U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
For the Quarter Ended June 30, 1998
[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 (740) 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, $0.25 par value,
5,251,252 shares outstanding
as of August 4, 1998
FORM 10-Q
BELMONT BANCORP.
Quarter Ending June 30,1998
INDEX
Part I. Financial information
Financial highlights
Management's report on financial statements
Consolidated Statements of Condition - June 30, 1998,
December 31, 1997, and June 30, 1997
Consolidated Statements of Income- Six Months Ended
June 30, 1998 and June 30, 1997
Consolidated Statements of Income-Three Months
Ended June 30, 1998 and June 30, 1997
Consolidated Statements of Income-Three Months and
Six Months Ended June 30, 1998 and June 30, 1997
Consolidated Statements of Cash Flows-Six Months
Ended June 30, 1998 and June 30, 1997
Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended June 30, 1998 and Year Ended
December 31, 1997
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
BELMONT BANCORP. AND SUBSIDIARIES
Financial Highlights
June 30 1998 1997 % Change
Earnings and dividends ($000's)
Net income $ 3,005 $ 2,985 0.7
Operating earnings (1) 3,504 3,664 (4.4)
Cash dividends declared on
common stock 973 719 35.3
Per common share (2):
Net income $ 0.57 $ 0.57 0.0
Cash dividends declared 0.185 0.136 36.0
Book value 6.31 5.57 13.4
Market price :
High 28.44 12.60 125.7
Low 22.25 10.40 113.9
At quarter-end ($000's)
Assets $ 416,298 $ 384,599 8.2
Loans and leases 223,569 205,116 9.0
Deposits 289,264 261,717 10.5
Stockholders' equity 33,216 29,376 13.1
Key Ratios
Return on average assets 1.52% 1.67% (9.0)
Return on average common
shareholders' equity 18.10% 21.30% (15.0)
Net interest margin (TE) 4.14% 4.47% (7.4)
Number of shares outstanding 5,261,996 5,274,996 (0.2)
Number of full time equivalent
employees 147.5 132.5 11.3
Total assets per FTE employee $ 2,822 $ 2,903 (2.8)
(1) Operating earnings are defined as earnings before
income taxes minus securities gains or plus securities losses.
(2) All per share amounts have been restated for the effect of
a 25% common stock dividend paid on July 1, 1997 and a
2-for-1 split paid on May 22, 1998.
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.
Belmont Bancorp.
Consolidated Balance Sheet
(Unaudited) ($000s except per share amounts)
June 30, December 31, June 30,
1998 1997 1997
ASSETS
Cash and due from banks $ 11,190 $ 10,265 $ 13,037
Federal funds sold 475 - -
Assets held for trading 988 - -
Securities available for sale at
market value 148,187 121,156 135,898
Securities held to maturity 14,254 15,955 17,584
Loans held for sale 1,615 884 -
Loans 221,954 224,016 205,116
Less allowance for possible loan
losses (4,307) (4,134) (3,474)
Net loans 217,647 219,882 201,642
Premises and equipment, net 7,445 7,401 7,256
Other real estate owned - 20 20
Accrued income receivable 2,921 2,586 2,678
Other assets 11,576 10,564 6,484
Total Assets $416,298 $388,713 $384,599
LIABILITIES
Non-interest bearing deposits
Demand $ 27,524 $ 29,987 $ 29,581
Interest-bearing deposits:
Demand 43,554 33,463 38,075
Savings 81,593 79,829 79,040
Time 136,593 120,629 115,021
Total deposits 289,264 263,908 261,717
Securities sold under
repurchase agreements 7,685 5,256 7,569
Short-term borrowings - 14,635 67,193
Long term debt 72,214 69,635 16,989
Accrued interest on deposits
and other borrowings 928 731 984
Other liabilities 12,991 2,649 771
Total liabilities $383,082 $356,814 $355,223
SHAREHOLDERS' EQUITY
Preferred stock - authorized
90,000 shares with
no par value; issued and
outstanding, none - - -
Common stock - $0.25 par
value, 17,800,000 shares
authorized; 5,288,326 issued
in 1998 and 1997 $ 1,321 $ 1,321 $ 1,057
Surplus 7,854 7,781 7,781
Treasury stock ( 26,330 shares
at June 30, 1998; 13,330 shares at
December 31, 1997 and June 30,
1997) (501) (131) (131)
Retained earnings:
Unappropriated 23,910 21,879 19,817
Appropriated for
contingencies 850 850 850
Common stock dividend to be
distributed (527,354 shares) - - 269
Accumulated other
comprehensive income (218) 199 (267)
Total shareholders' equity $ 33,216 $ 31,899 $ 29,376
Total liabilities and
shareholders' equity $416,298 $388,713 $384,599
Belmont Bancorp.
Consolidated Statement of Income
(Unaudited) ($000s except per share amounts)
Three months ended June 30,
1998 1997
INTEREST INCOME
Loans and lease financing
Taxable $ 5,236 $ 4,661
Tax-exempt 67 93
Investment securities:
Taxable 1,689 2,013
Tax-exempt 344 348
Dividends 82 70
Interest on trading securities 5 -
Interest on fed funds sold 17 1
Total interest income 7,440 7,186
INTEREST EXPENSE
Deposits 2,855 2,436
Borrowings 1,068 1,156
Total interest expense 3,923 3,592
Net interest income 3,517 3,594
Provision for possible loan losses 125 250
Net interest income after
provision for possible loan losses 3,392 3,344
NON-INTEREST INCOME
Trust fees 128 149
Service charges on deposits 182 175
Other operating income 222 185
Investment securities gains (losses) (1) (1)
Trading profits (losses) 17 -
Gains (losses) on securities
available for sale 267 198
Total non-interest income 815 706
NON-INTEREST EXPENSE
Salary and employee benefits 1,063 845
Net occupancy expense of premises 206 194
Equipment expenses 255 238
Other operating expenses 762 744
Total non-interest expense 2,286 2,021
Income before income taxes 1,921 2,029
INCOME TAXES
494 465
Net income $ 1,427 $ 1,564
PER COMMON SHARE DATA
Net income per share $ 0.27 $ 0.30
Cash dividend per share $ 0.100 $ 0.068
Weighted average shares
outstanding 5,261,996 5,278,754
Belmont Bancorp.
Consolidated Statement of Income
(Unaudited) ($000s except per share amounts)
For the Six Months Ended June 30,
1998 1997
INTEREST INCOME
Loans and lease financing:
Taxable $ 10,451 $ 9,015
Tax-exempt 133 182
Investment securities:
Taxable 3,517 3,716
Tax-exempt 635 624
Dividends 163 124
Interest on trading securities 6 -
Interest on fed funds sold 56 53
Total interest income 14,961 13,714
INTEREST EXPENSE
Deposits 5,515 4,880
Borrowings 2,228 1,763
Total interest expense 7,743 6,643
Net interest income 7,218 7,071
Provision for possible loan losses 275 355
Net interest income after
provision for possible loan losses 6,943 6,716
NON-INTEREST INCOME
Trust fees 237 227
Service charges on deposits 353 346
Other operating income 452 382
Investment securities gains (losses) (1) (2)
Trading profits (losses) 31 -
Gains (losses) on securities
available for sale 587 354
Total non-interest income 1,659 1,307
NON-INTEREST EXPENSE
Salary and employee benefits 2,129 1,680
Net occupancy expense of premises 405 384
Equipment expenses 476 467
Other operating expenses 1,502 1,476
Total non-interest expense 4,512 4,007
Income before income taxes 4,090 4,016
INCOME TAXES 1,085 1,031
Net income $ 3,005 $ 2,985
PER COMMON SHARE DATA
Net income per share $ 0.57 $ 0.57
Cash dividend per share $ 0.185 $ 0.136
Book value per share $ 6.31 $ 5.57
Weighted average shares
outstanding 5,262,797 5,281,360
Belmont Bancorp.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30
(Unaudited)
1998 1997
Operating Activities:
Net income $3,005 $2,985
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Provision for possible loan losses 275 355
Depreciation and amortization expense 403 411
Amortization of investment security premiums 897 594
Accretion of investment security discounts and
interest recorded on zero-coupon securities (126) (122)
Trading (gains) losses (31) 0
Investment securities (gains) losses 1 2
(Gains) losses on securities available for sale (587) (354)
Gain on sale of loans (70) (30)
Gain on sale of other real estate owned 0 (7)
Proceeds on sale of trading assets 3,152 0
Purchase of trading assets (3,640) 0
(Increase) decrease in interest receivable (335) (757)
Increase (decrease) in interest payable 197 320
Others, net 9,543 (6,473)
Net cash provided (used) by operating activities 12,684 (3,076)
Investing Activities:
Net decrease in federal funds sold (475) 24,450
Proceeds from sales of investment securities 0 0
Proceeds on sale of securities available for sale 37,845 25,319
Proceeds from maturities and calls of investment
securities 3,161 2,833
Purchase of securities available for sale (81,826) (91,300)
Principal collected on mortgage-backed
securities 14,206 7,422
Net (increase) decrease in loans and
leases, net of charge offs (12,952) (22,971)
Proceeds on sale of loans 14,220 6,603
Recoveries on loans previously charged off 12 10
Proceeds from sale of other real estate owned 39 73
Purchases of premises and equipment (447) (425)
Proceeds on sale of fixed assets 0 20
Net cash provided (used) by investing activities (26,217) (47,966)
Financing Activities:
Net increase (decrease) in deposits 25,356 178
Net increase (decrease) in repurchase agreements 2,429 (711)
Net increase (decrease) in short-term borrowings (14,635) 57,193
Proceeds on long-term debt 15,000 0
Payments on long-term debt (12,421) (2,687)
Purchase of treasury stock (409) (123)
Treasury stock issued 112 0
Dividends paid on common and preferred stock (974) (719)
Net cash provided (used) by financing activities 14,458 53,131
Increase (Decrease) in Cash and Cash Equivalents 925 2,089
Cash and Equivalents at Beginning of Year 10,265 10,948
Cash and Equivalents at June 30 $11,190 $13,037
<TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Six Months Ended
June 30, 1998 and 1997
<CAPTION>
Accumulated
Compre- Other Compre- Retained Earnings
hensive hensive Common Unappro- Appro- Treasury
Total Income Income Stock Surplus priated priated Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996 $27,332 ($168) $1,057 $7,781 $17,820 $850 ($8)
1997 Year-to-date net
income 2,985 2,985 2,985
Change in unrealized
loss-securities available-
for-sale (99) (99) (99)
Comprehensive income $2,886
Purchase of treasury
stock (123) (123)
Cash dividends
declared:
Common stock ($.136
per share) (719) (719)
Balance, June 30, 1997 $29,376 ($267) $1,057 $7,781 $20,086 $850 ($131)
Balance, December 31,
1997 $31,899 $199 $1,321 $7,781 $21,879 $850 ($131)
1998 Year-to-date net
income 3,005 3,005 3,005
Change in unrealized
loss-securities available-
for-sale, net of
reclassification
adjustment (1) (417) (417) (417)
Comprehensive income $2,588
Purchase of treasury
stock (409) (409)
Issuance of treasury
stock 112 73 39
Cash dividends
declared:
Common stock ($.185
per share) (974) (974)
Balance, June 30, 1998 $33,216 ($218) $1,321 $7,854 $23,910 $850 ($501)
(1) Disclosure of
reclassification
adjustment:
Unrealized holding
losses arising during
period (30)
Less: reclassification
adjustment for gains
included in net income,
net of tax 387
Net unrealized
losses on securities (417)
</TABLE>
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 1997.
Related party transactions - The Corporation's and its
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 1998. 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 and a 2-for-1 stock split
effected in the form of a 100% stock dividend paid May 22, 1998.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY
For the six months ended June 30, 1998, earnings for Belmont
Bancorp. increased slightly to $3,005,000 compared to $2,985,000 for
the first six months of 1997. Earnings per common share were $0.57
for the first six months of 1998 and 1997.
The net income of Belmont Bancorp. for the second quarter of 1998
decreased 8.8% to $1,427,000, compared to $1,564,000 in the second
quarter of 1997. Earnings per common share decreased to $0.27 in the
second quarter of 1998, compared to $0.30 in the second quarter of
1997.
Operating earnings decreased to $3,504,000 for the six months
ended June 30, 1998, down 4.4% from $3,664,000 for the same period
last year. For the second quarter of 1998, operating earnings were
$1,655,000, down 9.7% from $1,832,000 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
1998 and 1997.
Quarter ended Six months ended
June 30, June 30,
($000s) 1998 1997 1998 1997
Return on average
assets 1.44% 1.67% 1.52% 1.67%
Return on shareholders'
equity 17.23% 22.16% 18.10% 21.30%
Average assets $396,090 $374,644 $394,923 $356,980
Average shareholders'
equity $ 33,125 $ 28,233 $ 33,202 $ 28,032
Average assets increased $37.9 million during the six months
ended June 30, 1998 compared to the same period during 1997. Average
shareholders' equity increased $5.2 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, 1998, 1997, and 1996.
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 decreased
from 8.46% during the first six months of 1997 to 8.39% in 1998, a
decrease of 7 basis points. (A basis point (bp) is equivalent to
.01%.) The cost of interest bearing liabilities increased 22 basis
points from 4.50% during the first half of 1997 to 4.72% in 1998. The
net interest margin (net interest income divided by interest earning
assets) was 4.14% during the first half of 1998 compared to 4.47%
during the same period last year.
The taxable equivalent yield on interest earning assets decreased
from 8.39% during the second quarter of 1997 to 8.27% in 1998, a
decrease of 12 basis points. The cost of interest bearing liabilities
rose 17 basis points from 4.57% during the second quarter of 1997 to
4.74% in 1998. The net interest margin decreased from 4.31% to 4.01%.
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).
<TABLE>
TABLE 1. - CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET
INTEREST INCOME (Fully Taxable Equivalent Basis) ($000's)
<CAPTION>
Six Months Ended June 30,
1998 1997 1996
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 $224,414 $10,646 9.57% $198,140 $9,283 9.45% $167,058 $7,805 9.42%
Securities
Taxable 117,436 3,683 6.32% 111,257 3,837 6.95% 121,107 4,101 6.83%
Exempt from
income tax 23,973 916 7.71% 24,157 906 7.56% 24,044 924 7.75%
Trading
account assets 199 6 6.08% 0 0 0 0
Federal funds
sold 2,081 56 5.43% 2,036 53 5.25% 270 7 5.23%
Total interest
earning assets 368,103 15,307 8.39% 335,590 14,079 8.46% 312,479 12,837 8.28%
Cash and due from
banks 10,770 9,954 8,758
Other assets 20,242 15,710 13,683
Valuation
allowance-
available for
sale securities 9 (1,013) (138)
Allowance for
possible loan
loss (4,201) (3,261) (2,811)
Total assets 394,923 356,980 331,971
Liabilities
Interest bearing
liabilities
Interest
checking 43,156 718 3.36% 43,319 729 3.39% 35,393 532 3.03%
Savings 81,465 1,323 3.27% 79,263 1,202 3.06% 78,986 1,191 3.04%
Other time
deposits 127,322 3,475 5.50% 112,987 2,949 5.26% 114,016 2,890 5.11%
Other
Borrowings 78,903 2,227 5.69% 62,335 1,763 5.70% 49,081 1,294 5.32%
Total interest
bearing
liabilities 330,846 7,743 4.72% 297,904 6,643 4.50% 277,476 5,907 4.29%
Demand deposits 29,703 28,883 26,419
Other liabilities 1,172 2,161 2,223
Total liabilities 361,721 328,948 306,118
Shareholders'
equity 33,202 28,032 25,853
Liabilities &
shareholders'
equity 394,923 356,980 331,971
Net interest
income
Margin on a
taxable
equivalent basis 7,564 4.14% 7,436 4.47% 6,930 4.47%
Net interest rate
spread 3.67% 3.96% 3.99%
Interest bearing
liabilities
to interest
earning assets 89.88% 88.77% 88.80%
</TABLE>
TABLE 2. - ANALYSIS OF NET INTEREST INCOME CHANGES
(Taxable Equivalent Basis) ($000's)
Six Months ended June 30, 1998
1998 Compared to 1997 1997 Compared to 1996
Volume Yield Mix Total Volume Yield Mix Total
Increase (Decrease)
in Interest Income
Loans and Leases 1,231 117 15 1,363 1,452 22 4 1,478
Securities
Taxable 213 (348) (18) (153) (334) 76 (7) (265)
Exempt from
Income Taxes (7) 17 - 10 4 (22) - (18)
Trading account
assets - - 6 6 - - - -
Federal Funds Sold 1 2 - 3 46 - - 46
Total Interest
Income Change 1,438 (212) 3 1,229 1,168 76 (3) 1,241
Increase (Decrease)
in Interest Expense
Interest Checking (3) (8) - (11) 119 64 14 197
Savings 33 85 2 120 4 7 - 11
Other Time
Deposits 374 135 17 526 (26) 86 (1) 59
Short Term
Borrowings 469 (4) - 465 349 94 26 469
Total Interest
Expense Change 873 208 19 1,100 446 251 39 736
Increase (Decrease)
in Net Interest
Income on a Taxable
Equivalent Basis 565 (420) (16) 129 722 (175) (42) 505
(Increase) Decrease
in Taxable
Equivalent
Adjustment 19 (8)
Net Interest Income
Change 148 497
<TABLE>
TABLE 3. - CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET
INTEREST INCOME (Fully Taxable Equivalent Basis) ($000's)
<CAPTION>
Three Months Ended June 30,
1998 1997 1996
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 $223,588 $5,334 9.57% $203,096 $4,799 9.48% $172,681 $4,022 9.34%
Securities
Taxable 118,143 1,775 6.03% 122,944 2,083 6.80% 124,849 2,027 6.51%
Exempt from
income tax 26,327 491 7.48% 27,104 503 7.44% 24,221 458 7.58%
Trading account
assets 322 5 6.23% 0 0 0 0
Federal funds
sold 1,248 17 5.46% 70 1 5.73% 72 1 5.57%
Total interest
earning assets 369,628 7,622 8.27% 353,214 7,386 8.39% 321,823 6,508 8.11%
Cash and due
from banks 10,701 9,883 8,852
Other assets 20,214 16,325 14,056
Valuation
allowance-
available for
sale
securities (198) (1,448) (903)
Allowance for
possible loan
loss (4,255) (3,330) (2,883)
Total assets 396,090 374,644 340,945
Liabilities
Interest bearing
liabilities
Interest
checking 42,101 345 3.29% 40,440 337 3.34% 37,557 290 3.10%
Savings 81,292 665 3.28% 79,092 605 3.07% 79,653 603 3.04%
Other time
deposits 132,834 1,846 5.57% 114,102 1,494 5.25% 113,583 1,438 5.08%
Other
Borrowings 75,492 1,067 5.67% 81,361 1,156 5.70% 54,919 727 5.31%
Total interest
bearing
liabilities 331,719 3,923 4.74% 314,995 3,592 4.57% 285,712 3,058 4.29%
Demand deposits 30,167 29,227 27,018
Other liabilities 1,079 2,189 2,367
Total
liabilities 362,965 346,411 315,097
Shareholders'
equity 33,125 28,233 25,848
Liabilities &
shareholders'
equity 396,090 374,644 340,945
Net interest
income
Margin on a
taxable
equivalent basis 3,699 4.01% 3,794 4.31% 3,450 4.30%
Net interest
rate spread 3.53% 3.81% 3.82%
Interest bearing
liabilities
to interest
earning assets 89.74% 89.18% 88.78%
</TABLE>
<TABLE>
TABLE 4. - ANALYSIS OF NET INTEREST INCOME CHANGES
(Taxable Equivalent Basis) ($000's)
<CAPTION>
Three Months Ended June 30,
1998 Compared to 1997 1997 Compared to 1996
Volume Yield Mix Total Volume Yield Mix Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease)
in Interest Income
Loans and Leases 484 46 5 535 708 58 10 776
Securities
Taxable (81) (236) 9 (308) (31) 88 (1) 56
Exempt from
Income Taxes (14) 2 - (12) 55 (9) (1) 45
Trading account
assets - - 5 5 - - - -
Federal Funds Sold 17 - (1) 16 - - - -
Total Interest
Income Change 406 (188) 18 236 732 137 8 877
Increase (Decrease)
in Interest Expense
Interest Checking 14 (6) - 8 22 23 2 47
Savings 17 42 1 60 (4) 6 - 2
Other Time
Deposits 245 92 15 352 7 49 - 56
Short Term
Borrowings (83) (6) - (89) 350 53 25 428
Total Interest
Expense Change 193 122 16 331 375 131 27 533
Increase (Decrease)
in Net Interest
Income on a Taxable
Equivalent Basis 213 (310) 2 (95) 357 6 (19) 344
(Increase) Decrease
in Taxable
Equivalent
Adjustment 18 (23)
Net Interest Income
Change (77) 321
</TABLE>
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 1998, compared to $886,000 for the respective period last
year. Gains on sales of loans increased $40,000 during the year-to-
date period compared to last year, and trading profits contributed
$31,000 to other operating income. Changes in various categories of
other income are depicted in the table below.
Three months ended June 30, Six months ended June 30,
($000s) 1998 1997 % Change 1998 1997 % Change
Trust fees $128 $149 -14.1% $ 237 $ 227 4.4%
Service charges on
deposits 182 175 4.0% 353 346 2.0%
Gain on sale of
loans 29 24 20.8% 70 30 133.3%
Trading gains
(losses) 17 0 na 31 0 na
Other income 193 161 19.9% 382 352 8.5%
Subtotal 549 509 7.9% 1,073 955 12.4%
Security gains
(losses) (1) (1) 0.0% (1) (2) 50.0%
Gains (losses)
securities held
for sale 267 198 34.8% 587 354 65.8%
Total $815 $706 15.4% $1,659 $1,307 26.9%
INVESTMENT SECURITIES
The amortized cost and estimated market values of securities held
to maturity at June 30, 1998 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 $ 2,258 $ 0 $35 $ 2,223
Obligations of states and
political subdivisions 4,392 199 7 4,584
Mortgage-backed securities 7,604 97 35 7,666
Total $14,254 $296 $77 $14,473
Included above in U.S. Government corporations and agencies is a
structured note with a book value of $2,258,000 and a market value of
$2,223,000 which matures in the year 2000.
The amortized cost and estimated market values of securities
available for sale at June 30, 1998 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 $ 9,071 $ 12 $ 13 $ 9,070
Obligations of states and
political subdivisions 25,820 175 43 25,952
Mortgage-backed securities 80,153 316 537 79,932
Mortgage derivatives 24,302 44 281 24,065
Corporate trust preferred
securities 3,942 0 3 3,939
Marketable equity securities 5,229 0 0 5,229
Total $148,517 $547 $877 $148,187
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
$96,000. Privately issued CMOs included in the table above have a
book value of $919,000 and an estimated market value of $931,000.
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.
Corporate trust preferred securities consist of four separate
issues, none with a par value in excess of $1 million.
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) 1998 1997 % Change 1998 1996 % Change
Salaries and
wages $ 803 $ 638 25.9% $1,577 $1,263 24.9%
Employee benefits 260 207 25.6% 552 417 32.4%
Net occupancy
expense 206 194 6.2% 405 384 5.5%
Equipment expense 255 238 7.1% 476 467 1.9%
Other operating
expenses 762 744 2.4% 1,502 1,476 1.8%
Total $2,286 $2,021 13.1% $4,512 $4,007 12.6%
Increases in employee related costs during the quarter and year-
to-date comparative periods are due to the expansion of the branch
operation at Plaza West, St. Clairsville and Bellaire, the expansion
of asset management services (trust and brokerage services), and the
fulfillment of several positions within the organization that were
previously vacant. In addition, employee benefit costs increased by
$50,000 due to the implementation of deferred compensation plans for
the Board of Directors and executive management. These plans are
funded with bank-owned life insurance contracts. The cost of the
plans are substantially offset by earnings on these policies which are
included in other operating income.
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 1998, $275,000 was added to the allowance
and charged to expense compared to $355,000 in 1997. At June 30,
1998, the allowance for possible loan losses to total loans and leases
was 1.93% compared to 1.69% last year. The ratio of the Allowance for
Possible Loan Losses to underperforming assets was 504.3% at June 30,
1998. The following table details the Allowance for Possible Loan
Losses and also includes various loan charge off statistics for 1998
and 1997.
Allowance for Possible Loan
Losses
Three months ended Six months ended
June 30, June 30,
($000s) 1998 1997 1998 1997
Balance, beginning of period $ 4,186 $ 3,263 $ 4,134 $ 3,153
Provision for possible loan
losses 125 250 275 355
Loans charged-off 5 35 114 44
Recoveries on loans previously
charged-off 1 (4) 12 10
Net charge offs 4 39 102 34
Balance, end of period $ 4,307 $ 3,474 $ 4,307 $ 3,474
Loans and leases outstanding
at period $223,569 $205,116 $223,569 $205,116
Average loans and leases $223,588 $203,096 $224,414 $198,140
Annualized net charge offs as
a percent of:
Average loans and leases 0.01% 0.08% 0.09% 0.03%
Total loans at end of
period 0.01% 0.08% 0.09% 0.03%
Reserve for possible loan
losses 0.37% 4.49% 4.74% 1.96%
Reserve for possible loan
losses to:
Average loans and leases 1.93% 1.71% 1.92% 1.75%
Total loans at end of
period 1.93% 1.69%
Under-performing assets 504.33% 514.67%
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:
Under-performing assets June 30,
($000s) 1998 1997
Non-accrual loans and
leases $ 849 $443
Ninety days past due loans
and leases still accruing interest 5 211
Other real estate owned 0 21
Total $ 854 $675
Restructured loans and
leases included
in above totals $ 0 $537
Restructured loans and
leases in Compliance with
modified terms 1,225 65
Asset quality remained high since the year ago period. Total
under-performing assets were $854,000 or 0.4% of total loans
outstanding at June 30, 1998 compared to $675,000 or 0.3% of total
loans outstanding at June 30, 1997.
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 $ 5,000 6.10% 9/17/99
Fixed rate, non-
amortizing advance 5,000 6.20% 9/15/00
Fixed rate, non-
amortizing advance 10,000 6.56% 10/1/07
Fixed rate, non-
amortizing advance 30,000 5.09% 12/10/07
Fixed rate, non-
amortizing advance 7,000 5.60% 4/30/08
Fixed rate, non-
amortizing advance 8,000 5.46% 6/19/08
Fixed rate, amortizing
advance 62 5.55% 12/22/98
Fixed rate, amortizing
advance 1,755 6.05% 11/18/01
Fixed rate, amortizing
advance 119 5.80% 12/1/05
Fixed rate, amortizing
advance 1,244 6.85% 6/6/11
Fixed rate, amortizing
advance 109 6.75% 6/6/11
Fixed rate, amortizing
advance 811 6.85% 6/12/11
Fixed rate, amortizing
advance 250 6.95% 8/31/15
Fixed rate, amortizing
advance 2,224 6.70% 8/1/12
Fixed rate, amortizing
advance 640 6.25% 11/1/17
$72,214
CAPITAL RESOURCES
At June 30, 1998, shareholders' equity was $33,216,000 compared
to $31,899,000 at December 31, 1997 and $29,376,000 at June 30, 1997.
The following table presents various capital ratios as of June 30:
June 30, 1998 1997
Average shareholder's
equity to :
Average assets 8.4% 7.9%
Average deposits 11.8% 10.6%
Average loans and
leases 14.8% 14.1%
Primary capital 9.0% 8.5%
Risk-based capital
ratio:
Tier 1 11.9% 12.1%
Total 13.2% 13.4%
Leverage ratio 7.9% 7.5%
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, 1998,
the Corporation had a Tier 1 capital ratio of 11.9% and a total
capital ratio of 13.2%, 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, 1998, the Corporation's
leverage ratio was 7.9%.
STOCK REPURCHASE
In accordance with a plan approved by the Board of Directors and
previously announced in March 1996, the Company repurchased 9,000
shares of its common stock during the first quarter of 1998. The cost
of the purchases was $409,375. 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. No stock was purchased under the plan during
the second quarter of 1998. Through June 30, 1998, the Corporation has
purchased a total of $532,875 of its common stock.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board (FASB) has issued
Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income," which is effective for fiscal years
beginning after December 15, 1997. SFAS establishes standards for
reporting and presentation of comprehensive income and its components
within the Corporation's consolidated financial statements.
Generally, comprehensive income includes net income along with other
transactions not typically recorded as a component of net income,
including changes in unrealized gains and losses on securities
available for sale. SFAS 130 requires the disclosure of an amount
that represents total comprehensive income and the components of
comprehensive income in a consolidated financial statement. The
Corporation has disclosed the requirements of SFAS 130 within the
Statement of Changes in Shareholders' Equity.
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 14, 1998 s/J. Vincent Ciroli, Jr.
J. Vincent Ciroli, Jr.
President & CEO
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 11190
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 475
<TRADING-ASSETS> 988
<INVESTMENTS-HELD-FOR-SALE> 148187
<INVESTMENTS-CARRYING> 14254
<INVESTMENTS-MARKET> 14473
<LOANS> 223569
<ALLOWANCE> 4307
<TOTAL-ASSETS> 416298
<DEPOSITS> 289264
<SHORT-TERM> 7685
<LIABILITIES-OTHER> 13919
<LONG-TERM> 72214
0
0
<COMMON> 1321
<OTHER-SE> 31895
<TOTAL-LIABILITIES-AND-EQUITY> 416298
<INTEREST-LOAN> 10584
<INTEREST-INVEST> 4371
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 14961
<INTEREST-DEPOSIT> 5515
<INTEREST-EXPENSE> 7743
<INTEREST-INCOME-NET> 7218
<LOAN-LOSSES> 275
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<EXPENSE-OTHER> 4512
<INCOME-PRETAX> 4090
<INCOME-PRE-EXTRAORDINARY> 3005
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3005
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 4.14
<LOANS-NON> 849
<LOANS-PAST> 5
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3790
<ALLOWANCE-OPEN> 4134
<CHARGE-OFFS> 114
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 4307
<ALLOWANCE-DOMESTIC> 4307
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3227
</TABLE>
