U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
For the Quarter Ended June 30, 1997
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ___________________ to
__________________
Commission file number 0-12724
Belmont Bancorp.
An Ohio Corporation
IRS Employer ID number - 34-1376776
325 Main Street
Bridgeport, Ohio 43912
Telephone (614) 695-3323
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 ___
The number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Common Stock, $0.50 par value,
2,637,498 shares outstanding
as of August 6, 1997
<PAGE>
FORM 10-Q
BELMONT BANCORP.
Quarter Ending June 30,1997
INDEX
Part I. Financial information
Financial highlights
Management's report on financial statements
Consolidated Statements of Condition - June 30, 1997,
December 31, 1996, and June 30, 1996
Consolidated Statements of Income-Three Months and
Six Months Ended June 30, 1997 and June 30, 1996
Consolidated Statements of Cash Flows-Six Months
Ended June 30, 1997 and June 30, 1996
Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended June 30, 1997 and Year Ended
December 31, 1996
Notes to the Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II - Other Information
Legal Proceedings
Changes in Securities
Defaults upon Senior Securities
Submission of Matters to a Vote of Security Holders
Other Information
Signature page
<PAGE>
BELMONT BANCORP. AND
SUBSIDIARIES
Financial Highlights
June 30 1997 1996 % Change
Earnings and dividends
($000's)
Net income $ 2,985 $ 2,574 16.0
Operating earnings (1) 3,664 3,339 9.7
Cash dividends declared on
common stock 719 592 21.5
Per common share (2):
Net income $ 1.13 $ 0.96 17.7
Cash dividends declared 0.272 0.224 21.4
Book value 11.14 9.15 21.7
Market price :
High 25.20 22.40 12.5
Low 20.80 20.80 0.0
At quarter-end ($000's)
Assets $ 384,599 $ 352,937 9.0
Loans and leases 205,116 176,857 16.0
Deposits 261,717 256,624 2.0
Stockholders' equity 29,376 25,182 16.7
Key Ratios
Return on average assets 1.67% 1.55%
Return on average common
shareholders' equity 21.30% 20.39%
Net interest margin (TE) 4.47% 4.47%
Number of shares 2,637,498 2,641,998 (0.2)
Number of full time equivalent
employees 132.5 112.0 18.3
Total assets per FTE employee $ 2,903 $ 3,151 (7.9)
(1) Operating earnings are defined as earnings before
income taxes minus securities and trading gains or plus
securities and trading losses.
(2) All per share amounts have been restated for the effect
of a 25% common stock dividend paid on July 1, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The following consolidated financial statements and
related notes of Belmont Bancorp. and subsidiaries were
prepared by management which has the primary responsibility
for the integrity of the financial information. The
statements are prepared in conformity with generally
accepted accounting principles appropriate in the
circumstances, and include amounts that are based on
management's best estimates and judgments. Financial
information elsewhere in the quarterly report is prepared on
a basis consistent with that in the financial statements.
In meeting its responsibility for the accuracy of the
financial statements, management relies on the Corporation's
comprehensive system of internal accounting controls. This
system provides reasonable assurance that assets are
safeguarded and transactions are recorded to permit the
preparation of appropriate financial information. The
system of internal controls is characterized by an effective
control oriented environment within the Corporation which is
augmented by written policies and procedures, internal
audits and the careful selection and training of qualified
personnel.
The functioning of the accounting system and related
internal accounting controls is under the general oversight
of the Audit Committee of the Board of Directors which is
comprised of five outside directors. The accounting system
and related controls are reviewed by a program of internal
audits and by the Corporations' independent accountants.
The Audit Committee meets regularly with the internal
auditor and the independent public accountants to review the
work of each and ensure that each group is properly
discharging its responsibilities. In addition, the
Committee reviews and approves the scope and timing of the
internal and external audits and any findings with respect
to the system of internal controls. Reports of examinations
conducted by federal regulatory agencies are also reviewed
by the Committee.
The annual consolidated financial statements of Belmont
Bancorp. and subsidiaries will be examined by S.R. Snodgrass
A.C., the Corporation's independent certified public
accountants. Their examination will be conducted in
accordance with generally accepted auditing standards and
will include a review of internal controls and a test of
transactions in sufficient detail to allow them to report on
the fair presentation of the consolidated operating results
and financial condition of Belmont Bancorp. and
subsidiaries.
BASIS OF PRESENTATION
The consolidated financial statements include the
accounts of Belmont Bancorp. and its subsidiaries, Belmont
National Bank and Belmont Financial Network.
<PAGE>
Consolidated Condensed Balance
Sheet (Unaudited) ($000s except per share amounts)
June 30, Dec. 31 June 30,
1997 1996 1996
ASSETS
Cash and due from banks $ 13,037 $ 10,948 $ 9,740
Federal funds sold - 24,450 -
Securities available for sale
at market value 135,898 78,728 132,074
Securities held to maturity (1) 17,584 19,299 21,151
Loans 205,116 188,783 176,857
Less allowance for possible
loan losses (3,474) (3,153) (2,945)
Net loans 201,642 185,630 173,912
Premises and equipment, net 7,256 7,260 6,039
Other real estate owned 20 66 645
Accrued income receivable 2,678 1,921 2,527
Other assets 6,484 5,601 6,849
Total Assets $384,599 $333,903 $352,937
LIABILITIES
Non-interest bearing deposits
Demand $ 29,581 $ 29,232 $ 27,581
Interest-bearing deposits:
Demand 38,075 40,569 37,429
Savings 79,040 80,961 80,485
Time 115,021 110,777 111,129
Total deposits 261,717 261,539 256,624
Securities sold under
repurchase agreements 7,569 8,280 15,535
Short-term borrowings 67,193 10,000 35,148
Long term debt 16,989 19,676 17,467
Accrued interest on deposits
and other borrowings 984 664 709
Other liabilities 771 6,412 2,272
Total liabilities $355,223 $306,571 $327,755
SHAREHOLDERS' EQUITY
Preferred stock -
authorized 90,000 shares with
no par value; issued and
outstanding, none - - -
Senior cumulative preferred
stock - authorized, issued and
outstanding, no shares at
June 30, 1997 and December 31,
1996; 10,000 shares of $100
par value at June 30, 1996 $ 0 $ 0 $ 1,000
Common stock - $0.50 par
value, 8,900,000 shares
authorized; 2,115,476
issued in 1997 and 1996 1,057 1,057 1,057
Surplus 7,781 7,781 7,781
Treasury stock ( 5,332
shares at June 30, 1997; 832
shares at December 31, 1996
and June 30, 1996) (131) (8) (8)
Retained earnings:
Unappropriated 19,817 17,820 16,090
Appropriated for
contingencies 850 850 850
Common stock dividend to be
distributed (527,354 shares) 269 - -
Net unrealized loss on
securities available for sale (267) (168) (1,588)
Total shareholders' equity $ 29,376 $ 27,332 $ 25,182
Total liabilities and
shareholders' equity $384,599 $333,903 $352,937
(1) Market value at June 30, 1997, $17,599; December 31, 1996,
$19,302; June 30, 1996, $20,737.
<PAGE>
Consolidated Condensed Statement of Income
(Unaudited) ($000s except per share amounts)
Three months ended June 30,
1997 1996
INTEREST INCOME
Loans and lease financing
Taxable $ 4,661 $ 3,899
Tax-exempt 93 83
Investment securities:
Taxable 2,013 1,989
Tax-exempt 348 321
Dividends 70 38
Interest on fed funds
sold 1 1
Total interest income 7,186 6,331
INTEREST EXPENSE
Deposits 2,436 2,331
Borrowings 1,156 727
Total interest
expense 3,592 3,058
Net interest income 3,594 3,273
Provision for possible
loan losses 250 105
Net interest income
after provision
for possible loan
losses 3,344 3,168
NON-INTEREST INCOME
Trust fees 149 103
Service charges on
deposits 175 159
Other operating income 185 154
Investment securities
gains (losses) (1) -
Gains (losses) on
securities available
for sale 198 4
Total non-interest
income 706 420
NON-INTEREST EXPENSE
Salary and employee
benefits 845 794
Net occupancy expense of
premises 194 170
Equipment expenses 238 205
Other operating expenses 744 804
Total non-interest
expense 2,021 1,973
Income before income
taxes 2,029 1,615
INCOME TAXES 465 450
Net income $ 1,564 $ 1,165
PER COMMON SHARE DATA
Net income per share $ 0.59 $ 0.43
Cash dividend per
share $ 0.136 $ 0.120
Weighted average
shares outstanding 2,639,377 2,641,998
<PAGE>
Consolidated Condensed Statement of Income
(Unaudited) ($000s except per share amounts)
For the Six Mpnths Ended June 30,
1997 1996
INTEREST INCOME
Loans and lease financing
Taxable $ 9,015 $ 7,568
Tax-exempt 182 161
Investment securities:
Taxable 3,716 4,028
Tax-exempt 624 642
Dividends 124 75
Interest on fed funds
sold 53 7
Total interest income 13,714 12,481
INTEREST EXPENSE
Deposits 4,880 4,613
Borrowings 1,763 1,294
Total interest
expense 6,643 5,907
Net interest income 7,071 6,574
Provision for possible
loan losses 355 255
Net interest income
after provision
for possible loan
losses 6,716 6,319
NON-INTEREST INCOME
Trust fees 227 263
Service charges on
deposits 346 315
Other operating income 382 308
Investment securities
gains (losses) (2) (1)
Gains (losses) on
securities available
for sale 354 234
Total non-interest
income 1,307 1,119
NON-INTEREST EXPENSE
Salary and employee
benefits 1,680 1,620
Net occupancy expense of
premises 384 340
Equipment expenses 467 387
Other operating expenses 1,476 1,519
Total non-interest
expense 4,007 3,866
Income before income
taxes 4,016 3,572
INCOME TAXES 1,031 998
Net income $ 2,985 $ 2,574
PER COMMON SHARE DATA
Net income per share $ 1.13 $ 0.96
Cash dividend per
share $ 0.272 $ 0.224
Weighted average
shares outstanding 2,640,680 2,641,998
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30
(Unaudited)
1997 1996
Operating Activities
Net income $2,985 $2,574
Adjustments to reconcile net income to
net cash flows provided by operating
activities:
Provision for possible loan losses 355 255
Depreciation and amortization expense 411 314
Amortization of investment security
premiums 594 776
Accretion of investment security
discounts and interest recorded on zero-coupon
securities (122) (184)
Investment securities (gains) losses 2 1
(Gains) losses on securities available
for sale (354) (234)
Loss (gain) on sale of fixed assets 0 1
Gain on sale of loans (30) (31)
Gain on sale of other real estate owned (7) 0
(Increase) decrease in interest
receivable (757) (377)
Increase (decrease) in interest payable 320 48
Others, net (6,473) 1,473
Net cash provided (used) by operating
activities (3,076) 4,616
Investing Activities:
Net decrease in federal funds sold 24,450 0
Proceeds from sales of investment
securities 0 551
Proceeds on sale of securities available
for sale 25,319 43,998
Proceeds from maturities and calls of
investment securities 2,833 1,108
Purchases of investment securities 0 0
Purchase of securities available for
sale (91,300) (78,697)
Principal collected on mortgage-backed
securities 7,422 12,377
Net (increase) decrease in loans and
leases, net of charge offs (22,971) (21,756)
Proceeds on sale of loans 6,603 4,774
Recoveries on loans previously charged off 10 33
Proceeds from sale of other real estate
owned 73 0
Purchases of premises and equipment (425) (1,269)
Proceeds on sale of fixed assets 20 5
Net cash provided (used) by investing
activities (47,966) (38,876)
<PAGE>
Financing Activities:
Net increase (decrease) in deposits 178 9,774
Net increase (decrease) in repurchase
agreements (711) 996
Net increase (decrease) in short-term
borrowings 57,193 11,022
Proceeds on long-term debt 0 12,725
Payments on long-term debt (2,687) (60)
Purchase of treasury stock (123) 0
Dividends paid on common and preferred
stock (719) (632)
Net cash provided (used) by financing
activities 53,131 33,825
Increase (Decrease) in Cash and Cash
Equivalents 2,089 (435)
Cash and Equivalents at Beginning of
Year 10,948 10,175
Cash and Equivalents at June 30 $13,037 $9,740
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Shareholders' Equity For the Year
Ended December 31, 1996 and Six Months Ended June 30, 1997 ($000s)
<TABLE>
<CAPTION>
Retained Earnings
Unrealized
Loss of
Preferred Common Unappro- Appro- Treasury Available
Stock Stock Surplus priated (1) priated Stock for Sale
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 1,000 $1,057 $7,781 $14,148 $850 ($8) $336
1996 Net income 5,002
Cash dividends declared:
Preferred stock (61)
Common stock ($.480 per
share) (1,269)
Redemption of preferred stock (1,000)
Change in unrealized loss-
securities available-for-
sale (504)
Balance, December 31, 1996 $ 0 $1,057 $7,781 $17,820 $850 ($8) ($168)
1997 YTD Net income 2,985
Cash dividends declared:
Common stock ($.272 per share) (719)
Purchase of treasury stock (123)
Change in unrealized loss-
securities available-for-
sale (99)
Balance, June 30, 1997 $ 0 $1,057 $7,781 $20,086 $850 ($131) ($267)
(1) Unappropriated retained earnings includes $269,000 for
a 25% common stock dividend paid on July 1, 1997.
</TABLE>
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The foregoing financial statements are unaudited,
however, in the opinion of Management, all adjustments
necessary for a fair presentation of the financial
statements have been included. A summary of the
Corporation's significant accounting policies is set forth
in Note 1 to the Consolidated Financial Statements in the
Corporation's Annual Report on Form 10-K for 1996.
Related party transactions - The Corporation's and it
Subsidiaries' directors and officers and their associates
were customers of, and had other transactions with, the
subsidiary bank in the ordinary course of business during
1997. 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 other persons
and did not involve more than the normal risk of
collectibility.
Per share data has been restated in previous periods
for a 25% common stock dividend paid on
July 1, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY
The net income of Belmont Bancorp. for the second
quarter of 1997 increased 34.2% to $1,564,000, compared to
$1,165,000 in the second quarter of 1996. Earnings per
common share increased to $0.59 in the second quarter of
1997, compared to $0.43 in the second quarter of 1996.
For the six months ended June 30, 1997, net income
increased 16.0% to $2,985,000, compared to $2,574,000 for
the first six months of 1996. Earnings per common share
were $1.13 for the first six months of 1997, compared to
$0.96 for the corresponding period last year, an increase of
17.7%.
Operating earnings increased to $3,664,000 for the six
months ended June 30, 1997, up 9.7% from $3,339,000 for the
same period last year. For the second quarter of 1997,
operating earnings were $1,832,000, up 13.7% from $1,611,000
during the year ago quarter.
The following table presents the return on average
shareholders' equity and the return on average assets for
comparative periods of 1997 and 1996.
Quarter ended Six Months emded
June 30, June 30,
($000s) 1997 1996 1997 1996
Return on average
assets 1.67% 1.37% 1.67% 1.55%
Return on
shareholders' equity 22.16% 18.03% 21.30% 19.91%
Return on average
common equity 22.16% 18.43% 21.30% 20.39%
Average assets $374,644 $340,945 $356,980 $331,971
Average shareholders'
equity $ 28,233 $ 25,848 $ 28,032 $ 25,853
Average assets increased $25.0 million during the six
months ended June 30, 1997 compared to the same period
during 1996. Average shareholders' equity increased $2.2
million for the same period.
NET INTEREST INCOME
A major share of the Corporation's income results from
the spread between income on earning assets and interest
expense on the liabilities used to fund those assets. Net
interest income is affected by changes in interest rates and
the 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 paid on
liabilities without regard to the amounts outstanding in
either category.
Tables 1 and 3, Consolidated Average Balance Sheets and
Analysis of Net Interest Income, compares interest revenue
and interest earning assets outstanding with interest cost
and liabilities outstanding for the six months and three
months ended June 30, 1997, 1996, and 1995. The tables
contain 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 taxable equivalent yield on interest earning assets
increased from 8.28% during the first six months of 1996 to
8.46% in 1997, an increase of 18 basis points. (A basis
point (bp) is equivalent to .01%.) The cost of interest
bearing liabilities increased 21 basis points from 4.29%
during the first half of 1996 to 4.50% in 1997. The net
interest margin (net interest income divided by interest
earning assets) was 4.47% during both the first half of
1997 and 1996.
The taxable equivalent yield on interest earning assets
increased from 8.11% during the second quarter of 1996 to
8.39% in 1997, an increase of 28 basis points. The cost of
interest bearing liabilities rose 28 basis points from 4.29%
during the second quarter of 1996 to 4.57% in 1997. The net
interest margin increased only slightly from 4.30% to 4.31%.
Tables 2 and 4, 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 asset 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).
<PAGE>
<TABLE>
<CAPTION>
TABLE 1. - CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET
INTEREST INCOME (Fully Taxable Equivalent Basis) ($000's)
Six Months Ended June 30,
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning
assets:
Loans and leases $198,140 $9,283 9.45% $167,058 $7,805 9.42% $148,816 $6,986 9.47%
Securities:
Taxable 111,257 3,837 6.95% 121,107 4,101 6.83% 116,259 4,012 6.96%
Exempt from
income tax 24,157 906 7.56% 24,044 924 7.75% 24,842 1,004 8.15%
Federal funds
sold 2,036 53 5.25% 270 7 5.23% 1,002 30 6.04%
Total interest
earning assets 335,590 14,079 8.46% 312,479 12,837 8.28% 290,919 12,032 8.34%
Cash and due from
banks 9,954 8,758 8,348
Other assets 15,710 13,683 12,984
Valuation
allowance-
available for
sale securities (1,013) (138) (1,224)
Allowance for
possible loan loss (3,261) (2,811) (1,865)
Total assets 356,980 331,971 309,162
Liabilities
Interest bearing
liabilities:
Interest
checking 43,319 729 3.39% 35,393 532 3.03% 25,545 297 2.34%
Savings 79,263 1,202 3.06% 78,986 1,191 3.04% 79,085 1,172 2.99%
Other time
deposits 112,987 2,949 5.26% 114,016 2,890 5.11% 126,676 3,118 4.96%
Other Borrowings 62,335 1,763 5.70% 49,081 1,294 5.32% 29,498 807 5.52%
Total interest
bearing
liabilities 297,904 6,643 4.50% 277,476 5,907 4.29% 260,804 5,394 4.17%
Demand deposits 28,883 26,419 25,024
Other liabilities 2,161 2,223 1,705
Total liabilities 328,948 306,118 287,533
Shareholders'
equity 28,032 25,853 21,629
Liabilities &
shareholders'
equity 356,980 331,971 309,162
Net interest
income
Margin on a
taxable equiv-
alent basis 7,436 4.47% 6,930 4.47% 6,638 4.60%
Net interest rate
spread 3.96% 3.99% 4.17%
Interest bearing
liabilities
to interest
earning assets 88.77% 88.80% 89.65%
</TABLE>
<PAGE>
TABLE 2. - ANALYSIS OF NET INTEREST INCOME CHANGES
(Taxable Equivalent Basis) ($000's)
Six Months Ended June 30,
1997 Compared to 1996 1996 Compared to 1995
Volume Yield Mix Total Volume Yield Mix Total
Increase (Decrease)
in Interest Income
Loans and Leases 1,452 22 4 1,478 856 (33) (4) 819
Securities:
Taxable (334) 76 (7) (265) 167 (75) (3) 89
Exempt from
Income Taxes 4 (22) - (18) (32) (49) 2 (79)
Federal Funds Sold 46 - - 46 (22) (4) 3 (23)
Total Interest
Income Change 1,168 76 (3) 1,241 969 (161) (2) 806
Increase (Decrease)
in Interest Expense:
Interest Checking 119 64 14 197 114 87 33 234
Savings 4 7 - 11 (1) 20 - 19
Other Time
Deposits (26) 86 (1) 59 (312) 93 (9) (228)
Short Term
Borrowings 349 94 26 469 536 (29) (19) 488
Total Interest
Expense Change 446 251 39 736 337 171 5 513
Increase (Decrease)
in Net Interest
Income on a Taxable
Equivalent Basis 722 (175) (42) 505 632 (332) (7) 293
(Increase) Decrease
in Taxable
Equivalent
Adjustment (8) 14
Net Interest Income
Change 497 307
<PAGE>
<TABLE>
<CAPTION>
TABLE 3. - CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET
INTEREST INCOME (Fully Taxable Equivalent Basis) ($000's)
Three Months Ended June 30,
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning
assets:
Loans and
leases $203,096 $4,799 9.48% $172,681 $4,022 9.34% $150,618 $3,531 9.40%
Securities:
Taxable 122,944 2,083 6.80% 124,849 2,027 6.51% 110,091 1,913 6.97%
Exempt from
income tax 27,104 503 7.44% 24,221 458 7.58% 24,507 489 8.00%
Federal funds
sold 70 1 5.73% 72 1 5.57% 813 13 6.41%
Total interest
earning assets 353,214 7,386 8.39% 321,823 6,508 8.11% 286,029 5,946 8.34%
Cash and due from
banks 9,883 8,852 8,224
Other assets 16,325 14,056 12,802
Valuation
allowance-
available
for sale
securities (1,448) (903) (579)
Allowance for
possible loan
loss (3,330) (2,883) (2,041)
Total assets 374,644 340,945 304,435
Liabilities
Interest bearing
liabilities:
Interest
checking 40,440 337 3.34% 37,557 290 3.10% 26,020 153 2.36%
Savings 79,092 605 3.07% 79,653 603 3.04% 77,967 582 2.99%
Other time
deposits 114,102 1,494 5.25% 113,583 1,438 5.08% 127,960 1,604 5.03%
Other
Borrowings 81,361 1,156 5.70% 54,919 727 5.31% 23,490 309 5.28%
Total interest
bearing
liabilities 314,995 3,592 4.57% 285,712 3,058 4.29% 255,437 2,648 4.16%
Demand deposits 29,227 27,018 24,775
Other liabilities 2,189 2,367 1,818
Total liabilities 346,411 315,097 282,030
Shareholders'
equity 28,233 25,848 22,405
Liabilities &
shareholders'
equity 374,644 340,945 304,435
Net interest
income
Margin on a
taxable
equivalent basis 3,794 4.31% 3,450 4.30% 3,298 4.62%
Net interest rate
spread 3.81% 3.82% 4.18%
Interest bearing
liabilities
to interest
earning assets 89.18% 88.78% 89.30%
</TABLE>
<PAGE>
TABLE 4. - ANALYSIS OF NET INTEREST INCOME CHANGES
(Taxable Equivalent Basis) ($000's)
Three Months Ended June 30,
1997 Compared to 1996 1996 Compared to 1995
Volume Yield Mix Total Volume Yield Mix Total
Increase (Decrease)
in Interest Income
Loans and Leases 708 58 10 776 517 (23) (3) 491
Securities:
Taxable (31) 88 (1) 56 256 (126) (17) 113
Exempt from
Income Taxes 55 (9) (1) 45 (6) (26) - (32)
Federal Funds Sold - - - - (12) (2) 2 (12)
Total Interest
Income Change 732 137 8 877 755 (177) (18) 560
Increase (Decrease)
in Interest Expense:
Interest Checking 22 23 2 47 68 48 21 137
Savings (4) 6 - 2 13 8 - 21
Other Time
Deposits 7 49 - 56 (180) 16 (2) (166)
Short Term
Borrowings 350 53 25 428 413 2 3 418
Total Interest
Expense Change 375 131 27 533 314 74 22 410
Increase (Decrease)
in Net Interest
Income on a Taxable
Equivalent Basis 357 6 (19) 344 441 (251) (40) 150
(Increase) Decrease
in Taxable
Equivalent
Adjustment (23) 8
Net Interest Income
Change 321 158
OTHER OPERATING INCOME
Other operating income, excluding securities gains and
losses, increased 7.8%, or $69,000, and totaled $955,000 for
the first six months of 1997, compared to $886,000 for the
respective period last year. Other income was improved due
to commission income generated by foreign transactions on
the Bank's ATM network, brokerage fees, and rent income on
leased facilities. Changes in various categories of other
income are depicted in the table below.
Three months ended June 30, Six Months ended June 30,
($000s) 1997 1996 % Change 1997 1996 % Change
Trust fees $149 $103 44.7% $ 227 $ 263 -13.7%
Service charges on
deposits 175 159 10.1% 346 315 9.8%
Gain on sale of
loans 24 15 60.0% 30 31 -3.2%
Other income 161 139 15.8% 352 277 27.1%
Subtotal 509 416 22.4% 955 886 7.8%
Security gains
(losses) (1) 0 na (2) (1) -100.0%
Gains (losses)
securities held
for sale 198 4 4850.0% 354 234 51.3%
Total $706 $420 68.1% $1,307 $1,119 16.8%
INVESTMENT SECURITIES
The amortized cost and estimated market values of
securities held to maturity at June 30, 1997 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
($000s) Cost Gains Losses Value
U.S. Treasury securities
and obligations of
U.S. Government
corporations and agencies $ 2,262 $ 0 $ 87 $ 2,175
Obligations of states and
political subdivisions 4,700 120 23 4,797
Mortgage-backed securities 10,622 83 78 10,627
Total $17,584 $203 $188 $17,599
Included above in U.S. Government corporations and
agencies is a structured note with a book value of
$2,262,000 and a market value of $2,175,000 which matures in
the year 2000.
The amortized cost and estimated market values of
securities available for sale at June 30, 1997 are as
follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
($000s) Cost Gains Losses Value
U.S. Treasury securities
and obligations of
U.S. Government
corporations and agencies $ 20,246 $ 28 $103 $ 20,171
Obligations of states and
political subdivisions 22,127 113 94 22,146
Mortgage-backed securities 71,287 279 401 71,165
Mortgage derivatives 18,164 2 229 17,937
Marketable equity
securities 4,479 0 0 4,479
Total $136,303 $422 $827 $135,898
The mortgage derivatives are comprised solely of
collateralized mortgage obligations (CMOs) including one
principal only CMO issued by FNMA with a book value of
$105,000 and an estimated market value of $78,000.
Privately issued CMOs included in the table above have a
book value of $1,574,000 and an estimated market value of
$1,514,000. Credit risk on privately issued CMOs is
evaluated based upon independent rating agencies and on the
underlying collateral of the obligation. No privately
issued bonds from any issuer exceeded ten percent of
shareholders' equity.
Market factors and prepayment speeds can have an impact
on the yield and average lives of mortgage-backed securities
including mortgage derivatives.
OPERATING EXPENSES
Successful expense control is an essential element in
maintaining the Corporation's profitability. Historically,
when comparing the Corporation to various peer groups, the
overhead costs of the Corporation have been significantly
lower than peer. The following table shows the dollar
amounts and growth in various components of operating
expenses.
Three Months Ended June 30, Six Months Ended June 30,
($000s) 1997 1996 % Change 1997 1996 % Change
Salaries and
wages $ 638 $ 588 8.5% $1,263 $1,202 5.1%
Employee benefits 207 206 0.5% 417 418 -0.2%
Net occupancy
expense 194 170 14.1% 384 340 12.9%
Equipment expense 238 205 16.1% 467 387 20.7%
Other operating
expenses 744 804 -7.5% 1,476 1,519 -2.8%
Total $2,021 $1,973 2.4% $4,007 $3,866 3.6%
Increases in employee related costs as well as
occupancy and equipment expenses during the quarter and year-
to-date comparative periods are due to the opening of new
offices in the Elm Grove section of Wheeling, WV and at
Plaza West in St. Clairsville, Ohio. In addition, the Bank
accelerated depreciation on some data processing equipment
beginning in September of 1996 which contributed to the
increase in equipment expense. Other operating expenses
were positively impacted by the a reduction in FDIC
insurance premiums during six month period which fell by
$52,000 and a nonrecurring expense for other real estate
owned during 1996 of $140,000. These reductions were
partially offset by an increase in corporate state net
income and franchise taxes, corporate development expense
and telecommunication charges.
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation provides as an expense an amount which
reflects expected loan losses. This provision is based on
the growth of the loan and lease portfolio and on historical
loss experience. The expense is called the provision for
possible loan losses in the Consolidated Statement of
Income. Actual losses on loans and leases are charged
against the allowance built up on the Consolidated Balance
Sheet through the allowance for possible loan losses. The
amount of loans and leases actually removed as assets from
the Consolidated Balance Sheets is referred to as charge-
offs and, after netting out recoveries previously charged-
off assets, becomes net charge-offs.
For the first half of 1997, $355,000 was added to the
allowance and charged to expense compared to $255,000 in
1996. At June 30, 1997, the allowance for possible loan
losses to total loans and leases was 1.69% compared to 1.67%
last year. The ratio of the Allowance for Possible Loan
Losses to underperforming assets increased to 514.67% at
June 30, 1997. The following table details the Allowance
for Possible Loan Losses and also includes various loan
charge off statistics for 1997 and 1996.
Allowance for Possible Loan Losses
Three Months Ended Six Months Ended
June 30, June 30,
($000s) 1997 1996 1997 1996
Balance, beginning of period $3,263 $2,853 $3,153 $2,703
Provision for possible loan
losses 250 105 355 255
Loans charged-off 35 41 44 46
Recoveries on loans
previously charged-off (4) 28 10 33
Net charge offs 39 13 34 13
Balance, end of period $3,474 $2,945 $3,474 $2,945
Three Months ended Six Months ended
June 30, June 30,
($000s) 1997 1996 1997 1996
Loans and leases outstanding
at period $205,116 $176,857 $205,116 $176,857
Average loans and leases $203,096 $172,681 $198,140 $167,058
Annualized net charge offs
as a percent of:
Average loans and leases 0.08% 0.03% 0.03% 0.02%
Total loans at end of
period 0.08% 0.03% 0.03% 0.01%
Reserve for possible loan
losses 4.49% 1.77% 1.96% 0.88%
Reserve for possible loan
losses to:
Average loans and leases 1.71% 1.71% 1.75% 1.76%
Total loans at end of
period 1.69% 1.67%
Under-performing assets 514.67% 312.96%
UNDER-PERFORMING ASSETS
Under-performing assets consist of (1) non-accrual
loans, leases and debt securities on which the ultimate
collectibility of the full amount of interest is uncertain,
(2) loans and leases past due ninety days or more as to
principal or interest and (3) other real estate owned. A
summary of under-performing assets at June 30 follows:
($000s) 1997 1996
Non-accrual loans and
leases $443 $106
Ninety days past due loans
and leases still accruing
interest 211 190
Other real estate owned 21 645
Total $675 $941
Restructured loans and
leases included
in above totals $537 $ 0
Restructured loans and
leases in compliance with
modified terms 65 108
Asset quality remained high since the year ago period.
Total under-performing assets were $675,000 at June 30, 1997
compared to $941,000 at June 30, 1996.
LONG TERM DEBT
Long term debt consists of advances from the Federal
Home Loan Bank. Details are as follows:
Amount Current
Type ($000s) Rate Maturity
Fixed rate, non-
amortizing advance 10,000 5.40% 1/4/98
Fixed rate, non-
amortizing advance 2,000 5.90% 6/2/98
Fixed rate, amortizing
advance 156 5.55% 12/22/98
Fixed rate, amortizing
advance 2,156 6.05% 11/18/01
Fixed rate, amortizing
advance 163 5.80% 12/1/05
Fixed rate, amortizing
advance 1,297 6.85% 6/6/11
Fixed rate, amortizing
advance 114 6.75% 6/6/11
Fixed rate, amortizing
advance 845 6.85% 6/12/11
Fixed rate, amortizing
advance 258 6.95% 8/31/15
$16,989
STOCK REPURCHASE
In accordance with a plan approved by the Board of
Directors and previously announced in March 1996, the
Company repurchased 4,500 shares of its common stock. The
cost of the purchases was $124,500. The plan approved by
the Board of Directors permits the Company to repurchase up
to $1,000,000 of Belmont Bancorp. common stock on the open
market or in separately negotiated transactions.
CAPITAL RESOURCES
At June 30, 1997, shareholders' equity was $29,376,000
compared to $27,332,000 at December 31, 1996 and $25,182,000
at June 30, 1996. The following table presents various
capital ratios as of June 30:
June 30, 1997 1996
Average shareholder's
equity to :
Average assets 7.9% 7.8%
Average deposits 10.6% 10.1%
Average loans and
leases 14.1% 15.5%
Primary capital 8.5% 8.0%
Risk-based capital
ratio:
Tier 1 12.1% 12.2%
Total 13.4% 13.4%
Leverage ratio 7.5% 7.2%
The Federal Reserve Board has adopted risk-based
capital guidelines that assign risk weightings to assets and
off-balance sheet items. The guidelines also define and set
minimum capital requirements (risk-based capital ratios).
Banks are required to have core capital (Tier 1) of at least
4.0% or risk-weighted assets and total capital of 8.0% or
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 possible loan losses. At June
30, 1997, the Corporation had a Tier 1 capital ratio of
12.1% and a total capital ratio of 13.4%, well above
regulatory minimum requirements.
National banks are required to maintain Tier 1 capital
in an amount equal to at least 3.0% of adjusted total
assets, referred to as a total assets leverage ratio. At
June 30, 1997, the Corporation's leverage ratio was 7.5%.
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security
shareholders
None
Item 5. Other information
None
Item 6. Exhibits
None
SIGNATURE
Pursuant to the requirements 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.
Belmont Bancorp.
(Registrant)
August 13, 1997 s/ J. Vincent Ciroli, Jr.
J. Vincent Ciroli, Jr.
President & CEO
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