-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOU3Rs6QQ/5H37b9YT93m5GLYAUzxT4SoT0MIN3dAOd+C5BrILXuZIkk3+Fvf3iz 2efTr5KPpExrRqnuZT+rWA== 0000726294-96-000009.txt : 19960322 0000726294-96-000009.hdr.sgml : 19960322 ACCESSION NUMBER: 0000726294-96-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELMONT BANCORP CENTRAL INDEX KEY: 0000726294 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [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: 96536798 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. (Name of small business issuer 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, $0.50 par value NASDAQ SmallCap Market 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-B 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.X Aggregate market value of voting stock held by nonaffiliates as of March 13, 1996 - $57,624,000 There were 2,114,644 shares of $0.50 par value, common stock outstanding as of March 13, 1996. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement of the Registrant dated March 15, 1996 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 MAC, 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 1995. 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 15 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 ON 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. Wheeling, WV Office - In January 1996, Belmont National Bank relocated its corporate headquarters to Wheeling, WV. The office is a leased facility located at 980 National Road, Wheeling, WV. 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
1995 Dividend Quarter High Low per Share 1st $18.00 $14.25 $ 0.105 2nd 19.75 16.00 0.110 3rd 25.00 18.50 0.130 4th 26.50 23.50 0.130 Total $ 0.475 1994 Dividend Quarter High Low per Share 1st $8.80 $8.40 $ 0.084 2nd 9.80 8.80 0.084 3rd 12.88 10.00 0.105 4th 18.00 11.50 0.105 Total $ 0.378
The number of shareholders of record for the Corporation's stock as of March 6, 1996 was 614. The latest available market price based on an actual trade price was $27.25 per share on March 13, 1996. Belmont Bancorp.'s common stock has a par value of $0.50 and, since October 1994, has been traded on the Nasdaq SmallCap market. The tables above show its high and low market prices and dividend information for the past two years. Prior to the Nasdaq listing in October 1995, market prices were based on actual trades known to the Corporation due to lack of an established market. Market prices and cash dividends paid per share have been restated to reflect the effect of a 10% common stock dividend paid in January 1994, a 25% common stock dividend paid in July 1994 and a 2-for 1 split paid in May 1995. 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 B). Treasury stock is accounted for using the cost method. There were 832 shares held in treasury on December 31, 1995 and 424 shares in treasury on December 31 1994. 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 B) 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 For 1995, net income increased 30.06% from the previous year; net income for the year ended 1994 increased 25.89% compared to 1993. Net income per common share for 1995 was $1.95 compared to $1.49 per common share in 1994 and 1.18 in 1993. The Corporation's net income to average assets, referred to as return on assets, increased to 1.35% for the year ended 1995 from 1.12% last year and 0.96% during 1993. 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 $1,113,000 or 25.74% from 1994 to 1995. The table below summarizes earnings performance for the past three years.
($000s) except per share data 1995 1994 1993 Operating income $5,437 $4,324 $2,032 Net income 4,206 3,234 2,569 Net income per share $ 1.95 $ 1.49 $ 1.18 Return on average assets 1.35% 1.12% 0.96% Return on average common equity 18.90% 16.71% 14.57% Return on average total equity 18.42 16.27% 14.21%
1995 1994 compared compared % Increase from previous year to 1994 to 1993 Operating income 25.74% 112.80% Net income 30.06% 25.89% 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 B), compare interest revenue and interest earning assets outstanding with interest cost and liabilities outstanding for the years ended December 31, 1995, 1994, and 1993, 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 $1,764,000 on a taxable equivalent basis during 1995 compared to the same period last year, a 15.30% increase. The increase in net interest income was primarily attributable to the increase in average earning assets and improved net interest margins. During 1995, the Corporation's average interest-earning assets grew by approximately $20.9 million, up 7.68% from 1994. The yield on interest earning assets improved from 7.49% during 1994 to 8.28% during 1995, an increase of 79 basis points. (A basis point (bp) is equivalent to .01%.) However this increase was offset by an increase in the cost of interest bearing liabilities of 57 basis points from 1994 to 1995. Consequently, the net interest rate spread increased from 3.87% during 1994 to 4.09% during 1995. 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 1994 to 1995 was generated by growth in the levels of earning assets and average interest bearing liabilities outstanding (depicted by the volume column). OTHER OPERATING INCOME Other operating income excluding securities gains and losses, increased 30.47% and totaled $1,683,000 in 1995, compared to $1,290,000 in 1994 and $1,193,000 in 1993. The table below shows the dollar amounts and growth rates of the components of other operating income.
1995 1994 1993 ($000s) Total Change Total Change Total Trust income $ 431 $ 21.11% $ 341 24.45% $ 274 Service charges on 555 5.31% 527 11.18% 474 deposits Gain on sale of 136 491.30% 23 -65.67% 67 loans Recovery on class 189 na - na - action lawsuit Other income 390 -2.26% 399 5.56% 378 Subtotal $1,683 30.47% 1,290 8.13% 1,193 Investment (11) -22.22% (9) 95.61% (205) securities gains (losses) Gains (losses) on securities available for sale 113 305.45% (55) -104.35% 1,264 Trading gains - (losses) - 100.00% 1 100.86% (116) Total $1,785 45.48% $1,227 -42.56% $2,136
During the fourth quarter of 1995, the Corporation recovered $189,000 for settlement of a class action lawsuit arising out of the issuance and sale of taxable municipal bonds. This accounts for nearly half of the increase in Noninterest income. Another significant increase in Noninterest income is attributable to gains on sale of loans which increased $113,000 from 1994 to 1995. The Corporation utilized the secondary mortgage market during 1995 to divest itself of fixed rate mortgage loans with rates below a target rate for purposes of managing the interest rate risk associated with these loans. Servicing rights were retained on the loans sold. The Corporation continues to utilize the secondary market as a means of offering competitively priced mortgage loan products without retaining the interest rate risk associated with long term, fixed rate product. Trust income increased 21.11% from 1994 to 1995 and 24.45% from 1993 to 1994. This is an area that the Corporation expects to continue to develop and aggressively grow in the future. Losses on investments held in the maturity portfolio during 1995 and 1994 occurred as a result of calls on municipal bonds in the portfolio. These losses totaled $11,000 during 1995 and 9,000 during 1994. Net gains were realized on securities available for sale during 1995 totaling $113,000 compared to losses of $55,000 during 1994 and gains of $1,264,000 during 1993. The related income taxes on securities transactions, including trading and securities available for sale, were $25,000 and $67,000 for the years ended 1995 and 1993, 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 1995, 1994, and 1993.
($000s) 1995 % 1994 % 1993 % 1992 Change Change Change Salaries and $2,555 12.01% $2,281 8.98% $2,093 26.16% $1,659 wages Employee 802 20.60% 665 -6.99% 715 46.22% 489 benefits Net occupancy 552 3.56% 533 -1.48% 541 28.50% 421 expense Equipment 764 23.62% 618 25.87% 491 8.63% 452 expense Other 2,950 -0.74% 2,972 1.89% 2,917 39.84% 2,086 operating expenses Total $7,623 7.84% $7,069 4.62% $6,757 32.31% $5,107
Salaries and wages included incentive performance bonuses tied to earnings performance totalling $343,000 in 1995, $247,000 during 1994 and $129,000 during 1993. The increase in employee benefits from 1994 to 1995 was impacted by a higher contribution to the employees' profit sharing plan and by the purchase of personal computers for use by employees and directors at home. A goal of the Corporation's subsidized purchase of personal computers for its employees was to enhance their proficieny and skill on personal computers and translate that into added productivity in the workplace. A commonly used measure of operating efficiency is the amount of assets managed per full time equivalent employee (FTE). The table below depicts assets managed per FTE for each of the last 3 years compared to the Corporation's peer group as measured by the most recently available Uniform Bank Performance Report.
($000s) 1995 1994 1993 Total assets $317,279 $312,963 $267,505 FTEs 113.0 110.5 118.0 Assets managed per $ 2,808 $ 2,832 $ 2,267 FTE Peer group(1) $ 2,310 $ 2,200 $ 1,900 (1) 1995 Peer data as of September 30, 1995
Equipment expense increased from 1994 to 1995 due an increase in depreciation expense and repair and maintenance expense associated with the Corporation's in-house data processing system. During most of 1994 and all of 1993, the Corporation utilized a third party data processing servicer; payments for these services were included in other operatng expenses. Other noninterest operating expense includes FDIC insurance assessments. The premiums paid during 1995 were impacted by a reduction of the FDIC insurance premium rate in September and December on deposits insured by the Bank Insurance Fund (BIF). Approximately 70% of the Corporation's deposits are insured by the BIF. As a result FDIC and other insurance included in other operating expenses were $430,000, $616,000 and $581,000 in 1995, 1994 and 1993 respectively. Approximately 30% of the Corporation's deposits are insured through the Savings Association Insurance Fund (SAIF) of the FDIC and continue to be assessed at 23 cents per $100. These deposits had been acquired from a thrift in 1992. However Congress is currently considering a special, one-time assessment on SAIF- insured deposits. If enacted, this assessment could result in a one-time, pretax charge of up to $500,000, which could be offset by lower ongoing insurance costs in the future. FINANCIAL CONDITION SECURITIES The book values of investments as of December 31, 1995 and 1994 are detailed in Footnote 3 of the Notes to the Consolidated Financial Statements in the Corporation's annual report (Exhibit B). The investment portfolio consists largely of fixed and floating rate mortgage related securities, predominantly underwritten to the standards of and guaranteed by the government agency GNMA and by the government-sponsored agencies of FHLMC and FNMA. These securities differ from traditional debt securities primarily in that they have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying mortgages. Securities Held to Maturity December 31, 1995
Over 10 Year Maturity < 1-5 Year 6-10 Year Maturity Total 1 year Maturity Maturity ($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U.S. Government agencies and corporations $ - - $ 2,269 4.79 $ - - $ - - $ 2,269 4.79% States and political subdivisions 35 9.23 654 8.21 1,145 7.77 3,200 10.43% 5,034 9.53% (a) Agency mortgage- backed securities 866 0.47 9,094 6.78 3,651 7.36 2,812 8.46% 16,423 6.86% (b) Total $901 0.81% $12,017 6.48% $4,796 7.46% $6,012 9.51% $23,726 7.23%
(a) Taxable equivalent yields (b) Maturities of mortgage-backed securities are based on estimated average life. Securities Available for Sale (excluding Equity Securities) December 31, 1995
Maturity < 1-5 Year 6-10 Year Over 10 Year 1 year Maturity Maturity Maturity Total ($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U. S. $ - - $ 101 5.89% $ - - $ - - $ 101 5.89% Treasury securities U.S. Government agencies and - - 11,695 6.41% - - 967 9.58% $ 12,662 6.65% corporations Agency mortgage- backed securities 129 6.16% 43,596 7.04% 14,756 7.62% 10,869 8.38% 69,350 7.37% (b) States and political subdivisions - - 679 6.62% 6,157 7.18% 11,536 7.71% 18,372 7.49% (a) Mortgage derivative - - - - - - 9,378 7.45% 9,378 7.45% securities Total fair $129 6.16% $56,071 6.90% $20,913 7.49% $32,750 7.91% $109,863 7.31% value Amortized cost $131 $56,093 $20,796 $32,334 $109,354 (a) Taxable equivalent yields (b) Maturities of mortgage-backed securities are based on estimated average life.
The mortgage derivative securities consist solely of collateralized mortgage obligations (CMOs) including one principal-only CMO issued by FNMA with a book value of $267,000 and a market value of $209,000. The remaining CMOs are privately issued. Credit risk on privately issued CMOs is evaluated based upon independent rating agencies and on the underlying collateral of the obligation. At December 31, 1995, the Corporation held one CMO issued by Prudential Home Mortgage with a book value of $3,046,000 and a market value of $3,073,000. The state and political subdivision portfolio includes approximately $1.9 million zero coupon revenue bonds. These bonds are purchased at a significant discount to par value and the income recognized on the bonds is derived from the accretion of the discount using a method that approximates a level yield. MARKETABLE EQUITY SECURITIES The Corporation held marketable equity securities in its investment portfolio as of December 31, 1995. 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, 1995 and 1994, estimated market values approximated original cost.
Taxable Equivalent December 31, 1995 ($000s) Cost Market Value Yield Federal Home Loan Bank stock $1,844 $1,844 6.82% Corporate Stock 215 215 4.57% Federal Reserve Bank 187 187 6.00% Stock $2,246 $2,246 Equivalent December 31, 1994 ($000s) Cost Market Value Yield Federal Home Loan Bank stock $1,724 $1,724 6.38% Corporate Stock 155 155 2.74% Federal Reserve Bank 187 187 6.00% Stock $2,066 $2,066
LOANS AND LEASES The following table shows the history of commercial and consumer loans and leases by major category at December 31.
($000s) 1995 1994 1993 1992 1991 Commercial loans: Real estate construction $ 1,530 $ 1,801 $ 2,081 $ 973 $ 771 Acceptances of other banks - - - - - Real estate mortgage 28,744 23,701 21,211 19,184 20,817 Commercial, financial and agricultural 50,532 38,983 25,317 19,568 9,424 Direct financing leases 3 5 9 58 476 Total commercial loans $ 80,809 $ 64,490 $ 48,618 $ 39,783 $31,488 Consumer loans: Residential mortgage $ 69,999 $ 76,094 $ 70,301 $ 65,536 $38,720 Installment loans 6,959 5,116 5,281 7,535 6,538 Credit card and other 2,190 1,396 1,032 1,123 1,309 consumer Total consumer loans $ 79,148 $ 82,606 $ 76,614 $ 74,194 $46,567 Total loans and leases $159,957 $147,096 $125,232 $113,977 $78,055
An analysis of maturity and interest rate sensitivity of business loans at the end of 1995 follows:
Under 1 to 5 Over 5 ($000s) 1 Year Years Years Total Domestic loans: Real estate construction $ 1,213 $ 4 $ 313 $ 1,530 Real estate mortgage 17,813 4,247 6,684 28,744 Commercial, financial and agricultural 35,193 9,932 5,407 50,532 Direct financing leases 0 3 3 Total business loans (a) $54,219 $14,186 $12,404 $80,809 Rate sensitivity: Predetermined rate $ 4,200 $ 5,272 $12,224 $21,696 Floating or adjustable rate 50,019 8,914 180 59,113 Total domestic business loans $54,219 $14,186 $12,404 $80,809 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 $2,703,000, or 1.69% of total loans and leases at December 31, 1995. At the end of the previous year, the allowance for possible loan losses was $1,537,000, or 1.04% of total loans and leases. The provision charged to expense during 1995 was $1,150,000 compared to $805,000 in the year ago period. Management's allocation of the allowance for possible loan losses for the past four years based on estimates of potential future loan loss is set forth in the table below:
% of % of % of % of Total Total Total Total ($000s) 1995 Loans 1994 Loans 1993 Loans 1992 Loans Specific reserves: Commercial $ 310 0.19% $ 10 0.01% $ 960 0.77% $ 370 0.32% Mortgage 10 0.01% 5 0.00% 38 0.03% 51 0.04% Consumer 5 0.00% 7 0.00% 21 0.02% 41 0.04% Criticized loans without specific allocation 414 0.26% 315 0.21% 160 0.13% 153 0.13% Provision for loan categories based on historical loss experience: Commercial 1,344 0.84% 687 0.47% 335 0.27% 284 0.25% Commercial real estate 152 0.10% 103 0.07% 7 0.01% 10 0.01% Residential mortgage 325 0.20% 298 0.20% 28 0.02% 29 0.03% Consumer 143 0.09% 112 0.08% 68 0.05% 86 0.08% Total $ 2,703 1.69% $ 1,537 1.04% $ 1,617 1.29% $ 1,024 0.90% Total loans and leases $159,957 $147,096 $125,232 $113,977 outstanding
The allocation of the loan loss reserve in the manner described above is not available for 1991. 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) 1995 1994 1993 1992 1991 Balance as of January 1 $1,537 $1,617 $1,024 $1,013 $ 891 Provision of loan losses 1,150 805 577 405 125 Adjustment incident to acquisition - - - 4 - Loans charged off: Real estate 25 49 19 13 19 Commercial - 806 - 59 6 Consumer 26 85 15 25 22 Direct financing leases - - - 340 - Total loans charged-off 51 940 34 437 47 Recoveries of loans previously charged-off: Real estate 3 18 - 2 9 Commercial 1 29 21 22 19 Consumer 18 7 11 6 16 Direct financing leases 45 1 18 9 - Total recoveries 67 55 50 39 44 Net charge-offs (recoveries) (16) 885 (16) 398 3 Balance at December 31 $2,703 $1,537 $1,617 $1,024 $1,013
($000s) 1995 1994 1993 1992 1991 Loans and leases outstanding at December 31 $159,957 $147,096 $125,232 $113,977 $78,055 Allowance as a percent of loans and leases outstanding 1.69% 1.04% 1.29% 0.90% 1.30% Average loans and leases $152,502 $134,952 $120,218 $ 95,489 $76,333 Net charge-offs as a percent of average loans and leases -0.01% 0.66% -0.01% 0.42% 0.00%
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) 1995 1994 1993 Nonaccrual loans and leases $162 $ 478 $2,358 Loans 90 days or more past due but accruing interest 14 11 436 Other real estate owned 579 586 69 Total $755 $1,075 $2,863
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 1995 and not included in the table above was $787,000. There are no other loans classified for regulatory purposes that would materially impact future operating results, liquidity or capital resources or which management doubts the ability of the borrower to comply with loan repayment terms. 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) 1995 1994 1993 Demand $ 25,819 $ 24,797 $ 21,093 Interest bearing checking 25,953 26,764 30,895 Savings 78,679 95,655 85,865 Other time 108,578 89,431 96,045 Certificates-$100,000 and 12,751 10,229 10,661 over Total average deposits $251,780 $246,876 $244,559
DISTRIBUTION OF AVERAGE 1995 1994 1993 DEPOSITS Demand 10.26% 10.04% 8.63% Interest bearing checking 10.31% 10.84% 12.63% Savings 31.25% 38.75% 35.11% Other time 43.12% 36.23% 39.27% Certificates-$100,000 and 5.06% 4.14% 4.36% over Total 100.00% 100.00% 100.00% CHANGE IN AVERAGE DEPOSIT SOURCES ($000s) 1994 to 1995 1993 to 1994 Demand $ 1,022 $ 3,704 Interest bearing checking (811) (4,131) Savings (16,976) 9,790 Other time 19,147 (6,614) Certificates-$100,000 and over 2,522 (432) Total $ 4,904 $ 2,317
Average deposits increase 1.99% from 1994 to 1995. The mix of deposits is directly affected by the interest rate environment. During periods of low interest rates, customers tend to maintain their balances in savings accounts. As deposit rates increase, funds flow from savings deposits to time deposits. As part of its asset/liability strategy during 1995, the Corporation offered several certificate of deposit promotions to extend maturities on deposits. This resulted in a decrease in average savings balances and an increase in average time balances. BORROWINGS Other sources of funds for the Corporation include short- term repurchase agreements and Federal Home Loan Bank borrowings. Borrowings at the Federal Home Loan Bank are utilized to match the maturities of selected loans and to leverage the capital of the Corporation to enhance profitability for shareholders. CAPITAL RESOURCES At December 31, 1995, shareholders' equity was $25,164,000 compared to $20,214,000 at December 31, 1994, an increase of $4,950,000 or 24.49%. The increase in capital during 1995 was due to retention of earnings and the increase in market value of Securities Available for Sale. 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, 1995, the Corporation had a Tier 1 capital ratio of 13.07% and a total capital ratio of 14.59%, well above the regulatory minimum requirements. The following table shows several capital and liquidity ratios for the last three years:
December 31 1995 1994 1993 Average shareholder's equity to : Average assets 7.34% 6.87% 6.76% Average deposits 9.07% 8.05% 7.39% Average loans and leases 14.97% 14.73% 15.04% Primary capital 8.78% 6.95% 7.84% Risk-based capital ratio: Tier 1 13.07% 12.26% 12.82% Total 14.59% 13.21% 14.04% Leverage ratio 7.39% 6.33% 6.42%
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, 1995, the Corporation's Tier One leverage ratio was 7.39%. The following table presents dividend payout ratios for the past three years.
1995 1994 1993 Total dividends declared as a percentage of net 25.77% 27.18% 30.36% income Common dividends declared as a percentage of earnings per common share 24.36% 25.37% 28.05%
Currently there are no known trends, events or uncertainties that would have a material effect on the Corporation's liquidity, capital resources or results of operations. 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 decreased by $9.1 million, or 3.55%, from the end of 1994 to 1995. Short term borrowings increased by $3.2 million over the same period. Average deposits increased 1.99% during 1995 compared to 1994. The Corporation also has unused lines of credit with various correspondent banks totaling $10.4 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, 1995 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 $43,672 $ 9,688 $ 6,851 $13,783 $ 73,994 $ 28,496 $ 57,467 $159,957 Investment securities 697 3,703 1,106 1,678 7,184 6,608 9,934 23,726 Securities available 2,681 1,628 6,688 6,908 17,905 39,496 54,708 112,109 for sale Total interest $47,050 $15,019 $14,645 $22,369 $ 99,083 $ 74,600 $122,109 $295,792 earning assets Interest bearing liabilities: Interest checking $ - $ - $ - $ - $ - $ - $ 27,193 $ 27,193 Savings 21,145 - - - 21,145 - 57,738 78,883 Certificates-$100,000 2,360 1,266 3,410 3,205 10,241 1,327 309 11,877 and over Other time 6,498 16,185 23,621 24,050 70,354 24,877 7,172 102,403 Short term borrowings 38,665 - - - 38,665 - - 38,665 Long term debt - - - - - 4,802 - 4,802 Total interest $ 68,668 $ 17,451 $ 27,031 $ 27,255 $140,405 $ 26,204 $ 92,412 $259,021 bearing liabilities Rate sensitivity gap $(21,618) (2,432) $(12,386) (4,886) $(41,322) $ 48,396 $ 29,697 $ 36,771 Cumulative gap $(21,618)$(24,050) $(36,436) $(41,322) $ 7,074 $ 36,771 Cumulative gap as a percentage of interest earning -7.31% -8.13% -12.32% -13.97% 2.39% 12.43% assets
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 36.02%, 36.84%, 41.03%, 42.68%, 26.32% and positive 12.43%, 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, 1995. In January 1996, the maturity of $10 million included in short term borrowings was extended to one year and an additional $10 million was extended to two years. ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA The annual report of Belmont Bancorp. is hereby incorporated by reference and appears as Exhibit B. 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 15, 1996 (Exhibit C) is incorporated by reference in response to this item. EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1996: Name Age Position J. Vincent Ciroli, Jr. 50 President and Chief Executive, Officer, Belmont Bancorp. & Belmont National Bank William Wallace 40 Vice President, Belmont Bancorp.; Executive Vice President & Chief Operating Officer, Belmont National Bank Jane R. Marsh 34 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 15, 1996 (Exhibit C) 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 15, 1996 (Exhibit C) 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 15, 1996 (Exhibit C) 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 19, 1996. By Terrence A. Lee, Chairman BELMONT BANCORP Terrence A. Lee, 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 Vincent Ciroli, Jr. J. Vincent Ciroli, Jr. Director,President & CEO. Belmont Bancorp., Belmont National Bank Samuel Mumley Samuel Mumley Director Mary L. Holloway Haning Mary L. Holloway Haning Director Charles J. Kaiser, Jr. Charles J. Kaiser, Jr. Director John H. Goodman, II John H. Goodman, II Director Dana Lewis Dana Lewis Director Jane R. Marsh Jane R. Marsh Secretary, Belmont Bancorp. and 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, Belmont Bancorp.; Executive Vice President & COO, Belmont National Bank Charles A. Wilson, Jr. Charles A. Wilson, Jr. Vice Chairman Terrence A. Lee Chairman of the Board Terrence A. Lee March 19, 1996 INDEX TO EXHIBITS Exhibit 1 - Consent of Independent Certified Public Accountants Exhibit 2 - Belmont Bancorp.'s 1995 Annual Report to Shareholders Exhibit 3 - Belmont Bancorp.'s Proxy Statement to Shareholders, dated March 15, 1996 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, 1996, relating to the consolidated balance sheets of Belmont Bancorp. as of December 31, 1995 and 1994, 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, 1995. Said report appears as Exhibit B of Belmont Bancorp.'s annual form 10-K. s/S.R. Snodgrass A.C. S.R. Snodgrass A.C. Wheeling, WV March 19, 1996 EX-2 3 ANNUAL REPORT MODULE Corporate Profile Belmont Bancorp. (the Corporation) is a $317 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 ten 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)
1995 1994 % change Net income $ 4,206 $ 3,234 30.1% Operating Return on average assets 1.35% 1.12% results Return on average common equity 18.90% 16.71% Return on average total equity 18.42% 16.19% Per Net income $ 1.95 $ 1.49 30.8% common Dividend 0.475 0.378 25.7% share Book value at year-end 11.43 9.09 25.8% At Total assets $ 317,279 $ 312,963 1.4% year- Total loans 159,957 147,096 8.7% end Total deposits 246,850 255,923 -3.5% Total shareholders' equity 25,164 20,214 24.5% Liquidity Average common equity and to average total assets 7.02% 6.52% capital Average total equity ratios to average total assets 7.34% 6.87% Tier one capital ratio 13.07% 12.26% Total risk-based capital ratio 14.59% 13.21% Leverage ratio 7.39% 6.33% Dividend payment ratio 25.77% 27.49%
From Management 1995 represented another year of continued growth and record profits for Belmont Bancorp. Your Corporation continues to show double digit income growth, with net income of $4,206,000 for all of 1995 compared to $3,234,000 for twelve months 1994, a 30.1% increase. On a per share basis this was $1.95 compared to $1.49, respectively. Equally impressive was our return on average equity and our return on average assets. Return on average equity increased to 18.90% from 16.71% in 1994. Return on average assets increased to 1.35% from 1.12% in 1994. Total shareholder equity increased 24.5% to $25,164,000 from $20,214,000. During 1995, our loan portfolio grew 8.7% to $159,957,000, our net interest margin increased from 4.25% to 4.55% and our loan quality improved. Nonperforming assets as a percentage of total assets decreased to only 0.23% of total assets from 0.34% of total assets. Additionally, our allowance for possible loan loss as a percentage of total loans increased to 1.69% from 1.04%...excellent by any standard. Your Corporation is also pleased to announce that 1996 represents 150 years of service for Belmont National Bank; and we are still a young organization continuing to look for ways to service the needs of all the communities we serve. 1996 also represents the year we moved Belmont National Bank headquarters to Wheeling, West Virginia. This move permits your Corporation to have an interstate presence ahead of the law change permitting most banks to do so. We believe this move helps the value of our franchise. From Management We will not be resting on our laurels in 1996; we anticipate continued expansion in both Ohio and West Virginia opening new offices in both states during the year. Personally, I would like to extend my sincere appreciation to all the officers and staff of the Corporation, and the Board of Directors whose dedication make Belmont Bancorp. and Belmont National Bank one of the top banking organizations in the country. I would especially like to thank William P. Goddard, who recently resigned from our Board of Directors. Bill's wisdom, advise and counsel will be missed by our whole organization. And, as always, I would like to thank our shareholders who have shown trust in the leadership of our Corporation and to whom we pledge our continuing best effort. We look forward to providing them with another prosperous year. This annual report pays tribute to our forefathers who founded our organization back in 1846. We hope you enjoy this brief visit to the past. J. Vincent Ciroli, Jr. Terrence A. Lee President & CEO Chairman One Hundred and Fifty Years Young Belmont National Bank has the proud distinction of being one of the ten oldest financial institutions in the State of Ohio. Our roots go deep, representing an important part of our heritage as well as the development of the Ohio Valley and our communities. The Bank began in 1846 as the Belmont Branch of the State Bank of Ohio located in Bridgeport. Although there are few records from the Bank's early history, we do know that John C. Tallman was Cashier and John Warfield was President. The directors of the old State Bank were Jacob Holloway, Ezekiel Harris, Henry Kennon, John Warfield, John Kinsey, James Y. Patterson, John K. Newland, James A. Gray, and Hugh McNeely. Under the efficient management of these men, the bank withstood the Crash of 1857. The affairs of the Belmont Branch of the State Bank of Ohio were wound up by limitation in 1863 and reorganized under the name First National Bank of Bridgeport on December 5, 1863. In addition to being one of the first National Banks in the State of Ohio, First National Bank of Bridgeport was the 214th National Bank in the United States. It was funded with $200,000 of capital stock purchased by 80 shareholders at a cost of $100 per share. The Bank's largest investors were Jacob Holloway of Flushing (former director of the old State Bank) and John P. Smith of Pittsburgh, each purchasing 100 shares. Directors of the reorganized bank were Crispin Oglebay, William W. Holloway, Finley B. McGraw, Hiram W. Smith, and Ebenezer P. Rhodes. William W. Holloway was elected President, while John C. Tallman (former Cashier of the old State Bank) was retained as Cashier. Handwritten minutes from the Bank's board meetings indicate the President's salary was established at $1,000 per annum and the Cashier's salary at $2,000 per annum. One Hundred and Fifty Years Young On January 30, 1864, a new bank was organized in St. Clairsville with $60,000 of capital stock purchased by 47 shareholders at a cost of $100 per share. It became the 315th National Bank in the United States. Directors of the new First National Bank of St. Clairsville were D. D. T. Cowen, Joseph Woodsmansee, Ross J. Alexander, John Darrah and David Brown. Judge D. D. T. Cowen, Attorney, was elected President, while H. C. Welday was retained as Cashier with a salary of $600 per annum. Judge Cowen continued to serve as the Bank's President until his death on April 9, 1884. Here are a few interesting notes from board meetings. "On motion it was resolved to buy twenty two feet front and thirty four feet deep of the southwest corner of H. C. Welday's Lot on the south side of Main Street for Six Hundred Dollars on which to build a Banking House." "Joseph B. Butler was employed to haul the stone for the Banking House at the rate of One Dollar per perch (a measure of length equal to 5 1/2 yards)." "On Board motion the Cashier was directed to subscribe for the Bank the sum of Twenty Five Dollars to help defray the expense of opposing the removal of the County Seat from St. Clairsville to Bellair." The board enjoyed having dinner together after board meeting adjournment. Ernst String's Restaurant and Johnson's and Wilson's Restaurant were favorites to "partake of an oyster supper." On April 18, 1865, the following notation was written: "On motion it was Ordered that the Cashier drape the Banking House in black and close the Bank on the 19th. It being the day of the funeral observance of the President of the United States Abraham Lincoln." One Hundred and Fifty Years Young In 1903, the First National Bank of Bridgeport reorganized under the name of Bridgeport National Bank with J. J. Holloway named President. The Bank weathered the depression and remained open until the Bank Holiday. It closed for just one day and then reopened. An advertisement which appeared in the Bridgeport High School's 1916 yearbook exclaimed the following for Bridgeport National Bank. "It passed through The Panic of 1857, The Great Civil War of 1861-1865, The Panic of 1873, The Panic of 1893 and The Panic of 1907. During these troublesome times no depositor was ever asked to wait one hour for his or her money." On December 22, 1958, an agreement was entered into by First National Bank in St. Clairsville to merge with Bridgeport National Bank to form Belmont County National Bank. O. A. Holsinger, the President of Bridgeport National Bank, was named President of Belmont County National Bank. On April 1, 1990, Belmont County National Bank changed its name to Belmont National Bank. On June 1 of that same year, the Bank expanded service into Harrison County with the purchase of assets and deposits of the First National Bank of Jewett. Service expansion continued into Tuscarawas County in 1992 when the Bank purchased the assets and deposits of three offices of Diamond Savings and Loan Association. Today, Belmont National Bank is beginning its expansion into West Virginia, with a newly opened office in the Woodsdale area of Wheeling and a soon to open office in Elm Grove. Belmont Bancorp. and Subsidiaries Summarized Quarterly Financial Information (Unaudited) ($000's except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter 1995 Interest income $ 5,876 $ 5,785 $ 5,955 $ 5,838 Interest expense 2,746 2,648 2,791 2,742 Net interest income 3,130 3,137 3,164 3,096 Provision for credit 400 300 200 250 losses Security gains (losses) 127 37 18 (80) Net overhead 1,488 1,413 1,377 1,662 Income before income 1,369 1,461 1,605 1,104 taxes Income taxes 363 363 385 222 Net income $ 1,006 $ 1,098 $ 1,220 $ 882 Net income per common share $ 0.46 $ 0.51 $ 0.57 $ 0.41 1994 Interest income $ 4,250 $ 4,702 $ 5,250 $ 5,513 Interest expense 1,887 2,039 2,331 2,550 Net interest income 2,363 2,663 2,919 2,963 Provision for credit 250 270 85 200 losses Security gains (losses) 15 (3) (2) (73) Net overhead 1,269 1,411 1,377 1,722 Income before income 859 979 1,455 968 taxes Income taxes 218 187 320 302 Net income $ 641 $ 792 $ 1,135 $ 666 Net income per common share $ 0.29 $ 0.37 $ 0.53 $ 0.30 1993 Net income $ 301 $ 332 $ 1,125 $ 811 Net earnings per common share $ 0.14 $ 0.15 $ 0.52 $ 0.37
Belmont Bancorp. and Subsidiaries Consolidated Five Year Summary of Operations For the Years Ending December 31, 1995, 1994, 1993, 1992, 1991 (Unaudited) ($000's except per share data)
1995 1994 1993 1992 1991 Interest income $ 23,454 $ 19,715 $ 16,789 $ 14,717 $ 16,198 Interest expense 10,927 8,807 8,616 8,082 10,091 Net interest income 12,527 10,908 8,173 6,635 6,107 Provision for credit losses 1,150 805 577 405 125 Net interest income after provision for credit losses 11,377 10,103 7,596 6,230 5,982 Securities and trading gains (losses) 102 (63) 943 323 44 Other operating income 1,683 1,290 1,193 966 915 Operating expenses 7,623 7,069 6,757 5,107 4,629 Income before income taxes 5,539 4,261 2,975 2,412 2,312 Income taxes 1,333 1,027 406 574 528 Net income 4,206 $ 3,234 $ 2,569 $ 1,838 $ 1,784 Earnings per common share(1) 1.95 $ 1.49 $ 1.18 $ 0.85 $ 0.84 Cash dividend declared per share (1) $ 0.475 $ 0.378 $ 0.331 $ 0.324 $ 0.320 Book value per common share (1) $ 11.43 $ 9.09 $ 8.68 $ 7.84 $ 7.31 Total loans $159,957 $147,096 $125,232 $113,977 $ 78,055 Total assets 317,279 312,963 267,505 267,332 197,015 Total deposits 246,850 255,923 243,232 245,743 176,859 Total shareholders' equity 25,164 20,214 19,355 17,565 15,445 (1) Restated for stock dividends paid during 1994 and 1995.
Belmont Bancorp. and Subsidiaries
Assets 1995 1994 Cash and due from banks $ 10,175 $ 11,770 Securities available for sale (at market value) 112,109 49,132 Securities held to maturity (market value of $23,758 - 1995; and $86,828 - 1994) 23,726 92,463 Loans 159,957 147,096 Less allowance for possible loan losses (2,703) (1,537) Net loans 157,254 145,559 Premises and equipment, net 5,090 4,648 Other real estate owned 579 586 Accrued income receivable 2,150 2,133 Other assets 6,196 6,672 Total assets $ 317,279 $ 312,963 Liabilities and Shareholders' Equity Liabilities Non-interest bearing deposits: Demand $ 26,494 $ 27,269 Interest bearing deposits: Demand 27,193 26,273 Savings 78,883 84,023 Time 114,280 118,358 Total deposits 246,850 255,923 Short-term borrowings 38,665 35,498 Long-term debt 4,802 - Accrued interest on deposits and other borrowings 661 590 Other liabilities 1,137 738 Total liabilities 292,115 292,749 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 - in 1995 $0.50 par value, 8,900,000 shares authorized, 2,115,476 issued; in 1994 $3.57 par value, 1,750,000 shares authorized; 1,057,738 issued. 1,057 3,777 Surplus 7,781 5,061 Treasury stock (832 shares in 1995 and 424 shares in 1994.) (8) (8) Retained earnings: Unappropriated 14,148 11,026 Appropriated for contingencies 850 850 Net unrealized gain (loss) on securities available for sale 336 (1,492) Total shareholders' equity 25,164 20,214 Total liabilities and shareholders' equity $ 317,279 $ 312,963 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, 1995, 1994 and 1993 ($000's)
Interest Income 1995 1994 1993 Loans and lease financing: Taxable $ 13,924 $ 11,499 $ 10,508 Tax-exempt 288 190 167 Investment securities: Taxable 7,638 6,714 5,080 Tax-exempt 1,424 1,209 643 Dividends 133 98 221 Interest on trading securities - 1 45 Interest on federal funds sold 47 4 125 Total interest income 23,454 19,715 16,789 Interest Expense Deposits 9,022 7,865 8,525 Short-term borrowings 1,905 942 91 Total interest expense 10,927 8,807 8,616 Net interest income 12,527 10,908 8,173 Provision for Possible Loan Losses 1,150 805 577 Net interest income after provision for possible loan losses 11,377 10,103 7,596 Non-Interest Income Trust fees 413 341 274 Service charges on deposits 555 527 474 Other operating income 715 422 445 Investment securities gains (losses) 102 (64) 1,059 Trading gains (losses) - 1 (116) Total non-interest income 1,785 1,227 2,136 Non-Interest Expense Salary and employee benefits 3,357 2,946 2,808 Net occupancy expense of premises 552 533 541 Equipment expenses 764 618 491 Other operating expenses 2,950 2,972 2,917 Total non-interest expense 7,623 7,069 6,757 Income before income taxes 5,539 4,261 2,975 Income Taxes 1,333 1,027 406 Net income $ 4,206 $ 3,234 $ 2,569 Weighted - Average Number of Shares Outstanding 2,114,644 2,114,524 2,114,020 Earnings Per Common Share $ 1.95 $ 1.49 $ 1.18 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, 1995, 1994 and 1993 ($000's)
Unrealized Gain (Loss) Retained Earnings on Securities Preferred Common Unappro- Appro- Treasury Available Stock Stock Surplus priated priated Stock for Sale Balance, December 31, 1992 $ 1,000 $ 2,749 $ 3,647 $ 9,333 $ 850 $ (14) $ - 1993 Net income - - - 2,569 - - - Cash dividend declared: Preferred stock - - - (80) - - - Common stock ($.331 per share) - - - (700) - - - Sale of treasury stock - - - - - 1 Balance, December 31,1993 1,000 2,749 3,647 11,122 850 (13) - Effect of adopting SFAS 115 - - - - - - 6 10% Common stock dividend at fair market value - 274 1,413 (1,687) - - - 25% Common stock dividend at par value - 754 - (754) - - - 1994 Net income - - - 3,234 - - - Cash dividends declared: Preferred stock - - - (80) - - - Common stock ($.378 per share) - - - (799) - - - Cash paid in lieu- stock dividends - - - (10) - - - Change in unrealized loss- securities available for sale - - - - - - (1,498) Sale of treasury stock - - 1 - - 5 - Balance, December 31,1994 $ 1,000 $ 3,777 $ 5,061 $11,026 $ 850 $ (8) $(1,492) Transfer to surplus resulting from change in par value of common stock - (3,248) 3,248 - - - - 2 for 1 stock split - 528 (528) - - - - 1995 Net Income - - - 4,206 - - - Cash dividends declared: Preferred stock - - - (80) - - - Common stock (per share $.475) - - - (1,004) - - - Change in unrealized gain (loss)- securities available for sale - - - - - - 1,828 Balance, December 31, 1995 $ 1,000 $ 1,057 $ 7,781 $14,148 $ 850 $ (8) $ 336 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, 1995, 1994 and 1993 ($000's)
1995 1994 1993 Operating Activities Net income $ 4,206 $ 3,234 $ 2,569 Adjustments to reconcile net income to net cash flows provided (used) by operating activities: Provision for loan losses 1,150 805 577 Depreciation and amortization expense 601 519 446 Amortization of investment security premiums 1,123 1,877 3,025 Accretion of investment security discounts and interest recorded on zero- coupon securities (305) (403) (601) Investment securities (gains) losses 11 10 205 Trading (gains) losses - (1) 116 (Gains) losses on securities available for sale (113) 55 (1,264) Proceeds from sale of securities held in trading account - 1,517 11,196 Purchase of securities for trading account - (1,516) (13,346) Loss (gain) on sale of fixed assets 23 2 (29) Gain on sale of loans (136) (23) (67) Gain on sale of other real estate owned - (1) - (Increase) decrease in interest receivable (17) (420) 38 Increase (decrease) in interest payable 71 137 (265) Purchase of life insurance contracts - - (194) Others, net (65) 1,859 (734) Net cash provided (used) by operating activities 6,549 7,651 1,672 Investing Activities Proceeds from sales of investment securities - - 21,558 Proceeds from maturities and calls of investment securities 12,154 3,207 899 Purchase of securities available for sale (106,839) (26,052) (78,448) Purchase of investment securities (2,321) (47,621) (85,103) Proceeds on sale of securities available for sale 85,414 16,198 104,137 Principal collected on mortgage- backed securities 19,405 29,434 50,537 Net increase in loans and leases, net of charge-offs (23,491) (25,486) (15,002) Proceeds on sale of loans 10,816 2,104 3,841 Loans purchased (94) - (185) Recoveries on loans previously charged-off 67 55 50 Proceeds from sale of other real estate owned - 84 210 Purchase of premises and equipment (1,071) (711) (842) Proceeds from sale of fixed assets 4 1 29 Net cash provided by (used in) investing activities (5,956) (48,787) 1,681 Financing Activities Net increase (decrease) in deposits (9,073) 12,691 (2,511) Net increase (decrease) in short- term borrowings 3,167 31,789 716 Proceeds from the issuance of long-term debt 4,805 - - Payments on long-term debt (3) - - Dividends paid on common and preferred stock (1,084) (889) (780) Sale of treasury stock - 6 1 Net cash provided by (used in) financing activities (2,188) 43,597 (2,574) Increase (Decrease) in Cash and Cash Equivalents (1,595) 2,461 779 Cash and Cash Equivalents at Beginning of Year 11,770 9,309 8,530 Cash and Cash Equivalents at End of Year $ 10,175 $ 11,770 $ 9,309 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, 1995, 1994 and 1993 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. Nature of Operations: Belmont Bancorp. provides a variety of banking services to individuals and businesses through the branch network of its wholly-owned subsidiary, Belmont National Bank (BNB). BNB operates nine full-service banking facilities located in Belmont, Harrison and Tuscarawas Counties in Ohio. In 1995, BNB received approval from the Office of the Comptroller of the Currency to move its headquarters to Wheeling, West Virginia. Its tenth full- service banking facility was opened in Wheeling in January 1996. 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. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 reflected as adjustments to retained earnings. Market value depreciation below cost on debt securities held for sale prior to December 31, 1993, was required to be reflected 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 adopted the provisions of Statement of Financial Accounting Standards No. 114 and No. 118, "Accounting for Creditors for Impairment of a Loan." It is the Corporation's policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Since the adoption of SFAS Nos. 114 and 118, the Corporation had no loans which management has determined to be impaired. 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 maintained at a level which, in management's judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management's evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowance for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge- offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Because of uncertainties inherent in the estimation process, management's estimate of credit losses inherent in the loan portfolio and the related allowance may change in the near term. Belmont Bancorp. and Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended December 31, 1995, 1994 and 1993 (000's) 1. Summary of Significant Accounting Policies (continued) 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 lesser of the loan balance prior to foreclosure, plus certain costs incurred for improvements to the property, or fair value less estimated selling costs of the property. 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 Split and 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. On February 21, 1995, the Corporation declared a two-for-one stock split, which was effected in the form of a 100% stock dividend to shareholders of record on May 1, 1995, and paid on May 8, 1995. On April 18, 1995, shareholders approved a change in the par value of the Corporation's common stock to $0.50 per share from $3.57 per share. Shareholder approval was also received to increase the number of shares of common stock authorized to 8,900,000. 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, 1995 and 1994, were $1,508,000 and $1,923,000, respectively. Amortization charged to expense was $415,000 in 1995 and 1994, and $416,000 in 1993. 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 November 1995, the Financial Accounting Standards Board issued implementation guidance on SFAS No. 115. In accordance with this guidance, the Corporation reassessed the appropriateness of the classifications of all securities. As a result, securities with an amortized cost of $56,490,000 and unrealized loss of $95,000 were transferred from the held to maturity category to the available for sale category in December 1995. 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 $138,000 ($ .07 per share). 3. Investment Securities The estimated market value of investment securities are as follows at December 31:
1995 1994 Gross Gross Est. Gross Gross Est. Amort Unrealized Unrealized Market Amort 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 $2,269 $ - $ (65)$ 2,204 $ 4,248 $ 22 $ (312) $ 3,958 Obligations of states and political subdivisions 5,034 127 (78) 5,083 24,244 51 (1,615) 22,680 Mortgage derivative securities 12,695 - (836) 11,859 Mortgage-backed securities 16,423 147 (99) 16,471 51,276 7 (2,952) 48,331 Total held to maturity $23,726 $ 274 $(242)$ 23,758 $92,463 $ 80 $(5,715) $86,828 Securities available for sale: U.S. Treasury securities and obligations of U.S. Govern ment corporations and agencies $12,697 $ 66 $ - $ 12,763 $ 6,388 $ - $ (128) $ 6,260 Obligations of states and political subdivisions 18,162 296 (86) 18,372 - - - - Mortgage derivative securities 9,180 256 (58) 9,378 938 - (87) 851 Mortgage- backed securities 69,315 466 (431) 69,350 42,000 3 (2,048) 39,955 Total debt securities 109,354 1,084 (575) 109,863 49,326 3 (2,263) 47,066 Equity securities 2,246 - - 2,246 2,066 - - 2,066 Total available for sale $111,600 $1,084 $(575)$112,109 $51,392 $ 3 $(2,263) $49,132
The amortized cost and estimated market value of investment securities at December 31, 1995, 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 $ 35 $ 35 $ - $ - Due after one year through five years 2,923 2,887 12,420 12,476 Due after five years through ten years 1,141 1,165 5,946 6,021 Due after ten years 3,204 3,200 12,493 12,638 Mortgage-backed securities 16,423 16,471 69,315 69,350 Mortgage derivative securities - - 9,180 9,378 Equity securities - - 2,246 2,246 Total $23,726 $23,758 $111,600 $112,109
At December 31,1995 and 1994, the mortgage derivative securities consist solely of collateralized mortgage obligations (CMOs) including one principal-only CMO with a book value of $267,000 and an estimated fair market value of $209,000 at December 31, 1995. At December 31, 1995, securities held to maturity include a U.S. Government agency structured note with a carrying value of $2,269,000 and an estimated market value of $2,204,000; securities available for sale include two U.S. Government agency structured notes with a carrying value of $1,931,000 and estimated market value of $1,997,000. Sales and write-downs of investment securities resulted in the following:
1995 1994 1993 Proceeds from sales $ 85,414 $ 16,198 $ 21,558 Gross gains 464 31 790 Gross losses (352) (86) (191) Realized losses on market declines - - (804) Losses on securities called (26) (9) - Gains on securities called 16 - -
All securities sold were classified as available for sale at the time of sale. There were no transfers of securities between classifications, except for those discussed in Note 2. Assets carried at $39,149,000 and $36,538,000 at December 31, 1995 and 1994, 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:
1995 1994 Real estate-construction $ 1,530 $ 1,801 Real estate-mortgage 69,999 76,094 Real estate-secured by nonfarm, nonresidential property 28,744 23,701 Commercial, financial and agricultural 46,055 35,036 Obligations of political subdivisions in the U.S. 4,477 3,947 Installment and credit card loans to individuals 9,149 6,512 Direct financing leases 3 5 Loans receivable $ 159,957 $ 147,096
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 $162,000 and $478,000 at December 31, 1995 and 1994, respectively. The after-tax effect of the interest that would have been accrued on these loans was $5,000 in 1995 and $38,000 in 1994. The following is an analysis of loan activity to directors, executive officers, and their associates (see Note 12):
1995 1994 Balance previously reported $4,904 $2,775 New loans during the year 4,097 3,716 Total 9,001 6,491 Less repayments during the year 2,201 1,587 Balance, December 31 $6,800 $4,904
Activity in the allowance for loan losses is summarized as follows:
December 31 1995 1994 1993 Balance at beginning of year $1,537 $1,617 $1,024 Additions charged to operating expense 1,150 805 577 Recoveries on loans previously charged-off 67 55 50 Total 2,754 2,477 1,651 Loans charged-off 51 940 34 Balance at end of year $2,703 $1,537 $1,617
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 1995 1994 Years Land and land improvements $ 1,009 $ 734 Buildings 3,534 3,138 30 - 50 Furniture, fixtures and equipment 4,272 3,971 5 - 12 Leasehold improvements 373 406 5 - 20 Total 9,188 8,249 Less accumulated depreciation and amortization 4,098 3,601 Premises and equipment, net $ 5,090 $ 4,648
Charges to operations for depreciation and amortization approximate $601,000, $519,000, and $446,000 for 1995, 1994, and 1993, respectively. 6. Deposits The distribution of the bank's deposits at December 31, 1995 and 1994, are as follows:
1995 1994 Non- Non- interest interest Bearing Interest Bearing Bearing Interest Bearing Demand Demand Savings Time Demand Demand Savings Time Individuals, partnerships and Corpora- tions $12,422 $27,193 $78,883 $110,258 $16,978 $26,273 $84,023 $113,319 U.S. Government 272 - - - 197 - - - States and political subdivisions 12,124 - - 4,022 7,460 - - 5,039 Other depository institutions in the U.S. - - - - - - - - Certified, officers' checks, travelers cheques, etc. 1,676 - - - 2,634 - - Total $26,494 $27,193 $78,883 $114,280 $27,269 $26,273 $84,023 $118,358
6. Deposits (continued) Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $11,877,000 at December 31, 1995, and $12,090,000 at December 31, 1994. A maturity distribution of time certificates of deposit of $100,000 or more follows:
1995 1994 Due in three months or less $ 3,626 $ 3,697 Due after three months through six months 3,303 3,073 Due after six months through twelve months 3,312 2,182 Due after one year through five years 1,327 3,036 Due after five years 309 102 Total $ 11,877 $ 12,090 (/TABLE> 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:
1995 1994 1993 Securities sold under repurchase agreements: Balance at year end $14,539 $8,736 $3,709 Average during the year $17,669 $8,210 $3,581 Maximum month-end balance $24,012 $9,653 $4,319 Weighted average rate during the year 4.82% 3.56% 2.25% Rate at December 31 3.05% 4.93% 2.75% Federal funds purchased: Balance at year end $ - $4,500 N/A Average during the year $ 700 $ 397 N/A Maximum month-end balance $ - $4,500 N/A Weighted average rate during the year 6.87% 4.43% N/A Rate at December 31 - 6.25% 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. Collateral for the advances consists of residential mortgage loans and shares of stock of the Federal Home Loan Bank of Cincinnati. Information related to these borrowings at December 31, 1995 and 1994, is summarized below:
1995 1994 Balance outstanding $ 24,126 $ 22,262 Interest rate at December 31 6.15% 7.00% Collateral: Residential mortgage loans $ 36,190 $ 33,393 Federal Home Loan Bank stock $ 1,844 $ 1,724
8. Long-Term Debt Long-term debt consists of advances from the Federal Home Loan Bank of Cincinnati. Fixed-rate, single payment loans totaling $4,000,000 at December 31, 1995, mature in 1997 and 1998 with interest rates ranging from 5.9% to 7.0%. Fixed rate, amortizing loans totaling $802,000 at December 31, 1995, reach final maturity in years 1998 through 2015, with interest rates ranging from 5.55% to 6.95%. The loans are secured by residential mortgage loans with a carrying value of $7,203,000 and Federal Home Loan Bank Stock. Scheduled principal payments on long-term debt in each of the five years subsequent to December 31, 1995 are as follows: 1996 $ 119 1997 $ 2,125 1998 $ 2,133 1999 $ 29 2000 $ 31 9. 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 $(28,000) is determined as of January 1, 1993. The effect on the Statement of Income is considered immaterial ($ .01 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 1995 1994 1993 Currently payable $ 1,726 $ 880 $ 775 Deferred (393) 147 (369) Income tax $ 1,333 $1,027 $ 406
The following temporary differences gave rise to the deferred tax asset at December 31, 1995 and 1994:
1995 1994 Allowance for loan losses $ 770 $ 373 Interest on non-accrual loans 9 20 Unrealized (gains) losses on investments (145) 805 Deferred loan origination fees 19 25 Deferred compensation and liability for future employees benefits 81 78 Intangible assets 216 150 Premises and equipment due to differences in depreciation (121) (101) Direct finance leases (86) (102) Federal Home Loan Bank stock dividends (84) (44) Total deferred tax assets $ 659 $ 1,204
9. Income Tax (continued) 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:
1995 1994 1993 Amount Percent Amount Percent Amount Percent Tax at statutory rate $1,883 34.0 $1,449 34.0 $1,011 34.0 Reductions in taxes resulting from: Tax exempt interest on investments and loans (582) (10.5) (476) (11.2) (275) (9.2) Non-taxable portion- dividends - - - - (45) (1.5) Excess of tax loss over book gains on investment securities (22) (0.4) - - (161) (5.4) Utilization of capital loss carrybacks - - - - (112) (3.8) Earnings on life insurance policies (33) (0.6) (18) (0.4) (20) (0.7) Non-deductible interest expense 75 1.4 64 1.5 50 1.7 Others - net 12 0.2 8 0.2 (14) (0.5) Cumulative effect of adoption of FASB 109 - - - - (28) (1.0) Actual tax expense $1,333 24.1 $1,027 24.1 $ 406 13.6
The bank has available $623,000 in capital loss carryforwards. This amount will expire in 1998. 10. 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 1995, 1994, and 1993 was $242,000, $180,000, and $105,000, 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:
1995 1994 Accumulated post-retirement benefit obligation: Retirees $ 42 $ 40 Fully eligible active plan participants 50 46 Other active plan participants 53 35 145 121 Plan assets at fair value - - Accumulated post-retirement benefit obligation in excess of plan assets 145 121 Unrecognized net gain (loss) from past experience different from that assumed and from changes in assumptions (26) (14) Prior service cost not yet recognized in expense 38 51 Unrecognized transition obligation (12) (13) Accrued post-retirement benefit cost in the balance sheet $ 145 $ 145
The Corporation's post-retirement health care plan is underfunded. The accumulated post-retirement benefit obligation and plan assets for that plan are $145,000 and $- 0-, respectively at December 31, 1995, and $121,000 and $-0- respectively at December 31, 1994. Post-retirement expense includes the following components:
1995 1994 1993 Service cost $ 4 $ 6 $ 43 Interest cost on accumulated post-retirement benefit obligation 10 10 64 Actual return on plan assets - - - Net amortization and deferral (11) (5) 47 Benefit payments - - (16) Post-retirement expense $ 3 $ 11 $ 138
The annual assumed rate of increase in the per capita cost of covered benefits for 1996 is 11.5% for medical benefits and 8.5% for dental benefits (compared to 12.0% and 9.0% for 1995 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, 1995, by $6,000, and the aggregate of the service and interest cost components of net periodic post- retirement benefit cost for 1995 by $1,000. The weighted- average discount rate used in determining the accumulated post-retirement benefit obligation was 7.0% at December 31, 1995, and 8.5% at December 31, 1994. The long-term inflation rate assumed was 4% for both years. 11. 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, 1995, 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, 1996 $ 117 1997 117 1998 65 1999 47 2000 47 Thereafter 237 Total minimum lease payments $ 630
Rental expense under operating leases approximated $86,000 in 1995, $83,000 in 1994, and $82,000 in 1993. 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 1995 and 1994. The outstanding balance of all loans to the related parties was $6,800,000 and $4,904,000 at December 31, 1995 and 1994, 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:
Contract Amount 1995 1994 Commitments to extend credit $ 16,021 $ 14,210 Standby letters of credit 866 1,307
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, $587,000 will expire in 1996, while the remaining $279,000 expire in various years through 2005. 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 1996 without approval of the Comptroller of the Currency of approximately $6,200,000 plus an additional amount equal to the bank's net profit for 1996 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:
1995 1994 1993 Taxes other than payroll and real estate $ 287 $ 228 $ 267 Supplies and printing 295 262 249 Insurance, including Federal Deposit Insurance 430 616 581 Data processing 64 281 303 Advertising 159 102 121 Amortization of intangibles 415 415 416 Other (individually less than 1% of total interest income) 1,300 1,068 980 Total $ 2,950 $ 2,972 $ 2,917
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, 1995 and 1994, were $1,724,000 and $1,734,000, respectively. 18. Cash Flow 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 1995, 1994, and 1993 were $10,856,000, $8,670,000, and $8,880,000, respectively. Cash payments for income taxes for 1995, 1994, and 1993 were $1,740,000, $1,030,000, and $462,000, 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 11.11 shares of the Corporation's common stock. 20. Fair Value of Financial Statements Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlements of the instruments. Statement 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. In addition, the value of long- term relationships with depositors and other customers are not reflected. The value of these items is significant. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation. The following methods and assumptions were used in estimating fair values of financial instruments as disclosed herein: Cash and Cash Equivalents: For those short-term instruments, the carrying amount is a reasonable estimate of fair value. 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 prices 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 primarily 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. Long-Term Debt: The fair values of long-term debt are estimated using discounted cash flow analyses based on the Corporation's current incremental borrowing rates for similar types of borrowing arrangements. The fair values of the Corporation's financial instruments are as follows:
1995 1994 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents $ 10,175 $ 10,175 $ 11,770 $ 11,770 Securities available for sale 112,109 112,109 49,132 49,132 Securities held to maturity 23,726 23,758 92,463 86,828 Loans, net 157,254 160,186 145,559 143,300 Financial liabilities: Deposits 246,850 247,255 255,923 257,123 Short-term borrowings 38,665 38,665 35,498 35,498 Long-term debt 4,802 4,864 - -
21. Condensed Parent Company Financial Statements Presented below are the condensed balance sheets, statements of income, and statements of cash flows for Belmont Bancorp. Balance Sheets
1995 1994 Assets Cash $ 23 $ 377 Investment in subsidiaries (at equity in net assets) 24,485 19,504 Equity securities 120 60 Advances to subsidiaries, net 398 145 Prepaid taxes 158 148 Total Assets $25,184 $20,234 Liabilities Accrued dividends $ 20 $ 20 Shareholders' Equity Preferred stock Senior cumulative preferred stock 1,000 1,000 Common stock 1,057 3,777 Capital surplus 7,781 5,061 Treasury stock-832 shares in 1995 and 424 shares in 1994 (8) (8) Retained earnings-appropriated 850 850 Retained earnings-unappropriated 14,148 11,026 Net unrealized gain (loss) on securities available for sale 336 (1,492) Total shareholders' equity 25,164 20,214 Total Liabilities and Shareholders' Equity $25,184 $20,234 Statement of Income 1995 1994 1993 Operating Income Dividends from subsidiaries $ 1,084 $ 879 $ 780 Other income 10 10 9 Total income 1,094 889 789 Operating Expenses (59) (33) (30) Nonoperating Income - - 1 Income before income tax and equity in undistributed income of subsidiaries 1,035 856 760 Income Tax (credit) (18) (8) (8) Equity in Undistributed Income of Subsidiaries 3,153 2,370 1,801 Net Income $ 4,206 $3,234 $2,569 Statement of Cash Flows 1995 1994 1993 Operating Activities Net income $4,206 $3,234 $2,569 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of affiliates (3,153) (2,370) (1,801) Investment securities gains - - (1) Changes in operating assets and liabilities: Prepaid taxes (10) (148) 121 Accrued expenses - (166) 166 Net cash provided by operating activities 1,043 550 1,054 Investing Activities Payments (to) from subsidiaries (253) 539 (464) Proceeds from sales of equity securities - - 1 Investment purchases (60) - - Net cash provided (used) by investing activities (313) 539 (463) Financing Activities Cash paid for fractional shares - (10) - Sale of treasury stock - 5 1 Dividends (1,084) (879) (780) Net cash used by financing activities (1,084) (884) (779) Increase (Decrease) in Cash & Cash Equivalents (354) 205 (188) Cash and Cash Equivalents at Beginning of Year 377 172 360 Cash and Cash Equivalents at End of Year $ 23 $ 377 $ 172
Supplemental disclosure: The Corporation made income tax payments of $1,740,000, $1,030,000 and $462,000 in 1995, 1994, and 1993, respectively. These payments represented income tax payments for the Corporation and its consolidated subsidiaries. The Corporation incurred no interest expense in 1995, 1994 or 1993. 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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, 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, 1995, in conformity and 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. Wheeling, West Virginia January 23, 1996 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 system 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. President and Chief Executive Officer Belmont Bancorp. Belmont National Bank 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, 1995, 1994, and 1993 (Fully Taxable Equivalent Basis) ($000s)
1995 1994 1993 Average Average Average Average Average Aver. 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 $152,502 $ 14,347 9.41% $134,952 $ 11,779 8.73% $120,218 $ 10,753 8.94% Securities Taxable 113,409 7,768 6.85% 114,468 6,810 5.95% 111,760 5,169 4.63% Exempt from income taxes 25,689 2,062 8.03% 21,866 1,746 7.98% 12,474 1,104 8.85% Trading account assets - - - 138 1 0.72% 831 45 5.42% Federal funds sold 805 47 5.84% 130 4 3.08% 4,147 125 3.01% Interest bearing deposits - - - - - - 98 2 2.04% Total interest earning assets 292,405 24,224 8.28% 271,554 20,340 7.49% 249,528 17,198 6.89% Cash and due from banks 8,448 8,275 7,823 Other assets 12,927 12,014 11,568 Market value apprecia tion (deprecia tion) of securities available for sale (731) (860) - Allowance for possible loan loss (2,139) (1,427) (1,328) Total Assets $310,910 $289,556 $267,591 Liabilities Interest bearing liabilities Interest checking $25,953 $ 614 2.37% $ 26,764 $ 581 2.17% $ 30,895 $ 745 2.41% Savings 78,679 2,359 3.00% 95,655 2,850 2.98% 85,865 2,788 3.25% Other time deposits 121,329 6,049 4.99% 99,660 4,434 4.45% 106,706 4,992 4.68% Other borrowings 34,665 1,905 5.50% 21,217 942 4.44% 3,675 91 2.48% Total interest bearing liabili ties 260,626 10,927 4.19% 243,296 8,807 3.62% 227,141 8,616 3.79% Demand deposits 25,819 24,797 21,093 Other liabilities 1,632 1,583 1,272 Total liabili- ties 288,077 269,676 249,506 Share- holders' Equity 22,833 19,880 18,085 Total Liabilities and Share- holders' Equity $310,910 $289,556 $267,591 Net interest income margin on a taxable equivalent basis 13,297 4.55% 11,533 4.25% 8,582 3.44% Net interest rate spread 4.09% 3.87% 3.10% Interest bearing liabilities to interest earning assets 89.13% 89.59% 91.03%
Fully taxable equivalent basis computed at effective federal tax rate of 34%. Average loan balances include nonperforming loans. Analysis of Net Interest Income Changes For the Years Ended December 31, 1995, 1994 and 1993 (Fully Taxable Equivalent Basis) (000's)
1995 Compared to 1994 1994 Compared to 1993 Volume Yield Mix Total Volume Yield Mix Total Increase (decrease) in interest income Loans and leases $1,532 $ 917 $ 119 $2,568 $1,318 $ (260) $ (32) $1,026 Securities Taxable (63) 1,031 (10) 958 125 1,480 35 1,640 Exempt from income taxes 305 9 2 316 831 (108) (81) 642 Trading account assets (1) (1) 1 (1) (38) (39) 33 (44) Federal funds sold 21 4 18 43 (121) 3 (3) (121) Interest bearing deposits - - - - (2) (2) 2 (2) Total interest income change 1,794 1,960 130 3,884 2,113 1,074 (46) 3,141 Increase (decrease) in interest expense Interest checking (18) 52 (1) 33 (100) (74) 10 (164) Savings (506) 18 (3) (491) 318 (230) (26) 62 Other time deposits 964 535 116 1,615 (330) (245) 17 (558) Short-term borrowings 597 224 142 963 434 72 345 851 Total interest expense change 1,037 829 254 2,120 322 (477) 346 191 Increase (decrease) in net interest income on a taxable equivalent basis $ 757 $1,131 $(124) $1,764 $1,791 $1,551 $(392) $2,950 (Increase) decrease in taxable equivalent adjustment (145) (215) Net interest income change $1,619 $2,735
Belmont Bancorp. Directors John A. Belot President, Walden Industries, Inc. J. Vincent Ciroli, Jr. President and Chief Executive Officer, Belmont Bancorp. and Belmont National Bank William P. Goddard Director John H. Goodman, II Realtor, President, Goodman Group, Inc. Mary L. Holloway Haning Special Projects Coordinator, Plastic Surgery, Inc. Charles J. Kaiser, Jr. Attorney-at-Law, Partner, Phillips, Gardill, Kaiser and Altmeyer Terrence A. Lee Chairman, Belmont Bancorp. and Belmont National Bank; CPA, Partner, Lee, O'Connor & Associates Dana J. Lewis President, Zanco Enterprises, Inc. James R. Miller Vice President and General Manager, Joy Technologies, Inc. W. Quay Mull, II Chairman, Mull Machine Company Tom Olszowy Independent Insurance Agent, Tom Olszowy Insurance Keith A. Sommer Attorney, Partner, Sommer, Solovan, Liberati and Shaheen 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 Terrence A. Lee Chairman Charles A. Wilson, Jr. Vice Chairman J. Vincent Ciroli, Jr. President and Chief Executive Officer William Wallace Vice President Jane R. Marsh Secretary Belmont National Bank Officers Terrence A. Lee 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 Jane R. Marsh Senior Vice President, Controller and Cashier Robert A. Brown Vice President, Marketing and Product Development Manager J. Douglas Cash Vice President and Regional Manager Richard E. Dolan Vice President and Trust Officer Gerald J. Elliott Vice President and Compliance Officer Larry G. Gibbs Vice President & Trust Officer Logan B. Sturgeon Vice President & Senior Trust Officer Trent B. Troyer Vice President and Regional Manager Belmont Financial Network, Inc. J. Vincent Ciroli, Jr. Chairman and President Jane R. Marsh Secretary and Treasurer Belmont Investment and Financial Services,Inc. J. Vincent Ciroli, Jr. President and Chief Executive Officer William Wallace Vice President, Secretary and Treasurer 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 (330) 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 Woodsdale Office 980 National Road Wheeling, WV 26003 (304) 233-9691 Wabash Avenue Drive-In Office 525 Wabash Avenue New Philadelphia, OH 44663 Belmont Bancorp. 325 Main Street Bridgeport, OH 43912 (614) 695-3323 Notice of Form 10-K Upon written request of any shareholder on record on December 31, 1995, the Corporation will provide, without charge, a copy of its 1995 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. Teri Walters, Administrative Officer, Belmont Bancorp., 325 Main Street, Bridgeport, OH 43912. EX-3 4 PROXY STATEMENT NOTICE OF ANNUAL MEETING OF SHAREHOLDERS BELMONT BANCORP. April 16, 1996 To the Shareholders of BELMONT BANCORP.: The Annual Meeting of Shareholders of BELMONT BANCORP. will be held in the Belmont National Bank conference room at Belmont National Bank, 980 National Road, Wheeling, West Virginia, on Tuesday, April 16, 1996, at 1:00 p.m. for the following purposes: 1. To elect five (5) persons as Directors to serve for a three-year term expiring at the annual shareholders' meeting in 1999. 2. 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, 1996. 3. 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 29, 1996, 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 15, 1996 PROXY STATEMENT OF BELMONT BANCORP. 325 Main Street Bridgeport, Ohio 43912 ANNUAL MEETING OF SHAREHOLDERS April 16, 1996 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 16, 1996, in the conference room of Belmont National Bank, 980 National Road, Wheeling, West Virginia, 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 15, 1996. The Board of Directors has fixed the close of business on February 29, 1996, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. On the record date 2,114,644 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 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 16, 1996, set the number of Directors at fourteen (14) members with five (5) members to be elected to the class which expires at the annual meeting in 1999. All nominees are currently Directors of the Corporation and its principal subsidiary, Belmont National Bank. Except for James R. Miller and Mary L. Holloway Haning, 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 1999: Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total Mary L. Holloway Haning 40 1993 1,565 (1) * Special Projects Coordinator, Plastic Surgery, Inc. (Sept. 1995-Present) Director of Admissions, Wheeling Country Day School (1987-June 1995) Charles J. Kaiser, Jr. 46 1979 9,548 (2) * Attorney, Partner, Phillips, Gardill, Kaiser & Altmeyer Samuel A. Mumley (3) 64 1996 100 * Executive Secretary, Ohio Valley Athletic Conference Thomas Olszowy 49 1993 15,066 (4) * Independent Insurance Agent, Tom Olszowy Insurance Agency Charles A. Wilson, Jr. 53 1973 21,816 (5) 1.03 President, Wilson Funeral & Furniture Co. Footnotes 1. This amount includes 1,024 shares held for the benefit of Mary L. Holloway Haning in trust in which Wesbanco Bank Wheeling is trustee. 2. This amount includes 72 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 600 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. 3. Samuel A. Mumley was appointed to the Board on February 20, 1996, to serve out the remainder of the term of William P. Goddard who retired. 4. This amount includes 11,982 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 302 shares held in the name of Tom Olszowy, custodian for Dana Paul Olszowy, and 802 shares held in the name of Tom Olszowy, custodian for Jonathan T. Olszowy, to which Mr. Olszowy disclaims any beneficial interest. 5. This amount includes 3,122 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. *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 1997 Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total John A. Belot 53 1979 20,631 (6) 1.0 President, Walden Industries, Inc. Terrence A. Lee, CPA 46 1987 1,715 (7) * Chairman, Belmont Bancorp. and Belmont National Bank; Partner, Lee, O'Connor & Associates Dana J. Lewis 52 1994 10,652 * President, Zanco Enterprises, Inc. New Philadelphia, Ohio; Owner/Operator of McDonald restaurants W. Quay Mull, II 53 1984 12,594 (8) * Chairman of the Board Mull Industries, Inc. William Wallace 40 1991 9,614 (9) * Executive Vice President & Chief Operating Officer, Belmont National Bank; Vice President, Belmont Bancorp. Footnotes 6. This amount includes 6,324 shares held jointly by Terry L. Belot, wife of John A. Belot, and Jason Michael Belot, son of John A. Belot; 6,324 shares held jointly by Terry L. Belot and John A. Belot, Jr., son of John A. Belot; 5,500 shares held in the name of Jason Michael Belot; and 549 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 1,000 shares held in the name of Terry L. Belot, IRA, to which Mr. Belot disclaims any beneficial interest. 7. This amount includes 12 shares held in the name of Terrence A. Lee, Custodian for Katherine M. Lee, UOTMA; 12 shares held in the name of Terrence A. Lee, Custodian for Natalie A. Lee, UOTMA; and 12 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 21,084 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. 8. This amount includes 8,040 shares held in the name of Mull Machine Company of which Mr. Mull is President and holds a substantial ownership interest. 9. This amount includes 2,576 shares held jointly with Christine Wallace, Mr. Wallace's wife, in which he shares voting and investment power; 2,038 shares held in the name of Christine Wallace, IRA, to which Mr. Wallace disclaims any beneficial interest; 444 shares held in the name of William Wallace as Custodian for Joseph J. Wallace, UWVTMA; 444 shares held in the name of William Wallace as Custodian for Lauren C. Wallace, UWVTMA; 412 shares held in the name of William Wallace as Custodian for Adrienne C. Wallace, UWVTMA; and 380 shares held in the name of William Wallace as Custodian for William J. Wallace, UWVTMA; Mr. Wallace's minor children. Directors Whose Term of Office Will Expire at the Annual Shareholders' Meeting in 1998 Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total J. Vincent Ciroli, Jr. 50 1984 9,983 * President & Chief Executive Officer, Belmont Bancorp. and Belmont National Bank John H. Goodman, II 51 1974 45,026 (10) 2.13 Realtor, President Goodman Group, Inc. Keith A. Sommer 55 1995 2,734 * Attorney, Partner, Sommer, Sollovan, Liberati & Shaheen James R. Miller 53 1995 400 * Vice President & General Manager Joy Technologies Inc., April 1992 - present Specialty Operations Manager, Westinghouse Electric, 1970-1992 Footnotes 10. This amount includes 2,854 shares held in the name of Marylouise Goodman IRA, and 130 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 21,084 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. This amount also includes 1,605 shares held by John H. Goodman, II and J. Harvey Goodman, Trustees under a trust dated February 13, 1995 and 4,587 shares held by J. Harvey Goodman and John H. Goodman, II, Trustees under a trust dated April 26, 1995. As of February 29, 1996, the Directors and Officers of the Corporation as a group beneficially owned 161,444 shares or 7.63 percent of the outstanding common stock of the Corporation. 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 1995. 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 1995. 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 1995. 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 six (6) times during 1995. 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. Goodman, Kaiser, Lee, Miller, Mull and Olszowy 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 five (5) times during 1995. The Bank also has a Trust Committee that met four (4) times in 1995 whose members are Ms. Haning and Messrs. Belot, Goddard, Lewis, Sommer, Wallace, Wilson and Logan B. Sturgeon. 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 Bank or Committee Meeting attended. Also, Directors receive an attendance fee of One Hundred Dollars per regularly scheduled quarterly Bancorp. Meeting, not to exceed Four Hundred Dollars. During 1995, a total of $76,533.50 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 $2,747.04 and Mr. Terhune received $5,567.04 during 1995 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 and COO, 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 deemsmost 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, 1995, J. Vincent Ciroli, Jr., William Wallace and Jane R. Marsh were the only officers compensated in excess of $100,000. Their compensation is summarized in the following table: Name and All Other Principal Position Year Salary Bonus Compensation J. Vincent Ciroli, Jr. 1995 $145,000.00 $116,000.00 $14,159.04 President & 1994 $129,900.06 $88,181.00 $9,439.38 Chief Executive 1993 $126,600.00 $41,143.00 $8,488.62 Officer; Belmont Bancorp. and Belmont National Bank William Wallace 1995 $105,000.00 $84,000.00 $11,162.44 Vice President, 1994 $94,734.91 $64,303.00 $6,685.09 Belmont Bancorp. and 1993 $92,365.56 $30,021.00 $5,703.84 Executive Vice President & Chief Operating Officer, Belmont National Bank Jane R. Marsh 1995 $58,000.02 $46,400.00 $6,097.44 Secretary, Belmont 1994 $51,877.20 $35,212.00 $3,665.09 Bancorp. and Senior 1993 $50,572.80 $16,437.00 $3,063.22 Vice President, Controller,and Cashier, 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. 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. For the year 1995, the formula was altered to correlate the return on equity base to ninety percent (90%) of the December 31, 1995, Uniform Bank Performance Report's calculation of net income as a percent of average total equity for the peer group of which the Bank is a part. Since the information will not be available until March of the following year, the bonus was calculated and paid based upon the September 1995 peer numbers and final adjustments made when the final information is received. Ninety percent of the peer group's return on average equity at September 30, 1995 was 13.15%. The selected rates of return on beginning shareholders' equity was thirteen percent (13.00%) for 1994 and 1993. 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 1995, the Bank paid $33,314.54 in matching funds and made a voluntary contribution of $131,515.05, or seven and one tenth percent (7 1/10%) of annual salary. In 1995, the profit sharing contribution attributed to Mr. Ciroli was $10,650.00; the matching funds contribution was $2,900.04. The profit sharing contribution paid for Mr. Wallace was $8,857.67; the matching funds contribution was $2,100.02. The profit sharing contribution paid for Mrs. Marsh was $4,850.32 and the matching funds contribution was $1,160.12. 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 1995, the amount of income attributable for a split-dollar insurance plan was $609.00, $204.75 and $87.00 for Mr. Ciroli, Mr. Wallace and Mrs. Marsh 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, and subsequently amended the plan on December 19, 1995, in order to augment the retirement benefits payable to these officers and make them more comparable to the benefits provided under the defined 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 credited the sum of $163,000 to a book reserve account for the benefit of Mr. Ciroli, the sum of $19,000 for Mr. Wallace and the sum of $3,000 for Ms. Marsh. 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 U.S. 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, 1990 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 POINT- 12/31/90 $100.00 $100.00 $100.00 YEAR ENDED 12/31/91 104.70 138.00 160.56 YEAR ENDED 12/31/92 114.73 194.18 186.86 YEAR ENDED 12/31/93 125.43 226.91 214.51 YEAR ENDED 12/31/94 234.90 230.34 209.68 YEAR ENDED 12/31/95 439.46 297.62 296.30 PROPOSAL NUMBER 2: 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, 1996. 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 1995 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, 1995, all section 16(a) filing requirements applicable to the Corporation's officers, directors, and greater than 10% beneficial owners were complied with. 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 judgment. 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 15, 1997, 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 8, 1996. 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. Bridgeport, Ohio BY ORDER OF THE BOARD March 15, 1996 OF DIRECTORS J. VINCENT CIROLI, JR., PRESIDENT & CEO APPENDIX A PROXY BELMONT BANCORP., BRIDGEPORT, OHIO ANNUAL MEETING OF SHAREHOLDERS APRIL 16, 1996 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, 980 National Road, Wheeling, West Virginia, on April 16, 1996, at 1:00 P.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 1999: Mary L. Holloway Haning Thomas Olszowy Charles J. Kaiser, Jr. Charles A. Wilson, Jr. Samuel A. Mumley 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 a proposal to ratify the Against appointment of S.R. Snodgrass A.C. as independent auditors Abstain for the year ending December 31, 1996. For 3. In accordance with the judgment of the said proxies to vote Against 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. 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-31-1995 DEC-31-1995 10,175 0 0 0 112,109 23,726 23,758 159,957 2,703 317,279 246,850 38,665 1,798 4,802 0 1,000 1,057 23,107 317,279 14,212 9,242 0 23,454 9,022 10,927 12,527 1,150 102 7,623 5,539 5,539 0 0 4,206 1.95 1.95 4.55 162 14 0 787 1,537 51 67 2,703 2,703 0 1,964
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