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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

OR

Commission File Number: 0-12724

Belmont Bancorp.

(Exact name of registrant as specified in its charter)

(740)-695-3323

(Registrant’s telephone number, including area code)

(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 May 5, 2003

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BELMONT BANCORP

Quarter Ending March 31, 2003

INDEX

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Belmont Bancorp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited) ($000s except share and per share amounts)

See the Notes to the Consolidated Financial Statements.

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Belmont Bancorp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) ($000s except per share amounts)

See the Notes to the Consolidated Financial Statements.

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Belmont Bancorp. and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited) ($000s)

See the Notes to the Consolidated Financial Statements.

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Belmont Bancorp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2003 and 2002

(Unaudited) ($000’s)

See the Notes to the Consolidated Financial Statements.

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PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

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. Material intercompany accounts and transactions have been eliminated.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 to Shareholders on Form 10-K for the year ended December 31, 2002.

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.

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.

Earnings Per Common Share: Average shares outstanding used to compute basic and diluted earnings per share differ due to stock option grants. The average number of shares outstanding used to compute basic and diluted earnings per share was as follows:

Stock Compensation: Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income for options granted with an exercise price equal to or greater than the market price of the underlying common stock at date of grant. Compensation expense is reflected in net income for certain options granted with an exercise price below the market price of the underlying common stock at the date of the grant. The following table illustrates the

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effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation”.

The estimated fair values of securities were as follows:

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Loans outstanding are as follows:

Non-accruing loans amounted to $3,016,000 and $3,171,000 at March 31, 2003 and December 31, 2002, respectively. Generally, non-accruing loans are considered impaired and are also included in the impaired loan table below. Loans past due 90 days and still accruing interest were $34,000 and $32,000 at March 31, 2003 and December 31, 2002, respectively.

Impaired loans were as follows:

Activity in the allowance for loan losses is summarized as follows:

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The entire allowance represents a valuation reserve which is available for future charge-offs.

In May 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. 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 three months ended March 31, 2003:

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, net of taxes, of $3,000 and $5,000 was recognized for the three months ended March 31, 2003 and 2002, respectively, to reflect the impact of granting certain options below their market price. Pro forma information for net income and earnings per common share is presented in Note 1.

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.

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Since the date of the filing of the Company’s Annual Report to Shareholders on Form 10-K for the year ended December 31, 2002, there have been no material new 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, 2002, Mr. James J. Fleagane, the shareholder who commenced a derivative action on behalf of the Company, filed a motion in the derivative litigation described in such 10-K seeking compensation for his time spent prosecuting the derivative action. On May 8, 2003, the Company and Mr. Fleagane agreed to settle all claims related to Mr. Fleagane’s motion and to release each other from any claims relating to the derivative litigation and Mr. Fleagane’s motion for compensation. The Company agreed to enter into the settlement in order to avoid the management time and Company expense that would be involved in opposing Mr. Fleagane’s motion.

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ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF              OPERATIONS

FORWARD-LOOKING STATEMENTS

In addition to historic information, this report, as well as the notes to the consolidated financial statements, 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.

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RESULTS OF OPERATIONS

SUMMARY

For the three months ended March 31, 2003, Belmont Bancorp. earned $470,000, or $0.04 per common share, compared to earnings of $2,084,000, or $0.19 per common share, for the three months ended March 31, 2002. Included in earnings for the first quarter of 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 $161,000 for the first quarter of 2002.

Average assets increased to $288 million for the first quarter of 2003, compared to $285 million for the first quarter of 2002. Total assets at March 31, 2003 were $288 million, down slightly from $289 million at December 31, 2002.

Net interest income on a taxable equivalent basis increased $17,000 for the first quarter of 2003 compared to the first quarter of 2002. Average earning assets increased to $265 million during the first quarter of 2003 from $264 million for the first quarter of 2002. The taxable equivalent net interest margin was 3.45% and 3.43% for the three months ended March 31, 2003 and 2002, respectively. The net interest rate spread (the difference between the average yields on earning assets and interest-bearing liabilities) was 3.05% for the first three months of 2003 compared to 2.98% for the comparable period of 2002. The taxable equivalent yield on earning assets declined to 5.53% from 6.09%, a decrease of 56 basis points, during the first quarter of 2003 compared to the first quarter of 2002. This decline was offset by a decrease of 63 basis points in the cost of interest-bearing liabilities to 2.48% from 3.11%.

Interest rates across the maturity horizon remained low relative to historical levels during the first quarter of 2003. The Federal Open Market Committee (the “FOMC”) maintained a very accommodative stance to aid economic recovery. In November 2002, the FOMC reduced its targeted federal funds rate by 0.50% to 1.25%. This followed several federal funds rate cuts during 2001 when the targeted federal funds rate fell from 6.50% at the beginning of 2001 to 1.75% by the end of 2001. Likewise, the prime-lending rate fell from 9.50% at the beginning of 2001 to 4.25% by November 2002. Changing interest rates impact the Company through loan refinancing activity, reinvestment opportunities in loans and investments, and financing costs on its deposit base and other borrowings.

OTHER OPERATING INCOME

Changes in various categories of other income are depicted in the table below.

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Operating results during the first and second quarters of 2002 were impacted by a comprehensive legal settlement as more fully described in the Company’s Annual Report to Shareholders on Form 10-K. Other income during the first quarter of 2002 included $3.9 million in payments to the Company related to this settlement.

Trust fees declined modestly by $3,000, or 2.3%, for the first three months of 2003 compared to the first three months of 2002. The general decline in stock prices impacts trust fees since most fees are assessed on the market value of assets held in the trust accounts.

Capitalized mortgage servicing rights included in gains on sales of loans held for sale totaled $59,000 for the first three months of 2003 compared to $42,000 for the same period in 2002. Gains on sales of loans held for sale increased to $137,000 for the first three months of 2003 from $60,000 for the first three months of 2002. The total outstanding balance of mortgage loans sold without recourse and with servicing rights retained increased to $68.4 million at March 31, 2003 from $60.2 million at March 31, 2002.

Securities gains recorded during the first quarter of 2003 totaled $168,000 and included $92,000 in gains on sales of equity securities. Securities losses incurred during the first quarter of 2002 related to the sale of approximately $6.5 million in municipal bonds. Throughout 2002, the Bank reduced the tax-exempt municipal bond portfolio to reduce interest rate risk related to long term, fixed rate bonds and to increase taxable income to utilize its net operating loss carryforward.

OPERATING EXPENSES

The following table shows the dollar amounts and the percent change in various components of operating expenses.

At March 31, 2003 the Company employed 130 full time equivalent employees, down from 131 full time equivalent employees at the end of March 2002.

Employee benefits for the three months ended March 31, 2003 were $258,000, down 1.5% from $262,000 for the first quarter of 2002. The decline was principally due to a lower profit sharing accrual during the first quarter of 2003 compared to the first quarter of 2002.

Legal fees were $31,000 for the three months ended March 31, 2003, down from $597,000 for the comparative period for 2002. The cost for the first quarter of 2002 included approximately $432,000 that related to the comprehensive legal settlement previously described.

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Legal settlements expense for the first three months of 2002 totaled $559,000 and included $179,000 in settlement charges related to the comprehensive legal settlement previously described. The remaining settlement charges for the first quarter of 2003 and 2002 related to various claims against the Company previously disclosed in the Company’s Annual Report to Shareholders and Form 10-K for the years ended December 31, 2002 and 2001.

Two categories of expense declined during the first quarter of 2003 compared to the first quarter of 2002 as a result of improvements to the Bank’s regulatory risk profile. Insurance expense for the first quarter of 2003 included cost savings related to a reduction in FDIC premiums paid by the Bank. FDIC costs declined by $98,000 for the three months ended March 31, 2003 compared to the same period for 2002. Examination and audit expense declined to $87,000 for the first quarter of 2003 compared to $121,000 for the first quarter of 2002. Of this decline, $20,000 relates to savings for examination costs assessed for the Bank’s regulatory examinations.

Other taxes increased 35.8% to $91,000 for the first quarter of 2003 from $67,000 for the first quarter of 2002. This increase reflects higher state corporate franchise tax expense and is directly related to a larger capital base at year-end 2002 compared to year-end 2001.

Other operating expenses increased to $396,000 for the first quarter of 2003 compared to $294,000 for the same period in 2002. In 2003, the Company resumed payment of directors’ fees which totaled $40,000 for the first quarter. Higher expenditures for advertising, consulting and collection expenses also contributed to the increase in other operating expenses.

SECURITIES

The estimated fair value of securities available for sale at March 31, 2003 and December 31, 2002 are detailed in Note 2 of the quarterly financial statements.

At March 31, 2003, the Company did not own any investments of a single issuer, the value of which exceeded 10% of total shareholders’ equity, or $3,193,000, except for stock in the Federal Home Loan Bank of Cincinnati. The book value and estimated fair value of this stock was $3,487,000 at March 31, 2003.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The Company provides as an expense an amount that reflects the change in probable loan losses. This provision is based on several factors including 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 established on the Consolidated Balance Sheets through the provision for loan losses.

Details of the activity in the Allowance for Loan Losses for the first quarter of 2003 and 2002 are included in Note 3 of the quarterly financial statements. No loan loss provision was recorded during the quarter ended March 31, 2003 or 2002 because the Company had an appropriate balance in the allowance based on its analysis of loan quality. The following table depicts various loan and loan-related statistics.

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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:

Details of impaired loans and related information are included in Note 3 of the quarterly financial statements.

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 classified by management as substandard due to delinquency, a change in financial position, or other factors and not included as non-performing assets totaled $10,286,000 at March 31, 2003 and $11,419,000 at December 31, 2002.

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 Tier 1 capital are detailed in the following tables.

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DEFERRED FEDERAL TAX ASSETS

Deferred federal tax assets totaled $5.2 million at March 31, 2003. The deferred federal tax assets include significant balances related to tax loss carryforwards and tax credits. It also includes the tax effect of recording securities available for sale at estimated market value. At March 31, 2003, management believes no deferred tax valuation allowance is needed as future estimated taxable income will be sufficient to realize the net deferred tax assets.

OTHER LIABILITIES

Other liabilities increased to $2.4 million at March 31, 2003 compared to $1.7 million at December 31, 2002. Other liabilities include amounts for various accrued expenses, accounts payable, and funds owed for securities traded but not yet settled. The increase in other liabilities for the comparative periods presented resulted from securities traded but not settled by March 31, 2003.

CAPITAL RESOURCES

The table below depicts the capital ratios for the Bank and for the Company on a consolidated basis as of March 31, 2003. In addition, the table depicts the requirements for classification as “adequately capitalized” and “to be well 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.