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, 2000
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: 4,785,573 shares of common
stock, par value $.01 per share, were outstanding as of August 8, 2000.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
-----
PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets June 30, 2000 (unaudited)
and December 31, 1999............................................. 4
Consolidated Statements of Income for the Three and
Six Months Ended June 30, 2000 and 1999
(unaudited)....................................................... 5
Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended June 30, 2000 and
1999 (unaudited).................................................. 6
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months Ended June 30, 2000 and 1999 (unaudited)....... 7
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (unaudited).......................... 8
Notes to Unaudited Consolidated Financial Statements for the Three
and Six Months Ended June 30, 2000 and 1999 (unaudited)........... 10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 11
Item 3 Quantitative and Qualitative Disclosure About Market Risk......... 18
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................. 18
Item 2 Changes in Securities............................................. 18
Item 3 Defaults Upon Senior Securities................................... 18
Item 4 Submission of Matters to a Vote of Security Holders............... 18
Item 5 Other Information................................................. 19
Item 6 Exhibits and Reports on Form 8-K.................................. 19
SIGNATURES 20
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
3
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, DECEMBER 31,
2000 1999
------- -------
ASSETS (unaudited)
- ------
Cash:
Cash on-hand $ 861 $ 1,857
Non-interest-bearing deposits 2,267 2,204
Interest-bearing deposits 13,570 16,407
------- -------
Total cash 16,698 20,468
Federal funds sold 13,650 33,000
Investment securities held to maturity - at cost (fair value of
$5,242 at December 31, 1999) -- 4,989
Investment securities available-for-sale at fair value (cost of $216,154 and $217,043
at June 30, 2000 and December 31, 1999, respectively) 206,268 202,382
Mortgage-backed securities available-for-sale at fair value (cost $20,837 at
June 30, 2000) 20,755 --
Conventional mortgage loans - net of allowance for loan losses of $925 at
June 30,2000 and December 31, 1999, respectively 535,961 532,292
Other loans, net 999 967
Real estate owned 29 390
Premises and equipment, net 3,776 3,924
Federal Home Loan Bank stock, at cost 11,400 11,400
Accrued interest receivable 5,316 4,947
Other assets 1,839 1,363
------- -------
Total assets $816,691 $816,122
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits: $ 73,014 $ 73,308
Passbook, club and other accounts 59,188 52,259
Money market and NOW accounts 387,254 386,364
------- -------
Certificate accounts 519,456 511,931
Total deposits
Borrowings 221,750 238,000
Advances by borrowers for taxes and insurance 15,368 11,223
Accrued interest on deposits 4,710 703
Accrued interest on borrowings 830 864
(Receivable)/payable for income taxes (186) 93
Deferred income tax asset (3,216) (4,365)
Dividend payable on common stock 496 453
Other liabilities 2,056 2,702
------- -------
Total liabilities 761,264 761,604
Stockholders' equity:
Preferred stock, ($0.01 par value; 2,000,000 shares authorized;
no shares issued or outstanding) -- --
Common stock ($0.01 par value; 20,000,000 shares authorized;
8,596,250 issued; 4,819,973 outstanding at June 30, 2000
5,189,063 outstanding at December 31, 1999; one stock right per
share) 86 86
Paid-in capital 62,422 62,217
Unearned ESOP shares (513,751 and 528,739 shares at June 30, 2000
and December 31, 1999, respectively) (3,634) (3,740)
Unearned MRP shares (210,727 and 242,384 shares at June 30, 2000 and
December 31, 1999, respectively) (2,937) (3,378)
Treasury stock (3,776,277 shares and 3,407,187 shares at June 30,
2000 and December 31, 1999, respectively) (61,073) (55,523)
Accumulated other comprehensive loss, net of taxes (6,111) (8,931)
Retained earnings 66,674 63,787
------- -------
Total Stockholders' Equity 55,427 54,518
Total Liabilities and Stockholders' Equity $816,691 $816,122
======== ========
See notes to consolidated financial statements
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Interest income:
Conventional mortgage loans $ 9,636 $ 9,712 $19,192 $19,666
Interest-bearing deposits 323 291 547 553
Mortgage-backed securities 167 -- 213 --
Federal funds sold 224 52 515 289
Investment securities 2,654 2,697 5,325 5,018
Other loans 17 18 34 32
Federal Home Loan Bank stock 199 189 390 358
------- ------- ------- -------
Total interest and dividend income 13,220 12,959 26,216 25,916
Interest expense on deposits 6,784 5,926 13,211 11,947
Interest expense on borrowings 3,197 3,289 6,441 6,166
------- ------- ------- -------
Total interest expense 9,981 9,215 19,652 18,113
------- ------- ------- -------
Net interest income 3,239 3,744 6,564 7,803
Provision for loan losses -- 30 -- 60
------- ------- ------- -------
Net interest income after provision
for loan losses 3,239 3,714 6,564 7,743
------- ------- ------- -------
Other income:
Loan fees and service charges 151 124 309 220
Gain on sale of loans and securities 138 -- 138 45
Miscellaneous income and (expense) 2 15 90 (4)
------- ------- ------- -------
Total other income 291 139 537 261
------- ------- ------- -------
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 689 921 1,418 1,655
Federal insurance premiums 27 74 54 148
Office occupancy expense, excluding depreciation 132 126 248 276
Depreciation 72 76 143 148
Computer services 62 78 132 137
Other expenses 365 380 691 922
------- ------- ------- -------
Total general and administrative expense 1,347 1,655 2,686 3,286
------- ------- ------- -------
Net Income before provision for income taxes 2,183 2,198 4,415 4,718
------- ------- ------- -------
Provision for income taxes:
Current:
Federal 112 184 335 584
State 203 164 245 346
Deferred credit (49) (83) (51) (180)
------- ------- ------- -------
Total provision for income taxes 266 265 529 750
------- ------- ------- -------
Net income $ 1,917 $ 1,933 $ 3,886 $ 3,968
======= ======= ======= =======
Basic earnings per share $0.46 $0.40 $0.91 $0.78
======= ======= ======= =======
Diluted earnings per share $0.45 $0.38 $0.89 $0.75
======= ======= ======= =======
Weighted average shares outstanding-Basic 4,142 4,852 4,255 5,070
======= ======= ======= =======
Weighted average shares outstanding-Diluted 4,287 5,080 4,388 5,278
======= ======= ======= =======
See notes to consolidated financial statements
5
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30,1999
-------------- -------------- -------------- -------------
Net income $1,917 $ 1,933 $ 3,886 $ 3,968
------ ------- ------- --------
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during
the period 2,578 (7,858) 4,696 (10,195)
Less: reclassification adjustment for gains
realized in net income -- -- -- (45)
------ ------- ------- --------
Other comprehensive income/(loss), before taxes 2,578 (7,858) 4,696 (10,150)
Tax (expense)/benefit related to other comprehensive
income (998) 2,634 (1,876) 3,965
------ ------- ------- --------
Comprehensive income/(loss) $3,497 $(3,291) $ 6,706 ($2,217)
====== ======= ======= ========
See notes to consolidated financial statements
6
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(in thousands)
(unaudited)
Accumulated
Number of Other Com-
Common Additional Unearned prehensive
Stock Common Paid-in ESOP Treasury MRP Income, Net Retained
Shares Stock Capital Shares Stock Stock of Taxes Earnings Total
-------------------------------------------------------------------------------------------
Balance at December 31, 1998 6,100 $86 $61,768 ($3,972) ($38,918) ($3,839) $1,179 $57,598 $ 73,902
Purchase of treasury stock (672) (12,653) (12,653)
Allocation of ESOP shares 155 111 266
Allocation of MRP shares 129 461 590
Dividend on common stock ($0.20) (939) (939)
Change in unrealized gain or
(loss), net of taxes (6,185) (6,185)
Net income 3,968 3,968
----- --- ------- ------- -------- ------- ------- ------- -------
Balance at June 30, 1999 5,428 $86 $62,052 $(3,861) $(51,571) $(3,378) $(5,006) $60,627 $58,949
===== === ======= ======= ======== ======= ======= ======= =======
Balance at December 31, 1999 5,189 $86 $62,217 $(3,740) $(55,522) $(3,378) $(8,931) $63,786 $54,518
Purchase of treasury stock (369) (5,551) (5,551)
Allocation of ESOP shares 114 106 220
Allocation of MRP shares 91 441 532
Dividend on common stock ($0.24) (998) (998)
Change in unrealized gain or
(loss), net of taxes 2,820 2,820
Net income 3,886 3,886
----- --- ------- ------- -------- ------- ------- ------- -------
Balance at June 30, 2000 4,820 $86 $62,422 $(3,634) $(61,073) $(2,937) $(6,111) $66,674 $55,427
===== === ======= ======= ======== ======= ======= ======= =======
See notes to consolidated financial statements
7
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,886 $ 3,968
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 143 148
Deferred income taxes (51) (180)
Amortization of premiums and accretion of discounts (54) (54)
Provision for loan losses -- 60
Compensation expense-allocation of ESOP and MRP shares 433 549
(Gain)/Loss on sale of real estate owned (84) 9
Gain on sale of investment securities, available for sale (138) (45)
(Increase) or decrease in assets and liabilities
Accrued interest receivable (369) (1,007)
Accrued interest on deposits 4,007 3,293
Accrued interest on borrowings (34) 273
Accrued income taxes (280) (71)
Other assets (475) (18)
Other liabilities (1,045) (94)
Dividend payable 43 (66)
-------- --------
Net cash provided by operating activities 5,982 6,765
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, available for sale -- (85,188)
Purchase of mortgage-backed securities, available for sale (21,294) --
Maturity of federal funds 19,350 18,175
Principal repayments on mortgage-backed securities, available for sale 479 --
Net proceeds from sale of investments, available for sale -- 3,317
Net proceeds from sale of investments, held to maturity 5,125 --
Principal repayments on investment securities, available for sale 925 3,247
Net (increase)/decrease in conventional loans (3,698) 9,592
Net increase in other loans (33) (37)
Purchase of Federal Home Loan Bank stock -- (2,650)
Net proceeds from sale of real estate owned 474 124
Purchase of premises and equipment (29) (93)
Retirement of equipment 34 --
-------- --------
Net cash provided/(used) in investing activities 1,333 (53,513)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 6,634 2,729
Net increase/(decrease) in certificate accounts 891 (10,214)
Net increase in advances by borrowers for taxes and insurance 4,145 3,792
Net (decrease)/increase in borrowings (16,250) 63,000
Dividends paid (954) (939)
Purchase of treasury stock (5,551) (12,653)
-------- --------
Net cash (used)/provided by financing activities (11,085) 45,715
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,770) (1,033)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,468 21,543
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,698 $ 20,510
======== ========
See notes to consolidated financial statements
8
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
SUPPLEMENTAL DISCLOSURES: Six Months Ended Six Months Ended
Cash paid for: June 30, 2000 June 30, 1999
---------------- -----------------
Interest on deposits and advances by borrowers for
taxes and insurance $9,204 $ 8,654
Interest on borrowings 6,476 5,893
Income taxes 1,534 1,003
Non-cash transactions:
Transfers from conventional loans to real estate acquired through foreclosures 29 81
Increase in additional paid-in capital ESOP and MRP allocation and options
exercised 205 284
Unrealized appreciation/(depreciation) on securities available for sale 4,696 (10,150)
9
FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
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 the Association 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, 2000 and related consolidated
statements of income, comprehensive income, cash flows and changes in
stockholders' equity for the three and six months ended June 30, 2000 and 1999
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, 1999.
Private Securities Litigation Reform Act Safe Harbor Statement
- --------------------------------------------------------------
In addition to historical information, this 10-Q includes certain forward-
looking statements based on current management expectations. Examples of this
forward-looking information can be found in, but are not limited to, the
allowance for losses discussion and the quantitative and qualitative disclosure
about market risk. The Company's actual results could differ materially from
those of management expectations. Factors that could cause future results to
vary from current management expectations include, but are not limited to,
general economic conditions, legislative and regulatory changes, monetary and
fiscal policies of the federal government, changes in tax policies, rates and
regulations of federal, state and local tax authorities, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition of the
Company's loan and investment portfolios, changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices. The Company does not undertake-and specifically disclaims
any obligation-to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of Financial Condition at June 30, 2000 and December 31, 1999.
- --------------------------------------------------------------------------
Assets. Total assets increased by $569,000 to $816.7 million at June 30, 2000
from $816.1 million at December 31, 1999. The increase was the result of
increases in mortgage-backed securities, available for sale; investment
securities, available for sale; and conventional mortgage loans. Offsetting
these increases were decreases in federal funds sold, investment securities,
held to maturity and cash. Mortgage-backed securities, available for sale at
June 30, 2000 were $20.8 million. There were no mortgage-backed securities as
of June 30, 1999. The increase was the result of the purchase of $21.3 million
in adjustable rate mortgage-backed securities offset by principal repayments of
$479,000. Investment securities, available for sale increased by $3.9 million
or 1.9% to $206.3 million at June 30, 2000 from $202.4 million at December 31,
1999. The increase was the result of the unrealized gain or loss improving by
$4.7 million for the first six months of the year. Reducing the impact of the
improvement in unrealized gain or loss were principal paydowns of $925,000.
Conventional mortgage loans increased by $3.7 million or 0.7% to $536.0 million
at June 30, 2000 from $532.3 million at December 31, 1999. The increase was
primarily the result of the origination of $30.1 million in 1-4 family mortgage
loans and disbursements of $4.7 million for home equity loans offset by
principal payments of $29.5 million. Federal funds sold decreased by $19.4
million or 58.6% to $13.6 million at June 30, 2000 from $33.0 million at
December 31, 1999. Total cash decreased by $3.8 million or 18.4% to $16.7
million at June 30, 2000 from $20.5 million at December 31, 1999. The decrease
in federal funds sold and cash was the result of the money being used to paydown
borrowings, fund the purchases of mortgage-backed securities and treasury stock
and increase in lending for conventional mortgage loans. Investment securities,
held to maturity was zero at June 30, 2000. The $5.0 million reduction from
December 31, 1999 was the result of the Company selling a U.S. Treasury Note
that resulted in a gain of $138,000. The sale of the security was done to
improve the Company's interest rate risk position. The proceeds from the sale
were used to help fund the purchase of the adjustable rate mortgage-backed
securities.
Liabilities. Total liabilities remained relatively flat at $761.3 million at
June 30, 2000 compared to $761.6 million at December 31, 1999. There was a
decrease in borrowings, which was offset by increases in deposits, advances by
borrowers for taxes and insurance and accrued interest on deposits. Borrowings
decreased by $16.3 million or 6.8% to $221.8 million at June 30, 2000 from
$238.0 million at December 31, 1999. The reduction was caused by the repayment
of $20.0 million in FHLB borrowings and $1.3 million in borrowings from an
outside bank. Offsetting the payments was an additional $5.0 million in
borrowings from the outside bank. Total deposits increased to $519.5 million at
June 30, 2000 from $511.9 million at December 31, 1999. The $7.5 million or
1.5% increase was the result of money market and NOW accounts increasing by $6.9
million. The Company has been emphasizing it core deposits through a cross
selling program and through its advertising campaign. Advances by borrowers for
taxes and insurance increased by $4.1 million or 36.9% to $15.4 million at June
30, 2000 from $11.2 million at December 31, 1999. This increase was the result
of the collection of funds for taxes and insurance for future payments. Accrued
interest on deposits increased by $4.0 million to $4.7 million at June 30, 2000
from $703,000 at December 31, 1999. The increase is attributable to the timing
of interest payments on certificate accounts.
11
Capital. Total stockholders' equity increased by $909,000 or 1.7% to $55.4
million at June 30, 2000 from $54.5 million at December 31, 1999. The increase
was the result of increases in retained earnings and accumulated other
comprehensive loss, net of taxes. The additional purchases of treasury stock
reduced the impact of theses increases. Retained earnings increased to $66.7
million at June 30, 2000 from $63.8 million at December 31, 1999. The $2.9
million or 4.5% increase was the result of net income of $3.9 million reduced by
dividends of $998,000. Accumulated other comprehensive loss, net of taxes
improved by $2.8 million as the result of the change in unrealized gain or loss
on investment securities and mortgage-backed securities. Treasury stock
purchases of $5.6 million were made in the six months ended June 30, 2000.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits, borrowings, and principal and interest payments on mortgages,
mortgage-backed securities and investments. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows and
mortgage prepayments are strongly influenced by changes in general interest
rates, economic conditions and competition.
The primary investing activities of the Company for the six months ended June
30, 2000 was the paydown of $21.3 million in borrowings, the purchase of $21.3
million of mortgage-backed securities, held as available-for-sale and the
investment of $34.8 million in conventional mortgages. Sources of funds for the
six months ended June 30, 2000 were the $56.7 million in principal and interest
payments of conventional mortgage loans, mortgage-backed securities and
investments, $5.1 million from the sale of the U.S. Treasury Note, $5.0 million
in borrowings and $7.5 million in total deposits.
The Association is required to maintain an average daily balance of 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 ratio is currently 4.0%. The Association's
average liquidity ratio was 11.1% during the three month period ended June 30,
2000. 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 June 30, 2000, assets qualifying for liquidity, including cash
and investments, totaled $67.0 million.
At June 30, 2000, the Association's capital exceeded all of the capital
requirements of the OTS. The Association's Tangible, Tier I (core) capital (to
total assets), Tier I capital (to risk-based assets) and Risk-Based capital (to
risk-based assets) ratios were 9.3%, 9.3%, 22.1% and 22.4%, respectively. The
Association is considered a "well capitalized" institution under the prompt
corrective action regulations of the OTS.
Comparison of Results of Operation for the Six and Three Months ended June 30,
- ------------------------------------------------------------------------------
2000 and 1999.
- --------------
General. Net income for the six months ended June 30, 2000 decreased by
$82,000 to $3.9 million from $4.0 million for the six months ended June 30,
1999. The reduction can be attributable to a decrease in net interest income
offset by decreases in general and administrative expenses and taxes and an
increase in other income. Net income for the quarters ended June 30, 2000 and
1999 remained flat at $1.9 million. Net interest income for the three months
ended June 30, 2000 was lower compared to the three months ended June 30, 1999.
This was offset by decreases in general and administrative expenses and an
increase in other income.
12
Interest Income. Interest income discussed in this section is tax equivalent
interest income. Tax equivalent interest income is being used because interest
on investment securities includes tax-exempt securities. Tax-exempt securities
carry pre-tax yields lower than comparable assets. Therefore, it is more
meaningful to analyze interest income on a tax equivalent basis. Tax equivalent
increases of $2.0 million and $1.0 million were made for the six and three
months ended June 30, 2000, respectively. For the six and three months ended
June 30, 1999, tax equivalent adjustments of $1.8 million and $1.0 million were
made. Interest income for the six months ended June 30, 2000 increased by
$480,000 or 1.7% to $28.2 million from $27.7 million for the six months ended
June 30, 1999. The increase was the result of interest earned on investment
securities, federal funds sold, mortgage-backed securities and dividends on FHLB
stock rising. Offsetting these increases was a decline in interest earned on
conventional mortgage loans. Interest earned on investment securities increased
to $7.3 million for the six months ended June 30, 2000 from $6.8 million for the
comparable 1999 period. The $487,000 or 7.1% increase was due primarily to the
average rate on investment securities increasing to 7.09% for the six months
ended June 30, 2000 compared to 6.64% for the six months ended June 30, 1999.
Interest on federal funds sold increased by $226,000 or 78.2% to $515,000 for
the six months ended June 30, 2000 from $289,000 for the six months ended June
30, 1999. The increase was the result of the average balance of federal funds
sold and the average rate earned increasing for the six months ended June 30,
2000 to $18.0 million and 5.73%, respectively from $11.9 million and 4.85%,
respectively for the six months ended June 30 , 1999. Interest income on
mortgage-backed securities was $213,000 for the six months ended June 30, 2000.
There were no mortgage-backed securities for the six months ended June 30, 1999.
Dividends on FHLB stock increased by $32,000 or 8.9% to $390,000 from $358,000
for the six months ended June 30, 2000 and 1999, respectively. The increase was
the result of a 32 basis points increase in the average rate earned rising to
6.84% for the six months ended June 30, 2000 from 6.52% for the six months ended
June 30, 1999. In addition, the average balance for FHLB stock increased to
$11.4 million for the six months ended June 30, 2000 from $11.0 million for the
comparable 1999 period. Interest income on conventional mortgage loans
decreased by $474,000 or 2.4% to $19.2 million for the six months ended June 30,
2000 from $19.7 million for the six months ended June 30, 1999. This decrease
was the result of the average balance in conventional mortgage loans falling to
$534.0 million for the six months ended June 30, 2000 from $541.0 for the six
months ended June 30, 1999. Also contributing to the decrease was the decline
on the average rate earned on conventional mortgage loans by 8 basis points.
Interest income for the three months ended June 30, 2000 increased by $250,000
or 1.8% to $14.2 million from $14.0 million for the comparable 1999 period. The
increase was the result of increases in interest earned on federal funds sold,
mortgage-backed securities and interest-bearing deposits. Offsetting these
increases were declines in interest earned on conventional mortgage loans and
investment securities. Interest earned on federal funds sold was $224,000 for
the three months ended June 30, 2000 compared to $52,000 for the three months
ended June 30, 1999. The rise in interest was the result of the average balance
being $14.3 million compared to $4.4 million for the three months ended June 30,
2000 and 1999, respectively and the average rate earned increasing to 6.27% for
the three months ended June 30, 2000 from 4.73% for the three months ended June
30, 1999. Interest earned on mortgage-backed securities was $167,000 and zero
for the three months ended June 30, 2000 and 1999, respectively. Interest
earned on interest bearing deposits increased by $32,000 or 11.0% to $323,000
for the three months ended June 30, 2000 from $291,000 for the three months
ended June 30, 1999. The increase was the result of the average rate earned
increasing to 6.38% for the three months ended June 30, 2000 compared to 4.68%
for the three months ended June 30, 1999. Offsetting the impact of the increase
in the
13
average rate was a $4.7 million or 18.7% decline of the average balance
in interest-bearing deposits from June 30, 1999 to June 30, 2000. Interest
earned on conventional mortgage loans decreased by $76,000 or 0.8% to $9.6
million for the three months ended June 30, 2000 from $9.7 million for the
comparable 1999 period. The decrease was primarily the result of the average
balance falling to $535.6 million from $538.8 million for the three months ended
June 30, 2000 and 1999, respectively. Interest earned on investment securities
decreased to $3.6 million for the three months ended June 30, 2000 from $3.7
million for the three months ended June 30, 1999. The $54,000 or 1.5% decrease
can be attribute to the average balance declining to $206.6 million for the
three months ended June 30, 2000 from $223.5 million for the comparable 1999
period. Reducing the impact of the decline in the average balance was the
average rate earned increasing to 7.04% for the three months ended June 30, 2000
from 6.60% for the three months ended June 30, 1999.
Interest Expense. Interest expense for the six months ended June 30, 2000
increased to $19.7 million from $18.1 million for the six months ended June 30,
1999 as the result of interest expense on deposits and borrowings rising.
Interest expense on deposits increase by $1.3 million or 10.6% to $13.2 million
for the six months ended June 30, 2000 from $11.9 million for the six months
ended June 30, 1999. The increase was primarily due to rises in the average
balance and rate paid on certificate accounts. The average balance on
certificate accounts for the six months ended June 30, 2000 and 1999 were $386.9
million and $364.0 million, respectively. The average rate paid was 5.74% for
the six months ended June 30, 2000 and 5.49% for the six months ended June 30,
1999. Interest expense on borrowing increased to $6.4 million for the six
months ended June 30, 2000 from $6.2 million for the six months ended June 30,
1999. The $275,000 or 4.5% increase was primarily the result of the average
rate paid increasing to 5.76% for the six months ended June 30, 2000 from 5.55%
for the comparable 1999 period.
Interest expense for the three months ended June 30, 2000 increased by
$766,000 or 8.3% to $10.0 million from $9.2 million for the three months ended
June 30, 1999. Interest expense on deposits increased by $858,000 or 14.5% to
$6.8 million from $5.9 million for the three months ended June 30, 2000 and
1999, respectively. The increase was due to the average balance and rate paid
rising for the three months ended June 30, 2000 compared to the three months
ended June 30, 1999. The average balance and rate were $390.8 million and 5.82%
for the three months ended June 30, 2000. For the three months ended June 30,
1999, the average balance and rate were $360.5 million and 5.46%. Interest
expense on borrowings decreased to $3.2 million for the quarter ended June 30,
2000 from $3.3 million for the comparable 1999 period. The decrease was the
result of the average balance in borrowings declining to $222.2 million for the
three months ended June 30, 2000 from $237.4 million for the three months ended
June 30, 1999. Offsetting the average balance decline was an increase in the
average rate paid on borrowings by 21 basis points.
Net Interest Income. The net interest income for both the six and three months
ended June 30, 2000 decreased when compared to the net interest income for the
six and three months ended June 30, 1999. This was the result of interest
expense rising more than the increases in interest income.
Provision for Loan Losses. The provision for loan loss was zero for the six
and three months ended June 30, 2000 compared to $60,000 and $30,000 for the six
and three months ended June 30, 1999. At June 30, 2000 non-performing assets
were $571,000 compared to $659,000 at December 31, 1999. The allowance for loan
losses equaled 162.0% of total non-performing assets compared to 140.4% at
December 31, 1999. There were no loans charged off during the six and three
months ended June 30, 2000 and 1999. Management believes that the current level
of loan loss reserve is adequate to cover losses inherent on the portfolio as of
June 30, 2000. There can be no assurance, however, that the
14
Company will not sustain losses in future periods which could be substantial in
relation to the size of the allowance as of June 30, 2000.
Other Income. Other income increased by $276,000 or 105.7% to $537,000 for the
six months ended June 30, 2000 from $261,000 for the six months ended June 30,
1999. The increase was the result of increases in miscellaneous income, gains
on sale of investments and loan fees and service charges. Miscellaneous income
was $90,000 for the six months ended June 30, 2000 compared to a loss of $4,000
for the six months ended June 30, 1999. This was primarily the result of there
being a gain of $84,000 on the sale of real estate owned in 2000 compared to a
loss of $9,000 in 1999. Gains on sale of investments increased to $138,000 for
the six months ended June 30, 2000 compared to $45,000 for the six months ended
June 30, 1999. Loan fees and service charges increased by $89,000 or 40.5% to
$309,000 for the six months ended June 30, 2000 from $220,000 for the
comparable 1999 period. The increase was due to additional fees earned during
the six months ended June 30, 2000 compared to the six months ended June 30,
1999. The increase was due to additional fees earned during the six months
ended June 30, 2000 compared to the six months ended June 30, 1999.
Other income for the quarter ended June 30, 2000 increased by $152,000 or
109.4% to $291,000 from $139,000 for the quarter ended June 30, 1999. This
increase was mainly the result of the $138,000 gain on the sale of investments
that occurred during the quarter. There were no gains on the sale of
investments for the quarter in 1999.
General and Administrative Expense. General and administrative expense
declined by $600,000 or 18.3% to $2.7 million for the six months ended June 30,
2000 from $3.3 million for the six months ended June 30, 1999. The decline was
the result of decreases in compensation, payroll taxes and fringe benefits,
other expenses, federal insurance premiums and office occupancy expense.
Compensation, payroll taxes and fringe benefits decreased to $1.4 million for
the six months ended June 30, 2000 from $1.7 million for the six month ended
June 30, 1999. The $237,000 or 14.3% decrease was the result of a temporary
reduction in employees, the decrease in the cost of employee stock programs due
to the decline in the average stock price and an one-time pension expense
recorded in the prior year of $100,000. Other expenses decreased by $231,000 or
25.1% to $691,000 for the six months ended June 30, 2000 from $922,000 for the
six months ended June 30, 1999. The decline was due to costs associated with the
1999 annual meeting and other one time non-recurring expenses that were incurred
in 1999. Federal insurance premiums decreased by $94,000 or 63.5% to $54,000 for
the six months from $148,000 for the six months ended June 30, 1999. The
decrease was due to a decline in the premium rate charged by the Federal Deposit
Insurance Company ("FDIC") to Savings Association Insurance Fund ("SAIF")
members. Office occupancy expense decreased to $248,000 for the six months ended
June 30, 2000 from $276,000 for the comparable 1999 period. The $28,000 or 10.1%
decrease was due to the decline in expenses associated with the maintenance of
buildings and equipment and the reduction in rent due to the Wexford office
being purchased in 1999.
General and administrative expenses for the quarter ended June 30, 2000
decreased by $308,000 or 18.6% to $1.3 million compared to $1.7 million for the
quarter ended June 30,1999. The decline was due to decreases in compensation,
payroll taxes and fringe benefits, federal insurance premiums and other expenses
for the reasons stated above.
Income Taxes. Tax equivalent income taxes remained relatively flat for the six
and three months ended June 30, 2000 and 1999. Income tax expense for the six
and three months ended June 30, 2000 was $2.5 million and $1.2 million,
respectively. For the six and three months ended June 30, 1999, the expense was
$2.6 million and $1.3 million, respectively. Tax equivalent adjustments of $2.0
million
15
and $1.0 million were made for the six and three months ended June 30, 2000. For
the six and three months ended June 30, 1999, tax equivalent adjustments of $1.8
million and $1.0 million were made.
Other Comprehensive Income. The Financial Accounting Standards Board ("FASB")
No. 130 established standards for reporting and disclosure of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements.
The following tables set forth the related tax effects allocated to each
element of comprehensive income for the six and three months ended June 30, 2000
and 1999.
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
---------------------------- --------------------------------
Tax Net-of Tax Net-of-
Pre-Tax (Expense) Tax Pre-Tax (Expense) Tax
Amount or Benefit Amount Amount or Benefit Amount
------- ----------- ------ --------- ----------- --------
Unrealized gains or losses
on securities:
Unrealized holding gains/(losses)
arising during the period $4,696 $(1,876) $2,820 $(10,195) $3,983 $(6,212)
Reclassification adjustment
for gains realized in net
income -- -- -- (45) 18 (27)
------- ---------- ------ -------- ------ -------
Net realized gains/(losses) 4,696 (1,876) 2,820 (10,150) 3,965 (6,185)
------- ---------- ------ -------- ------ -------
Other comprehensive income $4,696 $(1,876) $2,820 $(10,150) $3,965 $(6,185)
======= ========== ====== ======== ====== =======
16
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
---------------------------- -------------------------------
Tax Net-of Tax Net-of-
Pre-Tax (Expense) Tax Pre-Tax (Expense) Tax
Amount or Benefit Amount Amount or Benefit Amount
------- ----------- ------ -------- ----------- --------
Unrealized gains or losses
on securities:
Unrealized holding gains/(losses)
arising during the period $2,578 $(998) $1,580 $(7,858) $2,634 $(5,224)
------- ---------- ------ ------- ---------- -------
Net realized gains/(losses) 2,578 (998) 1,580 (7,858) 2,634 (5,224)
------- ---------- ------ ------- ---------- -------
Other comprehensive income $2,578 $(998) $1,580 $(7,858) $2,634 $(5,224)
======= ========== ====== ======= ========== =======
The following tables set forth the component of accumulated other comprehensive
income for the six and three months ended June 30, 2000 and 1999.
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
-------------- --------------
Beginning Balance $(8,931) $ 1,179
Net unrealized gains/(losses) on securities, net of taxes 2,820 (6,185)
------- -------
Ending Balance $(6,111) $(5,006)
======= =======
Three Months Three Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
Beginning Balance $(7,691) $ 218
Net unrealized gains/(losses) on securities, net of taxes 1,580 (5,224)
------- -------
Ending Balance $(6,111) $(5,006)
======= =======
Recent Accounting Pronouncements. In June 1998, the FASB issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. First Bell has not yet determined the
impact that this standard will have on its financial statements.
17
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's interest rate sensitivity is monitored by management through
selected interest rate risk measures produced internally and by the OTS. Based
on internal reviews, management does not believe that there has been a material
change in the Company's interest rate sensitivity from December 31, 1999 to June
30, 2000. However, the OTS results are not yet available for the quarter ended
June 30, 2000. All methods used to measure interest rate sensitivity involve
the use of assumptions. Management cannot predict what assumptions are made by
the OTS, which can vary from management's assumptions. Therefore, the results
of the OTS calculations can differ from management's internal calculations. The
Company's interest rate sensitivity should be reviewed in conjunction with the
financial statements and notes thereto contained in First Bell's Annual Report
for the fiscal year ended December 31, 1999. Also, the Company along with the
industry as a whole has seen a narrowing of its interest margin due to the rise
in interest rates that has occurred during 2000.
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 24, 2000.
(b) The names of each Director elected at the Annual Meeting for three
years terms ending in the Year 2003 and votes cast are as follows:
For Withheld
--------- --------
Albert H. Eckert, II 4,504,017 245,645
William S. McMinn 4,509,920 239,742
Jack W. Schweiger 4,538,584 211,078
18
The names of the Directors whose term of office continued after the
Annual Meeting are as follows:
Jeffrey M. Hinds Theodore R. Dixon
Robert C. Baierl David F. Figgins
Thomas J. Jackson, Jr. Peter E. Reinert
(c) A brief description of each matter voted on and 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,
2000
For Against Abstain
--- ------- -------
4,691,204 32,778 25,680
(ii) Stockholder proposal
For Against Abstain
--- ------- -------
525,385 3,134,517 537,131
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)
*Incorporated herein by reference into this document from the
Exhibits to Form S-1, Registration Statement, filed on November
9, 1994, as amended, Registration No. 33-86160.
(b) Reports on Form 8-K
None
19
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FIRST BELL BANCORP, INC.
(Registrant)
Date: August 8, 2000 /s/ Albert H. Eckert, II
------------------------------------------
Albert H. Eckert, III
President and Chief Executive Officer
Date: August 8, 2000 /s/ Jeffrey M. Hinds
------------------------------------------
Jeffrey M. Hinds
Executive Vice President and Chief Financial
Officer (Principal Accounting Officer)
20