United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2002
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________________ to ________________________
Commission File Number: 0-12724
Belmont Bancorp.
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(Exact name of registrant as specified in its charter)
Ohio 34-1376776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 Main St., Bridgeport, Ohio 43912
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(Address of principal executive offices) (Zip Code)
(740)-695-3323
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. X____ Yes ____ No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.:
Common Stock, $0.25 par value,
11,108,403 shares outstanding
as of August 9, 2002
BELMONT BANCORP
Quarter Ending June 30, 2002
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Management's report on financial statements 3
Consolidated Balance Sheets - June 30, 2002 and
December 31, 2001 4
Consolidated Statements of Income-Three Months
Ended June 30, 2002 and June 30, 2001 5
Consolidated Statements of Income-Six Months
Ended June 30, 2002 and June 30, 2001 6
Condensed Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended June 30, 2002 and June 30, 2001 7
Condensed Consolidated Statements of Cash Flows-Six Months
Ended June 30, 2002 and June 30, 2001 8
Notes to the Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosure about Market Risk 21
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature page 24
2
PART I - FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The management of Belmont Bancorp. ("Belmont" or the "Company") is
responsible for the accurate and objective preparation of the consolidated
financial statements and the estimates and judgments upon which certain
financial statements are based. Management is also responsible for preparing the
other financial information included in this filing. In our opinion, the
financial statements on the following pages have been prepared in conformity
with accounting principles generally accepted in the United States of America
and other financial information in this quarterly 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. 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 derived benefits. The systems and
controls and compliance therewith are reviewed by a comprehensive 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. 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
Company's financial reporting primarily through its Audit Committee, which is
comprised solely of independent directors. The Audit Committee meets regularly
with management, personnel responsible for the contract internal audit function,
and the independent auditors to ensure that each is meeting its responsibilities
and to discuss matters concerning internal controls, accounting and financial
reporting. The above parties have full and free access to the Audit Committee.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Belmont
Bancorp and its subsidiaries, Belmont National Bank (the "Bank") and Belmont
Financial Network.
3
Belmont Bancorp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited) ($000s except share and per share amounts)
June 30, December 31,
2002 2001
Assets
Cash and due from banks $ 7,982 $ 14,587
Federal funds sold 11,800 17,600
----------------------------------
Cash and cash equivalents 19,782 32,187
Loans held for sale - 534
Securities available for sale at fair value 130,227 125,551
Loans 119,056 115,674
Less allowance for loan losses (5,250) (5,310)
----------------------------------
Net loans 113,806 110,364
Premises and equipment, net 6,342 6,532
Deferred federal tax assets 5,733 7,998
Cash surrender value of life insurance 1,240 1,205
Accrued income receivable 1,808 1,541
Other assets 2,403 2,944
----------------------------------
Total assets $281,341 $288,856
==================================
Liabilities and Shareholders' Equity
Liabilities
Non-interest bearing deposits:
Demand $ 25,720 $ 30,654
Interest-bearing deposits:
Demand 27,240 27,647
Savings 89,989 78,454
Time 84,439 101,731
----------------------------------
Total deposits 227,388 238,486
Securities sold under repurchase agreements 913 647
Long-term borrowings 20,000 20,000
Accrued interest on deposits and other borrowings 428 652
Other liabilities 1,465 3,225
----------------------------------
Total liabilities 250,194 263,010
----------------------------------
Shareholders' Equity
Preferred stock - authorized 90,000 shares with
no par value; no shares issued or outstanding - -
Common stock - $0.25 par value, 17,800,000 shares
authorized; 11,153,195 shares issued 2,788 2,788
Additional paid-in capital 17,523 17,506
Treasury stock at cost (44,792 shares at 6/30/02
and 51,792 shares at 12/31/01) (1,009) (1,170)
Retained earnings 11,780 8,100
Accumulated other comprehensive income (loss) 65 (1,378)
----------------------------------
Total shareholders' equity 31,147 25,846
----------------------------------
Total liabilities and shareholders' equity $281,341 $288,856
==================================
The accompanying notes are an integral part of the financial statements.
4
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Income
(Unaudited) ($000s except per share amounts) For the Three Months Ended
June 30,
2002 2001
Interest and Dividend Income
Loans:
Taxable $ 2,096 $ 2,735
Tax-exempt 44 52
Securities:
Taxable 1,300 1,271
Tax-exempt 280 507
Dividends 56 59
Interest on federal funds sold 57 138
-----------------------------
Total interest and dividend income 3,833 4,762
-----------------------------
Interest Expense
Deposits 1,356 2,330
Other borrowings 228 258
-----------------------------
Total interest expense 1,584 2,588
-----------------------------
Net interest income 2,249 2,174
Provision for loan losses - -
-----------------------------
Net interest income after provision
for loan losses 2,249 2,174
-----------------------------
Noninterest Income
Trust fees 122 208
Service charges on deposits 224 230
Legal settlements 2,378 -
Other operating income 156 123
Securities gains (losses) (31) 6
Gains on sale of loans and loans held for sale 45 20
-----------------------------
Total noninterest income 2,894 587
-----------------------------
Noninterest Expense
Salary and employee benefits 1,110 1,185
Net occupancy expense of premises 218 227
Equipment expenses 255 228
Legal fees 251 362
Legal settlements expense 35 -
Other operating expenses 863 826
-----------------------------
Total noninterest expense 2,732 2,828
-----------------------------
Income (loss) before income taxes 2,411 (67)
Income Tax Expense (Benefit) 679 (242)
-----------------------------
Net income $ 1,732 $ 175
=============================
Basic and Diluted Earnings per Common Share $ 0.16 $ 0.02
The accompanying notes are an integral part of the financial statements.
5
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Income
(Unaudited) ($000s except per share amounts) For the Six Months Ended
June 30,
2002 2001
Interest and Dividend Income
Loans:
Taxable $ 4,198 $ 5,368
Tax-exempt 89 107
Securities:
Taxable 2,499 2,488
Tax-exempt 607 1,020
Dividends 94 117
Interest on federal funds sold 145 333
-------------------------------
Total interest and dividend income 7,632 9,433
-------------------------------
Interest Expense
Deposits 2,851 4,724
Other borrowings 467 520
-------------------------------
Total interest expense 3,318 5,244
-------------------------------
Net interest income 4,314 4,189
Provision for loan losses - -
-------------------------------
Net interest income after provision
for loan losses 4,314 4,189
-------------------------------
Noninterest Income
Trust fees 250 307
Service charges on deposits 445 421
Legal settlements 6,311 -
Other operating income 352 326
Securities gains (losses) (94) 4
Gains on sale of loans and loans held for sale 105 26
-------------------------------
Total noninterest income 7,369 1,084
-------------------------------
Noninterest Expense
Salary and employee benefits 2,372 2,301
Net occupancy expense of premises 449 454
Equipment expenses 466 446
Legal fees 848 685
Legal settlements expense 594 -
Other operating expenses 1,615 1,528
-------------------------------
Total noninterest expense 6,344 5,414
-------------------------------
Income (loss) before income taxes 5,339 (141)
Income Tax Expense (Benefit) 1,523 (481)
-------------------------------
Net income $ 3,816 $ 340
===============================
Basic and Diluted Earnings per Common Share $ 0.34 $ 0.03
The accompanying notes are an integral part of the financial statements.
6
Belmont Bancorp. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited) ($000s)
Three Months Ended June 30,
2002 2001
----------------------------------
Balance, beginning of period $27,818 $26,879
Comprehensive income (loss):
Net income 1,732 175
Change in net unrealized gain (loss) on securities
available for sale, net of reclassification and tax 1,563 (322)
----------------------------------
Total comprehensive income (loss) 3,295 (147)
Treasury stock sold 25 -
Common stock options granted/vested 9 10
----------------------------------
Balance, end of period $31,147 $26,742
==================================
Six Months Ended June 30,
2002 2001
----------------------------------
Balance, beginning of period $25,846 $25,602
Comprehensive income:
Net income 3,816 340
Change in net unrealized gain on securities
available for sale, net of reclassification and tax effects 1,443 729
----------------------------------
Total comprehensive income 5,259 1,069
Treasury stock sold 25 -
Common stock options granted/vested 17 71
----------------------------------
Balance, end of period $31,147 $26,742
==================================
The accompanying notes are an integral part of the financial statements.
7
Belmont Bancorp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2002 and 2001
(Unaudited) ($000's)
2002 2001
---------------------------------
Cash from Operating Activities $ 5,132 ($21)
Investing Activities
Proceeds from:
Maturities and calls of securities 7,955 1,752
Sales of securities available for sale 16,097 4,147
Principal collected on mortgage-backed securities 14,473 12,167
Sales of loans 336 0
Sales of other real estate owned 230 378
Purchases of:
Securities available for sale (41,783) (29,583)
Premises and equipment (154) (296)
Changes in:
Loans, net (3,884) 7,580
---------------------------------
Cash from investing activities (6,730) (3,855)
---------------------------------
Financing Activities
Changes in:
Deposits (11,098) 1,447
Repurchase agreements 266 (433)
Proceeds from sale of treasury stock 25 0
---------------------------------
Cash from financing activities (10,807) 1,014
---------------------------------
Increase (Decrease) in Cash and Cash Equivalents (12,405) (2,862)
Cash and Cash Equivalents, Beginning of Year 32,187 26,000
---------------------------------
Cash and Cash Equivalents at June 30 $ 19,782 $ 23,138
=================================
Cash payments for interest $ 3,542 $ 5,274
Cash payments for income taxes 0 0
Non-cash transfers from loans to other real estate owned
and repossessions 170 233
The accompanying notes are an integral part of the financial statements.
8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The foregoing financial statements are unaudited; however, in the opinion
of management, all adjustments consisting of normal recurring items necessary
for a fair presentation of the financial statements have been included. A
summary of the Company's significant accounting policies is set forth in Note 1
to the Consolidated Financial Statements in the Company's Annual Report and Form
10-K for the year ended December 31, 2001.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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. Estimates particularly subject to change would include the allowance
for loan losses, deferred tax valuation allowance, fair value of financial
instruments, and loss contingencies.
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141. "Business
Combinations." SFAS No. 141 requires all business combinations within its scope
to be accounted for using the purchase method, rather than the
pooling-of-interests method. The provisions of this Statement apply to all
business combinations initiated after June 30, 2001. The adoption of this
statement will only impact the Company's financial statements if it enters into
a business combination.
Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets", which addresses the accounting for such assets arising from
prior and future business combinations. Goodwill arising from business
combinations is no longer amortized, but rather is assessed regularly for
impairment, with any such impairment recognized as a reduction to earnings in
the period identified. Other identified intangible assets, such as core deposit
intangible assets, will continue to be amortized over their estimated useful
lives. The adoption of this Statement does not currently impact the Company's
financial statements, as it has no unidentified intangible assets related to
prior business combinations.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS 143 is effective for fiscal years beginning after
June 15, 2002, and establishes an accounting standard requiring the recording of
the fair value of liabilities associated with the retirement of long-lived
assets in the period in which they are incurred. The Company is in the process
of determining the future impact that the adoption of FAS 143 may have on its
earnings and financial position.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
This statement is effective for fiscal years beginning after December 15, 2001.
The adoption of this statement has not materially affected the Company's
financial position and results of operations.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses the timing of
recognition of a liability for exit and disposal costs at the time a liability
is incurred, rather than at a plan commitment date, as previously required by
GAAP. Exit or disposal costs will be measured at fair value, and the recorded
liability will be subsequently adjusted for changes in estimated cash flows. The
adoption of the statement is not expected to have a material effect on the
Company.
While management monitors the revenue streams of the various Company
products and services, the identifiable segments are not material and operations
are managed and financial performance is evaluated on a Company-wide basis.
Accordingly, all of the Company's service operations are considered by
management to be aggregated in one reportable operating segment.
9
The average number of shares outstanding used to compute earnings per
share was as follows:
Average shares outstanding Basic Diluted
------------------------------------------------------------------------------------------
For the three months ended June 30, 2002 11,104,018 11,154,096
For the three months ended June 30, 2001 11,101,403 11,177,123
For the six months ended June 30, 2002 11,102,718 11,147,420
For the six months ended June 30, 2001 11,101,403 11,157,413
2. Securities
The estimated fair values of securities were as follows:
June 30, 2002
----------------------------------------------------
Estimated Gross Gross
Fair Unrealized Unrealized
(Expressed in thousands) Value Gains Losses
----------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies $ 31,552 $ 219 $ 13
Tax-exempt obligations of states and political subdivisions 19,561 145 867
Taxable obligations of states and political subdivisions 15,183 204 4
Mortgage-backed securities 35,648 567 102
Collateralized mortgage obligations 12,269 441 0
Corporate debt 11,804 79 697
----------------------------------------------------
Total debt securities 126,017 1,655 1,683
Marketable equity securities 4,210 126 0
----------------------------------------------------
Total available for sale $130,227 $1,781 $1,683
====================================================
December 31, 2001
-----------------------------------------------------
Estimated Gross Gross
Fair Unrealized Unrealized
(Expressed in thousands) Value Gains Losses
----------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies $ 13,730 $ 54 $ 47
Tax-exempt obligations of states and political subdivisions 29,576 105 2,307
Taxable obligations of states and political subdivisions 7,251 58 70
Mortgage-backed securities 39,273 452 173
Collateralized mortgage obligations 18,770 323 33
Corporate debt 12,851 42 584
-----------------------------------------------------
Total debt securities 121,451 1,034 3,214
Marketable equity securities 4,100 112 20
-----------------------------------------------------
Total available for sale $125,551 $1,146 $3,234
=====================================================
10
3. Loans and Allowance for Loan Losses
Loans outstanding are as follows:
June 30, December 31,
(Expressed in thousands) 2002 2001
----------------------------------------------------------------------------------------
Real estate-construction $ 4,602 $ 3,318
Real estate-mortgage 43,219 38,701
Real estate-secured by
nonfarm, nonresidential property 39,447 35,892
Commercial, financial and agricultural 26,159 31,306
Obligations of political subdivisions in the U.S. 2,660 2,779
Installment and credit card loans to
individuals 2,969 3,678
------------------------------
Loans receivable $119,056 $115,674
==============================
Non-accruing loans amounted to $1,920,000 and $2,558,000 at June 30, 2002
and December 31, 2001, respectively. Loans past due 90 days and still accruing
interest were $0 and $187,000 at June 30, 2002 and December 31, 2001,
respectively. Most nonaccruing loans are also identified as impaired loans in
the table below.
Impaired loans were as follows:
June 30, December 31, June 30,
(Expressed in thousands) 2002 2001 2001
-----------------------------------------------------------------------------------------------------------------
Impaired loans with no allocated allowance for loan losses $ 114 $ 124 $ 170
Impaired loans with allocated allowance for loan losses 3,949 5,822 7,260
---------------------------------------------
Total $4,063 $5,946 $7,430
=============================================
Amount of the allowance for loan losses allocated $1,131 $1,115 $1,177
Average impaired loans 5,157 7,429 8,574
Interest income recognized during impairment 51 4 6
Cash-basis interest income recognized 48 4 6
Activity in the allowance for loan losses is summarized as follows:
Three months ended June 30, Six months ended June 30,
(Expressed in thousands) 2002 2001 2002 2001
-----------------------------------------------------------------------------------------------------------------
Balance, beginning of period $5,217 $ 7,827 $5,310 $ 7,667
Provision for loan losses 0 0 0 0
Loans charged-off (57) (2,039) (157) (2,095)
Recoveries on loans previously charged-off 90 214 97 430
---------------------------------------------------------------
Net (charge-offs) recoveries 33 (1,825) (60) (1,665)
---------------------------------------------------------------
Balance, end of period $5,250 $ 6,002 $5,250 $ 6,002
===============================================================
The entire allowance represents a valuation reserve which is available for
future charge-offs.
11
4. Shareholders' Equity and Regulatory Matters
As described in its Annual Report on Form 10-K, the Company and the Bank
continue to operate under an agreement with the Federal Reserve Bank of
Cleveland, the Company's primary regulator, and a Consent Order with the Office
of the Comptroller of the Currency, the Bank's primary regulator. Both the
Company and the Bank have complied with or are taking steps designed to comply
with all of the requirements imposed by their regulators. One of the provisions
of the Consent Order requires that the Bank achieve and maintain a Tier 1
capital leverage ratio of at least 6.0%. Since the completion of two successive
stock offerings concluding in June 2000, the Bank has exceeded this minimum
requirement. The bank's unaudited Tier 1 leverage ratio at June 30, 2002 was
8.7%.
5. Stock Options
On May 21, 2001, the Company's shareholders approved the Belmont Bancorp.
2001 Stock Option Plan (the "Plan"). The Plan authorized the granting of up to
1,000,000 shares of common stock as incentive and nonqualified stock options.
Since the Plan's adoption, the Board of Directors has granted options to
purchase shares of common stock at an exercise price ranging from $2.00 to $4.00
to certain employees and officers of the Company. Generally, one fourth of the
options awarded become exercisable on each of the four anniversaries of the date
of grant. However, some of the options granted in 2001 vested immediately on the
date of the grant with the remaining amount vesting over the next three to four
years. The option period expires 10 years from the date of grant.
The following is a summary of the activity in the Plan for the six months
ended June 30, 2002:
Weighted
Average
Available Options Exercise
for Grant Outstanding Price
--------------------------------------------------------------------------------
Balance, January 1, 2002 779,000 221,000 $3.26
Forfeitures 53,000 (53,000) $3.79
Exercised - (7,000) $3.60
Granted (20,000) 20,000 $3.90
-------------------------------------------------
Balance, June 30, 2002 812,000 181,000 $3.13
=================================================
The Company accounts for the stock options under Accounting Principles
Board Opinion No. 25, which requires expense recognition only when the exercise
price is less than the market value of the underlying stock at the measurement
date. Compensation expense of $17,000 and $71,000 was recognized for the six
months ended June 30, 2002 and 2001, respectively, to reflect the impact of
granting certain options below their market price.
SFAS No. 123 requires pro forma disclosures for companies that do not adopt
its fair value accounting method for stock-based compensation. Instead, pro
forma information for net income and basic and diluted earnings per common share
will be provided in the notes to the financial statements as if the fair value
method had been used. During the first six months of 2002 and 2001, pro forma
expense was not considered significant, but the Company anticipates that pro
forma expense will increase and will be disclosed in future periods. For the
year ended 2001, the Company reported a net loss of $415,000. A pro forma loss
of $471,000 would have been recorded had the fair value of the options been
expensed in the consolidated financial statements.
6. Litigation
The Company and its subsidiaries have been named as defendants in legal
actions. Management believes, based on the advice of counsel, that no accrual
for loss is necessary.
12
Since the date of the filing of Company's Annual Report to Shareholders and
Form 10-K for the year ended December 31, 2001, there have been no new material
legal proceedings involving the Company or any material developments to the
proceedings described in such 10-K except as described below.
As described in the Company's Annual Report to Shareholders and Form 10-K
for the year ended December 31, 2001 and the quarterly report on Form 10-Q for
the period ended March 31, 2002, a number of cases related to the shareholder
derivative litigation were settled at the end of 2001, with the one remaining
claim involving the customers of Schwartz Homes, Inc. having been settled in
March of 2002. The Company received certain payments in the first quarter of
2002 as described in the Company's Report on Form 10-Q for the period ended
March 31, 2002. In April 2002, the Company received payment of approximately
$1.7 million representing its share of the remaining settlement proceeds in the
shareholder derivative litigation. In addition, in April 2002, the Company
received a payment of $675,000 from Progressive Casualty Insurance Company on
the fidelity bond issued by Progressive. As a result of this global settlement,
except for the item noted below, the litigation involving loans to Schwartz
Homes, Inc. and customers of Schwartz Homes, Inc., the shareholder derivative
action, the actions with Progressive, the action with Mr. Ciroli and the action
in Tuscarawas County, have all been concluded.
In May 2002, James John Fleagane filed a Petition for Appeal in the West
Virginia Supreme Court of Appeals. Mr. Fleagane seeks to have the Supreme Court
of Appeals review the trial court's ruling that he was not entitled to payment
for his time in connection with the prosecution of the shareholder derivative
action described in the Company's Annual Report to Shareholders and Form 10-K
for the year ended December 31, 2001, and the quarterly report on Form 10-Q for
the period ended March 31, 2002. The Company filed a Response to Petition for
Appeal on June 7, 2002, and intends to vigorously oppose the request for payment
by Mr. Fleagane. At the present time, the West Virginia Supreme Court of Appeals
has not decided whether it will accept the case for review.
In June 2002, the Company settled the litigation commenced in 1999 in the
Court of Common Pleas for Belmont County, Ohio, by George Michael Riley, further
described in the Company's Annual Report to Shareholders and Form 10-K for the
year ended December 31, 2001, for nominal consideration. As a result, that case
will be dismissed with prejudice.
13
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historic information, this report may contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are statements other
than statements of historical fact, including statements regarding the Company's
expectations, beliefs, hopes, intentions or strategies regarding the future. In
some cases, forward-looking statements can be identified by the use of words
such as "may," "will," "expects," "should," "believes," "plans," "anticipates,"
"estimates," "predicts," "potential," "continue," or other words of similar
meaning. Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those discussed in, or
implied by, the forward looking statements. Readers should not place undue
reliance on forward-looking statements, which reflect management's opinion only
as of the date on which they were made. Except as required by law, the Company
disclaims any obligation to review or update these forward-looking statements to
reflect events or circumstances as they occur. Readers should also carefully
review any risk factors described in Company reports filed with the Securities
and Exchange Commission.
Various statements made in this Report concerning the manner in which the
Company intends to conduct its future operations, and potential trends that may
impact future results of operations, are forward-looking statements. The Company
may be unable to realize its plans and objectives due to various important
factors, including, but not limited to, the factors described below. These and
other factors are more fully discussed elsewhere in this Report.
. The Company has entered into consent agreements with the Federal
Reserve Bank of Cleveland and the Office of the Comptroller of the
Currency, described in Note 4 to the quarterly consolidated financial
statements and below under the caption "Capital Resources", that
require it to take various actions and meet various requirements. If
the Company fails to satisfy all of these requirements, the Comptroller
of the Currency and Federal Reserve Bank could potentially assume
complete or significantly greater control of the Company's operations.
. The Company has recognized substantial loan losses in past years,
principally related to loans made under the direction of prior
management. While the Company has created what it believes are
appropriate loan loss reserves, the Company could incur significant
additional loan losses in future periods, particularly if general
economic conditions or conditions in particular industries in which its
loans are concentrated deteriorate.
. The Company is subject to increasingly vigorous and intense competition
from other banking institutions and from various financial institutions
and other nonbank or non-regulated companies or firms that engage in
similar activities. Many of these institutions have significantly
greater resources than the Company.
14
RESULTS OF OPERATIONS
SUMMARY
For the six months ended June 30, 2002, Belmont Bancorp. earned $3,816,000,
or $0.34 per common share, compared to earnings of $340,000, or $0.03 per common
share, for the first six months of 2001. For the quarter ended June 30, 2002,
the Company earned $1,732,000, or $0.16 per common share, compared to net income
of $175,000, or $0.02 per common share for the second quarter of 2001. Included
in earnings for the six months ended June 30, 2002 are proceeds from settlements
of legal matters including a derivative action and related litigation. Exclusive
of settlement proceeds and related expenses, the Company would have reported net
earnings of $234,000 for the second quarter and $395,000 for the six months
ended June 30.
Average assets were down slightly to $283 million for the second quarter of
2002, compared to $284 million for the second quarter of 2001. Average assets
for the six months ended June 30, 2002 were $284 million compared to $283
million for the comparable period last year. Total assets at June 30, 2002 were
$281 million compared to $289 million at December 31, 2001.
Throughout the second quarter of 2002, yields on U.S. Treasury securities
across the maturity spectrum remained low relative to historical levels. This
impacts the Company through loan refinancing activity, reinvestment
opportunities in loans and investments, and financing costs on its deposit base.
The taxable equivalent net interest margin was 3.65% for the second quarter of
2002, up from 3.43% for first quarter of 2002. The net interest margin for the
second quarter of 2001 was 3.72%. The net interest rate spread (the difference
between the average yields on earning assets and interest-bearing liabilities)
was 3.22% for the second quarter of 2002 compared to 3.20% for the comparable
period of 2001. The taxable equivalent yield on earning assets declined to 6.06%
from 7.69%, a decrease of 163 basis points, during the second quarter of 2002
compared to the second quarter of 2001. This decline was offset by a decrease of
166 basis points in the cost of interest-bearing liabilities to 2.83% from
4.49%. The declines in yields on earning assets and the cost of funds reflect
the precipitous drop in interest rates throughout 2001. Most notably the
targeted federal funds rate set by the Federal Open Market Committee fell from
6.50% at the beginning of 2001 to 1.75% by the end of 2001, and the prime
lending rate declined from 9.50% to 4.75% during 2001.
Net interest income increased by $125,000 for the first six months of 2002
compared to the same period last year as average earning assets increased $3.9
million to $264 million for the first six months of 2002. The yield on earning
assets decreased from 7.70% to 6.07%, and the cost of interest bearing
liabilities decreased from 4.60% to 2.97%. The taxable equivalent net interest
margin declined to 3.54% for the first six months of 2002 compared to 3.63% for
the same period in 2001.
15
OTHER OPERATING INCOME
Changes in various categories of other income are depicted in the table
below.
Three months ended June 30, Six months ended June 30,
(Expressed in thousands) 2002 2001 % Change 2002 2001 % Change
------------------------------------------------------------------------------------------------------------
Trust fees $ 122 $208 -41.3% $ 250 $ 307 -18.6%
Service charges on deposits 224 230 -2.6% 445 421 5.7%
Legal settlements 2,378 0 na 6,311 0 na
Earnings on bank-owned life insurance 18 54 -66.7% 35 108 -67.6%
Gain on sale of loans and loans held for sale 45 20 125.0% 105 26 303.8%
Other income (individually less than
1% of total income) 138 69 100.0% 317 218 45.4%
--------------- ---------------
Subtotal 2,925 581 403.4% 7,463 1,080 591.0%
Securities gains (losses) (31) 6 -616.7% (94) 4 -2450.0%
--------------- ---------------
Total $2,894 $587 393.0% $7,369 $1,084 579.8%
=============== ===============
Included in noninterest income for the first six months of 2002 was $6.3
million in proceeds from legal settlements. During December 2001, the Company
reached a comprehensive legal settlement wherein the Company resolved five
lawsuits, including a costly derivative action. Each case, concluded as a result
of the comprehensive settlement, was either directly or indirectly related to
losses incurred by the Company during 1998 and 1999 for commercial loans to
Schwartz Homes, Inc., formerly the Bank's largest commercial borrower, and an
interim lending program offered by the Bank to customers of Schwartz Homes, Inc.
Schwartz Homes, Inc. filed bankruptcy during 1999 and was subsequently
liquidated.
As a result of the settlement during the first quarter of 2002, the Company
received a pre-tax payment from its former independent audit firm in the amount
of $2.2 million and a pre-tax payment of $1.7 million settling claims against
certain current and former directors of the Company. The settlement concluded
during April 2002 when the Bank received the last payment of the settlement from
Progressive Insurance, its former carrier for directors and officers liability
insurance and fidelity bond insurance. The gross amount of Progressive's payment
to the Company was $2.4 million. All payments received and recorded by the
Company for the comprehensive settlement, except for $675,000 received from
Progressive for its fidelity bond policy, were net of plaintiff's attorneys fees
and costs; those fees and costs were approximately $3.6 million.
Trust fees were down in both the quarterly and year-to-date periods
presented. The overall decline in the valuation of the stock market impacts
trust fees since most fees are assessed based on the market value of assets held
in the trust accounts. Also, a trust with assets of $9 million closed its
account with the Trust department.
Service charges on deposits increased 5.7% from $421,000 to $445,000 during
the six months ended June 30, 2002 principally due to the reduction in the
earnings credit allowance rate provided for certain business accounts. The
earnings allowance provides a reduction to customers' service charges based on
deposit balances maintained; a lower earnings credit rate results in higher
service charge income for the Bank unless customers increase their deposit
balances to compensate for the lower rate.
Earnings on bank-owned life insurance policies declined $73,000, or 67.6%,
during the comparative reporting periods due to the redemption of approximately
$3.4 million in officer life insurance policies during December 2001.
Gains on sales of loans and loans held for sale increased from $26,000 for
the first six months of 2001 to $105,000 for same period of 2002. Capitalized
mortgage servicing rights of $66,000 were included in gains on sales of loans
held for sale for the six months ended June 30, 2002. No mortgage servicing
16
rights were capitalized during the first six months of 2001. The total
outstanding balance of mortgage loans sold without recourse and with servicing
rights retained increased to $60.0 million at June 30, 2002 from $44.0 million
at June 30, 2001. Gain on sales of loans also included $13,000 for gains
realized on the sale of the Bank's credit card portfolio during the second
quarter of 2002.
Securities losses incurred during the first six months of 2002 were related
to the sale of approximately $11.0 million in tax-exempt bonds. The Bank
continues to reduce the tax-exempt bond portfolio to reduce the interest rate
risk associated with long-term fixed rate investments and to increase taxable
income thereby enabling the Company to utilize its tax loss carryforwards and
tax credits.
OPERATING EXPENSES
The following table shows the dollar amounts and the percent change in
various components of operating expenses.
Three months ended June 30, Six months ended June 30,
(Expressed in thousands) 2002 2001 % Change 2002 2001 % change
---------------------------------------------------------------------------------------------------------------------------------
Salaries and wages $ 905 $ 915 -1.1% $1,905 $1,802 5.7%
Employee benefits 206 271 -24.0% 468 500 -6.4%
Occupancy expense 218 227 -4.0% 449 454 -1.1%
Furniture and equipment expense 255 228 11.8% 466 446 4.5%
Legal fees 251 362 -30.7% 848 685 23.8%
Legal settlements 35 - na 594 - na
Insurance, including federal deposit insurance 150 149 0.7% 298 295 1.0%
Examinations and audits 133 99 34.3% 254 196 29.6%
Telecommunication expense 40 45 -11.1% 81 84 -3.6%
Taxes other than payroll and real estate 51 53 -3.8% 118 109 8.3%
Supplies and printing 59 64 -7.8% 104 103 1.0%
Amortization of mortgage servicing rights 40 - na 76 - na
Other (individually less than 1% of total income) 389 415 -6.3% 683 740 -7.7%
---------------------------------------------------------------------------
Total $2,732 $2,828 -3.4% $6,344 $5,414 17.2%
===========================================================================
The employee count at the end of June 2002 was 131 full time equivalent
employees ("FTEs"), down from 141 FTEs at the end of June 2001. The average
number of FTEs for 2002 through June was 132 versus 136 for the same period
during 2001. The increase in salaries and wages for the six months ended June
30, 2002 compared to the six months ended June 30, 2001 was principally the
result of incentive compensation paid during 2002 and merit increases.
Compensation costs associated with the grant of stock options were $17,000 and
$71,000 for the six months of 2002 and 2001, respectively.
Employee benefits for the six months ended June 30, 2002 include
approximately $55,000 in costs associated with expenses related to former
executives of the Company in connection with the comprehensive legal settlement
previously described. These costs include payroll taxes associated with the
payment of various compensation plans and a contribution to the Company's 401(k)
plan for the benefit of one of the former executives. However, these one time
costs were offset by the elimination of liabilities previously recorded for
discontinued deferred compensation programs for directors and the unused portion
of moving expenses previously accrued for a former executive.
Legal fees totaled $848,000 for the first six months of 2002 and included
approximately $517,000 in costs related to the comprehensive legal settlement
previously described. The Company expects substantially lower legal costs during
the remaining months of 2002.
Legal settlements expense for the first six months of 2002 totaled $594,000
and includes $179,000 in settlement charges related to the comprehensive legal
17
settlement previously described. The remaining settlement charges relate to
various claims against the Company described under Item 1 - "Legal Proceedings"
below and in the Company's Annual Report to Shareholders and Form 10-K for the
year ended December 31, 2001.
SECURITIES
The estimated fair value of securities available for sale at June 30, 2002
and December 31, 2001 are detailed in Note 2 of the quarterly financial
statements.
At June 30, 2002, the Company did not own any investments of a single
issuer, the value of which exceeded 10% of total shareholders' equity, or
$3,115,000, except for stock in the Federal Home Loan Bank of Cincinnati. The
book value and estimated fair value of this stock was $3,375,000 at June 30,
2002.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company provides as an expense an amount which reflects incurred loan
losses. This provision is based on the growth of the loan portfolio and on
historical loss experience. The expense is called the provision for loan losses
in the Consolidated Statements of Income. Actual losses on loans are charged
against the allowance built up on the Consolidated Balance Sheets through the
provision for loan losses. The amount of loans actually removed as assets from
the Consolidated Balance Sheets is referred to as charge-offs and, after netting
out recoveries of previously charged-off assets, becomes net charge-offs.
Details of the activity in the Allowance for Loan Losses are included in
Note 3 of the quarterly financial statements. No loan loss provision was
recorded during the three months or six months ended June 30, 2002 or 2001
because the Company had sufficient reserves based on its analysis of the
allowance for loan losses. In addition, no events or changes in circumstances
were identified indicating a need to recognize a loss through current
provisions. The following table depicts various loan and loan-related
statistics.
Three months ended June 30, Six months ended June 30,
(Expressed in thousands) 2002 2001 2002 2001
--------------------------------------------------------------------------------------------------------------------------
Loans outstanding $119,056 $120,420 $119,056 $120,420
Average loans $116,379 $123,293 $115,572 $125,900
Annualized net charge offs (recoveries) as a percent of:
Average loans -0.11% 5.92% 0.10% 2.64%
Allowance for loan losses -2.51% 121.63% 2.29% 55.48%
Allowance for loan losses to:
Total loans at end of period 4.41% 4.98% 4.41% 4.98%
Non-performing assets 270.62% 78.86% 270.62% 78.86%
NON-PERFORMING ASSETS
Non-performing assets consist of (1) non-accrual loans, leases and debt
securities for which the ultimate collectibility of the full amount of interest
is uncertain, (2) loans and leases past due ninety days or more as to principal
or interest (unless management determines that, based on specific circumstances,
interest should continue to accrue on such loans) and (3) other real estate
owned. A loan is placed on non-accrual status when payment of the full amount of
principal and interest is not expected, or when principal or interest has been
in default for a period of ninety days or more unless the loan is well secured
and in the process of collection. A summary of non-performing assets follows:
18
Non-performing assets June 30, Dec. 31, June 30,
(Expressed in thousands) 2002 2001 2001
--------------------------------------------------------------------------------
Non-accrual loans $1,920 $2,558 $6,756
Loans 90 days or more past due
but accruing interest 0 187 242
Other real estate owned 20 104 613
-----------------------------------
Total $1,940 $2,849 $7,611
===================================
Non-performing assets as a percent of
total assets 0.69% 0.99% 2.68%
Details of impaired loans and related information are included in Note 3 of
the quarterly financial statements. The Company has made considerable
improvements to the level of nonperforming assets and impaired loans since June
2001. Impaired loans declined $3.3 million from $7.4 million at June 30, 2001 to
$4.1 million at June 30, 2002. A single credit relationship that refinanced most
of its debt elsewhere accounted for $2.1 million of this reduction.
In addition to the schedule of non-performing assets, management prepares a
watch list consisting of loans, which they have determined require closer
monitoring to further protect the Company against loss. The balance of loans and
available credit classified by management as substandard due to delinquency, a
change in financial position, or other factors and not included as
non-performing assets totaled $15,177,000 at June 30, 2002, $15,684,000 at
December 31, 2001, and $14,820,000 at June 30, 2001; no loans were classified as
doubtful.
LOAN CONCENTRATIONS
The Company uses the Standard Industry Code (SIC) system to determine
concentrations of credit risk by industry. Management monitors concentrations of
credit as measured by an industry's total available and outstanding credit
balance expressed as a percent of Tier 1 capital. Loan concentrations exceeding
25% of the Bank's Tier 1 capital are detailed in the following tables.
(Expressed in thousands) June 30, 2002 December 31, 2001
Loan Balance and % of Loan Balance and % of
Industry Available Credit Tier 1 Capital Available Credit Tier 1 Capital
-----------------------------------------------------------------------------------------------------------
Real estate - operators of
nonresidential buildings $8,033 33.6% $7,520 40.9%
DEFERRED FEDERAL TAX ASSETS
Deferred federal tax assets declined from approximately $8.0 million at
December 31, 2001 to $5.7 million at June 30, 2002. The deferred federal tax
assets include significant balances related to tax loss carryforwards and tax
credits. The gross legal settlements received during the first six months of
2002 generated taxable income of approximately $6.3 million that utilized a
portion of the tax loss carryforwards resulting in a reduction of the deferred
federal tax asset balance. Because the Company still has sizeable tax loss
carryforwards, the Company continues to reduce sources of tax-exempt income
principally through the sale of tax-exempt bonds.
OTHER LIABILITIES
Other liabilities declined from $3.2 million at December 31, 2001 to $1.5
million at June 30, 2002. Other liabilities include amounts for various accrued
expenses, accounts payable, funds owed for securities traded but not yet
settled, and obligations related to compensation plans. The decline in other
liabilities for the comparative periods presented was due to lower legal expense
accruals, the termination of certain compensation plans as a result of the
comprehensive legal settlements previously discussed, and a reduction in
securities traded but not settled.
19
CAPITAL RESOURCES
The table below depicts the capital ratios for the Bank and for the Company
on a consolidated basis as of June 30, 2002. In addition, the table depicts the
regulatory requirements for classification as "adequately capitalized" under the
regulatory guidelines for Prompt Corrective Action. Tier 1 capital consists
principally of shareholders' equity less goodwill and deferred tax assets, while
Tier 2 capital consists of certain debt instruments and a portion of the
allowance for loan losses. Total capital consists of Tier 1 and Tier 2 capital.
As described in Note 4 of the quarterly financial statements, the Bank
entered into a Consent Agreement with the Office of the Comptroller of the
Currency to maintain a Tier 1 leverage ratio of at least 6.0%. As a result of
its recapitalization efforts which began in 1999 and concluded in June 2000, the
Bank was formally notified that it had achieved an adequately capitalized
designation under Prompt Corrective Action regulations as of June 30, 2000 in a
letter from the Office of the Comptroller of the Currency dated July 27, 2000.
Under the Consent Order, the Bank will not be treated as "well capitalized" even
though it has achieved a Tier 1 leverage ratio of 8.7%, well in excess of the
requirement of 6%, unless and until the Consent Order is terminated or modified
to eliminate the capital requirement under the Consent Order. There are no
conditions or events since that notification that management believes has
changed the Bank's capital category.
(Expressed in thousands)
For Capital
Actual Adequacy Purposes (1)
As of June 30, 2002: Amount Ratio Amount Ratio
-----------------------------------------------------------------------------------------------------
Total risk based capital to risk weighted assets:
Consolidated $27,383 16.6% $12,777 8.0%
Bank 25,995 15.9% 12,700 8.0%
Tier 1 capital to risk weighted assets:
Consolidated 25,275 15.3% 6,389 4.0%
Bank 23,909 14.6% 6,350 4.0%
Tier 1 capital to average assets:
Consolidated 25,275 9.1% 6,389 4.0%
Bank 23,909 8.7% 11,044 4.0% (2)
(1) These are also the standards to be "adequately capitalized" under Prompt
Corrective Action Provisions.
(2) The Consent Order requires a 6% Tier 1 leverage ratio. At June 30, 2002, the
amount of the Bank's Tier 1 capital requirement to meet compliance with the
Consent Order was $16,566,000; the Bank's actual Tier 1 capital was $23,909,000
at June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Effective liquidity management involves ensuring that the cash flow
requirements of depositors and borrowers, as well as the operating needs of the
Company, are met. Funds are available through the operation of the 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 decreased $11.1 million,
or 4.7%, from December 31, 2001 to June 30, 2002. Average quarterly deposits
declined $3.1 million during the first quarter of 2002 and an additional $3.4
million during the second quarter of 2002 compared to the fourth quarter of
2001. With the decline in interest rates during 2001, the banking industry has
experienced a large amount of loan refinancing activity. The Bank has not
aggressively priced offered rates for time deposits relative to its competitors
due to available yields on investment alternatives and low loan demand. The
Bank's federal funds sold at June 30, 2002 totaled $11.8 million, down from
$17.6 million at December 31, 2001.
20
Cash flows from the securities portfolio are also a source of liquidity.
Securities available for sale increased from $126 million at December 31, 2001
to $130 million at June 30, 2002. Of this increase, approximately $2.2 million
related to increases in fair value. Purchases during 2002 were primarily
directed toward investments with relatively short average lives due to the lower
interest rate environment.
The Bank has an available line of credit with a correspondent bank totaling
$4,100,000 that may be used as an alternative funding source. The Bank also has
an unused credit line with the Federal Home Loan Bank for $20 million. All
borrowings at the Federal Home Loan Bank are subject to eligible collateral
requirements; at June 30, 2002, the Bank had sufficient eligible collateral to
utilize the credit line.
The main source of liquidity for the parent company is dividends from the
Bank. Presently, the Bank cannot pay dividends without prior regulatory approval
under the Consent Order. At June 30, 2002, the parent had cash and marketable
securities with an estimated fair value of $1.5 million. The parent company does
not have any debt to third parties. Management believes sufficient liquidity is
currently available to meet estimated short-term and long-term funding needs for
the Bank and the parent company. Liquidity may be impacted by the ability of the
Company to generate future earnings.
ITEM 3-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 3 has been disclosed in Item 7A of the
Company's Annual Report on Form 10-K for the year ended December 31, 2001. There
has been no material change in the disclosure regarding market risk.
PART II - OTHER INFORMATION
Item 1. Legal proceedings
Since the date of the filing of Company's Annual Report to Shareholders and
Form 10-K for the year ended December 31, 2001, there have been no new material
legal proceedings involving the Company or any material developments to the
proceedings described in such 10-K except as described below.
As described in the Company's Annual Report to Shareholders and Form 10-K
for the year ended December 31, 2001 and the quarterly report on Form 10-Q for
the period ended March 31, 2002, a number of cases related to the shareholder
derivative litigation were settled at the end of 2001, with the one remaining
claim involving the customers of Schwartz Homes, Inc. having been settled in
March of 2002. The Company received certain payments in the first quarter of
2002 as described in the Company's Report on Form 10-Q for the period ended
March 31, 2002. In April 2002, the Company received payment of approximately
$1.7 million representing its share of the remaining settlement proceeds in the
shareholder derivative litigation. In addition, in April 2002, the Company
received a payment of $675,000 from Progressive Casualty Insurance Company on
the fidelity bond issued by Progressive. As a result of this global settlement,
except for the item noted below, the litigation involving loans to Schwartz
Homes, Inc. and customers of Schwartz Homes, Inc., the shareholder derivative
action, the actions with Progressive, the action with Mr. Ciroli and the action
in Tuscarawas County, have all been concluded.
In May 2002, James John Fleagane filed a Petition for Appeal in the West
Virginia Supreme Court of Appeals. Mr. Fleagane seeks to have the Supreme Court
of Appeals review the trial court's ruling that he was not entitled to payment
for his time in connection with the prosecution of the shareholder derivative
action described in the Company's Annual Report to Shareholders and Form 10-K
for the year ended December 31, 2001, and the quarterly report on Form 10-Q for
the period ended March 31, 2002. The Company filed a Response to Petition for
Appeal on June 7, 2002, and intends to vigorously oppose the request for payment
by Mr. Fleagane. At the present time, the West Virginia Supreme Court of Appeals
has not decided whether it will accept the case for review.
In June 2002, the Company settled the litigation commenced in 1999 in the
Court of Common Pleas for Belmont County, Ohio, by George Michael Riley, further
described in the Company's Annual Report to Shareholders and Form 10-K for the
year ended December 31, 2001, for nominal consideration. As a result, that case
will be dismissed with prejudice.
21
Item 2. Changes in securities and use of proceeds
(c) Pursuant to the Belmont Bancorp. 2001 Stock Option Plan and the
exercise of options granted thereunder, on May 28, 2002, the Company issued
seven thousand shares of its common stock to Michael R. Baylor for a price of
Twenty Five Thousand Two Hundred Dollars ($25,200). The shares of common stock
were issued in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, due to the non-public nature of the
transaction and the sophistication of the purchaser, who is a recent former
Director of the Company and Executive Vice President and Chief Lending Officer
of the Bank.
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security shareholders
The annual meeting of shareholders was held on May 20, 2002. Of the
11,101,403 shares entitled to vote at the meeting, 9,315,555 shares were voted.
The results were as follows:
Proposal number 1 - To consider and act upon the proposed Amendment to
the Articles of Incorporation to reduce the number of permitted
directors
FOR AGAINST ABSTAIN NON-VOTE
6,784,912 257,049 61,346 2,212,248
Proposal number 2 - Election of directors
(Term expiring in the Year 2004):
FOR WITHHOLD
Brian L. Schambach 8,997,704 317,851
(Term expiring in the Year 2005):
FOR WITHHOLD
Jay A. Beck 8,950,036 365,519
David B. Kelley 9,000,792 314,762
Tillio P. Petrozzi 9,012,281 303,274
Charles A. Wilson, Jr. 8,832,754 482,801
Proposal number 3 - To ratify the appointment of Crowe, Chizek and
Company LLP as independent auditors for the year ending December 31,
2002:
FOR AGAINST ABSTAIN
9,258,455 22,854 34,246
The following directors continued in office:
Directors with terms ending in 2003:
David R. Giffin
Terrence A. Lee
W. Quay Mull, II
Wilbur R. Roat
Directors with terms ending in 2004:
John H. Goodman, II
James R. Miller
Keith A. Sommer
22
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 (i) Articles of Incorporation (1)
3(ii) Code of Regulations (2)
10.1 Employment Agreement dated December 15, 1999 between Wilbur R.
Roat, Belmont Bancorp. and Belmont National Bank (3)
10.2 Employment Agreement dated April 16, 2001 between Michael
Baylor, Belmont Bancorp. and Belmont National Bank (4)
10.3 Belmont Bancorp. 2001 Stock Option Plan (5)
99.1 Certification of Quarterly Report on Form 10-Q
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-2 filed with the Securities and Exchange Commission on November 16,
1999, and incorporated herein by reference; Amendment to the Articles
of Incorporation dated June, 2002, filed herewith.
(2) Filed as an exhibit to the Company's Registration Statement on Form
S-2 filed with the Securities and Exchange Commission on November 16,
1999, and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Annual Report and Form 10-K for
the year ended December 31, 1999 (Registration No. 0-12724) and
incorporated herein by reference.
(4) Filed as an exhibit to the Company's Annual Report and Form 10-K for
the year ended December 31, 2001 (Registration No. 0-12724) and
incorporated herein by reference.
(5) Filed as an exhibit to the Company's Annual Report and Form 10-K for
the year ended December 31, 2000 (Registration No. 0-12724) and
incorporated herein by reference.
(b) Reports on Form 8-K
None
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Belmont Bancorp.
(Registrant)
/s/ Wilbur Roat
By: Wilbur Roat
President & CEO
/s/ Jane Marsh
By: Jane Marsh
Secretary
(Principal Financial and Accounting Officer)
August 12, 2002
24