**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

----

 

**QuarterlyReport Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934**

 

**For the quarterly period ended:**

 

**June 30, 2004**

 

**Commission File Number:  2-95114**

 

| **LOGAN  COUNTY BANCSHARES, INC.**                              |
|-----------------------------------------------------------------|
| (Exact  name of Registrant as specified in its Charter)         |
|                                                            |   |
| **West Virginia**                                               |
| (State or  other jurisdiction of incorporation or organization) |
|                                                            |   |
| **55-0660015**                                                  |
| (I.R.S.  Employer Identification No.)                           |
|                                                            |   |
| **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)      |

 

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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 Actof 1934 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   No o

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No ý

 

Indicate the number of shares outstanding of each ofthe registrant’s classes of common stock as of the latest practicable date:

 

ClassOutstanding at August 18, 2004

 
| Common Stock ($1.67 Par Value) |   | 703,991  Shares |
|--------------------------------|--------|-----------------|

 

 

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LOGAN COUNTY BANCSHARES, INC.

 

Table of Contents

 
| EXPLANATORY NOTE                    | **Page** |
|-------------------------------------|----------|
| PART I – FINANCIAL INFORMATION |     |
|                                |     |   |
|                                | ITEM 1.  | FINANCIAL STATEMENTS: | 1 |
|                                |     |   |   |
|                                |     | Consolidated  Statement of Condition as of June 30, 2004 (unaudited) and  December 31, 2003 | 2 |
|                                |     |   |   |
|                                |     | Consolidated  Statement of Income For the Six Month Period Ended June 30, 2004 and  2003 (unaudited) | 3 |
|                                |     |   |   |
|                                |     | Consolidated Statement of  Income For the Three Month Period Ended June 30, 2004 and 2003  (unaudited) | 4 |
|                                |     |   |   |
|                                |     | Consolidated  Statement of Changes in Stockholders’ Equity for the Six Month Period Ended  June 30, 2004 (unaudited) | 5 |
|                                |     |   |   |
|                                |     | Consolidated  Statement of Cash Flows for the Six Month Period Ended June 30, 2004 and  2003 (unaudited) | 6 |
|                                |     |   |   |
|                                |     | Notes  to Unaudited Consolidated Financial Statements | 7 |
|                                |     |   |   |
|                                | ITEM  2. | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 9 |
|                                |     |   |   |
|                                | ITEM  3. | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 13 |
|                                |     |   |   |
|                                | ITEM 4.  | CONTROLS AND  PROCEDURES | 14 |
|                                |     |   |   |
| PART  II – OTHER INFORMATION   |     |
|                                |     |   |   |
|                                | ITEM 1.  | LEGAL  PROCEEDINGS | 15 |
|                                |     |   |   |
|                                | ITEM 2.  | CHANGES  IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES | 15 |
|                                |     |   |   |
|                                | ITEM 3.  | DEFAULTS  UPON SENIOR SECURITIES | 15 |
|                                |     |   |   |
|                                | ITEM  4. | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS | 15 |
|                                |     |   |   |
|                                | ITEM 5.  | OTHER INFORMATION | 15 |

 

i

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|   | ITEM 6.             | EXHIBITS AND  REPORTS ON FORM 8-K                                              | 16     |
|--------|---------------------|--------------------------------------------------------------------------------|--------|
|   |                |                                                                           |
|   | EXHIBITS            |                                                                           |
|   |                |                                                                           |   |
|   | Exhibit 14          | Code  of Ethics                                                                |   |
|   |                |                                                                           |   |
|   | Exhibit 31.1        | Sarbanes-Oxley  Act, Section 302 Certification of Chief Executive Officer |   |
|   |                |                                                                           |   |
|   | Exhibit 31.2        | Sarbanes-Oxley  Act, Section 302 Certification of Chief Financial Officer |   |
|   |                |                                                                           |   |
|   | Exhibit 32.1        | Sarbanes-Oxley  Act, Section 906 Certification of Chief Executive Officer |   |
|   |                |                                                                           |   |
|   | Exhibit 32.2        | Sarbanes-Oxley  Act, Section 906 Certification of Chief Financial Officer |   |
|   |                |                                                                           |
|   | Reports on Form 8-K | 16                                                                             |
|   |                |                                                                           |
|   | Signatures          | 17                                                                             |
|        |                     |                                                                                |        |  |  |

 

ii

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EXPLANATORYNOTE

 

As disclosed on Form 8-K filed with the Securities andExchange Commission (the “Commission”) on July 23, 2004, Logan CountyBancShares, Inc. (the “Company”), working with its outside auditors andspecially retained securities counsel, determined that it was subject to theSarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). In addition, and as disclosed on Form 8-K filed with the Commission onAugust 4, 2004, the Company was informed by its independent auditor,McNeal, Williamson & Co. (“McNeal Williamson”) that McNeal Williamson wasno longer permitted to issue audit reports for the Company and was no longerpermitted to perform interim reviews in accordance with SAS 100 for the Companyas a result of McNeal Williamson’s not being registered with the Public CompanyAccounting Oversight Board (“PCAOB”). McNeal Williamson advised the Company that it should obtain newcertifying independent accountants. Accordingly, the Company retained S.R. Snodgrass, A.C. on August 10,2004 to:  (i) review all interimreports that were reviewed by McNeal Williamson after the adoption ofSarbanes-Oxley; (ii) re-audit the financial statements included in the Form10-K for the period ended December 31, 2003; and (iii) review the auditreport for the period ended December 31, 2002.  All information contained in this reportcould be subject to update, amendment, and supplementation based on S. R.Snodgrass’s re-audit of the financial statements included in the Form 10-K forthe period ending December 31, 2003, and its review of all interim reportsafter the adoption of Sarbanes-Oxley. The Company does not believe there will be material changes to itsaudited and unaudited financial statements at this time.

 

PART I

 

ITEM 1. - FINANCIAL INFORMATION

 

1

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**LOGAN COUNTYBANCSHARES, INC. AND SUBSIDIARY**

**Consolidated Statement Of Condition**

**June 30,2004 (unaudited) and December 31, 2003**

**(In Thousands)**

 
| ** **                                                                                       | ** ** | **June 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                       | ** ** | ** **              | ** ** | ** **                  | ** ** |
| ASSETS                                                                                           |       |                    |       |                        |       |   |   |
| CASH AND DUE FROM BANKS                                                                          |       | $                       | 7,645      |                        | $          | 7,240 |   |
|                                                                                             |       |                    |       |                        |       |
| FEDERAL FUNDS SOLD                                                                               |       | 13,140                  |       | 13,385                      |       |
|                                                                                             |       |                    |       |                        |       |
| INVESTMENT SECURITIES:                                                                           |       |                    |       |                        |       |
| AVAILABLE FOR SALE                                                                               |       | 59,103                  |       | 47,973                      |       |
|                                                                                             |       |                    |       |                        |       |
| LOANS:                                                                                           |       |                    |       |                        |       |
| TOTAL LOANS                                                                                      |       | 99,077                  |       | 101,615                     |       |
| ALLOWANCE FOR LOAN LOSSES                                                                        |       | (1,556                  | )          | (1,582                      | )          |
| NET LOANS                                                                                        |       | 97,521                  |       | 100,033                     |       |
| BANK PREMISES AND EQUIPMENT, NET                                                                 |       | 3,227                   |       | 3,103                       |       |
| ACCRUED INTEREST AND OTHER ASSETS                                                                |       | 3,870                   |       | 3,755                       |       |
|                                                                                             |       |                    |       |                        |       |   |   |
| TOTAL ASSETS                                                                                     |       | $                       | 184,506    |                        | $          | 175,489 |   |
|                                                                                             |       |                    |       |                        |       |
| LIABILITIES AND STOCKHOLDERS EQUITY                                                              |       |                    |       |                        |       |
| DEPOSITS:                                                                                        |       |                    |       |                        |       |
| DEMAND DEPOSITS:                                                                                 |       |                    |       |                        |       |
| NON-INTEREST                                                                                     |       | $                       | 34,317     |                        | $          | 30,098 |   |
| INTEREST BEARING                                                                                 |       | 24,159                  |       | 23,256                      |       |
| SAVINGS DEPOSITS                                                                                 |       | 48,187                  |       | 43,203                      |       |
| TIME DEPOSITS                                                                                    |       | 57,479                  |       | 57,595                      |       |
|                                                                                             |       |                    |       |                        |       |
| TOTAL DEPOSITS                                                                                   |       | 164,142                 |       | 154,152                     |       |
| SECURITIES SOLD UNDER AGREEMENT TO  REPURCHASE                                                   |       | 2,000                   |       | 3,000                       |       |
| ACCRUED INTEREST AND OTHER LIABILITIES                                                           |       | 477                     |       | 582                         |       |
|                                                                                             |       |                    |       |                        |       |
| INCOME TAXES PAYABLE:                                                                            |       |                    |       |                        |       |
| CURRENT                                                                                          |       | 38                      |       | (35                         | )          |
|                                                                                             |       |                    |       |                        |       |
| TOTAL LIABILITIES                                                                                |       | 166,657                 |       | 157,699                     |       |
|                                                                                             |       |                    |       |                        |       |
| STOCKHOLDERS’ EQUITY:                                                                       |       |                    |       |                        |       |
| COMMON STOCK–$1.67 PAR VALUE;  AUTHORIZED – 780,000 SHARES  OUTSTANDING – 703,991 |       | 1,300                   |       | 1,300                       |       |
| SURPLUS                                                                                          |       | 2,408                   |       | 2,408                       |       |
| RETAINED EARNINGS                                                                                |       | 15,804                  |       | 15,426                      |       |
| ACCUMULATED OTHER COMP. INCOME(LOSS)                                                             |       | (257                    | )          | 62                          |       |
| TREASURY STOCK – 76,000 SHARES                                                              |       | (1,406                  | )          | (1,406                      | )          |
| TOTAL STOCKHOLDERS’ EQUITY                                                                  |       | 17,849                  |       | 17,790                      |       |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                  |       | $                       | 184,506    |                        | $          | 175,489 |   |

 

SEE ACCOMPANYING NOTES TO UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS.

 

2

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LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statement of Income (unaudited)

For the Six Month Periods Ended June 30,2004 and 2003

(In Thousands)

 
| ** **                                           | ** ** | **Six Months Ending June 30** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                           | ** ** | **2004**                           | ** ** | **2003** | ** ** |
| INTEREST AND DIVIDEND INCOME:                        |       |                               |       |   |   |
| INTEREST ON LOANS                                    |       | $                                  | 3,486      |   | $ | 3,837 |   |
| INTEREST AND DIVIDENDS ON INVESTMENTS                |       | 472                                |       | 504 |   |
| INTEREST ON FEDERAL FUNDS SOLD                       |       | 99                                 |       | 108 |   |
| TOTAL INTEREST & DIVIDEND INCOME                 |       | 4,057                              |       | 4,449 |   |
|                                                 |       |                               |       |   |   |
| INTEREST EXPENSE:                                    |       |                               |       |   |   |
| INTEREST ON DEPOSITS                                 |       | 841                                |       | 1,037 |   |
| INTEREST OTHER                                       |       | 51                                 |       | 46 |   |
| TOTAL INTEREST EXPENSE                               |       | 892                                |       | 1,083 |   |
| NET INTEREST INCOME                                  |       | 3,165                              |       | 3,366 |   |
| PROVISION FOR LOAN LOSSES                            |       | 0                                  |       | 3 |   |
| NET INTEREST INCOME AFTER PROVISION FOR  LOAN LOSSES |       | 3,165                              |       | 3,363 |   |
|                                                 |       |                               |       |   |   |
| NON-INTEREST INCOME:                                 |       |                               |       |   |   |
| SERVICE FEES                                         |       | 418                                |       | 430 |   |
| OTHER OPERATING INCOME                               |       | 110                                |       | 85 |   |
| TOTAL NON-INTEREST INCOME                            |       | 528                                |       | 515 |   |
|                                                 |       |                               |       |   |   |
| NON-INTEREST EXPENSES:                               |       |                               |       |   |   |
| SALARIES AND BENEFITS                                |       | 1,163                              |       | 1,160 |   |
| EXPENSE OF BANK PREMISES AND EQUIPMENT               |       | 280                                |       | 310 |   |
| DATA PROCESSING                                      |       | 309                                |       | 273 |   |
| SUPPLIES                                             |       | 84                                 |       | 67 |   |
| FEDERAL RESERVE CHARGES                              |       | 50                                 |       | 54 |   |
| DIRECTOR FEES                                        |       | 47                                 |       | 38 |   |
| POSTAGE                                              |       | 43                                 |       | 61 |   |
| OTHER OPERATING EXPENSES                             |       | 344                                |       | 301 |   |
| TOTAL NON-INTEREST EXPENSES                          |       | 2,320                              |       | 2,264 |   |
| INCOME BEFORE INCOME TAXES                           |       | 1,373                              |       | 1,614 |   |
| INCOME TAXES                                         |       | 488                                |       | 585 |   |
| NET INCOME                                           |       | $                                  | 885        |   | $ | 1,029 |   |
| Earnings per common share:                           |       |                               |       |   |   |
| Basic                                                |       | $                                  | 1.26       |   | $ | 1.46 |   |
| Diluted                                              |       | $                                  | 1.26       |   | $ | 1.46 |   |
|                                                 |       |                               |       |   |   |
| Dividends per common share:                          |       | $                                  | 0.72       |   | $ | 0.70 |   |
| Average outstanding shares:                          |       |                               |       |   |   |
| Basic                                                |       | 703,991                            |       | 703,991 |   |
| Diluted                                              |       | 703,991                            |       | 703,991 |   |

 

SEE ACCOMPANYING NOTES TO UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS.

 

3

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LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statement of Income (unaudited)

For the Three Month Periods EndedJune 30, 2004 and 2003

(In Thousands)

 
| ** **                                           | ** ** | **Three Months Ending June 30,** | ** ** |
|------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                           | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| INTEREST AND DIVIDEND INCOME:                        |       |                                  |       |   |   |
| INTEREST ON LOANS                                    |       | $                                     | 1,729      |   | $ | 1,910 |   |
| INTEREST AND DIVIDENDS ON INVESTMENTS                |       | 259                                   |       | 231 |   |
| INTEREST ON FEDERAL FUNDS SOLD                       |       | 45                                    |       | 59 |   |
| TOTAL INTEREST & DIVIDEND INCOME                 |       | 2,033                                 |       | 2,200 |   |
|                                                 |       |                                  |       |   |   |
| INTEREST EXPENSE:                                    |       |                                  |       |   |   |
| INTEREST ON DEPOSITS                                 |       | 415                                   |       | 506 |   |
| INTEREST OTHER                                       |       | 24                                    |       | 27 |   |
| TOTAL INTEREST EXPENSE                               |       | 439                                   |       | 533 |   |
| NET INTEREST INCOME                                  |       | 1,594                                 |       | 1,667 |   |
| PROVISION FOR LOAN LOSSES                            |       | 0                                     |       | 1 |   |
| NET INTEREST INCOME AFTER PROVISION FOR  LOAN LOSSES |       | 1,594                                 |       | 1,666 |   |
|                                                 |       |                                  |       |   |   |
| NON-INTEREST INCOME:                                 |       |                                  |       |   |   |
| SERVICE FEES                                         |       | 221                                   |       | 236 |   |
| OTHER OPERATING INCOME                               |       | 47                                    |       | 26 |   |
| TOTAL NON-INTEREST INCOME                            |       | 268                                   |       | 262 |   |
|                                                 |       |                                  |       |   |   |
| NON-INTEREST EXPENSES:                               |       |                                  |       |   |   |
| SALARIES AND BENEFITS                                |       | 573                                   |       | 576 |   |
| EXPENSE OF BANK PREMISES AND EQUIPMENT               |       | 146                                   |       | 161 |   |
| DATA PROCESSING                                      |       | 178                                   |       | 137 |   |
| SUPPLIES                                             |       | 48                                    |       | 38 |   |
| FEDERAL RESERVE CHARGE                               |       | 23                                    |       | 27 |   |
| DIRECTOR FEES                                        |       | 23                                    |       | 18 |   |
| POSTAGE                                              |       | 11                                    |       | 27 |   |
| OTHER OPERATING EXPENSES                             |       | 185                                   |       | 161 |   |
| TOTAL NON-INTEREST EXPENSES                          |       | 1,187                                 |       | 1,145 |   |
| INCOME BEFORE INCOME TAXES                           |       | 675                                   |       | 783 |   |
| INCOME TAXES                                         |       | 240                                   |       | 285 |   |
| NET INCOME                                           |       | $                                     | 435        |   | $ | 498 |   |
|                                                 |       |                                  |       |   |   |
| Earnings per common share:                           |       |                                  |       |   |   |
| Basic                                                |       | $                                     | 0.62       |   | $ | 0.71 |   |
| Diluted                                              |       | $                                     | 0.62       |   | $ | 0.71 |   |
| Dividends per common share:                          |       | $                                     | 0.36       |   | $ | 0.35 |   |
|                                                 |       |                                  |       |   |   |
| Average outstanding shares:                          |       |                                  |       |   |   |
| Basic                                                |       | 703,991                               |       | 703,991 |   |
| Diluted                                              |       | 703,991                               |       | 703,991 |   |

 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

 

4

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LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

For the Six Month Period Ended June 30,2004

(In Thousands)

 
| ** **                                              | ** ** | **Common  Stock** | ** ** | **Surplus** | ** ** | **Retained  Earnings** | ** ** | **Treasury  Stock** | ** **   | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Comprehensive  Income** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|-------------------|------------|-------------|------------|------------------------|------------|---------------------|--------------|------------------------------------------------------|------------|---------------------------|------------|-----------|------------|
| BALANCE –   DECEMBER 31, 2003            |       | $                 | 1,300      |        | $          | 2,408                  |       | $                   | 15,426       |                                                 | $          | (1,406                    | )          | $         | 62         |   |   |   | $ | 17,790 |   |
|                                                    |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| COMPREHENSIVE INCOME                               |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| NET INCOME FOR THE SIX MONTHS ENDED JUNE 30,  2004 |       | 0                 |       | 0           |       | 885                    |       | 0                   |         | 0                                                    |       | $                         | 885        |      | 885        |   |
|                                                    |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| OTHER COMPREHENSIVE INCOME                              |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| NET OF TAX:                                             |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| UNREALIZED LOSSES ON AVAILABLE-FOR-SALE SECURITIES      |       | 0                 |       | 0           |       | 0                      |       | 0                   |         | (319                                                 | )          | (319                      | )          | (319      | )          |
| COMPREHENSIVE INCOME                                    |       |              |       |        |       |                   |       |                |         |                                                 |       | $                         | 566        |      |       |   |
|                                                    |       |              |       |        |       |                   |       |                |         |                                                 |       |                      |       |      |       |
| DIVIDENDS ON 703,991 SHARES COMMON STOCK @ $.72         |       |              |       |        |       | (507                   | )          |                |         |                                                 |       |                      |       | (507      | )          |
| BALANCE –JUNE 30, 2004                        |       | $                 | 1,300      |        | $          | 2,408             |       | $                   | 15,804  |                                                 | $          | (1,406               | )          | $         | (257  | ) |   |   |   | $ | 17,849  |   |

 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATEDFINANCIAL STATEMENTS.

 

5

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LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statement of Cash Flows (unaudited)

For the Six Month Periods Ended June 30,2004 and 2003

(In Thousands)

 
| ** **                                                                         | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                              |       |     |       |     |       |
| NET INCOME                                                                         |       | $        | 885        |     | $          | 1,029 |   |
| ADJUSTMENTS TO RECONCILE NET INCOME TO NET  CASH PROVIDED BY OPERATING ACTIVITIES: |       |     |       |     |       |
| DEPRECIATION                                                                       |       | 124      |       | 132      |       |
| SECURITY AMORTIZATION AND ACCRETION                                           |       | 102      |       | 55       |       |
| PROVISION FOR LOAN LOSSES                                                          |       | 0        |       | 3        |       |
| (INCREASE) DECREASE IN OTHER ASSETS                                           |       | (92      | )          | (436     | )          |
| INCREASE (DECREASE) IN OTHER LIABILITIES                                           |       | (465     | )          | (607     | )          |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                          |       | 554      |       | 176      |       |
|                                                                               |       |     |       |     |       |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                              |       |     |       |     |       |
| PROCEEDS FROM SALE OF SECURITIES AVAILABLE  SALE                                   |       | 38,083   |       | 31,977   |       |
| PROCEEDS FROM MATURITIES OF SECURITIES  AVAILABLE FOR SALE                         |       | 0        |       | 0        |       |
| PURCHASE OF SECURITIES AVAILABLE FOR SALE                                          |       | (49,250  | )          | (37,255  | )          |
| NET (INCREASE) DECREASE IN FEDERAL FUNDS  SOLD                                     |       | 245      |       | (820     | )          |
| NET (INCREASE) DECREASE IN LOANS                                                   |       | 2,538    |       | 3,969    |       |
| PURCHASE OF BANK PREMISES AND EQUIPMENT                                            |       | (248     | )          | (45      | )          |
| NET CASH USES FOR INVESTING ACTIVITIES                                             |       | (8,632   | )          | (2,174   | )          |
|                                                                               |       |     |       |     |       |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                         |       |     |       |     |       |
| NET INCREASE (DECREASE) IN DEMAND  DEPOSITS                                   |       | 5,122    |       | 3,848    |       |
| NET INCREASE (DECREASE) IN SAVINGS  DEPOSITS                                  |       | 4,984    |       | (1,837   | )          |
| NET INCREASE (DECREASE) IN TIME  DEPOSITS                                     |       | (116     | )          | (526     | )          |
| NET INCREASE (DECREASE) IN REPURCHASE  AGREEMENTS                                  |       | (1,000   | )          | 2,000    |       |
| DIVIDENDS PAID                                                                     |       | (507     | )          | (493     | )          |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                     |       | 8,483    |       | 2,992    |       |
|                                                                               |       |     |       |     |       |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                              |       | 405      |       | 994      |       |
|                                                                               |       |     |       |     |       |
| CASH AND CASH EQUIVALENT AT BEGINNING OF  PERIOD                                   |       | 7,240    |       | 5,967    |       |
| CASH AND CASH EQUIVALENT AT END OF PERIOD                                          |       | $        | 7,645      |     | $          | 6,961 |   |
|                                                                               |       |     |       |     |       |   |   |
| Supplemental Disclosures of Cash Flow  Information Cash Paid For:                  |       |     |       |     |       |
| Interest                                                                           |       | $        | 857        |     | $          | 1,088 |   |
| Income Taxes                                                                       |       | $        | 580        |     | $          | 506 |   |

 

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

 

6

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LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARY

Notes to UnauditedConsolidated Financial Statements

 

1.                                       Financial Statements

 

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

 

2.                                       Basis of Consolidation

 

The Consolidated Statement of Condition and Consolidated Statement ofIncome of Logan County BancShares, Inc. include the activity of Logan Bank andTrust Company, a wholly owned subsidiary. All significant intercompany balancesand transactions have been eliminated.

 

3.                                       Critical Accounting Policies

 

The accounting and reporting policies of Logan County BancShares, Inc.( the “Company”) and its subsidiary were prepared in accordance with accountingprinciples generally accepted in the United States of America, (“US GAAP”),with the instructions for Form 10-Q and Article 10 of Regulations S-X, andto general practices within the financial services industry.  Accordingly, the financial statements do notcontain all of the financial information and footnotes required by USGAAP.  The preparation of financialstatements requires management to make estimates and assumptions that affectthe amounts reported in the financial statements and accompanying notes. Actualresults could differ from those estimates. Management has identified the accounting policies described below asthose that, due to the judgments, estimates and assumptions inherent in thosepolicies, are critical to an understanding of the Company’s consolidatedfinancial statements and management’s discussion and analysis.

 

4.                                       IncomeRecognition

 

The Company recognizes interest income by methods conforming to US GAAPthat include general accounting practices within the financial servicesindustry. Interest income on loans and investment securities is recognized bymethods that result in level rates of return on principal amounts outstanding,including yield adjustments resulting from the amortization of loan costs andpremiums on investment securities and accretion of loan fees and discounts oninvestment securities.

 

In the event management believes collection of all or a portion ofcontractual interest on a loan has become doubtful, which generally occursafter the loan is 90 days past due, the accrual of interest isdiscontinued.  In addition, previouslyaccrued interest deemed uncollectible that was recognized in income isreversed.  Interest received onnonaccrual loans is included in income only if principal recovery is reasonablyassured.  A nonaccrual loan is restoredto accrual status when it is brought current or has performed in accordancewith contractual terms for a reasonable period of time, and the collectibilityof the total contractual principal and interest is no longer doubtful.

 

5.                                       Allowancefor Loan Losses

 

In general, determining the amount of the allowance for loan lossesrequires significant judgment and the use of estimates by management.  The Company maintains an allowance for loanlosses to absorb probable losses in the loan portfolio based on a quarterlyanalysis of the portfolio.  This formalanalysis determines an appropriate level and allocation of the allowance forloan losses among loan types and resulting provision for loan losses byconsidering factors affecting loan losses, including specific losses, levelsand trends in impaired and nonperforming loans, historical loan lossexperience, current national and local economic conditions, volume, growth andcomposition of the portfolio, regulatory guidance and

 

7

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other relevant factors. Management continually monitors the loan portfolio through reviews ofpast due loans and all significant loans which are considered to be potentialproblem loans on a monthly basis.  Theinternal loan review function provides for an independent review to evaluatethe adequacy of the allowance.  Theprovision could increase or decrease each quarter based upon the results ofmanagement’s formal analysis.

 

The amount of the allowance for loan losses for the various loan typesrepresents management’s estimate of expected losses from existing loans basedupon specific allocations for individual lending relationships and historicalloss experience for each category of homogeneous loans.  Impaired loans are commercial and commercialreal estate loans for which it is probable the Company will not be able tocollect all amounts due according to the contractual terms of the loanagreement.  The Company individuallyevaluates such loans for impairment and does not aggregate loans by major riskclassifications.  The definition of“impaired loans” is not the same as the definition of “nonaccrual loans,”although the two categories overlap.  TheCompany may choose to place a loan on nonaccrual status due to paymentdelinquency or uncertain collectibility while not classifying the loan asimpaired, provided the loan is not a commercial or commercial real estateclassification.  Factors considered bymanagement in determining impairment include payment status and collateralvalue.  The amount of impairment forthese types of loans is determined by the difference between the present valueof the expected cash flows related to the loan, using the original interestrate, and its recorded value, or as a practical expedient in the case ofcollateralized loans, the difference between the fair value of the collateraland the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fairvalue of the collateral.  Whileallocations are made to specific loans and pools of loans, the allowance isavailable for all loan losses.

 

6.                                       Comprehensive Income

 

The Company is required to present comprehensive income in a full setof general-purpose financial statements for all periods presented.  The following represents comprehensive incomefor the three months ended June 30, 2004, and 2003.

 
| ** **                                                                  | ** ** | **For the three  Months ended  June 30,  2004** | ** ** | **For the three  Months ended  June 30,  2003** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| Net income                                                                  |       | $                                                    | 435        |                                                 | $          | 498 |   |
| Other comprehensive income, net of tax:                                     |       |                                                 |       |                                                 |       |
| Unrealized gains (losses) on securities net  of reclassification adjustment |       | (306                                                 | )          | (34                                                  | )          |
|                                                                             |       |                                                 |       |                                                 |       |
| Comprehensive Income (Loss)                                                 |       | $                                                    | 129        |                                                 | $          | 464 |   |

 

8

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LOGAN COUNTY BANCSHARES, INC.

 

ITEM 2. - MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

 

EARNINGSPER SHARE

 

Earnings per weighted-average common share, for the six-month periodsended June 30, 2004 and 2003 were $1.26 and $1.46, respectively.  Year-to-date earnings through June 30,2004 reflect an annualized return on average assets (ROAA) of 1.00% compared to1.20% for the same period ended June 30, 2003.  Also, these earnings reflect an annualizedreturn on average equity (ROAE) of 9.93% and 11.82% respectively, for theperiods ending June 30, 2004 and 2003. Dividends for the second quarter of 2004 increased to $0.36 per share,or 2.9% from $0.35 per share paid for the second quarter of 2003.

 

COMPARISION OF THE RESULTSOF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003

 

The Company reported net income of $885,000 for the six months endedJune 30, 2004 compared to $1,029,000 for the six months endedJune 30, 2003, representing a 14% decrease or $144,000.  Net interest income, the primary component ofinterest income, for the six months period ended June 30, 2004, was$3,165,000, a decrease of $201,000 or 5.97% as compared to $3,363,000 for thesame period.  The decrease points out thedecline in interest rates over the two periods in 2004.  Management continues to actively monitorinterest rate risk using asset and liability matching techniques.  Net interest margins for the six months endedJune 30, 2004 and 2003 were 3.54% and 3.94%, respectively.

 

Interest income amounted to $4,057,000 at June 30, 2004, adecrease of $392,000 or 8.81%, from $4,449,000 for the same six-month period of2003.  Interest income reflected aweighted-average yield of 4.55% for the quarter ended June 30, 2004,compared to 4.96% for the same six-month period in 2003.  Average interest earning assets were$167,146,000 and $161,683,000 during the six months ended June 30, 2004and 2003, respectively.

 

Interest expense decreasedto $439,000 for the quarter ended June 30, 2004, which was down $94,000 or17.64% from $533,000 for the second quarter of 2003.  For the six months ended June 30, 2004,interest expense totaled $892,000, which was down $191,000 or 17.64% comparedto $1,083,000 for the six-month period ended June 30, 2003.  This reflected an average cost of funds of1.01% and 1.30%, respectively, for the six-month periods ended June 30,2004 and 2003, and .98% and 1.23% for the second quarters of 2004 and 2003,respectively.  Average interest bearingliabilities were $126,939,000 and $125,315,000 during the six months endedJune 30, 2004 and 2003, respectively, and $128,342,000 and $125,478,000for the second quarters of 2004 and 2003, respectively.

 

There was no provision forloan losses for the six-month period ended June 30, 2004, compared to$3,000 for the comparable period in 2003. Also, there was no provision for the second quarter of 2004 compared to$1,000 for the second quarter of 2003. The decreased provision resulted primarily from an increase in recoveriesand slower loan growth.

 

NON-INTEREST INCOME

 

Non-interest income includesrevenues from service charges on deposit accounts, fees from the sale ofchecks, fees from automated teller machines, safe deposit box rent andinsurance investment. For the three-month period ended June 30, 2004,non-interest income totaled $268,000, representing an increase of $6,000 or0.02% from the $262,000 recorded during the same period in 2003.  For the six months ended June 30, 2004,non-interest income was $528,000, which was $13,000 or 2.52% more than thefirst half of 2003.

 

9

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NON-INTEREST EXPENSE

 

Non-interest expense includes overhead costs which are not related tointerest expense or to losses from loans or securities or income taxexpense.  During the six months endingJune 30, 2004, the Company’s non-interest expense totaled $2,362,000,increasing $48,000 or 2.07% over the non-interest expense for the six monthsended June 30, 2004.  For the secondquarter non-interest expense was $1,187,000 or 3.67% more than the $1,145,000for the same period in 2003.

 

Salaries and employeebenefits are the Company’s largest non-interest cost, representingapproximately 50% of total non-interest expense for the first half of 2004 whichwas virtually the same as the first half of 2003.  For the second quarter of 2004, thispercentage was 48%, and it was down compared to 50% for the second quarter of2003. Management was effective in controlling this category of expense for bothperiods in 2004. Expressed as a percentage of assets, annualized non-interestexpense was 2.51% for the first half of 2004 compared to 2.61% for thecomparable period for 2003.  Comparingthe second quarter of 2004 to 2003, these ratios were 2.57% and 2.64%, respectively.

 

INCOME TAXES

 

Logan County BancShares’income tax expense, for the six month period ended June 30, 2004,reflected a $97,000 or 16.58% decrease compared to 2003.  For the second quarter of 2004, income taxexpense was down $45,000 or 15.79%.  Incometax expenses equaled 35.54% and 36.25% of income before taxes for the firsthalf of 2004 and 2003, respectively.  Forthe second quarter of 2004 and 2003 these percentages were 35.56% and 36.40%,respectively.  For the three month andsix month periods the decrease in income tax expense was directly attributableto the decrease in pre-tax income.

 

FINANCIAL CONDITION ANDASSET QUALITY

 

Total assets atJune 30, 2004 were approximately $184,506,000 as compared to approximately$175,489,000 at December 31, 2003, or an increase of $8,810,000 or5.1%.  The loan portfolio decreased by$2,538,000 at June or 2.50%, during this six-month period, from$101,615,000 at December 31, 2003. As the economy began to show signs of improvement during the first half,loan demand began to improve.  Byinvesting short-term, management believes it is better positioned to manage theinterest margin as interest rates begin to increase.  The investment portfolio increased by$11,130,000 or 23.2% during this same period; at the same time federal fundssold decreased by $245,000 or 1.8%. Total deposits increased by $9,990,000 to $164,142,000 at June 30,2004 from $154,152,000 at December 31, 2003.  Although deposits increased by 6.5%, pricingfor deposits is very competitive in the Company’s primary trade areas amongbanks and other nontraditional financial service providers.

 

The continuing stagnation inthe local and national economies places ongoing emphasis on the Company’smethodology in determining the adequacy of the allowance for loan losses.  The Company periodically evaluates theadequacy of the allowance for loan losses in order to maintain the allowance ata level that is sufficient to absorb probable credit losses.  This evaluation is based on a review of theCompany’s historical loss experience, known and inherent risks in the loanportfolio, including adverse circumstances that may affect the ability of theborrower to repay interest and/or principal, the estimated value of collateral,and an analysis of the levels and trends of delinquencies, charge-offs and therisk ratings of the various loan categories. Such factors as the level and trend of interest rates and the conditionof the national and local economies are also considered.  At June 30, 2004, and December 31,2003, the allowance for loan losses was $1,556,000 and $1,582,000,respectively.  This resulted in the ratioof the allowance for loan losses to total period-end loans increasing slightlyfrom 1.56% at December 31, 2003, to 1.57% at June 30, 2004.

 

Financial instruments include commitments to extend and standby lettersof credit.  These commitments includestandby letters of credit of approximately $987,000 at June 30, 2004 and$1,027,000 at

 

10

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December 31, 2003.  These instruments contain various elements ofcredit and interest rate risk in excess of the amount recognized in theconsolidated statements of financial condition. Additionally, certain off-balance sheet items of approximately$12,203,000 at June 30, 2004 and $11,670,000 at December 31, 2003,were comprised primarily of unfunded loan commitments.

 

LIQUIDITY AND CAPITALRESOURCES

 

This report may containcertain forward-looking statements, including certain plans, expectations,goals and projections, which are subject to numerous assumptions, risks anduncertainties.  Actual results coulddiffer materially from those contained in or implied by such statements for avariety of factors including: changes in economic conditions which may affectthe Company’s primary market area; rapid movements in interest rates;competitive pressures on product pricing and services; success and timing ofbusiness strategies; the nature and extent of government actions and reforms;and rapidly changing technology and evolving financial industry standards.

 

Liquidity managementinvolves the ability to meet the cash flow requirements of depositors wantingto withdraw funds or borrowers needing assurance that sufficient funds will beavailable to meet their credit needs.  Liquidity can best be demonstrated by ananalysis of the Company’s cash flows. The primary source of cash flows for the Company is operatingactivities.  Operating activitiesprovided $554,000 of liquidity for the six-month period ended June 30,2004, compared to $176,000 for the same six months in 2003.  The principal elements of these operatingflows are net income, increased for significant non-cash expenses anddepreciation and amortization.  Asecondary source of liquidity for the Company comes from investing activities,principally the maturities of investment securities.  For the six-month periods ended June 30,2004 and 2003, due to the low interest rate environment, maturities and callsof investment securities amounted to $38,083,000 and $31,977,000,respectively.  As of June 30, 2004,the Company had approximately $4,257,000 of investment securities that maturewithin 12 months.  Interest rates arebeginning to stabilize and the rapidity of calls in investment securities isexpected to decline.  Relatively flatloan demand resulted in a net decrease in loans of $2,538,000 for the first sixmonths of 2004 following a decline of $3,969,000 the same period in 2003.

 

11

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Risk Elements

 

The table below presents information concerning non-performing assetsincluding non-accrual loans, renegotiated loans, loans 90 days or more pastdue, other real estate loans, and repossessed assets. A loan is classified asnon-accrual when, in the opinion of management, there are serious doubts aboutthe collectibility of interest and principal. At the time the accrual ofinterest is discontinued, future income is recognized only when cash isreceived. Renegotiated loans are those loans for which terms have been renegotiatedto provide a reduction or deferral of principal or interest as a result of thedeterioration of the borrower’s ability to pay.

 
| ** **                                          | ** ** | **June 30, 2004**     | ** ** | **December 31, 2003** | ** ** |
|-----------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
|                                                |       | **(dollars in thousands)** |       |
| Loans on non-accrual basis                          |       | $                          | 972        |                       | $          | 1,059 |   |
| Loans past due 90 days or more                      |       | 209                        |       | 149                        |       |
| Renegotiated loans                                  |       | 0                          |       | 0                          |       |
|                                                |       |                       |       |                       |       |
| Total non-performing loans                          |       | 1,181                      |       | 1208                       |       |
|                                                |       |                       |       |                       |       |
| Other real estate                                   |       | 171                        |       | 202                        |       |
| Repossessed assets                                  |       | 3                          |       | 3                          |       |
|                                                     |       |                            |       |                       |       |
| Total non-performing assets                         |       | $                          | 1,355      |                       | $          | 1,413 |   |
|                                                |       |                       |       |                       |       |
| Non-performing loans as a percent of total  loans   |       | 1.19                       | %          | 1.19                       | %          |
|                                                |       |                       |       |                       |       |
| Non-performing assets as a percent of total  assets |       | .73                        | %          | .81                        | %          |
|                                                |       |                       |       |                       |       |
| Allowance for loan losses to non-performing  loans  |       | 131.75                     | %          | 130.96                     | %          |

 

Management monitors impaired loans on a continual basis. As ofJune 30, 2004, the Company had impaired loans with a principal balance of$1,384,688. During the six months ended June 30, 2004, loans decreased$2,538,000 and non-performing loans decreased $27,000, while the allowance forloan losses decreased $26,000. The percentage of allowance for loan losses toloans outstanding remained at 1.57 % during this time period. The collateralrequirements on such loans reduce the risk of potential losses to an acceptablelevel in management’s opinion.

 

This report may contain certain forward-looking statements, includingcertain plans, expectations, goals and projections, which are subject tonumerous assumptions, risks and uncertainties. Actual results could differmaterially from those contained in or implied by such statements for a varietyof factors including: changes in economic conditions which may affect theCompany’s primary market area, rapid movements in interest rates; competitivepressures on product pricing and services; success and timing of businessstrategies; the nature and extent of government actions and reforms; andrapidly changing technology and evolving financial industry standards.

 

12

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ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Asset and liabilitymanagement is responsible for the planning, implementation, and control processfor determining asset mix and maturity features relative to liabilitymaturities in such a way that net interest margin will be maximized.  A major tool for such a process is gapmanagement of the Company’s interest sensitive assets to interest sensitiveliabilities.

 

The negative gap position aspresented in the following table for maturities of one year or less is offsetby the substantial positive gap position for maturities greater than oneyear.  The earnings of the Company aresufficient to withstand the short-term negative gap position.  Should a large fluctuation occur, increasingthe costs of funds, management would consider increasing service charges andnon-interest fees which management determines the market would bear in order tonegate increased rate costs.  Anadditional response, at the option of management, would be liquidation ofcertain long-term investments, and conversion of those funds into short-termsecurities.

 

The Company’s managementrecognized the concentration of large certificates of deposit.  The Company’s policy of asset-liabilitymanagement matches both rates and maturities so the Company will not have aliquidity problem or allow income to be materially affected by a change inrates.

 

All demand and savingsdeposits are considered highly volatile, although experience has shown theseaccounts to be stable regardless of economic cycles.  Interest on savings and other transactionalaccounts have generally remained constant over periods of interest ratechanges.  Therefore, deposits and savingsare classified as “over one year” to represent a more realistic rate sensitivegap.

 

INTEREST RATE SENSITIVEANALYSIS TABLE

 

(InThousands of Dollars)

 
| **As of  June 30, 2004**                                             | ** ** | **0-90** | ** ** | **91-180** | ** ** | **181-365** | ** ** | **Total  One  Year** | ** ** | **Over  One  Year** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------------------|------------|----------|------------|------------|------------|-------------|------------|----------------------|------------|---------------------|------------|-----------|------------|
| Earning Assets                                                            |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Loans                                                                     |       | $        | 15,371     |       | $          | 2,529       |       | $                    | 6,321      |                | $          | 24,221    |       | $ | 74,856 |   | $ | 99,077 |   |
| Investments                                                               |       | 0        |       | 251        |       | 2,241       |       | 2,492                |       | 56,692              |       | 59,184    |       |
| Federal Funds Sold                                                        |       | 13,140   |       | 0          |       | 0           |       | 13,140               |       | 0                   |       | 13,140    |       |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Total Earning Assets                                                      |       | 28,511   |       | 2,780      |       | 8,562       |       | 39,853               |       | 131,548             |       | 171,401   |       |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Interest Bearing Liabilities                                              |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Demand Deposits                                                           |       | 24,159   |       | 0          |       | 0           |       | 24,159               |       | 0                   |       | 24,159    |       |
| Savings                                                                   |       | 210      |       | 449        |       | 0           |       | 659                  |       | 47,528              |       | 48,187    |       |
| CD’s of $100,000 and Over                                            |       | 2,532    |       | 2,972      |       | 1,850       |       | 7,354                |       | 11,909              |       | 19,263    |       |
| Other Time                                                                |       | 7,309    |       | 5,853      |       | 5,887       |       | 19,049               |       | 19,167              |       | 38,216    |       |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Total Interest Bearing Liability                                          |       | 34,210   |       | 9,274      |       | 7,737       |       | 51,221               |       | 78,604              |       | 129,825   |       |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Interest Sensitivity Gap                                                  |       | $        | (5,699     | )          | $          | (6,494      | )          | $                    | 825        |                | $          | (11,368   | )          | $ | 52,944 |   | $ | 41,576 |   |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Cumulative Gap                                                            |       | $        | (5,699     | )          | $          | (12,193     | )          | $                    | (11,368    | )                   | $          | (11,368   | )          | $ | 52,944 |   | $ | 41,576 |   |
|                                                                      |       |     |       |       |       |        |       |                 |       |                |       |      |       |
| Rate Sensitive Assets/Rate Sensitive  Liabilities (Cumulative Percentage) |       | 83.34    | %          | 71.96      | %          | 77.81       | %          | 77.81                | %          | 132.02              | %          | 132.02    | %          |

 

13

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ITEM4. – CONTROLS AND PROCEDURES

 

Evaluation of disclosurecontrols and procedures:

 

As of June 30, 2004,the Company’s Chief Executive Officer and Chief Financial Officer evaluated theeffectiveness of the Company’s disclosure controls and procedures (as definedin Exchange act Rule 13a-15(e)).  Basedon their evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures (i) enable theCompany to record, process, summarize and report in a timely manner theinformation that the Company is required to disclose in its Exchange Actreports, and (ii) are designed with the objective of ensuring that suchinformation is accumulated and communicated to management, including the ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timelydecisions regarding disclosure.

 

Changes in internalcontrols:

 

There were no changes in theCompany’s internal controls over financial reporting or in other factors thatcould significantly affect these controls identified in connection with theevaluation performed by the Chief Executive Officer and Chief Financial Officerthat occurred during the quarter ended June 30, 2004, that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

14

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PART II

 

ITEM 1. – NONE

 

ITEM 2. – NONE

 

ITEM 3. – NONE

 

ITEM 4. – SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS

 

Logan County BancShares heldits annual meeting on May 25, 2004. At this meeting, the shareholders approvedthe election of the following directors to serve until the 2005 Annual Meeting.

 
| ** **        | ** ** | **For** | ** ** | **Against** | ** ** | **Withheld** | ** ** |
|-------------------|------------|---------|------------|-------------|------------|--------------|------------|
|              |       |    |       |        |       |         |       |
| Eddie Canterbury  |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| David McCormick   |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Harvey Oakley     |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Clell Peyton      |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Earle B. Queen    |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| LeVeta Jean Ray   |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Walter D. Vance   |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| William W. Wagner |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Michael Winter    |       | 418,325 |       | 0           |       | 1,377        |       |
|              |       |    |       |        |       |         |       |
| Glenn T. Yost     |       | 418,325 |       | 0           |       | 1,377        |       |

 

ITEM 5. – NONE

 

15

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ITEM 6. – EXHIBITS ANDREPORTS ON FORM 8-K

 

(a)                                  Exhibitsrequired by Item 601 of Regulation S-K :

 

(14)                            Codeof Ethics

 

(31)                            Rule 13a-14(a)/15d-14(a) Certifications

 

Certificationas Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 byChief Executive Officer

 

Certificationas Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 byChief Financial Officer

 

(32)                            Section 1350Certifications

 

CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

 

CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

 

(b)                                 Reports on Form 8-K

 

1.                                       OnJuly 23, 2004, the Company filed a current report on Form 8-K disclosingthat it will amend its filings on Form 10-K for the years endingDecember 31, 2002, and December 31, 2003, and its filings on Form10-Q for the quarters ending September 30, 2002, March 31, 2003,June 30, 2003, September 30, 2003, and March 31, 2004, as aresult of learning that it is subject to the Sarbanes-Oxley Act of 2002.

 

2.                                       OnAugust 4, 2004, the Company filed a current report on Form 8-K announcingchanges to the Company's certifying accountant.

 

3.                                       On August 17,2004, the Company filed a current report on Form 8-K disclosing its retentionof a new certifying accountant.

 

16

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**SIGNATURES**

 

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

 

 
|                        |   | LOGAN  COUNTY BANCSHARES, INC.   |
|-----------------------------|--------|----------------------------------|
|                        |   |                             |
|                        |   |                             |
|                        |   | (Registrant)                     |
|                        |   |                             |
| Date:  August 18, 2004 |   | /s/   Eddie Canterbury |   |
|                        |   | Eddie  Canterbury                |
|                        |   | Chief  Executive Officer         |
|                        |   |                             |
| Date:  August 18, 2004 |   | /s/   Mark Mareske     |   |
|                        |   | Mark  Mareske                    |
|                        |   | Chief  Financial Officer         |

 

17

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**EXHIBITINDEX**

 
| **Exhibit Number** | ** ** | **Description**                                                                                                                                               |
|-------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |       |                                                                                                                                                          |
| 14                      |       | Code  of Ethics                                                                                                                                               |
|                    |       |                                                                                                                                                          |
| 31.1                    |       | Certification  as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002  by Chief Executive Officer                                       |
|                    |       |                                                                                                                                                          |
| 31.2                    |       | Certification  as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002  by Chief Financial Officer                                       |
|                    |       |                                                                                                                                                          |
| 32.1                    |       | Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer |
|                    |       |                                                                                                                                                          |
| 32.2                    |       | Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer |

 

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