-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, X36OaLRbKzzCKvw2dQRXG/Z3Y0QN5h9YENtTvBnFLjHlv4BMSNPkv7jTokgi2GUT dtWC+hKaLzkmMCdqC9E9HA== 0000726294-95-000021.txt : 19950417 0000726294-95-000021.hdr.sgml : 19950417 ACCESSION NUMBER: 0000726294-95-000021 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950331 DATE AS OF CHANGE: 19950414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELMONT BANCORP CENTRAL INDEX KEY: 0000726294 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 341374776 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12724 FILM NUMBER: 95528053 BUSINESS ADDRESS: STREET 1: 325 MAIN ST CITY: BRIDGEPORT STATE: OH ZIP: 43912 BUSINESS PHONE: 6146953323 MAIL ADDRESS: STREET 1: P O BOX 249 CITY: ST CLAIRSVILLE STATE: OH ZIP: 43950 10-K 1 TEXT OF 10-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period from _____________ to _________________ Commission file number 0-12724 BELMONT BANCORP. (Exact Name of Registrant as specified in its charter) Ohio (State of Incorporation) I.R.S. Employer ID No. 34-1376776 325 MAIN STREET BRIDGEPORT, OHIO 43912 (Address of principal executive offices) Telephone (614)-695-3323 Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: Title of each class: Name of each exchange on which registered: Common stock, $3.57 par value NASDAQ SmallCapMarket Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K._____ Aggregate market value of voting stock held by nonaffiliates as of March 13, 1995 - $37,006,000 There were 1,057,322 shares of $3.57 par value, common stock outstanding as of March 13, 1995. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement of the Registrant dated March 17, 1995 are incorporated in Items 10, 11, 12, and 13. The Annual Report of the Registrant is incorporated by reference in Items 5, 6, 7, and 8. PART I ITEM 1-BUSINESS BELMONT BANCORP. Belmont Bancorp. is a bank holding company which was organized under the laws of the State of Ohio in 1982. On April 4, 1984, Belmont Bancorp. acquired all of the outstanding capital stock of Belmont National Bank (formerly Belmont County National Bank), a banking corporation organized as a national banking association. Belmont National Bank provides a variety of financial services. In addition to Belmont National Bank, the Corporation owns Belmont Financial Network, Inc., a non-bank subsidiary. BELMONT NATIONAL BANK Belmont National Bank resulted from the merger on January 2, 1959, of the First National Bank of St. Clairsville, and the First National Bank of Bridgeport. Both banks were organized as national associations prior to the turn of the century. Belmont National Bank operates through a network of ten branches located in Belmont, Harrison and Tuscarawas Counties in Ohio. The main office is located in the city of St. Clairsville. Other branch locations in Belmont County include Bridgeport, Lansing, Shadyside, and the Ohio Valley Mall. Branches in Harrison County are located in Jewett and Cadiz, Ohio. Branches in Tuscarawas County are located in New Philadelphia, Ohio. The three New Philadelphia offices were acquired on October 2, 1992, when Belmont National Bank acquired the deposits and loans of these offices from Diamond Savings and Loan. Belmont National Bank provides a wide range of retail banking services to individuals and small to medium-sized businesses. These services include various deposit products, business and personal loans, credit cards, residential mortgage loans, home equity loans, and other consumer oriented financial services including IRA and Keogh accounts, safe deposit and night depository facilities. Belmont National Bank also owns automatic teller machines located at the Ohio Valley Mall and in New Philadelphia, Ohio providing 24 hour banking service to our customers. Belmont National Bank belongs to Cirrus, a nationwide ATM network with thousands of locations nationwide. Belmont National Bank offers a wide variety of fiduciary services. The trust department of the Bank administers pension, profit-sharing, employee benefit plans, personal trusts and estates. BELMONT FINANCIAL NETWORK On July 1, 1985, Belmont Bancorp. formed a subsidiary corporation, Belmont Financial Network, Inc.(BFN). The purpose of the subsidiary was primarily to engage in lease consulting for personal or real property. Changes to the federal tax code that eliminated new investment tax credits as of December 31, 1987 adversely affected the leasing business. The daily operations of Belmont Financial Network were suspended during 1989 to reduce overhead costs. The leases formerly serviced by Belmont Financial Network are presently administered by Belmont National Bank. BFN was inactive throughout 1994. BELMONT INVESTMENT AND FINANCIAL SERVICES, INC. During 1988, Belmont National Bank began the operations of Belmont Investment and Financial Services, Inc., a wholly-owned subsidiary of the Bank. Belmont Investment and Financial Services, Inc. was organized so that the Bank's customers would have available to them a wider array of financial products as well as sound investment and financial planning. Through Belmont Investment and Financial Services, Inc., customers can purchase government or corporate bonds, and mutual fund products. In 1990, the services provided by the Corporation, other than advisory services, were reorganized into a department of the Bank. SUPERVISION AND REGULATION Belmont Bancorp. is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "Act"). The Act requires the prior approval of the Federal Reserve Board for a bank holding company to acquire or hold more than a 5% voting interest in any bank, and restricts interstate banking activities. The Act restricts Belmont's non-banking activities to those which are closely related to banking. The Act does not place territorial restrictions on the activities of nonbank subsidiaries of bank holding companies. Belmont's banking subsidiary is subject to limitations with respect to intercompany loans and investments. A substantial portion of Belmont's cash revenues is derived from dividends paid by its subsidiary bank. These dividends are subject to various legal and regulatory restrictions as summarized in Note 14 of the financial statements. The Bank is subject to the provisions of the National Banking Act and the regulations of the Federal Reserve Board and the Federal Deposit Insurance Corporation. Under the Bank Holding Company Act of 1956, as amended, and under regulations of the Federal Reserve Board pursuant thereto, a bank holding company is prohibited from engaging in certain tie-in arrangements in connection with extensions of credit. The monetary policies of regulatory authorities, including the Federal Reserve Board, have a significant effect on the operating results of banks and bank holding companies. The nature and future monetary policies and the effect of such policies on the future business and earnings of Belmont Bancorp. and its subsidiary bank cannot be predicted. FOREIGN OPERATIONS Belmont Bancorp. has no foreign operations. EXECUTIVE OFFICERS For information concerning executive officers of Belmont Bancorp. and Belmont National Bank, see Item 10 of Form 10-K. ITEM 2-PROPERTIES DESCRIPTION OF PROPERTIES The principal executive offices of Belmont National Bank are located in St. Clairsville, Ohio, the seat of Belmont County. This office consists of a two story brick building owned by the Bank with attached drive-in facilities. The building consists of 9,216 square feet which houses the commercial bank operations and the executive, marketing and human resources offices. In addition, the Bank transacts business in the following branch locations: Mall Office-This office is located at the Ohio Valley Mall, a major shopping mall located two miles east of St. Clairsville, Ohio, and consists of a 4,000 square foot office inside the mall proper, plus a stand alone drive-in facility at the perimeter of the Mall. Automatic teller machines are located at the drive-in location and inside the branch office. Lansing Office-This 1,352 square foot office is located in Lansing, Ohio, a small community approximately six miles east of St. Clairsville on US. Route 40. The facility is a masonry building with adjoining drive-in facilities. Bridgeport Office-This office is located in Bridgeport, Ohio, a community located on the Ohio/West Virginia border, approximately 10 miles east of St. Clairsville. This 5,096 square foot facility is a recently remodeled masonry building with adjoining drive-in facilities. Shadyside Office-This 1,792 square foot office is located in Shadyside, a village located on Ohio State Route 7. The facility is a masonry building with accompanying drive-in facilities. Jewett Office-This office is located in Harrison County approximately twenty-six miles north of St. Clairsville, across from Cross Street, the intersection of State Routes 9 and 151. The building is constructed of masonry brick and contains 2,400 square feet with an accompanying drive-in facility. Cadiz Office-This office is located in Cadiz, Ohio in Harrison County, approximately seventeen miles north of St. Clairsville at the intersection of State Routes 9 and 22. The brick and tile building contains 1,800 square feet with an accompanying drive-in facility. New Philadelphia Office-This office, located at 152 North Broadway Avenue, is a 33,792 square foot site improved with two inter-connected, two story brick office buildings with a total building area of 13,234 square feet. Part of the office space is leased to other businesses. This location also has a drive-in facility and an automatic teller machine. New Philadelphia Office-This office, located at 2300 East High Avenue, is comprised of a one story, 1,605 square foot brick structure with a 783 square foot drive-thru canopy. New Philadelphia Office-This office, located at 525 Wabash Avenue, is comprised of a 14,250 square foot site with a 246 square foot drive-thru banking facility. All offices are owned by the Bank except for the Mall Office. The lease at the Mall location is in effect until the year 1996 with options to renew thereafter. ITEM 3-LEGAL PROCEEDINGS None. ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5-MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDERS' MATTERS 1994 Dividend Quarter High Low per Share 1st $22.00 $21.00 $0.1680 2nd 24.50 22.00 0.1680 3rd 25.75 21.00 0.2100 4th 36.00 23.00 0.2100 Total $0.7560 1993 Dividend Quarter High Low per Share 1st $21.00 $21.00 $0.1527 2nd 21.00 20.50 0.1527 3rd 21.00 21.00 0.1527 4th 22.00 21.00 0.2036 Total $0.6617 The number of shareholders of record for the Corporation's stock as of March 10, 1995 was 598. The latest available market price based on an actual trade price was $35.00 per share on March 10, 1995. Belmont Bancorp.'s common stock has a par value of $3.57 and is traded in the over-the-counter market, principally in St. Clairsville, Ohio, and in Wheeling, WV areas. The tables above show its high and low market prices and dividend information for the past two years. In October 1994, the Corporation's stock was listed on The Nasdaq SmallCap Market. Previously, market prices were based on actual trades known to the Corporation due to lack of an established market. Cash dividends paid per share have been restated to reflect the effect of a 10% common stock dividend paid in January 1994 and a 25% common stock dividend paid in July 1994. Information regarding the limitations on dividends available to be paid can be located in Footnote 15 of the Notes to the Consolidated Financial Statements in the Corporation's Annual Report (Exhibit 2). Treasury stock is accounted for using the cost method. There were 424 shares held in treasury on December 31, 1994 and 728 shares in treasury on December 31 1993. ITEM 6.-SELECTED FINANCIAL DATA The Summarized Quarterly Financial Information and the Consolidated Five Year Summary of Operations contained in the Corporation's annual report (Exhibit 2) are hereby incorporated by reference. ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The data presented in this discussion should be read in conjunction with the audited consolidated financial statements. RESULTS OF OPERATIONS SUMMARY Net income increased during 1994 by 25.89% from the previous year. Net income per common share for 1994 was $2.98 compared to $2.35 per common share in 1993. The Corporation's net income to average assets, referred to as return on assets, increased to 1.12% for the year ended 1994 from .96% last year. Operating income consists of earnings before income taxes, minus net investment and trading gains or plus net investment and trading losses. Operating income increased by $2,292,000 from 1994 to 1993. The table below summarizes earnings performance for the past three years. ($000s) except per 1994 1993 1992 share data Operating income $4,324 $2,032 $2,089 Net income 3,234 2,569 1,838 Net income per share $2.98 $2.35 $1.71 Return on average assets 1.12% 0.96% 0.87% Return on average common equity 16.71% 14.57% 11.30% Return on average total equity 16.27% 14.21% 11.33% NET INTEREST REVENUE A major share of the Corporation's income results from the spread between income on interest earning assets and interest expense on the liabilities used to fund those assets, known as net interest income. Net interest income is affected by changes in interest rates and amounts and distributions of interest earning assets and interest bearing liabilities outstanding. Net interest margin is net interest income divided by the average earning assets outstanding. A third frequently used measure is net interest rate spread which is the difference between the average rate earned on assets and the average rate incurred on liabilities without regard to the amounts outstanding in either category. The Consolidated Average Balance Sheets and Analysis of Net Interest Income Changes included in the Corporation's annual report (Exhibit 2), compare interest revenue and interest earning assets outstanding with interest cost and liabilities outstanding for the years ended December 31, 1994, 1993, and 1992, and computes net interest income, net interest margin and net interest rate spread for each period. All three of these measures are reported on a taxable equivalent basis. The Corporation's net interest income grew by $2,963,000 on a taxable equivalent basis during 1994 compared to the same period last year, a 34.82% increase. The increase in net interest income was primarily attributable to the increase in average earning assets and improved net interest margins. During 1994, the Corporation's average interest-earning assets grew by approximately $21.2 million, up 8.48% from 1993. The yield on interest earning assets improved from 6.86% during 1993 to 7.49% during 1994, and increase of 63 basis points. (A basis point (bp) is equivalent to .01%.) The cost of interest bearing liabilities declined by 17 basis points from 1993 to 1994. Consequently, the net interest rate spread increased from 3.07% during 1993 to 3.87% during 1994. The Analysis of Net Interest Income Changes, separates the dollar change in the Corporation's net interest income into three components: changes caused by (1) an increase or decrease in the average assets and liability balances outstanding (volume); (2) the changes in average yields on interest earning assets and average rates for interest bearing liabilities (yield/rate); and (3) combined volume and yield/rate effects (mix). This table shows that the increase in the Corporation's net interest income during the year-to-date periods presented from 1993 to 1994 was generated by growth in the levels of earning assets and average interest bearing liabilities outstanding (depicted by the volume column). In addition, higher yields on taxable investment securities and lower costs on retail deposits (depicted by the yield column) contributed to the improvement in net interest margin. OTHER OPERATING INCOME Other operating income excluding securities gains and losses, increased 6.64% or $84,000 and totaled $1,349,000 in 1994, compared to $1,265,000 in 1993. The table below shows the dollar amounts and growth rates of the components of other operating income.
1994 1993 1992 ($000s) Total Change Total Change Total Trust income $ 341 24.45% $ 274 1.86% $ 269 Service charges on deposits 527 11.18% 474 15.33% 411 Other service charges 59 -18.06% 72 56.52% 46 Other income 422 -5.17% 445 55.59% 286 Subtotal 1,349 6.64% 1,265 25.00% 1,012 Investment securities gains (losses) (9) 95.61% (205) -141.58% 493 Gains (losses) on securities available for sale (55) -104.35% 1,264 1327.18% (103) Trading gains (losses) 1 100.86% (116) -73.13% (67) Total 1,286 -41.76% 2,208 65.39% $1,335
Service charges on deposits increased 11.18%, or $53,000 during 1994 compared to the prior period. This increase was partially offset by a decline in Other Service Charges which are primarily comprised of late charges on loans. Other income declined 5.17% from $445,000 in 1993 to $422,000 in 1994; this decline was the result of lower commissions earned in the discount brokerage operation as customers' demand for mutual funds declined as deposit rates improved. Losses on investments held in the maturity portfolio occurred as a result of calls on municipal bonds in the portfolio. These losses totalled $9,000 during 1994. Net losses were realized on securities available for sale during 1994 totalling $55,000 when securities were sold to reinvest at higher yields. Trading gains netted to $1,000 during 1994 compared to $116,000 in losses during 1993. Securities held in the trading account are valued at market value with a corresponding adjustment to income. No securities were held in the trading account at December 31, 1994. One security, a collateralized mortgage obligation, was held in the trading account at December 31, 1993. The following table summarizes trading gains and losses realized during the past three years. ($000s) 1994 1993 1992 Trading gains $ 1 $ 5 $ 34 Trading losses - (121) (101) Net trading gains (losses) $ 1 $ (116) $ (67) The related income taxes on securities transactions, including trading and securities available for sale, were $67,000 and $77,000 for the years ended 1993 and 1992, respectively. A tax credit of $15,000 was attributable to securities transactions for 1994. OPERATING EXPENSES Successful expense control is an essential element in maintaining the Corporation's profitability. The table below details the percentage changes in various categories of expense for the three years ended 1994, 1993, and 1992.
($000s) 1994 % Change 1993 % Change 1992 Salaries and wages $2,281 8.98% $2,093 26.16% 1,659 Employee benefits 665 -6.99% 715 46.22% 489 Net occupancy expense 533 -1.48% 541 28.50% 421 Equipment expense 618 25.87% 491 8.63% 452 Other operating expenses 2,972 1.89% 2,917 39.84% 2,086 Total $7,069 4.62% $6,757 32.31% $5,107
One measure of operating efficiency is the amount of assets managed per full time equivalent employee. Total assets managed per full time equivalent employee (FTE) were $2.819 million at December 31, 1994 compared to $2.623 million of assets per FTE at December 31, 1993. Equipment expense had the largest percentage increase of the categories itemized due to the installation of a network system and the purchase of computer equipment to convert the subsidiary bank's data processing sytem to an "in-house" operation. The increase in salaries and wages is primarily attributable to compensation plans for officers that are tied to earnings performance. FINANCIAL CONDITION The book values of investments as of December 31, 1994 and 1993 are detailed in Footnote 3 of the Notes to the Consolidated Financial Statements in the Corporation's annual report (Exhibit 2).
Securities Held to Maturity Maturity < 1-5 Year 6-10 Year Over 10 1 Year Maturity Maturity Maturity Total ($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U.S. Government agencies and corporations $ - - $974 5.58% $2,274 4.94% $1,000 7.00% $4,248 5.57% States and political subdivisions(a) 1,108 4.15% 919 7.44% 3,942 7.41% 18,275 8.51% 24,244 8.09% Agency mortgage- backed securities(b) 237 9.14% 40,968 7.32% 10,071 7.38% - - 51,276 7.34% Mortgage derivative securities 4,206 5.96% 7,449 5.45% 1,040 5.83% - - 12,695 5.65% Total $5,551 5.73% $50,310 7.01% $17,327 6.98% $19,275 8.43% $92,463 7.22% (a) Taxable equivalent yields (b) Maturities of mortgage-backed securities are based on estimated average life.
Securities Available for Sale (excluding Equity Securities) Maturity < 1-5 Year 6-10 Year Over 10 1 Year Maturity Maturity Maturity Total ($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U.S. Government Agencies and corporations $ 0 - $ 4,744 7.39% $ 1,516 7.53% $ 0 - $ 6,260 7.42% Agency mortgage- backed securities(b) 57 6.98% 29,517 6.83% 439 8.12% 9,942 6.68% 39,955 6.81% Mortgage derivative securities 0 - 851 5.39% 0 - 0 - 851 5.39% Total fair value $ 57 6.98% $35,112 6.87% $ 1,955 7.66% $ 9,942 6.68% $47,066 6.86% Amortized cost $ 56 $36,938 $ 1,973 $10,359 49,326 (a) Taxable equivalent yields (b) Maturities of mortgage-backed securities are based on estimated average life.
MARKETABLE EQUITY SECURITIES The Corporation held marketable equity securities in its investment portfolio as of December 31, 1994. In accordance with regulatory requirements, all equity securities were transferred to Securities Available for Sale on January 1, 1994 because these securities do not have a stated maturity. Current accounting principles require that marketable equity securities be recorded at the lower of cost or market value with a corresponding adjustment to reduce shareholders' equity if market value is lower than cost. At December 31, 1994 and 1993, estimated market values approximated original cost.
Taxable Market Equivalent December 31, 1994 ($000s) Cost Value Yield Federal Home Loan Bank stock $ 1,724 $ 1,724 6.38% Corporate Stock 155 155 2.74% Federal Reserve Bank Stock 187 187 6.00% Total $ 2,066 $ 2,066
Taxable Market Equivalent December 31, 1993 ($000s) Cost Value Yield Federal Home Loan Bank stock $ 1,628 $ 1,628 4.50% Corporate Stock 155 155 2.47% Total $ 1,783 $ 1,783
LOANS AND LEASES The following table shows the history of commercial and consumer loans and leases by major category at December 31.
($000s) 1994 1993 1992 1991 1990 Commercial loans: Real estate construction $1,801 $2,081 $973 $771 $2 Acceptances of other banks 0 0 0 0 14,984 Real estate mortgage 23,701 21,211 19,184 20,817 19,322 Commercial, financial and agricultural 38,983 25,317 19,568 9,424 7,937 Direct financing leases 5 9 58 476 599 Total commercial loans $64,490 48,618 39,783 $31,488 $42,844 Consumer loans: Residential mortgage $76,094 $70,301 65,536 $38,720 $38,415 Installment loans 5,116 5,281 7,535 6,538 7,152 Credit card and other consumer 1,396 1,032 1,123 1,309 1,099 Total consumer loans $82,606 $76,614 $ 74,194 $46,567 $46,666 Total loans and leases $147,096 $125,232 $113,977 $78,055 $89,510
An analysis of maturity and interest rate sensitivity of business loans at the end of 1994 follows:
Under 1 to 5 Over 5 ($000s) 1 Year Years Years Total Domestic loans: Real estate construction $1,441 $42 $318 $1,801 Real estate mortgage 15,612 2,633 5,400 23,645 Commercial and industrial 31,024 4,412 3,182 38,618 Direct financing leases 0 5 5 Total business loans (a) $48,077 $7,092 $8,900 $64,069 Rate sensitivity: Predetermined rate $3,642 $4,037 $8,900 $16,579 Floating or adjustable rate 44,435 3,055 0 47,490 Total domestic business loans $48,077 $7,092 $8,900 $64,069 Foreign loans 0 0 0 0 (a) does not include nonaccrual loans
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES The Corporation, as part of its philosophy of risk management, has established various credit policies and procedures intended to minimize the Corporation's exposure to undue credit risk. Credit evaluations of borrowers are performed to ensure that loans are granted on a sound basis. In addition, care is taken to minimize risk by diversifying specific industry. Credit risk is continuously monitored by Management through the periodic review of individual credits to ensure compliance with policies and procedures. Adequate collateralization, contractual guarantees, and compensating balances are also utilized by Management to mitigate risk. Management determines the appropriate level of the allowance for possible loan losses by continually evaluating the quality of the loan portfolio. The reserve is allocated to specific loans that exhibit above average credit loss potential based upon their payment history and the borrowers' financial conditions. Management maintains a watch list of substandard loans for monthly review. Although several of these loans are not delinquent and may be adequately secured, Management believes that due to location, size, or past payment history, it is necessary to monitor these loans monthly. The allowance for possible loan losses totaled $1,537,000, or 1.04% of total loans and leases at December 31, 1994. At the end of the previous year, the allowance for possible loan losses was $1,617,000, or 1.29% of total loans and leases. The provision charged to expense during 1994 was $805,000 compared to $577,000 in the year ago period. Management's allocation of the allowance for possible loan losses based on estimates of potential future loan loss is set forth in the table below:
% of % of % of Total Total Total ($000s) 1994 Loans 1993 Loans 1992 Loans Specific reserves: Commercial $ 10 0.01% $ 960 0.77% $ 370 0.32% Mortgage 5 0.00% 38 0.03% 51 0.04% Consumer 7 0.00% 21 0.02% 41 0.04% Criticized loans without specific allocation 315 0.21% 160 0.13% 153 0.13% Provision for loan categories based on historical loss experience: Commercial 687 0.47% 335 0.27% 284 0.25% Commercial real estate 103 0.07% 7 0.01% 10 0.01% Residential mortgage 298 0.20% 28 0.02% 29 0.03% Consumer 112 0.08% 68 0.05% 86 0.08% Total $ 1,537 1.04% $ 1,617 1.29% $1,024 0.90% Total loans and leases outstanding $ 147,096 $ 125,232 $113,977
The following table sets forth the five year historical information on the reserve for loan losses:
ALLOWANCE FOR POSSIBLE LOAN LOSSES Five year history ($000s) 1994 1993 1992 1991 1990 Balance as of January 1 $1,617 $1,024 $1,013 $891 $696 Provision of loan losses 805 577 405 125 225 Adjustment incident to acquisition - - 4 - - Loans charged off: Real estate 49 19 13 19 41 Commercial 806 - 59 6 45 Consumer 85 15 25 22 27 Direct financing leases - - 340 - - Total loans charged-off 940 34 437 47 113 Recoveries of loans previously charged-off: Real estate 18 - 2 9 21 Commercial 29 21 22 19 43 Consumer 7 11 6 16 19 Direct financing leases 1 18 9 - - Total recoveries 55 50 39 44 83 Net charge-offs (recoveries) 885 (16) 398 3 30 Balance at December 31 $1,537 $1,617 $1,024 $1,013 $891 Loans and leases outstanding at December 31 $ 147,096 $ 125,232 $ 113,977 $ 78,055 $ 89,510 Allowance as a percent of loans and leases outstanding 1.04% 1.29% 0.90% 1.30% 1.00% Average loans and leases $ 134,952 $ 120,218 $ 95,489 $ 76,333 $ 70,095 Net charge-offs as a percent of average loans and leases 0.66% -0.01% 0.42% 0.00% 0.04%
The following schedule shows the amount of under-performing assets and loans 90 days or more past due but accruing interest. UNDER-PERFORMING ASSETS ($000s) 1994 1993 1992 1991 1990 Nonaccrual debt securities $ 0 $ 0 $1,500 $1,500 $ 0 Nonaccrual loans and leases 478 2,358 1,647 1,514 1,582 Loans 90 days or more past due but accruing interest 11 436 11 988 819 Other real estate owned 586 69 155 185 81 Total $ 1,075 $ 2,863 $3,313 $4,187 $2,482
In addition to the above schedule of non-performing assets, Management prepares a watch list consisting of loans over $100,000 which Management has determined require closer monitoring to further protect the Corporation against loss. The balance of loans classified by Management as substandard due to delinquency and a change in financial position at the end of 1994 and not included in the table above was $1,031,000. DEPOSITS Primarily core deposits are used to fund interest-earning assets. The Corporation has a lower volume of interest-free checking accounts than its peer group which is typical for its market area. This results in an overall higher cost of funds than peer average. The accompanying tables show the relative composition of the Corporation's average deposits and the change in average deposit sources during the last three years.
AVERAGE DEPOSITS ($000s) 1994 1993 1992 Demand $ 24,797 $ 21,093 $ 16,537 Interest bearing checking 26,764 30,895 25,674 Savings 95,655 85,865 51,528 Other time 89,431 96,045 85,012 Certificates-$100,000 and over 10,229 10,661 11,091 Total average deposits $ 246,876 $ 244,559 $ 189,842
DISTRIBUTION OF AVERAGE DEPOSITS 1994 1993 1992 Demand 10.04% 8.63% 8.72% Interest bearing checking 10.84% 12.63% 13.52% Savings 38.75% 35.11% 27.14% Other time 36.23% 39.27% 44.78% Certificates-$100,000 and over 4.14% 4.36% 5.84% Total 100.00% 100.00% 100.00%
CHANGE IN AVERAGE DEPOSIT 1993 to 1992 to SOURCES ($000s) 1994 1993 Demand $ 3,704 $ 4,556 Interest bearing checking (4,131) 5,221 Savings 9,790 34,337 Other time (6,614) 11,033 Certificates-$100,000 and over (432) (430) Total $2,317 $54,717
CAPITAL RESOURCES The Corporation maintains a relatively high level of capital as a margin of safety for its depositors and shareholders. At December 31, 1994, shareholders' equity was $20,214,000 compared to $19,355,000 at December 31, 1993, an increase of $859,000 or 4.44%. The increase in capital during 1994 was due to retention of earnings, but this was partially offset by the recognition, in accordance with Financial Accounting Standard Number 115, of Unrealized Losses on Securities Available for Sale totalling $1,492,000 at December 31, 1994. The following table presents dividend payout ratios for the past three years. 1994 1993 1992 Total dividends declared as a percentage of net income 27.18% 30.36% 39.06% Common dividends declared as a percentage of earnings per common share 25.37% 28.16% 37.85% The Federal Reserve Board's capital adequacy guidelines require a minimum primary capital ratio of 5.5%. At December 31, 1994, the Corporation's primary capital (shareholders' equity plus the allowance for possible loan losses) was $21,751,000 or 6.95% of total assets. The Federal Reserve Board has adopted risk-based capital guidelines that assign risk weightings to assets and off-balance sheet items. The guidelines also define and set minimum capital requirements (risk-based capital ratios). Banks are required to have core capital (Tier 1) of at least 4.0% of risk-weighted assets and total capital of 8.0% of risk-weighted assets. Tier 1 capital consists principally of shareholders' equity less goodwill, while total capital consists of core capital, certain debt instruments and a portion of the reserve for loan losses. At December 31, 1994, the Corporation had a Tier 1 capital ratio of 12.26% and a total capital ratio of 13.21%, well above the regulatory minimum requirements. National banks must maintain a total assets leverage ratio of at least 3.0%. The total assets leverage ratio is calculated by dividing capital less intangibles into assets, net of intangibles. In many cases, regulators require an additional cushion of at least 1.0% to 2.0%. At December 31, 1994, the Corporation's Tier One leverage ratio was 6.36%. LIQUIDITY AND INTEREST RATE SENSITIVITY The Corporation meets its liability based needs through the operation of Belmont National Bank's branch banking network that gathers demand and retail time deposits. The Bank also acquires funds through repurchase agreements and overnight federal funds that provide additional sources of liquidity. Total deposits increased by $12.7 million, or 5.22%, from the end of 1993 to 1994. Short term borrowings increased by $31.8 million over the same period. Average deposits increased .95% during 1994 compared to 1993. The Corporation also has unused lines of credit with various correspondent banks totaling $7.7 million which may be used as an alternative funding source. INTEREST RATE SENSITIVITY The Corporation's net interest revenue can be vulnerable to wide fluctuations arising from a change in the general level of interest rates to the degree that the average yield on assets responds differently to such a change than does the average cost of funds. To maintain a consistent earnings performance, the Corporation actively manages the repricing characteristics of its assets and liabilities to control net interest income rate sensitivity. The mismatching of asset and liability repricing characteristics in specific time frames is referred to as interest rate sensitivity gaps. Mismatching or "gapping" can be profitable when the term structure of interest rates (the yield curve) is positive, i.e. short term yields are lower than long term yields, but gapping entails an element of risk, particularly in volatile markets. An institution is said to have a negative gap when its liabilities reprice in a shorter time period than its assets. A positive gap exists when assets reprice more quickly than liabilities. A negative gap in a period when the general level of interest rates is declining will produce a larger net interest income spread than would be the case if all assets and liabilities were perfectly matched. Conversely, net interest income will be adversely affected by a negative gap position in a period when the general level of interest rates is rising. Gaps, therefore, must be prudently managed. The Corporation examines its interest rate sensitivity position by categorizing the balance sheet into respective repricing time periods similar to those shown on the accompanying table. Repricing of certain assets, such as installment loans, mortgage loans and leases, is based upon contractual amortization or repricing, although experience indicates that they reprice more quickly due to early payoffs. Mortgage-backed securities are included in maturity/repricing categories based upon historical prepayment speeds. Based upon historical deposit rate relationships, savings and interest bearing checking are partially included in the non-rate sensitive category since rate changes on these products are not completely sensitive to fluctuations in the interest rate environment. Asset/liability management encompasses both interest rate risk and liquidity management. The resulting net cumulative gap positions reflect the Corporation's sensitivity to interest rate changes over time. The calculation is a static indicator and is not a net interest income predictor of a dynamic business in a volatile environment. As a static indicator, the gap methodology does capture major trends.
Rate Sensitivity Analysis-December 31, 1994 ($000s) Maturing or Repricing Non-rate Total Sensitive 31-90 91-180 181-365 1 year 1-5 & over 1-30 days days days days & under years 5 years Total Interest earning assets: Loans and leases $ 44,985 $ 4,577 $ 4,461 $ 11,764 $ 65,787 $ 16,606 $ 64,703 $ 147,096 Investment securities 1,665 14,228 12,561 12,358 40,812 41,748 9,903 92,463 Securities available for sale - - - - - 35,170 13,962 49,132 Securities in trading account - - - - - - - - Total interest earning assets $ 46,650 $18,805 $ 17,022 $ 24,122 $ 106,599 $ 93,524 $ 88,568 $ 288,691 Interest bearing liabilities: Interest checking $ - $ - $ - $ - $ - $ - $ 26,273 $ 26,273 Savings 24,163 - - - 24,163 - 59,860 84,023 Certificates-$100,000 and over 2,136 1,561 3,073 2,182 8,952 3,036 102 12,090 Other time 6,806 10,834 30,066 18,070 65,776 36,727 3,765 106,268 Short term borrowings 35,498 - - - 35,498 - - 35,498 Total interest bearing liabilities $ 68,603 $12,395 $ 33,139 $ 20,252 $134,389 $ 39,763 $ 90,000 $ 264,152 Rate sensitivity gap (21,953) $ 6,410 (16,117) $ 3,870 $(27,790) $ 53,761 (1,432) $ 24,539 Cumulative gap (21,953) (15,543) (31,660) (27,790) $ 25,971 $ 24,539 Cumulative gap as a percentage of interest earning assets -7.60% -5.38% -10.97% -9.63% 9.00% 8.50%
Interest bearing checking and savings deposits that have no contractual maturity are scheduled in the table above according to Management's best estimate of their repricing sensitivity to changes in market rates. If all of these deposits had been included in the 1- 30 days category above, the cumulative gap as a percentage of earning assets would have been negative 37.44%, 35.22%, 40.80%, 39.46%, 20.84% and positive 8.50%, respectively, for the 1-30 days, 31-90 days, 91- 180 days, 181-365 days, 1-5 years, and greater than 5 years categories at December 31, 1994. FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS 114 AND 118 Statements of Financial Accounting Standards No. 114 (FAS 114) "Accounting by Creditors for Impairment of a Loan" and No. 118 (FAS 118) "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures" are effective for financial statements for fiscal years beginning after December 15, 1994. FAS 114 and 118 address the accounting by creditors for impairment of a loan and loans that are restructured in a troubled debt restructuring. The Corporation will adopt these standards in the first quarter of 1995. It is estimated that such adoption will have no material effect on the earnings or financial condition of the Corporation. ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA The annual report of Belmont Bancorp. is hereby incorporated by reference and appears as Exhibit 2. Management's report on their responsibility for financial reporting is included in the Corporation's annual report. ITEM 9 - DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information appearing in Belmont Bancorp.'s definitive proxy statement dated March 17, 1995 (Exhibit 3) is incorporated by reference in response to this item.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1994: Name Age Position J. Vincent Ciroli, Jr. 49 President and Chief Executive Officer, Belmont Bancorp. & Belmont National Bank William Wallace 39 Vice President, Belmont Bancorp.; Executive Vice President & Chief Operating Officer, Belmont National Bank Jane R. Marsh 33 Secretary, Belmont Bancorp.; Senior Vice President, Controller & Cashier, Belmont National Bank
Each of the officers listed above has been an executive officer of the Corporation or one of its subsidiaries during the past five years. ITEM 11 - EXECUTIVE COMPENSATION The information appearing in Belmont Bancorp.'s definitive proxy statement dated March 17, 1995 (Exhibit 3) is incorporated by reference in response to this item. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing in Belmont Bancorp.'s definitive proxy statement dated March 17, 1995 (Exhibit 3) is incorporated by reference in response to this item. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing in Belmont Bancorp.'s definitive proxy statement dated March 17, 1995 (Exhibit 3) is incorporated by reference in response to this item. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 21, 1995. By John H. Goodman, II, __________________ BELMONT BANCORP John H. Goodman, II, Chairman (Registrant) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated. John A. Belot John A. Belot____________ Director J. Vincent Ciroli, Jr. J. Vincent Ciroli, Jr.___ Director, President & CEO; Belmont Bancorp. and Belmont National Bank William P. Goddard William P. Goddard_______ Director Mary L. Holloway Haning Mary L. Holloway Haning___ Director Charles J. Kaiser, Jr. Charles J. Kaiser, Jr.______ Director Terrence A. Lee Terrence A. Lee__________ Director Dana Lewis Dana Lewis_____________ Director Jane R. Marsh Jane R. Marsh___________ Secretary, Belmont Bancorp; Sr. Vice President & Controller, & Cashier, Belmont National Bank James Miller James Miller_____________ Director W. Quay Mull, II W. Quay Mull, II__________ Director Tom Olszowy Tom Olszowy____________ Director Keith Sommer Keith Sommer___________ Director William Wallace William Wallace__________ Director & Vice President; Executive Vice President & COO, Belmont National Bank Charles A. Wilson, Jr. Charles A. Wilson, Jr._____ Vice Chairman John H. Goodman, II____________ Chairman of the Board John H. Goodman, II Director March 21, 1995 INDEX TO EXHIBITS Exhibit 1 - Consent of Independent Certified Public Accountants Exhibit 2 - Belmont Bancorp.'s 1994 Annual Report to Shareholders Exhibit 3 - Belmont Bancorp.'s Proxy Statement to Shareholders, dated March 17, 1995 Exhibit 27 - Financial Data Schedule EX-1 2 CONSENT OF ACCOUNTANTS EXHIBIT 1 - CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and the Board of Directors of Belmont Bancorp. We consent to incorporation by reference of our report dated January 23, 1995, relating to the consolidated balance sheets of Belmont Bancorp. as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and statements of cash flows for each of the three years in the period ended December 31, 1994. Said report appears as Exhibit 2 of Belmont Bancorp.'s annual form 10-K. s/S.R. Snodgrass A.C. S.R. Snodgrass A.C. Wheeling, WV March 20, 1995 EX-2 3 ANNUAL REPORT MODULE The Belmont Bancorp 1994 Annual Report Dedication Daniel A. Giffin J. Harvey Goodman The Belmont Bancorp. 1994 Annual Report is dedicated to Mr. Daniel A. Giffin and Mr. J. Harvey Goodman. In January, 1995, Messrs. Giffin and Goodman announced they would not stand for re-election to the Board of Directors of Belmont Bancorp. and Belmont National Bank. With 16 years and 32 years of distinguished service to the Corporation, respectively, the contributions these gentlemen have made are significant and deeply appreciated by all. Their talent and dedication will be missed. Corporate Profile Belmont Bancorp. (the Corporation) is a $313 million bank holding company, incorporated in Ohio. Belmont National Bank, a wholly-owned subsidiary of the Corporation, is an FDIC-insured, federally chartered commercial bank. The Bank delivers a comprehensive range of financial products and services to individuals, families, businesses and corporations through nine full service offices and two drive-up service locations. Belmont National Bank's primary market areas for its consumer, commercial, trust and investment services are Belmont, Harrison, Tuscarawas and Jefferson counties in Ohio, and Marshall and Ohio counties in West Virginia. Financial Highlights (unaudited) (000's except per share data)
1994 1993 % change Net income $ 3,234 $ 2,569 25.9% Operating Return on average assets 1.12% 0.96% results Return on average common equity 16.71% 14.57% Return on average total equity 16.27% 14.21% Per Net income $ 2.98 $ 2.35 26.8% common Dividend 0.76 0.66 15.2% share Book value at year-end 18.17 17.36 4.7% At Total assets $312,963 $267,505 17.0% year- Total loans 147,096 125,232 17.5% end Total deposits 255,923 243,232 5.2% Total shareholders' equity 20,214 19,355 4.4% Liquidity Average common equity and to average total assets 6.52% 6.38% capital Average total equity ratios to average total assets 6.87% 6.76% Dividend payment ratio 27.18% 30.36%
The 1995 Annual Report cover charts Belmont Bancorp. asset growth over the past ten years. From Management The year 1994 proved to be a year of accomplishment and change. We entered the year with interest rates at all time lows and finished the year with short-term rates nearly double those of just twelve months earlier. At the beginning of 1994, home mortgages were being refinanced at a record pace; by the end of the year the refinancing boom had gone bust. But, through it all, we prevailed to have another record year. Our accomplishments include record net income, record asset size and record capital levels. During 1994, Belmont Bancorp. stock was listed as a NASDAQ company under the symbol BLMT, we introduced a dividend reinvestment plan for our shareholders and had two stock splits. During this time, our stock increased in value by 38%, increasing from a low of $21.00 to $29.00 at year-end. In addition, our cash dividend increased 15.2%. Review of 1994 Results We are very pleased with Belmont Bancorp's operating results, which were accomplished during a time of rising interest rates. Earnings per share for 1994 amounted to $2.98, a 26.8% increase compared to 1993. The return on common shareholders' equity, which is the primary way we measure our performance, totaled 16.7% for the year, up from 14.6% during 1993. Return on assets for the year equaled 1.12%, up from .96% in 1993. Technology and the Future Throughout our organization we continue to deploy the latest in banking and financial service innovations. Through technology we are able to compete with any size financial entity in the nation. Technology permits us to be more productive and customer friendly at the same time. 1995 will be another year of continuous improvement, including many new products and services which will keep us a leader in all the markets we serve. All of our products and services are designed to make or save our customers money. From Management Lines of Business We concentrate our efforts in primarily four areas: commercial lending and business development, residential real estate and mortgage lending, retail banking, and trust and investment services. We want to be recognized, in all the communities we serve, as the number one choice for financial products, services and information. The money we gather through our retail banking operation goes right back into the local economies we serve in the form of business loans that help create jobs, mortgage loans that provide shelter and comfort, and consumer loans that make dreams come true. For a community banking organization like Belmont Bancorp., the best investment we can make is in our local communities. Our "Banking on Education" partnership continues to provide our schools and our children with desperately needed educational equipment, and our Fortune Fifty Club continues to be one of the outstanding senior clubs in the country. Our People People make organizations successful. Without the right people, great plans fail...without the right people, nothing positive happens. At Belmont Bancorp., we put our people first--before the customer and even before you, our shareholder. Through time, the only way we can earn an above average return for our shareholders is to have satisfied customers. To have satisfied customers, we need an enthusiastic, well-trained and appropriately compensated staff. When this all fits together, we have a first class organization which best describes Belmont Bancorp. Once again we look forward to the challenges of 1995 and the future. Thank you, our shareholder, for the confidence you have shown us through the years. We dedicate ourselves to honoring that trust. J. Vincent Ciroli, Jr. John H. Goodman, II J. Vincent Ciroli, Jr. John H. Goodman, II President & CEO Chairman Financial Statements Belmont Bancorp. and Subsidiaries Summarized Quarterly Financial Information (Unaudited) ($000's except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter 1994 Interest income $4,235 $4,688 $5,237 $5,496 Interest expense 1,887 2,039 2,331 2,550 Net interest income 2,348 2,649 2,906 2,946 Provision for possible loan losses 250 270 85 200 Security gains (losses) 15 (3) (2) (73) Net overhead 1,254 1,397 1,364 1,705 Income before income taxes 859 979 1,455 968 Income taxes 218 187 320 302 Net income $ 641 $ 792 $1,135 $ 666 Net earnings per common share $ 0.59 $ 0.73 $ 1.05 $ 0.61 1993 Interest income $4,218 $4,175 $4,308 $4,016 Interest expense 2,267 2,208 2,152 1,989 Net interest income 1,951 1,967 2,156 2,027 Provision for possible loan losses 276 3 205 93 Security gains (losses) (87) (229) 475 784 Net overhead 1,281 1,311 1,292 1,608 Income before income taxes 307 424 1,134 1,110 Income taxes 6 92 9 299 Net income $ 301 $ 332 $1,125 $ 811 Net earnings per common share $ 0.27 $ 0.29 $ 1.04 $ 0.75 1992 Net income $ 453 $ 365 $ 913 $ 107 Net earnings per common share $ 0.43 $ 0.35 $ 0.86 $ 0.07
Belmont Bancorp. and Subsidiaries Consolidated Five Year Summary of Operations For the Years Ending December 31, 1994, 1993, 1992, 1991, 1990 (Unaudited) ($000's except per share data)
1994 1993 1992 1991 1990 Interest income $ 19,656 $ 16,717 $ 14,671 $ 16,151 $ 15,772 Interest expense 8,807 8,616 8,082 10,091 9,921 Net interest income 10,849 8,101 6,589 6,060 5,851 Provision for possible loan losses 805 577 405 125 225 Net interest income after provision for possible loan losses 10,044 7,524 6,184 5,935 5,626 Securities and trading gains (losses) (63) 943 323 44 (184) Other operating income 1,349 1,265 1,012 962 869 Operating expenses 7,069 6,757 5,107 4,629 4,390 Income before income taxes 4,261 2,975 2,412 2,312 1,921 Income taxes 1,027 406 574 528 338 Income before extraordinary item 3,234 2,569 1,838 1,784 1,583 Extraordinary item _ _ _ _ 289 Net income $ 3,234 $ 2,569 $ 1,838 $ 1,784 $ 1,872 Earnings per common share (1): Earnings before extraordinary item $ 2.98 $ 2.35 $ 1.71 $ 1.69 $ 1.50 Extraordinary item _ _ _ _ 0.27 Net earnings per common share $ 2.98 $ 2.35 $ 1.71 $ 1.69 $ 1.77 Cash dividend declared per share $ 0.76 $ 0.66 $ 0.65 $ 0.64 $ 0.64 Book value per common share $ 18.17 $ 17.37 $ 15.67 $ 14.61 $ 13.06 Total loans $ 147,096 $125,232 $113,977 $ 78,055 $ 89,510 Total assets $ 312,963 $267,505 $267,332 $197,015 $188,418 Total deposits $ 255,923 $243,232 $245,743 $176,859 $168,034 Total shareholders' equity $ 20,214 $ 19,355 $ 17,565 $ 15,445 $ 13,812 (1) Restated for stock dividends paid during 1994.
Belmont Bancorp. and Subsidiaries Consolidated Balance Sheets For the Years Ended December 31, 1994 and 1993
Assets 1994 1993 Cash and due from banks $ 11,770,000 $ 8,049,000 Federal funds sold _ 1,260,000 Securities available for sale (at market value in 1994; market value in 1993 - $4,076,000) 49,132,000 3,976,000 Securities in trading account _ 518,000 Securities held to maturity (market value of $86,828,000 - 1994 and $116,239,000 -1993) 92,463,000 116,065,000 Loans 147,096,000 125,232,000 Less allowance for possible loan losses (1,537,000) (1,617,000) Net loans 145,559,000 123,615,000 Premises and equipment, net 4,648,000 4,460,000 Other real estate owned 586,000 69,000 Accrued income receivable 2,133,000 1,713,000 Other assets 6,672,000 7,780,000 Total Assets $312,963,000 $267,505,000 Liabilities and Shareholders' Equity Liabilities 1994 1993 Non-interest bearing deposits: Demand $ 27,269,000 $ 24,051,000 Interest bearing deposits: Demand 26,273,000 27,854,000 Savings 84,023,000 99,988,000 Time 118,358,000 91,339,000 Total deposits 255,923,000 243,232,000 Short-term borrowings 35,498,000 3,709,000 Accrued interest on deposits and other borrowings 590,000 453,000 Other liabilities 738,000 756,000 Total liabilities $292,749,000 $248,150,000 Shareholders' Equity 1994 1993 Preferred stock - authorized 90,000 shares with no par value; issued and outstanding, none _ _ Senior cumulative preferred stock - authorized, issued and outstanding 10,000 shares with a $100 par value 1,000,000 1,000,000 Common stock - $3.57 par value, 1,750,000 shares authorized; 1,057,738 issued in 1994 and 1993 3,777,000 2,749,000 Surplus 5,061,000 3,647,000 Treasury stock (424 shares in 1994 and 728 shares in 1993) (8,000) (13,000) Retained earnings: Unappropriated 11,026,000 11,122,000 Appropriated for contingencies 850,000 850,000 Net unrealized loss on securities available for sale (1,492,000) _ Total shareholders' equity 20,214,000 19,355,000 Total Liabilities and Shareholders' Equity $312,963,000 $267,505,000
The accompanying notes are an integral part of the financial statements. Belmont Bancorp. and Subsidiaries Consolidated Statements of Income For the Years Ended December 31, 1994, 1993 and 1992
Interest Income 1994 1993 1992 Loans and lease financing: Taxable $11,440,000 $10,436,000 $8,830,000 Tax-exempt 190,000 167,000 208,000 Investment securities: Taxable 6,809,000 5,113,000 4,582,000 Tax-exempt 1,209,000 643,000 412,000 Dividends 3,000 188,000 258,000 Interest on trading securities 1,000 45,000 61,000 Interest on federal funds sold 4,000 125,000 320,000 Total interest income 19,656,000 16,717,000 14,671,000 Interest Expense Deposits 7,865,000 8,525,000 7,953,000 Short-term borrowings 942,000 91,000 129,000 Total interest expense 8,807,000 8,616,000 8,082,000 Net interest income 10,849,000 8,101,000 6,589,000 Provision for Possible Loan Losses 805,000 577,000 405,000 Net interest income after provision for possible loan losses 10,044,000 7,524,000 6,184,000 Non-lnterest Income Trust fees 341,000 274,000 269,000 Service charges on deposit and loan accounts 586,000 546,000 457,000 Other operating income 422,000 445,000 286,000 Investment securities gains (losses) (64,000) 1,059,000 390,000 Trading gains (losses) 1,000 (116,000) (67,000) Total non-interest income 1,286,000 2,208,000 1,335,000 Non-lnterest Expense Salary and employee benefits 2,946,000 2,808,000 2,148,000 Net occupancy expense of premises 533,000 541,000 421,000 Equipment expenses 618,000 491,000 452,000 Other operating expenses 2,972,000 2,917,000 2,086,000 Total non-interest expense 7,069,000 6,757,000 5,107,000 Income before income taxes 4,261,000 2,975,000 2,412,000 Income Taxes 1,027,000 406,000 574,000 Net income $ 3,234,000 $ 2,569,000 $1,838,000 Weighted - Average Number of Shares Outstanding 1,057,262 1,057,010 1,056,970 Earnings Per Common Share $ 2.98 $ 2.35 $ 1.71
The accompanying notes are an integral part of the financial statements. Belmont Bancorp. and Subsidiaries Consolidated Statements of Shareholders' Equity For the Years Ended December 31, 1994, 1993 and 1992
Unrealized Loss On Retained Earnings Securities Preferred Common Unappro- Appro- Treasury Available Stock Stock Surplus priated priated Stock for Sale Balance December 31, 1991 $ _ $2,749,000 $3,647,000 $ 8,213,000 $850,000 $(14,000) $ _ 1992 Net income _ _ _ 1,838,000 _ _ _ Dividend declared: Preferred Stock (33,000) Common Stock ($.65 per share) _ _ _ (685,000) - _ Preferred stock issued 1,000,000 _ _ _ _ _ _ Balance, December 31, 1992 1,000,000 2,749,000 3,647,000 9,333,000 850,000 (14,000) _ 1993 Net income _ _ _ 2,569,000 _ _ _ Dividends declared: Preferred stock _ _ _ (80,000) _ _ _ Common stock ($.66 per share) _ _ _ (700,000) _ _ _ Sale of treasury stock _ _ _ _ _ 1,000 _ Balance, December 31,1993 1,000,000 2,749,000 3,647,000 11,122,000 850,000 (13,000) _ Effect of adopting SFAS 115 _ _ _ _ _ _ 6,000 10% Common stock dividend at fair market value _ 274,000 1,413,000 (1,687,000) _ _ _ 25% Common stock dividend at par value _ 754,000 _ (754,000) _ _ _ 1994 Net income _ _ _ 3,234,000 _ _ _ Cash dividends declared: Preferred stock _ _ _ (80,000) _ _ _ Common stock ($.76 per share) _ _ _ (799,000) _ _ _ Cash paid in lieu-stock dividends _ _ _ (10,000) _ _ _ Change in unrealized loss - securities available for sale _ _ _ _ _ _ (1,498,000) Sale of treasury stock _ _ 1,000 _ _ 5,000 _ Balance, December 31,1994 $1,000,000 $3,777,000 $5,061,000 $11,026,000 $850,000 $ (8,000) $(1,492,000)
The accompanying notes are an integral part of the financial statements. Belmont Bancorp. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992 Operating Activities Net income $ 3,234,000 $ 2,569,000 $ 1,838,000 Adjustments to reconcile net income to net cash flows provided (used) by operating activities: Provision for loan losses 805,000 577,000 405,000 Depreciation and amortization expense 519,000 446,000 393,000 Amortization of investment security premiums 1,877,000 3,025,000 2,133,000 Accretion of investment security discounts and interest recorded on zero-coupon securities (403,000) (601,000) (986,000) Investment securities (gains) losses 10,000 205,000 (493,000) Trading (gains) losses (1,000) 116,000 103,000 (Gains) losses on securities available for sale 55,000 (1,264,000) 67,000 Proceeds from sale of securities held in trading account 1,517,000 11,196,000 25,738,000 Purchase of securities for trading account (1,516,000) (13,346,000) (25,804,000) Loss (gain) on sale of fixed assets 2,000 (29,000) (35,000) Gain on sale of loans (23,000) (67,000) _ Gain on sale of other real estate owned (1,000) _ _ (Increase) decrease in interest receivable (420,000) 38,000 (511,000) Increase (decrease) in interest payable 137,000 (265,000) (471,000) Purchase of life insurance contracts _ (194,000) (1,835,000) Others, net 1,859,000 (734,000) (3,591,000) Net cash provided (used) by operating activities $ 7,651,000 $ 1,672,000 $ (3,049,000)
Belmont Bancorp. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992 Investing Activities Proceeds from sales of investment securities _ 21,558,000 32,073,000 Proceeds from maturities and calls of investment securities 3,207,000 899,000 1,374,000 Proceeds from sales of equity securities _ _ 8,138,000 Purchase of securities available for sale (26,052,000) (78,448,000) (33,417,000) Purchase of investment securities (47,621,000) (85,103,000) (102,464,000) Proceeds on sale of securities available for sale 16,198,000 104,137,000 14,516,000 Principal collected on mortgage-backed securities 29,434,000 50,537,000 37,353,000 Net (increase) decrease in loans and leases, net of charge-offs (25,486,000) (15,002,000) (4,686,000) Proceeds on sale of loans 2,104,000 3,841,000 _ Loans purchased _ (185,000) (31,790,000) Recoveries on loans previously charged-off 55,000 50,000 39,000 Proceeds from sale of other real estate owned 84,000 210,000 148,000 Purchase of premises and equipment (711,000) (842,000) (2,343,000) Proceeds from sale of fixed assets 1,000 29,000 71,000 Net cash used by investing activities (48,787,000) 1,681,000 (80,988,000) Financing Activities Net increase (decrease) in deposits 12,691,000 (2,511,000) 68,884,000 Net increase (decrease) in short- term borrowings 31,789,000 716,000 (174,000) Dividends paid on common and preferred stock (889,000) (780,000) (718,000) Sale of treasury stock 6,000 1,000 _ Issuance of preferred stock _ _ 1,000,000 Net cash provided (used) by financing activities 43,597,000 (2,574,000) 68,992,000 Increase (Decrease) in Cash and Cash Equivalents 2,461,000 779,000 (15,045,000) Cash and Cash Equivalents at Beginning of Year 9,309,000 8,530,000 23,575,000 Cash and Cash Equivalents at End of Year $11,770,000 $ 9,309,000 $ 8,530,000
The accompanying notes are an integral part of the financial statements. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 1. Summary of Significant Accounting Policies The accounting and reporting policies and practices of the Corporation are in accordance with generally accepted accounting principles and conform to general practices within the banking industry. The more significant of these policies and practices are summarized below. Principles of Consolidation: The consolidated financial statements include the accounts of Belmont Bancorp. and its wholly-owned subsidiaries, Belmont National Bank and Belmont Financial Network, Inc. Material intercompany accounts and transactions have been eliminated. Held to Maturity Securities: These securities are purchased with the original intent to hold to maturity and events which may be reasonably anticipated are considered when determining the Corporation's intent and ability to hold to maturity. Securities meeting such criteria at date of purchase and as of the balance sheet date are carried at cost, adjusted for amortization of premiums and accretion of discounts. Available for Sale Securities: Debt and equity securities to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale and carried at market value with net unrealized gains and losses, net of tax, reflected as a component of shareholders' equity until realized. Securities held for indefinite periods of time include securities that may be sold to meet liquidity needs or in response to significant changes in interest rates or prepayment risks as part of the Corporation's overall asset/liability management strategy. Prior to December 31, 1993, marketable equity securities were carried at the lower of aggregate cost or market value with net unrealized gains and losses being reflected as adjustments to retained earnings. Market value depreciation below cost on debt securities held for sale prior to December 31, 1993, was required in current period earnings. Trading Securities: Trading securities are held for resale within a short period of time and are stated at market value. Trading gains and losses include the net realized gain or loss and market value adjustments of the trading account portfolio. Income Recognition: Income earned by the Corporation and its subsidiaries is recognized principally on the accrual basis of accounting. Certain fees, principally service, are recognized as income when billed. The subsidiary bank suspends the accrual of interest when, in Management's opinion, the collection of all or a portion of interest has become doubtful. Generally, when a loan is placed on non-accrual, the bank charges all previously accrued and unpaid interest against income. In future periods, interest will be included in income to the extent received only if complete principal recovery is reasonably assured. The Corporation defers and amortizes loan fees and related origination costs. These fees and costs are amortized into interest or other income over the estimated life of the loan using a method which approximates the interest method. Direct Financing Leases: The leasing operation of the Corporation consists of the leasing of various types of equipment under leases classified as direct financing leases. Interest and service charges, net of initial direct costs, are deferred and reported as income in decreasing amounts over the term of the lease so as to provide an approximate constant yield on the outstanding principal balance. Allowance For Loan Losses: The allowance for loan losses is established through a provision for loan losses charged to expenses. The allowance represents an amount which, in Management's judgment, will be adequate to absorb probable losses on existing loans that may become uncollectible. Management's judgment in determining the adequacy of the allowance is based on an evaluation of the collectibility of loans. These evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, current economic conditions, overall portfolio quality, and review of problem loans. Premises and Equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. Provisions for depreciation and amortization are computed generally using the straight line method over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight line basis over the lease period. When units of property are disposed of, the premises and equipment accounts are relieved of the cost and the accumulated depreciation related to such units. Any resulting gains or losses are credited to or charged against income. Costs of repairs and maintenance are charged to expense as incurred. Major renewals and betterments are capitalized at cost. Other Real Estate: Real estate acquired in satisfaction of indebtedness is recorded at the lower of estimated fair market value or loan amount. At the date of acquisition, any excess of the loan amount over the fair market value is charged against the allowance for loan losses. Earnings Per Common Share: Earnings per common share are calculated based on net income after preferred dividend requirements and the weighted average number of shares of common stock outstanding during the year. Stock Dividends: On February 2, 1994, the Corporation distributed 76,672 shares of common stock in connection with a 10% stock dividend. On July 22, 1994, the Corporation distributed 211,275 shares of common stock in connection with a 25% stock dividend. All references in the accompanying financial statements to the number of common shares and per- share amounts for 1993 and 1992 have been restated to reflect the stock dividend. Excess of Cost Over Net Assets Acquired: The excess of cost over net assets of branches purchased in 1991 is being amortized on the straight line method over ten years. The excess of cost over net assets of branches purchased in 1992 is being amortized on the straight line method over a five to eight year period for the portion allocated to the core deposit base and ten years for the remaining excess. The unamortized balances at December 31, 1994 and 1993, were $1,923,000 and $2,338,000, respectively. Amortization charged to expense was $415,000 in 1994 and $416,000 in 1993, and $148,000 in 1992. Disclosures About the Fair Values of Financial Instruments: Cash and Cash Equivalents: For those short-term instruments, the carrying amount is a reasonable estimate of fair value. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 1. Summary of Significant Accounting Policies (continued) Disclosures About the Fair Values of Financial Instruments: Investment Securities and Securities Available for Sale: For debt securities, derivative instruments and marketable equity securities held for investment purposes and for sale, fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market price for similar securities. Loans: For certain homogeneous categories of loans, such as some residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Deposit Liabilities: The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. Short-Term Borrowings: These liabilities represent primary overnight borrowings and debt maturing within ninety days of issuance with interest rates adjusted weekly Accordingly, the carrying amount is a reasonable estimate of fair value. Reclassifications: Certain prior year amounts have been reclassified to conform with current year presentation. 2. Changes in Accounting Policies On January 1, 1994, the Corporation adopted Financial Accounting Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires entities to classify debt and equity securities as either held to maturity, available for sale, or trading securities. Under SFAS No. 115, held to maturity securities are recorded at amortized cost; whereas available for sale securities and trading securities are carried at market value. SFAS No. 115 further requires that unrealized gains and losses on available for sale securities be reported, net of tax, as a separate component of shareholders' equity. Adoption of SFAS No. 115 had no effect on current year earnings. In 1993, the Corporation adopted Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109 requires an asset and liability approach which recognizes the amount of taxes payable or refundable in the current year and deferred tax consequences of events that have been recognized previously in financial statements or tax returns. The impact on tax expense in 1993 due to adoption of SFAS No. 109 was a consolidated benefit of $28,109 recorded as of January 1, 1993. In 1993, the Corporation adopted Financial Accounting Standards No. 106, "Employers Accounting for Post-retirement Benefits Other Than Pensions." The effect of this change was to decrease net income for 1993 by $138,000 ($ .13 per share). 3. Investment Securities The amortized cost and estimated market values of investment securities at December 31 are as follows:
1994 1993 Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value Securities held to maturity: U.S. Treasury securities and obligations of U.S. Government Corporations and agencies $ 4,248 $22 $ 312 $ 3,958 $ 4,462 $ 74 $ 47 $ 4,489 Obligations of states and political subdivisions 24,244 51 1,615 22,680 13,281 409 8 13,682 Mortgage derivative securities 12,695 _ 836 11,859 14,970 8 198 14,780 Mortgage- backed securities 51,276 7 2,952 48,331 81,569 441 505 81,505 Other securities _ _ _ _ 1,783 _ _ 1,783 Total held to maturity $92,463 $80 $5,715 $86,828 $116,065 $932 $758 $116,239 Securities available for sale: U.S. Treasury securities and obligations of U.S. Government Corporations and agencies $ 6,388 $ _ $ 128 $ 6,260 $ 2,181 $ _ $ _ $ 2,181 Obligations of states and political subdivisions _ _ _ _ 1,631 93 _ 1,724 Mortgage derivative securities 938 _ 87 851 164 7 _ 171 Mortgage-backed securities 42,000 3 2,048 39,955 _ _ _ _ Total Debt Securities 49,326 3 2,263 47,066 3,976 100 _ 4,076 Equity Securities 2,066 _ _ 2,066 _ _ _ _ Total available for sale $51,392 $ 3 $2,263 $49,132 $ 3,976 $100 $ _ $ 4,076
Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 3. Investment Securities (continued) The amortized cost and estimated market value of investment securities at December 31, 1994, by contractual maturity, follow. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Securities Securities Held to Maturity Available for Sale Estimated Estimated Amortized Market Amortized Market Cost Value Cost Value Due in one year or less $ 1,108 $ 1,104 $ _ $ _ Due after one year through five years 1,893 1,894 4,863 4,744 Due after five years through ten years 6,216 5,655 1,525 1,516 Due after ten years 19,275 17,985 _ _ 28,492 26,638 6,388 6,260 Mortgage-backed securities 51,276 48,330 42,000 39,955 Mortgage derivative securities 12,695 11,860 938 851 Equity securities _ _ 2,066 2,066 Total $92,463 $86,828 $51,392 $49,132
At December 31,1994 and 1993, the mortgage derivative securities consist solely of collateralized mortgage obligations. At December 31, 1994, securities held to maturity include U.S. Government Agency Structured Notes with a carrying value of $1,974,000 and an estimated market value of $1,947,000; securities available for sale include a U.S. Government Agency Structured Note with a carrying value and estimated market value of $953,000. Sales and write-downs of investment securities resulted in the following:
1994 1993 1992 Proceeds from sales $16,198 $21,558 $40,211 Gross gains 31 790 896 Gross losses (86) (191) (183) Realized losses on market declines _ (804) (220) Losses on securities called (9) _ _
In 1994, all securities sold were classified as available for sale at the time of sale. There were no transfers of securities between classifications. Assets carried at $36,538,000 and $26,043,000 at December 31, 1994 and 1993, respectively, were pledged to secure United States Government and other public funds, and for other purposes as required or permitted by law. 4. Loans and Allowance for Possible Loan Losses Loans outstanding at December 31 are as follows:
1994 1993 Real estate-construction $ 1,801 $ 2,081 Real estate-mortgage 78,573 74,986 Real estate-secured by nonfarm, nonresidential property 21,222 16,526 Commercial, financial and agricultural 35,036 23,263 Obligations of political subdivisions in the U.S. 3,947 2,054 Installment and credit card loans to individuals 6,512 6,313 Direct finance leases 5 9 Loans receivable $147,096 $125,232
The bank discontinues accruing interest income on loans and leases when, in the opinion of management, the collectibility of such interest appears doubtful. Non-accruing loans and leases amounted to $478,000 and $2,358,000 at December 31, 1994, and 1993, respectively. The after-tax effect of the interest that would have been accrued on these loans was $38,000 in 1994 and $148,000 in 1993. The estimated fair value of loans outstanding at December 31 1994, as determined by using the valuation method described in Note 1, amounted to $143,300,000. The following is an analysis of loan activity to directors, executive officers, and their associates (see Note 12):
1994 1993 Balance previously reported $2,775 $3,096 New loans during the year 3,716 497 Total 6,491 3,593 Less repayments during the year 1,587 818 Balance, December 31 $4,904 $2,775
Activity in the allowance for loan losses is summarized as follows:
December 31 1994 1993 1992 Balance at beginning of year $1,617 $1,024 $1,013 Additions charged to operating expense 805 577 405 Recoveries on loans previously charged-off 55 50 39 Total 2,477 1,651 1,457 Loans charged-off 940 34 433 Balance at end of year $1,537 $1,617 $1,024
The entire allowance represents a valuation reserve which is available for future charge-offs. 5. Premises and Equipment Premises and equipment are stated at cost, less accumulated depreciation and amortization, as follows:
Original December 31 Useful Life 1994 1993 Years Land and land improvements $ 734 $ 659 Buildings 3,138 3,131 30 - 50 Furniture, fixtures and equipment 3,971 3,369 5 - 12 Leasehold improvements 406 406 5 - 20 Total 8,249 7,565 Less accumulated depreciation and amortization 3,601 3,105 Premises and equipment, net $ 4,648 $4,460
Charges to operations for depreciation and amortization approximate $519,000, $446,000, and $393,000 for 1994, 1993, and 1992, respectively. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 6. Deposits The distribution of the bank's deposits at December 31, 1994 and 1993, are as follows: 1994 1993 Non- Non- interest interest Bearing Interest Bearing Bearing Interest Bearing Demand Demand Savings Time Demand Demand Savings Time Individuals, partnerships and Corporations $16,978 $26,273 $84,023 $113,319 $19,267 $27,854 $99,988 $83,080 U.S. Govern ment 197 - - - 321 - _ _ States and political subdivisions 7,460 - - 5,039 2,712 - _ 8,259 Other depository institutions in the U.S. - - - - - - _ - Certified, officers' checks, travelers cheques, etc. 2,634 - - - 1,751 - _ - Total $27,269 $26,273 $84,023 $118,358 $24,051 $27,854 $99,988 $91,339
Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $12,090,000 at December 31, 1994, and $9,770,000 at December 31, 1993. A maturity distribution of time certificates of deposit of $100,000 or more follows: 1994 1993 Due in three months or less $ 3,697 $7,113 Due after three months through six months 3,073 500 Due after six months through twelve months 2,182 1,311 Due after one year through five years 3,036 746 Due after five years 102 100 Total $12,090 $9,770
The estimated fair value of the Corporation's deposit liabilities determined under the criteria set forth in Note 1 totaled $257,123,000 at December 31, 1994. 7. Short-Term Borrowings Short term borrowings consist of advances from the Federal Home Loan Bank of Cincinnati, federal funds purchased and securities sold under agreement to repurchase. Federal funds purchased and securities sold under agreements to repurchase represent primarily overnight borrowings. Information related to these borrowings is summarized below: 1994 1993 1992 Securities sold under repurchase agreements: Balance at year end $8,736 $3,709 $2,993 Average during the year $8,210 $3,581 $3,947 Maximum month- end balance $9,653 $4,319 $4,245 Weighted average rate during the year 3.56% 2.25% 3.30% Rate at December 31 4.93% 2.75% 2.75% Federal funds purchased Balance at year end $4,500 N/A N/A Average during the year $ 397 N/A N/A Maximum month- end balance $4,500 N/A N/A Weighted average rate during the year 4.43% N/A N/A Rate at December 31 6.25% N/A N/A
Advances from The Federal Home Loan Bank of Cincinnati are made under a blanket agreement which allows for maximum borrowings of $30,000,000. Each advance is for a ninety day term and bears interest at a variable rate, adjusted daily. At December 31, 1994, the balance of advances due was $22,262,000 at an interest rate of 7%. Collateral for the advances consists of residential mortgage loans in the amount of $33,393,000 and 17,238 shares of The Federal Home Loan Bank of Cincinnati, with a carrying value of $1,723,800. 8. Income Tax As discussed in Note 1, the Corporation adopted the Financial Accounting Standards Board Statement 109 as of January 1, 1993. The cumulative effect of the change in accounting for income tax of $(28,109) is determined as of January 1, 1993. The effect on the Statement of Income is considered immaterial ($ .03 per share), and the total is included in the income tax expense for 1993. The components of applicable income taxes are as follows: Year Ended December 31 1994 1993 1992 Currently payable $ 880 $ 775 $ 779 Deferred 147 (369) (205) Income tax $1,027 $ 406 $ 574
For the year ended December 31, 1992, the amounts for deferred income tax resulted from differences in the timing of recognition of revenue and expenses for tax and financial reporting purposes. This amount, by source, follows: Year Ended 1992 Provision for loan losses- book provisions over tax $(115) Allowance for decline in market value- securities held for sale (10) Unrealized losses on investments _ Deferred loan origination fees (11) Depreciation (25) Lease income (20) Interest- nonaccrual loans (24) Total $(205)
Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 8. Income Tax (continued) The following temporary differences gave rise to the deferred tax asset at December 31, 1994 and 1993: 1994 1993 Allowance for loan losses $ 373 $ 395 Interest on non-accrual loans 20 76 Unrealized losses on investments 805 71 Deferred loan origination fees 25 40 Deferred compen- sation and liability for future employees benefits 78 76 Intangible assets 150 83 Premises and equipment due to differences in depreciation (101) (42) Direct finance leases (102) (105) Federal Home Loan Bank stock dividends (44) (11) Total deferred tax assets $1,204 $ 583
A reconciliation between the amount of reported income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows: 1994 1993 1992 Amount Percent Amount Percent Amount Percent Tax at statutory rate $1,449 34.0 $1,011 34.0 $820 34.0 Reductions in taxes resulting from: Tax exempt interest on investments and loans (476) (11.2) (275) (9.2) (211) (8.8) Non-taxable portion- dividends _ _ (45) (1.5) (59) (2.4) Excess of tax loss over book gains on investment securities _ _ (161) (5.4) (45) (1.9) Utilization of capital loss carrybacks _ _ (112) (3.8) _ _ Earnings on life insurance policies (18) (0.4) (20) (.7) _ _ Non- deductible interest expense 64 1.5 50 1.7 60 2.5 Others - net 8 .2 (14) (.5) 9 .4 Cumulative effect of adoption of FASB 109 _ _ (28) (1.0) _ _ Actual tax expense $1,027 24.1 $ 406 13.6 $574 23.8
The bank has available $623,000 in capital loss carry forwards. This amount will expire in 1998. 9. Employee Benefit Plans The Corporation has a profit-sharing retirement plan which includes all full- time employees who have reached the age of twenty-one and have completed a least one year of service. Each participant can elect to contribute to the plan an amount not to exceed 10% of their salary. The plan provides for an employer matching contribution on the first 4% of the participant's elective contribution. In addition to the matching contribution, the plan provides for a discretionary contribution to be determined by the bank's board of directors. Total pension expense for 1994, 1993, and 1992 was $180,000, $105,000, and $67,000, respectively. In addition to providing the profit-sharing plan, Belmont Bancorp. sponsors two defined benefit post-retirement plans that cover both salaried and nonsalaried employees. Employees must be fifty-five years old and have ten years of service to qualify for both plans. One plan provides medical and dental benefits, and the other provides life insurance benefits. The post-retirement health care plan is contributory, with retiree contributions adjusted annually; the life insurance plan is noncontributory. On January 1, 1993, Belmont Bancorp. adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employer's Accounting for Post-retirement Benefits Other than Pensions." The statement requires the accrual of the expected cost of providing post-retirement benefits to employees and certain dependents during the years that an employee renders service. The following table sets forth the plan's combined funded status reconciled with the amount shown in the Corporation's balance sheet at December 31: 1994 1993 Accumulated post- retirement benefit obligation: Retirees $ 40 $ 45 Fully eligible active plan participants 46 53 Other active plan participants 35 51 121 149 Plan assets at fair value _ _ Accumulated post-retirement benefit obligation in excess of plan assets 121 149 Unrecognized net gain (loss) from past experience different from that assumed and from changes in assumptions (14) (60) Prior service cost not yet recognized in expense 51 63 Unrecognized transition obligation (13) (14) Accrued post- retirement benefit cost in the balance sheet $145 $138
The Corporation's post-retirement health care plan is underfunded at December 31, 1994; the accumulated post-retirement benefit obligation and plan assets for that plan are $121,000 and $-0-, respectively. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 9. Employee Benefit Plans (continued) Post-retirement expense includes the following components: 1994 1993 Service cost $ 6 $ 43 Interest cost on accumlated post-retirement benefit obligation 10 64 Actual return on plan assets _ _ Net amortization and deferral (5) 47 Benefit payments _ (16) Post-retirement expense $11 $138
The annual assumed rate of increase in the per capita cost of covered benefits for 1995 is 12% for medical benefits and 9% for dental benefits (compared to 12.5% and 9.5% for 1994 for the respective benefits). The rates are assumed to decrease gradually to 6% (for medical 2007 and for dental in 2001), and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care trend rates by one percentage point in each year would increase the accumulated post-retirement benefit obligation as of December 31, 1994, by $5,000, and the aggregate of the service and interest cost components of net periodic post- retirement benefit cost for 1994 by $1,000. The weighted-average discount rate used in determining the accumulated post-retirement benefit obligation was 8.5% at December 31, 1994, and 7% at December 31, 1993. The long-term inflation rate assumed was 4% for both years. Prior to the adoption of SFAS No.106, Belmont Bancorp. recognized benefit expense related to post-retirement benefits on a cash basis. The expense of providing such benefits in 1992 did not differ materially from the amount expensed in 1994 and 1993. 10. Leases The subsidiary bank utilized certain bank premises and equipment under long-term leases expiring at various dates. In certain cases, these leases contain renewal options and generally provide that the Corporation will pay for insurance, taxes and maintenance. As of December 31, 1994, the future minimum rental payments required under noncancelable operating leases with initial terms in excess of one year are as follows: Operating Leases Year ending December 31, 1995 $ 91 1996 80 1997 70 1998 17 Later years _ Total minimum lease payments $ 258
Rental expense under operating leases approximated $83,000 in 1994, $82,000 in 1993, and $75,000 in 1992. 11. Acquisitions Effective October 2, 1992, the Corporation's subsidiary bank acquired the premises and equipment and approximately $15,000,000 in loans and assumed all deposit liabilities of three branch offices of Diamond Savings and Loan Corporation located in Tuscarawas County, Ohio in a cash transaction. The office locations are being operated as branches of Belmont National Bank. The excess of cost over the net assets acquired was $2,403,000. 12. Related Party Transactions Certain directors and executive officers and their associates were customers of, and had other transactions with, the subsidiary bank in the ordinary course of business in 1994 and 1993. The outstanding balance of all loans to the related parties was $4,904,000 and $2,775,000 at December 31, 1994 and 1993, respectively. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others and did not involve more than the normal risk of collectibility or present other unfavorable features. 13. Financial Instruments with Off-Balance-Sheet Risk The subsidiary bank is a party to financial instruments with off-balance- sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments. The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The following represents financial instruments whose contract amounts represent credit risk at December 31, 1994: Contract Amount Commitments to extend credit $14,210,000 Standby letters of credit 1,307,000
Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 13. Financial Instruments with Off-Balance-Sheet Risk (continued) Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. Of the standby letters of credit, $915,000 expire in 1995, while the remaining $392,000 expire prior to year end 1998. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 14. Concentration of Credit Risk The subsidiary bank extends commercial, consumer, and real estate loans to customers primarily located in Belmont, Harrison, and Tuscarawas Counties in Ohio and Ohio County, West Virginia. While the loan portfolios are diversified, the ability of the borrowers to meet their contractual obligations partially depends upon the general economic condition of Southeastern Ohio and the Northern Panhandle of West Virginia. 15. Limitation on Dividends The approval of the Comptroller of the Currency is required to pay dividends if the total of all dividends declared by a national bank in any calendar year exceeds the total of its retained net profits of the preceding two years. Under this formula, the bank can declare dividends in 1995 without approval of the Comptroller of the Currency of approximately $4,500,000 plus an additional amount equal to the bank's net profit for 1995 up to the date of any such dividend declaration. The subsidiary bank is the primary source of funds to pay dividends to the shareholders of Belmont Bancorp. 16. Other Operating Expenses Other operating expenses include the following: 1994 1993 1992 Taxes other than payroll and real estate $ 228 $ 267 $ 233 Supplies and printing 262 249 195 Insurance, including Federal Deposit Insurance 616 581 512 Data processing 281 303 145 Other (individually less than 1% of total interest income) $1,585 $1,517 $1,001 Total $2,972 $2,917 $2,086
17. Restrictions on Cash The subsidiary bank is required to maintain an average reserve balance with the Federal Reserve Bank. The average amounts of the reserve balance for the years ended December 31, 1994 and 1993, were $1,734,000 and $1,763,000, respectively. 18. Cash Flows Information The Corporation's policy is to include cash on hand, amounts due from banks and federal funds sold in the definition of cash and cash equivalents. Cash payments for interest in 1994,1993, and 1992 were $8,670,000, $8,880,000, and $8,553,000, respectively. Cash payments for income taxes for 1994, 1993, and 1992 were $1,030,000, $462,000, and $902,000, respectively. 19. Preferred Stock On October 2, 1992, the Corporation issued 10,000 shares of $100 par value, non- voting, senior cumulative preferred stock. Dividends are payable quarterly in an amount equal to $8 per annum. The shares are subject to a dividend adjustment feature at January 1, 2000, which provides for an increase in the dividend rate based on the prime rate of interest. The stock has a liquidation preference of $100 per share and a stated redemption value of $100 per share. The shares also contain conversion rights, effective January 1, 2000, permitting shareholders after that date to convert one share of preferred stock for 4.04 shares of the Corporation's common stock. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1994, 1993 and 1992 (000's) 20. Condensed Parent Corporation Financial Statements Presented below are the condensed balance sheets, statements of income, and statements of cash flows for Belmont Bancorp. Balance Sheets 1994 1993 Assets Cash $ 377 $ 172 Investment in subsidiaries (at equity in net assets) 19,504 18,625 Equity securities 60 60 Advances to subsidiaries net 145 684 Prepaid taxes 148 - Total Assets $20,234 $19,541 Liabilities Accrued dividends $ 20 $ 20 Accrued expenses _ 166 Total liabilities 20 186 Shareholders' Equity Preferred stock- authorized 90,000 shares with no par value; issued and outstanding, none $ _ $ _ Senior cumulative preferred stock -authorized, issued and outstanding, 10,000 shares with a $100 par value 1,000 1,000 Common stock- $3.57 par value, 1,750,000 shares authorized; 1,057,738 shares issued in 1994 & 1993 3,777 2,749 Capital surplus 5,061 3,647 Treasury stock- 424 shares in 1994 and 728 shares in 1993 (8) (13) Retained earnings- appropriated 850 850 Retained earnings- unappropriated 11,026 11,122 Net unrealized loss on securities available for sale (1,492) _ Total shareholders' equity 20,214 19,355 Total Liabilities and Shareholders' Equity $20,234 $19,541 Statement of Income 1994 1993 1992 Operating Income Dividends from subsidiaries $ 879 $ 780 $ 704 Other income 10 9 18 Total income 889 789 722 Operating Expense (33) (30) (27) Nonoperating Income _ 1 194 Income before income tax and equity in undistributed income of subsidiaries 856 760 889 Income Tax (credit) (8) (8) 63 Equity in Undistributed Income of Subsidiaries 2,370 1,801 1,012 Net Income $3,234 $2,569 $1,838 Statement of Cash Flows 1994 1993 1992 Operating Activities Net income $3,234 $2,569 $1,838 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of affiliates (2,370) (1,801) (1,012) Investment securities gains _ (1) (194) Changes in operating assets and liabilities: Other assets _ _ 1 Prepaid taxes (148) 121 (76) Accrued dividends _ _ 20 Accrued expenses (166) 166 _ Net cash provided by operating activities 550 1,054 577 Investment Activities Payment (to) from subsidiaries 539 (464) 144 Proceeds from sales of equity securities _ 1 339 Investment in subsidiary _ _ (1,000) Net cash provided (used) by investing activities 539 (463) (517) Financing Activities Cash paid for fractional shares (10) _ _ Issuance of preferred stock _ _ 1,000 Sale of treasury stock 5 1 _ Dividends (879) (780) (718) Net cash used by financing activities (884) (779) 282 Increase(Decrease) in Cash & Cash Equivalents 205 (188) 342 Cash and Cash Equivalents at Beginning of Year 172 360 18 Cash and Cash Equivalents at End of Year $ 377 $ 172 $ 360
Supplemental disclosure: The Corporation made income tax payments of $1,030,000, $462,000 and $902,000 in 1994, 1993, and 1992, respectively. These payments represented income tax payments for the Corporation and its consolidated subsidiaries. The Corporation incurred no interest expense in 1994, 1993 or 1992. Belmont Bancorp. and Subsidiaries Opinion of Independent Certified Public Accountants Board of Directors Belmont Bancorp. St. Clairsville, Ohio We have audited the accompanying consolidated balance sheets of Belmont Bancorp. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Belmont Bancorp. and subsidiaries at December 31, 1994 and 1993, and the consolidated results of its operations, changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 2 to the Consolidated Financial Statements, in 1994, Belmont Bancorp. changed its method of accounting for debt and equity securities and, in 1993, changed its methods of accounting for income taxes and post retirement benefits other than pensions. S.R. SNODGRASS A.C. S. R. Snodgrass A. C. Wheeling, West Virginia January 23, 1995 Belmont Bancorp. and Subsidiaries Report on Management's Responsibilities Management of Belmont Bancorp. is responsible for the accurate and objective preparation of the consolidated financial statements and the estimates and judgements upon which certain financial statements are based. Management is also responsible for preparing the other financial information included in this annual report. In our opinion, the financial statements on the preceding pages have been prepared in conformity with generally accepted accounting principles and other financial information in this annual report is consistent with the financial statements. Management is also responsible for establishing and maintaining an adequate internal control system which encompasses policies, procedures and controls directly related to, and designed to provide reasonable assurance as to the integrity and reliability of the financial reporting process and the financial statements generated therefrom. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal control, and that the cost of such systems should not exceed the benefits to be derived therefrom. The systems and controls and compliance therewith are reviewed by an extensive program of internal audits and by our independent auditors. Their activities are coordinated to obtain maximum audit coverage with a minimum of duplicate effort and cost. The independent auditors have access to all internal audit work papers. Management believes the systems of internal control effectively meets its objectives of reliable financial reporting. The Board of Directors pursues its responsibility for the quality of the Corporation's financial reporting primarily through its Audit Committee which is comprised solely of outside directors. The Audit Committee meets regularly with Management, the internal auditor and independent auditors to ensure that each is meeting its responsibilities and to discuss matters concerning internal controls, accounting and financial reporting. The internal auditor and independent auditors have full and free access to the Audit Committee. J.VINCENT CIROLI, JR. J. Vincent Ciroli, Jr. President and Chief Executive Officer Belmont Bancorp. Belmont National Bank WILLIAM WALLACE JANE R. MARSH William Wallace Jane R. Marsh Vice President, Belmont Bancorp. Secretary, Belmont Bancorp. Executive Vice President and Senior Vice President Chief Operating Officer Controller and Cashier Belmont National Bank Belmont National Bank Belmont Bancorp. and Subsidiaries Consolidated Average Balance Sheets For the Years Ended December 31, 1994, 1993 and 1992 (Fully Taxable Equivalent Basis) (000's) 1994 1993 1992 Average Average Average Average Average Average Out- Revenue/ Yield/ Out- Revenue/ Yield/ Out- Revenue/ Yield standing Cost Rate standing Cost Rate standing Cost Rate Assets Interest earning assets Loans and leases $134,952 $11,719 8.68% $120,218 $10,681 8.88% $ 95,489 $ 9,133 9.56% Securities Taxable 113,608 6,810 5.99% 111,760 5,169 4.63% 86,434 4,657 5.39% Exempt from income tax 21,866 1,746 7.98% 12,474 1,104 8.85% 8,790 819 9.32% Trading account assets 138 1 0.72% 831 45 5.42% 804 61 7.59% Federal funds sold 130 4 3.08% 4,147 125 3.01% 9,457 320 3.38% Interest bearing deposits _ _ _ 98 2 2.04% 104 3 2.88% Total interest earning assets $270,694 $20,280 7.49% $249,528 $17,126 6.86% $201,078 $14,993 7.46% Cash and due from banks 8,275 7,823 6,088 Other assets 12,014 11,568 5,880 Allowance for possible loan loss (1,427) (1,328) (997) Total Assets $289,556 $267,591 $212,049 Liabilities Interest bearing liabilities Interest checking $ 26,764 $ 581 2.17% $ 30,895 $ 745 2.41% $ 25,674 $ 838 3.26% Savings 95,655 2,850 2.98% 85,865 2,788 3.25% 51,528 1,836 3.56% Other time deposits 99,660 4,434 4.45% 106,706 4,992 4.68% 96,103 5,279 5.49% Short term borrowings 21,217 942 4.44% 3,675 91 2.48% 4,133 129 3.12% Total interest bearing liabilities 243,296 8,807 3.62% 227,141 8,616 3.79% 177,438 8,082 4.55% Demand deposits 24,797 21,093 16,537 Other liabilities 1,583 1,272 1,846 Total liabilities 269,676 249,506 195,821 Share- holders' Equity 19,880 18,085 16,228 Total Liabilities and Share holders' Equity 289,556 $267,591 $212,049 Net interest income margin on a taxable equiva- lent basis 11,473 4.24% 8,510 3.41% 6,911 3.44% Net interest rate spread 3.87% 3.07% 2.90% Interest bearing liabilities to interest earning assets 89.88% 91.03% 88.24%
Belmont Bancorp. and Subsidiaries Consolidated Average Balance Sheets For the Years Ended December 31, 1994, 1993 and 1992 (Fully Taxable Equivalent Basis) (000's) 1994 Compared to 1993 1993 Compared to 1992 Volume Yield Mix Total Volume Yield Mix Total Increase(decrease) in interest income Loans and lease $1,309 $ (241) $(29) $1,039 $2,365 $ (649) $(168) $1,548 Securities Taxable 85 1,530 25 1,640 1,365 (659) (194) 512 Exempt from income tax 831 (108) (81) 642 343 (41) (17) 285 Trading account assets (38) (39) 33 (44) 2 (17) (1) (16) Federal funds sold (121) 3 (3) (121) (180) (35) 20 (195) Interest bearing deposits (2) (2) 2 (2) _ (1) _ (1) Total interest income change 2,064 1,143 (53) 3,154 3,895 (1,402) (360) 2,133 Increase(decrease) in interest expense Interest checking (100) (74) 10 (164) 170 (219) (43) (92) Savings 318 (230) (26) 62 1,223 (163) (109) 951 Other time deposits (330) (245) 17 (558) 582 (783) (86) (287) Short-term borrowings 434 72 345 851 (14) (27) 3 (38) Total interest expense change 322 (477) 346 191 1,961 (1,192) (235) 534 Increase(decrease) in net interest income on a taxable equivalent basis $1,742 $1,620 $ (399) $2,963 $1,934 $ (210) $(125) $1,599 (Increase)decrease in taxable equivalent adjustment (215) (87) Net interest income change $2,748 $1,512
Belmont Bancorp. and Subsidiaries Financial Information, continued For the Years Ended December 31, 1994, 1993, 1992, 1991 and 1990 Notice of Form 10-K Upon written request of any shareholder on record on December 31, 1994, the Corporation will provide, without charge, a copy of its 1994 Annual Report on Form 10-K, including financial statements and schedules, as required to be filed with the Securities and Exchange Commission. To obtain a copy of Form 10-K, contact Ms. Cheryl Rusiecki, Administrative Officer, Belmont Bancorp., 325 Main Street, Bridgeport, OH 43912. Sharing The Vision: A Commitment to Community "We want to be recognized in all the communities we serve as the #1 choice for financial products, services and information." These important words, and those that follow, are excerpts from our Corporate Vision Statement which we provide to every employee. Belmont National Bank is a rapidly growing diversified financial information company with approximately 120 employees and ten offices in three Ohio counties. We have over 600 shareholders, many of whom are customers, friends, neighbors, family members and fellow employees. We are a financial intermediary, which means we take in and safeguard deposits in the communities we serve, and in turn lend these deposits back out into the same communities--making loans to individuals and families, loans to help new businesses become established or old businesses expand. Our role here is vital. It means jobs and continued prosperity for our communities and all of us. We help families finance homes, cars, boats, education and much more. We also provide our customers a wide selection of non- traditional bank products such as stocks, bonds and mutual funds. In fact, we offer most, if not all, of the products and services that bigger competitors offer. What separates us from them are two things: the "value added" design of our products and services, and our people. The mission of Belmont National Bank and Belmont Bancorp. is to provide the highest quality financial services possible and to promote economic growth within all the communities we serve while earning a desirable return. Our goals are fairly simple...we have financial goals and customer goals. Our long term financial goals are to (1) have above average asset quality and risk based capital levels when compared to peers, (2) maintain a diverse business loan portfolio both by industry and geography, (3) achieve earnings per share growth of at least ten percent per year, and (4) have a return on equity in excess of 15%. Sharing The Vision: A Commitment to Community We have two customer goals. First, we want all our customers to view us as their first choice for their next financial product need. Second, we want to achieve levels of service which exceed the customer's expectation. We use technology to improve customer service. Technology is essential in providing the right products and services, at the right price, while controlling cost. Technology enables us to compete against much larger institutions. Technology, however, is useless without the knowledge and creativity of our employees. Our Corporation's hierarchy does not indicate who is more important, more knowledgeable or more appreciated. The most important people at Belmont National Bank are those that meet and serve our customers on a daily basis. Everyone else's job is to help our customer service people. In reality, all Belmont National Bank employees are in the customer service business. We strive to attract the very best support staff we can find because it is their expertise that makes better customer service possible. We ask each and every employee to take personal responsibility for what happens with our customers. The key to winning more customers and satisfying our present customers is taking action and finding quick solutions to questions and problems. Belmont National Bank people must have a very strong sense of urgency in all that they do. We encourage our employees to buy shares of Belmont Bancorp. stock, for it is the best way for them to "think and act like owners." During 1995, we will continue to bring new technology and financial services to our customers. We will communicate our values and vision in actions, not just words. We will do more for our customers and our communities than is expected. Belmont Bancorp. Directors John A. Belot Vice President, Premier Concrete Products, Inc. J. Vincent Ciroli, Jr. President and Chief Executive Officer, Belmont Bancorp. and Belmont National Bank Daniel A. Giffin Retired President, Giffin Aluminum Supply, Co. William P. Goddard Director J. Harvey Goodman Realtor, Chairman, Goodman Group, Inc. John H. Goodman, II Chairman Belmont Bancorp. and Belmont National Bank Realtor, President, Goodman Group, Inc. Mary L. Holloway Haning Director of Admissions Wheeling Country Day School Charles J. Kaiser, Jr. Attorney-at-Law, Partner, Phillips, Gardill, Kaiser and Altmeyer Terrence A. Lee CPA, Partner, Lee, O'Connor & Associates Dana J. Lewis President, Zanco Enterprises, Inc. W. Quay Mull, II Chairman, Mull Machine Co. Tom Olszowy Independent Insurance Agent, Tom Olszowy Insurance William Wallace Vice President, Belmont Bancorp.; Executive Vice President and Chief Operating Officer Belmont National Bank Charles A. Wilson, Jr. Vice Chairman Belmont Bancorp. and Belmont National Bank President, Wilson Funeral & Furniture Co. Belmont Bancorp. Officers John H. Goodman, II Chairman Charles A. Wilson, Jr. Vice Chairman J. Vincent Ciroli, Jr. President & Chief Executive Officer William Wallace Vice President Jane R. Marsh Secretary Belmont National Bank Officers John H. Goodman, II Chairman Charles A. Wilson, Jr. Vice Chairman J. Vincent Ciroli, Jr. President and Chief Executive Officer William Wallace Executive Vice President and Chief Operating Officer Richard E. Dolan Senior Vice President and Trust Officer Jane R. Marsh Senior Vice President, Controller and Cashier Robert A. Brown Vice President, Marketing and Product Development Manager Gerald J. Elliott Vice President, Credit Administration Larry G. Gibbs Vice President, Trust Officer John L. Kloss Vice President, Real Estate Lending J. Douglas Cash Assistant Vice President, Commercial Loan Officer M. Annette Curtis Assistant Vice President Loan Administration Officer Roxie M. Ferda Personal Banking Officer, Branch Manager Linda L. Merritt Personal Banking Officer, Branch Manager Nancy J. Mroczkowski Assistant Vice President, Manager of Branch Administration Nell L. Murrell Assistant Vice President, Human Resources Officer Patricia A. Myers Personal Banking Officer, Branch Manager Trent B. Troyer Assistant Vice President, Lending Madelyn P. Witsberger Assistant Vice President, Trust Officer Linda L. Boyers Personal Banking Officer, Branch Supervisor Carol L. DeBonis Operations Officer Donald E. Duff Personal Banking Officer Dorothy A. Ellis Personal Banking Officer, Branch Supervisor Debba A. Janiszewski Personal Banking Officer, Branch Supervisor Michele L. Larkin Residential Loan Officer Robert A. Mroczkowski Internal Audit Manager Cheryl A. Rusiecki Administrative Officer Darlene K. Smith Personal Banking Officer, Branch Manager Sheila M. Stevens Personal Banking Officer, Branch Supervisor Teri L. Walters Administrative Officer Jo Ann Widmor Personal Banking Officer Belmont Financial Network, Inc. J. Vincent Ciroli, Jr. Chairman and President Jane R. Marsh Secretary and Treasurer Belmont Investment and Financial Services, Inc. Frank McDonnell Manager, Investment Services Belmont National Bank Locations Bridgeport Office 325 Main Street Bridgeport, OH 43912 (614) 635-1142 Cadiz Office 657 Lincoln Avenue Cadiz, OH 43907 (614) 942-4664 Jewett Office 318 East Main Street Jewett, OH 43986 (614) 946-2411 Lansing Office 55160 National Road Lansing, OH 43934 (614) 635-1454 New Philadelphia Office 152 North Broadway New Philadelphia, OH 44663 (216) 343-5518 Ohio Valley Mall Office Ohio Valley Mall St. Clairsville, OH 43950 (614) 695-9926 St. Clairsville Office 154 West Main Street St. Clairsville, OH 43950 (614) 695-3323 Schoenbrunn Office 2300 East High Avenue New Philadelphia, OH 44663 (216) 339-9200 Shadyside Office 4105 Central Avenue Shadyside, OH 43947 (614) 671-9346 Wabash Avenue Drive-In Office 525 Wabash Avenue New Philadelphia, OH 44663 Belmont Bancorp. 325 Main Street Bridgeport, OH 43912 (614) 695-3323 EX-3 4 PROXY STATEMENT PROXY BELMONT BANCORP., BRIDGEPORT, OHIO ANNUAL MEETING OF SHAREHOLDERS APRIL 18, 1995 KNOW ALL MEN BY THESE PRESENT that I the undersigned Shareholder of BELMONT BANCORP. do hereby nominate, constitute and appoint David L. Barnes and Kelley Archer, or either of them, my true and lawful attorney with full power of substitution, for me and in my name, place and stead to vote all of the Common Stock of said Corporation standing in my name at the Annual Meeting of its Shareholders to be held at Belmont National Bank, 150 West Main Street, St. Clairsville, Ohio, on April 18, 1995, at 11:00 A.M., or at any adjournments thereof with all the powers the undersigned would possess if personally present as follows: 1. For the election to the Board of Directors, except as otherwise specified below, of the following nominees, or any one or more of them to serve a three-year term expiring at the annual shareholders' meeting in 1998: J. Vincent Ciroli, Jr. James R.Miller John H. Goodman, II Keith A. Sommer with full authority to cumulate the votes represented by such shares and to distribute the same among the nominees in such manner and numbers as said proxies in their discretion may determine. THE AUTHORITY TO VOTE FOR THE ELECTION OF ANY OF THE NOMINEES LISTED ABOVE MAY BE WITHHELD BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE NOMINEE. For ___ 2. To Consider and act upon the proposed Amendment to Against ___ the Articles of Incorporation to increase the number of Abstain ___ authorized shares of capital stock from 1,850,000 to 9,000,000 shares. For ___ 3. To consider and act upon the proposed Amendment to the Against ___ Articles of Incorporation to reduce the par value of the Abstain ___ Corporation's Common Stock from $3.57 to $0.50 per share. For ___ 4. To consider and ratify the proposed Amendment to the Against ___ Corporation's Automatic Dividend Reinvestment Plan Abstain ___ to allow the Agent to purchase authorized but unissued shares of Common Stock from the Corporation. For ___ 5. To consider and ratify the appointment of S.R. Against ___ Snodgrass A.C. as independent auditors for the year ending Abstain ___ December 31, 1995. For ___ 6. In accordance with the judgement of the said proxies to Against ___ vote upon such other matters as may be presented for Abstain ___ consideration and action. DATED _________________ ________________________________________________ ________________________________________________ Signature(s) When signing in a fiduciary capacity, please give full title. All joint owners should sign. Please sign, date and return your Proxy promptly in the enclosed envelope to BELMONT NATIONAL BANK, 154 West Main Street, St. Clairsville, Ohio 43950. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE ABOVE ITEMS. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS BELMONT BANCORP. April 18, 1995 To the Shareholders of BELMONT BANCORP.: The Annual Meeting of Shareholders of BELMONT BANCORP. will be held in the Belmont National Bank conference room on the second floor at Belmont National Bank, 150 West Main Street, St. Clairsville, Ohio, on Tuesday, April 18, 1995, at 11:00 a.m. for the following purposes: 1. To elect four (4) persons as Directors to serve for a three-year term expiring at the annual shareholders' meeting in 1998. 2. To consider and act upon the proposed Amendment to the Articles of Incorporation to increase the number of authorized shares of capital stock from 1,850,000 to 9,000,000 shares. 3. To consider and act upon the proposed Amendment to the Articles of Incorporation to reduce the par value of the Corporation's Common Stock from $3.57 per share to $0.50 per share. 4. To consider and ratify the proposed Amendment to the Corporation's Dividend Reinvestment Plan to allow the Agent to purchase authorized but unissued shares of Common Stock from the Corporation. 5. To consider and act upon a proposal to ratify the appointment of S. R. Snodgrass A.C. as independent auditors for the year ending December 31, 1995. 6. To transact such other business as may properly come before the meeting and any adjournment thereof. Only shareholders of record at the close of business on February 28, 1995, are entitled to notice of and to vote at the meeting. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTING THEREOF. THUS, IF YOU ARE PRESENT AT THE MEETING AND SO REQUEST YOUR PROXY WILL NOT BE USED. BY ORDER OF THE BOARD OF DIRECTORS. JANE R. MARSH, Secretary Bridgeport, Ohio March 17, 1995 PROXY STATEMENT OF BELMONT BANCORP. 325 Main Street Bridgeport, Ohio 43912 ANNUAL MEETING OF SHAREHOLDERS April 18, 1995 This Proxy Statement is furnished to the shareholders of Belmont Bancorp. in connection with the solicitation by the Board of Directors of Belmont Bancorp. (the Corporation) of proxies for the annual Meeting of Shareholders of the Corporation to be held on April 18, 1995, in the conference room of Belmont National Bank, 150 West Main Street, St. Clairsville, Ohio, and any adjournment thereof. Shares represented by properly executed proxies received at the time of the meeting that have not been revoked will be voted at the meeting in the manner described in the proxies. Any proxy may be revoked any time before it is exercised. This Proxy Statement and the accompanying Proxy are being mailed to shareholders on March 17, 1995. The Board of Directors has fixed the close of business on February 28, 1995, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. On the record date 1,057,322 shares of Common Stock of the Corporation were outstanding and entitled to be voted at the meeting. Each share of Common Stock is entitled to one vote except in the election of Directors where shareholders are entitled to cumulate their votes. Cumulative voting permits each shareholder as many votes as shall equal the number of his shares of Common Stock multiplied by the number of Directors to be elected, and he may cast all of such votes for a single Director or he may distribute them among the number to be voted for, as he may see fit. The proxies are solicited by the Board of Directors of the Corporation, and the cost thereof is being borne by the Corporation. Proxies may be revoked by the shareholders who execute them at any time prior to the exercise thereof, by written notice to the Corporation or by announcement at the Shareholders' Meeting. Unless so revoked, the shares represented by all proxies will be voted by the persons named in the proxies at the Shareholders' Meeting and at all adjournments thereof, in accordance with the specifications set forth therein, or, absent such specifications, in accordance with the judgment of the holders of such proxies. PROPOSAL NUMBER 1: ELECTION OF DIRECTORS The Board of Directors of the Corporation by resolution at its meeting on January 17, 1995, set the number of Directors at fourteen (14) members with four (4) members to be elected to the class which expires at the annual meeting in 1998. All nominees are currently Directors of the Corporation and its principal subsidiary, Belmont National Bank. Except for James R. Miller, each nominee has continuously served in his principal occupation for the past five years. The following persons have been nominated for election to the Board of Directors to serve for a three-year term expiring at the annual shareholders' meeting in 1998: Common Stock Name And Year First %of Principal Occupation Age Elected Amount Total J. Vincent Ciroli, Jr. 49 1984 4,655 * President & Chief Executive Officer, Belmont Bancorp. and Belmont National Bank John H. Goodman, II Chairman, Belmont Bancorp 50 1974 19,315 (1) 1.83 and Belmont National Bank; Realtor, President Goodman Group, Inc. Keith A. Sommer (2) 54 1995 1,167 * Attorney, Partner, Sommer, Sollovan, Liberati & Shaheen James R. Miller (3) 52 1995 100 * Vice President & General Manager Joy Technologies Inc., April 1, 1992 to present; Specialty Opera- tions Manager, Westing- house Electric, 1970-92 Footnotes 1. This amount includes 1,427 shares held in the name of Marylouise Goodman IRA, and 61 shares held in the name of Marylouise Goodman, wife of John H. Goodman, II, to which Mr. Goodman disclaims any beneficial interest. This amount also includes 10,541 shares held in the name of John H. Goodman, II and Terrence A. Lee, Trustees under a trust dated February 2, 1991, to which Mr. Goodman disclaims any beneficial interest. 2. Keith A. Sommer was appointed to the Board on January 17, 1995, to serve out the remainder of the term of J. Harvey Goodman who retired. 3. James R. Miller was appointed to the Board on February 21, 1995, to serve out the remainder of the term of Daniel A. Giffin who retired. *Denotes less than a 1% interest. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE ABOVE NOMINEES TO THE BOARD OF DIRECTORS OF BELMONT BANCORP. In addition to the foregoing nominees, the following persons are presently serving as members of the Board of Directors: Directors Whose Term of Office Will Expire at the Annual Shareholders' Meeting in 1996 Common Stock Name And Year First %of Principal Occupation Age Elected Amount Total William P. Goddard 61 1977 2,791 * Retired, former President of Central Division North American Coal Co. Mary L. Holloway Haning 39 1993 775 (4) * Director of Admissions, Wheeling Country Day School Charles J. Kaiser, Jr. 45 1979 4,474 (5) * Attorney, Partner, Phillips, Gardill, Kaiser & Altmeyer Thomas Olszowy 48 1993 6,983 (6) * Independent Insurance Agent, Tom Olszowy Insurance Agency Charles A. Wilson, Jr. 52 1973 4,238 (7) * President, Wilson Funeral & Furniture Co. Footnotes 4. This amount includes 512 shares held for the benefit of Mary L. Holloway Haning in trust in which Wesbanco Bank Wheeling is trustee. 5. This amount includes 36 shares held in the name of Deborah P. Kaiser, IRA, wife of Charles J. Kaiser, Jr., to which Mr. Kaiser disclaims any beneficial interest and 300 shares held in the name of Marchak Investment Co., a partnership, in which Mr. Kaiser is a general partner and holds a substantial beneficial interest. 6. This amount includes 5,941 shares held in the names of Tom and Diana Olszowy joint tenants with right of survivorship in which Mr. Olszowy shares voting and investment power. This amount also includes 151 shares held in the name of Tom Olszowy, custodian for Dana Paul Olszowy, and 151 shares held in the name of Tom Olszowy, custodian for Jonathan T. Olszowy, to which Mr. Olszowy disclaims any beneficial interest. 7. This amount includes 1,561 shares held in the name of Wilson Funeral and Furniture Company of which Mr. Wilson is President, holds a substantial stock interest and has voting power. Directors Whose Term of Office Will Expire at the Annual Shareholders' Meeting in 1997 Common Stock Name And Year First %of Principal Occupation Age Elected Amount Total John A. Belot 52 1979 10,578 (8) 1.0 Vice President, Premier Concrete Products, Inc. Terrence A. Lee, CPA 45 1987 840 (9) * Partner, Lee, O'Connor & Associates Dana J. Lewis 51 1994 2,256 * President, Zanco Enterprises, Inc. New Philadelphia, Ohio; Owner/ Operator of McDonalds restaurants W. Quay Mull, II 52 1984 6,216 (10)* Chairman of the Board Mull Industries, Inc. William Wallace 39 1991 4,663 (11)* Executive Vice President & Chief Operating Officer, Belmont National Bank; Vice President, Belmont Bancorp. Footnotes 8. This amount includes 3,162 shares held jointly by Terry L. Belot, wife of John A. Belot, and Jason Michael Belot, son of John A. Belot; 3,162 shares held jointly by Terry L. Belot and John A. Belot, Jr., son of John A. Belot; 2,750 shares held in the name of Jason Michael Belot; and 322 shares held in the name of John A. Belot, Jr. Mr. John A. Belot has retained voting rights with respect to these shares. This amount also includes 440 shares held in the name of Terry L. Belot IRA, to which Mr. Belot disclaims any beneficial interest. 9. This amount includes 6 shares held in the name of Terrence A. Lee, Custodian for Katherine M. Lee, UOTMA; 6 shares held in the name of Terrence A. Lee, Custodian for Natalie A. Lee, UOTMA; and 6 shares held in the name of Terrence A. Lee, Custodian for Tara N. Lee, UOTMA; Mr. Lee's minor daughters. This amount does not include 10,541 shares held in the name of John H. Goodman, II and Terrence A. Lee, Trustees for a trust dated February 2, 1991, to which Mr. Lee disclaims any beneficial interest. 10. This amount includes 3,968 shares held in the name of Mull Machine Company of which Mr. Mull is President and holds a substantial ownership interest. 11. This amount includes 693 shares held jointly with Christine Wallace, Mr. Wallace's wife, in which he shares voting and investment power; 676 shares held in the name of Christine Wallace IRA, to which Mr. Wallace disclaims any beneficial interest; 217 shares held in the name of William Wallace as Custodian for Joseph J. Wallace, UWVTMA; 217 shares held in the name of William Wallace as Custodian for Lauren C. Wallace, UWVTMA; 201 shares held in the name of William Wallace as Custodian for Adrienne C. Wallace, UWVTMA; and 186 shares held in the name of William Wallace as Custodian for William J. Wallace, UWVTMA; Mr. Wallace's minor children. As of February 28, 1995, the Directors and Officers of the Corporation as a group beneficially owned 69,351 shares or 6.56 percent of the outstanding common stock of the Corporation. PROPOSAL NUMBER 2: AMENDMENT TO THE CORPORATION'S AMENDED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK Subparagraph (1) of Article FOURTH of the Corporation's Amended Articles of Incorporation currently provides the authority to issue 1,850,000 shares of capital stock of which 1,750,000 shares shall be common shares with a par value of $3.57 and 100,000 shares shall be preferred shares without par value. Subparagraph (2) of Article FOURTH of the Corporation's Amended Articles of Incorporation grants to the Board of Directors the authority to designate the powers, rights, preferences and other matters related to the Preferred Stock, and the Board of Directors by resolution dated October 2, 1992 has designated 10,000 shares of Senior Cumulative Preferred Stock with a $100 par value per share (the "Preferred Stock"). There are 90,000 preferred shares which remain undesignated and unissued. There are 1,057,738 shares of $3.57 par value Common Stock (the "Common Stock") presently issued. On February 21, 1995, the Corporation's Board of Directors adopted resolutions recommending that the shareholders adopt Amendments to the Articles of Incorporation to increase the number of authorized shares of capital stock from 1,850,000 shares to 9,000,000 shares and to reduce the par value of the Corporation's Common Stock from $3.57 per share to $0.50 per share. These amendments, if approved by a majority of the shareholders, would amend the Articles of Incorporation to increase the number of authorized shares of capital stock of the Corporation and reduce the par value of the Corporation's common stock. Specifically, if adopted the amendments would delete subparagraph (1) of Article FOURTH of the Amended Articles of Incorporation and substitute the following: (1) The total number of shares of stock which the Corporation shall have the authority to issue is 9,000,000 shares which shall be divided into 8,900,000 shares of Common Stock with a par value of $0.50 per share, 10,000 shares of Senior Cumulative Preferred Stock with a $100 par value per share and 90,000 shares of preferred stock without par value which shall be subject to the provisions of subparagraph (2) below. As described in the preceding paragraphs above, the Corporation's Amended Articles of Incorporation currently provides for 1,850,000 shares of capital stock comprised of 1,750,000 shares of common stock and 100,000 shares of preferred stock.On February 21, 1995, the Corporation's Board of Directors adopted a resolution recommending that the shareholders adopt an Amendment to the Amended Articles of Incorporation to increase the number of authorized shares of capital stock, and if the Amendment is adopted, to issue a 2 for 1 split on its Common Stock payable in the form of a one hundred percent (100%) stock dividend payable on May 8, 1995, to shareholders of record on May 1, 1995 (the "Stock Dividend"). In addition to providing the number of shares necessary to issue the Stock Dividend, increasing the number of authorized but unissued shares will afford the Corporation flexibility to issue new shares in order to raise additional capital, to acquire other financial institutions, and for other corporate purposes. Apart from the issuance of the 100% Stock Dividend and the registration of shares for the Dividend Reinvestment Plan, the CORPORATION CURRENTLY HAS NO PRESENT PLAN OR AGREEMENT FOR THE ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK. If adopted by the shareholders, the increase in the number of authorized shares of Common stock will become effective on the date on which the Amendment is accepted for filing by the Secretary of State of Ohio. Management presently expects that the Amendment will be filed on April 19, 1995 (the "Effective Date"). Under the terms of the Stock Dividend, holders of record of the Corporation's Common Stock on May 1, 1995 (the "Record Date") will be entitled to receive one additional share of Common Stock for each share of Common Stock held as of the Record Date. Certificates for the additional shares of Common Stock will be distributed on or about May 8, 1995. THE STOCK DIVIDEND WILL NOT AFFECT THE VALIDITY OF CERTIFICATES REPRESENTING SHARES OF COMMON STOCK, AND ACCORDINGLY, IT WILL NOT BE NECESSARY FOR ANY SHAREHOLDER TO EXCHANGE CERTIFICATES REPRESENTING CURRENTLY OUTSTANDING SHARES. The Corporation has been advised by its independent accountants, S.R. Snodgrass, A.C., that no taxable gain or loss under current federal income tax laws would result from the Stock Dividend. However, the basis of each shareholder's stock must be adjusted to take into account the additional shares. The holding period of the additional shares will be deemed to be the holding period for the original shares. Shareholders are cautioned that this information is only general in nature and not intended as a substitute for tax advice. Each shareholder is urged to contact his own tax advisors for specific information regarding the impact of applicable federal or state laws. The Board of Directors believes that the increase in the number of outstanding shares of common stock will make it easier for our shareholders to acquire stock, will cause a broader market, and enhance investor interest, thereby creating additional liquidity and trading volume. Adoption of this Amendment requires the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting. The Board of Directors unanimously recommends a vote FOR Proposal Number 2. Proxies not otherwise specified will be voted in favor of Proposal Number 2 (Increasing the Authorized Stock). PROPOSAL NUMBER 3: AMENDMENT OF THE CORPORATION'S AMENDED ARTICLES OF INCORPORATION TO DECREASE THE PAR VALUE OF COMMON STOCK FROM $3.57 to $0.50 PER SHARE As described in the paragraphs above, the Corporation's Amended Articles of Incorporation currently provides for shares of Common Stock with a par value of $3.57 per share. On February 21, 1995, the Corporation's Board of Directors adopted a resolution, subject to the approval of the shareholders, reducing the par value of the Corporation's Common Stock from $3.57 per share to $0.50 per share. Under Ohio law, a corporation is required to maintain stated capital equal to the amount of shares outstanding times the par value of each share. While the Corporation recognizes the need to retain significant capital, the Corporation will have significantly more flexibility by maintaining that capital in a capital surplus account or a retained earnings account. As of December 31, 1994, the Corporation had $3,777,000 in its common stock account (stated capital), $5,061,000 in the surplus account, and $11,026,000 in the unappropriated retained earnings account. If the Corporation issued a 100% Stock Dividend without modifying the par value, it would be required to transfer $3,775,000 from the retained earnings account to the stock account where this amount would be unavailable for other uses. By reducing the par value of the common stock to $0.50 per share, after the 100% Stock Dividend is issued the common stock account (stated capital) will be $1,057,000, the surplus account will be $11,556,000, and the retained earnings account will be $7,251,000 based upon balances as of December 31, 1994. Cash dividends are available for payment only from unappropriated retained earnings. Consequently, if this amendment is adopted, future stock dividends, if any, will have less of an impact on the unappropriated retained earnings account and, therefore, make more funds available for cash dividends. If this amendment is adopted by the shareholders, the change in the par value of Common Stock will become effective on the date on which the Amendment is accepted for filing by the Secretary of the State of Ohio. Management presently expects that the Amendment will be filed on April 19, 1995 (the "Effective Date"). The change in the par value of the Common Stock will not affect the certificates representing shares of Common Stock, as all Common Stock outstanding will be deemed to have a par value of $0.50 per share, and, accordingly, it will not be necessary for any shareholder to exchange certificates representing currently outstanding shares. Adoption of the Amendment Reducing the Par Value of the Common Stock will require the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting. The Board of Directors unanimously recommends a vote FOR the Amendment Reducing the Par Value. Proxies not otherwise specified will be voted in favor of the Amendment Reducing the Par Value of the Common Stock. PROPOSAL NUMBER 4: AMENDMENT OF THE CORPORATION'S AUTOMATIC DIVIDEND REINVESTMENT PLAN TO ALLOW THE AGENT TO PURCHASE AUTHORIZED BUT UNISSUED SHARES OF COMMON STOCK FROM THE CORPORATION. The Corporation's Automatic Dividend Reinvestment Plan (the "Plan") currently permits its Agent, KeyCorp Shareholder Services, Inc., to purchase shares of the Corporation's Common Stock on any exchange where the Common Shares are traded, in the over-the-counter market or in negotiated transactions to meet the demand for shares by participants in the Plan. On October 19, 1994 the Corporation's Common Stock was listed on the Nasdaq SmallCap Market. On February 21, 1995, the Board of Directors adopted a resolution amending the Plan, subject to ratification by the shareholders to allow the Agent to purchase authorized but unissued shares from the Corporation in addition to the existing methods of purchasing Common Stock for the Plan. The price of the stock purchased from the Corporation will be the average of the high and low sales price on the Nasdaq SmallCap Market for the last five days on which such shares traded prior to the dividend payment date. A complete copy of the Amended Dividend Reinvestment and Stock Purchase Plan is attached as Exhibit A. If this Proposal is ratified by a majority of shareholders, the Corporation must file a registration statement with the Securities and Exchange Commission to register authorized shares of the Corporation's Common Stock for sale to the Corporation's Automatic Dividend Reinvestment Plan. Until this registration is effective, the Agent will continue to rely upon stock purchased on the Nasdaq SmallCap Market, in the over-the-counter market or in negotiated transactions to meet the demand for shares in the Plan. Based upon the present participation in the Plan, approximately 1,500 (3,000 after implementation of proposed 100% stock dividend) shares are necessary each quarter to satisfy the requirements of the Plan. Accordingly, not more than fifty thousand (50,000) shares will be registered for this purpose. If all of the shares registered for this purpose are sold by the Corporation, there will be a slight ownership dilution (less than 2.5%) to the present shareholders who choose not to participate in the Plan. The Corporation intends to apply such proceeds as are received for general corporate purposes. Shares purchased in market or negotiated transactions will provide no proceeds to the Corporation. Adoption of Proposal Number 4 will require the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting. The Board of Directors unanimously recommends a vote FOR the Proposal to Amend the Dividend Reinvestment Plan. Proxies not otherwise specified will be voted in favor of Proposal Number 4 to Amend the Dividend Reinvestment Plan. TRANSACTIONS WITH DIRECTORS AND OFFICERS Certain Directors and Executive Officers and their associates were customers of and had transactions with the Bank in the ordinary course of the Bank's business during 1994. From time to time the law firm of Phillips, Gardill, Kaiser & Altmeyer, of which Charles J. Kaiser, Jr., a director of both the Corporation and the Bank, is a partner, has rendered legal services to the Corporation and the Bank. It is contemplated that this firm will be retained to perform legal services during the current year. MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES AND COMPENSATION OF MEMBERS The Board of Directors of the Corporation met eight (8 ) times during the year 1994. Each member of the Board of Directors of the Corporation attended seventy-five percent (75%) or more of the total number of meetings of the Board and its committees of which they were members. The Board of Directors of Belmont National Bank met twelve (12 ) times during 1994. The Directors of the Corporation and the Bank are the same. The Board of Directors elects an Executive Committee annually. Messrs. Ciroli, Goodman, Kaiser, Lee, Mull, Olszowy and Wilson are members of the Executive Committee of both the Corporation and the Bank. Meetings of the Executive Committee are called to consider Corporation or Bank business which may arise between normally scheduled meetings or to consider in depth policies and make recommendations to the Board of Directors. The Executive Committee of the Bank met four (4) times during 1994. The Executive Committee of the Corporation also serves as a Nominating Committee. As such, the Committee seeks and recommends individuals for nomination as directors. The Nominating Committee will consider as prospective directors persons suggested to them by any shareholder. Messrs. Kaiser, Lee, Mull, Olszowy and Wilson are members of the Audit Committee of the Bank and the Corporation. The Audit Committee reviews the reports of the Bank's internal auditor, the reports of the Corporation's independent Certified Public Accountants, the adequacy of internal controls and procedures, and reports to the Board of Directors of the Corporation and the Bank. This Committee met four (4) times during 1994. The Bank also has a Trust Committee that met four (4) times in 1994 whose members are Messrs. Belot, Dolan, Giffin, Goddard, Goodman, Haning, Lewis and Wallace. The Trust Committee of the Bank approves the operations of the Trust Department and reports to the Board of Directors. Directors who are not employees of the Corporation or the Bank receive an annual retainer fee of Two Thousand Dollars, payable quarterly in arrears, plus an attendance fee of Two Hundred Dollars for each Board or Committee Meeting attended. When Corporation and Bank meetings meet concurrently, only one attendance fee is paid. During 1994, a total of $62,885.23 was paid to Directors. In addition to the fees paid to Directors, Mr. Richard G. Anderson and Mr. Wilbur L. Terhune, each of whom is a retired Chairman of the Board, received payments under a Deferred Compensation Plan adopted by the Board of Directors on December 15, 1983. Mr. Anderson received $2,975.04 and Mr. Terhune received $5,567.04 during 1994 under this plan. The Deferred Compensation Plan provided an early retirement benefit to covered individuals equal to eighty percent (80%) of a factor corresponding to the number of years the employee's early retirement date preceded his normal retirement date, multiplied by the employee's average compensation as defined under the Bank's retirement plan, minus the employee's monthly accrued benefit under the Bank's retirement plan on a straight life annuity basis. This amount is further reduced by the employee's primary social security benefit. Mr. Terhune's benefit is further reduced by a pension which he receives from a plan unrelated to the Corporation or the Bank. EXECUTIVE COMPENSATION The Executive Committee without the executive officers serves as the Compensation Committee for Belmont National Bank. The officers of the Corporation are currently serving without compensation from Belmont Bancorp. They are, however, compensated by Belmont National Bank for services rendered as officers of the Bank. This Committee is responsible for setting compensation levels for the President and CEO, J. Vincent Ciroli, Jr.; the Executive Vice President, William Wallace; and the Senior Vice President, Controller and Cashier, Jane R. Marsh. The Committee also consults with senior officers with respect to the compensation and benefits of other officers and employees of the Corporation. COMPENSATION PHILOSOPHY The Corporation bases different portions of its executive compensation program on differing measures of corporate performance. As a result, the Corporation's compensation program currently reflects the following themes: A material portion of compensation should be meaningfully related to corporate performance. Since the Corporation has chosen a senior executive team to manage the operations of the Corporation, bonus compensation for these senior executives should be based on team effort and performance of the Corporation as a whole. Bonus compensation should be related to the return on shareholders' equity and should be payable only if the shareholders have received a reasonable return on the equity. Compensation should play a critical role in attracting and retaining executives whom the Corporation deems most able to further its goals and, therefore, should be comparable to compensation paid by comparable peer organizations. SUMMARY COMPENSATION TABLE For the year ended December 31, 1994, J. Vincent Ciroli, Jr. and William Wallace were the only officers compensated in excess of $100,000. Their compensation is summarized in the following table: Name and All Other Principal Position Salary Bonus Compensation J. Vincent Ciroli, Jr. 1994 $129,900.06 $88,181.00 $9,439.38 President & 1993 $126,600.00 $41,143.00 $8,488.62 Chief Executive 1992 $118,938.59 .00 $6,361.80 Officer Belmont and Belmont National Bank William Wallace 1994 $94,734.91 $64,303.00 $6,685.09 Vice President, 1993 $92,365.56 $30,021.00 $5,703.84 Belmont Bancorp. 1992 $87,023.86 .00 $4,539.41 and Executive Vice President & Chief Operating Officer, Belmont National Bank PAY MIX AND MEASUREMENT The Corporation's executive compensation program is based on three components, each of which is intended to serve the overall compensation philosophy. BASE SALARY is targeted at the competitive median for peer banking organizations. In order to determine these amounts, the Committee utilizes the Sheshunoff tables, the Executive Studies Group (a division of Ben S. Cole Financial, Inc.), and the Bank Wage-Hour & Personnel Service. Salaries for the executive officers named in the Summary Compensation Table are reviewed by the Committee on an annual basis and may be increased or decreased at that time based on the Committee's agreement of how the management team and the respective individual contributes to the Corporation, as well as increases in median competitive pay levels. ANNUAL BONUS INCENTIVES for executive officers are intended to reflect the Corporation's belief that management's contribution to corporate performance comes, in part, from maximizing the Corporation's return on common shareholders' equity. Accordingly, the Board of Directors adopted an Executive Incentive Compensation Plan in 1989 to provide incentive compensation based upon the earnings of Belmont National Bank. Amounts paid under the Plan are included in the "Bonus" column in the Summary Compensation Table above. The individuals covered by the Plan are J. Vincent Ciroli, Jr., William Wallace and Jane R. Marsh, Senior Vice President, Controller and Cashier of Belmont National Bank. Since 1990, the formula for calculating the Executive Incentive Compensation Plan bonus was based upon the return on equity (ROE) achieved by Belmont National Bank. Twenty percent (20%) of earnings in excess of a selected rate of return on shareholders' equity as of the beginning of each year comprised the bonus pool. The selected rate of return on shareholders' equity is established annually by the Board of Directors. The bonus pool is allocated among the executive officers based upon the ratio of the participant's salary to total participants' salaries. The selected rates of return on beginning shareholders' equity was thirteen percent (13.00%) for 1994, 1993 and 1992. The Committee believes that this program provides an appropriate link between the Corporation's performance and the incentives paid to the executive officers. The return on equity goal is established by the Committee annually. OTHER COMPENSATION is provided so that the Corporation's overall benefits are comparable with other similar organizations so as to attract and retain competent management. The Bank has a Defined Contribution 401(k) Savings Plan which allows employees who work over 1,000 hours per year to defer up to 10% of their pre-tax salary to the Plan. The Bank matches fifty percent (50%) of the first four percent (4%) deferred. The Bank may also make voluntary contributions to the Plan. In 1994, the Bank paid $31,586.60 in matching funds and made a voluntary contribution of $80,397.35, or five percent (5%) of annual salary. In 1994, the profit sharing contribution attributed to Mr. Ciroli was $6,330.00; the matching funds contribution was $2,598.09. The profit sharing contribution paid for Mr. Wallace was $4,618.28; the matching funds contribution was $1,894.73. This compensation is included in the "All Other Compensation" column in the Summary Compensation Table above. The Bank provides reimbursement for club fees, membership dues and entertainment expenses for business use by Mr. Ciroli and Mr. Wallace. The Bank also provides Mr. Ciroli and Mr. Wallace with the use of a company car. Personal benefits from such expenditures are less than 10% of salary and bonus and, therefore, have been excluded from the Summary Compensation Table above. The Bank maintains a split-dollar life insurance plan for several of its officers. Under the plan, the Bank maintains ownership of all cash value in the insurance policies and a portion of the death benefits. The participant's named beneficiary is entitled to three times the participant's annual salary at his death. Annually, the participant recognizes taxable income to the extent of the assumed term cost of the coverage. At the death of the participant, the Bank's share of the death benefit will be sufficient to recover all costs associated with the plan. For 1994, the amount of income attributable for a split- dollar insurance plan was $511.29 and $172.08 for Mr. Ciroli and Mr. Wallace respectively. These amounts are included in the "All Other Compensation" column in the Summary Compensation Table above. The Corporation adopted a Supplemental Retirement Plan for the three executive officers at its meeting on January 18, 1994, in order to augment the retirement benefits payable to these officers and make them more comparable to the benefits provided under the deferred benefit plan which was terminated in 1990. The persons covered under the plan are J. Vincent Ciroli, Jr., President and Chief Executive Officer; William Wallace, Vice President of the Corporation and Executive Vice President and Chief Operating Officer of the Bank; and Jane R. Marsh, Secretary of the Corporation and Senior Vice President, Controller and Cashier of the Bank. Under the Plan the Corporation will credit the sum of $14,000 to a book reserve account for the benefit of Mr. Ciroli, the sum of $5,000 for Mr. Wallace and the sum of $1,500 for Ms. Marsh and may, if approved by the Board of Directors, deposit like amounts during the years 1995, 1996, 1997, and 1998. The balance in the book reserve account will be invested as directed by the Board and distributed to the officer over a ten (10) year period following retirement. The officer will bear the risk of earnings in the book reserve account. Under the Plan the maximum amount that can be paid to Mr. Ciroli is $43,000 per annum; to Mr. Wallace $40,000 per annum; and to Ms. Marsh $11,250 per annum. The supplemental retirement benefits may be forfeited if the employee is terminated for cause. COMPENSATION COMMITTEE John H. Goodman, II Thomas Olszowy Charles J. Kaiser, Jr. W. Quay Mull, II Terrence A. Lee Charles A. Wilson, Jr. STOCK PRICE PERFORMANCE GRAPH The following graph compares for each of the last five years ending December 31 the cumulative total return of the Corporation's Common Stock, All Nasdaq US Stocks Index and SNL Securities' Index of Banks with Assets Size less than $500 million. The cumulative total return of the Corporation's Common Stock assumes $100 invested on December 31, 1989 and assumes reinvestment of dividends. BELMONT BANCORP. STOCK PRICE PERFORMANCE
SNL SECURITIES' INDEX OF BANKS WITH ALL NASDAQ U.S. BELMONT BANCORP. ASSETS LESS THAN $500M STOCKS MEASUREMENT PERIOD MEASUREMENT POINT- 12/31/89 $100.00 $100.00 $100.00 YEAR ENDED 12/31/90 $120.97 $ 55.00 $ 84.92 YEAR ENDED 12/31/91 $126.65 $ 77.36 $136.28 YEAR ENDED 12/31/92 $138.77 $112.70 $158.58 YEAR ENDED 12/31/93 $151.72 $138.53 $180.93 YEAR ENDED 12/31/94 $284.60 $146.52 $176.92
PROPOSAL NUMBER 5: SELECTION OF AUDITORS The Board of Directors has retained S.R. Snodgrass A.C. as independent auditors for both the Corporation and the Bank for the year ending December 31, 1995. There will be presented to the shareholders at the Annual Meeting a proposal that this selection be ratified by the shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THIS SELECTION BE SO RATIFIED. The services rendered by S.R. Snodgrass A.C. during the year 1994 involved auditing services primarily and consisted of the examination of the financial statements of the Corporation and its subsidiaries, principally the Bank. It is expected that a representative of the accounting firm will be present at the shareholders' meeting. Such representative will be given the opportunity to make a statement if he desires to do so, and will be available to respond to appropriate questions from the shareholders who are present. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's directors, executive officers, and persons who own more than 10% of a registered class of the Corporation's equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock of the Corporation. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Corporation's knowledge, based solely on a review of the copies of such reports furnished to the Corporation and written representations that no other reports were required, during the two fiscal years ended December 31, 1994, all section 16(a) filing requirements applicable to the Corporation's officers, directors, and greater than 10% beneficial owners were complied with except Dana J. Lewis and Charles A. Wilson, Jr. both of whom filed a late Form 4 report on March 6, 1995. OTHER MATTERS As of the date of this Proxy Statement, the Board of Directors and Management were unaware of any matters not referred to in this proxy statement for action at the meeting. If any other business comes before the meeting, the persons named in the proxy will have the authority to vote the shares represented by them in accordance with their best judgement. METHOD AND COST OF SOLICITATION The solicitation of proxies will be made primarily by mail. Proxies may also be solicited personally and by telephone by regular employees and Directors of the Corporation and the Bank without any additional remuneration and at minimal cost. Management intends to request banks, brokerage houses, custodians, nominees, and fiduciaries to obtain authorization for the execution of proxies. The Corporation will bear the entire cost of soliciting proxies. SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING Proposals which shareholders intend to present at next year's annual meeting, now scheduled to be held on April 19, 1996, will be eligible for inclusion in the Corporation's proxy material for that meeting if they are submitted to the Corporation in writing no later than November 10, 1995. A proponent may submit a maximum of two proposals of not more than 300 words each for inclusion in the proxy material. At the time of the submission of the proposal, a shareholder may also submit a written statement of not more than 200 words in support thereof for inclusion in the proxy material for the meeting, if requested by the proponent, in the event that the proposal is opposed by the Corporation. When submitted to the Corporation, a proposal should be accompanied by a written notice of the proponent's intention to appear personally at the meeting for the purpose of presenting the proposal for action. BY ORDER OF THE BOARD OF DIRECTORS J. VINCENT CIROLI, JR., PRESIDENT & CEO Bridgeport, Ohio March 17, 1995 EXHIBIT A AMENDED DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Purchase Belmont Bancorp. Common Shares at market price without fees of any kind by reinvesting dividends, and at your election, voluntary cash payments. BELMONT BANCORP. AMENDED DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The Amended Dividend Reinvestment and Stock Purchase Plan (the "Plan") of Belmont Bancorp. ("Belmont") described herein provides holders of record of Belmont Common Stock ("Common Stock") with a simple and convenient method of investing all or part of their cash dividends and voluntary cash payments in additional shares of Common Stock without payment of any brokerage commission or service charge. The Plan will be administered by KeyCorp Shareholder Services, Inc., Cleveland, Ohio. The price per share will be the weighted average of the per share price paid for all the Common Stock purchased by the Plan Administrator during the month in which the purchase is made. (See "DESCRIPTION OF THE PLAN - 8. WHAT WILL BE THE PRICE OF THE STOCK?"). The Plan does not constitute a guarantee of future dividends, which will depend on earnings, financial requirements and other factors. DESCRIPTION OF THE PLAN The Plan, approved by Belmont Bancorp's Board of Directors, consists of the following numbered questions and answers: 1. WHAT IS THE PURPOSE OF THE PLAN? The purpose of the Plan is to provide holders of record of Belmont Common stock with a simple and convenient method of investing all or part of their cash dividends and voluntary cash payments in additional Common Stock without payment of any direct brokerage commission or service charge (See "6. WHAT ARE THE INVESTMENT OPTIONS?"). 2. WHO ADMINISTERS THE PLAN? KEYCORP SHAREHOLDER SERVICES, INC. (the "Administrator") administers the Plan for participants, makes purchases of shares of Common Stock for the participants and handles all communications concerning the Plan including administrative functions such as record-keeping, preparation of statements of account for participants, and other clerical duties relating to the Plan. In accordance with each stockholder's authorization, the Administrator will: (a) Apply all or part of the cash dividends on the shares of Belmont Common Stock held by the participant, and on any shares acquired by the participant under the Plan, to purchase shares of Belmont Common Stock for such participant, and/or (b) Apply all voluntary cash payments of $25 to $1,500 per quarter received from the participant, who is a holder of one or more shares of Belmont Common Stock, together with cash dividends of shares acquired for such participant under the plan, to the purchase of shares of Belmont Common Stock for the participant's account. (c) The number of shares that will be purchased for a participant's account will depend on the amount of any dividend, voluntary cash payments, if any, and the applicable purchase price of the Common Stock. Your account will be credited with the number of shares (including any fractional share computed to three decimal places) that results from dividing the amount of your dividends and voluntary cash payments by the weighted average price of the shares purchased for all participants. The amount of your dividends for purposes of this computation will include cash dividends payable on all shares which you have elected to have participate in the plan, and shares in your plan account. The Administrator shall not be liable under the Plan for any act done in good faith or for any good faith omission to act including, without limitation, any claims for liability (1) arising out of failure to terminate a participant's participation in the Plan upon the participant's death prior to receipt of notice in writing of such death, and (2) with respect to the prices at which shares are purchased for participant accounts, and the time when such purchases are made. All correspondence regarding the Plan should refer to Belmont, and be addressed to Belmont Bancorp. Dividend Reinvestment Plan, c/o KeyCorp Shareholder Services, Inc., Corporate Trust Division, Dividend Reinvestment, Box 6477, Cleveland, OH 44114-1306 3. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN? Any holder of record of Belmont Common Stock is eligible to participate in the Plan. 4. WHEN MAY, AND HOW DOES, AN ELIGIBLE STOCKHOLDER PARTICIPATE? Any eligible stockholder may join the Plan at any time by completing the Authorization Form and returning it to KeyCorp Shareholder Services, Inc. 5. WHEN WILL PURCHASES OF SHARES BE MADE? The date on which dividends and voluntary cash payments will begin to be invested (the "Investment Date") will be the payment date of the quarterly dividend of Belmont. Dividend payment dates for Belmont Common Stock are expected to be the last Friday in March, June, September and December. For the purpose of making purchases, the Administrator will commingle each participant's funds with those of other holders of Belmont Common Stock who are participant's in the Plan. The Administrator will make every effort to invest dividends and voluntary cash payments promptly beginning on each Investment Date and in no event later than thirty days from such date, except where necessary under any applicable federal securities laws. No interest will be paid on funds held by the Administrator prior to investment. All voluntary cash payments (as above limited) shall be invested within thirty (30) days of such date or returned to the participant if insufficient stock is available. Any voluntary cash payment will be refunded if the participant's written request for a refund is received by the Administrator not less than 48 hours before the next succeeding Investment Date. Authorization Forms for the reinvestment of dividends received by the Administrator on or prior to the record date for a dividend payment will cause dividends to begin to be reinvested with that dividend payment. 6. WHAT ARE THE INVESTMENT OPTIONS? The Authorization Form provides for the purchase of additional Common Stock through the following investment options: OPTION 1. Reinvest dividends on all of the shares of Belmont Common Stock registered in shareholder's name. OPTION 2. Reinvest dividends on part of the shares of Belmont Common Stock registered in shareholder's name. OPTION 3. Invest voluntary cash payments participant's may choose to make of not less than $25 nor more than $1,500 per quarter. Under all options, dividends on all shares credited to the participant's account and held by the Plan Administrator shall be automatically reinvested. 7. WHAT ARE THE LIMITS ON VOLUNTARY CASH PAYMENTS? Voluntary cash payments are limited to a minimum of $25 and a maximum of $1,500 per quarter. No interest will be paid on voluntary cash payments held by the Administrator prior to their investment. No such payments may be made prior to the record date of the next quarterly dividend, nor subsequent to the payment date for such quarterly dividend. 8. WHAT WILL BE THE PRICE OF THE STOCK? Shares of authorized but previously unissued shares of Common Stock purchased from Belmont will be at a price equal to the average of the high and low sales price on The Nasdaq SmallCap Market for the last five days on which such shares traded prior to the dividend payment date. Shares of Belmont Common Stock may be purchased in the over-the- counter market or by negotiated transactions, and may be subject to such terms and conditions with respect to price, delivery, etc., as the Administrator may require. Neither Belmont nor any shareholder shall have any authority or power to direct the time or price at which shares may be purchased, or the selection of the broker or dealer through or from whom purchases are to be made. The price per share purchased for each participant's account in any month shall be the weighted average price of all such shares purchased that month, computed to three decimal places. (See Question "20. WHAT IS THE TAX STATUS OF REINVESTED CASH DIVIDENDS AND SHARES OF STOCK ACQUIRED THROUGH THE PLAN?"). 9. HOW MANY SHARES OF COMMON STOCK WILL BE CREDITED TO PARTICIPANTS? Each participant's account will be credited with that number of Common Stock equal to the amounts to be invested on behalf of the participant divided by the applicable purchase price computed to three decimal places. In the case of foreign shareholders, and those shareholders subject to backup withholding, any amounts required to be withheld for tax purposes will be deducted prior to reinvestment. 10. ARE THERE ANY FEES OR EXPENSES INCURRED BY PARTICIPANTS IN THE PLAN? A participant will incur no brokerage commissions or service charges for purchases made under the Plan. Certain charges as described in the answer to Question 13 may be incurred upon withdrawal from the Plan or upon termination of the Plan. 11. WILL CERTIFICATES BE ISSUED FOR COMMON STOCK PURCHASED? Common Stock purchased under the Plan will be held by the Administrator and registered in the name of the nominee of the Administrator as agent for participants in the Plan. Certificates for shares of such stock will not be issued to participants unless and until requested. The number of shares credited to an account under the Plan will be shown on the participant's periodic statement of account. Neither the Administrator nor its nominee will have any responsibility for the value per share of the stock after it is purchased. Certificates for any number of whole shares credited to an account under the Plan will be issued without charge to a participant after receipt of a written request from a participant who wishes to remain in the Plan. This request should be mailed to the Plan Administrator. Any remaining shares will continue to be credited to the participant's account. Certificates for fractional shares will not be issued under any circumstances. Participants may also deposit Belmont Common Stock certificates registered in their names for credit as Common Stock held in their account under the Plan ("credited"). There is no charge for such deposits. Because you bear the risk of loss in sending stock certificates to the Administrator, it is recommended that your certificates be sent by registered mail, return receipt requested, and properly insured. Certificates should not be endorsed. Whenever certificates are issued to you either upon your request or upon termination of your participation, new differently numbered certificates will be issued. When a certificate is issued by the Administrator in the name of a participant in the Plan, the automatic dividend reinvestment feature of the Plan with respect to the shares of Common Stock represented by such certificates will continue only if the reinvestment of dividends on all shares has been elected on the Authorization Form or if the participant authorizes the reinvestment of the dividends on the shares represented by that certificate by submitting a new Authorization Form. Shares credited to the account of a participant under the Plan may not be pledged. A participant who wishes to pledge such shares must request that certificates for such shares be issued in the participant's name. Certificates for fractions of shares will not be issued under any circumstances. In the event a participant elects to terminate participation in the plan, the Administrator will liquidate to cash all fractional shares based on the market value of Common Stock on the date the termination of the participant's account becomes effective, all as determined by the Administrator in its sole discretion. 12. IN WHOSE NAME WILL CERTIFICATES BE REGISTERED WHEN ISSUED TO PARTICIPANTS? Accounts under the Plan are maintained in the names in which certificates of the participants were registered at the time they entered the Plan. Consequently, certificates for shares of Common Stock will be similarly registered when issued to participants. 13. HOW DOES A PARTICIPANT WITHDRAW FROM THE PLAN? A participant may withdraw from the Plan at any time by notifying the plan Administrator in writing. To be effective on any given dividend payment date, the notice must be received by the Plan Administrator before the record date for that payment. In the event of withdrawal, or in the event of termination of the Plan, certificates for whole shares of Common Stock credited to a participant's account under the Plan will be delivered to the participant. Any fractional share credited to the participant's account will be distributed by the Administrator through a cash payment based on the market value of Common Stock on the date the withdrawal of the participant's account becomes effective, all as determined by the Administrator in its sole discretion. Alternatively, a participant may request the Administrator to sell all shares, or part of the shares credited to the participant's account under the Plan. In that case, the sale will be made as promptly as practicable after receipt by the Administrator of the request. If a participant elects to sell all full shares credited to the participant's account, any remaining fractional shares will automatically be distributed as an additional cash payment as above described. The participant will receive the proceeds of the sale less any related brokerage commissions, and deductions for backup withholding, if applicable. 14. WHAT HAPPENS WHEN A PORTION OF A PARTICIPANT'S STOCK IS SOLD OR TRANSFERRED? If a participant disposes of a part of Belmont Common Stock registered in participant's name, dividends on the remaining shares, to the extent authorized, including all shares credited under the Plan, will continue to be reinvested. 15. WHAT HAPPENS IF BELMONT ISSUES A STOCK DIVIDEND, DECLARES A STOCK SPLIT, OR HAS A RIGHTS OFFERING? Any shares of Common Stock distributed by Belmont as a stock dividend on shares of Belmont Common Stock credited to an account under the Plan, or upon any split of such stock, will be credited to the account. Stock dividends or splits distributed on all other shares held by a participant and registered in a participant's own name will be mailed directly to the participant. In the event that Belmont makes available to its holders of Common Stock rights to subscribe to additional shares, debentures, or other securities, the shares credited to an account under the Plan will be added to other shares held by the participant in calculating the number of rights to be issued to such participant. 16. HOW WILL A PARTICIPANT'S STOCK BE VOTED AT MEETINGS OF SHAREHOLDERS? Each participant will have the sole right to vote shares purchased for such participant which are held by the Administrator under the Plan on the record date for a vote. Participants under the Plan who are registered holders of Belmont Common Stock will receive only one proxy which will include any shares credited to an account under the Plan. 17. WHAT REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN? A statement describing any dividends invested, the number of shares of Common Stock purchased, the price per share, and the total shares of Common Stock accumulated under the Plan will be mailed to each participant by the Plan Administrator as soon as practicable after completion of each investment for a participant's account. Dividends paid on the accumulated shares, and fees and brokerage commissions paid on each participant's behalf by Belmont, will be included in the Form 1099 DIV information return to the Internal Revenue Service. A separate Form 1099 DIV will be sent for each class of stock covered in the Plan. Presently, only Belmont Common Stock is covered by the Plan. In addition, each participant will receive a copy of each communication sent generally to holders of Common Stock. 18. WHO INTERPRETS AND REGULATES THE PLAN? The Administrator and Belmont Bancorp. The terms, conditions, and operations of the Plan are governed by the laws of the State of Ohio. 19. MAY THE PLAN BE MODIFIED OR TERMINATED? The Administrator and Belmont may agree from time to time to amendments and modifications of the Plan. The Administrator, for whatever reason, at any time as it may determine in its sole discretion, may terminate a participant's participation in the Plan (and will terminate the Plan upon request by Belmont) after mailing a notice of intention to terminate to the participant affected at the address appearing on the Administrator's records. Upon termination, participants will receive a check for the cash value of any fractional share and certificates for the full shares of Common Stock in the participant's account unless the sale of all or part of such shares is requested by the participant. Such sale will be made as set forth in answer to Question 13 with respect to withdrawal from the Plan. 20. WHAT IS THE TAX STATUS OF REINVESTED CASH DIVIDENDS AND SHARES OF STOCK ACQUIRED THROUGH THE PLAN? ACQUISITION OF COMMON STOCK UNDER THE PLAN: For federal income tax purposes, participants who have their cash dividends reinvested in Common Stock under the Plan will be treated the same as nonparticipants with respect to dividends on their shares. Participants will be treated as having received on each dividend payment date, the full amount of the cash dividends for that dividend payment date, even though the dividends are not actually received in cash but instead are applied to the purchase of shares for their accounts. Each participant's tax basis in the shares of Common Stock purchased will be equal to the amount of the cash dividends applied to the purchases of such shares. The Internal Revenue Service has ruled that brokerage commissions and service charges paid by a corporation on a participant's behalf in connection with stock purchased in the open market, as under this plan, will be treated as distributions subject to federal income tax in the same manner as dividends. However, these rulings further provide that the amount paid to cover service charges may be deductible by a participant who itemizes deductions on his federal income tax return and the amount paid for brokerage commissions will be added to a participant's tax basis for the shares purchased. DISPOSITIONS OF COMMON STOCK UNDER THE PLAN: No taxable income will be realized upon a participant's receipt of certificates for whole shares of Common Stock acquired under the Plan. Gain or loss may be recognized by a participant when shares are sold or otherwise disposed of in a taxable exchange, whether by the Administrator on behalf of the participant, or by the participant upon withdrawal from or termination of the Plan. The amount of such gain or loss will be the difference between the amount the participant receives for the shares and his tax basis in such shares. A participant must also recognize gain or loss upon receipt of a cash payment for a fractional share equivalent credited to the participant's account upon termination of participation in, or termination of, the Plan. The amount of gain or loss will be the difference between the amount that the participant received for the fractional share equivalent, and the tax basis thereof. Participants are advised to consult with their own tax advisers to determine the particular tax consequences that may result from their participation in the Plan and the subsequent sale or other disposition of Common Stock acquired under the Plan. Participants should also consult their own tax advisers to determine the effect of state, local and foreign tax laws on their participation in the Plan. EX-27 5 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT AND FORM 10-K OF BELMONT BANCORP. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 11770 0 0 0 49132 92463 86828 147096 1537 312963 255923 35498 1328 0 3777 0 1000 15437 312963 11630 8025 0 19656 7865 8807 10849 805 (64) 7069 4261 4261 0 0 3234 2.98 2.98 4.24 478 11 0 1031 1617 940 55 1537 1537 0 1200
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