The
Belmont
Bancorp 1994 Annual Report
<PAGE>
Dedication
Daniel A. Giffin J. Harvey Goodman
The Belmont Bancorp. 1994 Annual Report is dedicated to Mr. Daniel A.
Giffin and Mr. J. Harvey Goodman. In January, 1995, Messrs. Giffin and
Goodman announced they would not stand for re-election to the Board of
Directors of Belmont Bancorp. and Belmont National Bank. With 16 years
and 32 years of distinguished service to the Corporation, respectively,
the contributions these gentlemen have made are significant and deeply
appreciated by all. Their talent and dedication will be missed.
<PAGE>
Corporate Profile
Belmont Bancorp. (the Corporation) is a $313 million bank holding
company, incorporated in Ohio. Belmont National Bank, a wholly-owned
subsidiary of the Corporation, is an FDIC-insured, federally chartered
commercial bank.
The Bank delivers a comprehensive range of financial products and
services to individuals, families, businesses and corporations through
nine full service offices and two drive-up service locations. Belmont
National Bank's primary market areas for its consumer, commercial, trust
and investment services are Belmont, Harrison, Tuscarawas and Jefferson
counties in Ohio, and Marshall and Ohio counties in West Virginia.
<TABLE>
Financial Highlights
(unaudited) (000's except per share data)
<CAPTION>
1994 1993 % change
<S> <C> <C> <C>
Net income $ 3,234 $ 2,569 25.9%
Operating Return on average assets 1.12% 0.96%
results Return on average common
equity 16.71% 14.57%
Return on average
total equity 16.27% 14.21%
Per Net income $ 2.98 $ 2.35 26.8%
common Dividend 0.76 0.66 15.2%
share Book value at year-end 18.17 17.36 4.7%
At Total assets $312,963 $267,505 17.0%
year- Total loans 147,096 125,232 17.5%
end Total deposits 255,923 243,232 5.2%
Total shareholders'
equity 20,214 19,355 4.4%
Liquidity Average common equity
and to average total assets 6.52% 6.38%
capital Average total equity
ratios to average total assets 6.87% 6.76%
Dividend payment ratio 27.18% 30.36%
</TABLE>
The 1995 Annual Report
cover charts Belmont Bancorp. asset growth over the past ten years.
<PAGE>
From Management
The year 1994 proved to be a year of accomplishment and change. We
entered the year with interest rates at all time lows and finished the
year with short-term rates nearly double those of just twelve months
earlier. At the beginning of 1994, home mortgages were being refinanced
at a record pace; by the end of the year the refinancing boom had gone
bust. But, through it all, we prevailed to have another record year.
Our accomplishments include record net income, record asset size and
record capital levels. During 1994, Belmont Bancorp. stock was listed
as a NASDAQ company under the symbol BLMT, we introduced a dividend
reinvestment plan for our shareholders and had two stock splits. During
this time, our stock increased in value by 38%, increasing from a low of
$21.00 to $29.00 at year-end. In addition, our cash dividend increased
15.2%.
Review of 1994 Results
We are very pleased with Belmont Bancorp's operating results, which
were accomplished during a time of rising interest rates.
Earnings per share for 1994 amounted to $2.98, a 26.8% increase
compared to 1993. The return on common shareholders' equity, which is
the primary way we measure our performance, totaled 16.7% for the year,
up from 14.6% during 1993. Return on assets for the year equaled 1.12%,
up from .96% in 1993.
Technology and the Future
Throughout our organization we continue to deploy the latest in
banking and financial service innovations. Through technology we are
able to compete with any size financial entity in the nation.
Technology permits us to be more productive and customer friendly at the
same time. 1995 will be another year of continuous improvement,
including many new products and services which will keep us a leader in
all the markets we serve. All of our products and services are designed
to make or save our customers money.
<PAGE>
From Management
Lines of Business
We concentrate our efforts in primarily four areas: commercial
lending and business development, residential real estate and mortgage
lending, retail banking, and trust and investment services. We want to
be recognized, in all the communities we serve, as the number one choice
for financial products, services and information.
The money we gather through our retail banking operation goes right
back into the local economies we serve in the form of business loans
that help create jobs, mortgage loans that provide shelter and comfort,
and consumer loans that make dreams come true. For a community banking
organization like Belmont Bancorp., the best investment we can make is
in our local communities.
Our "Banking on Education" partnership continues to provide our
schools and our children with desperately needed educational equipment,
and our Fortune Fifty Club continues to be one of the outstanding senior
clubs in the country.
Our People
People make organizations successful. Without the right people, great
plans fail...without the right people, nothing positive happens. At
Belmont Bancorp., we put our people first--before the customer and even
before you, our shareholder.
Through time, the only way we can earn an above average return for our
shareholders is to have satisfied customers. To have satisfied
customers, we need an enthusiastic, well-trained and appropriately
compensated staff. When this all fits together, we have a first class
organization which best describes Belmont Bancorp.
Once again we look forward to the challenges of 1995 and the future.
Thank you, our shareholder, for the confidence you have shown us through
the years. We dedicate ourselves to honoring that trust.
J. Vincent Ciroli, Jr. John H. Goodman, II
J. Vincent Ciroli, Jr. John H. Goodman, II
President & CEO Chairman
<PAGE>
Financial Statements
<PAGE>
<TABLE>
Belmont Bancorp. and Subsidiaries
Summarized Quarterly Financial Information
(Unaudited) ($000's except per share data)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
<S> <C> <C> <C> <C>
Interest income $4,235 $4,688 $5,237 $5,496
Interest expense 1,887 2,039 2,331 2,550
Net interest income 2,348 2,649 2,906 2,946
Provision for possible
loan losses 250 270 85 200
Security gains (losses) 15 (3) (2) (73)
Net overhead 1,254 1,397 1,364 1,705
Income before
income taxes 859 979 1,455 968
Income taxes 218 187 320 302
Net income $ 641 $ 792 $1,135 $ 666
Net earnings
per common share $ 0.59 $ 0.73 $ 1.05 $ 0.61
1993
Interest income $4,218 $4,175 $4,308 $4,016
Interest expense 2,267 2,208 2,152 1,989
Net interest income 1,951 1,967 2,156 2,027
Provision for
possible loan losses 276 3 205 93
Security gains (losses) (87) (229) 475 784
Net overhead 1,281 1,311 1,292 1,608
Income before
income taxes 307 424 1,134 1,110
Income taxes 6 92 9 299
Net income $ 301 $ 332 $1,125 $ 811
Net earnings
per common share $ 0.27 $ 0.29 $ 1.04 $ 0.75
1992
Net income $ 453 $ 365 $ 913 $ 107
Net earnings
per common share $ 0.43 $ 0.35 $ 0.86 $ 0.07
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Five Year Summary of Operations
For the Years Ending December 31, 1994, 1993, 1992, 1991, 1990
(Unaudited) ($000's except per share data)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Interest income $ 19,656 $ 16,717 $ 14,671 $ 16,151 $ 15,772
Interest expense 8,807 8,616 8,082 10,091 9,921
Net interest income 10,849 8,101 6,589 6,060 5,851
Provision for
possible loan losses 805 577 405 125 225
Net interest income
after provision
for possible
loan losses 10,044 7,524 6,184 5,935 5,626
Securities and
trading gains (losses) (63) 943 323 44 (184)
Other operating
income 1,349 1,265 1,012 962 869
Operating expenses 7,069 6,757 5,107 4,629 4,390
Income before
income taxes 4,261 2,975 2,412 2,312 1,921
Income taxes 1,027 406 574 528 338
Income before
extraordinary item 3,234 2,569 1,838 1,784 1,583
Extraordinary item _ _ _ _ 289
Net income $ 3,234 $ 2,569 $ 1,838 $ 1,784 $ 1,872
Earnings per
common share (1):
Earnings before
extraordinary item $ 2.98 $ 2.35 $ 1.71 $ 1.69 $ 1.50
Extraordinary item _ _ _ _ 0.27
Net earnings
per common share $ 2.98 $ 2.35 $ 1.71 $ 1.69 $ 1.77
Cash dividend declared
per share $ 0.76 $ 0.66 $ 0.65 $ 0.64 $ 0.64
Book value
per common share $ 18.17 $ 17.37 $ 15.67 $ 14.61 $ 13.06
Total loans $ 147,096 $125,232 $113,977 $ 78,055 $ 89,510
Total assets $ 312,963 $267,505 $267,332 $197,015 $188,418
Total deposits $ 255,923 $243,232 $245,743 $176,859 $168,034
Total shareholders'
equity $ 20,214 $ 19,355 $ 17,565 $ 15,445 $ 13,812
<F1>(1) Restated for stock dividends paid during 1994.
<PAGE>
</TABLE>
<TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Balance Sheets
For the Years Ended December 31, 1994 and 1993
<CAPTION>
Assets 1994 1993
<S> <C> <C>
Cash and due from banks $ 11,770,000 $ 8,049,000
Federal funds sold _ 1,260,000
Securities available
for sale (at market
value in 1994;
market value in 1993 - $4,076,000) 49,132,000 3,976,000
Securities in trading account _ 518,000
Securities held to maturity
(market value of $86,828,000 -
1994 and $116,239,000 -1993) 92,463,000 116,065,000
Loans 147,096,000 125,232,000
Less allowance for
possible loan losses (1,537,000) (1,617,000)
Net loans 145,559,000 123,615,000
Premises and equipment, net 4,648,000 4,460,000
Other real estate owned 586,000 69,000
Accrued income receivable 2,133,000 1,713,000
Other assets 6,672,000 7,780,000
Total Assets $312,963,000 $267,505,000
Liabilities and
Shareholders' Equity
Liabilities
1994 1993
Non-interest bearing deposits:
Demand $ 27,269,000 $ 24,051,000
Interest bearing deposits:
Demand 26,273,000 27,854,000
Savings 84,023,000 99,988,000
Time 118,358,000 91,339,000
Total deposits 255,923,000 243,232,000
Short-term borrowings 35,498,000 3,709,000
Accrued interest on deposits
and other borrowings 590,000 453,000
Other liabilities 738,000 756,000
Total liabilities $292,749,000 $248,150,000
Shareholders' Equity 1994 1993
Preferred stock - authorized 90,000
shares with no par value;
issued and outstanding, none _ _
Senior cumulative preferred stock -
authorized, issued
and outstanding 10,000 shares
with a $100 par value 1,000,000 1,000,000
Common stock - $3.57 par value,
1,750,000 shares
authorized; 1,057,738 issued
in 1994 and 1993 3,777,000 2,749,000
Surplus 5,061,000 3,647,000
Treasury stock (424 shares in 1994
and 728 shares in 1993) (8,000) (13,000)
Retained earnings:
Unappropriated 11,026,000 11,122,000
Appropriated for contingencies 850,000 850,000
Net unrealized loss on securities
available for sale (1,492,000) _
Total shareholders' equity 20,214,000 19,355,000
Total Liabilities and
Shareholders' Equity $312,963,000 $267,505,000
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Statements of Income
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
Interest Income 1994 1993 1992
<S> <C> <C> <C>
Loans and lease financing:
Taxable $11,440,000 $10,436,000 $8,830,000
Tax-exempt 190,000 167,000 208,000
Investment securities:
Taxable 6,809,000 5,113,000 4,582,000
Tax-exempt 1,209,000 643,000 412,000
Dividends 3,000 188,000 258,000
Interest on trading securities 1,000 45,000 61,000
Interest on federal funds sold 4,000 125,000 320,000
Total interest income 19,656,000 16,717,000 14,671,000
Interest Expense
Deposits 7,865,000 8,525,000 7,953,000
Short-term borrowings 942,000 91,000 129,000
Total interest expense 8,807,000 8,616,000 8,082,000
Net interest income 10,849,000 8,101,000 6,589,000
Provision for Possible
Loan Losses 805,000 577,000 405,000
Net interest income
after provision
for possible loan losses 10,044,000 7,524,000 6,184,000
Non-lnterest Income
Trust fees 341,000 274,000 269,000
Service charges on deposit
and loan accounts 586,000 546,000 457,000
Other operating income 422,000 445,000 286,000
Investment securities gains (losses) (64,000) 1,059,000 390,000
Trading gains (losses) 1,000 (116,000) (67,000)
Total non-interest income 1,286,000 2,208,000 1,335,000
Non-lnterest Expense
Salary and employee benefits 2,946,000 2,808,000 2,148,000
Net occupancy expense of premises 533,000 541,000 421,000
Equipment expenses 618,000 491,000 452,000
Other operating expenses 2,972,000 2,917,000 2,086,000
Total non-interest expense 7,069,000 6,757,000 5,107,000
Income before income taxes 4,261,000 2,975,000 2,412,000
Income Taxes 1,027,000 406,000 574,000
Net income $ 3,234,000 $ 2,569,000 $1,838,000
Weighted - Average Number
of Shares Outstanding 1,057,262 1,057,010 1,056,970
Earnings Per Common Share $ 2.98 $ 2.35 $ 1.71
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
Unrealized
Loss On
Retained Earnings Securities
Preferred Common Unappro- Appro- Treasury Available
Stock Stock Surplus priated priated Stock for Sale
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1991 $ _ $2,749,000 $3,647,000 $ 8,213,000 $850,000 $(14,000) $ _
1992 Net income _ _ _ 1,838,000 _ _ _
Dividend declared:
Preferred Stock (33,000)
Common Stock
($.65 per
share) _ _ _ (685,000) - _
Preferred stock
issued 1,000,000 _ _ _ _ _ _
Balance,
December 31, 1992 1,000,000 2,749,000 3,647,000 9,333,000 850,000 (14,000) _
1993 Net income _ _ _ 2,569,000 _ _ _
Dividends declared:
Preferred stock _ _ _ (80,000) _ _ _
Common stock ($.66
per share) _ _ _ (700,000) _ _ _
Sale of treasury
stock _ _ _ _ _ 1,000 _
Balance,
December 31,1993 1,000,000 2,749,000 3,647,000 11,122,000 850,000 (13,000) _
Effect of adopting
SFAS 115 _ _ _ _ _ _ 6,000
10% Common stock
dividend at fair
market value _ 274,000 1,413,000 (1,687,000) _ _ _
25% Common stock
dividend
at par value _ 754,000 _ (754,000) _ _ _
1994 Net income _ _ _ 3,234,000 _ _ _
Cash dividends
declared:
Preferred stock _ _ _ (80,000) _ _ _
Common stock
($.76 per share) _ _ _ (799,000) _ _ _
Cash paid in
lieu-stock
dividends _ _ _ (10,000) _ _ _
Change in
unrealized
loss - securities
available
for sale _ _ _ _ _ _ (1,498,000)
Sale of
treasury stock _ _ 1,000 _ _ 5,000 _
Balance,
December 31,1994 $1,000,000 $3,777,000 $5,061,000 $11,026,000 $850,000 $ (8,000) $(1,492,000)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating Activities
Net income $ 3,234,000 $ 2,569,000 $ 1,838,000
Adjustments to
reconcile net
income to net cash flows
provided (used) by
operating activities:
Provision for loan losses 805,000 577,000 405,000
Depreciation and
amortization expense 519,000 446,000 393,000
Amortization of investment
security premiums 1,877,000 3,025,000 2,133,000
Accretion of investment
security discounts and
interest recorded on
zero-coupon securities (403,000) (601,000) (986,000)
Investment securities
(gains) losses 10,000 205,000 (493,000)
Trading (gains) losses (1,000) 116,000 103,000
(Gains) losses on
securities available for sale 55,000 (1,264,000) 67,000
Proceeds from sale of
securities held in
trading account 1,517,000 11,196,000 25,738,000
Purchase of securities
for trading account (1,516,000) (13,346,000) (25,804,000)
Loss (gain) on sale
of fixed assets 2,000 (29,000) (35,000)
Gain on sale of loans (23,000) (67,000) _
Gain on sale of other
real estate owned (1,000) _ _
(Increase) decrease in
interest receivable (420,000) 38,000 (511,000)
Increase (decrease)
in interest payable 137,000 (265,000) (471,000)
Purchase of life
insurance contracts _ (194,000) (1,835,000)
Others, net 1,859,000 (734,000) (3,591,000)
Net cash provided (used)
by operating activities $ 7,651,000 $ 1,672,000 $ (3,049,000)
</TABLE>
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION> 1994 1993 1992
<S> <C> <C> <C>
Investing Activities
Proceeds from sales
of investment
securities _ 21,558,000 32,073,000
Proceeds from maturities
and calls of investment
securities 3,207,000 899,000 1,374,000
Proceeds from sales
of equity securities _ _ 8,138,000
Purchase of securities
available for sale (26,052,000) (78,448,000) (33,417,000)
Purchase of
investment securities (47,621,000) (85,103,000) (102,464,000)
Proceeds on sale of
securities available
for sale 16,198,000 104,137,000 14,516,000
Principal collected
on mortgage-backed
securities 29,434,000 50,537,000 37,353,000
Net (increase) decrease
in loans and leases,
net of charge-offs (25,486,000) (15,002,000) (4,686,000)
Proceeds on sale
of loans 2,104,000 3,841,000 _
Loans purchased _ (185,000) (31,790,000)
Recoveries on loans
previously charged-off 55,000 50,000 39,000
Proceeds from sale
of other real
estate owned 84,000 210,000 148,000
Purchase of premises
and equipment (711,000) (842,000) (2,343,000)
Proceeds from sale
of fixed assets 1,000 29,000 71,000
Net cash used
by investing activities (48,787,000) 1,681,000 (80,988,000)
Financing Activities
Net increase
(decrease) in deposits 12,691,000 (2,511,000) 68,884,000
Net increase
(decrease) in short-
term borrowings 31,789,000 716,000 (174,000)
Dividends paid on
common and
preferred stock (889,000) (780,000) (718,000)
Sale of treasury
stock 6,000 1,000 _
Issuance of
preferred stock _ _ 1,000,000
Net cash provided
(used) by financing
activities 43,597,000 (2,574,000) 68,992,000
Increase (Decrease)
in Cash and
Cash Equivalents 2,461,000 779,000 (15,045,000)
Cash and
Cash Equivalents
at Beginning
of Year 9,309,000 8,530,000 23,575,000
Cash and Cash
Equivalents at
End of Year $11,770,000 $ 9,309,000 $ 8,530,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992
1. Summary of Significant Accounting Policies
The accounting and reporting policies and practices of the Corporation
are in accordance with generally accepted accounting principles and
conform to general practices within the banking industry. The more
significant of these policies and practices are summarized below.
Principles of Consolidation: The consolidated financial statements
include the accounts of Belmont Bancorp. and its wholly-owned
subsidiaries, Belmont National Bank and Belmont Financial Network, Inc.
Material intercompany accounts and transactions have been eliminated.
Held to Maturity Securities: These securities are purchased with the
original intent to hold to maturity and events which may be reasonably
anticipated are considered when determining the Corporation's intent and
ability to hold to maturity. Securities meeting such criteria at date
of purchase and as of the balance sheet date are carried at cost,
adjusted for amortization of premiums and accretion of discounts.
Available for Sale Securities: Debt and equity securities to be held
for indefinite periods of time and not intended to be held to maturity
are classified as available for sale and carried at market value with
net unrealized gains and losses, net of tax, reflected as a component of
shareholders' equity until realized. Securities held for indefinite
periods of time include securities that may be sold to meet liquidity
needs or in response to significant changes in interest rates or
prepayment risks as part of the Corporation's overall asset/liability
management strategy. Prior to December 31, 1993, marketable equity
securities were carried at the lower of aggregate cost or market value
with net unrealized gains and losses being reflected as adjustments to
retained earnings. Market value depreciation below cost on debt
securities held for sale prior to December 31, 1993, was required in
current period earnings.
Trading Securities: Trading securities are held for resale within a
short period of time and are stated at market value. Trading gains and
losses include the net realized gain or loss and market value
adjustments of the trading account portfolio.
Income Recognition: Income earned by the Corporation and its
subsidiaries is recognized principally on the accrual basis of
accounting. Certain fees, principally service, are recognized as income
when billed. The subsidiary bank suspends the accrual of interest when,
in Management's opinion, the collection of all or a portion of interest
has become doubtful. Generally, when a loan is placed on non-accrual,
the bank charges all previously accrued and unpaid interest against
income. In future periods, interest will be included in income to the
extent received only if complete principal recovery is reasonably
assured.
The Corporation defers and amortizes loan fees and related origination
costs. These fees and costs are amortized into interest or other income
over the estimated life of the loan using a method which approximates
the interest method.
Direct Financing Leases: The leasing operation of the Corporation
consists of the leasing of various types of equipment under leases
classified as direct financing leases. Interest and service charges,
net of initial direct costs, are deferred and reported as income in
decreasing amounts over the term of the lease so as to provide an
approximate constant yield on the outstanding principal balance.
Allowance For Loan Losses: The allowance for loan losses is established
through a provision for loan losses charged to expenses. The allowance
represents an amount which, in Management's judgment, will be adequate
to absorb probable losses on existing loans that may become
uncollectible.
Management's judgment in determining the adequacy of the allowance is
based on an evaluation of the collectibility of loans. These
evaluations take into consideration such factors as changes in the
nature and volume of the loan portfolio, current economic conditions,
overall portfolio quality, and review of problem loans.
Premises and Equipment: Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Provisions for depreciation
and amortization are computed generally using the straight line method
over the estimated useful lives of the assets. Leasehold improvements
are amortized on the straight line basis over the lease period.
When units of property are disposed of, the premises and equipment
accounts are relieved of the cost and the accumulated depreciation
related to such units. Any resulting gains or losses are credited to or
charged against income. Costs of repairs and maintenance are charged to
expense as incurred. Major renewals and betterments are capitalized at
cost.
Other Real Estate: Real estate acquired in satisfaction of indebtedness
is recorded at the lower of estimated fair market value or loan amount.
At the date of acquisition, any excess of the loan amount over the fair
market value is charged against the allowance for loan losses.
Earnings Per Common Share: Earnings per common share are calculated
based on net income after preferred dividend requirements and the
weighted average number of shares of common stock outstanding during the
year.
Stock Dividends: On February 2, 1994, the Corporation distributed
76,672 shares of common stock in connection with a 10% stock dividend.
On July 22, 1994, the Corporation distributed 211,275 shares of common
stock in connection with a 25% stock dividend. All references in the
accompanying financial statements to the number of common shares and per-
share amounts for 1993 and 1992 have been restated to reflect the stock
dividend.
Excess of Cost Over Net Assets Acquired: The excess of cost over net
assets of branches purchased in 1991 is being amortized on the straight
line method over ten years. The excess of cost over net assets of
branches purchased in 1992 is being amortized on the straight line
method over a five to eight year period for the portion allocated to the
core deposit base and ten years for the remaining excess. The
unamortized balances at December 31, 1994 and 1993, were $1,923,000
and $2,338,000, respectively. Amortization charged to expense was
$415,000 in 1994 and $416,000 in 1993, and $148,000 in 1992.
Disclosures About the Fair Values of Financial Instruments:
Cash and Cash Equivalents: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
1. Summary of Significant Accounting Policies (continued)
Disclosures About the Fair Values of Financial Instruments:
Investment Securities and Securities Available for Sale: For debt
securities, derivative instruments and marketable equity securities held
for investment purposes and for sale, fair values are based on quoted
market prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted market price for similar
securities.
Loans: For certain homogeneous categories of loans, such as some
residential mortgages, fair value is estimated using the quoted market
prices for securities backed by similar loans. The fair value of other
types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
Short-Term Borrowings: These liabilities represent primary overnight
borrowings and debt maturing within ninety days of issuance with
interest rates adjusted weekly Accordingly, the carrying amount is a
reasonable estimate of fair value.
Reclassifications: Certain prior year amounts have been reclassified to
conform with current year presentation.
2. Changes in Accounting Policies
On January 1, 1994, the Corporation adopted Financial Accounting
Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires entities to classify
debt and equity securities as either held to maturity, available for
sale, or trading securities. Under SFAS No. 115, held to maturity
securities are recorded at amortized cost; whereas available for sale
securities and trading securities are carried at market value. SFAS No.
115 further requires that unrealized gains and losses on available for
sale securities be reported, net of tax, as a separate component of
shareholders' equity. Adoption of SFAS No. 115 had no effect on current
year earnings.
In 1993, the Corporation adopted Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109 requires an
asset and liability approach which recognizes the amount of taxes
payable or refundable in the current year and deferred tax consequences
of events that have been recognized previously in financial statements
or tax returns. The impact on tax expense in 1993 due to adoption of
SFAS No. 109 was a consolidated benefit of $28,109 recorded as of
January 1, 1993.
In 1993, the Corporation adopted Financial Accounting Standards No. 106,
"Employers Accounting for Post-retirement Benefits Other Than Pensions."
The effect of this change was to decrease net income for 1993 by
$138,000 ($ .13 per share).
<TABLE>
3. Investment Securities
The amortized cost and estimated market values of investment securities at
December 31 are as follows:
<CAPTION>
1994 1993
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held
to maturity:
U.S. Treasury
securities and
obligations of
U.S. Government
Corporations
and agencies $ 4,248 $22 $ 312 $ 3,958 $ 4,462 $ 74 $ 47 $ 4,489
Obligations
of states and
political
subdivisions 24,244 51 1,615 22,680 13,281 409 8 13,682
Mortgage
derivative
securities 12,695 _ 836 11,859 14,970 8 198 14,780
Mortgage-
backed securities 51,276 7 2,952 48,331 81,569 441 505 81,505
Other securities _ _ _ _ 1,783 _ _ 1,783
Total held to
maturity $92,463 $80 $5,715 $86,828 $116,065 $932 $758 $116,239
Securities
available
for sale:
U.S. Treasury
securities and
obligations of
U.S. Government
Corporations
and agencies $ 6,388 $ _ $ 128 $ 6,260 $ 2,181 $ _ $ _ $ 2,181
Obligations of
states and
political
subdivisions _ _ _ _ 1,631 93 _ 1,724
Mortgage
derivative
securities 938 _ 87 851 164 7 _ 171
Mortgage-backed
securities 42,000 3 2,048 39,955 _ _ _ _
Total Debt
Securities 49,326 3 2,263 47,066 3,976 100 _ 4,076
Equity Securities 2,066 _ _ 2,066 _ _ _ _
Total available
for sale $51,392 $ 3 $2,263 $49,132 $ 3,976 $100 $ _ $ 4,076
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
3. Investment Securities (continued)
The amortized cost and estimated market value of investment securities at
December 31, 1994, by contractual maturity, follow. Expected maturities will
differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
Held to Maturity Available for Sale
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one
year or less $ 1,108 $ 1,104 $ _ $ _
Due after one
year through
five years 1,893 1,894 4,863 4,744
Due after
five years
through
ten years 6,216 5,655 1,525 1,516
Due after
ten years 19,275 17,985 _ _
28,492 26,638 6,388 6,260
Mortgage-backed
securities 51,276 48,330 42,000 39,955
Mortgage
derivative
securities 12,695 11,860 938 851
Equity
securities _ _ 2,066 2,066
Total $92,463 $86,828 $51,392 $49,132
</TABLE>
At December 31,1994 and 1993, the mortgage derivative securities consist solely
of collateralized mortgage obligations. At December 31, 1994, securities held to
maturity include U.S. Government Agency Structured Notes with a carrying value
of $1,974,000 and an estimated market value of $1,947,000; securities available
for sale include a U.S. Government Agency Structured Note with a carrying value
and estimated market value of $953,000.
Sales and write-downs of investment securities resulted in the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Proceeds from sales $16,198 $21,558 $40,211
Gross gains 31 790 896
Gross losses (86) (191) (183)
Realized losses
on market declines _ (804) (220)
Losses on
securities called (9) _ _
</TABLE>
In 1994, all securities sold were classified as available for sale at the time
of sale. There were no transfers of securities between classifications.
Assets carried at $36,538,000 and $26,043,000 at December 31, 1994 and 1993,
respectively, were pledged to secure United States Government and other public
funds, and for other purposes as required or permitted by law.
4. Loans and Allowance for Possible Loan Losses
<TABLE>
Loans outstanding at December 31 are as follows:
<CAPTION>
1994 1993
<S> <C> <C>
Real estate-construction $ 1,801 $ 2,081
Real estate-mortgage 78,573 74,986
Real estate-secured by nonfarm,
nonresidential property 21,222 16,526
Commercial, financial and
agricultural 35,036 23,263
Obligations of
political subdivisions in the U.S. 3,947 2,054
Installment and
credit card loans
to individuals 6,512 6,313
Direct finance leases 5 9
Loans receivable $147,096 $125,232
</TABLE>
The bank discontinues accruing interest income on loans and leases when, in the
opinion of management, the collectibility of such interest appears doubtful.
Non-accruing loans and leases amounted to $478,000 and $2,358,000 at December
31, 1994, and 1993, respectively. The after-tax effect of the interest that
would have been accrued on these loans was $38,000 in 1994 and $148,000 in 1993.
The estimated fair value of loans outstanding at December 31 1994, as
determined by using the valuation method described in Note 1, amounted to
$143,300,000.
<TABLE>
The following is an analysis of loan activity to directors, executive officers,
and their associates (see Note 12):
<CAPTION>
1994 1993
<S> <C> <C>
Balance previously reported $2,775 $3,096
New loans during the year 3,716 497
Total 6,491 3,593
Less repayments during the year 1,587 818
Balance, December 31 $4,904 $2,775
</TABLE>
<TABLE>
Activity in the allowance for loan losses is summarized as follows:
<CAPTION>
December 31
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year $1,617 $1,024 $1,013
Additions charged to
operating expense 805 577 405
Recoveries on loans
previously charged-off 55 50 39
Total 2,477 1,651 1,457
Loans charged-off 940 34 433
Balance at end of year $1,537 $1,617 $1,024
</TABLE>
The entire allowance represents a valuation reserve which is available for
future charge-offs.
5. Premises and Equipment
<TABLE>
Premises and equipment are stated at cost, less accumulated depreciation and
amortization, as follows:
<CAPTION>
Original
December 31 Useful Life
1994 1993 Years
<S> <C> <C> <C>
Land and land improvements $ 734 $ 659
Buildings 3,138 3,131 30 - 50
Furniture, fixtures
and equipment 3,971 3,369 5 - 12
Leasehold improvements 406 406 5 - 20
Total 8,249 7,565
Less accumulated depreciation
and amortization 3,601 3,105
Premises and equipment, net $ 4,648 $4,460
</TABLE>
Charges to operations for depreciation and amortization approximate $519,000,
$446,000, and $393,000 for 1994, 1993, and 1992, respectively.
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
6. Deposits
The distribution of the bank's deposits at December 31, 1994 and 1993, are as
follows:
<TABLE>
1994 1993
Non- Non-
interest interest
Bearing Interest Bearing Bearing Interest Bearing
Demand Demand Savings Time Demand Demand Savings Time
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals,
partnerships
and
Corporations $16,978 $26,273 $84,023 $113,319 $19,267 $27,854 $99,988 $83,080
U.S. Govern
ment 197 - - - 321 - _ _
States and
political
subdivisions 7,460 - - 5,039 2,712 - _ 8,259
Other
depository
institutions
in the U.S. - - - - - - _ -
Certified,
officers'
checks,
travelers
cheques, etc. 2,634 - - - 1,751 - _ -
Total $27,269 $26,273 $84,023 $118,358 $24,051 $27,854 $99,988 $91,339
</TABLE>
Time deposits include certificates of deposit issued in denominations of
$100,000 or more which amounted to $12,090,000 at December 31, 1994, and
$9,770,000 at December 31, 1993. A maturity distribution of time certificates
of deposit of $100,000 or more follows:
<TABLE>
1994 1993
<S> <C> <C>
Due in three
months or less $ 3,697 $7,113
Due after three
months through
six months 3,073 500
Due after six
months through
twelve months 2,182 1,311
Due after one
year through five
years 3,036 746
Due after five
years 102 100
Total $12,090 $9,770
</TABLE>
The estimated fair value of the Corporation's deposit liabilities
determined under the criteria set forth in Note 1 totaled $257,123,000
at December 31, 1994.
7. Short-Term Borrowings
Short term borrowings consist of advances from the Federal Home Loan
Bank of Cincinnati, federal funds purchased and securities sold under
agreement to repurchase.
Federal funds purchased and securities sold under agreements to
repurchase represent primarily overnight borrowings. Information
related to these borrowings is summarized below:
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
Securities sold under
repurchase agreements:
Balance at year end $8,736 $3,709 $2,993
Average during the
year $8,210 $3,581 $3,947
Maximum month-
end balance $9,653 $4,319 $4,245
Weighted average
rate during the year 3.56% 2.25% 3.30%
Rate at December 31 4.93% 2.75% 2.75%
Federal funds
purchased
Balance at year end $4,500 N/A N/A
Average during the
year $ 397 N/A N/A
Maximum month-
end balance $4,500 N/A N/A
Weighted average
rate during the year 4.43% N/A N/A
Rate at December 31 6.25% N/A N/A
</TABLE>
Advances from The Federal Home Loan Bank of Cincinnati are made under a
blanket agreement which allows for maximum borrowings of $30,000,000. Each
advance is for a ninety day term and bears interest at a variable rate, adjusted
daily. At December 31, 1994, the balance of advances due was $22,262,000
at an interest rate of 7%. Collateral for the advances consists of
residential mortgage loans in the amount of $33,393,000 and 17,238 shares of
The Federal Home Loan Bank of Cincinnati, with a carrying value of
$1,723,800.
8. Income Tax
As discussed in Note 1, the Corporation adopted the Financial Accounting
Standards Board Statement 109 as of January 1, 1993. The cumulative effect of
the change in accounting for income tax of $(28,109) is determined as of January
1, 1993. The effect on the Statement of Income is considered immaterial ($ .03
per share), and the total is included in the income tax expense for 1993.
The components of applicable income taxes are as follows:
<TABLE>
Year Ended December 31
1994 1993 1992
<S> <C> <C> <C>
Currently
payable $ 880 $ 775 $ 779
Deferred 147 (369) (205)
Income
tax $1,027 $ 406 $ 574
</TABLE>
For the year ended December 31, 1992, the amounts for deferred income tax
resulted from differences in the timing of recognition of revenue and expenses
for tax and financial reporting purposes. This amount, by source, follows:
<TABLE>
Year Ended 1992
<S> <C>
Provision for
loan losses-
book provisions
over tax $(115)
Allowance for
decline in market
value-
securities
held for sale (10)
Unrealized losses
on investments _
Deferred loan
origination fees (11)
Depreciation (25)
Lease income (20)
Interest-
nonaccrual loans (24)
Total $(205)
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
8. Income Tax (continued)
The following temporary differences gave rise to the deferred tax asset at
December 31, 1994 and 1993:
<TABLE>
1994 1993
<S> <C> <C>
Allowance for
loan losses $ 373 $ 395
Interest on
non-accrual
loans 20 76
Unrealized losses
on investments 805 71
Deferred loan
origination fees 25 40
Deferred compen-
sation and liability
for future
employees
benefits 78 76
Intangible assets 150 83
Premises and
equipment due
to differences
in depreciation (101) (42)
Direct finance
leases (102) (105)
Federal Home
Loan Bank stock
dividends (44) (11)
Total deferred
tax assets $1,204 $ 583
</TABLE>
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:
<TABLE>
1994 1993 1992
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at
statutory rate $1,449 34.0 $1,011 34.0 $820 34.0
Reductions
in taxes
resulting from:
Tax exempt
interest
on investments
and loans (476) (11.2) (275) (9.2) (211) (8.8)
Non-taxable
portion-
dividends _ _ (45) (1.5) (59) (2.4)
Excess of tax
loss over
book gains
on investment
securities _ _ (161) (5.4) (45) (1.9)
Utilization of
capital loss
carrybacks _ _ (112) (3.8) _ _
Earnings on
life insurance
policies (18) (0.4) (20) (.7) _ _
Non-
deductible
interest
expense 64 1.5 50 1.7 60 2.5
Others - net 8 .2 (14) (.5) 9 .4
Cumulative
effect of
adoption of
FASB 109 _ _ (28) (1.0) _ _
Actual tax
expense $1,027 24.1 $ 406 13.6 $574 23.8
</TABLE>
The bank has available $623,000 in capital loss carry forwards. This amount will
expire in 1998.
9. Employee Benefit Plans
The Corporation has a profit-sharing retirement plan which includes all full-
time employees who have reached the age of twenty-one and have completed a least
one year of service. Each participant can elect to contribute to the plan an
amount not to exceed 10% of their salary. The plan provides for an employer
matching contribution on the first 4% of the participant's elective
contribution. In addition to the matching contribution, the plan provides for a
discretionary contribution to be determined by the bank's board of directors.
Total pension expense for 1994, 1993, and 1992 was $180,000, $105,000, and
$67,000, respectively.
In addition to providing the profit-sharing plan, Belmont Bancorp. sponsors two
defined benefit post-retirement plans that cover both salaried and nonsalaried
employees. Employees must be fifty-five years old and have ten years of service
to qualify for both plans. One plan provides medical and dental benefits, and
the other provides life insurance benefits. The post-retirement health care
plan is contributory, with retiree contributions adjusted annually; the life
insurance plan is noncontributory. On January 1, 1993, Belmont Bancorp. adopted
Statement of Financial Accounting Standards ("SFAS") No. 106, "Employer's
Accounting for Post-retirement Benefits Other than Pensions." The statement
requires the accrual of the expected cost of providing post-retirement benefits
to employees and certain dependents during the years that an employee renders
service.
The following table sets forth the plan's combined funded status reconciled with
the amount shown in the Corporation's balance sheet at December 31:
<TABLE>
1994 1993
<S> <C> <C>
Accumulated post-
retirement benefit
obligation:
Retirees $ 40 $ 45
Fully eligible
active plan
participants 46 53
Other active
plan
participants 35 51
121 149
Plan assets at
fair value _ _
Accumulated
post-retirement
benefit obligation
in excess of plan
assets 121 149
Unrecognized net
gain (loss) from
past experience
different from
that assumed
and from changes
in assumptions (14) (60)
Prior service
cost not yet
recognized
in expense 51 63
Unrecognized
transition obligation (13) (14)
Accrued post-
retirement benefit
cost in the balance
sheet $145 $138
</TABLE>
The Corporation's post-retirement health care plan is underfunded at December
31, 1994; the accumulated post-retirement benefit obligation and plan assets for
that plan are $121,000 and $-0-, respectively.
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
9. Employee Benefit Plans (continued)
Post-retirement expense includes the following components:
<TABLE>
1994 1993
<S> <C> <C>
Service cost $ 6 $ 43
Interest cost
on accumlated
post-retirement
benefit obligation 10 64
Actual return
on plan assets _ _
Net amortization
and deferral (5) 47
Benefit payments _ (16)
Post-retirement
expense $11 $138
</TABLE>
The annual assumed rate of increase in the per capita cost of covered benefits
for 1995 is 12% for medical benefits and 9% for dental benefits (compared to
12.5% and 9.5% for 1994 for the respective benefits). The rates are assumed to
decrease gradually to 6% (for medical 2007 and for dental in 2001), and remain
at that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. Increasing the assumed health care
trend rates by one percentage point in each year would increase the accumulated
post-retirement benefit obligation as of December 31, 1994, by $5,000, and the
aggregate of the service and interest cost components of net periodic post-
retirement benefit cost for 1994 by $1,000. The weighted-average discount rate
used in determining the accumulated post-retirement benefit obligation was 8.5%
at December 31, 1994, and 7% at December 31, 1993. The long-term inflation rate
assumed was 4% for both years.
Prior to the adoption of SFAS No.106, Belmont Bancorp. recognized benefit
expense related to post-retirement benefits on a cash basis. The expense of
providing such benefits in 1992 did not differ materially from the amount
expensed in 1994 and 1993.
10. Leases
The subsidiary bank utilized certain bank premises and equipment under long-term
leases expiring at various dates. In certain cases, these leases contain
renewal options and generally provide that the Corporation will pay for
insurance, taxes and maintenance.
As of December 31, 1994, the future minimum rental payments required under
noncancelable operating leases with initial terms in excess of one year are as
follows:
<TABLE>
Operating Leases
<S> <C>
Year ending
December 31,
1995 $ 91
1996 80
1997 70
1998 17
Later years _
Total minimum
lease payments $ 258
</TABLE>
Rental expense under operating leases approximated $83,000 in 1994,
$82,000 in 1993, and $75,000 in 1992.
11. Acquisitions
Effective October 2, 1992, the Corporation's subsidiary bank acquired
the premises and equipment and approximately $15,000,000 in loans and
assumed all deposit liabilities of three branch offices of Diamond
Savings and Loan Corporation located in Tuscarawas County, Ohio in a
cash transaction. The office locations are being operated as branches
of Belmont National Bank. The excess of cost over the net assets
acquired was $2,403,000.
12. Related Party Transactions
Certain directors and executive officers and their associates were
customers of, and had other transactions with, the subsidiary bank in
the ordinary course of business in 1994 and 1993. The outstanding
balance of all loans to the related parties was $4,904,000 and
$2,775,000 at December 31, 1994 and 1993, respectively. All loans and
commitments included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with others and did not involve
more than the normal risk of collectibility or present other unfavorable
features.
13. Financial Instruments with Off-Balance-Sheet Risk
The subsidiary bank is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments involve,
to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet. The contract amounts of those
instruments reflect the extent of involvement the Corporation has in
particular classes of financial instruments.
The Corporation's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Corporation uses the same credit
policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.
The following represents financial instruments whose contract amounts
represent credit risk at December 31, 1994:
<TABLE>
Contract Amount
<S> <C>
Commitments to
extend credit $14,210,000
Standby letters
of credit 1,307,000
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
13. Financial Instruments with Off-Balance-Sheet Risk (continued)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant, and equipment, and
income-producing properties.
Standby letters of credit are conditional commitments issued by the Corporation
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. Of
the standby letters of credit, $915,000 expire in 1995, while the remaining
$392,000 expire prior to year end 1998. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers.
14. Concentration of Credit Risk
The subsidiary bank extends commercial, consumer, and real estate loans to
customers primarily located in Belmont, Harrison, and Tuscarawas Counties in
Ohio and Ohio County, West Virginia. While the loan portfolios are diversified,
the ability of the borrowers to meet their contractual obligations partially
depends upon the general economic condition of Southeastern Ohio and the
Northern Panhandle of West Virginia.
15. Limitation on Dividends
The approval of the Comptroller of the Currency is required to pay dividends if
the total of all dividends declared by a national bank in any calendar year
exceeds the total of its retained net profits of the preceding two years. Under
this formula, the bank can declare dividends in 1995 without approval of the
Comptroller of the Currency of approximately $4,500,000 plus an additional
amount equal to the bank's net profit for 1995 up to the date of any such
dividend declaration. The subsidiary bank is the primary source of funds to pay
dividends to the shareholders of Belmont Bancorp.
16. Other Operating Expenses
Other operating expenses include the following:
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
Taxes other
than payroll
and real
estate $ 228 $ 267 $ 233
Supplies and
printing 262 249 195
Insurance,
including
Federal
Deposit
Insurance 616 581 512
Data
processing 281 303 145
Other
(individually
less than
1% of total
interest
income) $1,585 $1,517 $1,001
Total $2,972 $2,917 $2,086
</TABLE>
17. Restrictions on Cash
The subsidiary bank is required to maintain an average reserve balance with the
Federal Reserve Bank. The average amounts of the reserve balance for the years
ended December 31, 1994 and 1993, were $1,734,000 and $1,763,000, respectively.
18. Cash Flows Information
The Corporation's policy is to include cash on hand, amounts due from banks and
federal funds sold in the definition of cash and cash equivalents.
Cash payments for interest in 1994,1993, and 1992 were $8,670,000, $8,880,000,
and $8,553,000, respectively. Cash payments for income taxes for 1994, 1993, and
1992 were $1,030,000, $462,000, and $902,000, respectively.
19. Preferred Stock
On October 2, 1992, the Corporation issued 10,000 shares of $100 par value, non-
voting, senior cumulative preferred stock. Dividends are payable quarterly in
an amount equal to $8 per annum. The shares are subject to a dividend
adjustment feature at January 1, 2000, which provides for an increase in the
dividend rate based on the prime rate of interest. The stock has a liquidation
preference of $100 per share and a stated redemption value of $100 per share.
The shares also contain conversion rights, effective January 1, 2000, permitting
shareholders after that date to convert one share of preferred stock for 4.04
shares of the Corporation's common stock.
<PAGE>
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992 (000's)
20. Condensed Parent Corporation Financial Statements
Presented below are the condensed balance sheets, statements of income, and
statements of cash flows for Belmont Bancorp.
<TABLE>
Balance Sheets
1994 1993
<S> <C> <C>
Assets
Cash $ 377 $ 172
Investment
in subsidiaries
(at equity in net
assets) 19,504 18,625
Equity securities 60 60
Advances to
subsidiaries net 145 684
Prepaid taxes 148 -
Total Assets $20,234 $19,541
Liabilities
Accrued dividends $ 20 $ 20
Accrued expenses _ 166
Total liabilities 20 186
Shareholders' Equity
Preferred stock-
authorized
90,000 shares
with no par
value; issued
and outstanding,
none $ _ $ _
Senior cumulative
preferred stock
-authorized, issued
and outstanding,
10,000 shares
with a $100
par value 1,000 1,000
Common stock-
$3.57 par value,
1,750,000 shares
authorized;
1,057,738 shares
issued in 1994
& 1993 3,777 2,749
Capital surplus 5,061 3,647
Treasury stock-
424 shares in
1994 and 728
shares in 1993 (8) (13)
Retained earnings-
appropriated 850 850
Retained earnings-
unappropriated 11,026 11,122
Net unrealized
loss on securities
available for sale (1,492) _
Total shareholders'
equity 20,214 19,355
Total Liabilities
and Shareholders'
Equity $20,234 $19,541
Statement of Income
1994 1993 1992
Operating Income
Dividends from
subsidiaries $ 879 $ 780 $ 704
Other income 10 9 18
Total income 889 789 722
Operating Expense (33) (30) (27)
Nonoperating Income _ 1 194
Income before
income tax and
equity in
undistributed
income of
subsidiaries 856 760 889
Income Tax (credit) (8) (8) 63
Equity in
Undistributed Income
of Subsidiaries 2,370 1,801 1,012
Net Income $3,234 $2,569 $1,838
Statement of
Cash Flows
1994 1993 1992
Operating Activities
Net income $3,234 $2,569 $1,838
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Undistributed
earnings of
affiliates (2,370) (1,801) (1,012)
Investment
securities gains _ (1) (194)
Changes in
operating assets
and liabilities:
Other assets _ _ 1
Prepaid taxes (148) 121 (76)
Accrued dividends _ _ 20
Accrued expenses (166) 166 _
Net cash provided
by operating
activities 550 1,054 577
Investment Activities
Payment (to) from
subsidiaries 539 (464) 144
Proceeds from
sales of equity
securities _ 1 339
Investment
in subsidiary _ _ (1,000)
Net cash provided
(used) by investing
activities 539 (463) (517)
Financing Activities
Cash paid for
fractional shares (10) _ _
Issuance of preferred
stock _ _ 1,000
Sale of treasury
stock 5 1 _
Dividends (879) (780) (718)
Net cash used by
financing
activities (884) (779) 282
Increase(Decrease) in
Cash & Cash
Equivalents 205 (188) 342
Cash and Cash
Equivalents at
Beginning of Year 172 360 18
Cash and Cash
Equivalents
at End of Year $ 377 $ 172 $ 360
</TABLE>
Supplemental disclosure:
The Corporation made income tax payments of $1,030,000, $462,000 and $902,000 in
1994, 1993, and 1992, respectively. These payments represented income tax
payments for the Corporation and its consolidated subsidiaries.
The Corporation incurred no interest expense in 1994, 1993 or 1992.
<PAGE>
Belmont Bancorp. and Subsidiaries
Opinion of Independent Certified Public Accountants
Board of Directors
Belmont Bancorp.
St. Clairsville, Ohio
We have audited the accompanying consolidated balance sheets of Belmont Bancorp.
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows, for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Belmont Bancorp.
and subsidiaries at December 31, 1994 and 1993, and the consolidated results of
its operations, changes in shareholders' equity, and cash flows, for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the Consolidated Financial Statements, in 1994,
Belmont Bancorp. changed its method of accounting for debt and equity securities
and, in 1993, changed its methods of accounting for income taxes and post
retirement benefits other than pensions.
S.R. SNODGRASS A.C.
S. R. Snodgrass A. C.
Wheeling, West Virginia
January 23, 1995
<PAGE>
Belmont Bancorp. and Subsidiaries
Report on Management's Responsibilities
Management of Belmont Bancorp. is responsible for the accurate and objective
preparation of the consolidated financial statements and the estimates and
judgements upon which certain financial statements are based. Management is
also responsible for preparing the other financial information included in this
annual report. In our opinion, the financial statements on the preceding pages
have been prepared in conformity with generally accepted accounting principles
and other financial information in this annual report is consistent with the
financial statements.
Management is also responsible for establishing and maintaining an adequate
internal control system which encompasses policies, procedures and controls
directly related to, and designed to provide reasonable assurance as to the
integrity and reliability of the financial reporting process and the financial
statements generated therefrom. The concept of reasonable assurance is based on
the recognition that there are inherent limitations in all systems of internal
control, and that the cost of such systems should not exceed the benefits to be
derived therefrom.
The systems and controls and compliance therewith are reviewed by an extensive
program of internal audits and by our independent auditors. Their activities
are coordinated to obtain maximum audit coverage with a minimum of duplicate
effort and cost. The independent auditors have access to all internal audit
work papers. Management believes the systems of internal control effectively
meets its objectives of reliable financial reporting.
The Board of Directors pursues its responsibility for the quality of the
Corporation's financial reporting primarily through its Audit Committee which is
comprised solely of outside directors. The Audit Committee meets regularly with
Management, the internal auditor and independent auditors to ensure that each is
meeting its responsibilities and to discuss matters concerning internal
controls, accounting and financial reporting. The internal auditor and
independent auditors have full and free access to the Audit Committee.
J.VINCENT CIROLI, JR.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
Belmont Bancorp.
Belmont National Bank
WILLIAM WALLACE JANE R. MARSH
William Wallace Jane R. Marsh
Vice President, Belmont Bancorp. Secretary, Belmont Bancorp.
Executive Vice President and Senior Vice President
Chief Operating Officer Controller and Cashier
Belmont National Bank Belmont National Bank
<PAGE>
Belmont Bancorp. and Subsidiaries
Consolidated Average Balance Sheets
For the Years Ended December 31, 1994, 1993 and 1992 (Fully Taxable Equivalent
Basis) (000's)
<TABLE>
1994 1993 1992
Average Average Average Average Average Average
Out- Revenue/ Yield/ Out- Revenue/ Yield/ Out- Revenue/ Yield
standing Cost Rate standing Cost Rate standing Cost Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest
earning
assets
Loans
and
leases $134,952 $11,719 8.68% $120,218 $10,681 8.88% $ 95,489 $ 9,133 9.56%
Securities
Taxable 113,608 6,810 5.99% 111,760 5,169 4.63% 86,434 4,657 5.39%
Exempt
from
income
tax 21,866 1,746 7.98% 12,474 1,104 8.85% 8,790 819 9.32%
Trading
account
assets 138 1 0.72% 831 45 5.42% 804 61 7.59%
Federal
funds
sold 130 4 3.08% 4,147 125 3.01% 9,457 320 3.38%
Interest
bearing
deposits _ _ _ 98 2 2.04% 104 3 2.88%
Total
interest
earning
assets $270,694 $20,280 7.49% $249,528 $17,126 6.86% $201,078 $14,993 7.46%
Cash and
due from
banks 8,275 7,823 6,088
Other
assets 12,014 11,568 5,880
Allowance
for
possible
loan loss (1,427) (1,328) (997)
Total
Assets $289,556 $267,591 $212,049
Liabilities
Interest
bearing
liabilities
Interest
checking $ 26,764 $ 581 2.17% $ 30,895 $ 745 2.41% $ 25,674 $ 838 3.26%
Savings 95,655 2,850 2.98% 85,865 2,788 3.25% 51,528 1,836 3.56%
Other
time
deposits 99,660 4,434 4.45% 106,706 4,992 4.68% 96,103 5,279 5.49%
Short term
borrowings 21,217 942 4.44% 3,675 91 2.48% 4,133 129 3.12%
Total
interest
bearing
liabilities 243,296 8,807 3.62% 227,141 8,616 3.79% 177,438 8,082 4.55%
Demand
deposits 24,797 21,093 16,537
Other
liabilities 1,583 1,272 1,846
Total
liabilities 269,676 249,506 195,821
Share-
holders'
Equity 19,880 18,085 16,228
Total
Liabilities
and
Share
holders'
Equity 289,556 $267,591 $212,049
Net
interest
income
margin
on a
taxable
equiva-
lent
basis 11,473 4.24% 8,510 3.41% 6,911 3.44%
Net
interest
rate
spread 3.87% 3.07% 2.90%
Interest
bearing
liabilities
to interest
earning
assets 89.88% 91.03% 88.24%
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
Consolidated Average Balance Sheets
For the Years Ended December 31, 1994, 1993 and 1992 (Fully Taxable Equivalent
Basis) (000's)
<TABLE>
1994 Compared to 1993 1993 Compared to 1992
Volume Yield Mix Total Volume Yield Mix Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase(decrease)
in interest income
Loans and lease $1,309 $ (241) $(29) $1,039 $2,365 $ (649) $(168) $1,548
Securities Taxable 85 1,530 25 1,640 1,365 (659) (194) 512
Exempt from
income tax 831 (108) (81) 642 343 (41) (17) 285
Trading account
assets (38) (39) 33 (44) 2 (17) (1) (16)
Federal funds sold (121) 3 (3) (121) (180) (35) 20 (195)
Interest bearing
deposits (2) (2) 2 (2) _ (1) _ (1)
Total interest
income change 2,064 1,143 (53) 3,154 3,895 (1,402) (360) 2,133
Increase(decrease)
in interest expense
Interest checking (100) (74) 10 (164) 170 (219) (43) (92)
Savings 318 (230) (26) 62 1,223 (163) (109) 951
Other time
deposits (330) (245) 17 (558) 582 (783) (86) (287)
Short-term
borrowings 434 72 345 851 (14) (27) 3 (38)
Total interest
expense change 322 (477) 346 191 1,961 (1,192) (235) 534
Increase(decrease)
in net interest
income on a
taxable equivalent
basis $1,742 $1,620 $ (399) $2,963 $1,934 $ (210) $(125) $1,599
(Increase)decrease
in taxable
equivalent
adjustment (215) (87)
Net interest
income change $2,748 $1,512
</TABLE>
<PAGE>
Belmont Bancorp. and Subsidiaries
Financial Information, continued
For the Years Ended December 31, 1994, 1993, 1992, 1991 and 1990
Notice of Form 10-K
Upon written request of any shareholder on record on December 31, 1994, the
Corporation will provide, without charge, a copy of its 1994 Annual Report on
Form 10-K, including financial statements and schedules, as required to be filed
with the Securities and Exchange Commission. To obtain a copy of Form 10-K,
contact Ms. Cheryl Rusiecki, Administrative Officer, Belmont Bancorp., 325 Main
Street, Bridgeport, OH 43912.
<PAGE>
Sharing The Vision: A Commitment to Community
"We want to be recognized in all the communities we serve as the #1 choice for
financial products, services and information." These important words, and those
that follow, are excerpts from our Corporate Vision Statement which we provide
to every employee.
Belmont National Bank is a rapidly growing diversified financial information
company with approximately 120 employees and ten offices in three Ohio counties.
We have over 600 shareholders, many of whom are customers, friends, neighbors,
family members and fellow employees. We are a financial intermediary, which
means we take in and safeguard deposits in the communities we serve, and in turn
lend these deposits back out into the same communities--making loans to
individuals and families, loans to help new businesses become established or old
businesses expand.
Our role here is vital. It means jobs and continued prosperity for our
communities and all of us. We help families finance homes, cars, boats,
education and much more. We also provide our customers a wide selection of non-
traditional bank products such as stocks, bonds and mutual funds. In fact, we
offer most, if not all, of the products and services that bigger competitors
offer. What separates us from them are two things: the "value added" design of
our products and services, and our people.
The mission of Belmont National Bank and Belmont Bancorp. is to provide the
highest quality financial services possible and to promote economic growth
within all the communities we serve while earning a desirable return.
Our goals are fairly simple...we have financial goals and customer goals. Our
long term financial goals are to (1) have above average asset quality and risk
based capital levels when compared to peers, (2) maintain a diverse business
loan portfolio both by industry and geography, (3) achieve earnings per share
growth of at least ten percent per year, and (4) have a return on equity in
excess of 15%.
<PAGE>
Sharing The Vision: A Commitment to Community
We have two customer goals. First, we want all our customers to view us as
their first choice for their next financial product need. Second, we want to
achieve levels of service which exceed the customer's expectation.
We use technology to improve customer service. Technology is essential in
providing the right products and services, at the right price, while controlling
cost. Technology enables us to compete against much larger institutions.
Technology, however, is useless without the knowledge and creativity of our
employees.
Our Corporation's hierarchy does not indicate who is more important, more
knowledgeable or more appreciated. The most important people at Belmont
National Bank are those that meet and serve our customers on a daily basis.
Everyone else's job is to help our customer service people. In reality, all
Belmont National Bank employees are in the customer service business. We strive
to attract the very best support staff we can find because it is their expertise
that makes better customer service possible.
We ask each and every employee to take personal responsibility for what
happens with our customers. The key to winning more customers and satisfying
our present customers is taking action and finding quick solutions to questions
and problems. Belmont National Bank people must have a very strong sense of
urgency in all that they do. We encourage our employees to buy shares of
Belmont Bancorp. stock, for it is the best way for them to "think and act like
owners."
During 1995, we will continue to bring new technology and financial services
to our customers. We will communicate our values and vision in actions, not
just words. We will do more for our customers and our communities than is
expected.
<PAGE>
Belmont Bancorp. Directors
John A. Belot
Vice President,
Premier Concrete Products, Inc.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer,
Belmont Bancorp. and Belmont National Bank
Daniel A. Giffin
Retired President, Giffin Aluminum Supply, Co.
William P. Goddard
Director
J. Harvey Goodman
Realtor, Chairman, Goodman Group, Inc.
John H. Goodman, II
Chairman
Belmont Bancorp. and Belmont National Bank
Realtor, President, Goodman Group, Inc.
Mary L. Holloway Haning
Director of Admissions
Wheeling Country Day School
Charles J. Kaiser, Jr.
Attorney-at-Law, Partner,
Phillips, Gardill, Kaiser and Altmeyer
Terrence A. Lee
CPA, Partner, Lee, O'Connor & Associates
Dana J. Lewis
President, Zanco Enterprises, Inc.
W. Quay Mull, II
Chairman, Mull Machine Co.
Tom Olszowy
Independent Insurance Agent,
Tom Olszowy Insurance
William Wallace
Vice President, Belmont Bancorp.;
Executive Vice President and
Chief Operating Officer
Belmont National Bank
Charles A. Wilson, Jr.
Vice Chairman
Belmont Bancorp. and Belmont National Bank
President, Wilson Funeral & Furniture Co.
Belmont Bancorp. Officers
John H. Goodman, II
Chairman
Charles A. Wilson, Jr.
Vice Chairman
J. Vincent Ciroli, Jr.
President & Chief Executive Officer
William Wallace
Vice President
Jane R. Marsh
Secretary
Belmont National Bank Officers
John H. Goodman, II
Chairman
Charles A. Wilson, Jr.
Vice Chairman
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
William Wallace
Executive Vice President and
Chief Operating Officer
Richard E. Dolan
Senior Vice President and Trust Officer
Jane R. Marsh
Senior Vice President, Controller
and Cashier
Robert A. Brown
Vice President, Marketing and
Product Development Manager
Gerald J. Elliott
Vice President, Credit Administration
Larry G. Gibbs
Vice President, Trust Officer
John L. Kloss
Vice President, Real Estate Lending
J. Douglas Cash
Assistant Vice President, Commercial Loan Officer
M. Annette Curtis
Assistant Vice President Loan Administration Officer
Roxie M. Ferda
Personal Banking Officer, Branch Manager
Linda L. Merritt
Personal Banking Officer, Branch Manager
Nancy J. Mroczkowski
Assistant Vice President, Manager of Branch Administration
Nell L. Murrell
Assistant Vice President, Human Resources Officer
Patricia A. Myers
Personal Banking Officer, Branch Manager
Trent B. Troyer
Assistant Vice President, Lending
Madelyn P. Witsberger
Assistant Vice President, Trust Officer
Linda L. Boyers
Personal Banking Officer, Branch Supervisor
Carol L. DeBonis
Operations Officer
Donald E. Duff
Personal Banking Officer
Dorothy A. Ellis
Personal Banking Officer, Branch Supervisor
Debba A. Janiszewski
Personal Banking Officer, Branch Supervisor
Michele L. Larkin
Residential Loan Officer
Robert A. Mroczkowski
Internal Audit Manager
Cheryl A. Rusiecki
Administrative Officer
Darlene K. Smith
Personal Banking Officer, Branch Manager
Sheila M. Stevens
Personal Banking Officer, Branch Supervisor
Teri L. Walters
Administrative Officer
Jo Ann Widmor
Personal Banking Officer
Belmont Financial Network, Inc.
J. Vincent Ciroli, Jr.
Chairman and President
Jane R. Marsh
Secretary and Treasurer
Belmont Investment and Financial
Services, Inc.
Frank McDonnell
Manager, Investment Services
<PAGE>
Belmont National Bank Locations
Bridgeport Office
325 Main Street
Bridgeport, OH 43912
(614) 635-1142
Cadiz Office
657 Lincoln Avenue
Cadiz, OH 43907
(614) 942-4664
Jewett Office
318 East Main Street
Jewett, OH 43986
(614) 946-2411
Lansing Office
55160 National Road
Lansing, OH 43934
(614) 635-1454
New Philadelphia Office
152 North Broadway
New Philadelphia, OH 44663
(216) 343-5518
Ohio Valley Mall Office
Ohio Valley Mall
St. Clairsville, OH 43950
(614) 695-9926
St. Clairsville Office
154 West Main Street
St. Clairsville, OH 43950
(614) 695-3323
Schoenbrunn Office
2300 East High Avenue
New Philadelphia, OH 44663
(216) 339-9200
Shadyside Office
4105 Central Avenue
Shadyside, OH 43947
(614) 671-9346
Wabash Avenue Drive-In Office
525 Wabash Avenue
New Philadelphia, OH 44663
<PAGE>
Belmont Bancorp.
325 Main Street
Bridgeport, OH 43912
(614) 695-3323
