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, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-25172
FIRST BELL BANCORP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 251752651
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
300 DELAWARE AVENUE, SUITE 1704, WILMINGTON, DELAWARE 19801
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(Address of principal executive offices) (Zip Code)
(302) 427-7883
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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: 6,510,625 shares of
common stock, par value $.01 per share, were outstanding as of June 30, 1997.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets June 30, 1997 (unaudited)
and December 31, 1996 (audited)............................... 2
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1997
and 1996, (unaudited)......................................... 3
Consolidated Statements of Changes in Stockholder's Equity
for the Six Months Ended June 30, 1997 and 1996, (unaudited).. 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996, (unaudited)........................... 5
Notes to Unaudited Consolidated Financial Statements.......... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 6
PART II OTHER INFORMATION
Item 1 Legal Proceedings............................................. 12
Item 2 Changes in Securities......................................... 12
Item 3 Defaults Upon Senior Securities............................... 12
Item 4 Submission of Matters to a Vote of Security Holders........... 12
Item 5 Other Information............................................. 13
Item 6 Exhibits and Reports on Form 8-K.............................. 13
SIGNATURES
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(unaudited) (audited)
ASSETS:
Cash:
Cash on-hand......................................................................... $ 860 $ 980
Non-interest-bearing deposits........................................................ 1,345 1,554
Interest-bearing deposits............................................................ 25,993 23,872
------- -------
Total cash......................................................................... 28,198 26,406
Mortgage-backed securities held for sale, at fair value (cost of $64,581
and $0 at June 30, 1997 and December 31, 1996, respectively).......................... 65,291 --
Federal funds sold..................................................................... 1,600 72,875
Investment securities held to maturity - at cost (fair value of $10,303 and
$15,429 at June 30, 1997 and December 31, 1996, respectively)......................... 9,969 14,964
Investment securities held for sale, at fair value (cost of $25,928 and
0 at June 30, 1997 and December 31, 1996, respectively)............................... 26,165 --
Conventional mortgage loans - net of allowance for
loan losses of $715 and $665 at June 30, 1997 and
December 31, 1996, respectively....................................................... 557,606 529,866
Conventional mortgage loans, held for sale............................................. 9,982 --
Other loans, net....................................................................... 887 949
Real estate owned...................................................................... 94 229
Properties and equipment, net.......................................................... 3,608 3,692
Federal Home Loan Bank stock, at cost.................................................. 5,900 3,999
Accrued interest receivable............................................................ 3,633 2,758
Other assets........................................................................... 1,433 445
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Total assets........................................................................ $714,366 $656,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Passbook, club and other accounts.................................................... $ 67,948 $ 66,486
Money market and NOW accounts........................................................ 46,587 44,661
Certificate accounts................................................................. 395,693 372,794
-------- --------
Total deposits..................................................................... 510,228 483,941
Borrowings............................................................................. 108,000 70,000
Advances by borrowers for taxes and insurance.......................................... 15,739 10,822
Accrued interest on deposits........................................................... 4,028 503
Accrued interest on borrowings......................................................... 376 191
Accrued income taxes................................................................... 155 81
Deferred income tax liability.......................................................... 1,591 1,244
Dividend payable on common stock....................................................... 588 713
Other liabilities...................................................................... 3,487 2,255
-------- --------
Total liabilities................................................................... 644,192 569,750
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; 6,510,625 outstanding at June 30, 1997
7,758,150 outstanding at December 31, 1996.......................................... 86 86
Paid-in capital...................................................................... 61,200 61,063
Unearned ESOP shares (613,668 and 629,622 shares at June 30, 1997
and December 31, 1996, respectively)................................................ (4,344) (4,454)
Unearned MRP shares (307,528 and 343,850 shares at June 30, 1997 and
December 31, 1996, respectively).................................................... (4,290) (4,792)
Treasury stock (2,085,625 shares and 838,100 shares at June 30,
1997 and December 31, 1996, respectively)........................................... (32,078) (11,684)
Unrealized gain or loss on securities held for sale, net of taxes.................... 99 --
Retained earnings.................................................................... 49,501 46,214
-------- --------
Total Stockholders' Equity............................................................. 70,174 86,433
Total Liabilities and Stockholders' Equity............................................. $714,366 $656,183
======== ========
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
Interest income:
Conventional mortgage loans $10,425 $ 9,147 $20,390 $17,373
Interest-bearing deposits 311 108 579 393
Mortgage-backed securities 882 -- 1,654 --
Federal funds sold 137 552 476 1,234
Investment securities 666 330 1,301 668
Other loans 17 18 35 37
Federal Home Loan Bank stock 95 64 171 111
------- ------- ------- -------
Total interest and dividend income 12,533 10,219 24,606 19,816
Interest expense on deposits 6,672 5,180 13,094 10,112
Interest expense on borrowings 1,651 -- 2,868 --
------- ------- ------- -------
Total interest expense 8,323 5,180 15,962 10,112
Net interest income 4,210 5,039 8,644 9,704
Provision for loan losses 30 30 50 60
------- ------- ------- -------
Net interest income after provision
for loan losses 4,180 5,009 8,594 9,644
Other income:
Loan fees and service charges 112 203 239 404
Gain on sale of loans 258 -- 258 --
Miscellaneous income 40 6 43 8
------- ------- ------- -------
Total other income 410 209 540 412
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 718 668 1,403 1,349
Federal insurance premiums 80 227 98 447
Office occupancy expense, excluding depreciation 128 117 258 230
Depreciation 74 65 147 116
Computer services 54 52 109 102
Other expenses 245 249 456 569
------- ------- ------- -------
Total general and administrative expense 1,299 1,378 2,471 2,813
Net Income before provision for income taxes 3,291 3,840 6,663 7,243
Provision for income taxes:
Current:
Federal 951 1,022 1,959 1,934
State 256 261 514 489
Deferred expense (credit) 170 262 280 414
------- ------- ------- -------
Total provision for income taxes 1,377 1,545 2,753 2,837
Net income $ 1,914 $ 2,295 $ 3,910 $ 4,406
======= ======= ======= =======
Primary earnings per share $0.32 $0.31 $0.60 $0.58
------- ------- ------- -------
Fully diluted earnings per share $0.31 $0.31 $0.59 $0.58
------- ------- ------- -------
Weighted average shares outstanding 6,517 7,511 7,061 7,633
======= ======= ======= =======
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
Number
Common Additional Unearned Unrealized
Stock Common Paid-in ESOP Treasury MRP Gain/Loss Retained
Shares Stock Capital Shares Stock Stock Net of Taxes Earnings Total
------ ------ ---------- -------- -------- ------- ------------ --------- --------
Balance at December 31, 1995 7,932 $86 $83,524 $(6,636) -- -- -- $41,508 $118,482
Purchase of treasury stock (430) (5,996) (5,996)
Allocation and adjustments of ESOP
shares 12 61 129 190
Dividend on common stock ($0.10) -- (817) (817)
Net income -- 4,406 4,406
------ --- ------- -------- -------- -------- --- ------- --------
Balance at June 30, 1996 7,514 $86 $83,585 $(6,507) $ (5,996) -- -- $45,097 $116,265
====== === ======= ======= ======== ======== === ======= ========
Balance at December 31, 1996 6,784 $86 $61,063 $(4,454) $(11,684) $(4,792) $46,214 $ 86,433
Purchase of treasury stock (1,247) (20,394) (20,394)
Allocation and adjustments
of MRP shares 36 8 502 581 1,091
Allocation of ESOP 16 129 110 239
Dividend on common stock ($0.20) (1,204) (1,204)
Change in unrealized gain or
loss on securities available for --
sale, net of taxes 99 99
Net income 3,910 3,910
------ --- ------- ------- -------- ------- --- ------- --------
Balance at June 30, 1997 5,589 $86 $61,200 $(4,344) $(32,078) $(4,290) $99 $49,501 $ 70,174
====== === ======= ======= ======== ======= === ======= ========
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,910 $ 4,406
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 147 116
Deferred income taxes 280 414
Amortization of premiums and accretion of discounts 112 (6)
Provision for loan losses 50 60
Compensation expense-allocation of ESOP and MRP shares 513 453
Gain on sale of real estate owned (31) --
Gain on sale of conventional mortgage loans (258) --
Net proceeds from sale of conventional mortgage loans 19,839 --
Dividend payable -- (409)
Increase or decrease in assets and liabilities
Accrued interest receivable (875) (295)
Accrued interest on deposits 3,525 2,598
Accrued interest on borrowings 185 --
Accrued income taxes 74 25
Other assets (988) (483)
Other liabilities 1,469 1,202
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Net cash provided by operating activities 27,951 8,081
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, held for sale (25,947) --
Purchase of mortgage-backed securities, held for sale (71,545) --
Maturity of Federal Funds 71,275 21,900
Maturity of investment securities held to maturity 5,000 --
Principal paydowns on mortgage-backed securities, held for sale 6,087 --
Net increase in conventional mortgage loans (57,447) (85,311)
Net increase in other loans 62 (39)
Purchase of Federal Home Loan Bank stock (1,901) (990)
Net proceeds from sale of real estate owned 260 178
Purchase of premises and equipment (63) (276)
-------- --------
Net cash used in investing activities (74,219) (64,538)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 3,388 4,291
Net increase in certificate accounts 22,899 37,949
Increase in advances by borrowers for taxes and insurance 4,917 5,282
Net increase in borrowings 38,000 --
Dividend paid (750) (408)
Purchase of treasury stock (20,394) (5,996)
-------- --------
Net cash provided by financing activities 48,060 41,118
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,792 (15,339)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,406 23,722
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,198 $ 8,383
======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and advances by borrowers for
taxes and insurance $ 9,569 $ 3,625
Income taxes 2,424 181
Transfer from conventional loans to real estate acquired through foreclosure 94 --
Increase in additional paid-in capital-ESOP and MRP allocation 136 21
Transfers from conventional mortgage loans to conventional mortgage loans,
held for sale 29,989 --
5
FIRST BELL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED JUNE 30, 1997 AND 1996
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"). 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 June 30, 1997, the consolidated
statements of income for the three and six months ended June 30, 1997 and 1996
and related consolidated statements of cash flows and changes in stockholders'
equity for the six months ended June 30, 1997 and 1996 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, 1996.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Comparison of Financial Condition at June 30, 1997 and December 31, 1996.
- ------------------------------------------------------------------------
Assets. Total assets increased by $58.2 million, or 8.9% to $714.4 million at
June 30, 1997 from $656.2 million at December 31, 1996. The increase in total
assets is the result of increases in conventional mortgage loans, mortgage-
backed securities, investment securities, Federal Home Loan Bank ("FHLB") stock,
accrued interest receivable and interest-bearing deposits offset by a decline in
Federal Funds Sold. Conventional mortgage loans increased $37.7 million or 7.1%
to $567.6 million at June 30, 1997 from $529.9 million at December 31, 1996.
This increase in attributable to $89.1 million in conventional mortgage loans
originated in the first six months of 1997 offset by the sale of $20.0 million
of conventional mortgage loans and $22.0 million in payments and prepayments.
In addition, $10.0 million of conventional mortgage loans were classified as
held for sale at June 30, 1997. These loans have been committed to be sold to
the Federal National Mortgage Association in the third quarter of 1997.
Mortgage-backed securities increased $65.3 million at June 30, 1997, from
December 31, 1996, due to the purchase of adjustable rate mortgage-backed
securities during the first six months of 1997. In addition, the Company had
committed to purchase an additional $20.1 million of adjustable rate mortgage-
backed securities as of June 30, 1997. The Company had no mortgage-backed
securities at
6
December 31, 1996. Investment securities increased by $21.2 million, or 141.5%
to $36.1 million at June 30, 1997 from $14.9 million at December 31, 1996. The
increase was due to the purchase of $25.9 million of adjustable rate
Collateralized Mortgage Obligations ("CMO's") offset by the maturity of a $5.0
million Treasury bond. Federal Home Loan Bank stock increased to $5.9 million
at June 30, 1997 from $4.0 million at December 31, 1996. The $1.9 million or
47.5% increase was the result of the Association being required by the Federal
Home Loan Bank to increase the amount of stock held due to increases in
borrowings and the conventional mortgage loan portfolio. Accrued interest
receivable increased by $875,000 or 31.7% to $3.6 million at June 30, 1997 from
$2.8 million at December 31, 1996. This increase was the result of increases in
conventional mortgage loans, mortgage-backed securities and investment
securities. Interest-bearing deposits increased to $26.0 million at June 30,
1997 from $23.9 million at December 31, 1996. The $2.1 million or 8.9% increase
was the result of normal fluctuations from the operation of the Company.
Offsetting the above increases was a decrease in Federal Funds Sold of $71.3
million or 97.8% to $1.6 million at June 30, 1997 from $72.9 million at December
31, 1996. This reduction in Federal Funds Sold was used to fund the above
described increases.
Liabilities. Total liabilities increased by $74.4 million or 13.1% to $644.2
million at June 30, 1997 from $569.8 million at December 31, 1996. The increase
is the result of increases in deposits, borrowings, advances by borrowers for
taxes and insurance, accrued interest on deposits and borrowings and other
liabilities. Total deposits increased by $26.3 million or 5.4% to $510.2
million at June 30, 1997 from $483.9 million at December 31, 1996. This
increase was the result of the favorable rates offered by the Company on its
savings products. Borrowings increased to $108.0 million at June 30, 1997 from
$70.0 million at December 31, 1996. The $38.0 million or 54.3% increased was
the result of an additional $50.0 million borrowed in the first quarter of 1997
reduced by the subsequent repayment of $12.0 million during the second quarter
of 1997. Advances by borrowers for taxes and insurance increased to $15.7
million at June 30, 1997 from $10.8 million at December 31, 1996. The $4.9
million or 45.4% increase was the result of an increase in conventional mortgage
loans and the collection of such advances for future payments. Accrued interest
on deposits and borrowings increased by $3.7 million or 534.6% to $4.4 million
at June 30, 1997 from $694,000 at December 31, 1996. This increase is
attributable to the timing of interest payments on certificate accounts and an
increase in the balance of borrowings. Other liabilities increased by $1.2
million or 54.6% to $3.5 million at June 30, 1997 from $2.3 million at December
31, 1996. This increase is primarily the result of borrower's deposits on
construction loans increasing due to an increase in construction loans in
process in the first six months of 1997.
Capital. Stockholders' equity decreased by $16.3 million or 18.8% to $70.1
million at June 30, 1997 from $86.4 million at December 31, 1996. The decrease
was the result of dividends paid of $1.2 million and the purchase of 1.2 million
shares of common stock for $20.4 million. The average price per share paid for
these 1.2 million shares, which were placed in Treasury, was $16.34. Offsetting
these decreases was net income of $3.9 million for the six months ended June 30,
1997, MRP and ESOP share allocations and adjustments totaling $1.3 million and
unrealized gains on investment held for sale, net of taxes of $99,000.
7
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits, borrowings, and principal and interest payments on loans, 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 investing activities of the Company for the six months ended June
30, 1997 was the origination of $89.1 million of conventional mortgage loans and
the purchase of $71.5 million of adjustable rate mortgage-backed securities and
$25.9 million of adjustable rate CMO's. Sources of funds for the six months
ended June 30, 1997 were the increase in deposits of $26.3 million, the $38.0
million increase in borrowings, $20.0 million in proceeds from the sale of
loans, $28.1 million in principal repayments and prepayments of conventional
mortgage loans and mortgage-backed securities and $5.0 million from the maturity
of a Treasury bond.
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 ("OTS") 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 9.7% and 8.7% at
June 30, 1997. The Association's most liquid assets are cash and short-term
investments. The levels of the Association's liquid assets are dependent upon
the Association's operating, financing, lending and investing activities during
any given period. At June 30, 1997, assets qualifying for short-term liquidity,
including cash and short term investments, totalled $33.0 million.
At June 30, 1997, the Association's capital exceeded all of the capital
requirements of the OTS. The Association's tangible, Tier I capital (to total
assets) and Tier I Capital (to risk-based capital) ratios were 9.5%, 9.5% and
21.9%, 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 Six and Three Months ended June 30,
- -------------------------------------------------------------------------------
1997 and 1996.
- -------------
General. Net income for the six months ended June 30, 1997 decreased by
$496,000 or 11.3% to $3.9 million for the six months ended June 30, 1997 from
$4.4 million for the comparable 1996 period. This decline was the result of net
interest income decreasing by $1.1 million to $8.6 million for the six months
ended June 30, 1997 from $9.7 million for the six months ended June 30, 1996.
Offsetting the decrease in net interest income was an increase in other income
of $128,000 and a decrease in general and administrative expenses of $342,000.
For the second quarter of 1997, net income declined by $381,000 or 16.6% to
$1.9 million for the quarter as compared to $2.3 million for the second quarter
of 1996. Again, this was the result of a decline in net interest income offset
by an increase in other income and a decrease in general and administrative
expenses and taxes.
8
Interest Income. Interest income for the six months ended June 30, 1997 was
$24.6 million compared to $19.8 million for the six months ended June 30, 1996.
The $4.8 million or 24.2% increase was the result of increases in interest
income on conventional mortgage loans, mortgage-backed securities, investment
securities and interest-bearing deposits and in dividends on FHLB stock.
Offsetting these increases was a decrease in interest earned on Federal Funds
Sold. Interest income on conventional mortgage loans increased by $3.0 million
or 17.4% to $20.4 million for the six months ended June 30, 1997 from $17.4
million for the comparable 1996 period. This increase was the result of the
average balance of conventional mortgage loans increasing by $97.8 million or
21.5% to $551.9 million for the six months ended June 30, 1997 from $454.1
million for the six months ended at June 30, 1996. Average balances are based
on month end balances for the respective periods. Interest income on mortgage-
backed securities was $1.7 million for the six months ended June 30, 1997
compared to zero for the comparable 1996 period. This increase was the result
of the purchase of $71.5 million in adjustable rate mortgage-backed securities.
Interest income earned on investment securities was $1.3 million for the six
months ended June 30, 1997 compared to $668,000 for the six months ended June
30, 1996. The $663,000 or 94.8% increase was the result of the purchase of
$25.9 million in CMO's. Interest on interest-bearing deposits increased
$186,000 or 47.3% to $579,000 for the six months ended June 30, 1997 from
$393,000 for the six months ended June 30, 1996. This increase was the result
of the average balance in interest bearing deposits increasing by $7.6 million
or 57.0% to $21.0 million for the six months ended at June 30, 1997 from $13.4
million for the six months ended at June 30, 1996. Dividends on FHLB stock
increased by $60,000 or 54.1% to $171,000 for the six months ended June 30, 1997
from $111,000 for the same 1996 period. This increase was the result of the
additional $1.9 million of FHLB stock held by the Company in the 1997 period.
Interest income on federal funds sold decreased by $758,000 or 61.4% to $476,000
for the six months ended June 30, 1997 from $1.2 million for the comparable 1996
period. This decrease was the result of the average balance falling to $16.8
million for the six months at June 30, 1997 from $43.8 million for the six
months ended June 30, 1996.
Interest income for the second quarter of 1997 was $12.5 million compared to
$10.2 million for the comparable 1996 period. The $2.3 million or 22.6%
increase was the result of increases in interest income earned on conventional
mortgage loans, mortgage-backed securities, investment securities, interest
bearing deposits and dividends on FHLB stock. In addition, interest earned on
federal funds sold declined. Interest income earned on conventional mortgage
loans increased $1.3 million or 14.0% to $10.4 million for the three months
ended June 30, 1997 from $9.1 million for the three months ended June 30, 1996.
This increase was the result of the average balance in conventional mortgage
loans increasing $81.8 million or 17.0% to $562.4 million for the three months
ended June 30, 1997 from $480.6 million for the three months ended June 30,
1996. Interest on mortgage-backed securities was $882,000 for the three months
ended June 30, 1997, compared to zero for the same 1996 period. This was due to
the purchase of adjustable rate mortgage-backed securities during 1997.
Interest on investment securities for the three months ended June 30, 1997 was
$666,000 compared to $330,000 for the three months ended June 30, 1996. The
$336,000 or 101.8% increase was the result of the purchases of the CMO's.
Interest on interest-bearing deposits increased by $203,000 or 188.0% to
$311,000 for the three months ended June 30, 1997 from $108,000 for the
comparable 1996 period. This increase was the result of the average balance
rising from $5.8 million for the
9
three months ended June 30, 1996 to $23.7 million for the three months ended
June 30, 1997. Dividend income on FHLB stock increased $31,000 or 48.4% as the
result of the additional purchase of FHLB stock. Due to the decline in the
average balance of federal funds sold from $38.8 million for the three months
ended June 30, 1996 to $8.5 million for the three months ended June 30, 1997,
interest income on federal funds sold dropped by $415,000 or 75.2% to $137,000
from $552,000 for the three months ended June 30, 1997 and 1996, respectively.
Interest Expense. Interest expense for the six months ended June 30, 1997
increased $5.9 million or 57.9% to $16.0 million from $10.1 million for the
comparable 1996 period. This increase was the result of a rise in both interest
on deposits and borrowings. Interest expense on deposits for the six months
ended June 30, 1997 was $13.1 million compared to $10.1 million for the six
months ended June 30, 1996. This $3.0 million or 29.5% increase is due
primarily to an increase of $87.9 million or 29.5% in the average balance of
certificate accounts. Also contributing to the increase was a 21 basis points
increase on the average yield paid on certificate accounts. Interest expense on
borrowings was $2.9 million for the six months ended June 30, 1997. This was
the result of the leverage program undertaken during the fourth quarter of 1996
and completed in 1997 in which the proceeds were invested in adjustable rate
securities.
Interest expense for the three months ended June 30, 1997 was $8.3 million
compared to $5.2 million for the three months ended June 30, 1996. The $3.1
million or 60.7% increase was the result of an increase in both the interest
expense on deposits and borrowings. Interest expense on deposits increased by
$1.5 million or 28.8% to $6.7 million for the three months ended June 30, 1997
from $5.2 million for the three months ended June 30, 1996. Again, this was
primarily the result of the average balance on certificate accounts rising to
$391.0 million for three months ended June 30, 1997 from $309.4 million for the
comparable 1996 period and a 31 basis points increase on the average cost of
certificate accounts. In addition, interest expense on borrowings was $1.7
million for the three months ended June 30, 1997. This was the result of the
leverage program discussed previously.
Net Interest Income. Net interest income decreased to $8.6 million and $4.2
million for the six and three month periods ended June 30, 1997 as compared to
$9.7 million and $5.0 million for the comparable 1996 periods. This was the
result of interest expense rising $1.1 million and $829,000 more than interest
income for the six and three month periods ended June 30, 1997 and 1996.
Provision for Loan Losses. A $50,000 provision for loan losses was recorded
for the six months ended June 30, 1997 as compared to $60,000 for the six month
period ended June 30, 1996. A $30,000 provision was recorded for the three
month period ended June 30, 1997 and 1996. The additional provision was
recorded as the result of the continued growth in the conventional mortgage
loans portfolio. At June 30, 1997, non-performing assets were $485,000 compared
to $629,000 at December 31, 1996. At June 30, 1997, the allowance for loan
losses equalled 147.4% of total non-performing assets, as compared to 105.7% as
of December 31, 1996. For the three and six month periods ended June 30, 1997
and 1996, no loans were charged off. Management believes that the current level
of loan loss reserve is adequate to
10
cover losses inherent in the portfolio as of such date. 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 at June 30,
1997.
Other Income. Other income increased by $128,000 or 31.1% to $540,000 for the
six month period ended June 30, 1997 from $412,000 for the six month period
ended June 30, 1996. In addition, other income increased by $201,000 or 96.2%
to $410,000 for the three months ended June 30, 1997 from $209,000 for the three
month period ended June 30, 1996. The increases were the result of a gain on
the sale of loans of $258,000 and a gain on the sale of real estate owned of
$31,000. Offsetting these gains was a decline in loan fees and service charges.
General and Administrative Expenses. General and administrative expenses
declined by $342,000 or 12.2% to $2.5 million for the six month period ended
June 30, 1997 from $2.8 million for the six month period ended June 30, 1996.
This decrease was primarily the result of a decline in federal insurance
premiums offset by an increase in compensation, payroll taxes and fringe
benefits. Federal insurance premiums declined by $349,000 or 78.1% to $98,000
for the six months ended June 30, 1997 from $447,000 for the six months ended
June 30, 1996. The decrease in federal insurance premiums was the result of the
Saving Association Insurance Fund ("SAIF") reducing the premiums for deposit
insurance in 1997 to 6.5 basis points per $100 of deposits from 23 basis points
per $100 of deposits during the first six months of 1996. In addition, there
was a $57,000 credit received in the first quarter of 1997 for an overcharge of
the premium paid during the fourth quarter of 1996. Compensation, payroll taxes
and fringe benefits increased by $54,000 or 4.0% to $1.4 million for the six
months ended June 30, 1997 from $1.3 million for the comparable 1996 period.
General and administrative expenses declined by $79,000 or 5.7% for the three
months ended June 30, 1997 to $1.3 million from $1.4 million for the three
months ended June 30, 1996. Again, this was primarily the result of a decrease
in federal insurance premiums offset by an increase in compensation, payroll
taxes and fringe benefits.
Income Taxes. Income taxes decreased by $84,000 or 3.0% for the six months
ended June 30, 1997 from the comparable 1996 period. This was the result of net
income before taxes decreasing by $580,000 or 8.0% to $6.6 million for the six
months ended June 30, 1997 from $7.2 million for the six months ended June 30,
1996 The annualized effective income tax rate for the periods ended June 30,
1997 and 1996 were 41.3% and 39.2%, respectively.
Income taxes for the three months ended June 30, 1997 was $1.4 million
compared to $1.5 million for the three months ended June 30, 1996. Again, this
$168,000 or 10.9% decrease was the result of a lower net income before taxes for
the three months ended June 30, 1997 as compared to the three months ended June
30, 1996 and the change in the effective federal income tax rate.
New Accounting Pronouncement. The Financial Accounting Standard Board
("FASB") recently issued Statement of Financial Accounting Standards ("SFAS")
128, "Earnings per Share", which is effective for financial statements for
both interim and annual periods ending after December 15, 1997.
11
SFAS 128 establishes standards for computing and presenting earnings per share
(EPS). It simplifies the standards for computing EPS and makes them comparable
to international EPS. It replaces the presentation of primary EPS with a
presentation of basic EPS. If SFAS 128 had been adopted, basic and diluted EPS
would have been $.34 and $.32, respectively, for the three months ended June 30,
1997 and $.64 and $.61, respectively for the six months ended June 30, 1997.
Basic and diluted EPS would have been $.32 and $.31, respectively for the three
months ended June 30, 1996 and $.60 and $.59 respectively for the six months
ended June 30, 1996.
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.
(a) The Holding Company held an Annual Meeting of Stockholders on April
28, 1997.
(b) The names of each Director elected at the Annual Meeting for three
year terms ending in the year 2000 and votes cast are as follows:
For Withheld
--------- --------
Albert H. Eckert, II 6,986,095 50,314
William S. McMinn 6,995,304 41,105
Jack W. Schweiger 6,992,589 43,820
The names of the Directors whose term of office continued after the
Annual Meeting are as follows:
Thomas J. Jackson, Jr. David F. Figgins
Robert C. Baierl Peter E. Reinert
Jeffrey M. Hinds Theodore R. Dixon
12
(c) A brief description of each matter voted on and the number of yes and
no votes cast:
(i) Ratification of Deloitte & Touche LLP as independent auditor of
First Bell Bancorp, Inc. for the fiscal year ending December 31,
1997.
For Against Abstain
----- ------- -------
6,977,780 50,925 7,704
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 - 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.
13
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: /s/ Albert H. Eckert, II
--------------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: /s/ Jeffrey M. Hinds
--------------------------------------
Jeffrey M. Hinds
Executive Vice President and Chief
Financial Officer (Principal Accounting
Officer)