# **FORM 10-Q**

#  

**SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON, D.C. 20549**

 

**QuarterlyReport Under Section 13 or 15 (d)Of the Securities Exchange Act of 1934**

 

**For QuarterEnded                       March 31,2004**

 

**Commission FileNumber            2-95114**

 

**LOGAN COUNTY BANCSHARES, INC.**

(Exact Name of Registrant as Specified In ItsCharter)

 

**WEST VIRGINIA**

(State or other jurisdiction of incorporationor 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 areacode)

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15 (d) ofthe Securities Exchange Act of 1934 during the preceding12 months (or for suchshorter 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  No   o

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding, ofeach of the issuer’s classes of common stock, as of the latest practicabledate.  703,991

 

 

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LOGAN COUNTY BANCSHARES, INC.

 
| PART 1 – FINANCIAL INFORMATION                                                                                             |                                                                                         |
|---------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                                                                                            |                                                                                         |
| ITEM 1.                                                                                                                         | FINANCIAL STATEMENTS:                                                                        |   |
|                                                                                                                            |                                                                                         |
| Consolidated Statement of Condition as of  March 31, 2004 and 2003 and December 31, 2003.                             |                                                                                         |
|                                                                                                                            |                                                                                         |
| Consolidated Statement of Income For the  Three Month Period Ended March 31, 2004 and 2003.                                |                                                                                         |
|                                                                                                                            |                                                                                         |
| Consolidated Statement of Changes in  Stockholders’ Equity for the Three Month Period Ended March 31, 2004 and  2003. |                                                                                         |
|                                                                                                                            |                                                                                         |
| Consolidated Statement of Cash Flows for the Three Month Period Ended  March 31, 2004 and 2003.                            |                                                                                         |
|                                                                                                                            |                                                                                         |
| Notes to Consolidated Financial Statements                                                                                      |                                                                                         |
|                                                                                                                            |                                                                                         |
| ITEM 2.                                                                                                                         | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS. |   |
|                                                                                                                            |                                                                                         |
| PART II  – OTHER INFORMATION                                                                                               |                                                                                         |
|                                                                                                                            |                                                                                         |
| SIGNATURES                                                                                                                      |                                                                                         |
|                                                                                                                            |                                                                                         |
| CERTIFICATION                                                                                                                   |                                                                                         |

 

2

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LOGAN COUNTY BANCSHARES, INC AND SUBSIDIARIES

Consolidated Statement of Condition

March 31, 2004 and 2003 andDecember 31, 2003

(In Thousands)

 
|                                       |   | **March 31,** |    | **December 31,** |   |
|--------------------------------------------|--------|--------------------|---------|-----------------------|--------|
|                                       |   | **2004**           |    | **2003**              |   | **2003** |   |
|                                       |   |               |    |                  |   |   |   |
| ASSETS                                     |   |               |    |                  |   |   |   |
|                                       |   |               |    |                  |   |   |   |
| CASH AND DUE FROM BANKS                    |   | $                  | 6,757   |                  | $      | 7,334 |   | $ | 7,240 |   |
|                                       |   |               |    |                  |   |   |   |
| INVESTMENT SECURITIES:                     |   |               |    |                  |   |   |   |
| AVAILABLE FOR SALE                         |   | 36,226             |    | 39,605                |   | 47,973 |   |
| HELD TO MATURITY                           |   | 0                  |    | 0                     |   | 0 |   |
| FEDERAL FUNDS SOLD                         |   | 34,085             |    | 20,990                |   | 13,385 |   |
|                                       |   |               |    |                  |   |   |   |
| LOANS:                                     |   |               |    |                  |   |   |   |
| TOTAL LOANS                                |   | 100,062            |    | 105,222               |   | 101,615 |   |
|                                       |   |               |    |                  |   |   |   |
| RESERVE FOR LOAN LOSSES                    |   | 1,562              |    | 1,578                 |   | 1,582 |   |
|                                       |   |               |    |                  |   |   |   |
| NET LOANS                                  |   | 98,500             |    | 103,644               |   | 100,033 |   |
|                                       |   |               |    |                  |   |   |   |
| BANK PREMISES AND EQUIPMENT                |   | 3,246              |    | 3,196                 |   | 3,103 |   |
|                                       |   |               |    |                  |   |   |   |
| ACCRUED INTEREST AND OTHER ASSETS          |   | 3,699              |    | 1,746                 |   | 3,925 |   |
|                                       |   |               |    |                  |   |   |   |
|                                       |   | $                  | 182,513 |                  | $      | 176,515 |   | $ | 175,659 |   |
|                                       |   |               |    |                  |   |   |   |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY |   |               |    |                  |   |   |   |
|                                       |   |               |    |                  |   |   |   |
| DEPOSITS:                                  |   |               |    |                  |   |   |   |
| DEMAND DEPOSITS:                           |   |               |    |                  |   |   |   |
| NON-INTEREST                               |   | $                  | 33,192  |                  | $      | 27,413 |   | $ | 30,098 |   |
| INTEREST BEARING                           |   | 24,895             |    | 26,479                |   | 23,256 |   |
| SAVINGS DEPOSITS                           |   | 44,841             |    | 43,016                |   | 43,203 |   |
| TIME DEPOSITS                              |   | 57,790             |    | 58,199                |   | 57,595 |   |
|                                       |   |               |    |                  |   |   |   |
| TOTAL DEPOSITS                             |   | 160,718            |    | 155,107               |   | 154,152 |   |
|                                       |   |               |    |                  |   |   |   |
| REPURCHASED AGREEMENTS                     |   | 3,000              |    | 3,003                 |   | 3,000 |   |
| ACCRUED AND OTHER LIABILITIES              |   | 414                |    | 430                   |   | 582 |   |
|                                       |   |               |    |                  |   |   |   |
| INCOME TAXES PAYABLE:                      |   |               |    |                  |   |   |   |
| CURRENT                                    |   | 230                |    | 283                   |   | (35 | ) |
| DEFERRED                                   |   | 177                |    | 302                   |   | 170 |   |
|                                       |   |               |    |                  |   |   |   |
| TOTAL LIABILITIES                          |   | 164,539            |    | 159,125               |   | 157,869 |   |
|                                       |   |               |    |                  |   |   |   |
| STOCKHOLDERS’ EQUITY:                 |   |               |    |                  |   |   |   |
| COMMON STOCK-$1.67 PAR VALUE;              |   |               |    |                  |   |   |   |
| AUTHORIZED - 780,000 SHARES                |   |               |    |                  |   |   |   |
| OUTSTANDING - 703,991                      |   |               |    |                  |   |   |   |
| SHARES IN 2004 AND 2003                    |   | 1,300              |    | 1,300                 |   | 1,300 |   |
| SURPLUS                                    |   | 2,408              |    | 2,408                 |   | 2,408 |   |
| RETAINED EARNINGS                          |   | 15,672             |    | 15,088                |   | 15,488 |   |
| TREASURY STOCK                             |   | (1,406             | )       | (1,406                | )      | (1,406 | ) |
|                                       |   |               |    |                  |   |   |   |
| TOTAL STOCKHOLDERS’ EQUITY            |   | 17,974             |    | 17,390                |   | 17,790 |   |
|                                       |   |               |    |                  |   |   |   |
|                                       |   | $                  | 182,513 |                  | $      | 176,515 |   | $ | 175,659 |   |

 

See Accompany Notes to Consolidated FinancialStatement

 

3

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement of Income

For the Three Month Periods EndedMarch 31, 2004 and 2003

(In Thousands)

 
|                                                 |   | **2004** |   | **2003** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   |     |   |     |   |
| INTEREST INCOME:                                     |   |     |   |     |   |
| INTEREST ON LOANS                                    |   | $        | 1,757  |     | $      | 1,927 |   |
| INTEREST ON INVESTMENTS                              |   | 213      |   | 273      |   |
| INTEREST ON FEDERAL FUNDS SOLD                       |   | 54       |   | 49       |   |
|                                                 |   |     |   |     |   |
|                                                 |   | 2,024    |   | 2,249    |   |
|                                                 |   |     |   |     |   |
| INTEREST EXPENSE:                                    |   |     |   |     |   |
| INTEREST ON DEPOSITS                                 |   | 426      |   | 531      |   |
| INTEREST OTHER                                       |   | 27       |   | 19       |   |
|                                                 |   |     |   |     |   |
| NET INTEREST INCOME                                  |   | 1,571    |   | 1,699    |   |
|                                                 |   |     |   |     |   |
| PROVISION FOR LOAN LOSSES                            |   | 0        |   | 2        |   |
|                                                 |   |     |   |     |   |
| NET INTEREST INCOME AFTER PROVISION FOR  LOAN LOSSES |   | 1,571    |   | 1,697    |   |
|                                                 |   |     |   |     |   |
| OTHER INCOME:                                        |   |     |   |     |   |
| SERVICE FEES                                         |   | 197      |   | 194      |   |
| OTHER OPERATING INCOME                               |   | 63       |   | 59       |   |
|                                                 |   |     |   |     |   |
| TOTAL OTHER INCOME                                   |   | 260      |   | 253      |   |
|                                                 |   |     |   |     |   |
| OTHER EXPENSES:                                      |   |     |   |     |   |
| SALARIES AND BENEFITS                                |   | 590      |   | 584      |   |
| EXPENSE OF BANK PREMISES AND EQUIPMENT               |   | 134      |   | 149      |   |
| OTHER OPERATING EXPENSES                             |   | 430      |   | 385      |   |
|                                                 |   |     |   |     |   |
| TOTAL OTHER EXPENSES                                 |   | 1,154    |   | 1,118    |   |
|                                                 |   |     |   |     |   |
| INCOME BEFORE INCOME TAXES                           |   | 677      |   | 832      |   |
|                                                 |   |     |   |     |   |
| INCOME TAXES                                         |   | 227      |   | 301      |   |
|                                                 |   |     |   |     |   |
| NET INCOME                                           |   | $        | 450    |     | $      | 531 |   |
|                                                 |   |     |   |     |   |
| PER SHARE OF COMMON STOCK NET INCOME                 |   | $        | 0.64   |     | $      | 0.75 |   |

 

See Accompany Notes to Consolidated FinancialStatement

 

4

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Logan County BancShares, Inc. and Subsidiary

ConsolidatedStatement of Stockholders’ Equity

For the Three Month Periords EndedMarch 31, 2004, and 2003

 
|                                                       |   | **Common  Stock** |   | **Surplus** |   | **Retained  Earnings** |   | **Treasury  Stock** |   | **Accumulated  Other  Comprehensive  Income, Net** |   | **Total** |   |
|------------------------------------------------------------|--------|-------------------|--------|-------------|--------|------------------------|--------|---------------------|--------|----------------------------------------------------|--------|-----------|--------|
| Balance-December 2003                                 |   | $                 | 1,300  |        | $      | 2,408                  |   | $                   | 15,426 |                                               | $      | (1,406    | )      | $ | 62 |   | $ | 17,790 |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Comprehensive Income                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Net Income for the Three Months Ended  March 31, 2004 |   | 0                 |   | 0           |   | 450                    |   | 0                   |   | 0                                                  |   | 450       |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Net unrealized gain on securities available  for Sale      |   | 0                 |   | 0           |   | 0                      |   | 0                   |   | (13                                                | )      | (13       | )      |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Total Comprehensive Income                                 |   | 0                 |   | 0           |   | 450                    |   |                |   | (13                                                | )      | 437       |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Dividends on 703,991 Shares of Common  Stock@ $.36         |   | 0                 |   | 0           |   | (253                   | )      | 0                   |   | 0                                                  |   | (253      | )      |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Balance at March 31, 2004                             |   | $                 | 1,300  |        | $      | 2,408                  |   | $                   | 15,623 |                                               | $      | (1,406    | )      | $ | 49 |   | $ | 17,974 |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Balance-December 31,2002                              |   | $                 | 1,300  |        | $      | 2,408                  |   | $                   | 14,631 |                                               | $      | 260       |   | $ | (1,406 | ) | $ | 17,193 |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Comprehensive Income                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Net Income for the Three Months Ended  March 31, 2003 |   | 0                 |   | 0           |   | 531                    |   | 0                   |   | 0                                                  |   | 531       |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Net unrealized gain on securities available  for Sale      |   | 0                 |   | 0           |   | 0                      |   | (88                 | )      | 0                                                  |   | (88       | )      |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Total Comprehensive Income                                 |   | 0                 |   | 0           |   | 531                    |   | (88                 | )      | 0                                                  |   | 443       |   |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Dividends on 703,991 Shares of Common  Stock@ $.35         |   | 0                 |   | 0           |   | (246                   | )      | 0                   |   | 0                                                  |   | (246      | )      |
|                                                       |   |              |   |        |   |                   |   |                |   |                                               |   |      |   |
| Balance at March 31, 2003                             |   | $                 | 1,300  |        | $      | 2,408                  |   | $                   | 14,916 |                                               | $      | 84        |   | $ | (1,406 | ) | $ | 17,390 |   |

 

See Accompany Notes to Consolidated FinancialStatement

 

5

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

ConsolidatedStatement of Cash Flows

For the Three Month Periods EndedMarch 31, 2004 and 2003

 
|                                                                               |   | **2004** |   | **2003** |   |
|------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                              |   |     |   |     |   |
| NET INCOME                                                                         |   | $        | 450    |     | $      | 531 |   |
| ADJUSTMENTS TO RECONCILE NET INCOME TO NET  CASH PROVIDED BY OPERATING ACTIVITIES: |   |     |   |     |   |
| DEPRECIATION                                                                       |   | 62       |   | 66       |   |
| SECURITY AMORTIZATION AND ACCREATION                                               |   | 5        |   | 23       |   |
| PROVISION FOR LOAN LOSSES                                                          |   | 0        |   | 3        |   |
| (INCREASE) DECREASE IN OTHER ASSETS                                                |   | 183      |   | (220     | )      |
| INCREASE (DECREASE) IN OTHER LIABILITIES                                           |   | 104      |   | (10      | )      |
|                                                                               |   |     |   |     |   |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                          |   | 804      |   | 393      |   |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                              |   |     |   |     |   |
| PROCEEDS FROM SALE OF SECURITIES AVAILABLE  FOR SALE                               |   | 29,502   |   | 21,477   |   |
| PROCEEDS FROM MATURITIES OF SECURITIES  AVAILABLE FOR SALE                         |   | 0        |   | 0        |   |
| PURCHASE OF SECURITIES AVAILABLE FOR SALE                                          |   | (17,750  | )      | (20,014  | )      |
| NET (INCREASE) DECREASE IN FEDERAL FUNDS  SOLD                                     |   | (20,700  | )      | (9,620   | )      |
| NET (INCREASE) DECREASE IN LOANS                                                   |   | 1,553    |   | 2,755    |   |
| PURCHASE OF BANK PREMISES AND EQUIPMENT                                            |   | (205     | )      | (45      | )      |
|                                                                               |   |     |   |     |   |
| NET CASH PROVIDED BY INVESTING ACTIVITIES                                          |   | (7,600   | )      | (5,447   | )      |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                              |   |     |   |     |   |
| NET INCREASE (DECREASE) IN DEMAND DEPOSITS                                         |   | 4,733    |   | 6,965    |   |
| NET INCREASE (DECREASE) IN SAVINGS DEPOSITS                                        |   | 1,638    |   | (1,848   | )      |
| NET INCREASE (DECREASE) IN TIME DEPOSITS                                           |   | 195      |   | (453     | )      |
| NET INCREASE (DECREASE) IN REPURCHASED  AGREEMENTS                                 |   | —   |   | 2,003    |   |
| DIVIDENDS PAID                                                                     |   | (253     | )      | (246     | )      |
|                                                                               |   |     |   |     |   |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                          |   | 6,313    |   | 6,421    |   |
|                                                                               |   |     |   |     |   |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                              |   | (483     | )      | 1,367    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH EQUIVALENT AT BEGINNING OF  PERIOD                                   |   | 7,240    |   | 5,967    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH EQUIVALENT AT END OF PERIOD                                          |   | $        | 6,757  |     | $      | 7,334 |   |
| Suplemental Disclosures of Cash flow  information:                                 |   |     |   |     |   |
| Cash paid for Interest                                                             |   | $        | 459    |     | $      | 549 |   |
| Cash paid for Income Taxes                                                         |   | $        | 232    |     | $      | 286 |   |

 

SeeAccompanying Notes to Consolidated Financial Statement

 

6

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March 31, 2004

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notes toConsolidated Financial Statements

 

1.               FinancialStatements:

 

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

 

2.               Basisof Consolidation:

 

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

 

7

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MANAGEMENT’SDISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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

 

EARNINGSSUMMARY

 

The Companyreported net income of $450,000. for the three months ended March 31, 2004compared to $531,000. for the three months ended March 31, 2003,representing a 15.% decrease.  Thisdecrease was primarily the result of the decrease in net interest income of$126,000., offset by an increase in other income of $7,000. and a increase inall operating expenses of $36,000. and decrease in income taxes of $74,000.

 

Earnings per common share were $.64 for thethree months ended March 31, 2004 compared with $.76 for the same periodof 2003.

 

Logan County Bancshares’ annualized return onassets (ROA) for the three month period ended March 31, 2004 was .99%compared to 1.20% for the three month period ended March 31, 2003.  Annualized return on shareholders’ equity(ROE) was 10.02% and 12.21% at March 31, 2004 and 2003, respectively.

 

NET INTERESTINCOME

 

The most significant component of LoganCounty Bancshares’ net earnings is net interest income, which represents theexcess of interest income earned on earning assets over the interest expensepaid for sources of funds.  Net interestincome is affected by changes in volume resulting from growth and alteration ofthe balance sheet composition, as well as by fluctuations in market interestrates and maturities of sources and uses of funds.

 

Interest income amounted to$2,024,000. at March 31, 2004, a decrease of $225,000. from March 31,2003.  Interest expense also decreased$97,000., resulting in an overall decrease of $128,000. or 7.53% in netinterest income between March 31, 2004 and March 31, 2003.

 

PROVISION FORLOAN LOSSES AND ASSET QUALITY

 

The provision for loan lossesrepresents charges to earnings necessary to maintain an adequate allowance forpotential future loan losses. Management’s determination of the appropriate level of the allowance isbased on an ongoing analysis of credit quality and loss potential in the loanportfolio, actual loan loss experience relative to the size and characteristicsof the loan portfolio, change in the composition and risk characteristics ofthe loan portfolio and the anticipated influence of national and local economicconditions.  The adequacy of theallowance for loan losses is reviewed quarterly and adjustments are made asconsidered necessary.

 

For the three month periodended March 31, 2004 and 2003, the provision for loan losses was $-0- and$3,000. respectively.

 

The reserve for loan losses was$1,562,000. at March 31, 2004 compared to $1,578,000. at March 31,2003.  Expressed as a percentage ofloans (net of unearned income), the reserve for loan losses was 1.56% atMarch 31, 2004 and 1.50% at March 31, 2003.

 

A summary of the Company’s past due loans andnon-performing assets is provided in the following table.

 

8

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SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS

(in thousands of dollars)

 
|                                                    |   | **March 31** |   |
|---------------------------------------------------------|--------|-------------------|--------|
|                                                    |   | **2004**          |   | **2003** |   |
| Loans past due 90 or more days still  accruing interest |   | $                 | 279    |   | $ | 1,039 |   |
| Non-performing assets:                                  |   |              |   |   |   |
| Non-accruing loans                                      |   | 999               |   | 2,196 |   |
| Other real estate owned                                 |   | 171               |   | 159 |   |
|                                                    |   | $                 | 1,170  |   | $ | 2,355 |   |

 

NONINTERESTINCOME

 

Non-interest income includes revenues fromall sources other than interest income. For the three-month period ended March 31, 2004, non-interestincome  totaled $260,000., representingan  increase of $7,000., or 2.77% fromthe $253,000. recorded during the same period of 2003.  This increase was primarily due to increasesin other income of $4,000. and increased fees of $3,000.

 

NONINTERESTEXPENSE

 

Non-interest expense comprisesoverhead costs which are not related to interest expense or to losses fromloans or securities.  As of March 31,2004, the Company’s non-interest expense totaled $1,154,000., increasing$36,000. over the $1,118,000. of non-interest expense for the three monthsended March 31, 2003.  Expressed asa percentage of assets, annualized non-interest expense was 2.53% atMarch 31, 2004, compared to 2.54% at March 31, 2003.

 

Salaries and employee benefitsare Logan County Bancshares’ largest non-interest cost, representingapproximately 52% of total non-interest expense at March 31, 2004 and2003.  Salaries and employee benefitsincreased $6,000., or 1.02% at March 31, 2004 compared to March 31,2003.  This increase is primarily due tonormal personnel increases and timing of personnel benefit accruals.

 

INCOME TAXES

 

Logan County Bancshares’ incometax expense, for the three month period ended March 31, 2004, reflected a$74,000. decrease when compared to the same period of 2003.  Income tax expense equaled 33.53% and 36.18%of income before taxes at March 31, 2004 and 2003, respectively.  For financial reporting purposes, income taxexpense does not equal the statutory income tax rate of 43% when applied topretax income, primarily because of timing differences in expense items for taxpurposes.

 

Balance SheetData:

 

Total assets increased by$6,854,000. between year end and March 31, 2004 to a balance of$182,513,000.  The major component ofthis change was an increase in Federal Funds Sold of $20,700,000.  The primary source of funds for this changewas an increase in deposits of $6,566,000. offset by a decrease in investmentsof $11,747,000. and net income of $450,000.

 

9

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Liquidity:

 

Managing Logan’s liquidityrequirements primarily involves meeting the loan demand, deposit withdrawal andthe cash flow requirements. Logan’s primary sources of liquid assets arefederal funds sold and investment securities maturing in less than oneyear.  These items can be converted intofunds in a short period of time.  AtMarch 31, 2004, Federal Funds Sold amounted to $34,085,000. and securitiesmaturing within one year amounted to $4,257,000.  These are compared to the balances at March 31, 2003 duewithin one year of $20,990,000. in Federal Funds Sold and maturing Investmentsecurities of $28,210,000.

 

Traditionally, banks have beenable to manage liquidity based on a relatively stable group of coredeposits.  The deposits, demand andconsumer deposits under $l00,000. are considered the most stable and leastexpensive source of funds.  During 2004and 2003, banks continue to be faced with volatile interest sensitive funds andhave had to match their funding requirements by using assets and liabilitymanagement techniques.

 

CapitalResources:

 

Logan’s capital position isbased on its stockholders’ equity and the primary source of such equity hasbeen retained earnings.  Since Logan’sformation, it has accumulated Retained Earnings of $15,672,000. and has a totalStockholders’ Equity of $17,974,000. as of March 31, 2004; as compared to$15,088,000. of Retained Earnings and total Stockholders’ equity of$17,390,000. at March 31, 2003.

 

The equity capital was 9.85%and 9.85% of total assets at March 31, 2004 and 2003 respectively.  Logan County Bancshares exceeds allregulatory capital guide lines and has not been advised by any regulatory agencyof any minimum capital requirement.

 

Effects of Inflation:

 

The impact of inflation on afinancial institution differs significantly from that exerted on an industrialconcern, primarily because a financial institution’s assets and liabilitiesconsist almost entirely of monetary items. The low proportion of the Bank’s net fixed assets to total assetsreduces both the potential of inflated earnings resulting from understateddepreciation charges and the potential significant understatement of assetvalues.  However, inflation does have aconsiderable indirect impact on banks, including increased loan demand, as itbecomes necessary for producers and consumers to acquire additional funds tomaintain the same levels of consumption, inventories, and new investments.Inflation, also frequently results in higher interest rates which can affectboth yields on earning assets and rates paid on deposits and otherinterest-bearing liabilities.

 

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PART II.- OTHER INFORMATION

 

NONE.

 

SIGNATURES

 

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

 
|   | LOGAN COUNTY BANCSHARES, INC. |   |
|--------|-------------------------------|--------|
|   | (Registrant)                  |   |
|   |                          |   |
|   |                          |   |
| Date   | May 11, 2004                  |   | /s/Harvey  Oakley |   |
|   |                          |   | Harvey  Oakley Chairman |   |
|   |                          |   | (Signature) |   |
|   |                          |   |   |   |
|   |                          |   |   |   |
| Date   | May 11, 2004                  |   | /s/Eddie D.  Canterbury |   |
|   |                          |   | Eddie D.  Canterbury President & CEO. |   |
|   |                          |   | (Signature) |   |

 

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