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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2002

OR

For the transition period from                          to                                      

Commission file number 0-12724

BELMONT BANCORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (740) 695-3323

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

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 requirements for the past 90 days.  Yes  x  No  ¨        

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  ¨  No  x        

State the aggregate market value of the voting stock held by nonaffiliates of the registrant at June 30, 2002: $53,654,000

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 11,108,403 shares

DOCUMENTS INCORPORATED BY REFERENCE:

Documents Incorporated by Reference: Portions of the Registrant’s proxy statement to be filed by April 30, 2003 are incorporated herein by reference into Items 10, 11, 12 and 13.

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PART I

ITEM 1-BUSINESS

BELMONT BANCORP.

Belmont Bancorp., (the “Company” or “Belmont”), 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 (“BNB” or the “Bank”), a banking corporation organized as a national banking association. BNB provides a variety of financial services and employs 144 people. In addition to the Bank, the Company owns Belmont Financial Network, Inc., a non-bank subsidiary (“BFN”).

BELMONT NATIONAL BANK

BNB 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, residential mortgage loans, home equity loans, and other consumer oriented financial services including IRA and Keogh accounts, safe deposit and night depository facilities. BNB also owns automatic teller machines located at branches in Bellaire, Bridgeport, Woodsdale, Elm Grove, Cadiz, the Ohio Valley Mall, Plaza West, Shadyside, Schoenbrunn and New Philadelphia providing 24 hour banking service to our customers. BNB belongs to STAR Systems, Inc., a nationwide ATM network with thousands of locations nationwide. BNB offers a wide variety of fiduciary services. The trust department of the Bank administers personal trusts and estates.

BELMONT FINANCIAL NETWORK

On July 1, 1985, Belmont formed a subsidiary corporation, Belmont Financial Network, Inc. (“BFN”). BFN serves as a community development corporation by investing in a low-income housing project that provides low-income housing and historic tax credits.

SUPERVISION AND REGULATION

Belmont is supervised and examined by the Board of Governors of the Federal Reserve system under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The BHC 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 BHC Act allows interstate branching by acquisitions anywhere in the country and acquisition and consolidation in those states that had not opted out by January 1, 1997.

The BHC Act restricts Belmont’s nonbanking activities to those which are determined by the Federal Reserve Board to be closely related to banking and a proper incident thereto. The BHC 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 transactions with affiliates.

The enactment of the Graham-Leach-Bliley Act of 1999 (the “GLB Act”) represented a pivotal point in the history of the financial services industry. The GLB Act swept away large parts of a regulatory framework that had its origins in the Depression Era of the 1930s. Effective March 11, 2000, new opportunities became available for banks, other depository institutions, insurance companies and securities firms to enter into combinations that permit a single financial services organization to offer customers a more complete array of financial products and services. The GLB Act provides a new regulatory framework for regulation through the financial holding company which has as its umbrella regulator the Federal Reserve Board. Functional regulation of the financial holding company’s separately regulated subsidiaries will be conducted by their primary functional regulator. The GLB Act requires “satisfactory” or higher Community Reinvestment Act compliance for insured depository institutions and their financial holding companies in order for them to engage in new financial activities. The GLB Act provides a federal right to privacy of non-public personal information of individual customers.

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BNB’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). As a national bank, BNB is supervised and examined by the Office of the Comptroller of the Currency.

A substantial portion of the Company’s cash revenue is derived from dividends paid by its subsidiary bank. These dividends are subject to various regulatory restrictions as summarized in Note 15 of the Company’s Consolidated Financial Statements.

A fundamental principle underlying the Federal Reserve’s supervision and regulation of bank holding companies is that bank holding companies should be a source of managerial and financial strength to their subsidiary banks. Subsidiary banks in turn are to be operated in a manner that protects the overall soundness of the institution and the safety of deposits. Bank regulators can take various remedial measures to deal with banks and bank holding companies that fail to meet legal and regulatory standards.

The Financial Reform, Recovery and Enforcement Act of 1989 provides that a holding company’s controlled insured depository institutions are liable for any loss incurred by the FDIC in connection with the default of any FDIC-assisted transaction involving an affiliated insured bank or savings association. The Federal Deposit Insurance Corporation Improvement Act of 1991 created five capital-based supervisory levels for banks and requires bank holding companies to guarantee compliance with capital restoration plans of undercapitalized insured depository affiliates.

The monetary policies of regulatory authorities, including the Federal Reserve Board and the FDIC, have a significant effect on the operating results of banks and bank holding companies. The nature of future monetary policies and the effect of such policies on the future business and earnings of Belmont and its subsidiary bank cannot be predicted.

FOREIGN OPERATIONS

Belmont Bancorp. has no foreign operations.

ITEM 2-PROPERTIES

DESCRIPTION OF PROPERTIES

BNB operates a network of twelve full service branches located in Belmont, Harrison and Tuscarawas Counties in Ohio and Ohio County in West Virginia. In addition to its main office in the Woodsdale section of Wheeling, West Virginia, BNB operates a branch in the Elm Grove section of Wheeling. Locations in Belmont County, Ohio include three branch offices in St. Clairsville and offices in Bridgeport, Lansing, Shadyside, and Bellaire. BNB’s West Main Street office in downtown St. Clairsville serves as the location for the Company’s and the Bank’s executive, administrative, finance and operations functions. The Harrison County branch is located in Cadiz, Ohio. In Tuscarawas County, Ohio, BNB operates two full service offices and one automated facility in New Philadelphia, Ohio.

All offices are owned by BNB except for the Ohio Valley Mall and Bellaire offices. The land for the Elm Grove office is also leased. The Ohio Valley Mall office lease expires in 2003 and contains a five year renewal option; BNB intends to exercise the renewal option during 2003. The Bellaire office lease expires in 2007 and contains a ten year renewal option. The land lease for the Elm Grove office expires in 2005 and provides for four, five year renewal options.

ITEM 3-LEGAL PROCEEDINGS

During December 2001, the Company reached a comprehensive legal settlement wherein five lawsuits were resolved, including a costly derivative action. Proceeds from the settlement totaled $6.3 million and were recorded during the first and second quarters of 2002. 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,

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Inc. filed bankruptcy during 1999 and was subsequently liquidated. All payments received and recorded by the Company for the comprehensive settlement, except for $675,000 received for its fidelity bond policy, were net of plaintiff’s attorneys fees and costs; those fees and costs were approximately $3.6 million. Mr. James J. Fleagane, the shareholder who commenced the derivative action on behalf of the Company, filed a motion in the derivative litigation seeking compensation for his time spent prosecuting the case. The Circuit Court of Ohio County, West Virginia, denied his request. In May 2002, Mr. Fleagane filed a Petition for Appeal to the West Virginia Supreme Court of Appeals, and in January 2003, the Court agreed to hear the appeal. The Company intends to vigorously oppose Mr. Fleagane’s request for payment.

In February 2001, Belmont National Bank filed a foreclosure action in the Common Pleas Court of Harrison County, Ohio against Martin Snyder, et al., for loans Snyder had with the Bank. In May 2001, Snyder filed a lender liability counterclaim against the Bank which claimed that through certain actions the Bank and its representatives caused Snyder’s business to fail and thereby “deprived defendants of their unfettered will.” Snyder sought compensatory damages in excess of $25,000 and punitive damages to be determined at trial. In December 2002, the parties agreed to settle this matter, and appropriate documentation is pending to formally dismiss the case.

In October 2001 in a civil action in the Circuit Court of Ohio County, West Virginia, Manuel A. Velez, DDS filed a pro se complaint against the Company doing business as Belmont National Bank with respect to the terms of refinancing of a commercial loan. The complaint sought recission of the contract, compensatory damages in excess of $50,000, and punitive damages of $200,000, together with fees and costs. The Company filed a timely answer and a counterclaim for a complaint on a promissory note as against the pro se plaintiff. This matter was scheduled for trial on November 19, 2002. The Company filed a motion for summary judgment to dismiss the case, and a hearing was scheduled for November 15, 2002. At that time, the matter was dismissed in favor of the Bank’s motion for summary judgment, and the dismissal judgment was entered in the Ohio County Clerk’s Office, West Virginia, on February 18, 2003.

In October 2001 in the United States District Court for the Northern District of Ohio, an action was filed by BVM Hospitality, Inc., Kiran Patel, Raman Patel and Chandu Patel against Belmont National Bank, four of its directors and one of its officers. The claim alleged that the Bank declined to extend credit based upon national origin. Plaintiffs sought $628,508 in compensatory damages and $500,000 in punitive damages. On October 10, 2002, the Ohio Civil Rights Commission filed a complaint against the Bank arising out of the same matter pending in the Federal Court. An administrative hearing originally set on that matter on April 8, 2003, was stayed pending the outcome of the civil matter. With discovery complete, both sides filed motions for summary judgment in the civil action. While the motions remained pending, on February 14, 2003, the parties agreed to settle all claims. Plaintiffs also agreed to take steps to withdraw or terminate the proceedings instituted by the Ohio Civil Rights Commission. As the parties finalized the settlement, and upon notice of the settlement, on February 20, 2003 the Court dismissed the civil case. The administrative action has not yet been dismissed.

Management believes, based on the advice of counsel, that no accrual for loss is necessary at year-end 2002. However, losses were reasonably possible and subsequent to December 31, 2002, settlements were reached in all cases (except for Mr. Fleagane’s Petition for Appeal previously described) resulting in charges during the first quarter of 2003 of approximately $50,000.

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.

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PART II

ITEM 5-MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED SHAREHOLDERS’ MATTERS

The number of shareholders of record for the Company’s stock as of March 14, 2003 was 1,044. The closing price of Belmont stock on March 13, 2003 was $5.20 per share.

Belmont Bancorp.’s common stock has a par value of $0.25 and, since October 1994, has been traded on the Nasdaq SmallCap market.

High and low market prices and dividend information for the past two years for Belmont’s common stock are depicted in the following tables.

Information regarding the limitations on dividends available to be paid can be located in Note 15 of the Notes to the Consolidated Financial Statements in the Company’s financial statements beginning on page F-1 (Item 8).

Treasury stock is accounted for using the cost method. There were 44,792 shares held in treasury on December 31, 2002 and 51,792 shares on December 31, 2001.

Equity Compensation Plan Information

The following table provides information as of December 31, 2002 with respect to shares of Belmont Bancorp. common stock that may be issued under our existing equity compensation plan.

(1) Consists of the options issued under the Belmont Bancorp. 2001 Stock Option Plan approved by shareholders at the annual meeting held May 21, 2001. See Note 24 to the Consolidated Financial Statements for additional information.

(2) There are no equity compensation plans not approved by security holders.

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ITEM 6-SELECTED FINANCIAL DATA

The data presented herein should be read in conjunction with the audited Consolidated Financial Statements beginning on page F-1.

Consolidated Five Year Summary of Operations

For the Years Ended December 31, 2002, 2001, 2000, 1999 and 1998

($000s except per share data)

(1) Restated for stock dividends paid during 1998

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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 beginning on page F-1.

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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APPLICATION OF CRITICAL ACCOUNTING POLICIES

Belmont’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management.

The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosure presented in the other financial statement notes and in management’s discussion and analysis of the financial condition and results of operations of the Company, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and the valuation of deferred federal tax assets to be accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

The allowance for loan losses represents management’s estimate of probable loan losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents nearly half of the assets on the consolidated balance sheet.

The valuation of deferred federal tax assets represents management’s estimate that the Company will have sufficient taxable income in future years to utilize these assets. The deferred federal tax assets at December 31, 2002 are largely comprised of net operating loss and tax credit carryforwards to future periods. The Company’s ability to use these assets is based on its ability to generate taxable income in sufficient amounts to use the operating losses and tax credits before the applicable expiration dates. Forecasting taxable income in future periods requires the use of estimates for loan, investment and deposit levels, loan losses, noninterest income and expenses, the interest rates applicable to earning assets and interest paying liabilities, and unforeseen events that could have a material impact on the Company’s earnings prospects. Actual results in future periods may vary significantly from the forecasts prepared as of the date of the financial statements.

RESULTS OF OPERATIONS

Summary

Belmont Bancorp. reported net income of $5,997,000 for the year ended December 31, 2002, or $0.54 per common share, compared to a loss of $415,000, or a loss of $0.04 per common share for the year ended December 31, 2001. The Company posted fourth quarter 2002 net income of $1,492,000, or $0.13 per common share, compared to a loss of $293,000, or a loss of $0.03 per common share for the fourth quarter of 2001. For the year ended 2000, net income was $1,386,000, or $.16 per common share.

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Early in 2002, the Company resolved a number of legal actions resulting in gross settlement proceeds before expenses of $6,311,000. Exclusive of the settlement proceeds and related expenses, the Company would have reported net earnings after related taxes of $2,602,000, or $0.23 per common share, for the year ended 2002.

The Company’s efforts to improve certain problem loans resulted in substantial recoveries enabling the Bank to reduce its Allowance for Loan Losses. The Company recorded a $529,000 reduction in its Allowance for Loan Losses during the fourth quarter of 2002. For the year ended 2002, the Company’s reduction to its Allowance for Loan Losses totaled $1,029,000. After recognition of related federal tax expense, these actions contributed $349,000 to fourth quarter net income and $679,000 to net income for the year ended 2002. Additional information is discussed below under the heading, “Provision and Allowance for Loan Losses”.

Belmont Bancorp. was formally released from its regulatory agreement with the Federal Reserve Bank of Cleveland during December 2002. This action, in addition to the termination in November 2002 of the Consent Order and a Memorandum of Understanding between Belmont National Bank and the Office of the Comptroller of the Currency, completely eliminates all regulatory agreements imposed on the Company and Bank since 1999.

Aided by low interest rates during 2002, the Company continued its balance sheet restructuring and reduced the amount of tax-exempt securities held in its investment portfolio. This restructure is part of a plan to ensure that the Company can utilize net operating loss and tax credit carryforwards in future years. As a result, the Company and Bank eliminated a deferred tax asset valuation allowance of $1,000,000 previously established in 1999. The elimination of the deferred tax asset valuation allowance also positively affected the Company’s earnings and contributed $1,000,000 to net income during the fourth quarter and year ended 2002.

The Company faced unusually high operating expenses during each of the last three years. In particular, large legal expenses, consulting fees, deposit insurance costs, and other insurance costs negatively impacted profitability. Legal fees and legal settlement expenses were $1.7 million for the year ended 2002, $3.0 million for the year ended 2001, and $1.2 million for the year ended 2000. As more fully described above and under Item 3-Legal Proceedings, the Company has settled all previously pending lawsuits. Also, as a result of the improvement in its regulatory risk profile, the Company will incur lower FDIC insurance premiums and lower regulatory examination fees during 2003.

The following table depicts the Company’s performance for the past three years.

Net Interest Income

The primary source of the Company’s revenue is net interest income. Net interest income is the difference between interest income on earning assets such as loans and securities, and interest expense paid on liabilities such as deposits and borrowings. Net interest income is affected by the general level of interest rates, changes in interest rates and by changes in the amount and composition of interest-earning assets and interest-bearing liabilities. The relative performance of the lending and deposit-raising functions is frequently measured by two statistics—net interest margin and net interest rate spread. The net interest margin is determined by dividing fully-taxable equivalent net interest income by average interest-earning assets. The net interest rate spread is the difference between the average fully-taxable equivalent yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin is generally greater than the net interest rate spread due to the

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additional income earned on those assets funded by non-interest-bearing liabilities, or free funding, such as demand deposits and shareholders’ equity.

The Consolidated Average Balance Sheets and Analysis of Net Interest Income compare interest revenue and interest-earning assets outstanding with interest cost and liabilities outstanding for the years ended December 31, 2002, 2001, and 2000, and compute 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 computed using a 34% effective federal tax rate. Loan fees included in interest income were $513,000 in 2002, $521,000 in 2001, and $190,000 in 2000. Nonaccrual loans and loans held for sale have been included in the average loan balances. Average outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available for sale.

Consolidated Average Balance Sheets and Analysis of Net Interest Income

For the Years Ended December 31 (Taxable Equivalent Basis) ($000’s)

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The following table shows changes in taxable-equivalent interest income, interest expense, and net interest income due to volume and rate variances for major categories of earning assets and interest-bearing liabilities. The change in interest not solely due to changes in volume or rates has been consistently allocated in proportion to the absolute dollar amount of the change in each and is reflected as the mix.

Analysis of Net Interest Income

Changes

(Taxable Equivalent Basis) ($000’s)