<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2000
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Commission File Number 2-95114
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LOGAN COUNTY BANCSHARES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
WEST VIRGINIA
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(State or other jurisdiction of incorporation or organization)
55-0660015
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(IRS Employer Identification Number)
P. O. BOX 597, LOGAN, WEST VIRGINIA 25601
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(Address of Principal Executive Offices) (Zip Code)
-
(304) 752-1166
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding, of each of the issuer's
classes of common stock, as of the latest practicable date. 716,991
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<PAGE>
LOGAN COUNTY BANCSHARES, INC.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS:
Consolidated Statement of Condition As of September 30,
2000 and 1999 and December 31, 1999.
Consolidated Statement of Income For the Three Month
Period Ended September 30, 2000 and 1999.
Consolidated Statement of Income For the Nine Month
Period Ended September 30, 2000 and 1999.
Consolidated Statement of Changes in Stockholders'
Equity for the Nine Month Period Ended
September 30, 2000 and 1999.
Consolidated Statement of Cash Flows for the Nine Month Period
Ended September 30, 2000 and 1999.
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
PART II - OTHER INFORMATION
SIGNATURES
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Condition
September 30, 2000 and 1999 and
December 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
------ September 30, December 31,
2000 1999 1999
--------- --------- ---------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 5,481 $ 4,861 $ 7,184
INVESTMENT SECURITIES:
AVAILABLE FOR SALE 28,898 31,537 30,029
HELD TO MATURITY 0 0 0
FEDERAL FUNDS SOLD 1,830 0 0
LOANS:
TOTAL LOANS 113,193 108,810 109,572
RESERVE FOR LOAN LOSSES 613 718 701
--------- --------- ---------
NET LOANS 112,580 108,092 108,871
BANK PREMISES AND EQUIPMENT 3,656 3,025 3,774
ACCRUED INTEREST AND OTHER ASSETS 2,713 2,356 2,888
--------- --------- ---------
$ 155,158 $ 149,871 $ 152,746
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST $ 21,500 $ 18,692 $ 19,332
INTEREST BEARING 20,588 22,297 18,999
SAVINGS DEPOSITS 31,722 32,439 31,024
TIME DEPOSITS 63,178 59,717 58,264
--------- --------- ---------
TOTAL DEPOSITS 136,988 133,145 127,619
FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER AGREEMENTS TO REPURCHASE 2,000 1,590 9,840
ACCRUED AND OTHER LIABILITIES 572 611 789
INCOME TAXES PAYABLE:
CURRENT 79 91 (18)
DEFERRED 72 (207) 72
--------- --------- ---------
TOTAL LIABILITIES 139,711 135,230 138,302
STOCKHOLDERS' EQUITY:
COMMON STOCK-$1.67 PAR VALUE;
AUTHORIZED - 780,000 SHARES
OUTSTANDING-716,991 SHARES
IN 2000 AND 1999 1,300 1,300 1,300
SURPLUS 2,408 2,408 2,408
RETAINED EARNINGS 12,599 11,793 11,596
TREASURY STOCK (860) (860) (860)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 15,447 14,641 14,444
--------- --------- ---------
$ 155,158 $ 149,871 $ 152,746
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Three Month Periods Ended September 30, 2000 and 1999
(In Thousands)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $2,456 $2,205
INTEREST ON INVESTMENTS 469 503
INTEREST ON FEDERAL FUNDS SOLD 28 38
------ ------
2,953 2,746
INTEREST EXPENSE:
INTEREST ON DEPOSITS 1,241 1,093
INTEREST OTHER 0 0
------ ------
NET INTEREST INCOME 1,712 1,653
PROVISION FOR LOAN LOSSES 0 0
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,712 1,653
OTHER INCOME:
SERVICE FEES 162 167
OTHER OPERATING INCOME 7 13
------ ------
TOTAL OTHER INCOME 169 180
OTHER EXPENSES:
SALARIES AND BENEFITS 514 487
EXPENSE OF BANK PREMISES AND
EQUIPMENT 136 109
OTHER OPERATING EXPENSES 430 349
------ ------
TOTAL OTHER EXPENSES 1,080 945
INCOME BEFORE INCOME TAXES 801 888
INCOME TAXES 250 319
------ ------
NET INCOME $ 551 $ 569
====== ======
PER SHARE OF COMMON STOCK NET INCOME $ 0.77 $ 0.80
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Nine Month Periods Ended September 30, 2000 and 1999
(In Thousands)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $7,012 $6,336
INTEREST ON INVESTMENTS 1,416 1415
INTEREST ON FEDERAL FUNDS SOLD 42 229
------ ------
8,470 7,980
INTEREST EXPENSE:
INTEREST ON DEPOSITS 3,478 3,228
INTEREST OTHER 69 0
------ ------
NET INTEREST INCOME 4,923 4,752
PROVISION FOR LOAN LOSSES 0 23
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,923 4,729
OTHER INCOME:
SERVICE FEES 492 464
OTHER OPERATING INCOME 56 59
------ ------
TOTAL OTHER INCOME 548 523
OTHER EXPENSES:
SALARIES AND BENEFITS 1,575 1466
EXPENSE OF BANK PREMISES AND
EQUIPMENT 407 312
OTHER OPERATING EXPENSES 1,158 973
------ ------
TOTAL OTHER EXPENSES 3,140 2,751
INCOME BEFORE INCOME TAXES 2331 2501
INCOME TAXES 799 896
------ ------
NET INCOME $1,532 $1,605
====== ======
PER SHARE OF COMMON STOCK NET INCOME $ 2.14 $ 2.24
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement in Changes in Stockholders' Equity
For the Nine Month Periods Ended September 30, 2000 and 1999
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive Treasury
Stock Surplus Earnings Income, Net Stock Total
-------- -------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31 2000 $ 1,300 $ 2,408 $ 12,236 ($641) ($860) $ 14,443
COMPREHENSIVE INCOME
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 0 0 1,532 0 0 1,532
CHANGE IN NET UNREALIZED
HOLDING GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES 160 160
-------- -------- -------- -------- -------- --------
TOTAL COMPREHENSIVE INCOME 0 0 1,532 160 0 1,692
DIVIDENDS ON 716,991 SHARES
0 COMMON STOCK @ $0.96 (688) (688)
-------- -------- -------- -------- -------- --------
$ 1,300 $ 2,408 $ 13,080 ($481) ($860) $ 15,447
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
BALANCE - DECEMBER 31 1999 $ 1,300 $ 2,408 $ 11,171 $ 40 ($860) $ 14,059
COMPREHENSIVE INCOME
NET INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 0 0 1,605 0 0 1,605
NET UNREALIZED GAINS (LOSSES)
ON AVAILABLE FOR-SALE
SECURITIES (394) (394)
-------- -------- -------- -------- -------- --------
TOTAL COMPREHENSIVE INCOME 0 0 1605 (394) 0 1,211
DIVIDENDS ON 716,991 SHARES
COMMON STOCK @ $0.88 (629) (629)
-------- -------- -------- -------- -------- --------
$ 1,300 $ 2,408 $ 12,147 ($354) ($860) $ 14,641
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,532 $ 1,605
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
DEPRECIATION 200 120
SECURITY AMORTIZATION AND
ACCREATION 5 0
MARKET VALUE AMORTIZATION (3) (3)
PROVISION FOR LOAN LOSSES 0 23
(INCREASE) DECREASE IN OTHER
ASSETS 37 (608)
INCREASE (DECREASE) IN OTHER
LIABILITIES (120) (79)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,651 1,058
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OFSECURITIES AVAILABLE FOR SALE 0 9,700
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE 5,400 5,000
PURCHASE OF SECURITIES AVAILABLE FOR SALE (3,974) (19,074)
NET (INCREASE) DECREASE IN
FEDERAL FUNDS SOLD (1,830) 7,520
NET (INCREASE) DECREASE IN LOANS (3,709) (13,696)
PURCHASE OF BANK PREMISES
AND EQUIPMENT (82) (1,060)
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES (4,195) (11,610)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN
DEMAND DEPOSITS 3,757 2,053
NET INCREASE (DECREASE) IN
SAVINGS DEPOSITS 698 2,622
NET INCREASE (DECREASE) IN
TIME DEPOSITS 4,914 4,050
NET INCREASE (DECREASE) IN
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD (7,840) 1,590
UNDER AGREEMENT TO REPURCHASE
DIVIDENDS PAID (688) (629)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 841 9,686
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,703) (866)
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 7,184 5,727
-------- --------
CASH AND CASH EQUIVALENT AT
END OF PERIOD $ 5,481 $ 4,861
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
September 30, 2000
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Financial Statements:
The foregoing statements are unaudited; however, in the opinion of the
Management, all adjustments (comprising of only normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included.
2. Basis of Consolidation:
The Consolidated Statement of Condition and Consolidated Statement of
Income of Logan County BancShares, Inc. include the activity of Logan Bank
and Trust Company, a wholly owned subsidiary.
3. Year 2000 Assessment
Management has initiated a Company-wide program to assess its data
processing, information systems and customer service programs to ensure the
Company's operating capabilities in the year 2000. Currently, the Company's
subsidiary Bank, LB&T, uses EDS, a regional provider of financial
institution data processing as it's primary provider of computer services
and data processing. EDS has certified it's hardware and software are Year
2000, and beyond, compliant.
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis focused on significant changes
in the financial condition and results of operations of Logan County Bancshares,
Inc.
EARNINGS SUMMARY
The Company reported net income of $1,532,000. for the nine months
ended September 30, 2000 compared to $1,605,000. for the nine months ended
September 30, 1999, representing a 4.55% decrease. This decrease was
primarily the result of the increase in net interest income of $171,000.,
increase in other income of $25,000. and increase in all operating
expenses of $389,000. and decrease in income taxes of $97,000.
Earnings per common share were $2.14 for the nine months ended September
30, 2000 compared with $2.24 for the same period of 1999.
Logan County Bancshares' annualized return on assets (ROA) for the nine
month period ended September 30, 2000 was 1.32% compared to 1.42% for the nine
month period ended September 30, 1999. Annualized return on shareholders' equity
(ROE) was 13.22% and 14.62% at September 30, 2000 and 1999, respectively.
NET INTEREST INCOME
The most significant component of Logan County Bancshares' net earnings is
net interest income, which represents the excess of interest income earned on
earning assets over the interest expense paid for sources of funds. Net interest
income is affected by changes in volume resulting from growth and alteration of
the balance sheet composition, as well as by fluctuations in market interest
rates and maturities of sources and uses of funds.
Interest income amounted to $8,470,000. at September 30, 2000, an
increase of $490,000. from September 30, 1999. Interest expense also increased
$319,000., resulting in an overall increase of $171,000. or 3.60% in net
interest income between September 30, 2000 and September 30, 1999.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
The provision for loan losses represents charges to earnings necessary to
maintain an adequate allowance for potential future loan losses. Management's
determination of the appropriate level of the allowance is based on an ongoing
analysis of credit quality and loss potential in the loan portfolio, actual loan
loss experience relative to the size and characteristics of the loan portfolio,
change in the composition and risk characteristics of the loan portfolio and the
anticipated influence of national and local economic conditions. The adequacy of
the allowance for loan losses is reviewed quarterly and adjustments are made as
considered necessary.
For the nine month period ended September 30, 2000 and 1999, the provision
for loan losses was $0.00 and $23,000. respectively.
The reserve for loan losses was $613,000. at September 30, 2000 compared to
$718,000. at September 30, 1999. Expressed as a percentage of loans (net of
unearned income), the reserve for loan losses was .54% at September 30, 2000 and
.66% at September 30, 1999.
<PAGE>
A summary of the Company's past due loans and nonperforming assets is
provided in the following table.
SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS
(in thousands of dollars)
<TABLE>
<CAPTION>
September 30,
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Loans past due 90 or more days
still accruing interest $3,440 $4,077
------ ------
Nonperforming assets:
Nonaccruing loans 511 474
Other real estate owned 270 315
------ ------
$ 781 $ 789
====== ======
</TABLE>
NONINTEREST INCOME
Noninterest income includes revenues from all sources other than interest
income. For the nine month period ended September 30, 2000, noninterest income
totalled $548,000., representing a increase of $25,000., or 4.78% from the
$523,000. recorded during the same period of 1999. This increase was primarily
due to increases in service fees income of $28,000.
NONINTEREST EXPENSE
Noninterest expense comprises overhead costs which are not related to
interest expense or to losses from loans or securities. As of September 30,
2000, the Company's noninterest expense totalled $3,140,000., increasing
$389,000. over the $2,751,000. of noninterest expense for the nine months ended
September 30, 1999. Expressed as a percentage of assets, annualized noninterest
expense was 2.69% at September 30, 2000, compared to 2.45% at September 30,
1999.
Salaries and employee benefits are Logan County Bancshares' largest
noninterest cost, representing approximately 51% of total noninterest expense at
September 30, 2000 and 1999. Salaries and employee benefits increased $109,000.,
or 7.43% at September 30, 2000 compared to September 30, 1999. This increase is
primarily due to increased personnel.
INCOME TAXES
Logan County Bancshares' income tax expense, for the nine month period
ended September 30, 2000, reflected a $97,000. decrease when compared to the
same period of 1999. Income tax expense equalled 34.28% and 35.82% of income
before taxes at September 30, 2000 and 1999, respectively. For financial
reporting purposes, income tax expense does not equal the statutory income tax
rate of 43% when applied to pretax income, primarily because of timing
differences included in income before income taxes.
<PAGE>
Balance Sheet Data:
Total assets increased by $2,412,000. between year end and September 30,
2000 to a balance of $155,158,000. The major component of this change was a
decrease in Investment Securities of $1,131,000., and loan increases of
$3,621,000. and cash decreased by $1,703,000. The primary source of funds for
this change was an increase in deposits of $9,369,000., a decrease in Federal
Funds purchased of $7,840,000., and net income of $1,532,000.
Liquidity:
Managing Logan's liquidity requirements primarily involves meeting the loan
demand, deposit withdrawal and the cash flow requirements. Logan's primary
sources of liquid assets are federal funds sold and investment securities
maturing in less than one year. These items can be converted into funds in a
short period of time. At September 30, 2000, Federal Funds Sold amounted to
$1,830,000. and securities maturing within one year amounted to $1,992,000.
These are compared to the balances at September 30, 1999 of $0. in Federal Funds
Sold and maturing Investment Securities of $3,409,000. due within one year.
Traditionally, banks have been able to manage liquidity based on a
relatively stable group of core deposits. The deposits, demand and consumer
deposits under $l00,000. are considered the most stable and least expensive
source of funds. During 2000 and 1999, banks continue to be faced with volatile
interest sensitive funds and have had to match their funding requirements by
using assets and liability management techniques.
Capital Resources:
Logan's capital position is based on its stockholders' equity and the
primary source of such equity has been retained earnings. Since Logan's
formation, it has accumulated Retained Earnings of $12,599,000. and has a
total Stockholders' Equity of $15,447,000. as of September 30, 2000; as
compared to $11,793,000. of Retained Earnings and total Stockholders'
equity of $14,641,000. at September 30, 1999.
The equity capital was 9.96% and 9.77% of total assets at September 30,
2000 and 1999 respectively. Logan County Bancshares exceeds all regulatory
capital guide lines and has not been advised by any regulatory agency of any
minimum capital requirement.
Effects of Inflation:
The impact of inflation on a financial institution differs significantly
from that exerted on an industrial concern, primarily because a financial
institution's assets and liabilities consist almost entirely of monetary items.
The low proportion of the Bank's net fixed assets to total assets reduces both
the potential of inflated earnings resulting from understated depreciation
charges and the potential significant understatement of asset values. However,
inflation does have a considerable indirect impact on banks, including increased
loan demand, as it becomes necessary for producers and consumers to acquire
additional funds to maintain the same levels of consumption, inventories, and
new investments. Inflation also frequently results in higher interest rates
which can affect both yields on earning assets and rates paid on deposits and
other interest-bearing liabilities.
<PAGE>
PART II. - OTHER INFORMATION
NONE.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOGAN COUNTY BANCSHARES, INC.
-------------------------------------
(Registrant)
Date --------------------------- --------------------------------------
Frank H. Oakley, Chairman
(Signature)
--------------------------------------
Harvey Oakley, President
(Signature)
Date --------------------------- --------------------------------------
Eddie D. Canterbury, Exec. Vice Pres.
(Signature)
