<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, 1999
.......................................................
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,
1999 and 1998 and December 31, 1998.
Consolidated Statement of Income For the Three Month
Period Ended March 31, 1999 and 1998.
Consolidated Statement of Changes in Stockholders'
Equity for the Three Month Period Ended March
31, 1999 and 1998.
Consolidated Statement of Cash Flows for the Three Month
Period Ended March 31, 1999 and 1998.
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, 1999 and 1998 and December 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
---------
March 31, December 31,
1999 1998 1998
---- ---- ------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 4,856 $ 5,131 $ 5,727
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 28,585 15,046 25,299
HELD TO MATURITY 1,997 2,495 2,496
FEDERAL FUNDS SOLD 5,890 17,130 7,520
LOANS:
TOTAL LOANS 100,199 86,997 95,103
RESERVE FOR LOAN LOSSES 721 692 701
-------- -------- --------
NET LOANS 99,478 86,305 94,402
BANK PREMISES AND EQUIPMENT 2,609 2,128 2,085
ACCRUED INTEREST AND OTHER ASSETS 1,963 1,585 1,749
-------- -------- --------
$145,378 $129,820 $139,278
-------- -------- --------
LABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST $ 19,795 $ 14,322 $ 18,292
INTEREST BEARING 22,922 20,691 20,644
SAVINGS DEPOSITS 31,687 30,630 29,817
TIME DEPOSITS 55,838 49,911 55,667
-------- -------- --------
TOTAL DEPOSITS 130,242 115,554 124,420
ACCRUED AND OTHER LIABILITIES 621 606 680
INCOME TAXES PAYABLE:
CURRENT 272 260 28
DEFERRED 8 71 91
-------- -------- --------
TOTAL LIABILITIES 131,143 116,491 125,219
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 1,300 1,300
SURPLUS 2,408 2,408 2,408
RETAINED EARNINGS 11,387 10,481 11,211
TREASURY STOCK (860) (860) (860)
-------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 14,235 13,329 14,059
-------- --------- ---------
$145,378 $129,820 $ 139,278
-------- --------- ---------
-------- --------- ---------
</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, 1999 and 1998
(In Thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $2,026 $1,861
INTEREST ON INVESTMENTS 437 300
INTEREST ON FEDERAL FUNDS SOLD 105 165
------ ------
2,568 2,326
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1063 996
------ ------
NET INTEREST INCOME 1,505 1,330
PROVISION FOR LOAN LOSSES 23 23
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,482 1,307
OTHER INCOME:
SERVICE FEES 136 298
OTHER OPERATING INCOME 39 22
------ ------
TOTAL OTHER INCOME 175 320
OTHER EXPENSES:
SALARIES AND BENEFITS 486 442
EXPENSE OF BANK PREMISES AND
EQUIPMENT 123 97
OTHER OPERATING EXPENSES 285 280
------ ------
TOTAL OTHER EXPENSES 894 819
INCOME BEFORE INCOME TAXES 763 808
FEDERAL INCOME TAXES 272 297
------ ------
NET INCOME $ 491 $ 511
------ ------
------ ------
PER SHARE OF COMMON STOCK NET INCOME $ 1.03 $ 1.07
------ ------
------ ------
</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, 1999 and 1998
(In Thousands)
<TABLE>
<CAPTION>
Net Unrealized
(losses) on
Common Retained Available-for Treasury
Stock Surplus Earnings Sale Securiti Stock Total
------ ------- -------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31
1998 $1,300 $2,408 $11,171 $ 40 ($860) $14,059
SW
DIVIDENDS ON 478,000 SHARES
COMMON STOCK @ $0.43 (206) (206)
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES (109) (109)
NET INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1999 0 0 491 0 0 491
------ ------ ------- ----- ----- -------
$1,300 $2,408 $11,456 ($69) ($860) $14,235
------ ------ ------- ----- ----- -------
------ ------ ------- ----- ----- -------
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, 1998 0 0 511 0 0 2,511
------ ------ ------- ----- ----- -------
$1,300 $2,408 $10,451 $ 30 ($860) 13,329
------ ------ ------- ----- ----- -------
------ ------ ------- ----- ----- -------
</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, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 491 $ 511
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 40 40
SECURITY AMORTIZATION AND
ACCREATION (1) 0
MARKET VALUE AMORTIZATION (1) (1)
PROVISION FOR LOAN LOSSES 23 23
(INCREASE) DECREASE IN OTHER
ASSETS (235) (215)
INCREASE (DECREASE) IN OTHER
LIABILITIES 185 160
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 502 518
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES AVAILABLE FOR SALE 5,500 1,000
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE 2,000 0
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY 500 1,500
PURCHASE OF SECURITIES AVAILABLE FOR SALE (10,956) (50)
PURCHASE OF SECURITIES HELD TO MATURITY 0 0
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD 1,630 (8,220)
NET (INCREASE) DECREASE IN LOANS (5,099) (2,103)
PURCHASE OF BANK PREMISES
AND EQUIPMENT (564) (42)
-------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES (6,989) (7,915)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 3,781 3,804
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 1,870 1,343
NET INCREASE (DECREASE) IN
TIME DEPOSITS 171 2,300
DIVIDENDS PAID (206) (186)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,616 7,261
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (871) (136)
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 5,727 5,267
-------- -------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 4,856 $ 5,131
-------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
March 31, 1999
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.
.3 Year 2000 Assessment
Management has initiated a Company-wide program to assess
its data processing, information systems and customer service
programs to ensure the Company's operating capabilities in the
year 2000. Currently, the Company's subsidiary Bank, L B & T,
uses EDS, a regional provider of financial institution data
processing, as it's primary provider of computer services and
data processing. EDS has certified it's hardware and software are
Year 2000, and beyond, compliant.
As required by Regulatory guidelines, the company has
contracted with EDS to perform Y2K testing. This testing will
include Data Processing, ATM's, Debit Cards, Financial and
Communications Systems. The estimated cost for this testing is
approximately $55,000. The Company has also contracted to have
their computer hardware evaluated for Year 2000 compliance and
estimates additional computer hardware and software costs to be
approximately $105,000. These cost will be capitalized and
amortized over five years. It is the opinion of management that
the cost of converting these systems and the annual amortization,
thereof, will not materially impact the results of operation or
its financial position.
We anticipate having all testing completed by June, 1999 and
upgrading completed by August, 1999. There are many factors
involved in upgrading these systems, such as: conversion of data,
employee training and implementation. There can be no assurances
this process will not have a material effect on the company's
operations.
While management believes its planning efforts are adequate
to address its Year 2000 concerns, there is no guarantee the
systems of other companies on which the Company's systems and
operations rely will function properly and not have an adverse
effect on the Company's operations or financial position.
<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 $491,000. For the three months ended
March 31, 1999 compared to $511,000. for the three months ended March 31,
1998, representing a 9.48% decrease. This decrease was primarily the result
of the increase in net interest income of $175,000. decrease in other income
of $145,000. and increase in all operating expenses of $75,000. and decrease
in income taxes of $25,000.
Earnings per common share were $1.03 for the three months ended
March 31, 1999 compared with $1.07 for the same period of 1998.
Logan County Bancshares' annualized return on assets (ROA) for the
three month period ended March 31, 1999 was 1.35% compared to 1.57% for
the three month period ended March 31, 1998. Annualized return on
shareholders' equity (ROE) was 13.80% and 15.33% at March 31, 1999 and
1998, 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 $2,568,000. at March 31, 1999, an
increase of $242,000. from March 31, 1998. Interest expense also
increased $67,000., resulting in an overall increase of $175,000. or
13.16% in net interest income between March 31, 1999 and March 31, 1998.
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 and 1997, the
provision for loan losses was $23,000.
he reserve for loan losses was $721,000. at March 31, 1999
compared to $692,000. at March 31, 1998. Expressed as a percentage of
loans (net of unearned income), the reserve for loan losses was .72% at
March 31, 1999 and .80% at March 31, 1998.
<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,
------------------------
1999 1998
----- -----
<S> <C> <C>
Loans past due 90 or more days
still accruing interest $3,501 $1,433
------ ------
Nonperforming assets:
Nonaccruing loans 459 572
Other real estate owned 236 171
------ ------
$ 695 $ 743
------ ------
------ ------
</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than
interest income. For the three month period ended March 31, 1999,
noninterest income totalled $175,000., representing a decrease of
$145,000., or 45.31% from the $320,000. recorded during the same period
of 1998. This decrease was primarily due to decreases in service fees
income of $162,000.
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, 1999, the Company's noninterest expense totalled $894,000.,
increasing $75,000. over the $819,000. of noninterest expense for the
three months ended March 31, 1998. Expressed as a percentage of assets,
annualized noninterest expense was 2.46% at March 31, 1999, compared to
2.52% at March 31, 1998.
Salaries and employee benefits are Logan County Bancshares'
largest noninterest cost, representing approximately 54% of total
noninterest expense at March 31, 1999 and 1998. Salaries and employee
benefits increased $44,000., or 9.95% at March 31, 1999 compared to
March 31, 1998. 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, 1999, reflected a $25,000. increase when
compared to the same period of 1998. Income tax expense equalled 35.65%
and 36.76% of income before taxes at March 31, 1999 and 1998,
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 $6,100,000. between year end and March 31,
1999 to a balance of $145,378,000. The major component of this growth
was an increase in Investment Securities of $2,787,000., and loan
increases of 5,096,000. The primary source of funds for this growth was
an increase in deposits of $5,822,000., a decrease in Federal Funds
Sold of $1,630,000., and net income of $491,000.
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, 1999,
Federal Funds Sold amounted to $5,890,000. and securities maturing
within one year amounted to $3,460,000. These are compared to the
balances at March 31, 1998 of $17,130,000. in Federal Funds Sold and
maturing Investment Securities of $9,210,000. 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 1999 and 1998, 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 $11,387,000. and has a
total Stockholders' Equity of $14,235,000. as of March 31, 1999; as compared
to $10,481,000. of Retained Earnings and total Stockholders' equity of
$13,329,000. at March 31, 1998.
The equity capital was 9.79% and 10.27% of total assets at March
31, 1999 and 1998 respectively. 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 ____________________________ _____________________________________
Harvey 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-31-1999 MAR-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998 DEC-31-1998
<CASH> 4,856 5,131 5,727
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 5,890 17,130 7,520
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 28,585 15,046 25,299
<INVESTMENTS-CARRYING> 1,997 2,495 2,496
<INVESTMENTS-MARKET> 2,013 2,525 2,525
<LOANS> 100,199 86,997 95,103
<ALLOWANCE> 721 692 701
<TOTAL-ASSETS> 145,378 129,820 139,278
<DEPOSITS> 130,242 115,554 124,420
<SHORT-TERM> 0 0 0
<LIABILITIES-OTHER> 901 937 799
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 1,300 1,300 1,300
<OTHER-SE> 12,935 12,029 12,759
<TOTAL-LIABILITIES-AND-EQUITY> 145,378 129,820 139,278
<INTEREST-LOAN> 2,026 1,861 0
<INTEREST-INVEST> 437 300 0
<INTEREST-OTHER> 105 165 0
<INTEREST-TOTAL> 2,568 2,326 0
<INTEREST-DEPOSIT> 1,063 996 0
<INTEREST-EXPENSE> 1,063 996 0
<INTEREST-INCOME-NET> 1,505 1,330 0
<LOAN-LOSSES> 23 23 0
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 894 819 0
<INCOME-PRETAX> 763 808 0
<INCOME-PRE-EXTRAORDINARY> 491 511 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 491 511 0
<EPS-PRIMARY> 1.03 1.07 0
<EPS-DILUTED> 1.03 1.07 0
<YIELD-ACTUAL> 4.428 4.398 0
<LOANS-NON> 459 572 0
<LOANS-PAST> 3,501 1,433 0
<LOANS-TROUBLED> 354 327 0
<LOANS-PROBLEM> 913 843 0
<ALLOWANCE-OPEN> 701 673 0
<CHARGE-OFFS> 4 4 0
<RECOVERIES> 1 0 0
<ALLOWANCE-CLOSE> 721 692 0
<ALLOWANCE-DOMESTIC> 721 692 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
