##### Table of Contents

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United States

Securities and Exchange Commission

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



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



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Belmont Bancorp.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-1376776                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|325 Main St., Bridgeport, Ohio                                 |  | 43912                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(740)-695-3323

(Registrants telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last report.)



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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.     Yes  x    No ̈



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



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,

11,110,028 shares outstanding

as of May 10, 2004



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##### Table of Contents

BELMONT BANCORP

Quarter Ending March 31, 2004



INDEX



|                                                                                                                          |  |   
|------------------------------------------------------------------------------------------------------------------------- |  | --
|Part I. FINANCIAL INFORMATION                                                                                             |  |   
|                                                                                                                          | 
|Item 1. Financial Statements                                                                                              |  |   
|                                                                                                                          | 
|Consolidated Balance Sheets  March 31, 2004 and December 31, 2003                                                        |  | 3 
|                                                                                                                          | 
|Consolidated Statements of Income-Three Months Ended March 31, 2004 and March 31, 2003                                    |  | 4 
|                                                                                                                          | 
|Condensed Consolidated Statements of Changes in Shareholders Equity Three Months Ended March 31, 2004 and March 31, 2003 |  | 5 
|                                                                                                                          | 
|Condensed Consolidated Statements of Cash Flows-Three Months Ended March 31, 2004 and March 31, 2003                      |  | 6 
|                                                                                                                          | 
|Notes to the Consolidated Financial Statements                                                                            |  | 7 
|                                                                                                                          | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 12
|                                                                                                                          | 
|Item 3. Quantitative and Qualitative Disclosure about Market Risk                                                         |  | 19
|                                                                                                                          | 
|Item 4. Controls and Procedures                                                                                           |  | 19
|                                                                                                                          | 
|Part II  OTHER INFORMATION                                                                                               |  |   
|                                                                                                                          | 
|Item 1. Legal Proceedings                                                                                                 |  | 19
|                                                                                                                          | 
|Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                  |  | 19
|                                                                                                                          | 
|Item 3. Defaults upon Senior Securities                                                                                   |  | 20
|                                                                                                                          | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                               |  | 20
|                                                                                                                          | 
|Item 5. Other Information                                                                                                 |  | 20
|                                                                                                                          | 
|Item 6. Exhibits and Reports on Form 8-K                                                                                  |  | 20
|                                                                                                                          | 
|Signature page                                                                                                            |  | 21
|                                                                                                                          | 
|Certifications                                                                                                            |  |   



2



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##### Table of Contents

Belmont Bancorp. and Subsidiaries

Consolidated Balance Sheets

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



|                                                                                              |  |               |         |   |                   |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                              |  | March 31,2004 |         |   | December 31, 2003 |  
|Assets                                                                                        |  |               |         |   |                   |   |         |  
|Cash and due from banks                                                                       |  | $             | 9,379   |   |                   | $ | 10,722  |  
|Interest-bearing deposits in other banks                                                      |  |               | 34      |   |                   |   | 14      |  
|Federal funds sold                                                                            |  |               |        |   |                   |   | 2,300   |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                     |  |               | 9,413   |   |                   |   | 13,036  |  
|Loans held for sale                                                                           |  |               | 215     |   |                   |   | 255     |  
|Securities available for sale at fair value                                                   |  |               | 115,415 |   |                   |   | 112,145 |  
|Securities held to maturity (estimated fair value of $272 in 2004 and $273 in 2003)           |  |               | 250     |   |                   |   | 250     |  
|Federal Home Loan Bank stock, at cost                                                         |  |               | 3,629   |   |                   |   | 3,594   |  
|Federal Reserve Bank stock, at cost                                                           |  |               | 517     |   |                   |   | 517     |  
|Loans                                                                                         |  |               | 166,550 |   |                   |   | 157,528 |  
|Less allowance for loan losses                                                                |  |               | (3,317  | ) |                   |   | (3,300  | )
|                                                                                              |  |               |         |   |                   |   |         |  
|Net loans                                                                                     |  |               | 163,233 |   |                   |   | 154,228 |  
|Premises and equipment, net                                                                   |  |               | 6,077   |   |                   |   | 6,111   |  
|Deferred federal tax assets                                                                   |  |               | 4,191   |   |                   |   | 4,538   |  
|Cash surrender value of life insurance                                                        |  |               | 1,349   |   |                   |   | 1,339   |  
|Accrued income receivable                                                                     |  |               | 1,475   |   |                   |   | 1,366   |  
|Other assets                                                                                  |  |               | 2,235   |   |                   |   | 2,096   |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Total assets                                                                                  |  | $             | 307,999 |   |                   | $ | 299,475 |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Liabilities and Shareholders Equity                                                          |  |               |         |   |                   |   |         |  
|Liabilities                                                                                   |  |               |         |   |                   |   |         |  
|Non-interest bearing deposits:                                                                |  |               |         |   |                   |   |         |  
|Demand                                                                                        |  | $             | 28,610  |   |                   | $ | 30,632  |  
|Interest-bearing deposits:                                                                    |  |               |         |   |                   |   |         |  
|Demand                                                                                        |  |               | 30,849  |   |                   |   | 30,357  |  
|Savings                                                                                       |  |               | 97,008  |   |                   |   | 100,034 |  
|Time                                                                                          |  |               | 73,436  |   |                   |   | 74,016  |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Total deposits                                                                                |  |               | 229,903 |   |                   |   | 235,039 |  
|Securities sold under repurchase agreements                                                   |  |               | 961     |   |                   |   | 1,403   |  
|Short-term Federal Home Loan Bank advances                                                    |  |               | 4,000   |   |                   |   |        |  
|Long-term Federal Home Loan Bank advances                                                     |  |               | 35,564  |   |                   |   | 25,269  |  
|Accrued interest on deposits and other borrowings                                             |  |               | 286     |   |                   |   | 312     |  
|Other liabilities                                                                             |  |               | 1,218   |   |                   |   | 1,930   |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Total liabilities                                                                             |  |               | 271,932 |   |                   |   | 263,953 |  
|                                                                                              |  |               |         |   |                   |   |         |  
|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                                                                    |  |               | 17,558  |   |                   |   | 17,556  |  
|Retained earnings                                                                             |  |               | 15,639  |   |                   |   | 15,285  |  
|Treasury stock at cost (44,292 shares)                                                        |  |               | (997    | ) |                   |   | (997    | )
|Accumulated other comprehensive income                                                        |  |               | 1,079   |   |                   |   | 890     |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Total shareholders equity                                                                    |  |               | 36,067  |   |                   |   | 35,522  |  
|                                                                                              |  |               |         |   |                   |   |         |  
|Total liabilities and shareholders equity                                                    |  | $             | 307,999 |   |                   | $ | 299,475 |  
|                                                                                              |  |               |         |   |                   |   |         |  



See the Notes to the Consolidated
Financial Statements.



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##### Table of Contents

Belmont Bancorp. and Subsidiaries

Consolidated Statements of Income

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



|                                                              |  |                                    |       |      |   |      
|------------------------------------------------------------- |  | ---------------------------------- | ----- | ---- | - | -----
|                                                              |  | For the ThreeMonths EndedMarch 31,
|                                                              |  | 2004                               |       | 2003
|Interest and Dividend Income                                  |  |                                    |       |      |   |      
|Loans:                                                        |  |                                    |       |      |   |      
|Taxable                                                       |  | $                                  | 2,452 |      | $ | 2,206
|Tax-exempt                                                    |  |                                    | 37    |      |   | 39   
|Securities:                                                   |  |                                    |       |      |   |      
|Taxable                                                       |  |                                    | 1,178 |      |   | 1,193
|Tax-exempt                                                    |  |                                    | 18    |      |   | 47   
|Dividends                                                     |  |                                    | 44    |      |   | 45   
|Interest on federal funds sold                                |  |                                    | 5     |      |   | 41   
|                                                              |  |                                    |       |      |   |      
|Total interest and dividend income                            |  |                                    | 3,734 |      |   | 3,571
|                                                              |  |                                    |       |      |   |      
|Interest Expense                                              |  |                                    |       |      |   |      
|Deposits                                                      |  |                                    | 780   |      |   | 1,117
|Borrowings                                                    |  |                                    | 331   |      |   | 244  
|                                                              |  |                                    |       |      |   |      
|Total interest expense                                        |  |                                    | 1,111 |      |   | 1,361
|                                                              |  |                                    |       |      |   |      
|Net interest income                                           |  |                                    | 2,623 |      |   | 2,210
|Provision (Benefit) for Loan Losses                           |  |                                    |      |      |   |     
|                                                              |  |                                    |       |      |   |      
|Net interest income after provision (benefit) for loan losses |  |                                    | 2,623 |      |   | 2,210
|                                                              |  |                                    |       |      |   |      
|Noninterest Income                                            |  |                                    |       |      |   |      
|Trust fees                                                    |  |                                    | 166   |      |   | 125  
|Service charges on deposits                                   |  |                                    | 323   |      |   | 253  
|Mortgage servicing fees                                       |  |                                    | 46    |      |   | 44   
|Other operating income                                        |  |                                    | 200   |      |   | 164  
|Securities gains                                              |  |                                    | 22    |      |   | 168  
|Gains on sale of loans held for sale                          |  |                                    | 29    |      |   | 137  
|                                                              |  |                                    |       |      |   |      
|Total noninterest income                                      |  |                                    | 786   |      |   | 891  
|                                                              |  |                                    |       |      |   |      
|Noninterest Expense                                           |  |                                    |       |      |   |      
|Salary and employee benefits                                  |  |                                    | 1,258 |      |   | 1,254
|Net occupancy expense                                         |  |                                    | 243   |      |   | 238  
|Equipment expense                                             |  |                                    | 205   |      |   | 196  
|Legal fees                                                    |  |                                    | 38    |      |   | 31   
|Legal settlements expense                                     |  |                                    |      |      |   | 53   
|Other operating expenses                                      |  |                                    | 718   |      |   | 737  
|                                                              |  |                                    |       |      |   |      
|Total noninterest expense                                     |  |                                    | 2,462 |      |   | 2,509
|                                                              |  |                                    |       |      |   |      
|Income before income taxes                                    |  |                                    | 947   |      |   | 592  
|Income Tax Expense                                            |  |                                    | 260   |      |   | 122  
|                                                              |  |                                    |       |      |   |      
|Net Income                                                    |  | $                                  | 687   |      | $ | 470  
|                                                              |  |                                    |       |      |   |      
|Basic and Diluted Earnings Per Common Share                   |  | $                                  | 0.06  |      | $ | 0.04 
|                                                              |  |                                    |       |      |   |      



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 except per share amounts)



|                                                                                                               |  |                             |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                               |  | Three Months EndedMarch 31, |       
|                                                                                                               |  | 2004                        |        |   | 2003 |  
|Balance at beginning of period                                                                                 |  | $                           | 35,522 |   |      | $ | 34,757 |  
|Comprehensive income:                                                                                          |  |                             |        |   |      |   |        |  
|Net income                                                                                                     |  |                             | 687    |   |      |   | 470    |  
|Change in net unrealized gain (loss) on securities available for sale, net of reclassification and tax effects |  |                             | 189    |   |      |   | (194   | )
|                                                                                                               |  |                             |        |   |      |   |        |  
|Total comprehensive income                                                                                     |  |                             | 876    |   |      |   | 276    |  
|Cash dividends ($0.03 per share)                                                                               |  |                             | (333   | ) |      |   |       |  
|Common stock options granted/vested                                                                            |  |                             | 2      |   |      |   | 4      |  
|                                                                                                               |  |                             |        |   |      |   |        |  
|Balance at end of period                                                                                       |  | $                           | 36,067 |   |      | $ | 35,037 |  
|                                                                                                               |  |                             |        |   |      |   |        |  



See the Notes to the Consolidated
Financial Statements.



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##### Table of Contents

Belmont Bancorp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2004 and 2003

(Unaudited) ($000s)



|                                                                           |  |      |         |   |      |   |        |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | -
|                                                                           |  | 2004 |         |   | 2003 |  
|Cash from Operating Activities                                             |  | $    | 473     |   |      | $ | 1,151  |  
|                                                                           |  |     
|Investing Activities                                                       |  |      |         |   |      |   |        |  
|                                                                           |  |     
|Proceeds from:                                                             |  |      |         |   |      |   |        |  
|Maturities and calls of securities                                         |  |      | 2,669   |   |      |   | 5,071  |  
|Sales of securities available for sale                                     |  |      | 33      |   |      |   | 2,740  |  
|Principal collected on mortgage-backed securities                          |  |      | 4,385   |   |      |   | 7,340  |  
|Sales of other real estate owned                                           |  |      | 2       |   |      |   | 53     |  
|Purchases of:                                                              |  |      |         |   |      |   |        |  
|Mortgage-backed securities available for sale                              |  |      | (10,363 | ) |      |   | (9,914 | )
|Other securities available for sale                                        |  |      |        |   |      |   | (3,585 | )
|Loans                                                                      |  |      | (4,060  | ) |      |   |       |  
|Premises and equipment                                                     |  |      | (111    | ) |      |   | (97    | )
|Changes in:                                                                |  |      |         |   |      |   |        |  
|Loans, net                                                                 |  |      | (5,035  | ) |      |   | (3,069 | )
|                                                                           |  |      |         |   |      |   |        |  
|Cash from investing activities                                             |  |      | (12,480 | ) |      |   | (1,461 | )
|                                                                           |  |      |         |   |      |   |        |  
|Financing Activities                                                       |  |      |         |   |      |   |        |  
|Proceeds from:                                                             |  |      |         |   |      |   |        |  
|Advances on long-term debt                                                 |  |      | 10,300  |   |      |   |       |  
|Payments on long term debt                                                 |  |      | (5      | ) |      |   | (4     | )
|Dividends paid on common stock                                             |  |      | (333    | ) |      |   |       |  
|Changes in:                                                                |  |      |         |   |      |   |        |  
|Deposits                                                                   |  |      | (5,136  | ) |      |   | (1,031 | )
|Repurchase agreements                                                      |  |      | (442    | ) |      |   | (942   | )
|Short-term borrowings                                                      |  |      | 4,000   |   |      |   |       |  
|                                                                           |  |      |         |   |      |   |        |  
|Cash from financing activities                                             |  |      | 8,384   |   |      |   | (1,977 | )
|                                                                           |  |      |         |   |      |   |        |  
|Increase (Decrease) in Cash and Cash Equivalents                           |  |      | (3,623  | ) |      |   | (2,287 | )
|Cash and Cash Equivalents, Beginning of Year                               |  |      | 13,036  |   |      |   | 23,040 |  
|                                                                           |  |      |         |   |      |   |        |  
|Cash and Cash Equivalents at March 31                                      |  | $    | 9,413   |   |      | $ | 20,753 |  
|                                                                           |  |      |         |   |      |   |        |  
|Cash payments for interest                                                 |  | $    | 1,137   |   |      | $ | 1,376  |  
|Cash payments for income taxes                                             |  |      |        |   |      |   |       |  
|Non-cash transfers from loans to other real estate owned and repossessions |  |      |        |   |      |   | 70     |  



See the Notes to the Consolidated
Financial Statements.



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##### Table of Contents

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



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 to Shareholders on Form 10-K for the year ended December 31, 2003.



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:



|                                     |  |            |  |            |  |            |  |           
|------------------------------------ |  | ---------- |  | ---------- |  | ---------- |  | ----------
|                                     |  | Basic      |  | Diluted   
|Average shares outstanding           |  | 2004       |  | 2003       |  | 2004       |  | 2003      
|For the three months ending March 31 |  | 11,108,903 |  | 11,108,403 |  | 11,213,334 |  | 11,176,404



Comprehensive Income: The
components of other comprehensive income were as follows:



|                                                            |  |                             |     |   |      |   |      |  
|----------------------------------------------------------- |  | --------------------------- | --- | - | ---- | - | ---- | -
|                                                            |  | Three monthsended March 31, |    
|(Expressed in thousands)                                    |  | 2004                        |     |   | 2003 |  
|Unrealized holding gains (losses) arising during the period |  | $                           | 309 |   |      | $ | (126 | )
|Reclassification adjustment                                 |  |                             | (22 | ) |      |   | (168 | )
|                                                            |  |                             |     |   |      |   |      |  
|Change in net unrealized gains (losses) on securities       |  |                             | 287 |   |      |   | (294 | )
|Tax effect                                                  |  |                             | (98 | ) |      |   | 100  |  
|                                                            |  |                             |     |   |      |   |      |  
|Other comprehensive income (loss)                           |  | $                           | 189 |   |      | $ | (194 | )
|                                                            |  |                             |     |   |      |   |      |  



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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 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.



|                                                                                      |  |                                    |      |   |      |   |      |  
|------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                      |  | For the ThreeMonths EndedMarch 31, |     
|(Expressed in thousands except per share amounts)                                     |  | 2004                               |      |   | 2003 |  
|Net income as reported                                                                |  | $                                  | 687  |   |      | $ | 470  |  
|Add: Expense, net of tax, included in net income for options granted below fair value |  |                                    | 1    |   |      |   | 3    |  
|Deduct: Stock-based compensation expense determined under fair value based method     |  |                                    | (39  | ) |      |   | (41  | )
|                                                                                      |  |                                    |      |   |      |   |      |  
|Pro forma net income                                                                  |  | $                                  | 649  |   |      | $ | 432  |  
|                                                                                      |  |                                    |      |   |      |   |      |  
|Basic earnings per share as reported                                                  |  | $                                  | 0.06 |   |      | $ | 0.04 |  
|Pro forma basic earnings per share                                                    |  |                                    | 0.06 |   |      |   | 0.04 |  
|                                                                                      |  |                                   
|Diluted earnings per share as reported                                                |  | $                                  | 0.06 |   |      | $ | 0.04 |  
|Pro forma diluted earnings per share                                                  |  |                                    | 0.06 |   |      |   | 0.04 |  



2. Securities



The estimated fair values of securities available for sale
were as follows:



|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|------------------------------------------------------------------------------------- |  | ------------------- | ------- | -------------------- | - | --------------------- |  | - | ---- | -
|                                                                                      |  | March 31, 2004      |        
|(Expressed in thousands)                                                              |  | EstimatedFair Value |         | GrossUnrealizedGains |   | GrossUnrealizedLosses | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 20,472  |                      | $ | 199                   |  | $ | 0    |  
|Tax-exempt obligations of states and political subdivisions                           |  |                     | 1,791   |                      |   | 176                   |  |   | 0    |  
|Taxable obligations of states and political Subdivisions                              |  |                     | 19,305  |                      |   | 626                   |  |   | 0    |  
|Mortgage-backed securities                                                            |  |                     | 48,973  |                      |   | 871                   |  |   | (164 | )
|Collateralized mortgage obligations                                                   |  |                     | 12,093  |                      |   | 224                   |  |   | (43  | )
|Corporate debt                                                                        |  |                     | 9,414   |                      |   | 146                   |  |   | (415 | )
|Asset-backed securities                                                               |  |                     | 336     |                      |   | 1                     |  |   | 0    |  
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|Total debt securities                                                                 |  |                     | 112,384 |                      |   | 2,243                 |  |   | (622 | )
|Marketable equity securities                                                          |  |                     | 3,031   |                      |   | 32                    |  |   | (18  | )
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|Total available for sale                                                              |  | $                   | 115,415 |                      | $ | 2,275                 |  | $ | (640 | )
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  



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Unrealized losses on corporate debt have not been recognized into income because management has the intent and ability to
hold the securities for the foreseeable future and believes the issuers have the ability to repay their obligations upon maturity.



|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|------------------------------------------------------------------------------------- |  | ------------------- | ------- | -------------------- | - | --------------------- |  | - | ---- | -
|                                                                                      |  | December 31, 2003   |        
|(Expressed in thousands)                                                              |  | EstimatedFair Value |         | GrossUnrealizedGains |   | GrossUnrealizedLosses | 
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                   | 22,688  |                      | $ | 291                   |  | $ | (4   | )
|Tax-exempt obligations of states and political subdivisions                           |  |                     | 1,788   |                      |   | 152                   |  |   |     |  
|Taxable obligations of states and political subdivisions                              |  |                     | 19,426  |                      |   | 539                   |  |   |     |  
|Mortgage-backed securities                                                            |  |                     | 41,521  |                      |   | 670                   |  |   | (249 | )
|Collateralized mortgage obligations                                                   |  |                     | 13,247  |                      |   | 237                   |  |   | (51  | )
|Corporate debt                                                                        |  |                     | 9,949   |                      |   | 161                   |  |   | (431 | )
|Asset-backed securities                                                               |  |                     | 466     |                      |   | 2                     |  |   |     |  
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|Total debt securities                                                                 |  |                     | 109,085 |                      |   | 2,052                 |  |   | (735 | )
|Marketable equity securities                                                          |  |                     | 3,060   |                      |   | 49                    |  |   | (18  | )
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  
|Total available for sale                                                              |  | $                   | 112,145 |                      | $ | 2,101                 |  | $ | (753 | )
|                                                                                      |  |                     |         |                      |   |                       |  |   |      |  



The carrying amount,
unrecognized gains and losses, and fair value of securities held to maturity are summarized as follows:



|                         |  |                   |     |                      |   |                       |  |                     |  |   |    
|------------------------ |  | ----------------- | --- | -------------------- | - | --------------------- |  | ------------------- |  | - | ---
|                         |  | March 31, 2004   
|(Expressed in thousands) |  | CarryingAmount    |     | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Corporate debt           |  | $                 | 250 |                      | $ | 22                    |  |                    |  | $ | 272
|                         | 
|                         |  | December 31, 2003
|(Expressed in thousands) |  | CarryingAmount    |     | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFairValue 
|Corporate debt           |  | $                 | 250 |                      | $ | 23                    |  |                    |  | $ | 273



3. Loans and Allowance
for Loan Losses



Loans outstanding are as follows:



|                                                        |  |               |         |                  |   |        
|------------------------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|(Expressed in thousands)                                |  | March 31,2004 |         | December 31,2003
|Real estate-construction                                |  | $             | 5,743   |                  | $ | 5,679  
|Real estate-mortgage                                    |  |               | 58,286  |                  |   | 57,213 
|Real estate-secured by nonfarm, nonresidential property |  |               | 71,789  |                  |   | 65,380 
|Commercial, financial and agricultural                  |  |               | 21,332  |                  |   | 24,018 
|Obligations of political subdivisions in the U.S.       |  |               | 2,159   |                  |   | 2,236  
|Installment loans and loans to individuals              |  |               | 7,241   |                  |   | 3,002  
|                                                        |  |               |         |                  |   |        
|Loans receivable                                        |  | $             | 166,550 |                  | $ | 157,528
|                                                        |  |               |         |                  |   |        





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##### Table of Contents

Non-accruing loans amounted to $1,421,000 at March 31, 2004, down from $1,808,000 at year-end 2003.
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 $11,000 at March 31, 2004 and $3,000 at year-end 2003.



Impaired loans were as follows:



|                                                           |  |               |       |                  |   |      
|---------------------------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|(Expressed in thousands)                                   |  | March 31,2004 |       | December 31,2003
|Impaired loans with no allocated allowance for loan losses |  | $             | 14    |                  | $ | 58   
|Impaired loans with allocated allowance for loan losses    |  |               | 1,330 |                  |   | 1,673
|                                                           |  |               |       |                  |   |      
|Total (1)                                                  |  | $             | 1,344 |                  | $ | 1,731
|                                                           |  |               |       |                  |   |      
|Amount of the allowance for loan losses allocated          |  | $             | 401   |                  | $ | 524  

---

|(1) | Balances are net of nonaccrual interest paid.
|--- | ---------------------------------------------

|                                             |  |                             |       |      |   |      
|-------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                             | 
|                                             |  | Three MonthsEnded March 31,
|(Expressed in thousands)                     |  | 2004                        |       | 2003
|Average impaired loans                       |  | $                           | 1,538 |      | $ | 3,259
|Interest income recognized during impairment |  |                             | 0     |      |   | 0    
|Cash-basis interest income recognized        |  |                             | 0     |      |   | 0    



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



|                                           |  |                             |       |   |      |   |       |  
|------------------------------------------ |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                           |  | Three monthsended March 31, |      
|(Expressed in thousands)                   |  | 2004                        |       |   | 2003 |  
|Balance, beginning of period               |  | $                           | 3,300 |   |      | $ | 4,287 |  
|Provision for loan losses                  |  |                             | 0     |   |      |   | 0     |  
|Loans charged-off                          |  |                             | (73   | ) |      |   | (18   | )
|Recoveries on loans previously charged-off |  |                             | 90    |   |      |   | 68    |  
|                                           |  |                             |       |   |      |   |       |  
|Net recoveries                             |  |                             | 17    |   |      |   | 50    |  
|                                           |  |                             |       |   |      |   |       |  
|Balance, end of period                     |  | $                           | 3,317 |   |      | $ | 4,337 |  
|                                           |  |                             |       |   |      |   |       |  



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



4. Stock Option Plan



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.



10



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##### Table of Contents

The following is a summary of the activity in the Plan for the three months ended March 31, 2004:



|                           |  |                   |  |                    |   |  |                              |     
|-------------------------- |  | ----------------- |  | ------------------ | - |  | ---------------------------- | ----
|                           |  | AvailableforGrant |  | OptionsOutstanding |   |  | WeightedAverageExercisePrice
|Balance at January 1, 2004 |  | 624,500           |  | 368,000            |   |  | $                            | 4.12
|Forfeitures                |  | 3,375             |  | (3,375             | ) |  | $                            | 4.94
|                           |  |                   |  |                    |   |  |                              |     
|Balance at March 31, 2004  |  | 627,875           |  | 364,625            |   |  | $                            | 4.11
|                           |  |                   |  |                    |   |  |                              |     



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 $1,000 and $3,000 was recognized for the three months ended March 31, 2004 and 2003, 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.



5. Litigation



The Company and its subsidiaries are involved in legal proceedings through
the normal course of business and could face claims, including unasserted claims, which may ultimately result in litigation. It is managements opinion that the Companys financial position, results of operations, and cash flows would not
be materially affected by the outcome of any pending or threatened legal proceedings, commitments, or claims.



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##### Table of Contents

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.



| |  | The Company has recognized substantial loan losses in past years, principally related to loans made under the direction of prior management. The volume of classified loans remains
high relative to the Companys peers. 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Certain credit, market, operational, liquidity and interest rate risks associated with the Companys business operations as well as changes in business and economic conditions,
competition, fiscal and monetary policies and legislation could impact the future operations and performance of the Company.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12



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##### Table of Contents

RESULTS OF OPERATIONS



SUMMARY



For the three months ended March 31, 2004, Belmont Bancorp. earned $687,000, or $0.06 per common share, compared to earnings of $470,000, or $0.04 per
common share, for the three months ended March 31, 2003.



Average assets increased to $304 million for the first quarter of 2004, compared to $288 million for the first quarter of 2003. Total assets at March 31, 2004 were $308 million, up from $299 million at year end 2003.



Net interest income on a taxable equivalent basis increased $398,000 for the
first quarter of 2004 compared to the first quarter of 2003. Average earning assets increased to $282 million during the first quarter of 2004 from $265 million for the first quarter of 2003. The taxable equivalent net interest margin was 3.81% for
the first quarter of 2004 and 3.45% for the first quarter of 2003. The taxable equivalent net interest margin for the fourth quarter of 2003 was 3.51%. The net interest rate spread (the difference between the average yields on earning assets and
interest-bearing liabilities) was 3.50% for the first three months of 2004 compared to 3.05% for the comparable period of 2003. The taxable equivalent yield on earning assets declined to 5.41% from 5.53%, a decrease of 12 basis points, during the
first quarter of 2004 compared to the first quarter of 2003. This decline was offset by a decrease of 57 basis points in the cost of interest-bearing liabilities to 1.91% from 2.48%.



Interest rates across the maturity horizon remained low relative to historical levels during the first quarter of 2004. The
Federal Open Market Committee (the FOMC) has maintained a very accommodative stance to aid economic recovery keeping its targeted federal funds rate at 1.00%the lowest level in 46 years. 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. Generally, higher interest rates will positively impact the Companys net interest income,
while lower interest rates will negatively impact net interest income. The Company has significantly reduced it cost of funds since 2001; there is little room for further reductions. To increase and retain deposits, competitive pressures may prompt
the Company to offer deposit products that result in a migration of its funds to different products paying a higher rate of interest.



OTHER OPERATING INCOME



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



|                                                         |  |                              |     |      |   |         |  |       |  
|-------------------------------------------------------- |  | ---------------------------- | --- | ---- | - | ------- |  | ----- | -
|                                                         |  | Three months ended March 31, |    
|(Expressed in thousands)                                 |  | 2004                         |     | 2003 |   | %Change | 
|Trust fees                                               |  | $                            | 166 |      | $ | 125     |  | 32.8  | %
|Service charges on deposits                              |  |                              | 323 |      |   | 253     |  | 27.7  | %
|Mortgage servicing fees                                  |  |                              | 46  |      |   | 44      |  | 4.5   | %
|Other income (individually less than 1% of total income) |  |                              | 200 |      |   | 164     |  | 22.0  | %
|                                                         |  |                              |     |      |   |         |  |       |  
|Subtotal                                                 |  |                              | 735 |      |   | 586     |  | 25.4  | %
|Gain on sale of loans held for sale                      |  |                              | 29  |      |   | 137     |  | -78.8 | %
|Securities gains                                         |  |                              | 22  |      |   | 168     |  | -86.9 | %
|                                                         |  |                              |     |      |   |         |  |       |  
|Total                                                    |  | $                            | 786 |      | $ | 891     |  | -11.8 | %
|                                                         |  |                              |     |      |   |         |  |       |  



Overall, noninterest
income, excluding gains on sale of securities and loans held for sale, increased $149,000, or 25.4%, during the first quarter of 2004 compared to 2003.



Trust fees increased 32.8% to $166,000 for the first quarter of 2004 compared to $125,000 for the first quarter of 2003 as the result of market conditions
and an increase in the trust fee schedule. Trust fees are affected by the valuation of the stock market because most fees are assessed based on the underlying market values of trust accounts.



13



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##### Table of Contents

Service charges on deposits totaled $323,000 for the first quarter of 2004 compared to $253,000 for the
comparable period of 2003. The increase in service charges for 2004 was principally due to the introduction in June 2003 of a new product and the implementation of a new service charge.



Mortgage servicing fees are collected from the Federal Home Loan Mortgage Corporation (Freddie Mac) for the
Companys role in servicing mortgage loans previously sold to Freddie Mac. Generally, the Company receives 0.25% of the outstanding loan balance for servicing. Mortgage servicing fees increased to $46,000 for first quarter of 2004 compared to
$44,000 for the comparable quarter of 2003. The portfolio of loans sold to Freddie Mac declined slightly to $71.4 million at March 31, 2004 compared to $72.6 million at year-end 2003. The portfolio totaled $68.4 million at March 31, 2003. Future
increases to mortgage servicing fees are largely dependent upon the volume of mortgage loans originated and sold in the secondary market.



Other income includes, among other miscellaneous items, commissions and fees unrelated to loan origination, brokerage fees, loan documentation preparation
fees, rental income, and check printing charges. Other income increased 22.0% to $200,000 for the first quarter of 2004 compared to $164,000 for the comparable period of 2003.



Mortgage lending volumes declined during the first quarter of 2004 compared to the first quarter of 2003 reflecting the
cyclical nature of the mortgage lending business. A component of gains on sale of loans held for sale includes capitalized mortgage servicing rights. This right represents the value associated with servicing loans sold in the secondary market.
Capitalization of mortgage servicing rights totaled $19,000 for the first quarter of 2004 compared to $59,000 for the first quarter of 2003. Total gains on sales of loans (including the component for capitalized mortgage servicing rights) decreased
78.8% to $29,000 for the first quarter of 2004 compared to $137,000 for the same period of 2003.



OPERATING EXPENSES



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



|                                                  |  |                              |       |      |   |         |  |        |  
|------------------------------------------------- |  | ---------------------------- | ----- | ---- | - | ------- |  | ------ | -
|                                                  |  | Three months ended March 31, |      
|(Expressed in thousands)                          |  | 2004                         |       | 2003 |   | %Change | 
|Salaries and wages                                |  | $                            | 993   |      | $ | 996     |  | -0.3   | %
|Employee benefits                                 |  |                              | 265   |      |   | 258     |  | 2.7    | %
|Occupancy expense                                 |  |                              | 243   |      |   | 238     |  | 2.1    | %
|Furniture and equipment expense                   |  |                              | 205   |      |   | 196     |  | 4.6    | %
|Legal fees                                        |  |                              | 38    |      |   | 31      |  | 22.6   | %
|Legal settlements                                 |  |                              |      |      |   | 53      |  | -100.0 | %
|Insurance, including federal deposit insurance    |  |                              | 41    |      |   | 52      |  | -21.2  | %
|Examinations and audits                           |  |                              | 61    |      |   | 87      |  | -29.9  | %
|Directors fees                                   |  |                              | 57    |      |   | 40      |  | 42.5   | %
|Data processing expense                           |  |                              | 52    |      |   | 57      |  | -8.8   | %
|Taxes other than payroll and real estate          |  |                              | 95    |      |   | 91      |  | 4.4    | %
|Supplies and printing                             |  |                              | 37    |      |   | 45      |  | -17.8  | %
|Amortization of mortgage servicing rights, net    |  |                              | 41    |      |   | 29      |  | 41.4   | %
|Other (individually less than 1% of total income) |  |                              | 334   |      |   | 336     |  | -0.6   | %
|                                                  |  |                              |       |      |   |         |  |        |  
|Total                                             |  | $                            | 2,462 |      | $ | 2,509   |  | -1.9   | %
|                                                  |  |                              |       |      |   |         |  |        |  



14



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##### Table of Contents

At March 31, 2004 the Company employed 131 full time equivalent employees compared to 130 full time
equivalent employees at the end of March 2003. Compensation expense was relatively unchanged for the first quarter of 2004 compared to the first quarter of 2003, and benefit costs increased 2.7% for the same period.



Insurance expense included costs for federal deposit insurance premiums,
directors and officers liability insurance, and fidelity bond insurance. Insurance costs decreased 21.2% to $41,000 for the first quarter of 2004 from $52,000 for the same period of 2003. The decrease was principally related to lower
costs associated with directors and officers liability insurance.



Examination and audit costs decreased 29.9% to $61,000 for the first quarter of 2004 from $87,000 for the same period of 2003. During the first quarter of 2003, certain internal audit and loan review functions were
outsourced. Beginning in 2004, the Companys staff performed the internal audit and loan review functions. Consequently, some costs related to examinations and audit expenses are now reflected in compensation cost.



Directors fees increased to $57,000 for the first quarter of 2004
compared to the same quarter of 2003. Retainer and attendance fees for directors were increased beginning in 2004.



Data processing expenses decreased 8.8% to $52,000 for the first quarter of 2004 compared to the same quarter of 2003 as the result of the conversion of
the trust accounting system in early 2003 from a third party provider to an in-house system.



Net amortization of mortgage servicing rights (MSR) increased to $41,000 for the first quarter of 2004 compared to $29,000 for the comparable quarter of 2003. Activity associated with MSR, amortization of
MSR and reductions to a valuation allowance established during 2002 to reduce the carrying value of MSR to estimated fair value is summarized in the following table.



|                               |  |                             |     |   |      |   |     |  
|------------------------------ |  | --------------------------- | --- | - | ---- | - | --- | -
|                               |  | Three MonthsEnded March 31, |    
|(Expressed in thousands)       |  | 2004                        |     |   | 2003 |  
|Servicing rights:              |  |                             |     |   |      |   |     |  
|Beginning of the period        |  | $                           | 433 |   |      | $ | 418 |  
|Additions                      |  |                             | 19  |   |      |   | 59  |  
|Amortized to expense           |  |                             | (45 | ) |      |   | (41 | )
|                               |  |                             |     |   |      |   |     |  
|End of period balance          |  | $                           | 407 |   |      | $ | 436 |  
|                               |  |                             |     |   |      |   |     |  
|Valuation allowance:           |  |                             |     |   |      |   |     |  
|Beginning of the period        |  | $                           | 59  |   |      | $ | 109 |  
|Additions expensed             |  |                             |    |   |      |   |    |  
|Reductions credited to expense |  |                             | (4  | ) |      |   | (12 | )
|Direct write-downs             |  |                             | 0   |   |      |   | 0   |  
|                               |  |                             |     |   |      |   |     |  
|End of period balance          |  | $                           | 55  |   |      | $ | 97  |  
|                               |  |                             |     |   |      |   |     |  



SECURITIES



The estimated fair value of securities available for sale at March 31, 2004
and December 31, 2003 are detailed in Note 2 of the quarterly financial statements.



At March 31, 2004, the Company did not own any investments of a single issuer, the value of which exceeded 10% of total shareholders equity, or $3,607,000, except for stock in the Federal Home Loan Bank of
Cincinnati. The carrying value of this stock was $3,629,000 at March 31, 2004.



15



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##### Table of Contents

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 2004 and 2003 are included in Note 3 of the quarterly financial statements. No loan loss provision was recorded during the first
quarters of 2004 or 2003 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.



|                                                         |  |                             |         |   |      |   |         |  
|-------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                         |  | Three months endedMarch 31, |        
|(Expressed in thousands)                                 |  | 2004                        |         |   | 2003 |  
|Loans outstanding, end of period                         |  | $                           | 166,550 |   |      | $ | 133,886 |  
|Average loans                                            |  | $                           | 159,971 |   |      | $ | 132,134 |  
|Annualized (net charge offs) recoveries as a percent of: |  |                             |         |   |      |   |         |  
|Average loans                                            |  |                             | 0.04    | % |      |   | 0.15    | %
|Allowance for loan losses                                |  |                             | 2.05    | % |      |   | 4.61    | %
|Allowance for loan losses to:                            |  |                             |         |   |      |   |         |  
|Total loans at end of period                             |  |                             | 1.99    | % |      |   | 3.24    | %
|Non-performing assets                                    |  |                             | 199.22  | % |      |   | 139.05  | %



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:



|                                                     |  |               |       |   |              |   |       |  
|---------------------------------------------------- |  | ------------- | ----- | - | ------------ | - | ----- | -
|(Expressed in thousands)                             |  | March 31,2004 |       |   | Dec. 31,2003 |  
|Non-accrual loans and leases                         |  | $             | 1,421 |   |              | $ | 1,808 |  
|Loans 90 days or more past due but accruing interest |  |               | 11    |   |              |   | 3     |  
|Other real estate owned                              |  |               | 233   |   |              |   | 120   |  
|                                                     |  |               |       |   |              |   |       |  
|Total                                                |  | $             | 1,665 |   |              | $ | 1,931 |  
|                                                     |  |               |       |   |              |   |       |  
|Non-performing assets as a percent of total assets   |  |               | 0.54  | % |              |   | 0.64  | %



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



16



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##### Table of Contents

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 $8,166,000 at March 31, 2004 and $8,214,000 at December 31, 2003.



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) |       
|Industry                                             |  | March 31,2004            |        |   | December 31,2003 |  
|Real estate - operators of nonresidential buildings: |  |                          |        |   |                  |   |        |  
|Loan balance and available credit                    |  | $                        | 14,762 |   |                  | $ | 13,588 |  
|Percent of tier 1 capital                            |  |                          | 50.9   | % |                  |   | 47.9   | %
|                                                     |  |                         
|Real estate - apartment buildings:                   |  |                          |        |   |                  |   |        |  
|Loan balance and available credit                    |  | $                        | 9,599  |   |                  | $ | 9,281  |  
|Percent of tier 1 capital                            |  |                          | 33.1   | % |                  |   | 32.7   | %
|                                                     |  |                         
|Services - motel, hotel:                             |  |                          |        |   |                  |   |        |  
|Loan balance and available credit                    |  | $                        | 8,738  |   |                  | $ | 7,653  |  
|Percent of tier 1 capital                            |  |                          | 30.1   | % |                  |   | 27.0   | %



DEFERRED FEDERAL TAX ASSETS



Deferred federal tax assets totaled $4.2 million at March 31,
2004. 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 fair value. At March 31, 2004, management
believes no deferred tax valuation allowance is needed as future estimated taxable income will be sufficient to realize the net deferred tax assets.



SHORT-TERM FEDERAL HOME LOAN BANK ADVANCES



Short-term borrowings at March 31, 2004 totaled $4 million and consisted of a draw on a line of credit with the Federal Home Loan Bank.



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LONG-TERM FEDERAL HOME LOAN BANK ADVANCES



Long-term advances at March 31, 2004 from the Federal Home Loan Bank of Cincinnati are summarized in the following table.



|                                                                                                                                                                         |  |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------
|(Expressed in thousands)                                                                                                                                                 |  |  
|Fixed rate advances with balances due at maturity, maturities ranging from September 2004 through July 2010 and fixed rates ranging from 1.60%
to 4.29%, averaging 2.93% |  | $ | 9,535 
|Fixed rate advances with quarterly FHLB option to convert to floating rate tied to LIBOR maturing in 2008 and rates ranging from 4.53% to
4.78%, averaging 4.66%         |  |   | 20,000
|Fixed rate advance with FHLB option to convert to floating rate tied to LIBOR in 2005 and maturing in 2009 with rate of 3.16% and a conversion
strike rate of 7.50%      |  |   | 5,000 
|Amortizing balloon advance maturing in 2017 with fixed rate of 4.654%                                                                                                    |  |   | 1,029 
|                                                                                                                                                                         |  |   |       
|Total long-term FHLB advances                                                                                                                                            |  | $ | 35,564
|                                                                                                                                                                         |  |   |       
|(LIBOR is the 3 month London Interbank Offered Rate)                                                                                                                     |  |   |       



CAPITAL RESOURCES



The table below depicts the capital ratios for the Bank and for the Company
on a consolidated basis as of March 31, 2004. 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.



|                                                  |  |        |        |       |                                              |   |        |                                                                                 |        |  |     |        |  |       |        |  |      |  
|------------------------------------------------- |  | ------ | ------ | ----- | -------------------------------------------- | - | ------ | ------------------------------------------------------------------------------- | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|                                                  |  | Actual |        |       | Minimum Required ForCapitalAdequacy Purposes |   |        | Minimum RequiredTo Be Well CapitalizedUnder Prompt Corrective ActionRegulations |       
|(Expressed in thousands)                          |  | Amount |        | Ratio |                                              |   | Amount |                                                                                 | Ratio  |  |     | Amount |  | Ratio |       
|Total risk based capital to risk weighted assets: |  |        |        |       |                                              |   |        |                                                                                 |        |  |     |        |  |       |        |  |      |  
|Consolidated                                      |  | $      | 32,741 |       | 16.3                                         | % |        | $                                                                               | 16,096 |  | 8.0 | %      |  | $     | 20,120 |  | 10.0 | %
|Bank                                              |  |        | 31,559 |       | 15.5                                         | % |        |                                                                                 | 16,248 |  | 8.0 | %      |  |       | 20,311 |  | 10.0 | %
|                                                  |  |        |        |       |                                              |  
|Tier 1 capital to risk weighted assets:           |  |        |        |       |                                              |   |        |                                                                                 |        |  |     |        |  |       |        |  |      |  
|Consolidated                                      |  |        | 30,216 |       | 15.0                                         | % |        |                                                                                 | 8,048  |  | 4.0 | %      |  |       | 12,072 |  | 6.0  | %
|Bank                                              |  |        | 29,011 |       | 14.3                                         | % |        |                                                                                 | 8,124  |  | 4.0 | %      |  |       | 12,186 |  | 6.0  | %
|                                                  |  |        |        |       |                                              |  
|Tier 1 capital to average assets:                 |  |        |        |       |                                              |   |        |                                                                                 |        |  |     |        |  |       |        |  |      |  
|Consolidated                                      |  |        | 30,216 |       | 10.1                                         | % |        |                                                                                 | 11,939 |  | 4.0 | %      |  |       | 14,924 |  | 5.0  | %
|Bank                                              |  |        | 29,011 |       | 9.7                                          | % |        |                                                                                 | 11,913 |  | 4.0 | %      |  |       | 14,891 |  | 5.0  | %



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LIQUIDITY



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 Companys branch banking network that gathers demand and retail time deposits. The Company also acquires funds through repurchase agreements, overnight federal funds, and FHLB
advances that provide additional sources of liquidity. Total deposits decreased $5.1 million from year-end 2003 to March 31, 2004. Average deposits decreased $2.5 million during the first quarter of 2004 compared to the fourth quarter of 2003. As a
consequence of low interest rates, loan refinance activity, calls on investment securities and investment sales, the Company had a relatively large liquidity position throughout 2003. Liquidity may be impacted by the ability of the Company to
generate future earnings.



The Bank also has lines of credit
with various correspondent banks totaling $4,100,000 that may be used as an alternative funding source; none of these lines were drawn upon at March 31, 2004. The Bank had a credit line with the Federal Home Loan Bank for $20 million with available
credit of $16 million at March 31, 2004. All borrowings at the Federal Home Loan Bank are subject to eligible collateral requirements.



The main source of liquidity for the parent company is dividends from the Bank. At March 31, 2004, the parent company had cash and marketable securities
with an estimated fair value of $783,000. 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.



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 to Shareholders on Form 10-K for the year ended December 31, 2003. There has been no material change in the
disclosure regarding market risk.



ITEM 4. CONTROLS AND PROCEDURES



The
Companys Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this quarterly report, that the Companys disclosure controls and procedures are effective for
the timely recording, processing, summarizing and reporting of the information required to be disclosed in reports filed under the Securities and Exchange Act of 1934.



There have been no significant changes in the Companys internal controls or in other factors that could significantly
affect those controls subsequent to the date of their evaluation.



PART II - OTHER INFORMATION



Item 1. Legal proceedings



The
Company and its subsidiaries are involved in legal proceedings through the normal course of business and could face claims, including unasserted claims, which may ultimately result in litigation. It is managements opinion that the
Companys financial position, results of operations, and cash flows would not be materially affected by the outcome of any pending or threatened legal proceedings, commitments, or claims.



Item 2. Changes in securities, use of proceeds and issuer purchases of equity securities



None



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Item 3. Defaults upon senior securities



None



Item 4. Submission of matters to a vote of security shareholders



None



Item 5. Other information



None



Item 6. Exhibits and Reports on Form 8-K



| | (a) | Exhibits
| | --- | --------



| | 3.1 | Articles of Incorporation (1)
| | --- | -----------------------------



| | 3.2 | Amendment regarding Series A Preferred Stock (2)
| | --- | ------------------------------------------------



| | 3.3 | Amendment regarding number of directors (3)
| | --- | -------------------------------------------



| | 3.4 | Code of Regulations (4)
| | --- | -----------------------



| | 10.1 | Employment Agreement dated December 15, 1999 between Wilbur R. Roat, Belmont Bancorp. and Belmont National Bank (5)
| | ---- | -------------------------------------------------------------------------------------------------------------------



| | 10.2 | Employment Agreement dated April 16, 2001 between Michael Baylor, Belmont Bancorp. and Belmont National Bank (6)
| | ---- | ----------------------------------------------------------------------------------------------------------------



| | 10.3 | Belmont Bancorp. 2001 Stock Option Plan (7)
| | ---- | -------------------------------------------



| | 31.1 | Certification under Section 302 of the Sarbanes-Oxley Act of 2002 of Quarterly Report on Form 10-Q of Belmont Bancorp. for the quarter ended March 31, 2004
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 | Certification under Section 302 of the Sarbanes-Oxley Act of 2002 of Quarterly Report on Form 10-Q of Belmont Bancorp. for the quarter ended March 31, 2004
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Quarterly Report on Form 10-Q of Belmont Bancorp. for the quarter ended March 31, 2004
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.2 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Quarterly Report on Form 10-Q of Belmont Bancorp. for the quarter ended March 31, 2004
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Filed as an exhibit to Amendment No. 3 to the Companys Registration Statement on Form S-2 filed with the Securities and Exchange Commission (Registration No. 333-91035) on
February 3, 2000 and incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.
|--- | ----------------------------------------------------------------------------------------------------------------

|(4) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | 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
| | --- | -------------------



On February 10, 2004, Belmont Bancorp. furnished a current report on Form 8-K under Item 12 reporting the issuance of a press release on February 9, 2004,
announcing earnings for the fourth quarter and year ending December 31, 2003.



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On January 22, 2004, Belmont Bancorp. filed a current report on Form 8-K under Item 5 reporting the
issuance of a press release on January 21, 2004, announcing a regular cash dividend payable on February 13, 2004 to shareholders of record as of February 2, 2004.



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 R. RoatBy: Wilbur R. RoatPresident & CEO/s/ Jane R. MarshBy: Jane R. MarshChief Financial Officer




May 10, 2004



21