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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.
(Exact Name of Registrant as specified 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 (614)-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, $3.57 par value NASDAQ SmallCapMarket
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-K 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._____
Aggregate market value of voting stock held by nonaffiliates
as of March 13, 1995 - $37,006,000
There were 1,057,322 shares of $3.57 par value, common stock
outstanding as of March 13, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the Registrant dated
March 17, 1995 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
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 ten branches located in Belmont,
Harrison and Tuscarawas Counties in Ohio. The main office is located
in the city of St. Clairsville. Other branch locations in Belmont
County include Bridgeport, Lansing, Shadyside, and the Ohio Valley
Mall. Branches in Harrison County are located in Jewett and 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 the Ohio
Valley Mall and in New Philadelphia, Ohio providing 24 hour banking
service to our customers. Belmont National Bank belongs to Cirrus, 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). The purpose of the
subsidiary was primarily to engage in lease consulting for personal or
real property. Changes to the federal tax code that eliminated new
investment tax credits as of December 31, 1987 adversely affected the
leasing business. The daily operations of Belmont Financial Network
were suspended during 1989 to reduce overhead costs. The leases
formerly serviced by Belmont Financial Network are presently
administered by Belmont National Bank. BFN was inactive throughout
1994.
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 subject to regulation under the Bank Holding
Company Act of 1956, as amended (the "Act"). The Act requires the
prior approval of the Federal Reserve Board for a bank holding company
to acquire or hold more than a 5% voting interest in any bank, and
restricts interstate banking activities. The Act restricts Belmont's
non-banking activities to those which are closely related to banking.
The Act does not place territorial restrictions on the activities of
nonbank subsidiaries of bank holding companies. Belmont's banking
subsidiary is subject to limitations with respect to intercompany
loans and investments. A substantial portion of Belmont's cash
revenues is derived from dividends paid by its subsidiary bank. These
dividends are subject to various legal and regulatory restrictions as
summarized in Note 14 of the financial statements.
The Bank is subject to the provisions of the National Banking Act
and the regulations of the Federal Reserve Board and the Federal
Deposit Insurance Corporation. Under the Bank Holding Company Act of
1956, as amended, and under regulations of the Federal Reserve Board
pursuant thereto, a bank holding company is prohibited from engaging
in certain tie-in arrangements in connection with extensions of
credit.
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 OF PROPERTIES
The principal executive offices of Belmont National Bank are
located in St. Clairsville, Ohio, the seat of Belmont County. 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,
marketing and human resources offices. In addition, the Bank
transacts business in the following branch locations:
Mall Office-This office is located at the Ohio Valley Mall, a
major shopping mall located two miles east of St. Clairsville,
Ohio, and consists of a 4,000 square foot office inside the mall
proper, plus a stand alone drive-in facility at the perimeter of
the Mall. Automatic teller machines are located at the drive-in
location and inside the branch office.
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.
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.
Jewett Office-This office is located in Harrison County
approximately twenty-six miles north of St. Clairsville, across
from Cross Street, the intersection of State Routes 9 and 151.
The building is constructed of masonry brick and contains 2,400
square feet with an accompanying drive-in facility.
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.
All offices are owned by the Bank except for the Mall Office.
The lease at the Mall location is in effect until the year 1996 with
options to renew thereafter.
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
1994
Dividend
Quarter High Low per Share
1st $22.00 $21.00 $0.1680
2nd 24.50 22.00 0.1680
3rd 25.75 21.00 0.2100
4th 36.00 23.00 0.2100
Total $0.7560
1993
Dividend
Quarter High Low per Share
1st $21.00 $21.00 $0.1527
2nd 21.00 20.50 0.1527
3rd 21.00 21.00 0.1527
4th 22.00 21.00 0.2036
Total $0.6617
The number of shareholders of record for the Corporation's stock
as of March 10, 1995 was 598. The latest available market price
based on an actual trade price was $35.00 per share on March 10, 1995.
Belmont Bancorp.'s common stock has a par value of $3.57 and is
traded in the over-the-counter market, principally in St. Clairsville,
Ohio, and in Wheeling, WV areas. The tables above show its high and low
market prices and dividend information for the past two years. In October
1994, the Corporation's stock was listed on The Nasdaq SmallCap Market.
Previously, market prices were based on actual trades known to the
Corporation due to lack of an established market. Cash dividends paid
per share have been restated to reflect the effect of a 10% common
stock dividend paid in January 1994 and a 25% common stock dividend
paid in July 1994.
Information regarding the limitations on dividends available to
be paid can be located in Footnote 15 of the Notes to the Consolidated
Financial Statements in the Corporation's Annual Report (Exhibit 2).
Treasury stock is accounted for using the cost method. There
were 424 shares held in treasury on December 31, 1994 and 728 shares
in treasury on December 31 1993.
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 2) 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
Net income increased during 1994 by 25.89% from the previous
year. Net income per common share for 1994 was $2.98 compared to
$2.35 per common share in 1993. The Corporation's net income to
average assets, referred to as return on assets, increased to 1.12%
for the year ended 1994 from .96% last year. Operating income
consists of earnings before income taxes, minus net investment and
trading gains or plus net investment and trading losses. Operating
income increased by $2,292,000 from 1994 to 1993. The table below
summarizes earnings performance for the past three years.
($000s) except per 1994 1993 1992
share data
Operating income $4,324 $2,032 $2,089
Net income 3,234 2,569 1,838
Net income per share $2.98 $2.35 $1.71
Return on average
assets 1.12% 0.96% 0.87%
Return on average common equity 16.71% 14.57% 11.30%
Return on average total equity 16.27% 14.21% 11.33%
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 2), compare interest revenue and interest earning assets
outstanding with interest cost and liabilities outstanding for the
years ended December 31, 1994, 1993, and 1992, 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 grew by $2,963,000 on a
taxable equivalent basis during 1994 compared to the same period last
year, a 34.82% increase. The increase in net interest income was
primarily attributable to the increase in average earning assets and
improved net interest margins. During 1994, the Corporation's average
interest-earning assets grew by approximately $21.2 million, up 8.48%
from 1993.
The yield on interest earning assets improved from 6.86% during
1993 to 7.49% during 1994, and increase of 63 basis points. (A basis
point (bp) is equivalent to .01%.) The cost of interest bearing
liabilities declined by 17 basis points from 1993 to 1994.
Consequently, the net interest rate spread increased from 3.07% during
1993 to 3.87% during 1994.
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 increase in the Corporation's net
interest income during the year-to-date periods presented from 1993 to
1994 was generated by growth in the levels of earning assets and
average interest bearing liabilities outstanding (depicted by the
volume column). In addition, higher yields on taxable investment
securities and lower costs on retail deposits (depicted by the yield
column) contributed to the improvement in net interest margin.
OTHER OPERATING INCOME
Other operating income excluding securities gains and losses,
increased 6.64% or $84,000 and totaled $1,349,000 in 1994, compared
to $1,265,000 in 1993. The table below shows the dollar amounts and
growth rates of the components of other operating income.
1994 1993 1992
($000s) Total Change Total Change Total
Trust income $ 341 24.45% $ 274 1.86% $ 269
Service charges on deposits 527 11.18% 474 15.33% 411
Other service charges 59 -18.06% 72 56.52% 46
Other income 422 -5.17% 445 55.59% 286
Subtotal 1,349 6.64% 1,265 25.00% 1,012
Investment securities
gains (losses) (9) 95.61% (205) -141.58% 493
Gains (losses) on
securities
available for sale (55) -104.35% 1,264 1327.18% (103)
Trading gains (losses) 1 100.86% (116) -73.13% (67)
Total 1,286 -41.76% 2,208 65.39% $1,335
Service charges on deposits increased 11.18%, or $53,000 during
1994 compared to the prior period. This increase was partially offset
by a decline in Other Service Charges which are primarily comprised of
late charges on loans. Other income declined 5.17% from $445,000 in
1993 to $422,000 in 1994; this decline was the result of lower
commissions earned in the discount brokerage operation as customers'
demand for mutual funds declined as deposit rates improved.
Losses on investments held in the maturity portfolio occurred as
a result of calls on municipal bonds in the portfolio. These losses
totalled $9,000 during 1994. Net losses were realized on securities
available for sale during 1994 totalling $55,000 when securities were
sold to reinvest at higher yields.
Trading gains netted to $1,000 during 1994 compared to $116,000
in losses during 1993. Securities held in the trading account are
valued at market value with a corresponding adjustment to income. No
securities were held in the trading account at December 31, 1994. One
security, a collateralized mortgage obligation, was held in the
trading account at December 31, 1993. The following table summarizes
trading gains and losses realized during the past three years.
($000s) 1994 1993 1992
Trading gains $ 1 $ 5 $ 34
Trading losses - (121) (101)
Net trading gains (losses) $ 1 $ (116) $ (67)
The related income taxes on securities transactions, including
trading and securities available for sale, were $67,000 and $77,000
for the years ended 1993 and 1992, respectively. A tax credit of
$15,000 was attributable to securities transactions for
1994.
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 1994, 1993, and 1992.
($000s) 1994 % Change 1993 % Change 1992
Salaries and wages $2,281 8.98% $2,093 26.16% 1,659
Employee benefits 665 -6.99% 715 46.22% 489
Net occupancy expense 533 -1.48% 541 28.50% 421
Equipment expense 618 25.87% 491 8.63% 452
Other operating
expenses 2,972 1.89% 2,917 39.84% 2,086
Total $7,069 4.62% $6,757 32.31% $5,107
One measure of operating efficiency is the amount of assets
managed per full time equivalent employee. Total assets managed per
full time equivalent employee (FTE) were $2.819 million at December
31, 1994 compared to $2.623 million of assets per FTE at December 31,
1993. Equipment expense had the largest percentage increase of the
categories itemized due to the installation of a network system and
the purchase of computer equipment to convert the subsidiary bank's
data processing sytem to an "in-house" operation. The increase in
salaries and wages is primarily attributable to compensation plans for
officers that are tied to earnings performance.
FINANCIAL CONDITION
The book values of investments as of December 31, 1994 and 1993
are detailed in Footnote 3 of the Notes to the Consolidated Financial
Statements in the Corporation's annual report (Exhibit 2).
Securities Held to Maturity
Maturity < 1-5 Year 6-10 Year Over 10
1 Year Maturity Maturity Maturity Total
($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
U.S. Government
agencies and
corporations $ - - $974 5.58% $2,274 4.94% $1,000 7.00% $4,248 5.57%
States and
political
subdivisions(a) 1,108 4.15% 919 7.44% 3,942 7.41% 18,275 8.51% 24,244 8.09%
Agency mortgage-
backed
securities(b) 237 9.14% 40,968 7.32% 10,071 7.38% - - 51,276 7.34%
Mortgage
derivative
securities 4,206 5.96% 7,449 5.45% 1,040 5.83% - - 12,695 5.65%
Total $5,551 5.73% $50,310 7.01% $17,327 6.98% $19,275 8.43% $92,463 7.22%
(a) Taxable equivalent yields
(b) Maturities of mortgage-backed securities are based on estimated average life.
Securities Available for Sale (excluding Equity Securities)
Maturity < 1-5 Year 6-10 Year Over 10
1 Year Maturity Maturity Maturity Total
($000s) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
U.S. Government
Agencies and
corporations $ 0 - $ 4,744 7.39% $ 1,516 7.53% $ 0 - $ 6,260 7.42%
Agency mortgage-
backed
securities(b) 57 6.98% 29,517 6.83% 439 8.12% 9,942 6.68% 39,955 6.81%
Mortgage
derivative
securities 0 - 851 5.39% 0 - 0 - 851 5.39%
Total fair value $ 57 6.98% $35,112 6.87% $ 1,955 7.66% $ 9,942 6.68% $47,066 6.86%
Amortized cost $ 56 $36,938 $ 1,973 $10,359 49,326
(a) Taxable equivalent yields
(b) Maturities of mortgage-backed securities are based on estimated average life.
MARKETABLE EQUITY SECURITIES
The Corporation held marketable equity securities in its
investment portfolio as of December 31, 1994. 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, 1994 and 1993, estimated market values approximated
original cost.
Taxable
Market Equivalent
December 31, 1994 ($000s) Cost Value Yield
Federal Home Loan Bank stock $ 1,724 $ 1,724 6.38%
Corporate Stock 155 155 2.74%
Federal Reserve Bank Stock 187 187 6.00%
Total $ 2,066 $ 2,066
Taxable
Market Equivalent
December 31, 1993 ($000s) Cost Value Yield
Federal Home Loan Bank stock $ 1,628 $ 1,628 4.50%
Corporate Stock 155 155 2.47%
Total $ 1,783 $ 1,783
LOANS AND LEASES
The following table shows the history of commercial and consumer
loans and leases by major category at December 31.
($000s) 1994 1993 1992 1991 1990
Commercial loans:
Real estate construction $1,801 $2,081 $973 $771 $2
Acceptances of other banks 0 0 0 0 14,984
Real estate mortgage 23,701 21,211 19,184 20,817 19,322
Commercial, financial and
agricultural 38,983 25,317 19,568 9,424 7,937
Direct financing leases 5 9 58 476 599
Total commercial loans $64,490 48,618 39,783 $31,488 $42,844
Consumer loans:
Residential mortgage $76,094 $70,301 65,536 $38,720 $38,415
Installment loans 5,116 5,281 7,535 6,538 7,152
Credit card and other consumer 1,396 1,032 1,123 1,309 1,099
Total consumer loans $82,606 $76,614 $ 74,194 $46,567 $46,666
Total loans and leases $147,096 $125,232 $113,977 $78,055 $89,510
An analysis of maturity and interest rate sensitivity of business
loans at the end of 1994 follows:
Under 1 to 5 Over 5
($000s) 1 Year Years Years Total
Domestic loans:
Real estate construction $1,441 $42 $318 $1,801
Real estate mortgage 15,612 2,633 5,400 23,645
Commercial and industrial 31,024 4,412 3,182 38,618
Direct financing leases 0 5 5
Total business loans (a) $48,077 $7,092 $8,900 $64,069
Rate sensitivity:
Predetermined rate $3,642 $4,037 $8,900 $16,579
Floating or adjustable rate 44,435 3,055 0 47,490
Total domestic business
loans $48,077 $7,092 $8,900 $64,069
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. Management maintains a watch
list of substandard loans for monthly review. Although several of
these loans are not 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 $1,537,000, or
1.04% of total loans and leases at December 31, 1994. At the end of
the previous year, the allowance for possible loan losses was
$1,617,000, or 1.29% of total loans and leases. The provision charged
to expense during 1994 was $805,000 compared to $577,000 in the year
ago period.
Management's allocation of the allowance for possible loan losses
based on estimates of potential future loan loss is set forth in the
table below:
% of % of % of
Total Total Total
($000s) 1994 Loans 1993 Loans 1992 Loans
Specific reserves:
Commercial $ 10 0.01% $ 960 0.77% $ 370 0.32%
Mortgage 5 0.00% 38 0.03% 51 0.04%
Consumer 7 0.00% 21 0.02% 41 0.04%
Criticized loans without specific
allocation 315 0.21% 160 0.13% 153 0.13%
Provision for loan categories
based on historical loss experience:
Commercial 687 0.47% 335 0.27% 284 0.25%
Commercial real estate 103 0.07% 7 0.01% 10 0.01%
Residential mortgage 298 0.20% 28 0.02% 29 0.03%
Consumer 112 0.08% 68 0.05% 86 0.08%
Total $ 1,537 1.04% $ 1,617 1.29% $1,024 0.90%
Total loans and leases outstanding $ 147,096 $ 125,232 $113,977
The following table sets forth the five year historical
information on the reserve for loan losses:
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Five year history
($000s) 1994 1993 1992 1991 1990
Balance as of January 1 $1,617 $1,024 $1,013 $891 $696
Provision of loan losses 805 577 405 125 225
Adjustment incident to
acquisition - - 4 - -
Loans charged off:
Real estate 49 19 13 19 41
Commercial 806 - 59 6 45
Consumer 85 15 25 22 27
Direct financing leases - - 340 - -
Total loans charged-off 940 34 437 47 113
Recoveries of loans previously
charged-off:
Real estate 18 - 2 9 21
Commercial 29 21 22 19 43
Consumer 7 11 6 16 19
Direct financing leases 1 18 9 - -
Total recoveries 55 50 39 44 83
Net charge-offs (recoveries) 885 (16) 398 3 30
Balance at December 31 $1,537 $1,617 $1,024 $1,013 $891
Loans and leases outstanding
at December 31 $ 147,096 $ 125,232 $ 113,977 $ 78,055 $ 89,510
Allowance as a percent of
loans and leases outstanding 1.04% 1.29% 0.90% 1.30% 1.00%
Average loans and leases $ 134,952 $ 120,218 $ 95,489 $ 76,333 $ 70,095
Net charge-offs as a percent
of average loans and leases 0.66% -0.01% 0.42% 0.00% 0.04%
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) 1994 1993 1992 1991 1990
Nonaccrual debt securities $ 0 $ 0 $1,500 $1,500 $ 0
Nonaccrual loans and leases 478 2,358 1,647 1,514 1,582
Loans 90 days or more past
due but accruing interest 11 436 11 988 819
Other real estate owned 586 69 155 185 81
Total $ 1,075 $ 2,863 $3,313 $4,187 $2,482
In addition to the above schedule of non-performing assets,
Management prepares a watch list consisting of loans over $100,000
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 1994 and not included in the table
above was $1,031,000.
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.
AVERAGE DEPOSITS ($000s)
1994 1993 1992
Demand $ 24,797 $ 21,093 $ 16,537
Interest bearing checking 26,764 30,895 25,674
Savings 95,655 85,865 51,528
Other time 89,431 96,045 85,012
Certificates-$100,000 and
over 10,229 10,661 11,091
Total average deposits $ 246,876 $ 244,559 $ 189,842
DISTRIBUTION OF AVERAGE
DEPOSITS 1994 1993 1992
Demand 10.04% 8.63% 8.72%
Interest bearing checking 10.84% 12.63% 13.52%
Savings 38.75% 35.11% 27.14%
Other time 36.23% 39.27% 44.78%
Certificates-$100,000 and
over 4.14% 4.36% 5.84%
Total 100.00% 100.00% 100.00%
CHANGE IN AVERAGE DEPOSIT 1993 to 1992 to
SOURCES ($000s) 1994 1993
Demand $ 3,704 $ 4,556
Interest bearing checking (4,131) 5,221
Savings 9,790 34,337
Other time (6,614) 11,033
Certificates-$100,000 and
over (432) (430)
Total $2,317 $54,717
CAPITAL RESOURCES
The Corporation maintains a relatively high level of capital as a
margin of safety for its depositors and shareholders. At December 31,
1994, shareholders' equity was $20,214,000 compared to $19,355,000 at
December 31, 1993, an increase of $859,000 or 4.44%. The increase in
capital during 1994 was due to retention of earnings, but this was
partially offset by the recognition, in accordance with Financial
Accounting Standard Number 115, of Unrealized Losses on Securities
Available for Sale totalling $1,492,000 at December 31, 1994.
The following table presents dividend payout ratios for the past
three years.
1994 1993 1992
Total dividends declared
as a percentage of net income 27.18% 30.36% 39.06%
Common dividends
declared as a percentage of
earnings per common share 25.37% 28.16% 37.85%
The Federal Reserve Board's capital adequacy guidelines
require a minimum primary capital ratio of 5.5%. At December 31,
1994, the Corporation's primary capital (shareholders' equity plus
the allowance for possible loan losses) was $21,751,000 or 6.95% of
total assets.
The Federal Reserve Board has adopted risk-based capital
guidelines that assign risk weightings to assets and off-balance
sheet items. The guidelines also define and set minimum capital
requirements (risk-based capital ratios). Banks are required to
have core capital (Tier 1) of at least 4.0% 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,
1994, the Corporation had a Tier 1 capital ratio of 12.26% and a
total capital ratio of 13.21%, well above the regulatory minimum
requirements.
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, 1994, the Corporation's Tier One
leverage ratio was 6.36%.
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 $12.7
million, or 5.22%, from the end of 1993 to 1994. Short term
borrowings increased by $31.8 million over the same period. Average
deposits increased .95% during 1994 compared to 1993.
The Corporation also has unused lines of credit with various
correspondent banks totaling $7.7 million which may be used as an
alternative funding source.
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.
Rate Sensitivity Analysis-December 31, 1994 ($000s)
Maturing or Repricing
Non-rate
Total Sensitive
31-90 91-180 181-365 1 year 1-5 & over
1-30 days days days days & under years 5 years Total
Interest earning
assets:
Loans and leases $ 44,985 $ 4,577 $ 4,461 $ 11,764 $ 65,787 $ 16,606 $ 64,703 $ 147,096
Investment securities 1,665 14,228 12,561 12,358 40,812 41,748 9,903 92,463
Securities available
for sale - - - - - 35,170 13,962 49,132
Securities in trading
account - - - - - - - -
Total interest
earning assets $ 46,650 $18,805 $ 17,022 $ 24,122 $ 106,599 $ 93,524 $ 88,568 $ 288,691
Interest bearing
liabilities:
Interest checking $ - $ - $ - $ - $ - $ - $ 26,273 $ 26,273
Savings 24,163 - - - 24,163 - 59,860 84,023
Certificates-$100,000
and over 2,136 1,561 3,073 2,182 8,952 3,036 102 12,090
Other time 6,806 10,834 30,066 18,070 65,776 36,727 3,765 106,268
Short term borrowings 35,498 - - - 35,498 - - 35,498
Total interest
bearing liabilities $ 68,603 $12,395 $ 33,139 $ 20,252 $134,389 $ 39,763 $ 90,000 $ 264,152
Rate sensitivity gap (21,953) $ 6,410 (16,117) $ 3,870 $(27,790) $ 53,761 (1,432) $ 24,539
Cumulative gap (21,953) (15,543) (31,660) (27,790) $ 25,971 $ 24,539
Cumulative gap as a
percentage of
interest earning
assets -7.60% -5.38% -10.97% -9.63% 9.00% 8.50%
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. If all of these deposits had been included in the 1-
30 days category above, the cumulative gap as a percentage of earning
assets would have been negative 37.44%, 35.22%, 40.80%, 39.46%, 20.84%
and positive 8.50%, respectively, for the 1-30 days, 31-90 days, 91-
180 days, 181-365 days, 1-5 years, and greater than 5 years categories
at December 31, 1994.
FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS 114 AND 118
Statements of Financial Accounting Standards No. 114 (FAS 114)
"Accounting by Creditors for Impairment of a Loan" and No. 118 (FAS 118)
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" are effective for financial statements for fiscal years
beginning after December 15, 1994. FAS 114 and 118 address the accounting
by creditors for impairment of a loan and loans that are restructured in
a troubled debt restructuring. The Corporation will adopt these standards
in the first quarter of 1995. It is estimated that such adoption will have no
material effect on the earnings or financial condition of the Corporation.
ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
The annual report of Belmont Bancorp. is hereby incorporated by
reference and appears as Exhibit 2. 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 17, 1995 (Exhibit 3) is incorporated by
reference in response to this item.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1994:
Name Age Position
J. Vincent Ciroli, Jr. 49 President and Chief Executive Officer,
Belmont Bancorp. & Belmont National Bank
William Wallace 39 Vice President, Belmont Bancorp.;
Executive Vice President & Chief
Operating Officer, Belmont National
Bank
Jane R. Marsh 33 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 17, 1995 (Exhibit 3) 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 17, 1995 (Exhibit 3) 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 17, 1995 (Exhibit 3) 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 21, 1995.
By John H. Goodman, II, __________________ BELMONT BANCORP
John H. Goodman, 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 John A. Belot____________ Director
J. Vincent Ciroli, Jr. J. Vincent Ciroli, Jr.___ Director, President
& CEO;
Belmont Bancorp.
and Belmont
National Bank
William P. Goddard William P. Goddard_______ Director
Mary L. Holloway Haning Mary L. Holloway Haning___ Director
Charles J. Kaiser, Jr. Charles J. Kaiser, Jr.______ Director
Terrence A. Lee Terrence A. Lee__________ Director
Dana Lewis Dana Lewis_____________ Director
Jane R. Marsh Jane R. Marsh___________ Secretary, Belmont
Bancorp;
Sr. Vice President &
Controller,
& Cashier, Belmont
National Bank
James Miller James Miller_____________ Director
W. Quay Mull, II W. Quay Mull, II__________ Director
Tom Olszowy Tom Olszowy____________ Director
Keith Sommer Keith Sommer___________ Director
William Wallace William Wallace__________ Director &
Vice President;
Executive Vice
President & COO,
Belmont National Bank
Charles A. Wilson, Jr. Charles A. Wilson, Jr._____ Vice Chairman
John H. Goodman, II____________ Chairman of the Board
John H. Goodman, II Director March 21, 1995
INDEX TO EXHIBITS
Exhibit 1 - Consent of Independent Certified Public Accountants
Exhibit 2 - Belmont Bancorp.'s 1994 Annual Report to Shareholders
Exhibit 3 - Belmont Bancorp.'s Proxy Statement to Shareholders, dated
March 17, 1995
Exhibit 27 - Financial Data Schedule