**FORM10-Q**

 

**SECURITIES AND EXCHANGECOMMISSION****WASHINGTON, D. C. 20549**

 

**Quarterly Report UnderSection 13 or 15 (d)**

**of the Securities ExchangeAct of 1934**

 

ForQuarter Ended               **September 30, 2002**

 

CommissionFile Number    **2-95114**

 

 

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

 

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

 

**55-0660015**(IRS Employer Identification Number)

 

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

(Address of Principal Executive Offices)            (Zip Code)

 

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

 

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

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

                                                                 

 

1

----

 

 

LOGAN COUNTY BANCSHARES, INC.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM I.  FINANCIAL STATEMENTS:

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

 

 

2

----

 

 

LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

ConsolidatedStatement of Condition

September 30, 2002 and 2001 and December 31,2001

(In Thousands)

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

 

SEEACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

3

----

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Income

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

(In Thousands)

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

 

SEEACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

4

----

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement ofIncome

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

(In Thousands)

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

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

5

----

 

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement inChanges in Stockholders’ Equity 

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

(In Thousands)

 

 

|                                                                              |   |       |   |        |   |         |   | **Accumulated**   |   |         |   |      |   |
|-----------------------------------------------------------------------------------|--------|------------|--------|-------------|--------|--------------|--------|-------------------|--------|--------------|--------|-----------|--------|
|                                                                              |   |       |   |        |   |         |   | **Other**         |   |         |   |      |   |
|                                                                              |   | **Common** |   |        |   | **Retained** |   | **Comprehensive** |   | **Treasury** |   |      |   |
|                                                                              |   | **Stock**  |   | **Surplus** |   | **Earnings** |   | **Income,  Net**  |   | **Stock**    |   | **Total** |   |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| BALANCE - DECEMBER 31 2001                                                        |   | $          | 1,300  |        | $      | 2,408        |   | $                 | 13,917 |         | $      | 35        |   | $ | (860 | ) | $ | 16,800 |   |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| COMPREHENSIVE INCOME                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| NET INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002                      |   | 0          |   | 0           |   | 1,603        |   | 0                 |   | 0            |   | 1,603     |   |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES                    |   | 0          |   | 0           |   | 0            |   | 337               |   | 0            |   | 337       |   |
| OTHER ADJUSTMENTS                                                                 |   | 0          |   | 0           |   | (32          | )      |              |   |         |   | (32       | )      |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| TOTAL COMPREHENSIVE INCOME                                                        |   | 0          |   | 0           |   | 1,571        |   | 337               |   | 0            |   | 1,908     |   |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| DIVIDENDS ON 716,991 SHARES COMMON STOCK @ $1.04                                  |   |       |   |        |   | (738         | )      |              |   |         |   | (738      | )      |
|                                                                              |   | $          | 1,300  |        | $      | 2,408        |   | $                 | 14,750 |         | $      | 372       |   | $ | (860 | ) | $ | 17,970 |   |
|                                                                              |   |       |   |        |   |         |   |              |   |         |   |      |   |
| 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     |   |
| CHANGE IN NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE FOR-SALE  SECURITIES |   | 0          |   | 0           |   | 0            |   | 188               |   | 0            |   | 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 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS.

 

 

6

----

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statement ofCash Flows

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

 

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

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

 

7

----

 

 

September30, 2002

 

LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notes to ConsolidatedFinancial Statements

 

1.  Financial Statements:

 

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

 

2.  Basis of 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  owned subsidiary.

 

3.  Year 2000 Assessment

 

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

 

                TheCompany  had their  computer hardware evaluated  for Year 2000  compliance and  purchasedadditional  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 financialposition.

 

 

8

----

 

MANAGEMENT'S DISCUSSION ANDANALYSIS OF

FINANCIALCONDITION 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.

 

EARNINGS SUMMARY

 

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

 

Earnings per common share were $2.24 for thenine months ended September 30, 2002 compared with $2.11 for the same period of2001.

 

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

 

NET INTEREST INCOME

 

The most significant component of 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 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.

 

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

 

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

 

                Theprovision for loan losses represents charges to earnings necessary to maintainan adequate allowance for  potentialfuture  loan losses.  Management's determination of theappropriate 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 thecomposition and risk characteristics of the loan portfolio and the anticipatedinfluence of national and local economic conditions.  The adequacy of the allowance for loan losses is reviewedquarterly and adjustments are made as considered necessary.

 

 

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

 

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

 

 

9

----

 

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

 

 

SUMMARYOF PAST DUE LOANS AND NONPERFORMING ASSETS

(inthousands of dollars)

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

 

NON-INTEREST INCOME

 

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

 

NON-INTEREST EXPENSE

 

                Non-interestexpense comprises overhead costs which are not related to interest expenseor  to losses from loans orsecurities.  As of September 30,  2002, the Company's  non-interest expense totaled $3,356,000.,decreasing $67,000. over the $3,423,000. of non-interest expense for the ninemonths ended  September 30, 2001.  Expressed as a percentage of assets,annualized  non-interest expense was1.93% at September 30, 2002, compared to 1.98% at September 30, 2001.

 

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

 

INCOME TAXES

 

                LoganCounty Bancshares' income tax expense, for the nine month period endedSeptember 30, 2002, reflected a $82,000. increase when compared to the sameperiod of 2001.  Income tax expenseequaled 37.96% and 37.24% of income before taxes at  September 30, 2002 and 2001, respectively.  For financial reporting purposes, income tax expense does not equal thestatutory income tax rate of 43% when applied to pretax income, primarilybecause of timing differences included in income before income taxes.

 

 

10

----

 

 

Balance Sheet Data:

 

                Totalassets increased by $2,663,000. between year end and September 30, 2002 to abalance of $174,262,000.  The majorcomponent of this change was an increase in Investment Securities of$10,098,000., and loan decreases of $8,516,000. and cash decreased by$187,000.  The primary source of fundsfor this change was an increase in deposits of $366,000., a decrease inrepurchase agreements of $1,000,000., and net income of $1,603,000.

 

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 30,2002, Federal Funds Sold amounted to $8,860,000. and securities maturing withinone year amounted to $8,589,000.  Theseare compared to the balances at September 30, 2001 of $28,060,000. in FederalFunds Sold and maturing Investment Securities of $2,998,000. due within oneyear.

 

                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 2002and 2001, banks continue to be faced with volatile interest sensitive funds andhave had  to match their funding requirementsby using assets and liability management 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$15,122,000. and has a total Stockholders' Equity of $17,970,000. as ofSeptember 30, 2002; as compared to $14,145,000. of Retained Earnings andtotal  Stockholders' equity of$16,993,000. at September 30, 2001.

 

                Theequity capital was 10.31% and 9.77% of total assets at September 30, 2002 and2001 respectively.  Logan CountyBancshares exceeds all regulatory capital guide lines and has not been advisedby any regulatory  agency of any minimumcapital requirement.

 

 

# **Tableof Contents**

 

 

LOGAN COUNTY BANCSHARES,INC.

 

 

Item 4. Controls and Procedures

 

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

 

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

 

11

----

 

 

PARTII. - OTHER INFORMATION

 

NONE.

SIGNATURES

 

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

 

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

 

 

CERTIFICATIONUNDER SECTION 906

OFTHE SARBANES-OXLEY ACT OF 2002

 

 

                Pursuantto Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersignedcertifies that this periodic report fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934 and thatinformation contained in this periodic report fairly presents, in all materialrespects, the financial condition and results of operations of Logan CountyBancShares, Inc.

 

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

 

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

 

 

12

----

 

Table of Contents

 

LOGANCOUNTY BANCSHARES, INC

 

CERTIFICATIONS

 

 

I, Eddie D. Canterbury, certify that:

 

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

 

2.  Based on my knowledge, this quarterly report does not contain anyuntrue statement of a  material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report.

 

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

 

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

 

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

 

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

 

c)  presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on the evaluated as of the Evaluation Date;

 

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

 

a)  all significant deficiencies in the designor operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

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

 

6.  The registrant’s othercertifying officers and I have indicated in this quarterly report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 

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

 

 

13

----