**FORM 10-Q**

 

**SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON,D. C. 20549**

 

**Quarterly Report Under Section 13 or 15 (d)**

**of the Securities Exchange Act of 1934**

 

**ForQuarter Ended      March 31, 2002**

 

**CommissionFile Number   2-95114**

 

**LOGAN COUNTY BANCSHARES, INC.**

(Exact Name of Registrantas Specified in Its Charter)

 

**WESTVIRGINIA**

(State or otherjurisdiction of incorporation or organization)

 

**55-0660015**

(IRS EmployerIdentification Number)

 

| **P. O.  BOX 597, LOGAN, WEST VIRGINIA**  |   | **25601**  |
|-------------------------------------------|--------|------------|
| (Address of Principal  Executive Offices) |   | (Zip Code) |

 

**(304)752-1166**

(Registrant’s telephonenumber including area code)

 

 

Indicate by check mark whether the registrant (1) hasfiled all reportsrequired to be filed by Section 13 or 15 (d) of the Securities ExchangeAct of 1934 during the preceding 12months (or for such shorter periodthat the registrant was required to file such reports)and (2) has beensubject to such filing requirements for the past 90 days. Yes ý  No o

 

 

**APPLICABLEONLY TO CORPORATE ISSUERS:**

 

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

 

 

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**LOGANCOUNTY BANCSHARES, INC**.

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

 

 

1

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**LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES********Consolidated Statementof Condition********March 31, 2002 and 2001 and December 31, 2001********(In Thousands)**

 

 
|                                                                                                                       |   | **March 31,** |    | **December 31,** |       |
|----------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|------------------|------------|
|                                                                                                                       |   | **2002**      |    | **2001**         | ** ** | **2001** |   |
| **ASSETS**                                                                                                                 |   |          |    |             |       |   |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| CASH AND DUE FROM BANKS                                                                                                    |   | $             | 6,121   |             | $          | 6,144 |   | $ | 7,072 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| INVESTMENT SECURITIES:                                                                                                     |   |          |    |             |       |   |   |
| AVAILABLE FOR SALE                                                                                                         |   | 37,016        |    | 30,806           |       | 36,355 |   |
| HELD TO MATURITY                                                                                                           |   | 0             |    | 0                |       | 0 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| FEDERAL FUNDS SOLD                                                                                                         |   | 19,110        |    | 13,110           |       | 7,150 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| LOANS:                                                                                                                     |   |          |    |             |       |   |   |
| TOTAL LOANS                                                                                                                |   | 111,112       |    | 112,405          |       | 116,908 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| RESERVE FOR LOAN LOSSES                                                                                                    |   | 1,198         |    | 737              |       | 1,153 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| NET LOANS                                                                                                                  |   | 109,914       |    | 111,668          |       | 115,755 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| BANK PREMISES AND  EQUIPMENT                                                                                               |   | 3,323         |    | 3,552            |       | 3,384 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| ACCRUED INTEREST AND  OTHER ASSETS                                                                                         |   | 2,077         |    | 2,059            |       | 1,883 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
|                                                                                                                       |   | $             | 177,561 |             | $          | 167,339 |   | $ | 171,599 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                             |   |          |    |             |       |   |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| DEPOSITS:                                                                                                                  |   |          |    |             |       |   |   |
| DEMAND DEPOSITS:                                                                                                           |   |          |    |             |       |   |   |
| NON-INTEREST                                                                                                               |   | $             | 28,970  |             | $          | 25,337 |   | $ | 27,571 |   |
| INTEREST BEARING                                                                                                           |   | 22,769        |    | 22,264           |       | 21,371 |   |
| SAVINGS DEPOSITS                                                                                                           |   | 43,825        |    | 33,602           |       | 39,804 |   |
| TIME DEPOSITS                                                                                                              |   | 61,379        |    | 66,735           |       | 63,282 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| TOTAL DEPOSITS                                                                                                             |   | 156,943       |    | 147,938          |       | 152,028 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| FEDERAL FUNDS  PURCHASED/REPURCHASE AGREEMENTS                                                                             |   | 3,004         |    | 2,000            |       | 2,000 |   |
| ACCRUED AND OTHER  LIABILITIES                                                                                             |   | 474           |    | 640              |       | 673 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| INCOME TAXES PAYABLE:                                                                                                      |   |          |    |             |       |   |   |
| CURRENT                                                                                                                    |   | 272           |    | 274              |       | (18 | ) |
| DEFERRED                                                                                                                   |   | (31           | )       | 97               |       | 116 |   |
| TOTAL LIABILITIES                                                                                                          |   | 160,662       |    | 150,949          |       | 154,799 |   |
|                                                                                                                       |   |          |    |             |       |   |   |
| STOCKHOLDERS’ EQUITY:                                                                                                 |   |          |    |             |       |   |   |
| COMMON STOCK—$1.67 PAR  VALUE; AUTHORIZED — 780,000 SHARES OUTSTANDING 3⁄4  716,991 SHARES   IN 2002 AND 2001 |   | 1,300         |    | 1,300            |       | 1,300 |   |
| SURPLUS                                                                                                                    |   | 2,408         |    | 2,408            |       | 2,408 |   |
| RETAINED EARNINGS                                                                                                          |   | 14,051        |    | 13,542           |       | 13,952 |   |
| TREASURY STOCK                                                                                                             |   | (860          | )       | (860             | )          | (860 | ) |
|                                                                                                                       |   |          |    |             |       |   |   |
| TOTAL STOCKHOLDERS’  EQUITY                                                                                           |   | 16,899        |    | 16,390           |       | 16,800 |   |
|                                                                                                                       |   | $             | 177,561 |             | $          | 167,339 |   | $ | 171,599 |   |
|                                                                                                                       |   |          |    |             |       |   |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

2

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**LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES********Consolidated Statementof Income********For the Three Month Periods Ended March 31, 2002 and 2001********(In Thousands)**

 
|                                                 |   | **2002** |   | **2001** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   |     |   |     |   |
| INTEREST INCOME:                                     |   |     |   |     |   |
| INTEREST ON LOANS                                    |   | $        | 2,218  |     | $      | 2,442 |   |
| INTEREST ON INVESTMENTS                              |   | 335      |   | 420      |   |
| INTEREST ON FEDERAL  FUNDS SOLD                      |   | 51       |   | 160      |   |
|                                                 |   | 2,604    |   | 3,022    |   |
|                                                 |   |     |   |     |   |
| INTEREST EXPENSE:                                    |   |     |   |     |   |
| INTEREST ON DEPOSITS                                 |   | 725      |   | 1,273    |   |
| INTEREST OTHER                                       |   | 39       |   | 34       |   |
|                                                 |   |     |   |     |   |
| NET INTEREST INCOME                                  |   | 1,840    |   | 1,715    |   |
|                                                 |   |     |   |     |   |
| PROVISION FOR LOAN  LOSSES                           |   | 60       |   | 30       |   |
|                                                 |   |     |   |     |   |
| NET INTEREST INCOME  AFTER PROVISION FOR LOAN LOSSES |   | 1,780    |   | 1,685    |   |
|                                                 |   |     |   |     |   |
| OTHER INCOME:                                        |   |     |   |     |   |
| SERVICE FEES                                         |   | 153      |   | 150      |   |
| OTHER OPERATING INCOME                               |   | 43       |   | 35       |   |
|                                                 |   |     |   |     |   |
| TOTAL OTHER INCOME                                   |   | 196      |   | 185      |   |
|                                                 |   |     |   |     |   |
| OTHER EXPENSES:                                      |   |     |   |     |   |
| SALARIES AND BENEFITS                                |   | 572      |   | 513      |   |
| EXPENSE OF BANK  PREMISES AND EQUIPMENT              |   | 139      |   | 142      |   |
| OTHER OPERATING  EXPENSES                            |   | 403      |   | 423      |   |
| TOTAL OTHER EXPENSES                                 |   | 1,114    |   | 1,078    |   |
|                                                 |   |     |   |     |   |
| INCOME BEFORE INCOME  TAXES                          |   | 862      |   | 792      |   |
|                                                 |   |     |   |     |   |
| INCOME TAXES                                         |   | 325      |   | 285      |   |
| NET INCOME                                           |   | $        | 537    |     | $      | 507 |   |
|                                                 |   |     |   |     |   |
| PER SHARE OF COMMON  STOCK NET INCOME                |   | $        | 0.75   |     | $      | 0.71 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

3

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**LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES**

**Consolidated Statement in Changes inStockholders’ Equity********For the Three Month Periods Ended March 31, 2002 and 2001********(In Thousands)**

** **
|                                                                              |   | **Common  Stock** |   | **Surplus** |   | **Retained  Earnings** |   | **Accumulated  Other  Comprehensive  Income, Net** |   | **Treasury  Stock** |   | **Total** |   |
|-----------------------------------------------------------------------------------|--------|-------------------|--------|-------------|--------|------------------------|--------|----------------------------------------------------|--------|---------------------|--------|-----------|--------|
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| BALANCE  — DECEMBER 31 2001                                                  |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 13,917 |                | $      | 35        |   | $ | (860 | ) | $ | 16,800 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| COMPREHENSIVE  INCOME                                                             |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| NET  INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2002                             |   | 0                 |   | 0           |   | 537                    |   | 0                                                  |   | 0                   |   | 537       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| CHANGE  IN NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES |   |              |   |        |   |                   |   | (194                                               | )      |                |   | (194      | )      |
| TOTAL  COMPREHENSIVE INCOME                                                       |   | 0                 |   | 0           |   | 537                    |   | (194                                               | )      | 0                   |   | 343       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| DIVIDENDS  ON 716,991 SHARES COMMON STOCK @ $0.34                                 |   |              |   |        |   | (244                   | )      |                                               |   |                |   | (244      | )      |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| Balance  March 31, 2002                                                           |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 14,210 |                | $      | (159      | )      | $ | (860 | ) | $ | 16,899 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| BALANCE  — DECEMBER 31 2000                                                  |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 13,237 |                | $      | (71       | )      | $ | (860 | ) | $ | 16,014 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| COMPREHENSIVE  INCOME                                                             |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| NET  INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001                             |   | 0                 |   | 0           |   | 507                    |   | 0                                                  |   | 0                   |   | 507       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| NET  UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES                   |   |              |   |        |   |                   |   | 105                                                |   |                |   | 105       |   |
| TOTAL  COMPREHENSIVE INCOME                                                       |   | 0                 |   | 0           |   | 507                    |   | 105                                                |   | 0                   |   | 612       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| DIVIDENDS  ON 716,991 SHARES COMMON STOCK @ $0.33                                 |   |              |   |        |   | (236                   | )      |                                               |   |                |   | (236      | )      |
|                                                                              |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 13,508 |                | $      | 34        |   | $ | (860 | ) | $ | 16,390 |   |

 

SEE ACCOMPANYING NOTES TOCONSOLIDATED FINANCIAL STATEMENTS.

 

4

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**LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES********CONSOLIDATED STATEMENTOF CASH FLOWS********FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001**

** **
|                                                                               |   | **2002** |   | **2001** |   |
|------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |   |     |   |     |   |
| NET  INCOME                                                                        |   | $        | 537    |     | $      | 507 |   |
| ADJUSTMENTS TO  RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |   |     |   |     |   |
| DEPRECIATION                                                                       |   | 67       |   | 67       |   |
| SECURITY AMORTIZATION  AND ACCREATION                                              |   | 20       |   | 0        |   |
| MARKET VALUE  AMORTIZATION                                                         |   | (1       | )      | (1       | )      |
| PROVISION FOR LOAN  LOSSES                                                         |   | 60       |   | 30       |   |
| (INCREASE) DECREASE IN  OTHER ASSETS                                               |   | (51      | )      | 304      |   |
| INCREASE (DECREASE) IN  OTHER LIABILITIES                                          |   | (56      | )      | 163      |   |
| NET CASH PROVIDED BY  OPERATING ACTIVITIES                                         |   | 576      |   | 1,070    |   |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |   |     |   |     |   |
| PROCEEDS FROM SALE OF  SECURITIES AVAILABLE FOR SALE                               |   | 13,000   |   | 11,000   |   |
| PROCEEDS FROM  MATURITIES OF SECURITIES AVAILABLE FOR SALE                         |   | 3,487    |   | 2,000    |   |
| PURCHASE OF SECURITIES  AVAILABLE FOR SALE                                         |   | (17,504  | )      | (13,977  | )      |
| NET (INCREASE) DECREASE  IN                                                        |   |     |   |     |   |
| FEDERAL FUNDS SOLD                                                                 |   | (11,960  | )      | (8,830   | )      |
| NET (INCREASE) DECREASE  IN LOANS                                                  |   | 5,781    |   | 1,241    |   |
| PURCHASE OF BANK PREMISES  AND EQUIPMENT                                           |   | (6       | )      | (25      | )      |
| NET CASH PROVIDED BY  INVESTING ACTIVITIES                                         |   | (7,202   | )      | (8,591   | )      |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN DEMAND DEPOSITS                                        |   | 2,797    |   | 4,823    |   |
| NET INCREASE (DECREASE)  IN SAVINGS DEPOSITS                                       |   | 4,021    |   | 1,314    |   |
| NET INCREASE (DECREASE)  IN TIME DEPOSITS                                          |   | (1,903   | )      | 3,078    |   |
| NET INCREASE (DECREASE)  IN                                                        |   |     |   |     |   |
| FEDERAL FUNDS PURCHASED                                                            |   | 1,004    |   | 0        |   |
| DIVIDENDS PAID                                                                     |   | (244     | )      | (236     | )      |
| NET CASH PROVIDED BY  FINANCING ACTIVITIES                                         |   | 5,675    |   | 8,979    |   |
|                                                                               |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                              |   | (951     | )      | 1,458    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT BEGINNING OF PERIOD                                   |   | 7,072    |   | 4,686    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT END OF PERIOD                                         |   | $        | 6,121  |     | $      | 6,144 |   |
|                                                                               |   |     |   |     |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

 

5

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March 31, 2002

 

 

 

 

**LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES********Notes to ConsolidatedFinancial Statements**

** **

1.             FinancialStatements:

 

The foregoing statements are unaudited; however, in theopinion of the Management, all adjustments (comprising of only normal recurringaccruals) necessary for a fair presentation of the financial statements havebeen included.

 

2.             Basisof Consolidation:

 

The Consolidated Statement of Condition and ConsolidatedStatement of Income of Logan County BancShares, Inc. include the activity ofLogan Bank and Trust Company and Bank of Chapmanville, a wholly ownedsubsidiary.

 

3.             Year2000 Compliance and Assessment

 

Management has initiated a Company-wide program toassess its data processing, information systems and customer service programsto ensure the Company’s operating capabilities in the year 2000. Currently, theCompany’s subsidiary Bank, LB&T, uses EDS, a regional provider of financialinstitution data processing as it’s primary provider of computer services anddata processing. EDS has certified it’s hardware and software are Year 2000,and beyond, compliant.

 

The Company contracted tohave their computer hardware evaluated for Year 2000 compliance and estimatesadditional computer hardware and software costs to be approximately $455,000.These costs were capitalized and will be amortized over five years. It is theopinion of management that the cost of converting these systems and the annualamortization, thereof, will not materially impact the results of operation orits financial position.

 

6

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**MANAGEMENT’S DISCUSSION AND ANALYSISOF********FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

 

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

 

EARNINGS SUMMARY

 

The Company reported net income of $537,000. for thethree months ended March 31, 2002 compared to $507,000. for the three monthsended March 31, 2001, representing a 5.92% increase. This increase wasprimarily the result of the increase in net interest income of $125,000., andother income of $16,000., increase in all operating expenses of $66,000. and increasein income taxes of $43,000.

 

                Earningsper common share were $0.75 for the three months ended March 31, 2002 comparedwith $0.71 for the same period of 2001.

 

Logan County Bancshares’ annualized return on assets(ROA) for the three month period ended March 31, 2002 was 1.21% compared to1.21% for the three month period ended March 31, 2001. Annualized return onshareholders’ equity (ROE) was 12.71% and 12.37% at March 31, 2002 and 2001,respectively.

 

NET INTEREST INCOME

 

The most significant component of Logan CountyBancshares’ net earnings is net interest income, which represents the excess ofinterest income earned on earning assets over the interest expense paid forsources of funds. Net interest income is affected by changes in volumeresulting from growth and alteration of the balance sheet composition, as wellas by fluctuations in market interest rates and maturities of sources and usesof funds.

 

Interest income amounted to $2,604,000. at March 31,2002, a decrease of $418,000. from March 31, 2001. Interest expense alsodecreased $543,000., resulting in an overall increase of $125,000. or 7.29% innet interest income between March 31, 2002 and March 31, 2001.

 

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

 

The provision for loan losses represents charges toearnings necessary to maintain an adequate allowance for potential future loanlosses. 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 the allowance for loan losses is reviewed quarterlyand adjustments are made as considered necessary.

 

For the three month period ended March 31, 2002 and2001, the provision for loan losses was $60,000. and $30,000. respectively.

 

The reserve for loan losses was $1,198,000. at March31, 2002 compared to $737,000. at March 31, 2001. Expressed as a percentage ofloans (net of unearned income), the reserve for loan losses was 1.08% at March31, 2002 and .66% at March 31, 2001.

 

7

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

 

SUMMARY OF PAST DUE LOANSAND NONPERFORMING ASSETS(in thousands ofdollars)

 
|                                                          |   | **March 31,** |   |
|---------------------------------------------------------------|--------|---------------|--------|
|                                                          |   | **2002**      |   | **2001** |   |
|                                                          |   |          |   |   |   |
| Loans past due 90 or  more days  still accruing interest |   | $             | 672    |   | $ | 2,397 |   |
|                                                          |   |          |   |   |   |
| Nonperforming assets:                                         |   |          |   |   |   |
| Nonaccruing loans                                             |   | 1,170         |   | 423 |   |
| Other real estate owned                                       |   | 388           |   | 257 |   |
|                                                          |   | $             | 1,558  |   | $ | 680 |   |
|                                                          |   |          |   |   |   |

 

NONINTEREST INCOME

 

Noninterest income includes revenues from all sourcesother than interest income. For the three month period ended March 31, 2002,noninterest income totalled $196,000., representing an increase of $11,000., or5.61% from the $185,000. recorded during the same period of 2001. This increasewas primarily due to increases in other income of $8,000. and increased fees of$3,000.

 

NONINTEREST EXPENSE

 

Noninterest expense comprises overhead costs which arenot related to interest expense or to losses from loans or securities. As ofMarch 31, 2002, the Company’s noninterest expense totalled $1,114,000.,increasing $36,000. over the $1,078,000. of noninterest expense for the threemonths ended March 31, 2001. Expressed as a percentage of assets, annualizednoninterest expense was 2.51% at March 31, 2002, compared to 2.57% at March 31,2001.

 

Salaries and employee benefits are Logan CountyBancshares’ largest noninterest cost, representing approximately 51% of totalnoninterest expense at March 31, 2002 and 2001. Salaries and employee benefitsincreased $59,000., or 11.50% at March 31, 2002 compared to March 31, 2001.This increase is primarily due to normal personnel increases and timing ofpersonnel benefit accruals.

 

INCOME TAXES

 

Logan County Bancshares’ federal income tax expense,for the three month period ended March 31, 2002, reflected a $40,000. increasewhen compared to the same period of 2001. Income tax expense equalled 37.70%and 35.98% of income before taxes at March 31, 2002 and 2001, respectively. Forfinancial reporting purposes, income tax expense does not equal the statutoryincome tax rate of 43% when applied to pretax income, primarily because oftiming differences in expense items for tax purposes.

 

8

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Balance Sheet Data:

 

Total assets increased by $5,962,000. between year endand March 31, 2002 to a balance of $177,561,000. The major component of thischange was a increase in Federal Funds Sold of $11,960,000. The primary sourceof funds for this change was an increase in deposits of $4,915,000., FederalFunds purchased\repurchase agreements of $1,004,000., and net income of$537,000.

 

Liquidity:

 

Managing Logan’s liquidity requirements primarilyinvolves meeting the loan demand, deposit withdrawal and the cash flowrequirements. Logan’s primary sources of liquid assets are federal funds soldand investment securities maturing in less than one year. These items can beconverted into funds in a short period of time. At March 31, 2002, FederalFunds Sold amounted to $19,110,000. and securities maturing within one yearamounted to $4,996,000. These are compared to the balances at March 31, 2001 of$13,110,000. in Federal Funds Sold and maturing Investment Securities of$2,995,000. due within one year.

 

Traditionally, banks have been able to manageliquidity based on a relatively stable group of core deposits. The deposits,demand and consumer deposits under $l00,000. are considered the most stable andleast expensive source of funds. During 2002 and 2001, banks continue to befaced with continuing changes in interest sensitive funds and have had to matchtheir 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. SinceLogan’s formation, it has accumulated Retained Earnings of $14,051,000. and hasa total Stockholders’ Equity of $16,899,000. as of March 31, 2002; as comparedto $13,952,000. of Retained Earnings and total Stockholders’ equity of$16,800,000. at March 31, 2001.

 

The equity capital was 9.52% and 9.79% of total assetsat March 31, 2002 and 2001 respectively. Logan County Bancshares exceeds allregulatory capital guide lines and has not been advised by any regulatoryagency of any minimum capital requirement.

 

Effects of Inflation:

 

The impact of inflation on a financial institutiondiffers significantly from that exerted on an industrial concern, primarilybecause a financial institution’s assets and liabilities consist almostentirely of monetary items. The low proportion of the Bank’s net fixed assetsto total assets reduces both the potential of inflated earnings resulting fromunderstated depreciation charges and the potential significant understatementof asset values. However, inflation does have a considerable indirect impact onbanks, including increased loan demand, as it becomes necessary for producersand consumers to acquire additional funds to maintain the same levels ofconsumption, inventories, and new investments. Inflation also frequentlyresults in higher interest rates which can affect both yields on earning assetsand rates paid on deposits and other interest-bearing liabilities.

 

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PART II. - OTHER INFORMATION

 

                    NONE**.**

 

 

SIGNATURES

 

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

 

 
|   |         |   | LOGAN COUNTY  BANCSHARES, INC.        |
|--------|--------------|--------|---------------------------------------|
|   |         |   | (Registrant)                          |
|   |         |   |                                  |
|   |         |   |                                  |
|   |         |   |                                  |
| Date   | May 10, 2002 |   | /s/ Harvey Oakley                     |
|   |         |   | Harvey Oakley, President              |
|   |         |   | (Signature)                           |
|   |         |   |                                  |
| Date   | May 10, 2002 |   | /s/ Eddie D. Canterbury               |
|   |         |   | Eddie D. Canterbury, Exec. Vice Pres. |
|   |         |   | (Signature)                           |

 

 

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