<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 September 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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<PAGE>
LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of September
30, 1997 and 1996 and December 31, 1996.
Consolidated Statement of Income for the Three Month
Period Ended September 30, 1997 and 1996.
Consolidated Statement of Income for the Nine Month
Period Ended September 30, 1997 and 1996.
Consolidated Statement of Changes in Stockholders'
Equity for the Nine Month Period Ended September
30, 1997 and 1996.
Consolidated Statement of Cash Flows for the Nine
Month Period Ended September 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
September 30, 1997 and 1996 and December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
------
September 30, December 31,
1997 1996 1996
--------- --------- ------------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 5,023 $ 3,246 $ 4,435
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 16,937 10,744 14,326
HELD TO MATURITY 4,060 8,383 7,069
FEDERAL FUNDS SOLD 7,860 11,860 7,275
LOANS:
TOTAL LOANS 82,515 69,435 71,553
RESERVE FOR LOAN LOSSES 595 680 681
--------- --------- -----------
NET LOANS 81,920 68,755 70,872
BANK PREMISES AND EQUIPMENT 2,122 1,927 2,121
ACCRUED INTEREST AND OTHER ASSETS 1,416 1,286 1,282
--------- --------- ----------
$119,338 $106,201 $107,380
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS:
DEMAND DEPOSITS $ 31,955 $ 30,830 $ 28,030
SAVINGS DEPOSITS 30,113 28,968 30,560
TIME DEPOSITS 44,086 34,667 36,643
--------- --------- -----------
TOTAL DEPOSITS 106,154 94,465 95,233
LONG-TERM BORROWINGS 0 0 0
ACCRUED AND OTHER LIABILITIES 535 423 689
INCOME TAXES PAYABLE:
CURRENT 99 60 39
DEFERRED 41 0 4
--------- --------- -----------
TOTAL LIABILITIES 106,829 94,948 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 10,024 8,768 8,930
TREASURY STOCK (860) (860) (860)
--------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY 12,509 11,253 11,415
--------- --------- -----------
$119,338 $106,201 $107,380
--------- --------- -----------
--------- --------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Three Month Periods Ended September 30, 1997 and 1996
(In Thousands)
1997 1996
---- ----
INTEREST INCOME:
INTEREST ON LOANS $ 1,759 $ 1,460
INTEREST ON INVESTMENTS 382 320
INTEREST ON FEDERAL FUNDS SOLD 119 120
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2,260 1,900
INTEREST EXPENSE:
INTEREST ON DEPOSITS 938 761
OTHER INTEREST EXPENSE 0 0
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NET INTEREST INCOME 1,322 1,139
PROVISION FOR LOAN LOSSES 15 15
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,307 1,124
OTHER INCOME:
SERVICE FEES 347 281
OTHER OPERATING INCOME 7 11
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TOTAL OTHER INCOME 354 292
OTHER EXPENSES:
SALARIES AND BENEFITS 433 389
EXPENSE OF BANK PREMISES AND
EQUIPMENT 103 80
OTHER OPERATING EXPENSES 303 284
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TOTAL OTHER EXPENSES 839 753
INCOME BEFORE INCOME TAXES 822 663
FEDERAL INCOME TAXES 278 227
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NET INCOME $ 544 $ 436
------- -------
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PER SHARE OF COMMON STOCK NET INCOME $ 1.16 $ 0.93
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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, 1997 and 1996
(In Thousands)
1997 1996
---- ----
INTEREST INCOME:
INTEREST ON LOANS.............................. $4,963 $4,173
INTEREST ON INVESTMENTS........................ 1,080 835
INTEREST ON FEDERAL FUNDS SOLD................. 349 369
------ ------
6,392 5,377
INTEREST EXPENSE:
INTEREST ON DEPOSITS........................... 2,631 2,174
OTHER INTEREST EXPENSE......................... 0 8
------ ------
NET INTEREST INCOME....................... 3,761 3,195
PROVISION FOR LOAN LOSSES........................... 30 35
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES......................... 3,731 3,160
OTHER INCOME:
SERVICE FEES................................... 909 666
OTHER OPERATING INCOME......................... 34 41
------ ------
TOTAL OTHER INCOME........................ 943 707
OTHER EXPENSES:
SALARIES AND BENEFITS.......................... 1,272 1,159
EXPENSE OF BANK PREMISES AND EQUIPMENT......... 286 241
OTHER OPERATING EXPENSES....................... 873 821
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TOTAL OTHER EXPENSES...................... 2,431 2,221
INCOME BEFORE INCOME TAXES.......................... 2,243 1,646
FEDERAL INCOME TAXES................................ 753 555
------ ------
NET INCOME..................................... 1,490 1,091
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME................ $ 3.19 $ 2.33
------ ------
------ ------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT IN CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
NET UNREALIZED
(LOSSES) ON
COMMON RETAINED AVAILABLE-FOR- TREASURY
STOCK SURPLUS EARNINGS SALES 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........................ 58 58
DIVIDENDS ON 467,612 SHARES COMMON
STOCK @ $.97 PER SHARE............ (454) (454)
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997.......... 1,490 0 0 1,490
------ ------- -------- ---------------- -------- -------
$1,274 $2,071 $10,022 $2 ($860) $12,509
------ ------- -------- ---------------- -------- -------
------ ------- -------- ---------------- -------- -------
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 467,612 SHARES COMMON
STOCK @ $0.45 PER SHARE........... (211) (211)
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996.......... 1,091 1,091
------ ------- -------- ---------------- -------- -------
$1,274 $2,071 $8,866 ($98) ($860) $11,253
------ ------- -------- ---------------- -------- -------
------ ------- -------- ---------------- -------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Logan County Bancshares, Inc. and Subsidiaries
Statement of Cash Flows
Consolidated Cash Flows
For the Nine Month Periods Ended September 30, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from Operating Activities:
Net income $1,490 $1,091
Adjustment to Reconcile Net Income to
net cash provided by operating
activities:
Depreciation 108 109
Security amortization and accreation 6 10
Market value amortization (3) (3)
Provision for loan losses 30 35
(Gain) loss on sale of investment
securities (5) 0
(Increase) decrease in other assets (134) (251)
Increase (decrease) in other
liabilities (15) (127)
-------- --------
Net cash provided by operating activities 1,477 864
Cash flows from investing activities:
Proceeds from sale of securities available
for sale 4,000 1,000
Proceeds from maturities of securities 3,000 4,000
Purchase of securities available for sale (6,500) (6,227)
Purchase of securities held to maturity 0 (1,491)
Net (increase) decrease in federal
funds sold (585) (4,390)
Net (increase) decrease in loans (11,165) (5,088)
Proceeds from sale of assets 0 0
Purchase of bank premises and equipment (106) (320)
-------- --------
Net cash provided by investing activities (11,356) (12,516)
Cash flows from financing activities:
Net increase (decrease) in demand
deposits 3,925 3,585
Net increase (decrease) in savings
deposits (447) 519
Net increase (decrease) in time
deposits 7,443 6,644
Dividends paid (454) (211)
Proceeds from long-term borrowings 0 187
Repayment of borrowings 0 (187)
-------- --------
Net cash provided by financing
activities 10,467 10,537
Net increase (decrease) in cash and
cash equivalents 588 (1,115)
Cash and cash equivalent at beginning
of period 4,435 4,361
-------- --------
Cash and cash equivalent at end of
period $5,023 $3,246
-------- --------
-------- --------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
September 30, 1997
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, a wholly owned subsidiary.
<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 $1,490,000. for the nine months ended
September 30, 1997 compared to $1,091,000. for the nine months ended
September 30, 1996, representing a 36.57% increase. This increase was
primarily the result of the increase in net interest income of $571,000.,
increase in other income of $236,000. These were offset by increase in all
operating expenses of 408,000.
Earnings per common share were $3.19 for the nine months ended September
30, 1997 compared with $2.33 for the same period of 1996.
Logan County Bancshares' annualized return on assets (ROA) for the nine
month period ended September 30, 1997 was 1.66% compared to 1.37% for the
nine month period ended September 30, 1996. Annualized return on
shareholders' equity (ROE) was 15.88% and 12.92% at September 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 $6,392,000. at September 30, 1997, an
increase of $1,015,000. from September 30, 1996. Interest expense also
increased $449,000., resulting in an overall increase of $566,000. or 17.91%
in net interest income between September 30, 1997 and September 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.
<PAGE>
For the nine month period ended September 30, 1997, the provision for
loan losses decreased $5,000. to $30,000. or 16.67% compared to the same period
ended September 30, 1996.
The reserve for loan losses was $595,000. at September 30, 1997 compared
to $680,000. at September 30, 1996. Expressed as a percentage of loans (net
of unearned income), the reserve for loan losses was .72% at September 30,
1997 and .98% at September 30, 1996.
A summary of the Company's past due loans and nonperforming assets is
provided in the following table.
<TABLE>
<CAPTION>
SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS
(in thousands of dollars)
September 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Loans past due 90 or more days
still accruing interest $254 $1,063
-------- --------
Nonperforming assets:
Nonaccruing loans 550 691
Other real estate owned 209 262
-------- --------
$759 $ 953
-------- --------
-------- --------
</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than interest
income. For the nine month period ended September 30, 1997, noninterest
income totalled $943,000., representing an increase of $236,000., or 33.38%
from the $707,000. recorded during the same period of 1996. This increase was
primarily due to increases in service fees income of $243,000.
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 September 30,
1997, the Company's noninterest expense totalled $2,431,000., remaining
consistent with total noninterest expense for the six months ended June 30,
1996. Expressed as a percentage of assets, annualized noninterest expense was
2.72% at September 30, 1997, compared to 2.79% at September 30, 1996.
<PAGE>
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 52% of total noninterest expense
at September 30, 1997 and 1996. Salaries and employee benefits increased
$113,000., or 9.75% at September 30, 1997 compared to September 30, 1996.
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, 1997, reflected a $198,000, increase when compared
to the same period of 1996. Income tax expense equalled 33.57% and 33.72% of
income before taxes at September 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.
Balance Sheet Data:
Total assets grew by $11,958,000, between year end and September 30,
1997 to a balance of $119,338,000. The major component of this growth was an
increase in Federal Funds sold of $585,000, and loan increases of
$11,048,000. The primary source of funds for this growth was an increase in
deposits of $10,921,000, and net income of $1,490,000.
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 September 30, 1997, Federal Funds Sold
amounted to $7,860,000, and securities maturing within one year amounted to
$4,216,000. These are compared to the balances at June 30, 1996 of
$11,860,000, in Federal Funds Sold and maturing Investment Securities of
$6,385,000, 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 1997 and 1996, 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.
<PAGE>
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 $10,024,000
and has a total Stockholders' Equity of $12,509,000. As of September 30,
1997; as compared to $8,768,000 of Retained Earnings and total Stockholders'
equity of $11,253,000 at September 30, 1996.
The equity capital was 10.48% and 10.60% of total assets at September
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.
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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 November 13, 1997 /s/ Frank Oakley
------------------------------ -----------------------------------------
Frank Oakley, President
(Signature)
Date November 13, 1997 /s/ Eddie D. Canterbury
------------------------------ -----------------------------------------
Eddie D. Canterbury, Exec. Vice President
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000760327
<NAME> LOGAN COUNTY BANKSHARES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,023
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,860
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,937
<INVESTMENTS-CARRYING> 4,060
<INVESTMENTS-MARKET> 4,090
<LOANS> 82,515
<ALLOWANCE> 595
<TOTAL-ASSETS> 119,338
<DEPOSITS> 106,154
<SHORT-TERM> 0
<LIABILITIES-OTHER> 675
<LONG-TERM> 0
0
0
<COMMON> 1,274
<OTHER-SE> 11,235
<TOTAL-LIABILITIES-AND-EQUITY> 119,338
<INTEREST-LOAN> 4,963
<INTEREST-INVEST> 1,080
<INTEREST-OTHER> 349
<INTEREST-TOTAL> 6,392
<INTEREST-DEPOSIT> 2,631
<INTEREST-EXPENSE> 2,631
<INTEREST-INCOME-NET> 3,761
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 2,431
<INCOME-PRETAX> 2,243
<INCOME-PRE-EXTRAORDINARY> 2,243
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,490
<EPS-PRIMARY> 3.19
<EPS-DILUTED> 3.19
<YIELD-ACTUAL> 4.527
<LOANS-NON> 550
<LOANS-PAST> 254
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 681
<CHARGE-OFFS> 117
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 595
<ALLOWANCE-DOMESTIC> 595
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
