<PAGE>
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 September 30, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________________
Commission File Number 0-25172
FIRST BELL BANCORP, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 251752651
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
300 DELAWARE AVENUE, SUITE 1704, WILMINGTON, DELAWARE 19801
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(302) 427-7883
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 4,758,360 shares of common
stock, par value $.01 per share, were outstanding as of November 10, 2000.
<PAGE>
FIRST BELL BANCORP, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets September 30, 2000 (unaudited)
and December 31, 1999......................................................... 4
Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 2000 and 1999
(unaudited)................................................................... 5
Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 2000 and
1999 (unaudited).............................................................. 6
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 2000 and 1999 (unaudited)............. 7
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (unaudited)................................. 8
Notes to Unaudited Consolidated Financial Statements for the Three
and Nine Months Ended September 30, 2000 and 1999 (unaudited)................. 10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................................. 11
Item 3 Quantitative and Qualitative Disclosure About Market Risk..................... 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............................................................. 18
Item 6 Exhibits and Reports on Form 8-K.............................................. 18
SIGNATURES 19
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
------
Cash:
Cash on-hand
Non-interest-bearing deposits $ 774 $ 1,857
Interest-bearing deposits 2,123 2,204
Total cash 23,078 16,407
-------- ----------
Federal funds sold 25,975 20,468
Investment securities held to maturity - at cost (fair value of 4,800 33,000
$5,242 at December 31, 1999) - 4,989
Investment securities available-for-sale at fair value (cost of $215,664 and $217,043
at September 30, 2000 and December 31, 1999, respectively) 207,876 202,382
Mortgage-backed securities available-for-sale at fair value (cost $22,047 at
September 30, 2000) 22,052 -
Conventional mortgage loans - net of allowance for loan losses of $925 at September
30, 2000 and December 31, 1999, respectively 533,493 532,292
Other loans, net 981 967
Real estate owned 29 390
Premises and equipment, net 3,757 3,924
Federal Home Loan Bank stock, at cost 11,400 11,400
Accrued interest receivable 5,633 4,947
Other assets 1,479 1,363
-------- ----------
Total assets $817,475 $ 816,122
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Passbook, club and other accounts
Money market and NOW accounts $ 70,011 $ 73,308
Certificate accounts 60,325 52,259
Total deposits 397,457 386,364
-------- ----------
527,793 511,931
Borrowings 220,500 238,000
Advances by borrowers for taxes and insurance 5,517 11,223
Accrued interest on deposits 6,355 703
Accrued interest on borrowings 1,086 864
Income taxes payable - 93
Deferred income tax asset (3,021) (4,365)
Dividend payable on common stock 487 453
Other liabilities 1,803 2,702
-------- ----------
Total liabilities 760,520 761,604
-------- ----------
Stockholders' equity:
Preferred stock, ($0.01 par value; 2,000,000 shares authorized;
no shares issued or outstanding) --
Common stock ($0.01 par value; 20,000,000 shares authorized; --
8,596,250 issued; 4,758,360 outstanding at September 30, 2000 and
5,189,063 outstanding at December 31, 1999; one stock right per share) 86 86
Paid-in capital 62,487 62,217
Unearned ESOP shares (506,257 and 528,739 shares at September 30, 2000
and December 31, 1999, respectively) (3,581) (3,740)
Unearned MRP shares (210,727 and 242,384 shares at September 30, 2000 and
December 31, 1999, respectively) (2,937) (3,378)
Treasury stock (3,837,890 shares and 3,407,187 shares at September 30,
2000 and December 31, 1999, respectively) (62,055) (55,523)
Accumulated other comprehensive loss, net of taxes (4,728) (8,931)
Retained earnings 67,683 63,787
-------- ----------
Total Stockholders' Equity 56,955 54,518
-------- ----------
Total Liabilities and Stockholders' Equity $817,475 $ 816,122
======== ==========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 2000 SEPT. 30, 1999 SEPT. 30, 2000 SEPT. 30, 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Conventional mortgage loans $ 9,619 $ 9,475 $ 28,811 $ 29,141
Interest-bearing deposits 256 235 803 788
Mortgage-backed securities 358 -- 572 -
Federal funds sold 183 332 698 620
Investment securities 2,577 2,597 7,900 7,615
Other loans 17 16 51 49
Federal Home Loan Bank stock 208 199 598 557
--------- ----------- ---------- ----------
Total interest and dividend income 13,218 12,854 39,433 38,770
Interest expense on deposits 7,051 6,031 20,261 17,978
Interest expense on borrowings 3,315 3,348 9,757 9,514
--------- ----------- ---------- ----------
Total interest expense 10,366 9,379 30,018 27,492
--------- ----------- ---------- ----------
Net interest income 2,852 3,475 9,415 11,278
Provision for loan losses - 30 - 90
--------- ----------- ---------- ----------
Net interest income after provision
for loan losses 2,852 3,445 9,415 11,188
--------- ----------- ---------- ----------
Other income:
Loan fees and service charges 159 165 468 386
Gain on sale of securities - - 138 45
Miscellaneous income 5 15 95 10
--------- ----------- ---------- ----------
Total other income 164 180 701 441
--------- ----------- ---------- ----------
Other general and administrative expense:
Compensation, payroll taxes and fringe benefits 694 785 2,113 2,440
Federal insurance premiums 27 77 81 225
Office occupancy expense, excluding depreciation 103 118 351 394
Depreciation 75 73 219 221
Computer services 74 62 206 198
Other expenses 473 305 1,162 1,228
--------- ----------- ---------- ----------
Total general and administrative expense 1,446 1,420 4,132 4,706
--------- ----------- ---------- ----------
Net Income before provision for income taxes 1,570 2,205 5,984 6,923
--------- ----------- ---------- ----------
Provision for income taxes:
Current:
Federal (41) 246 294 831
State 168 184 412 530
Deferred credit (48) (200) (99) (381)
--------- ----------- ---------- ----------
Total provision for income taxes 79 230 607 980
--------- ----------- ---------- ----------
Net income $ 1,491 $ 1,975 $ 5,377 $ 5,943
========= =========== ========== ==========
Basic earnings per share $ 0.37 $ 0.43 $ 1.28 $ 1.21
========= =========== ========== ==========
Diluted earnings per share $ 0.35 $ 0.41 $ 1.24 $ 1.16
========= =========== ========== ==========
Weighted average shares outstanding-Basic 4,061 4,601 4,190 4,908
========= =========== ========== ==========
Weighted average shares outstanding-Diluted 4,213 4,805 4,331 5,115
========= =========== ========== ==========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 2000 SEPT. 30, 1999 SEPT. 30, 2000 SEPT. 30, 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 1,491 $ 1,975 $ 5,377 $ 5,943
--------- -------- --------- ---------
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during
the period 2,184 (2,895) 6,880 (13,089)
Less: reclassification adjustment for gains
realized in net income -- - - (45)
--------- -------- --------- ----------
Other comprehensive income/(loss), before taxes 3,675 (920) 12,257 (7,101)
Tax (expense)/benefit related to other comprehensive
income (801) 1,131 (2,677) 5,095
--------- -------- --------- ----------
Comprehensive income/(loss) $ 2,874 $ 211 $ 9,580 ($2,006)
========= ======== ========= ==========
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Number of
Common Additional Unearned
Stock Common Paid-in ESOP Treasury MRP
Shares Stock Capital Shares Stock Stock
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 6,100 $ 86 $61,768 ($3,972) ($38,918) ($3,839)
Purchase of treasury stock (772) (14,353)
Allocation of ESOP shares 232 163
Allocation of MRP shares 129 461
Dividend on common stock ($0.30)
Change in unrealized gain or
(loss), net of taxes
Net income
-------- ----- ------- -------- -------- -------
Balance at September 30, 1999 5,328 $ 86 $62,129 $ (3,809) $(53,271) $(3,378)
======== ===== ======= ======== ======== =======
Balance at December 31, 1999 5,189 $ 86 $62,217 $ (3,740) $(55,522) $(3,378)
Purchase of treasury stock (431) (6,533)
Allocation of ESOP shares 179 159
Allocation of MRP shares 91 441
Dividend on common stock ($0.36)
Change in unrealized gain or
(loss), net of taxes
Net income
-------- ----- ------- -------- -------- -------
Balance at September 30, 2000 4,758 $ 86 $62,487 $ (3,581) $(62,055) $(2,937)
======== ===== ======= ======== ======== =======
<CAPTION>
Accumulated
Other Com-
prehensive
Income, Net Retained
of Taxes Earnings Total
-------------------------------------------
-------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $ 1,179 $ 57,598 $ 73,902
Purchase of treasury stock (14,353)
Allocation of ESOP shares 395
Allocation of MRP shares 590
Dividend on common stock ($0.30) (1,403) (1,403)
Change in unrealized gain or
(loss), net of taxes (7,949) (7,949)
Net income 5,943 5,943
--------- -------- --------
Balance at September 30, 1999 $ (6,770) $ 62,138 $ 57,125
========= ======== ========
Balance at December 31, 1999 $ (8,931) $ 63,786 $ 54,518
Purchase of treasury stock (6,533)
Allocation of ESOP shares 338
Allocation of MRP shares 532
Dividend on common stock ($0.36) (1,480) (1,480)
Change in unrealized gain or
(loss), net of taxes 4,203 4,203
Net income 5,377 5,377
--------- -------- --------
Balance at September 30, 2000 $ (4,728) $ 67,683 $ 56,955
========= ======== ========
</TABLE>
See notes to consolidated financial
statements
7
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 2000 Sept. 30, 1999
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,377 $ 5,943
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 219 221
Deferred income taxes (99) (381)
Amortization of premiums and accretion of discounts (90) (76)
Provision for loan losses - 90
Compensation expense-allocation of ESOP and MRP shares 684 809
(Gain)/Loss on sale of real estate owned (84) 8
Gain on sale of investment securities, available for sale (138) (45)
(Increase) or decrease in assets and liabilities
Accrued interest receivable (685) (1,163)
Accrued interest on deposits 5,652 4,793
Accrued interest on borrowings 222 398
Accrued income taxes (93) 49
Other assets (116) (106)
Other liabilities (1,978) (311)
Dividend payable 34 (75)
-------- --------
Net cash provided by operating activities 8,905 10,154
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities, available for sale - (90,188)
Purchase of mortgage-backed securities, available for sale (23,291) -
Maturity of federal funds 28,200 12,750
Maturity of investment securities, held to maturity - 5,000
Principal repayments on mortgage-backed securities, available for sale 1,286 -
Net proceeds from sale of investments, available for sale - 3,317
Net proceeds from sale of investments, held to maturity 5,125 -
Principal repayments on investment securities, available for sale 1,429 4,076
Net (increase)/decrease in conventional loans (1,230) 15,464
Net increase in other loans (14) (50)
Purchase of Federal Home Loan Bank stock - (2,650)
Net proceeds from sale of real estate owned 474 138
Purchase of premises and equipment (52) (648)
-------- --------
Net cash provided/(used) in investing activities 11,927 (52,791)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and savings
accounts 4,769 944
Net increase in certificate accounts 11,093 1,560
Net decrease in advances by borrowers for taxes and insurance (5,706) (5,845)
Net (decrease)/increase in borrowings (17,500) 58,000
Dividends paid (1,448) (1,403)
Purchase of treasury stock (6,533) (14,353)
-------- --------
Net cash (used)/provided by financing activities (15,325) 38,903
-------- --------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 5,507 (3,734)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,468 21,543
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,975 $ 17,809
======== ========
</TABLE>
See notes to consolidated financial statements
8
<PAGE>
FIRST BELL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES: Nine Months Ended Nine Months Ended
Cash paid for: Sept. 30, 2000 Sept. 30, 1999
----------------- -----------------
<S> <C> <C>
Interest on deposits and advances by borrowers for
taxes and insurance $ 14,609 $ 13,185
Interest on borrowings 9,535 9,116
Income taxes 2,053 1,312
Non-cash transactions:
Transfers from conventional loans to real estate acquired through foreclosures 29 92
Increase in additional paid-in capital-ESOP and MRP allocation 270 361
Unrealized appreciation/(depreciation) on securities available for sale 6,880 (13,089)
</TABLE>
9
<PAGE>
FIRST BELL BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of First Bell
Bancorp, Inc. ("First Bell" or the "Company") and its wholly-owned subsidiary,
Bell Federal Savings and Loan Association of Bellevue (the "Association"). All
significant intercompany transactions have been eliminated in consolidation. The
investment in the Association on First Bell's financial statements is carried at
the parent company's equity in the underlying net assets.
The consolidated balance sheet as of September 30, 2000 and related
consolidated statements of income, comprehensive income, cash flows and changes
in stockholders' equity for the three and nine months ended September 30, 2000
and 1999 are unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of such financial statements have been included. Such
adjustments consisted of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q.
The interim statements are unaudited and should be read in conjunction with the
financial statements and notes thereto contained in First Bell's annual report
for the fiscal year ended December 31, 1999.
Private Securities Litigation Reform Act Safe Harbor Statement
--------------------------------------------------------------
In addition to historical information, this 10-Q includes certain
forward-looking statements based on current management expectations. Examples of
this forward-looking information can be found in, but are not limited to, the
allowance for 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.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of Financial Condition at September 30, 2000 and December 31, 1999.
------------------------------------------------------------------------------
Assets. Total assets were $817.5 million at September 30, 2000 in comparison to
$816.1 million at December 31, 1999. There were increases in mortgage-backed
securities-available for sale, cash, investment securities-available for sale
and conventional mortgage loans. Offsetting these increases were decreases in
federal funds sold and investment securities-held to maturity. Mortgage-backed
securities at September 30, 2000 were $22.1 million compared to zero at December
31, 1999. The increase was the result of the purchase of $23.3 million in
adjustable rate mortgage-backed securities offset by the principal repayments of
$1.3 million. Cash increased by $5.5 million or 26.9% to $26.0 million at
September 30, 2000 from $20.5 million at December 31, 1999. The increase was the
result of increase in deposits and mortgage payments. Investment securities-
available for sale increased to $207.9 million at September 30, 2000 from $202.4
million at December 31, 1999. The $5.5 million or 27.1% increase was due to
unrealized gains of $6.9 million in investment securities-available for sale.
Reducing this impact were the principal repayments of $1.4 million for the nine
months ended September 30, 2000. Federal funds sold decreased by $28.2 million
to $4.8 million at September 30, 2000 from $33.0 million at December 31, 1999.
The decrease was the result of paydowns in borrowings, payments for real estate
taxes from advances by borrowers for taxes and insurance and the purchase of
mortgage-backed securities. Investment securities-held to maturity was zero at
September 30, 2000. The $5.0 million reduction from December 31, 1999 was the
result of the Company selling a U.S. Treasury Note that resulted in a gain of
$138,000. The sale of the security was done to improve the Company's interest
rate risk position. The proceeds from the sale were used to help fund the
purchase of the adjustable rate mortgage-backed securities.
Liabilities. Total liabilities remained relatively flat at $760.5 million at
September 30, 2000 compared to $761.6 at December 31, 1999. Increases in
deposits and accrued interest on deposits were offset by decreases in borrowings
and advances by borrowers for taxes and insurance. Deposits increased by $15.9
million or 3.1% to $527.8 million at September 30, 2000 from $511.9 million at
December 31, 1999. The increase was the result of increases in certificate
accounts of $11.1 million and money market and NOW accounts of $8.1 million
offset by a decline of passbook, club and other accounts of $3.3 million.
Accrued interest on deposits increased by $5.7 million to $6.4 million at
September 30, 2000 from $703,000 at December 31, 1999. The increase is
attributable to the timing of interest payments on certificate accounts.
Borrowings decreased by $17.5 million or 7.4% to $220.5 million at September 30,
2000 from $238.0 million at December 31, 1999. The decrease was the result of
principal repayments of $22.5 million offset by an additional $5.0 million in
borrowings. Advances by borrowers for taxes and insurance decreased by $5.7
million or 50.8% to $5.5 million at September 30, 2000 from $11.2 million at
December 31, 1999. The decrease is the result of payment of property taxes on
conventional mortgage loans serviced by the Association during the third
quarter.
Capital. Total stockholders' equity increased by $2.4 million or 4.5% to $57.0
million at September 30, 2000 from $54.5 million at December 31, 1999. The
increase was the result of a decrease in accumulated other comprehensive loss,
net of taxes and an increase in retained earnings offset by additional treasury
stock purchased. Accumulated other comprehensive loss,
11
<PAGE>
net of taxes improved by $4.2 million as the result of the change in unrealized
gain or loss on investment securities-available for sale and mortgage-backed
securities-available for sale. Retained earnings increased by $3.9 million or
6.1% to $67.7 million at September 30, 2000 from $63.8 million at December 31,
1999. The increase was the result of net income of $5.4 million reduced by
dividends of $1.5 million. Treasury stock purchases of $6.5 million were made
during the nine months ended September 30, 2000.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits, borrowings, and principal and interest payments on mortgages,
mortgage-backed securities and investments. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows and
mortgage prepayments are strongly influenced by changes in general interest
rates, economic conditions and competition.
The primary use of funds by the Company for the nine months ended September
30, 2000 was the paydown of $22.5 million in borrowings, the purchase of $23.3
million of mortgage-backed securities, held as available-for-sale and the
investment of $46.2 million in conventional mortgages. Sources of funds for the
nine months ended September 30, 2000 were the $88.1 million in principal and
interest payments on conventional mortgage loans, mortgage-backed securities and
investments, $5.1 million from the sale of the U.S. Treasury Note, $5.0 million
in borrowings and $15.9 million in total deposits.
The Association is required to maintain an average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings as defined by the Office of Thrift Supervision ("OTS") regulations.
The minimum required liquidity ratio is currently 4.0%. The Association's
average liquidity ratio was 8.2% during the three month period ended September
30, 2000. The Association's most liquid assets are cash and short-term
investments.
The levels of the Association's liquid assets are dependent on the
Association's operating, financing, lending and investing activities during any
given period. At September 30, 2000, assets qualifying for liquidity, including
cash and investments, totaled $67.6 million.
At September 30, 2000, the Association's capital exceeded all of the
capital requirements of the OTS. The Association's Tangible, Tier I (core)
capital (to total assets), Tier I capital (to risk-based assets) and Risk-Based
capital (to risk-based assets) ratios were 9.4%, 9.4%, 22.3% and 22.6%,
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 Nine and Three Months ended September
--------------------------------------------------------------------------------
30, 2000 and 1999.
------------------
General. Net income for the nine months ended September 30, 2000 declined by
$566,000 or 9.5% to $5.4 million from $5.9 million for the nine months ended
September 30, 1999. The decline can be attributable to the decline in net
interest income offset by an increase in other income and decreases in general
administrative expenses and income taxes. For the three months ended September
30, 2000, net income was $1.5 million compared to $2.0 million for the three
months ended September 30, 1999. The decrease of $484,000 was the result of a
decrease in net interest income offset by a decrease in income taxes.
12
<PAGE>
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 $3.0 million and $970,000 were made for the nine months and three
months ended September 30, 2000, respectively. For the nine and three months
ended September 30, 1999, tax equivalent adjustments of $2.8 million and $1.0
million were made, respectively. Interest income for the nine months ended
September 30, 2000 increased by $830,000 or 2.0% to $42.4 million from $41.6
million for the nine months ended September 30, 1999. The increase was the
result of increases in interest earned on mortgage-backed securities, investment
securities and federal funds sold and dividends earned on FHLB stock. Offsetting
these increases was a decrease in interest earned on conventional mortgage
loans. Interest on mortgage-backed securities for the nine months ended
September 30, 2000 was $572,000. The Company had no mortgage-backed securities
during 1999. Interest on investment securities was $10.9 million for the nine
months ended September 30, 2000 compared to $10.4 million for the nine months
ended September 30, 1999. The $452,000 or 4.3% increase can be attributable to a
thirty three basis points increase on the average rate earned on investment
securities. The average rates for the nine months ended September 30, 2000 and
1999 were 7.00% and 6.67%, respectively. Interest earned on federal funds sold
increased by $78,000 or 12.6% to $698,000 for the nine months ended September
30, 2000 from $620,000 for the comparable 1999 period. The increase was the
result of the average rate rising to 5.96% for the nine months ended September
30, 2000 compared to 5.28% for the nine months ended September 30, 1999.
Dividends earned on FHLB stock increased to $598,000 for the nine months ended
September 30, 2000 from $557,000 for the nine months ended September 30, 1999.
The $41,000 or 7.4% increase was primarily due to the average rate rising to
6.99% from 6.63% for the nine months ended September 30, 2000 and 1999,
respectively. Interest earned on conventional mortgage loans decreased $330,000
or 1.1% to $28.8 million for the nine months ended September 30, 2000 from $29.1
million for the nine months ended September 30, 1999. The decrease was the
result of the average rate earned and the average balance on conventional
mortgage loans declining for the nine months ended September 30, 2000 from the
comparable 1999 period. The average rate earned and the average balance for the
nine months ended September 30, 2000 were 7.19% and $534.4 million,
respectively. For the nine months ended September 30, 1999, the average rate
earned and the average balance were 7.23% and $537.3 million, respectively.
Interest income for the three months ended September 30, 2000 increased by
$350,000 or 2.5% to $14.2 million from $13.8 million for the three months ended
September 30, 1999. The increase was the result of increases in interest earned
on mortgage-backed securities and conventional mortgage loans offset by a
decline in interest earned on federal funds sold. Interest earned on mortgage-
backed securities was $358,000 for the three months ended September 30, 2000
compared to zero for the comparable 1999 period. Interest earned on conventional
mortgage loans increased by $144,000 or 1.5% to $9.6 million for the three
months ended September 30, 2000 from $9.5 million for the three months ended
September 30, 1999. The increase was the result of the average balance
increasing to $535.2 million from $529.8 million for the three months ended
September 30, 2000 and 1999, respectively. In addition, the average rate earned
on conventional mortgage loans increased to 7.19% for the three months ended
September 30, 2000 from 7.15% for the comparable 1999 period. Interest earned on
federal funds sold decreased by $149,000 or 44.9% to $183,000 for the three
months ended September 30, 2000 from $332,000 for the three months ended
September 30, 1999. The decrease can be
13
<PAGE>
primarily attributable to the decline of the average balance to $10.9 million
from $23.2 million for the three months ended September 30, 2000 and 1999,
respectively.
Interest Expense. Interest expense for the nine months ended September 30, 2000
increased by $2.5 million or 9.2% to $30.0 million from $27.5 million for the
nine months ended September 30, 1999. The increase was due mainly to the
increase in interest expense on deposits. Interest expense on deposits increased
by $2.3 million or 12.7% to $20.3 million for the nine months ended September
30, 2000 from $18.0 million for the nine months ended September 30, 1999. The
average rate paid on deposits for the nine months ended September 30, 2000 and
1999 were 5.09% and 4.74%, respectively. The average balance on deposits was
$530.5 million and $505.3 million for the nine months ended September 30, 2000
and 1999, respectively.
Interest expense for the three months ended September 30, 2000 increased by
$1.0 million to $10.4 million from $9.4 million for the three months ended
September 30, 1999. Again, increases in the average balance and the average rate
paid on deposits resulted in the rise of interest expense on deposits.
Net Interest Income. Net interest income decreased to $12.4 million for the nine
months ended September 30, 2000 from $14.1 million for the nine months ended
September 30, 1999. The decline was the result of interest expenses increasing
by $2.5 million while interest income increased by $830,000.
Similarly, net interest income decreased by $637,000 or 14.3% as the result
of interest expense rising more than interest income for the three months ended
September 30, 2000 and 1999, respectively.
Provision for Loan Losses. The provision for loan loss was zero for the nine and
three months ended September 30, 2000 compared to $90,000 and $30,000 for the
nine and three months ended September 30, 1999, respectively. At September 30,
2000, nonperforming assets were $594,000 compared to $659,000 at December 31,
1999. The allowance for loan losses equaled 155.7% of total non-performing
assets compared to 140.4% at December 31, 1999. There were no loans charged off
during the nine and three months ended September 30, 2000 and 1999. Management
believes that the current level of loan loss reserve is adequate to cover losses
inherent in the portfolio as of September 30, 2000. 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 September 30,
2000.
Other Income. Other income for the nine months ended September 30, 2000
increased by $260,000 or 59.0% to $701,000 from $441,000 for the nine months
ended September 30, 1999. 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 $138,000 for the nine months ended
September 30, 2000 from $45,000 for the nine months ended September 30, 1999.
Miscellaneous income increased by $85,000 to $95,000 for the nine months ended
September 30, 2000 from $10,000 for the comparable 1999 period. This increase
was primarily the result of a gain of $84,000 on the sale of real estate owned
in 2000 compared to a loss of $8,000 in 1999. Loan fees and service charges
increased by $82,000 or 21.2% to $468,000 for the nine months ended September
30, 2000 from $386,000 for the comparable 1999 period. The increase was due to
additional fees earned during the nine months ended September 30, 2000 compared
to the nine months ended September 30, 1999.
14
<PAGE>
Other income for the three months ended September 30, 2000 decreased by
$16,000 as the result of a reduction on income earned on miscellaneous income
and loan fees and service charges.
General and Administrative Expenses. General and administrative expenses for the
nine months ended September 30, 2000 decreased by $574,000 or 12.2% to $4.1
million from $4.7 million for the nine months ended September 30, 1999. The
decrease was the result of declines in compensation, payroll taxes and fringe
benefits, federal insurance premiums, other expenses and office occupancy
expense. Compensation, payroll taxes and fringe benefits decreased by $327,000
or 13.4% to $2.1 million for the nine months ended September 30, 2000 from $2.4
million from the nine months ended September 30, 1999. The decrease was the
result of a temporary reduction in employees, the decrease in the cost of
employee stock programs due to the decline in the average stock price and an
one-time pension expense recorded in the prior year of $100,000. Federal
insurance premiums decreased by $144,000 to $81,000 for the nine months ended
September 30, 2000 from $225,000 for the nine months ended September 30, 1999.
The decrease was due to a decline in the premium rate charged by the Federal
Deposit Insurance Company "(FDIC") to Savings Association Insurance Fund
("SAIF") members. Other expenses declined by $66,000 for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 1999. The
decrease was due to the reduction in costs associated with the Company's annual
meetings and other one time non-recurring expenses that were incurred in 1999
offset by an increase in advertising expense of $160,000 in 2000 over the
expense in 1999. Office occupancy expense decreased by $43,000 or 10.9% to
$351,000 for the nine months ended September 30, 2000 from $394,000 for the nine
months ended September 30, 1999. The decrease was due to the decline in expenses
associated with the maintenance of buildings and equipment and the reduction in
rent due to the Wexford office being purchased in 1999.
General and administrative expenses for the three months ended September
30, 2000 increased by $26,000 or 1.8%. The increase was the result of increases
in other expenses offset by reductions in compensation, payroll taxes and fringe
benefits and federal insurance premiums. Other expenses increased by $168,000 or
55.1% to $473,000 for the three months ended September 30, 2000 from $305,000
for the three months ended September 30, 1999. The increase can be attributed to
the increase in advertising expense. Compensation, payroll taxes and fringe
benefits and federal insurance premiums declined for the same reasons as stated
above.
Income Taxes. Tax equivalent income taxes decreased by $206,000 or 5.5% to $3.6
million for the nine months ended September 30, 2000 from $3.8 million for the
comparable 1999 period. The decrease was the result of net income before taxes
declining to $8.9 million from $9.7 million for the nine months ended September
30, 2000 and 1999, respectively. Tax equivalent adjustments of $3.0 million and
$2.8 million were made for the nine months ended September 30, 2000 and 1999,
respectively.
Income taxes for the three months ended September 30, 2000 declined to $1.0
million from $1.2 million for the three months ended September 30, 1999. The
decrease again was the result of a decline in net income before taxes. Tax
equivalent adjustments of $970,000 and $1.0 million during the respective
quarters.
15
<PAGE>
Other Comprehensive Income. The Financial Accounting Standards Board ("FASB")
No. 130 established standards for reporting and disclosure of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements.
The following tables set forth the related tax effects allocated to each
element of comprehensive income for the nine and three months ended September
30, 2000 and 1999.
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 2000 Sept. 30, 1999
--------------------------- ----------------------------
Tax Net-of- Tax Net-of-
Pre-Tax (Expense) (Expense) Pre-Tax (Expense) (Expense)
Amount or Benefit or Benefit Amount or Benefit or Benefit
------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains or losses on securities:
Unrealized holding gains/(losses)
arising during the period $6,880 $(2,677) $4,203 $(13,089) $5,113 $(7,976)
Reclassification adjustment
for gains realized in net
income - - - (45) 18 (27)
------ ------- ------ -------- ------ -------
Net unrealized gains/(losses) 6,880 (2,677) 4,203 (13,044) 5,095 (7,949)
------ ------- ------ -------- ------ -------
Other comprehensive income $6,880 $(2,677) $4,203 $(13,044) $5,095 $(7,949)
====== ======= ====== ======== ====== =======
Three Months Ended Three Months Ended
Sept. 30, 2000 Sept. 30, 1999
--------------------------- ----------------------------
Tax Net-of- Tax- Net-of-
Pre-Tax (Expense) (Expense) Pre-Tax (Expense) (Expense)
Amount or Benefit or Benefit Amount or Benefit or Benefit
------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains or losses on securities:
Unrealized holding gains/(losses)
arising during the period $2,184 $ (801) $ 1,383 $ (2,895) $ 1,131 $ (1,764)
------ ------ ------- -------- ------- --------
Net unrealized gains/(losses) 2,184 (801) 1,383 (2,895) 1,131 (1,764)
------ ------ ------- -------- ------- --------
Other comprehensive income $2,184 $ (801) $ 1,383 $ (2,895) $ 1,131 $ (1,764)
====== ====== ======= ======== ======= ========
</TABLE>
16
<PAGE>
The following tables set forth the component of accumulated other comprehensive
income for the nine and three months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Beginning Balance $ (8,931) $ 1,179
Net unrealized gains/(losses) on securities, net of taxes 4,203 (7,949)
--------- --------
Ending Balance $ (4,728) $ (6,770)
========= ========
Three Months Three Months
Ended Ended
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Beginning Balance $ (6,111) $ (5,006)
Net unrealized gains/(losses) on securities, net of taxes 1,383 (1,764)
--------- --------
Ending Balance $ (4,728) $ (6,770)
========= ========
</TABLE>
Recent Accounting Pronouncements. In June 1998, the FASB issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. First Bell has not yet determined the
impact that this standard will have on its financial statements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's interest rate sensitivity is monitored by management through
selected interest rate risk measures produced internally and by the OTS. Based
on internal reviews, management does not believe that there has been a material
change in the Company's interest rate sensitivity from December 31, 1999 to
September 30, 2000. However, the OTS results are not yet available for the
quarter ended September 30, 2000. All methods used to measure interest rate
sensitivity involve the use of assumptions. Management cannot predict what
assumptions are made by the OTS, which can vary from management's assumptions.
Therefore, the results of the OTS calculations can differ from management's
internal calculations. The Company's interest rate sensitivity should be
reviewed in conjunction with the financial statements and notes thereto
contained in First Bell's Annual Report for the fiscal year ended December 31,
1999. Also, the Company along with the industry as a whole has seen a narrowing
of its interest margin due to the rise in interest rates that has occurred
during 2000.
17
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There are various claims and lawsuits in which the Company is
periodically involved incidental to the Company's business, which in
the aggregate involve amounts which are believed by management to be
immaterial to the financial condition and results of operations of the
Company.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
Exhibit 3.1 - Certificate of Incorporation of First Bell Bancorp,
Inc.*
Exhibit 3.2 - Bylaws of First Bell Bancorp, Inc.*
Exhibit 4.0 - Stock Certificate of First Bell Bancorp, Inc.*
Exhibit 11 - Computation of Earnings Per Share (filed herewith)
Exhibit 27 - Financial Data Schedule (filed herewith)
*Incorporated herein by reference into this document from the
Exhibits to Form S-1, Registration Statement, filed on
November 9, 1994, as amended, Registration No. 33-86160.
(b) Reports on Form 8-K
None
18
<PAGE>
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: November 10, 2000 /s/ Albert H. Eckert, II
---------------------------------
Albert H. Eckert, II
President and Chief Executive Officer
Date: November 10, 2000 /s/ Jeffrey M. Hinds
---------------------------------
Jeffrey M. Hinds
Executive Vice President and
Chief Financial Officer (Principal Accounting
Officer)
19
