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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, 2000 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, 2001
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)
1
LOGAN COUNTY BANCSHARES, INC.
FORM 10 - K
INDEX
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Page
----
ITEM 1 - Business............................................... 1 - 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
ITEM 8 - Financial Statements and Supplemental Data............. 31
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....................................................... 63
2
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
LOGAN COUNTY BANCSHARES, INC., 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 is determined
by negotiations between individual buyers and sellers. Although Company keeps no
records of sale prices paid for Company stock and has no direct knowledge of
such prices, for purposes of presentation, Corporation's management estimates
the approximate market value ranges for 2000 and 1999 to be as follows:
First Second Third Fourth
Sale Price: Quarter Quarter Quarter Quarter
2000 Common Stock $42-$42 $42-$42 $42-$42 $42-$42
1999 Common Stock $27-$28 $28-$40 $42-$42 $42-$42
Per Share Dividends
Declared:
2000 Common Stock $0.32 $0.32 $0.32 $0.48
1999 Common Stock $0.29 $0.29 $0.30 $0.46
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
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
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 Corpora- tion,
please see Item 10.
6
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
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 Company keeps no
records of sales prices paid for Company stock and has no direct knowledge of
such prices, for purposes of presentation, Corporation's management estimates
the approximate market value ranges for 2000 and 1999 to be as follows:
First Second Third Fourth
Sales Price: Quarter Quarter Quarter Quarter
------------ ------- ------- ------- -------
2000 Common Stock $42-$42 $42-$42 $42-$42 $42-$42
1999 Common Stock $27-$28 $28-$40 $42-$42 $42-$42
Per Share Dividends Declared:
-----------------------------
2000 Common Stock $0.32 $0.32 $0.32 $0.48
1999 Common Stock $0.29 $0.29 $0.30 $0.46
8
ITEM 6 - SELECTED FINANCIAL DATA
LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY
(In Thousands of Dollars)
YEAR ENDED DECEMBER 31: 2000 1999 1998 1997 1996
- ----------------------- ---- ---- ---- ---- ----
Total Interest Revenue $11,508 $10,753 $9,964 $8,693 $7,359
Total Interest Expense 4,828 4,378 4,260 3,605 2,988
------- ------- ------- ------- -------
Net Interest Revenue 6,680 6,375 5,704 5,088 4,371
Provision for Possible
Loan Losses 100 22 90 107 40
------- ------- ------- ------- -------
Net Interest Revenue After
Provision for Possible
Loan Losses 6,580 6,353 5,614 4,981 4,331
Other Operating Revenue 769 699 989 1,264 1,000
Other Operating Expense (4,185) (3,897) (3,629) (3,294) (3,026)
------- ------- ------- ------- -------
Income Before Income Taxes 3,164 3,155 2,974 2,951 2,305
Income Taxes 1,131 1,131 1,083 1,057 767
------- ------- ------- ------- -------
Net Income $2,033 $2,024 $1,891 $1,894 $1,538
======= ======= ======= ======= =======
Per Common Share:
Net Income $2.84 $2.83 $2.64 $2.65 $2.19
======= ======= ======= ======= =======
Cash Dividends Declared $1.44 $1.34 $1.18 $1.07 $0.77
======= ======= ======= ======= =======
At December 31:
Total Loans $113,641 $109,571 $95,139 $84,898 $70,872
Total Assets 157,480 152,746 139,278 121,850 107,380
Total Deposits 138,723 127,619 124,420 108,107 95,233
Short-Term Debt 2,000 9,840 0 0 0
Total Shareholders' Equity 16,014 14,444 14,060 12,983 11,415
Selected Ratios:
Rate of Return on Average:
Total Assets 1.36% 1.39% 1.43% 1.62% 1.52%
Shareholders' Equity 13.35% 13.84% 13.99% 15.18% 14.00%
Tier 1 Capital to Total
Assets at Year End 10.25% 9.92% 10.09% 11.09% 10.89%
Average Total Share-
holders' Equity to
Average total Assets 10.15% 10.05% 10.22% 10.66% 10.88%
Common Dividend Payout
Ratio 50.79% 47.35% 44.70% 39.60% 34.95%
Nonaccrual and Re-
structured Business
Loans as a Percentage
of Total Loans 0.13% 0.51% 0.53% 0.64% 0.96%
9
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 2000 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 2000 to 1999, 1999 to 1998, and 1998 to
1997, 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, 2000, and 1999, the funds available within one year from
investments and loans were $43,830,000. and $31,095,000.
Logan County BancShares, Inc.'s subsidiary deposit mix has increased by
$11,104,000. in 2000, $3,198,000., in 1999, and $16,313,000. in 1998. 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 $5,392,000., and $8,056,000. respectively in
2000, 1999 and 1998. 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
$4,011,000. in 2000 and $4,744,891 in 1998. Savings deposits showed slight
increase in 2000 of $1,263,000. and 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, 2000
and 1999, 30.83% and 30.03% of the total deposits were in demand deposits, while
23.27% and 24.31% were in savings and 45.89% and 45.65% 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
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
During 2000, 1999 and 1998, 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 1.36%, 1.39%, and 1.43%, for the years ended December 31,
2000, 1999 and 1998, 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 the periods presented, 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
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)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Year End Balances:
Total Assets $157,480 $152,746 $139,278 $121,850 $107,380
Total Earning Assets 147,539 139,600 130,454 113,088 99,542
Total Deposits 138,728 127,619 124,420 108,107 95,233
Stockholders' Equity 16,014 14,444 14,059 12,983 11,415
Income for the Year:
Total Interest Income 11,508 10,753 9,964 8,693 7,359
Total Interest Expense 4,828 4,378 4,260 3,605 2,988
Net Interest Income 6,680 6,375 5,704 5,088 4,371
Provision for Loan
Losses 100 22 90 107 40
Non-Interest Income 769 699 989 1,264 1,000
Non-interest expense 5,316 5,028 4,712 4,351 3,793
Net Income 2,033 2,024 1,891 1,893 1,538
Per Share Data
Net Income 2.84 2.83 2.64 2.65 2.19
Stockholders' Equity 22.34 20.14 19.61 18.44 16.27
Cash Dividends 1.44 1.34 1.18 1.07 0.77
Key Ratios
Net Income To:
Average Assets 1.36% 1.39% 1.43% 1.62% 1.52%
Average Stockholders'
Equity 13.36% 13.84% 13.99% 15.18% 14.00%
Average Stockholders'
Equity to Average
Assets 10.15% 10.05% 10.22% 10.66% 10.88%
12
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)
2000 1999 1998
----------------------------- ----------------------------- -------------------------------
Average Income Average Average Income Average Average Income Average
Balance (Expense) Yield Balance (Expense) Yield Balance (Expense) Yield
--------- --------- --------- --------- --------- --------- --------- --------- ---------
EARNING ASSETS:
Loans
(Net of Reserves & Discounts):
Commercial $43,232 $3,955 9.15% $40,468 $3,476 8.59% $36,041 $3,209 8.90%
Real Estate 52,215 4,302 8.24% 49,235 4,037 8.20% 43,454 3,704 8.52%
Consumer 13,348 1,257 9.42% 12,212 1,100 9.01% 10,394 937 9.01%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Net Loans 108,795 9,514 8.74% 101,915 8,613 8.45% 89,889 7,850 8.73%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment Securities:
Taxable 0 0 0.00% 1,080 68 6.30% 3,245 187 5.76%
Available for Sale 28,887 1,886 6.53% 29,045 1,840 6.33% 18,763 1210 6.45%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Investment
Securities 28,887 1,886 6.53% 30,125 1,908 6.33% 22,008 1,397 6.35%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Federal Funds Sold and
Securities Purchased
Under Option to Resale 1,728 108 6.25% 4,792 232 4.84% 13,203 717 5.43%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Earning Assets $139,410 $11,508 8.25% $136,832 $10,753 7.86% $125,100 $9,964 7.96%
========= ========= ========= ========= ========= ========= ========= ========= =========
Interest Bearing Liabilities:
Savings & Interest
Bearing Demand $55,169 $1,329 2.41% $53,114 $1,360 2.56% $50,133 $1,345 2.68%
Time Deposits 59,505 3,430 5.76% 58,167 2,964 5.10% 52,055 2,915 5.61%
Federal Funds Purchased 1,052 69 6.56% 833 54 6.48%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Interest Bearing
Liabilities $115,726 $4,828 4.17% $112,114 $4,378 3.93% $102,188 $4,260 4.17%
========= ========= ========= ========= ========= ========= ========= ========= =========
13
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)
2000 Vs. 1999 1999 Vs. 1998
----------------------------- -----------------------------
Interest Income Expense Increase (Decrease) Due To Increase (Decrease) Due To
Change In Change In
2000 1999 1998 Volume Rate Total Volume Rate Total
-------- -------- -------- --------- --------- --------- --------- --------- ---------
INTEREST INCOME ON
EARNING ASSETS:
LOANS:
Commercial $3,955 $3,476 $3,209 $252 $227 $479 $394 ($127) $267
Real Estate 4,302 4,037 3,704 245 20 265 492 (159) 333
Consumer 1,257 1,100 937 107 50 157 163 0 163
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Loans 9,514 8,613 7,850 604 297 901 1,049 (286) 763
--------- --------- --------- --------- --------- --------- --------- --------- ---------
SECURITIES:
Taxable 0 68 187 (68) 0 (68) (125) 6 (119)
Tax Exempt 0 0 0 0 0 0 0 0 0
Available for Sale 1,886 1,840 1,210 (12) 58 46 663 (33) 630
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Securities 1,886 1,908 1,397 (80) 58 (22) 538 (27) 511
--------- --------- --------- --------- --------- --------- --------- --------- ---------
FEDERAL FUNDS SOLD AND
SECURITIES PURCHASED:
Under Agreement to
Resale 108 232 717 (56) (68) (124) (457) (28) (485)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INTEREST INCOME ON
EARNING ASSETS 11,508 10,753 9,964 468 287 755 1,130 (341) 789
--------- --------- --------- --------- --------- --------- --------- --------- ---------
INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES:
Savings and Interest Bearing
Demand Deposits 1,329 1,360 1,345 49 (80) (31) 79 (64) 15
Time Deposits 3,430 2,964 2,915 82 384 466 343 (294) 49
Federal Funds Purchased 69 54 14 1 15 54 0 54
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INTEREST EXPENSE ON
INTEREST BEARING LIABILITIES 4,828 4,378 4,260 145 304 450 476 (358) 118
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME $6,680 $6,375 $5,704 $323 ($17) $305 $654 $17 $671
========= ========= ========= ========= ========= ========= ========= ========= =========
14
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. Subsidiary
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 33.05% of the total
loans due within one year. Further, the Company has 13.10% of the loan portfolio
in floating rates loans.
TABLE IV - REMAINING MATURITIES OF LOANS AT DECEMBER 31, 2000
(In Thousands of Dollars)
COMMERCIAL,
FINANCIAL AND REAL ESTATE
AGRICULTURAL MORTGAGES INSTALLMENTS TOTAL
------------- ----------- ------------ -------------
MATURITIES
----------
Due Within One Year $15,387 $13,941 $8,229 37,557
Due One to Five Years 18,269 17,212 4,274 39,755
Due After Five Years 13,870 21,444 1,015 36,329
------------ ------------ ------------ -------------
Total Loans $47,526 $52,597 $13,518 $113,641
============ ============ ============ =============
Due After One Year at Fixed Rate $24,104 $32,858 $4,231 61,193
Due After One Year at Floating
Rate 8,035 5,798 1,058 14,891
------------ ------------ ------------ -------------
Total Loans Due After
One Year $32,139 $38,656 $5,289 $76,084
============ ============ ============ =============
15
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 2000, 1999, 1998, 1997 and 1996.
TABLE V. - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Year Ended December 31,
--------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Amount of Loans Outstanding
at End of Period $112,939 $108,871 $94,402 $84,225 $70,872
========== ========= ========= ========= =========
Monthly Average
Amount of Loans $109,447 $101,197 $89,182 $78,430 $65,894
========== ========= ========= ========= =========
Balance of Allowance for
Possible Loan Losses at
Beginning of Period $700 $701 $673 $681 $662
========== ========= ========= ========= =========
Loans Charged Off:
Commercial $0 $0 $14 $103 $3
Real Estate 7 0 0 0 17
Consumer 99 29 51 13 5
---------- --------- --------- --------- ---------
Total Loans Charged Off 106 29 65 116 25
---------- --------- --------- --------- ---------
Recoveries of Loans Previously
Charged Off:
Commercial 0 1 1 0 0
Real Estate 3 0 0 0 1
Consumer 5 4 2 1 3
---------- --------- --------- --------- ---------
Total Recoveries 8 5 3 1 4
---------- --------- --------- --------- ---------
Net Loans Charged Off: 98 24 62 116 21
---------- --------- --------- --------- ---------
Additions to Allowance:
Charged to Expense 100 23 90 107 40
---------- --------- --------- --------- ---------
Balance at End of Period $702 $700 $701 $673 $681
========== ========= ========= ========= =========
Ratio of Net Charge-Offs
During Period to
Average Loans 0.089% 0.024% 0.069% 0.148% 0.003%
========== ========= ========= ========= =========
16
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
December 31, 2000 December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
--------------------- --------------------- --------------------- --------------------- ---------------------
% 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
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Commercial $464 0.98% $464 1.03% $463 1.22% $422 1.03% $435 1.41%
Real Estate 163 0.31% 163 0.32% 163 0.35% 144 0.40% 141 0.41%
Consumer 75 0.55% 73 0.55% 75 0.67% 107 1.27% 105 1.58%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total $702 0.62% $700 0.64% $701 0.74% $673 0.79% $681 0.95%
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
17
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 uncollectable
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)
Year Ended December 31,
-------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Commercial Loans $47,526 $45,069 $37,938 $35,643 $30,974
Real Estate Loans 52,597 51,163 46,088 40,858 34,100
Consumer Loans 13,518 13,339 11,114 8,493 6,649
--------- --------- --------- --------- ---------
Subtotal 113,641 109,571 95,140 84,994 71,723
Less: Unearned Income 0 0 36 96 170
--------- --------- --------- --------- ---------
Subtotal 113,641 109,571 95,104 84,898 71,553
Less: Reserve for Loan
Losses 702 700 701 673 681
--------- --------- --------- --------- ---------
Net Loans $112,939 $108,871 $94,403 $84,225 $70,872
========= ========= ========= ========= =========
Non-Performing Assets
Non-Accruing Loans $426 $555 $509 $546 $687
Loans Past Due 90 Days 3,338 3,272 3,310 1,031 739
Other Real Estate Owned 200 358 94 172 260
------- ------- ------- ------- -------
Total Non-Performing Assets $3,964 $4,185 $3,913 $1,749 $1,686
======= ======= ======= ======= =======
18
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 2000 was under 10% of the portfolio and
represented minor shifting between categories. During 2000, the investment
securities decreased $410,000. in U.S. agencies that were classified as
available for sale.
All debt securities, that Logan County BancShares subsidiary 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, 2000
(In Thousands of Dollars)
Over
Over Five
One One Year Years
Year Through Through Over
December 31, 2000 or Five Ten Ten Market
Dollars in thousands Less Years Years Years Total Value
--------- --------- --------- ---------- --------- ---------
U.S. Government:
Available for sale 1,992 0 0 0 1,992 1,993
Held to maturity 0 0 0 0 0 0
U.S. Federal Agency Security
Available for sale 0 13,000 14,500 0 27,500 27,375
Held to maturity 0 0 0 0 0 0
Total securities:
Available for sale 1,992 13,000 14,500 0 29,492 29,368
Held to maturity 0 0 0 0 0 0
--------- --------- --------- ---------- --------- ---------
Total 1,992 13,000 14,500 0 29,492 29,368
Percent of total 6.78% 44.07% 49.15% 0.00% 100.00% 100.00%
Weighted average yield** 6.00% 6.28% 6.44% 0.00% 6.36% 6.47%
** The weighted average yields are based on carrying value and
effective yields are weighted for the scheduled maturity of each security.
19
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
OTHER INCOME
In 2000 and 1999, 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 increased in 2000 by $32,000. Other income
decreased by $290,000. in 1999, and increased by $71,000. in 2000 or 29.32% and
10.16% respectively as a result of these changes.
TABLE IX - OTHER INCOME
(In Thousands of Dollars)
Increase (Decrease)
----------------------------------
2000 Over 1999 1999 Over 1998
---------------- ----------------
2000 1999 1998 Amount Percent Amount Percent
---- ---- ---- ------ ------- ------ -------
Service Fee $669 $637 $926 $32 5.02% ($289) -31.21%
Other Fees 101 56 63 45 80.36% (7) -11.11%
Securities:
Gain (Loss) 0 6 0 (6) 100.00% 6 100.00%
------- ------- ------- ------- --------- ------- ---------
Total Other
Income $770 $699 $989 $71 29.32% ($290) 29.32%
======= ======= ======= ======= ========= ======= =========
20
Logan County BancShares, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
OTHER EXPENSES
In 2000 other expenses increased $288,000. or 7.39% compared to 1999.
This increase was due to overall growth in 2000 and the operations of the new
facility at Fountain Place. The increase of salaries and benefits of $129,000.,
FDIC insurance of $21,000. and bank operating expenses of $55,000. are all a
direct effect of the increase customer base.
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.
In 2000 and 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 the Fountain Place facility late 1999.
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
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)
----------------------------------
2000 Over 1999 1999 Over 1998
---------------- ----------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
Salaries and
Benefits $2,148 $2,019 $1,858 $129 6.39% $161 8.67%
Taxes 70 61 78 9 14.75% (17) -21.79%
Depreciation 273 179 165 94 52.51% 14 8.48%
Repairs and
Maintenance 179 181 181 (2) -1.10% 0 0.00%
Fees Paid to
Directors 79 74 69 5 6.76% 5 7.25%
Equipment Rental 41 42 24 (1) -2.38% 18 75.00%
FDIC & Fidelity
Insurance 99 78 78 21 26.92% 0 0.00%
Data Processing 475 483 421 (8) -1.66% 62 14.73%
Bank Stationery 119 133 121 (14) -10.53% 12 9.92%
Bank Operating
Expenses 702 647 634 55 8.50% 13 2.05%
------- ------- ------- ------- -------- ------- --------
Total $4,185 $3,897 $3,629 $288 7.39% $268 7.38%
======= ======= ======= ======= ======== ======= ========
22
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 2000 the
company grew 3.10% in terms of asset and stockholder's equity and increased by
10.70%, along with increases of .44% in net income and 3.44% increase in the
dividend payout ratio. These positive indicators reflect the overall growth in
size, service area and customer base. In 1999 the late 90's trends improved with
a 9.67% growth in assets, an increase of 7.17% in net income and a 2.65%
increase in dividends payout ratio. 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 company's desire to reward the shareholder while maintaining an
excellent capital base.
TABLE XI. - THREE-YEAR SUMMARY OF EARNINGS AND DIVIDENDS
Per Share Percent Change Over Prior Year
--------------------------- --------------------------------
Dividend Net Net Total
Payout Income Dividends Income Dividends Assets Equity
-------- ------ --------- ------ --------- ------ ------
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%
2000 50.79% $2.84 $1.44 0.44% 7.46% 3.10% 10.70%
23
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, 2000, 1999 and 1998.
In the period presented average earning assets grew by $2,578,000. in
2000, $13,192,000. in 1999 and $15,517,000. in 1998. This growth represented
increases of 1.88% in 2000, 9.93% in 1999 and 14.16% in 1998. The loan portfolio
is the major component of earning assets which grew by $6,880,000. or 6.65% in
2000, $12,026,000. or 13.38% in 1999, and $12,067,000. or 15.51% in 1998. 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. subsidiary to support earning assets.
Total average interest bearing liabilities increased $9,926,000. or 9.71% in
1999, $3,612,000 or 3.22% in 2000 and $12,850,000. or 14.38% in 1998. 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
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
(In Thousands of Dollars)
Year Ended December 31, 2000 Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------- ---------------------------- ----------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------ ------- -------- ------
ASSETS:
EARNING ASSETS:
LOANS:
Commercial $43,232 $3,955 9.15% $40,468 $3,476 8.59% $36,041 $3,209 8.90%
Real Estate 52,215 4,302 8.24% 49,235 4,037 8.20% 43,453 3,704 8.52%
Consumer 13,348 1,257 9.42% 12,212 1,100 9.01% 10,395 937 9.01%
--------- ------- ------- --------- ------- ------- --------- ------- -------
Total Loans 108,795 9,514 8.74% 101,915 8,613 8.45% 89,889 7,850 8.73%
--------- ------- ------- --------- ------- ------- --------- ------- -------
INVESTMENT SECURITIES:
Taxable 0 0 0.00% 1,080 68 6.30% 3,245 187 5.76%
Available for Sale 28,887 1,886 6.53% 29,045 1840 6.45% 18,763 1210 6.45%
--------- ------- ------- --------- ------- ------- --------- ------- -------
Total Securities 28,887 1,886 6.53% 30,125 1,908 6.33% 22,008 1,397 6.35%
--------- ------- ------- --------- ------- ------- --------- ------- -------
FEDERAL FUNDS SOLD 1,728 108 6.25% 4,792 232 4.84% 13,203 717 5.43%
--------- ------- ------- --------- ------- ------- --------- ------- -------
TOTAL EARNING ASSETS $139,410 $11,508 8.25% $136,832 $10,753 7.86% $125,100 $9,964 7.96%
======= ======== ======= ======== ======= ========
NON-EARNING ASSETS:
Cash and Due from Banks 4,467 4,400 4,168
Bank Premises 3,765 2,824 2,113
Other Assets 2,373 1,418 901
--------- --------- ---------
TOTAL NON-EARNING ASSETS $10,605 $8,642 $7,182
--------- --------- ---------
TOTAL ASSETS $150,015 $145,474 $132,282
========= ========= =========
25
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)
Year Ended December 31, 2000 Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------- ---------------------------- ----------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------ ------- -------- ------
INTEREST BEARING LIABILITIES:
Savings Deposits and Interest
Bearing:
DDA $55,169 $1,329 2.41% $53,114 $1,360 2.56% $50,133 $1,345 2.68%
Time Deposits 59,505 3,430 5.76% 58,167 2,964 5.10% 52,055 2,915 5.61%
Federal Funds Purchased 1,052 69 6.56% 833 54 6.48%
--------- ------- --------- --------- ------- --------- --------- ------- ------
Total Interest Bearing
Liabilities 115,726 4,828 4.17% 112,114 4,378 3.90% 102,188 $4,260 4.17%
--------- ======= ========= --------- ======= ========= --------- ======= ======
NON-INTEREST BEARING LIABILITIES
AND CAPITAL:
Demand Deposits 18,587 17,885 15,253
Accrued Expenses 470 851 1,014
Capital 15,232 14,624 13,827
--------- --------- ---------
Total Non-Interest Bearing
Liabilities and Capital 34,289 33,360 30,094
--------- --------- ---------
Total Liabilities and
Stockholders' Equity $150,015 $145,474 $132,282
========= ========= =========
NET INTEREST MARGIN $139,410 $6,680 4.79% $136,832 $6,375 4.66% $125,100 $5,704 4.70%
========= ======== ========= ========= ======== ========= ========= ======== ======
26
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 recognizes 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
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)
Total Over
0 - 90 91-180 181-365 One Year One Year Total
------ ------ ------- -------- -------- -----
Earning Assets
Loans $18,375 $11,145 $8,037 $37,557 $76,084 $113,641
Investments 1,000 992 0 1,992 27,626 29,618
Fed. Funds Sold 4,280 0 0 4,280 0 4,280
------- ------- ------- ------- ------- -------
Total Earning
Assets 23,655 12,137 8,037 43,829 103,710 147,539
------- ------- ------- ------- ------- -------
Interest Bearing
Liabilities:
Demand Deposits 19,435 0 0 19,435 0 19,435
Savings 9,477 7,450 15,360 32,287 0 32,287
CD's of $100,000
and Over 2,855 4,597 6,896 14,348 6,922 21,270
Other Time 9,049 11,679 12,998 33,726 10,661 44,387
------- ------- ------- ------- ------- -------
Total Interest
Bearing Liability 40,816 23,726 35,254 99,796 17,583 117,379
------- ------- ------- ------- ------- -------
Interest
Sensitivity Gap ($17,151)($11,589)($27,217)($55,957) $86,127 $30,170
======= ======= ======= ======= ======= =======
Cumulative Gap ($17,151)($28,740)($55,957)($55,957) $30,170 $30,170
======= ======= ======= ======= ======= =======
Rate Sensitive
Assets/Rate
Sensitive
Liabilities
(Cumulative
Percentage) 57.95% 55.45% 43.92% 43.92% 125.69% 125.69%
======= ======= ======= ======= ======= =======
28
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)
2000 1999 1998 1997 1996
ASSETS: ---- ---- ---- ---- ----
Cash and Due from Banks $4,467 $4,400 $4,168 $3,677 $3,546
Investment Securities:
Available for Sale 28,887 29,045 18,763 16,689 10,206
Held to Maturity 0 1,080 3,245 5,782 8,432
--------- --------- --------- --------- ---------
Total Investments 28,887 30,125 22,008 22,471 18,638
--------- --------- --------- --------- ---------
Federal Funds Sold 1,728 4,792 13,203 9,290 9,827
Loans
Real Estates 52,215 49,235 43,454 37,449 31,897
Installment 13,348 12,212 10,459 7,402 5,606
Commercial & Other 43,884 40,468 36,041 33,714 29,144
--------- --------- --------- --------- ---------
109,447 101,915 89,954 78,565 66,647
Less: Unearned Discount 0 0 65 129 85
--------- --------- --------- --------- ---------
109,447 101,915 89,889 78,436 66,562
Allowance For Loan Losses (652) (718) (707) (614) (668)
--------- --------- --------- --------- ---------
Net Loans 108,795 101,197 89,182 77,822 65,894
--------- --------- --------- --------- ---------
Banking Premises 3,765 2,824 2,113 2,133 1,942
Accrued Interest and
Other Assets 2,373 2,136 1,608 1,565 1,128
--------- --------- --------- --------- ---------
TOTAL ASSETS $150,015 $145,474 $132,282 $116,958 $100,975
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand Deposits $40,135 $39,585 $35,332 $31,007 $27,940
Savings Deposits 33,621 31,413 30,054 31,582 30,049
Time Deposits 59,505 58,167 52,055 40,816 31,006
--------- --------- --------- --------- ---------
Total Deposits 133,261 129,165 117,441 103,405 88,995
Federal Funds Purchased 1,052 834 0 0 0
Other Liabilities 470 851 1,014 1,074 995
--------- --------- --------- --------- ---------
TOTAL LIABILITIES 134,783 130,850 118,455 104,479 89,990
STOCKHOLDERS' EQUITY 15,232 14,624 13,827 12,479 10,985
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $150,015 $145,474 $132,282 $116,958 $100,975
========= ========= ========= ========= =========
29
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 had their computer hardware evaluated for Year 2000
compliance and purchased additional computer hardware and software at a cost of
approximately $175,000. 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
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Page
----
Management's Report on Financial Statements................. 32
Report of Independent Certified Public Accountants.......... 33
Financial Statements:
Logan County BancShares, Inc. and Subsidiary:
Consolidated Statement of Condition as of
December 31, 2000 and 1999................... 34-35
Consolidated Statement of Income as of December
31, 2000, 1999 and 1998...................... 36-37
Consolidated Statement of Changes in Stock-
holders' Equity for the Years Ended
December 31, 2000, 1999 and 1998............. 38
Consolidated Statement of Cash Flows for the
Years Ended December 31, 2000, 1999,
and 1998..................................... 39-40
Notes to Consolidated Financial Statements........ 41-53
31
[Letterhead of Logan County BancShares, Inc.]
To Our Stockholders, Customers and Friends:
We are proud to present the 2000 annual report of Logan County BancShares,
Inc. and its subsidiary, Logan Bank and Trust Company. In 2000, we started
the new millenium on a strong foundation that had long been our trademark.
Starting the new century on a good note, our total assets grew by $4,734,244
or 3.00%, to a new record of $157,479,972. This growth was largely invested
in the region by increasing loans by $4,069,314, showing a continued
commitment to our service area. Earnings of $2,032,721, or $2.84 per share,
in 2000 not only strengthens our capital position but also provides our
shareholders a return of dividends of $1,032,467. The return of average
assets of 1.36% and return on equity of 13.35% are high performance goals for
any organization.
As we began a new millenium, we had some exciting decisions to make: build on
the "hometown" feeling we worked so hard to establish or begin as many of the
ever-increasing number out-of-town banks: less customer satisfaction with the
new standard banking procedures. We made a commitment to begin the same way
we ended the 90's: by being a concerned, caring, innovative force in meeting
the financial needs of our customers. Even with our sophisticated, up-to-date
and convenient services at our five locations, we decided to keep the "local
bank" feel instead of joining the ranks of banks who seem to feel the
customer should not want any more than the privilege of "giving us their
money" and then making them pay for every additional service! New
technologies do not have to make everything confusing. The plain fact is we
prefer being simple: simple to deal with, simple to understand and not
"hiding" fees; we prefer being straightforward. We still believe in investing
in our communities; working with the state, regional and local authorities to
ensure all of us enjoy the benefits of success. We decided to continue to
treat you as the bank and bankers you grew up with: saying what we mean,
meaning what we say and being concerned with you. After all, if your
customers become dissatisfied, it won't be long until you lose them. WE WANT
TO KEEP YOU! With this in mind, we renewed our commitment to supplying the
communities ever-changing financial needs while never losing site of our most
important asset: YOU. We will continually look for ways to improve our
service at each and every one of our five facilities.
In line with our renewed and continued commitment to the local region and
YOU, still expect to see our employees 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. While
we will certainly make sure our management policies continue to reflect this
philosophy, we realize to be successful takes a joint effort between
management and our dedicated employees. It helps that we have the most
cordial, earnest, sincere, conscientious and professional employees in the
region.
We would like to express our sincere appreciation to our employees for their
commitment, to our shareholders for their support, to our directors for their
leadership and for 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 eager to
face the challenges of the new economy as YOUR locally-owned, hometown 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
[Logo McNeal, Williamson & Co. Certified Public Accountants]
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, 2000, and 1999, 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,
2000. 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, 2000, and 1999, and the
consolidated results of its operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with generally
accepted accounting principles.
Logan, West Virginia
February 28, 2001
33
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 2000 and 1999
ASSETS
------
2000 1999
---- ----
CASH AND DUE FROM BANKS $4,686,547 $7,183,524
-------------- -------------
INVESTMENT SECURITIES:
Available for sale 29,617,886 30,028,536
Held to maturity 0 0
-------------- -------------
Total Investment Securities 29,617,886 30,028,536
-------------- -------------
FEDERAL FUNDS SOLD 4,280,000 0
LOANS:
Mortgage Loans 52,596,774 51,162,583
Installment Loans 13,518,168 13,339,520
Commercial and Other Loans 47,525,670 45,069,195
-------------- -------------
Total Loans 113,640,612 109,571,298
Less: Unearned Interest 0 0
Reserve-Loan Losses 702,008 700,554
-------------- -------------
Net Loans 112,938,604 108,870,744
-------------- -------------
BANK PREMISES AND EQUIPMENT 3,594,002 3,774,001
INTEREST RECEIVABLE 1,708,259 1,635,877
OTHER ASSETS 654,674 1,253,046
-------------- -------------
$157,479,972 $152,745,728
============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
34
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 2000 and 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
2000 1999
---- ----
DEPOSITS:
Non-Interest Bearing $23,343,157 $19,331,859
Interest Bearing 19,435,265 18,998,623
Savings Deposits 32,287,308 31,023,961
Time Certificates 63,657,059 58,264,563
------------- -------------
Total Deposits 138,722,789 127,619,006
FEDERAL FUNDS PURCHASED 2,000,000 9,840,000
ACCRUED AND OTHER LIABILITIES 717,919 788,688
FEDERAL INCOME TAXES PAYABLE:
Current 17,796 (17,577)
Deferred 7,252 71,918
------------- -------------
TOTAL LIABILITIES 141,465,756 138,302,035
------------- -------------
STOCKHOLDERS' EQUITY:
Common Stock-$1.67 par value;
Authorized - 780,000 shares,
Outstanding-716,991 shares
in 2000 and 1999 1,300,000 1,300,000
Surplus 2,408,426 2,408,426
Retained Earnings 13,236,733 12,236,479
Net unrealized amortization
on securities available for
sale (70,745) (641,014)
Treasury Stock (860,198) (860,198)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 16,014,216 14,443,693
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $157,479,972 $152,745,728
============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
35
Logan County BancShares, Inc. and Subsidiary
Consolidated Statements of Income
For the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
---- ---- ----
INTEREST INCOME:
Loans, Including Fees $9,513,879 $8,613,254 $7,850,317
Investment Securities:
Available for Sale 1,885,787 1,840,356 1,210,113
Held to Maturity 0 67,844 187,046
Federal Funds Sold 108,011 231,723 716,608
----------- ----------- -----------
Total Interest Income 11,507,677 10,753,177 9,964,084
----------- ----------- -----------
INTEREST EXPENSE:
Deposits 4,758,575 4,323,357 4,259,739
Other Borrowings 68,950 54,416 0
----------- ----------- -----------
Total Interest Expense 4,827,525 4,377,773 4,259,739
----------- ----------- -----------
NET INTEREST INCOME 6,680,152 6,375,404 5,704,345
PROVISION FOR LOAN LOSSES 100,000 22,500 90,000
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,580,152 6,352,904 5,614,345
----------- ----------- -----------
OTHER INCOME:
Service Fees 668,719 637,221 925,644
Other 100,516 56,072 63,206
Securities Gains (Losses) 0 6,054 0
----------- ----------- -----------
769,235 699,347 988,850
----------- ----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
36
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Income
For The Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
---- ---- ----
OTHER EXPENSES:
Salaries and Benefits $2,147,995 $2,018,797 $1,857,732
Taxes Other Than Payroll & Income 69,879 61,432 78,289
Depreciation 273,478 179,323 164,474
Repairs and Maintenance 178,994 181,477 181,403
Fees Paid to Directors 78,850 73,650 69,275
Equipment Rental 40,963 41,735 24,377
FDIC & Fidelity Insurance 98,603 77,783 77,540
Data Processing 475,161 482,814 420,897
Bank Stationery and Printing 119,180 132,754 121,268
Professional Fees 71,273 61,395 81,145
Other Operating Expenses 631,022 586,131 553,053
----------- ----------- -----------
4,185,398 3,897,291 3,629,453
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 3,163,989 3,154,960 2,973,742
INCOME TAXES:
Current 1,132,515 1,118,623 1,079,990
Deferred (1,247) 11,980 2,639
----------- ----------- -----------
NET INCOME $2,032,721 $2,024,357 $1,891,113
=========== =========== ===========
PER SHARE OF COMMON STOCK:
NET INCOME $2.84 $2.83 $2.64
=========== =========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
37
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
For The Years Ended December 31, 2000, 1999 and 1998
ACCUMULATED
OTHER
COMMON RETAINED TREASURY COMPREHENSIVE
STOCK SURPLUS EARNINGS STOCK INCOME, NET TOTAL
------ ------- -------- -------- ------------ -----
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 701,418 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 gain 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
Comprehensive Income
Net Income - 2000 2,032,721 2,032,721
Net unrealized gain on
securities available
for sale 570,269 570,269
------------ ------------- ------------ ----------- ------------ -------------
Total Comprehensive
income $2,032,721 $570,269 $2,602,990
Dividends on 716,991 shares
of Common Stock @ $1.34 (1,032,467) (1,032,467)
------------ ------------- ------------ ----------- ------------ -------------
Balance-December 31, 2000 $1,300,000 $2,408,426 $13,236,733 ($860,198) ($70,745) 16,014,216
============ ============= ============ =========== ============ =============
The accompanying notes are an integral part of these consolidated
financial statements.
38
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Change in Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES: ---- ---- ----
Net Income $2,032,271 $2,024,357 $1,891,113
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and Amortization 277,506 179,323 164,474
Provision For Loan Losses 100,000 22,500 90,000
Provision For Deferred Taxes (1,247) 11,980 2,639
(Gain) Loss on Sale of Securities 0 (6,054) 0
Premium Amortization and
Accretion on Investment
Securities (5,060) 4,207 (8,666)
Increases (Decreases) in
Income Taxes Payable 35,373 (46,091) 46,077
(Increases) Decreases in
Interest Receivable and
Other Assets 32,608 (686,703) (388,951)
Increases (Decreases) in
Interest Payable & Other Liab. (119,149) 108,479 (33,071)
Market Value Adjustment
Amortization 4,028 4,028 4,028
------------- ------------- -------------
Net Cash Provided by
Operating Activities 2,356,330 1,616,026 1,767,643
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment Sec:
Available for Sale 0 8,418,000 15,750,000
Held to Maturity 0 1,000,000 0
Proceeds from Maturities of Inv. Sec:
Available for Sale 7,400,000 4,000,000 2,750,000
Held to Maturity 0 1,500,000 1,500,000
Purchase of Investment Securities:
Available for Sale (5,943,619) (18,365,433) (27,779,025)
Held to Maturity 0 0 0
Net (Increases) Decreases
Federal Funds Sold (4,280,000) 7,520,000 1,390,000
Net (Increases) Decreases
Commercial Loans (2,555,021) (7,131,049) (2,309,156)
Net (Increases) Decreases
Real Estate Loans (1,434,191) (5,074,720) (5,230,511)
Net (Increases) Decreases
Installment Loans (178,648) (2,238,777) (2,727,440)
Purchase of Bank Premises
and Equipment (93,479) (1,868,083) (119,083)
------------- ------------- -------------
Net Cash Used by
Investing Activities (7,084,958) (12,240,062) (16,775,215)
============= ============= =============
The accompanying notes are an integral part of these
financial statements.
39
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Changes in Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
2000 1999 1998
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increases (Decreases) in
Demand Deposits $4,447,940 ($605,526) $7,727,593
Net Increases (Decreases) in
Savings Deposits 1,263,647 1,207,064 529,420
Net Increases (Decreases) in
Time Deposits 5,392,497 2,597,299 8,056,389
Net Increases (Decreases) in
Federal Funds Purchased (7,840,000) 9,840,000 0
Proceeds from Issuance of Common
Stock 0 0 0
Dividends Paid (1,032,437) (958,381) (846,059)
--------------- --------------- ---------------
Net Cash Provided by Financing
Activities $2,231,647 $12,080,456 $15,467,343
--------------- --------------- ---------------
Net Increase (Decrease) in Cash
and Cash Equivalents (2,496,977) 1,456,420 459,771
Cash and Cash Equivalents at
Beginning of Year 7,183,524 5,727,104 5,267,333
--------------- --------------- ---------------
Cash and Cash Equivalents at
End of Year $4,686,547 $7,183,524 $5,727,104
=============== =============== ===============
Supplemental Disclosures of Cash
Flow Information Cash Paid for:
Interest $4,762,739 $4,325,850 $4,230,266
Income Taxes $1,117,740 $1,164,714 $1,033,913
The accompanying notes are an integral part of these
financial statements.
40
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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. As a state bank, the Bank is
subject to regulation by the West Virginia Division of Banking
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
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:
Methods Range of Lives
------- --------------
Banking House S/L, ACRS 10 - 40 years
Furniture, Fixtures and
Equipment S/L, DDB,ACRS 3 - 20 years
42
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 are 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
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Loss Value
----- ------ ----- ------
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
============= ============= ============= =============
VALUES FOR THE YEAR
ENDED DECEMBER 31, 2000
Securities Available for Sale
U.S. Treasury Securities $1,992,000 $1,347 $0 $1,993,347
Federal Agency Securities 27,500,000 0 125,462 27,374,539
Equity Securities 250,000 0 0 250,000
------------- ------------- ------------- -------------
$29,742,000 $1,347 $125,462 $29,617,886
============= ============= ============= =============
44
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
2. Investment Securities: (continued)
The par value of securities pledged to secure public deposits
and for other purposes amounted to $23,135,696 in 2000 and $21,822,123
in 1999.
The amortized cost and estimated market value of investment in
debt securities at December 31, 2000, 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.
Securities to be Held Securities Available
to Maturity For Sale
--------------------------- --------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------ --------- ------
Due in one year or less $0 $0 $1,992,000 $1,993,347
Due from one year to five years 0 0 13,000,000 12,945,316
Due from five years to ten years 0 0 14,750,000 14,679,223
Due after ten years 0 0 0 0
------------- ------------- ------------ ------------
$0 $0 $29,742,000 $29,617,886
============= ============= ============ ============
3. Restriction on Cash, 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
$934,000. and 854,000. for 2000 and 1999 respectively. The Bank has
various claims and suits pending at December 31, 2000 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
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
4. Loans:
Major classifications of loans at December 31, 2000 and 1999
are as follows:
2000 1999
---- ----
Mortgage Loans $52,596,774 $51,162,583
Installment Loans 13,518,168 13,339,520
Commercial and Other Loans 47,525,670 45,069,195
------------- -------------
113,640,612 109,571,298
Less: Unearned Interest 0 0
Reserve for Loan Loss 702,008 700,554
------------- -------------
$112,938,604 $108,870,744
============= =============
Loans on which accrual of interest has been discontinued or
reduced amounted to $425,754. and $555,454. at December 31, 2000 and
1999 respectively. Had the above loans not been placed on a non-accrual
status, income for the Company would have increased approximately
$31,135. and $45,998. for the two years.
The Company's recorded investment in impaired loans was
approximately $1,057,618. at December 31, 2000 and $936,615. at
December 31, 1999. Of that amount in 2000, $667,390. represents loans
for which an allowance for loan losses, amounting to $433,803., has
been established under SFAS 114. The average recorded investment in
impaired loans was approximately $997,116. for 2000 and $925,175. for
1999. Interest income recognized on impaired loans was approximately
$54,252. for the year ended December 31, 2000.
Reserve for Loan Losses:
Transactions in the reserve for loan losses for the years were
as follows:
2000 1999 1998
---- ---- ----
Balance at Beginning of Year $700,553 $701,275 $672,563
Provision Charged to
Operating Expenses 100,000 22,500 90,000
Recoveries credited to
Reserve 7,125 5,494 3,806
Losses Charged to Reserve (105,670) (28,716) (65,094)
------------- ------------- -------------
Balance at End of Year $702,008 $700,553 $701,275
============= ============= =============
The balance of the reserve for loan losses for income tax
purposes was $281,723. at December 31, 2000 and 1999.
Certain directors and executive officers of the Bank and
companies in which they have beneficial ownership, were loan customers
of the Bank during 2000 and 1999. Such loans were made in the ordinary
course of business at the Banks' normal credit terms and interest
rates. An analysis of the 2000 activity with respect to all director
and executive officer loans is as follows:
Balance New Loans Loan Payments Balance
1999 2000 2000 2000
$2,765,252 $981,430 $689,676 $3,057,006
46
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
5. Bank Premises and Equipment:
Bank premises and equipment are summarized as follows:
2000 1999
---- ----
Land $949,972 $949,972
Banking House 3,171,374 3,143,415
Furniture, Fixtures and
Equipment 2,382,842 2,317,618
------------ ------------
6,504,188 6,411,005
Less: Accumulated
Depreciation 2,910,187 2,637,004
------------ ------------
Bank Premises and Equipment $3,594,001 $3,774,001
============ ============
Depreciation expense amounted to $277,506., 179,323., and
$164,474., in 2000, 1999 and 1998 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, 2000 are as follows:
Year Amount
---- ------
2001 $21,400
2002 $21,400
2003 $21,400
2004 $21,400
2005 $21,400
7. Federal Funds Purchased:
At December 31, 2000, 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
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
8. Federal Income Taxes:
The provisions for Federal income taxes for the years ended
December 31, 2000, 1999, and 1998 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:
2000 1999 1998
---------------------- --------------------- ---------------------
Amount Percent Amount Percent Amount Percent
----------- ---------- ----------- --------- ----------- ---------
Tax Expense at
Statutory Rate $1,044,203 34.00% $1,037,245 34.00% $977,013 34.00%
State income tax
net of tax benefits 92,802 3.02% 104,238 3.42% 95,240 3.31%
----------- ---------- ----------- --------- ----------- ---------
1,137,005 37.02% 1,141,483 37.42% 1,072,253 37.31%
Security Transaction 0 0.00% (786) -0.03% (4,894) -0.17%
Loan Loss
Provision (1,457) -0.05% (8,661) -0.28% 9,762 0.34%
Pension Accruals 4,338 0.14% 3,400 0.11% 3,400 0.12%
Other (7,371) -0.24% (16,813) -0.55% (531) -0.02%
Deferred Income
Tax (1,247) 0.04% 11,980 0.39% 2,639 0.09%
----------- ---------- ----------- --------- ----------- ---------
$1,131,268 36.83% $1,130,603 37.06% $1,082,629 37.67%
=========== ========== =========== ========= =========== =========
The tax effect of significant temporary differences which comprise
non-current deferred tax assets and liabilities as of December 31, 2000 and 1999
are as follows:
2000 1999
Assets: ---- ----
Market Value Allowance $21,297 $22,425
Reserve for Loan Loss 142,897 142,403
Allowances for Investments 53,369 483,572
---------- ---------
Gross Deferred Tax Asset 217,563 648,400
---------- ---------
Liabilities:
Property and Equipment 71,165 94,344
---------- ---------
Net Deferred Tax Asset $146,398 $554,056
========== =========
48
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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 board and amounted to $114,358. in 2000 and
$96,335. in 1999.
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
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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:
December 31,
2000 1999
---- ----
Loan commitments $11,236,000 $17,347,000
Standby letters of credit $678,000 $433,000
The Bank subsidiary grants 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:
For Capital
Adequacy To be Well
Company Bank Purposes Capitalized
------------- ------------ ------------- -------------
As of December 31, 1999 Amt. Ratio Amt. Ratio Amt. Ratio Amt. Ratio
------------- ------------ ------------- -------------
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%
As of December 31, 2000
Total Capital (to Risk
Weighted Assets) 16,014 14.91% 15,692 14.65% 8,590 8.00% 10,738 10.00%
Tier I Capital (to Risk
Weighted Assets) 16,147 15.04% 15,825 14.77% 4,295 4.00% 6,442 6.00%
Tier I Capital (to
Average Assets) 16,147 10.31% 15,825 10.27% 6,265 4.00% 7,831 5.00%
50
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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 2001, the Bank could, without prior approval,
declare dividends of approximately $3,111,284. plus any 2001 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, 2000 are as follows:
Carrying Fair
Amount Value
Financial assets:
Cash and cash equivalents $4,686,547 $4,686,547
Investment securities 29,492,000 29,367,886
Loans 113,640,612 113,356,510
Less: Res. for loan losses (702,008) (702,008)
------------- -------------
$147,117,151 $146,708,935
============= =============
Financial liabilities:
Deposits $138,722,789 $138,459,216
============= =============
51
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
13. Stockholders' Equity:
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, 2000 and 1999.
14. Parent Only Condensed Financial Information:
December 31,
--------------------------------------
2000 1999 1998
---- ---- ----
Condensed Balance Sheet:
Assets:
Cash $360,466 $375,496 $365,591
Other Assets 254,875 264,674 264,685
Investment in Subsidiary 15,692,172 14,091,689 13,679,457
------------ ------------ ------------
$16,307,513 $14,731,859 $14,309,733
============ ============ ============
Liabilities and Equity:
Accrued Liabilities $293,297 $288,166 $250,783
Common Stock 1,300,000 1,300,000 1,300,000
Surplus 2,408,426 2,408,426 2,408,426
Retained Earnings 13,165,988 11,595,465 11,210,722
Treasury Stock (860,198) (860,198) (860,198)
------------ ------------ ------------
$16,307,513 $14,731,859 $14,309,733
============ ============ ============
Condensed Statement of Income:
Equity in Net Earnings of
Subsidiary $2,062,681 $2,051,846 $1,918,697
Other Income 7,203 14,800 18,750
Operating Expenses 37,163 42,289 46,334
------------ ------------ ------------
Net Income $2,032,721 $2,024,357 $1,891,113
============ ============ ============
52
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
14. Parent Only Condensed Financial Information (Continued):
December 31,
----------------------------------
2000 1999 1998
---- ---- ----
Condensed Statement of Changes
in Cash Flow:
Cash Flows From Increases (Decreases)
in Cash and Cash Equivalents
Operating Activities:
Net Income $2,032,721 $2,024,357 $1,891,113
Net Change in Other Assets 9,799 11 0
Net Change in Accrued Liabilities 5,131 37,383 (61,950)
------------ ----------- -----------
Net Cash Provided by Operating
Activities 2,047,651 2,061,751 1,829,163
------------ ----------- -----------
Cash Flows From Investing Activities:
Net Change in Investment in
Subsidiary (1,030,214) (1,093,465) (1,072,637)
------------ ----------- -----------
Net Cash Provided (Used) in
Investing Activities (1,030,214) (1,093,465) (1,072,637)
------------ ----------- -----------
Cash Flows From
Financing Activities:
Dividends (1,032,467) (958,381) (846,059)
------------ ----------- -----------
Net Cash Used in Financing
Activities (1,032,467) (958,381) (846,059)
------------ ----------- -----------
Net Change in Cash and Cash
Equivalents During the Year (15,030) 9,905 (89,533)
Cash Account:
Beginning of Year 375,496 365,591 455,124
------------ ----------- -----------
End of Year $360,466 $375,496 $365,591
============ =========== ===========
53
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 2, 2001, is incorporated herein by reference in response to this item.
Executive Officers of the Registrant:
Name Age Position and Office
---- --- -------------------
Harvey Oakley 80 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 52 Executive Vice President
and CEO of Logan County
BancShares, Inc. Mr. Can-
terbury has been Pres-
ident/CEO of Logan Bank &
Trust Company since 1998
and Sr. Vice President
since 1980. He is a
Director of Logan Bank &
Trust Company.
54
ITEM 11 - EXECUTIVE COMPENSATION
The information appearing in the Corporation's Definitive Proxy
Statement, dated May 2, 2001, 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 2, 2001, 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 2, 2001, is incorporated herein by" reference in response
to this item.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
BAND REPORTS ON FORM 8-K
None.
55
LOGAN COUNTY BANCSHARES, INC.
Proxy for the Annual Meeting of Shareholders
To be Held May 22, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harvey Oakley and Eddie Canterbury, or
any of them, proxies or porxy of the undersigned with full power of
substitution to vote, as designated below, the shares of the undersigned at
the Annual Meeting of the Shareholders of Logan County Bancshares, Inc. to be
held at Logan Bank and Trust Company's office, Corner of Washington Avenue
and Main Street, Logan, West Virginia, on May 22, 2001, at 3:00 p.m. and at
any and all adjournments thereof, with all of the powers the undersigned
would possess if personally present.
1. Proposal to approve the nominated Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business and on such other matters as may properly come before
the meeting or any adjournments thereof.
The shares as represented by this Proxy will be voted as specified by
the undersigned. If no specification is made, this Proxy will be cast FOR
Proposal.
Number of Shares: Date: , 2001
--------------------- --------------
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
Certificate Name(s) Signature(s)
Please sign in the manner in which your stock is registered. When
signing as attorney, administrator, trustee of guardian, please give your
full title as such. For joint accounts, each Joint Tenant should sign. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
56
[Letterhead of Logan County BancShares, Inc.]
May 2, 2001
Dear Stockholder:
Your Board of Directors is pleased to invite you to attend the Annual
Meeting of Stockholders of Logan County BancShares, Inc. on May 22, 2001, at
3:00 p.m. The Notice of Meeting and Proxy Statement are attached.
The meeting will be held at Logan Bank and Trust Company's lobby,
Washington and Main Street, Logan, West Virginia. The business of the meeting
will be the election of the Directors and to transact such other business as
may properly come before the meeting.
We hope that you can attend the meeting. In any event, please mark, date
and sign the enclosed proxy and return it in the accompanying envelope.
LOGAN COUNTY BANCSHARES, INC.
Harvey Oakley Eddie Canterbury
President/Chairman Executive Vice President/CEO
57
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 2001
The Annual Meeting of Stockholders of Logan County BancShares, Inc. will
be held at Logan Bank and Trust Company's lobby at 3:00 p.m. on May 22, 2001,
for the following purposes:
1. To elect Directors of the Corporation.
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 20, 2001,
are entitled to notice of and to vote at the meeting.
58
LOGAN COUNTY BANCSHARES, INC.
P.O. BOX 597
LOGAN, WEST VIRGINIA 25601
MAY 2, 2001
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROCESS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Logan County BancShares, Inc. (Corporation) of
proxies for the Annual Meeting of Stockholders of the corporation to be held
May 22, 2001, and any adjournment thereof. Shares represented by properly
executed proxies which are received in time and not revoked will be voted at
the meeting in the manner described in the proxies. Any proxy may be revoked
at any time before it is exercised.
INFORMATION AS TO VOTING SECURITIES
The Board of Directors has fixed the close of business on April 20,
2001, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. At the record date, 716,991
shares of Common Stock of the Corporation were outstanding and entitled to
be voted at the meeting. Each share of Common Stock is entitled to one vote.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation has, in accordance with the
bylaws, fixed the number of Directors of the Corporation at not less than
three. Accordingly, ten Directors are proposed to be elected to serve until
the next Annual Meeting of Stockholders and until their respective successors
are duly elected and have qualified. It is intended that shares represented
by proxies solicited by the Board of Directors will, unless contrary
instructions are given, be voted in favor of the election as Directors of the
nominees listed below. If any nominee is unavailable for election, the shares
may be voted for a substitute nominee. The following nominees have been
proposed to serve as Directors of the Corporation. They are:
COMMON STOCK
NAME AGE PRINCIPAL OCCUPATION BENEFICIALLY OWNED
---- --- -------------------- ------------------
Frank H. Oakley 86 Chairman, Bray and Oakley 49,659
Insurance Agency, Inc.
59
COMMON STOCK
NAME AGE PRINCIPAL OCCUPATION BENEFICIALLY OWNED
---- --- -------------------- ------------------
Harvey Oakley 80 President/Chairman of the Board, (A) 47,938
Logan County BancShares, Inc.;
Attorney at Law; Chairman of the
Board of Logan Bank and Trust.
Clell Peyton 64 Director, Logan Bank and Trust 10,773
Retired, Nationwide Insurance Company.
Earle B. Queen 73 Director, Loan Bank and Trust; (B) 19,255
President, James Funeral Home.
La Veta Jean Ray 69 Retired Counselor, (C) 7,428
Champmanville High School.
William W. Wagner 68 Director, Logan Bank and Trust; (D) 15,409
Former Director and Executive Comm.,
United Bancshares; Former Chairman
Eagle Bancorp, Inc.
Eddie Canterbury 52 Director and Executive Vice President/ (E) 7,467
CEO, Logan County BancShares, Inc.;
Director and President/CEO
Logan Bank and Trust.
Walter D. Vance 50 Vice President, Logan County (F) 4,569
BancShares, Inc.; Vice President,
Aracoma Drug Company.
Glenn T. Yost 43 Director, Logan Bank and Trust; (G) 28,963
President, W.W. McDonald Land Co.;
President, Triadelphia Land Co.;
President, Bruce McDonald Holding Co.
David McCormick 53 Director, Logan Bank and Trust; (H) 38,058
President, McCormick's, Inc.;
President, Bodaco, Co.
60
(A) Includes 6,982 shares jointly owned with spouse.
(B) Includes 18,000 shares owned by Earle B. Queen, Trust, 205 shares
owned by Funeral Services, Inc. and 225 shares owned by Queen
Brothers, Inc.
(C) Includes 1,428 shares jointly owned with sister, Erma Ray Butcher.
(D) Includes 654 shares jointly owned with spouse.
(E) Includes 357 shares owned by IRA.
(F) Includes 849 shares owned by Aracoma Drug Company.
(G) Includes 1,125 shares jointly owned with spouse; and 27,164 shares
for which voting and investment powers are deemed; 20,625 shares owned
by W.W. McDonald Land Company; 5,863 shares owned by Bruce McDonald
Holding Company; 675 shares owned by Triadelphia Land Company.
(H) Includes 37,908 shares owned by Badaco, Co.
EXECUTIVE COMPENSATION
All Executive Officers of Logan County BancShares, Inc. were compensated
$7,200.00 in Director's fees during 2000.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors was not
aware of any matters not referred to in the form proxy that would be
presented for action at the meeting. If any other business comes before the
meeting, the persons named in the proxy will have discretionary authority to
vote the shares represented by them in accordance with their best judgement.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
All proposals must be submitted to the Board of Directors 30 days prior
to the Annual Meeting of Stockholders.
61
NOTICE TO SHAREHOLDERS
The Annual Disclosure Statement, which contains certain financial
information, of Logan Bank and Trust Company is available upon request.
Please contact the New Accounts Department at:
Logan Bank and Trust Company
43 Washington Avenue
PO Box 597
Logan, West Virginia 25601-0597
Phone: (304) 752-1166
62
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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)
-----------------------------
Eddie Canterbury
Executive Vice President/CEO
March 23, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the dates indicated.
SIGNATURE
Frank H. Oakley Director
Harvey Oakley Director, President/Chairman
of the Board
Clell Peyton Director By: _________________
Eddie Canterbury
Earle B. Queen Director Attorney in Fact
Date: March 23, 2001
Lavetta J. Ray Director
Walter D. Vance Director
William W. Wagner Director
___________________________ Executive Vice President
Eddie Canterbury and Director
Director
63