material effect on the Company’s financial position or results of operations.

In January, 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, in an effort to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. The objective of this interpretation is not to restrict the use of variable interest entities but to improve

9

financial reporting by companies involved with variable interest entities. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. This interpretation changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption of this interpretation has not and is not expected to have a material effect on the Company’s financial position or results of operations.

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

Private Securities Litigation Reform Act Safe Harbor Statement

         In addition to historical information, this Form 10-Q includes certain forward-looking statements based on current management expectations. Examples of this forward-looking information can be found in, but are not limited to, the discussion of the expected effects of recent accounting pronouncements, the allowance for loan losses discussion and the quantitative and qualitative disclosure about market risk. The Company’s actual results could differ materially from those of management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of the Company’s loan and investment portfolios, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors, including war or terrorist activities affecting the Company’s operations, markets, products, services and prices. The Company does not undertake-and specifically disclaims any obligation-to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Acquisition of the Company

On March 11, 2003, the Company and the Association entered into an Agreement and Plan of Merger (the “Agreement”) with Northwest Bancorp, MHC, Northwest Bancorp, Inc. (“Northwest Bancorp”), a majority-owned subsidiary of Northwest Bancorp, Northwest Savings Bank, a wholly-owned subsidiary of Northwest Bancorp, and Northwest Merger Subsidiary, Inc., a wholly-owned subsidiary of Northwest Bancorp. The Agreement sets forth the terms and conditions pursuant to which, among other things, Northwest Merger Subsidiary, Inc. shall merge with and into the Company, with the Company as the surviving entity (the “Merger”), and, subsequent to consummation of the Merger, the Association shall merge with and into Northwest Savings Bank, with Northwest Savings Bank as the surviving entity. The Agreement provides, among other things, that, as a result of the Merger each outstanding share of common stock of the Company (subject to certain exceptions) will be automatically converted into the right to receive an amount equal to $26.25 in cash, without interest. On June 2, 2003, the stockholders of First Bell Bancorp, Inc approved the Merger. Consummation of the Merger is subject to a number of customary conditions, including the receipt of requisite regulatory approvals.

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Comparison of Financial Condition at June 30, 2003 and December 31, 2002.

Assets. Total assets were $923.1 million at June 30, 2003 in comparison to $892.9 million at December 31, 2002. Increases in mortgage-backed securities-available for sale, investment securities-available for sale and cash and cash equivalents were offset by a decrease in conventional mortgage loans. Mortgage-backed securities at June 30, 2003 were $234.2 million compared to $158.6 million at December 31, 2002. The increase was the result of the purchase of $103.4 million in mortgage-backed securities offset by principal repayments of $28.3 million. Investment securities, available for sale, at June 30, 2003 were $331.7 million compared to $309.1 million at December 31, 2002. The increase was the net result of the purchase of $82.1 million in investment securities offset by principal repayments of $57.4 million and the proceeds from the sale of securities of $7.0 million. Cash increased by $14.1 million to $49.5 million at June 30, 2003 from $35.4 million at December 31, 2002. Conventional mortgage loans decreased by $82.9 million to $250.8 million from $333.7 million. The net decrease was the result of principal repayments of $114.9 and loan originations of $32.0 million.

Liabilities. Total liabilities increased to $842.7 million at June 30, 2003 compared to $819.2 million at December 31, 2002. Increases in deposits, advances by borrowers for taxes and insurance and other liabilities were offset by a decrease in borrowing. Deposits increased by $22.7 million to $609.4 million at June 30, 2003 from $586.7 million at December 31, 2002. The increase was the net result of increases of $55.0 million in passbook, club and other accounts offset by decreases of $2.9 million in money market and NOW accounts and in certificates of deposit of $29.3 million. Other liabilities increased by $2.3 million while advances by borrowers for taxes and insurance increased by $1.0 million. These fluctuations were the result of the timing of payments for accrued expenses and customer payments in relation to the actual tax payment of property taxes and insurance payments. Borrowings decreased by $2.5 million to $219.3 million at June 30, 2003 from $221.8 million at December 31, 2002. This decrease was the result of normal quarterly principal repayments.

Capital. Total stockholders’ equity increased by $6.7 million to $80.4 million at June 30, 2003 from $73.7 million at December 31, 2002. The increase was the result of increases in retained earnings and the value of the Company’s investment securities, net of taxes. Accumulated other comprehensive income, net of taxes increased by $4.3 million during the six month period ended June 30, 2003 as a result of decreases in general interest rates. Retained earnings increased by $2.0 million to $81.2 million at June 30, 2003 from $79.2 million at December 31, 2002. The increase was the result of net income of $3.1 million reduced by dividends of $1.1 million.

Liquidity and Capital Resources. The Company’s primary sources of funds on a consolidated basis are deposits, borrowings, and principal and interest payments on mortgages, mortgage-backed securities and investments. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are strongly influenced by changes in general interest rates, economic conditions and competition.

The primary uses of funds by the Company for the six months ended June 30, 2003 were the purchase of $103.4 million of mortgage-backed securities available-for-sale, investment securities available-for-sale of $82.1 million and mortgage loan originations of $32.0 million. Sources of funds for the six months ended June 30, 2003 were $114.9 million in principal payments on conventional mortgage loans, principal payments of $57.4 million and $28.3 million on investment

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securities, available for sale and mortgage-backed securities-available for sale, respectively and increases in savings deposits of $22.7 million.

At June 30, 2003, the Association’s capital exceeded all of the capital requirements of the Office of Thrift Supervision (“OTS”). The Association’s Tangible, Tier I (core) capital (to adjusted total assets), Tier I capital (to risk-weighted assets) and Total capital (to risk-weighted assets) ratios were 8.67%, 8.67%, 26.19% and 26.49%, respectively at June 30, 2003. The Association is considered a “well capitalized” institution under the prompt corrective action regulations of the OTS.

Dividend payments by the Association have primarily been used to pay dividends to stockholders, interest on borrowings and other operating expenses of the Company. The ability of the Association to pay dividends and other capital distributions to the Company is generally limited by the OTS regulations. Additionally, the OTS may prohibit the payment of the dividends that are otherwise permissible by regulation for safety and reasons. As of June 30, 2003, the Association has received approval from the OTS to pay $9.0 million in dividends to the Company for the fiscal year ending December 31, 2003. Any dividend by the Association beyond its current year net income combined with retained net income of the preceding two years would require notification to or approval of the OTS. The Association currently has no intention to apply for additional dividends beyond the previously approved amount. However, there can be no assurance that, if the Company were to apply for an additional dividend distribution to the Company, that such application would be approved by the regulatory authorities.

Comparison of Results of Operation for the Six and Three Months ended June 30, 2003 and 2002.

General. Net income for the six months ended June 30, 2003 was $3.1million in comparison to $4.5 million for the six months ended June 30, 2002. The decrease can be attributed to decreases in interest income and other income, partially offset by a decrease in interest expense. Income taxes decreased as a result of the decrease in net income before taxes and a higher percentage of income being derived from sources, which are non-taxable. For the three months ended June 30, 2003, net income was $1.3 million compared to $2.5 million for the three months ended June 30, 2002. The decrease of $1.2 million resulted from the same sources previously described for the six-month period ended June 30, 2003 and 2002.

Interest Income. Interest income discussed in this section is tax equivalent interest income. Tax equivalent interest income is being used because interest on investment securities includes tax-exempt securities. Tax-exempt securities carry pre-tax yields lower than comparable assets. Therefore, it is more meaningful to analyze interest income on a tax equivalent basis. Tax equivalent increases of $2.2 million and $1.1 million were made for the six months and three months ended June 30, 2003, respectively. For the six and three months ended June 30, 2002, tax equivalent adjustments of $2.1 million and $1.0 million were made, respectively. Interest income for the six months ended June 30, 2003 decreased by $2.6 million or 10.8% to $22.0 million from $24.6 million for the six months ended June 30, 2002. The decrease primarily the net result of decreases in interest earned on conventional mortgage loans, and interest bearing deposits offset by increases in interest earned on mortgage-backed securities and federal funds sold. Interest earned on investment securities and dividends earned on Federal Home Loan Bank stock remained relatively constant. Interest earned on conventional mortgage loans decreased $4.8 million or 32.9% to $9.8 million for the six months ended June 30, 2003 from $14.6 million for the six months ended June 30, 2002. The decrease was the result of the average rate earned and the average balance on conventional mortgage loans declining due to mortgage refinancing during the first half of the current year The average rate

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earned and the average balance for the six months ended June 30, 2003 were 6.66% and $293.5 million, respectively. For the six months ended June 30, 2002, the average rate earned and the average balance were 6.97% and $417.9 million, respectively. Interest on interest bearing deposits totaled $215,000 for the six months ended June 30, 2003 compared to $314,000 for the six months ended June 30, 2002. The $99,000 decrease is the net result of a $6.8 million increase in the average balance and a decrease in the average rate from 1.70% to 0.98%. Interest on mortgage-backed securities for the six months ended June 30, 2003 was $3.4 million compared to $1.3 million in the same period for the prior year. The $2.1 million increase can be attributable to an increase in the average balance from $65.2 million to $197.9 million offset by a decrease in the average rate earned on the securities to 3.48% from 3.85%. Interest earned on federal funds sold increased by $32,000 to $82,000 for the six months ended June 30, 2003 from $50,000 for the comparable 2002 period. Interest on investment securities for the six months ended June 30, 2003 was $8.3 million compared to $8.2 million in the same period for the prior year. While the interest earned on these securities remained relatively unchanged, the average balance increased from $288.8 million to $303.7 million and the average rate earned on these securities decreased to 5.46% from 5.71%.

Interest income for the three months ended June 30, 2003 decreased by $1.6 million or 13.4% to $10.6 million from $12.2 million for the three months ended June 30, 2002. The decrease was the net result of increases in interest earned on mortgage-backed securities and federal funds sold and decreases in interest earned on conventional mortgage loans, investment securities, interest bearing deposits and Federal Home Loan Bank stock. Interest earned on mortgage-backed securities was $1.7 million for the three months ended June 30, 2003 compared to $654,000 for the comparable 2002 period. The increase was the result of the average balance increasing to $221.2 million from $71.8 million while the average interest rate decreased to 3.14% from 3.65% for the three months ended June 30, 2003 and 2002, respectively. Interest earned on federal funds sold increased by $18,000 to $41,000 for the three months ended June 30, 2003 from $23,000 for the three months ended June 30, 2002. This increase can be primarily attributable to the increase in the average rate balance to $14.2 million from $5.8 million offset by a decrease in the average interest rate earned to 1.15% from 1.58% for the three months ended June 30, 2003 and 2002, respectively. Interest earned on conventional mortgage loans decreased by $2.6 million or to $4.4 million for the three months ended June 30, 2003 from $7.1 million for the three months ended June 30, 2002. The decrease was the result of the average balance decreasing from $409.7 million to $272.1 million for the three months ended June 30, 2002 and 2003, respectively. In addition, the average rate earned on conventional mortgage loans decreased to 6.54% for the three months ended June 30, 2003 from 6.89% for the comparable 2002 period. Interest earned on investment securities was $4.2 million for the three months ended June 30, 2003 compared to $4.3 million for the second quarter of 2002. The decrease was the result of the average balance increasing to $307.0 million from $294.3 million while the average interest rate decreased to 5.45% from 5.77% for the three months ended June 30, 2003 and 2002, respectively.

Interest Expense. Interest expense for the six months ended June 30, 2003 decreased by $1.8 million or 10.6% to $14.9 million from $16.7 million for the six months ended June 30, 2002. The decrease was due to a decrease in interest expense on deposits and an increase in the cost of borrowings. Interest expense on deposits decreased by $1.9 million or 17.9% to $8.7 million for the six months ended June 30, 2003 from $10.6 million for the six months ended June 30, 2002. The average rate paid on deposits for the six months ended June 30, 2003 and 2002 was 2.88% and 3.66%, respectively. The average balance on deposits and borrower’s deposits for taxes and insurance was $604.7 million and $579.0 million for the six months ended June 30, 2003 and 2002, respectively. Interest expense on borrowings increased by $126,000 to $6.2 million for the six months ended June

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30, 2003 from $6.1 million for the six months ended June 30, 2002. The average balance on borrowings was $221.1 million and $213.0 million for the six months ended June 30, 2003 and 2002, respectively. The average rate paid on borrowings for the six months ended June 30, 2003 and 2002 was 5.60% and 5.69%, respectively.

Interest expense for the three months ended June 30, 2003 decreased by $766,000 to $7.3 million from $8.1 million for the three months ended June 30, 2002. An increase in the average balance to $611.1 million from $582.1 million was offset by a decrease in the average rate paid on deposits during the comparable three-month periods. The average rate paid on deposits decreased from 3.49% to 2.78%. Interest expense on borrowings increased by $64,000 to $3.1 million for the three months ended June 30, 2003 from $3.0 million for the three months ended June 30, 2002. The average balance on borrowings was $220.5 million and $212.6 million for the three months ended June 30, 2003 and 2002, respectively. The average rate paid on borrowings for the three months ended June 30, 2003 and 2002 was 5.63% and 5.72%, respectively.

Net Interest Income. Net interest income decreased to $7.1 million for the six months ended June 30, 2003 from $8.0 million for the six months ended June 30, 2002. The decrease was the result of interest income decreasing by $2.7 million while interest expense decreased by $1.7 million. Similarly, net interest income decreased by $877,000 for the three months ended June 30, 2003 as compared to the same period ended June 30, 2002. This decrease was the result of interest income decreasing by $1.6 million offset by interest expense decreasing $766,000.

Provision for Loan Losses. The provision for loan loss was zero for each of the six and three months ended June 30, 2003 and 2002. At June 30, 2003, non-performing assets were $1.1 million compared to $1.8 million at December 31, 2002. The allowance for loan losses equaled 81.0% of total non-performing assets as of June 30, 2003. There were no loans charged off during the six and three months ended June 30, 2003 and 2002. Management believes that the current level of loan loss reserve is adequate to cover losses inherent in the portfolio as of June 30, 2003. There can be no assurance, however, that the Company will not sustain losses in future periods which could be substantial in relation to the size of the allowance as of June 30, 2003.

Other Income. Other income for the six months ended June 30, 2003 decreased by $516,000 or 29.4% to $1.2 million from $1.8 million for the six months ended June 30, 2002. The decrease was the result of a decrease in gains on sale of investment securities, and miscellaneous income while loan fees and service charges increased. Gains on sale of investment securities decreased to $9,000 for the six months ended June 30, 2003 from $663,000 for the six months ended June 30, 2002. Other income decreased by $16,000 to $516,000 for the six months ended June 30, 2003 from $532,000 for the comparable 2002 period. Loan fees and service charges increased by $154,000 to $712,000 for the six months ended June 30, 2003 from $558,000 for the comparable 2002 period.

Other income for the three months ended June 30, 2003 decreased by $568,000 as the result of decreases in net gains on the sale of investment securities of $656,000, increases in loan fees and service charges of $100,000 and a decrease in miscellaneous income of $12,000.

General and Administrative Expenses. Total general and administrative expenses for the six months ended June 30, 2003 increased by $688,000 from $2.6 million to $3.3 million. Compensation, payroll taxes and fringe benefits increased by $478,000, office occupancy expense decreased by $12,000, computer services expense increased by $32,000 and other expenses increased by $190,000. The increase in Compensation, payroll taxes and fringe benefits and other expenses

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includes accruals for expenses related to the pending merger with Northwest Bancorp, Inc. of $256,000.

General and administrative expenses for the three months ended June 30, 2003 increased by $282,000. The increase was the result of the same factors causing the change in general and administrative expenses for the six-month period ended June 30, 2003. Expenses related to the pending merger with Northwest Bancorp, Inc. of $170,000 were recorded during the second quarter of the current year.

Income Taxes. Tax equivalent income taxes decreased by $700,000 to $2.0 million for the six months ended June 30, 2003 from $2.7 million for the comparable 2002 period. The decrease was primarily the result of net income before taxes decreasing to $5.1 million from $7.2 million for the six months ended June 30, 2003 and 2002, respectively and a larger percentage of net interest income being derived from non-taxable sources. Tax equivalent adjustments of $2.2 million and $2.1 million were made for the six months ended June 30, 2003 and 2002, respectively.

Tax equivalent income taxes for the three months ended June 30, 2003 decreased to $917,000 from $1.5 million for the three months ended June 30, 2002. The decrease was the result of a decrease in net income before taxes and a larger percentage of net interest income being derived from non-taxable sources. Tax equivalent adjustments of $1.1 million and $1.0 million were made during the respective quarters.

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Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company’s interest rate sensitivity is monitored by management through selected interest rate risk measures produced internally and by the OTS. Based on internal reviews, management does not believe that there has been a material change in the Company’s interest rate sensitivity from December 31, 2002 to June 30, 2003. However, the OTS results are not yet available for the quarter ended June 30, 2003. All methods used to measure interest rate sensitivity involve the use of assumptions. Management cannot predict what assumptions are made by the OTS, which can vary from management’s assumptions. Therefore, the results of the OTS calculations can differ from management’s internal calculations. The Company’s interest rate sensitivity should be reviewed in conjunction with the financial statements and notes thereto contained in First Bell’s Annual Report for the fiscal year ended December 31, 2002.

Item 4. Controls and Procedures

The Company maintains a system of controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission. The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures under the supervision and the participation of management, including the Chief Executive Officer and Chief Financial Officer, within 90 days prior to the filing date of this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in its periodic Securities and Exchange Commission filings. No significant changes were made to the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.

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PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

There are various claims and lawsuits in which the Company is periodically involved incidental to the Company’s business, which in the aggregate involve amounts which are believed by management to be immaterial to the financial condition and results of operations of the Company.

Item 2. Changes in Securities and Use of Proceeds.

              Not applicable.

Item 3. Defaults Upon Senior Securities.

              Not applicable.

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

(a) First Bell Bancorp, Inc. held an Annual Meeting of Stockholders on June 2, 2003.

(b) The names of each director elected at the Annual Meeting for terms of three years ending in 2006 and votes cast for each are as follows:

	For	Withhold
Albert H. Eckert, II	4,094,103	66,438
William S. McMinn	4,096,806	63,735
Jack W. Schweiger	4,095,994	64,547

The names of the Directors whose terms of office continued after the Annual Meeting are as follows:

Jeffrey M. Hinds	Theodore R. Dixon
Robert C. Baierl	Peter E. Reinert
Thomas J. Jackson, Jr.

(c) A brief description of each matter voted on and a summary of the voting of each item is as follows:

(1) To consider and vote upon a proposal to approve and adopt an agreement and plan of merger, dated as of March 11, 2003, among Northwest Bancorp, MHC, Northwest Bancorp, Inc., Northwest Merger Subsidiary, Inc., Northwest Savings Bank and First Bell Bancorp, Inc. and Bell Federal Savings and Loan Association of Bellevue, pursuant to which, among other things, (i)Northwest Merger Subsidiary, Inc. will merge with and into First Bell Bancorp and (ii)upon consummation of the merger, each outstanding share of First Bell Bancorp common stock (other than certain shares held directly or indirectly by First Bell Bancorp or Northwest and any dissenting shares) will be converted into the right to receive $26.25 in cash, without interest;

For	Against	Abstain	Non-Vote
3,025,755	71,515	4,771	1,058,500

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Item 4. Submission of Matters to a Vote of Security Holders (continued).

(2) Ratification of S.R. Snodgrass A.C. as independent auditors of First Bell Bancorp, Inc. for the fiscal year ending December 31, 2003.

For	Against		Abstain
4,138,788		11,448		10,305

(3) Proposal to adjourn the annual meeting to a later date or dates, if necessary.

For	Against	Abstain
3,868,578	284,008	7,955

Item 5. Other Information.

              None

Item 6. Exhibits and Reports on Form 8-K.

(a) The following exhibits are filed as part of this report.

Exhibit 3.1 - Certificate of Incorporation of First Bell Bancorp, Inc.*

Exhibit 3.2 - Bylaws of First Bell Bancorp, Inc.*

Exhibit 4.0 - Stock Certificate of First Bell Bancorp, Inc.*

Exhibit 11.0 - Computation of Earnings Per Share (filed herewith)

Exhibit 99.0 - Independent Accountants Review Report, dated July 15, 2003

Exhibit 31.1 - Certification of Chief Executive Officer Pursuant to Section 302

Exhibit 31.2 - Certification of Chief Financial Officer Pursuant to Section 302

Exhibit 32.1 - Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

Exhibit 32.2 - Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

*Incorporated herein by reference into this document from the Exhibits to Form S-1, Registration Statement, filed on November 9, 1994, as amended,

Registration No. 33-86160.

(b) Reports on Form 8-K

                    None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FIRST BELL BANCORP, INC.
		(Registrant)
Date:	August 14, 2003	/s/ ALBERT H. ECKERT, II
		Albert H. Eckert, II
		President and Chief Executive Officer

Date:	August 14, 2003	/s/ JEFFREY M. HINDS
		Jeffrey M. Hinds
		Executive Vice President and
		Chief Financial Officer (Principal Accounting Officer)

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