**FORM 10-Q**

 

**SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON, D. C.  20549**

 

**QuarterlyReport Under Section 13 or 15 (d)****of theSecurities Exchange Act of 1934**

 

**For Quarter Ended March 31, 2003**

 

**Commission File Number 2-95114**

 

**LOGAN COUNTY BANCSHARES, INC.**

(Exact Name of Registrant as Specified in ItsCharter)

 

**WEST VIRGINIA**

(State or other jurisdiction of incorporationor organization)

 

**55-0660015**

(IRS Employer Identification Number)

 

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

 

**(304) 752-1166**

(Registrant’s telephone number including areacode)

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject to suchfiling requirements for the past 90 days. Yes  ý  No o

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding, of each of the issuer’sclasses of common stock, as of the latest practicable date.   703,991

 

 

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LOGAN COUNTY BANCSHARES, INC.

 
| PART I - FINANCIAL INFORMATION |
|--------------------------------|
|                           |
|                           | ITEM I. | FINANCIAL STATEMENTS: |
|                           |
|                           | Consolidated  Statement of Condition As of March 31,  2003 and 2002 and December 31, 2002. |
|                           |
|                           | Consolidated Statement  of Income For the Three Month  Period Ended March 31, 2003 and 2002. |
|                           |
|                           | Consolidated  Statement of Changes in Stockholders’  Equity for the Three Month Period Ended March 31, 2003 and 2002. |
|                           |
|                           | Consolidated  Statement of Cash Flows for the Three  Month Period Ended March 30, 2003 and 2002 |
|                           |
|                           | Notes to  Consolidated Financial Statements |
|                           |
|                           | ITEM  2. | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
|                           |
| PART II - OTHER  INFORMATION   |
|                           |
| SIGNATURES                     |

 

2

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement of Income

For the Three Month Periods Ended March 31,2003 and 2002

(In Thousands)

 
|                                                 |   | **2003** |   | **2002** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   |     |   |     |   |
| INTEREST INCOME:                                     |   |     |   |     |   |
| INTEREST ON LOANS                                    |   | $        | 1,927  |     | $      | 2,218 |   |
| INTEREST ON INVESTMENTS                              |   | 273      |   | 335      |   |
| INTEREST ON FEDERAL  FUNDS SOLD                      |   | 49       |   | 51       |   |
|                                                 |   | 2,249    |   | 2,604    |   |
|                                                 |   |     |   |     |   |
| INTEREST EXPENSE:                                    |   |     |   |     |   |
| INTEREST ON DEPOSITS                                 |   | 531      |   | 725      |   |
| INTEREST OTHER                                       |   | 19       |   | 39       |   |
| NET INTEREST INCOME                                  |   | 1,699    |   | 1,840    |   |
|                                                 |   |     |   |     |   |
| PROVISION FOR LOAN  LOSSES                           |   | 2        |   | 60       |   |
| NET INTEREST INCOME  AFTER PROVISION FOR LOAN LOSSES |   | 1,697    |   | 1,780    |   |
|                                                 |   |     |   |     |   |
| OTHER INCOME:                                        |   |     |   |     |   |
| SERVICE FEES                                         |   | 194      |   | 153      |   |
| OTHER OPERATING INCOME                               |   | 59       |   | 43       |   |
| TOTAL OTHER INCOME                                   |   | 253      |   | 196      |   |
|                                                 |   |     |   |     |   |
| OTHER EXPENSES:                                      |   |     |   |     |   |
| SALARIES AND BENEFITS                                |   | 584      |   | 572      |   |
| EXPENSE OF BANK  PREMISES AND EQUIPMENT              |   | 149      |   | 139      |   |
| OTHER OPERATING  EXPENSES                            |   | 385      |   | 403      |   |
| TOTAL OTHER EXPENSES                                 |   | 1,118    |   | 1,114    |   |
|                                                 |   |     |   |     |   |
| INCOME BEFORE INCOME  TAXES                          |   | 832      |   | 862      |   |
|                                                 |   |     |   |     |   |
| INCOME TAXES                                         |   | 301      |   | 325      |   |
| NET INCOME                                           |   | $        | 531    |     | $      | 537 |   |
|                                                 |   |     |   |     |   |
| PER SHARE OF COMMON  STOCK NET INCOME                |   | $        | 0.75   |     | $      | 0.76 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

3

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LOGAN COUNTY BANCSHARES, INC.AND SUBSIDIARIES

Consolidated Statement of Condition

March 31, 2003 and 2002 andDecember 31, 2002

(In Thousands)

 
|                                                                                                                  |   | **March 31,** |    | **December 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|------------------|--------|
|                                                                                                                  |   | **2003**      |    | **2002**         |   | **2002** |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| ASSETS                                                                                                                |   |          |    |             |   |   |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| CASH AND  DUE FROM BANKS                                                                                              |   | $             | 7,334   |             | $      | 6,121 |   | $ | 5,967 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| INVESTMENT  SECURITIES:                                                                                               |   |          |    |             |   |   |   |
| AVAILABLE  FOR SALE                                                                                                   |   | 39,605        |    | 37,016           |   | 41,305 |   |
| HELD TO  MATURITY                                                                                                     |   | 0             |    | 0                |   | 0 |   |
| FEDERAL  FUNDS SOLD                                                                                                   |   | 20,990        |    | 19,110           |   | 11,370 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| LOANS:                                                                                                                |   |          |    |             |   |   |   |
| TOTAL  LOANS                                                                                                          |   | 105,222       |    | 111,112          |   | 107,933 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| RESERVE  FOR LOAN LOSSES                                                                                              |   | 1,578         |    | 1,198            |   | 1,619 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| NET LOANS                                                                                                             |   | 103,644       |    | 109,914          |   | 106,314 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| BANK  PREMISES AND EQUIPMENT                                                                                          |   | 3,196         |    | 3,323            |   | 3,217 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| ACCRUED  INTEREST AND OTHER ASSETS                                                                                    |   | 1,746         |    | 2,077            |   | 1,526 |   |
|                                                                                                                  |   | $             | 176,515 |             | $      | 177,561 |   | $ | 169,699 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                             |   |          |    |             |   |   |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| DEPOSITS:                                                                                                             |   |          |    |             |   |   |   |
| DEMAND  DEPOSITS:                                                                                                     |   |          |    |             |   |   |   |
| NON-INTEREST                                                                                                          |   | $             | 27,413  |             | $      | 28,970 |   | $ | 25,076 |   |
| INTEREST  BEARING                                                                                                     |   | 26,479        |    | 22,769           |   | 21,851 |   |
| SAVINGS  DEPOSITS                                                                                                     |   | 43,016        |    | 43,825           |   | 44,864 |   |
| TIME  DEPOSITS                                                                                                        |   | 58,199        |    | 61,379           |   | 58,652 |   |
| TOTAL  DEPOSITS                                                                                                       |   | 155,107       |    | 156,943          |   | 150,443 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| FEDERAL  FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE                                           |   | 3,003         |    | 3,004            |   | 1,000 |   |
| ACCRUED  AND OTHER LIABILITIES                                                                                        |   | 430           |    | 474              |   | 1,046 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| INCOME  TAXES PAYABLE:                                                                                                |   |          |    |             |   |   |   |
| CURRENT                                                                                                               |   | 283           |    | 272              |   | (10 | ) |
| DEFERRED                                                                                                              |   | 302           |    | (31              | )      | 27 |   |
| TOTAL  LIABILITIES                                                                                                    |   | 159,125       |    | 160,662          |   | 152,506 |   |
|                                                                                                                  |   |          |    |             |   |   |   |
| STOCKHOLDERS’  EQUITY:                                                                                           |   |          |    |             |   |   |   |
| COMMON  STOCK-$1.67 PAR VALUE; AUTHORIZED - 780,000 SHARES OUTSTANDING - 703,991 and  716,991 SHARES IN 2003 AND 2002 |   | 1,300         |    | 1,300            |   | 1,300 |   |
| SURPLUS                                                                                                               |   | 2,408         |    | 2,408            |   | 2,408 |   |
| RETAINED  EARNINGS                                                                                                    |   | 15,088        |    | 14,051           |   | 14,891 |   |
| TREASURY  STOCK                                                                                                       |   | (1,406        | )       | (860             | )      | (1,406 | ) |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                      |   | 17,390        |    | 16,899           |   | 17,193 |   |
|                                                                                                                  |   | $             | 176,515 |             | $      | 177,561 |   | $ | 169,699 |   |

 

SEE ACCOMPANYING NOTES TOCONSOLIDATED FINANCIAL STATEMENTS.

 

4

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement in Changes in Stockholders’Equity

For the Three Month Periods Ended March 31,2003 and 2002

(In Thousands)

 
|                                                                              |   | **Common  Stock** |   | **Surplus** |   | **Retained  Earnings** |   | **Accumulated  Other  Comprehensive  Income, Net** |   | **Treasury  Stock** |   | **Total** |   |
|-----------------------------------------------------------------------------------|--------|-------------------|--------|-------------|--------|------------------------|--------|----------------------------------------------------|--------|---------------------|--------|-----------|--------|
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| BALANCE - DECEMBER 31  2002                                                       |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 14,631 |                | $      | 260       |   | $ | (1,406 | ) | $ | 17,193 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| COMPREHENSIVE INCOME  NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2003        |   | 0                 |   | 0           |   | 531                    |   | 0                                                  |   | 0                   |   | 531       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| NET UNREALIZED GAINS  (LOSSES) ON AVAILABLE FOR-SALE SECURITIES                   |   | 0                 |   | 0           |   | 0                      |   | (88                                                | )      | 0                   |   | (88       | )      |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| TOTAL COMPREHENSIVE  INCOME                                                       |   | 0                 |   | 0           |   | 531                    |   | (88                                                | )      | 0                   |   | 443       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| DIVIDENDS ON 703,991  SHARES COMMON STOCK @ $1.04                                 |   |              |   |        |   | (246                   | )      |                                               |   |                |   | (246      | )      |
|                                                                              |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 14,916 |                | $      | 172       |   | $ | (1,406 | ) | $ | 17,390 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| BALANCE - DECEMBER 31  2001                                                       |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 13,917 |                | $      | 35        |   | $ | (860 | ) | $ | 16,800 |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| COMPREHENSIVE INCOME  NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2002        |   | 0                 |   | 0           |   | 537                    |   | 0                                                  |   | 0                   |   | 537       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| CHANGE IN NET  UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES |   | 0                 |   | 0           |   | 0                      |   | (194                                               | )      | 0                   |   | (194      | )      |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| TOTAL COMPREHENSIVE  INCOME                                                       |   | 0                 |   | 0           |   | 537                    |   | (194                                               | )      | 0                   |   | 343       |   |
|                                                                              |   |              |   |        |   |                   |   |                                               |   |                |   |      |   |
| DIVIDENDS ON 716,991  SHARES COMMON STOCK @ $0.34                                 |   |              |   |        |   | (244                   | )      |                                               |   |                |   | (244      | )      |
|                                                                              |   | $                 | 1,300  |        | $      | 2,408                  |   | $                                                  | 14,210 |                | $      | (159      | )      | $ | (860 | ) | $ | 16,899 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

5

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement of Cash Flows

For the Three Month Periods Ended March 31,2003 and 2002

 
|                                                                               |   | **2003** |   | **2002** |   |
|------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |   |     |   |     |   |
| NET INCOME                                                                         |   | $        | 531    |     | $      | 537 |   |
| ADJUSTMENTS TO  RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |   |     |   |     |   |
| DEPRECIATION                                                                       |   | 66       |   | 67       |   |
| SECURITY AMORTIZATION  AND ACCREATION                                              |   | 23       |   | 20       |   |
| MARKET VALUE  AMORTIZATION                                                         |   | 0        |   | (1       | )      |
| PROVISION FOR LOAN  LOSSES                                                         |   | 3        |   | 60       |   |
| (INCREASE) DECREASE IN  OTHER ASSETS                                               |   | (220     | )      | (51      | )      |
| INCREASE (DECREASE) IN  OTHER LIABILITIES                                          |   | (10      | )      | (56      | )      |
| NET CASH PROVIDED BY  OPERATING ACTIVITIES                                         |   | 393      |   | 576      |   |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                                             |   |     |   |     |   |
| PROCEEDS FROM SALE OF  SECURITIES AVAILABLE FOR SALE                               |   | 21,477   |   | 13,000   |   |
| PROCEEDS FROM  MATURITIES OF SECURITIES AVAILABLE FOR SALE                         |   | 0        |   | 3,487    |   |
| PURCHASE OF SECURITIES  AVAILABLE FOR SALE                                         |   | (20,014  | )      | (17,504  | )      |
| NET (INCREASE) DECREASE  IN FEDERAL FUNDS SOLD                                     |   | (9,620   | )      | (11,960  | )      |
| NET (INCREASE) DECREASE  IN LOANS                                                  |   | 2,755    |   | 5,781    |   |
| PURCHASE OF BANK  PREMISES AND EQUIPMENT                                           |   | (45      | )      | (6       | )      |
| NET CASH PROVIDED BY  INVESTING ACTIVITIES                                         |   | (5,447   | )      | (7,202   | )      |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN DEMAND DEPOSITS                                        |   | 6,965    |   | 2,797    |   |
| NET INCREASE (DECREASE)  IN SAVINGS DEPOSITS                                       |   | (1,848   | )      | 4,021    |   |
| NET INCREASE (DECREASE)  IN TIME DEPOSITS                                          |   | (453     | )      | (1,903   | )      |
| NET INCREASE (DECREASE)  IN FEDERAL FUNDS PURCHASED/REPURCHASED                    |   | 2,003    |   | 1,004    |   |
| DIVIDENDS PAID                                                                     |   | (246     | )      | (244     | )      |
| NET CASH PROVIDED BY  FINANCING ACTIVITIES                                         |   | 6,421    |   | 5,675    |   |
|                                                                               |   |     |   |     |   |
|                                                                               |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                              |   | 1,367    |   | (951     | )      |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT BEGINNING OF PERIOD                                   |   | 5,967    |   | 7,072    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT END OF PERIOD                                         |   | $        | 7,334  |     | $      | 6,121 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

6

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March 31, 2003

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notes toConsolidated Financial Statements

 

1.   Financial Statements:

 

The foregoing statements are unaudited; however, in the opinion of theManagement, all adjustments (comprising 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.

 

7

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MANAGEMENT’SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following is a discussion and analysis focused on significantchanges in the financial condition and results of operations of Logan CountyBancshares, Inc.

 

EARNINGSSUMMARY

 

The Companyreported net income of $531,000. for the three months ended March 31, 2003compared to $537,000. for the three months ended March 31, 2002, representing a1.00% decrease. This decrease was primarily the result of the decrease in netinterest income of $141,000., offset by an increase in other income of $57,000.and a decrease in all operating expenses of $54,000. and decrease in incometaxes of $24,000.

 

Earnings per common share were $.75 for the three months ended March31, 2003 compared with $.76 for the same period of 2002.

 

Logan County Bancshares’ annualized return on assets (ROA) for thethree month period ended March 31, 2003 was 1.20% compared to 1.21% for thethree month period ended March 31, 2002. Annualized return on shareholders’equity (ROE) was 12.21% and 12.71% at March 31, 2003 and 2002, respectively.

 

NET INTERESTINCOME

 

The most significant component of Logan County Bancshares’ net earningsis net interest income, which represents the excess of interest income earnedon earning assets over the interest expense paid for sources of funds. Netinterest income is affected by changes in volume resulting from growth andalteration of the balance sheet composition, as well as by fluctuations inmarket interest rates and maturities of sources and uses of funds.

 

Interest income amounted to $2,249,000. at March 31, 2003, a decreaseof $355,000. from March 31, 2002. Interest expense also decreased $214,000.,resulting in an overall decrease of $141,000. or 5.41% in net interest incomebetween March 31, 2003 and March 31, 2002.

 

PROVISION FORLOAN LOSSES AND ASSET QUALITY

 

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

 

For the three month period ended March 31, 2003 and 2002, the provisionfor loan losses was $3,000. and $60,000. respectively.

 

The reserve for loan losses was $1,578,000. at March 31, 2003 comparedto $1,198,000. at March 31, 2002. Expressed as a percentage of loans (net ofunearned income), the reserve for loan losses was 1.50% at March 31, 2003 and1.08% at March 31, 2002.

 

8

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Balance SheetData:

 

Total assets increased by $6,816,000. between year end and March 31,2003 to a balance of $176,515,000. The major component of this change was anincrease in Federal Funds Sold of $9,620,000. The primary source of funds forthis change was an increase in deposits of $4,664,000., Federal Fundspurchased/repurchase agreements of $2,003,000., and net income of $531,000.

 

Liquidity:

 

Managing Logan’s liquidity requirements primarily involves meeting theloan demand, deposit withdrawal and the cash flow requirements. Logan’s primarysources of liquid assets are federal funds sold and investment securitiesmaturing in less than one year. These items can be converted into funds in ashort period of time. At March 31, 2003, Federal Funds Sold amounted to $20,990,000.and securities maturing within one year amounted to $28,210,000. These arecompared to the balances at March 31, 2002 of $19,110,000. in Federal FundsSold and maturing Investment Securities of $4,996,000. due within one year.

 

Traditionally, banks have been able to manage liquidity based on arelatively stable group of core deposits. The deposits, demand and consumerdeposits under $l00,000. are considered the most stable and least expensivesource of funds. During 2003 and 2002, banks continue to be faced with volatileinterest sensitive funds and have had to match their funding requirements byusing assets and liability management techniques.

 

CapitalResources:

 

Logan’s capital position is based on its stockholders’ equity and theprimary source of such equity has been retained earnings. Since Logan’sformation, it has accumulated Retained Earnings of $15,088,000. and has a totalStockholders’ Equity of $17,390,000. as of March 31, 2003; as compared to$14,051,000. of Retained Earnings and total Stockholders’ equity of$16,899,000. at March 31, 2003.

 

The equity capital was 9.85% and 9.52% of total assets at March 31,2003 and 2002 respectively. Logan County Bancshares exceeds all regulatorycapital guide lines and has not been advised by any regulatory agency of anyminimum capital requirement.

 

Effects of Inflation:

 

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

 

9

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A summary of the Company’s past due loans and non-performing assets isprovided in the following table.

 

SUMMARY OF PAST DUE LOANS AND NONPERFORMING ASSETS

(in thousands of dollars)

 
|                                                   |   | **March 31** |   |
|--------------------------------------------------------|--------|--------------|--------|
|                                                   |   | **2003**     |   | **2002** |   |
| Loans past due 90 or more days still accruing interest |   | $            | 1,039  |   | $ | 672 |   |
|                                                   |   |         |   |   |   |
| Non-performing assets:                                 |   |         |   |   |   |
| Non-accruing loans                                     |   | 2,196        |   | 1,170 |   |
| Other real estate owned                                |   | 159          |   | 388 |   |
|                                                   |   | $            | 2,355  |   | $ | 1,558 |   |

 

NONINTERESTINCOME

 

Non-interestincome includes revenues from all sources other than interest income. For thethree month period ended March 31, 2003, non-interest income totaled $253,000.,representing a increase of $57,000., or 29.01% from the $196,000. recordedduring the same period of 2002. This increase was primarily due to increases inother income of $16,000. and increased fees of $41,000.

 

NONINTERESTEXPENSE

 

Non-interest expense comprises overhead costs which are not related tointerest expense or to losses from loans or securities. As of March 31, 2003,the Company’s non-interest expense totaled $1,118,000., increasing $4,000. overthe $1,114,000. of non-interest expense for the three months ended March 31,2002. Expressed as a percentage of assets, annualized non-interest expense was2.53% at March 31, 2003, compared to 2.51% at March 31, 2002.

 

Salaries and employee benefits are Logan County Bancshares’ largestnon-interest cost, representing approximately 52% of total non-interest expenseat March 31, 2003 and 2002. Salaries and employee benefits increased $12,000.,or 2.09% at March 31, 2003 compared to March 31, 2002. This increase isprimarily due to normal personnel increases and timing of personnel benefitaccruals.

 

INCOME TAXES

 

Logan County Bancshares’ income tax expense, for the three month periodended March 31, 2003, reflected a $24,000. decrease when compared to the sameperiod of 2002. Income tax expense equaled 36.18% and 37.00% of income beforetaxes at March 31, 2003 and 2002, respectively. For financial reportingpurposes, income tax expense does not equal the statutory income tax rate of43% when applied to pretax income, primarily because of timing differences inexpense items for tax purposes..

 

10

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PART II. - OTHER INFORMATION

 

NONE.

 

SIGNATURES

 

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

 
|   | LOGAN COUNTY BANCSHARES, INC.             |
|--------|-------------------------------------------|
|   | (Registrant)                              |
|   |                                      |
|   |                                      |
| Date   | May 12, 2003                              |   | /s/ Harvey  Oakley |   |
|   | Harvey  Oakley Chairman                   |
|   | (Signature)                               |
|   |                                      |
|   |                                      |
| Date   | May 12, 2003                              |   | /s/ Eddie D.  Canterbury |   |
|   | Eddie D.  Canterbury President & CEO. |
|   | (Signature)                               |

 

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CERTIFICATIONS

 

I, Eddie D. Canterbury, certify that:

 

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

 

2.               Basedon my knowledge, this annual report does not contain any untrue statement of amaterial fact omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this annual report;

 

3.               Basedon my knowledge, the financial statements, and other financial informationincluded in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this annual report;

 

4.               Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)         designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this annual report is being prepared;

 

b)        evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this annual report (the“Evaluation Date”); and

 

c)         presentedin this annual report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)         allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to report, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)        anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.               Theregistrant’s other certifying officers and I have indicated in this annualreport whether there were significant changes in internal controls or in otherfactors that could significantly affect internal controls subsequent to thedate of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date: May 12, 2003 | /s/ Eddie D. Canterbury |   | President & CEO |   |
|--------------------|-------------------------|--------|---------------------|--------|

 

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CERTIFICATIONS

 

I, Mark Mareske, certify that:

 

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

 

2.               Basedon my knowledge, this annual report does not contain any untrue statement of amaterial fact omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this annual report;

 

3.               Basedon my knowledge, the financial statements, and other financial informationincluded in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this annual report;

 

4.               Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)         designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this annual report is being prepared;

 

b)        evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this annual report (the“Evaluation Date”); and

 

c)         presentedin this annual report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)         allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to report, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)        anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.               Theregistrant’s other certifying officers and I have indicated in this annualreport whether there were significant changes in internal controls or in otherfactors that could significantly affect internal controls subsequent to thedate of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date: May 12, 2003 | /s/ Mark Mareske |   | Vice President & CFO |   |
|--------------------|------------------|--------|--------------------------|--------|

 

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