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, 1998
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: 6,524,557 shares of common
stock, par value $.01 per share, were outstanding as of May 14, 1998.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets at March 31, 1998
and December 31, 1997, (unaudited)..................... 2
Consolidated Statements of Income and Comprehensive
Income for the Three Months Ended March 31, 1998
and 1997, (unaudited).................................. 3
Consolidated Statements of Changes in
Stockholders' Equity for the Three Months Ended
March 31, 1998 and 1997, (unaudited)................... 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997,
(unaudited)............................................ 5
Notes to Unaudited Consolidated Financial Statements... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 7
Item 3 Quantitative and Qualitative Disclosure About
Market Risk............................................ 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings...................................... 12
Item 2 Changes in Securities.................................. 12
Item 3 Defaults Upon Senior Securities........................ 12
Item 4 Submission of Matters to a Vote of Security Holders.... 12
Item 5 Other Information...................................... 12
Item 6 Exhibits and Reports on Form 8-K....................... 13
SIGNATURES
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
1
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
MARCH 31, DECEMBER 31
ASSETS: 1998 1997
-------- -------
Cash:
Cash on-hand......................................................... $ 819 $ 872
Non-interest-bearing deposits........................................ 1,164 1,708
Interest-bearing deposits............................................ 16,344 21,943
-------- -------
Total cash........................................................ 18,327 24,523
Mortgage-backed securities-available for sale, at fair value (cost of
$31,654 at December 31, 1997............................................ - 31,885
Federal funds sold...................................................... 24,725 1,550
Investment securities - at cost (fair value of $10,551 and
$10,553 at March 31, 1998 and December 31, 1997, respectively)....... 9,975 9,973
Investment securities available for sale, at fair value (cost of $22,564
and $15,928 at March 31, 1998 and December 31, 1997, respectively)... 22,648 15,902
Conventional mortgage loans - net of allowance for
loan losses of $735 and $715 at March 31, 1998 and
December 31, 1997, respectively...................................... 575,115 578,487
Other loans, net........................................................ 862 907
Real estate owned....................................................... 85 --
Properties and equipment, net........................................... 3,440 3,492
Federal Home Loan Bank stock, at cost................................... 5,148 5,148
Accrued interest receivable............................................. 3,386 3,202
Other assets............................................................ 921 615
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Total assets......................................................... $664,632 $675,684
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Passbook, club and other accounts.................................... $ 69,292 $ 67,587
Money market and NOW accounts........................................ 48,329 47,264
Certificate accounts................................................. 356,431 380,204
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Total deposits................................................... 474,052 495,055
Borrowings.............................................................. 95,000 90,000
Advances by borrowers for taxes and insurance........................... 12,524 12,226
Accrued interest on deposits............................................ 2,409 535
Accrued interest on borrowings.......................................... 566 332
Accrued income taxes.................................................... 1,273 229
Deferred income tax liability........................................... 1,702 1,725
Dividend payable on common stock........................................ 575 575
Other liabilities....................................................... 1,968 2,024
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Total liabilities.................................................... 590,069 602,701
Stockholders' equity:
Preferred stock, ($0.01 par value; 2,000,000 shares authorized;
no shares issued or outstanding).................................. -- --
Common stock ($0.01 par value; 20,000,000 shares authorized;
8,596,250 issued; 6,523,920 outstanding at March 31, 1998
6,510,625 outstanding at December 31, 1997........................ 86 86
Paid-in capital...................................................... 61,391 61,371
Unearned ESOP shares (588,033 and 596,088 shares at March 31, 1998
and December 31, 1997, respectively)................................ (4,160) (4,217)
Unearned MRP shares (307,798 shares at March 31, 1998 and
December 31, 1997, respectively).................................. (4,290) (4,290)
Treasury stock at cost (2,072,330 shares and 2,085,625 shares at
March 31, 1998 and December 31, 1997, respectively) .............. (31,860) (32,077)
52 117
Accumulated other comprehensive income, net of taxes................. 53,344 51,993
Retained earnings.................................................... -------- -------
Total Stockholders' Equity.............................................. 74,563 72,983
Total Liabilities and Stockholders' Equity.............................. $664,632 $675,684
======== =======
2
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
--------------- ---------------
Interest income:
Conventional mortgage loans $10,694 $ 9,966
Interest-bearing deposits 344 268
Mortgage-backed securities 283 772
Federal funds sold 167 339
Investment securities 387 635
Other loans 15 17
Federal Home Loan Bank stock 83 76
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Total interest and dividend income 11,973 12,073
Interest expense on deposits 6,271 6,422
Interest expense on borrowings 1,265 1,217
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Total interest expense 7,536 7,639
Net interest income 4,437 4,434
Provision for loan losses 20 20
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Net interest income after provision
for loan losses 4,417 4,414
Other income:
Loan fees and service charges 101 127
Gains on sales of investment 97 --
Other income 8 3
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Total other income 206 130
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 815 685
Federal insurance premiums 81 18
Office occupancy expense, excluding depreciation 124 130
Depreciation 71 73
Computer services 56 55
Other expenses 253 211
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Total general and administrative expenses 1,400 1,172
Net income before taxes 3,223 3,372
Provision for income taxes:
Current:
Federal 1,028 1,008
State 248 258
Deferred expense (credit) 21 110
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Total provision for income taxes 1,297 1,376
Net income $ 1,926 $ 1,996
======= =======
Other comprehensive income, net of taxes
Unrealized loss on investments (65) (100)
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Comprehensive income $ 1,861 $ 1,896
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Primary earnings per share $0.34 $0.30
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Fully diluted earnings per share $0.33 $0.29
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Weighted average shares outstanding 6,516 7,612
======= =======
3
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands)
(unaudited)
Number Accumulated
Common Additional Unearned Unearned Comprehensive
Stock Common Paid-in ESOP Treasury MRP Income Retained
Shares Stock Capital Shares Stock Shares Net of Taxes Earnings Total
-------- -------- --------- ------- -------- -------- ------------ -------- -----
Balance at December 31, 1996 7,758 $ 86 $61,063 $(4,454) ($11,684) ($4,792) -- $46,214 $ 86,433
Purchase of treasury stock (956) (15,537) (15,537)
Allocation of ESOP shares 61 60 121
Dividend payable ($0.10) (618) (618)
Change in unrealized gain or
loss, net of taxes (100) (100)
Net income 1,996 1,996
-------- -------- ------- ------- -------- -------- ------------ -------- --------
Balance at March 31, 1997 6,802 $ 86 $61,124 $(4,394) ($27,221) ($4,792) $(100) $47,592 $ 72,295
======== ======== ======= ======= ======== ======== ============ ======== ========
Balance at December 31, 1997 6,511 $ 86 $61,371 $(4,217) $(32,077) $(4,290) $117 $51,993 $ 72,983
Exercise of Options 13 (76) 217 141
Allocation of ESOP shares 96 57 153
Dividend payable ($0.10) (575) (575)
Change in accumulated comprehensive
income, net of taxes (65) (65)
Net income 1,926 1,926
-------- -------- ------- ------- -------- -------- ------------ -------- --------
Balance at March 31, 1998 6,524 $ 86 $61,391 $(4,160) $(31,860) $(4,290) $52 $53,344 $ 74,563
======== ======== ======= ======= ======== ======== ============ ======== ========
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,926 $ 1,996
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 71 73
Deferred income taxes 21 109
Amortization of premiums and accretion of discounts 8 66
Provision for loan losses 20 20
Compensation expense-allocation of ESOP and MRP shares 313 121
Gain on sale of mortgage-backed securities (97) --
Loss on sale of real estate owned -- 5
Increase or decrease in assets and liabilities
Accrued interest receivable (183) (779)
Accrued interest on deposits 1,875 1,763
Accrued interest on borrowings 234 (32)
Accrued income taxes 1,044 1,039
Other assets (305) 4
Other liabilities (219) 211
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Net cash provided by operating activities 4,708 4,596
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, available for sale (16,636) (25,947)
Purchase of mortgage-backed securities, available for sale -- (61,926)
(Purchase)/maturity of Federal Funds (23,175) 45,175
Maturity of investment securities, available for sale 10,000 --
Principal paydowns on mortgage-backed securities, available for sale 1,402 2,095
Net proceeds from sale of mortgage-backed securities, available for sale 30,352 --
Net (increase)/decrease in conventional mortgage loans 3,266 (20,828)
Net increase in other loans 45 (15)
Purchase of Federal Home Loan Bank stock -- (2,001)
Net proceeds from sale of real estate owned -- 35
Purchase of premises and equipment (19) (23)
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Net cash provided/(used) in investing activities 5,235 (63,435)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 2,770 4,743
Net increase/(decrease) in certificate accounts (23,773) 8,515
Advances by borrowers for taxes and insurance 297 777
Net increase in borrowings 5,000 50,000
Dividend paid (575) (713)
Options exercised 142 --
Purchase of treasury stock -- (15,537)
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Net cash (used)/provided by financing activities (16,139) 47,785
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS (6,196) (11,054)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,523 26,406
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,327 $ 15,352
======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and advances by borrowers for
taxes and insurance $ 4,396 $ 4,659
Interest on borrowings 1,032 1,249
Income taxes 233 266
Noncash Transactions:
Transfer from conventional loans to real estate acquired through foreclosure 85 29
Increase in additional paid-in capital-ESOP allocation and options exercised 20 61
Unrealized appreciation/(depreciation) on securities available for sale 84 (163)
Transfers from conventional mortgage loans to conventional mortgage loans,
available for sale -- 10,065
5
FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of First Bell
Bancorp, Inc. ("First Bell" or the "Company") and its wholly-owned subsidiary
Bell Federal Savings and Loan Association of Bellevue (the "Association"). All
significant intercompany transactions have been eliminated in consolidation.
The investment in Bell Federal on First Bell's financial statements is carried
at the parent company's equity in the underlying net assets.
The consolidated balance sheet as of March 31, 1998 and related consolidated
statements of income and comprehensive income, cash flows and changes in
stockholders' equity for the three months ended March 31, 1998 and 1997 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, 1997.
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 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.
6
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of Financial Condition at March 31, 1998 and December 31, 1997.
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Assets. Total assets decreased by $11.1 million, or 1.6% to $664.6 million at
March 31, 1998, from $675.7 million at December 31, 1997. The decrease was the
result of a decrease in mortgage-backed securities of $31.9 million, cash of
$6.2 million and conventional mortgage loans of $3.4 million. Offsetting these
decreases were increases of $23.2 in federal funds sold and $6.7 million in
investment securities. Mortgage-backed securities at March 31, 1998 were zero
compared to $31.9 million at December 31, 1997. All of the mortgage-backed
securities were sold during the first quarter of 1998 which resulted in a gain
of $97,000. Total cash declined $6.2 million or 25.3% to $18.3 million at March
31, 1998 from $24.5 million at December 31, 1997. The decrease was the result
of net cash of $16.1 million being used for financing activities offset by net
cash provided by operating activities of $4.7 million and by investing
activities of $5.2 million. Conventional mortgage loans decreased by $3.4
million or 1.0% to $575.1 million at March 31, 1998 from $578.5 million at
December 31, 1997. The decrease was primarily the result of principle payments
and prepayments of $21.0 million offset by conventional mortgage loan
originations of $16.2 million. Reducing the impact of the above decreases was
an increase in federal funds sold of $23.2 million to $24.7 million at March 31,
1998 from $1.5 at December 31, 1997. The increase was the result of the
proceeds from the sale of the mortgage-backed securities being temporarily
invested in federal funds sold. Investment securities have increased to $32.6
million at March 31, 1998 from $25.9 million at December 31, 1997. The $6.7
million or 26.1% increase was the result of the purchase of $16.6 million of
investment securities offset by the maturity of $10.0 million. As of March 31,
1998, the Company had committed to purchase $14.3 million in investment
securities in the second quarter of 1998.
Liabilities. Total liabilities declined by $12.6 million or 2.1% to $590.1
million at March 31, 1998 from $602.7 million at December 31, 1997. The
decrease was the result of deposits declining by $21.0 million offset by an
increase in borrowings of $5.0 million, accrued interest on borrowings of $1.9
million and accrued income taxes of $1.0 million. Total deposits at March 31,
1998 were $474.1 million compared to $495.1 million at December 31, 1997. The
decrease of $21.0 million or 4.2% was the result of certificate accounts
decreasing by $23.8 million or 6.3% to $356.4 million at March 31, 1998 from
$380.2 million at December 31, 1997. The decrease in certificate accounts was
the result of the withdrawal of high cost institutional retail accounts.
Borrowings increased to $95.0 at March 31, 1998 from $90.0 million at December
31, 1997. The $5.0 million or 5.6% increase was used to assist in the funding
of the operation of the Association. Accrued interest on deposits increased by
$1.9 million or 350.3%, to $2.4 million at March 31, 1998 from $535,000 at
December 31, 1997. The increase is attributable to the timing of interest
payments on certificate accounts. Accrued income taxes at March 31, 1998 were
$1.3 million compared to $229,000 at December 31, 1997. The $1.0 million or
$455.9% increase can also be attributable to the timing of the federal estimated
income tax deposit for the first quarter.
7
Capital. Total stockholders' equity increased by $1.6 million or 2.2% to
$74.6 million at March 31, 1998 from $73.0 million at December 31, 1997. The
increase was the result of net income of $1.9 million and the exercise of stock
options of $217,000. Offsetting these increases were dividends of $575,000.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits, borrowings, and principle and interest payments on loans, mortgage-
backed securities and investments. While maturities and scheduled amortization
of loans are predictable sources of funds, deposit flows and mortgage
prepayments are strongly influenced by changes in general interest rates,
economic conditions, and competition.
The primary investing activities of the Company for the three months ended
March 31, 1998 was the purchase of $23.2 million in federal funds, the purchase
of $16.6 million in investment securities and the origination of $16.2 million
of conventional mortgage loans. Sources of funds for the quarter ended March
31, 1998 were net proceeds of $30.4 million from the sale of the mortgage-backed
securities, $21.0 million in principle payment and prepayments, $10.0 from the
maturity of investment securities, and the $5.0 million increase in borrowings.
In addition, $23.8 million in high cost certificate accounts were withdrawn
during the three months ended March 31, 1998.
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 Office of Thrift Supervision ("OTS") regulations. The
minimum required liquidity is currently 4.0%. The Association's average
liquidity ratio was 12.5% for the quarter ended March 31, 1998. 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 March 31, 1998, assets qualifying for liquidity, including cash and
investments, totalled $45.9 million.
At March 31, 1998, 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 1 capital (to risk-based assets) and risk-based capital (to
risk-based assets) ratios were 10.9%, 10.9%, 23.3% and 23.5%, respectively. The
Association is considered a "well capitalized" institution under the prompt
corrective regulations of the OTS.
Comparison of Results of Operations for the Three Months ended March 31, 1998
- -----------------------------------------------------------------------------
and 1997.
- --------
General. Net income decreased by $70,000 or 3.5% for the three months ended
March 31, 1998 to $1.9 million from $2.0 million for the three months ended
March 31, 1997. The decrease was the result of general and administrative
expenses increasing by $228,000 or 19.5% to $1.4 million for the quarter ended
March 31, 1998 from $1.2 million for the comparable 1997 period. Offsetting the
increase in general and administrative expenses was a decrease in income taxes
of $79,000 and an increase in other income of $76,000.
8
Interest Income. Interest income for the three months ended March 31, 1998
decreased by $100,000 or 1.0% to $12.0 million from $12.1 million for the three
months ended March 31, 1997. The decrease was the result of interest earned on
mortgage-backed securities, investment securities, and federal funds sold
declining by a total of $909,000. Offsetting these decreases was an increase in
interest earned on conventional mortgage loans and interest-bearing deposits
that totalled $804,000. Interest earned on mortgage-backed securities decreased
by $489,000 or 63.3% to $283,000 for the quarter ended March 31, 1998 from
$772,000 for the comparable 1997 period. The decrease was the result of the
sale of mortgage-backed securities during the first quarter of 1998. Interest
earned on investment securities decreased by $248,000 or 39.1% to $387,000 for
the three months ended March 31, 1998 from $635,000 for the three months ended
March 31, 1997. The decrease was the result of the average balance in
investment securities decreasing by $9.0 million or 27.4% to $23.9 million for
the quarter ended March 31, 1998 from $32.9 million for the comparable 1997
period. Interest earned on federal funds sold for the three months ended March
31, 1998 was $167,000 compared to $339,000 for the three months ended March 31,
1997. The $172,000 or 50.7% decrease, was the result of the average balance in
federal funds sold decreasing by $22.7 million or 64.6% to $12.5 million for the
quarter ended March 31, 1998 from $35.2 million for the comparable 1997 period.
Reducing the impact of the decline in the average federal funds balance was a 12
basis points increase in the average rate earned. The rate increased 5.44% for
the three months ended March 31, 1998 from 5.32% for the comparable 1997 period.
Interest on conventional mortgages increased by $728,000 or 7.3% to $10.7
million for the three months ended March 31, 1998 from $10.0 million for the
three months ended March 31, 1997. The increase was the result of the average
balance of conventional mortgage loans increasing by $37.9 million, or 7.0% to
$576.8 million for the quarter ended March 31, 1998 from $538.9 million for the
comparable 1997 period. Interest earned on interest-bearing deposits increased
$76,000 or 28.4% to $344,000 for the three months ended March 31, 1998 from
$268,000 for the three months ended March 31, 1997. The increase was the result
of the average balance in interest-bearing deposits increasing by $3.2 million
or 15.5% to $24.3 million for the three months ended March 31, 1998 from $21.1
million for the three months ended March 31, 1997. In addition, there was a 23
basis point increase on the average rate on interest-bearing deposits going to
5.44% for the quarter ended March 31, 1998 from 5.21% for the comparable 1997
period.
Interest Expense. Interest expense for the three-months ended March 31, 1998
decreased by a $103,000 or 1.3% to $7.5 million from $7.6 million for the three
months ended March 31, 1997. The decrease was the result of interest expense on
deposits declining by $151,000 or 2.4% to $6.3 million for the three months
ended March 31, 1998 from $6.4 million for the comparable 1997 period. Interest
expense on deposits decreased as a result of the average balance on certificate
accounts declining by $15.7 million or 4.1% to $365.5 million for the quarter
ended March 31, 1998 from $381.2 million for the quarter ended March 31, 1997.
Offsetting the decrease was an increase in interest expense on borrowings of
$48,000 or 3.9%. This increase was the result of the average balance of
borrowings rising to $93.3 million for the first quarter of 1998 from $91.6
million for the first quarter of 1997. Also contributing to the increase in
interest expense on borrowings was a ten basis points increase on the average
interest rate paid on borrowings. For the three months ended March 31, 1998,
the average rate was 5.42% compared to 5.32% for the comparable 1997 period.
9
Net Interest Income. Net interest income increased by $3,000. The increase
was the result of interest expense decreasing by $103,000 and interest income
decreasing by $100,000.
Provision for Loan Losses. A $20,000 provision for loan losses was recorded
during quarters ended March 31, 1998 and 1997. At March 31, 1998, non-
performing assets were $471,000 compared to $634,000 at December 31, 1997 and
the allowance for loan losses equaled 156.1% of total non-performing assets, as
compared to 112.8% at December 31, 1997. For the three-months ended March 31,
1998 and 1997, no loans were charged off. Management believes that the current
level of loan loss reserves is adequate to cover losses inherent in the
portfolio as of such date. There can be no assurance, however, that the Company
will not sustain losses in future periods which could be substantial in relation
to the size of the allowance at March 31, 1998.
Other Income. Other income for the three months ended March 31, 1998 was
$206,000 as compared to $130,000 for the three months ended March 31, 1997. The
$76,000, or 58.5% increase, was the result of the $97,000 gain on the sale of
the mortgage-backed securities as previously discussed. Offsetting this gain
was a $26,000 decline in loan fees and service charges. The decrease was the
result of a decline in servicing income loans sold to the Federal National
Mortgage Association ("FNMA"). The decrease in servicing income was the result
of principle prepayments on the FNMA loans.
General and Administrative Expenses. General and administrative expenses
increased by $228,000 or 19.5% to $1.4 million for the three months ended March
31, 1998 from $1.2 million for the three months ended March 31, 1997. The
increase was the result of increases in compensation, payroll taxes and fringe
benefits, federal insurance premiums and other expenses. Compensation, payroll
taxes and fringe benefits rose to $815,000 for the quarter ended March 31, 1998
from $685,000 for the comparable 1997 period. The $130,000 or 19.0% increase
was the result of the increased cost of the employee stock programs due to the
rise in the average price of the Company's common stock. Federal insurance
premiums increased by $63,000 or 3.5 times that of the 1997 expenses. The
increase was the result of an increase in the base used to determine the premium
from the first quarter of 1998 compared to the first quarter of 1997. In
addition, a 1996 federal insurance refund was recorded in the first quarter of
1997. Other expenses increased by $42,000 or 19.9% to $253,000 for the quarter
ended March 31, 1998 from $211,000 for the comparable 1997 period. This
increase was the result of additional expenses incurred in the operation of the
Company.
Income Taxes. Income taxes decreased by $79,000 or 5.7% to $1.3 million for
the three months ended March 31, 1998 from $1.4 million for the three months
ended March 31, 1997. The decrease was the result of net income before taxes
declining to $3.2 million for the period from $3.4 million for the 1997 period.
In addition, the deferred tax liability increased by $21,000 for the three
months ended March 31, 1998 as compared to $109,000 for the three months ended
March 31, 1997.
Preparation for the Year 2000. Many computer systems may not correctly
process information with dates beyond December 31, 1999 due to programming
assumptions that were made as computer applications were developed. The Company
has assessed its primary business
10
information system with respect to the compatibility with the Year 2000. A plan
has been approved by the Company's Board of Directors to ensure that the
operation of the Company remains uninterrupted. It is not expected that the
related costs will have a material effect on the Company's operating income,
liquidity or capital resources. However, the Company is dependent on outside
vendors, who may incur disruptions as a result of the Year 2000. Accordingly,
no assurance can be given that the Company's results of operations will not be
adversely affected by this industry-wide issue.
Recent Accounting Pronouncements. Reporting Comprehensive Income -- In June
1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130
"Reporting Comprehensive Income." This statement establishes standards for the
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The provisions of this statement are effective for fiscal years
beginning after December 15, 1997, with reclassification of comparative
financial statements and as applicable to interim periods. The Company
currently has one component of other comprehensive income which includes
unrealized gains or losses on securities available for sale which are detailed
as follows:
March 31, 1998 March 31, 1997
------------------------------ -----------------------------
Before Tax Net-of-Tax Before Tax Net-of-tax
Amount Tax Amount Amount Tax Amount
----------- ---- ----------- ----------- --- -----------
Unrealized gains or losses
on securities:
Unrealized holding losses
arising during the period $ (11) $ 5 $( 6) $(163) $63 $(100)
Less: reclassification adjust-
ment for gains realized in
net income (97) 38 (59) -- -- --
----- --- ---- ---------- --- ----------
Net realized gains (108) 43 (65) (163) 63 (100)
--- ---- ---------- --- ----------
Other comprehensive income $(108) $43 $(65) $(163) $63 $(100)
===== === ==== ========== === ==========
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This Statement is effective for
financial statements for the year ended December 31, 1998.
11
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, 1997 to
March 31, 1998. However, the OTS results are not yet available for the quarter
ended March 31, 1998. 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 statement and notes thereto contained in First
Bell's Annual Report for the fiscal year ended December 31, 1997.
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.
None
Item 5. Other Information.
None
12
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
Exhibit 3.1 - Certificate of Incorporation of First Bell Bancorp,
Inc.*
Exhibit 3.2 - Bylaws of First Bell Bancorp, Inc.*
Exhibit 4.0 - Stock Certificate of First Bell Bancorp, Inc.*
Exhibit 11 - Computation of Earnings Per Share (filed herewith)
Exhibit 27 - Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None
_______________________
* Incorporated herein by reference into this document from the Exhibits to Form
S-1, Registration Statement, filed on November 9, 1994, as amended,
Registration No. 33-86160.
13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FIRST BELL BANCORP, INC.
(Registrant)
Date: May 14, 1998 /s/ Albert H. Eckert, II
--------------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: May 14, 1998 /s/ Jeffrey M. Hinds
--------------------------------------
Jeffrey M. Hinds
Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)