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 September 30, 1996
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 Number 0-25172
FIRST BELL BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 251752651
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
532 LINCOLN AVENUE, PITTSBURGH, PENNSYLVANIA 15202
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(Address of principal executive offices) (Zip Code)
(412) 734-2700
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(Registrant's telephone number, including area code)
Not Applicable
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(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 [ ] 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: 7,758,150 shares of
common stock, par value $.01 per share, were outstanding as of September 30,
1996.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995............................... 2
Consolidated Statement of Income for the
Three and Nine Months Ended September 30, 1996
and 1995............................................ 3
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995....... 4
Consolidated Statements of Changes in
Stockholders' Equity for the Nine Months Ended
September 30, 1996 and 1995......................... 5
Notes to Consolidated Financial Statements.......... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 7
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................... 11
Item 2 Changes in Securities............................... 11
Item 3 Defaults Upon Senior Securities..................... 11
Item 4 Submission of Matters to a Vote of Security Holders. 11
Item 5 Other Information................................... 12
Item 6 Exhibits and Reports on Form 8-K.................... 12
SIGNATURES
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(unaudited)
ASSETS
- ------
Cash:
Cash on hand........................................................... $ 931 $ 735
Non-interest-bearing deposits.......................................... 1,322 1,262
Interest-bearing deposits.............................................. 5,355 21,725
-------- --------
Total cash........................................................... 7,608 23,722
Federal funds sold....................................................... 24,100 52,025
Investment securities held to maturity - at cost (fair value of $15,241
and $20,968 at September 30, 1996 and December 31, 1995,
respectively)........................................................... 14,962 19,953
Conventional mortgage loans - net of allowance for
loan losses of $665 and $575 at September 30, 1996
and December 31, 1995, respectively..................................... 518,341 414,610
Other loans, net......................................................... 861 959
Real estate owned........................................................ -- 178
Premises and equipment, net.............................................. 3,406 3,601
Federal Home Loan Bank stock, at cost.................................... 3,999 3,009
Accrued interest receivable.............................................. 3,037 2,677
Other assets............................................................. 667 108
-------- --------
Total assets...................................................... $576,981 $520,842
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits:
Passbook, club and other accounts................................. $ 67,986 $ 71,723
Money market and NOW accounts..................................... 40,492 39,447
Certificate accounts.............................................. 346,479 280,241
-------- --------
Total deposits................................................. 454,957 391,411
Advances by borrowers for taxes and insurance............................ 6,069 8,545
Accrued interest on deposits............................................. 4,285 338
Accrued income taxes..................................................... (973) 23
Deferred tax liability................................................... 1,167 673
Other liabilities........................................................ 5,114 1,370
-------- --------
Total liabilities..................................................... 470,619 402,360
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; 7,758,150 outstanding at September 30, 1996;
8,596,250 outstanding at December 31, 1995).......................... 86 86
Additional paid-in capital............................................ 83,630 83,524
Unearned ESOP shares.................................................. (6,431) (6,636)
Unearned MRP shares................................................... (4,792) --
Treasury stock, at cost, 838,100 shares at September 30, 1996......... (11,684) --
Retained earnings - substantially restricted.......................... 45,553 41,508
-------- --------
Total stockholders' equity........................................ 106,362 118,482
-------- --------
Total liabilities and stockholders' equity............................... $576,981 $520,842
======== ========
See accompanying notes to consolidated financial statements.
2
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
------------------ ------------------ ------------------ ------------------
Interest income:
Conventional mortgage loans........................ $ 9,694 $7,050 $27,065 $19,657
Interest-earning deposits.......................... 156 646 548 1,860
Mortgage-backed securities......................... -- 84 -- 260
Federal funds sold................................. 216 783 1,450 795
Investment securities.............................. 292 370 962 1,634
Other loans........................................ 17 19 54 61
Federal Home Loan Bank stock....................... 64 52 176 143
------- ------ ------- -------
Total interest and dividend income................ 10,439 9,004 30,255 23,410
Interest expense on deposits........................ 5,624 4,656 15,736 13,560
------- ------ ------- -------
Net interest income................................. 4,815 4,348 14,519 10,850
Provision for loan losses........................... 30 -- 90 --
------- ------ ------- -------
Net interest income after provision for loan losses. 4,785 4,348 14,429 10,850
------- ------ ------- -------
Other income:
Service fees and charges........................... 113 193 517 546
Gain on sales of premises.......................... 536 - 536 -
Other income....................................... 3 7 12 13
------- ------ ------- -------
Total of other income............................. 652 200 1,065 559
------- ------ ------- -------
Other expenses:
Compensation, payroll taxes and fringe benefits.... 762 651 2,111 1,575
Depreciation and amortization...................... 57 53 173 186
Federal insurance premiums......................... 2,714 216 3,161 633
Office occupancy expense, excluding depreciation... 108 118 339 358
Computer services.................................. 50 57 152 161
Other expenses..................................... 228 241 798 698
------- ------ ------- -------
Total other expenses.............................. 3,919 1,336 6,734 3,611
------- ------ ------- -------
Income before provision for income taxes............ 1,518 3,212 8,760 7,798
------- ------ ------- -------
Provision for income taxes:
Current:
Federal........................................... 308 888 2,242 2,039
State............................................. 31 189 520 491
Deferred expense.................................. 80 160 494 479
------- ------ ------- -------
Total provision for income taxes................. 419 1,237 3,256 3,009
------- ------ ------- -------
Net income.......................................... $ 1,099 $1,975 $ 5,504 $ 4,789
======= ====== ======= =======
Earnings per share.................................. $0.15 $0.25 $0.73 $ N/A
======= ====== ======= =======
Weighted average share outstanding.................. 7,224 8,596 7,496 N/A
======= ====== ======= =======
See accompanying notes to consolidated financial statements.
3
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 5,504 $ 4,789
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................................... 173 186
Deferred income taxes............................................................ 494 479
Amortization of premiums and accretion of discounts.............................. (9) (357)
Provision for loan losses........................................................ 90 --
Compensation expense-allocation of ESOP shares................................... 311 --
Dividend payable................................................................. (643) --
Gain on sale of premises......................................................... (536) --
Increase or decrease in assets and liabilities:
Accrued interest receivable..................................................... (360) (365)
Accrued interest on deposits.................................................... 3,947 3,212
Accrued income taxes............................................................ (996) 294
Other assets.................................................................... (559) 112
Other liabilities............................................................... 3,744 506
--------- ---------
Net cash provided by operating activities...................................... 11,160 8,856
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities................................................ -- (4,878)
(Purchase)/maturity of Federal Funds............................................. 27,925 (51,450)
Proceeds from maturities of investment securities................................ 5,000 30,000
Principal paydowns on mortgage-backed securities................................. -- 665
Net increase in conventional mortgage loans...................................... (103,820) (63,452)
Purchase of conventional mortgage loans.......................................... -- (20,984)
Net (increase)/decrease in other loans........................................... 98 96
Purchase of Federal Home Loan Bank stock......................................... (990) (600)
Net proceeds from sale of real estate owned...................................... 178 76
Net proceeds from sale of premise................................................ 908 --
(Purchase) disposal of premises and equipment.................................... (350) (15)
--------- ---------
Net cash used in investing activities........................................... (71,051) (110,542)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts and savings
accounts........................................................................ (2,692) (21,946)
Net increase in certificate accounts............................................. 66,238 36,139
Net increase in advances by borrowers for taxes and insurance.................... (2,476) (2,152)
Dividends paid................................................................... (817) --
Proceeds from sale of stock...................................................... -- 76,663
Purchase of treasury stock....................................................... (11,684) --
Purchase of MRP stock............................................................ (4,792) --
--------- ---------
Net cash provided by financing activities....................................... 43,777 88,704
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... (16,114) (12,982)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 23,722 40,204
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 7,608 $ 27,222
--------- ---------
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest on deposits and advances by borrowers for taxes and insurance........... $ 11,789 $ 10,348
Income taxes..................................................................... 3,713 2,236
Noncash transactions:
Transfers from conventional loans to real estate acquired through
foreclosure................................................................. -- 287
See accompanying notes to consolidated financial statements.
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
(Unaudited)
Unearned
Preferred Stock Common Stock Additional ESOP Shares
--------------- --------------- Paid In -----------------
Shares Amount Shares Amount Capital Shares Amount
------ ------ ------ ------ ---------- ------- -------
Balance at December 31, 1994.......... -- $ -- -- $ -- $ -- -- $ --
Net income............................ -- -- -- -- -- -- --
Net proceeds from initial public
offering.............................. -- -- 8,596 86 83,454 (688) (6,877)
------ ------ ------ ------ --------- ------- -------
Balance at June 30, 1995.............. -- $ -- 8,596 $ 86 $ 83,454 (688) $(6,877)
====== ====== ====== ====== ========= ======= =======
Balance at December 31, 1995.......... -- $ -- $8,596 $ 86 $ 83,524 (664) $(6,636)
Purchase of treasury stock............ -- -- -- -- -- -- --
Purchase of MRP stock................. -- -- -- -- -- -- --
Allocation of ESOP shares............. -- -- -- -- 106 20 205
Dividends............................. -- -- -- -- -- -- --
Net income............................ -- -- -- -- -- -- --
------ ------ ------ ------ --------- ------- -------
Balance at June 30, 1996.............. -- $ -- $8,596 $ 86 $ 83,630 (644) $(6,431)
====== ====== ====== ====== ========= ======= =======
Unearned
Treasury Stock MRP Shares
----------------- ----------------- Retained
Shares Amount Shares Amount Earnings Total
------ -------- ------ -------- --------- ---------
Balance at December 31, 1994.......... -- $ -- $34,575 $ 34,575
Net income............................ -- -- 4,789 4,789
Net proceeds from initial public
offering.............................. -- -- -- -- -- 76,663
------ -------- ------- ------- ------- --------
Balance at June 30, 1995.............. -- $ -- -- $ -- $39,364 $116,027
====== ======== ======= ======= ======= ========
Balance at December 31, 1995.......... -- $ -- $41,508 $118,482
Purchase of treasury stock............ (838) (11,684) -- (11,684)
Purchase of MRP stock................. -- -- (344) $(4,792) -- (4,792)
Allocation of ESOP shares............. -- -- -- 311
Dividends............................. -- -- (1,460) (1,460)
Net income............................ -- -- -- 5,505 5,505
----- -------- ------ ------- ------- --------
Balance at June 30, 1996.............. (838) $(11,684) (344) $(4,792) $45,553 $106,362
===== ======== ==== ======= ======= ========
See accompanying notes to consolidated financial statements.
5
FIRST BELL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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 (the "Association or
Bell Federal"). All significant intercompany transactions have been eliminated
in consolidation. The investment in Bell Federal on First Bell's financial
statements is carried at the parent company's equity in the underlying net
assets.
The consolidated balance sheet as of September 30, 1996 and related
consolidated statements of income, cash flows and changes in stockholder's
equity for the three and/or nine months ended September 30, 1996 and 1995 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, 1995.
2. CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP
---------------------------------------------
On July 18, 1994, the Board of Directors of Bell Federal Savings and Loan
Association of Bellevue adopted a plan of conversion, pursuant to which the
Association would convert from a federally chartered mutual savings and loan
association to a federally chartered capital stock savings and loan association,
with the concurrent formation of the holding company, First Bell Bancorp, Inc.
On June 29, 1995, the conversion from a mutual form of ownership to a stock
form was finalized. First Bell was capitalized through the initial sale of
8,596,250 shares of common stock to eligible account holders, an employee
benefit plan of the Association, supplemental eligible account holders, other
members of the Association, and the general public. First Bell then used a
portion of the proceeds from the sale to purchase all of the outstanding shares
of the Association. This transaction was accounted for in a manner similar to
the pooling of interests method.
The Association may not declare or pay cash dividends on or repurchase any of
its shares of common stock if the effect thereof would cause equity to be
reduced below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.
6
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Comparison of Financial Condition at September 30, 1996 and December 31, 1995.
- -----------------------------------------------------------------------------
Assets. Total assets increased by $56.1 million, or 10.8% to $576.9 million at
September 30, 1996, from $520.8 million at December 31, 1995. The increase in
total assets was primarily attributable to an increase in conventional mortgage
loans of $103.7 million, or 25.0% to $518.3 million at September 30, 1996 from
$414.6 million at December 31, 1995. The increase in conventional mortgage
loans, which was caused by the strong demand for mortgage refinancing due to the
favorable rates offered by the Association, was offset by a decrease in interest
bearing deposits of $16.4 million or 75.4% to $5.3 million at September 30, 1996
from $21.7 million at December 31, 1995, and a decrease in federal funds sold of
$27.9 million or 53.7% to $24.1 million at September 30, 1996 from $52.0 million
at December 31, 1995. Conventional mortgage loans were funded through the
decrease of interest bearing deposits and federal funds sold, increases in
deposits and principal repayments and prepayments of conventional mortgage
loans.
Liabilities. Total deposits at September 30, 1996 were $455.0 million,
representing a $63.6 million, or 16.2% increase over the December 31, 1995
balance of $391.4 million. Certificate accounts increased $66.2 million or
23.6% while passbook, club and other accounts decreased $3.7 million or 5.2% and
money market and NOW accounts increased $1.0 million or 2.6% during the first
nine months of 1996. The increase in deposits was due mainly to the continued
strong demand and favorable rates offered by the Association. Advances by
borrowers for taxes and insurance decreased $2.5 million or 29.0% to $6.0
million at September 30, 1996 from $8.5 million at December 31, 1995. The
decrease in advances by borrowers for taxes and insurance was the result of the
payment of property taxes on behalf of mortgage loan borrowers made during the
quarter. Accrued interest on deposits increased $3.9 million from $338,000 at
December 31, 1995 to $4.3 million at September 30, 1996. This increase is the
result of increases in the balance of total deposits between the respective
periods and the timing of the crediting of the accrued interest to the deposit
accounts. Other liabilities increased $3.7 million or 273.3% to $5.1 million at
September 30, 1996 from $1.4 million at December 31, 1995. This increase was the
result of a $2.5 million special Savings Association Insurance Fund ("SAIF")
assessment. This assessment was imposed by the Federal Deposit Insurance
Corporation to replenish the savings and loan insurance fund that guarantees
deposits up to $100,000. Also contributing to the increase in other liabilities
is additional monies held for mortgage commitments and the quarterly dividend on
the Company's common stock which will be paid during the fourth quarter.
Stockholders' Equity. Stockholders' equity decreased by $12.1 million or 10.2%
to $106.4 million at September 30, 1996 from $118.5 million at December 31,
1995. The decrease was due to the repurchase of 838,100 shares of common stock
on the open market for $11.7 million or at an average price of $13.94 and the
purchase of the 343,850 shares of common stock for the Association's master
stock compensation plan ("MRP") at a price of $4.8 million or $13.94 per share.
7
In addition, total dividends of $1.5 million were paid to stockholders of record
on March 29, 1996, June 28, 1996 and September 30, 1996. Offsetting these
decreases to stockholders' equity was a net income of $5.5 million earned for
the nine months ended September 30, 1996.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits and principal and interest payments on loans. 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 investment activity of the Company for the nine months ended
September 30, 1996 was the origination of mortgage loans in the amount of $147.3
million. The most significant source of funds for the nine months ended
September 30, 1996 was the net increase in deposits of $63.6 million and the
principal repayment and prepayment of conventional mortgage loans of $43.6
million.
The Association is required to maintain an average daily balance of liquid
assets and short term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings as defined by the Office of Thrift
Supervision's regulations. The minimum required liquidity and short term
liquidity ratios are currently 5.0% and 1.0% respectively. The Association's
average liquidity and average short-term liquidity ratios were 7.5% and 6.3% at
September 30, 1996. The Association's most liquid assets are cash and short-
term investments. The levels of the Association's liquid assets are dependent
on the Association's operating, financing, lending and investing activities
during any given period. At September 30, 1996, assets qualifying for short
term liquidity, including cash and short term investments, totalled $18.0
million.
At September 30, 1996, the Association's capital exceeded all of the capital
requirements of the Office of Thrift Supervision ("OTS"). The Association's
tangible, core and risk-based capital ratios were 13.7%, 13.7% and 28.6%,
respectively. The Association is considered a "well capitalized" institution
under the prompt corrective action regulations of the OTS.
Comparison of Results of Operations for the Three and Nine Months ended
- -----------------------------------------------------------------------
September 30, 1996 and 1995.
- ---------------------------
General. Net income for the nine months ended September 30, 1996 increased by
$715,000, or 14.9%, to $5.5 million from $4.8 million for the nine months ended
September 30, 1995. This increase was due primarily to an increase in net
interest income of $3.7 million, offset by an increase of $3.1 million or 86.5%
in general and administrative expenses. This increase was due primarily as the
result of the $2.5 million one-time special assessment to recapitalize the SAIF
previously mentioned and an increase of $536,000 in compensation, payroll taxes
and fringe benefits. In addition, income taxes increased by $247,000 (see
"Legislative Initiatives").
For the third quarter of 1996, net income decreased by $876,000 or 44.4% to $1.1
million as compared with the third quarter of 1995. The decrease, again, was
the result of the special SAIF assessment and an increase of compensation,
payroll taxes and fringe benefits. Offsetting these increases was an increase
in net interest income at $467,000 or 10.7%.
8
Net Income. Net income for the three and nine month periods was affected by two
non-reccurring items. As previously mentioned, a charge of $2.5 million was
recorded to recapitalize the SAIF, the fund which insures our customer's savings
deposits. Also during the quarter ended September 30, 1996, the Association's
branch office, which was located in the central business district in the City of
Pittsburgh, was sold at a gain of $536,000. The sale of the building was the
result of a redevelopment project undertaken by the City of Pittsburgh to
enhance the downtown retail business. Without these two, non-reoccurring items,
net income for the three and nine month periods ended September 30, 1996 would
have been $6.7 million or $0.89 per share and $2.3 million or $0.32 per share,
respectively.
Interest Income. Interest earned on conventional mortgage loans increased $7.4
million, or 37.7% to $27.1 million for the nine months ended September 30, 1996
from $19.7 million for the nine months ended September 30, 1995 and was the
primary reason for the increase in interest income. The increase in interest
earned on conventional mortgage loans was primarily due to an increase of $132.2
million, or 38.6%, in the average balance of conventional mortgage loans for the
nine months ended September 30, 1996 from the comparable 1995 period. This
increase was due to the favorable rates offered by the Association and the
continued strong demand for conventional mortgage loans and mortgage
refinancing. In addition, interest on federal funds sold was $1.5 million for
the nine months ended September 30, 1996 compared to $795,000 for the nine
months ended September 30, 1995. This increase was due to the average balance
increasing by $16.3 million or 95.6% to $33.4 million at September 30, 1996 from
$17.1 million at September 30, 1995. Offsetting these increases in interest
income, was a decrease of $1.3 million or 70.5% in interest earned on interest
bearing deposits. This decrease was primarily due to the average balance of
interest bearing deposits declining $29.5 million or 67.5% to $14.1 million for
the nine months ended September 30, 1996 as compared to an average balance of
$43.6 million for the nine months ended September 30, 1995. Interest on other
investment securities decreased by $672,000 or 41.1% to $962,000 for the nine
months ended September 30, 1996 from $1.6 million for the nine months ended
September 30, 1995. This decrease was primarily due to the average balance of
investment securities decreasing by $14.2 million or 43.8% to $18.3 million for
the nine months ended September 30, 1996 from $32.5 million for the comparable
1995 period. Also, due to the sale of the mortgage-backed securities portfolio
in the fourth quarter of 1995, there was no interest earned on mortgage-backed
securities for the nine months ended September 30, 1996. For the nine months
ended September 30, 1995, $260,000 was earned from investments in mortgage-
backed securities.
Interest income for the quarter ended September 30, 1996 increased by $1.4
million or 15.9% to $10.4 million from $9.0 million for the quarter ended
September 30, 1995. This increase was due to an increase in interest on
conventional mortgage loans, offset by a decrease in interest on federal funds
sold, interest-bearing deposits, mortgage-backed securities and other investment
securities. Interest on conventional mortgage loans increased by $2.6 million
or 37.5%. The increase was the result of the average balance on conventional
mortgage loans increasing by $145.1 million or 39.1% from $371.6 million for the
quarter ended September 30, 1995 to $516.7 million for the quarter ended
September 30, 1996. Interest on federal funds sold was $216,000 for the quarter
ended September 30, 1996, down from $783,000 earned during the quarter ended
September 30, 1995. This decrease was the result of the average balance
decreasing by $38.6 million or 75.3% to $12.7 million for the quarter ended
September 30,
9
1996 from $51.3 million for the comparable 1995 period. Interest
on interest-bearing deposits decreased by $490,000 or 75.9% to $156,000 for the
quarter ended September 30, 1996 from $646,000 for the comparable 1995 period.
This decrease was primarily due to the average balance decreasing by $23.7
million or 60.0% to $15.8 million for the quarter ended September 30, 1996 from
$39.5 million for the quarter ended September 30, 1995. Interest on other
investment securities decreased by $78,000 or 21.1% to $292,000 for the quarter
ended September 30, 1996 from $370,000 for the comparable 1995 period. Again,
this was the result of the average balance of other investment securities
decreasing by $6.3 million or 29.7% to $15.0 million for the quarter ended
September 30, 1996 from $21.3 for the quarter ended September 30, 1995. No
interest was earned on mortgage-backed securities for the third quarter of 1996
compared to $84,000 for the comparable 1995 period.
Interest Expense. Interest expense on deposits was $15.7 million for the nine
months ended September 30, 1996 as compared to $13.5 million for the nine months
ended September 30, 1995. The $2.2 million or 16.0% increase was primarily due
to an overall increase of $57.1 million in the average balance of deposits to
$435.4 million from $378.3 million for the nine months ended September 30, 1996
and 1995, respectively.
Interest expense for the quarter ended September 30, 1996 increased to $5.6
million or 20.8% compared to $4.7 million for the quarter ended September 30,
1995. The $968,000 increase was primarily due to an increase of $79.6 million
in the average balance of deposits to $459.0 million from $379.4 million for the
quarterly periods ended September 30, 1996 and 1995, respectively.
Net Interest Income. Net interest income increased for the nine months ended
September 30, 1996 by 33.0% to $14.5 million from $10.9 million for the nine
months ended June 30, 1995. This increase was due to interest income increasing
by $5.8 million, or 23.9% to $30.2 million for the nine months ended September
30, 1996 from $24.4 million for the nine months ended September 30, 1995.
Offsetting this increase was an increase in interest expense of $2.2 million for
the nine months ended September 30, 1996, as compared to the nine months ended
September 30, 1995.
For the quarter ended September 30, 1996 net interest income increased by
$467,000 or 10.7% to $4.8 million from $4.3 million for the quarter ended
September 30, 1995. This increase was due to an increase in interest income of
$1.4 million offset by an increase of interest expense of $968,000.
Provision for Loan Losses. A provision for loan losses of $90,000 was recorded
for the nine months ended September 30, 1996, of which $30,000 was recorded in
the quarter ended September 30, 1996. The additional provision was recorded as
the result of the continued growth in the conventional mortgage loan portfolio.
No provision for loan losses was recorded for the nine or three month periods
ended September 30, 1995. As of September 30, 1996, non-performing assets
totalled $582,000 representing a $71,000 increase from the December 31, 1995
balance of $511,000. At September 30, 1996, the allowance for loan losses
equalled 114.3% of total non-performing assets, as compared to 112.5% as of
December 31, 1995.
10
For the nine months ended September 30, 1996 and 1995, no loans were charged
off. Management believes that the current level of loan loss reserve is
adequate to cover losses inherent in the portfolio as of such date. There can
be no assurance, however, that First Bell will not sustain losses in future
periods which could be substantial in relation to the size of the allowance at
September 30, 1996.
Other Income. Other income increased $506,000 or 90.5% to $1.1 million for the
nine months ended September 30, 1996 from $559,000 for the nine months ended
September 30, 1995. The increase was due to a gain of $536,000 on the sale of
the building in which our Wood Street office was located. Our downtown branch
will be moving to a new location in the same area during the fourth quarter of
1996. Offsetting this gain was a decrease of $29,000 or 5.3% in service fees
and charges.
Other income for the quarter ended September 30, 1996 increased $452,000 or
226.0% to $652,000 from $200,000 for the quarter ended September 30, 1995.
Again, the increase was due to the sale of the Wood Street building offset by a
decrease in service fees and charges.
Other Expenses. Other expenses increased for the nine months ended September
30, 1996 to $6.7 million from $3.6 million for the nine months ended September
30, 1995 and increased to $3.9 million from $1.3 million for the quarterly
periods ending September 30, 1996 and 1995, respectively. These increases were
primarily the result of the special SAIF assessment of $2.5 million, the
implementation of the Association's Employee Stock Ownership Plan ("ESOP") of
$311,000, accruals for other employee benefit plans, the additional cost of
federal deposit insurance premiums and additional accounting and legal expenses
associated with becoming a public company.
Income Taxes. Income taxes for the nine months ended September 30, 1996
increased $247,000 to $3.3 million, from $3.0 million for the nine months ended
September 30, 1995. This was the result of an increase in income before taxes
of $962,000 for the nine months ended September 30, 1996, compared to the same
period of the prior year. The annualized effective income tax rate for the
periods ended September 30, 1996 and 1995 were 37.2% and 38.6%, respectively.
Income taxes decreased for the third quarter of 1996 to $419,000 million from
$1.2 million for the third quarter of 1995. This was due to net income before
taxes decreasing $1.7 million to $1.5 million from $3.2 million for the
quarterly periods ended September 30, 1996 and 1995, respectively.
LEGISLATIVE INITIATIVES
- -----------------------
On September 30, 1996, the President signed into law the Deposit Insurance Funds
Act of 1996 (the "Funds Act") which, among other things, imposes a special one-
time assessment on SAIF member institutions, including the Association, to
recapitalize the SAIF. As required by the funds Act, the FDIC imposed a special
assessment of 65.7 basis points on SAIF assessable deposits held as of March 31,
1995, payable November 27, 1996 and is tax deductible. The Association took a
charge of $2.5 million as a result of the FDIC special assessment.
11
The Funds Act also spreads the obligations for payment of the Financing
Corporation ("FICO") bonds across all SAIF and Bank Insurance Fund ("BIF")
members. Beginning on January 1, 1997, BIF deposits will be assessed for FICO
payments at a rate of 20% of the rate assessed on SAIF deposits. Based on
current estimates by the FDIC, BIF deposits will be assessed a FICO payment of
1.3 basis points, while SAIF deposits will pay an estimated 6.5 basis points on
the FICO bonds. Full pro rata sharing of the FICO payments between BIF and SAIF
members will occur on the earlier of January 1, 2000 or the date the BIF and
SAIF are merged. The Funds Act specifies that the BIF and SAIF will be merged on
January 1, 1999 provided no savings associations remain as of that time.
As a result of the Funds Act, the FDIC recently proposed to lower SAIF
assessments to 0 to 27 basis points effective January 1, 1997, a range
comparable to that of BIF members. However, SAIF members will continue to make
the higher FICO payments described above. Management cannot predict the level
of FDIC insurance assessments on an on-going basis whether the savings
association charter will be eliminated or whether the BIF and SAIF will
eventually be merged.
Congress recently passed legislation eliminating the taxation of bad debt
reserves created by thrifts prior to 1988. These bad debt reserves for tax
purposes would have created a potential tax liability if a thrift changed its
charter.
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.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
None
12
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 11 - Computation of Earnings Per Share (filed herewith)
Exhibit 27 - Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None
_______________________
*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.
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SIGNATURES
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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: November 13, 1996 /s/ Albert H. Eckert, II
--------------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: November 13, 1996 /s/ Jeffrey M. Minds
--------------------------------------
Jeffrey M. Hinds
Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)