**FORM 10-Q**

** **

**SECURITIESAND EXCHANGE COMMISSION**

** **

# **WASHINGTON, D. C. 20549**

 

**QuarterlyReport Under Section 13 or 15 (d)**

**of theSecurities Exchange Act of 1934**

 

# **ForQuarter EndedSeptember 30, 2001**

 

 

# **Commission File Number2-95114**

 

 

**LOGANCOUNTY BANCSHARES, INC.**

(Exact Name of Registrant asSpecified in Its Charter)

 

**WESTVIRGINIA******(State or other jurisdictionof incorporation or organization)

 

**55-0660015******(IRS Employer IdentificationNumber)

 

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

 

**(304) 752-1166**

(Registrant'stelephone number including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject to suchfiling requirements for the past 90 days. Yes ý  Noo

 

 

APPLICABLE ONLY TO CORPORATEISSUERS:

 

Indicate  the number of sharesoutstanding, of each of the issuer's classes of common stock, as of the latestpracticable date.   716,991

 

 

LOGAN COUNTY BANCSHARES, INC.

 
| PART I -   | FINANCIAL INFORMATION |
|------------|-----------------------|
|       |                  |   |
|       | ITEM I.          | FINANCIAL STATEMENTS: |
|       |                  |   |
|       |                  | Consolidated Statement of  Condition As of September 30, 2001 and 2000 and December 31, 2000. |
|       |                  |   |
|       |                  | Consolidated Statement of  Income For the Three Month Period Ended September 30, 2001 and 2000. |
|       |                  |   |
|       |                  | Consolidated Statement of  Income For the Nine Month Period Ended September 30, 2001 and 2000. |
|       |                  |   |
|       |                  | Consolidated  Statement   of Changes in Stockholders' Equity for the Nine Month Period Ended  September 30, 2001 and 2000. |
|       |                  |   |
|       |                  | Consolidated Statement of  Cash Flows for the Nine Month Period Ended September 30, 2001 and 2000. |
|       |                  |   |
|       |                  | Notes to Consolidated  Financial Statements |
|       |                  |   |
|       | ITEM 2.          | MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF  OPERATIONS. |
|       |                  |   |
| PART II -  | OTHER INFORMATION     |
|       |                  |   |
| SIGNATURES |                  |

 

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Condition

September 30, 2001 and 2000 and December 31, 2000

(In Thousands)

 
| ASSETS                                                                                                 |   |               |    |              |   |     |   |
|--------------------------------------------------------------------------------------------------------|--------|--------------------|---------|-------------------|--------|----------|--------|
|                                                                                                   |   | **September  30,** |    | **December  31,** |   |
|                                                                                                   |   | **2001**           |    | **2000**          |   | **2000** |   |
| CASH AND DUE FROM BANKS                                                                                |   | $                  | 5,228   |              | $      | 5,481    |   | $ | 4,686 |   |
|                                                                                                   |   |               |    |              |   |     |   |
| INVESTMENT SECURITIES:                                                                                 |   |               |    |              |   |     |   |
| AVAILABLE FOR SALE                                                                                     |   | 21,034             |    | 28,898            |   | 29,618   |   |
| HELD TO MATURITY                                                                                       |   | 0                  |    | 0                 |   | 0        |   |
| FEDERAL FUNDS SOLD                                                                                     |   | 28,060             |    | 1,830             |   | 4,280    |   |
|                                                                                                   |   |               |    |              |   |     |   |
| LOANS:                                                                                                 |   |               |    |              |   |     |   |
| TOTAL LOANS                                                                                            |   | 115,491            |    | 113,193           |   | 113,641  |   |
|                                                                                                   |   |               |    |              |   |     |   |
| RESERVE FOR LOAN LOSSES                                                                                |   | 805                |    | 613               |   | 702      |   |
| NET LOANS                                                                                              |   | 114,686            |    | 112,580           |   | 112,939  |   |
|                                                                                                   |   |               |    |              |   |     |   |
| BANK PREMISES AND EQUIPMENT                                                                            |   | 3,433              |    | 3,656             |   | 3,594    |   |
|                                                                                                   |   |               |    |              |   |     |   |
| ACCRUED INTEREST AND OTHER ASSETS                                                                      |   | 1,579              |    | 2,713             |   | 2,363    |   |
|                                                                                                   |   | $                  | 174,020 |              | $      | 155,158  |   | $ | 157,480 |   |
|                                                                                                   |   |               |    |              |   |     |   |
|                                                                                                   |   |               |    |              |   |     |   |
| LIABILITIES AND  STOCKHOLDERS' EQUITY                                                                  |   |               |    |              |   |     |   |
|                                                                                                   |   |               |    |              |   |     |   |
| DEPOSITS:                                                                                              |   |               |    |              |   |     |   |
| DEMAND DEPOSITS:                                                                                       |   |               |    |              |   |     |   |
| NON-INTEREST                                                                                           |   | $                  | 29,481  |              | $      | 21,500   |   | $ | 23,343 |   |
| INTEREST BEARING                                                                                       |   | 22,563             |    | 20,588            |   | 19,435   |   |
| SAVINGS DEPOSITS                                                                                       |   | 37,922             |    | 31,722            |   | 32,288   |   |
| TIME DEPOSITS                                                                                          |   | 64,273             |    | 63,178            |   | 63,657   |   |
| TOTAL DEPOSITS                                                                                         |   | 154,239            |    | 136,988           |   | 138,723  |   |
|                                                                                                   |   |               |    |              |   |     |   |
| FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO  REPURCHASE                            |   | 2,000              |    | 2,000             |   | 2,000    |   |
| ACCRUED AND OTHER LIABILITIES                                                                          |   | 600                |    | 572               |   | 718      |   |
|                                                                                                   |   |               |    |              |   |     |   |
| INCOME TAXES PAYABLE:                                                                                  |   |               |    |              |   |     |   |
| CURRENT                                                                                                |   | 28                 |    | 79                |   | 18       |   |
| DEFERRED                                                                                               |   | 160                |    | 72                |   | 7        |   |
| TOTAL LIABILITIES                                                                                      |   | 157,027            |    | 139,711           |   | 141,466  |   |
|                                                                                                   |   |               |    |              |   |     |   |
| 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                                                                                      |   | 14,145             |    | 12,599            |   | 13,166   |   |
| TREASURY STOCK                                                                                         |   | (860               | )       | (860              | )      | (860     | )      |
| TOTAL STOCKHOLDERS' EQUITY                                                                             |   | 16,993             |    | 15,447            |   | 16,014   |   |
|                                                                                                   |   | $                  | 174,020 |              | $      | 155,158  |   | $ | 157,480 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS.

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Income

For the Nine Month Periods Ended September 30, 2001 and 2000

(In Thousands)

 

 
|                                                     |   | **2001** |   | **2000** |   |
|----------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                     |   |     |   |     |   |
| INTEREST INCOME:                                         |   |     |   |     |   |
| INTEREST ON LOANS                                        |   | $        | 7,667  |     | $      | 7,012 |   |
| INTEREST ON INVESTMENTS                                  |   | 1,033    |   | 1,416    |   |
| INTEREST ON FEDERAL FUNDS SOLD                           |   | 652      |   | 42       |   |
|                                                     |   | 9,352    |   | 8,470    |   |
|                                                     |   |     |   |     |   |
| INTEREST EXPENSE:                                        |   |     |   |     |   |
| INTEREST ON DEPOSITS                                     |   | 3,775    |   | 3,478    |   |
| INTEREST OTHER                                           |   | 105      |   | 69       |   |
| NET INTEREST INCOME                                      |   | 5,472    |   | 4,923    |   |
|                                                     |   |     |   |     |   |
| PROVISION FOR LOAN LOSSES                                |   | 170      |   | 0        |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |   | 5,302    |   | 4,923    |   |
|                                                     |   |     |   |     |   |
| OTHER INCOME:                                            |   |     |   |     |   |
| SERVICE FEES                                             |   | 460      |   | 492      |   |
| OTHER OPERATING INCOME                                   |   | 75       |   | 56       |   |
| TOTAL OTHER INCOME                                       |   | 535      |   | 548      |   |
|                                                     |   |     |   |     |   |
| OTHER EXPENSES:                                          |   |     |   |     |   |
| SALARIES AND BENEFITS                                    |   | 1,598    |   | 1,575    |   |
| EXPENSE OF BANK PREMISES AND EQUIPMENT              |   | 432      |   | 407      |   |
| OTHER OPERATING EXPENSES                                 |   | 1,393    |   | 1,158    |   |
| TOTAL OTHER EXPENSES                                     |   | 3,423    |   | 3,140    |   |
|                                                     |   |     |   |     |   |
| INCOME BEFORE INCOME TAXES                               |   | 2,414    |   | 2,331    |   |
|                                                     |   |     |   |     |   |
| INCOME TAXES                                             |   | 899      |   | 799      |   |
| NET INCOME                                               |   | $        | 1,515  |     | $      | 1,532 |   |
|                                                     |   |     |   |     |   |
| PER SHARE OF COMMON STOCK NET INCOME                     |   | $        | 2.11   |     | $      | 2.14 |   |

 

SEEACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Income

For the Three Month Periods Ended September30, 2001 and 2000

(In Thousands)

 
|                                                     |   | **2001** |   | **2000** |   |
|----------------------------------------------------------|--------|----------|--------|----------|--------|
| INTEREST INCOME:                                         |   |     |   |     |   |
| INTEREST ON LOANS                                        |   | $        | 2,448  |     | $      | 2,456 |   |
| INTEREST ON INVESTMENTS                                  |   | 243      |   | 469      |   |
| INTEREST ON FEDERAL FUNDS SOLD                           |   | 270      |   | 28       |   |
|                                                     |   | 2,961    |   | 2,953    |   |
|                                                     |   |     |   |     |   |
| INTEREST EXPENSE:                                        |   |     |   |     |   |
| INTEREST ON DEPOSITS                                     |   | 1,209    |   | 1,205    |   |
| INTEREST OTHER                                           |   | 36       |   | 36       |   |
| NET INTEREST INCOME                                      |   | 1,716    |   | 1,712    |   |
|                                                     |   |     |   |     |   |
| PROVISION FOR LOAN LOSSES                                |   | 30       |   | 0        |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |   | 1,686    |   | 1,712    |   |
|                                                     |   |     |   |     |   |
| OTHER INCOME:                                            |   |     |   |     |   |
| SERVICE FEES                                             |   | 142      |   | 162      |   |
| OTHER OPERATING INCOME                                   |   | 34       |   | 7        |   |
| TOTAL OTHER INCOME                                       |   | 176      |   | 169      |   |
|                                                     |   |     |   |     |   |
| OTHER EXPENSES:                                          |   |     |   |     |   |
| SALARIES AND BENEFITS                                    |   | 558      |   | 514      |   |
| EXPENSE OF BANK PREMISES AND EQUIPMENT              |   | 147      |   | 136      |   |
| OTHER OPERATING EXPENSES                                 |   | 415      |   | 430      |   |
| TOTAL OTHER EXPENSES                                     |   | 1,120    |   | 1,080    |   |
|                                                     |   |     |   |     |   |
| INCOME BEFORE INCOME TAXES                               |   | 742      |   | 801      |   |
|                                                     |   |     |   |     |   |
| INCOME TAXES                                             |   | 267      |   | 250      |   |
| NET INCOME                                               |   | $        | 475    |     | $      | 551 |   |
|                                                     |   |     |   |     |   |
|                                                     |   |     |   |     |   |
| PER SHARE OF COMMON STOCK NET INCOME                     |   | $        | 0.67   |     | $      | 0.77 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS.

LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement in Changes in Stockholders' Equity

For the Nine Month Periods Ended September 30, 2001 and 2000

(In Thousands)

 
|                                                                              | **Common Stock** |   | **Surplus** |   | **Retained Earnings** |   | **Accumulated  Other  Comprehensive  Income, Net** |   | **Treasury Stock** |   | **Total** |   |
|-----------------------------------------------------------------------------------|------------------|--------|-------------|--------|-----------------------|--------|----------------------------------------------------|--------|--------------------|--------|-----------|--------|
| BALANCE  – DECEMBER 31 2000                                                  | $                | 1,300  |        | $      | 2,408                 |   | $                                                  | 13,237 |               | $      | (71       | )      | $ | (860 | ) | $ | 16,014 |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| COMPREHENSIVE  INCOME                                                             |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| NET INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001                           | 0                |   | 0           |   | 1,515                 |   | 0                                                  |   | 0                  |   | 1,515     |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| NET  UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES                   |             |   |        |   |                  |   | 188                                                |   |               |   | 188       |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| TOTAL COMPREHENSIVE INCOME                                                        | 0                |   | 0           |   | 1,515                 |   | 188                                                |   | 0                  |   | 1,703     |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| DIVIDENDS ON 716,991 SHARES COMMON STOCK @ $1.01                                  |             |   |        |   | (724                  | )      |                                               |   |               |   | (724      | )      |
|                                                                              | $                | 1,300  |        | $      | 2,408                 |   | $                                                  | 14,028 |               | $      | 117       |   | $ | (860 | ) | $ | 16,993 |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| BALANCE  – DECEMBER 31 1999                                                  | $                | 1,300  |        | $      | 2,408                 |   | $                                                  | 12,236 |               | $      | (641      | )      | $ | (860 | ) | 14,443 |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| COMPREHENSIVE  INCOME                                                             |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| NET INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000                           | 0                |   | 0           |   | 1,532                 |   | 0                                                  |   | 0                  |   | 1,532     |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| CHANGE IN NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE FOR-SALE  SECURITIES |             |   |        |   |                  |   | 160                                                |   |               |   | 160       |   |
| TOTAL COMPREHENSIVE INCOME                                                        | 0                |   | 0           |   | 1,532                 |   | 160                                                |   | 0                  |   | 1,692     |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
|                                                                              |             |   |        |   |                  |   |                                               |   |               |   |      |   |
| DIVIDENDS ON 716,991 SHARES 0 COMMON STOCK @ $0.96                                |             |   |        |   |                  |   |                                               |   | (688               | )      | (688      | )      |
|                                                                              | $                | 1,300  |        | $      | 2,408                 |   | $                                                  | 13,080 |               | $      | (481      | )      | $ | (860 | ) | $ | 15,447 |   |
|                                                                                   |                  |        |             |        |                       |        |                                                    |        |                    |        |           |        |  |  |  |  |  |  |  |

 

LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATEDSTATEMENT OF CASH FLOWS

FORTHE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000

 
|                                                                                                       |   | **2001** |   | **2000** |   |
|------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      |   |     |   |     |   |
| NET INCOME                                                                                                 |   | $        | 1,515  |     | $      | 1,532 |   |
| ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING  ACTIVITIES:                         |   |     |   |     |   |
| DEPRECIATION                                                                                               |   | 200      |   | 200      |   |
| SECURITY AMORTIZATION AND ACCREATION                                                                       |   | 0        |   | 5        |   |
| MARKET VALUE AMORTIZATION                                                                                  |   | (3       | )      | (3       | )      |
| PROVISION FOR LOAN LOSSES                                                                                  |   | 170      |   | 0        |   |
| (INCREASE) DECREASE IN OTHER ASSETS                                                                        |   | 784      |   | 37       |   |
| INCREASE (DECREASE) IN OTHER LIABILITIES                                                                   |   | (112     | )      | (120     | )      |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                  |   | 2,554    |   | 1,651    |   |
|                                                                                                       |   |     |   |     |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |   |     |   |     |   |
| PROCEEDS FROM SALE OF SECURITIES AVAILABLE FOR SALE                                                        |   | 34,900   |   | 0        |   |
| PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE                                                  |   | 7,400    |   | 5,400    |   |
| PURCHASE OF SECURITIES AVAILABLE FOR SALE                                                                  |   | (33,435  | )      | (3,974   | )      |
| NET (INCREASE) DECREASE IN FEDERAL FUNDS SOLD                                                              |   | (23,780  | )      | (1,830   | )      |
| NET (INCREASE) DECREASE IN LOANS                                                                           |   | (1,850   | )      | (3,709   | )      |
| PURCHASE OF BANK PREMISES AND EQUIPMENT                                                                    |   | (39      | )      | (82      | )      |
| NET CASH PROVIDED BY INVESTING ACTIVITIES                                                                  |   | (16,804  | )      | (4,195   | )      |
|                                                                                                       |   |     |   |     |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |   |     |   |     |   |
| NET INCREASE (DECREASE) IN DEMAND DEPOSITS                                                                 |   | 9,266    |   | 3,757    |   |
| NET INCREASE (DECREASE) IN SAVINGS DEPOSITS                                                                |   | 5,634    |   | 698      |   |
| NET INCREASE (DECREASE) IN TIME DEPOSITS                                                                   |   | 616      |   | 4,914    |   |
| NET INCREASE (DECREASE) IN FEDERAL FUNDS PURCHASED AND SECURITIES  SOLD UNDER AGREEMENT TO REPURCHASE |   | 0        |   | (7,840   | )      |
| DIVIDENDS PAID                                                                                             |   | (724     | )      | (688     | )      |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                  |   | 14,792   |   | 841      |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                       |   | 542      |   | (1,703   | )      |
|                                                                                                       |   |     |   |     |   |
| CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD                                                            |   | 4,686    |   | 7,184    |   |
| CASH AND CASH EQUIVALENT AT END OF PERIOD                                                                  |   | $        | 5,228  |     | $      | 5,481 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS.

 

September30, 2001

 

LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notesto 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  ConsolidatedStatement  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 EDS, a regional  provider of financial institution data processing, as it's primary provider  of computer services and data processing. EDS has certified it's  hardware and software are Year  2000,  and beyond, compliant. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                 The Company 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.                                        |

 

 

MANAGEMENT'SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Thefollowing is a discussion and analysis focused on significant changes in the financial condition and results of operations of LoganCounty Bancshares, Inc.

 

EARNINGS SUMMARY

 

TheCompany reported net income of $1,515,000. for the nine months ended September30, 2001 compared to $1,532,000. for the nine months ended September 30, 2000,representing a 1.11% decrease.  Thisdecrease was primarily the result of the increase in net interest income of$379,000., decrease in other income of $13,000. and increase in all operatingexpenses of $283,000. and increase in income taxes of $100,000.

 

Earningsper common share were $2.11 for the nine months ended September 30, 2001compared with $2.14 for the same period of 2000.

 

LoganCounty Bancshares' annualized return on assets (ROA) for the nine month periodended September 30, 2001 was 1.16% compared to 1.32% for the nine month periodended September 30, 2000.  Annualizedreturn on shareholders' equity (ROE) was 11.89% and 13.22% at September 30,2001 and 2000, respectively.

 

NET INTEREST INCOME

 

Themost significant component of Logan County Bancshares' net earnings is netinterest income, which represents the excess of interest income earned onearning assets over the interest expense paid for sources of funds.  Net interest income is affected by changesin volume resulting from growth and alteration of the balance sheetcomposition, as well as by fluctuations in market  interest rates and maturities of sources and uses of funds.

 

Interestincome amounted to $9,352,000. at September 30, 2001, an increase of$882,000.  from September  30, 2000. Interest expense also increased $333,000., resulting in an overallincrease of $549,000. or 11.15% in net interest income between September 30,2001 and September 30, 2000.

 

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

 

Theprovision for loan losses represents charges to earnings necessary to maintain an adequate allowance for potential future loanlosses.  Management's determination ofthe appropriate level of the allowance is based on an ongoing analysis of creditquality and loss potential in the loan portfolio, actual loan loss experiencerelative to the size and characteristics of 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.

 

Forthe nine month period ended September 30, 2001 and 2000, the provision for loanlosses was $170,000. and $0. respectively.

 

Thereserve for loan losses was $805,000. at September 30, 2001 compared to$702,000. at September 30, 2000. Expressed as a percentage of loans (net of unearned income), the reservefor loan losses was .70% at September 30, 2001 and .54% at September 30, 2000.

Asummary of the Company's past due loans and nonperforming assets is provided inthe following table.

 

SUMMARYOF PAST DUE LOANS AND NONPERFORMING ASSETS

(inthousands of dollars)

 

 

 
|                                                        |   | **September  30,** |   |
|-------------------------------------------------------------|--------|--------------------|--------|
|                                                        |   | **2001**           |   | **2000** |   |
| Loans past due 90 or more days still accruing interest |   | $                  | 2,575  |   | $ | 3,440 |   |
|                                                        |
| Nonperforming assets:                                       |   |               |   |   |   |
| Nonaccruing loans                                           |   | 493                |   | 511 |   |
| Other real estate owned                                     |   | 155                |   | 270 |   |
|                                                        |   | $                  | 648    |   | $ | 781 |   |

 

NONINTEREST INCOME

 

Noninterestincome includes revenues from all sources other than interest income. For  the nine month period ended September 30,2001, noninterest income totalled $535,000., representing a decrease of$13,000., or 2.37% from the $548,000. recorded during the same period of2000.  This increase was primarily dueto increases in service fees income of $32,000.

 

NONINTEREST EXPENSE

 

Noninterestexpense comprises overhead costs which are not related to interest expense orto losses from loans or securities.  Asof September 30, 2001, the Company's noninterest expense totalled $3,423,000.,increasing $283,000. over the $3,140,000. of noninterest expense for the ninemonths ended September 30, 2000. Expressed as a percentage of assets, annualized noninterest expense was2.62% at September 30, 2001, compared to 2.69% at September 30, 2000.

 

Salariesand employee benefits are Logan County Bancshares' largest noninterest cost,representing approximately 50% of total noninterest expense at September 30,2001 and 2000.  Salaries and employeebenefits increased $23,000., or 1.46% at September 30, 2001 compared toSeptember 30, 2000.  This increase isprimarily due to increased personnel.

 

INCOME TAXES

 

LoganCounty Bancshares' income tax expense, for the nine month period endedSeptember 30, 2001, reflected a $100,000. increase when compared to the sameperiod of 2000.  Income tax expenseequalled 37.24% and 34.28% of income before taxes at September 30, 2001 and2000, respectively.  For financialreporting purposes, income tax expense does not equal the statutory income taxrate of 43% when applied to pretax income, primarily because of timingdifferences included in income before income taxes.

Balance Sheet Data:

 

Totalassets increased by $16,540,000. between year end and September 30, 2001 to abalance of $174,020,000.  The majorcomponent of this change was a decrease in Investment Securities of$8,584,000., and loan increases of $1,850,000. and increased federal funds sold by $23,780,000.  The primary source of funds for this changewas an increase in deposits of $15,516,000., and net income of $1,515,000.

 

Liquidity:

 

ManagingLogan'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 soldand investment securities maturing in less than one year.  These items can be converted into funds in ashort period of time.  At September 30,2001, Federal Funds Sold amounted to $28,060,000. and securities maturingwithin one year amounted to $2,998,000. These are compared to the balances at September 30, 2000 of$1,830,000.  in Federal Funds Sold andmaturing Investment Securities of $1,992,000. due within one year.

 

Traditionally,banks have been able to manage liquidity based on a relatively stable group ofcore deposits.  The deposits, demand andconsumer deposits under $l00,000. are considered the most stable and leastexpensive source of funds.  During 2001and 2000, banks continue to be faced with volatile interest sensitive funds andhave had to match their funding requirements by using assets and liabilitymanagement techniques.

 

Capital Resources:

 

Logan'scapital position is based on its stockholders' equity and the primary source ofsuch equity has been retained earnings. Since Logan's formation, it has accumulated Retained Earnings of$14,145,000. and has a total Stockholders' Equity of $16,993,000.  as of September 30, 2001; as compared to$12,599,000.  of Retained Earnings andtotal Stockholders' equity of $15,447,000. at September 30, 2000.

 

Theequity capital was 9.76% and 9.96% of total assets at September 30, 2001 and2000 respectively.  Logan CountyBancshares exceeds all regulatory capital guide lines and has not been advisedby any regulatory agency of any minimum capital requirement.

 

Effects of Inflation:

 

Theimpact of inflation on a financial institution differs significantly from thatexerted on an industrial concern, primarily because a financial institution'sassets and liabilities consist almost entirely of monetary items.  The low proportion of the Bank's net fixedassets to total assets reduces both the potential of inflated earningsresulting from understated depreciation charges and the potential significantunderstatement of asset values. However, inflation does have a considerable indirect impact on banks,including increased loan demand, as it becomes necessary for producers andconsumers to acquire additional funds to maintain the same levels ofconsumption, inventories, and new investments. Inflation also frequently results in higher interest rates which canaffect both yields on earning assets and rates paid on deposits and otherinterest-bearing liabilities.

 
| PART II. - | OTHER INFORMATION |
|------------|-------------------|
|       | NONE.             |   |
|       |              |

 

SIGNATURES

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 

 

 

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