<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, 1998
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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
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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
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LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of June 30, 1998 and
1997 and December 31, 1997.
Consolidated Statement of Income For the Three Month Period
Ended June 30, 1998 and 1997.
Consolidated Statement of Income For the Six Month Period Ended
June 30, 1998 and 1997.
Consolidated Statement of Changes in Stockholders'
Equity for the Six Month Period Ended June
30, 1998 and 1997.
Consolidated Statement of Cash Flows for the Six Month Period
Ended June 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
June 30, 1998 and 1997 and December 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 5,090 $ 4,844 $ 5,267
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 18,342 18,842 15,958
HELD TO MATURITY 2,495 7,061 3,995
FEDERAL FUNDS SOLD 12,280 4,475 8,910
LOANS:
TOTAL LOANS 89,318 77,259 84,898
RESERVE FOR LOAN LOSSES 716 581 673
--------- --------- ---------
NET LOANS 88,602 76,678 84,225
BANK PREMISES AND EQUIPMENT 2,115 2,121 2,125
ACCRUED INTEREST AND OTHER ASSETS 1,441 1,341 1,370
--------- --------- ---------
$ 130,365 $ 115,362 $ 121,850
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
---------
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST $ 14,085 $ 30,230 $ 13,547
INTEREST BEARING 19,345 0 17,662
SAVINGS DEPOSITS 30,806 30,592 29,287
TIME DEPOSITS 51,710 41,821 47,611
--------- --------- ---------
TOTAL DEPOSITS 115,946 102,643 108,107
ACCRUED AND OTHER LIABILITIES 656 556 723
INCOME TAXES PAYABLE:
CURRENT 61 87 (18)
DEFERRED 68 0 55
--------- --------- ---------
TOTAL LIABILITIES 116,731 103,286 108,867
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 10,786 9,591 10,135
TREASURY STOCK (860) (860) (860)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 13,634 12,076 12,983
--------- --------- ---------
$ 130,365 $ 115,362 $ 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 June 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $1,933 $1,645
INTEREST ON INVESTMENTS 309 371
INTEREST ON FEDERAL FUNDS SOLD 220 112
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2,462 2,128
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1,049 875
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NET INTEREST INCOME 1,413 1,253
PROVISION FOR LOAN LOSSES 22 15
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,391 1,238
OTHER INCOME:
SERVICE FEES 229 290
OTHER OPERATING INCOME 31 10
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TOTAL OTHER INCOME 260 300
OTHER EXPENSES:
SALARIES AND BENEFITS 445 423
EXPENSE OF BANK PREMISES AND
EQUIPMENT 98 95
OTHER OPERATING EXPENSES 317 303
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TOTAL OTHER EXPENSES 860 821
INCOME BEFORE INCOME TAXES 791 717
INCOME TAXES 290 243
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NET INCOME $ 501 $ 474
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $ 1.04 $ 1.01
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Six Month Periods Ended June 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $3,794 $3,204
INTEREST ON INVESTMENTS 609 698
INTEREST ON FEDERAL FUNDS SOLD 385 230
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4,788 4,132
INTEREST EXPENSE:
INTEREST ON DEPOSITS 2,045 1,693
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NET INTEREST INCOME 2,743 2,439
PROVISION FOR LOAN LOSSES 45 15
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,698 2,424
OTHER INCOME:
SERVICE FEES 527 562
OTHER OPERATING INCOME 53 27
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TOTAL OTHER INCOME 580 589
OTHER EXPENSES:
SALARIES AND BENEFITS 887 839
EXPENSE OF BANK PREMISES AND
EQUIPMENT 195 183
OTHER OPERATING EXPENSES 597 570
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TOTAL OTHER EXPENSES 1,679 1,551
INCOME BEFORE INCOME TAXES 1,599 1,462
INCOME TAXES 587 516
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NET INCOME $1,012 $ 946
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PER SHARE OF COMMON STOCK NET INCOME $ 2.11 $ 2.02
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</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, 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 @ $0.79 (378) (378)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 17 17
NET INCOME FOR THE SIX MONTHS
ENDED JUNE 30, 1998 0 0 1,012 0 0 1,012
------ ------ ------- --- ----- -------
$1,300 $2,408 $10,760 $26 ($860) $13,634
------ ------ ------- --- ----- -------
------ ------ ------- --- ----- -------
BALANCE - DECEMBER 31
1996 $1,274 $2,071 $8,986 ($56) ($860) $11,415
DIVIDENDS ON 467,612 SHARES
COMMON STOCK @ $0.62 (290) (290)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 5 5
NET INCOME FOR THE SIX MONTHS
ENDED JUNE 30, 1997 946 946
------ ------ ------- --- ----- -------
$1,274 $2,071 $9,642 ($51) ($860) $12,076
------ ------ ------- --- ----- -------
------ ------ ------- --- ----- -------
</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, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,012 $ 946
ADJUSTMENT TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 78 70
SECURITY AMORTIZATION AND
ACCREATION 5 4
MARKET VALUE AMORTIZATION (2) (2)
PROVISION FOR LOAN LOSSES 45 15
(GAIN) LOSS ON SALE OF INVESTMENT
SECURITIES 0 (5)
(INCREASE) DECREASE IN OTHER ASSETS (71) (59)
INCREASE (DECREASE) IN OTHER
LIABILITIES 4 (89)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,071 880
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES
AVAILABLE FOR SALE 5,700 1,000
PROCEEDS FROM MATURITIES
OF SECURITIES 1,500 0
PURCHASE OF SECURITIES AVAILABLE
FOR SALE (8,049) (5,500)
PURCHASE OF SECURITIES HELD TO MATURITY 0 0
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD (3,370) 2,800
NET (INCREASE) DECREASE IN LOANS (4,422) (5,821)
PROCEEDS FROM SALE OF ASSETS 0 0
PURCHASE OF BANK PREMISES AND EQUIPMENT (68) (70)
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NET CASH PROVIDED BY INVESTING ACTIVITIES (8,709) (7,591)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 2,221 2,200
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 1,519 32
NET INCREASE (DECREASE) IN
TIME DEPOSITS 4,099 5,178
DIVIDENDS PAID (378) (290)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 7,461 7,120
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (177) 409
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 5,267 4,435
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CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 5,090 $ 4,844
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</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 $1,012,000. for the six months ended
June 30, 1998 compared to $946,000. for the six months ended June 30, 1997,
representing a 6.98% increase. This increase was primarily the result of the
increase in net interest income of $304,000., which was offset by an increase in
all operating expenses of $87,000. and income taxes of $112,000.
Earnings per common share were $2.11 for the six months ended June 30, 1998
compared with $2.02 for the same period of 1997.
Logan County Bancshares' annualized return on assets (ROA) for the six
month period ended June 30, 1998 was 1.60% compared to 1.70% for the six month
period ended June 30, 1997. Annualized return on shareholders' equity (ROE) was
15.21% and 16.11% at June 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 $4,788,000. at June 30, 1998, an increase of
$656,000. from June 30, 1997. Interest expense also increased $352,000.,
resulting in an overall increase of $304,000. or 12.46% in net interest income
between June 30, 1998 and June 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
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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, 1998, the provision for loan losses
increased $30,000. to $45,000. or 200.00% compared to the same period ended June
30, 1997.
The reserve for loan losses was $716,000. at June 30, 1998 compared to
$581,000. at June 30, 1997. Expressed as a percentage of loans (net of unearned
income), the reserve for loan losses was .80% at June 30, 1998 and .75% at June
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>
June 30,
1998 1997
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<S> <C> <C>
Loans past due 90 or more days $2,200 $ 352
still accruing interest
Nonperforming assets:
Nonaccruing loans 578 554
Other real estate owned 170 209
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748 763
------ ------
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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, 1998, noninterest income totaled
$580,000., representing a decrease of $9,000., or 1.55% from the $589,000.
recorded during the same period of 1997. This decrease was primarily due to
decreases in service fees income of $35,000.
Logan County Bancshares intends to strive in the future to enhance its
overall profitability by identifying new opportunities for earning additional
noninterest income.
<PAGE>
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, 1998, the
Company's noninterest expense totaled $1,679,000., remaining consistent with
total noninterest expense for the six months ended June 30, 1997. Expressed as a
percentage of assets, annualized noninterest expense was 2.57% at June 30, 1998,
compared to 2.76% at June 30, 1997.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 53% of total noninterest expense at
June 30, 1998 and 1997. Salaries and employee benefits increased $48,000., or
5.72% at June 30, 1998 compared to June 30, 1997. This increase is primarily due
to increased personnel.
INCOME TAXES
Logan County Bancshares' income tax expense, for the six month period ended
June 30, 1998, reflected a $71,000. increase when compared to the same period of
1997. Income tax expense equaled 36.71% and 36.31% of income before taxes at
June 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 $8,515,000. between year end and June 30, 1998 to a
balance of $130,365,000. The major component of this growth was an increase in
Federal Funds Sold of $3,370,000., and loan increases of 4,420,000. The primary
source of funds for this growth was an increase in deposits of $7,839,000., and
net income of $1,012,000.
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, 1998, Federal Funds Sold amounted to
$12,280,000. and securities maturing within one year amounted to $3,046,000.
These are compared to the balances at June 30, 1997 of $4,475,000. in Federal
Funds Sold and maturing Investment Securities of $5,740,000. 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
<PAGE>
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 $10,786,000. and has a total
Stockholders' Equity of $13,634,000. as of June 30, 1998; as compared to
$9,591,000. of Retained Earnings and total Stockholders' equity of $12,076,000.
at June 30, 1997.
The equity capital was 10.45% and 10.46% of total assets at June 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.
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.
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(Registrant)
<PAGE>
Date
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Frank Oakley, President
(Signature)
Date
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Eddie D. Canterbury, Exec. Vice Pres.
(Signature)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997 DEC-31-1997
<CASH> 5,090 4,844 5,267
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 12,280 4,475 8,910
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 18,342 18,842 15,958
<INVESTMENTS-CARRYING> 2495 7061 3958
<INVESTMENTS-MARKET> 2,527 7074 4026
<LOANS> 89,318 77,259 84,898
<ALLOWANCE> 716 581 673
<TOTAL-ASSETS> 130,365 115,362 121,850
<DEPOSITS> 115,946 102,643 108,107
<SHORT-TERM> 0 0 0
<LIABILITIES-OTHER> 785 643 760
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 1,300 1274 1,300
<OTHER-SE> 12,334 10,802 11,683
<TOTAL-LIABILITIES-AND-EQUITY> 130,365 115,362 121,850
<INTEREST-LOAN> 3,794 3204 0
<INTEREST-INVEST> 609 698 0
<INTEREST-OTHER> 385 230 0
<INTEREST-TOTAL> 4,788 4132 0
<INTEREST-DEPOSIT> 2045 1,693 0
<INTEREST-EXPENSE> 2045 1693 0
<INTEREST-INCOME-NET> 2743 2439 0
<LOAN-LOSSES> 45 15 0
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 1,679 1,551 0
<INCOME-PRETAX> 1,599 1,462 0
<INCOME-PRE-EXTRAORDINARY> 1012 946 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1012 946 0
<EPS-PRIMARY> 2.11 2.02 0
<EPS-DILUTED> 2.11 2.02 0
<YIELD-ACTUAL> 4.645 4.770 0
<LOANS-NON> 578 554 0
<LOANS-PAST> 2,200 352 0
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 843 548 0
<ALLOWANCE-OPEN> 673 681 0
<CHARGE-OFFS> 4 115 0
<RECOVERIES> 3 0 0
<ALLOWANCE-CLOSE> 716 581 0
<ALLOWANCE-DOMESTIC> 716 581 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
