<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 and 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997
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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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LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of June 30,
1997 and 1996 and December 31, 1996.
Consolidated Statement of Income for the Three Month
Period Ended June 30, 1997 and 1996.
Consolidated Statement of Income for the Six Month
Period Ended June 30, 1997 and 1996.
Consolidated Statement of Changes in Stockholders'
Equity for the Six Month Period Ended June
30, 1997 and 1996.
Consolidated Statement of Cash Flows for the Six
Month Period Ended June 30, 1997 and 1996.
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, 1997 and 1996 and December 31, 1996
(In Thousands)
ASSETS
June 30, December 31,
1997 1996 1996
---- ---- ------------
CASH AND DUE FROM BANKS $ 4,844 $ 3,344 $ 4,435
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 18,842 11,423 14,326
HELD TO MATURITY 7,061 9,637 7,069
FEDERAL FUNDS SOLD 4,475 6,050 7,275
LOANS:
TOTAL LOANS 77,259 66,427 71,553
RESERVE FOR LOAN LOSSES 581 676 681
-------- ------- --------
NET LOANS 76,678 65,751 70,872
BANK PREMISES AND EQUIPMENT 2,121 1,943 2,121
ACCRUED INTEREST AND OTHER ASSETS 1,341 1,213 1,282
-------- ------- --------
$115,362 $99,361 $107,380
-------- ------- --------
-------- ------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
DEMAND DEPOSITS $ 30,230 $26,519 $ 28,030
SAVINGS DEPOSITS 30,592 29,338 30,560
TIME DEPOSITS 41,821 32,073 36,643
-------- ------- --------
TOTAL DEPOSITS 102,643 87,930 95,233
LONG-TERM BORROWINGS 0 0 0
ACCRUED AND OTHER LIABILITIES 556 602 689
INCOME TAXES PAYABLE:
CURRENT 87 51 39
DEFERRED 0 0 4
-------- ------- --------
TOTAL LIABILITIES 103,286 88,583 95,965
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 9,591 8,293 8,930
TREASURY STOCK (860) (860) (860)
-------- ------- --------
TOTAL STOCKHOLDERS' EQUITY 12,076 10,778 11,415
-------- ------- --------
$115,362 $99,361 $107,380
-------- ------- --------
-------- ------- --------
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, 1997 and 1996
(In Thousands)
1997 1996
------ ------
INTEREST INCOME:
INTEREST ON LOANS $1,645 $1,375
INTEREST ON INVESTMENTS 371 298
INTEREST ON FEDERAL FUNDS SOLD 112 115
------ ------
2,128 1,788
INTEREST EXPENSE:
INTEREST ON DEPOSITS 875 712
OTHER INTEREST EXPENSE 0 1
------ ------
NET INTEREST INCOME 1,253 1,075
PROVISION FOR LOAN LOSSES 15 10
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,238 1,065
OTHER INCOME:
SERVICE FEES 290 234
OTHER OPERATING INCOME 10 10
------ ------
TOTAL OTHER INCOME 300 244
OTHER EXPENSES:
SALARIES AND BENEFITS 423 385
EXPENSE OF BANK PREMISES AND
EQUIPMENT 95 82
OTHER OPERATING EXPENSES 303 268
------ ------
TOTAL OTHER EXPENSES 821 735
INCOME BEFORE INCOME TAXES 717 574
FEDERAL INCOME TAXES 243 189
------ ------
NET INCOME $474 $385
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $1.01 $0.82
------ ------
------ ------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCHSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Six Month Period Ended June 30, 1997 and 1996
(In Thousands)
1997 1996
---- ----
INTEREST INCOME
INTEREST ON LOANS $3,204 $2,713
INTEREST ON INVESTMENTS 698 515
INTEREST ON FEDERAL FUNDS SOLD 230 249
-------- ---------
4,132 3,477
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1,693 1,413
OTHER INTEREST EXPENSE 0 8
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NET INTEREST INCOME 2,439 2,056
PROVISION FOR LOAN LOSSES 15 20
-------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,424 2,036
OTHER INCOME:
SERVICE FEES 562 385
OTHER OPERATING INCOME 27 30
-------- ---------
TOTAL OTHER INCOME 589 415
OTHER EXPENSES:
SALARIES AND BENEFITS 839 770
EXPENSE OF BANK PREMISES AND
EQUIPMENT 183 161
OTHER OPERATING EXPENSES 570 537
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TOTAL OTHER EXPENSES 1,592 1,468
INCOME BEFORE INCOME TAXES 1,421 983
FEDERAL INCOME TAXES 475 328
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NET INCOME 946 655
-------- ---------
-------- ---------
PER SHARE OF COMMON STOCK NET INCOME $2.02 $1.40
-------- ---------
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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, 1997 and 1996
(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
1996 $1,274 $2,071 $8,986 ($56) $(860) $11,415
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 5 5
DIVIDENDS ON 467,612 SHARES COMMON
STOCK @ $.62 PER SHARE 0 0 (290) (290)
NET INCOME FOR THE SIX MONTHS
ENDED JUNE 30, 1997 0 0 946 0 0 946
------ ------ -------- ------------- ------ ----
$1,274 $2,071 $9,642 ($51) ($860) $12,076
------ ------ -------- ------------- ------ ------
------ ------ -------- ------------- ------ ------
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 467,612 SHARES 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
------ ------ -------- ------------- ------ ------
------ ------ -------- ------------- ------ ------
</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, 1997 AND 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES: $ 946 $ 655
NET INCOME
ADJUSTMENT TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 70 75
SECURITY AMORTIZATION AND
ACCREATION 4 9
MARKET VALUE AMORTIZATION (2) (2)
PROVISION FOR LOAN LOSSES 15 20
(GAIN) LOSS ON SALE OF INVESTMENT
SECURITIES (5) 0
(INCREASE) DECREASE IN OTHER ASSETS (59) (133)
INCREASE (DECREASE) IN OTHER
LIABILITIES (89) 43
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NET CASH PROVIDED BY OPERATING ACTIVITIES 880 667
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES
AVAILABLE FOR SALE 1000 500
PROCEEDS AND MATURITIES
OF SECURITIES 0 2,500
PURCHASE OF SECURITIES AVAILABLE
FOR SALE (5,500) (6,227)
PURCHASE OF SECURITIES HELD TO MATURITY 0 (1,491)
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD 2,800 1,420
NET (INCREASE) DECREASE IN LOANS (5,821) (2,086)
PROCEEDS FROM SALE OF ASSETS 0 0
PURCHASE OF BANK PREMISES AND EQUIPMENT (70) (302)
--------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES (7,591) (5,686)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 2,200 (726)
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 32 889
NET INCREASE (DECREASE) IN
TIME DEPOSITS 5,178 4,050
DIVIDENDS PAID (290) (211)
PROCEEDS FROM LONG-TERM BORROWINGS 0 187
REPAYMENT OF BORROWINGS 0 (187)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,120 4,002
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 409 (1,017)
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 4,435 4,361
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CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 4,844 $ 3,344
--------- ----------
--------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<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 $946,000. for the six months ended March
31, 1997 compared to $270,000. for the three months ended June 30, 1996,
representing a 44.42% increase. This increase was primarily the result of the
increase in net interest income of $383,000., increase in other income of
$174,000. and increase in all operating expenses net of other income of
$266,000.
Earnings per common share were $2.02 for the six months ended June 30, 1997
compared with $1.40 for the same period of 1996.
Logan County Bancshares' annualized return on assets (ROA) for the six month
period ended June 30, 1997 was 1.70% compared to 1.34% for the six month period
ended June 30, 1996. Annualized return on shareholders' equity (ROE) was 16.11%
and 12.38% at June 30, 1997 and 1996, 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 $4,132,000. at June 30, 1997, an increase of
$655,000. from June 30, 1996. Interest expense also increased $272,000.,
resulting in an overall increase of $383,000. or 20.90% in net interest income
between June 30, 1997 and June 30, 1996.
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 three month period ended June 30, 1997, the provision for loan
losses decreased $5,000. to $15,000 or 25.00% compared to the same period ended
June 30, 1996.
The reserve for loan losses was $581,000. at June 30, 1997 compared to
$676,000. at June 30, 1996. Expressed as a percentage of loans (net of unearned
income), the reserve for loan losses was .75% at June 30, 1997 and 1.01% at June
30, 1996.
<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,
--------------------
<S> <C> <C>
1997 1996
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Loans past due 90 or more days still accruing interest............................................ $ 352 $ 485
Nonperforming assets:
Nonaccruing loans................................................................................. 554 801
Other real estate owned........................................................................... 209 179
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$ 763 $ 980
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</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than interest
income. For the six month period ended June 30, 1997, noninterest income
totalled $589,000., representing an increase of $175,000., or 42.17% from the
$451,000. recorded during the same period of 1996. This increase was primarily
due to increases in service fees income of $177,000.
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, 1997, the
Company's noninterest expense totalled $1,592,000., remaining consistent with
total noninterest expense for the six months ended June 30, 1996. Expressed as a
percentage of assets, annualized noninterest expense was 2.76% at June 30, 1997,
compared to 2.93% at June 30, 1996.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 54% of total noninterest expense at
June 30, 1997 and 1996. Salaries and employee benefits increased $69,000., or
8.96% at June 30, 1997 compared to June 30, 1996. This increase is primarily due
to increased personnel.
INCOME TAXES
Logan County Bancshares' federal income tax expense, for the three month
period ended June 30, 1997, reflected a $147,000. increase when compared to the
same period of 1996. Income tax expense equalled 33.43% and 33.36% of income
before taxes at June 30, 1997 and 1996, 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.
<PAGE>
Balance Sheet Data:
Total assets grew by $7,983,000. between year end and June 30, 1997 to a
balance of $115,362,000. The major component of this growth was an increase in
Investment Securities of $4,508,000. and loan increases of $2,435,000. The
primary source of funds for this growth was an increase in deposits of
$7,410,000., and net income of $946,000.
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, 1997, Federal Funds Sold amounted to
$4,475,000. and securities maturing within one year amounted to $5,740,000.
These are compared to the balances at June 30, 1996 of $6,050,000. in Federal
Funds Sold and maturing Investment Securities of $1,810,000. 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 $9,591,000. and
has a total Stockholders' Equity of $12,076,000. as of June 30, 1997; as
compared to $8,293,000. of Retained Earnings and total Stockholders' equity of
$10,778,000. at June 30, 1996.
The equity capital was 10.47% and 11.85% of total assets at June 30, 1997
and 1996 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.
<PAGE>
PART II.--OTHER INFORMATION
NONE.
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 /s/ Frank Oakley
---------------------------- ---------------------------
Frank Oakley, President
(Signature)
Date /s/ Eddie D. Canterbury
---------------------------- ---------------------------
Eddie D. Canterbury,
Exec. Vice Pres.
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000760327
<NAME> LOGIN COUNTY BANCSHARES
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,844
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,842
<INVESTMENTS-CARRYING> 7,061
<INVESTMENTS-MARKET> 7,074
<LOANS> 77,259
<ALLOWANCE> 581
<TOTAL-ASSETS> 115,362
<DEPOSITS> 102,643
<SHORT-TERM> 0
<LIABILITIES-OTHER> 643
<LONG-TERM> 0
0
0
<COMMON> 1,274
<OTHER-SE> 10,802
<TOTAL-LIABILITIES-AND-EQUITY> 115,362
<INTEREST-LOAN> 3,204
<INTEREST-INVEST> 698
<INTEREST-OTHER> 230
<INTEREST-TOTAL> 4,132
<INTEREST-DEPOSIT> 1,693
<INTEREST-EXPENSE> 1,693
<INTEREST-INCOME-NET> 2,439
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 1,592
<INCOME-PRETAX> 1,421
<INCOME-PRE-EXTRAORDINARY> 1,421
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 946
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
<YIELD-ACTUAL> 4,532
<LOANS-NON> 554
<LOANS-PAST> 352
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 681
<CHARGE-OFFS> 115
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 581
<ALLOWANCE-DOMESTIC> 581
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
