<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securtities Exchange ACt of 1934
For Quarter Ended September 30, 1996
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Commission File Number 2-95114
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LOGAN COUNTY BANCSHARES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
WEST VIRGINIA
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(State or other jurisdiction of incorporation or organization)
55-0660015
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(IRS Employer Identification Number)
P. O. BOX 597, LOGAN, WEST VIRGINIA 25601
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(Address of Principal Executive Offices) (Zip Code)
(304) 752-1166
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------ -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding, of each of the issuer's classes of
common stock, as of the latest practicable date. 467,612
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<PAGE>
LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of September 30, 1996
and 1995 and December 31, 1995.
Consolidated Statement of Income for the Three Month
Period Ended September 30, 1996 and 1995.
Consolidated Statement of Income for the Nine Month
Period Ended September 30, 1996 and 1995
Consolidated Statement of Changes in Stockholders' Equity
for the Nine Month Period Ended September 30, 1996 and 1995.
Consolidated Statement of Cash Flows for the Nine
Month Period Ended September 30, 1996 and 1995.
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
PART II - OTHER INFORMATION
SIGNATURES
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Condition
September 30, 1996 and 1995 and December 31, 1995
(In Thousands)
ASSETS
------ September 30, December 31,
1996 1995 1995
---- ---- ------------
CASH AND DUE FROM BANKS $3,246 $2,934 $4,361
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 10,744 6,883 5,797
HELD TO MATURITY 8,383 11,229 10,655
FEDERAL FUNDS SOLD 11,860 7,085 7,470
LOANS:
TOTAL LOANS 69,435 62,816 64,347
RESERVE FOR LOAN LOSSES 680 646 662
----------- ----------- --------
NET LOANS 68,755 62,170 63,685
BANK PREMISES AND EQUIPMENT 1,927 1,338 1,716
ACCRUED INTEREST AND OTHER ASSETS 1,286 1,132 1,035
----------- ----------- --------
$106,201 $92,771 $94,719
=========== =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS:
DEMAND DEPOSITS $30,830 $25,760 $27,245
SAVINGS DEPOSITS 28,968 29,131 28,449
TIME DEPOSITS 34,667 26,959 28,023
----------- ----------- --------
TOTAL DEPOSITS 94,465 81,850 83,717
LONG-TERM BORROWINGS 0 0 0
ACCRUED AND OTHER LIABILITIES 423 333 594
INCOME TAXES PAYABLE:
CURRENT 60 86 14
DEFERRED 0 54 2
----------- ----------- --------
TOTAL LIABILITIES 94,948 82,323 84,327
STOCKHOLDERS' EQUITY:
COMMON STOCK-$2.50 PAR VALUE;
AUTHORIZED-520,000 SHARES;
ISSUED & OUTSTANDING-509,612. 1,274 1,274 1,274
SURPLUS 2,071 2,071 2,071
RETAINED EARNINGS 8,768 7,963 7,907
TREASURY STOCK (860) (860) (860)
------------ ------------ ---------
TOTAL STOCKHOLDERS' EQUITY 11,253 10,448 10,392
------------ ------------ ---------
$106,201 $92,771 $94,719
============ ============ =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Three Month Periods Ended September 30, 1996 and 1995
(In Thousands)
1996 1995
---- ----
INTEREST INCOME:
INTEREST ON LOANS $1,460 $1,312
INTEREST ON INVESTMENTS 320 263
INTEREST ON FEDERAL FUNDS SOLD 120 121
------- -------
1,900 1,696
INTEREST EXPENSE
INTEREST ON DEPOSITS 761 704
OTHER INTEREST EXPENSE 0 0
------- -------
NET INTEREST INCOME 1,139 992
PROVISION FOR LOAN LOSSES 15 15
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,124 977
OTHER INCOME:
SERVICE FEES 281 207
OTHER OPERATING INCOME 11 8
------- -------
TOTAL OTHER INCOME 292 215
OTHER EXPENSES:
SALARIES AND BENEFITS 389 335
EXPENSE OF BANK PREMISES AND
EQUIPMENT 80 85
OTHER OPERATING EXPENSES 284 214
------- -------
TOTAL OTHER EXPENSES 753 634
INCOME BEFORE INCOME TAXES 663 558
FEDERAL INCOME TAXES 227 179
------- -------
NET INCOME $436 $379
======= =======
PER SHARE OF COMMON STOCK NET INCOME $0.93 $0.81
======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Nine Month Period Ended September 30, 1996 and 1995
(In Thousands)
1996 1995
---- ----
INTEREST INCOME:
INTEREST ON LOANS $4,173 $3,823
INTEREST ON INVESTMENTS 835 868
INTEREST ON FEDERAL FUNDS SOLD 369 267
------------ ------------
5,377 4,958
INTEREST EXPENSE:
INTEREST ON DEPOSITS 2,174 1,968
OTHER INTEREST EXPENSE 8 0
------------- ------------
NET INTEREST INCOME 3,195 2,990
PROVISION FOR LOAN LOSSES 35 40
------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,160 2,950
OTHER INCOME:
SERVICE FEES 666 523
OTHER OPERATING INCOME 41 28
------------- -------------
TOTAL OTHER INCOME 707 551
OTHER EXPENSES:
SALARIES AND BENEFITS 1,159 1,055
EXPENSE OF BANK PREMISES AND
EQUIPMENT 241 249
OTHER OPERATING EXPENSES 821 743
-------------- -------------
TOTAL OTHER EXPENSES 2,221 2,047
INCOME BEFORE INCOME TAXES 1,646 1,454
FEDERAL INCOME TAXES 555 489
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NET INCOME $1,091 5,965
============= ==============
PER SHARE OF COMMON STOCK NET INCOME $2.33 $2.06
============= ==============
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement in Changes in Stockholders' Equity
For the Nine Month Periods Ended September 30, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
Net Unrealized
(losses) on
Common Retained Available-for- Treasury
Stock Surplus Earnings Sale Securities Stock Total
------- ------- -------- --------------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31
1995 $1,274 $2,071 $7,986 ($79) ($860) $10,392
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES (19) (19)
DIVIDENDS ON COMMON STOCK
@ 0.45 PER SHARE (211) (211)
NET INCOME FOR THE SIX MONTHS
ENDED JUNE 30, 1996 0 0 1,091 0 0 1,091
------- ------- -------- --------------- --------- -------
$1,274 $2,071 $8,866 ($98) ($860) $9,555
======= ======= ======== =============== ========= =======
BALANCE - DECEMBER 31
1994 $1,274 $2,071 $7,218 ($148) ($860) $9,555
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 115 115
DIVIDENDS ON COMMON STOCK
@ $.40 PER SHARE 0 0 (187) (187)
NET INCOME FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 0 0 965 0 0 965
------- ------- -------- --------------- --------- -------
$1,274 $2,071 $7,996 ($33) ($860) $10,448
======= ======= ======== =============== ========= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED SPETEMBER 30, 1996 AND 1995
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,091 $ 965
ADJUSTMENT TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 109 81
SECURITY AMORTIZATION AND
ACCREATION 10 21
MARKET VALUE AMORTIZATION (3) (3)
PROVISION FOR LOAN LOSSES 35 40
(GAIN) LOSS ON SALE OF INVESTMENT
SECURITIES 0
(INCREASE) DECREASE IN OTHER ASSETS (251) (60)
INCREASE (DECREASE) IN OTHER
LIABILITIES (127) (135)
---------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 864 911
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES
AVAILABLE FOR SALE 1,000 0
PROCEEDS FROM MATURITIES
OF SECURITIES 4,000 3,250
PURCHASE OF SECURITIES AVAILABLE
FOR SALE (6,227) (500)
PURCHASE OF SECURITIES HELD TO MATURITY (1,491) 0
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD (4,390) (3,765)
NET (INCREASE) DECREASE IN LOANS (5,088) (2,773)
PROCEEDS FROM SALE OF ASSETS 0 0
PURCHASE OF BANK PREMISES AND EQUIPMENT (320) (55)
---------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES (12,516) (3,843)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 3,585 (374)
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 519 (4,332)
NET INCREASE (DECREASE) IN
TIME DEPOSITS 6,644 6,847
DIVIDENDS PAID (211) (187)
PROCEEDS FROM LONG-TERM BORROWINGS 187 0
REPAYMENT OF BORROWINGS (187) 0
---------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,537 1,954
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,115) (978)
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 4,361 3,912
---------- --------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 3,246 $ 2,934
---------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
September 30, 1996
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Financial Statements:
The foregoing statements are unaudited; however, in the opinion of
the Management, all adjustments (comprising of only normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included.
2. Basis of Consolidation:
The Consolidated Statement of Condition and Consolidated Statement
of Income of Logan County BancShares, Inc. include the activity of Logan Bank
and Trust Company and Bank of Chapmanville, wholly owned subsidiaries.
3. In January 1995 the company adopted SFAS 114 and 118 for impaired
loans. Under these statements the company identifies impaired loans by
individual loan officers, normal management information data, the loan
committee, the internal audit department, independent auditor and bank
executors. The identification process excludes hemogenous loans such as
pools of direct and indirect consumer loans, home equity loans and
residential real estate loans and excludes loans that are under ninety days
past due. Loans that are identified as impaired are evaluated on a loan by
loan basis to determine the extent of their impairment. In addition, loans
are placed on non-accrual status in the event of bankruptcy, reorganization
or statutory default arising from non-compliance with the essential covenants
of the loan agreement. Loans are charged off when there is a reasonable
probability that all amounts due cannot be collected. Income on impaired and
non-accrual loans is only recognized to the extent payments are received.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis focused on significant changes
in the financial condition and results of operations of Logan County
Bancshares, Inc.
EARNINGS SUMMARY
The Company reported net income of $1,091,000. for the nine months ended
September 30, 1996 compared to $965,000. for the nine months ended September
30, 1995, representing a 13.06% increase. This increase was primarily the
result of the increase in net interest income of $210,000. which was offset
by a increase in all operating expenses net of other income of $84,000.
Earnings per common share were $2.33 for the nine months ended September
30, 1996 compared with $2.06 for the same period of 1995.
Logan County Bancshares' annualized return on assets (ROA) for the nine
month period ended September 30, 1996 was 1.37% compared to 1.38% for the
nine month period ended September 30, 1995. Annualized return on
shareholders' equity (ROE) was 13.19% and 12.31% at September 30, 1996 and
1995, respectively.
NET INTEREST INCOME
The most significant component of Logan County Bancshares' net earnings is
net interest income, which represents the excess of interest income earned on
earning assets over the interest expense paid for sources of funds. Net
interest income is affected by changes in volume resulting from growth and
alteration of the balance sheet composition, as well as by fluctuations in
market interest rates and maturities of sources and uses of funds.
Interest income amount to $5,377,000. at September 30, 1996, an increase
of $419,000. from September 30, 1995. Interest expense also increased
$214,000., resulting in an overall increase of $205,000. or 6.86% in net
interest income between September 30, 1996 and 1995.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
The provision for loan losses represents charges to earnings necessary to
maintain an adequate allowance for potential future loan losses. Management's
determination of the appropriate level of the allowance is based on an
ongoing analysis of credit quality and loss potential in the loan portfolio,
actual loan loss experience relative to the size and characteristics of the
loan portfolio, change in the composition and risk characteristics of the
loan portfolio and the anticipated influence of national and local economic
conditions. The adequacy of the allowance for loan losses is reviewed
quarterly and adjustments are made as considered necessary.
For the nine month period ended September 30, 1996, the provision for loan
losses decreased $5,000. to $35,000. or 12.50% compared to the same period
ended September 30, 1995.
The reserve for loan losses was $680,000. at September 30, 1996 compared
to $662,000. at September 30, 1995. Expressed as a percentage of loans (net
of unearned income), the reserve for loan losses was .98% at September 30,
1996 and 1.03% at September 30, 1995.
<PAGE>
SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS
(in thousands of dollars)
September 30,
--------------------
1996 1995
-------- ---------
Loans past due 90 or more days
still accruing interest $1,063 $1,272
-------- ---------
Nonperforming assets:
Nonaccruing loans 691 1,478
Other real estate owned 262 182
-------- ---------
$953 $1,660
======== =========
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than
interest income. For the nine month period ended September 30, 1996,
noninterest income totalled $707,000., representing an increase of $156,000.,
or 28.31% from the $551,000. recorded during the same period of 1995. This
increase was primarily due to increases in service fees.
Loan County Bancshares intends to strive in the future to enhance its
overall profitability by identifying new opportunities for earning additional
noninterest income.
NONINTEREST EXPENSE
Noninterest expense comprises overhead costs which are not related to
interest expense or to losses from loans or securities. As of September 30,
1996, the Company's noninterest expense totalled $2,221,000., remaining
consistent with total noninterest expense for the nine months ended September
30, 1995. Expressed as a percentage of assets, annualized noninterest expense
was 2.09% at September 30, 1996, compared to 2.21% at September 30, 1995.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 52% of total noninterest expense
at September 30, 1996 and 1995. Salaries and employee benefits increased
$104,000., or 9.85% at September 30, 1996 compared to September 30, 1995.
This increase is primarily due to increased personnel.
INCOME TAXES
Logan County Bancshares' federal income tax expense, for the nine month
period ended September 30, 1996, reflected a $66,000. increase when compared
to the same period of 1995. Income tax expense equalled 33.72% and 33.63% of
income before taxes at September 30, 1996 and 1995, respectively. For
financial reporting purposes, income tax expense does not equal the Federal
statutory income tax rate of 34% when applied to pretax income, primarily
because of tax-exempt interest income included in income before income taxes.
Balance Sheet Data:
Total assets grew by $11,482,000. between year end and September 30,
1996 to a balance of $106,201,000. The major component of this growth was an
increase in Investment Securities of $2,718,000., an increase in Net Loans of
$5,088,000., and an increase of $4,390,000. in Federal Funds sold. The
primary source of funds for this growth was an increase in deposits of
$10,748,000., and net income of $1,091,000. and a decrease in cash due from
banks of $1,115,000. for the period.
<PAGE>
Liquidity:
Managing Logan's liquidity requirements primarily involves meeting the
loan demand, deposit withdrawal and the cash flow requirements. Logan's
primary sources of liquid assets are federal funds sold and investment
securities maturing in less than one year. These items can be converted into
funds in a short period of time. At September 30, 1996, Federal Funds Sold
amounted to $11,860,000. and securities maturing within one year amounted to
$6,385,000. These are compared to the balances at September 30, 1995 of
$7,470,000. in Federal Funds Sold and maturing Investment Securities of
$5,010,000. due within one year.
Traditionally, banks have been able to manage liquidity based on a
relatively stable group of core deposits. The deposits, demand and consumer
deposits under $100,000. are considered the most stable and least expensive
source of funds. During 1996 and 1995, banks have been faced with more
volatile, interest sensitive funds and have had to match their funding
requirements by using assets and liability management techniques.
Capital Resources:
Logan's capital position is based on its stockholders' equity and the
primary source of such equity has been retained earnings. Since Logan's
formation and merger, it has accumulated Retained Earnings of $8,768,000, and
has a total Stockholders' Equity of $11,253,000. as of September 30, 1996; as
compared to $7,963,000. of Retained Earnings and total Stockholders' equity
of $10,448,000. at September 30, 1996.
The equity capital was 10.60% and 11.26% of total assets at September
30, 1996 and 1995 respectively. At present, there are no plans for any
significant capital expenditures. Logan County Bancshares exceeds all
regulatory capital guidelines and has not been advised by any regulatory
agency of any minimum capital requirement.
Effects of Inflation:
The impact of inflation on a financial institution differs
significantly from that exerted on an industrial concern, primarily because
a financial institution's assets and liabilities consist almost entirely of
monetary items. The low proportion of the Bank's net fixed assets to total
assets reduces both the potential of inflated earnings resulting from
understated depreciation charges and the potential significant understatement
of asset values. However, inflation does have a considerable indirect impact
on banks, including increased loan demand, as it becomes necessary for
producers and consumers to acquire additional funds to maintain the same
levels of consumption, inventories, and new investments. Inflation also
frequently results in higher interest rates which can affect both yields on
earning assets and rates paid on deposits and other interest-bearing
liabilities.
- ---------------------
PART II. - OTHER INFORMATION
NONE.
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<PAGE>
SIGNATURES
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.
LOGAN COUNTY BANCSHARES, INC.
------------------------------------
(Registrant)
Date _________________________________ ____________________________________
Frank Oakley, President
(Signature)
Date _________________________________ _____________________________________
Eddie D. Canterbury, Exec. Vice Pres.
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,246
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,860
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,744
<INVESTMENTS-CARRYING> 8,383
<INVESTMENTS-MARKET> 8,346
<LOANS> 69,435
<ALLOWANCE> 680
<TOTAL-ASSETS> 106,201
<DEPOSITS> 94,465
<SHORT-TERM> 0
<LIABILITIES-OTHER> 483
<LONG-TERM> 0
0
0
<COMMON> 1,274
<OTHER-SE> 9,979
<TOTAL-LIABILITIES-AND-EQUITY> 106,201
<INTEREST-LOAN> 4,173
<INTEREST-INVEST> 835
<INTEREST-OTHER> 369
<INTEREST-TOTAL> 5,377
<INTEREST-DEPOSIT> 2,174
<INTEREST-EXPENSE> 8
<INTEREST-INCOME-NET> 3,195
<LOAN-LOSSES> 35
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,221
<INCOME-PRETAX> 1,646
<INCOME-PRE-EXTRAORDINARY> 1,091
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,091
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 3.88
<LOANS-NON> 691
<LOANS-PAST> 1,063
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 662
<CHARGE-OFFS> 19
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 680
<ALLOWANCE-DOMESTIC> 680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
