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, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission File Number 0-25172
FIRST BELL BANCORP, INC.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 251752651
________________________________________________________________________________
State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 DELAWARE AVENUE, SUITE 1704, WILMINGTON, DELAWARE 19801
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(302) 427-7883
________________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 5,512,843 shares of common
stock, par value $.01 per share, were outstanding as of May 15, 1999.
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets March 31, 1999 (unaudited)
and December 31, 1998 (audited)................................... 2
Consolidated Statements of Income and Comprehensive Income for the
Three Months Ended March 31, 1999
and 1998, (unaudited)............................................. 3
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months Ended March 31, 1999 and 1998,
(unaudited)....................................................... 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 1998, (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................................... 13
Item 4 Submission of Matters to a Vote of Security Holders............... 13
Item 5 Other Information................................................. 13
Item 6 Exhibits and Reports on Form 8-K.................................. 13
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
1
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
ASSETS: (unaudited) (audited)
Cash and Cash Equivalents:
Cash on-hand............................................................................. $969 $ 925
Non-interest-bearing deposits............................................................ 1,732 2,116
Interest-bearing deposits................................................................ 21,562 18,502
-------- --------
Total cash........................................................................... 24,263 21,543
Federal funds sold........................................................................... 6,700 36,175
Investment securities-held to maturity-at cost (fair value of $10,569
and $10,766 at March 31, 1999 and December 31, 1998, respectively)......................... 9,983 9,980
Investment securities available for sale, at fair value (cost of $214,872 and $134,743
at March 31, 1999 and December 31, 1998, respectively)..................................... 215,230 136,677
Conventional mortgage loans - net of allowance for
loan losses of $835 and $805 at March 31, 1999 and
December 31, 1998, respectively............................................................ 540,766 544,636
Other loans, net............................................................................. 884 899
Real estate owned............................................................................ 39 82
Properties and equipment, net................................................................ 3,341 3,405
Federal Home Loan Bank stock, at cost........................................................ 11,650 9,000
Accrued interest receivable.................................................................. 4,953 4,272
Other assets................................................................................. 943 937
-------- --------
Total assets.......................................................................... $818,752 $767,606
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Passbook, club and other accounts........................................................ $ 75,468 $ 73,578
Money market and NOW accounts............................................................ 53,417 52,164
Certificate accounts..................................................................... 363,620 369,386
-------- --------
Total deposits........................................................................ 492,505 495,128
Borrowings................................................................................... 233,000 180,000
Advances by borrowers for taxes and insurance................................................ 11,931 11,354
Accrued interest on deposits................................................................. 2,406 600
Accrued interest on borrowings............................................................... 983 863
Accrued income taxes......................................................................... 514 120
Deferred income tax liability................................................................ 1,713 2,424
Dividend payable on common stock............................................................. 439 536
Other liabilities............................................................................ 2,809 2,679
-------- --------
Total liabilities..................................................................... 746,300 693,704
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; 5,972,976 outstanding at March 31, 1999
6,100,476 outstanding at December 31, 1998; one stock right per share)................... 86 86
Paid-in capital............................................................................ 61,834 61,768
Unearned ESOP shares (553,702 and 561,562 shares at March 31, 1999
and December 31, 1998, respectively)....................................................... (3,917) (3,972)
Unearned MRP shares (275,441 shares at March 31, 1999 and December 31, 1998,
respectively).............................................................................. (3,839) (3,839)
Treasury stock (2,623,274 shares and 2,495,774 shares at March 31,
1999 and December 31, 1998, respectively)............................................... (41,124) (38,918)
Accumulated other comprehensive income, net of taxes....................................... 218 1,179
Retained earnings.......................................................................... 59,194 57,598
-------- --------
Total Stockholders' Equity................................................................... 72,452 73,902
Total Liabilities and Stockholders' Equity................................................... $818,752 $767,606
======== ========
2
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
--------------- ---------------
Interest income:
Conventional mortgage loans $ 9,954 $10,694
Interest-bearing deposits 262 344
Mortgage-backed securities 0 283
Federal funds sold 237 167
Investment securities 2,329 388
Other loans 15 14
Federal Home Loan Bank stock 169 83
------- -------
Total interest and dividend income 12,966 11,973
Interest expense on deposits 6,021 6,271
Interest expense on borrowings 2,877 1,265
------- -------
Total interest expense 8,898 7,536
Net interest income 4,068 4,437
Provision for loan losses 30 20
------- -------
Net interest income after provision
for loan losses 4,038 4,417
Other income:
Loan fees and service charges 97 101
Gain on sale of loans and securities 45 97
Miscellaneous income (19) 8
------- -------
Total other income 123 206
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 733 815
Federal insurance premiums 74 81
Office occupancy expense, excluding depreciation 150 124
Depreciation 72 71
Computer services 59 56
Other expenses 544 253
------- -------
Total general and administrative expense 1,632 1,400
Net Income before provision for income taxes 2,529 3,223
Provision for income taxes:
Current:
Federal 401 1,028
State 190 248
Deferred expense (credit) (97) 21
------- -------
Total provision for income taxes 494 1,297
Net income $ 2,035 $ 1,926
======= =======
Other comprehensive income, net of taxes,
unrealized gain on investments (961) (65)
------- -------
Comprehensive income $ 1,074 $ 1,861
======= =======
Basic earnings per share $0.39 $0.34
------- -------
Diluted earnings per share $0.37 $0.33
------- -------
Weighted average shares outstanding-Basic 5,256 5,615
======= =======
Weighted average shares outstanding-Diluted 5,471 5,934
======= =======
3
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 1999
(In thousands)
(Unaudited)
Accumulated
Number Other Com-
Common Additional Unearned prehensive
Stock Common Paid-in ESOP Treasury MRP Income, Net Retained
Shares Stock Capital Shares Stock Stock of Taxes Earnings Total
----------------------------------------------------------------------------------------------
Balance at December 31, 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 on common stock ($0.10) (575) (575)
Change in unrealized gain or
loss, 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
===== === ======= ======= ======== ======= ====== ======= =======
Balance at December 31, 1998 6,100 $86 $61,768 $(3,972) $(38,918) $(3,839) $1,179 $57,598 $73,902
Purchase of Treasury Stock (127) (2,206) (2,206)
Allocation of ESOP 66 55 121
Dividend on common stock ($0.10) (439) (439)
Change in unrealized gain or
loss, net of taxes (961) (961)
Net income
2,035 2,035
----- --- ------- ------- -------- -------- ------ ------- -------
Balance at March 31, 1999 5,973 $86 $61,834 $(3,917) $(41,124) $(3,839) $ 218 $59,194 $72,452
===== === ======= ======= ========= ======== ====== ======= =======
4
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, 1999 March 31, 1998
------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,035 $ 1,926
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 72 71
Deferred income taxes (97) 21
Amortization of premiums and accretion of discounts (29) 8
Provision for loan losses 30 20
Compensation expense-allocation of ESOP and MRP shares 253 313
Gain on sale of mortgage-backed securities, available for sale -- (97)
Loss on sale of real estate owned 21 --
Gain on sale of investment securities, available for sale (45) --
Increase or decrease in assets and liabilities
Accrued interest receivable (681) (183)
Accrued interest on deposits 1,806 1,875
Accrued interest on borrowings 120 234
Accrued income taxes 394 1,044
Other assets (5) (305)
Other liabilities 96 (219)
Dividend payable (97) --
-------- --------
Net cash provided by operating activities 3,873 4,708
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, available for sale (85,188) (16,636)
(Purchase)/maturity of Federal Funds 29,475 (23,175)
Maturity of investment securities, available for sale -- 10,000
Principal paydowns on mortgage-backed securities, available for sale -- 1,402
Net proceeds from sale of mortgage-backed securities, available for sale -- 30,352
Net proceeds from sale of investments, available for sale 3,317 --
Principal paydowns on investment securities, available for sale 1,814 --
Net decrease in conventional loans 3,776 3,266
Net decrease in other loans 15 45
Purchase of Federal Home Loan Bank stock (2,650) --
Net proceeds from sale of real estate owned 85 --
Purchase of premises and equipment (8) (19)
-------- --------
Net cash used in investing activities (49,364) 5,235
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 3,143 2,770
Net decrease in certificate accounts (5,767) (23,773)
Net increase advances by borrowers for taxes and insurance 577 297
Net increase in borrowings 53,000 5,000
Dividend paid (536) (575)
Options exercised -- 142
Purchase of treasury stock (2,206) --
-------- --------
Net cash provided by financing activities 48,211 (16,139)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,720 (6,196)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,543 24,523
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,263 $ 18,327
======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and advances by borrowers for
taxes and insurance $ 4,215 $ 4,936
Interest on borrowings 1,145 1,032
Income taxes 189 233
Noncash transactions:
Transfers from conventional loans to real estate acquired through foreclosure 63 85
Increase in additional paid-in capital-ESOP allocation and options exercised 66 20
Unrealized appreciation/(depreciation) on securities available for sale 358 84
5
FIRST BELL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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, 1999 and related
consolidated statements of income and comprehensive income, cash flows and
changes in stockholders' equity for the three months ended March 31, 1999 and
1998 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, 1998.
Private Securities and 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, management
discussion and analysis of financial condition and results of operation, the
quantitative and qualitative disclosure about market risk and the Year 2000
compliance. 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, 1999 and December 31, 1998.
- -------------------------------------------------------------------------
Assets. Total assets increased to $818.8 million, or 6.7% at March 31, 1999
from $767.6 million at December 31, 1998. The increase was the result of a rise
in investment securities, cash and Federal Home Loan Bank ("FHLB") stock offset
by a decrease in federal funds sold. Investment securities at March 31, 1999
were $225.2 million compared to $146.7 million at December 31, 1998. The $78.6
million or 53.6% increase was the result of the purchase of $85.2 million of
municipal securities, offset by the sale of $3.3 million of municipal securities
that resulted in a gain of $45,000 and the principal repayments of $1.8 million.
The funding of the municipal securities came from borrowings and the reduction
in federal funds sold. Total cash increased to $24.3 million or 12.6% at March
31, 1999 from $21.5 million at December 31, 1998. The increase was primarily
the result of an increase in prepayments on conventional mortgage loans. FHLB
stock increased by $2.7 million or 29.4% to $11.7 million at March 31, 1999 from
$9.0 million at December 31, 1998. The increase was the result of the minimum
amount of stock to be held required by the FHLB increasing due to the additional
borrowings obtained from the FHLB during the quarter. Federal funds decreased
to $6.7 million at March 31, 1999 from $36.2 million at December 31, 1998. The
$29.5 million or 81.5% decrease was used to purchase additional municipal
securities.
Liabilities. Total liabilities increased to $746.3 million at March 31, 1999
from $693.7 million at December 31, 1998. The $52.6 million or 7.6% increase
was primarily the result of borrowings increasing by $53.0 million or 29.4% to
$233.0 million at March 31, 1999 from $180.0 million at December 31, 1998.
Capital. Total stockholders' equity decreased by $1.5 million or 2.0% to $72.4
million at March 31, 1999 from $73.9 million at December 31, 1998. The decrease
was the result of the purchase of 127,500 shares of treasury stock totaling $2.2
million, a decline of $961,000 in accumulated other comprehensive income, net of
taxes, as the result of a decrease in the market value of investment securities
and dividends declared of $439,000. Offsetting these decreases was net income of
$2.0 million.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits, borrowings, and principal and interest payments on loans 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, 1999 was the purchase of $85.2 million of investment securities held
as available-for-sale and the investment of $37.8 million in conventional
mortgage loans. Sources of funds for the three months ended March 31, 1999 were
the additional $53.0 million in FHLB borrowings and $43.6 million in principal
repayments of conventional mortgage loans and investments.
7
The Association is required to maintain an average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings as defined by the Office of Thrift Supervision ("OTS") regulations.
The minimum required liquidity balance is currently 4.0%. The Association's
average liquidity ratio was 9.1% for the quarter ended March 31, 1999. 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, 1999, assets qualifying for liquidity, including
cash and investments, totaled $53.7 million.
At March 31, 1999 the Association's capital exceeded all of the capital
requirements of the Office of Thrift Supervision ("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 8.9%, 8.9%,
21.4%, and 21.6%, respectively. The Association is considered a "well
capitalized" institution under the prompt corrective action regulations of the
OTS.
Comparison of Results of Operations for the Three Months ended March 31, 1999
- -----------------------------------------------------------------------------
and 1998.
- --------
General. Net income for the quarter ended March 31, 1999 increased by
$109,000 or 5.7% to $2.0 million from $1.9 million for the quarter ended March
31, 1999. The increase was the result of tax equivalent net interest income
increasing by $443,000 or 10.0% to $4.9 million for the quarter ended March 31,
1999 from $4.4 million for the comparable 1998 period. Offsetting this increase
was an increase in general and administrative expenses of $232,000 and a
decrease in other income of $83,000.
Interest Income. Interest income discussed in this section is the tax
equivalent interest income. Tax equivalent interest income is being used
because interest on investment securities included tax-exempt securities. Tax-
exempt securities carry pre-tax yields lower than comparable taxable assets.
Therefore, it is more meaningful to analyze interest income on a tax-equivalent
basis. Tax-equivalent increases of $812,000 and zero have been made to interest
on investment securities for the three months ended March 31, 1999 and 1998,
respectively. Tax equivalent interest income for the three months ended March
31, 1999 was $13.8 million compared to $12.0 million for the three months ended
March 31, 1998. The $1.8 million or 15.1% increase was primarily the result of
increases in interest earned on investment securities offset by a reduction of
interest earned on conventional mortgage loans. Tax equivalent interest on
investment securities increased to $3.1 million from $388,000 for the quarter
ended March 31, 1999 and 1998, respectively. The increase was due to the average
balance of investment securities increasing to $187.8 million for the quarter
ended March 31, 1999 from $23.9 million for the quarter ended March 31, 1998.
This was the result of the municipal securities that were purchased beginning
late in the first quarter of 1998. In addition, there was a 20 basis points
increase on the tax equivalent yield earned on investment securities. The tax
equivalent yield was 6.69% for the quarter ended March 31, 1999 compared to
6.49% for the quarter ended March 31, 1998. Interest earned on conventional
mortgage loans decreased by $740,000 or 6.9% to $10.0 million for the quarter
ended March 31, 1999 from $10.7 million for the quarter ended March 31, 1998.
The decrease was the result of the average balance of conventional mortgage
loans falling to $543.2 million for the quarter ended March 31, 1999
8
from $576.7 million for the quarter ended March 31, 1998. The $33.6 million or
5.8% decrease was due to an increase in refinancing and prepayments of mortgage
loans. Also, the average yield declined to 7.33% from 7.42% for the quarters
ended March 31, 1999 and 1998, respectively.
Interest Expense. Interest expense increased by $1.4 million or 18.1% to
$8.9 million for the quarter ended March 31, 1999 from $7.5 million for the
quarter ended March 31, 1998. The increase was the result of a rise in interest
expense on borrowings offset by a decrease in interest expense on deposits.
Interest expense on borrowings increased $1.6 million or 127.4% to $2.9 million
for the quarter ended March 31, 1999 from $1.3 million for the comparable 1998
period. The increase was the result of the average balance of borrowings
increasing by $113.9 million or 122.0% to $207.3 million for the quarter ended
March 31, 1999 from $93.4 million for the quarter ended March 31, 1998. The
proceeds from increased borrowings were used to fund the purchase of investment
securities available for sale. In addition, there was 13 basis point rise in
the average cost of borrowings. Interest expense on deposits dropped to $6.0
million for the quarter ended March 31, 1999 from $6.3 million for the
comparable 1998 period. The $250,000 or 4.0% decrease was primarily the result
of a 32 basis points decline on the average cost of certificate accounts. The
average cost on certificate accounts was 5.56% and 5.88% for the quarters ended
March 31, 1999 and 1998, respectively. The average cost declined because the
Association allowed higher rate certificate accounts to run off while
emphasizing lower cost core deposits.
Net Interest Income. Tax equivalent net interest income rose to $4.9
million for the quarter ended March 31, 1999 from $4.4 million for the quarter
ended March 31, 1998. The $443,000 or 10.0% increase was the result of tax
equivalent interest income increasing by $1.8 million offset by an increase in
interest expense of $1.4 million as described in the preceeding sections.
Provision for Loan Losses. The provision for loan losses increased by
$10,000 or 50.0% to $30,000 for the quarter ended March 31, 1999 from $20,000
for the quarter ended March 31, 1998. At March 31, 1999, non-performing assets
were $430,000 compared to $580,000 at December 31, 1998. The allowance for loan
losses equaled 194.2% of total non-performing assets as compared to 138.8% at
December 31, 1998. There were no loans charged off for the quarters ended March
31, 1999 and 1998. Management believes that the current level of loan loss
reserve is adequate to cover losses inherent on 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, 1999.
Other Income. Other income declined by $83,000 or 40.3% to $123,000 for
the quarter ended March 31, 1999 from $206,000 for the quarter ended March 31,
1998. The decrease was the result of a decline in gains on sales of investments
of $52,000 and $21,000 in losses on sales of real estate owned.
General and Administrative Expenses. General and administrative expenses
increased to $1.6 million for the quarter ended March 31, 1999 from $1.4 million
for the quarter ended March 31, 1998. The $232,000 increase was primarily the
result of an increase in other
9
expenses offset by a decrease in compensation, payroll taxes and fringe
benefits. Other expenses increased $291,000 due to costs associated with the
Annual Meeting and other one time non-recurring expenses. Compensation, payroll
taxes and fringe benefits decreased by $82,000 or 10.1% to $733,000 for the
quarter ended March 31, 1999 from $815,000 for the quarter ended March 31, 1998.
The decrease was due to a decline in the cost of the employee stock programs as
the result of the average price of the common stock being less in the first
quarter of 1999 than in the comparable 1998 period.
Income Taxes. Income taxes for the quarter ended March 31, 1999 and 1998,
remained flat at $1.3 million. After considering tax equivalent adjustments,
tax equivalent increases of $812,000 and zero were made for the quarters ended
March 31, 1999 and 1998, respectively.
Other Comprehensive Income - The Financial Accounting Standards Board ("FASB")
recently issued SFAS No. 130, "Reporting Comprehensive Income," which became
effective for financial statements for fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements.
The following table sets forth the related tax effects allocated to each
element of comprehensive income for the quarters ended March 31, 1999 and 1998:
1999 1998
------------------------------- -------------------------------
Tax Net-of- Tax Net-of-
Pre-tax (Expense) tax Pre-tax (Expense) tax
Amount or Benefit Amount Amount or Benefit Amount
-------- ----------- -------- -------- ----------- --------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period................. $(1,622) $634 $(988) $(217) $93 $(124)
Less: reclassification adjustment for
(gains) losses realized in net
income................................ (45) 18 (27) (97) 38 (54)
------- ---- ----- ----- --- -----
Net unrealized gains (losses)........... (1,577) 616 (961) (120) 55 (65)
------- ---- ----- ----- --- -----
Other comprehensive income................ $(1,577) $616 $(961) $(120) $55 $ (65)
======= ==== ===== ===== === =====
The following table sets forth the components of accumulated other
comprehensive income for the quarters ended March 31, 1999 and 1998:
1999 1998
------- ------
Beginning Balance................................. $1,179 $ 117
Net unrealized gains on securities, net of taxes.. (961) (65)
------ -----
Ending balance.................................... $ 218 $ 52
====== =====
10
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 information system with respect to the
compatibility with the Year 2000. The Company utilizes a third-party vendor for
processing its primary banking applications and several other third-party
vendors for ancillary computer applications. The Company and all third-party
vendors for the Company's banking applications have modified, upgraded or
replaced their computer applications and are in the process of validating the
changes to ensure Year 2000 compliance. The Company's primary regulator, in
conjunction with other regulatory agencies, has developed guidelines which must
be met by the Company to ensure that the Year 2000 issue is properly addressed.
In accordance with these guidelines, the Board of Directors has appointed a Year
2000 Committee, comprised of senior managers and department heads to assess the
impact that the Year 2000 will have on the Company's operations and financial
standing. The Year 2000 Committee has developed a Year 2000 Compliance Program,
the ("Program"). The Program has been divided into 5 sub-parts; awareness,
assessment, renovation, validation and implementation. The awareness,
assessment and renovation portions of the program are complete. The validation
and implementation portions have been completed with respect to the Company's
mission critical systems. Ancillary computer communications, data exchanges and
non information technology continue to be tested as other third party vendors
complete their Year 2000 computer changes. These final two portions of the plan
are expected to be complete by June 30, 1999. In addition to internal
processes, the Company monitors through correspondence, the progress of other
third party vendors to ensure that their systems do not indirectly affect the
Company's operations.
Costs. The Company has not and does not expect to incur any material
expense to replace data processing equipment. The Company does not currently
expect that the cost of its Year 2000 compliance program, including possible
remediation costs, will be material to its financial condition and expects that
it will satisfy such compliance program without material disruption of its
operations. The Company estimates the costs related to Year 2000 compliance
will be less than $75,000.
Risks and Contingencies. The Company does not have commercial loans
outstanding. However, the Company's mortgage loans could be indirectly affected
by the Year 2000 if the employer's of the borrowers are affected by the Year
2000. The Company has attempted to make its borrowers aware of the Year 2000
issue but the effect that the Year 2000 will have, if any, on the Company's
loans cannot be determined.
In the event that the Company's operations are affected by the Year 2000,
either internally or externally through significant vendors including utilities,
other financial institutions or supply companies, the Company's results of
operations and/or financial condition could be adversely affected. In the event
that problems arise, a contingency plan has been developed to ensure the
continued operation of the Company.
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
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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, 1999. First Bell has not yet
determined the impact that this standard will have on the financial statements.
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, 1998 to
March 31, 1999. However, the OTS results are not yet available for the quarter
ended March 31, 1999. 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, 1998.
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 and Use of Proceeds.
The Company adopted a Stockholder Rights Plan on November 18, 1998 in
which preferred stock purchase rights were distributed as a dividend at
the rate of one right for each share of common stock held as of the close
of business on November 30, 1998 and for each share of Company Common
Stock issued (including shares distributed from Treasury) by the Company
thereafter and prior to the Distribution Date.
Each Right will entitle stockholders to buy one one-thousandth of a share
of Series A Preferred Stock of the Company at an exercise price of $50.00.
The Rights will be exercisable only if a person or group acquires
beneficial ownership of 10% or more of the Company's outstanding Common
Stock or commences a tender or exchange offer upon consummation of which a
person or group would beneficially own 10% or more of the Company's
outstanding Common Stock.
If any person becomes the beneficial owner of 10% or more of Company's
Common Stock or a holder of 10% or more of the Company's Common Stock
engages in certain self-dealing transactions or a merger transaction in
which the Company is the surviving corporation and its Common Stock
remains outstanding, then each right now owned by such person or certain
related parties will entitle its holder to purchase, at the Right's
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then-current exercise price, units of the Company's Series A Preferred
Stock having a market value equal to twice the then-current exercise
price. In addition, if First Bell is involved in a merger or other
business combination transactions with another person after which its
Common Stock does not remain outstanding, or sells 50% or more of its
assets or earning power to another person, each Right will entitle its
holder to purchase, at the Right's then-current exercise price, shares of
common stock of the ultimate parent of such other person having a market
value equal to twice the then-current exercise price.
First Bell will generally be entitled to redeem the Rights at $0.01 per
right at any time until the 10th business day following public
announcement that a person or group has acquired 10% or more of the
Company's Common Stock.
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)
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.
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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, 1999 /s/ Albert H. Eckert, II
--------------------------------------------
Albert H. Eckert, III
President and Chief Executive Officer
Date: May 15, 1999 /s/ Jeffrey M. Hinds
--------------------------------------------
Jeffrey M. Hinds
Executive Vice President and Chief Financial
Officer (Principal Accounting Officer)