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, 1997
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
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 [ ] 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 September 30,
1997.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets September 30, 1997 (unaudited)
and December 31, 1996 (audited)................................... 2
Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1997
and 1996, (unaudited)............................................. 3
Consolidated Statements of Changes in Stockholder's Equity
for the Nine Months Ended September 30, 1997 and 1996, (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 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..................... 7
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............... 13
Item 5 Other Information................................................. 13
Item 6 Exhibits and Reports on Form 8-K.................................. 13
SIGNATURES
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(unaudited) (audited)
ASSETS:
Cash:
Cash on-hand .......................................... $ 800 $ 980
Non-interest-bearing deposits ......................... 1,418 1,554
Interest-bearing deposits ............................. 26,663 23,872
-------- -------
Total cash....................................... 28,881 26,406
Mortgage-backed securities-available for sale, at fair
value (cost of $33,696 at September 30, 1997) .......... 34,110 --
Federal funds sold ...................................... 825 72,875
Investment securities held to maturity - at cost
(fair value of $10,417 and $15,429 at September
30, 1997 and December 31, 1996, respectively)........... 9,971 14,964
Investment securities available for sale, at fair value
(cost of $25,947 at September 30, 1997)................. 26,246 --
Conventional mortgage loans - net of allowance for
loan losses of $715 and $665 at September 30, 1997 and
December 31, 1996, respectively......................... 565,681 529,866
Other loans, net ........................................ 953 949
Real estate owned ....................................... 75 229
Properties and equipment, net ........................... 3,558 3,692
Federal Home Loan Bank stock, at cost ................... 5,800 3,999
Accrued interest receivable ............................. 3,402 2,758
Other assets ............................................ 1,713 445
-------- --------
Total assets .................................... $681,215 $656,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Passbook, club and other accounts ...................... $ 65,215 $ 66,486
Money market and NOW accounts .......................... 45,779 44,661
Certificate accounts ................................... 395,475 372,794
-------- -------
Total deposits .................................. 506,469 483,941
Borrowings .............................................. 86,000 70,000
Advances by borrowers for taxes and insurance ........... 6,139 10,822
Accrued interest on deposits ............................ 5,809 503
Accrued interest on borrowings .......................... 407 191
Accrued income taxes .................................... 109 81
Deferred income tax liability ........................... 1,737 1,244
Dividend payable on common stock ........................ 571 713
Other liabilities ....................................... 2,212 2,255
-------- --------
Total liabilities ............................... 609,453 569,750
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 September 30, 1997 7,758,150 outstanding at
December 31, 1996 ..................................... 86 86
Additional paid-in capital ............................. 61,271 61,063
Unearned ESOP shares (605,691 and 629,622 shares at
September 30, 1997 and December 31, 1996,
respectively) ......................................... (4,285) (4,454)
Unearned MRP shares (307,528 and 343,850 shares at
September 30, 1997 and December 31, 1996,
respectively) ......................................... (4,290) (4,792)
Treasury stock at cost (2,085,625 shares and 838,100
shares at September 30, 1997 and December 31, 1996,
respectively) ......................................... (32,077) (11,684)
Unrealized gain or loss on securities available for sale,
net of taxes at $184 .................................. 282 --
Retained earnings ...................................... 50,775 46,214
------- -------
Total Stockholders' Equity .............................. 71,762 86,433
Total Liabilities and Stockholders' Equity .............. $681,215 $656,183
======== ========
2
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------- ------------------ ------------------ ------------------
Interest income:
Conventional mortgage loans $10,440 $ 9,694 $30,830 $27,065
Interest-bearing deposits 412 156 991 548
Mortgage-backed securities 998 -- 2,652 --
Federal funds sold 15 216 492 1,450
Investment securities 625 292 1,926 962
Other loans 16 17 50 54
Federal Home Loan Bank stock 94 64 265 176
------- ------- ------- -------
Total interest and dividend income 12,600 10,439 37,206 30,255
Interest expense on deposits 6,913 5,624 20,007 15,736
Interest expense on borrowings 1,610 -- 4,478 --
------- ------- ------- -------
Total interest expense 8,523 5,624 24,485 15,736
Net interest income 4,077 4,815 12,721 14,519
Provision for loan losses -- 30 50 90
------- ------- ------- -------
Net interest income after provision
for loan losses 4,077 4,785 12,671 14,429
Other income:
Loan fees and service charges 128 113 367 517
Gain on sale of premises -- 536 -- 536
(Loss) gain on sale of loans (8) -- 250 --
Miscellaneous income (2) 3 41 12
------- ------- ------- -------
Total other income 118 652 658 1,065
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 784 762 2,188 2,111
Federal insurance premiums 80 2,714 178 3,161
Office occupancy expense, excluding depreciation 54 108 312 339
Depreciation 74 57 221 173
Computer services 54 50 163 152
Other expenses 214 228 669 798
------- ------- ------- -------
Total general and administrative expense 1,260 3,919 3,731 6,734
Net income before provision for income taxes 2,935 1,518 9,598 8,760
Provision for income taxes:
Current:
Federal 811 308 2,770 2,242
State 248 31 762 520
Deferred expense 30 80 310 494
------- ------- ------- -------
Total provision for income taxes 1,089 419 3,842 3,256
Net income $ 1,846 $ 1,099 $ 5,756 $ 5,504
======= ======= ======= =======
Primary earnings per share $0.30 $0.15 $0.89 $0.73
------- ------- ------- -------
Fully diluted earnings per share $0.30 $0.15 $0.89 $0.73
------- ------- ------- -------
Weighted average shares outstanding 6,511 7,224 6,876 7,496
======= ======= ======= =======
3
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
Number of
Common Additional Unearned Unearned Unrealized
Stock Common Paid-in ESOP Treasury MRP Gain/Loss
Shares Stock Capital Shares Stock Shares Net of
Taxes
------------------------------------------------------------------------------
Balance at December 31, 1995 7,932 $86 $83,524 $(6,636) -- -- --
Purchase of treasury stock (838) (11,684)
Purchase of MRP stock (344) (4,792)
Allocation of ESOP shares 29 106 205
Dividend on common stock ($0.20) --
Net income --
------ --- ------- ------- -------- ------- -------
Balance at September 30, 1996 6,779 $86 $83,631 $(6,432) $(11,684) (4,792) --
====== === ======= ======= ======== ======= =======
Balance at December 31, 1996 6,784 $86 $61,063 $(4,454) $(11,684) $(4,792)
Purchase of treasury stock (1,247) (20,394)
Allocation and adjustments of MRP
shares 36 8 502
Allocation of ESOP 24 200 169
Dividend on common stock ($0.30)
Change in unrealized gain or
loss on securities available for sale,
net of taxes 282
Net income
------ === ------- ------- -------- ------- -------
Balance at September 30, 1997 5,597 $86 $61,271 $(4,285) $(32,078) $(4,290) $282
====== === ======= ======= ======== ======= =======
Retained
Earnings Total
----------------------
Balance at December 31, 1995 $41,508 $118,482
Purchase of treasury stock (11,684)
Purchase of MRP stock (4,792)
Allocation of ESOP shares 311
Dividend on common stock ($0.20) (1,460) (1,460)
Net income 5,505 5,505
------- --------
Balance at September 30, 1996 $45,553 $106,362
======= ========
Balance at December 31, 1996 $46,214 $ 86,433
Purchase of treasury stock (20,394)
Allocation and adjustments of MRP
shares 581 1,091
Allocation of ESOP 369
Dividend on common stock ($0.30) (1,775) (1,775)
Change in unrealized gain or
loss on securities available for sale,
net of taxes 282
Net income 5,756 5,756
------- --------
Balance at September 30, 1997 $50,776 $ 71,762
======= ========
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,756 $ 5,504
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 221 173
Deferred income taxes 310 494
Amortization of premiums and accretion of discounts 185 (9)
Provision for loan losses 50 90
Compensation expense-allocation of ESOP and MRP shares 785 714
Gain on sale of real estate owned (25) -
Gain on sale of conventional mortgage loans (258) -
Loss on sale of mortgage-backed securities 8 -
Gain on sale of premises - (536)
Net proceeds from sale of mortgage-backed securities,
available for sale 46,668 -
Net proceeds from sale of conventional mortgage loans,
available for sale 29,662 -
Dividend payable - (643)
Increase or decrease in assets and liabilities
Accrued interest receivable (644) (360)
Accrued interest on deposits 5,306 3,947
Accrued interest on borrowings 216 -
Accrued income taxes 28 (996)
Other assets (1,268) (559)
Other liabilities 50 3,341
-------- ---------
Net cash provided by operating activities 87,050 11,160
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, available for sale (25,947) -
Purchase of mortgage-backed securities, available for sale (92,528) -
Maturity of Federal Funds 72,050 27,925
Maturity of investment securities held to maturity 5,000 5,000
Principal paydowns on mortgage-backed securities, available for sale 11,718 -
Net increase in conventional mortgage loans (65,344) (103,820)
Net (increase)decrease in other loans (4) 98
Purchase of Federal Home Loan Bank stock (1,801) (990)
Net proceeds from sale of real estate owned 254 178
Net proceeds from sale of premises - 908
Purchase of premises and equipment (87) (350)
-------- ---------
Net cash used in investing activities (96,689) (71,051)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in money market, NOW, passbook, club and
other savings accounts (153) (2,692)
Net increase in certificate accounts 22,681 66,238
Decrease in advances by borrowers for taxes and insurance (4,683) (2,476)
Net increase in borrowings 16,000 -
Dividend paid (1,338) (817)
Purchase of MRP stock - (4,792)
Purchase of treasury stock (20,393) (11,684)
-------- ---------
Net cash provided by financing activities 12,114 43,777
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,475 (16,114)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,406 23,722
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,881 $ 7,608
======== =========
5
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and advances by borrowers for
taxes and insurance $14,701 $11,789
Income taxes 3,530 3,713
Transfer from conventional loans to real estate acquired through foreclosure 94 287
Increase in additional paid-in capital-ESOP and MRP allocation 208 205
Transfers from conventional mortgage loans to conventional mortgage loans,
held for sale 29,989 -
6
FIRST BELL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR NINE MONTHS ENDED SEPTEMBER 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 September 30, 1997, the consolidated
statements of income for the three and nine months ended September 30, 1997 and
1996 and related consolidated statements of cash flows and changes in
stockholders' equity for the nine months ended September 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 September 30, 1997 and December 31, 1996.
- -----------------------------------------------------------------------------
Assets. Total assets increased by $25.0 million, or 3.8% to $681.2 million at
September 30, 1997 from $656.2 million at December 31, 1996. The increase was
primarily the result of increases in conventional mortgage loans of $35.8
million, mortgage-backed securities of $34.1 million and investment securities
of $21.3 million. Offsetting these increases was a decrease in Federal Funds
sold of $72.1 million. The $35.8 million, or 6.8% increase in conventional
mortgage loans was the result of $105.4 million in conventional mortgages being
originated during the first nine months of 1997 reduced by $35.6 million in
payments and prepayments and the sale of $30.0 million in conventional mortgage
loans. Mortgage-backed securities increased to $34.1 million as the result of
the purchase of $91.2 million in adjustable rate mortgage-backed securities
offset by the sale and principle repayment of the same of $45.8 million and
$11.7 million, respectively. Investment securities increased $21.3 million or
142.0% to $36.2 million at September 30, 1997 from $14.9 million at December 31,
1996. The increase was the result of the purchase of $25.9 million in adjustable
rate Collateralized Mortgage Obligations ("CMO's") reduced by the maturity of
$5.0 million in treasury bills. Federal Funds sold declined by $72.1 million, or
7
98.9% to $825,000 at September 30, 1997 from $72.9 million at December 31, 1996.
The reduction in Federal Funds sold was the result of the funds being used to
finance the above described purchases.
Liabilities. Total liabilities increased to $609.5 million at September 30,
1997 from $569.8 million at December 31, 1996. The $39.7 million or 7.0%
increase was the result of increases in deposits of $22.5 million, borrowings of
$16.0 million and accrued interest on deposits of $5.3 million. Offsetting
these increases was a decrease of $4.7 million in advances by borrowers for
taxes and insurance. Deposits at September 30, 1997 were $506.4 million
compared to $483.9 million at December 31, 1996. The $22.5 million or 4.7%
increase was primarily the result of certificate accounts increasing by $22.7
million or 6.1% to $395.5 million at September 30, 1997 from $372.8 million at
December 31, 1996. Borrowings increased $16.0 million or 22.9% to $86.0 million
at September 30, 1997 from $70.0 million at December 31, 1996. The increase was
the result of an additional $50.0 million being borrowed to fund the purchase of
investment and mortgage-backed securities and increased loan originations,
reduced by the repayment of $34.0 million from the proceeds of the sale of the
mortgage-backed securities. Accrued interest on deposits increased by $5.3
million from $503,000 at December 31, 1996 to $5.8 million at September 30,
1997. This increase is attributable to the timing of interest payments on
certificate accounts which will be made in December.
Capital. Stockholders' equity decreased by $14.7 million or 17.0% to $71.7
million at September 30, 1997 from $86.4 million at December 31, 1996. This
decrease was the result of the repurchase of 1.2 million shares of the
Company's common stock for $20.4 million and dividends paid of $1.8 million. The
average price per share paid for the 1.2 million shares, which were placed in
Treasury, was $16.34. Offsetting these decreases was net income of $5.8 million
for the nine months ended September 30, 1997.
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 nine months ended
September 30, 1997 was the origination of $105.4 million of conventional
mortgage loans and the purchase of $91.2 million of adjustable rate mortgage-
backed securities and $25.9 million of adjustable rate CMO's. Sources of funds
for the nine months ended September 30, 1997 were the increase in deposits of
$22.5 million, the $16.0 million increase in borrowings, $76.3 million in
proceeds from the sale of loans and mortgage-backed securities, $47.3 million in
principal repayments and prepayments of conventional mortgage loans and
mortgage-backed securities and $5.0 million from the maturity of investment
securities held to maturity.
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 6.8% at
8
September 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 September 30, 1997, assets qualifying for short-
term liquidity, including cash and short term investments, totalled $34.0
million.
At September 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 assets) ratios were 10.2%, 10.2% and
23.0%, 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 Nine and Three Months ended
- -----------------------------------------------------------------------
September 30, 1997 and 1996.
- ---------------------------
General. Net income increased by $252,000 or 4.6% for the nine months ended
September 30, 1997 to $5.8 million from $5.5 million for the nine months ended
September 30, 1996. This increase was the result of general administrative
expenses decreasing by $3.0 million or 44.6% for the nine months ended September
30, 1997 to $3.7 million from $6.7 million for the comparable 1996 period, which
included a special one-time assessment of $2.5 million to recapitalize the
Savings Association Insurance Fund. Reducing the impact of the decline in
general and administrative expenses was a decrease in net interest income of
$1.8 million or 12.4% to $12.7 million for the nine months ended September 30,
1997 from $14.5 million for the nine months ended September 30, 1996. In
addition, other income decreased by $407,000 or 38.2% to $658,000 from $1.1
million and income taxes increased by $586,000 or 18.0% to $3.8 million from
$3.3 million for the nine months ended September 30, 1997 and 1996,
respectively.
For the third quarter of 1997, net income increased by $747,000 or 68.0% to
$1.8 million from $1.1 million for the third quarter of 1996. Again, this was
due to a decline of $2.7 million or 67.8% in general and administrative expenses
to $1.2 million for third quarter of 1997 from $3.9 million for the third
quarter of 1996. Offsetting this reduction in general and administrative
expenses were decreases in net interest income of $738,000 and other income of
$534,000. Net interest income declined to $4.1 million from $4.8 million and
other income to $118,000 from $652,000 for the third quarter of 1997 as compared
to the third quarter of 1996. Income taxes increased by $670,000 or 159.9% to
$1.1 million for the third quarter of 1997 from $419,000 for the comparable 1996
period.
Interest Income. Interest income for the nine months ended September 30, 1997
increased $7.0 million or 23.0% to $37.2 million from $30.2 million for the nine
months ended September 30, 1996. The increase was the result of increases in
interest on conventional mortgage loans, mortgage-backed securities, investment
securities and interest-bearing deposits. Offsetting these increases was a
decrease in interest earned on Federal Funds Sold. Interest on conventional
mortgage loans increased by $3.8 million or 13.9% to $30.8 million for the nine
months ended September 30, 1997 compared to $27.0 million for the nine months
ended September 30, 1996. The increase was the result of the average balance on
conventional mortgage loans increasing by $80.9 million or 17.0% to $555.9
million from $475.0 million for 1996. Average balances are based on month-end
balances for the respective periods. Interest
9
on mortgage-backed securities was $2.7 million for the nine months ended
September 30, 1997. First Bell did not have any mortgage-backed securities in
1996. Interest on investment securities increased to $1.9 million for the nine
months ended September 30, 1997 from $962,000 for the comparable 1996 period.
The $964,000 or 100.2% increase was the result of the purchase of the CMO's in
1997. Interest on interest-bearing deposits increased by $443,000 or 80.8%.
The increase was the result of the average balance of interest bearing deposits
increasing $8.7 million or 61.4% to $22.9 million for the nine months ended
September 30, 1997 from $14.2 million for the comparable 1996 period.
Offsetting these increases was a decrease in interest on Federal Funds Sold of
$958,000 or 66.1% to $492,000 for the nine months ended September 30, 1997 from
$1.5 million for the nine months ended September 30, 1996.
Interest income for the quarter ended September 30, 1997 increased to $12.6
million from $10.4 million for the quarter ended September 30, 1996. The $2.2
million or 20.7% increase was again the result of increases in interest earned
on conventional mortgage loans, mortgage-backed securities, investment
securities, and interest bearing deposits offset by a decrease in Federal Funds
Sold. Interest on conventional mortgage loans increased $746,000 or 7.7% to
$10.4 million for the quarters ended September 30, 1997 from $9.7 million for
the quarter September 30, 1996. The increase was the result of the average
balance of conventional mortgages increasing by $47.3 million or 9.2% to $564.0
million from $516.7 million for the quarters ended September 30, 1997 and 1996,
respectively. Interest on mortgage-backed securities was $998,000 for the third
quarter of 1997 compared to zero for the third quarter of 1996. Interest on
investment securities increased by $333,000 or 114.0% to $625,000 for the third
quarter of 1997 from $292,000 for the comparable 1996 period. The increase was
the result of the purchase of CMO's in 1997. Interest on interest-bearing
deposits increased to $412,000 for the quarter ended September 30, 1997 from
$156,000 for the quarter ended September 30, 1996. The $256,000 or 164.1%
increase was the result of the average balance in interest-bearing deposits
increasing by $10.9 million or 69.0% to $26.7 million for third quarter of 1997
compared to $15.8 million the third quarter of 1996. In addition, there was a
28 basis point increase on the rate earned on interest-bearing deposits rising
to 5.5% for the quarter ended September 30, 1997 from 5.2% for the comparable
1996 period. Interest on Federal Funds Sold decreased by $201,000 or 93.1% to
$15,000 for the third quarter of 1997 from $216,000 for the third quarter of
1996. This is the result of the average balance declining by $11.8 million or
93.4% to $842,000 from $12.7 million for the quarters ended September 30, 1997
and 1996, respectively.
Interest Expense. Interest expense increased to $24.5 million for the nine
months ended September 30, 1997 from $15.7 million for the nine months ended
September 30, 1996. The $8.8 million or 55.6% increase was the result
of increases in interest on deposits and borrowings. Interest on deposits
increased $4.3 million or 27.1% to $20.0 million for the nine months ended
September 30, 1997 from $15.7 million for the nine months ended September 30,
1996. The increase was the result of the average balance in certificate
accounts increasing by $80.1 million or by 25.8% to $390.1 million for the nine
months ended September 30, 1997 from $310.0 million for the comparable 1996
period. In addition, there was a 22 basis points increase on the average rate
paid on certificate accounts rising to 6.01% from 5.79% for the nine months
ended September 30, 1997 and 1996, respectively. Interest expense on
borrowings for the nine months ended September 30, 1997 was $4.5 million. There
were no borrowings in 1996.
10
Interest expense for the quarter ended September 30, 1997 increased by $2.9
million or 51.5% to $8.5 million from $5.6 million for the quarter ended
September 30, 1996. Again, this was the result of an increase in interest on
deposits and borrowings. Interest on deposits increased to $6.9 million from
$5.6 million for the quarters ended September 30, 1997 and 1996, respectively.
The increase was the result of the average balance on certificate accounts
increasing by $64.4 million or 19.3% to $398.1 million for the quarter ended
September 30, 1997 from $333.7 million for the quarter ended September 30, 1996.
In addition, the average rate paid increased to 6.05% for the third quarter of
1997 from 5.80% for the comparable 1996 period. Interest expense on borrowings
for the quarter ended September 30, 1997 was $1.6 million.
Net Interest Income. Net interest income declined to $12.7 million for the
nine months ended September 30, 1997 from $14.5 million for the nine months
ended September 30, 1996. The $1.8 million or 12.4% decline was the result of
interest expense increasing by $8.8 million while interest income increased by
$7.0 million. Net interest income for the quarter ended September 30, 1997
declined by $738,000 or 15.3% to $4.1 million from $4.8 million for the quarter
ended September 30, 1996. The decline was the result of interest expense
increasing by $2.9 million while interest income increased $2.2 million.
Provision for Loan Losses. A $50,000 provision for loan losses was recorded
for the nine months ended September 30, 1997, none of which was recorded during
the third quarter. For the nine and three months ended September 30, 1996, a
provision of $90,000 and $30,000 was recorded, respectively. The additional
provision recorded in 1997 was the result of $35.8 million or 6.8% increase in
conventional mortgage loans to $565.7 million from $529.9 million at December
31, 1996. At September 30, 1997, non-performing assets were $615,000 compared
to $629,000 at December 31, 1996. At September 30, 1997, the allowance for loan
losses equaled 116.3% of total non-performing assets, as compared to 105.7% at
December 31, 1996. For the nine and three months ended September 30, 1997, no
loans were charged off. Management believes that the current level of loan loss
reserves is adequate to 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 as of September 30, 1997.
Other Income. Other income declined by $407,000 or 38.2% to $658,000 from
$1.1 million for the nine months ended September 30, 1997 and September 30,
1996, respectively. The decline was the result of a $536,000 gain recorded in
the third quarter of 1996 for the sale of premises and loans fees and service
charges decreasing by $150,000. Offsetting these items was a gain of $250,000
on the sale of loans and investments recorded during 1997. For the third
quarter of 1997, other income declined $534,000 or 81.9% to $118,000 from
$652,000 for the comparable 1996 period. This decline was the result of the
sale of premises as described above.
General and Administrative Expenses. General and administrative expenses for
the nine months ended September 30, 1997 decreased by $3.0 million or 44.6% to
$3.7 million from $6.7 million for the nine months ended September 30, 1996.
For the third quarter of 1997, general and administrative expenses decreased by
$2.7 million or 67.8% to $1.2 million from $3.9 million for the third quarter of
1996. The decline was the result of a decrease in federal
11
insurance premiums of $3.0 million and $2.6 million for the nine and three
months ended September 30, 1997 and 1996, respectively. On September 30, 1996,
the President signed into law the Deposit Insurance Funds Act of 1996 (the
"Funds Act") which among other things, imposed a special one-time assessment of
65.7 basis points per $100 of deposits on SAIF member institutions, including
the Association, to recapitalize the SAIF. The Association took a charge of
$2.5 million as the result of the FDIC special assessment. In addition, the
premium for deposit insurance was reduced to 6.5 basis points per $100 deposit
from 23 basis points starting January 1, 1997.
Income Taxes. Income taxes increased to $3.8 million for the nine months
ended September 30, 1997 from $3.3 million for the nine months ended September
30, 1996. The $586,000 or 18.0% increase was the result of net income before
taxes increasing by $838,000 or 9.6% to $9.6 million for the nine months ended
September 30, 1997 from $8.8 million for the comparable 1996 period. Income
taxes for the third quarter of 1997 increased $670,000 or 160.0% to $1.1 million
from $419,000 for the third quarter of 1996. Again this was the result of net
income before taxes rising to $2.9 million from $1.5 million for the quarters
ended September 30, 1997 and 1996, respectively.
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. 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.
SFAS 128 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 $.33
and $.31, respectively, for the three months ended September 30, 1997 and $.97
and $.92, respectively for the nine months ended September 30, 1997. Basic and
diluted EPS would have been $.16 for the nine months ended September 30, 1996
and $.77 and $.75 respectively for the nine months ended September 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.
12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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: November , 1997 /s/ Albert H. Eckert, II
-------------------------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: November , 1997 /s/ Jeffrey M. Hinds
-----------------------------------------------
Jeffrey M. Hinds
Executive Vice President and Chief
Financial Officer (Principal Accounting
Officer)
14