SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.  20549

 

Quarterly Report Under Section 13 or 15 (d)

of the Securities Exchange Act of 1934

 

For Quarter Ended               September 30, 2002

 

Commission File Number    2-95114

 

 

LOGAN COUNTY BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)

 

WEST VIRGINIA
(State or other jurisdiction of incorporation or organization)

 

55-0660015
(IRS Employer Identification Number)

 

P. O. BOX 597, LOGAN, WEST VIRGINIA                  25601

(Address of Principal Executive Offices)            (Zip Code)

 

(304) 752-1166
(Registrant’s telephone number including area code)

 

 

Indicate by check mark whether the  registrant (1) has filed all reports required to be filed by Section 13  or 15 (d) of the Securities Exchange Act of 1934  during the preceding 12 months (or  for such shorter period that the registrant was required to  file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  Noo

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate  the number  of shares  outstanding,  of each  of the  issuer’s classes of common stock, as of the latest practicable date.   716,991

 

1

 

 

LOGAN COUNTY BANCSHARES, INC.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM I.  FINANCIAL STATEMENTS:

 

Consolidated Statement of Condition As of September 30, 2002 and 2001 and December 31, 2001.
Consolidated Statement of Income For the Three Month Period Ended September 30, 2002 and 2001.
Consolidated Statement of Income For the Nine Month Period Ended September 30, 2002 and 2001.
Consolidated  Statement  of Changes in Stockholders’ Equity for the Nine Month Period Ended September 30, 2002 and 2001.
Consolidated Statement of Cash Flows for the Nine Month Period Ended September 30, 2002 and 2001.
Notes to Consolidated Financial Statements
ITEM 2.	MANAGEMENT’S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 4.	CONTROLS  AND  PROCEDURES
PART II - OTHER INFORMATION
SIGNATURES
CERTIFICATION

 

 

2

 

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Condition

September 30, 2002 and 2001 and December 31, 2001

(In Thousands)

 

		September 30,						December 31,
		2002			2001			2001
ASSETS
CASH AND DUE FROM BANKS		$	6,885		$	5,228		$	7,072
INVESTMENT SECURITIES:
AVAILABLE FOR SALE		46,433			21,034			36,335
HELD TO MATURITY		0			0			0
FEDERAL FUNDS SOLD		8,860			28,060			7,150
LOANS:
TOTAL LOANS		108,532			115,491			116,908
RESERVE FOR LOAN LOSSES		1,293			805			1,153
NET LOANS		107,239			114,686			115,755
BANK PREMISES AND EQUIPMENT		3,231			3,433			3,384
ACCRUED INTEREST AND OTHER ASSETS		1,614			1,579			1,883
		$	174,262		$	174,020		$	171,579
LIABILITIES AND STOCKHOLDERS’ EQUITY
DEPOSITS:
DEMAND DEPOSITS:
NON-INTEREST		$	24,647		$	29,481		$	27,571
INTEREST BEARING		24,827			22,563			21,371
SAVINGS DEPOSITS		42,786			37,922			39,804
TIME DEPOSITS		60,134			64,273			63,282
TOTAL DEPOSITS		152,394			154,239			152,028
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE		3,000			2,000			2,000
ACCRUED AND OTHER LIABILITIES		514			600			673
INCOME TAXES PAYABLE:
CURRENT		15			28			(18		)
DEFERRED		369			160			116
TOTAL LIABILITIES		156,292			157,027			154,799
STOCKHOLDERS’ EQUITY:
COMMON STOCK-$1.67 PAR VALUE; AUTHORIZED - 780,000 SHARES OUTSTANDING-716,991 SHARES IN 2001 AND 2000		1,300			1,300			1,300
SURPLUS		2,408			2,408			2,408
RETAINED EARNINGS		15,122			14,145			13,952
TREASURY STOCK		(860		)	(860		)	(860		)
TOTAL STOCKHOLDERS’ EQUITY		17,970			16,993			16,800
		$	174,262		$	174,020		$	171,599

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

3

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Income

For the Three Month Periods Ended September 30, 2002 and 2001

(In Thousands)

 

		2002			2001
INTEREST INCOME:
INTEREST ON LOANS		$	2,124		$	2,448
INTEREST ON INVESTMENTS		343			243
INTEREST ON FEDERAL FUNDS SOLD		53			270
		2,520			2,961
INTEREST EXPENSE:
INTEREST ON DEPOSITS		634			1,209
INTEREST OTHER		41			36
NET INTEREST INCOME		1,845			1,716
PROVISION FOR LOAN LOSSES		60			30
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		1,785			1,686
OTHER INCOME:
SERVICE FEES		174			142
OTHER OPERATING INCOME		18			34
TOTAL OTHER INCOME		192			176
OTHER EXPENSES:
SALARIES AND BENEFITS		561			558
EXPENSE OF BANK PREMISES AND EQUIPMENT		150			147
OTHER OPERATING EXPENSES		397			415
TOTAL OTHER EXPENSES		1,108			1,120
INCOME BEFORE INCOME TAXES		869			742
INCOME TAXES		327			267
NET INCOME		$	542		$	475
PER SHARE OF COMMON STOCK NET INCOME		$	0.76		$	0.67

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

4

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Income

For the Nine Month Periods Ended September 30, 2002 and 2001

(In Thousands)

 

		2002			2001
INTEREST INCOME:
INTEREST ON LOANS		$	6,491		$	7,667
INTEREST ON INVESTMENTS		1,039			1,033
INTEREST ON FEDERAL FUNDS SOLD		153			652
		7,683			9,352
INTEREST EXPENSE:
INTEREST ON DEPOSITS		2,013			3,775
INTEREST OTHER		120			105
NET INTEREST INCOME		5,550			5,472
PROVISION FOR LOAN LOSSES		180			170
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,370			5,302
OTHER INCOME:
SERVICE FEES		486			460
OTHER OPERATING INCOME		84			75
TOTAL OTHER INCOME		570			535
OTHER EXPENSES:
SALARIES AND BENEFITS		1,696			1,598
EXPENSE OF BANK PREMISES AND EQUIPMENT		440			432
OTHER OPERATING EXPENSES		1,220			1,393
TOTAL OTHER EXPENSES		3,356			3,423
INCOME BEFORE INCOME TAXES		2,584			2,414
INCOME TAXES		981			899
NET INCOME		$	1,603		$	1,515
PER SHARE OF COMMON STOCK NET INCOME		$	2.24		$	2.11

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

5

 

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement in Changes in Stockholders’ Equity

For the Nine Month Periods Ended September 30, 2002 and 2001

(In Thousands)

 

 

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

6

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows

For the Nine Month Periods Ended September 30, 2002 and 2001

 

 

		2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME		$	1,603		$	1,515
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION		201			200
SECURITY AMORTIZATION AND ACCREATION		—			—
MARKET VALUE AMORTIZATION		(3		)	(3		)
PROVISION FOR LOAN LOSSES		180			170
(INCREASE) DECREASE IN OTHER ASSETS		(859		)	784
INCREASE (DECREASE) IN OTHER LIABILITIES		127			(112		)
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,249			2,554
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF SECURITIES AVAILABLE FOR SALE		20,820			34,900
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE		4,487			7,400
PURCHASE OF SECURITIES AVAILABLE FOR SALE		(33,935		)	(33,435		)
NET (INCREASE) DECREASE IN FEDERAL FUNDS SOLD		(1,710		)	(23,780		)
NET (INCREASE) DECREASE IN LOANS		8,336			(1,850		)
PURCHASE OF BANK PREMISES AND EQUIPMENT		(48		)	(39		)
NET CASH PROVIDED BY INVESTING ACTIVITIES		(2,050		)	(16,804		)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN DEMAND DEPOSITS		532			9,266
NET INCREASE (DECREASE) IN SAVINGS DEPOSITS		2,982			5,634
NET INCREASE (DECREASE) IN TIME DEPOSITS		(3,148		)	616
NET INCREASE (DECREASE) IN FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE		1,000			—
DIVIDENDS PAID		(752		)	(724		)
NET CASH PROVIDED BY FINANCING ACTIVITIES		614			14,792
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(187		)	542
CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD		7,072			4,686
CASH AND CASH EQUIVALENT AT END OF PERIOD		$	6,885		$	5,228

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

7

 

 

September 30, 2002

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

1.  Financial Statements:

 

                The  foregoing  statements  are unaudited;  however,  in  the opinion  of the  Management, all  adjustments (comprising  of only normal recurring  accruals) necessary  for a fair  presentation of the financial statements have been included.

 

2.  Basis of Consolidation:

 

                The  Consolidated  Statement  of Condition  and  Consolidated Statement of Income  of Logan County Bancshares,  Inc. include the activity  of  Logan  Bank  and Trust  Company,  a  wholly  owned subsidiary.

 

3.  Year 2000 Assessment

 

                Management has initiated a Company-wide program to assess its data processing, information systems and customer service programs to ensure the  Company’s operating capabilities in  the year 2000.  Currently, the  Company’s Subsidiary Bank,  L B  & T, uses Aurum Technology, Inc., a regional  provider of  financial institution  data processing,  as it’s primary  provider of  computer services and  data processing.  Aurum Technology, Inc. has  certified it’s hardware  and software are Year  2000, and beyond, compliant.

 

                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.

 

 

8

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

The following is a discussion and analysis focused on significant changes in the financial condition and results of operations of Logan County Bancshares, Inc.

 

EARNINGS SUMMARY

 

The Company reported net income of $1,603,000. for the nine months ended September 30, 2002 compared to $1,515,000. for the nine months ended September 30, 2001, representing a 5.81% increase.  This increase was primarily the result of the increase  in net interest income of $78,000., increase in other income of $35,000. and a decrease in all operating expenses of $67,000. and an increase in income taxes of $82,000.

 

Earnings per common share were $2.24 for the nine months ended September 30, 2002 compared with $2.11 for the same period of 2001.

 

Logan County Bancshares' annualized return on assets (ROA) for the nine month period ended September 30, 2002 was 1.23% compared to 1.16% for the nine month period ended September 30, 2001.  Annualized return on shareholders' equity (ROE) was 11.89% and 11.89% at September 30, 2002 and 2001, respectively.

 

NET INTEREST INCOME

 

The most significant component of Logan County Bancshares' net earnings is net interest income, which represents the excess of interest income earned on earning assets over the interest expense paid for sources of funds.  Net interest income is  affected by changes in volume resulting from growth and alteration of the balance sheet composition, as well as by fluctuations in market interest rates and maturities of sources and uses of funds.

 

                Interest income amounted to  $7,683,000. at September 30, 2002, a decrease of $1.669,000. from September 30, 2001.  Interest expense also decreased $1,747,000., resulting in an overall increase of $78,000. or 1.43% in net interest income between September 30, 2002 and September 30, 2001.

 

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

 

                The provision for loan losses represents charges to earnings necessary to maintain an adequate allowance for  potential future  loan losses.  Management's determination of the appropriate level of the allowance is based on an ongoing analysis of credit quality and loss potential in the loan portfolio, actual loan loss experience relative to the size and characteristics of the loan portfolio, change in the composition and risk characteristics of the loan portfolio and the anticipated influence of national and local economic conditions.  The adequacy of the allowance for loan losses is reviewed quarterly and adjustments are made as considered necessary.

 

 

                For the nine month period ended September 30, 2002 and 2001, the provision for loan losses was $180,000. and $170,000. respectively.

 

                The reserve for loan was  $1,293,000. at September 30, 2002 compared to $805,000. at September 30, 2001.  Expressed as a percentage of loans (net of unearned income), the reserve for loan losses was 1.19% at September 30, 2002 and .70% at September 30, 2001.

 

 

9

 

A summary of the Company's past due loans and non-performing assets is provided in the following table.

 

 

SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS

(in thousands of dollars)

 

		September 30
		2002			2001
Loans past due 90 or more days still accruing interest		$	1,142		$	1,297
Non-performing assets:
Non-accruing loans		1,098			1,202
Other real estate owned		97			14
		$	1,195		$	1,216

 

NON-INTEREST INCOME

 

                Non-interest income includes from all sources other than interest income.  For  the nine  month period  ended September 30, 2002, non-interest income totaled $570,000., representing a increase of $35,000., or 6.54% from the $535,000. recorded during the same period of 2001.  This increase was primarily due to increases in service fees income of $26,000.

 

NON-INTEREST EXPENSE

 

                Non-interest expense comprises overhead costs which are not related to interest expense or  to losses from loans or securities.  As of September 30,  2002, the Company's  non-interest expense totaled $3,356,000., decreasing $67,000. over the $3,423,000. of non-interest expense for the nine months ended  September 30, 2001.  Expressed as a percentage of assets, annualized  non-interest expense was 1.93% at September 30, 2002, compared to 1.98% at September 30, 2001.

 

                Salaries and employee benefits are Logan County Bancshares' largest non-interest cost, representing approximately  50% of total non-interest expense at September 30, 2002 and 2001.  Salaries and employee benefits increased $98,000., or 7.43% at  September 30, 2002 compared to September 30, 2000.  This increase is primarily due to increased personnel.

 

INCOME TAXES

 

                Logan County Bancshares' income tax expense, for the nine month period ended September 30, 2002, reflected a $82,000. increase when compared to the same period of 2001.  Income tax expense equaled 37.96% and 37.24% of income before taxes at  September 30, 2002 and 2001, respectively.  For  financial reporting purposes, income tax expense does not equal the statutory income tax rate of 43% when applied to pretax income, primarily because of timing differences included in income before income taxes.

 

 

10

 

 

Balance Sheet Data:

 

                Total assets increased by $2,663,000. between year end and September 30, 2002 to a balance of $174,262,000.  The major component of this change was an increase in Investment Securities of $10,098,000., and loan decreases of $8,516,000. and cash decreased by $187,000.  The primary source of funds for this change was an increase in deposits of $366,000., a decrease in repurchase agreements of $1,000,000., and net income of $1,603,000.

 

Liquidity:

 

                Managing Logan's liquidity requirements primarily involves meeting the loan demand, deposit withdrawal and the cash flow requirements.  Logan's primary sources of liquid assets are federal funds sold and investment securities maturing in less than one year.  These items can be converted into funds in a short period of time.  At September 30, 2002, Federal Funds Sold amounted to $8,860,000. and securities maturing within one year amounted to $8,589,000.  These are compared to the balances at September 30, 2001 of $28,060,000. in Federal Funds Sold and maturing Investment Securities of $2,998,000. due within one year.

 

                Traditionally, banks have been able to manage liquidity based on a relatively stable group of core deposits.  The deposits, demand and consumer deposits under $l00,000. are considered the most stable and least expensive source of funds.  During 2002 and 2001, banks continue to be faced with volatile interest sensitive funds and have had  to match their funding requirements by using assets and liability management techniques.

 

Capital Resources:

 

                Logan's capital position is based on its stockholders' equity and the primary source of such equity has been retained earnings.  Since Logan's formation, it has accumulated Retained Earnings of $15,122,000. and has a total Stockholders' Equity of $17,970,000. as of September 30, 2002; as compared to $14,145,000. of Retained Earnings and total  Stockholders' equity of $16,993,000. at September 30, 2001.

 

                The equity capital was 10.31% and 9.77% of total assets at September 30, 2002 and 2001 respectively.  Logan County Bancshares exceeds all regulatory capital guide lines and has not been advised by any regulatory  agency of any minimum capital requirement.

 

 

Table of Contents

 

 

LOGAN COUNTY BANCSHARES, INC.

 

 

Item 4. Controls and Procedures

 

(a)  Based on their evaluation of the issuer’s disclosure controls and procedures (as defined in 17 C.F.R. Sections 240.13a-14(c) and 240.15d-14(c) as of a date within 90 days prior to the filing of this quarterly report, the issuer’s chief executive officer and other certifying officers concluded that the effectiveness of such controls and procedures was adequate.

 

(b)  There were no significant changes in the issuer’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

11

 

 

PART II. - OTHER INFORMATION

 

NONE.

SIGNATURES

 

     Pursuant to the requirements of  the Securities Exchange Act of 1934, the registrant has duly  caused this report to be signed  on its behalf by the undersigned thereunto duly authorized.

 

 

				LOGAN COUNTY BANCSHARES, INC.
			(Registrant)
Date		11/08/02			/s/Harvey Oakley
						Harvey Oakley, President
						(Signature)
Date		11/08/02			/s/Eddie D. Canterbury
						Eddie D. Canterbury, Exec. Vice Pres.
						(Signature)

 

 

CERTIFICATION UNDER SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

 

                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Logan County BancShares, Inc.

 

 

	/s/Harvey Oakley
	Harvey Oakley, President
	(signature)

 

 

Date	11/08/02		/s/Eddie D. Canterbury
			Eddie D. Canterbury, Exec. Vice President
			(signature)

 

 

12

 

Table of Contents

 

LOGAN COUNTY BANCSHARES, INC

 

CERTIFICATIONS

 

 

I, Eddie D. Canterbury, certify that:

 

1.  I have reviewed this quarterly report on Form 10-Q of Logan County Bancshares, Inc.;

 

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a  material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.

 

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the registrant and have:

 

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on the evaluated as of the Evaluation Date;

 

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.  The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

 

Date:  November 8, 2002	/s/ Harvey Oakley
	Harvey Oakley, President
	(Signature)
Date:  November 8, 2002	/s/ Eddie D. Canterbury
	Eddie D. Canterbury, Exec. Vice President
	(Signature)

 

 

13