<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, 1998
.......................................................
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. 478,000
------------
<PAGE>
LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of September 30, 1998
and 1997 and December 31, 1997.
Consolidated Statement of Income For the Three Month Period
Ended September 30, 1998 and 1997.
Consolidated Statement of Income For the Nine Month Period
Ended September 30, 1998 and 1997.
Consolidated Statement of Changes in Stockholders'
Equity for the Nine Month Period Ended September
30, 1998 and 1997.
Consolidated Statement of Cash Flows for the Nine Month Period
Ended September 30, 1998 and 1997.
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, 1998 and 1997 and December 31, 1997
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 5,354 $ 5,023 $ 5,267
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 22,462 16,937 15,958
HELD TO MATURITY 2,496 4,060 3,995
FEDERAL FUNDS SOLD 9,360 7,860 8,910
LOANS:
TOTAL LOANS 92,800 82,515 84,898
RESERVE FOR LOAN LOSSES 732 595 673
--------- --------- ---------
NET LOANS 92,068 81,920 84,225
BANK PREMISES AND EQUIPMENT 2,091 2,122 2,125
ACCRUED INTEREST AND OTHER ASSETS 1,878 1,416 1,370
--------- --------- ---------
$ 135,709 $ 119,338 $ 121,850
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST $ 14,304 $ 12,878 $ 13,547
INTEREST BEARING 22,410 19,077 17,662
SAVINGS DEPOSITS 29,538 30,113 29,287
TIME DEPOSITS 54,554 44,086 47,611
--------- --------- ---------
TOTAL DEPOSITS 120,806 106,154 108,107
ACCRUED AND OTHER LIABILITIES 723 535 723
INCOME TAXES PAYABLE:
CURRENT 62 99 (18)
DEFERRED 121 41 55
--------- --------- ---------
TOTAL LIABILITIES 121,712 106,829 108,867
STOCKHOLDERS' EQUITY:
COMMON STOCK - $ 2.50 PAR VALUE;
AUTHORIZED & ISSUED 520,000 SHARES
IN 1998 AND 509,612 IN 1997;
OUTSTANDING 478,000 IN 1998 AND
467,612 IN 1997 1,300 1,274 1,300
SURPLUS 2,408 2,071 2,408
RETAINED EARNINGS 11,149 10,024 10,135
TREASURY STOCK (860) (860) (860)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 13,997 12,509 12,983
--------- --------- ---------
$ 135,709 $ 119,338 $ 121,850
--------- --------- ---------
--------- --------- ---------
</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 September 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $1,997 $1,759
INTEREST ON INVESTMENTS 373 382
INTEREST ON FEDERAL FUNDS SOLD 182 119
------ ------
2,552 2,260
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1,097 938
------ ------
NET INTEREST INCOME 1,455 1,322
PROVISION FOR LOAN LOSSES 23 15
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,432 1,307
OTHER INCOME:
SERVICE FEES 239 347
OTHER OPERATING INCOME 6 7
------ ------
TOTAL OTHER INCOME 245 354
OTHER EXPENSES:
SALARIES AND BENEFITS 458 433
EXPENSE OF BANK PREMISES AND
EQUIPMENT 109 103
OTHER OPERATING EXPENSES 335 303
------ ------
TOTAL OTHER EXPENSES 902 839
INCOME BEFORE INCOME TAXES 775 822
INCOME TAXES 286 278
------ ------
NET INCOME $ 489 $ 544
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $ 1.02 $ 1.16
------ ------
------ ------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Nine Month Periods Ended September 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $5,791 $4,963
INTEREST ON INVESTMENTS 982 1080
INTEREST ON FEDERAL FUNDS SOLD 567 349
------ ------
7,340 6,392
INTEREST EXPENSE:
INTEREST ON DEPOSITS 3,142 2,631
------ ------
NET INTEREST INCOME 4,198 3,761
PROVISION FOR LOAN LOSSES 68 30
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,130 3,731
OTHER INCOME:
SERVICE FEES 766 909
OTHER OPERATING INCOME 59 34
------ ------
TOTAL OTHER INCOME 825 943
OTHER EXPENSES:
SALARIES AND BENEFITS 1,345 1,272
EXPENSE OF BANK PREMISES AND
EQUIPMENT 304 286
OTHER OPERATING EXPENSES 932 873
------ ------
TOTAL OTHER EXPENSES 2,581 2,431
INCOME BEFORE INCOME TAXES 2,374 2,243
INCOME TAXES 873 753
------ ------
NET INCOME $1,501 $1,490
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $ 3.14 $ 3.19
------ ------
------ ------
</TABLE>
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, 1998 and 1997
(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
1997 $ 1,300 $ 2,408 $ 10,126 $ 9 ($ 860) $ 12,983
DIVIDENDS ON 478,00 SHARES
COMMON STOCK @ $1.20 (574) (574)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 87 87
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 0 0 1,501 0 0 1,501
-------- -------- -------- -------- -------- --------
$ 1,300 $ 2,408 $ 11,053 $ 96 ($ 860) $ 13,997
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
BALANCE - DECEMBER 31
1996 $ 1,274 $ 2,071 $ 8,986 ($ 56) ($ 860) $ 11,415
DIVIDENDS ON 467,612 SHARES
COMMON STOCK @ $0.97 (454) (454)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 58 58
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 1,490 1,490
-------- -------- -------- -------- -------- --------
$ 1,274 $ 2,071 $ 10,022 $ 2 ($ 860) $ 12,509
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,501 $ 1,490
ADJUSTMENT TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 117 108
SECURITY AMORTIZATION AND
ACCREATION (5) 6
MARKET VALUE AMORTIZATION (3) (3)
PROVISION FOR LOAN LOSSES 68 30
(GAIN) LOSS ON SALE OF INVESTMENT
SECURITIES 0 (5)
(INCREASE) DECREASE IN OTHER ASSETS (508) (134)
INCREASE (DECREASE) IN OTHER
LIABILITIES 66 (15)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,236 1,477
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES
AVAILABLE FOR SALE 8,200 4,000
PROCEEDS FROM MATURITIES
OF SECURITIES 3,000 3,000
PURCHASE OF SECURITIES AVAILABLE
FOR SALE (16,048) (6,500)
PURCHASE OF SECURITIES HELD TO MATURITY 0 0
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD (450) (585)
NET (INCREASE) DECREASE IN LOANS (7,893) (11,165)
PROCEEDS FROM SALE OF ASSETS 0 0
PURCHASE OF BANK PREMISES AND EQUIPMENT (83) (106)
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES (13,274) (11,356)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 5,505 3,925
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 251 (447)
NET INCREASE (DECREASE) IN
TIME DEPOSITS 6,943 7,443
DIVIDENDS PAID (574) (454)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,125 10,467
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 87 588
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 5,267 4,435
-------- --------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 5,354 $ 5,023
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
September 30, 1998
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 $1,501,000. for the nine months
ended September 30, 1998 compared to $1,490,000. for the nine months ended
September 30, 1997, representing a 1.00% increase. This increase was primarily
the result of the increase in net interest income of $437,000., offset by a
decrease in other income of $118,000. These were offset by increase in all
operating expenses of $150,000.
Earnings per common share were $3.14 for the nine months ended September
30, 1998 compared with $3.19 for the same period of 1997.
Logan County Bancshares' annualized return on assets (ROA) for the nine
month period ended September 30, 1998 was 1.55% compared to 1.66% for the nine
month period ended September 30, 1997. Annualized return on shareholders' equity
(ROE) was 14.83% and 15.88% at September 30, 1998 and 1997, 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 $7,340,000. at September 30, 1998, an
increase of $948,000. from September 30, 1997. Interest expense also
increased $511,000., resulting in an overall increase of $437,000. or 11.62%
in net interest income between September 30, 1998 and September 30, 1997.
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, 1998, the provision for loan
losses increased $38,000. to $68,000. compared to the same period ended
September 30, 1997.
The reserve for loan losses was $732,000. at September 30, 1998 compared to
$595,000. at September 30, 1997. Expressed as a percentage of loans (net of
unearned income), the reserve for loan losses was .79% at September 30, 1998 and
.72% at September 30, 1997.
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>
September 30,
1998 1997
------ ------
<S> <C> <C>
Loans past due 90 or more days $4,300 $ 254
still accruing interest
Nonperforming assets:
Nonaccruing loans 488 550
Other real estate owned 239 209
------ ------
727 759
------ ------
------ ------
</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than interest
income. For the nine month period ended September 30, 1998, noninterest income
totaled $825,000., representing a decrease of $118,000., or 12.51% from the
$943,000. recorded during the same period of 1997. This decrease was primarily
due to decreases in service fees income of $143,000.
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,
1998, the Company's noninterest expense totaled $2,581,000., remaining
consistent with total noninterest expense for the nine months ended September
30, 1997. Expressed as a percentage of assets, annualized noninterest expense
was 2.54% at September 30, 1998, compared to 2.72% at September 30, 1997.
<PAGE>
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 53% of total noninterest expense at
September 30, 1998 and 1997. Salaries and employee benefits increased $73,000.,
or 5.74% at September 30, 1998 compared to September 30, 1997. This increase is
primarily due to increased personnel.
INCOME TAXES
Logan County Bancshares' income tax expense, for the nine month period
ended September 30, 1998, reflected a $120,000. increase when compared to the
same period of 1997. Income tax expense equaled 36.77% and 36.31% of income
before taxes at September 30, 1998 and 1997, respectively. For financial
reporting purposes, income tax expense does not equal the statutory income tax
rate of 43% 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 $13,859,000. between year end and September 30, 1998
to a balance of $135,709,000. The major component of this growth was an increase
in Federal Funds Sold of $450,000., investments of $5,005,000., and loan
increases of 7,902,000. The primary source of funds for this growth was an
increase in deposits of $12,699,000., and net income of $1,501,000.
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, 1998, Federal Funds Sold amounted to
$9,360,000. and securities maturing within one year amounted to $1,550,000.
These are compared to the balances at September 30, 1997 of $7,860,000. in
Federal Funds Sold and maturing Investment Securities of $4,216,000. 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 1998 and 1997, banks continue to be 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, it has accumulated Retained Earnings of $11,149,000. and has a total
Stockholders' Equity of $13,997,000. as of September 30, 1998; as
<PAGE>
compared to $10,024,000. of Retained Earnings and total Stockholders' equity of
$12,509,000. at September 30, 1997.
The equity capital was 10.31% and 10.48 of total assets at September 30,
1998 and 1997 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
------------------------------ -------------------------------------------
Frank Oakley, President
(Signature)
Date
----------------------------- -------------------------------------------
Eddie D. Canterbury, Exec. Vice Pres.
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000760327
<NAME> LOGAN COUNTY BANC SHARES, INC.
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997 DEC-31-1997
<CASH> 5,354 5,023 5,267
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 9,360 7,860 8,910
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 22,462 16,937 15,958
<INVESTMENTS-CARRYING> 2,496 4,060 3,995
<INVESTMENTS-MARKET> 2,534 4,073 4,026
<LOANS> 92,800 82,515 84,898
<ALLOWANCE> 732 595 673
<TOTAL-ASSETS> 135,709 119,338 121,850
<DEPOSITS> 120,806 106,154 108,107
<SHORT-TERM> 0 0 0
<LIABILITIES-OTHER> 906 675 760
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 1,300 1,274 1,300
<OTHER-SE> 12,697 11,235 11,683
<TOTAL-LIABILITIES-AND-EQUITY> 135,709 119,338 121,850
<INTEREST-LOAN> 5,791 4,963 0
<INTEREST-INVEST> 982 1,080 0
<INTEREST-OTHER> 567 349 0
<INTEREST-TOTAL> 7,340 6,392 0
<INTEREST-DEPOSIT> 3,142 2,631 0
<INTEREST-EXPENSE> 3,142 2,631 0
<INTEREST-INCOME-NET> 4,198 3,761 0
<LOAN-LOSSES> 68 30 0
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 2,581 2,431 0
<INCOME-PRETAX> 2,374 2,243 0
<INCOME-PRE-EXTRAORDINARY> 1,501 1,490 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,501 1,490 0
<EPS-PRIMARY> 3.14 3.19 0
<EPS-DILUTED> 3.14 3.19 0
<YIELD-ACTUAL> 3.332 3.395 0
<LOANS-NON> 0 0 0
<LOANS-PAST> 3,790 254 0
<LOANS-TROUBLED> 843 838 0
<LOANS-PROBLEM> 546 686 0
<ALLOWANCE-OPEN> 673 681 0
<CHARGE-OFFS> 11 117 0
<RECOVERIES> 3 1 0
<ALLOWANCE-CLOSE> 732 595 0
<ALLOWANCE-DOMESTIC> 732 595 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
