##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2003



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)



|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.    x  Yes ̈No



Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.:



Common Stock, $0.25 par value,

11,108,903 shares outstanding

as of August 8, 2003



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##### Table of Contents

BELMONT BANCORP

Quarter Ended June 30, 2003



INDEX



|Part I. FINANCIAL INFORMATION |  |                                                                                                                                
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|                              |  |                                                                                                                                
|Item 1.                       |  | Financial Statements                                                                                                           
|                              |  |                                                                                                                                
|                              |  | Consolidated Balance SheetsJune 30, 2003 and December 31, 2002                                                                
|                              |  |                                                                                                                                
|                              |  | Consolidated Statements of IncomeThree Months Ended June 30, 2003 and June 30, 2002                                           
|                              |  |                                                                                                                                
|                              |  | Consolidated Statements of IncomeSix Months Ended June 30, 2003 and June 30, 2002                                             
|                              |  |                                                                                                                                
|                              |  | Condensed Consolidated Statements of Changes in Shareholders Equity Three and Six Months Ended June 30, 2003 and June 30, 2002
|                              |  |                                                                                                                                
|                              |  | Condensed Consolidated Statements of Cash FlowsSix Months Ended June 30, 2003 and June 30, 2002                               
|                              |  |                                                                                                                                
|                              |  | Notes to the Consolidated Financial Statements                                                                                 
|                              |  |                                                                                                                                
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                          
|                              |  |                                                                                                                                
|Item 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                                      
|                              |  |                                                                                                                                
|Item 4.                       |  | Controls and Procedures                                                                                                        
|                              | 
|Part IIOTHER INFORMATION     |  |                                                                                                                                
|                              |  |                                                                                                                                
|Item 1.                       |  | Legal Proceedings                                                                                                              
|                              |  |                                                                                                                                
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                                                                      
|                              |  |                                                                                                                                
|Item 3.                       |  | Defaults upon Senior Securities                                                                                                
|                              |  |                                                                                                                                
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                            
|                              |  |                                                                                                                                
|Item 5.                       |  | Other Information                                                                                                              
|                              |  |                                                                                                                                
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                               
|                              | 
|Signature page                |  | 23                                                                                                                             
|                              | 
|Certifications                |  | 24                                                                                                                             



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##### Table of Contents

Belmont Bancorp. and Subsidiaries

Consolidated Balance Sheets

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



|                                                                                            |  | June 30,2003 |         |   | December 31,2002 |  
|------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | -
|Assets                                                                                      |  |              |         |   |                  |  
|Cash and due from banks                                                                     |  | $            | 10,135  |   |                  | $
|Interest bearing deposits in other banks                                                    |  |              | 120     |   |                  |  
|Federal funds sold                                                                          |  |              | 5,900   |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Cash and cash equivalents                                                                   |  |              | 16,155  |   |                  |  
|Loans held for sale                                                                         |  |              | 1,370   |   |                  |  
|Securities available for sale at fair value                                                 |  |              | 127,023 |   |                  |  
|Securities held to maturity (estimated fair value of $250,000 in 2003)                      |  |              | 250     |   |                  |  
|Loans                                                                                       |  |              | 137,091 |   |                  |  
|Less allowance for loan losses                                                              |  |              | (3,940  | ) |                  |  
|                                                                                            |  |              |         |   |                  |  
|Net loans                                                                                   |  |              | 133,151 |   |                  |  
|Premises and equipment, net                                                                 |  |              | 6,094   |   |                  |  
|Deferred federal tax assets                                                                 |  |              | 4,457   |   |                  |  
|Cash surrender value of life insurance                                                      |  |              | 1,317   |   |                  |  
|Federal taxes receivable                                                                    |  |              |         |   |                  |  
|Accrued income receivable                                                                   |  |              | 1,488   |   |                  |  
|Other assets                                                                                |  |              | 3,217   |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Total assets                                                                                |  | $            | 294,522 |   |                  | $
|                                                                                            |  |              |         |   |                  |  
|Liabilities and Shareholders Equity                                                        |  |              |         |   |                  |  
|Liabilities                                                                                 |  |              |         |   |                  |  
|Noninterest bearing deposits:                                                               |  |              |         |   |                  |  
|Demand                                                                                      |  | $            | 27,642  |   |                  | $
|Interest bearing deposits:                                                                  |  |              |         |   |                  |  
|Demand                                                                                      |  |              | 30,569  |   |                  |  
|Savings                                                                                     |  |              | 100,390 |   |                  |  
|Time                                                                                        |  |              | 73,288  |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Total deposits                                                                              |  |              | 231,889 |   |                  |  
|Securities sold under repurchase agreements                                                 |  |              | 1,345   |   |                  |  
|Federal funds purchased and other short-term borrowings                                     |  |              |         |   |                  |  
|Long-term borrowings                                                                        |  |              | 21,042  |   |                  |  
|Accrued interest on deposits and other borrowings                                           |  |              | 344     |   |                  |  
|Other liabilities                                                                           |  |              | 3,228   |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Total liabilities                                                                           |  |              | 257,848 |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|                                                                                            |  |             
|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   |   |                  |  
|Additional paid-in capital                                                                  |  |              | 17,548  |   |                  |  
|Retained earnings                                                                           |  |              | 15,781  |   |                  |  
|Treasury stock at cost (44,292 shares at 6/30/03; 44,792 shares at 12/31/02)                |  |              | (997    | ) |                  |  
|Accumulated other comprehensive income                                                      |  |              | 1,554   |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Total shareholders equity                                                                  |  |              | 36,674  |   |                  |  
|                                                                                            |  |              |         |   |                  |  
|Total liabilities and shareholders equity                                                  |  | $            | 294,522 |   |                  | $
|                                                                                            |  |              |         |   |                  |  



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 Three Months EndedJune 30, |       
|--------------------------------------------------- |  | ---------------------------------- | ------
|                                                    |  | 2003                               |       
|Interest and Dividend Income                        |  |                                    |       
|Loans:                                              |  |                                    |       
|Taxable                                             |  | $                                  | 2,287 
|Tax-exempt                                          |  |                                    | 38    
|Securities:                                         |  |                                    |       
|Taxable                                             |  |                                    | 1,151 
|Tax-exempt                                          |  |                                    | 20    
|Dividends                                           |  |                                    | 44    
|Interest on trading securities                      |  |                                    |      
|Interest on federal funds sold                      |  |                                    | 34    
|                                                    |  |                                    |       
|Total interest and dividend income                  |  |                                    | 3,574 
|                                                    |  |                                    |       
|Interest Expense                                    |  |                                    |       
|Deposits                                            |  |                                    | 1,079 
|Other borrowings                                    |  |                                    | 246   
|                                                    |  |                                    |       
|Total interest expense                              |  |                                    | 1,325 
|                                                    |  |                                    |       
|Net interest income                                 |  |                                    | 2,249 
|Provision for loan losses                           |  |                                    | (1,350
|                                                    |  |                                    |       
|Net interest income after provision for loan losses |  |                                    | 3,599 
|                                                    |  |                                    |       
|Noninterest Income                                  |  |                                    |       
|Trust fees                                          |  |                                    | 135   
|Service charges on deposits                         |  |                                    | 356   
|Legal settlements                                   |  |                                    |      
|Other operating income                              |  |                                    | 188   
|Trading gains (losses)                              |  |                                    |      
|Securities gains (losses)                           |  |                                    | 75    
|Gains on sale of loans held for sale                |  |                                    | 156   
|                                                    |  |                                    |       
|Total noninterest income                            |  |                                    | 910   
|                                                    |  |                                    |       
|Noninterest Expense                                 |  |                                    |       
|Salary and employee benefits                        |  |                                    | 1,262 
|Net occupancy expense of premises                   |  |                                    | 218   
|Equipment expenses                                  |  |                                    | 195   
|Legal fees                                          |  |                                    | 29    
|Legal settlements expense                           |  |                                    | 50    
|Other operating expenses                            |  |                                    | 796   
|                                                    |  |                                    |       
|Total noninterest expense                           |  |                                    | 2,550 
|                                                    |  |                                    |       
|Income before income taxes                          |  |                                    | 1,959 
|Income Tax Expense                                  |  |                                    | 599   
|                                                    |  |                                    |       
|Net income                                          |  | $                                  | 1,360 
|                                                    |  |                                    |       
|Basic and Diluted Earnings per Common Share         |  | $                                  | 0.12  
|                                                    |  |                                    |       



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 Six Months EndedJune 30, |       
|--------------------------------------------------- |  | -------------------------------- | ------
|                                                    |  | 2003                             |       
|Interest and Dividend Income                        |  |                                  |       
|Loans:                                              |  |                                  |       
|Taxable                                             |  | $                                | 4,493 
|Tax-exempt                                          |  |                                  | 77    
|Securities:                                         |  |                                  |       
|Taxable                                             |  |                                  | 2,344 
|Tax-exempt                                          |  |                                  | 67    
|Dividends                                           |  |                                  | 89    
|Interest on trading securities                      |  |                                  |       
|Interest on federal funds sold                      |  |                                  | 75    
|                                                    |  |                                  |       
|Total interest and dividend income                  |  |                                  | 7,145 
|                                                    |  |                                  |       
|Interest Expense                                    |  |                                  |       
|Deposits                                            |  |                                  | 2,196 
|Other borrowings                                    |  |                                  | 490   
|                                                    |  |                                  |       
|Total interest expense                              |  |                                  | 2,686 
|                                                    |  |                                  |       
|Net interest income                                 |  |                                  | 4,459 
|Provision for loan losses                           |  |                                  | (1,350
|                                                    |  |                                  |       
|Net interest income after provision for loan losses |  |                                  | 5,809 
|                                                    |  |                                  |       
|Noninterest Income                                  |  |                                  |       
|Trust fees                                          |  |                                  | 260   
|Service charges on deposits                         |  |                                  | 609   
|Legal settlements                                   |  |                                  |      
|Other operating income                              |  |                                  | 396   
|Trading gains (losses)                              |  |                                  |       
|Securities gains (losses)                           |  |                                  | 243   
|Gains on sale of loans held for sale                |  |                                  | 293   
|                                                    |  |                                  |       
|Total noninterest income                            |  |                                  | 1,801 
|                                                    |  |                                  |       
|Noninterest Expense                                 |  |                                  |       
|Salary and employee benefits                        |  |                                  | 2,516 
|Net occupancy expense of premises                   |  |                                  | 456   
|Equipment expenses                                  |  |                                  | 391   
|Legal fees                                          |  |                                  | 60    
|Legal settlements expense                           |  |                                  | 103   
|Other operating expenses                            |  |                                  | 1,533 
|                                                    |  |                                  |       
|Total noninterest expense                           |  |                                  | 5,059 
|                                                    |  |                                  |       
|Income before income taxes                          |  |                                  | 2,551 
|Income Tax Expense                                  |  |                                  | 721   
|                                                    |  |                                  |       
|Net income                                          |  | $                                | 1,830 
|                                                    |  |                                  |       
|Basic and Diluted Earnings per Common Share         |  | $                                | 0.16  
|                                                    |  |                                  |       



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)



|                                                                                   |  | Three Months Ended June 30,
|---------------------------------------------------------------------------------- |  | ---------------------------
|                                                                                   |  | 2003                       
|Balance, beginning of period                                                       |  | $                          
|Comprehensive income:                                                              |  |                            
|Net income                                                                         |  |                            
|Change in net unrealized gain on securities available for sale, net of tax effects |  |                            
|                                                                                   |  |                            
|Total comprehensive income                                                         |  |                            
|Treasury stock issued                                                              |  |                            
|Common stock options vested                                                        |  |                            
|                                                                                   |  |                            
|Balance, end of period                                                             |  | $                          
|                                                                                   |  |                            
|                                                                                   | 
|                                                                                   |  | Six Months Ended June 30,  
|                                                                                   |  | 2003                       
|Balance, beginning of period                                                       |  | $                          
|Comprehensive income:                                                              |  |                            
|Net income                                                                         |  |                            
|Change in net unrealized gain on securities available for sale, net of tax effects |  |                            
|                                                                                   |  |                            
|Total comprehensive income                                                         |  |                            
|Dividends declared                                                                 |  |                            
|Treasury stock issued                                                              |  |                            
|Treasury stock issued                                                              |  |                            
|Common stock options vested                                                        |  |                            
|                                                                                   |  |                            
|Balance, end of period                                                             |  | $                          
|                                                                                   |  |                            



See
the Notes to the Consolidated Financial Statements.



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Belmont Bancorp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2003 and 2002

(Unaudited) ($000s)



|                                                                           |  | 2003 |         |   | 2002 |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -
|Cash from Operating Activities                                             |  | $    | 2,595   |   |      | $
|                                                                           |  |     
|Investing Activities                                                       |  |      |         |   |      |  
|Proceeds from:                                                             |  |      |         |   |      |  
|Maturities and calls of securities                                         |  |      | 9,671   |   |      |  
|Sales of securities available for sale                                     |  |      | 4,586   |   |      |  
|Principal collected on mortgage-backed securities                          |  |      | 13,853  |   |      |  
|Sales of loans                                                             |  |      | 0       |   |      |  
|Sales of other real estate owned                                           |  |      | 124     |   |      |  
|Purchases of:                                                              |  |      |         |   |      |  
|Securities held to maturity                                                |  |      | (250    | ) |      |  
|Securities available for sale                                              |  |      | (32,781 | ) |      |  
|Premises and equipment                                                     |  |      | (191    | ) |      |  
|Changes in:                                                                |  |      |         |   |      |  
|Loans, net                                                                 |  |      | (6,170  | ) |      |  
|                                                                           |  |      |         |   |      |  
|Cash from investing activities                                             |  |      | (11,158 | ) |      |  
|                                                                           |  |      |         |   |      |  
|Financing Activities                                                       |  |      |         |   |      |  
|Payments on long-term debt                                                 |  |      | (8      | ) |      |  
|Changes in:                                                                |  |      |         |   |      |  
|Deposits                                                                   |  |      | 1,646   |   |      |  
|Repurchase agreements                                                      |  |      | 38      |   |      |  
|Proceeds from sale of treasury stock                                       |  |      | 2       |   |      |  
|                                                                           |  |      |         |   |      |  
|Cash from financing activities                                             |  |      | 1,678   |   |      |  
|                                                                           |  |      |         |   |      |  
|Decrease in Cash and Cash Equivalents                                      |  |      | (6,885  | ) |      |  
|Cash and Cash Equivalents, Beginning of Year                               |  |      | 23,040  |   |      |  
|                                                                           |  |      |         |   |      |  
|Cash and Cash Equivalents at June 30                                       |  | $    | 16,155  |   |      | $
|                                                                           |  |      |         |   |      |  
|Cash payments for interest                                                 |  | $    | 2,720   |   |      | $
|Cash payments for income taxes                                             |  |      | 11      |   |      |  
|Non-cash transfers from loans to other real estate owned and repossessions |  |      | 1,020   |   |      |  



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, 2002.



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates particularly subject to change would include the allowance for loan losses, deferred tax
valuation allowance, fair value of financial instruments, and loss contingencies.



While management monitors the revenue streams of the various Company products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a
Company-wide basis. Accordingly, all of the Companys service operations are considered by management to be aggregated in one reportable operating segment.



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



|                                   |  | Basic      |  | Diluted   
|---------------------------------- |  | ---------- |  | ----------
|Average shares outstanding         |  | 2003       |  | 2002      
|For the three months ended June 30 |  | 11,108,584 |  | 11,101,018
|For the six months ended June 30   |  | 11,108,494 |  | 11,102,718



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.



Newly Issued But Not Yet Effective Accounting Standards



The Financial Accounting Standards Board (FASB) recently issued two new accounting
standards, Statement 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, and Statement 150,



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Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities, both of which generally become effective in the quarter
beginning July 1, 2003. Because the Company does not have these instruments or is only nominally involved in these instruments, the new accounting standards will not materially affect the Companys operating results or financial condition.



|                                                                                  |  | For the Three MonthsEnded June 30, |       |   | For the Six MonthsEnded June 30, |  
|--------------------------------------------------------------------------------- |  | ---------------------------------- | ----- | - | -------------------------------- | -
|(Expressed in thousands except per share amounts)                                 |  | 2003                               |       |   | 2002                             |  
|Net income as reported                                                            |  | $                                  | 1,360 |   |                                  | $
|Deduct: Stock-based compensation expense determined under fair value based method |  |                                    | (22   | ) |                                  |  
|                                                                                  |  |                                    |       |   |                                  |  
|Pro forma net income                                                              |  | $                                  | 1,338 |   |                                  | $
|                                                                                  |  |                                    |       |   |                                  |  
|Basic earnings per share as reported                                              |  | $                                  | 0.12  |   |                                  | $
|Pro forma basic earnings per share                                                |  |                                    | 0.12  |   |                                  |  
|                                                                                  |  |                                    |       |  
|Diluted earnings per share as reported                                            |  | $                                  | 0.12  |   |                                  | $
|Pro forma diluted earnings per share                                              |  |                                    | 0.12  |   |                                  |  



2. Securities



Securities held to maturity at June 30, 2003 included a
corporate debt issue with a book value and estimated fair market value of $250,000. No securities were classified as held to maturity at December 31, 2002.



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



|                                                                                      |  | June 30, 2003      |        
|------------------------------------------------------------------------------------- |  | ------------------ | -------
|(Expressed in thousands)                                                              |  | EstimatedFairValue |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                  | 26,118 
|Tax-exempt obligations of states and political subdivisions                           |  |                    | 1,383  
|Taxable obligations of states and political Subdivisions                              |  |                    | 21,675 
|Mortgage-backed securities                                                            |  |                    | 41,141 
|Collateralized mortgage obligations                                                   |  |                    | 18,330 
|Corporate debt                                                                        |  |                    | 10,418 
|Asset-backed securities                                                               |  |                    | 775    
|                                                                                      |  |                    |        
|Total debt securities                                                                 |  |                    | 119,840
|Marketable equity securities                                                          |  |                    | 7,183  
|                                                                                      |  |                    |        
|Total available for sale                                                              |  | $                  | 127,023
|                                                                                      |  |                    |        



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|                                                                                      |  | December 31, 2002  |        
|------------------------------------------------------------------------------------- |  | ------------------ | -------
|(Expressed in thousands)                                                              |  | EstimatedFairValue |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $                  | 33,004 
|Tax-exempt obligations of states and political subdivisions                           |  |                    | 3,596  
|Taxable obligations of states and political subdivisions                              |  |                    | 20,042 
|Mortgage-backed securities                                                            |  |                    | 36,002 
|Collateralized mortgage obligations                                                   |  |                    | 9,806  
|Corporate debt                                                                        |  |                    | 13,011 
|Asset-backed securities                                                               |  |                    | 1,017  
|                                                                                      |  |                    |        
|Total debt securities                                                                 |  |                    | 116,478
|Marketable equity securities                                                          |  |                    | 6,316  
|                                                                                      |  |                    |        
|Total available for sale                                                              |  | $                  | 122,794
|                                                                                      |  |                    |        



3. Loans and Allowance
for Loan Losses



Loans outstanding are as follows:



|(Expressed in thousands)                                |  | June 30,2003 |         | December 31,2002
|------------------------------------------------------- |  | ------------ | ------- | ----------------
|Real estate-construction                                |  | $            | 4,036   |                 
|Real estate-mortgage                                    |  |              | 50,736  |                 
|Real estate-secured by nonfarm, nonresidential property |  |              | 53,888  |                 
|Commercial, financial and agricultural                  |  |              | 22,892  |                 
|Obligations of political subdivisions in the U.S.       |  |              | 2,391   |                 
|Installment and credit card loans to individuals        |  |              | 3,148   |                 
|                                                        |  |              |         |                 
|Loans receivable                                        |  | $            | 137,091 |                 
|                                                        |  |              |         |                 



Non-accruing loans
amounted to $2,748,000 at June 30, 2003 and $3,171,000 at December 31, 2002. Loans past due 90 days and still accruing interest were $68,000 at June 30, 2003 and $33,000 at December 31, 2002. Most non-accruing loans are also identified as impaired
loans in the table below.



Impaired loans were as follows:



|(Expressed in thousands)                                   |  | June 30, 2003 |       | December 31, 2002
|---------------------------------------------------------- |  | ------------- | ----- | -----------------
|Impaired loans with no allocated allowance for loan losses |  | $             | 59    |                  
|Impaired loans with allocated allowance for loan losses    |  |               | 2,931 |                  
|                                                           |  |               |       |                  
|Total                                                      |  | $             | 2,990 |                  
|                                                           |  |               |       |                  
|Amount of the allowance for loan losses allocated          |  | $             | 1,093 |                  



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|(Expressed in thousands)                     |  | June 30, 2003 |       | June 30, 2002
|-------------------------------------------- |  | ------------- | ----- | -------------
|Average impaired loans                       |  | $             | 3,169 |              
|Interest income recognized during impairment |  |               | 0     |              
|Cash-basis interest income recognized        |  |               | 0     |              



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



|                                           |  | Three months ended June 30, |        |   | Six months ended June 30, |  
|------------------------------------------ |  | --------------------------- | ------ | - | ------------------------- | -
|(Expressed in thousands)                   |  | 2003                        |        |   | 2002                      |  
|Balance, beginning of period               |  | $                           | 4,337  |   |                           | $
|                                           |  |                             |        |  
|Provision for loan losses                  |  |                             | (1,350 | ) |                           |  
|                                           |  |                             |        |  
|Loans charged-off                          |  |                             | (3     | ) |                           |  
|Recoveries on loans previously charged-off |  |                             | 956    |   |                           |  
|                                           |  |                             |        |   |                           |  
|Net (charge-offs) recoveries               |  |                             | 953    |   |                           |  
|                                           |  |                             |        |   |                           |  
|Balance, end of period                     |  | $                           | 3,940  |   |                           | $
|                                           |  |                             |        |   |                           |  



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.



The following is a summary of the activity in the Plan for the six months ended June 30, 2003:



|                           |  | Availablefor Grant |  | OptionsOutstanding |   |  | WeightedAverageExercisePrice
|-------------------------- |  | ------------------ |  | ------------------ | - |  | ----------------------------
|Balance at January 1, 2003 |  | 691,500            |  | 301,500            |   |  | $                           
|Exercised                  |  |                   |  | (500               | ) |  | $                           
|Forfeitures                |  | 14,000             |  | (14,000            | ) |  | $                           
|Granted                    |  |                   |  | 5,000              |   |  | $                           
|                           |  |                    |  |                    |   |  |                             
|Balance at June 30, 2003   |  | 705,500            |  | 292,000            |   |  | $                           
|                           |  |                    |  |                    |   |  |                             



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 $6,000 and $11,000 was recognized for the six months ended June 30, 2003 and 2002, respectively, to reflect the impact of granting certain options below their market price. Pro forma information for net income and earnings per common share
is presented in Note 1.



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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.



On May 8, 2003, the
Company entered into a settlement agreement with Mr. James J. Fleagane, the shareholder who commenced a derivative action on behalf of the Company. The derivative suit was settled in December 2001, however Mr. Fleagane sought compensation for his
time spent prosecuting the action. The Company and Mr. Fleagane settled all claims relating to the derivative litigation and his motion for compensation. The Company agreed to enter into the settlement in order to avoid the management time and
Company expense that would be involved in opposing Mr. Fleaganes motion. The settlement cost associated with this agreement was recorded during the three month period ending June 30, 2003.



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ITEM 2MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



FORWARD-LOOKING STATEMENTS



In addition to historic information, this report, as well as the notes to the consolidated financial statements, may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than statements of historical fact, including statements regarding the Companys expectations, beliefs, hopes,
intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as may, will, expects, should, believes,
plans, anticipates, estimates, predicts, potential, continue, or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Readers should not place undue reliance on forward-looking statements, which reflect managements opinion only as of the date on
which they were made. Except as required by law, the Company disclaims any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur. Readers should also carefully review any risk factors
described in Company reports filed with the Securities and Exchange Commission.



Various statements made in this Report concerning the manner in which the Company intends to conduct its future operations, and potential trends that may impact future results of operations, are forward-looking
statements. The Company may be unable to realize its plans and objectives due to various important factors, including, but not limited to, the factors described below. These and other factors are more fully discussed elsewhere in this Report.



| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



RESULTS OF OPERATIONS



SUMMARY



Belmont Bancorp. reported net income of $1,360,000, or $0.12 per common share for the three months ended June 30, 2003, compared to $1,732,000, or $0.16
per common share, for the three months ended June 30, 2002. For the first six months of 2003, the Company reported net income of $1,830,000, or $0.16 per common share, versus $3,816,000, or $0.34 per common share, for the first half of 2002.
Earnings during 2002 were positively impacted by the distribution of settlement proceeds from the Companys derivative action during the first and second quarters of 2002.



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Loan loss recoveries continued to reward the Company during the second quarter of 2003. During June 2003,
the Bank acquired title to commercial real estate through bankruptcy proceedings involving a former customer. This action resulted in a sizable recovery on a credit relationship previously charged off by the Bank. In combination with other
improvements in the Banks loan portfolio, this enabled the Company to reduce its allowance for loan loss by $1,350,000 during the second quarter of 2003. Net of the related federal tax effect, this contributed $891,000 to net income.



Ownership of this property caused nonperforming assets to
increase to 1.28% of total assets at June 30, 2003, up from 1.08% of total assets at March 31, 2003. However, in July 2003, the property was sold, reducing nonperforming assets by $950,000. Had the sale taken place prior to the end of the quarter,
the ratio of nonperforming assets to total assets would have been 0.96% at June 30, 2003. The completion of the sale of the property will also eliminate future legal and collection expenses associated with it.



Deposit service charges increased 37% to $609,000 for the six months ended
June 30, 2003 compared to $445,000 for the same period in 2002, largely the result of new products offered by the Bank during the second quarter.



Strong refinancing activity continued during the second quarter in the mortgage lending business, fueled by low interest rates. Mortgage loan sales to the
secondary market contributed $156,000 in gains during the second quarter and $293,000 in gains during the first six months of 2003, up from $45,000 for the second quarter and $105,000 for the first six months of 2002. The Company also realized
$243,000 in securities gains during the first six months of 2003 compared to securities losses of $94,000 recorded during the comparative period in 2002. Securities gains for the second quarter of 2003 were $75,000 compared to a loss of $31,000 for
the second quarter of 2002.



While low interest rates have
spurred mortgage lending, many banks have seen net interest margins fall as yields on earning assets decline more quickly than their cost of funds. The Companys taxable equivalent net interest margin for the second quarter of 2003 was 3.41%
compared to 3.45% for the first quarter of 2003 and 3.42% for the fourth quarter of 2002.



Total operating expenses declined to $5.1 million for the first half of 2003 compared to $6.3 million for the first half of 2002. This reduction principally resulted from the near elimination of litigation and legal
settlement expenses incurred during the first half of 2002.



Total assets at June 30, 2003 were $294.5 million compared to $289.5 million at year-end 2002. Total loans increased to $137.1 million at June 30, up from $130.8 million at December 31, 2002. Average assets were $291 million for the second
quarter of 2003, compared to $283 million for the second quarter of 2002. Average assets for the six months ended June 30, 2003 were $290 million compared to $284 million for the comparable period last year.



Total shareholders equity increased to $36.7 million at June 30, 2003
compared to $34.8 million at year-end 2002. This increase bolstered the Companys Tier One capital leverage ratio to 10.5% at June 30, 2003.



NET INTEREST INCOME



Interest rates across the maturity horizon remained low relative to historical levels during the first half of 2003. The Federal Open Market Committee
(the FOMC) maintained a very accommodative stance to aid economic recovery. In late June 2003, the FOMC reduced its targeted federal funds rate by 0.25% following a rate reduction in November 2002 of 0.50%. In 2001, the federal funds
rate fell from 6.50% to 1.75%. Likewise, the prime-lending rate fell from 9.50% at the beginning of 2001 to 4.00% by June 2003. 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



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interest rates will positively impact the Companys net interest income, while lower interest rates will negatively
impact net interest income.



Net interest income on a taxable
equivalent basis declined $121,000 for the second quarter of 2003 compared to the second quarter of 2002. Average earning assets increased to $268 million during the second quarter of 2003 from $264 million for the second quarter of 2002. The
taxable equivalent net interest margin was 3.41% and 3.65% for the three months ended June 30, 2003 and 2002, respectively. The net interest rate spread (the difference between the average yields on earning assets and interest bearing liabilities)
was 3.02% for the second quarter of 2003 compared to 3.22% for the comparable period of 2002. The taxable equivalent yield on earning assets declined to 5.39% from 6.06%, a decrease of 67 basis points, during the second quarter of 2003 compared to
the second quarter of 2002. This decline was partially offset by a decrease of 47 basis points in the cost of interest-bearing liabilities to 2.36% from 2.83%.



Net interest income on a taxable equivalent basis decreased by $104,000 for the first six months of 2003 compared to the same period last year as
average earning assets increased $2.5 million to $266 million for the first six months of 2003. The yield on earning assets decreased from 6.07% to 5.46%, and the cost of interest bearing liabilities decreased from 2.97% to 2.42%. The taxable
equivalent net interest margin declined to 3.43% for the first six months of 2003 compared to 3.54% for the same period in 2002.



OTHER OPERATING INCOME



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



|                                                         |  | Three months ended June 30, |     |      | Six months ended June 30, |      
|-------------------------------------------------------- |  | --------------------------- | --- | ---- | ------------------------- | -----
|(Expressed in thousands)                                 |  | 2003                        |     | 2002 |                           |      
|Trust fees                                               |  | $                           | 135 |      | $                         | 122  
|Service charges on deposits                              |  |                             | 356 |      |                           | 224  
|Legal settlements                                        |  |                             | 0   |      |                           | 2,378
|Gain on sale of loans held for sale                      |  |                             | 156 |      |                           | 45   
|Other income (individually less than 1% of total income) |  |                             | 188 |      |                           | 156  
|                                                         |  |                             |     |      |                           |      
|Subtotal                                                 |  |                             | 835 |      |                           | 2,925
|Securities gains (losses)                                |  |                             | 75  |      |                           | (31  
|                                                         |  |                             |     |      |                           |      
|Total                                                    |  | $                           | 910 |      | $                         | 2,894
|                                                         |  |                             |     |      |                           |      



Trust fees increased
4% to $260,000 for the first six months of 2003 compared to $250,000 for the comparative period in 2002. For the second quarter of 2003, trust fees increased to $135,000 compared to $122,000 in 2002. The improvement in revenue was the result of a
fee increase on trust accounts.



Service charges on deposits
increased 36.9% from $445,000 to $609,000 during the six months ended June 30, 2003, compared to the same period in 2002, principally due to the introduction during the second quarter of 2003 of a new product and the implementation of a new service
charge. Since these changes were introduced during the second quarter of 2003, the percentage increase in service charges on deposits is larger for the quarter than for the year-to-date period; service charges increased 58.9% in the quarter to
quarter comparison.



Operating results during the first and
second quarters of 2002 were impacted by a comprehensive legal settlement as more fully described in the Companys Annual Report to Shareholders on Form 10-K for the year ended December 31, 2002. Other income during the second quarter of 2002
included $2.4 million in payments to the Company related to this settlement. For the first six months of 2002, the Company received at total of $6.3 million in payments related to the settlement.



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Gains on sales of loans and loans held for sale increased from $105,000 for the first six months of 2002
to $293,000 for same period of 2003. Capitalized mortgage servicing rights of $114,000 were included in gains on sales of loans held for sale for the six months ended June 30, 2003 compared to $66,000 for the comparable period of 2002. The total
outstanding balance of mortgage loans sold without recourse and with servicing rights retained increased to $69.6 million at June 30, 2003 from $65.9 million at December 31, 2002. Gains on sales of loans also included $13,000 for gains realized on
the sale of the Banks credit card portfolio during the second quarter of 2002. Management expects that as mortgage interest rates increase, mortgage refinancing volume will subside and fees related to mortgage loan activities will decline.



Other income increased 20.5% to $188,000 for the three months
ended June 30, 2003 and 12.5% to $396,000 for the six months ended June 30, 2003. This increase was primarily related to an increase in fee income associated with lending and loan servicing fees.



Securities gains for the six months ended June 30, 2003 totaled $243,000 and
included $92,000 in gains on sales of equity securities. Securities losses incurred during the first six months of 2002 were related to the sale of approximately $11.0 million in tax-exempt bonds. During this period, the Bank continued to reduce its
tax-exempt bond portfolio to minimize the interest rate risk associated with long-term fixed rate investments and to increase taxable income thereby enabling the Company to utilize its tax loss carryforwards and tax credits.



OPERATING EXPENSES



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



|                                                  |  | Three months ended June 30, |       |      | Six months ended June 30, |         
|------------------------------------------------- |  | --------------------------- | ----- | ---- | ------------------------- | --------
|(Expressed in thousands)                          |  | 2003                        |       | 2002 |                           | % Change
|Salaries and wages                                |  | $                           | 1,020 |      | $                         | 905     
|Employee benefits                                 |  |                             | 242   |      |                           | 206     
|Occupancy expense                                 |  |                             | 218   |      |                           | 218     
|Furniture and equipment expense                   |  |                             | 195   |      |                           | 255     
|Legal fees                                        |  |                             | 29    |      |                           | 251     
|Legal settlements                                 |  |                             | 50    |      |                           | 35      
|Insurance, including federal deposit insurance    |  |                             | 52    |      |                           | 150     
|Examinations and audits                           |  |                             | 88    |      |                           | 133     
|Taxes other than payroll and real estate          |  |                             | 94    |      |                           | 51      
|Supplies and printing                             |  |                             | 63    |      |                           | 59      
|Data processing                                   |  |                             | 35    |      |                           | 68      
|Advertising                                       |  |                             | 68    |      |                           | 58      
|Amortization of mortgage servicing rights         |  |                             | 47    |      |                           | 40      
|Other (individually less than 1% of total income) |  |                             | 349   |      |                           | 303     
|                                                  |  |                             |       |      |                           |         
|Total                                             |  | $                           | 2,550 |      | $                         | 2,732   
|                                                  |  |                             |       |      |                           |         



The employee count at
the end of June 2003 was 134 full time equivalent employees (FTEs). The average number of FTEs for 2003 through June was 130 versus 132 for the same period during 2002. The increase in salaries and wages for the six months ended June 30,
2003 compared to the six months ended June 30, 2002 was principally the result of incentive compensation paid during 2003. Compensation costs associated with the grant of stock options were $9,000 and $16,000 for the first six months of 2003 and
2002, respectively.



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Employee benefit costs presented for the 2003 periods were higher than the comparative periods of 2002
due to higher payroll taxes and health insurance benefits. Health insurance costs increased 8.8% for the first half of 2003 compared to 2002.



Furniture and equipment expense incurred for the 2003 periods were lower than the comparative periods of 2002 largely as the result of the Banks
mainframe computer and wide-area network costs being fully depreciated during the fourth quarter of 2002. As the Company upgrades its data processing systems, management expects these costs will increase.



Legal fees and legal settlements expense were down significantly during 2003
compared to 2002 resulting from the settlement of the derivative action in late 2001 with settlement distributions concluding during the first six months of 2003. Legal settlements expense for the first half of 2003 totaled $103,000 and represents
the conclusion of all material litigation previously confronting the Company.



Insurance costs includes the expense associated with FDIC deposit insurance. The Company realized large savings in FDIC costs during 2003 compared to 2002 because of improvements to the Companys regulatory risk
profile which became effective with the assessment period beginning January 1, 2003. The regulatory risk profile also impacts examination cost assessed by the Banks regulator. Examination and audit costs were down approximately 34% for the
comparative quarter and 31% for the six months ended June 30, 2003.



Other taxes increased 57% to $185,000 for the first six months of 2003 compared to the first half of 2002. This increase reflects higher state corporate franchise tax expense and is directly related to a larger capital base at year-end 2002
compared to year-end 2001 because the Companys state franchise tax is assessed based on a tax rate applied to its capital base.



Data processing costs decreased 28% to $92,000 for the first six months of 2003 resulting from changes in processing for the Trust Department and
brokerage services. These changes will result in cost efficiencies in future periods on a comparative basis as well.



Other expense increased 25% to $704,000 for the first six months of 2003. This increase is principally related to the resumption of payment of director
fees and collection expenses related to a large commercial real estate property. That property was sold during July 2003.



SECURITIES



The estimated fair value of securities available for sale at June 30, 2003 and December 31, 2002 are detailed in Note 2 of the quarterly financial
statements.



At June 30, 2003, the Company did not own any
investments of a single issuer, the value of which exceeded 10% of total shareholders equity, or $3,667,000.



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 the second quarter are included in Note 3 of the quarterly financial statements. No loan loss provision was recorded during the second quarter or first six months of 2002 because the Company had an
appropriate balance in the allowance based on its analysis of loan quality. During the second quarter of 2003, the Company recorded a negative loan loss provision in



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the amount of $1,350,000 based on loan loss recoveries and improvements to its loan asset quality. This contributed $0.08 per common share (basic and
diluted) after income taxes, to the Companys operating results for the period. If the Company continues to experience either low net charge-offs or net recoveries in future periods, and continues to experience improvements in its loan loss
rates, it is possible that the Company will record additional reductions to its allowance for loan loss through negative loan loss provisions in forthcoming periods. The following table depicts various loan and loan-related statistics.



|                                                         |  | Three months endedJune 30, |         |   | Six months ended June 30, |  
|-------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------- | -
|(Expressed in thousands)                                 |  | 2003                       |         |   | 2002                      |  
|Loans outstanding                                        |  | $                          | 137,091 |   |                           | $
|Average loans                                            |  | $                          | 136,906 |   |                           | $
|Annualized net (charge offs) recoveries as a percent of: |  |                            |         |   |                           |  
|Average loans                                            |  |                            | 2.78    | % |                           |  
|Allowance for loan losses                                |  |                            | 96.75   | % |                           |  
|Allowance for loan losses to:                            |  |                            |         |   |                           |  
|Total loans at end of period                             |  |                            | 2.87    | % |                           |  
|Non-performing assets                                    |  |                            | 104.62  | % |                           |  



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:



|Non-performing assets (Expressed in thousands)       |  | June 30, 2003 |       |   | Dec. 31, 2002 |  
|---------------------------------------------------- |  | ------------- | ----- | - | ------------- | -
|Non-accrual loans and leases                         |  | $             | 2,748 |   |               | $
|Loans 90 days or more past due but accruing interest |  |               | 68    |   |               |  
|Other real estate owned                              |  |               | 950   |   |               |  
|                                                     |  |               |       |   |               |  
|Total                                                |  | $             | 3,766 |   |               | $
|                                                     |  |               |       |   |               |  
|Non-performing assets as a percent of total assets   |  |               | 1.28  | % |               |  



Although nonperforming
assets increased at June 30, 2003 compared to December 31, 2002, the Bank sold a commercial property during July 2003 resulting in a reduction to nonperforming assets in the amount of $950,000. Had the sale taken place prior to the end of the
quarter, the ratio of nonperforming assets to total assets would have been 0.96% at June 30, 2003.



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



In addition to the schedule of non-performing assets, management prepares a
watch list consisting of loans, which they have determined require closer monitoring to further protect the Company against loss. The balance of loans classified by management as substandard due to delinquency, a change in financial



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position, or other factors and not included as non-performing assets totaled $7,423,000 at June 30, 2003, $11,419,000 at December 31, 2002, and $15,177,000
at June 30, 2002; no loans were classified as doubtful.



LOAN CONCENTRATIONS



The
Company uses the Standard Industry Code (SIC) system to determine concentrations of credit risk by industry. Management monitors concentrations of credit as measured by an industrys total available and outstanding credit balance expressed as a
percent of Tier 1 capital. Loan concentrations exceeding 25% of the Banks Tier 1 capital are detailed in the following tables.



|                                                  |  | (Expressed in thousands) |       
|------------------------------------------------- |  | ------------------------ | ------
|Industry                                          |  | June 30, 2003            |       
|Real estateoperators of nonresidential buildings |  |                          |       
|Loan balance and available credit                 |  | $                        | 13,009
|Percent of tier 1 capital                         |  |                          | 45.6  



DEFERRED FEDERAL TAX ASSETS



Deferred federal tax
assets totaled $4.5 million at June 30, 2003. The deferred federal tax assets include significant balances related to tax loss carryforwards and tax credits. It also includes the tax effect of recording securities available for sale at estimated
fair value. At June 30, 2003, management believes no deferred tax valuation allowance is needed as future estimated taxable income will be sufficient to realize the net deferred tax assets.



OTHER LIABILITIES



Other liabilities increased to $3.2 million at June 30, 2003 compared to
$1.7 million at December 31, 2002. Other liabilities include amounts for various accrued expenses, accounts payable, funds owed for securities traded but not yet settled, and obligations related to compensation plans. The increase for the periods
presented is related to recording a liability for securities traded but not settled.



CAPITAL RESOURCES



The table below depicts the capital ratios for the Bank and for the Company on a consolidated basis as of June 30, 2003. In addition, the table depicts
the regulatory requirements for classification as adequately capitalized under the regulatory guidelines for Prompt Corrective Action. Tier 1 capital consists principally of shareholders equity less goodwill and deferred tax
assets, while Tier 2 capital consists of certain debt instruments and a portion of the allowance for loan losses. Total capital consists of Tier 1 and Tier 2 capital.



|                                                  |  | Actual |        |       | Minimum Required For Capital AdequacyPurposes |   |        | Minimum RequiredTo Be Well CapitalizedUnder Prompt Corrective ActionRegulations |       
|------------------------------------------------- |  | ------ | ------ | ----- | --------------------------------------------- | - | ------ | ------------------------------------------------------------------------------- | ------
|As of June 30, 2003:                              |  | Amount |        | Ratio |                                               |   | Amount |                                                                                 | Ratio 
|Total risk based capital to risk weighted assets: |  |        |        |       |                                               |   |        |                                                                                 |       
|Consolidated                                      |  | $      | 32,016 |       | 18.5                                          | % |        | $                                                                               | 13,866
|Bank                                              |  |        | 30,755 |       | 17.5                                          | % |        |                                                                                 | 14,094
|Tier 1 capital to risk weighted assets:           |  |        |        |       |                                               |   |        |                                                                                 |       
|Consolidated                                      |  |        | 29,827 |       | 17.2                                          | % |        |                                                                                 | 6,933 
|Bank                                              |  |        | 28,532 |       | 16.2                                          | % |        |                                                                                 | 7,047 



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|Tier 1 capital to average assets: |  |        |  |      |   |  |        |  |     |   |  |        |  |     |  
|--------------------------------- |  | ------ |  | ---- | - |  | ------ |  | --- | - |  | ------ |  | --- | -
|Consolidated                      |  | 29,827 |  | 10.5 | % |  | 11,233 |  | 4.0 | % |  | 14,041 |  | 5.0 | %
|Bank                              |  | 28,532 |  | 10.1 | % |  | 11,341 |  | 4.0 | % |  | 14,176 |  | 5.0 | %



LIQUIDITY AND CAPITAL RESOURCES



Effective liquidity
management involves ensuring that the cash flow requirements of depositors and borrowers, as well as the operating needs of the Company, are met. Funds are available through the operation of the Banks branch banking network that gathers demand
and retail time deposits. The Bank also acquires funds through repurchase agreements and overnight federal funds that provide additional sources of liquidity. Total deposits increased $1.6 million, or 0.7%, from December 31, 2002 to June 30, 2003.
The Banks federal funds sold at June 30, 2003 totaled $5.9 million, down from $13.6 million at December 31, 2002.



Cash flows from the securities portfolio are also a source of liquidity. Proceeds from principal repayments, sales, calls and maturities of investment
securities totaled $28.1 million during the six months ended June 30, 2003. Securities available for sale increased from $123 million at December 31, 2002 to $127 million at June 30, 2003.



The Bank has an available line of credit with a correspondent bank totaling
$4,100,000 that may be used as an alternative funding source. The Bank also has an unused credit line with the Federal Home Loan Bank for $20 million. All borrowings at the Federal Home Loan Bank are subject to eligible collateral requirements; at
June 30, 2003, the Bank had sufficient eligible collateral to utilize the credit line.



The main source of liquidity for the parent company is dividends from the Bank. At June 30, 2003, the parent had cash and marketable securities with an estimated fair value of $1.3 million. The parent company does not
have any debt to third parties. Management believes sufficient liquidity is currently available to meet estimated short-term and long-term funding needs for the Bank and the parent company.



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, 2002. 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 within 90 days prior to the filing date of 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



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be materially affected by the outcome of any pending or threatened legal proceedings, commitments, or claims.



As reported in its Form 10-Q for the three months ended March 31, 2003, the
Company entered into a settlement agreement on May 8, 2003 with Mr. James J. Fleagane, the shareholder who commenced a derivative action on behalf of the Company. Mr. Fleagane sought compensation for his time spent prosecuting the derivative action.
The Company and Mr. Fleagane settled all claims relating to the derivative litigation and his motion for compensation. The Company agreed to enter into the settlement in order to avoid the management time and Company expense that would be involved
in opposing Mr. Fleaganes motion. The settlement cost associated with this agreement was recorded during the three month period ending June 30, 2003.



Item 2. Changes in securities and use of proceeds



None



Item 3. Defaults upon senior securities



None



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



The annual meeting of shareholders was held on May 19, 2003. Of the 11,108,403 shares entitled to vote at the meeting, 9,090,606 shares were voted. The results were as follows:



Proposal number 1Election of directors



(Term expiring in the Year 2006):



|                |  | FOR       |  | WITHHOLD
|--------------- |  | --------- |  | --------
|David R. Giffin |  | 9,027,571 |  | 63,035  
|Terrence A. Lee |  | 9,016,140 |  | 74,466  
|Wilbur R. Roat  |  | 9,028,781 |  | 61,825  



Proposal number
2To ratify the appointment of Crowe Chizek and Company LLC as independent auditors for the year ending December 31, 2003:



|FOR       |  | AGAINST |  | ABSTAIN
|--------- |  | ------- |  | -------
|9,059,604 |  | 15,327  |  | 15,674 



The
following directors continued in office:



Directors with terms ending in 2004:

John H. Goodman, II

James R. Miller

Brian L. Schambach

Keith A. Sommer



Directors with terms ending in 2005:

Jay A. Beck

David B. Kelley

Tillio P. Petrozzi

Charles A. Wilson, Jr.



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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 June 30, 2003
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 June 30, 2003
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 June 30, 2003
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 June 30, 2003
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|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 April 23, 2003, Belmont Bancorp. issued a news release announcing its earnings for the three month period ending March 31, 2003.



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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 RoatBy:

Wilbur RoatPresident & CEO




/s/Jane MarshBy:

Jane MarshSecretary & Chief Financial Officer




August 8, 2003



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