<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
Annual Report Persuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the calendar year ended December 31, 1999 Commission File No.2-95114
-----------------------
LOGAN COUNTY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
West Virginia 55-0660015
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 597 Logan, WV 25601
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (304) 752-2080
Securities Registered Pursuant To Section 12(b) of The Act:
NONE
Name of each exchange
Title of Each Class on which registered
Securities Registered Pursuant to Section 12(g) of The Act:
NONE
(Title of Class)
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. (X)Yes ( )No.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date:
Class Outstanding at March 23, 1999
Common Stock ($1.67 Par Value) 716,991 Shares
State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
Aggregate market value of voting stock Based on last trade price
$30,113,622 $42.00
Documents Incorporated by Reference
(NONE)
<PAGE>
LOGAN COUNTY BANCSHARES, INC.
FORM 10 - K
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1 - Business ............................................ 3-6
ITEM 2 - Properties .......................................... 7
ITEM 3 - Legal Proceedings ................................... 7
ITEM 4 - Submission of Matters to a Vote of Security Holders . 7
ITEM 5 - Market for the Registrant's Common Stock
and Related Security Holder Matters ................. 8
ITEM 6 - Selected Financial Data ............................. 9
ITEM 7 - Management's Discussion and Analysis ................ 10 - 30
ITEM 8 - Financial Statements and Supplemental Data .......... 31 - 53
ITEM 9 - Disagreements on Accounting and Financial Disclosures 54
ITEM 10 - Directors and Executive Officers of the Registrant . 54
ITEM 11 - Executive Compensation ............................. 55
ITEM 12 - Security Ownership of Certain Beneficial
Owners and Management .............................. 55
ITEM 13 - Certain Relationships and Related Transactions ..... 55
ITEM 14 - Exhibits, Financial Statement Schedules and
Reports on Form 8K ................................. 55
PROXY MATERIALS .............................................. 56 - 61
SIGNATURES ................................................... 62
</TABLE>
2
<PAGE>
ITEM 1 - BUSINESS
LOGAN COUNTY BANCSHARES, INC.
Logan County BancShares, Inc. is a bank holding company which was organized
under the laws of the State of West Virginia in 1985. On May 17, 1985, the
Corporation acquired all the outstanding capital stock of Logan Bank & Trust
Company (LB&T) and also all of the outstanding stock of Bank of Chapmanville
(BC). Both of these subsidiaries are banking corporations organized under the
laws of the State of West Virginia. On May 28, 1996, the subsidiary banks; Logan
Bank & Trust Company and Bank of Chapmanville entered into a merger agreement
whereby they would be merged into Logan Bank & Trust Company. The merger was
completed after proper regulatory approval and was accounted for under the
pooling of interest method of accounting.
Logan Bank & Trust Company was organized in 1963, and still operates at its
original location at the corner of Washington and Main Streets in Logan, West
Virginia. The Company also has a separate drive-up facility and mini-bank also
located on Main Street in Logan, and in early February 1996 opened a new
full-service branch in the Man area. In November 1996, the bank acquired a
branch facility from another financial institution located at Harts, West
Virginia. The facility at Route 10 North, Harts, is operated as a full service
branch of the bank. Logan Bank & Trust Company is a member of the Federal
Reserve System and deposits are insured persuant to the Federal Deposit
Insurance Act.
Logan Bank & Trust Company provides a complete range of retail banking
services to individuals and small and medium size businesses. Their services
include checking, savings, NOW, certificates of deposit and money market deposit
accounts, business loans, individual loans, mortgage loans, home equity loans,
consumer loans for various other purposes, other consumer-oriented financial
services including safety deposit box accounts, IRA accounts and night
depository. The Company also operates several automatic teller machines at three
strategic locations in Logan County which provide 24-hour working services to
customers of Logan Bank & Trust Company. The Company is a member of the Cirrus
ATM network which has over 100 locations in West Virginia and more than 10,000
locations in 47 states.
Logan Bank & Trust Company provides depository lending and related
financial services to commercial, retail, industrial, financial and governmental
customers. The lending function includes short and medium term loans, letters of
credit, inventory and accounts receivable financing and real estate construction
lending. The Company also offers a discount investment brokerage service through
a sub-contract arrangement with a larger financial institution.
The Chapmanville Bank of LB&T bank has one location situated on Railroad
Avenue in Chapmanville, West Virginia.
This facility also provides a complete range of retail banking services to
individuals and small and medium sized businesses. These services include
checking, savings, NOW, certificates of deposit and money market account
deposits. Business loans, individual loans, mortgage loans, home equity loans,
consumer loans for various other purposes are provided as well. In addition, the
Bank offers consumer oriented financial services such as IRA accounts, night
depository, safety deposit boxes and other banking related services.
3
<PAGE>
LOGAN BANK & TRUST COMPANY, Continued
The branch also provides depository, lending and related financial services
to commercial, retail, industrial, financial and governmental customers. The
lending function includes short and medium-term loans, letters of credit,
inventory and accounts receivable financing, and real estate construction
lending as do all the branches of Logan Bank & Trust Company.
INVESTMENT CONSIDERATIONS
An investment in the shares offered hereby involves certain risks. A
subscription for shares should be made only after careful considerations set
forth below and elsewhere in this Offering Circular, and should be undertaken
only by persons who can afford an investment involving such risks.
MARKET FOR THE COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The shares of Logan County Bancshares, Inc. are infrequently traded in the
over-the-counter market and are not listed on the National Association of
Security Dealers Automated Quotation System (NASDAQ) or on any exchange.
Management is not aware of any security dealer which makes a market in the
stock; therefore, no active trading market should be deemed to exist.
The sales price for Logan County Bancshares, Inc. stock are determined by
negotiations between individual buyers and sellers. Although Logan keeps no
records of sale prices paid for Logan stock and has no direct knowledge of such
prices, for purposes of presentation, Corporation's management estimates the
approximate market value ranges for 1999 and 1998 to be as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Sale Price: Quarter Quarter Quarter Quarter
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
1999 Common Stock $27-$28 $28-$40 $42-$42 $42-$42
1998 Common Stock $23-$27 $27-$27 $27-$27 $27-$27
Per Share Dividends
Declared:
- ---------
1999 Common Stock $0.29 $0.29 $0.30 $0.46
1998 Common Stock $0.26 $0.26 $0.27 $0.38
</TABLE>
COMPETITION
Vigorous competition exists in the market area of Logan County BancShares,
Inc. In addition to the three other banks located within the market area, the
location is in a relatively close proximity to two population centers of the
State. There is also competition for deposits and related financial services
from non-bank institutions such as savings and loans, insurance companies and
brokerage firms, all of which are active in the area. Loans are provided by
those instutitions as well in addition to the finance companies. Since the Bank
Holding Company Act, passed by the West Virginia Legislature in 1982, local
banks have been joining bank holding companies around the State. Of the five
banks located in Logan County, only one is a unit bank. The other four are
members of various multi-bank holding companies. Logan County BancShares, Inc.
has been able to compete effectively within the county by having one institution
located in the county seat (Logan Bank & Trust Company), and Branches located in
the high-growth area of the county. Also, to stimulate growth, Logan County
BancShares, Inc. is the only bank holding company owned and controlled from
within the county.
4
<PAGE>
SUPERVISION AND REGULATION
The Corporation is a bank holding company within the meaning of the Bank
Holding Company Act of 1956 (the Act) and is registered as such with the Board
of Governors of the Federal Reserve System (the Reserve Board). As a bank
holding company, the Corporation is required to file with the Federal Reserve
Board an annual report and such other information as may be required. The
Federal Reserve Board may also make examinations of the corporation. In
addition, the Federal Reserve Board has the authority (which it has not
exercised) to regulate provisions of certain bank holding company debt.
The Act requires every bank holding company to obtain the prior approval of
the Federal Reserve Board before acquiring substantially all the assets of or
direct or indirect ownership or control of more than 5% of the voting shares of
any bank which is not already majority-owned. The Act also prohibits a bank
holding company, with certain exceptions, from itself engaging in or acquiring
direct or indirect control of more than 5% of the voting shares of any company
engaged in non-banking activities. One of the principal exceptions to these
prohibitions is for engaging or acquiring shares of a company engaged in
activities found by the Federal Reserve Board by order or regulation to be so
closely related to banking or managing banks as to be a proper incident thereto.
The Act prohibits the acquisition by a bank holding company of more than 5% of
the outstanding voting shares of a bank located outside the State in which the
operations of its banking subsidiaries are principally conducted, unless such an
acquisition is specifically authorized by statute of the State in which the bank
acquired is located. The Act and regulations of the Federal Reserve Board also
prohibit a bank holding company and its subsidiaries from engaging in certain
tie-in arrangements in connection with any extension of credit or provision of
any property or services.
Logan Bank & Trust Company is an insured bank, organized under the Banking
Law of the State of West Virginia and is a member of the Federal Reserve System.
Accordingly, their operations are subject to Federal and State laws applicable
to commercial banks with trust powers and to regulation by the Commissioner of
Banking and the West Virginia State Banking Commissioner, the Federal Reserve
Board and the Federal Deposit Insurance Corporation. Among other restrictions,
the West Virginia Banking laws state that banks organized thereunder may pay
dividends only out of undivided profits. Under the Federal Reserve Act, the
approval of the Federal Reserve Board is required for dividends declared by a
state member bank which in any year exceeds the net profits of such bank for
that year, as defined, combined with retained net profits for the two preceeding
years.
5
<PAGE>
GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS
The earnings and growth of the banking industry and of Logan Bank & Trust
Company is affected by the credit policies of monetary authorities including the
Federal Reserve System. An important function of the Federal Reserve System is
to regulate the national supply of bank credit in order to control recessionary
and inflationary pressures. Among the instruments of monetary policy used by the
Federal Reserve to implement these objectives are open market operations in the
U. S. Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth of bank
loans, investments and deposits and may also affect interest rates charged on
loans or paid for deposits. The monetary policies of the Federal Reserve
authorities have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to have such an effect in the
future.
In view of changing conditions in the national economy and in the money
markets, as well as the effect of actions by monetary and fiscal authorities,
including the Federal Reserve system, no prediction can be made as to possible
future changes in interest rates, deposit levels, loan demand or their effect on
the business and earnings of the Corporation, and Logan Bank & Trust Company.
FOREIGN OPERATIONS
The corporation and subsidiary have no foreign operations.
EXECUTIVE OFFICERS
For information concerning the Executive Officers of the Corporation,
please see Item 10.
6
<PAGE>
ITEM 2 - PROPERTIES
The principal offices of the corporation are shared with those of Logan
Bank & Trust Company and are situated in Logan, West Virginia. This building, a
two-story bank and office building, is owned by Logan Bank & Trust company, as
is a mini-bank and drive-up facility which is located near-by. In addition, a
one-story office and bank building is located on Railroad Avenue in
Chapmanville, West Virginia. During 1996 the Bank opened two other branch
facilities in West Virginia. Both are one-story office and bank buildings
located at Rt. 10, South Man, West Virginia and Rt.10 North at Harts, West
Virginia.
ITEM 3 - LEGAL PROCEEDINGS
There are no legal actions or proceedings pending to which the Corporation,
or its subsidiary are a party.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
7
<PAGE>
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The shares of Logan County BancShares, Inc. are infrequently traded in the
over-the-counter market and are not listed on the National Association of
Security Dealers Automated Quotation System (NASDAQ) or on any exchange.
Management is not aware of any security dealer which makes a market in the
stock; therefore, no active trading market should be deemed to exist.
The sales price for Logan County BancShares, Inc. stock are determined by
negotiations between individual buyers and sellers. Although Logan keeps no
records of sales prices paid for Logan stock and has no direct knowledge of such
prices, for purposes of presentation, Corporation's management estimates the
approximate market value ranges for 1999 and 1998 to be as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Sales Price: Quarter Quarter Quarter Quarter
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
1999 Common Stock $27-$28 $28-$40 $42-$42 $42-$42
1998 Common Stock $23-$27 $27-$27 $27-$27 $27-$27
Per Share Dividends Declared:
-----------------------------
1999 Common Stock $0.29 $0.29 $0.30 $0.46
1998 Common Stock $0.26 $0.26 $0.27 $0.38
</TABLE>
8
<PAGE>
OPERATING HISTORY
ITEM 6 - SELECTED FINANCIAL DATA
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY
(In Thousands of Dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: 1999 1998 1997 1996 1995
- ----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Interest Revenue $10,753 $9,964 $8,693 $7,359 $6,664
Total Interest Expense 4,378 4,260 3,605 2,988 2,687
------- ------- ------- ------- -------
Net Interest Revenue 6,375 5,704 5,088 4,371 3,977
Provision for Possible
Loan Losses 22 90 107 40 59
------- ------- ------- ------- -------
Net Interest Revenue After
Provision for Possible
Loan Losses 6,353 5,614 4,981 4,331 3,918
Other Operating Revenue 699 989 1,264 1,000 731
Other Operating Expense (3,897) (3,629) (3,294) (3,026) (2,794)
------- ------- ------- ------- -------
Income Before Income Taxes 3,155 2,974 2,951 2,305 1,855
Income Taxes 1,131 1,083 1,057 767 643
------- ------- ------- ------- -------
Net Income $2,024 $1,891 $1,894 $1,538 $1,212
======= ======= ======= ======= =======
Per Common Share:
Net Income $2.83 $2.64 $2.65 $2.19 $1.73
======= ======= ======= ======= =======
Cash Dividends Declared $1.34 $1.18 $1.07 $0.77 $0.63
======= ======= ======= ======= =======
At December 31:
Total Loans $109,571 $95,139 $84,898 $70,872 $63,685
Total Assets 152,746 139,278 121,850 107,380 94,719
Total Deposits 127,619 124,420 108,107 95,233 83,717
Short-Term Debt 9,840 0 0 0 0
Total Shareholders' Equity 14,444 14,060 12,983 11,415 10,391
Selected Ratios:
Rate of Return on Average:
Total Assets 1.39% 1.43% 1.62% 1.52% 1.32%
Shareholders' Equity 13.84% 13.99% 15.18% 14.00% 11.98%
Tier 1 Capital to Total
Assets at Year End 9.92% 10.09% 11.09% 10.89% 10.90%
Average Total Share-
holders' Equity to
Average total Assets 10.05% 10.22% 10.66% 10.88% 10.99%
Common Dividend Payout
Ratio 47.35% 44.70% 39.60% 34.95% 36.66%
Nonaccrual and Re-
structured Business
Loans as a Percentage
of Total Loans 0.51% 0.53% 0.64% 0.96% 2.64%
</TABLE>
9
<PAGE>
ITEM 7 - Management's Discussion and Analysis
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
INTRODUCTION
The Management's Discussion and Analysis reviews and discusses the
financial condition of Logan County BancShares, Inc. and Subsidiary. Included
are (a) the results of operations for 1998 and (b) discussion of liquidity
including an asset and liability sensitivity analysis, and (c) an analysis of
earnings, dividends, and capital. The discussion and analysis discloses any
material changes and any infrequent events and known trends as they relate to
liquidity, capital resources and results of operations. The information
presented reflects the activities of the holding company and the subsidiary
bank, Logan Bank & Trust Company.
To assist in understanding and evaluating major changes in Logan County
BancShares, Inc.'s financial position and results of operations, this discussion
emphasizes a comparison of the years 1999 to 1998, 1998 to 1997, and 1997 to
1996, and also presents five year information in instances where appropriate.
This discussion should be read concurrently with the audited financial
statements including notes to those statements.
The following definitions apply to terms used in this report:
AVERAGE BALANCES: All balances have been computed on the basis of
monthly averages.
NET INTEREST INCOME: Interest and related fee income on earning assets,
reduced by total interest paid on interest bearing deposits and borrowed funds.
This net amount, when divided by average earning asset balances becomes net
interest margin.
NET NON-INTEREST EXPENSE: Non-interest expenses reduced by the
amount of non-interest income.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided through short-term investments, payments on
outstanding loans, and the ability to attract new deposits or borrow funds. At
December 31, 1999, and 1998, the funds available within one year from
investments and loans were $31,095,000. and $27,105,000.
Logan County BancShares, Inc.'s deposit mix has increased by $3,198,000. in
1999, $16,313,000. in 1998, and $12,874,000. in 1997. These increases in the
deposit mix points out a marketing strategy that has attracted new customers to
the Bank. Time deposits represented the major growth in the deposit mix. They
increased by $2,597,000., $8,056,000. and $10,968,000. respectively in 1999,
1998 and 1997. In 1998 all catagories grew while the shift in 1997 was from
Savings accounts into Time deposits due to the Banks' promotional activities;
offering competitive interest rates for short-term and long-term CD's. Demand
deposits contributed to the growth in the deposit mix by increasing $4,744,891
in 1998, $2,999,000. in 1997. Savings deposits showed slight increase in 1999 of
$1,207,000. after remaining stable over the past five years. These changes are
predominantly due to the fluctuating interest rates by the Federal Reserve and
movement of savings to time deposits by the consumer in order to obtain a better
interest rate. At December 31, 1999 and 1998, 30.03% and 31.29% of the total
deposits were in demand deposits, while 24.31% and 23.96% were in savings and
45.65% and 44.74% were in time deposits, respectively. The stable growth in
deposits gives the Bank a firm deposit base to meet the lending demand and
market fluctuations.
10
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
During 1999, 1998 and 1997, banks have been faced with a highly competitive
atmosphere in the sense of maintaining a continuity of growth. Logan County
BancShares, Inc. has maintained a community bank approach which enhances its
performance over those years. The merger of Bank of Chapmanville into Logan Bank
& Trust Company enabled the Company to operate more effeciently and thereby
capture a sizeable portion of the market for deposits in the fastest growing
area of Logan County, West Virginia. Also, with the addition of the Man Branch
of Logan Bank & Trust and Harts Bank of Logan Bank & Trust in 1996, and the
Fountain Place location in 1999, the company has expanded its current market.
See Table I. for a five-year summary of financial data.
Capital planning is essentially the management process that allocates
capital resources in a manner that generates the highest income, while
maintaining sufficient liquidity, at the lowest degree of risk attainable.
Moreover, it is the philosophy of Logan County BancShares, Inc. to nurture that
growth by planning for steady, long-range profits rather than the high-risk,
high-exposure techniques. As noted in Table I. the ratio of net income to
average assets was 1.39%, 1.43%, and 1.62%, for the years ended December 31,
1999, 1998 and 1997, respectively. Through the periods presented, management has
allocated new funds into the higher-yielding loans and holding the investment
securities nearly constant. Although the improvement in the local economy had
been at a slow pace through 1997, 1998 and 1999 overall loan demand and deposit
growth show a marked increase due to marketing the community bank service
approach.
Table I. represents a summary of financial data for the previous
five years.
11
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE I. - SUMMARY OF FINANCIAL DATA FOR FIVE YEARS
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Year End Balances:
Total Assets $152,746 $139,278 $121,850 $107,380 $94,719
Total Earning Assets 139,600 130,454 113,088 99,542 91,968
Total Deposits 127,619 124,420 108,107 95,233 83,717
Stockholders' Equity 14,444 14,059 12,983 11,415 10,391
Income for the Year:
Total Interest Income 10,753 9,964 8,693 7,359 6,664
Total Interest Expense 4,378 4,260 3,605 2,988 2,686
Net Interest Income 6,375 5,704 5,088 4,371 3,978
Provision for Loan
Losses 22 90 107 40 59
Non-Interest Income 699 989 1,264 1,000 731
Non-interest expense 5,028 4,712 4,351 3,793 3,438
Net Income 2,024 1,891 1,893 1,538 1,212
Per Share Data
Net Income 2.83 2.64 2.65 2.19 1.73
Stockholders' Equity 20.14 19.61 18.44 16.27 14.81
Cash Dividends 1.34 1.18 1.07 0.77 0.63
Key Ratios
Net Income To:
Average Assets 1.39% 1.43% 1.62% 1.52% 1.32%
Average Stockholders'
Equity 13.84% 13.99% 15.18% 14.00% 11.98%
Average Stockholders'
Equity to Average
Assets 10.05% 10.22% 10.66% 10.88% 10.99%
12
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE II. - RATE ANALYSIS OF INTEREST EARNING ASSETS AND INTEREST BEARING
LIABILITIES
(In Thousands of Dollars)
1999 1998
---------------------------------------- -----------------------------------------
Average Income Average Average Income Average
Balance (Expense) Yield Balance (Expense) Yield
------- --------- ----- ------- --------- -----
EARNING ASSETS:
Loans
(Net of Reserves & Discounts)
Commercial $ 40,468 $ 3,476 8.59% $ 36,041 $ 3,209 8.90%
Real Estate 49,235 4,037 8.20% 43,454 3,704 8.52%
Consumer 12,212 1,100 9.01% 10,394 937 9.01%
--------- --------- -------- --------- --------- --------
Total Net Loans 101,915 8,613 8.45% 89,889 7,850 8.73%
--------- --------- -------- --------- --------- --------
Investment Securities:
Taxable 1,080 68 6.30% 3,245 187 5.76%
Non-Taxable 0 0 0.00% 0 0 0.00%
Available for Sale 29,045 1840 6.33% 18,763 1210 6.45%
--------- --------- -------- --------- --------- --------
Total Investment
Securities 30,125 1,908 6.33% 22,008 1,397 6.35%
--------- --------- -------- --------- --------- --------
Federal Funds Sold and
Securities Purchased
Under Option to Resell 4,792 232 4.84% 13,203 717 5.43%
--------- --------- -------- --------- --------- --------
Total Earning Assets $136,832 $ 10,753 7.86% $125,100 $ 9,964 7.96%
========= ========= ======== ========= ========= ========
Interest Bearing Liabilities
Savings & Interest
Bearing Demand $ 53,114 $ 1,360 2.56% $ 50,133 $ 1,345 2.68%
Time Deposits 58,167 2,964 5.10% 52,055 2,915 5.61%
Federal Funds Purchased 833 54 6.48%
--------- --------- -------- --------- --------- --------
Total Interest Bearing
Liabilities $112,114 $ 4,378 3.93% $102,188 $ 4,260 4.17%
========= ========= ======== ========= ========= ========
<CAPTION>
1997
----------------------------------------
Average Income Average
Balance (Expense) Yield
------- --------- -----
<S> <C> <C> <C>
EARNING ASSETS:
Loans
(Net of Reserves & Discounts)
Commercial $ 33,292 $ 2,959 8.89%
Real Estate 37,305 3,153 8.45%
Consumer 7,225 678 9.38%
--------- --------- ---------
Total Net Loans 77,822 6,790 8.67%
--------- --------- ---------
Investment Securities:
Taxable 2,949 146 4.95%
Non-Taxable 59 4 6.78%
Available for Sale 19,463 1245 6.39%
--------- --------- ---------
Total Investment
Securities 22,471 1,395 6.21%
--------- --------- ---------
Federal Funds Sold and
Securities Purchased
Under Option to Resell 9,290 509 5.48%
--------- --------- ---------
Total Earning Assets $109,583 $ 8,694 7.93%
========= ========= ==========
Interest Bearing Liabilities
Savings & Interest
Bearing Demand $ 48,523 $ 1,334 2.75%
Time Deposits 40,815 2,271 5.56%
Federal Funds Purchased
--------- --------- ---------
Total Interest Bearing
Liabilities $ 89,338 $ 3,605 4.03%
========= ========= ==========
</TABLE>
13
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE III. - VOLUME ANALYSIS OF CHANGE IN INTEREST INCOME AND INTEREST EXPENSE
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1999 Vs. 1998
-------------------------------------------
Interest Income Expense Increase (Decrease) Due To
Change In
1999 1998 1997 Volume Rate Total
INTEREST INCOME ON ---------- ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
LOANS:
Commercial $ 3,476 $ 3,209 $ 2,959 $ 394 ($ 127) $ 267
Real Estate 4,037 3,704 3,153 492 (159) 333
Consumer 1,100 937 678 163 0 163
---------- ---------- ---------- ------------ ----------- -----------
Total Loans 8,613 7,850 6,790 1,049 (286) 763
---------- ---------- ---------- ------------ ----------- -----------
SECURITIES:
Taxable 68 187 146 (125) 6 (119)
Tax Exempt 0 0 4 0 0 0
Available for Sale 1,840 1,210 1,245 663 (33) 630
---------- ---------- ---------- ------------ ----------- -----------
Total Securities 1,908 1,397 1,395 538 (27) 511
---------- ---------- ---------- ------------ ----------- -----------
FEDERAL FUNDS SOLD AND
SECURITIES PURCHASED:
Under Agreement to
Resell 232 717 509 (457) (28) (485)
---------- ---------- ---------- ------------ ----------- -----------
TOTAL INTEREST INCOME ON
EARNING ASSETS 10,753 9,964 8,694 1,130 (341) 789
---------- ---------- ---------- ------------ ----------- -----------
INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES:
Savings and Interest Bearing
Demand Deposits 1,360 1,345 1,334 79 (64) 15
Time Deposits 2,964 2,915 2,271 343 (294) 49
Federal Funds Purchased 54 54 0 54
---------- ---------- ---------- ------------ ----------- -----------
TOTAL INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES 4,378 4,260 3,605 476 (358) 118
---------- ---------- ---------- ------------ ----------- -----------
NET INTEREST INCOME $ 6,375 $ 5,704 $ 5,089 $ 654 $ 17 $ 671
========== ========== ========== ============ =========== ===========
<CAPTION>
1998 Vs. 1997
-------------------------------------------
Increase (Decrease) Due To
Change In
Volume Rate Total
INTEREST INCOME ON ---------- ----------- -----------
<S> <C> <C> <C>
EARNING ASSETS:
LOANS:
Commercial $ 245 $ 5 $ 250
Real Estate 520 31 551
Consumer 297 (38) 259
---------- ----------- -----------
Total Loans 1,062 (2) 1,060
---------- ----------- -----------
SECURITIES:
Taxable 15 26 41
Tax Exempt (4) 0 (4)
Available for Sale (45) 10 (35)
---------- ----------- -----------
Total Securities (34) 36 2
---------- ----------- -----------
FEDERAL FUNDS SOLD AND
SECURITIES PURCHASED:
Under Agreement to
Resell 214 (6) 208
---------- ----------- -----------
TOTAL INTEREST INCOME ON
EARNING ASSETS 1,242 28 1,270
---------- ----------- -----------
INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES:
Savings and Interest Bearing
Demand Deposits 41 (30) 11
Time Deposits 625 19 644
Federal Funds Purchased
---------- ----------- -----------
TOTAL INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES 666 (11) 655
---------- ----------- -----------
NET INTEREST INCOME $ 576 $ 39 $ 615
========== =========== ===========
</TABLE>
14
<PAGE>
Logan County BancShars, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
LOAN PORTFOLIO
--------------
The loan portfolio of Logan County BancShares, Inc. continues to represent
the largest component of earning assets. Loan activity has continued to increase
due to the Bank's emphasis on lending; as shown on Table IV, the Bank has
contributed substantially to liquidity by structuring the loan portfolio in such
a manner as to have approximately 22.21% of the total loans due within one year.
Further, the company has 10.37% of the loan portfolio in floating rates loans.
TABLE IV - REMAINING MATURITIES OF LOANS AT DECEMBER 31, 1999
(In Thousands of Dollars)
<TABLE>
<CAPTION>
COMMERCIAL,
FINANCIAL AND REAL ESTATE
AGRICULTURAL MORTGAGES INSTALLMENTS TOTAL
------------- ------------ ------------ -----------
MATURITIES
----------
<S> <C> <C> <C> <C>
Due Within One Year $9,424 $7,833 $7,086 24,343
Due One to Five Years 12,329 20,559 5,145 38,033
Due After Five Years 23,316 22,771 1,108 47,195
------------ ------------ ------------ -----------
Total Loans $45,069 $51,163 $13,339 $109,571
============ ============ ============ ===========
Due After One Year at Fixed Rate $30,857 $37,698 $5,313 73,868
Due After One Year at Floating
Rate 4,788 5,632 940 11,360
------------ ------------ ------------ -----------
Total Loans Due After
One Year $35,645 $43,330 $6,253 $85,228
============ ============ ============ ===========
</TABLE>
15
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
LOAN LOSSES AND CREDIT RISKS
The allowance for loan losses is established by charging expenses at an
amount which will maintain the allowance for loan losses at a level sufficient
to provide for potential loan losses. Loan losses are charged directly to the
allowance when they occur and recoveries are credited to the allowance. The
amount of the provision is based on past loan loss experience, management's
evaluation of the loan portfolio under current economic conditions, and such
other factors as in management's best judgement deserve current recognition in
estimating loan losses. Tables V. and VI. represent a summary of loan loss
experience for the years 1999, 1998, 1997, 1996 and 1995.
TABLE V. - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
Amount of Loans Outstanding ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
at End of Period $108,871 $ 94,402 $ 84,225 $ 70,872 $ 63,685
=============== ================ ================ ================ ==============
Monthly Average
Amount of Loans $101,197 $ 89,182 $ 78,430 $ 65,894 $ 61,147
=============== ================ ================ ================ ==============
Balance of Allowance for
Possible Loan Losses at
Beginning of Period $ 701 $ 673 $ 681 $ 662 $ 606
=============== ================ ================ ================ ==============
Loans Charged Off:
Commercial $ 0 $ 14 $ 103 $ 3 $ 0
Real Estate 0 0 0 17 0
Consumer 29 51 13 5 8
--------------- ---------------- ---------------- ---------------- --------------
Total Loans Charged Off 29 65 116 25 8
--------------- ---------------- ---------------- ---------------- --------------
Recoveries of Loans Previously
Charged Off:
Commercial 1 1 0 0 0
Real Estate 0 0 0 1 0
Consumer 4 2 1 3 5
--------------- ---------------- ---------------- ---------------- --------------
Total Recoveries 5 3 1 4 5
--------------- ---------------- ---------------- ---------------- --------------
Net Loans Charged Off: 24 62 116 21 3
--------------- ---------------- ---------------- ---------------- --------------
Additions ions to Allowance:
Charged to Expense 23 90 107 40 59
--------------- ---------------- ---------------- ---------------- --------------
Balance at End of Period $ 700 $ 701 $ 673 $ 681 $ 662
=============== ================ ================ ================ ==============
Ratio of Net Charge-Offs
During Period to
Average Loans 0.024% 0.069% 0.148% 0.003% 0.005%
=============== ================ ================ ================ ==============
</TABLE>
16
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE VI. - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996 December 31, 1995
--------------------- ---------------------- --------------------- -------------------- ---------------------
% Of % Of % Of % Of % Of
Outstanding Outstanding Outstanding Outstanding Outstanding
Loan Loan Loan Loan Loan
Allowance Balance Allowance Balance Allowance Balance Allowance Balance Allowance Balance
--------- --------- ---------- --------- ---------- ---------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $464 1.03% $463 1.22% $422 1.03% $435 1.41% $423 1.51%
Real Estate 163 0.32% 163 0.35% 144 0.40% 141 0.41% 137 0.44%
Consumer 73 0.55% 75 0.67% 107 1.27% 105 1.58% 102 1.85%
--------- --------- ---------- --------- ---------- ---------- --------- --------- ---------- -----------
Total $700 0.64% $701 0.74% $673 0.79% $681 0.95% $662 1.03%
========= ========= ========== ========= ========== ========== ========= ========= ========== ===========
</TABLE>
17
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
CONSOLIDATED SUMMARY OF LOANS AND NON-PERFORMING ASSETS
Non-performing assets consist of (a) loans not accruing interest any
longer due to doubts about future collectability, (b) loans more than ninety
days past due for the last principal or interest payment, and (c) other real
estate owned by the Bank taken originally as loan collateral. Table VII.
provides a five-year summary of the components involved in non-performing
assets as of year end.
Loans are determined to be nonaccruing when it has been determined that
the ability of the Bank to collect the unpaid balance of such loans is highly
unlikely due to the financial position of the borrower and general economic
conditions. The determination of such classification is made by bank management
on a case-by-case basis for problem loans. Generally, a review of each loan
ninety days or more past due is made monthly and such loans deemed uncollectible
become classified as nonaccrual.
Loans are determined to be ninety days delinquent when such a period of
time has elapsed since the last payment of principal or interest was made. At
such a time, consideration as to whether to classify the loan as nonaccruing is
made. However, until such classification is made, interest will continue to be
accrued.
Other real estate consists of real property that the Bank originally
took as collateral for loans but has since acquired title to when the borrowers
defaulted and the Bank bid on the property in question at public auction.
TABLE VII. - CONSOLIDATED SUMMARY OF LOANS AND NON-PERFORMING ASSETS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial Loans $45,069 $37,938 $85,643 $30,974 $27,977
Real Estate Loans 51,163 46,088 40,858 34,100 30,848
Consumer Loans 13,339 11,114 8,493 6,649 5,522
--------- -------- -------- -------- --------
Subtotal 109,571 95,140 84,994 71,723 64,347
Less: Unearned Income 0 36 96 170 0
--------- -------- -------- -------- --------
Subtotal 109,571 95,104 84,898 71,553 64,347
Less: Reserve for Loan
Losses 700 701 673 681 662
--------- -------- -------- -------- --------
Net Loans $108,871 $94,403 $84,225 $70,872 $63,685
========= ======== ======== ======== ========
Non-Performing Assets
Non-Accruing Loans $555 $509 $546 $687 $1,700
Loans Past Due 90 Days 3,272 3,310 1,031 739 1,614
Other Real Estate Owned 358 94 172 260 181
--------- -------- -------- -------- --------
Total Non-Performing Assets $4,185 $3,913 $1,749 $1,686 $3,495
========= ======== ======== ======== ========
</TABLE>
18
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
SECURITIES
The securities portfolio of Logan County BancShares, Inc. is the second
largest area of resource allocation. Investments provide liquidity and serve as
a hedge offsetting the increased sensitivity of deposits caused by deregulation.
The Company has been shifting the concentration of the portfolio from held to
maturity securities into more flexible, higher-yielding available for sale
investments.
Securities include those classified as held to maturity and available for
sale. The change in securities in 1997 was under 10% of the portfolio and
represented minor shifting between categories. In 1998, all categories of
investment securities increased by $7,841,000. representing a 39.30% increase
from 1997. The components of this increase were U.S. agencies increasing by
$7,359,000. and U.S. governments increasing by $482,000. During 1999, the
investment securities increased $2,235,000. in U.S. agencies that were
classified as available for sale.
All debt securities, that Logan County BancShares does not have the ability
or management does not have the positive intent to hold to maturity, are
classified as "securities available for sale" and are carried at market value.
TABLE VIII. - MATURITY DISTRIBUTION OF SECURITIES AT DECEMBER 31, 1999
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Over
Over Five
One One Year Years
Year Through Through Over
December 31, 1999 or Five Ten Ten Market
Dollars in thousands Less Years Years Years Total Value
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government:
Available for sale 3,403 0 0 0 3,403 3,399
Held to maturity 0 0 0 0 0 0
U.S. Federal Agency Security
Available for sale 0 2,000 25,750 0 27,750 26,630
Held to maturity 0 0 0 0 0 0
Total securities:
Available for sale 3,403 2,000 25,750 0 31,153 30,029
Held to maturity 0 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total 3,403 2,000 25,750 0 31,153 30,029
Percent of total 10.92% 6.42% 2.66% 0.00% 100.00% 100.00%
Weighted average yield** 5.22% 6.10% 6.38% 0.00% 6.24% 6.24%
</TABLE>
** The weighted average yields are based on carrying value and effective
yields are weighted for the scheduled maturity of each security.
19
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
OTHER INCOME
In 1999 and 1998, the company adjusted their focus from increased
collection of fees to promoting a growth in deposits. As a result, the
service fees declined $289,000. in 1999 and $298,000 in 1998. Other income
decreased by $290,000. in 1999 and $274,000. in 1998 or 29.32% and 21.69%
respectively as a result of these changes.
TABLE IX - OTHER INCOME
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Increase (Decrease)
------------------------------------------------
1999 Over 1998 1998 Over 1997
-------------------- -------------------
1999 1998 1997 Amount Percent Amount Percent
---- ---- ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Service Fee $637 $926 $1,224 ($289) -31.21% ($298) 31.14%
Other Fees 56 63 34 (7) -11.11% 29 85.29%
Securities:
Gain (Loss) 6 0 5 6 100.00% (5) -100.00%
------- ------- ------- ------- --------- ------- ---------
Total Other
Income $699 $989 $1,263 ($290) 29.32% ($274) -21.69%
======= ======= ======= ======= ========= ======= =========
</TABLE>
20
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
OTHER EXPENSES
Other expenses grew by 7.38% in 1999 or $268,000. to a total of $3,897,000.
The major components of this increase were salaries and benefits of $161,000.,
data processing of $62,000. and equipment rental of $18,000. A large part of
these increases relate to the opening of the new Fountain Place facility in late
1999 and the overall growth in the bank's customer base.
Other expenses continued to increase in 1998 by $333,000. to $3,629,000.
This growth was due to the overall growth of the company and its expansion of
customer services. The largest components of the increase was salaries and
benefits of $157,000. and data porcessing of $133,000. While both are related to
the subsidiary bank's growth and increased service, the data processing cost
also reflect preliminary Y2K cost incurred to evaluate the systems used by the
company. These cost amount to $42,000. in 1998.
Other expenses increased by $328,000. to $3,965,000. in 1997. This
increase was generally due to activity in all areas of the subsidiary
bank. Salaries and benefits increased $168,000. or 12.17% due to normal
salary adjustments while other operating expenses increased slightly by
$19,386. or 4.29% due to overall efforts to control operating costs.
In 1998 the increase in taxes were due to increased property taxes.
Depreciation expense increased throughout the period. This increase is
attributable to the opening of two branch facilities at Man and Harts, West
Virginia and updating bank equipment.
Repairs and maintenance, directors' fees, equipment rental, and Bank
stationery expenses vary from year to year based on the Company's demand. These
types of expenses are not directly related to the income function and,
therefore, increase or decrease sporadically.
21
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
TABLE X. - OTHER EXPENSES
(In Thousands of Dollars)
<TABLE>
<CAPTION>
------------------------------------------------
1999 Over 1998 1998 Over 1997
-------------------- -------------------
1999 1998 1997 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and
Benefits $2,019 $1,858 $1,701 $161 8.67% $157 10.14%
Taxes 61 78 70 (17) -21.79% 8 11.43%
Depreciation 179 165 153 14 8.48% 11 7.19%
Repairs and
Maintenance 181 181 176 0 0.00% 5 2.84%
Fees Paid to
Directors 74 69 66 5 7.25% 3 4.54%
Equipment Rental 42 24 25 18 75.00% (1) -4.00%
FDIC & Fidelity
Insurance 78 78 74 0 0.00% 3 4.05%
Data Processing 483 421 287 62 14.73% 133 46.34%
Bank Stationery 133 121 103 12 9.92% 18 17.47%
Bank Operating
Expenses 647 634 638 13 2.05% (4) 0.63%
------- ------- ------- ------- -------- ------- --------
Total $3,897 $3,629 $3,293 $268 7.38% $333 10.11%
======= ======= ======= ======= ======== ======= ========
</TABLE>
22
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
EARNINGS AND DIVIDENDS
As demonstrated in Table XI., Logan County BancShares, Inc. strives to
achieve a favorable dividend payout rate to the shareholders. During 1999 the
company grew 9.67% in terms of asset and stockholder's equity and increased by
2.74%, along with increases of 7.17% in net income and 2.65% increase in the
dividend payout ratio. These positive indicators reflect the overall growth in
size, service area and customer base. In 1998 the companies continued to grow in
terms of total assets and equity by 14.30% and 8.29% respectively, net income
decreased by 1.98% due to overall market changes. Dividends increased by 10.63%
to reflect the companies desire to reward the shareholder while maintaining an
excellent capital base. In 1997, records were set in terms of net income, total
assets and dividends. The growth in assets and utilization of them have produced
a 22.80% increase in net income and a 13.74% increase in equity for the year.
TABLE XI. - THREE-YEAR SUMMARY OF EARNINGS AND DIVIDENDS
<TABLE>
<CAPTION>
Per Share Percent Change Over Prior Year
--------------------------------------- -----------------------------------------------
Dividend Net Net Total
Payout Income Dividends Income Dividends Assets Equity
-------- ------ --------- ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 39.60% $2.65 $1.07 22.80% 39.13% 13.47% 13.74%
1998 44.70% $2.64 $1.18 -1.98% 10.63% 14.30% 8.29%
1999 47.35% $2.83 $1.34 7.17% 13.56% 9.67% 2.74%
</TABLE>
23
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
EARNING ASSETS
Table XII. represents analysis of average earning assets and interest
bearing liabilities for the years ended December 31, 1999, 1998 and 1997.
In the period presented average earning assets grew by $13,192,000.
in 1999, $15,517,000. in 1998 and $15,224,000. in 1997. This growth
represented increases of 9.93% in 1999, 14.16% in 1998 and 16.13% in
1997. The loan portfolio is the major component of earning assets which
grew by $12,026,000. or 13.38% in 1999, $12,067,000. or 15.51% in 1998,
and $11,928,000. or 18.10% in 1997. The company also allocated to the
investment portfolio a portion of the growth to maintain liquity and
fund future loan requirements.
INTEREST BEARING LIABILITIES
Interest bearing liabilities include interest bearing demand deposits,
savings accounts, time deposits and borrowed funds. These are the prime sources
of funds for Logan County BancShares, Inc. to support earning assets. Total
average interest bearing liabilities increased $9,926,000. or 9.71% in 1999,
$12,850,000. or 14.38% in 1998, and $11,380,000. or 14.59% in 1997. In all years
the Company has maintained a stable net interest margin while experiencing
growth in the underlying deposits. The company has been able to match earning
yields with costs of funds over the past three years to maintain a stable net
interest margin.
24
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE XII. - ANALYSIS OF EARNING ASSETS AND AND INTEREST BEARING LIABILITIES
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998 Year Ended December 31, 1997
---------------------------- ---------------------------- ----------------------------
Average Yield/ Average Yield/ Average Yield/
ASSETS: Balance Interest Rate Balance Interest Rate Balance Interest Rate
EARNING ASSETS: ------- -------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS:
Commercial $40,468 $3,476 8.59% $36,041 $3,209 8.90% $33,292 $2,959 8.89%
Real Estate 49,235 4,037 8.20% 43,453 3,704 8.52% 37,305 3,153 8.45%
Consumer 12,212 1,100 9.01% 10,395 937 9.01% 7,225 678 9.38%
--------- ------- ------- --------- ------- ------- --------- ------- -------
Total Loans 101,915 8,613 8.45% 89,889 7,850 8.73% 77,822 6,790 8.67%
--------- ------- ------- --------- ------- ------- --------- ------- -------
INVESTMENT SECURITIES:
Taxable 1,080 68 6.30% 3,245 187 5.76% 2,949 146 4.95%
Tax Exempt * 0 0 0.00% 0 0 0.00% 59 4 6.78%
Available for Sale 29,045 1840 6.45% 18,763 1210 6.45% 19,463 1245 6.39%
--------- ------- ------- --------- ------- ------- --------- ------- -------
Total Securities 30,125 1,908 6.33% 22,008 1,397 6.35% 22,471 1,395 6.21%
--------- ------- ------- --------- ------- ------- --------- ------- -------
FEDERAL FUNDS SOLD 4,792 232 4.84% 13,203 717 5.43% 9,290 509 5.48%
--------- ------- ------- --------- ------- ------- --------- ------- -------
TOTAL EARNING ASSETS $136,832 $10,753 7.86% $125,100 $9,964 7.96% $109,583 $8,694 7.89%
======= ======= ======= ======= ======= =======
NON-EARNING ASSETS:
Cash and Due from Banks 4,400 4,168 3,677
Bank Premises 2,824 2,113 2,133
Other Assets 1,418 901 1,565
--------- --------- ---------
TOTAL NON-EARNING ASSETS $8,642 $7,182 $7,375
--------- --------- ---------
TOTAL ASSETS $145,474 $132,282 $116,958
========= ========= =========
</TABLE>
* Shown at tax equivalent amount given statutory tax rate @ 34%
25
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE XII. - ANALYSIS OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
(CONTINUED)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998 Year Ended December 31, 1997
---------------------------- --------------------------- ----------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST BEARING LIABILITIES:
Savings Deposits and Interest
Bearing:
DDA $53,114 $1,360 2.56% $50,133 $1,345 2.68% $48,523 $1,334 2.75%
Time Deposits 58,167 2,964 5.10% 52,055 2,915 5.61% 40,815 2,271 5.56%
Federal Funds Purchased 833 54 6.48%
-------- ------ ------ ------- ------ ----- ------ ------ ------
Total Interest Bearing
Liabilities 112,114 4,378 3.90% 102,188 $4,260 4.17% 89,338 $3,605 4.03%
====== ======= ======= ======= ======= ======
NON-INTEREST BEARING LIABILITIES
AND CAPITAL:
Demand Deposits 17,885 15,253 14,067
Accrued Expenses 851 1,014 1,074
Capital 14,624 13,827 12,479
------- -------- --------
Total Non-Interest Bearing
Liabilities and Capital 33,360 30,094 27,620
------- -------- --------
Total Liabilities and
Stockholders' Equity $145,474 $132,282 $116,958
======== ======== =========
NET INTEREST MARGIN $136,832 $6,375 4.66% $125,100 $5,704 4.70% $109,583 $5,089 4.60%
======== ====== ======= ======= ======= ======= ======== ======= ======
</TABLE>
26
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
INTEREST RATE SENSITIVITY ANALYSIS
----------------------------------
Asset and liability management is responsible for the planning,
implementation, and control process for determining asset mix and maturity
features relative to liability maturities in such a way that net interest margin
will be maximized. A major tool for such a process is gap management of the
Bank's interest sensitive assets to interest sensitive liabilities.
The negative gap position as presented in the following table for
maturities of one year or less is offset by the substantial positive gap
position for maturities greater than one year. The earnings of Logan County
BancShares, Inc. are sufficient to withstand the short term negative gap
position. Should a large fluctuation occur, increasing the cost of funds,
management would consider increasing service charges and non-interest fees which
management determines the market would bear in order to negate increased rate
costs. An additional response, at the option of management, would be liquidation
of certain long-term investments, and conversion of those funds into short-term
securities.
Bank management recognized the concentration of large certificates of
deposit. The Bank's policy of asset-liability management matches both rates and
maturities so the Bank will not have a liquidity problem or allow income to be
affected by a change in rates.
All demand and savings deposits are considered highly volatile, although
experience has shown these accounts to be stable regardless of economic cycles.
Interest on savings and other transactional accounts have generally remained
constant over periods of interest rate changes. Therefore, deposits and savings
are classified as "over one year" to represent a more realistic rate sensitive
gap.
27
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
TABLE XIII. - INTEREST RATE SENSITIVITY ANALYSIS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Total Over
0 - 90 91-180 181-365 One Year One Year Total
------ ------ ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans $17,162 $2,171 $5,010 $24,343 $85,228 $109,571
Investments 901 2,502 0 3,403 27,500 30,903
Fed. Funds Sold 0 0 0 0 0 0
--------- --------- --------- --------- --------- -------
Total Earning
Assets 18,063 4,673 5,010 27,746 112,728 140,474
--------- --------- --------- --------- --------- -------
Interest Bearing
Liabilities:
Demand Deposits 18,998 0 0 18,998 0 18,998
Savings 10,763 4,186 16,075 31,024 0 31,024
CD's-$100,000 4,347 1,372 2,467 8,186 13,116 21,302
and Over 8,453 3,436 5,114 17,003 19,960 36,963
Other Time 9,840 0 0 9,840 0 9,840
------- ------- ------- ------- ------- -------
Total Interest
Bearing Liability 52,401 8,994 23,656 85,051 33,076 118,127
------- ------- ------- ------- ------- -------
Interest
Sensitivity Gap ($34,338) ($4,321) ($18,646) ($57,305) $79,652 $22,347
======= ======= ======= ======= ======= =======
Cumulative Gap $34,338 ($38,659) ($57,305) ($57,305) $22,347 $22,347
======= ======= ======= ======= ======= =======
Rate Sensitive
Assets/Rate
Sensitive
Liabilities
(Cumulative
Percentage) 34.47% 37.03% 32.62% 32.62% 118.92% 118.92%
======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis
of Financial Position and Results of Operations
TABLE XIV. - AVERAGE BALANCE SHEET
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
ASSETS: ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and Due from Banks $4,400 $4,168 $3,677 $3,546 $2,989
Investment Securities:
Available for Sale 29,045 18,763 16,689 10,206 6,360
Held to Maturity 1,080 3,245 5,782 8,432 12,419
------- ------ ------ ------ ------
Total Investments 30,125 22,008 22,471 18,638 18,779
------- ------ ------ ------ ------
Federal Funds Sold 4,792 13,203 9,290 9,827 6,693
Loans
Real Estates 49,235 43,454 37,449 31,897 30,108
Installment 12,212 10,459 7,402 5,606 5,650
Commercial & Other 40,468 36,041 33,714 29,144 26,020
------- ------ ------ ------ ------
101,915 89,954 78,565 66,647 61,778
Less: Unearned Discount 0 65 129 85 0
------- ------ ------ ------ ------
101,915 89,889 78,436 66,562 61,778
Allowance For Loan Losses (718) (707) (614) (668) (631)
------- ------ ------ ------ ------
Net Loans 101,197 89,182 77,822 65,894 61,147
------- ------ ------ ------ ------
Banking Premises 2,824 2,113 2,133 1,942 1,364
Accrued Interest and
Other Assets 2,136 1,608 1,565 1,128 1,108
------- ------ ------ ------ ------
TOTAL ASSETS $145,474 $132,282 $116,958 $100,975 $92,080
======= ====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand Deposits $39,585 $35,332 $31,007 $27,940 $26,287
Savings Deposits 31,413 30,054 31,582 30,049 29,685
Time Deposits 58,167 52,055 40,816 31,006 25,352
------- ------ ------ ------ ------
Total Deposits 129,165 117,441 103,405 88,995 81,324
Federal Funds Purchased 834 0 0 0 0
Other Liabilities 851 1,014 1,074 995 636
------- ------ ------ ------ ------
TOTAL LIABILITIES 130,850 118,455 104,479 89,990 81,960
STOCKHOLDERS' EQUITY 14,624 13,827 12,479 10,985 10,120
------- ------ ------ ------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $145,474 $132,282 $116,958 $100,975 $92,080
======= ====== ====== ====== ======
</TABLE>
29
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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, complaint.
The Company contracted to have their computer hardware evaluated
for Year 2000 compliance and estimates additional computer hardware and
software costs to be approximately $455,000. These costs were
capitalized and will be 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.
30
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management's Report on Financial Statements .................................... 32
Report of Independent Certified Public Accountants ............................. 33
Financial Statements:
Logan County BancShares, Inc. and Subsidiaries:
Consolidated Statement of Condition as of
December 31, 1999 and 1998 .............................. 34-35
Consolidated Statement of Income as of December
31, 1999, 1998 and 1997 ................................. 36-37
Consolidated Statement of Changes in Stock-
holders' Equity for the Years Ended
December 31, 1999, 1998 and 1997 ..................... 38
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1999, 1998,
and 1997 ............................................. 39-40
Notes to Consolidated Financial Statements ................... 41-53
</TABLE>
31
<PAGE>
To Our Stockholders, Customers and Friends:
We are proud to present the 1999 annual report of Logan County BancShares,
Inc. and its subsidiary, Logan Bank and Trust Company. In 1999, we were able
to build on the strong foundation of growth that has been our trademark
throughout the 90's. Total assets grew by $13,467,363, or 9.67%, to a new
record of $152,745,728. This growth was largely invested in the region by
increasing loans by $14,431,577, showing a continued commitment to our
service area. Earnings of $2,024,357, or $2.82 per share, in 1999 not only
strengthens our capital position but also provides our shareholders a return
of dividends of $958,381. The return of average assets of 1.39% and return on
equity of 13.84% are high performance goals for any organization.
We are ending the decade of the 90's the same way we began it: by being a
concerned, caring, innovative force in meeting the financial needs of our
customers. The only difference is we are stronger than before and more able
to fully meet those needs. In response to this, we have added four more
facilities to our cornerstone bank in downtown Logan: in Chapmanville, Harts,
Man and, as of November 1999, our newest facility is located at Fountain
Place off Corridor G. We have expanded into various communities in an effort
to address the growing need of our customers to have ready-access to our vast
array of products. Today, our customers have come to expect not only our
excellent service, varied financial products, but to expect it in a place
that is both convenient and full-service. For our customers who are even too
busy to come in, or work hours incompatible with our expanded banking hours,
we have not only the ATM's but an automated bank-by-phone system, as well as,
a large investment in new technologies to insure even better customer
support. The 90's have seen us not only face the challenge of supplying the
communities ever-changing needs, but excel by being innovative, dedicated and
committed. This is done at every level in our bank; our directors, management
team, and entire staff continue to stay focused on our number one priority:
customer satisfaction. We understand that along with customer satisfaction
comes the financial rewards of a solid institution for our stockholders as
well as the communities at-large.
Our commitment to the local region and communities does not come about only
because of our directors and management policies, rather it stems from the
sincere care of our employees who work just as hard for the quality of life in
their communities as they do for themselves. To see this in action, one only
needs to look around; our employees are in numerous civic organizations, schools
and churches, often in leadership positions. Where there is a need, we are proud
our employees step up to the challenge and lead by example.
We would like to express my heartfelt appreciation to our employees for their
commitment, to our shareholders for their support, to our directors for their
guidance and to the confidence of our customers, old and new, in making Logan
County BancShares, Inc. and its subsidiary, Logan Bank and Trust Company, a
solid force in the communities we serve. We are indeed poised to face the new
millennium as the premium locally-owned, community-based bank of the future in
an even stronger position than in the past.
Respectfully,
- -------------------------- ---------------------------
Harvey Oakley Eddie Canterbury
Chairman/President Executive Vice President/CEO
32
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Logan County BancShares, Inc. and Subsidiary
We have audited the accompanying consolidated statements of condition of Logan
County BancShares, Inc., and Subsidiary as of December 31, 1999, and 1998, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Logan County
BancShares, Inc. and Subsidiary as of December 31, 1999, and 1998, and the
consolidated results of its operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ McNeal, Williamson & Co
Logan, West Virginia
February 28, 2000
Members of American Institute of Certified Public Accountants and West Virginia
Society of Certified Public Accountants
33
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
------
1999 1998
---- ----
<S> <C> <C>
CASH AND DUE FROM BANKS $7,183,524 $5,727,104
---------- ----------
INVESTMENT SECURITIES:
Available for sale 30,028,536 25,298,347
Held to maturity 0 2,496,108
---------- ----------
Total Investment Securities 30,028,536 27,794,455
---------- ----------
FEDERAL FUNDS SOLD 0 7,520,000
LOANS:
Mortgage Loans 51,162,583 46,087,863
Installment Loans 13,339,520 11,113,712
Commercial and Other Loans 45,069,195 37,938,146
---------- ----------
Total Loans 109,571,298 95,139,721
Less: Unearned Interest 0 36,190
Reserve-Loan Losses 700,554 701,275
---------- ----------
Net Loans 108,870,744 94,402,256
---------- ----------
BANK PREMISES AND EQUIPMENT 3,774,001 2,085,318
INTEREST RECEIVABLE 1,635,877 1,103,008
OTHER ASSETS 1,253,046 646,224
---------- ----------
$152,745,728 $139,278,365
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 1999 and 1998
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1999 1998
---- ----
<S> <C> <C>
DEPOSITS:
Non-Interest Bearing $19,331,859 $18,291,587
Interest Bearing 18,998,623 20,644,421
Savings Deposits 31,023,961 29,816,897
Time Certificates 58,264,563 55,667,264
---------- ----------
Total Deposits 127,619,006 124,420,169
FEDERAL FUNDS PURCHASED 9,840,000 0
ACCRUED AND OTHER LIABILITIES 788,688 680,209
FEDERAL INCOME TAXES PAYABLE:
Current (17,577) 28,514
Deferred 71,918 90,523
---------- ----------
TOTAL LIABILITIES 138,302,035 125,219,415
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock - $1.67 par value;
Authorized - 780,000 shares,
Outstanding-716,991 shares
in 1999 and 1998 1,300,000 1,300,000
Surplus 2,408,426 2,408,426
Retained Earnings 12,236,479 11,170,503
Net unrealized amortization
on securities available for
sale (641,014) 40,219
Treasury Stock (860,198) (860,198)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 14,443,693 14,058,950
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $152,745,728 $139,278,365
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statements of Income
For the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME:
Loans, Including Fees $8,613,254 $7,850,317 $6,789,421
Investment Securities:
Available for Sale 1,840,356 1,210,113 1,047,951
Held to Maturity 67,844 187,046 347,762
Federal Funds Sold 231,723 716,608 508,539
----------- ----------- -----------
Total Interest Income 10,753,177 9,964,084 8,693,673
----------- ----------- -----------
INTEREST EXPENSE:
Deposits 4,323,357 4,259,739 3,605,404
Other Borrowings 54,416 0 0
----------- ----------- -----------
Total Interest Expense 4,377,773 4,259,739 3,605,404
----------- ----------- -----------
NET INTEREST INCOME 6,375,404 5,704,345 5,088,269
PROVISION FOR LOAN LOSSES 22,500 90,000 107,000
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,352,904 5,614,345 4,981,269
----------- ----------- -----------
OTHER INCOME:
Service Fees 637,221 925,644 1,224,231
Other 56,072 63,206 33,697
Securities Gains (Losses) 6,054 0 5,457
----------- ----------- -----------
699,347 988,850 1,263,385
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Income
For The Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OTHER EXPENSES:
Salaries and Benefits $2,018,797 $1,857,732 $1,701,231
Taxes Other Than Payroll & Income 61,432 78,289 70,208
Depreciation 179,323 164,474 152,804
Repairs and Maintenance 181,477 181,403 176,049
Fees Paid to Directors 73,650 69,275 66,275
Equipment Rental 41,735 24,377 25,217
FDIC & Fidelity Insurance 77,783 77,540 74,187
Data Processing 482,814 420,897 286,349
Bank Stationery and Printing 132,754 121,268 102,914
Professional Fees 61,395 81,145 76,059
Other Operating Expenses 586,131 553,053 562,027
----------- ----------- -----------
3,897,291 3,629,453 3,293,320
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 3,154,960 2,973,742 2,951,334
INCOME TAXES:
Current 1,118,623 1,079,990 1,030,248
Deferred 11,980 2,639 26,963
----------- ----------- -----------
NET INCOME $2,024,357 $1,891,113 $1,894,123
=========== =========== ===========
PER SHARE OF COMMON STOCK:
NET INCOME $2.83 $2.64 $2.64
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
37
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
For The Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON RETAINED TREASURY COMPREHENSIVE
STOCK SURPLUS EARNINGS STOCK INCOME, NET TOTAL
------ ------- -------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance-December 31, 1996 $1,274,030 $2,070,816 $8,986,050 ($860,198) ($55,762) $11,414,936
Comprehensive Income
Net Income - 1997 1,894,123 1,894,123
Net unrealized gain on
securities available
for sale 65,073 65,073
---------- ---------- ----------- ---------- ---------- -----------
Total Comprehensive
income $1,894,123 $65,073 $1,959,196
Issuance of 15,582 Shares
of Common Stock 25,970 337,610 363,580
Dividends on 701,418 shares
Common Stock @ $1.08 (754,724) (754,724)
---------- ---------- ----------- ---------- ---------- -----------
Balance-December 31, 1997 $1,300,000 $2,408,426 $10,125,449 ($860,198) $9,311 $12,982,988
Comprehensive Income
Net income - 1998 1,891,113 1,891,113
Net unrealized gain on
securities available
for Sale 30,908 30,908
---------- ---------- ----------- ---------- ---------- -----------
Total Comprehensive
income $1,891,113 $30,908 $1,922,021
Dividends on 716,991 shares
Common Stock @ $1.18 (846,059) (846,059)
---------- ---------- ----------- ---------- ---------- -----------
Balance-December 31, 1998 $1,300,000 $2,408,426 $11,170,503 ($860,198) $40,219 $14,058,950
Comprehensive Income
Net income - 1999 2,024,357 2,024,357
Net unrealized loss on
securities available
for Sale (681,233) (681,233)
---------- ---------- ----------- ---------- ---------- -----------
Total Comprehensive
income $2,024,357 ($681,233) $1,343,124
Dividends on 716,991 shares
of Common Stock @ $1.34 (958,381) (958,381)
---------- ---------- ----------- ---------- ---------- -----------
Balance-December 31, 1999 $1,300,000 $2,408,426 $12,236,479 ($860,198) ($641,014) $14,443,693
---------- ---------- ----------- ---------- ---------- -----------
---------- ---------- ----------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Change in Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: ---- ---- ----
<S> <C> <C> <C>
Net Income $2,024,357 $1,891,113 $1,894,123
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and Amortization 179,323 164,474 157,804
Provision For Loan Losses 22,500 90,000 107,000
Provision For Deferred Taxes 11,980 2,639 26,963
(Gain) Loss on Sale of Securities (6,054) 0 (5,457)
Premium Amortization and
Accretion on Investment
Securities 4,207 (8,666) (2,529)
Increases (Decreases) in
Income Taxes Payable (46,091) 46,077 (56,772)
(Increases) Decreases in
Interest Receivable and
Other Assets (686,703) (388,951) (107,229)
Increases (Decreases) in
Interest Payable & Other Liab. 108,479 (33,071) 34,288
Market Value Adjustment
Amortization 4,028 4,028 4,028
------------ ----------- -----------
Net Cash Provided by
Operating Activities 1,616,026 1,767,643 2,052,219
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment Sec:
Available for Sale 8,418,000 15,750,000 5,494,543
Held to Maturity 1,000,000 0 500,000
Proceeds from Maturities of Inv. Sec:
Available for Sale 4,000,000 2,750,000 500,000
Held to Maturity 1,500,000 1,500,000 2,565,000
Purchase of Investment Securities:
Available for Sale (18,365,433) (27,779,025) (7,500,000)
Held to Maturity 0 0 0
Net (Increases) Decreases
Federal Funds Sold 7,520,000 1,390,000 (1,635,000)
Net (Increases) Decreases
Commercial Loans (7,131,049) (2,309,156) (4,785,088)
Net (Increases) Decreases
Real Estate Loans (5,074,720) (5,230,511) (6,757,195)
Net (Increases) Decreases
Installment Loans (2,238,777) (2,727,440) (1,918,130)
Purchase of Bank Premises
and Equipment (1,868,083) (119,083) (166,758)
------------ ----------- -----------
Net Cash Used by
Investing Activities (12,240,062) (16,775,215) (13,702,628)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Changes in Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Net Increases (Decreases) in
Demand Deposits ($605,526) $7,727,593 $3,178,825
Net Increases (Decreases) in
Savings Deposits 1,207,064 529,420 (1,272,829)
Net Increases (Decreases) in
Time Deposits 2,597,299 8,056,389 10,968,193
Net Increases (Decreases) in
Federal Funds Purchased 9,840,000 0
Proceeds from Issuance of Common
Stock 0 0 363,580
Dividends Paid (958,381) (846,059) (754,724)
----------- ----------- ------------
Net Cash Provided by Financing
Activities $12,080,456 $15,467,343 $12,483,045
----------- ----------- ------------
Net Increase (Decrease) in Cash
and Cash Equivalents 1,456,420 459,771 832,636
Cash and Cash Equivalents at
Beginning of Year 5,727,104 5,267,333 4,434,697
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $7,183,524 $5,727,104 $5,267,333
=========== =========== ===========
Supplemental Disclosures of Cash
Flow Information Cash Paid for:
Interest $4,325,850 $4,230,266 $2,951,541
Income Taxes $1,164,714 $1,033,913 $817,985
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies:
A. Basis of Consolidation:
The Consolidated Financial Statements of Logan County BancShares,
Inc. and its subsidiaries include the accounts of Logan County
BancShares, Inc. a bank holding company and its wholly owned
subsidiaries, Logan Bank & Trust Company. As further discussed in Note
13, the Company's subsidiaries were merged into Logan Bank & Trust
Company on May 28, 1996. The merger was accounted for under the
pooling of interest method of accounting and no restatement was
necessary. All material intercompany balances and transactions have
been eliminated in consolidation.
B. Nature of Operations:
The Bank operates under State bank charter, and provides full
banking services, including trust services. As a state bank, the Bank
is subject to regulation by the West Virginia State Banking Commission
and the Federal Deposit Insurance Corporation. The Company is also
subject to regulation by the Federal Reserve Bank.
C. Estimates in the Financial Statements:
The presentation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
D. Cash and Cash Equivalents:
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and amounts due from banks.
E. Investment Securities:
The Banks' Investment securities are classified in two
categories and accounted for as follows:
Securities to be Held to Maturity: Bonds, notes and debentures
for which the bank has the positive intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premiums
and accretion of discounts which are recognized in interest income,
using the Constant Yeild Method, over the period to maturity.
Securities Available for Sale: Securities available for sale
consist of bonds, notes, debentures, and certain equity securities not
classified as securities held to maturity. These securities are
carried at their fair value. Unrealized gains and (losses), net of
tax, are reported as a net amount in a separate component of
Shareholders' Equity until realized.
Gains and losses on sale of securities available for sale are
determined using the Specific-Indentification Method.
41
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies (Continued):
F. Loans:
Loans are stated at the amount of unpaid principal, reduced by
unearned income and an allowance for loan losses. Interest income on
loans is recognized on the accrual basis except for those loans in a
nonaccrual income status. The accrual of interest on impaired loans is
discontinued when management believes, after consideration of economic
and business conditions and collection efforts, that the borrowers'
financial condition is such that collection of interest is doubtful.
When interest accrual is discontinued, interest income is subsequently
recognized only to the extent cash payments are received.
The reserve for loan losses is established through a provision
for loan losses charged to expense. The reserve is an amount that
management believes will be adequate to absorb losses on existing
loans that may become uncollectible based on evaluations of the
collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions that
may affect the borrowers' ability to pay. Loans are charged against
the allowance for loan losses when management believes that the
collection of the principal is unlikely.
The allowance for loan losses on impaired loans is determined
using the present value of estimated future cash flows of the loan,
discounted at the loan's effective interest rate or the fair value of
the underlying collateral. A loan is considered to be impaired when it
is probable that all principal and interest amounts will not be
collected according to the loan contract. The entire change in present
value of expected cash flows is reported as provision for loan losses
in the same manner in which impairment initially was recognized or as
a reduction in the amount of provision for loan losses that otherwise
would be reported.
Certain loan origination fees and direct origination costs are
capitalized and recognized as an adjustment of the yield on the
related loan.
G. Bank Premises and Equipment:
Bank premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided over the estimated useful lives
of the assets as follows:
<TABLE>
<CAPTION>
Methods Range of Lives
------- --------------
<S> <C> <C>
Banking House S/L, ACRS 10 - 40 years
Furniture, Fixtures and
Equipment S/L, DDB,ACRS 3 - 20 years
</TABLE>
42
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies (Continued):
H. Real Estate Acquired Through Foreclosure:
Real estate acquired through foreclosure is carried at the lower
of the recorded investment in the property or its fair value. The
value of the underlying loan is written down to the fair value of the
real estate to be acquired by a charge to the allowance for loan
losses, if necessary. Any subsequent write-downs are charged to
operating expenses.
I. Income Taxes:
The Company and its subsidiary files a consolidated federal
income tax return. The Subsidiary is charged or credited an amount
equal to the income tax that would have been applicable on a separate
return basis.
The Company uses the liability method for computing deferred
income taxes. Under the liability method, deferred income taxes are
based on the change during the year in the deferred tax liability or
asset established for the expected future tax consequences of
differences in the financial reporting and tax bases of assets and
liabilities. The differences relate principally to premises and
equipment, unrealized gains and losses on investment securities
available for sale, and the allowance for loan losses.
J. Per Share Information:
Primary earnings per share is computed by dividing net income by
the weighted average number of shares of common stock outstanding and
the number of shares of common stock which would be assumed
outstanding under the treasury-stock method.
K. Comprehensive Income:
Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized
gains and losses on securities available for sale which are also
recognized as a separate component of equity. The accounting standard
that requires reporting comprehensive income first applies for 1998,
with prior information restated to be comparable.
L. New Accounting Pronouncements:
Beginning January 1, 2000, a new accounting standard will require
all derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income
statement. Fair value changes involving hedges will generally be
recorded by offsetting gains and losses on the hedge and on the hedged
item, even if the fair value of the hedged item is not otherwise
recorded. This is not expected to have a material effect, but the
effect will depend on derivative holdings when this standard applies.
43
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
December 31, 1999, 1998 and 1997
2. Investment Securities:
The carrying amounts of investment in securities as shown in the
consolidated balance sheets of the bank and their approximate full values
at December 31 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Loss Value
----- ------ ----- ------
<S> <C> <C> <C> <C>
VALUES FOR THE YEAR
ENDED DECEMBER 31, 1998:
Securities Available for Sale
U.S. Treasury Securities $1,982,056 $0 $718 $1,981,338
Federal Agency Securities 22,995,731 82,084 10,806 23,067,009
Equity Securities 250,000 0 0 250,000
------------ ----------- --------- ------------
$25,227,787 $82,084 $11,524 $25,298,347
============ =========== ========= ============
Securities to be Held to Maturity
Federal Agency Securities 2,496,108 28,581 0 2,524,689
------------ ----------- --------- ------------
$2,496,108 $28,581 $0 $2,524,689
============ =========== ========= ============
VALUES FOR THE YEAR
ENDED DECEMBER 31, 1999:
Securities Available for Sale
Federal Agency Securities $27,500,000 $0 $1,120,464 $26,379,536
U.S. Treasury Securities 3,403,123 0 4,123 3,399,000
Equity Securities 250,000 0 0 250,000
------------ ----------- --------- ------------
$31,153,123 $0 $1,124,587 $30,028,536
============ =========== ========= ============
</TABLE>
44
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
December 31, 1999, 1998 and 1997
2. Investment Securities: (continued)
The par value of securities pledged to secure public deposits and for
other purposes amounted to $21,822,123 in 1999 and $9,991,838 in 1998.
The amortized cost and estimated market value of investment in debt
securities at December 31, 1999, by contractural maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call as prepayment penalties.
<TABLE>
<CAPTION>
Securities to be Held Securities Available
to Maturity For Sale
----------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Due in one year or less $0 $0 $3,403,123 $3,399,000
Due from one year to five years 0 0 2,000,000 1,931,250
Due from five years to ten years 0 0 25,750,000 24,698,286
Due after ten years 0 0 0 0
---------- ---------- ----------- ------------
$0 $0 $31,153,123 $30,028,536
========== ========== =========== ============
</TABLE>
3. Restriction on Cash and Due from Banks and Contingent Liabilities:
The Bank is required to maintain average balances with the Federal
Reserve Bank. The average required reserve balances were $854,000. and
887,000. for 1999 and 1998 respectively. The Bank has various claims and
suits pending at December 31, 1999 arising in the ordinary course of its
business. It is the opinion of management and legal counsel that such
litigation will not materially affect the Bank's financial position or
earnings.
45
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
4. Loans:
Major classifications of loans at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Mortgage Loans $51,162,583 $46,087,863
Installment Loans 13,339,520 11,113,712
Commercial and Other Loans 45,069,195 37,938,146
--------------- --------------
109,571,298 95,139,721
Less: Unearned Interest 0 36,190
Reserve for Loan Loss 700,554 701,275
--------------- --------------
$108,870,744 $94,402,256
--------------- --------------
--------------- --------------
</TABLE>
Loans on which accrual of interest has been discontinued or reduced
amounted to $555,454. and $508,222. at December 31, 1999 and 1998
respectively. Had the above loans not been placed on a non-accrual status,
income for the Company would have increased approximately $45,998., and
$34,798. for the two years.
The Company's recorded investment in impaired loans was approximately
$936,615. at December 31, 1999 and $913,620. at December 31, 1998. Of that
amount in 1999, $709,801. represents loans for which an allowance for loan
losses, amounting to $381,412., has been established under SFAS 114. The
average recorded investment in impaired loans was approximately $925,175.
for 1999 and $878,545. for the year ended, December 31, 1998. Interest
income recognized on impaired loans was approximately $38,849. for the year
ended December 31, 1999.
Reserve for Loan Losses:
Transactions in the reserve for loan losses for the years were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at Beginning of Year $701,275 $672,563 $681,375
Provision Charged to
Operating Expenses 22,500 90,000 107,000
Recoveries credited to
Reserve 5,494 3,806 1,138
Losses Charged to Reserve (28,716) (65,094) (116,950)
-------------- ------------ -------------
Balance at End of Year $700,553 $701,275 $672,563
============== ============ =============
</TABLE>
The balance of the reserve for loan losses for income tax purposes was
$281,723. at December 31, 1999 and 1998.
Certain directors and executive officers of the Bank and companies in
which they have beneficial ownership, were loan customers of the Bank
during 1999 and 1998. Such loans were made in the ordinary course of
business at the Banks' normal credit terms and interest rates. An analysis
of the 1999 activity with respect to all director and executive officer
loans is as follows:
<TABLE>
<CAPTION>
Balance New Loans Loan Payments Balance
1998 1999 1999 1999
<S> <C> <C> <C> <C>
$ 2,568,607 $1,143,591 $946,946 $2,765,252
</TABLE>
46
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
5. Bank Premises and Equipment:
Bank premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Land $949,972 $404,847 $404,847
Banking House 3,143,415 2,468,754 2,445,752
Furniture, Fixtures and
Equipment 2,317,618 1,669,692 1,568,611
------------- ------------ ------------
6,411,005 4,543,293 4,419,210
Less: Accumulated
Depreciation 2,637,004 2,457,975 2,293,860
------------- ------------ ------------
Bank Premises and Equipment $3,774,001 $2,085,318 $2,125,350
============= ============ ============
</TABLE>
Depreciation expense amounted to $179,323., $164,474., and $157,804.
in 1999, 1998 and 1997 respectively. Expenditures for maintenance and
repairs are charged against operations as incurred.
6. Operating Lease Commitments:
The Company has entered into lease agreements for certain premises at
three of its facility locations. Future minimum lease payments under the
leases during the five years subsequent to December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- -------
<S> <C>
2000 $21,400
2001 $21,400
2002 $21,400
2003 $21,400
2004 $21,400
</TABLE>
7. Federal Funds Purchased:
At December 31, 1998, the combined weighted average interest rates
related to federal funds purchased was 5.88%. Maturities related to such
borrowings for the year were not greater 90 days.
47
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
8. Federal Income Taxes:
The provisions for Federal income taxes for the years ended December
31, 1999, 1998, and 1997 were less than the respective amounts that would
result from applying the statutory Federal and state income tax rates, due
primarily to the Banks' investment income and expense accruals.
A reconciliation of the difference between the U. S. statutory income
tax rate and the effective tax rates with resulting dollar amounts are
shown in the following table:
<TABLE>
<CAPTION>
1999 1997 1996
----------------------- -------------------- -------------------
Amount Percent Amount Percent Amount Percent
---------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Tax Expense at
Statutory Rate $1,037,245 34.00% $977,013 34.00% $975,261 34.00%
State income tax
net of tax benefits 104,238 3.42% 95,240 3.31% 82,920 2.89%
---------- --------- --------- -------- -------- --------
1,141,483 37.42% 1,072,253 37.31% 1,058,181 36.89%
Tax Exempt
Interest 0 0.00% 0 0.00% (7,430) -0.26%
Security Transactions (786) -0.03% (4,894) -0.17% 413 0.00%
Loan Loss
Provision (8,661) -0.28% 9,762 0.34% (2,996) -0.01%
Pension Accruals 3,400 0.11% 3,400 0.12% (11,918) -0.42%
Other (16,813) -0.55% (531) -0.02% (6,002) -0.21%
Deferred Income
Tax 11,980 0.39% 2,639 0.09% 26,963 0.94%
---------- --------- --------- -------- -------- --------
$1,130,603 37.06% $1,082,629 37.67% $1,057,211 36.93%
========== ========= ========== ======== ========== ========
</TABLE>
The tax effect of significant temporary differences which comprise
non-current deferred tax assets and liabilities as of December 31, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
1999 1998
Assets: ---- ----
<S> <C> <C>
Market Value Allowance $22,425 $23,800
Reserve for Loan Loss 142,403 142,648
Allowances for Investments 483,572 0
------- --------
Gross Deferred Tax Asset 648,400 166,448
------- --------
Liabilities:
Allowance for Investments 0 3,123
Property and Equipment 94,344 83,782
------- --------
Net Deferred Tax Asset $554,056 $79,543
======== =======
</TABLE>
48
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
9. Employee Benefit Plans:
During 1997 the Company terminated the qualified defined benefit
pension plan. The Company's subsidiary adopted a qualified profit sharing
and 401K employee benefit plan covering substantially all employees. The
contributions to the plans are at the discretion of the plans' advisory
boards and amounted to $96,335. in 1999 and $93,569. in 1998.
10. Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentration of Credit Risk:
The Bank is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include loan commitments, unused
credit loan limits, and standby letters of credit. The instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the financial statements.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for loan commitments and
standby letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The exposure to
credit loss in the event of nonperformance by the other party to the
financial instrument for these commitments is represented by the
contractual amount. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan commitments to
customers.
49
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
10. Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentration of Credit Risk (Continued):
The total amounts of off-balance-sheet financial instruments with
credit risk are as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Loan commitments $17,347,000 $10,221,000
Standby letters of credit $433,000 $323,000
</TABLE>
The Bank subsidiary grant retail, commercial and commercial real
estate loans to customers located throughout West Virginia and Eastern
Kentucky.
The Bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based on management's credit evaluation of the
customer. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties. Although the Bank has a diversified loan portfolio, a
substantial portion of the debtors' ability to honor their contracts is
dependent upon the economic conditions in each loan's respective location.
11. Regulatory Matters
The various regulatory agencies having supervisory authority over
financial institutions have adopted risk-based capital guidelines which
define the adequacy of the capital levels of regulated institutions. These
risk based capital guidelines require minimun levels of capital based upon
the risk rating of assets and certain off-balance-sheet items. Assets and
off-balance-sheet items are assigned regulatory risk-weights ranging from
0% to 100% depending on their level of credit risk. The guidelines classify
capital in two tiers, Tier I and Tier II, the sum of which is total
capital. Tier I capital is essentially common equity, less intangible
assets. Tier II capital is essentially qualifying long-term debt and a
portion of the reserve for loan losses.
The Company and Bank actual capital amounts and ratios are presented
below in thousands of dollars:
<TABLE>
<CAPTION>
For Capital
Adequacy To be Well
Company Bank Purposes Capitalized
------- ---- ----------- ------------
<S> <C> <C> <C> <C>
As of December 31, 1998 Amt. Ratio Amt. Ratio Amt. Ratio Amt. Ratio
--------------- --------------- --------------- --------------
Total Capital (to Risk
Weighted Assets) 14,059 15.46% 13,749 15.16% 7,275 8.00% 9,094 10.00%
Tier I Capital (to Risk
Weighted Assets) 14,019 15.41% 13,719 15.13% 3,637 4.00% 5,456 6.00%
Tier I Capital (to
Average Assets) 14,019 10.60% 13,719 10.41% 5,291 4.00% 6,614 5.00%
As of December 31, 1999
Total Capital (to Risk
Weighted Assets) 14,444 13.27% 14,158 13.04% 8,709 8.00% 10,886 10.00%
Tier I Capital (to Risk
Weighted Assets) 15,085 13.86% 14,799 13.63% 4,355 4.00% 6,532 6.00%
Tier I Capital (to Risk
Average Assets) 15,085 10.19% 14,799 10.01% 5,923 4.00% 5,443 5.00%
</TABLE>
50
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
11. Regulatory Matters (Continued)
The Company's principal source of funds for dividend payments is
dividends received from the subsidiary Bank. Banking regulations limit the
amount of dividends that may be paid without prior approval of regulatory
agencies. Under these regulations, the amount of dividends that may be paid
in any calendar year is limited to the current year's net profits, as
defined, combined with the retained net profits of the preceding two years,
subject to the capital requirements as defined above. During 2000, the Bank
could, without prior approval, declare dividends of approximately
$3,250,429. plus any 2000 net profits returned to the date of the dividend
declaration.
12. Disclosures about fair value of financial instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents - For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Investment Securities - For investment securities, fair values are
based on quoted market prices or dealer quotes.
Loans - Fair value is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
Deposit Liabilities - The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated by discounting future cash flows
using the rates currently offered for deposits of similar remaining
maturities.
Securities Sold Under Agreements to Repurchase - For these short-term
instruments, the carrying amount is a reasonable estimate of fair
value.
Federal Home Loan Bank Advances - Rates currently available to the
Company for advances with similar terms and remaining maturities are
used to estimate fair value of existing debt.
Note Payable - The carrying value of variable rate borrowed funds is a
reasonable estimate of fair value.
Commitments to Extend Credit and Standby Letters of Credit Commitments
to extend credit and standby letters of credit represent agreements to
lend to a customer at the market rate when the loan is extended, thus
the commitments and letters of credit are not considered to have a
fair value.
The fair values of the Company's financial instruments at December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
<S> <C> <C>
Financial assets:
Cash and cash equivalents $7,183,524 $7,183,524
Investment securities 31,153,123 30,028,536
Loans 109,571,298 109,297,369
Less: Res. for loan losses (700,554) (700,554)
------------ -------------
$147,207,391 $145,808,875
============ =============
Financial liabilities:
Deposits $127,619,006 $127,376,530
============ =============
</TABLE>
51
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
13. Stockholders' Equity:
In November 1997, the Company completed a sale of 10,388 shares of
common stock at a price of $35.00 per share. Total proceeds to the Company
were $363,580. Earnings per share has been computed using a weighted
average number of shares outstanding.
On June 16, 1999, the Board of Directors declared a stock dividend of
three shares of common stock for each two shares of common stock
outstanding. All related financial information including earnings per share
gives retroactive effect to issuance of this stock dividend. This results
in a total authorized common stock of 780,000 shares and 716,991 shares
outstanding at December 31, 1999.
14. Parent Only Condensed Financial Information:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
Condensed Balance Sheet: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Assets:
Cash $375,496 $365,591 $455,124
Other Assets 264,674 264,685 264,685
Investment in Subsidiary 14,091,689 13,679,457 12,575,912
----------- ----------- ------------
$14,731,859 $14,309,733 $13,295,721
=========== =========== ===========
Liabilities and Equity:
Accrued Liabilities $288,166 $250,783 $312,733
Common Stock 1,300,000 1,300,000 1,300,000
Surplus 2,408,426 2,408,426 2,408,426
Retained Earnings 11,595,465 11,210,722 10,134,760
Treasury Stock (860,198) (860,198) (860,198)
----------- ----------- ------------
$14,731,859 $14,309,733 $13,295,721
=========== =========== ===========
Condensed Statement of Income:
Equity in Net Earnings of
Subsidiary $2,051,846 $1,918,697 $1,886,554
Other Income 14,800 18,750 18,757
Operating Expenses 42,289 46,334 11,188
----------- ----------- ------------
Net Income $2,024,357 $1,891,113 $1,894,123
=========== =========== ===========
</TABLE>
52
<PAGE>
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
14. Parent Only Condensed Financial Information (Continued):
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Condensed Statement of Changes
in Cash Flow:
Cash Flows From Increases (Decreases)
in Cash and Cash Equivalents
Operating Activities:
Net Income $2,024,357 $1,891,113 $1,894,123
Net Change in Other Assets 11 0 (289)
Net Change in Accrued Liabilities 37,383 (61,950) (270,220)
---------- ---------- -----------
Net Cash Provided by Operating
Activities 2,061,751 1,829,163 1,623,614
---------- ---------- -----------
Cash Flows From Investing Activities:
Net Change in Investment in
Subsidiary (1,093,465) (1,072,637) (1,131,831)
---------- ---------- -----------
Net Cash Provided (Used) in
Investing Activities (1,093,465) (1,072,637) (1,131,831)
---------- ---------- -----------
Cash Flows From
Financing Activities:
Dividends (958,381) (846,059) (754,724)
Sale of Common Stock 0 0 363,580
---------- ---------- -----------
Net Cash Used in Financing
Activities (958,381) (846,059) (391,144)
---------- ---------- -----------
Net Change in Cash and Cash
Equivalents During the Year 9,905 (89,533) 100,639
Cash Account:
Beginning of Year 365,591 455,124 354,485
---------- ---------- -----------
End of Year $375,496 $365,591 $455,124
========== ========== ===========
</TABLE>
53
<PAGE>
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing on Page of the Corporation's Proxy Statement,
dated May 3, 2000, is incorporated herein by reference in response to this
item.
Executive Officers of the Registrant:
<TABLE>
<CAPTION>
Name Age Position and Office
---- --- -------------------
<S> <C> <C>
Harvey Oakley 79 Chairman of the Board and President
Logan County BancShares, Inc. Mr. Oakley
has been an officer and Director of
Logan Bank & Trust Company since 1963, a
attorney at law, and Circuit Judge,
State of West Virginia.
Eddie D. Canterbury 51 Executive Vice President and CEO of
Logan County BancShares, Inc. Mr. Can-
terbury has been the Executive Vice
President/CEO of Logan Bank & Trust
Company since 1983 and Sr. Vice
President since 1980. He is a Director
of Logan Bank & Trust Company.
</TABLE>
54
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information appearing in the Corporation's Definitive Proxy
Statement, dated May 3, 2000, is incorporated herein by reference in
response to this item.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information appearing in the Corporation's Definitive Proxy
Statement, dated May 3, 2000, is incorporated herein by reference in
response to this item.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Corporation's Definitive Proxy
Statement, dated May 3, 2000, is incorporated herein by reference in
response to this item.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
None.
55
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 7,184 5,727 0
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 0 7,520 0
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 30,029 25,298 0
<INVESTMENTS-CARRYING> 0 2,496 0
<INVESTMENTS-MARKET> 30,029 27,823 0
<LOANS> 109,571 95,104 0
<ALLOWANCE> 701 701 0
<TOTAL-ASSETS> 152,746 139,278 0
<DEPOSITS> 127,619 124,420 0
<SHORT-TERM> 9,840 0 0
<LIABILITIES-OTHER> 843 799 0
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 1,300 1,300 0
<OTHER-SE> 13,144 12,759 0
<TOTAL-LIABILITIES-AND-EQUITY> 152,746 139,278 0
<INTEREST-LOAN> 8,613 7,850 6,789
<INTEREST-INVEST> 1,908 1,397 1,396
<INTEREST-OTHER> 232 717 508
<INTEREST-TOTAL> 10,753 9,964 8,694
<INTEREST-DEPOSIT> 4,323 4,260 3,605
<INTEREST-EXPENSE> 4,378 4,260 3,605
<INTEREST-INCOME-NET> 6,375 5,704 5,088
<LOAN-LOSSES> 23 90 107
<SECURITIES-GAINS> 6 0 5
<EXPENSE-OTHER> 3,897 3,629 3,293
<INCOME-PRETAX> 3,155 2,974 2,951
<INCOME-PRE-EXTRAORDINARY> 2,024 1,891 1,894
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 2,024 1,891 1,894
<EPS-BASIC> 2.83 2.64 2.64
<EPS-DILUTED> 2.83 2.64 2.64
<YIELD-ACTUAL> 4.66 4.70 4.60
<LOANS-NON> 555 509 0
<LOANS-PAST> 3,272 3,310 0
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 936 914 0
<ALLOWANCE-OPEN> 701 672 0
<CHARGE-OFFS> 29 65 0
<RECOVERIES> 5 4 0
<ALLOWANCE-CLOSE> 701 701 0
<ALLOWANCE-DOMESTIC> 701 701 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
