<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 March 31, 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 March 31, 1998 and
1997 and December 31, 1997.
Consolidated Statement of Income For the Three Month Period
Ended March 31, 1998 and 1997.
Consolidated Statement of Changes in Stockholders'
Equity for the Three Month Period Ended March
31, 1998 and 1997.
Consolidated Statement of Cash Flows for the Three Month
Period Ended March 31, 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
March 31, 1998 and 1997 and December 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1998 1997 1997
---- ---- -----
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $5,131 $4,817 $5,267
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 15,046 15,220 15,958
HELD TO MATURITY 2,495 7,065 3,995
FEDERAL FUNDS SOLD 17,130 9,210 8,910
LOANS:
TOTAL LOANS 86,997 73,988 84,898
RESERVE FOR LOAN LOSSES 692 681 673
--------- -------- --------
NET LOANS 86,305 73,307 84,225
BANK PREMISES AND EQUIPMENT 2,128 2,136 2,125
ACCRUED INTEREST AND OTHER ASSETS 1,585 1,383 1,370
--------- -------- --------
$129,820 $113,138 $121,850
--------- -------- --------
--------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST $14,322 $12,874 $13,547
INTEREST BEARING 20,691 18,017 17,662
SAVINGS DEPOSITS 30,630 30,606 29,287
TIME DEPOSITS 49,911 39,178 47,611
-------- ------- -------
TOTAL DEPOSITS 115,554 100,675 108,107
ACCRUED AND OTHER LIABILITIES 606 543 723
INCOME TAXES PAYABLE:
CURRENT 260 237 (18)
DEFERRED 71 (3) 55
-------- ------- -------
TOTAL LIABILITIES 116,491 101,452 108,867
STOCKHOLDERS' EQUITY:
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 10,481 9,201 10,135
TREASURY STOCK (860) (860) (860)
-------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 13,329 11,686 12,983
-------- ------- -------
$129,820 $113,138 $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 March 31, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $1,861 $1,559
INTEREST ON INVESTMENTS 300 327
INTEREST ON FEDERAL FUNDS SOLD 165 118
------ ------
2,326 2,004
INTEREST EXPENSE:
INTEREST ON DEPOSITS 996 818
------ ------
NET INTEREST INCOME 1,330 1,186
PROVISION FOR LOAN LOSSES 23 0
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,307 1,186
OTHER INCOME:
SERVICE FEES 298 272
OTHER OPERATING INCOME 22 17
------ ------
TOTAL OTHER INCOME 320 289
OTHER EXPENSES:
SALARIES AND BENEFITS 442 416
EXPENSE OF BANK PREMISES AND
EQUIPMENT 97 88
OTHER OPERATING EXPENSES 280 267
------ ------
TOTAL OTHER EXPENSES 819 771
INCOME BEFORE INCOME TAXES 808 704
FEDERAL INCOME TAXES 297 232
------ ------
NET INCOME $511 $472
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $1.07 $1.01
------ ------
------ ------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement in Changes in Stockholders' Equity
For the Three Month Periods Ended March 31, 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 @ $0.39 (186) (186)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 21 21
NET INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1996 . 0 0 511 0 0 511
-------- -------- -------- -------- -------- --------
$ 1,300 $ 2,408 $ 10,451 $ 30 ($860) $ 13,329
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
BALANCE - DECEMBER 31 1996 $ 1,274 $ 2,071 $ 8,986 ($56) ($860) $ 11,415
DIVIDENDS ON 467,612 SHARES
COMMON STOCK @ $0.30 (140) (140)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES (61) (61)
NET INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1997 0 0 472 0 0 472
-------- -------- -------- -------- -------- --------
$ 1,274 $ 2,071 $ 9,318 ($117) ($860) $ 11,686
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $511 $472
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 40 36
SECURITY AMORTIZATION AND
ACCREATION 0 3
MARKET VALUE AMORTIZATION (1) 1
PROVISION FOR LOAN LOSSES 23 0
(INCREASE) DECREASE IN OTHER
ASSETS (215) (56)
INCREASE (DECREASE) IN OTHER
LIABILITIES 160 45
------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 518 501
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES AVAILABLE FOR SALE 1,000 0
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY 1,500 0
PURCHASE OF SECURITIES AVAILABLE FOR SALE (50) (1,000)
PURCHASE OF SECURITIES HELD TO MATURITY 0 0
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD (8,220) (1,935)
NET (INCREASE) DECREASE IN LOANS (2,103) (2,435)
PURCHASE OF BANK PREMISES
AND EQUIPMENT (42) (51)
------- ------
NET CASH PROVIDED BY INVESTING ACTIVITIES (7,915) (5,421)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 3,804 2,861
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 1,343 46
NET INCREASE (DECREASE) IN
TIME DEPOSITS 2,300 2,535
DIVIDENDS PAID (186) (140)
------- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,261 5,302
---------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (136) 382
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 5,267 4,435
---------- -----------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $5,131 $4,817
========== ===========
</TABLE>
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 $511,000. for the three months ended
March 31, 1998 compared to $472,000. for the three months ended March 31, 1997,
representing a 8.26% increase. This increase was primarily the result of the
increase in net interest income of $121,000., increase in other income of
$31,000. and increase in all operating expenses of $48,000. and income taxes of
$65,000.
Earnings per common share were $1.07 for the three months ended March 31,
1998 compared with $1.01 for the same period of 1997.
Logan County Bancshares' annualized return on assets (ROA) for the three
month period ended March 31, 1998 was 1.57% compared to 1.67% for the three
month period ended March 31, 1997. Annualized return on shareholders' equity
(ROE) was 15.33% and 16.16% at March 31, 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 $2,326,000. at March 31, 1998, an
increase of $322,000. from March 31, 1997. Interest expense also
increased $178,000., resulting in an overall increase of $144,000. or
12.14% in net interest income between March 31, 1998 and March 31, 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.
For the three month period ended March 31, 1998, the provision for
loan losses increased $23,000. to $23,000. or 100.00% compared to the same
period ended March 31, 1997.
The reserve for loan losses was $692,000. at March 31, 1998 compared to
$681,000. at March 31, 1997. Expressed as a percentage of loans (net of unearned
income), the reserve for loan losses was .80% at March 31, 1998 and .92% at
March 31, 1997.
<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>
March 31,
------------------
1998 1997
------ -----
<S> <C> <C>
Loans past due 90 or more days
still accruing interest $1,433 $246
------ -----
Nonperforming assets:
Nonaccruing loans 572 683
Other real estate owned 171 259
------ -----
$743 $942
------ -----
------ -----
</TABLE>
NONINTEREST INCOME:
Noninterest income includes revenues from all sources other than interest
income. For the three month period ended March 31, 1998, noninterest income
totalled $320,000., representing an increase of $31,000., or 10.73% from the
$289,000. recorded during the same period of 1997. This increase was primarily
due to increases in service fees income of $26,000.
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 March 31, 1998,
the Company's noninterest expense totalled $819,000., remaining consistent with
total noninterest expense for the three months ended March 31, 1997. Expressed
as a percentage of assets, annualized noninterest expense was 2.52% at March 31,
1998, compared to 2.66% at March 31, 1997.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 54% of total noninterest expense at
March 31, 1998 and 1997. Salaries and employee benefits increased $26,000., or
6.25% at March 31, 1998 compared to March 31, 1997. This increase is primarily
due to increased personnel.
INCOME TAXES:
Logan County Bancshares' federal income tax expense, for the three month
period ended March 31, 1998, reflected a $45,000. increase when compared to the
same period of 1997. Income tax expense equalled 36.76% and 32.95% of income
before taxes at March 31, 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.
<PAGE>
Balance Sheet Data:
Total assets grew by $7,970,000. between year end and March 31, 1998 to a
balance of $129,820,000. The major component of this growth was an increase in
Federal Funds Sold of $8,220,000., and loan increases of 2,080,000. The primary
source of funds for this growth was an increase in deposits of $7,624,000., a
decrease in Investment Securities of $2,412,000., and net income of $511,000.
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 March 31, 1998, Federal Funds Sold amounted to
$17,130,000. and securities maturing within one year amounted to $2,731,000.
These are compared to the balances at March 31, 1997 of $9,210,000. in Federal
Funds Sold and maturing Investment Securities of $7,180,000. 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 $10,481,000. and has a
total Stockholders' Equity of $13,329,000. as of March 31, 1998; as
compared to $9,318,000. of Retained Earnings and total Stockholders'
equity of $11,686,000. at March 31, 1997.
The equity capital was 10.27% and 10.33% of total assets at March 31, 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 H. Oakley, President
(Signature)
Date ______________ _____________________________________
Eddie D. Canterbury, Exec. Vice Pres.
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS YEAR
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997 DEC-31-1997
<CASH> 5,131 4,817 5,267
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 17,130 9,210 8,910
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 15,046 15,220 15,958
<INVESTMENTS-CARRYING> 2,495 7,065 3,995
<INVESTMENTS-MARKET> 2,528 7,098 4,026
<LOANS> 86,997 73,988 84,898
<ALLOWANCE> 692 681 673
<TOTAL-ASSETS> 129,820 113,138 121,850
<DEPOSITS> 115,554 100,675 108,109
<SHORT-TERM> 0 0 0
<LIABILITIES-OTHER> 937 777 760
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 1,300 1,274 1,300
<OTHER-SE> 12,029 10,412 11,683
<TOTAL-LIABILITIES-AND-EQUITY> 129,820 113,138 121,850
<INTEREST-LOAN> 1,861 1,559 0
<INTEREST-INVEST> 300 327 0
<INTEREST-OTHER> 165 118 0
<INTEREST-TOTAL> 2,326 2,004 0
<INTEREST-DEPOSIT> 996 818 0
<INTEREST-EXPENSE> 996 818 0
<INTEREST-INCOME-NET> 1,330 1,186 0
<LOAN-LOSSES> 23 0 0
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 819 771 0
<INCOME-PRETAX> 808 704 0
<INCOME-PRE-EXTRAORDINARY> 511 472 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 511 472 0
<EPS-PRIMARY> 1.07 1.01 0
<EPS-DILUTED> 1.07 1.01 0
<YIELD-ACTUAL> 4.52 5.61 0
<LOANS-NON> 572 683 0
<LOANS-PAST> 1,433 246 0
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 673 681 0
<CHARGE-OFFS> 4 0 0
<RECOVERIES> 0 0 0
<ALLOWANCE-CLOSE> 692 681 0
<ALLOWANCE-DOMESTIC> 692 681 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
