<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
.......................................................
Commission File Number 2-95114
.................................................
LOGAN COUNTY BANCSHARES, INC.
........................................................................
(Exact Name of Registrant as Specified in Its Charter)
WEST VIRGINIA
........................................................................
(State or other jurisdiction of incorporation or organization)
55-0660015
.......................................................................
(IRS Employer Identification Number)
P. O. BOX 597, LOGAN, WEST VIRGINIA 25601
.......................................................................
(Address of Principal Executive Offices) (Zip Code)
(304) 752-1166
........................................................................
(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
------------
<PAGE>
LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of June 30,
1996 and 1995 and December 31, 1995.
Consolidated Statement of Income for the Three Month
Period Ended June 30, 1996 and 1995.
Consolidated Statement of Income for the Six Month
Period Ended June 30, 1996 and 1995.
Consolidated Statement of Changes in Stockholders'
Equity for the Three Month Period Ended June
30, 1996 and 1995.
Consolidated Statement of Cash Flows for the Three
Month Period Ended June 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
June 30, 1996 and 1995 and December 31, 1995
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $3,344 $4,087 $4,361
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 11,423 6,860 5,797
HELD TO MATURITY 9,637 11,224 10,655
FEDERAL FUNDS SOLD 6,050 8,385 7,470
LOANS:
TOTAL LOANS 66,427 61,112 64,347
RESERVE FOR LOAN LOSSES 676 630 662
------- ------ -------
NET LOANS 65,751 60,482 63,685
BANK PREMISES AND EQUIPMENT 1,943 1,322 1,716
ACCRUED INTEREST AND OTHER ASSETS 1,213 1,095 1,035
------- ------- -------
$99,361 $93,455 $94,719
======= ======= =======
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C> <C> <C>
DEPOSITS:
DEMAND DEPOSITS $26,519 $27,359 $27,245
SAVINGS DEPOSITS 29,338 29,593 28,449
TIME DEPOSITS 32,073 25,846 28,023
------- ------- -------
TOTAL DEPOSITS 87,930 82,798 83,717
LONG-TERM BORROWINGS 0 0 0
ACCRUED AND OTHER LIABILITIES 602 519 594
INCOME TAXES PAYABLE:
CURRENT 51 50 14
DEFERRED 0 29 2
-------- -------- --------
TOTAL LIABILITIES 88,583 83,396 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 8,293 7,574 7,907
TREASURY STOCK (860) (860) (860)
--------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 10,778 10,059 10,392
--------- -------- --------
$99,361 $93,455 $94,719
========= ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Six Month Period Ended June 30, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $2,713 $2,511
INTEREST ON INVESTMENTS 515 605
INTEREST ON FEDERAL FUNDS SOLD 249 146
------- -------
3,477 3,262
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1,413 1,264
OTHER INTEREST EXPENSE 8 0
------- -------
NET INTEREST INCOME 2,056 1,998
PROVISION FOR LOAN LOSSES 20 25
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,036 1,973
OTHER INCOME:
SERVICE FEES 385 316
OTHER OPERATING INCOME 30 20
------- --------
TOTAL OTHER INCOME 415 336
OTHER EXPENSES:
SALARIES AND BENEFITS 770 720
EXPENSE OF BANK PREMISES AND
EQUIPMENT 161 164
OTHER OPERATING EXPENSES 537 529
------- --------
TOTAL OTHER EXPENSES 1,468 1,413
INCOME BEFORE INCOME TAXES 983 896
FEDERAL INCOME TAXES 328 310
------- --------
NET INCOME $655 $586
======= ========
PER SHARE OF COMMON STOCK
NET INCOME $1.40 $1.25
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Three Month Periods Ended June 30, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $1,375 $1,273
INTEREST ON INVESTMENTS 298 296
INTEREST ON FEDERAL FUNDS SOLD 115 99
------- -------
1,788 1,668
INTEREST EXPENSE:
INTEREST ON DEPOSITS 712 660
OTHER INTEREST EXPENSE 1 0
------- -------
NET INTEREST INCOME 1,075 1,008
PROVISION FOR LOAN LOSSES 10 10
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,065 998
OTHER INCOME:
SERVICE FEES 234 165
OTHER OPERATING INCOME 10 9
------- -------
TOTAL OTHER INCOME 244 174
OTHER EXPENSES:
SALARIES AND BENEFITS 385 360
EXPENSE OF BANK PREMISES AND
EQUIPMENT 82 85
OTHER OPERATING EXPENSES 268 274
------- --------
TOTAL OTHER EXPENSES 735 719
INCOME BEFORE INCOME TAXES 574 453
FEDERAL INCOME TAXES 189 155
------- --------
NET INCOME $385 $298
======= ========
PER SHARE OF COMMON STOCK NET
INCOME $0.82 $0.63
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement in Changes in Stockholders' Equity
For the Six Month Periods Ended June 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 (58) (58)
DIVIDENDS ON COMMON STOCK
@ 0.45 PER SHARE (211) (211)
NET INCOME FOR THE SIX
MONTHS ENDED JUNE 30, 1996 0 0 655 0 0 655
------- -------- --------- --------------- -------- -------
$1,274 $2,071 $8,430 ($137) ($860) $10,778
======= ======== ========= =============== ======== =======
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 105 105
DIVIDENDS ON COMMON STOCK
@ $.40 PER SHARE 0 0 (187) (187)
NET INCOME FOR THE SIX
MONTHS ENDED
JUNE 30, 1995 0 0 586 0 0 586
------- -------- --------- --------------- -------- -------
$1,274 $2,071 $7,617 ($43) ($860) $10,059
======= ======== ========= =============== ======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 655 $ 586
ADJUSTMENT TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 75 54
SECURITY AMORTIZATION AND
ACCRETION 9 14
MARKET VALUE AMORTIZATION (2) (2)
PROVISION FOR LOAN LOSSES 20 25
(GAIN) LOSS ON SALE OF INVESTMENT
SECURITIES 0 0
(INCREASE) DECREASE IN OTHER ASSETS (133) 2
INCREASE (DECREASE) IN OTHER
LIABILITIES 43 (10)
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 667 669
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES
AVAILABLE FOR SALE 500 0
PROCEEDS FROM MATURITIES
OF SECURITIES 2,500 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 1,420 (5,065)
NET (INCREASE) DECREASE IN LOANS (2,086) (1,070)
PROCEEDS FROM SALE OF ASSETS 0 0
PURCHASE OF BANK PREMISES AND EQUIPMENT (302) (11)
--------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES (5,686) (3,396)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS (726) 1,225
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 889 (3,870)
NET INCREASE (DECREASE) IN
TIME DEPOSITS 4,050 5,734
DIVIDENDS PAID (211) (187)
PROCEEDS FROM LONG-TERM BORROWINGS 187 0
REPAYMENT OF BORROWINGS (187)
--------- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,002 2,902
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,017) 175
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 4,361 3,912
--------- ------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 3,344 $ 4,087
========= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
June 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 ninty 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 $655,000. for the six months ended June
30, 1996 compared to $586,000. for the six months ended June 30, 1995,
representing a 11.77% increase. This increase was primarily the result of the
increase in net interest income of $63,000. and decrease in all operating
expenses net of other income of $6,000.
Earnings per common share were $1.40 for the six months ended June 30,
1996 compared with $1.25 for the same period of 1995.
Logan County Bancshares' annualized return on assets (ROA) for the six
month period ended June 30, 1996 was 1.32% compared to 1.25% for the six
month period ended June 30, 1995. Annualized return on shareholders' equity
(ROE) was 12.15% and 11.65% at June 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 amounted to $3,477,000. at June 30, 1996, an increase of
$215,000. from June 30, 1995. Interest expense also increased $157,000.,
resulting in an overall increase of $58,000. or 2.90% in net interest income
between June 30, 1996 and June 30, 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 six month period ended June 30, 1996, the provision for loan
losses decreased $5,000. to $20,000. or 20.00% compared to the same period
ended June 30, 1995.
The reserve for loan losses was $676,000. at June 30, 1996 compared to
$630,000. at June 30, 1995. Expressed as a percentage of loans (net of unearned
income), the reserve for loan losses was 1.02% at June 30, 1996 and 1.03% at
June 30, 1995.
<PAGE>
A summary of the Company's past due loans and nonperforming assets is provided
in the following table.
SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30,
-----------------
1996 1995
------ -------
<S> <C> <C>
Loans past due 90 or more days
still accruing interest $485 $768
------ -------
Nonperforming assets:
Nonaccruing loans 801 1,395
Other real estate owned 179 183
------- -------
$980 $1,578
======= =======
</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than interest
income. For the six month period ended June 30, 1996, noninterest income
totalled $415,000., representing an increase of $79,000., or 23.51% from the
$336,000. recorded during the same period of 1995. This increase was primarily
due to increases in service fees.
Logan 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 June 30, 1996,
the Company's noninterest expense totalled $1,468,000., remaining consistent
with total noninterest expense for the six months ended June 30, 1995.
Expressed as a percentage of assets, annualized noninterest expense was 2.95%
at June 30, 1996, compared to 3.02% at Juen 30, 1995.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 52% of total noninterest expense
at June 30, 1996 and 1995. Salaries and employee benefits increased $50,000.,
or 6.94% at June 30, 1996 compared to June 30, 1995. This increase is primarily
due to increased personnel.
INCOME TAXES
Logan County Bancshares' federal income tax expense, for the six month
period ended June 30, 1996, reflected a $18,000. increase when compared to the
same period of 1995. Income tax expense equalled 33.36% and 34.60% of income
before taxes at June 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 $4,642,000. between year end and June 30, 1996 to a
balance of $99,361,000. The major component of this growth was an increase in
Investment Securities of $4,608,000. and an increase in Net Loans of
$2,080,000. The primary source of funds for this growth was an increase in
deposits of $4,213,000., and net income of $655,000. and a decrease in
Federal Funds Sold of $1,420,000. and cash and due from banks of $1,017,000.
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 June 30, 1996, Federal Funds Sold amounted to
$6,050,000. and securities maturing within one year amounted to $1,810,000.
These are compared to the balances at June 30, 1995 of $8,385,000. in Federal
Funds Sold and maturing Investment Securities of $2,562,000. 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 $l00,000. 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 $8,293,000.
and has a total Stockholders' Equity of $10,778,000. as of June 30, 1996;
as compared to $7,574,000. of Retained Earnings and total Stockholders'
equity of $10,059,000. at June 30, 1996.
The equity capital was 10.85% and 10.76% of total assets at June 30,
1996 and 1995 respectively. At present, there are no plans for any significant
capital expenditures. Logan County Bancshares exceeds all regulatory capital
guide lines 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.
----
<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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,344
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,423
<INVESTMENTS-CARRYING> 9,637
<INVESTMENTS-MARKET> 9,596
<LOANS> 66,427
<ALLOWANCE> 676
<TOTAL-ASSETS> 99,361
<DEPOSITS> 87,930
<SHORT-TERM> 0
<LIABILITIES-OTHER> 653
<LONG-TERM> 0
0
0
<COMMON> 1,274
<OTHER-SE> 9,504
<TOTAL-LIABILITIES-AND-EQUITY> 99,361
<INTEREST-LOAN> 2,713
<INTEREST-INVEST> 515
<INTEREST-OTHER> 249
<INTEREST-TOTAL> 3,477
<INTEREST-DEPOSIT> 1,413
<INTEREST-EXPENSE> 1,421
<INTEREST-INCOME-NET> 2,056
<LOAN-LOSSES> 20
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,468
<INCOME-PRETAX> 983
<INCOME-PRE-EXTRAORDINARY> 655
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 655
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 3.83
<LOANS-NON> 801
<LOANS-PAST> 485
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 662
<CHARGE-OFFS> 4
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 676
<ALLOWANCE-DOMESTIC> 676
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
