U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from _____________ to _________________
Commission file number 0-12724
BELMONT BANCORP.
(Name of issuer in its charter)
Ohio (State of Incorporation)
I.R.S. Employer ID No. 34-1376776
325 MAIN STREET
BRIDGEPORT, OHIO 43912
(Address of principal executive offices)
Telephone (740)-695-3323
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
Title of each class: Name of each exchange on
which registered:
Common stock, $0.25 par value NASDAQ SmallCap Market
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of the
Registrant's knowledge. In definitive proxy or information
statements incorporated by reference to Part III of this Form 10-
K or any amendment to this Form 10-K.X
Aggregate market value of voting stock held by nonaffiliates as
of March 5, 1999 - $95,304,000.
There were 5,222,152 shares of $0.25 par value, common stock
outstanding as of March 5, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the Registrant dated March 19,
1999 are incorporated in Items 10, 11, 12, and 13. The Annual
Report of the Registrant is incorporated by reference in Items 5,
6, 7, and 8.
PART I
Forward-looking Statements
This report includes forward-looking statements
within the meaning of Section 27A of the Securities Act
of 1933, as amended, that involve inherent risks and
uncertainties. A number of important factors could
cause actual results to differ materially from those in
the forward-looking statements. These factors include
the economic environment, competition, products and
pricing in geographic and business areas in which the
Corporation operates, prevailing interest rates,
changes in government regulations and policies
affecting financial services companies, credit quality
and credit risk management, changes in the banking
industry including the effects of consolidation
resulting from possible mergers of financial
institutions, acquisitions and integration of acquired
businesses. The Corporation undertakes no obligation
to release revisions to these forward-looking
statements or reflect events or circumstances after the
date of this report.
The data presented herein should be read in
conjunction with the audited Consolidated Financial
Statements incorporated by reference.
ITEM 1-BUSINESS
BELMONT BANCORP.
Belmont Bancorp. is a bank holding company which
was organized under the laws of the State of Ohio in
1982. On April 4, 1984, Belmont Bancorp. acquired all
of the outstanding capital stock of Belmont National
Bank (formerly Belmont County National Bank), a banking
corporation organized as a national banking association.
Belmont National Bank provides a variety of financial services.
In addition to Belmont National Bank, the Corporation owns
Belmont Financial Network, Inc., a non-bank subsidiary.
BELMONT NATIONAL BANK
Belmont National Bank resulted from the merger on
January 2, 1959, of the First National Bank of St.
Clairsville, and the First National Bank of Bridgeport.
Both banks were organized as national associations
prior to the turn of the century. Belmont National
Bank operates through a network of thirteen branches
located in Belmont, Harrison and Tuscarawas Counties in
Ohio and Ohio County in West Virginia. The main office
is located in the Woodsdale section of Wheeling, West
Virginia. In addition to its main office in West
Virginia, the Bank operates a branch in the Elm Grove
section of Wheeling. Branch locations in Belmont
County, Ohio include St. Clairsville, Bridgeport,
Lansing, Shadyside, Ohio Valley Mall, Bellaire and
Plaza West, St. Clairsville. The Harrison County
branch is located in Cadiz, Ohio. Branches in
Tuscarawas County are located in New Philadelphia,
Ohio. The three New Philadelphia offices were acquired
on October 2, 1992, when Belmont National Bank acquired
the deposits and loans of these offices from Diamond
Savings and Loan.
Belmont National Bank provides a wide range of
retail banking services to individuals and small to
medium-sized businesses. These services include
various deposit products, business and personal loans,
credit cards, residential mortgage loans, home equity
loans, and other consumer oriented financial services
including IRA and Keogh accounts, safe deposit and
night depository facilities. Belmont National Bank
also owns automatic teller machines located at branches
in Bellaire, Bridgeport, Woodsdale, Elm Grove, Cadiz,
the Ohio Valley Mall, Plaza West and New Philadelphia
providing 24 hour banking service to our customers.
Belmont National Bank belongs to MAC, a nationwide ATM
network with thousands of locations nationwide.
Belmont National Bank offers a wide variety of
fiduciary services. The trust department of the Bank
administers pension, profit-sharing, employee benefit
plans, personal trusts and estates.
BELMONT FINANCIAL NETWORK
On July 1, 1985, Belmont Bancorp. formed a
subsidiary corporation, Belmont Financial Network,
Inc.(BFN). BFN serves as a community development
corporation by investing in low income housing projects
that provide low income and historic tax credits.
BELMONT INVESTMENT AND FINANCIAL SERVICES, INC.
During 1988, Belmont National Bank began the
operations of Belmont Investment and Financial
Services, Inc., a wholly-owned subsidiary of the Bank.
Belmont Investment and Financial Services, Inc. was
organized so that the Bank's customers would have
available to them a wider array of financial products
as well as sound investment and financial planning.
Through Belmont Investment and Financial Services,
Inc., customers can purchase government or corporate
bonds, and mutual fund products. In 1990, the services
provided by the Corporation, other than advisory
services, were reorganized into a department of the
Bank.
SUPERVISION AND REGULATION
Belmont Bancorp. is supervised and examined by the
Board of Governors of the Federal Reserve system under
the Bank Holding Company Act of 1956 (BHCA). The BHCA
requires Federal Reserve approval for bank acquisitions
and regulates non-banking activities of bank holding
companies. Deposits of Belmont Bancorp. are insured by
the Federal Deposit Insurance Corporation (FDIC). As a
national bank, Belmont National Bank is supervised and
examined by the Office of the Comptroller of the
Currency (OCC).
Since September 1995, the BHCA has permitted bank
holding companies from any state to acquire banks and
bank holding companies located in any other state,
subject to certain conditions, including nationwide and
state imposed concentration limits. Banks have been
able to branch across state lines by acquisition,
merger or new bank charter, since June 1, 1997, if
state law expressly permits interstate branching.
A fundamental principle underlying the Federal
Reserve's supervision and regulation of bank holding
companies is that bank holding companies should be a
source of managerial and financial strength to their
subsidiary banks. Subsidiary banks in turn are to be
operated in a manner that protects the overall
soundness of the institution and the safety of
deposits. Bank regulators can take various remedial
measures to deal with banks and bank holding companies
that fail to meet legal and regulatory standards.
The 1989 Financial Reform, Recovery and
Enforcement Act (FIRREA) expanded federal regulatory
enforcement powers. The Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) created
five capital-based supervisory levels for banks and
requires bank holding companies to guarantee compliance
with capital restoration plans of undercapitalized
insured depository affiliates. Belmont Bancorp. was
considered "well capitalized" under regulatory
definitions in effect at December 31, 1998. This is
the highest rating presently available.
The monetary policies of regulatory authorities,
including the Federal Reserve Board, have a significant
effect on the operating results of banks and bank
holding companies. The nature and future monetary
policies and the effect of such policies on the future
business and earnings of Belmont Bancorp. and its
subsidiary bank cannot be predicted.
FOREIGN OPERATIONS
Belmont Bancorp. has no foreign operations.
EXECUTIVE OFFICERS
For information concerning executive officers of
Belmont Bancorp. and Belmont National Bank, see Item 10
of Form 10-K.
ITEM 2-PROPERTIES
DESCRIPTION ON PROPERTIES
In January 1996, the Bank relocated its corporate
headquarters to Wheeling, WV. The office is located at
980 National Road and consists of a 14,000 square foot,
combination one and two story masonry block building.
Approximately half of the space is leased to a tenant.
In addition, the Bank transacts business in the
following branch locations:
St. Clairsville Office-This office consists of a
two story brick building owned by the Bank with
attached drive-in facilities. The building
consists of 9,216 square feet which houses the
commercial bank operations and the executive and
human resources offices.
Mall Office-This office is located at the Ohio
Valley Mall, a major shopping mall located two
miles east of St. Clairsville, Ohio. The office
consists of a 1,400 square foot office located
along the perimeter of the Mall at the main
entrance. An automatic teller machine is located
at the drive-in facility.
Lansing Office-This 1,352 square foot office is
located in Lansing, Ohio, a small community
approximately six miles east of St. Clairsville on
US. Route 40. The facility is a masonry building
with adjoining drive-in facilities.
Bridgeport Office-This office is located in
Bridgeport, Ohio, a community located on the
Ohio/West Virginia border, approximately 10 miles
east of St. Clairsville. This 5,096 square foot
facility is a recently remodeled masonry building
with adjoining drive-in facilities and an ATM.
Shadyside Office-This 1,792 square foot office is
located in Shadyside, a village located on Ohio
State Route 7. The facility is a masonry building
with accompanying drive-in facilities.
Cadiz Office-This office is located in Cadiz, Ohio
in Harrison County, approximately seventeen miles
north of St. Clairsville at the intersection of
State Routes 9 and 22. The brick and tile
building contains 1,800 square feet with an
accompanying drive-in facility.
New Philadelphia Office-This office, located at
152 North Broadway Avenue, is a 33,792 square
foot site improved with two inter-connected, two
story brick office buildings with a total building
area of 13,234 square feet. Part of the office
space is leased to other businesses. This
location also has a drive-in facility and an
automatic teller machine.
New Philadelphia Office-This office, located at
2300 East High Avenue, is comprised of a one
story, 1,605 square foot brick structure with a
783 square foot drive-thru canopy.
New Philadelphia Office-This office, located at
525 Wabash Avenue, is comprised of a 14,250 square
foot site with a 246 square foot drive-thru
banking facility.
Elm Grove Office-This office is located at 2066
National Road in Wheeling, WV, and includes a
drive-thru facility and an ATM.
Bellaire Office - This leased office, located in
the Imperial Shopping Center, is comprised of
approximately 1,750 square feet with an adjoining
drive-thru facility and ATM.
Plaza West Solution Center - This office is
located at the west end of St. Clairsville and
features a different concept in retail banking.
It includes a drive-thru facility and an ATM.
All offices are owned by the Bank except for the
Mall and Bellaire offices. All leased offices contain
renewal options. The land for the Elm Grove office is
also leased.
ITEM 3-LEGAL PROCEEDINGS
None.
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security
holders during the fourth quarter of the fiscal year
covered by this report.
PART II
ITEM 5-MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDERS' MATTERS
The number of shareholders of record for the
Corporation's stock as of February 26, 1999 was 619.
The closing price of Belmont Bancorp. stock on March 5,
1999 was $18.25 per share.
Belmont Bancorp.'s common stock has a par value of
$0.25 and, since October 1994, has been traded on the
Nasdaq SmallCap market.
1998
Dividend
Quarter High Low per Share
1st $26.00 $20.00 $0.085
2nd 28.44 22.25 0.100
3rd 27.25 19.75 0.100
4th 23.50 18.00 0.100
Total $0.385
1997
Dividend
Quarter High Low per Share
1st $11.20 $10.20 $0.068
2nd 12.60 10.40 0.068
3rd 15.00 12.56 0.085
4th 20.75 14.50 0.085
Total $0.306
The tables above show its high and low market
prices and dividend information for the past two years.
Market prices and cash dividends paid per share have
been restated to reflect the effect of a 5-for 4 common
stock split effected in the form of a 25% common stock
dividend paid July 1, 1997 and a 2-for-1 common stock
split effected in the form of a 100% common stock
dividend paid May 22, 1998.
Information regarding the limitations on dividends
available to be paid can be located in Footnote 16 of
the Notes to the Consolidated Financial Statements in
the Corporation's Annual Report (Exhibit B).
Treasury stock is accounted for using the cost
method. There were 66,174 shares and 13,330 shares
held in treasury on December 31, 1998 and 1997,
respectively.
ITEM 6.-SELECTED FINANCIAL DATA
The Summarized Quarterly Financial Information and
the Consolidated Five Year Summary of Operations
contained in the Corporation's annual report (Exhibit
B) are hereby incorporated by reference.
ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The data presented in this discussion should be
read in conjunction with the audited consolidated
financial statements.
RESULTS OF OPERATIONS
SUMMARY
For 1998, net income increased 3.4% from the
previous year; net income for the year ended 1997
increased 18.9% compared to 1996. Net income per
common share for 1998 was $1.17 compared to $1.13 per
common share in 1997 and $0.94 in 1996. Return on
average common shareholders' equity was 18.45% for
1998, compare to from 20.21% in 1997 and 19.55% in 1996. The
Corporation's net income to average assets, referred to
as return on assets, was 1.49% for the year ended 1998
compared to 1.62% last year and 1.49% during 1996.
Operating income consists of earnings before income
taxes, minus net investment gains and gains on sale of
real estate, or plus net investment losses. Operating
income decreased by $172,000 or 2.6% from 1997 to 1998.
The table below summarizes earnings performance for the
past three years.
($000s) except per share 1998 1997 1996
data
Operating income $6,395 $6,567 $6,382
Net income 6,147 5,945 5,002
Net income per share $ 1.17 $ 1.13 $ 0.94
Return on average assets 1.49% 1.62% 1.49%
Return on average common
equity 18.45% 20.21% 19.55%
Return on average total
equity 18.45% 20.21% 19.05%
NET INTEREST REVENUE
A major share of the Corporation's income results
from the spread between income on interest earning
assets and interest expense on the liabilities used to
fund those assets, known as net interest income. Net
interest income is affected by changes in interest
rates and amounts and distributions of interest earning
assets and interest bearing liabilities outstanding.
Net interest margin is net interest income divided by
the average earning assets outstanding. A third
frequently used measure is net interest rate spread
which is the difference between the average rate earned
on assets and the average rate incurred on liabilities
without regard to the amounts outstanding in either
category.
The Consolidated Average Balance Sheets and
Analysis of Net Interest Income Changes included in the
Corporation's annual report (Exhibit B), compare
interest revenue and interest earning assets
outstanding with interest cost and liabilities
outstanding for the years ended December 31, 1998,
1997, and 1996, and computes net interest income, net
interest margin and net interest rate spread for each
period. All three of these measures are reported on a
taxable equivalent basis.
The Corporation's net interest income declined by
0.2%, or $34,000, on a taxable equivalent basis during
1998 compared to the same period last year. During
1998, the Corporation's average interest-earning assets
grew by approximately $41.9 million, up 12.1% from
1997.
The yield on interest earning assets was down 28
basis points from 8.43% in 1997 to 8.15% in 1998. The
cost of interest bearing liabilities rose 15 basis
points from 1997 to 1998. Consequently, the net
interest rate spread decreased from 3.84% during 1997
to 3.42% during 1998. The taxable equivalent net
interest margin was 3.89% during 1998 compared to 4.37%
for 1997 and 4.45% during 1996.
The Analysis of Net Interest Income Changes,
separates the dollar change in the Corporation's net
interest income into three components: changes caused
by (1) an increase or decrease in the average assets
and liability balances outstanding (volume); (2) the
changes in average yields on interest earning assets
and average rates for interest bearing liabilities
(yield/rate); and (3) combined volume and yield/rate
effects (mix).
This table shows that the decrease in the
Corporation's net interest income during the year-to-
date periods presented from 1997 to 1998 was generated
by a decline in yields on earning assets and higher
funding costs.
OTHER OPERATING INCOME
Other operating income excluding securities gains
and a gain on sale of real estate, increased 11.7% and
totaled $2,245,000 in 1998, compared to $2,010,000 in
1997 and $1,861,000 in 1996. The table below shows the
dollar amounts and growth rates of the components of
other operating income.
1998 1997 1996
($000s) Total Change Total Change Total
Trust income $ 463 -0.64% $ 466 -7.17% $ 502
Service charges on deposits 752 6.36% 707 7.12% 660
Gain on sale of loans 144 58.24% 91 26.39% 72
Trading profits (losses) 62 na - na -
Recovery on class action
lawsuit - na - -100.00% 27
Other income 824 10.46% 746 24.33% 600
Subtotal 2,245 11.69% 2,010 8.01% 1,861
Investment securities gains
(losses) - 100.00% (3) -200.00% (1)
Gains (losses) on securities
available for sale 1,338 66.83% 802 102.02% 397
Gain on sale of real estate 383 na - na -
Total $3,966 41.19% $2,809 24.46% $2,257
Gains on sale of loans contributed $144,000 to
noninterest income during 1998, up from $91,000 in
1997. The Corporation utilizes the secondary mortgage
market to divest itself of fixed rate mortgage loans
with rates below a target rate for purposes of managing
the interest rate risk associated with these loans.
Servicing rights were retained on the loans sold. The
Corporation continues to utilize the secondary market
as a means of offering competitively priced mortgage
loan products without retaining the interest rate risk
associated with long term, fixed rate product. At
December 31, 1998 mortgage loans serviced for others
totaled approximately $38.2 million.
Losses on investments held in the maturity
portfolio during 1997 and 1996 occurred as a result of
calls on municipal bonds in the portfolio. These
losses totaled $3,000 during 1997 and $1,000 during
1996. Net gains were realized on securities available
for sale during 1998 totaling $1,338,000 compared to
gains of $802,000 during 1997 and $397,000 during 1996.
The related income taxes on securities transactions,
including trading and securities available for sale,
were $337,000, $174,000, and $104,000 for the years
ended 1998, 1997 and 1996, respectively.
OPERATING EXPENSES
Successful expense control is an essential element
in maintaining the Corporation's profitability. The
table below details the percentage changes in various
categories of expense for the three years ended 1998,
1997, and 1996.
($000s) 1998 % Change 1997 % Change 1996
Salaries and wages $3,533 16.45% $3,034 14.66% $2,646
Employee benefits 1,100 20.35% 914 15.70% 790
Net occupancy expense 824 5.24% 783 14.14% 686
Equipment expense 933 -1.48% 947 15.91% 817
FDIC insurance 65 1.56% 64 -87.74% 522
Other operating
expenses 3,041 1.71% 2,990 2.15% 2,927
Total $9,496 8.75% $8,732 4.10% $8,388
Management strives to maintain the Corporation's
efficiency ratio at or below 50%. (The efficiency
ratio is computed by dividing the sum of fully taxable
equivalent net interest margin plus non-interest income
by non-interest expenses.) For the year ended 1998,
the efficiency ratio was 50.0% compared to 48.8% in
1997 and 51.4% in 1996.
Salaries and wages included incentive performance
bonuses tied to earnings performance totalling $323,000
in 1998, $299,000 during 1997 and $243,000 during 1996.
Salaries and wages were higher in the areas of trust
and asset management services, credit administration
and data processing due to increased strategic focus on
asset management services, loan portfolio expansion,
and fulfillment of vacant positions.
Other non-interest operating expense includes FDIC
insurance assessments. FDIC insurance expense included
in other operating expenses was $65,000, $64,000, and
$522,000 in 1998, 1997 and 1996, respectively,
including a one time, pre-tax assessment on deposits
insured through the Savings Association Insurance Fund
during the third quarter of 1996 totaling $397,000.
Taxes, other than payroll and real estate taxes,
included in noninterest expense totaled $493,000 during
1998, up from $426,000 in 1997. This includes the
Ohio state corporate franchise tax based on the equity
of the subsidiary bank.
Other noninterest expense also includes expense
associated with other real estate owned. During 1998
there was no expense associated with other real estate
owned. During 1997 this expense was $20,000 compared
to $143,000 in 1996. Expenses associated with one
property which was disposed of during the fourth
quarter of 1996 totaled $140,000.
In the fourth quarter of 1997, federal income
taxes were reduced by $482,000 in historic tax credits
associated with a low income housing project that the
subsidiary, Belmont Financial Network, invested in as a
limited partner. The project contributed $74,000 in
low income housing credits (LIHC) during 1998 and is
expected to generate approximately $1.6 million in LIHC
over the next ten years.
FINANCIAL CONDITION
SECURITIES
The book values of investments as of December 31,
1998 and 1997 are detailed in Footnote 3 of the Notes
to the Consolidated Financial Statements in the
Corporation's annual report (Exhibit B).
The investment portfolio consists largely of fixed
and floating rate mortgage related securities,
predominantly underwritten to the standards of and
guaranteed by the government agency GNMA and by the
government-sponsored agencies of FHLMC and FNMA. These
securities differ from traditional debt securities
primarily in that they have uncertain maturity dates
and are priced based on estimated prepayment rates on
the underlying mortgages.
The maturities and yields of securities held to maturity and available
for sale (excluding equity securities) are detailed in the following tables.
<TABLE>
<CAPTION>
Securities Held to Maturity
December 31, 1998 Over 10 Year
Maturity 1-5 Year 6-10 Year Maturity Total
< 1 year Maturity Maturity
($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
agencies
and
corporations $ - $2,255 4.81% $ $ $ 2,255 4.81%
States and
political
subdivisions (a) 533 5.48% 1,228 8.15% 557 10.00% 1,506 9.57% 3,824 8.61%
Agency mortgage-
backed
securities (b) 87 -2.25% 5,033 6.87% 827 7.98% 490 8.33% 6,437 7.00%
Total $620 4.41% $8,516 6.51% $1,384 8.79% $1,996 9.26% $12,516 7.10%
</TABLE>
<TABLE>
Securities Available for Sale (excluding Equity Securities)
December 31, 1998
<CAPTION> Over 10
Year
Maturity < 1-5 Year 6-10 Year Maturity Total
1 year Maturity Maturity
($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury
securities $ 101 6.32% $ - $ - $ - $ 101 6.32%
U.S. Government
agencies
and
corporations (b) - - 10,455 6.43% - 10,455 6.43%
States and
political
subdivisions (a) - - 102 7.58% 28,955 7.13% 29,057 7.13%
Corporate debt - - - 7,340 6.39% 7,340 6.39%
Agency mortgage-
backed
securities (b) 1,307 3.01% 79,263 5.76% 7,654 6.98% 5,478 8.41% 93,702 5.98%
Mortgage
derivative
securities 3,198 9.07% 14,278 5.79% 910 10.10% 20,253 6.77% 38,639 6.68%
Total fair
value $4,606 7.31% $93,541 5.76% $19,121 6.82% $62,026 7.02% $179,294 6.35%
Amortized cost $4,605 $94,555 $19,206 $62,746 $181,112
(a) Taxable equivalent yields
(b) Maturities of mortgage-backed securities and agency loan pools are based on
estimated average life.
</TABLE>
At December 31, 1998, there were no securities of
a single issuer, other than U.S. Treasury or other U.S.
government agency securities, which exceeded 10% of
shareholders' equity.
The state and political subdivision portfolio
includes approximately $7.0 million zero coupon revenue
bonds. These bonds are purchased at a significant
discount to par value and the income recognized on the
bonds is derived from the accretion of the discount
using a method that approximates a level yield.
MARKETABLE EQUITY SECURITIES
The Corporation held marketable equity securities
in its investment portfolio as of December 31, 1998.
In accordance with regulatory requirements, all equity
securities were transferred to Securities Available for
Sale on January 1, 1994 because these securities do not
have a stated maturity. Current accounting principles
require that marketable equity securities be recorded
at the lower of cost or market value with a
corresponding adjustment to reduce shareholders' equity
if market value is lower than cost. At December 31,
1998 and 1997, estimated market values approximated
original cost.
Taxable
Equivalent
December 31, 1998 ($000s) Cost Market Yield
Value
Federal Home Loan Bank
stock $5,001 $5,001 7.00%
Corporate Stock 512 513 0.93%
Federal Reserve Bank
Stock 187 187 6.00%
$5,700 $5,701
Taxable
Equivalent
December 31, 1997 ($000s) Cost Market Yield
Value
Federal Home Loan Bank
stock $4,450 $4,450 7.19%
Corporate Stock 66 66 5.17%
Federal Reserve Bank
Stock 187 187 6.00%
$4,703 $4,703
LOANS AND LEASES
The following table shows the history of
commercial and consumer loans and leases, including
loans held for sale, by major category at December 31.
($000s) 1998 1997 1996 1995 1994
Commercial loans:
Real estate construction $ 135 $ 1,418 $ 1,327 $ 1,530 $ 1,801
Acceptances of other
banks 0 0 0 0 0
Real estate mortgage 14,719 19,984 25,954 28,744 23,701
Commercial, financial
and agricultural 119,730 109,618 80,554 50,532 38,983
Direct financing leases 0 0 0 3 5
Total commercial loans $134,584 $131,020 $107,835 $ 80,809 $ 64,490
Consumer loans:
Residential mortgage $ 58,099 $ 77,995 $ 71,715 $ 69,999 $ 76,094
Installment loans 25,710 14,435 7,626 6,959 5,116
Credit card and other
consumer 1,020 1,450 1,607 2,190 1,396
Total consumer loans $ 84,829 $ 93,880 $ 80,948 $ 79,148 $ 82,606
Total loans and leases $219,413 $224,900 $188,783 $159,957 $147,096
An analysis of maturity and interest rate sensitivity
of business loans at the end of 1998 follows:
Under 1 to 5 Over 5
($000s) 1 Year Years Years Total
Domestic loans:
Real estate construction $ 10 $ 15 $ 110 $ 135
Real estate mortgage 8,655 2,717 3,347 14,719
Commercial, financial
and agricultural 59,682 46,693 12,885 119,260
Direct financing leases 0
Total business loans (a) $68,347 $49,425 $16,342 $134,114
Rate sensitivity:
Predetermined rate $ 4,087 $22,547 $15,443 $ 42,077
Floating or adjustable rate 64,260 26,878 899 92,037
Total domestic business loans $68,347 $49,425 $16,342 $134,114
Foreign loans 0 0 0 0
(a) does not include nonaccrual loans
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation, as part of its philosophy of risk
management, has established various credit policies and
procedures intended to minimize the Corporation's
exposure to undue credit risk. Credit evaluations of
borrowers are performed to ensure that loans are
granted on a sound basis. In addition, care is taken
to minimize risk by diversifying specific industry.
Credit risk is continuously monitored by Management
through the periodic review of individual credits to
ensure compliance with policies and procedures.
Adequate collateralization, contractual guarantees, and
compensating balances are also utilized by Management
to mitigate risk.
Management determines the appropriate level of the
allowance for possible loan losses by continually
evaluating the quality of the loan portfolio. The
reserve is allocated to specific loans that exhibit
above average credit loss potential based upon their
payment history and the borrowers' financial
conditions. The adequacy of the allowance for possible
loan losses is evaluated based on an assessment of the
losses inherent in the loan portfolio. This assessment
results in an allowance consisting of two components,
allocated and unallocated. The allocations are made
for analytical purposes. The total allowance is
available to absorb losses from any segment of the
portfolio. Management maintains a watch list of
substandard loans for monthly review. Although these
loans may not be delinquent and may be adequately
secured, Management believes that due to location,
size, or past payment history, it is necessary to
monitor these loans monthly.
The allowance for possible loan losses totaled
$4,529,000, or 2.06% of total loans and leases at
December 31, 1998. At the end of the previous year,
the allowance for possible loan losses was $4,134,000,
or 1.84% of total loans and leases. The provision
charged to expense during 1998 was $710,000 compared to
$1,055,000 in the year ago period.
Management's allocation of the allowance for
possible loan losses for the past five years based on
estimates of potential future loan loss is set forth in
the table below:
($000s) 1998 1997 1996 1995 1994
Specific reserves:
Commercial $ 268 $ 560 $ 330 $ 310 $ 10
Mortgage 0 0 10 10 5
Consumer 60 161 176 5 7
Criticized loans without
specific allocation 616 470 296 414 315
Provision for loan
categories based on
historical loss
experience:
Commercial 1,577 1,534 1,197 799 664
Commercial real estate 324 313 269 152 103
Residential mortgage 272 358 328 325 298
Consumer 322 209 137 143 112
Unallocated 1,090 529 410 545 23
Total $4,529 $4,134 $3,153 $2,703 $1,537
Reserves as a % of
total loans
($000s) 1998 1997 1996 1995 1994
Specific reserves:
Commercial 0.12% 0.25% 0.17% 0.19% 0.01%
Mortgage 0.00% 0.00% 0.01% 0.01% 0.00%
Consumer 0.03% 0.07% 0.09% 0.00% 0.00%
Criticized loans without
specific allocation 0.28% 0.21% 0.16% 0.26% 0.21%
Provision for loan
categories based on
historical loss
experience:
Commercial 0.72% 0.68% 0.63% 0.50% 0.45%
Commercial real estate 0.15% 0.14% 0.14% 0.10% 0.07%
Residential mortgage 0.12% 0.16% 0.17% 0.20% 0.20%
Consumer 0.15% 0.09% 0.07% 0.09% 0.08%
Unallocated 0.49% 0.24% 0.23% 0.34% 0.02%
Total 2.06% 1.84% 1.67% 1.69% 1.04%
Total loans and leases
outstanding $219,413 $224,899 $188,783 $159,957 $147,096
The following table sets forth the five year
historical information on the reserve for loan losses:
($000s) 1998 1997 1996 1995 1994
Balance as of January 1 $4,134 $3,153 $2,703 $1,537 $1,617
Provision of loan losses 710 1,055 465 1,150 805
Adjustment incident to
acquisition 0 0 0 0 0
Loans charged off:
Real estate 133 24 30 25 49
Commercial 178 23 0 0 806
Consumer 19 43 32 26 85
Direct financing leases 0 0 0 0 0
Total loans charged-off 330 90 62 51 940
Recoveries of loans
previously
charged-off:
Real estate 11 2 2 3 18
Commercial 1 1 0 1 29
Consumer 3 13 45 18 7
Direct financing leases 0 0 0 45 1
Total recoveries 15 16 47 67 55
Net charge-offs
(recoveries) 315 74 15 (16) 885
Balance at December 31 $4,529 $4,134 $3,153 $2,703 $1,537
($000s) 1998 1997 1996 1995 1994
Loans and leases
outstanding
at December 31 $219,413 $224,899 $188,783 $159,957 $147,096
Allowance as a percent of
loans and leases
outstanding 2.06% 1.84% 1.67% 1.69% 1.04%
Average loans and leases $222,961 $208,265 $174,445 $152,502 $134,952
Net charge-offs as a
percent of average loans
and leases 0.14% 0.04% 0.01% -0.01% 0.66%
The following schedule shows the amount of under-
performing assets and loans 90 days or more past due
but accruing interest.
UNDER-PERFORMING ASSETS
($000s) 1998 1997 1996 1995 1994
Nonaccrual loans and
leases $562 $1,515 $143 $162 $ 478
Loans 90 days or more past
due but accruing interest 4 44 74 14 11
Other real estate owned - 20 66 579 586
Total $566 $1,579 $283 $755 $1,075
In addition to the above schedule of non-performing
assets, Management prepares a watch list consisting of
loans which Management has determined require closer
monitoring to further protect the Corporation against
loss. The balance of loans classified by Management as
substandard due to delinquency and a change in financial
position at the end of 1998 and not included in the table
above was $4,746,000. There are no other loans classified
for regulatory purposes that would materially impact future
operating results, liquidity or capital resources or which
management doubts the ability of the borrower to comply
with loan repayment terms.
DEPOSITS
Primarily core deposits are used to fund interest-
earning assets. The Corporation has a lower volume of
interest-free checking accounts than its peer group
which is typical for its market area. This results in
an overall higher cost of funds than peer average. The
accompanying tables show the relative composition of
the Corporation's average deposits and the change in
average deposit sources during the last three years.
BORROWINGS
Other sources of funds for the Corporation include
short-term repurchase agreements and Federal Home Loan
Bank borrowings. Borrowings at the Federal Home Loan
Bank are utilized to match the maturities of selected
loans and to leverage the capital of the Corporation to
enhance profitability for shareholders.
CAPITAL RESOURCES
At December 31, 1998, shareholders' equity was
$33,430,000 compared to $31,899,000 at December 31,
1997, an increase of $1,531,000 or 4.8%. The increase
in capital during 1998 was due primarily to the
retention of earnings.
The Federal Reserve Board has adopted risk-
based capital guidelines that assign risk weightings
to assets and off-balance sheet items. The
guidelines also define and set minimum capital
requirements (risk-based capital ratios). Bank
holding companies are required to have core capital
(Tier 1) of at least 4.0% of risk-weighted assets
and total capital of 8.0% of risk-weighted assets.
Tier 1 capital consists principally of shareholders'
equity less goodwill, while total capital consists
of core capital, certain debt instruments and a
portion of the reserve for loan losses. At December
31, 1998, the Corporation had a Tier 1 capital ratio
of 11.6% and a total capital ratio of 12.9%, well
above the regulatory minimum requirements.
The following table shows several capital and
liquidity ratios for the Corporation for the last
two years:
December 31 1998 1997
Average shareholders' equity
to :
Average assets 8.06% 8.02%
Average deposits 11.39% 11.01%
Average loans and leases 14.94% 14.13%
Primary capital 8.50% 9.10%
Risk-based capital ratio:
Tier 1 11.60% 11.81%
Total 12.85% 13.06%
Leverage ratio 7.64% 8.00%
National banks must maintain a total assets
leverage ratio of at least 3.0%. The total assets
leverage ratio is calculated by dividing capital
less intangibles into assets, net of intangibles.
In many cases, regulators require an additional
cushion of at least 1.0% to 2.0%. At December 31,
1998, the Corporation's Tier One leverage ratio was
7.64%.
The following table presents dividend payout
ratios for the past three years.
1998 1997 1996
Total dividends declared
as a percentage of net income 32.89% 27.17% 26.59%
Common dividends declared
as a percentage of earnings
per common share 32.91% 27.20% 25.64%
Currently there are no known trends, events or
uncertainties that would have a material effect on
the Corporation's liquidity, capital resources or
results of operations.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation meets its liability based needs
through the operation of Belmont National Bank's branch
banking network that gathers demand and retail time
deposits. The Bank also acquires funds through
repurchase agreements and overnight federal funds that
provide additional sources of liquidity. Total
deposits increased by $40.4 million, or 15.3%, from the
end of 1997 to 1998. Average deposits increased $25.2
million, or 9.4%, during 1998 compared to 1997.
The Bank has utilized alternative funding sources
to leverage shareholders' equity and improve overall
profitability. Sources include the Federal Home Loan
Bank of Cincinnati and various correspondent bank
relationships.
The Bank also has lines of credit with various
correspondent banks totaling $6,500,000 which may be
used as an alternative funding source; the unused
portion of these lines at December 31, 1998 was
$4,550,000. In addition, the Bank has a line of credit
with the Federal Home Loan Bank of Cincinnati for $30
million; at December 31, 1998, the line was not drawn
upon. All borrowings at the Federal Home Loan Bank are
subject to eligible collateral requirements.
INTEREST RATE SENSITIVITY
The Corporation's net interest revenue can be
vulnerable to wide fluctuations arising from a change
in the general level of interest rates to the degree
that the average yield on assets responds differently
to such a change than does the average cost of funds.
To maintain a consistent earnings performance, the
Corporation actively manages the repricing
characteristics of its assets and liabilities to
control net interest income rate sensitivity.
The mismatching of asset and liability repricing
characteristics in specific time frames is referred to
as interest rate sensitivity gaps. Mismatching or
"gapping" can be profitable when the term structure of
interest rates (the yield curve) is positive, i.e.
short term yields are lower than long term yields, but
gapping entails an element of risk, particularly in
volatile markets. An institution is said to have a
negative gap when its liabilities reprice in a shorter
time period than its assets. A positive gap exists
when assets reprice more quickly than liabilities. A
negative gap in a period when the general level of
interest rates is declining will produce a larger net
interest income spread than would be the case if all
assets and liabilities were perfectly matched.
Conversely, net interest income will be adversely
affected by a negative gap position in a period when
the general level of interest rates is rising. Gaps,
therefore, must be prudently managed.
The Corporation examines its interest rate
sensitivity position by categorizing the balance sheet
into respective repricing time periods similar to those
shown on the accompanying table. Repricing of certain
assets, such as installment loans, mortgage loans and
leases, is based upon contractual amortization or
repricing, although experience indicates that they
reprice more quickly due to early payoffs. Mortgage-
backed securities are included in maturity/repricing
categories based upon historical prepayment speeds.
Based upon historical deposit rate relationships,
savings and interest bearing checking are partially
included in the non-rate sensitive category since rate
changes on these products are not completely sensitive
to fluctuations in the interest rate environment.
Asset/liability management encompasses both
interest rate risk and liquidity management. The
resulting net cumulative gap positions reflect the
Corporation's sensitivity to interest rate changes over
time. The calculation is a static indicator and is not
a net interest income predictor of a dynamic business
in a volatile environment. As a static indicator, the
gap methodology does capture major trends.
<TABLE>
Rate Sensitivity Analysis
December 31, 1998
<CAPTION>
Maturing or repricing
Non-rate
Total Sensitive
1-30 31-90 91-180 181-356 1 Year 1-5 & Over
days days days days & Over Years 5 years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning
assets:
Loans and leases $58,406 $14,171 $ 7,968 $21,826 $102,371 $60,114 $ 56,928 $219,413
Trading securities $ 955 955 $ 967 $ 359 2,281
Investment securities 0 2,491 648 576 3,715 5,531 3,270 12,516
Securities available
for sale 14,937 6,816 5,655 28,377 55,785 68,690 60,520 184,995
Total interest
earning assets 74,298 23,478 14,271 50,779 162,826 135,302 121,077 419,205
Interest bearing
liabilities:
Interest checking 5,580 5,580 36,857 42,437
Savings 17,077 17,077 71,188 88,265
Certificates-$100,000
and over 1,190 2,497 5,482 10,392 19,561 3,987 3,697 27,245
Other time 7,845 14,991 23,398 23,887 70,121 31,405 14,659 116,185
Repurchase agreements 6,239 6,239 6,239
Short term borrowings 3,950 3,950 3,950
Long term debt 5,000 5,000 11,401 75,000 91,401
Total interest
bearing liabilities 35,642 17,488 28,880 45,518 127,528 46,793 201,401 375,722
Rate sensitivity gap 38,656 5,990 -14,609 5,261 35,298 88,509 -80,324 43,483
Cumulative gap $38,656 $44,646 $30,037 $35,298 $123,807 $ 43,483
Cumulative gap as a
percentage of
interest earning
assets 9.22% 10.65% 7.17% 8.42% 29.53% 10.37%
</TABLE>
Interest bearing checking and savings deposits
that have no contractual maturity are scheduled in the
table above according to Management's best estimate of
their repricing sensitivity to changes in market rates.
Year 2000
The Corporation is aware of the overall potential
impact the 1999 to 2000 calendar changes could present.
The loss of hardware and/or software systems as well as
the loss of electricity and/or telecommunications are
areas of concern throughout the entire industry. A
smooth transition to the Year 2000 is planned with
little or no impact to our customer base.
The Corporation began gathering Year 2000 data in
August 1997. A written project plan was researched and
delivered during the fourth quarter of 1997. The Year
2000 project plan was presented to the Board of
Directors in February 1998 and was approved at the
February board meeting. The Year 2000 Project Team was
assigned in December 1997 and is comprised of
representatives from all affected departments. Monthly
meetings are held to review the current project status
and to assign various tasks to departments.
As a financial institution, The Corporation
follows Year 2000 guidelines written by the Federal
Financial Institutions Examination Council as well as
OCC Advisory Letters. Our regulatory agency, the
Office of the Comptroller of the Currency, has
completed three extensive examinations of Belmont
National Bank and the Year 2000 plan. The assigned
examiner reviews all plans, research, and results on a
continual basis.
The Belmont National Bank Year 2000 plan is
comprised of the five Y2K phases: Awareness,
Assessment, Renovation, Validation and Implementation.
The Awareness phase consists of the institution being
aware of the potential problem(s) that could result
from the Year 2000. This phase was completed in
December 1997. The Assessment phase was completed in
January 1998 and included inventories of all equipment
including hardware, software, environmental controls,
fax machines, copiers, vault timers, security systems,
network systems etc. The Renovation phase, January
1998 through October 1998, consisted of known
renovations such as upgrading network routers, servers,
and software, and the installation of a new mainframe
system. June 1998 through December 1998 was the time
frame designated for the Validation phase. This phase
consisted of testing the software and hardware at
Belmont National Bank. During this phase all "mission
critical" systems were tested by changing the date and
completing transactions with calculation results
validated. From March 1998 through the remainder of
1999 Belmont National Bank will implement new software,
hardware and/or any equipment that did not pass all Y2K
tests.
As of January 1999, all "mission critical" systems
have been tested. All mission critical systems passed
Year 2000 testing. Other less critical systems that
did not pass have been or will be replaced by June
1999. The regulatory agency examiner has reviewed all
test results.
Belmont National Bank has included a customer
awareness policy dedicated to maintaining updated
communication with our customer base. We provided a
project update in June 1998 and issued a new update in
February 1999. Both Y2K status reports were available
through our WEB site on the internet as well as to
customers and employees at all branch locations.
At its June 1998 meeting, the Loan Committee
established a Year 2000 evaluation form, which was
included in the lending policy for all new commercial
loan applicants. The lending department prepared and
distributed Y2K readiness surveys to existing loan
customers with aggregate balances greater than
$150,000.00. All returned survey responses were
evaluated and a rating was assigned to each commercial
customer. The customer's Y2K readiness status was
reviewed quarterly.
Year 2000 surveys were also sent to commercial
deposit account holders with balances greater than
$250,000.00. Senior Management reviewed these surveys
and took appropriate action based on a low to high risk
rating system.
Quarterly update reports have been presented to
the Board of Directors of the Corporation. In
addition, an internal audit is completed each month.
The audit report is presented to the board monthly.
ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
The annual report of Belmont Bancorp. is hereby
incorporated by reference and appears as Exhibit B.
Management's report on their responsibility for
financial reporting is included in the Corporation's
annual report.
ITEM 9 - DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing in Belmont Bancorp.'s
definitive proxy statement dated March 19, 1999
(Exhibit C) is incorporated by reference in response to
this item.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1999:
Name Age Position
J. Vincent Ciroli, Jr. 53 President and
Chief Executive Officer,
Belmont Bancorp. &
Belmont National Bank
William Wallace 43 Vice President, Belmont Bancorp.;
Executive Vice President & Chief
Operating Officer, Belmont
National Bank
Jane R. Marsh 37 Secretary, Belmont Bancorp.;
Senior Vice President, Controller &
Cashier, Belmont National Bank
Each of the officers listed above has been an
executive officer of the Corporation or one of its
subsidiaries during the past five years.
ITEM 11 - EXECUTIVE COMPENSATION
The information appearing in Belmont Bancorp.'s
definitive proxy statement dated March 19, 1999
(Exhibit C) is incorporated by reference in response to
this item.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in Belmont Bancorp.'s
definitive proxy statement dated March 19, 1999
(Exhibit C) is incorporated by reference in response to
this item.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in Belmont Bancorp.'s
definitive proxy statement dated March 19, 1999
(Exhibit C) is incorporated by reference in response to
this item.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 15, 1999.
By W. Quay Mull II ________________ BELMONT BANCORP
W. Quay Mull II, Chairman (Registrant)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the
date indicated.
John A. Belot
Director
J. Vincent Ciroli, Jr.
Director, President & CEO. Belmont Bancorp.,
Belmont National Bank
Mary L. Holloway Haning
Director
Charles J. Kaiser, Jr.
Director
John H. Goodman, II
Director
Dana Lewis
Director
Jane R. Marsh
Secretary, Belmont Bancorp. and
Sr. Vice President, Controller
& Cashier, Belmont National Bank
James Miller
Director
Terrence Lee
Director
Tom Olszowy
Director
Keith Sommer
Director
William Wallace
Director & Vice President,
Belmont Bancorp.; Executive Vice
President & COO, Belmont National Bank
Charles A. Wilson, Jr.
Vice Chairman
W. Quay Mull II
Chairman of the Board
W. Quay Mull II
March 15, 1999
EXHIBIT 1 - CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Belmont Bancorp.
We consent to incorporation by reference of our report dated
January 22, 1999, relating to the consolidated balance sheets of
Belmont Bancorp. as of December 31, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity, and
statements of cash flows for each of the three years in the period
ended December 31, 1998. Said report appears as Exhibit 2 of Belmont
Bancorp.'s annual form 10-K.
s/S.R. Snodgrass A.C.
S.R. Snodgrass A.C.
Wheeling, WV
March 16, 1999
The Belmont Bancorp. 1998 Annual Report
Forward Looking Statements
Certain sections of this report contain forward looking
statements and can be identified by the use of such words as
"anticipates," "expects," "estimates," and similar expressions.
These statements are subject to certain risks and uncertainties.
These risks and uncertainties could cause actual results to
differ materially from the current statements.
Dedication
Samuel A. Mumley
The Belmont Bancorp. 1998 Annual Report is dedicated to our
beloved friend and colleague, Samuel A. Mumley. Mr. Mumley
served loyally and with dedication as a Board of Directors'
member of Belmont Bancorp. and Belmont National Bank. His
contributions to our communities, the Ohio Valley Athletic
Conference, and, most importantly, our young people are
virtually impossible to quantify. We miss Sam's friendship,
talent, and unequaled enthusiasm.
Corporate Profile
Belmont Bancorp. (the Corporation) is a $446 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 twelve full service offices and one
drive-up service location. Belmont National Bank's primary
market areas for its consumer, commercial, trust and
investment services are Belmont, Harrison, Tuscarawas and
Jefferson counties in Ohio, and Marshall and Ohio counties
in West Virginia.
Financial Highlights
(unaudited) (000's except per share data)
1998 1997 % change
Operating results
Net income $ 6,147 $ 5,945 3.4%
Return on average assets 1.49% 1.62%
Return on average total equity 18.45% 20.21%
Per common share
Net income $ 1.17 $ 1.13 3.5%
Dividend 0.385 0.306 25.8%
Book value at year-end 6.40 6.05 5.8%
At year-end
Total assets $446,349 $388,713 14.8%
Total loans 219,413 224,900 -2.4%
Total deposits 304,351 263,908 15.3%
Total shareholders' equity 33,430 31,899 4.8%
Liquidity and capital ratios
Average total equity
to average total assets 8.06% 8.02%
Tier one capital ratio 11.60% 11.81%
Total risk-based capital ratio 12.85% 13.06%
Leverage ratio 7.64% 8.00%
Dividend payment ratio 32.88% 27.17%
From Management
It is our pleasure to report to you that we have achieved
another notable milestone in the 152 year history of Belmont
Bancorp. Net income for 1998 exceeded the $6 million mark,
while our continuing strong asset growth should help Belmont
Bancorp. become a half-billion dollar corporation by year-
end '99...another important milestone. For 1998, excellent
performance continued in every meaningful area of
measurement.
Net income for 1998 was a record $6,147,000 compared to
$5,945,000 for 1997, a 3.4% increase. On an earnings per
share basis this was $1.17 for 1998 versus $1.13 for the
prior year, a 3.9% increase.
Dividends paid to Belmont Bancorp. shareholders increased
significantly during 1998. Cash dividends per share for
1998 were up 25.82% over 1997. In addition, shareholders
received a 2-for-1 stock split in May, 1998.
During 1998, we experienced excellent growth in both
deposits and assets. Total deposits increased by 15.3%,
compared to the prior year, and closed the year at a record
level of $304,351,000. Also at a record level, total assets
were at $446,349,000 at the end of 1998, up 14.8% from 1997.
Our 1998 return on average equity and return on average
assets demonstrate continued strength.
Return on average equity at 18.45% compared to 20.21% in
1997.
Return on average assets at 1.49% compared to 1.62% in
1997.
Total shareholders' equity for 1998 increased 4.8% to
$33,430,000 from $31,899,000 in 1997.
In 1998, our loan portfolio decreased slightly, by 2.4% from
1997, to $219,413,000 with excellent efforts to maintain and
improve our asset quality. Nonperforming assets as a
percentage of total assets decreased significantly to 0.12%
as compared to 0.41% in 1997, while nonperforming assets as
a percentage of allowance for loan losses also dropped
materially to 11.83% versus 38.20% in the prior year.
Additionally, our allowance for possible loan loss as a
percentage of total loans increased slightly to 2.06% from
1.84% in 1997.
Our 152nd year of service to families, businesses and
communities was an exciting and busy one. Among other
things, we significantly expanded the resources and services
available through our Investment Management and Trust
Services Team, relocated our Ohio Valley Mall Office to the
mall perimeter and expanded our ATM service.
Although mostly invisible to our customers and shareholders,
another major focus continued for Belmont Bancorp. in 1998.
Commanding our attention, staff, and financial resources is
our Year 2000 Compliance Project. Unless you have been
residing on a deserted island in the South Pacific, you
probably have had your fill of reports about the Year 2000
technological challenge the world is facing. Fortunately
for us all, most of the doomsayers appear to have crawled
back under their rocks...allowing the experts to work
diligently on squashing the Y2K Bug. John McIsaac,
President of Market Partners, Inc. and speaker on Year 2000
readiness, has testified before Congress on Year 2000
issues. McIsaac stated, "The financial services industry to
date has created a tremendous amount of momentum and is
doing an excellent job preparing for Year 2000. It
understands the issues and is taking proactive steps to do
the right thing."
At Belmont National Bank, our preparations for the new
millennium continue. The biggest news, certainly in terms
of importance as well as expense, is that we have purchased
and installed a new state-of-the-art mainframe computer
system. As anticipated, our new mainframe has enjoyed
satisfactory performance when put through rigorous in-house
testing in the Year 2000 environment.
Also as anticipated, we have either upgraded or replaced
software programs, personal computers, and other hardware.
As you might expect with any project of this magnitude,
there have been many milestones and critical dates for our
Year 2000 project team. As our 1998 Annual Report went to
press, five critical test dates have been completed very
successfully. Testing is also finished successfully on our
bankwide network and file servers, which link all Belmont
National Bank offices and personal computers. Testing and
retesting will continue throughout the remainder of 1999 as
we make every effort humanly possible to avoid problems.
With all of our extensive preparation, the likelihood of the
bank's computer systems experiencing Y2K related problems
are now remote. It is also important for you to remember
that your insured deposit accounts will continue to be
covered against any and all losses up to the established
limits. In case of an emergency, we keep back-up records
for account transactions which are used to identify and
correct any error. We also have a business resumption
contingency plan that outlines steps we'll take to continue
operations.
One thing is certain. We at Belmont National Bank look
forward to continuing to be a financial partner to families
and businesses in our communities this year, next year, and
into the new millennium.
If you would like more information about our Y2K project, we
invite you to call us at (740) 695-3323 or toll-free at
(800) 542-0174.
Belmont Bancorp. continues the tradition of being one of the
most outstanding financial institutions in the country.
That is a powerful statement for us to make...but you do not
need to take our word for it. During 1998, we were once
again honored by The Cleveland Plain Dealer as one of Ohio's
top 100 best-performing companies. In addition, we were
rated as one of the 10 best Ohio banks by Akron's Beacon
Journal, and as one of the 10 best Ohio "Wall Street
Darlings."
We extend our sincerest appreciation to all the officers and
staff of the Corporation, and the Board of Directors whose
dedication and hard work make Belmont Bancorp. and Belmont
National Bank one of the top banking organizations in the
country.
And, as always, we thank our shareholders across the country
who have shown confidence and trust in the leadership of
your Corporation. We pledge to you our continuing best
effort and look forward to providing you with another
prosperous year.
J. Vincent Ciroli, Jr. W. Quay Mull, II
President & CEO Chairman
The Solution Center
We're Changing The Way You Look For Financial Solutions.
Two years ago, Belmont National Bank opened the financial
services center of the future...the Solution Center at Plaza
West in St. Clairsville, Ohio. The Solution Center is more
than just a unique facility. It is a better way for us to
build permanent, mutually beneficial relationships with our
customers. Rather than focusing on selling products and
services, we choose to focus our energy on what individuals,
families and businesses are really seeking...information in
order to make their own intelligent financial decisions.
Today, you will find a financial partner at every Belmont
National Bank location. A partner who will take the time to
understand your circumstances, your hopes and dreams. Your
partner is there to listen, provide you with pertinent
information, guidance, and expertise to assist you in
finding financial solutions that make sense for your unique
situation. We've armed your financial partner with state-of-
the-art technology and the skills needed to provide the
knowledge you require to make the most informed financial
decisions possible. Our objective is to help you and your
family through life's journey...from cradle, to grave and
beyond.
Why are we taking this approach to doing business? The
financial challenges families and businesses face today are
more numerous and complex. The fact is life was simpler for
our parents and grandparents. Banking was simpler, too. We
had passbook savings, one checking account which paid no
interest, and maybe a couple of different loan products.
Today, we offer a multitude of different types of checking
accounts, money market savings, certificates of deposit and
a long list of alternative investment options including:
stocks, bonds and mutual funds. We provide trust services,
taxable investments, tax-free investments, and retirement
plans ranging from a basic IRA, to a Roth, to a 401(k).
Need a loan? We provide short term or long term loans,
secured or unsecured, fixed or adjustable rate, lines of
credit, tax-deductible loans, credit cards, working capital
loans, mortgages, loans for every imaginable purpose, loans
with floors, loans with ceilings, and on and on.
Your Belmont National Bank financial partner will take the
confusion out of banking for you, your family and, if you
are self-employed, your business. As your needs and
requirements change, as your family or business
circumstances change, your financial partner is ready to
work with you every step of the way. And, just like any
journey, it takes planning and preparation to arrive safely
at your destination. Working together, we will develop a
road map for any destination, like buying a new home or
business, saving for the children's education and your
family's future, or planning for a comfortable, secure
retirement.
We invite you to stop by any Belmont National Bank location
and start building a long-term relationship with your
financial partner. If you are an internet user and would
like to do independent research, we invite you to visit our
interactive website at www.belmontbank.com. There you will
find many of the tools we use everyday to help customers
realize their hopes...dreams...and financial goals.
The Return To Shareholders
The following graph and table compare, for each of the last
five years ending December 31, the cumulative total return
of Belmont Bancorp.'s Common Stock, SNL Securities' Index of
Banks with Assets Size less than $500, and all NASDAQ U.S.
Stocks Index. The cumulative total return of the Corporation's
Common Stock assumes $1,000 invested on December 31, 1993 and
reinvestment of dividends.
Total Return of a $1,000 Investment in Five Years
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
Belmont Bancorp. $1,000 $1,962 $3,671 $3,612 $7,510 $7,732
All Banks <$500M Assets 1,000 978 1,383 1,700 2,086 2,932
NASDAQ-Total US Stocks 1,000 1,076 1,471 1,894 3,228 2,948
Financial Statements
Belmont Bancorp. and Subsidiaries
Summarized Quarterly Financial Information
(Unaudited) ($000's except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1998
Interest income $7,521 $7,440 $7,878 $7,997
Interest expense 3,820 3,923 4,281 4,456
Net interest income 3,701 3,517 3,597 3,541
Provision for loan losses 150 125 185 250
Security gains 320 266 675 77
Net overhead 1,702 1,737 1,853 1,576
Income before income taxes 2,169 1,921 2,234 1,792
Income taxes 591 494 630 254
Net income $1,578 $1,427 $1,604 $1,538
Net income per common share $ 0.30 $ 0.27 $ 0.31 $ 0.29
1997
Interest income $6,528 $7,186 $7,337 $7,297
Interest expense 3,051 3,592 3,686 3,675
Net interest income 3,477 3,594 3,651 3,622
Provision for loan losses 105 250 200 500
Security gains 155 197 234 213
Net overhead 1,540 1,512 1,692 1,978
Income before income taxes 1,987 2,029 1,993 1,357
Income taxes 566 465 570 (180)
Net income $1,421 $1,564 $1,423 $1,537
Net income per common share $ 0.27 $ 0.30 $ 0.27 $ 0.29
1996
Net income $1,409 $1,165 $1,083 $1,345
Net earnings per common
share $ 0.26 $ 0.22 $ 0.20 $ 0.26
Belmont Bancorp. and Subsidiaries
Consolidated Five Year Summary of Operations
For the Years Ending December 31, 1998, 1997, 1996, 1995,
1994 (Unaudited) ($000's except per share data)
1998 1997 1996 1995 1994
Interest income $ 30,836 $ 28,348 $ 25,501 $ 23,454 $ 19,715
Interest expense 16,480 14,004 12,127 10,927 8,807
Net interest income 14,356 14,344 13,374 12,527 10,908
Provision for loan
losses 710 1,055 465 1,150 805
Net interest income after
provision for loan losses 13,646 13,289 12,909 11,377 10,103
Securities gains (losses) 1,338 799 396 102 (63)
Trading gains 62 - - - -
Gain on sale of real estate 383 - - - -
Other operating income 2,183 2,010 1,861 1,683 1,290
Operating expenses 9,496 8,732 8,388 7,623 7,069
Income before income taxes 8,116 7,366 6,778 5,539 4,261
Income taxes 1,969 1,421 1,776 1,333 1,027
Net income $ 6,147 $ 5,945 $ 5,002 $ 4,206 $ 3,234
Earnings per common
share (1) $ 1.17 $ 1.13 $ 0.94 $ 0.78 $ 0.60
Cash dividend declared
per share (1) $ 0.385 $ 0.306 $ 0.240 $ 0.190 $ 0.151
Book value per common
share (1) $ 6.40 $ 6.05 $ 5.17 $ 4.57 $ 3.63
Total loans $219,413 $224,900 $ 188,783 $159,957 $147,096
Total assets 446,349 388,713 333,903 317,279 312,963
Total deposits 304,351 263,908 261,539 246,850 255,923
Total shareholders' equity 33,430 31,899 27,332 25,164 20,214
(1) Restated for stock dividends paid during 1994, 1995, 1997 and 1998.
Belmont Bancorp. and Subsidiaries
Consolidated Balance Sheets
($000's)
December 31,
Assets 1998 1997
Cash and due from banks $ 9,439 $ 10,265
Loans held for sale 1,734 884
Trading securities 2,281 -
Securities available for sale (at fair value) 184,995 121,156
Securities held to maturity (fair value of
$12,814 - 1998; and $16,181 - 1997) 12,516 15,955
Loans 217,679 224,016
Less allowance for possible loan losses (4,529) (4,134)
Net loans 213,150 219,882
Premises and equipment, net 7,377 7,401
Other real estate owned - 20
Accrued income receivable 2,780 2,586
Other assets 12,077 10,564
Total Assets $446,349 $388,713
Liabilities and Shareholders' Equity
Liabilities
Noninterest bearing deposits:
Demand $ 30,219 $ 29,987
Interest bearing deposits:
Demand 42,437 33,463
Savings 88,265 79,829
Time 143,430 120,629
Total deposits 304,351 263,908
Securities sold under repurchase agreements 6,239 5,256
Federal funds purchased and other short
term borrowings 3,950 14,635
Long-term debt 91,401 69,635
Accrued interest on deposits and other
borrowings 896 731
Other liabilities 6,082 2,649
Total liabilities 412,919 356,814
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
Surplus 7,854 7,781
Treasury stock (66,174 shares in 1998;
13,330 shares in 1997) (1,400) (131)
Retained earnings:
Unappropriated 26,004 21,879
Appropriated for contingencies 850 850
Accumulated other comprehensive income (1,199) 199
Total shareholders' equity 33,430 31,899
Total liabilities and shareholders'
equity $446,349 $388,713
The accompanying notes are an integral part of the financial statements.
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31, 1998, 1997 and 1996
($000's)
Interest Income 1998 1997 1996
Loans and lease financing:
Taxable $ 20,972 $ 19,141 $ 15,905
Tax-exempt 271 334 329
Investment securities:
Taxable 7,720 7,238 7,660
Tax-exempt 1,241 1,284 1,251
Dividends 336 280 175
Interest on trading securities 68 - -
Interest on federal funds sold 228 71 181
Total interest income 30,836 28,348 25,501
Interest Expense
Deposits 11,671 10,063 9,386
Other borrowings 4,809 3,941 2,741
Total interest expense 16,480 14,004 12,127
Net interest income 14,356 14,344 13,374
Provision for Possible Loan Losses 710 1,055 465
Net interest income after provision
for possible loan losses 13,646 13,289 12,909
Noninterest Income
Trust fees 463 466 502
Service charges on deposits 752 707 660
Other operating income 968 837 699
Gain on sale of real estate 383 - -
Trading gains 62 - -
Investment securities gains 1,338 799 396
Total noninterest income 3,966 2,809 2,257
Noninterest Expense
Salary and employee benefits 4,633 3,948 3,436
Net occupancy expense of premises 824 783 686
Equipment expenses 933 947 817
Other operating expenses 3,106 3,054 3,449
Total noninterest expense 9,496 8,732 8,388
Income before income taxes 8,116 7,366 6,778
Income Taxes 1,969 1,421 1,776
Net income $ 6,147 $ 5,945 $ 5,002
Weighted Average Number of
Shares Outstanding 5,252,161 5,278,152 5,286,610
Earnings Per Common Share $ 1.17 $ 1.13 $ 0.95
The accompanying notes are an integral part of the financial statements.
<TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 1998, 1997 and 1996
($000's)
<CAPTION> Accumulated
Other
Retained Earnings Compre- Compre-
Preferred Common Unappro- Appro- Treasury hensive hensive
Stock Stock Surplus priated priated Stock Income Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 1,000 $1,057 $7,781 $14,148 $850 $ (8) $ 336
Comprehensive income
Net Income - - - 5,002 - - - $5,002
Other comprehensive income,
net of tax
Unrealized loss on securities (504) (504)
Comprehensive income $4,498
Cash dividends declared:
Preferred stock - - - (61) - - -
Common stock(per share $.240) - - - (1,269) - - -
Redemption of preferred stock (1,000) - - - - - -
Balance, December 31, 1996 $ - $1,057 $7,781 $17,820 $850 $ (8) $(168)
Comprehensive income
Net income - - - 5,945 - - - $5,945
Other comprehensive income,
net of tax
Unrealized gains on securities 367 367
Comprehensive income $6,312
Cash dividends declared:
Common stock (per share $.306) - - - (1,615) - - -
Five-for-four stock split effected
in the form of a stock dividend - 264 - (264) - - -
Cash paid in lieu of fractional
shares on stock dividend - - - (7) - - -
Purchase of treasury stock - - - - - (123) -
Balance, December 31, 1997 $ - $1,321 $7,781 $21,879 $850 $(131) $ 199
Comprehensive income
Net income - - - 6,147 - - - $6,147
Other comprehensive income,
net of tax
Unrealized loss on securities
net of reclassification
adjustment (see disclosure) (1,398) (1,398)
Comprehensive income $4,749
Cash dividends declared:
Common stock (per share $.385) - - - (2,022) - - -
Purchase of treasury stock - - - - - (1,308) -
Issuance of treasury stock - - 73 - - 39 -
Balance, December 31, 1998 $ - $1,321 $7,854 $26,004 $850 $(1,400) $(1,199)
The accompanying notes are an integral part of the financial statements.
</TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996
($000's)
Operating Activities 1998 1997 1996
Net income $ 6,147 $ 5,945 $ 5,002
Adjustments to reconcile net income to
net cash flows provided by (used in)
operating activities:
Provision for loan losses 710 1,055 465
Depreciation and amortization expense 743 818 674
Amortization of investment security premiums 2,403 1,278 1,469
Accretion of investment security discounts and
interest recorded on zero-coupon securities (302) (230) (358)
Investment securities losses - 3 1
Trading (gains) losses (62) - -
Gains on securities available for sale (1,338) (802) (397)
Proceeds from sales of securities held in
trading account 12,893 - -
Purchase of securities for trading account (14,865) - -
Loss (gain) on sale of fixed assets (384) (1) 6
Gain on sale of loans (144) (91) (72)
Loss (gain) on sale of other real estate owned - (7) 65
(Increase) decrease in interest receivable (194) (665) 229
Increase in interest payable 165 67 3
Net increase in loans held for sale (850) (642) (242)
Others, net 3,052 (6,546) 6,130
Net cash provided by operating activities 7,974 182 12,975
Investing Activities
Net decrease (increase) in federal funds sold - 24,450 (24,450)
Proceeds from maturities and calls of
investment securities 4,370 3,575 1,859
Purchase of securities available for sale (193,441) (164,305) ( 99,267)
Purchase of investment securities - - -
Proceeds from sale of securities available for
sale 87,580 105,407 110,808
Principal collected on mortgage-backed
securities 37,964 16,545 22,930
Net increase in loans and leases, net of
charge-offs (14,013) (39,771) (38,514)
Proceeds from sale of loans 20,144 13,361 9,874
Loans purchased - (9,124) -
Recoveries on loans previously charged-off 15 16 47
Proceeds from sale of other real estate owned 39 111 514
Purchase of life insurance contracts (413) (2,365) -
Purchase of premises and equipment (947) (979) (2,859)
Proceeds from sale of fixed assets 612 20 8
Net cash used in investing activities (58,090) (53,059) (19,050)
Financing Activities
Net increase in deposits 40,443 2,369 14,689
Net increase (decrease) in repurchase
agreements 983 (3,024) (6,259)
Net increase (decrease) in short-term
borrowings (10,685) 4,635 (14,126)
Proceeds from the issuance of long-term debt 35,000 52,950 15,125
Payments on long-term debt (13,233) (2,991) (251)
Dividends paid on common and preferred stock (2,022) (1,622) (1,330)
Redemption of preferred stock - - (1,000)
Issuance of treasury stock 112 - -
Purchase of treasury stock (1,308) (123) -
Net cash provided by financing activities 49,290 52,194 6,848
Increase (Decrease) in Cash and Cash
Equivalents (826) (683) 773
Cash and Cash Equivalents, Beginning of Year 10,265 10,948 10,175
Cash and Cash Equivalents, End of Year $ 9,439 $ 10,265 $ 10,948
The accompanying notes are an integral part of the financial statements.
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1998, 1997 and 1996
1. Summary of Significant Accounting Policies
The accounting and reporting policies and practices of
Belmont Bancorp. (the "Corporation") and its subsidiaries
are in accordance with generally accepted accounting
principles and conform to general practices within the
banking industry. The more significant of these policies
and practices are summarized below.
Nature of Operations: Belmont Bancorp. provides a variety
of banking services to individuals and businesses through
the branch network of its wholly-owned subsidiary, Belmont
National Bank (BNB). BNB operates twelve full-service
banking facilities located in Belmont, Harrison, and
Tuscarawas Counties in Ohio, and Wheeling, West Virginia.
Principles of Consolidation: The consolidated financial
statements include the accounts of Belmont Bancorp. and its
wholly-owned subsidiaries, Belmont National Bank and Belmont
Financial Network, Inc. Material intercompany accounts and
transactions have been eliminated.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Held to Maturity Securities: These securities are purchased
with the original intent to hold to maturity and events
which may be reasonably anticipated are considered when
determining the Corporation's intent and ability to hold to
maturity. Securities meeting such criteria at date of
purchase and as of the balance sheet date are carried at
cost, adjusted for amortization of premiums and accretion of
discounts.
Available for Sale Securities: Debt and equity securities
to be held for indefinite periods of time and not intended
to be held to maturity are classified as available for sale
and carried at fair value with net unrealized gains and
losses, net of tax, reflected as a component of shareholders'
equity until realized. Securities held for indefinite periods
of time include securities that may be sold to meet liquidity
needs or in response to significant changes in interest rates
or prepayment risks as part of the Corporation's overall asset/
liability management strategy.
Trading Securities: Trading securities are held for resale
within a short period of time and are stated at fair value.
Trading gains and losses include the net realized gain or
loss and market value adjustments of the trading account
portfolio.
Loans Held for Sale: Residential mortgage loans which
management does not intend to hold to maturity or for which
sales are pending are reported as loans held for sale. Such
loans are carried at the lower of aggregate cost or market.
Income Recognition: Income earned by the Corporation and
its subsidiaries is recognized principally on the accrual
basis of accounting. Certain fees, principally service, are
recognized as income when billed. The subsidiary bank
suspends the accrual of interest when, in management's
opinion, the collection of all or a portion of interest has
become doubtful. Generally, when a loan is placed on
nonaccrual, the bank charges all previously accrued and
unpaid interest against income. In future periods, interest
will be included in income to the extent received only if
complete principal recovery is reasonably assured.
The Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 114 and No. 118,
"Accounting for Creditors for Impairment of a Loan." It is
the Corporation's policy not to recognize interest income on
specific impaired loans unless the likelihood of future loss
is remote. Interest payments received on such loans are
applied as a reduction of the loan principal balance. Since
the adoption of SFAS Nos. 114 and 118, the Corporation had
no loans which management has determined to be impaired.
The Corporation defers and amortizes loan fees and related
origination costs. These fees and costs are amortized into
interest or other income over the estimated life of the loan
using a method which approximates the interest method.
Allowance For Loan Losses: The allowance for loan losses is
maintained at a level which, in management's judgment, is
adequate to absorb credit losses inherent in the loan
portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan
portfolio, including the nature of the portfolio, credit
concentrations, trends in historical loss experience,
specific impaired loans, and economic conditions.
Allowances for impaired loans are generally determined based
on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan
losses, which is charged to expense and reduced by charge-
offs, net of recoveries. Changes in the allowance relating
to impaired loans are charged or credited to the provision
for loan losses. Because of uncertainties inherent in the
estimation process, management's estimate of credit losses
inherent in the loan portfolio and the related allowance may
change in the near term.
Premises and Equipment: Premises and equipment are stated
at cost, less accumulated depreciation and amortization.
Provisions for depreciation and amortization are computed
generally using the straight line method over the estimated
useful lives of the assets. Leasehold improvements are
amortized on the straight line basis over the lease
period. When units of property are disposed of, the premises
and equipment accounts are relieved of the cost and the
accumulated depreciation related to such units. Any
resulting gains or losses are credited to or charged against
income. Costs of repairs and maintenance are charged to
expense as incurred. Major renewals and betterments are
capitalized at cost.
Other Real Estate: Real estate acquired in satisfaction of
indebtedness is recorded at the lesser of the loan balance
prior to foreclosure, plus certain costs incurred for
improvements to the property, or fair value less estimated
selling costs of the property.
Earnings Per Common Share: Earnings per common share are
calculated based on net income after preferred dividend
requirements and the weighted average number of shares of
common stock outstanding during the year. The Corporation
has no securities which would be considered potential common
stock. The following is a reconciliation of net income to
income available to common shareholders in computing basic
earnings per share:
1998 1997 1996
(Expressed in Thousands)
Net income $6,147 $5,945 $5,002
Preferred stock dividends - - (61)
Income available to
common shareholders $6,147 $ 5,945 $4,941
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, 1998 and 1997, were
$481,000 and $677,000, respectively. Amortization charged
to expense was $196,000 in the period ended December 31,
1998, and $415,000 for the periods ended December 31, 1997
and 1996.
Reclassifications: Certain prior year amounts have been
reclassified to conform with current year presentation.
2. Shareholders' Equity
On December 31, 1996, the Corporation redeemed and retired
all of the remaining outstanding shares of its $100 par
value, non-voting, senior cumulative preferred stock.
On June 16, 1997, the Corporation declared a five-for-four
stock split, which was effected in the form of a 25% stock
dividend to shareholders of record on June 16, 1997, and
paid on July 1, 1997.
On February 27, 1998, the Corporation declared a two-for-one
stock split to shareholders of record on March 16, 1998. As
a result of the split, the par value of each share was
reduced to $0.25.
All references in the accompanying financial statements to
the number of common shares and per-share amounts in prior
years, have been restated to reflect the stock splits.
At various times during 1998 and 1997, the Corporation
repurchased shares of its common stock in open market
transactions. The following table represents the change in
the Corporation's outstanding shares:
Preferred Common
Stock Stock
Shares outstanding, December 31, 1995 10,000 2,114,644
Preferred stock redemption (10,000) -
Shares outstanding, December 31, 1996 - 2,114,644
25% stock dividend - 527,354
Shares repurchased - (4,500)
Shares outstanding, December 31, 1997 - 2,637,498
Two-for-one stock split - 2,644,163
Treasury shares reissued - 5,000
Shares repurchased - (64,509)
Shares outstanding, December 31, 1998 - 5,222,152
3. Investment Securities
The estimated fair value of investment securities are as
follows at December 31:
<TABLE>
<CAPTION>
1998 1997
Gross Gross
Unreal- Gross Estimated Unreal- Gross Estimated
Amortized ized Unrealized Fair Amortized ized Unrealized Fair
(Expressed in thousands) 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 $ 2,255 $ - $ (26) $ 2,229 $ 2,260 $ - $ (52) $ 2,208
Obligations of states and
political subdivisions 3,823 273 (3) 4,093 4,487 222 (13) 4,696
Mortgage-backed securities 6,438 84 (30) 6,492 9,208 119 (50) 9,277
Total held to maturity $ 12,516 $ 357 $ (59) $ 12,814 $ 15,955 $ 341 $(115) $ 16,181
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 10,653 $ 1 $ (97) $ 10,557 $ 14,886 $ 16 $ (10) $ 14,892
Obligations of states and
political subdivisions 29,509 63 (515) 29,057 17,832 346 - 18,178
Mortgage-backed securities 94,623 324 (1,246) 93,701 58,897 341 (286) 58,952
Corporate debt 7,530 1 (191) 7,340 - - - -
Mortgage derivative securities 38,797 124 (282) 38,639 24,537 47 (153) 24,431
Total debt securities 181,112 513 (2,331) 179,294 116,152 750 (449) 116,453
Equity securities 5,700 134 (133) 5,701 4,703 - - 4,703
Total available for sale $186,812 $ 647 $(2,464) $184,995 $120,855 $ 750 $(449) $121,156
</TABLE>
The amortized cost and estimated fair value of investment
securities at December 31, 1998, by contractual maturity,
follow. Expected maturities will differ from contractual
maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
Securities Securities
Held to Maturity Available for Sale
Estimated Estimated
Amortized Fair Amortized Fair
(Expressed in thousands) Cost Value Cost Value
Due in one year or less $ 533 $ 540 $ 100 $ 101
Due after one year
through five years 3,483 3,520 - -
Due after five years
through ten years 557 621 2,026 2,010
Due after ten years 1,506 1,642 45,566 44,842
Mortgage-backed securities 6,437 6,491 94,623 93,702
Mortgage derivative securities - - 38,797 38,639
Equity securities - - 5,700 5,701
Total $12,516 $12,814 $186,812 $184,995
Sales and write-downs of investment securities resulted in
the following:
(Expressed in thousands) 1998 1997 1996
Proceeds from sales $87,580 $105,407 $110,808
Gross gains 1,355 869 745
Gross losses (18) (67) (346)
Losses on securities called (1) (3) (3)
Gains on securities called 1 - -
Gross trading gains 101 - -
Gross trading losses (39) - -
All securities sold were classified as available for sale at
the time of sale. There were no transfers of securities
between classifications in 1998, 1997, or 1996.
Assets carried at $34,847,000 and $29,526,000 at December
31, 1998 and 1997, respectively, were pledged to secure
United States Government and other public funds, and for
other purposes as required or permitted by law.
4. Loans and Allowance for Possible Loan Losses
Loans outstanding at December 31 are as follows:
(Expressed in thousands) 1998 1997
Real estate-construction $ 135 $ 1,418
Real estate-mortgage 56,364 77,111
Real estate-secured by nonfarm,
nonresidential property 14,719 19,983
Commercial, financial and agricultural 116,539 106,443
Obligations of political subdivisions
in the U.S 3,191 3,175
Installment and credit card loans to
individuals 26,731 15,886
Loans receivable $217,679 $224,016
Mortgage loans serviced for others approximated $38,230,000,
$31,301,000, and $21,047,000 at December 31, 1998, 1997,
and 1996, respectively.
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 $562,000 and $1,515,000 at December 31, 1998
and 1997, respectively. The after-tax effect of the interest
that would have been accrued on these loans was $35,000 in 1998
and $46,000 in 1997.
The following is an analysis of loan activity to directors,
executive officers, and their associates (see Note 13):
(Expressed in thousands) 1998 1997
Balance previously reported $6,906 $7,812
New loans during the year 474 2,003
Total 7,380 9,815
Less repayments during the year 1,145 2,909
Balance, December 31 $6,235 $6,906
Activity in the allowance for loan losses is summarized as
follows:
December 31
(Expressed in thousands) 1998 1997 1996
Balance at beginning of year $4,134 $3,153 $2,703
Additions charged to operating expense 710 1,055 465
Recoveries on loans previously
charged-off 15 17 47
Total 4,859 4,225 3,215
Loans charged-off 330 91 62
Balance at end of year $4,529 4,134 $3,153
The entire allowance represents a valuation reserve which is
available for future charge-offs.
5. Premises and Equipment
Premises and equipment are stated at cost, less accumulated
depreciation and amortization, as follows:
Original
December 31 Useful Life
(Expressed in thousands) 1998 1997 Years
Land and land improvements $ 1,186 $ 1,225
Buildings 5,843 5,874 30 - 50
Furniture, fixtures and equipment 5,972 5,456 5 - 12
Leasehold improvements 492 377 5 - 20
Total 13,493 12,932
Less accumulated depreciation
and amortization 6,116 5,531
Premises and equipment, net $ 7,377 $ 7,401
Charges to operations for depreciation and amortization
approximate $743,000, $818,000, and $674,000 for 1998, 1997,
and 1996, respectively.
6. Deposits
The distribution of the bank's deposits at December 31, 1998
and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
Non- Non-
interest interest
Bearing Interest Bearing Bearing Interest Bearing
(Expressed in thousands) Demand Demand Savings Time Demand Demand Savings Time
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals, partnerships
and Corporations $13,893 $42,437 $88,265 $130,378 $20,818 $33,463 $79,829 $112,190
U.S. Government 41 - - - 44 - - -
States and political
subdivisions - - - 13,052 7,016 - - 8,439
Other depository
institutions in the U.S. 14,564 - - - - - - -
Certified, officers' checks,
travelers cheques, etc. 1,721 - - - 2,109 - - -
Total $30,219 $42,437 $88,265 $143,430 $29,987 $33,463 $79,829 $120,629
</TABLE>
Time deposits include certificates of deposit issued in
denominations of $100,000 or more which amounted to
$27,245,000 at December 31, 1998, and $17,716,000 at
December 31, 1997. A maturity distribution of time
certificates of deposit of $100,000 or more follows:
(Expressed in thousands) 1998 1997
Due in three months or less $ 3,687 $ 5,966
Due after three months through six months 5,482 4,093
Due after six months through twelve months 10,392 4,526
Due after one year through five years 3,987 1,996
Due after five years 3,697 1,135
Total $27,245 $17,716
7. Securities Sold Under Repurchase Agreements
Securities sold under agreements to repurchase represent
primarily overnight borrowings. However, as of December 31,
1998 and 1997, Belmont National Bank had repurchase
agreements outstanding with maturities of three months. For
all repurchase agreements, the securities underlying the
agreements were under the subsidiary bank's control.
Information related to these borrowings is summarized below:
(Expressed in thousands) 1998 1997 1996
Balance at year-end $6,239 $5,256 $ 8,280
Average during the year $6,733 $7,116 $11,529
Maximum month-end balance $7,807 $8,847 $21,362
Weighted average rate during the year 5.65% 5.66% 4.86%
Weighted average rate at December 31 5.36% 6.39% 5.55%
8. Short-Term Borrowings
Short-term borrowings consist of advances from the Federal
Home Loan Bank of Cincinnati (FHLB) and federal funds
purchased. These represent primarily overnight borrowings.
FHLB advances are made under agreements which allow for
maximum borrowings of $30 million. Advances can be made at
fixed or variable rates of interest. Collateral for the
advances consists of residential mortgage loans and shares
of stock of the Federal Home Loan Bank of Cincinnati.
Information related to these borrowings at December 31, 1998
and 1997, is summarized below:
(Expressed in thousands)
FHLB Advances 1998 1997
Balance at year-end $ - $ 8,829
Average balance during the year $ 2,709 $17,648
Maximum month-end balance $22,047 $49,209
Weighted average rate during the year 5.63% 5.66%
Interest rate at December 31 - 6.90%
Collateral:
Residential mortgage loans $ - $13,244
Federal Home Loan Bank stock $ - $ 4,450
Federal Funds Purchased 1998 1997
Balance at year-end $ 3,950 $ 5,806
Average during the year $ 843 $ 953
Maximum month-end balance $11,000 $ 7,000
Weighted average rate during the year 5.35% 5.93%
Weighted average rate at December 31 5.25% 6.76%
9. Long-Term Debt
Long-term debt consists of advances from the Federal Home
Loan Bank of Cincinnati. Fixed-rate, single payment loans
totaling $85,000,000 and $62,000,000 at December 31, 1998
and 1997, respectively, mature in 1999 through 2008 with
interest rates ranging from 4.53% to 6.56%. Fixed-rate,
amortizing loans totaling $6,401,000 and $7,635,000 at
December 31, 1998 and 1997, respectively, reach final
maturity in years 2001 through 2017, with interest rates
ranging from 5.50% to 6.95%. The loans are secured by
residential mortgage loans with a carrying value of
$44,356,000 and $63,151,000 at December 31, 1998 and 1997,
respectively, Federal Home Loan Bank Stock, and investment
securities with a carrying value of $84,427,000 and
$39,877,000 at December 31, 1998 and 1997, respectively.
Scheduled principal payments on long-term debt in each of
the five years subsequent to December 31, 1998, are as
follows:
(Expressed in thousands)
1999 $ 6,055
2000 5,997
2001 967
2002 379
2003 343
Thereafter 77,660
10. Income Tax
The components of applicable income taxes are as follows:
(Expressed in thousands) 1998 1997 1996
Currently payable $2,108 $1,710 $1,910
Deferred (139) (289) (134)
Income tax $1,969 $1,421 $1,776
The following temporary differences gave rise to the
deferred tax asset at December 31, 1998 and 1997:
(Expressed in thousands) 1998 1997
Allowance for loan losses $1,390 $1,256
Interest on non-accrual loans 18 24
Unrealized (gains) losses on investments 624 (94)
Deferred loan origination fees 10 11
Deferred compensation and liability
for future employees' benefits 295 228
Intangible assets 342 301
Premises and equipment due to
differences in depreciation (137) (156)
Direct finance leases (86) (86)
Federal Home Loan Bank
stock dividends (347) (235)
Total deferred tax assets $2,109 $1,249
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:
1998 1997 1996
(Expressed in thousands) Amount Percent Amount Percent Amount Percent
Tax at statutory rate $2,759 34.0 $2,504 34.0 $2,305 34.0
Reductions in taxes
resulting from:
Tax exempt interest
on investments and loans (514) (6.3) (550) (7.5) (537) (7.9)
Tax credits (74) (0.9) (482) (6.5) - -
Excess of tax loss over
book gains on
investment securities (31) (0.4) (33) (0.4) (37) (0.6)
Earnings on life
insurance policies (93) (1.2) (43) (0.6) (39) (0.6)
Non-deductible
interest expense 64 0.8 68 0.9 78 1.2
Use of capital loss
carryforward (147) (1.8) (44) (0.6) - -
Others - net 5 0.1 1 - 6 0.1
Actual tax expense $1,969 24.3 $1,421 19.3 $1,776 26.2
11. Employee Benefit Plans
The Corporation has a profit-sharing retirement plan which
includes all full-time employees who have reached the age of
twenty-one and have completed at least one year of service.
Each participant can elect to contribute to the plan an
amount not to exceed 10% of their salary. The plan provides
for an employer matching contribution on the first 4% of the
participant's elective contribution. In addition to the
matching contribution, the plan provides for a discretionary
contribution to be determined by the bank's Board of Directors.
Total pension expense for 1998, 1997, and 1996 was $295,000,
$277,000, and $234,000, 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:
(Expressed in thousands) 1998 1997
Accumulated post-retirement benefit obligation:
Retirees $ 50 $ 39
Active plan participants 42 49
92 88
Plan assets at fair value - -
Accumulated post-retirement benefit
obligation in excess of plan assets 92 88
Unrecognized net gain (loss) from past
experience different from that assumed
and from changes in assumptions 49 56
Prior service cost not yet recognized
in expense (10) 2
Accrued post-retirement benefit cost
in the balance sheet $131 $146
The Corporation's post-retirement health care plan is under
funded. The accumulated post-retirement benefit obligation
and plan assets for that plan are $92,000 and $-0-,
respectively, at December 31, 1998, and $88,000 and $-0-,
respectively, at December 31, 1997.
Post-retirement expense includes the following components:
(Expressed in thousands) 1998 1997 1996
Service cost $ 2 $ 5 $ 6
Interest cost on accumulated
post-retirement benefit obligation 7 9 10
Net amortization and deferral (20) (12) (10)
Post-retirement expense $(11) $ 2 $ 6
The annual assumed rate of increase in the per capita cost
of covered benefits for 1998 and 1997 is 11.0% for medical
benefits and 8.5% for dental benefits. The rates are
assumed to decrease gradually to 5.5% (for medical in 2006
and for dental in 2004), and remain at that level
thereafter. Increasing the assumed health care trend rates
by one percentage point in each year would have an
immaterial effect on the accumulated post-retirement benefit
obligation and the aggregate of the service and interest
cost components of the net periodic post-retirement benefit
cost. The weighted-average discount rate used in determining
the accumulated post-retirement benefit obligation was 7%.
The long-term inflation rate assumed was 4%.
12. Leases
The subsidiary bank utilized certain bank premises and
equipment under long-term leases expiring at various dates.
In certain cases, these leases contain renewal options and
generally provide that the Corporation will pay for
insurance, taxes and maintenance.
As of December 31, 1998, the future minimum rental payments
required under noncancelable operating leases with initial
terms in excess of one year are as follows:
(Expressed in thousands)
Operating Leases
Year ending December 31,
1999 $119
2000 119
2001 120
2002 122
2003 121
Thereafter 203
Total minimum lease payments $804
Rental expense under operating leases approximated $139,000
in 1998, $132,000 in 1997, and $129,000 in 1996.
13. Related Party Transactions
Certain directors and executive officers and their
associates were customers of, and had other transactions
with, the subsidiary bank in the ordinary course of business
in 1998 and 1997. The outstanding balance of all loans to
the related parties was $6,235,000 and $6,906,000 at
December 31, 1998 and 1997, respectively. All loans and
commitments included in such transactions were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with others and did not involve more than the
normal risk of collectibility or present other unfavorable
features.
14. Commitments and Contingencies
The subsidiary bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial
instruments include commitments to extend credit and
standby letters of credit. These instruments involve, to
varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet. The contract
amounts of those instruments reflect the extent of
involvement the Corporation has in particular classes of
financial instruments.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount
of those instruments. The Corporation uses the same credit
policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
The following represents financial instruments whose
contract amounts represent credit risk at December 31:
Contract Amount
(Expressed in thousands) 1998 1997
Commitments to extend credit $30,297 $27,081
Standby letters of credit 2,414 1,449
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Corporation
upon extension of credit, is based on management's credit
evaluation of the counter party. Collateral held varies,
but may include accounts receivable, inventory, property,
plant, and equipment, and income-producing properties.
Standby letters of credit are conditional commitments issued
by the Corporation to guarantee the performance of a
customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements.
Of the standby letters of credit, $2,121,000 expire in 1999,
while the remaining $293,000 expire in various years through
2027. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan
facilities to customers.
In the ordinary course of business, the Corporation and its
subsidiaries have been named as defendants in legal actions.
Management believes, based on the advice of counsel, that
liabilities, if any, arising from these actions will not be
material to the Corporation's financial position or results
of operations.
15. Concentrations of Credit Risk
The subsidiary bank extends commercial, consumer, and real
estate loans to customers primarily located in Belmont,
Harrison, and Tuscarawas Counties in Ohio and Ohio County,
West Virginia. While the loan portfolios are diversified,
the ability of the borrowers to meet their contractual
obligations partially depends upon the general economic
condition of Southeastern Ohio and the Northern Panhandle of
West Virginia.
At December 31, 1998, there were approximately $21,669,000
in loans to businesses that operated in the outdoor
amusement industry or manufactured equipment for use in this
industry. These loans represent 9.95% of total loans.
Approximately one-half of these loans are to borrowers
located in the State of Ohio. The remaining businesses
operate throughout the continental United States. There
were no other significant concentrations.
16. Limitations on Dividends
The approval of the Comptroller of the Currency is required
to pay dividends if the total of all dividends declared by a
national bank in any calendar year exceeds the total of its
retained net profits of the preceding two years. Under this
formula, the bank can declare dividends in 1999 without
approval of the Comptroller of the Currency of approximately
$6,900,000 plus an additional amount equal to the bank's net
profit for 1999 up to the date of any such dividend
declaration. The subsidiary bank is the primary source of
funds to pay dividends to the shareholders of Belmont
Bancorp.
17. Other Operating Expenses
Other operating expenses include the following:
(Expressed in thousands) 1998 1997 1996
Taxes other than payroll
and real estate $ 507 $ 426 $ 395
Supplies and printing 299 280 301
Insurance, including
Federal Deposit Insurance 127 125 567
Amortization of intangibles 196 415 415
Other (individually less than
1% of total interest income) 1,977 1,808 1,771
Total $3,106 $3,054 $3,449
18.Restrictions on Cash
The subsidiary bank is required to maintain an average
reserve balance with the Federal Reserve Bank. The average
amounts of the reserve balance for the years ended
December 31, 1998 and 1997, were $4,337,000 and $3,987,000,
respectively.
19. Cash Flows Information
The Corporation's policy is to include cash on hand and
amounts due from banks in the definition of cash and cash
equivalents.
Cash payments for interest in 1998, 1997, and 1996 were
$16,316,000, $13,937,000, and $12,124,000, respectively.
Cash payments for income taxes for 1998, 1997, and 1996,
were $2,168,000, $2,074,000, and $1,733,000, respectively
20. Regulatory Matters
The subsidiary bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary,
actions by regulators that, if undertaken, could have a
direct material effect on the bank's financial statements.
Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the bank must meet
specific capital guidelines that involve quantitative
measures of the bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting
practices. The bank's capital amounts and classifications
are also subject to qualitative judgments by the regulators
about components, risk, weighting, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the bank to maintain minimum
amounts and ratios (set forth in the table below) of total
and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management
believes, as of December 31, 1998, that the bank meets all
capital adequacy requirements to which they are subject.
As of December 31, 1998, the most recent notifications from
the Office of the Comptroller of the Currency categorized
the bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well
capitalized, the bank must maintain minimum total risk-
based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or events since
those notifications that management believes have changed
the institution's category.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
(Expressed in thousands) Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital $35,520 12.2% $23,251 8.0% $29,063 10.0%
(to Risk Weighted Assets)
Tier I Capital $31,876 11.0% $11,625 4.0% $17,438 6.0%
(to Risk Weighted Assets)
Tier I Capital $31,876 7.2% $17,674 4.0% $22,093 5.0%
(to Average Assets)
As of December 31, 1997:
Total Capital $33,614 12.9% $20,912 8.0% $26,141 10.0%
(to Risk Weighted Assets)
Tier I Capital $30,336 11.6% $10,456 4.0% $15,684 6.0%
(to Risk Weighted Assets)
Tier I Capital $30,336 8.1% $14,962 4.0% $18,702 5.0%
(to Average Assets)
</TABLE>
21. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about
financial instruments, whether or not recognized in the
balance sheet. In cases where quoted market prices are not
available, fair values are based on estimates using present
value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlements
of the instruments. Statement 107 excludes certain
financial instruments and all nonfinancial instruments from
its disclosure requirements. In addition, the value of long-
term relationships with depositors and other customers is
not reflected. The value of these items is significant.
Accordingly, the aggregate fair value amounts presented do
not represent the underlying value of the Corporation.
The following methods and assumptions were used in
estimating fair values of financial instruments as disclosed
herein:
Cash and Cash Equivalents: For those short-term instruments,
the carrying amount is a reasonable estimate of fair value.
Investment Securities and Securities Available for Sale:
For debt securities, derivative instruments and marketable
equity securities held for investment purposes and for sale,
fair values are based on quoted market prices or dealer
quotes. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar
securities.
Loans: For certain homogeneous categories of loans, such as
some residential mortgages, fair value is estimated using
the quoted market prices for securities backed by similar
loans. The fair value of other types of loans is estimated
by discounting the future cash flows using the current rates
at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining
maturities.
Deposit Liabilities: The fair value of demand deposits,
savings accounts, and certain money market deposits is the
amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar
remaining maturities.
Short-Term Borrowings: These liabilities represent
primarily overnight borrowings and debt maturing within
ninety days of issuance with interest rates adjusted weekly.
Accordingly, the carrying amount is a reasonable estimate of
fair value.
Long-Term Debt: The fair values of long-term debt are
estimated using discounted cash flow analyses based on the
Corporation's current incremental borrowing rates for
similar types of borrowing arrangements.
1998 1997
Carrying Estimated Carrying Estimated
(Expressed in thousands) Amount Fair Value Amount Fair Value
Financial assets:
Cash and federal funds sold $ 9,439 $ 9,439 $ 10,265 $ 10,265
Trading securities 2,281 2,281 - -
Securities available for sale 184,995 184,995 121,156 121,156
Securities held to maturity 12,516 12,814 15,955 16,181
Loans, net 214,884 227,732 220,766 225,678
Financial liabilities:
Deposits 304,351 307,079 263,908 264,413
Repurchase Agreements 6,239 6,239 5,256 5,256
Short-term borrowings 3,950 3,950 14,635 14,635
Long-term debt 91,401 93,975 69,635 60,857
22. Condensed Parent Company Financial Statements
Presented below are the condensed balance sheets, statements
of income, and statements of cash flows for Belmont Bancorp.
Balance Sheets (Expressed in thousands)
December 31,
Assets 1998 1997
Cash $ 307 $ 227
Investment in subsidiaries
(at equity in net assets) 31,432 30,611
Equity securities 513 66
Advances to subsidiaries 1,006 1,068
Prepaid expenses 155 247
Other assets 660 565
Total assets $34,073 $32,784
Liabilities
Payable to subsidiary $ 149 $ 485
Deferred compensation 494 400
Total liabilities 643 885
Shareholders' Equity
Preferred stock - -
Common stock 1,321 1,321
Capital surplus 7,854 7,781
Treasury stock-
66,174 and 13,330 shares, respectively (1,400) (131)
Retained earnings-appropriated 850 850
Retained earnings-unappropriated 26,004 21,879
Net unrealized gain (loss) on
securities available for sale (1,199) 199
Total shareholders' equity 33,430 31,899
Total liabilities and shareholders' equity $34,073 $32,784
Statements of Income
1998 1997 1996
Operating income
Dividends from subsidiaries $3,921 $2,207 $2,479
Gain on sale of securities - 126 -
Other income 108 27 19
Total income 4,029 2,360 2,498
Operating expenses 143 113 67
Income before income tax
and equity in undistributed
income of subsidiaries 3,886 2,247 2,431
Income tax (credit) (41) 12 (18)
Equity in undistributed income
of subsidiaries 2,220 3,710 2,553
Net income $6,147 $5,945 $5,002
Statements of Cash Flows
1998 1997 1996
Operating activities
Net income $ 6,147 $ 5,945 $ 5,002
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of securities - (126) -
Undistributed earnings of
affiliates (2,220) (3,710) (2,553)
Changes in operating assets and
liabilities:
Prepaid expenses 92 (242) 153
Accrued expenses and dividends 94 121 259
Other assets (95) (143) (422)
Net cash provided by
operating activities 4,018 1,845 2,439
Investing activities
Proceeds from sale of securities - 180 -
Payments to subsidiaries (274) (154) (31)
Investment purchases (446) - -
Net cash provided by (used in)
investing activities (720) 26 (31)
Financing activities
Cash paid for fractional shares - (7) -
Purchase of treasury stock (1,308) (123) -
Redemption of preferred stock 112 - (1,000)
Dividends (2,022) (1,615) (1,330)
Net cash used in financing
activities (3,218) (1,745) (2,330)
Increase (decrease) in cash & cash
equivalents 80 126 78
Cash and cash equivalents at
beginning of year 227 101 23
Cash and cash equivalents at
end of year $ 307 $ 227 $ 101
Supplemental disclosures:
The Corporation made income tax payments of $2,168,000,
$2,074,000, and $1,733,000 in 1998, 1997, and 1996,
respectively. These payments represented income tax
payments for the Corporation and its consolidated
subsidiaries.
The parent company incurred no interest expense in 1998,
1997, or 1996.
24. Comprehensive Income
In June, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." This statement
establishes standards for reporting and display of
comprehensive income in a full set of financial statements.
The Corporation adopted this statement on January 1, 1998,
and has reclassified information in the 1997 and 1996
financial statements to reflect application of the
provisions of this statement. Unrealized gains and losses
on securities available for sale are the only components of
other comprehensive income that apply to the Corporation.
(Expressed in thousands) 1998 1997 1996
Before-tax amount $(2,118) $556 $ (764)
Tax expense (benefit) (720) 189 (260)
Net-of-tax amount $(1,398) $367 $ (504)
Disclosure of reclassification amount for 1998:
Unrealized holding loss
arising during the period $ (959)
Less: reclassification adjustment
for gains included in net income (439)
Net unrealized loss on securities $(1,398)
The income tax benefit related to the
reclassification adjustment for 1998
was $226.
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, 1998
and 1997, 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, 1998.
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, 1998 and 1997, 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, 1998, in conformity with generally accepted
accounting principles.
S.R. Snodgrass A.C.
Wheeling, West Virginia
January 22, 1999
Belmont Bancorp. and Subsidiaries
Report on Management's Responsibilities
Management of Belmont Bancorp. is responsible for the
accurate and objective preparation of the consolidated
financial statements and the estimates and judgements upon
which certain financial statements are based. Management is
also responsible for preparing the other financial
information included in this annual report. In our opinion,
the financial statements on the preceding pages have been
prepared in conformity with generally accepted accounting
principles and other financial information in this annual
report is consistent with the financial statements.
Management is also responsible for establishing and
maintaining an adequate internal control system which
encompasses policies, procedures and controls directly
related to, and designed to provide reasonable assurance as
to the integrity and reliability of the financial reporting
process and the financial statements generated therefrom.
The concept of reasonable assurance is based on the
recognition that there are inherent limitations in all
systems of internal control, and that the cost of such
systems should not exceed the benefits to be derived
therefrom.
The systems and controls and compliance therewith are
reviewed by an extensive program of internal audits and by
our independent auditors. Their activities are coordinated
to obtain maximum audit coverage with a minimum of duplicate
effort and cost. The independent auditors have access to
all internal audit work papers. Management believes the
system of internal control effectively meets its objectives
of reliable financial reporting.
The Board of Directors pursues its responsibility for the
quality of the Corporation's financial reporting primarily
through its Audit Committee which is comprised solely of
outside directors. The Audit Committee meets regularly with
management, the contract internal auditor and independent
auditors to ensure that each is meeting its responsibilities
and to discuss matters concerning internal controls,
accounting and financial reporting. The contract internal
auditor and independent auditors have full and free access
to the Audit Committee.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
Belmont Bancorp.
Belmont National Bank
William Wallace 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
<TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Average Balance Sheets
For the Years Ended December 31, 1998, 1997 and 1996
(Fully Taxable Equivalent Basis) (000's)
<CAPTION>
1998 1997 1996
Average Averag 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 $222,961 $21,370 9.58% $208,265 $19,632 9.43% $174,445 $16,389 9.39%
Securities
Taxable 134,337 8,053 5.99% 110,739 7,515 6.79% 115,070 7,828 6.80%
Exempt from income tax 24,261 1,802 7.43% 24,728 1,861 7.53% 23,403 1,802 7.70%
Trading account assets 1,193 68 5.70% - - - - - -
Federal funds sold 4,194 228 5.44% 1,317 71 5.39% 3,409 181 5.31%
Total interest earning assets 386,946 31,521 8.15% 345,049 29,079 8.43% 316,327 26,200 8.28%
Cash and due from banks 10,972 10,267 9,328
Other assets 20,100 15,648 14,229
Market value depreciation
of securities
available for sale (597) (546) (767)
Allowance for possible loan loss (4,312) (3,461) (2,928)
Total Assets $413,109 $366,957 $336,189
Liabilities
Interest bearing liabilities
Interest checking $ 45,864 1,525 3.33% $ 43,476 1,444 3.32% $ 38,576 $ 1,225 3.18%
Savings 82,196 2,709 3.30% 78,636 2,474 3.15% 79,341 2,423 3.05%
Other time deposits 134,485 7,438 5.53% 115,304 6,145 5.33% 111,657 5,738 5.14%
Other borrowings 86,084 4,809 5.59% 68,095 3,941 5.79% 50,274 2,741 5.45%
Total interest bearing
liabilities 348,629 16,481 4.73% 305,511 14,004 4.58% 279,848 12,127 4.33%
Demand deposits 29,910 29,878 27,878
Other liabilities 1,256 2,146 2,199
Total liabilities 379,795 337,535 309,925
Shareholders' Equity 33,314 29,422 26,264
Total Liabilities and
Shareholders' Equity $413,109 $366,957 $336,189
Net interest income margin
on a taxable equivalent basis 15,040 3.89% 15,075 4.37% 14,073 4.45%
Net interest rate spread 3.42% 3.84% 3.95%
Interest bearing liabilities to
interest earning assets 90.10% 88.54% 88.47%
</TABLE>
Fully taxable equivalent basis computed at effective federal
tax rate of 34%.
Average loan balances include nonperforming loans.
<TABLE>
Belmont Bancorp. and Subsidiaries
Analysis of Net Interest Income Changes
For the Years Ended December 31, 1998, 1997 and 1996 (Fully
Taxable Equivalent Basis) (000's)
<CAPTION>
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 $1,385 $ 329 $ 25 $1,739 $3,177 $ 55 $ 12 $3,244
Securities
Taxable 1,601 (877) (188) 536 (295) (19) - (314)
Exempt from income taxes (35) (24) - (59) 102 (41) (2) 59
Trading Account Assets - - 68 68 - - - -
Federal funds sold 155 1 2 158 (111) 3 (2) (110)
Total interest income change 3,106 (571) (93) 2,442 2,873 (2) 8 2,879
Increase (decrease) in interest
expense:
Interest checking 79 2 - 81 156 56 8 220
Savings 112 118 4 234 (22) 73 (1) 50
Other time deposits 1,022 232 39 1,293 187 213 7 407
Short-term borrowings 1,041 (137) (36) 868 972 169 59 1,200
Total interest expense change 2,254 215 7 2,476 1,293 511 73 1,877
Increase (decrease) in net
interest
income on a taxable equivalent
basis $ 852 $(786) $(100) $(34) $1,580 $(513) $(65) $1,002
(Increase) decrease in taxable
equivalent adjustment 46 (32)
Net interest income change $ 12 $ 970
</TABLE>
Belmont Bancorp. Directors
John A. Belot
President,
Walden Industries, Inc.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer,
Belmont Bancorp. and Belmont National Bank
John H. Goodman, II
Realtor, President, Goodman Group, Inc.
Mary L. Holloway Haning
Teacher, Mount DeChantal Visitation Academy
Charles J. Kaiser, Jr.
Attorney-at-Law, Partner,
Phillips, Gardill, Kaiser and Altmeyer
Terrence A. Lee
CPA, Partner, Lee & Associates
Dana J. Lewis
President, Zanco Enterprises, Inc.
James R. Miller
President, Howden Air & Gas-Americas
W. Quay Mull, II
Chairman, Belmont Bancorp. & Belmont National Bank;
Chairman, Mull Industries, Inc.
Tom Olszowy
Independent Insurance Agent,
Tom Olszowy Insurance Agency
Keith A. Sommer
Attorney, Partner,
Sommer, Liberati & Hoffman
William Wallace
Vice President, Belmont Bancorp.;
Executive Vice President and
Chief Operating Officer,
Belmont National Bank
Charles A. Wilson, Jr.
Vice Chairman, Belmont Bancorp.
and Belmont National Bank; Ohio State Representative;
President, Wilson Funeral & Furniture Co.
Belmont Bancorp. Officers
W. Quay Mull, II
Chairman
Charles A. Wilson, Jr.
Vice Chairman
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
William Wallace
Vice President
Jane R. Marsh
Secretary
Belmont National Bank Officers
W. Quay Mull, 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
Jane R. Marsh
Senior Vice President, Controller and Cashier
Robert A. Brown
Vice President, Marketing and Product Development Manager
William Busick
Vice President and Regional Manager
Gerald J. Elliott
Vice President and Compliance Officer
Clare Kapral
Vice President Retail Services
Alison Meeks
Vice President Investment and Trust Services
Robin Morelli
Vice President, Credit Administration
Belmont Financial Network, Inc.
J. Vincent Ciroli, Jr. Jane R. Marsh
Chairman and President Secretary and Treasurer
William Wallace
Vice President
Belmont Investment and Financial Services, Inc.
J. Vincent Ciroli, Jr. William Wallace
President and Chief Executive Officer Vice President, Secretary
and Treasurer
Belmont National Bank Locations
Bellaire Office
Imperial Plaza
330-28th Street
Bellaire, OH 43906
(740) 671-3036
Bridgeport Office
325 Main Street
Bridgeport, OH 43912
(740) 635-1142
Cadiz Office
657 Lincoln Avenue
Cadiz, OH 43907
(740) 942-4664
Elm Grove Office
2066 National Road
Wheeling, WV 26003
(304) 243-6570
Lansing Office
55160 National Road
Lansing, OH 43934
(740) 635-1454
New Philadelphia Office
152 North Broadway
New Philadelphia, OH 44663
(330) 343-5518
Ohio Valley Mall Office
Ohio Valley Mall
St. Clairsville, OH 43950
(740) 695-9926
The Solution Center
At Plaza West
100 Plaza Drive
St. Clairsville, OH 43950
(740) 695-8484
St. Clairsville Office
154 West Main Street
St. Clairsville, OH 43950
(740) 695-3323
Schoenbrunn Office
2300 East High Avenue
New Philadelphia, OH 44663
(330) 339-9200
Shadyside Office
4105 Central Avenue
Shadyside, OH 43947
(740) 671-9346
Woodsdale Office
980 National Road
Wheeling, WV 26003
(304) 233-9691
Wabash Avenue Drive-In Office
525 Wabash Avenue
New Philadelphia, OH 44663
Our Internet Address:
www.belmontbank.com
Corporate Information
Stock Listing Belmont Bancorp.'s common stock is
listed on The Small-Cap Market of
NASDAQ under the symbol BLMT. The
Transfer Agent is Registrar and Transfer
Company, 10 Commerce Drive, Cranford, New
Jersey 07016, telephone 1-800-368-5948.
Annual Shareholders' All shareholders are invited to attend
Meeting Belmont Bancorp.'s annual meeting to be
held at Belmont National Bank,150 West Main
St., St. Clairsville, Ohio, on Tuesday,
April 20, 1999, at 11 a.m.
Dividend Payment Subject to approval of the board of
directors, dividends are paid on Belmont
Bancorp.'s common stock on or about the 28th
day of March, June, September and December.
Automatic Dividend Through the corporation's Automatic
Reinvestment Plan Dividend Reinvestment Plan, shareholders
may elect to reinvest dividends, and invest
optional cash payments of up to $1,500
per quarter, in additional shares of Belmont
Bancorp.'s common stock at the market value.
To join the plan, please write to Registrar
and Transfer Company, 10 Commerce Drive,
Cranford, New Jersey 07016, or call 1-800-368-5948.
Form 10-K Upon written request of any
shareholder on record on December
31, 1998, the Corporation will
provide, without charge, a copy
of its 1998 Annual Report on Form 10-
K, including financial statements and
schedules, as required to be filed with
the Securities and Exchange Commission.
To obtain a copy of Form 10-K, contact
Ms. Teri Walters, Administrative Officer,
Belmont Bancorp., 325 Main Street,
Bridgeport, OH 43912.
Inquiries Inquiries, comments and suggestions
concerning Belmont Bancorp. are welcome.
Individual shareholders, analysts and
institutional investors should contact
Ms. Jane Marsh, Secretary,
at 1-740-695-3323 or 1-800-542-0174.
Equal Employment Belmont Bancorp. is committed to
providing equal employment
opportunities to every employee and
every applicant for employment,
regardless of, but not limited to
such factors as race, color, religion,
sex, national origin, age, familial or
marital status, ancestry, citizenship,
sexual orientation, veteran status
or being a qualified individual with a
disability.
Belmont Bancorp.
325 Main Street
Bridgeport, OH 43912
(740) 695-3323
Fax: (740) 695-4921
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
BELMONT BANCORP.
April 20, 1999
To the Shareholders of BELMONT BANCORP.:
The Annual Meeting of Shareholders of BELMONT BANCORP.
will be held in the Belmont National Bank conference room at
Belmont National Bank, 150 West Main Street, St. Clairsville,
Ohio, on Tuesday, April 20, 1999, at 11:00 a.m. for the following
purposes:
1. To consider and act upon the proposed Amendment to
the Articles of Incorporation to reduce the number of
permitted directors.
2. To elect four (4) persons as Directors to serve for a
three-year term expiring at the annual shareholders'
meeting in 2002.
3. To consider and act upon a proposal to ratify the
appointment of S.R. Snodgrass A.C. as independent
auditors for the year ending December 31, 1999.
4. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on
February 26, 1999, are entitled to notice of and to vote at
the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN
AND DATE THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT ANY TIME PRIOR
TO THE VOTING THEREOF. THUS, IF YOU ARE PRESENT AT THE
MEETING AND SO REQUEST YOUR PROXY WILL NOT BE USED.
BY ORDER OF THE BOARD OF DIRECTORS.
JANE R. MARSH, Secretary
Bridgeport, Ohio
March 19, 1999
PROXY STATEMENT
OF
BELMONT BANCORP.
325 Main Street
Bridgeport, Ohio 43912
ANNUAL MEETING OF SHAREHOLDERS
April 20, 1999
This Proxy Statement is furnished to the shareholders of
Belmont Bancorp.in connection with the solicitation by the
Board of Directors of Belmont Bancorp. (the "Corporation")
of proxies for the Annual Meeting of Shareholders of the
Corporation to be held on April 20, 1999, in the conference
room of Belmont National Bank, 150 West Main Street, St.
Clairsville, Ohio, and any adjournment thereof. Shares
represented by properly executed proxies received at the
time of the meeting that have not been revoked will be voted
at the meeting in the manner described in the proxies. Any
proxy may be revoked any time before it is exercised.
This Proxy Statement and the accompanying Proxy are being
mailed to shareholders on March 19, 1999.
The Board of Directors has fixed the close of business on
February 26, 1999, as the record date for the determination
of shareholders entitled to notice of and to vote at the
Annual Meeting. On the record date 5,236,534 shares of
Common Stock of the Corporation were outstanding and
entitled to be voted at the meeting. Each share of Common
Stock is entitled to one vote except in the election of
Directors where shareholders are entitled to cumulate their
votes. Cumulative voting permits each shareholder as many
votes as shall equal the number of the shareholders' shares
of Common Stock multiplied by the number of Directors to be
elected, and the shareholder may cast all of such votes for
a single Director, or such votes may be distributed among
the nominees, as each shareholder may see fit.
The proxies are solicited by the Board of Directors of the
Corporation, and the cost thereof is borne by the Corporation.
Proxies may be revoked by the shareholders who execute them
at any time prior to the exercise thereof, by written notice
to the Corporation or by announcement at the Shareholders'
Meeting. Unless so revoked, the shares represented by all
proxies will be voted by the persons named in the proxies at
the Shareholders' Meeting and at all adjournments thereof,
in accordance with the specifications set forth therein, or,
absent such specifications, in accordance with the judgment
of the holders of such proxies.
PROPOSAL NUMBER 1: AMENDMENT OF ARTICLES OF INCORPORATION
REDUCING NUMBER OF PERMITTED DIRECTORS
Subparagraph (1) of Article THIRTEENTH of the
Corporation's Amended Articles of Incorporation currently
provides that the corporation be managed by a Board of
Directors consisting of not less than fourteen (14) nor more
than eighteen (18) members to be determined annually by a
resolution adopted by the Board of Directors. Prior to the
death of Samuel A. Mumley, the Board of Directors consisted
of fourteen (14) members, the minimum number permitted by
the Articles of Incorporation. Accordingly, upon the death
of Mr. Mumley on February 18, 1999, the number of directors
was reduced below the number permitted under the Articles of
Incorporation thus requiring the naming of another director.
At a special meeting held February 24, 1999, the Board of
Directors unanimously adopted a resolution, subject to
approval by the shareholders, amending the Articles of
Incorporation to permit the Board of Directors to consist of
a minimum of twelve (12) members. The maximum number of
directors would remain at eighteen (18).
Specifically, if adopted the amendment would delete
subparagraph (1) of Article THIRTEENTH of the Amended
Articles of Incorporation and substitute the following:
Section 1. The property, business, and affairs of
the corporation shall be managed and controlled by the
Board of Directors. The number of directors of the
corporation (exclusive of directors to be elected by the
holders of one or more series of Preferred Stock voting
separately as a class or classes) shall not be less than
twelve (12) nor more than eighteen (18), the exact number
of directors to be determined from time to time by
resolution adopted by affirmative vote of a majority of
the whole Board of Directors. As used in this Article,
the term "whole Board" means the total number of
Directors which the Corporation would have if there were
no vacancies.
The only change from the present language is the reduction
of the lower limit in the range from fourteen (14) members
to twelve (12).
The Board of Directors believes that the corporation is
managed most effectively by a small number of directors
having a variety of backgrounds. Accordingly, it does not
believe that a reduction of the minimum size of the Board
from fourteen (14) members to twelve (12) members will have
a significant impact upon the corporation or its operation.
There is no present intention to reduce the size of the
Board of Directors below its present thirteen (13) members.
The Articles of Incorporation do not permit a reduction in
the size of the Board of Directors to have the effect of
reducing the term of any sitting director. Because the
Articles of Incorporation presently permits the Board of
Directors to increase the number of its members from time to
time, it is possible that five additional members could be
added to the present Board by the adoption of a resolution
by the Board of Directors. This could be beneficial if, for
example, the corporation would acquire another financial
business or would expand its operations into communities
where it does not currently have operations and desired to
have directors experienced in these new financial businesses
or knowledgeable about these communities. Under the terms of
the Articles of Incorporation, any new directors appointed
as a result of an increase in the number of Directors may
only serve until the next annual shareholders' meeting when
they must stand for election by the shareholders. There are
no current plans to increase the size of the Board of
Directors beyond its existing thirteen (13) members.
Under the terms of the Articles of Incorporation, the
affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the corporation are
required to amend this provision of the Articles of
Incorporation. The Board of Directors unanimously
recommends a vote FOR the Amendment. Proxies not otherwise
specified will be voted in favor of the Amendment.
PROPOSAL NUMBER 2: ELECTION OF DIRECTORS
The Board of Directors of the Corporation by resolution at
its meeting on February 24, 1999, set the number of
Directors at thirteen (13) members contingent upon approval
by the shareholders of the proposal to reduce the minimum
number of directors with four (4) members to be elected to
the class which expires at the annual meeting in 2002. All
nominees are currently Directors of the Corporation and its
principal subsidiary, Belmont National Bank. Each of the
nominees to be elected has continuously served in the
principal occupation shown for the past five years.
The following persons have been nominated for election to
the Board of Directors to serve for a three-year term
expiring at the annual shareholders' meeting in 2002:
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
Mary L. Holloway Haning 43 1993 3,966 (1) *
Teacher, Mount De Chantal
School
(Sept. 1996 - Present)
Special Projects Coordinator,
Plastic Surgery, Inc.
(Sept. 1995-Sept. 1996)
Director of Admissions,
Wheeling Country Day School
(1987-1995)
Charles J. Kaiser, Jr. 49 1979 26,370 (2) *
Attorney, Partner, Phillips,
Gardill, Kaiser & Altmeyer
Thomas Olszowy 52 1993 44,057 (3) *
Independent Insurance Agent,
Tom Olszowy Insurance Agency
Charles A. Wilson, Jr. 56 1973 53,556 (4) 1.02
Ohio State
Representative;
President, Wilson Funeral &
Furniture Co.
Footnotes
1. This amount includes 2,560 shares held for the benefit
of Mary L. Holloway Haning in trust in which Wesbanco Bank
Wheeling is trustee.
2. This amount includes 180 shares held in the name of
Deborah P. Kaiser, IRA, wife of Charles J. Kaiser, Jr., to
which Mr. Kaiser disclaims any beneficial interest and 1,500
shares held in the name of Marchak Investment Co., a
partnership, in which Mr. Kaiser is a general partner and
holds a substantial beneficial interest.
3. This amount includes 30,254 shares held in the names of
Tom and Diana Olszowy joint tenants with right of
survivorship in which Mr. Olszowy shares voting and
investment power. This amount also includes 754 shares held
in the name of Tom Olszowy, custodian for Dana Paul Olszowy,
and 2,204 shares held in the name of Tom Olszowy, custodian
for Jonathan T. Olszowy, to which Mr. Olszowy disclaims any
beneficial interest. This amount also includes 10,845
shares held in the name of Thomas P. Olszowy SEP IRA.
4. This amount includes 7,804 shares held in the name of
Wilson Funeral and Furniture Company of which Mr. Wilson is
President, holds a substantial stock interest and has voting
power.
* Denotes less than a 1% interest.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE
ABOVE NOMINEES TO THE BOARD OF DIRECTORS OF BELMONT BANCORP.
In addition to the foregoing nominees, the following persons
are presently serving as members of the Board of Directors:
Directors Whose Term of Office Will Expire at the Annual
Shareholders' Meeting in 2000
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
John A. Belot 56 1979 47,600 (5) *
President,
Walden Industries, Inc.
Terrence A. Lee, CPA 49 1987 4,433 (6) *
Chairman, Belmont Bancorp.
and Belmont National Bank;
Partner, Lee & Associates
Dana J. Lewis 55 1994 41,642 *
President, Zanco Enterprises,
Inc.
New Philadelphia, Ohio;
Owner/Operator of McDonalds
restaurants
W. Quay Mull, II 56 1984 31,484 (7) *
Chairman of the Board
Mull Industries, Inc.
William Wallace 43 1991 28,927 (8) *
Executive Vice President &
Chief Operating Officer,
Belmont National Bank;
Vice President, Belmont
Bancorp.
Footnotes
5. This amount includes 15,810 shares held jointly by
Terry L. Belot, wife of John A. Belot, and Jason Michael
Belot, son of John A. Belot; 15,810 shares held jointly by
Terry L. Belot and John A. Belot, Jr., son of John A. Belot;
8,936 shares held in the name of Jason Michael Belot; and
1,372 shares held in the name of John A. Belot, Jr. Mr.
John A. Belot has retained voting rights with respect to
these shares. This amount also includes 2,500 shares held
in the name of Terry L. Belot, IRA, to which Mr. Belot
disclaims any beneficial interest.
6. This amount includes 32 shares held in the name of
Terrence A. Lee, Custodian for Katherine M. Lee, UOTMA; 32
shares held in the name of Terrence A. Lee, Custodian for
Natalie A. Lee, UOTMA; and 32 shares held in the name of
Terrence A. Lee, Custodian for Tara N. Lee, UOTMA; Mr. Lee's
minor daughters. This amount does not include 52,704 shares
held in the name of John H. Goodman, II and Terrence A. Lee,
Trustees for a trust dated February 2, 1991, to which Mr.
Lee disclaims any beneficial interest.
7. This amount includes 16,080 shares held in the name of
Mull Machine Company of which Mr. Mull is President and
holds a substantial ownership interest.
8. This amount includes 5,775 shares held jointly with
Christine Wallace, Mr. Wallace's wife, in which he shares
voting and investment power; 3,535 shares held in the name
of Christine Wallace, IRA, to which Mr. Wallace disclaims
any beneficial interest; 1,167 shares held in the name of
William Wallace as Custodian for Joseph J. Wallace, UWVTMA;
1,167 shares held in the name of William Wallace as
Custodian for Lauren C. Wallace, UWVTMA; 1,083 shares held
in the name of William Wallace as Custodian for Adrienne C.
Wallace, UWVTMA; and 999 shares held in the name of William
Wallace as Custodian for William J. Wallace, UWVTMA; Mr.
Wallace's minor children.
Directors Whose Term of Office Will Expire at the Annual
Shareholders' Meeting in 2001
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
J. Vincent Ciroli, Jr. 53 1984 31,980 *
President & Chief Executive
Officer,
Belmont Bancorp. and
Belmont National Bank
John H. Goodman, II 54 1974 109,820 (9) 2.10
Realtor, President
Goodman Group, Inc.
Keith A. Sommer 58 1995 10,658 *
Attorney, Partner, Sommer,
Liberati & Hoffman
James R. Miller 56 1995 1,000 *
President, Howden Air & Gas-
Americas (Oct. 98 to Present)
President, New Philadelphia
Fan Company (Jan. 1997 to
Oct. 98)
Vice President & General
Manager, Joy Technologies Inc.
(April 1992-Dec. 1996)
Footnotes
9. This amount includes 7,134 shares held in the name of
Marylouise Goodman IRA, and 1,236 shares held in the name of
Marylouise Goodman, wife of John H. Goodman, II, to which
Mr. Goodman disclaims any beneficial interest. This amount
also includes 887 shares held in the name of John H.
Goodman, Custodian for Emily Goodman, UOTMA., Mr. Goodman's
minor child. This amount also includes 52,704 shares held
in the name of John H. Goodman, II and Terrence A. Lee,
Trustees under a trust dated February 2, 1991, to which Mr.
Goodman disclaims any beneficial interest. This amount also
includes 9,101 shares held by J. Harvey Goodman and John H.
Goodman, II, Trustees under a trust dated April 26, 1995.
As of February 26, 1999, the Directors and Officers of the
Corporation as a group beneficially owned 439,792 shares or
8.40 percent of the outstanding common stock of the
Corporation.
Transactions with Directors and Officers
Certain Directors and Executive Officers and their
associates were customers of and had transactions with the
Bank in the ordinary course of the Bank's business during
1998. From time to time the law firms of Phillips, Gardill,
Kaiser & Altmeyer, of which Charles J. Kaiser, Jr. is a
partner, and Sommer, Liberati & Hoffman, of which Keith A.
Sommer is a partner, have rendered legal services to the
Corporation and the Bank. Messrs. Kaiser and Sommer are
directors of both the Corporation and the Bank. It is
contemplated that these firms will be retained to perform
legal services during the current year.
Meetings of the Board of Directors and Committees and
Compensation of Members
The Board of Directors of the Corporation met eight (8)
times during the year 1998. Each member of the Board of
Directors of the Corporation attended seventy-five percent
(75%) or more of the total number of meetings of the Board
and its committees of which they were members. The Board of
Directors of Belmont National Bank met sixteen (16) times
during 1998. The Directors of the Corporation and the Bank
are the same.
The Board of Directors elects an Executive Committee
annually. Messrs. Ciroli, Goodman, Kaiser, Lee, Mull,
Olszowy and Wilson are members of the Executive Committee of
both the Corporation and the Bank. Meetings of the
Executive Committee are called to consider Corporation or
Bank business which may arise between normally scheduled
meetings or to consider in depth policies and make
recommendations to the Board of Directors. The Executive
Committee of the Bank did not meet during 1998.
The Executive Committee of the Corporation also serves as
a Nominating Committee. As such, the Committee seeks and
recommends individuals for nomination as directors. The
Nominating Committee will consider as prospective directors
persons suggested to them by any shareholder.
Messrs. Belot, Kaiser, Lee, Lewis, Miller, and Olszowy are
members of the Audit Committee of the Bank and the
Corporation. The Audit Committee reviews the reports of the
Bank's internal auditor, the Bank's compliance officer, and
the reports of the Corporation's independent Certified
Public Accountants, the adequacy of internal controls and
procedures, and reports to the Board of Directors of the
Corporation and the Bank. This Committee met five (5) times
during 1998.
The Bank also has a Trust Committee that met five (5)
times in 1998 whose members are Ms. Haning and Messrs.
Goodman, Mull, Mumley, Sommer, Wallace and Wilson. The
Trust Committee of the Bank approves the operations of the
Trust Department and reports to the Board of Directors.
Directors who are not employees of the Corporation or the
Bank receive an annual retainer fee of Three Thousand
Dollars, payable quarterly in arrears, plus an attendance
fee of Three Hundred Dollars for each Bank or Committee
Meeting attended. During 1998, a total of $112,200.00 was
paid to Directors.
In addition to the fees paid to Directors, Mr. Richard G.
Anderson and Mr. Wilbur L. Terhune, each of whom is a
retired Chairman of the Board, received payments under a
Deferred Compensation Plan adopted by the Board of Directors
on December 15, 1983. Mr. Anderson received $1,864.80 and
Mr. Terhune received $5,567.04 during 1998 under this plan.
The Deferred Compensation Plan provided an early retirement
benefit to covered individuals equal to eighty percent (80%)
of a factor corresponding to the number of years the
employee's early retirement date preceded his normal
retirement date, multiplied by the employee's average
compensation as defined under the Bank's retirement plan,
minus the employee's monthly accrued benefit under the
Bank's retirement plan on a straight life annuity basis.
This amount is further reduced by the employee's primary
social security benefit. Mr. Terhune's benefit is further
reduced by a pension which he receives from a plan unrelated
to the Corporation or the Bank.
EXECUTIVE COMPENSATION
The Executive Committee without the executive officers but
with the addition of James R. Miller and Keith A. Sommer
serves as the Compensation Committee for Belmont National
Bank. The officers of the Corporation are currently serving
without compensation from Belmont Bancorp. They are,
however, compensated by Belmont National Bank for services
rendered as officers of the Bank. This Committee is
responsible for advising the Board regarding compensation
levels for the President and CEO, J. Vincent Ciroli, Jr.;
the Executive Vice President and COO, William Wallace; and
the Senior Vice President, Controller and Cashier, Jane R.
Marsh. The Committee also consults with senior officers
with respect to the compensation and benefits of other
officers and employees of the Corporation.
Compensation Philosophy
The Corporation bases different portions of its executive
compensation program on differing measures of corporate
performance. As a result, the Corporation's compensation
program currently reflects the following themes:
A material portion of compensation should be
meaningfully related to corporate performance.
Since the Corporation has chosen a senior executive
team to manage the operations of the Corporation, bonus
compensation for these senior executives should be based
on team effort and performance of the Corporation as a whole.
Bonus compensation should be related to the return on
shareholders' equity and should be payable only if the
shareholders have received a reasonable return on the equity.
Compensation should play a critical role in attracting and
retaining executives whom the Corporation deems most able to
further its goals and, therefore, should be comparable to
compensation paid by peer organizations in the same region of
the country that the Corporation operates.
Summary Compensation Table
For the year ended December 31, 1998, J. Vincent Ciroli,
Jr., William Wallace and Jane R. Marsh were the only
officers compensated in excess of $100,000. Their
compensation is summarized in the following table:
Long Term
Incentive
Name and Compen- All Other
Principal Position Year Salary Bonus sation(1) Compensation
J. Vincent Ciroli, Jr. 1998 $161,000.00 $24,150.00 $24,150.00 $23,198.90
President & Chief 1997 $152,000.00 $26,600.00 $26,600.00 $15,707.59
Executive Officer 1996 $152,000.00 $68,400.00 - $16,767.99
Belmont Bancorp. and
Belmont National Bank
William Wallace 1998 $119,000.00 $17,850.00 $17,850.00 $26,249.23
Vice President, 1997 $110,000.00 $19,250.00 $19,250.00 $12,420.97
Belmont Bancorp. and 1996 $110,000.17 $49,500.00 - $15,722.09
Executive Vice President
& Chief Operating Officer,
Belmont National Bank
Jane R. Marsh 1998 $ 79,000.00 $11,850.00 $11,850.00 $13,088.05
Secretary, Belmont 1997 $ 70,000.00 $12,250.00 $12,250.00 $11,350.80
Bancorp. and Senior 1996 $ 70,000.01 $31,500.00 - $ 9,915.19
Vice President,
Controller, and Cashier,
Belmont National Bank
(1) See the description for the Long Term Incentive
Compensation under the heading "Annual Bonus Incentives".
Pay Mix and Measurement
The Corporation's executive compensation program is based
on three components, each of which is intended to serve the
overall compensation philosophy.
Base Salary is targeted at the competitive median for peer
banking organizations. In order to determine these amounts,
the Committee has utilized the Sheshunoff tables, the
Executive Studies Group (a division of Ben S. Cole
Financial, Inc.), and the Bank Wage-Hour & Personnel
Service. During 1997, the Committee retained Bank
Compensation Strategies Group located in Dublin, Ohio, to
advise it and the Board concerning salaries for comparable
officers at other Ohio and regional banking organizations of
similar size. Salaries for the executive officers named in
the Summary Compensation Table are reviewed by the Committee
on an annual basis and may be increased or decreased at that
time based on the Committee's analysis of how the management
team and the respective individual contributes to the
Corporation, as well as increases in median competitive pay
levels.
Annual Bonus Incentives for executive officers are intended
to reflect the Corporation's belief that management's
contribution to corporate performance comes, in part, from
maximizing the Corporation's return on common shareholders'
equity. Accordingly, since 1989 the Board of Directors has
had in place an Executive Incentive Compensation Plan to
provide incentive compensation based upon the earnings of
Belmont National Bank. Amounts paid under the Plan are
included in the "Bonus" column in the Summary Compensation
Table above. The individuals covered by the Plan are J.
Vincent Ciroli, Jr., William Wallace and Jane R. Marsh.
During 1997, the Compensation Committee retained Bank
Compensation Strategies Group of Dublin, Ohio, to advise the
Committee and the Board on changes to the Executive
Incentive Compensation Plan designed in part to: (i) allow
additional senior executives to be added to the Executive
Incentive Compensation Plan without disrupting the formula;
and (ii) requiring half of each year's bonus to be deferred
and held as phantom stock of the Corporation which is hoped
will enhance the senior executives' interest in the long-
term appreciation of the Corporation's stock. The revised
Senior Executive Incentive Plan adopted during 1997 pays an
incentive bonus calculated as a percentage of salary varying
between 10% and 80% when the Corporation's return on equity
exceeds the average return on equity of a peer group. No
award is made unless the Corporation's return on equity is
at least 10% greater than the peer group average. Half of
any bonus is paid to the executive in cash and the other
half is credited to a non-qualified deferred compensation
plan that invests in the Corporation's phantom stock. That
amount is shown as Long Term Incentive Compensation in the
Summary Compensation Table. The plan is a phantom stock
plan because the portion of the bonus paid to the plan is
converted to units designed to appreciate or depreciate in
relation to the appreciation or depreciation of the
Corporation's common stock. Upon termination of employment
for reasons of death, disability, retirement or any other
reason the executive will be paid his benefit in cash over a
period of years. The Committee believes that the program,
as revised, provides an appropriate link between the
Corporation's short-term performance and long-term
performance (as measured by the appreciation of its stock)
and the incentives paid to the executive officers. The
return on equity goal is established by the Committee
annually.
Other Compensation is provided so that the Corporation's
overall benefits are comparable with other similar
organizations so as to attract and retain competent
management.
The Bank has a Defined Contribution 401(k) Savings Plan
which allows employees who work over 1,000 hours per year to
defer up to 10% of their pre-tax salary to the Plan. The
Bank matches fifty percent (50%) of the first four percent
(4%) deferred. The Bank may also make voluntary contributions
to the Plan. In 1998, the Bank paid $43,651.46 in matching
funds and made a voluntary contribution of $260,783.05, or
ten and four tenths percent (10.4%) of annual salary. In 1998,
the profit sharing contribution attributed to Mr. Ciroli was
$14,148.16; the matching funds contribution was $3,220.10.
The profit sharing contribution paid for Mr. Wallace was
$12,355.20; the matching funds contribution was $2,260.96.
The profit sharing contribution paid for Mrs. Marsh was
$10,228.40 and the matching funds contribution was $1,580.02.
In addition, a contribution was made to a deferred compensation
account to make up profit sharing and matching contributions
that were lost to the executives during 1996, 1997 and 1998,
as their deferred salaries were considered ineligible wages
in the 401(k) plan for a profit sharing or matching
contribution. This contribution was $5,009.54 for Mr.
Ciroli, $11,361.75 for Mr. Wallace and $1,137.43 for Mrs.
Marsh. This compensation is included in the "All Other
Compensation" column in the Summary Compensation Table
above.
The Bank provides reimbursement for club fees, membership
dues and entertainment expenses for business use by Mr.
Ciroli and Mr. Wallace. The Bank also provides Mr. Ciroli
and Mr. Wallace with the use of a company car. Personal
benefits from such expenditures are less than 10% of salary
and bonus and, therefore, have been excluded from the
Summary Compensation Table above.
The Bank maintains a split-dollar life insurance plan for
several of its officers. Under the plan, the Bank maintains
ownership of all cash value in the insurance policies and a
portion of the death benefits. The participant's named
beneficiary is entitled to three times the participant's
annual salary at his death. Annually, the participant
recognizes taxable income to the extent of the assumed term
cost of the coverage. At the death of the participant, the
Bank's share of the death benefit will be sufficient to
recover all costs associated with the plan. For 1998, the
amount of income attributable for a split-dollar insurance
plan was $821.10, $271.32 and $142.20 for Mr. Ciroli, Mr.
Wallace and Mrs. Marsh respectively. These amounts are
included in the "All Other Compensation" column in the
Summary Compensation Table above.
The Corporation adopted a Supplemental Retirement Plan for
the three executive officers at its meeting on January 18,
1994, and subsequently amended the plan on December 19,
1995, in order to augment the retirement benefits payable to
these officers and make them more comparable to the benefits
provided under the defined benefit plan which was terminated
in 1990. The persons covered under the plan are J. Vincent
Ciroli, Jr., President and Chief Executive Officer; William
Wallace, Vice President of the Corporation and Executive
Vice President and Chief Operating Officer of the Bank; and
Jane R. Marsh, Secretary of the Corporation and Senior Vice
President, Controller and Cashier of the Bank. Under the
Plan the Corporation credited the sum of $163,000 to a book
reserve account for the benefit of Mr. Ciroli, the sum of
$19,000 for Mr. Wallace and the sum of $3,000 for Ms. Marsh.
The balance in the book reserve account will be invested as
directed by the Board and distributed to the officer over a
ten (10) year period following retirement. The officer will
bear the risk of earnings in the book reserve account.
Under the Plan the maximum amount that can be paid to Mr.
Ciroli is $43,000 per annum; to Mr. Wallace $40,000 per
annum; and to Ms. Marsh $11,250 per annum. The supplemental
retirement benefits may be forfeited if the employee is
terminated for cause.
COMPENSATION COMMITTEE
John H. Goodman, II W. Quay Mull, II
Charles J. Kaiser, Jr. Thomas Olszowy
Terrence A. Lee Keith A. Sommer
James R. Miller Charles A. Wilson, Jr.
Stock Price Performance Graph
The following graph compares for each of the last five
years ending December 31 the cumulative total return of the
Corporation's Common Stock, All Nasdaq U.S. Stocks Index and
SNL Securities' Index of Banks with Assets Size less than
$500 million. The cumulative total return of the Corporation's
Common Stock assumes $100 invested on December 31, 1993 and
assumes reinvestment of dividends.
<TABLE>
Belmont Bancorp. Stock Price Performance
<CAPTION>
SNL SECURITIES' INDEX
OF BANKS WITH ASSETS ALL NASDAQ U.S.
MEASUREMENT PERIOD BELMONT BANCORP LESS THAN $500M STOCKS
<S> <C> <C> <C>
MEASUREMENT POINT 12/31/93 $100.00 $100.00 $100.00
12/31/94 196.23 107.55 97.75
12/31/95 367.11 147.13 138.26
12/31/96 361.17 189.37 170.01
12/31/97 750.95 322.82 208.58
12/31/98 773.23 294.76 293.21
</TABLE>
PROPOSAL NUMBER 3: SELECTION OF AUDITORS
The Board of Directors has retained S.R. Snodgrass A.C. as
independent auditors for both the Corporation and the Bank
for the year ending December 31, 1999. There will be
presented to the shareholders at the Annual Meeting a
proposal that this selection be ratified by the
shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THIS SELECTION BE SO RATIFIED. The services rendered
by S.R. Snodgrass A.C. during the year 1998 involved
auditing services primarily and consisted of the examination
of the financial statements of the Corporation and its
subsidiaries, principally the Bank. It is expected that a
representative of the accounting firm will be present at the
shareholders' meeting. Such representative will be given
the opportunity to make a statement if he desires to do so,
and will be available to respond to appropriate questions
from the shareholders who are present.
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors, executive officers,
and persons who own more than 10% of a registered class of
the Corporation's equity securities to file with the
Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common
Stock of the Corporation. Officers, directors and greater
than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms
they file. To the Corporation's knowledge, based solely on
a review of the copies of such reports furnished to the
Corporation and written representations that no other
reports were required, during the two fiscal years ended
December 31, 1998, all section 16(a) filing requirements
applicable to the Corporation's officers, directors, and
greater than 10% beneficial owners were complied with.
Other Matters
As of the date of this Proxy Statement, the Board of
Directors and Management were unaware of any matters not
referred to in this proxy statement for action at the
meeting. If any other business comes before the meeting,
the persons named in the proxy will have the authority to
vote the shares represented by them in accordance with their
best judgment.
Method and Cost of Solicitation
The solicitation of proxies will be made primarily by
mail. Proxies may also be solicited personally and by
telephone by regular employees and Directors of the
Corporation and the Bank without any additional remuneration
and at minimal cost. Management intends to request banks,
brokerage houses, custodians, nominees, an fiduciaries to
obtain authorization for the execution of proxies. The
Corporation will bear the entire cost of soliciting proxies.
Shareholder Proposals for Next Year's Annual Meeting
Proposals which shareholders intend to present at next
year's annual meeting, now scheduled to be held on April 17,
2000, will be eligible for inclusion in the Corporation's
proxy material for that meeting if they are submitted to the
Corporation in writing no later than November 19, 1999. At
the time of the submission of the proposal, a proponent may
also submit a statement in support of the proposal. The
proposal and its supporting statement in the aggregate
shall not exceed 500 words. When submitted to the
Corporation, a proposal should be accompanied by a written
notice of the proponent's intention to appear personally at
the meeting for the purpose of presenting the proposal for
action.
Bridgeport, Ohio BY ORDER OF THE BOARD OF DIRECTORS
March 19, 1999 J. VINCENT CIROLI, JR., PRESIDENT & CEO
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9439
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 2281
<INVESTMENTS-HELD-FOR-SALE> 184995
<INVESTMENTS-CARRYING> 12516
<INVESTMENTS-MARKET> 12814
<LOANS> 219413
<ALLOWANCE> 4529
<TOTAL-ASSETS> 446349
<DEPOSITS> 304351
<SHORT-TERM> 10189
<LIABILITIES-OTHER> 6978
<LONG-TERM> 91401
0
0
<COMMON> 1321
<OTHER-SE> 32109
<TOTAL-LIABILITIES-AND-EQUITY> 446349
<INTEREST-LOAN> 21243
<INTEREST-INVEST> 9525
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 30836
<INTEREST-DEPOSIT> 11671
<INTEREST-EXPENSE> 16480
<INTEREST-INCOME-NET> 14356
<LOAN-LOSSES> 710
<SECURITIES-GAINS> 1338
<EXPENSE-OTHER> 9496
<INCOME-PRETAX> 8116
<INCOME-PRE-EXTRAORDINARY> 6147
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6147
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 3.89
<LOANS-NON> 562
<LOANS-PAST> 4
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4746
<ALLOWANCE-OPEN> 4134
<CHARGE-OFFS> 330
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 4529
<ALLOWANCE-DOMESTIC> 4529
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1090
</TABLE>
