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, 2001
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.
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(Exact name of registrant as specified in its charter)
DELAWARE 251752651
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(State or other jurisdiction of (IRS Employer Identification No.)
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 August 10, 2001.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets June 30, 2001 (unaudited)
and December 31, 2000........................................................................ 4
Consolidated Statements of Income for the Three and
Six Months Ended June 30, 2001 and 2000
(unaudited).................................................................................. 5
Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended June 30, 2001 and
2000 (unaudited)............................................................................. 6
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months Ended June 30, 2001 and 2000 (unaudited)................................. 7
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 (unaudited)..................................................... 8
Notes to Unaudited Consolidated Financial Statements for the Three
and Six Months Ended June 30, 2001 and 2000 (unaudited)..................................... 10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................ 13
Item 3 Quantitative and Qualitative Disclosure About Market Risk.................................... 17
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
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(unaudited)
ASSETS
- ------
Cash:
Cash on-hand $ 901 $ 988
Non-interest-bearing deposits 9,923 2,113
Interest-bearing deposits 25,694 37,408
----------- ------------
Total cash 36,518 40,509
Federal funds sold 6,425 6,425
Investment securities available-for-sale at fair value (cost
of $238,189 and $215,237 at June 30, 2001 and December
31, 2000, respectively) 237,432 213,234
Mortgage-backed securities available-for-sale at fair value
(cost $48,218 and $21,271 at June 30, 2001 and December 31,
2000, respectively) 48,247 21,523
Conventional mortgage loans - net of allowance for loan
losses of $925 at June 30, 2001 and December 31, 2000 478,506 526,842
Other loans, net 937 969
Real estate owned - 29
Premises and equipment, net 3,540 3,682
Federal Home Loan Bank stock, at cost 10,400 11,400
Accrued interest receivable 5,346 5,383
Deferred income tax asset 1,531 1,232
Prepaid income taxes 1,024 152
Other assets 22,371 1,300
----------- ------------
Total assets $ 852,277 $ 832,680
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Passbook, club and other accounts $ 76,589 $ 69,607
Money market and NOW accounts 62,724 61,609
Certificate accounts 409,852 405,469
----------- ------------
Total deposits 549,165 536,685
Borrowings 216,750 219,250
Advances by borrowers for taxes and insurance 12,672 10,993
Accrued interest on deposits 5,562 869
Accrued interest on borrowings 1,071 1,183
Dividend payable on common stock 490 490
Other liabilities 1,627 1,590
----------- ------------
Total liabilities 787,337 771,060
----------- ------------
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 June 30, 2001
and December 31, 2000; one stock right per share) 86 86
Paid-in capital 62,693 62,556
Unearned ESOP shares (482,289 and 495,807 shares at June
30, 2001 and December 31, 2000, respectively) (3,411) (3,507)
Unearned MRP shares (210,727 shares at June 30, 2001 and
December 31, 2000) (2,521) (2,937)
Treasury stock (3,837,890 shares at June 30, 2001 and
December 31, 2000) (62,030) (62,030)
Accumulated other comprehensive loss, net of taxes (439) (1,067)
Retained earnings 70,562 68,519
----------- ------------
Total Stockholders' Equity 64,940 61,620
----------- ------------
Total Liabilities and Stockholders' Equity $ 852,277 $ 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 SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income:
Conventional mortgage loans $ 8,626 $ 9,636 $ 17,790 $ 19,192
Interest-bearing deposits 320 323 913 547
Mortgage-backed securities 461 167 597 213
Federal funds sold 69 224 162 515
Investment securities 2,886 2,654 5,659 5,325
Other loans 17 17 34 34
Federal Home Loan Bank stock 197 199 375 390
------------- ------------- ------------- ------------
Total interest and dividend income 12,576 13,220 25,530 26,216
Interest expense on deposits 7,373 6,784 14,907 13,211
Interest expense on borrowings 3,156 3,197 6,335 6,441
------------- ------------- ------------- ------------
Total interest expense 10,529 9,981 21,242 19,652
------------- ------------- ------------- ------------
Net interest income 2,047 3,239 4,288 6,564
Provision for loan losses - - - -
------------- ------------- ------------- ------------
Net interest income after provision
for loan losses 2,047 3,239 4,288 6,564
------------- ------------- ------------- ------------
Other income:
Loan fees and service charges 230 151 515 309
Gain on sale of securities (11) 138 391 138
Miscellaneous income 265 2 429 90
------------- ------------- ------------- ------------
Total other income 484 291 1,335 537
------------- ------------- ------------- ------------
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 611 689 1,268 1,418
Federal insurance premiums 26 27 52 54
Office occupancy expense, excluding depreciation 143 132 291 248
Depreciation 74 72 150 143
Computer services 81 62 161 132
Other expenses 371 365 621 691
------------- ------------- ------------- ------------
Total general and administrative expense 1,306 1,347 2,543 2,686
------------- ------------- ------------- ------------
Net Income before provision for income taxes 1,225 2,183 3,080 4,415
------------- ------------- ------------- ------------
Provision for income taxes:
Current:
Federal 190 112 480 335
State 66 203 271 245
Deferred credit (379) (49) (694) (51)
------------- ------------- ------------- ------------
Total provision for income taxes (123) 266 57 529
------------- ------------- ------------- ------------
Net income $ 1,348 $ 1,917 $ 3,023 $ 3,886
============= ============= ============= ============
Basic earnings per share $ 0.33 $ 0.46 $ 0.74 $ 0.91
============= ============= ============= ============
Diluted earnings per share $ 0.32 $ 0.45 $ 0.72 $ 0.89
============= ============= ============= ============
Weighted average shares outstanding-Basic 4,091 4,142 4,087 4,255
============= ============= ============= ============
Weighted average shares outstanding-Diluted 4,186 4,287 4,186 4,388
============= ============= ============= ============
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, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,348 $ 1,917 $ 3,023 $ 3,886
------------- ------------- ------------- ------------
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during
the period (1,456) 2,578 1,342 4,696
Less: reclassification adjustment for gains
realized in net income (11) - 319 -
------------- ------------- ------------- ------------
Other comprehensive income/(loss), before taxes (1,445) 2,578 1,023 4,696
Tax (expense)/benefit related to other comprehensive
income 567 (998) (395) (1,876)
------------- ------------- ------------- ------------
Comprehensive income/(loss) $ 470 $ 3,497 $ 3,651 $ 6,706
============= ============= ============= ============
See notes to consolidated financial statements
6
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(in thousands)
(unaudited)
Accumulated
Number of Other
Common Additional Unearned Comprehensive
Stock Common Paid-in ESOP Treasury MRP Income, Net of
Shares Stock Capital Shares Stock Stock Taxes
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Balance at December 31, 1999 5,189 $86 $62,217 $(3,740) $(55,522) $(3,378) $(8,931)
Purchase of treasury stock (369) (5,551)
Allocation of ESOP shares 114 106
Allocation of MRP shares 91 441
Dividend on common stock ($0.24)
Change in unrealized gain or
(loss), net of taxes 2,820
Net income
----- --- ------- ------- -------- ------- -------
Balance at June 30, 2000 4,820 $86 $62,422 $(3,634) $(61,073) $(2,937) $(6,111)
===== === ======= ======= ======== ======= =======
Balance at December 31, 2000 4,758 $86 $62,556 $(3,507) $(62,030) $(2,937) $(1,067)
Allocation of ESOP shares 118 96
Allocation of MRP shares 19 416
Dividend on common stock ($0.24)
Change in unrealized gain or
(loss), net of taxes 628
Net income
----- --- ------- ------- -------- ------- -------
Balance at June 30, 2001 4,758 $86 $62,693 $(3,411) $(62,030) $(2,521) $ (439)
===== === ======= ======= ======== ======= =======
Retained
Earnings Total
---------------------------
---------------------------
Balance at December 31, 1999 $63,786 $54,518
Purchase of treasury stock (5,551)
Allocation of ESOP shares 220
Allocation of MRP shares 532
Dividend on common stock ($0.24) (998) (998)
Change in unrealized gain or
(loss), net of taxes 2,820
Net income 3,886 3,886
------- -------
Balance at June 30, 2000 $66,674 $55,427
======= =======
Balance at December 31, 2000 $68,519 $61,620
Allocation of ESOP shares 214
Allocation of MRP shares 435
Dividend on common stock ($0.24) (980) (980)
Change in unrealized gain or
(loss), net of taxes 628
Net income 3,023 3,023
------- -------
Balance at June 30, 2001 $70,562 $64,940
======= =======
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, 2001 JUNE 30, 2000
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,023 $ 3,886
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 150 143
Deferred income taxes (694) (51)
Amortization of premiums and accretion of discounts 45 (54)
Compensation expense-allocation of ESOP and MRP shares 649 433
Loss/(Gain) on sale of real estate owned 21 (84)
Gain on sale of mortgage-backed securities, available for sale (314) -
Gain on sale of investment securities, available for sale (15) (138)
Gain on sale of mortgage loans (62) -
Changes in assets and liabilities
Accrued interest receivable 37 (369)
Accrued interest on deposits 4,693 4,007
Accrued interest on borrowings (112) (34)
Prepaid income taxes (872) (280)
Other assets (1,071) (475)
Other liabilities 37 (1,045)
Dividend payable - 43
-------- --------
Net cash provided by operating activities 5,515 5,982
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of investment securities, held to maturity - 5,125
Sale of investment securities, available for sale 29,889 -
Sale of mortgage-backed securities, available for sale 21,194 -
Purchase of investment securities, available for sale (56,386) -
Purchase of mortgage-backed securities, available for sale (50,123) (21,294)
Principal repayments on investment securities, available for sale 3,720 925
Principal repayments on mortgage-backed securities, available for sale 2,091 479
Maturity of federal funds - 19,350
Sale of conventional loans 20,207 -
Net decrease/(increase) in conventional loans 28,191 (3,698)
Net increase/(decrease) in other loans 32 (33)
Purchase of Bank Owned Life Insurance (20,000) -
Sale of Federal Home Loan Bank stock 1,000 -
Net proceeds from sale of real estate owned 8 474
(Purchase) retirement of premises and equipment (8) 5
-------- --------
Net cash (used)/provided in investing activities (20,185) 1,333
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 8,097 6,634
Net increase in certificate accounts 4,383 891
Net decrease in advances by borrowers for taxes and insurance 1,679 4,145
Net decrease in borrowings (2,500) (16,250)
Dividends paid (980) (954)
Purchase of treasury stock - (5,551)
-------- --------
Net cash provided/(used) by financing activities 10,679 (11,085)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,991) (3,770)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 40,509 20,468
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,518 $ 16,698
======== ========
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, 2001 JUNE 30, 2000
---------------- ----------------
Interest on deposits and advances by borrowers for
taxes and insurance $8,357 $9,204
Interest on borrowings 6,447 6,476
Income taxes 1,626 1,534
Non-cash transactions:
Transfers from conventional loans to real estate acquired through foreclosures - 29
Increase in additional paid-in capital-ESOP and MRP allocation 137 205
Unrealized appreciation on securities available for sale 1,342 4,696
9
FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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") and
the Association's wholly-owned subsidiary 1891 Associates, Inc. All significant
intercompany transactions have been eliminated in consolidation. The investment
in the Association on First Bell's financial statements and the investment in
1891 Associates, Inc. on the Association's financial statements are carried at
the parent company's equity in the underlying net assets.
The consolidated balance sheet as of June 30, 2001 and related consolidated
statements of income, comprehensive income, cash flows and changes in
stockholders' equity for the three and six months ended June 30, 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. Establishment of a Delaware Holding Company
-------------------------------------------
In June, 2001 Bell Federal Savings established a Delaware Holding Company
subsidiary to hold a portion of the investment securities previously owned
exclusively by the Association. These securities transferred to the subsidiary
consisted of $100 million of Bank Qualified Municipal Securities which were and
continue to be designated as, "available for sale."
3. Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") 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.
10
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfer and
Servicing of Financial Assets and Extinguishments of Liabilities" which replaces
SFAS No. 125, issued in June 1996. SFAS No. 140 revises the standards for
accounting for securitization and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of the
provisions of SFAS No. 125. The statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. SFAS 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 SFAS No
140 is not expected to have a material impact on the Company's financial
condition or results of operations.
On June 29, 2001, the FASB approved SFAS No. 141, "Business Combinations." SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Goodwill and certain intangible
assets will remain on the balance sheet and not be amortized. On an annual
basis, or when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and write-
downs may be necessary. The Company is required to implement SFAS No. 141 on
July 1, 2001 and has not determined the impact, if any, that this statement will
have on its consolidated financial position or results of operations.
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. The Company is required to implement SFAS No. 142
on January 1, 2002 and has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.
4. Other Comprehensive Income
- ------------------------------
SFAS 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.
11
The following tables set forth the related tax effects allocated to each element
of comprehensive income for the six and three months ended September 30, 2001
and 2000.
Six Months Ended Six Months Ended
JUNE 30, 2001 JUNE 30, 2000
---------------------------------- ---------------------------------
Tax Net Tax Net
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 $ 1,342 $(520) $ 822 $4,696 $(1,876) $2,820
Reclassification adjustment
for gains realized in net
income 319 (125) 194 - - -
------- ----- ----- ------- ---------- ----------
Net unrealized gains/(losses) 1,023 (395) 628 4,696 (1,876) 2,820
------- ----- ----- ------- ---------- ----------
Other comprehensive income $ 1,023 $(395) $ 628 $4,696 $(1,876) $2,820
======= ===== ===== ======= ========== ==========
Three Months Ended Three Months Ended
JUNE 30, 2001 JUNE 30, 2000
----------------------------- -------------------------
Tax Net Tax Net
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 $(1,456) $ 571 $(885) $2,578 $ (998) $1,580
------- ----- ----- ------- ---------- ----------
Reclassification adjustment
for gains realized in net
income (11) 4 (7) - - -
------- ----- ----- ------- ---------- ----------
Net unrealized gains/(losses) (1,445) 567 (878) 2,578 (998) 1,580
------- ----- ----- ------- ---------- ----------
Other comprehensive income $(1,445) $ 567 $(878) $2,578 $ (998) $1,580
======= ===== ===== ======= ========== ==========
The following tables set forth the component of accumulated other comprehensive
income for the six and three months ended June 30, 2001 and 2000.
Six Months Six Months
Ended Ended
JUNE 30, 2001 JUNE 30, 2000
-------------- --------------
Beginning Balance $(1,067) $(8,931)
Net unrealized gains on securities, net of taxes 628 2,820
------- -------
Ending Balance $ (439) $(6,111)
======= =======
Three Months Three Months
Ended Ended
JUNE 30, 2001 JUNE 30, 2000
------------- -------------
Beginning Balance $ 439 $(7,691)
Net unrealized (losses)/gains on securities, net of taxes (878) 1,580
------- -------
Ending Balance $ (439) $(6,111)
======= =======
12
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 June 30, 2001 and December 31, 2000.
- -------------------------------------------------------------------------
Assets. Total assets were $852.3 million at June 30, 2001 in comparison to
$832.7 million at December 31, 2000. There were increases in mortgage-backed
securities-available for sale, investment securities-available for sale and
other assets. Offsetting these increases were decreases cash, conventional
mortgage loans and Federal Home Loan Bank stock. Mortgage-backed securities at
June 30, 2001 were $48.2 million compared to $21.5 million at December 31, 2000.
The increase was the result of the purchase of $50.1 million in adjustable rate
mortgage-backed securities offset by sales of mortgage-backed securities of
$21.2 million and principal repayments of $2.1 million. Investment securities,
available for sale, at June 30, 2001 were $237.4 million compared to $213.2
million at December 31, 2000. The increase was the result of the purchase of
$56.4 million in adjustable rate securities offset by sales of securities of
$29.9 million and principal repayments of $3.7 million. The balance in other
assets increased $21.1 million. During the first quarter, the Company purchased
$20.0 million in bank owned life insurance ("BOLI"). The earnings from this
purchase will be used to defray the cost of current and future employee benefit
costs. Cash decreased by $4.0 million or 9.9% to $36.5 million at June 30, 2001
from $40.5 million at December 31, 2000. In addition, the Association's
investment in stock of the Federal Home Loan Bank was reduced by $1.0 million as
a result of the net decrease in the balance of mortgage loans and mortgage-
backed securities.
Liabilities. Total liabilities increased to $787.3 million at June 30, 2001
compared to $771.1 million at December 31, 2000. Increases in deposits, accrued
interest on deposits and advances by borrowers for taxes and insurance were
offset by decreases in borrowings. Deposits increased by $12.5 million or 2.3%
to $549.2 million at June 30, 2001 from $536.7 million at December 31, 2000.
The increase was the result of increases in certificate accounts of $4.4
million, money market and NOW accounts of $1.1 million and an increase in
passbook, club and other accounts of $7.0 million. Accrued interest on deposits
increased by $4.7 million to $5.6 million at June 30, 2001 from $869,000 at
December 31, 2000. The increase is attributable to the timing of interest
payments on certificate accounts. Borrowings decreased by $2.5 million or 1.1%
to $216.8 million at June 30, 2001 from $219.3 million at December 31, 2000.
The decrease was the result of normal quarterly principal repayments. Advances
by borrowers for taxes and insurance increased by $1.7 million to $12.7 million
at June 30, 2001 from $11.0 million at December 31, 2000. The decrease is the
result of the timing of customer payments in relation to the actual tax payment
of property taxes and insurance payments.
Capital. Total stockholders' equity increased by $3.3 million or 5.4% to $64.9
million at June 30, 2001 from $61.6 million at December 31, 2000. The increase
was the result of a decrease in accumulated other comprehensive loss, net of
taxes and an increase in retained earnings. Accumulated other comprehensive
loss, net of taxes improved by $628,000. Retained earnings increased by $2.0
million or 3.0% to $70.6 million at June 30, 2001 from $68.5 million at December
31, 2000. The increase was the result of net income of $3.0 million reduced by
dividends of $980,000.
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
13
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 six months ended June 30, 2001
was the purchase of $20.0 million in Bank Owned Life Insurance, $56.4 million of
mortgage-backed securities available-for-sale and investment securities
available for sale of $50.1 million. Sources of funds for the six months ended
June 30, 2001 were $53.7 million in principal and interest payments on
conventional mortgage loans, sales of mortgage-backed securities and
investments, available for sale of $51.1 million and increases in savings
deposits of $12.4 million.
At June 30, 2001, the Association's capital exceeded all of the capital
requirements of the OTS. The Association's Tangible, Tier I (core) capital (to
adjusted total assets), Tier I capital (to risk-based assets) and Risk-Based
capital (to risk-based assets) ratios were 9.20%, 9.20%, 22.81% and 23.07%,
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,
- ------------------------------------------------------------------------------
2001 and 2000.
- --------------
General. Net income for the six months ended June 30, 2001 was $3.0 million in
comparison to $3.9 million for the six months ended June 30, 2000. The decline
can be attributable to the decrease in interest income, increase in interest
expense offset by increase in other income and decreases in general
administrative expenses and income taxes. For the three months ended June 30,
2001, net income was $1.3 million compared to $1.9 million for the three months
ended June 30, 2000. The decrease of $569,000 was the result of a decrease in
net interest income offset by a decrease in income taxes.
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 $1.6 million and $806,000 were made for the six months and three
months ended June 30, 2001, respectively. For the six and three months ended
June 30, 2000, tax equivalent adjustments of $2.0 million and $982,000 were
made, respectively. Interest income for the six months ended June 30, 2001
decreased by $1.0 million or 3.7% to $27.2 million from $28.2 million for the
six months ended June 30, 2000. The decrease was the net result of decreases in
interest earned on conventional mortgage loans and federal funds sold while
interest earned on mortgage-backed securities and interest bearing deposits
increased. Interest on mortgage-backed securities for the six months ended June
30, 2001 was $597,000 compared to $213,000 in the prior year. The $384,000
increase can be attributable to an increase in the average balance from $5.9
million to $19.7 million offset by a decrease in the average rate earned on the
securities to 6.05% from 7.21%. Interest on interest bearing deposits was
$913,000 for the six months ended June 30, 2001 compared to $547,000 for the six
months ended June 30, 2000. The $366,000 increase is the net result of a $19.8
million increase in the average balance and a decrease in the average rate from
5.98% to 4.79%. Interest earned on federal funds sold decreased by $353,000 to
$162,000 for the six months ended June 30, 2001 from $515,000 for the comparable
2000 period. The decrease was primarily the result of a decrease in the federal
14
funds sold average balance. Interest earned on conventional mortgage loans
decreased $1.4 million or 7.3% to $17.8 million for the six months ended June
30, 2001 from $19.2 million for the six months ended June 30, 2000. The decrease
was the result of the average rate earned and the average balance on
conventional mortgage loans declining for the six months ended June 30, 2001
from the comparable 2000 period. The decreases in the average rate and the
average balance were more primarily due to mortgage refinancing and the sale of
mortgage loans during the first quarter of the current year. The average rate
earned and the average balance for the six months ended June 30, 2001 were 7.11%
and $501.6 million, respectively. For the six months ended June 30, 2000, the
average rate earned and the average balance were 7.19% and $535.0 million,
respectively.
Interest income for the three months ended June 30, 2001 decreased by $820,000
or 5.8% to $13.4 million from $14.2 million for the three months ended June 30,
2000. The decrease was the net result of increases in interest earned on
mortgage-backed securities and decreases in interest earned on conventional
mortgage loans and interest earned on federal funds sold. Interest earned on
mortgage-backed securities was $461,000 for the three months ended June 30, 2001
compared to $167,000 for the comparable 2000 period. Interest earned on
conventional mortgage loans decreased by $1.0 million or 10.5% to $8.6 million
for the three months ended June 30, 2001 from $9.6 million for the three months
ended June 30, 2000. The decrease was the result of the average balance
decreasing to $487.7 million from $536.6 million for the three months ended June
30, 2001 and 2000, respectively. In addition, the average rate earned on
conventional mortgage loans decreased to 7.09% for the three months ended June
30, 2001 from 7.20% for the comparable 2000 period. Interest earned on federal
funds sold decreased by $155,000 or 69.2% to $69,000 for the three months ended
June 30, 2001 from $167,000 for the three months ended June 30, 2000. The
decrease can be primarily attributable to the decline of the average balance to
$6.4 million from $14.3 million for the three months ended June 30, 2001 and
2000, respectively.
Interest Expense. Interest expense for the six months ended June 30, 2001
increased by $1.6 million or 8.1% to $21.2 million from $19.7 million for the
six months ended June 30, 2000. The increase was due to the increase in
interest expense on deposits offset by a decrease in the cost of borrowings.
Interest expense on deposits increased by $1.7 million or 12.8% to $14.9 million
for the six months ended June 30, 2001 from $13.2 million for the six months
ended June 30, 2000. The average rate paid on deposits for the six months ended
June 30, 2001 and 2000 was 5.36% and 4.99%, respectively. The average balance
on deposits and borrower's deposits for taxes and insurance was $543.4 million
and $515.9 million for the six months ended June 30, 2001 and 2000,
respectively.
Interest expense for the three months ended June 30, 2001 increased by $548,000
to $10.5 million from $10.0 million for the three months ended June 30, 2000.
Again, increases in the average balance and the average rate paid on deposits
and borrower's deposits for taxes and insurance resulted in the rise of interest
expense on deposits.
Net Interest Income. Net interest income decreased to $5.9 million for the six
months ended June 30, 2001 from $8.6 million for the six months ended June 30,
2000. The decline was the result of interest expense increasing by $1.6
million while interest income decreased by $1.0 million.
Similarly, net interest income decreased by $1.4 million or as the result of
interest expense rising and interest income decreasing for the three months
ended June 30, 2001 and 2000, respectively.
15
Provision for Loan Losses. The provision for loan loss was zero for the six and
three months ended June 30, 2001 and June 30, 2000, respectively. At June 30,
2001, non-performing assets were $1.1 million compared to $594,000 at December
31, 2000. The allowance for loan losses equaled 83.4% of total non-performing
assets as of June 30, 2001. There were no loans charged off during the six and
three months ended June 30, 2001 and 2000. Management believes that the current
level of loan loss reserve is adequate to cover losses inherent in the portfolio
as of June 30, 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 June 30, 2001.
Other Income. Other income for the six months ended June 30, 2001 increased by
$798,000 or 148.6% to $1.3 million from $537,000 for the six months ended June
30, 2000. The increase was the result of increases in gains on sale of
securities, miscellaneous income and loan fees and service charges. Gains on
sale of securities increased to $391,000 for the six months ended June 30, 2001
from $138,000 for the six months ended June 30, 2000. Other income increased by
$339,000 to $429,000 for the six months ended June 30, 2001 from $90,000 for the
comparable 2000 period largely due to earnings on the BOLI purchase. Loan fees
and service charges increased by $206,000 to $515,000 for the six months ended
June 30, 2001 from $309,000 for the comparable 2000 period.
Other income for the three months ended June 30, 2001 increased by $193,000 as
the result of a increases in miscellaneous income and loan fees and service
charges offset by a reduction in gains on the sale of loans and investments.
General and Administrative Expenses. General and administrative expenses for
the six months ended June 30, 2001 decreased by $143,000 or 5.3% to $2.5 million
from $2.7 million for the six months ended June 30, 2000. The decrease was
mainly the result of declines in compensation, payroll taxes and fringe benefits
and other expenses. Compensation, payroll taxes and fringe benefits decreased
by $150,000 or 10.6% to $1.3 million for the six months ended June 30, 2001 from
$1.4 million from the six months ended June 30, 2000. The decrease was the
result of a temporary reduction in employees and the decrease in the cost of
employee stock programs. Other expenses declined by $70,000 for the six months
ended June 30, 2001 compared to the six months ended June 30, 2000. Office
occupancy expense increased by $43,000 or 17.3% to $291,000 for the six months
ended June 30, 2001 from $248,000 for the six months ended June 30, 2000. The
increase was due to expenses associated with the maintenance of buildings and
equipment and increases in rent paid for the Association's branch offices. The
cost of computer services increased to $161,000 from $132,000 as a result of the
growth in the number of customer accounts processed and the addition of internet
banking.
General and administrative expenses for the three months ended June 30, 2001
decreased by $41,000 or 3.0%. The decrease was the result of the same factors
causing the change in general and administrative expenses for the six month
period ended June 30, 2001.
Income Taxes. Tax equivalent income taxes decreased by $833,000 or 33.0% to
$1.7 million for the six months ended June 30, 2001 from $2.5 million for the
comparable 2000 period. The decrease was primarily the result of net income
before taxes declining to $4.7 million from $6.4 million for the six months
ended June 30, 2001 and 2000, respectively. Tax equivalent
16
adjustments of $1.6 million and $2.0 million were made for the six months ended
June 30, 2001 and 2000, respectively.
Income taxes for the three months ended June 30, 2001 declined to $686,000 from
$1.2 million for the three months ended June 30, 2000. The decrease again was
the result of a decline in net income before taxes. Tax equivalent adjustments
of $806,000 and $982,000 were made during the respective quarters.
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 June
30, 2001. However, the OTS results are not yet available for the quarter ended
June 30, 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 saw a narrowing of its
interest margin due to the rise in interest rates that occurred during 1999 and
2000. In fiscal year 2001, the federal reserve has decreased short-term
interest rates. The effects of these decreases however, have not yet translated
into lower deposit costs due to the maturity dates on the Company's certificates
of deposit.
17
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) First Bell Bancorp, Inc. held an Annual Meeting of Stockholders on
April 30, 2001.
(b) The names of each director elected at the Annual Meeting for terms
of three years ending in 2004 and votes cast for each are as
follows:
For Withhold
--------- --------
Robert C. Baierl 3,913,213 414,444
Jeffrey M. Hinds 3,933,947 393,710
Thomas J Jackson, Jr. 3,911,569 416,088
The names of the Directors whose terms of office continued after the
Annual Meeting are as follows:
Albert H. Eckert, II Theodore R. Dixon
William S. McMinn Peter E. Reinert
Jack W. Schweiger
(c) A brief description of each matter voted on and a summary of the
voting of each item is as follows:
(1) Ratification of Deloitte & Touche LLP as independent auditors
of First Bell Bancorp, Inc. for the fiscal year ending
December 31, 2001.
For Against Abstain
-------------------------------------------
4,283,608 36,155 7,894
(2) Stockholder proposal
For Against Abstain
-------------------------------------------
973,278 2,537,083 206,489
18
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
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 13, 2001 /s/ Albert H. Eckert, II
-------------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: August 13, 2001 /s/ Jeffrey M. Hinds
-------------------------------------
Jeffrey M. Hinds
Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)
20