-----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, OfdjxZkmpQBr8aBxqL0ztiifqWxUNjnq+s5I7iLLWDlupeQr9swC+QB6YonFALUD GJUomtkOUcEVjJKV9XILDg== 0000726294-98-000009.txt : 19980330 0000726294-98-000009.hdr.sgml : 19980330 ACCESSION NUMBER: 0000726294-98-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELMONT BANCORP CENTRAL INDEX KEY: 0000726294 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 341374776 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-12724 FILM NUMBER: 98575231 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 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 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 6, 1998 - $121,568,000 There were 2,628,498 shares of $0.50 par value, common stock outstanding as of March 6, 1998. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement of the Registrant dated March 20, 1998 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 thirteen branches located in Belmont, Harrison and Tuscarawas Counties in Ohio and Ohio County in West Virginia. The main office is located in the Woodsdale section of Wheeling, West Virginia. In addition to its main office in West Virginia, the Bank operates a branch in the Elm Grove section of Wheeling. Branch locations in Belmont County, Ohio include St. Clairsville, Bridgeport, Lansing, Shadyside, Ohio Valley Mall, Bellaire and Plaza West, St. Clairsville. 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 branches in Bellaire, Bridgeport,Elm Grove, Cadiz, the Ohio Valley Mall, Plaza West and New Philadelphia 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 1996. During the fourth quarter of 1997, BFN acted as a community development corporation by investing as a limited partner in a low income housing project that also includes historic renovation. 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 16 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 In January 1996, the Bank relocated its corporate headquarters to Wheeling, WV. The office is located at 980 National Road and consists of a 14,000 square floor combination one and two story masonry block building. Approximately half of the space is leased to a tenant. In addition, the Bank transacts business in the following branch locations: St. Clairsville Office-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 and human resources offices. 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 and an ATM. 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. Elm Grove Office-This office is located at 2066 National Road in Wheeling, WV, and includes a drive-thru facility and an ATM. Bellaire Office - This leased office, located in the Imperial Shopping Center, is comprised of approximately 1,750 square feet with an adjoining drive-thru facility and ATM. Plaza West Solution Center - This office is located at the west end of St. Clairsville and features a different concept in retail banking. It includes a drive-thru facility and an ATM. All offices are owned by the Bank except for the Mall and Bellaire offices. All leased offices contain renewal options. The land for the Elm Grove office is also leased. 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 The number of shareholders of record for the Corporation's stock as of March 6, 1998 was 613. The closing price of Belmont Bancorp. stock on March 6, 1998 was $46.25 per share. Belmont Bancorp.'s common stock has a par value of $0.50 and, since October 1994, has been traded on the Nasdaq SmallCap market. 1997 Dividend Quarter High Low per Share 1st $22.40 $20.40 $0.136 2nd 25.20 20.80 0.136 3rd 30.00 25.13 0.170 4th 41.50 29.00 0.170 Total $0.612 1996 Dividend Quarter High Low per Share 1st $22.00 $20.00 $0.104 2nd 22.40 20.80 0.120 3rd 22.40 20.80 0.120 4th 22.00 20.40 0.136 Total $0.480 The tables above show its high and low market prices and dividend information for the past two years. Market prices and cash dividends paid per share have been restated to reflect the effect of a 5-for 4 common stock split effected in the form of a 25% common stock dividend paid July 1, 1997. Information regarding the limitations on dividends available to be paid can be located in Footnote 16 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 6,665 shares and 832 shares held in treasury on December 31, 1997 and 1996, respectively. 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 1997, net income increased 18.9% from the previous year; net income for the year ended 1996 also increased 18.9% compared to 1995. Net income per common share for 1997 was $2.25 compared to $1.87 per common share in 1996 and $1.56 in 1995. Return on average common shareholders' equity was 20.21% for 1997, up from 19.55% in 1996 and 18.90% in 1995. The Corporation's net income to average assets, referred to as return on assets, increased to 1.62% for the year ended 1997 from 1.49% last year and 1.35% during 1995. 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 $185,000 or 2.9% from 1996 to 1997. The table below summarizes earnings performance for the past three years. ($000s) except per share data 1997 1996 1995 Operating income $6,567 $6,382 $5,437 Net income 5,945 5,002 4,206 Net income per share $ 2.25 $ 1.87 $ 1.56 Return on average assets 1.62% 1.49% 1.35% Return on average common equity 20.21% 19.55% 18.90% Return on average total equity 20.21% 19.05% 18.42% 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, 1997, 1996, and 1995, 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 $1,002,000 on a taxable equivalent basis during 1997 compared to the same period last year, a 7.1% increase. The increase in net interest income was attributable to an increase in average earning assets. During 1997, the Corporation's average interest-earning assets grew by approximately $28.7 million, up 9.1% from 1996. The yield on interest earning assets was up 15 basis points from 8.28% in 1996 to 8.43% in 1997. However the cost of interest bearing liabilities rose 25 basis points from 1996 to 1997. Consequently, the net interest rate spread decreased from 3.95% during 1996 to 3.84% during 1997. The taxable equivalent net interest margin was 4.37% during 1997 compared to 4.45% for 1996 and 4.55% 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 1996 to 1997 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 8.0% and totaled $2,010,000 in 1997, compared to $1,861,000 in 1996 and $1,683,000 in 1995. The table below shows the dollar amounts and growth rates of the components of other operating income. 1997 1996 1995 ($000s) Total Change Total Change Total Trust income $ 466 -7.17% $ 502 21.55% $ 413 Service charges on deposits 707 7.12% 660 18.92% 555 Gain on sale of loans 91 26.39% 72 -47.06% 136 Recovery on class action lawsuit - -100.00% 27 -85.71% 189 Other income 746 24.33% 600 53.85% 390 Subtotal 2,010 8.01% 1,861 10.58% 1,683 Investment securities gains(losses) (3) -200.00% (1) 90.91% (11) Gains (losses) on securities available for sale 802 102.02% 397 251.33% 113 Total $2,809 24.46% $2,257 26.44% $1,785 During the fourth quarters of 1996 and 1995, the Corporation recovered $27,000 and $189,000, respectively for settlement of a class action lawsuit arising out of the issuance and sale of taxable municipal bonds. Gains on sale of loans contributed $91,000 to noninterest income during 1997, up from $72,000 in 1996. The Corporation utilizes the secondary mortgage market 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. Losses on investments held in the maturity portfolio during 1997 and 1996 occurred as a result of calls on municipal bonds in the portfolio. These losses totaled $3,000 during 1997 and 1,000 during 1996. Net gains were realized on securities available for sale during 1997 totaling $802,000 compared to gains of $397,000 during 1996 and losses of $113,000 during 1995. The related income taxes on securities transactions, including trading and securities available for sale, were $174,000, $104,000, and $25,000 for the years ended 1997, 1996 and 1995, respectively. 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 1997, 1996, and 1995. ($000s) 1997 % Change 1996 % Change 1995 Salaries and wages $3,034 14.66% $2,646 3.56% $2,555 Employee benefits 914 15.70% 790 -1.50% 802 Net occupancy expense 783 14.14% 686 24.28% 552 Equipment expense 947 15.91% 817 6.94% 764 FDIC insurance 64 -87.74% 522 38.46% 377 Other operating expenses 2,990 2.15% 2,927 13.76% 2,573 Total $8,732 4.10% $8,388 10.04% $7,623 Management strives to maintain the Corporation's efficiency ratio at or below 50%. (The efficiency ratio is computed by dividing the sum of fully taxable equivalent net interest margin plus non-interest income by non-interest expenses.) For the year ended 1997, the efficiency ratio was 48.8% compared to 51.4% in 1996 and 50.6% in 1995. Salaries and wages included incentive performance bonuses tied to earnings performance totalling $299,000 in 1997, $243,000 during 1996 and $343,000 during 1995. Overall, operating expenses were impacted by the addition of two new offices in Wheeling, West Virginia during 1996 and new offices in Bellaire, Ohio and at Plaza West in St. Clairsville, Ohio in 1997. Other non-interest operating expense includes FDIC insurance assessments. FDIC insurance expense included in other operating expenses were $64,000, $522,000 and $377,000 in 1997, 1996 and 1995, respectively, including a one time, pre-tax assessment on deposits insured through the Savings Association Insurance Fund during the third quarter of 1996 totaling $397,000. Taxes, other than payroll and real estate taxes, included in noninterest expense totaled $426,000 during 1997, up from $395,000 in 1996. This includes the Ohio state corporate franchise tax based on the equity of the subsidiary bank. Other noninterest expense also includes expense associated with other real estate owned. During 1997 this expense was $20,000 compared to $143,000 during 1996. Expenses associated with one property which was disposed of during the fourth quarter of 1996 totaled $140,000. Federal income taxes were reduced by $482,000 in historic tax credits associated with a low income housing project that the subsidiary, Belmont Financial Network, invested in as a limited partner during the fourth quarter of 1997. The project is expected to generate low income housing credits in excess of $150,000 in each of the next ten years. FINANCIAL CONDITION SECURITIES The book values of investments as of December 31, 1997 and 1996 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. The maturities and yields of securities held to maturity and available for sale (excluding equity securities) are detailed in the following tables. Securities Held to Maturity December 31, 1997 U.S. Government States and Agency agencies and Political mortgage-backed Maturity Period corporations Subdivisions(a) securities(b) Total Less than 1 year 2,260 466 - 2,726 Yield 4.80% 3.06% 4.50% 1-5 Years - 1,714 6,455 8,169 Yield 8.17% 6.98% 7.23% 6-10 Years - 332 1,725 2,057 Yield 10.68% 7.60% 8.10% Over 10 Years - 1,975 1,028 3,003 Yield 10.07% 8.77% 9.63% Total 2,260 4,487 9,208 15,955 Yield 4.80% 8.66% 7.30% 7.33% Securities Available for Sale December 31, 1997 At estimated fair value
U.S. U.S. Govt. States and Agency Mortgage Total Treasury agencies and political mortgage-backed derivatives Fair Amortized Maturity Period securities corporations subdivisions(a) securities(b) securities(b) Value Cost Less than 1 year - - - 180 1,524 1,704 1,705 Yield 3.24% 5.48% 5.25% 1-5 Years 100 6,528 - 36,873 20,445 63,946 64,131 Yield 6.38% 6.75% 6.37% 6.61% 6.40% 6-10 Years - 8,264 103 18,605 - 26,972 26,851 Yield 6.35% 7.58% 7.19% 6.93% Over 10 Years - - 18,075 3,294 2,462 23,831 23,465 Yield 8.10% 9.05% 7.73% 8.19% Total fair value 100 14,792 18,178 58,952 24,431 116,453 116,152 Yield 6.38% 6.53% 8.10% 6.77% 6.65% 6.87% (a) Taxable equivalent yields (b) Maturities of mortgage-backed securities are based on estimated average life.
At December 31, 1997, there were no securities of a single issuer, other than U.S. Treasury or other U.S. government agency securities, which exceeded 10% of shareholders' equity. The state and political subdivision portfolio includes approximately $2.4 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, 1997. 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, 1997 and 1996, estimated market values approximated original cost. Taxable Equivalent December 31, 1997 ($000s) Cost Market Value Yield Federal Home Loan Bank Stock $4,450 $4,450 7.19% Corporate Stock 66 66 5.17% Federal Reserve Bank Stock 187 187 6.00% $4,703 $4,703 Taxable Equivalent December 31, 1996 ($000s) Cost Market Value Yield Federal Home Loan Bank Stock $2,960 $2,960 7.00% Corporate Stock 120 120 8.00% Federal Reserve Bank Stock 187 187 6.00% $3,267 $3,267 LOANS AND LEASES The following table shows the history of commercial and consumer loans and leases, including loans held for sale, by major category at December 31. ($000s) 1997 1996 1995 1994 1993 Commercial loans: Real estate construction $ 1,418 $ 1,327 $ 1,530 $ 1,801 $ 2,081 Acceptances of other banks 0 0 0 0 0 Real estate mortgage 19,984 25,954 28,744 23,701 21,211 Commercial, financial and agricultural 109,618 80,554 50,532 38,983 25,317 Direct financing leases 0 0 3 5 9 Total commercial loans $131,020 $107,835 $80,809 $64,490 $48,618 Consumer loans: Residential mortgage $ 77,995 $ 71,715 $69,999 $76,094 $70,301 Installment loans 14,435 7,626 6,959 5,116 5,281 Credit card and other consumer 1,450 1,607 2,190 1,396 1,032 Total consumer loans $ 93,880 $ 80,948 $79,148 $82,606 $76,614 Total loans and leases $224,900 $188,783 $159,957 $147,096 $125,232 An analysis of maturity and interest rate sensitivity of business loans at the end of 1997 follows: Under 1 to 5 Over 5 ($000s) 1 Year Years Years Total Domestic loans: Real estate construction $ 1,145 $ 18 $ 255 $ 1,418 Real estate mortgage 13,285 1,880 4,818 19,983 Commercial, financial and agricultural 53,560 41,722 13,442 108,724 Direct financing leases 0 0 0 0 Total business loans (a) $67,990 $43,620 $18,515 $130,125 Rate sensitivity: Predetermined rate $ 3,518 $21,303 $17,833 $ 42,654 Floating or adjustable rate 64,472 22,317 682 87,471 Total domestic business loans $67,990 $43,620 $18,515 $130,125 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. The adequacy of the allowance for possible loan losses is evaluated based on an assessment of the losses inherent in the loan portfolio. This assessment results in an allowance consisting of two components, allocated and unallocated. The allocations are made for analytical purposes. The total allowance is available to absorb losses from any segment of the portfolio. Management maintains a watch list of substandard loans for monthly review. Although these loans may not be 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 $4,134,000, or 1.84% of total loans and leases at December 31, 1997. At the end of the previous year, the allowance for possible loan losses was $3,153,000, or 1.67% of total loans and leases. The provision charged to expense during 1997 was $1,055,000 compared to $465,000 in the year ago period. Management's allocation of the allowance for possible loan losses for the past five years based on estimates of potential future loan loss is set forth in the table below: ($000s) 1997 1996 1995 1994 1993 Specific reserves: Commercial $ 560 $ 330 $ 310 $ 10 $ 960 Mortgage 0 10 10 5 38 Consumer 161 176 5 7 21 Criticized loans without specific allocation 470 296 414 315 160 Provision for loan categories based on historical loss experience: Commercial 2,063 1,607 1,344 687 335 Commercial real estate 313 269 152 103 7 Residential mortgage 358 328 325 298 28 Consumer 209 137 143 112 68 Total $ 4,134 $ 3,153 $ 2,703 $ 1,537 $ 1,617 Total loans and leases outstanding $224,899 $188,783 $159,957 $147,096 $125,232 Reserves as a % of total loans ($000s) 1997 1996 1995 1994 1993 Specific reserves: Commercial 0.25% 0.17% 0.19% 0.01% 0.77% Mortgage 0.00% 0.01% 0.01% 0.00% 0.03% Consumer 0.07% 0.09% 0.00% 0.00% 0.02% Criticized loans without specific allocation 0.21% 0.16% 0.26% 0.21% 0.13% Provision for loan categories based on historical loss experience: Commercial 0.92% 0.85% 0.84% 0.47% 0.27% Commercial real estate 0.14% 0.14% 0.10% 0.07% 0.01% Residential mortgage 0.16% 0.17% 0.20% 0.20% 0.02% Consumer 0.09% 0.07% 0.09% 0.08% 0.05% Total 1.84% 1.67% 1.69% 1.04% 1.29% 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) 1997 1996 1995 1994 1993 Balance as of January 1 $3,153 $2,703 $1,537 $1,617 $1,024 Provision of loan losses 1,055 465 1,150 805 577 Adjustment incident to acquisition 0 0 0 0 0 Loans charged off: Real estate 24 30 25 49 19 Commercial 23 0 0 806 0 Consumer 43 32 26 85 15 Direct financing leases 0 0 0 0 0 Total loans charged-off 90 62 51 940 34 Recoveries of loans previously charged-off: Real estate 2 2 3 18 0 Commercial 1 0 1 29 21 Consumer 13 45 18 7 11 Direct financing leases 0 0 45 1 18 Total recoveries 16 47 67 55 50 Net charge-offs (recoveries) 74 15 (16) 885 (16) Balance at December 31 $4,134 $3,153 $2,703 $1,537 $1,617 ($000s) 1997 1996 1995 1994 1993 Loans and leases outstanding at December 31 $224,899 $188,783 $159,957 $147,096 $125,232 Allowance as a percent of loans and leases outstanding 1.84% 1.67% 1.69% 1.04% 1.29% Average loans and leases $208,265 $174,445 $152,502 $134,952 $120,218 Net charge-offs as a percent of Average loans and leases 0.04% 0.01% -0.01% 0.66% -0.01% 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) 1997 1996 Nonaccrual loans and leases $1,515 $143 Loans 90 days or more past due but accruing interest 44 74 Other real estate owned 20 66 Total $1,579 $283 In addition to the above schedule of non-performing assets, Management prepares a watch list consisting of loans over $150,000 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 1997 and not included in the table above was $3,693,000. 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) 1997 1996 1995 Demand $ 29,878 $ 27,878 $ 25,819 Interest bearing checking 43,476 38,576 25,953 Savings 78,636 79,341 78,679 Other time 101,405 99,649 108,578 Certificates-$100,000 and over 13,899 12,008 12,751 Total average deposits $267,294 $257,452 $251,780 DISTRIBUTION OF AVERAGE DEPOSITS 1997 1996 1995 Demand 11.18% 10.83% 10.26% Interest bearing checking 16.27% 14.98% 10.31% Savings 29.42% 30.82% 31.25% Other time 37.94% 38.71% 43.12% Certificates-$100,000 and over 5.20% 4.66% 5.06% Total 100.00% 100.00% 100.00% CHANGE IN AVERAGE DEPOSIT SOURCES ($000s) 1996 to 1997 1995 to 1996 Demand $2,000 $ 2,059 Interest bearing checking 4,900 12,623 Savings (705) 662 Other time 1,756 (8,929) Certificates-$100,000 and over 1,891 (743) Total $9,842 $ 5,672 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, 1997, shareholders' equity was $31,899,000 compared to $27,332,000 at December 31, 1996, an increase of $4,567,000 or 16.7%. The increase in capital during 1997 was due prmarily to the retention of earnings. During the fourth quarter of 1996, the Corporation retired $1,000,000 in senior cumulative preferred stock. 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). Bank holding companies 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, 1997, the Corporation had a Tier 1 capital ratio of 11.8% and a total capital ratio of 10.6%, well above the regulatory minimum requirements. The following table shows several capital and liquidity ratios for the Corporation for the last three years: December 31 1997 1996 1995 Average shareholder's equity to: Average assets 8.02% 7.81% 7.34% Average deposits 11.01% 10.20% 9.07% Average loans and leases 14.13% 15.06% 14.97% Primary capital 9.10% 9.13% 8.78% Risk-based capital ratio: Tier 1 11.81% 12.43% 13.07% Total 10.60% 13.68% 14.32% Leverage ratio 8.00% 7.93% 7.39% 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, 1997, the Corporation's Tier One leverage ratio was 8.00%. The following table presents dividend payout ratios for the past three years. 1997 1996 1995 Total dividends declared as a percentage of net income 27.17% 26.59% 25.77% Common dividends declared as a percentage of earnings per common share 27.20% 25.64% 24.36% 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 increased by $2.4 million, or 0.9%, from the end of 1996 to 1997. Average deposits increased $9.8 million, or 3.8%, during 1997 compared to 1996. The Bank has utilized alternative funding sources to leverage shareholders' equity and improve overall profitability. Sources include the Federal Home Loan Bank of Cincinnati and various correspondent bank relationships. The Bank also has lines of credit with various correspondent banks totaling $6,500,000 which may be used as an alternative funding source; the unused portion of these lines at December 31, 1997 was $694,000. In addition, the Bank has a line of credit with the Federal Home Loan Bank of Cincinnati for $30 million. At December 31, 1997, the balance of the overnight cash management advance was $8,829,000 with an available balance of $21,171,000. The Bank also has a repurchase-agreement based advance with the Federal Home Loan Bank for $70 million. All borrowings at the Federal Home Loan Bank are subject to eligible collateral requirements. 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, 1997
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 $54,723 $10,320 $11,965 $21,025 $98,033 $ 60,971 $ 65,895 $224,899 Investment securities 0 2,555 754 474 3,783 7,565 4,607 15,955 Securities available for sale 13,051 0 11,686 25,302 50,039 35,519 35,598 121,156 Total interest earning assets 67,774 12,875 24,405 46,801 151,855 104,055 106,100 362,010 Interest bearing liabilities: Interest checking 1,504 1,504 31,959 33,463 Savings 18,101 18,101 61,728 79,829 Certificates-$100,000 and over 3,053 2,913 4,093 4,526 14,585 1,996 1,135 17,716 Other time 8,925 17,797 14,202 20,546 61,470 29,960 11,483 102,913 Repurchase agreements 756 756 756 Short term borrowings 14,635 14,635 14,635 Long term debt 10,000 2,000 12,000 17,635 40,000 69,635 Total interest bearing liabilities 56,974 20,710 20,295 25,072 123,051 49,591 146,305 318,947 Rate sensitivity gap 10,800 -7,835 4,110 21,729 28,804 54,464 -40,205 43,063 Cumulative gap $10,800 $ 2,965 $ 7,075 $28,804 $ 83,268 $ 43,063 Cumulative gap as a percentage of interest earning assets 2.98% .82% 1.95% 7.96% 23.00% 11.90% 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. Year 2000 The Corporation initiated the process of preparing its computer systems and applications for the Year 2000 during 1997. This process involves modifying or replacing certain hardware and software maintained by the Corporation as well as communicating with external service providers to ensure that they are taking the appropriate action to remedy their Year 2000 issues. Management expects testing for Year 2000 functionality to be complete by the end of 1998. Purchased hardware and software will be capitalized in accordance with normal policy. Personnel and other costs related to the project will be expensed as incurred. The Corporation does not expect to spend any significant amounts with outside contractors relative to the completion of this task. Therefore, cost estimates do not represent any material incremental costs, but rather will represent the redeployment of existing technology resources. The majority of information systems are vendor-supplied, and all vendors have provided a certification or a delivery commitment letter. Management believes that modifications to existing systems, conversions to new systems, and vendor delivery of millennium-compliant systems will be resolved on a timely basis, and any related costs will not have a material impact on the operations, cash flows, or financial condition of future periods. 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 20, 1998 (Exhibit C) is incorporated by reference in response to this item. EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1998: Name Age Position J. Vincent Ciroli, Jr. 52 President and Chief Executive Officer, Belmont Bancorp. & Belmont National Bank William Wallace 42 Vice President, Belmont Bancorp.; Executive Vice President & Chief Operating Officer, Belmont National Bank Jane R. Marsh 36 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 20, 1998 (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 20, 1998 (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 20, 1998 (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 16, 1998. By Terrence A. Lee, Chairman BELMONT BANCORP Terrence A. Lee, Chairman (Registrant) John A. Belot s/John A. Belot Director Vincent Ciroli, Jr. s/J. Vincent Ciroli, Jr. Director, President & CEO. Belmont Bancorp., Belmont National Bank Samuel Mumley s/Samuel Mumley Director Mary L. Holloway Haning s/Mary L. Holloway Haning Director Charles J. Kaiser, Jr. s/Charles J. Kaiser, Jr. Director John H. Goodman, II Director Dana Lewis s/Dana Lewis Director Jane R. Marsh s/Jane R. Marsh Secretary, Belmont Bancorp. and Sr. Vice President, Controller & Cashier, Belmont National Bank James Miller Director W. Quay Mull, II s/W. Quay Mull, II Director Tom Olszowy s/Tom Olszowy Director Keith Sommer s/Keith Sommer Director William Wallace s/William Wallace Director & Vice President, Belmont Bancorp.; Executive Vice President & COO, Bank Charles A. Wilson, Jr. Vice Chairman Terrence A. Lee Chairman of the Board Terrence A. Lee March 16, 1998
EX-1 2 ACCOUNTANTS' CONSENT 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, 1998, relating to the consolidated balance sheets of Belmont Bancorp. as of December 31, 1997 and 1996, 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, 1997. Said report appears as Exhibit 2 of Belmont Bancorp.'s annual form 10-K. s/S.R. Snodgrass A.C. S.R. Snodgrass A.C. Wheeling, WV March 16, 1998 EX-2 3 REFER TO ANNUAL RPT MOD The Belmont Bancorp. 1997 Annual Report The 1997 Annual Report Cover This chart artistically compares Belmont Bancorp.'s 5 year compound annual return to shareholders of 50.94% to similar size banks and other familiar indices. A complete chart, with axes labels and a table, is provided on page 10 of this annual report. Dedication Robert N. Lewis, M.D. William Q. Mull The Belmont Bancorp. 1997 Annual Report is dedicated to Dr. Robert N. Lewis and Mr. William Q. Mull. Dr. Lewis and Mr. Mull served loyally and with dedication as Board of Directors' members of Belmont Bancorp. and Belmont National Bank. With nearly 30 years of total service to the Corporation, the contribution these gentlemen have made are significant and deeply appreciated by all. Bob and Bill's friendship and talent are missed. Corporate Profile Belmont Bancorp. (the Corporation) is a $389 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 thirteen 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) 1997 1996 % change Net income $ 5,945 $ 5,002 18.9% Operating Return on average assets 1.62% 1.49% results Return on average common equity 20.21% 19.55% Return on average total equity 20.21% 19.05% Per Net income $ 2.25 $ 1.87 20.5% common Dividend 0.612 0.480 27.5% share Book value at year-end 12.09 10.34 17.0% At Total assets $388,713 $333,903 16.4% year- Total loans 224,900 188,783 19.1% end Total deposits 263,908 261,539 0.9% Total shareholders' equity 31,899 27,332 16.7% Liquidity Average common equity and to average total assets 8.02% 7.51% capital Average total equity ratios to average total assets 8.02% 7.81% Tier one capital ratio 11.81% 12.43% Total risk-based capital ratio 13.06% 13.68% Leverage ratio 8.00% 7.93% Dividend payment ratio 27.17% 26.59% From Management We are pleased to report that we have just concluded the most successful year in the 151 year history of Belmont Bancorp. Performance improvement was shown in nearly every meaningful area of measurement over our record results in 1996. Our accomplishments are extraordinary in light of the cost associated with the continuing geographic expansion of your Corporation. Belmont Bancorp. continues to experience double digit income growth. Net income for 1997 was a record $5,945,000 compared to $5,002,000 for 1996, an 18.9% increase. On an earning per share basis this was $2.25 for 1997 versus $1.87 for the prior year. As illustrated on the annual report cover, our return to shareholders continues to be remarkable compared to our peers and other notable stock market indices. As of December 31, 1997, Belmont Bancorp. common stock provided shareholders with a 50.94% compounded annual return over the past 5 years. Had you invested $1,000 on December 31, 1992, and reinvested all dividends, your $1,000 was worth $7,835.50 at year-end '97. Also noteworthy was our return on average equity and our return on average assets. Return on average equity increased to 20.21% from 19.55% in 1996. Return on average assets increased to 1.62% from 1.49% in 1996. Total shareholders' equity for 1997 increased 16.7% to $31,899,000 from $27,332,000. In 1997, our loan portfolio grew 19.1% to $224,900,000 while maintaining excellent asset quality. Nonperforming assets as a percentage of total assets increased slightly to 0.41% compared to 0.08% in 1996, while nonperforming assets as a percentage of allowance for loan losses was 38.20% versus 8.98% in the prior year. Additionally, our allowance for possible loan loss as a percentage of total loans increased slightly to 1.84% from 1.67% in 1996. Our 151st year of service to families, businesses and communities was an exciting and busy one. In May, we opened the Belmont National Bank Solution Center...an innovative, new approach to banking in the Ohio Valley. Located at Plaza West, St. Clairsville, in front of Riesbeck's, the Solution Center is much more than just another banking office. The moment you walk through the door, you'll experience a different atmosphere. It's a place where everyone is welcome and feels comfortable. It's a place to spend time: reading in our Investors' Lounge, doing independent research linked to our web site and the internet, attending a workshop on a variety of financial topics, or simply relaxing with a cup of cappuccino. There's even a kids' playroom for young families with children. Our Solution Center also features 24-hour drivein ATM service. In September, we celebrated the opening of our lucky 13th full service office. Located in the new Imperial Plaza in Bellaire, Ohio, this office features extended drive-in banking service from 8am til 7pm weekdays, Saturday hours, and 24- hour drive-in ATM convenience. During the year, we also added drive-in ATM service for Ohio communities served by our Bridgeport and Cadiz offices. This annual report is dedicated to each and every Belmont National Bank customer. We are grateful for the opportunity to be your financial partner...to work with you through your constantly changing needs in your lifelong pursuit of financial well-being and security. Our objective is to bring order and expertise to the process of understanding and evaluating the rapidly expanding and complex financial services options you face throughout your life. Belmont Bancorp. continues the tradition of being one of the most outstanding financial institutions in the country. That is a powerful statement for us to make...but you do not need to take our word for it. In May, we were once again honored by The Cleveland Plain Dealer as one of Ohio's top 100 best-performing companies. Then, in July, Belmont Bancorp. was rated the 18th best-performing community bank in the entire nation by the U.S. Banker magazine. In addition to our financial statements, we have included in this report highlights from an independent evaluation of Belmont Bancorp. by McDonald & Company Securities Inc. We extend our sincerest appreciation to all the officers and staff of the Corporation, and the Board of Directors whose dedication and hard work make Belmont Bancorp. and Belmont National Bank one of the top banking organizations in the country. And, as always, we thank our shareholders across the country who have shown confidence and trust in the leadership of your Corporation. We pledge to you our continuing best effort and look forward to providing you with another prosperous year. J. Vincent Ciroli, Jr. Terrence A. Lee An Independent Evaluation By McDonald & Company Securities, Inc. Dated December 17, 1997 Belmont Bancorp. ranks among the upper tier of banks in profitability and has shown strong earnings per share growth over the last five years. Belmont Bancorp. currently trades at 17.7 times its last twelve months earnings and 331% of book, relative to its peer group medians of 19.6x and 255%, respectively. While Belmont Bancorp. operates in maturing markets, loan growth has remained strong. For this reason, this corporation's long term prospects for continued earnings momentum are promising. Profitability: Belmont Bancorp. has achieved strong earnings and profitability improvement over the last five years. The improvement is primarily a result of strong loan growth, operating efficiencies and strong non-interest income growth. Between 1992 and 1996, the corporation's loan portfolio grew at a compound average annual rate of 13%. Its composition changed as well, with the proportion of commercial loans in the portfolio increasing from 17% at year-end 1992 to 42% at year-end 1996. Net interest income benefitted from the higher loan volumes and, with the help of higher returns on its investment securities portfolio after 1993, posted a compound average annual growth rate of 19%. The corporation's net interest margin increased from 3.44% in 1992 to 4.45% in 1996. Strong revenue growth, as well as effective expense management, had a positive effect on Belmont Bancorp.'s efficiency ratio, which fell from 62% in 1992 to 49% in 1996. Non-interest income grew at a compound average annual rate of 15%, with strong increases in all categories. Of special note is the significance of securities transactions to profitability. In the course of managing interest rate risk, Belmont Bancorp. shops around for pools of low-risk securities that serve to mitigate interest rate risk but that it perceives to be good value. If the timing is right, Belmont Bancorp. will take securities gains. Overall balance sheet growth was modest, with assets growing at a compound average annual rate of 6% between 1992 and 1996. The corporation's double digit loan growth was offset by declines in its investment securities portfolio. At year-end 1992, loans represented 46% of earning assets; by year-end 1996 that proportion increased to 67%. Deposits grew at a compound average annual rate of under 2% during this period, reflecting increased sources of competition. The ratio of loans to deposits rose from 46% at 12/31/92 to 72% at 12/31/96. For the quarter ended 9/30/97, earning per share totalled $.54 compared to $.50 for the 9/30/96 quarter, and $.59 for the 6/30/97 quarter. The improvement over the 9/30/96 quarter resulted from 8% growth in net interest income and larger gains on securities transactions. The change over the 6/30/97 quarter primarily reflected a change in accounting for trust fees, a higher effective tax rate and higher non- interest expenses. Belmont Bancorp.'s net interest margin of 4.28% compared to 4.30% for the linked quarter and 4.33% for the 9/30/96 quarter. Its efficiency ratio improved to 47% from 48% in the 9/30/96 quarter. Asset, loan, and deposit growth from the 9/30/96 quarter were 8%, 21%, and 5%, respectively. Asset Quality: Asset quality ratios are strong. At 9/30/97, the ratio of nonperforming assets to total assets was .32%. Reserve coverage of nonperforming loans was 310%. The ratio of reserves to loans exceeded 1.60% for the last two years and was 1.67% at 9/30/97. For the 9/30/97 quarter, annualized net charge-offs were only .01% of average loans. Capital: Belmont Bancorp. maintains a strong capital position but not at the expense of shareholder returns. At 9/30/97, its Tier 1 and Risk-Based Capital ratios were 11.9% and 13.2%, respectively. Dividends per share grew at a compound average annual rate of 16.7% since 1992, and the dividend payout ratio was 26% for fiscal 1996. Recent Developments: During 1997, Belmont Bancorp. opened new offices in Bellaire and St. Clairsville, Ohio. A 25% stock dividend was paid on July 1, 1997. Strengths: Excellent Profitability: The corporation's earnings and profitability ratios have shown excellent improvement over the last five years, thanks to strong loan growth and effective cost control management. Its last twelve months' return on assets and return on equity of 1.60% and 20.33% respectively, compare to the national medians of 1.21% and 13.34%. Strong Loan Growth: Over the last five years, Belmont Bancorp.'s loan portfolio grew at a compound average rate of 13%. Much of this growth consisted of commercial loans extended to small manufacturing businesses and to the amusement industry. Belmont Bancorp. believes these two segments will continue to positively impact loan growth. Shareholder Commitment: Belmont Bancorp.'s commitment to shareholder returns is evidenced not only by its strong dividend growth rate but also its focus on capital deployment to maximize return on equity. Belmont Bancorp. will sacrifice net interest margin and return on assets by leveraging capital if doing so results in a higher return on equity. Risk Factors: Maturing Market: Belmont Bancorp.'s market area has traditionally depended upon the steel and coal industries, which have become less labor intensive over the years. Prospects for growth in the region are therefore limited. However, the area has experienced somewhat of a rebound as a regional draw for retail shopping. Deposit Competition: Like all financial institutions, Belmont Bancorp. faces intense competition for attracting deposits. Deposits since 1992 have only grown at a compound average annual growth rate of 2%. As loan growth continues to outpace deposit growth, the net interest margin will narrow. Belmont Bancorp., however, generally believes that the overhead and interest rate expense required to fight for deposits makes the effort too costly. Borrowing sources, such as the Federal Home Loan Bank, may be the most cost effective means to fund future loan growth. Outlook: Belmont Bancorp. has been experimenting with a more innovative retail delivery system at one of its branches and plans to expand that to other branches in the future. The company would like to expand geographically, and will consider acquisition opportunities as they arise. The Return To Shareholders The following graph and table compare, for each of the last five years ending December 31, the cumulative total return of Belmont Bancorp.'s Common Stock, SNL Securities' Index of Banks with Assets Size less than $500, Dow Jones Industrial Average, S & P 500, and all NASDAQ U.S. Stocks Index. The cumulative total return of the Corporation's Common Stock assumes $1,000 invested on December 31, 1992 and reinvestment of dividends.
Total Return Of A $1,000 Investment In Five Years 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Belmont Bancorp. $1,000 $1,093 $2,048 $3,831 $3,769 $7,836 All Banks <$500M Assets 1,000 1,306 1,404 1,921 2,472 4,215 Dow Jones Industrial 1,000 1,169 1,229 1,681 2,166 2,705 S & P 500 1,000 1,100 1,115 1,533 1,884 2,511 NASDAQ-Total US Stocks 1,000 1,148 1,122 1,587 1,952 2,395
Belmont Bancorp. and Subsidiaries Summarized Quarterly Financial Information (Unaudited) ($000's except per share data) First Second Third Fourth Quarter Quarter Quarter Quarter 1997 Interest income $6,528 $7,186 $7,337 $7,297 Interest expense 3,051 3,592 3,686 3,675 Net interest income 3,477 3,594 3,651 3,622 Provision for credit losses 105 250 200 500 Security gains 155 197 234 213 Net overhead 1,540 1,512 1,692 1,978 Income before income taxes 1,987 2,029 1,993 1,357 Income taxes 566 465 570 (180) Net income $1,421 $1,564 $1,423 $1,537 Net income per common share $ 0.54 $ 0.59 $ 0.54 $ 0.58 1996 Interest income $6,150 $6,331 $6,576 $6,444 Interest expense 2,849 3,058 3,201 3,019 Net interest income 3,301 3,273 3,375 3,425 Provision for credit losses 150 105 105 105 Security gains 229 4 34 129 Net overhead 1,423 1,557 1,897 1,650 Income before income taxes 1,957 1,615 1,407 1,799 Income taxes 548 450 324 454 Net income $1,409 $1,165 $1,083 $1,345 Net income per common share $ 0.53 $ 0.43 $ 0.40 $ 0.51 1995 Net income $1,006 $1,098 $1,220 $ 882 Net earnings per common share $ 0.23 $ 0.30 $ 0.42 $ 0.24 Belmont Bancorp. and Subsidiaries Consolidated Five Year Summary of Operations For the Years Ending December 31, 1997, 1996, 1995, 1994, 1993 (Unaudited) ($000's except per share data)
1997 1996 1995 1994 1993 Interest income $ 28,348 $ 25,501 $ 23,454 $ 19,715 $ 16,789 Interest expense 14,004 12,127 10,927 8,807 8,616 Net interest income 14,344 13,374 12,527 10,908 8,173 Provision for credit losses 1,055 465 1,150 805 577 Net interest income after provision for credit losses 13,289 12,909 11,377 10,103 7,596 Securities and trading gains (losses) 799 396 102 (63) 943 Other operating income 2,010 1,861 1,683 1,290 1,193 Operating expenses 8,732 8,388 7,623 7,069 6,757 Income before income taxes 7,366 6,778 5,539 4,261 2,975 Income taxes 1,421 1,776 1,333 1,027 406 Net income $ 5,945 $ 5,002 $ 4,206 $ 3,234 $ 2,569 Earnings per common share (1) $ 2.25 $ 1.87 $ 1.56 $ 1.19 $ 0.94 Cash dividend declared per share (1) $ 0.612 $ 0.480 $ 0.380 $ 0.302 $ 0.265 Book value per common share (1) $ 12.09 $ 10.34 $ 9.14 $ 7.27 $ 6.95 Total loans $224,900 $188,783 $159,957 $147,096 $125,232 Total assets 388,713 333,903 317,279 312,963 267,505 Total deposits 263,908 261,539 246,850 255,923 243,232 Total shareholders' equity 31,899 27,332 25,164 20,214 19,355 (1) Restated for stock dividends paid during 1994, 1995 and 1997.
Belmont Bancorp. and Subsidiaries Consolidated Balance Sheets ($000's) December 31, Assets 1997 1996 Cash and due from banks $ 10,265 $ 10,948 Federal funds sold - 24,450 Loans held for sale 884 242 Securities available for sale (at market value) 121,156 78,728 Securities held to maturity (market value of $16,181 - 1997; and $19,302 - 1996) 15,955 19,299 Loans 224,016 188,541 Less allowance for possible loan losses (4,134) (3,153) Net loans 219,882 185,388 Premises and equipment, net 7,401 7,260 Other real estate owned 20 66 Accrued income receivable 2,586 1,921 Other assets 10,564 5,601 Total assets $388,713 $333,903 Liabilities and Shareholders' Equity Liabilities Non-interest bearing deposits: Demand $ 29,987 $ 29,232 Interest bearing deposits: Demand 33,463 40,569 Savings 79,829 80,961 Time 120,629 110,777 Total deposits 263,908 261,539 Securities sold under repurchase agreements 5,256 8,280 Federal funds purchased and other short-term borrowings 14,635 10,000 Long-term debt 69,635 19,676 Accrued interest on deposits and other borrowings 731 664 Other liabilities 2,649 6,412 Total liabilities 356,814 306,571 Shareholders' Equity Preferred stock - authorized 90,000 shares with no par value; issued and outstanding, none - - Common stock - $0.50 par value, 8,900,000 shares authorized, 2,644,163 issued 1,321 1,057 Surplus 7,781 7,781 Treasury stock (6,665 shares in 1997; 832 shares in 1996) (131) (8) Retained earnings: Unappropriated 21,879 17,820 Appropriated for contingencies 850 850 Net unrealized gain (loss) on securities available for sale 199 (168) Total shareholders' equity 31,899 27,332 Total liabilities and shareholders' equity $388,713 $333,903 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, 1997, 1996 and 1995 ($000's) Interest Income 1997 1996 1995 Loans and lease financing: Taxable $ 19,141 $15,905 $ 13,924 Tax-exempt 334 329 288 Investment securities: Taxable 7,238 7,660 7,638 Tax-exempt 1,284 1,251 1,424 Dividends 280 175 133 Interest on federal funds sold 71 181 47 Total interest income 28,348 25,501 23,454 Interest Expense Deposits 10,063 9,386 9,022 Other borrowings 3,941 2,741 1,905 Total interest expense 14,004 12,127 10,927 Net interest income 14,344 13,374 12,527 Provision for Possible Loan Losses 1,055 465 1,150 Net interest income after provision for possible loan losses 13,289 12,909 11,377 Non-lnterest Income Trust fees 466 502 413 Service charges on deposits 707 660 555 Other operating income 837 699 715 Investment securities gains 799 396 102 Total non-interest income 2,809 2,257 1,785 Non-lnterest Expense Salary and employee benefits 3,948 3,436 3,357 Net occupancy expense of premises 783 686 552 Equipment expenses 947 817 764 Other operating expenses 3,054 3,449 2,950 Total non-interest expense 8,732 8,388 7,623 Income before income taxes 7,366 6,778 5,539 Income Taxes 1,421 1,776 1,333 Net income $ 5,945 5,002 $ 4,206 Weighted-Average Number of Shares Outstanding 2,639,076 2,643,305 2,643,155 Earnings Per Common Share $ 2.25 1.87 $ 1.56 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, 1997, 1996 and 1995 ($000's)
Unrealized Gain (Loss) Retained Earnings on Securities Preferred Common Unappro- Appro- Treasury Avaiable Stock Stock Surplus priated priated Stock for Sale Balance, December 31, 1994 $ 1,000 $ 3,777 $5,061 $11,026 $ 850 $ (8) $(1,492) Transfer to surplus resulting from change in par value of common stock - (3,248) 3,248 - - - - Two-for-One stock split - 528 (528) - - - - 1995 Net income - - - 4,206 - - - Cash dividends declared: Preferred stock - - - (80) - - - Common stock ($.380 per share) - - - (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 1996 Net income - - - 5,002 - - - Cash dividends declared: Preferred stock - - - (61) - - - Common stock (per share $.480) - - - (1,269) - - - Redemption of preferred stock (1,000) - - - - - - Change in unrealized gain (loss)- securities available for sale - - - - - - (504) Balance, December 31, 1996 $ - $ 1,057 $7,781 $17,820 $ 850 $ (8) $ (168) 1997 net income - - - 5,945 - - - Cash dividends declared: Common stock (per share $.612) - - - (1,615) - - - Five-for-four stock split effected in the form of a stock dividend - 264 - (264) - - - Cash paid in lieu-stock dividends - - - (7) - - - Purchase of treasury stock - - - - - (123) - Change in unrealized gain (loss)- securities available for sale - - - - - - 367 Balance, December 31, 1997 $ - $ 1,321 $7,781 $21,879 $ 850 $(131) $ 199
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, 1997, 1996 and 1995 ($000's) Operating Activities: 1997 1996 1995 Net income $ 5,945 $ 5,002 $ 4,206 Adjustments to reconcile net income to net cash flows provided by (used in) operating activities: Provision for loan losses 1,055 465 1,150 Depreciation and amortization expense 818 674 601 Amortization of investment security premiums 1,278 1,469 1,123 Accretion of investment security discounts and interest recorded on zero-coupon securities (230) (358) (305) Investment securities losses 3 1 11 Gains on securities available for sale (802) (397) (113) Loss (gain) on sale of fixed assets (1) 6 23 Gain on sale of loans (91) (72) (136) Loss (gain) on sale of other real estate owned (7) 65 - (Increase) decrease in interest receivable (665) 229 (17) Increase in interest payable 67 3 71 Net increase in loans held for sale (642) (242) - Others, net (6,546) 6,130 (65) Net cash provided by operating activities 182 12,975 6,549 Investing Activities: Net decrease (increase) in federal funds sold 24,450 (24,450) - Proceeds from maturities and calls of investment securities 3,575 1,859 12,154 Purchase of securities available for sale (164,305) (99,267) (106,839) Purchase of investment securities - - (2,321) Proceeds on sale of securities available for sale 105,407 110,808 85,414 Principal collected on mortgage-backed securities 16,545 22,930 19,405 Net increase in loans and leases, net of charge-offs (39,771) (38,514) (23,491) Proceeds on sale of loans 13,361 9,874 10,816 Loans purchased (9,124) - (94) Recoveries on loans previously charged-off 16 47 67 Proceeds from sale of other real estate owned 111 514 - Purchase of life insurance contracts (2,365) - - Purchase of premises and equipment (979) (2,859) (1,071) Proceeds from sale of fixed assets 20 8 4 Net cash used in investing activities (53,059) (19,050) (5,956) Financing Activities: Net increase (decrease) in deposits 2,369 14,689 (9,073) Net increase (decrease) in repurchase agreements (3,024) (6,259) 5,803 Net increase (decrease) in short-term borrowings 4,635 (14,126) (2,636) Proceeds from the issuance of long-term debt 52,950 15,125 4,805 Payments on long-term debt (2,991) (251) (3) Dividends paid on common and preferred stock (1,622) (1,330) (1,084) Redemption of preferred stock - (1,000) - Purchase of treasury stock (123) - - Net cash provided by (used in) financing activities 52,194 6,848 (2,188) Increase (Decrease) in Cash and Cash Equivalents (683) 773 (1,595) Cash and Cash Equivalents, Beginning of Year 10,948 10,175 11,770 Cash and Cash Equivalents, End of Year $ 10,265 $ 10,948 $ 10,175 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, 1997, 1996 and 1995 ($000's) 1. Summary of Significant Accounting Policies The accounting and reporting policies and practices of Belmont Bancorp. (the "Corporation") and its subsidiaries 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 thirteen full-service banking facilities located in Belmont, Harrison, and Tuscarawas Counties in Ohio, and Wheeling, West Virginia. 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 affect 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. 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. Loans Held for Sale: Residential mortgage loans which management does not intend to hold to maturity or for which sales are pending are reported as loans held for sale. Such loans are carried at the lower of aggregate cost or market. 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 nonaccrual, 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. 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. Allowances 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 chargeoffs, 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. 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. The Corporation has no securities which would be considered potential common stock. The following is a reconciliation of net income to income available to common shareholders in computing basic earnings per share: 1997 1996 1995 (Expressed in Thousands) Net income $5,945 $5,002 $4,206 Preferred stock dividends - (61) (80) Income available to common shareholders $5,945 $4,941 $4,126 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, 1997 and 1996, were $677,000 and $1,092,000, respectively. Amortization charged to expense was $415,000 in each of the three years in the period ended December 31, 1997. Reclassifications: Certain prior year amounts have been reclassified to conform with current year presentation. 2. Shareholders' Equity 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 December 31, 1996, the Corporation redeemed and retired all of the remaining outstanding shares of its $100 par value, non-voting, senior cumulative preferred stock. On June 16, 1997, the Corporation declared a five-for-four stock split, which was effected in the form of a 25% stock dividend to shareholders of record on June 16, 1997, and paid on July 1, 1997. At various times during 1997, the Corporation repurchased shares of its common stock in open market transactions. The following table represents the change in the Corporation's outstanding shares: Preferred Common Stock Stock Shares outstanding, December 31, 1994 10,000 1,057,322 Two-for-one stock split - 1,057,322 Shares outstanding, December 31, 1995 10,000 2,114,644 Preferred stock redemption (10,000) - Shares outstanding, December 31, 1996 - 2,114,644 25% stock dividend - 527,354 Shares repurchased - (4,500) Shares outstanding, December 31, 1997 - 2,637,498 3. Investment Securities The estimated market value of investment securities are as follows at December 31:
1997 1996 Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value Securities held to maturity: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 2,260 $ - $ (52) $ 2,208 $ 2,264 $ - $ (94) $ 2,170 Obligations of states and political subdivisions 4,487 222 (13) 4,696 4,812 131 (58) 4,885 Mortgage-backed securities 9,208 119 (50) 9,277 12,223 121 (97) 12,247 Total held to maturity $ 15,955 $ 341 $(115) $ 16,181 $19,299 $ 252 $ (249) $19,302 Securities available for sale: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 14,886 $ 16 $ (10) $ 14,892 $ 4,098 - $ (40) $ 4,058 Obligations of states and political subdivisions 17,832 346 - 18,178 9,618 19 (93) 9,544 Mortgage derivative securities 24,537 47 (153) 24,431 22,776 104 (477) 22,403 Mortgage-backed securities 58,897 341 (286) 58,952 39,223 412 (179) 39,456 Total debt securities 116,152 750 (449) 116,453 75,715 535 (789) 75,461 Equity securities 4,703 - - 4,703 3,267 - - 3,267 Total available for sale $120,855 $ 750 $(449) $121,156 $78,982 $ 535 $ (789) $78,728
The amortized cost and estimated market value of investment securities at December 31, 1997, 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 $ 2,726 $ 2,667 $ 11,326 $ 11,333 Due after one year through five years 1,714 1,780 3,667 3,667 Due after five years through ten years 332 391 102 103 Due after ten years 1,975 2,065 17,623 17,968 Mortgage-backed securities 9,208 9,278 58,897 58,952 Mortgage derivative securities - - 24,537 24,430 Equity securities - - 4,703 4,703 Total $15,955 $16,181 $120,855 $121,156 The mortgage derivative securities consist solely of collateralized mortgage obligations (CMO), including one principal-only CMO with a book value of $105,000 and $169,000 at December 31, 1997 and 1996, respectively and an estimated fair value of $86,000 and $126,000 at December 31, 1997 and 1996, respectively. Securities held to maturity include a U.S. Government Agency structured note with a carrying value of $2,260,000 and $2,264,000 at December 31, 1997 and 1996, respectively, and an estimated fair value of $2,170,000 at both December 31, 1997 and 1996. At December 31, 1997, securities available for sale include a U.S. Government Agency structured note with a carrying value of $3,567,000 and an estimated fair value of $3,566,000. Sales and write-downs of investment securities resulted in the following: 1997 1996 1995 Proceeds from sales $105,407 $110,808 $85,414 Gross gains 869 745 464 Gross losses (67) (346) (352) Losses on securities called (3) (3) (26) 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 in 1997 or 1996. In accordance with guidance issued by the Financial Accounting Standards Board, the Corporation reassessed the appropriateness of the classifications of all securities in December, 1995. 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 at that time. Assets carried at $29,526,000 and $26,724,000 at December 31, 1997 and 1996, 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: 1997 1996 Real estate-construction $ 1,418 $ 1,327 Real estate-mortgage 77,111 71,473 Real estate-secured by nonfarm, nonresidential property 19,983 25,954 Commercial, financial and agricultural 106,443 76,035 Obligations of political subdivisions in the U.S 3,175 4,519 Installment and credit card loans to individuals 15,886 9,233 Loans receivable $224,016 $188,541 Mortgage loans serviced for others approximated $31,301,000 and $21,047,000 at December 31,1997 and 1996, respectfully. The bank discontinues accruing interest income on loans and leases when, in the opinion of management, the collectibility of such interest appears doubtful. Nonaccruing loans and leases amounted to $1,515,000 and $143,000 at December 31, 1997 and 1996, respectively. The after-tax effect of the interest that would have been accrued on these loans was $46,000 in 1997 and $7,000 in 1996. The following is an analysis of loan activity to directors, executive officers, and their associates (see Note 13): 1997 1996 Balance previously reported $7,812 $6,800 New loans during the year 1,857 2,760 Total 9,669 9,560 Less repayments during the year 2,909 1,748 Balance, December 31 $6,760 $7,812 Activity in the allowance for loan losses is summarized as follows: December 31 1997 1996 1995 Balance at beginning of year $3,153 $2,703 $1,537 Additions charged to operating expense 1,055 465 1,150 Recoveries on loans previously charged-off 17 47 67 Total 4,225 3,215 2,754 Loans charged-off 91 62 51 Balance at end of year $4,134 $3,153 $2,703 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 1997 1996 Years Land and land improvements $ 1,225 $ 1,161 Buildings 5,874 5,546 30 - 50 Furniture, fixtures and equipment 5,456 4,890 5 - 12 Leasehold improvements 377 377 5 - 20 Total 12,932 11,974 Less accumulated depreciation and amortization 5,531 4,714 Premises and equipment, net $ 7,401 $ 7,260 Charges to operations for depreciation and amortization approximate $818,000, $674,000, and $601,000 for 1997, 1996, and 1995, respectively. 6. Deposits The distribution of the bank's deposits at December 31, 1997 and 1996, are as follows:
1997 1996 Non- Non- interest interest Bearing Interest Bearing Bearing Interest Bearing Demand Demand Savings Time Demand Demand Savings Time Individuals, partnerships and Corporations $20,818 $33,463 $79,829 $112,190 $13,020 $40,569 $80,961 $105,878 U.S. Government 44 - - - 285 - - - States and political subdivisions 7,016 - - 8,439 14,705 - - 4,899 Other depository institutions in the U.S. - - - - - - - - Certified, officers' checks, travelers cheques, etc. 2,109 - - - 1,222 - - - Total $29,987 $33,463 $79,829 $120,629 $29,232 $40,569 $80,961 $110,777
Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $17,716,000 at December 31, 1997, and $13,133,000 at December 31, 1996. A maturity distribution of time certificates of deposit of $100,000 or more follows: 1997 1996 Due in three months or less $ 5,966 $ 3,247 Due after three months through six months 4,093 2,125 Due after six months through twelve months 4,526 4,667 Due after one year through five years 1,996 2,074 Due after five years 1,135 1,020 Total $17,716 $13,133 7. Securities Sold Under Repurchase Agreements Securities sold under agreements to repurchase represent primarily overnight borrowings. However, as of December 31, 1997, BNB had two repurchase agreements outstanding with maturities of three months. For all repurchase agreements, the securities underlying the agreements were under BNB's control. Information related to these borrowings is summarized below: 1997 1996 1995 Balance at year-end $5,256 $ 8,280 $14,539 Average during the year $7,116 $11,529 $17,669 Maximum month-end balance $8,847 $21,362 $24,012 Weighted average rate during the year 5.66% 4.86% 4.82% Weighted average rate at December 31 6.39% 5.55% 3.05% At December 31, 1997, BNB also had available additional credit totaling $70 million under a repurchase agreement-based cash management advance agreement, all of which was unused. This agreement will expire on June 5, 1998. 8. Short-Term Borrowings Short-term borrowings consist of advances from the Federal Home Loan Bank of Cincinnati (FHLB) and federal funds purchased. These represent primarily overnight borrowings. FHLB advances are made under agreements which allow for maximum borrowings of $30 million. Advances can be made at fixed or variable rates of interest. 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, 1997 and 1996, is summarized below: FHLB Advances 1997 1996 Balance at year-end $ 8,829 $10,000 Average balance during the year $17,648 $11,222 Maximum month-end balance $49,209 $27,352 Weighted average rate during the year 5.66% 5.59% Interest rate at December 31 6.90% 5.45% Collateral: Residential mortgage loans $13,244 $15,000 Federal Home Loan Bank stock $ 4,450 $ 2,959 Federal Funds Purchased 1997 1996 Balance at year-end $ 5,806 $ - Average during the year $ 953 $ 1,132 Maximum month-end balance $ 7,000 $ 5,338 Weighted average rate during year 5.93% 5.61% Weighted average rate at December 31 6.76% 0.00% 9. Long-Term Debt Long-term debt consists of advances from the Federal Home Loan Bank of Cincinnati. Fixed- rate, single payment loans totaling $62,000,000 and $14,000,000 at December 31, 1997 and 1996, respectively, mature in 1998 through 2007 with interest rates ranging from 5.09% to 6.56%. Fixed-rate, amortizing loans totaling $7,635,000 and $5,676,000 at December 31, 1997 and 1996, respectively, reach final maturity in years 1998 through 2017, with interest rates ranging from 5.50% to 6.95%. The loans are secured by residential mortgage loans with a carrying value of $63,151,000 and $29,514,000 at December 31, 1997 and 1996, respectively, Federal Home Loan Bank Stock, and investment securities with a carrying value of $39,877,000 and $19,055,000 at December 31, 1997 and 1996, respectively. Scheduled principal payments on long-term debt in each of the five years subsequent to December 31, 1997, are as follows: 1998 $12,746 1999 $ 794 2000 $10,783 2001 $ 833 2002 $ 314 Thereafter $44,165 10. Income Tax The components of applicable income taxes are as follows: 1997 1996 1995 Currently payable $1,710 $1,910 $1,726 Deferred (289) (134) (393) Income tax $1,421 $1,776 $1,333 The following temporary differences gave rise to the deferred tax asset at December 31, 1997 and 1996: 1997 1996 Allowance for loan losses $1,256 $ 923 Interest on non-accrual loans 24 4 Unrealized (gains) losses on investments (94) 105 Deferred loan origination fees 11 11 Deferred compensation and liability for future employees benefits 228 85 Intangible assets 301 283 Premises and equipment due to differences in depreciation (156) (132) Direct finance leases (86) (86) Federal Home Loan Bank stock dividends (235) (141) Total deferred tax assets $1,249 $1,052 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: 1997 1996 1995 Amount Percent Amount Percent Amount Percent Tax at statutory rate $2,504 34.0 $2,305 34.0 $1,883 34.0 Reductions in taxes resulting from: Tax exempt interest on investments and loans (550) (7.5) (537) (7.9) (582) (10.5) Tax credits (482) (6.5) - - - - Excess of tax loss over book gains on investment securities (33) (0.4) (37) (0.6) (22) (0.4) Earnings on life insurance policies (43) (0.6) (39) (0.6) (33) (0.6) Non-deductible interest expense 68 0.9 78 1.2 75 1.4 Others - net (43) (0.6) 6 0.1 12 0.2 Actual tax expense $1,421 19.3 $1,776 26.2 $1,333 24.1 The bank has available $494,000 in capital loss carryforwards which will expire in 1998. 11. 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 at 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 1997, 1996, and 1995 was $277,000, $234,000, and $242,000, respectively. In addition to providing the profit-sharing plan, Belmont Bancorp. sponsors two defined benefit postretirement 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 postretirement 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 Postretirement Benefits Other than Pensions." The statement requires the accrual of the expected cost of providing postretirement 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: 1997 1996 Accumulated post-retirement benefit obligation: Retirees $ 39 $ 44 Active plan participants 49 84 88 128 Plan assets at fair value - - Accumulated post-retirement benefit obligation in excess of plan assets 88 128 Unrecognized net gain (loss) from past experience different from that assumed and from changes in assumptions 56 6 Prior service cost not yet recognized in expense 2 14 Accrued post-retirement benefit cost in the balance sheet $146 $148 The Corporation's postretirement health care plan is under funded. The accumulated postretirement benefit obligation and plan assets for that plan are $88,000 and $-0-, respectively, at December 31, 1997, and $128,000 and $-0-, respectively, at December 31, 1996. Postretirement expense includes the following components: 1997 1996 1995 Service cost $ 5 $ 6 $ 4 Interest cost on accumulated post-retirement benefit obligation 9 10 10 Net amortization and deferral (12) (10) (11) Post-retirement expense $ 2 $ 6 $ 3 The annual assumed rate of increase in the per capita cost of covered benefits for 1998 and 1997 is 11.0% for medical benefits and 8.5% for dental benefits. The rates are assumed to decrease gradually to 5.5% (for medical in 2006 and for dental in 2004), and remain at that level thereafter. Increasing the assumed health care trend rates by one percentage point in each year would have an immaterial effect on the accumulated postretirement benefit obligation and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7%. The long-term inflation rate assumed was 4%. 12. 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, 1997, 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, 1998 $ 81 1999 64 2000 64 2001 65 2002 67 Thereafter 274 Total minimum lease payments $615 Rental expense under operating leases approximated $132,000 in 1997, $129,000 in 1996, and $86,000 in 1995. 13. 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 1997 and 1996. The outstanding balance of all loans to the related parties was $6,760,000 and $7,812,000 at December 31, 1997 and 1996, 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. 14. Commitments and Contingencies 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 1997 1996 Commitments to extend credit $27,081 $20,827 Standby letters of credit 1,449 859 Commitments to purchase when-issued securities - 5,500 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 counter party. 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, $880,000 expire in 1998, while the remaining $569,000 expire in various years through 2002. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In the ordinary course of business, the Corporation and its subsidiaries have been named as defendants in legal actions. Management believes, based on the advice of counsel, that liabilities, if any, arising from these actions will not be material to the Corporation's financial position or results of operations. 15. Concentrations 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. At December 31, 1997, there were approximately $21,600,000 in loans to businesses that operated in the outdoor amusement industry or manufactured equipment for use in this industry. These loans represent 9.6% of total loans. Approximately one-half of these loans are to borrowers located in the State of Ohio. The remaining businesses operate throughout the continental United States. There were no other significant concentrations. 16. Limitations 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 1998 without approval of the Comptroller of the Currency of approximately $8,200,000 plus an additional amount equal to the bank's net profit for 1998 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. 17. Other Operating Expenses Other operating expenses include the following: 1997 1996 1995 Taxes other than payroll and real estate $ 426 $ 395 $ 287 Supplies and printing 280 301 295 Insurance, including Federal Deposit Insurance 125 567 430 Amortization of intangibles 415 415 415 Other (individually less than 1% of total interest income) 1,808 1,771 1,523 Total $3,054 $3,449 $2,950 18. 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, 1997 and 1996, were $3,987,000 and $3,095,000, respectively. 19. Cash Flows Information The Corporation's policy is to include cash on hand and amounts due from banks in the definition of cash and cash equivalents. Cash payment for interest in 1997, 1996, and 1995 were $13,937,000, $12,124,000 and $10,856,000, respectively. Cash payments for income taxes for 1997, 1996, and 1995, were $2,074,000, $1,733,000, and $1,740,000, respectively. 20. Regulatory Matters The subsidiary bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank must meet specific capital guidelines that involve quantitative measures of the bank's assets, liabilities, and certain off balance-sheet items as calculated under regulatory accounting practices. The bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk, weighting, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1997, that the bank meets all capital adequacy requirements to which they are subject. As of December 31, 1997, the most recent notifications from the Office of the Comptroller of the Currency categorized the bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since those notifications that management believes have changed the institution's category.
To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 1997: Total Capital $33,614 12.9% $20,912 8.0% $26,141 10.0% (to Risk Weighted Assets) Tier I Capital $30,336 11.6% $10,456 4.0% $15,684 6.0% (to Risk Weighted Assets) Tier I Capital $30,336 8.1% $14,962 4.0% $18,702 5.0% (to Average Assets) As of December 31, 1996: Total Capital $28,368 13.4% $16,917 8.0% $21,146 10.0% (to Risk Weighted Assets) Tier I Capital $25,718 12.2% $ 8,458 4.0% $12,687 6.0% (to Risk Weighted Assets) Tier I Capital $25,718 7.7% $13,357 4.0% $16,696 5.0% (to Average Assets)
21. Fair Value of Financial Instruments 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 oflong term relationships with depositors and other customers is 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 Held 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 estimated fair values as of December 31 for the Corporation's financial instruments are as follows: 1997 1996 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Financial assets: Cash and federal funds sold $ 10,265 $ 10,265 $ 35,398 $ 35,398 Securities available for sale 121,156 121,156 78,728 78,728 Securities held to maturity 15,955 16,181 19,299 19,302 Loans, net 220,766 225,678 185,630 188,755 Financial liabilities: Deposits 263,908 264,413 261,539 261,602 Repurchase agreements 5,256 5,256 8,280 8,280 Short-term borrowings 14,635 14,635 10,000 10,000 Long-term debt 69,635 60,857 19,676 17,808 22. 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 December 31, 1997 1996 Assets Cash $ 227 $ 101 Investment in subsidiaries (at equity in net assets) 30,611 26,535 Equity securities 66 120 Advances to subsidiaries, net 1,068 429 Prepaid taxes 247 4 Other assets 565 422 Total Assets $32,784 $27,611 Liabilities Payable to subsidiary $ 485 $ - Accrued taxes - 23 Deferred compensation 400 256 Total liabilities 885 279 Shareholders' Equity Preferred stock - - Common stock 1,321 1,057 Capital surplus 7,781 7,781 Treasury stock-6,665 and 832 shares, respectively (131) (8) Retained earnings-appropriated 850 850 Retained earnings-unappropriated 21,879 17,820 Net unrealized gain (loss) on securities available for sale 199 (168) Total shareholders' equity 31,899 27,332 Total Liabilities and Shareholders' Equity $32,784 $27,611 Statements of Income 1997 1996 1995 Operating Income Dividends from subsidiaries $2,207 $2,479 $1,084 Gain on sale of securities 126 - - Other income 27 19 10 Total income 2,360 2,498 1,094 Operating Expenses (113) (67) (59) Income before income tax and equity in undistributed income of subsidiaries 2,247 2,431 1,035 Income Tax (Credit) 12 (18) (18) Equity in Undistributed Income of Subsidiaries 3,710 2,553 3,153 Net Income $5,945 $5,002 $4,206 Statements of Cash Flows 1997 1996 1995 Operating Activities Net income $ 5,945 $ 5,002 $ 4,206 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of securities (126) - - Undistributed earnings of affiliates (3,710) (2,553) (3,153) Changes in operating assets and liabilities: Prepaid expenses (242) 153 (10) Accrued expenses and dividends 121 259 - Other assets (143) (422) - Net cash provided by operating activities 1,845 2,439 1,043 Investing Activities Proceeds from sale of securities 180 - - Payments to subsidiaries (154) (31) (253) Investment purchases - - (60) Net cash provided by (used in) investing activities 26 (31) (313) Financing Activities Cash paid for fractional shares (7) - - Purchase of treasury stock (123) - - Redemption of preferred stock - (1,000) - Dividends (1,615) (1,330) (1,084) Net cash used in financing activities (1,745) (2,330) (1,084) Increase (Decrease)in Cash & Cash Equivalents 126 78 (354) Cash and Cash Equivalents at Beginning of Year 101 23 377 Cash and Cash Equivalents at End of Year $ 227 $ 101 $ 23 Supplemental disclosures: The Corporation made income tax payments of $2,074,000, $1,733,000, and $1,740,000, in 1997, 1996, and 1995, respectively. These payments represented income tax payments for the Corporation and its consolidated subsidiaries. The Corporation incurred no interest expense in 1997, 1996 or 1995. 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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, 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, 1997, in conformity with generally accepted accounting principles. S. R. Snodgrass A. C. Wheeling, West Virginia January 23, 1998 Belmont Bancorp. and Subsidiaries Report on Management's Responsibilities Management of Belmont Bancorp. is responsible for the accurate and objective preparation of the consolidated financial statements and the estimates and judgements upon which certain financial statements are based. Management is also responsible for preparing the other financial information included in this annual report. In our opinion, the financial statements on the preceding pages have been prepared in conformity with generally accepted accounting principles and other financial information in this annual report is consistent with the financial statements. Management is also responsible for establishing and maintaining an adequate internal control system which encompasses policies, procedures and controls directly related to, and designed to provide reasonable assurance as to the integrity and reliability of the financial reporting process and the financial statements generated therefrom. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal control, and that the cost of such systems should not exceed the benefits to be derived therefrom. The systems and controls and compliance therewith are reviewed by an extensive program of internal audits and by our independent auditors. Their activities are coordinated to obtain maximum audit coverage with a minimum of duplicate effort and cost. The independent auditors have access to all internal audit work papers. Management believes the 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 contract 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 contract 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 Executive Vice President and Chief Operating Officer Belmont National Bank Jane R. Marsh Secretary, Belmont Bancorp. Senior Vice President, Controller and Cashier Belmont National Bank Belmont Bancorp. and Subsidiaries Consolidated Average Balance Sheets For the Years Ended December 31, 1997, 1996 and 1995 (Fully Taxable Equivalent Basis) (000's)
1997 1996 1995 Average Average Average Average Average Average Out- Revenue/ Yield/ Out- Revenue/ Yield/ Out- Revenue/ Yield/ standing Cost Rate standing Cost Rate standing Cost Rate Assets Interest earning assets Loans and leases $208,265 $19,632 9.43% $174,445 $16,389 9.39% $152,502 $14,347 9.41% Securities Taxable 110,739 7,515 6.79% 115,070 7,828 6.80% 113,409 7,768 6.85% Exempt from income tax 24,728 1,861 7.53% 23,403 1,802 7.70% 25,689 2,062 8.03% Federal funds sold 1,317 71 5.39% 3,409 181 5.31% 805 47 5.84% Total interest earning assets 345,049 29,079 8.43% 316,327 26,200 8.28% 292,405 24,224 8.28% Cash and due from banks 10,267 9,328 8,448 Other assets 15,648 14,229 12,927 Market value appreciation (depreciation) of securities available for sale (546) (767) (731) Allowance for possible loan loss (3,461) (2,928) (2,139) Total Assets $366,957 $336,189 $310,910 Liabilities Interest bearing liabilities Interest checking $ 43,476 1,444 3.32% $ 38,576 $ 1,225 3.18% $ 25,953 $ 614 2.37% Savings 78,636 2,474 3.15% 79,341 2,423 3.05% 78,679 2,359 3.00% Other time deposits 115,304 6,145 5.33% 111,657 5,738 5.14% 121,329 6,049 4.99% Other borrowings 68,095 3,941 5.79% 50,274 2,741 5.45% 34,665 1,905 5.50% Total interest bearing liabilities 305,511 14,004 4.58% 279,848 12,127 4.33% 260,626 10,927 4.19% Demand deposits 29,878 27,878 25,819 Other liabilities 2,146 2,199 1,632 Total liabilities 337,535 309,925 288,077 Shareholders' Equity 29,422 26,264 22,833 Total Liabilities and Shareholders' Equity $366,957 $336,189 $310,910 Net interest income margin on a taxable equivalent basis 15,075 4.37% 14,073 4.45% 13,297 4.55% Net interest rate spread 3.84% 3.95% 4.09% Interest bearing liabilities to interest earning assets 88.54% 88.47% 89.13%
Fully taxable equivalent basis computed at effective federal tax rate of 34%. Average loan balances include nonperforming loans. Belmont Bancorp. and Subsidiaries Analysis of Net Interest Income Changes For the Years Ended December 31, 1997, 1996 and 1995 (Fully Taxable Equivalent Basis) (000's)
1997 Compared to 1996 1996 Compared to 1995 Volume Yield Mix Total Volume Yield Mix Total Increase (decrease) in interest income Loans and leases $3,177 $ 55 $ 12 $3,244 $2,064 $ (20) $ (2) $2,042 Securities Taxable (295) (19) - (314) 114 (53) (1) 60 Exempt from income taxes 102 (41) (2) 59 (183) (84) 7 (260) Federal funds sold (111) 3 (2) (110) 152 (4) (14) 134 Total interest income change 2,873 (2) 8 2,879 2,147 (161) (10) 1,976 Increase (decrease) in interest expense Interest checking 156 56 8 220 299 210 102 611 Savings (22) 73 (1) 50 20 44 - 64 Other time deposits 187 213 7 407 (482) 186 (15) (311) Short-term borrowings 972 169 59 1,200 858 (15) (7) 836 Total interest expense change 1,293 511 73 1,877 695 425 80 1,200 Increase (decrease) in net interest income on a taxable equivalent basis $1,580 $(513) $(65) $1,002 $1,452 $(586) $(90) $ 776 (Increase) decrease in taxable equivalent adjustment (32) 71 Net interest income change $ 970 $ 847
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 John H. Goodman, II Realtor, President, Goodman Group, Inc. Mary L. Holloway Haning Teacher,Mount DeChantal Visitation Academy 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 & Associates Dana J. Lewis President, Zanco Enterprises, Inc. James R. Miller President, New Philadelphia Fan Company W. Quay Mull, II Chairman, Mull Industries, Inc. Samuel A. Mumley Executive Secretary, Ohio Valley Athletic Conference Tom Olszowy Independent Insurance Agent, Tom Olszowy Insurance Agency Keith A. Sommer Attorney, Partner, Sommer, Liberati & Hoffman 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; Ohio State Representative; 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 Andrew Beckner Vice President and Regional Manager Robert A. Brown Vice President, Marketing and Product Development Manager William Busick Vice President and Regional Manager J. Douglas Cash Vice President and Regional Manager Gerald J. Elliott Vice President and Compliance Officer Alison Meeks Vice President Investment and Trust Services Robin Morelli Vice President,Credit Administration Belmont Financial Network, Inc. J. Vincent Ciroli, Jr. Chairman and President Jane R. Marsh Secretary and Treasurer William Wallace Vice President 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 Bellaire Office Imperial Plaza 330-28th Street Bellaire, OH 43906 (740) 671-3036 Bridgeport Office 325 Main Street Bridgeport, OH 43912 (740) 635-1142 Cadiz Office 657 Lincoln Avenue Cadiz, OH43907 (740) 942-4664 Elm Grove Office 2066 National Road Wheeling, WV 26003 (304) 243-6570 Jewett Office 318 East Main Street Jewett, OH 43986 (740) 946-2411 Lansing Office 55160 National Road Lansing, OH 43934 (740) 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 (740) 695-9926 The Solution Center At Plaza West 100 Plaza Drive St. Clairsville, OH 43950 (740) 695-8484 St. Clairsville Office 154 West Main Street St. Clairsville, OH 43950 (740) 695-3323 Schoenbrunn Office 2300 East High Avenue New Philadelphia, OH 44663 (330) 339-9200 Shadyside Office 4105 Central Avenue Shadyside, OH 43947 (740) 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 Our Internet Address: www.belmontbank.com Corporate Information Stock Listing Belmont Bancorp.'s common stock is listed on The Small-Cap Market of NASDAQ under the symbol BLMT. The Transfer Agent is Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016, telephone 1-800-368-5948. Annual Shareholders' All shareholders are invited to attend Belmont Meeting Bancorp.'s annual meeting to be held at Belmont National Bank,150 West Main St., St. Clairsville, Ohio, on Monday, April 20, 1998, at 11 a.m. Dividend Payment Subject to approval of the board of directors, dividends are paid on Belmont Bancorp.'s common stock on or about the 28th day of March, June, September and December. Automatic Dividend Through the corporation's Automatic Dividend Reinvestment Plan Reinvestment Plan, shareholders may elect to reinvest dividends, and invest optional cash payments of up to $1,500 per quarter, in additional shares of Belmont Bancorp.'s common stock at the market value. To join the plan, please write to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016, or call 1-800-368-5948. Form 10-K Upon written request of any shareholder on record on December 31, 1997, the Corporation will provide, without charge, a copy of its 1997 Annual Report on Form 10K, 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 Teri Walters, Administrative Officer, Belmont Bancorp., 325 Main Street, Bridgeport, OH 43912. Inquiries Inquiries, comments and suggestions concerning Belmont Bancorp. are welcome. Individual shareholders, analysts and institutional investors should contact Ms. Jane Marsh, Secretary, at 1-740-695-3323 or 1-800-542-0174. Equal Employment Belmont Bancorp.is committed to providing equal employment opportunities to every employee and every applicant for employment, regardless of, but not limited to such factors as race, color, religion, sex, national origin, age, familial or marital status, ancestry, citizenship, sexual orientation, veteran status or being a qualified individual with a disability. Belmont Bancorp. 325 Main Street Bridgeport, OH 43912 (740)695-3323 Fax:(740) 695-4921 EX-3 4 REFER TO PROXY MOD SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant (X) Filed by a Party other than the Registrant ( ) Check the appropriate box: ( ) Preliminary Proxy Statement ( ) Confidential, for Use of the Commission Only (as permitted ( x ) Definitive Proxy Statement by Rule 14a-6(e)(2)) ( ) Definitive Additional Materials ( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 BELMONT BANCORP. _______________________________________________________________________ (Name of Registrant as Specified In Its Charter _______________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): ( X )$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. ( )$500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). ( )Fee computed on table below per Exchange Act Rules14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transactions computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: ( x )Fee paid previously with preliminary materials. ( )Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: NOTICE OF ANNUAL MEETING OF SHAREHOLDERS BELMONT BANCORP. April 20, 1998 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, 150 West Main Street, St. Clairsville, Ohio, on Monday, April 20, 1998, at 11:00 a.m. for the following purposes: 1. To elect four (4) persons as Directors to serve for a three-year term expiring at the annual shareholders' meeting in 2001. 2. To consider and act upon the proposed Amendment to the Articles of Incorporation to allow for a two-for-one split of the common stock. 3. 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, 1998. 4. 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 27, 1998, 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 20, 1998 PROXY STATEMENT OF BELMONT BANCORP. 325 Main Street Bridgeport, Ohio 43912 ANNUAL MEETING OF SHAREHOLDERS April 20, 1998 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 20, 1998, in the conference room of Belmont National Bank, 150 West Main Street, St. Clairsville, Ohio, and any adjournment thereof. Shares represented by properly executed proxies received at the time of the meeting that have not been revoked will be voted at the meeting in the manner described in the proxies. Any proxy may be revoked any time before it is exercised. This Proxy Statement and the accompanying Proxy are being mailed to shareholders on March 20, 1998. The Board of Directors has fixed the close of business on February 27, 1998, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. On the record date 2,630,498 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 the shareholders' shares of Common Stock multiplied by the number of Directors to be elected, and the shareholder may cast all of such votes for a single Director, or such votes may be distributed among the nominees, as each shareholder 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 19, 1998, set the number of Directors at fourteen (14) members with four (4) members to be elected to the class which expires at the annual meeting in 2001. All nominees are currently Directors of the Corporation and its principal subsidiary, Belmont National Bank. Each of the nominees to be elected has continuously served in the principal occupation shown 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 2001: Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total J. Vincent Ciroli, Jr. 52 1984 14,149 * President & Chief Executive Officer, Belmont Bancorp. and Belmont National Bank John H. Goodman, II 53 1974 55,946(1) 2.13 Realtor, President Goodman Group, Inc. Keith A. Sommer 57 1995 3,854 * Attorney, Partner, Sommer, Liberati & Hoffman James R. Miller 55 1995 500 * President, New Philadelphia Fan Company (Jan. 1997 to Present) Vice President & General Manager, Joy Technologies Inc. (April 1992-Dec. 1996) Footnotes 1. This amount includes 3,567 shares held in the name of Marylouise Goodman IRA, and 170 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 26,352 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 2,015 shares held by John H. Goodman, II and J. Harvey Goodman, Trustees under a trust dated February 13, 1995 and 5,094 shares held by J. Harvey Goodman and John H. Goodman, II, Trustees under a trust dated April 26, 1995. * 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 1999 Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total Mary L. Holloway Haning 42 1993 1,983 (2) * Teacher, Mount De Chantal School (Sept. 1996 - Present) Special Projects Coordinator, Plastic Surgery, Inc. (Sept. 1995-Sept. 1996) Director of Admissions, Wheeling Country Day School (1987-1995) Charles J. Kaiser, Jr. 48 1979 13,185 (3) * Attorney, Partner, Phillips, Gardill, Kaiser & Altmeyer Samuel A. Mumley 66 1996 287 * Executive Secretary, Ohio Valley Athletic Conference Thomas Olszowy 51 1993 20,060 (4) * Independent Insurance Agent, Tom Olszowy Insurance Agency Charles A. Wilson, Jr. 55 1973 26,778 (5) 1.02 Ohio State Representative; President, Wilson Funeral & Furniture Co. Footnotes 2. This amount includes 1,280 shares held for the benefit of Mary L. Holloway Haning in trust in which Wesbanco Bank Wheeling is trustee. 3. This amount includes 90 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 750 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. 4. This amount includes 15,127 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 377 shares held in the name of Tom Olszowy, custodian for Dana Paul Olszowy, and 1,002 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 3,902 shares held in the name of Wilson Funeral and Furniture Company of which Mr. Wilson is President, holds a substantial stock interest and has voting power. Directors Whose Term of Office Will Expire at the Annual Shareholders' Meeting in 2000 Common Stock Name And Year First % of Principal Occupation Age Elected Amount Total John A. Belot 55 1979 24,000 (6) * President, Walden Industries, Inc. Terrence A. Lee, CPA 48 1987 2,180 (7) * Chairman, Belmont Bancorp. and Belmont National Bank; Partner, Lee & Associates Dana J. Lewis 54 1994 20,821 * President, Zanco Enterprises, Inc. New Philadelphia, Ohio; Owner/ Operator of McDonalds restaurants W. Quay Mull, II 55 1984 15,742 (8) * Chairman of the Board Mull Industries, Inc. William Wallace 42 1991 17,852 (9) * Executive Vice President & Chief Operating Officer, Belmont National Bank; Vice President, Belmont Bancorp. Footnotes 6. This amount includes 7,905 shares held jointly by Terry L. Belot, wife of John A. Belot, and Jason Michael Belot, son of John A. Belot; 7,905 shares held jointly by Terry L. Belot and John A. Belot, Jr., son of John A. Belot; 4,468 shares held in the name of Jason Michael Belot; and 686 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 1,250 shares held in the name of Terry L. Belot, IRA, to which Mr. Belot disclaims any beneficial interest. 7. This amount includes 16 shares held in the name of Terrence A. Lee, Custodian for Katherine M. Lee, UOTMA; 16 shares held in the name of Terrence A. Lee, Custodian for Natalie A. Lee, UOTMA; and 16 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 26,352 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 3,347 shares held jointly with Christine Wallace, Mr. Wallace's wife, in which he shares voting and investment power; 2,733 shares held in the name of Christine Wallace, IRA, to which Mr. Wallace disclaims any beneficial interest; 577 shares held in the name of William Wallace as Custodian for Joseph J. Wallace, UWVTMA; 577 shares held in the name of William Wallace as Custodian for Lauren C. Wallace, UWVTMA; 535 shares held in the name of William Wallace as Custodian for Adrienne C. Wallace, UWVTMA; and 494 shares held in the name of William Wallace as Custodian for William J. Wallace, UWVTMA; Mr. Wallace's minor children. As of February 27, 1998, the Directors and Officers of the Corporation as a group beneficially owned 219,181 shares or 8.33 percent of the outstanding common stock of the Corporation. PROPOSAL NUMBER 2: AMENDMENT TO THE CORPORATION'S ARTICLES OF INCORPORATION TO ALLOW FOR 2-FOR-1 STOCK SPLIT Subparagraph (1) of Article FOURTH of the Corporation's Amended Articles of Incorporation currently provides the authority to issue 9,000,000 shares of capital stock of which 8,900,000 shall be common shares with a par value of $0.50; 10,000 shares shall be Senior Cumulative Preferred Stock with a par value of $100 per share; and 90,000 shares of undesignated preferred shares without par value but subject to the provisions of subparagraph (2) of Article FOURTH. Subparagraph (2) grants to the Board of Directors the authority to designate the powers, rights, preferences and other matters related to the Preferred Stock. The 10,000 shares of Senior Cumulative Preferred Stock have been redeemed and cancelled, and thus cannot be reissued. There are 2,644,163 shares of Common Stock presently issued and 2,630,498 shares outstanding. On February 27, 1998, the Corporation's Board of Directors unanimously adopted a resolution authorizing a two-for-one split of the common stock subject to the approval by the shareholders at its annual meeting. This approval will require an Amendment to the Articles of Incorporation increasing the number of authorized shares of capital stock to 17,890,000 shares divided into 90,000 shares of preferred stock without par value but subject to the provisions subparagraph (2) of Article FOURTH and 17,800,000 shares of common stock with a par value of $0.25 per share. Specifically, if adopted, the amendment would delete subparagraph (1) of Article FOURTH of the Amended Articles of Incorporation and substitute the following: (1) The total number of shares of stock which the Corporation shall have the authority to issue is 17,890,000 shares which shall be divided into 17,800,000 shares of Common Stock with a par value of $0.25 per share, and 90,000 shares of Preferred Stock without par value which shall be subject to the provisions of subparagraph (2) below. If this Amendment is adopted, the 2-for-1 stock split will be effective for stock of record May 1, 1998, and certificates for additional shares are expected to be distributed on May 22, 1998. The change in par value of the common stock will not affect the certificates representing shares of common stock presently outstanding, as all common stock outstanding will be deemed to have a par value of $0.25 per share, and accordingly, it will not be necessary for any shareholder to exchange certificates representing currently outstanding shares. If this Amendment is adopted, there will be no change in the Common Stock portion of the Shareholders' Equity portion of the Corporation's Balance Sheet. The Board of Directors believes that the proposed stock split will enhance the marketability of the shares because each share of the present common stock with a par value of $0.50 will, if the proposal is approved, become 2 shares with a par value of $0.25 per share. Except for the reduction in the par value and the increase in the number of shares, the stock split will not in any way affect the rights or interests of the stockholders. Nevertheless, as a result of the stock split the Corporation will have 12,511,674 shares of authorized but unissued stock. Such authorized but unissued stock could be used by the Corporation to raise additional capital by sale of stock to the public, to acquire other financial institutions or related businesses, or in a merger or consolidation. Depending upon the sale price of the stock or the value of the acquired business in any acquisition or merger, such a transaction could be dilutive to existing shareholders. At the present time no such stock sale, acquisition or merger is contemplated. Moreover, the authorized but unissued stock could be employed as a denfensive anti-takeover safeguard in the event that the Corporation should be targeted for a takeover by outside interests. The mere availability of such stock in itself could serve as a deterrent to the initiation of a hostile takeover effort. Furthermore, any increase in the number of shares outstanding, through the sale or distribution of authorized but unissued shares, would make the acquisition of a controlling stock interest in the Corporation proportionately more difficult and expensive. The Board of Directors has no present intention of issuing additional shares for such purposes and has no present knowledge of any such takeover efforts. Adoption of the Amendment requires the affirmative vote by shareholders holding a majority of the outstanding shares at a meeting at which a quorum is present. The Board of Directors unanimously recommends a vote FOR the Amendment. Proxies not otherwise specified will be voted in favor of the Amendment. 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 1997. From time to time the law firms of Phillips, Gardill, Kaiser & Altmeyer, of which Charles J. Kaiser, Jr. is a partner, and Sommer, Liberati & Hoffman, of which Keith A. Sommer is a partner, have rendered legal services to the Corporation and the Bank. Messrs. Kaiser and Sommer are directors of both the Corporation and the Bank. It is contemplated that these firms 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 six (6) times during the year 1997. 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 fifteen (15 ) times during 1997. 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 three (3) times during 1997. 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 Bank's compliance officer, and 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 1997. The Bank also has a Trust Committee that met three (3) times in 1997 whose members are Ms. Haning and Messrs. Belot, Lewis, Mumley, Sommer, Wallace and Wilson. 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 annually. During 1997, a total of $78,500.00 was paid to Directors. For the year 1998, the annual retainer has been increased to Three Thousand Dollars and the attendance fee increased to Three Hundred Dollars per meeting. The separate fee for Bancorp. meetings has been eliminated. 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 $2,312.70 and Mr. Terhune received $6,030.96 during 1997 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 but with the addition of James R. Miller and Keith A. Sommer 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 advising the Board regarding 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 deems most able to further its goals and, therefore, should be comparable to compensation paid by peer organizations in the same region of the country that the Corporation operates. Summary Compensation Table For the year ended December 31, 1997, 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:
Long Term Name and Incentive All Other Principal Position Year Salary Bonus Compensation (1) Compensation J. Vincent Ciroli, Jr. 1997 $152,000.00 $ 26,600.00 $26,600.00 $15,707.59 President & 1996 $152,000.00 $ 68,400.00 - $16,767.99 Chief Executive Officer 1995 $145,000.00 $116,000.00 - $14,159.04 Belmont Bancorp. and Belmont National Bank William Wallace 1997 $110,000.00 $ 19,250.00 $19,250.00 $12,420.97 Vice President, 1996 $110,000.17 $ 49,500.00 - $15,722.09 Belmont Bancorp. and 1995 $105,000.00 $ 84,000.00 - $11,162.44 Executive Vice President & Chief Operating Officer, Belmont National Bank Jane R. Marsh 1997 $ 70,000.00 $ 12,250.00 $12,250.00 $11,350.80 Secretary, Belmont 1996 $ 70,000.01 $ 31,500.00 - $ 9,915.19 Bancorp. and Senior 1995 $ 58,000.02 $ 46,400.00 - $ 6,097.44 Vice President, Controller, and Cashier, Belmont National Bank (1) See the description for the Long Term Incentive Compensation under the heading "Annual Bonus Incentives". 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 has utilized the Sheshunoff tables, the Executive Studies Group (a division of Ben S. Cole Financial, Inc.), and the Bank Wage-Hour & Personnel Service. During 1997, the Committee retained Bank Compensation Strategies Group located in Dublin, Ohio, to advise it and the Board concerning salaries for comparable officers at other Ohio and regional banking organizations of similar size. 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 analysis 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, since 1989 the Board of Directors has had in place an Executive Incentive Compensation Plan 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. During 1997, the Compensation Committee retained Bank Compensation Strategies Group of Dublin, Ohio, to advise the Committee and the Board on changes to the Executive Incentive Compensation Plan designed in part to: (i) allow additional senior executives to be added to the Executive Incentive Compensation Plan without disrupting the formula; and (ii) requiring half of each year's bonus to be deferred and held as phantom stock of the Corporation which is hoped will enhance the senior executives' interest in the long- term appreciation of the Corporation's stock. The revised Senior Executive Incentive Plan adopted during 1997 pays an incentive bonus calculated as a percentage of salary varying between 10% and 80% when the Corporation's return on equity exceeds the average return on equity of a peer group. No award is made unless the Corporation's return on equity is at least 10% greater than the peer group average. Half of any bonus is paid to the executive in cash and the other half is credited to a non-qualified deferred compensation plan that invests in the Corporation's phantom stock. That amount is shown as Long Term Incentive Compensation in the Summary Compensation Table. The plan is a phantom stock plan because the portion of the bonus paid to the plan is converted to units designed to appreciate or depreciate in relation to the appreciation or depreciation of the Corporation's common stock. Upon termination of employment for reasons of death, disability, retirement or any other reason the executive will be paid his benefit in cash over a period of years. The Committee believes that the program, as revised, provides an appropriate link between the Corporation's short-term performance and long-term performance (as measured by the appreciation of its stock) 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 1997, the Bank paid $36,459.49 in matching funds and made a voluntary contribution of $208,055.29, or nine percent (9%) of annual salary. In 1997, the profit sharing contribution attributed to Mr. Ciroli was $12,672.00; the matching funds contribution was $2,305.99. The profit sharing contribution paid for Mr. Wallace was $10,422.01; the matching funds contribution was $1,751.46. The profit sharing contribution paid for Mrs. Marsh was $10,058.40 and the matching funds contribution was $1,292.40. 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 1997, the amount of income attributable for a split-dollar insurance plan was $729.60, $247.50 and $126.00 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 W. Quay Mull, II Charles J. Kaiser, Jr. Thomas Olszowy Terrence A. Lee Keith A. Sommer James R. Miller 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, 1992 and assumes reinvestment of dividends. Belmont Bancorp. Stock Price Performance Total return performance assuming reinvestment of dividends MEASUREMENT PERIOD Index 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Belmont Bancorp. 100.00 109.33 204.75 383.05 376.85 783.55 NASDAQ-Total U.S. 100.00 114.80 112.21 158.70 195.19 239.53 SNL<$500M Bank Index 100.00 130.56 140.42 192.09 247.24 421.47 PROPOSAL NUMBER 3: 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, 1998. 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 1997 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, 1997, 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 19, 1999, 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 20, 1998. At the time of the submission of the proposal, a proponent may also submit a statement in support of the proposal. The proposal and its supporting statement in the aggregate shall not exceed 500 words. 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 OF DIRECTORS March 20, 1998 J. VINCENT CIROLI, JR., PRESIDENT & CEO APPENDIX A PROXY BELMONT BANCORP., BRIDGEPORT, OHIO ANNUAL MEETING OF SHAREHOLDERS APRIL 20, 1998 KNOW ALL MEN BY THESE PRESENT that I the undersigned Shareholder of BELMONT BANCORP. do hereby nominate, constitute and appoint David L. Barnes and Kelley Archer, or either of them, my true and lawful attorney with full power of substitution, for me and in my name, place and stead to vote all of the Common Stock of said Corporation standing in my name at the Annual Meeting of its Shareholders to be held at Belmont National Bank, 150 West Main Street, St. Clairsville, Ohio, on April 20, 1998, at 11:00 A.M., or at any adjournments thereof with all the powers the undersigned would possess if personally present as follows: 1. For the election to the Board of Directors, except as otherwise specified below, of the following nominees, or any one or more of them to serve a three-year term expiring at the annual shareholders' meeting in 2001: J. Vincent Ciroli, Jr. Keith A. Sommer John H. Goodman, II James R. Miller with full authority to cumulate the votes represented by such shares and to distribute the same among the nominees in such manner and numbers as said proxies in their discretion may determine. THE AUTHORITY TO VOTE FOR THE ELECTION OF ANY OF THE NOMINEES LISTED ABOVE MAY BE WITHHELD BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE NOMINEE. For 2. To consider and act upon the proposed Amendment to the Against Articles of Incorporation to allow for a two-for-one Abstain split of the common stock. For 3. To consider and act upon a proposal to ratify the Against appointment of S.R. Snodgrass A.C. as independent Abstain auditors for the year ending December 31, 1998. For 4. 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 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 10265 0 0 0 121156 15955 16181 224900 4134 388713 263908 19891 3380 69635 0 0 1321 30578 388713 19475 8873 0 28348 10063 14004 14344 1055 799 8732 7366 5945 0 0 5945 2.25 2.25 4.37 1515 44 0 3693 3153 90 16 4134 4134 0 2943
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