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 March 31, 2001
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
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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: 4,758,360 shares of common
stock, par value $.01 per share, were outstanding as of May 6, 2001.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets March 31, 2001
and December 31, 2000 (unaudited)................................. 4
Consolidated Statements of Income for the Three
Months Ended March 31, 2001 and 2000
(unaudited)....................................................... 5
Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2001 and 2000 (unaudited)............ 6
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months Ended March 31, 2001 and 2000 (unaudited).... 7
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2001 and 2000 (unaudited)......................... 8
Notes to Unaudited Consolidated Financial Statements for the Three
Months Ended March 31, 2001 and 2000 (unaudited).................. 10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 12
Item 3 Quantitative and Qualitative Disclosure About Market Risk......... 16
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................. 17
Item 2 Changes in Securities............................................. 17
Item 3 Defaults Upon Senior Securities................................... 17
Item 4 Submission of Matters to a Vote of Security Holders............... 17
Item 5 Other Information................................................. 17
Item 6 Exhibits and Reports on Form 8-K.................................. 17
SIGNATURES....................................................................... 18
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
3
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DECEMBER 31,
2001 2000
ASSETS --------- ------------
- ------ (unaudited)
Cash and cash equivalents:
Cash on-hand $ 806 $ 988
Non-interest-bearing deposits 5,737 2,113
Interest-bearing deposits 52,911 37,408
-------- --------
Total cash 59,454 40,509
Federal funds sold 6,425 6,425
Investment securities available-for-sale at fair value (cost
of $241,205 and $215,237
at March 31, 2001 and December 31, 2000, respectively) 242,235 213,234
Mortgage-backed securities available-for-sale at fair value
(cost $21,271 at December 31, 2000) - 21,523
Conventional mortgage loans - net of allowance for loan
losses of $925 at March 31, 2001 and December 31, 2000,
respectively 495,500 526,842
Other loans, net 986 969
Real estate owned - 29
Premises and equipment, net 3,608 3,682
Federal Home Loan Bank stock, at cost 11,400 11,400
Accrued interest receivable 5,790 5,383
Deferred tax asset 602 1,232
Prepaid income taxes - 152
Other assets 22,362 1,300
-------- --------
Total assets $848,362 $832,680
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Passbook, club and other accounts $ 72,655 $ 69,607
Money market and NOW accounts 64,627 61,609
Certificate accounts 409,594 405,469
-------- --------
Total deposits 546,876 536,685
Borrowings 218,000 219,250
Advances by borrowers for taxes and insurance 11,533 10,993
Accrued interest on deposits 3,521 869
Accrued interest on borrowings 1,140 1,183
Income taxes payable 59 -
Dividend payable on common stock 549 490
Other liabilities 2,294 1,590
-------- --------
Total liabilities 783,972 771,060
-------- --------
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; 4,758,360 outstanding at March 31, 2001 and
December 31, 2000; one stock right per share) 86 86
Paid-in capital 62,636 62,556
Unearned ESOP shares (487,677 and 495,807 shares at March 31, 2001
and December 31, 2000, respectively) (3,449) (3,507)
Unearned MRP shares (210,727 shares at March 31, 2001 and
December 31, 2000) (2,937) (2,937)
Treasury stock (3,837,890 shares March 31, 2000 and
December 31, 2000) (62,030) (62,030)
Accumulated other comprehensive income (loss), net of taxes 439 (1,067)
Retained earnings 69,645 68,519
-------- --------
Total stockholders' equity 64,390 61,620
-------- --------
Total liabilities and stockholders' equity $848,362 $832,680
======== ========
See notes to consolidated financial statements
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
Interest income:
Conventional mortgage loans $ 9,164 9,556
Interest-bearing deposits 593 223
Mortgage-backed securities 136 46
Federal funds sold 93 291
Investment securities 2,773 2,670
Other loans 17 17
Federal Home Loan Bank stock 178 192
------- -------
Total interest and dividend income 12,954 12,995
Interest expense on deposits 7,534 6,427
Interest expense on borrowings 3,179 3,245
------- -------
Total interest expense 10,713 9,672
Net interest income 2,241 3,323
Provision for loan losses - -
------- -------
Net interest income after provision
for loan losses 2,241 3,323
Other income:
Loan fees and service charges 285 158
Gain on sale of securities and loans 402 -
Miscellaneous income 164 88
------- -------
Total other income 851 246
------- -------
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 657 729
Federal insurance premiums 26 26
Office occupancy expense, excluding depreciation 148 117
Depreciation 76 71
Computer services 80 70
Other expenses 250 325
------- -------
Total general and administrative expense 1,237 1,338
------- -------
Income before provision for income taxes 1,855 2,231
------- -------
Provision for income taxes:
Current:
Federal 290 223
State 205 41
Deferred credit (315) (2)
------- -------
Total provision for income taxes 180 262
------- -------
Net income $ 1,675 $ 1,969
======= =======
Basic earnings per share $0.41 $0.46
======= =======
Diluted earnings per share $0.40 $0.44
======= =======
Weighted average shares outstanding-Basic 4,055 4,322
======= =======
Weighted average shares outstanding-Diluted 4,186 4,475
======= =======
See notes to consolidated financial statements
5
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, 2001 MARCH 31, 2000
--------------- ---------------
Net income $1,675 $1,969
------ ------
Unrealized gains on securities:
Unrealized holding gains arising during
the period 2,798 2,118
Less: reclassification adjustment for gains
realized in net income 330 -
------ ------
Other comprehensive income, before taxes 2,468 2,118
Tax expense related to other comprehensive
income (962) (879)
------ ------
Comprehensive income $3,181 $3,208
====== ======
See notes to consolidated financial statements
6
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(in thousands)
(unaudited)
Accumulated
Number of Other Com-
Common Additional Unearned 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, 1999 5,189 $86 $62,217 $(3,740) (55,522) $(3,378) $ (8,931) $63,786 $54,518
Purchase of treasury stock (221) (3,430) (3,430)
Allocation of ESOP shares 51 53 104
Dividend on common stock ($0.12) (514) (514)
Change in unrealized gain or
(loss), net of taxes 1,240 1,240
Net income 1,969 1,969
----- --- ------- ------- -------- ------- -------- ------- --------
Balance at March 31, 2000 4,968 $86 $62,268 $(3,687) $(58,952) $(3,378) $ (7,691) $65,241 $ 53,887
===== === ======= ======= ======== ======= ======== ======= ========
Balance at December 31, 2000 4,758 $86 $62,556 $(3,507) $(62,030) $(2,937) $ (1,067) $68,519 $ 61,620
Allocation of ESOP shares 80 58 138
Dividend on common stock ($0.12) (549) (549)
Change in unrealized gain or
(loss), net of taxes 1,506 - 1,506
Net income 1,675 1,675
----- --- ------- ------- -------- ------- -------- ------- --------
Balance at March 31, 2001 4,758 $86 $62,636 $(3,449) $(62,030) $(2,937) $ 439 $69,645 $ 64,390
===== === ======= ======= ======== ======= ======== ======= ========
See notes to consolidated financial statements
7
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,675 $ 1,969
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 76 71
Deferred income taxes (315) (2)
Amortization of premiums and accretion of discounts (15) (21)
Compensation expense-allocation of ESOP and MRP shares 138 217
(Gain)/Loss on sale of real estate owned 21 (84)
Gain on sale of mortgage-backed securities, available for sale (325) -
Gain on sale of investment securities, available for sale (15) -
Gain on sale of mortgage loans (62) -
(Increase) or decrease in assets and liabilities
Accrued interest receivable (407) (544)
Accrued interest on deposits 2,652 1,988
Accrued interest on borrowings (43) 180
Accrued income taxes 59 (488)
Other assets 969 (370)
Other liabilities 704 152
Dividend payable 59 67
-------- --------
Net cash provided by operating activities 5,171 3,135
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of investment securities, available for sale 27,946 -
Sale of mortgage-backed securities, available for sale 20,870 -
Purchase of mortgage-backed securities, available for sale - (6,419)
Purchase of investment securities, available for sale (56,644) -
Maturity of federal funds - 15,525
Principal repayments on mortgage-backed securities, available for sale 401 63
Principal repayments on investment securities, available for sale 817 458
Net (increase)/decrease in conventional loans 11,197 (3,077)
Proceeds from the sale of conventional loans 20,207 -
Purchase of bank owned life insurance (20,000) -
Net increase in other loans (17) (68)
Purchase of Federal Home Loan Bank stock - -
Net proceeds from sale of real estate owned 8 474
Purchase of premises and equipment (2) (1)
-------- --------
Net cash provided in investing activities 4,783 6,955
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 6,066 4,991
Net increase in certificate accounts 4,125 (1,247)
Net decrease in advances by borrowers for taxes and insurance 540 823
Net decrease in borrowings (1,250) (15,000)
Dividends paid (490) (448)
Purchase of treasury stock - (3,430)
-------- --------
Net cash (used)/provided by financing activities 8,991 (14,311)
-------- --------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 18,945 (4,221)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 40,509 20,468
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 59,454 $ 16,247
======== ========
See notes to consolidated financial statements
8
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
SUPPLEMENTAL DISCLOSURES: Three Months Ended Three Months Ended
Cash paid for: March 31, 2001 March 31, 2000
------------------ ------------------
Interest on deposits and advances by borrowers for
taxes and insurance $4,882 $4,439
Interest on borrowings 3,222 3,065
Income taxes 925 755
Non-cash transactions:
Transfers from conventional loans to real estate acquired through foreclosures - 29
Increase in additional paid-in capital-ESOP and MRP allocations 80 51
Unrealized appreciation on securities available for sale 2,798 2,118
9
FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
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 and balances 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 March 31, 2001 and related consolidated
statements of income, comprehensive income, cash flows and changes in
stockholders' equity for the three months ended March 31, 2001 and 2000 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, 2000.
2. 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 three months ended March 31, 2001 and
2000.
Three Months Ended Three Months Ended
March. 31, 2001 March 31, 2000
--------------------------------- ----------------------------------
Tax Net-of- Tax- Net-of-
Pre-Tax (Expense) (Expense) Pre-Tax (Expense) (Expense)
Amount or Benefit or Benefit Amount or Benefit or Benefit
------- ----------- ----------- -------- ----------- -----------
Unrealized gains or losses
on securities:
Unrealized holding gains/(losses)
arising during the period $2,798 $(1,091) $1,707 $(2,118) $(879) $ 1,239
Less: reclassification adjustment for
gains realized in net income 330 (129) $ 201 - - -
------ ------- ------ ------- ---------- ----------
Net unrealized gains/(losses) 2,468 (962) 1,506 (2,118) (879) (1,239)
------ ------- ------ ------- ---------- ----------
Other comprehensive income $2,468 $ (962) $1,506 $(2,118) $(879) $ 1,239
====== ======= ====== ======= ========== ==========
10
The following tables set forth the components of accumulated other comprehensive
income for the three months ended March 31, 2001 and 2000.
Three Months Three Months
Ended Ended
March. 31, 2001 March 31, 2000
---------------- ---------------
Beginning Balance $(1,067) $(8,931)
Net unrealized gains/(losses) on securities, net of taxes 1,506 1,240
------- -------
Ending Balance $ 439 $(7,691)
======= =======
3. 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 adopted SFAS No. 133 effective January 1, 2001. The adoption of this
statement did not have a significant impact on the Company's financial position,
results of operations or cash flows.
In September 2000, the FASB issued statement No. 140, "Accounting for Transfer
and Servicing of Financial Assets and Extinguishments of Liabilities" which
replaces FASB statement No. 125, issued in June 1996. FAS No. 140 revises the
standards for accounting for se curitization and other transfers of financial
assets and collateral and requires certain disclosures, but it carries over most
of the provisions of FAS No. 125. The statement provides consistent standards
for distinguishing transfers of financial assets that are sales from transfers t
hat are secured borrowings. FAS No. 140 is effective for transfers occurring
after March 31, 2001 and for disclosures relating to securitization transactions
and collateral for years ending after December 15, 2000. Implementation of FAS
No 140 is not expected to have a material impact on the Company's financial
condition or results of operations.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Private Securities Litigation Reform Act Safe Harbor Statement
- --------------------------------------------------------------
In addition to historical information, this 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 loan losses discussion and the quantitative and qualitative
disclosure about market risk. The Company's actual results could differ
materially from those of management expectations. Factors that could cause
future results to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, changes in tax policies,
rates and regulations of federal, state and local tax authorities, changes in
interest rates, deposit flows, the cost of funds, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of the Company's loan and investment portfolios, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental and technological factors 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.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000.
- ---------------------------------------------------------------------------
Assets. Total assets were $848.4 million at March 31, 2001 in comparison to
$832.7 million at December 31, 2000. There were increases in investment
securities, available for sale, cash, and other assets. Offsetting these
increases were decreases in conventional mortgage loans and mortgage-backed
securities-available for sale. Investment securities- available for sale
increased to $242.2 million at March 31, 2001 from $213.2 million at December
31, 2000. The $29.0 million or 13.6% increase was due to the purchase of $56.6
million in securitized small business administration loans offset by sales of
$19.0 million in municipal securities, $5.0 million Federal Home Loan Bank Bonds
and principal repayments of $817,000. In addition the balance of unrealized
gains and losses in the portfolio changed from a loss of $1.8 million at
December 31, 2001 to a gain of $1.0 million at March 31, 2001. The entire
portfolio of mortgage-backed securities at December 31, 2000 was sold during the
quarter bringing the balance to zero. Cash increased by $18.9 million or 46.8%
to $59.5 million at March 31, 2001 from $40.5 million at December 31, 2000. The
increase was the result of increase in deposits and mortgage payments. The
balance of federal funds sold remained unchanged at $6.4 million. The balance
in other assets increased $21.1 million. During the quarter, the Company
purchased $20.0 million in bank owned life insurance. The earnings from this
purchase will be used to defray the cost of employee benefit costs.
Liabilities. Total liabilities increased to $784.0 million at March 31, 2001
from $771.1 at December 31, 2000. The primary factors contributing to this
increase were increases in deposits and accrued interest on deposits, offset by
decreases in borrowings. Deposits increased by $10.2 million or 1.9% to $546.9
million at March 31, 2001 from $536.7 million at December 31, 2000. The increase
was the result of increases in certificate accounts of $4.1 million, money
market and NOW accounts of $3.0 million and passbook, club and other accounts of
$3.0 million.
12
Accrued interest on deposits increased by $2.7 million to $3.5 million at March
31, 2001 from $869,000 at December 31, 2000. The increase is attributable to the
timing of interest payments on certificate accounts. Also, borrowings decreased
by $1.3 million at March 31, 2001. The decrease was the result of contractual
principal repayments. Advances by borrowers for taxes and insurance increased by
$540,000 to $11.5 million at March 31, 2001 from $11.0 million at December 31,
2000. The increase is the result of the timing of the payment of property taxes
on conventional mortgage loans serviced by the Association.
Capital. Total stockholders' equity increased by $2.8 million or 4.5% to $64.4
million at March 31, 2001 from $61.6 million at December 31, 2000. The increase
was the result of a change in the value the Company's investment portfolio and
net income. The balance of the unrealized gain or loss on securities held as
available for sale, net of taxes changed from a loss of $1.1 million as of
December 31, 2000 to a gain of $439,000 as of March 31, 2001. Also, retained
earnings increased by $1.1 million or 1.6% to $69.6 million at March 31, 2001
from $68.5 million at December 31, 2000. The increase was the result of net
income of $1.7 million reduced by dividends of $549,000.
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 use of funds by the Company for the three months ended March 31,
2001 was the purchase of $56.6 million of securitized SBA loans and the purchase
of $20.0 million of Bank Owned Life Insurance. Sources of funds for the three
months ended March 31, 2001 were $10.2 million in additional deposits, $20.2
million from the sale of first mortgage loans, $30.2 million from the sale of
mortgage-backed securities and investments and principal and interest payments
on conventional mortgage loans.
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 March 31, 2001, assets qualifying for liquidity, including cash and
investments, totaled $59.8 million.
At March 31, 2001, 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 9.48%, 9.48%, 23.29% and 23.55%, 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 Three Months ended March 31, 2001 and
- --------------------------------------------------------------------------------
2000.
- -----
General. 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 $823,000 and $1.0 million was made for the three months ended March
31, 2001 and 2000, respectively. For the three months ended March 31, 2001, net
income was $1.7 million compared to $2.0 million for the three months ended
March 31, 2000. The decrease of
13
$294,000 was the result of a decrease in net interest income offset by increases
in other income and decreases in general and administration expenses and income
taxes.
Interest Income. Interest income for the three months ended March 31, 2001
decreased by $229,000 or 1.6% to $13.8 million from $14.0 million for the three
months ended March 31, 2000. The decrease was the result of increases in
interest earned on interest bearing deposits, mortgage-backed securities and
investment securities offset by a decline in interest earned on conventional
mortgage loans and federal funds sold. Interest earned on interest bearing
deposits was $593,000 for the three months ended March 31, 2001 compared to
$223,000 for the comparable 2000 period. This increase was the result of
increases in the average balance of interest bearing deposits. Interest earned
on mortgage-backed securities was $136,000 for the three months ended March 31,
2001 compared to $46,000 for the comparable 2000 period. Interest earned on
federal funds sold decreased by $198,000 or 68.0% to $93,000 for the three
months ended March 31, 2001 from $291,000 for the three months ended March 31,
2000. The decrease can be primarily attributable to the decline of the average
balance as a larger percentage of the Company's liquid assets were invested in
interest bearing deposits instead of federal funds. Interest earned on
conventional mortgage loans decreased by $392,000 or 4.1% to $9.2 million for
the three months ended March 31, 2001 from $9.6 million for the three months
ended March 31, 2000. The decrease was the result of the average balance
decreasing to $516.5 million from $533.4 million for the three months ended
March 31, 2001 and 2000, respectively. In addition, the average rate earned on
conventional mortgage loans decreased to 7.11% for the three months ended March
31, 2001 from 7.18% for the comparable 2000 period.
Interest Expense. Interest expense for the three months ended March 31, 2001
increased by $1.0 million to $10.7 million from $9.7 million for the three
months ended March 31, 2000. Increases in both the average balance and the
average rate paid on deposits resulted in the rise of interest expense on
deposits.
Provision for Loan Losses. The provision for loan loss was zero for the three
months ended March 31, 2001 and 2000. At March 31, 2001, non-performing assets
were $807,000 compared to $594,000 at December 31, 2000. The allowance for loan
losses equaled 114.6% of total non-performing assets at March 31, 2001. There
were no loans charged off during the three months ended March 31, 2001 and 2000.
Management believes that the current level of loan loss reserve is adequate to
cover losses inherent in the portfolio as of March 31, 2001. 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 March
31, 2001.
Other Income. Other income for the three months ended March 31, 2001 increased
by $605,000. This increase was a result of gains realized on the sale of
mortgage-backed securities of $325,000, gains on the sale of mortgage loans of
$62,000 and net gains on the sale of other investment securities of $15,000.
Also, loan fees and service charges increased $127,000 and other miscellaneous
income increased $76,000.
General and Administrative Expenses. General and administrative expenses for
the three months ended March 31, 2001 decreased by $101,000 or 7.5% to $1.2
million from $1.3 million for the quarter ended March 31, 2000. The decrease
was the result of declines in compensation, payroll taxes and fringe benefits
and other expenses, offset by increases in office occupancy expense and computer
services. Compensation, payroll taxes and fringe benefits decreased by $72,000
or 9.9% to $657,000 for the three months ended March 31, 2001 from $729,000 for
the three months ended
14
March 31, 2000. The decrease was the result of a temporary reduction in
employees and a decrease in the cost of employee stock programs. Other expenses
declined by $75,000 for the three months ended March 31, 2001 compared to the
quarter ended March 31, 2000. The decrease was due to the reduction in costs
associated with advertising and miscellaneous legal expenses. Office occupancy
expense and computer services increased by $41,000.
Income Taxes. Tax equivalent income taxes for the three months ended March 31,
2001 declined to $1.0 million from $1.3 million for the three months ended March
31, 2000. The decrease was the result of a decline in net income before taxes.
Tax equivalent adjustments of $823,000 and $1.0 million were made during the
respective quarters.
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 adopted SFAS No. 133 effective
January 1, 2001. The adoption of this statement did not have a significant
impact on the Company's financial position, results of operations or cash flows.
15
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, 2000 to
March 31, 2001. However, the OTS results are not yet available for the quarter
ended March 31, 2001. 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, 2000. The Company,
along with the industry as a whole, saw a narrowing of its interest margin due
to the rising interest rate period which occurred during fiscal year 2000. This
rising interest rate period reversed itself during the first quarter of 2001 as
the federal reserve decreased short-term interest rates by 150 basis points
during the quarter ended March 31, 2001.
16
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There are various claims and lawsuits in which the Company is periodically
involved incidental to the Company's business, which in the aggregate
involve amounts which are believed by management to be immaterial to the
financial condition and results of operations of the Company.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 5. Other Information.
None
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)
*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
17
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: May 15, 2001 /s/ Albert H. Eckert, II
____________________________________
Albert H. Eckert, II
President and Chief Executive Officer
Date: May 15, 2001 /s/ Jeffrey M. Hinds
____________________________________
Jeffrey M. Hinds
Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)
18