An Ohio community banking company that says it was the victim of fraud by a former executive and a former customer reported it lost $3.9 million in the third quarter, compared with earnings of $1.6 million a year earlier.

The $376.2 million-asset Belmont Bancorp in Bridgeport said last week that it added $5.8 million to its loan-loss provision and charged off $2.8 million of loans in the quarter that ended Sept. 30. It now has $10 million of reserves against potential loan problems.

The report came after an exhaustive review that the company said its main subsidiary, Belmont National Bank, undertook to identify troubled loans.

"Aside from losses that occur in the normal course of the banking business, we believe the current loan portfolio is properly reserved for potential losses," said W. Quay Mull, Belmont's chairman and chief executive officer.

Belmont said in a mid-October filing with the Securities and Exchange Commission that former executive vice president William Wallace and Steven D. Schwartz, former president of the defunct Schwartz Homes Inc. of New Philadelphia, Ohio, had bilked the bank of as much as $15 million in the preceding three years.

The company is trying to recover its losses in Tuscarawas County Court. It said it believes Mr. Wallace and Mr. Schwartz misrepresented the quality of Schwartz Homes as a borrower and orchestrated a bogus loan program that claimed to help people buy Schwartz homes.

-- Craig Woker

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