** **

**FORM 10-Q**

 

**SECURITIES AND EXCHANGECOMMISSION**

 

**WASHINGTON, D. C.  20549**

 

**Quarterly Report UnderSection 13 or 15 (d)of the Securities Exchange Act of 1934**

 

**For Quarter Ended June30, 2003**

 

**Commission FileNumber  2-95114**

 

**LOGAN COUNTY BANCSHARES,INC.**

(Exact Name of Registrant as Specified inIts Charter)

 

**WEST VIRGINIA**

(State or other jurisdiction ofincorporation or organization)

 

**55-0660015**

(IRS Employer Identification Number)

 

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

 

**(304) 752-1166**

(Registrant’s telephone number includingarea code)

 

Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or  for such shorter period that the registrantwas required to  file such reports) and(2) has been subject to such filing requirements for the past 90 days.Yes ý  No o

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding, of eachof the issuer’s classes of common stock, as of the latest practicable date.703,991

 

 

----

 

 

LOGAN COUNTY BANCSHARES, INC.

 
| PART I - FINANCIAL INFORMATION                                                                        |
|-------------------------------------------------------------------------------------------------------|
|                                                                                                  |
| ITEM I.  FINANCIAL STATEMENTS:                                                                   |
|                                                                                                  |   |
|                                                                                                  | Consolidated  Statement of Condition As of June 30, 2003 and 2002 and  December 31, 2002. |
|                                                                                                  |   |
|                                                                                                  | Consolidated Statement  of Income For the Six Month Period Ended June 30, 2003 and 2002. |
|                                                                                                  |   |
|                                                                                                  | Consolidated Statement of  Income For the Three Month Period Ended June 30, 2003 and 2002. |
|                                                                                                  |   |
|                                                                                                  | Consolidated  Statement   of Changes in Stockholders’ Equity for the Six  Month Period Ended June 30, 2003 and 2002. |
|                                                                                                  |   |
|                                                                                                  | Consolidated  Statement of Cash Flows for the Six Month Period Ended June 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.AND SUBSIDIARIESConsolidated Statement of ConditionJune 30, 2003 and 2002 and December 31, 2002(In Thousands)

 
|                                                                                   |   | **June 30,** | ** ** | **December 31,********2002** |       |
|----------------------------------------------------------------------------------------|--------|--------------|------------|-----------------------------------|------------|
|                                                                                   |   | **2003**     |       | **2002**                          | ** ** |   |
| ASSETS                                                                                 |   |         |       |                              |       |   |   |
|                                                                                   |   |         |       |                              |       |   |   |
| CASH AND  DUE FROM BANKS                                                               |   | $            | 6,961      |                              | $          | 5,792 |   | $ | 5,967 |   |
|                                                                                   |   |         |       |                              |       |   |   |   |   |   |
| INVESTMENT  SECURITIES:                                                                |   |         |       |                              |       |   |   |
| AVAILABLE  FOR SALE                                                                    |   | 46,656       |       | 42,893                            |       | 41,305 |   |
| HELD TO  MATURITY                                                                      |   | 0            |       | 0                                 |       | 0 |   |
| FEDERAL  FUNDS SOLD                                                                    |   | 12,190       |       | 6,500                             |       | 11,370 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| LOANS:                                                                                 |   |         |       |                              |       |   |   |
| TOTAL  LOANS                                                                           |   | 103,913      |       | 110,906                           |       | 107,933 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| RESERVE  FOR LOAN LOSSES                                                               |   | 1,571        |       | 1,261                             |       | 1,619 |   |
| NET LOANS                                                                              |   | 102,342      |       | 109,645                           |       | 106,314 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| BANK  PREMISES AND EQUIPMENT                                                           |   | 3,130        |       | 3,265                             |       | 3,217 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| ACCRUED  INTEREST AND OTHER ASSETS                                                     |   | 1,962        |       | 1,593                             |       | 1,526 |   |
|                                                                                   |   | $            | 173,241    |                              | $          | 169,688 |   | $ | 169,699 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                              |   |         |       |                              |       |   |   |
|                                                                                   |   |         |       |                              |       |   |   |
| DEPOSITS:                                                                              |   |         |       |                              |       |   |   |
| DEMAND  DEPOSITS:                                                                      |   |         |       |                              |       |   |   |
| NON-INTEREST                                                                           |   | $            | 26,664     |                              | $          | 24,173 |   | $ | 25,076 |   |
| INTEREST  BEARING                                                                      |   | 24,111       |       | 21,631                            |       | 21,851 |   |
| SAVINGS  DEPOSITS                                                                      |   | 43,027       |       | 43,631                            |       | 44,864 |   |
| TIME  DEPOSITS                                                                         |   | 58,126       |       | 59,185                            |       | 58,652 |   |
| TOTAL  DEPOSITS                                                                        |   | 151,928      |       | 148,620                           |       | 150,443 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| FEDERAL  FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE            |   | 3,000        |       | 3,000                             |       | 1,000 |   |
| ACCRUED  AND OTHER LIABILITIES                                                         |   | 449          |       | 469                               |       | 1,046 |   |
|                                                                                   |   |         |       |                              |       |   |   |
| INCOME  TAXES PAYABLE:                                                                 |   |         |       |                              |       |   |   |
| CURRENT                                                                                |   | (20          | )          | 16                                |       | (10 | ) |
| DEFERRED                                                                               |   | 277          |       | 169                               |       | 27 |   |
| TOTAL  LIABILITIES                                                                     |   | 155,634      |       | 152,274                           |       | 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                                                                     |   | 15,305       |       | 14,566                            |       | 14,891 |   |
| TREASURY  STOCK                                                                        |   | (1,406       | )          | (860                              | )          | (1,406 | ) |
| TOTAL  STOCKHOLDERS’ EQUITY                                                       |   | 17,607       |       | 17,414                            |       | 17,193 |   |
|                                                                                   |   | $            | 173,241    |                              | $          | 169,688 |   | $ | 169,699 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS.

 

3

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement of IncomeFor the Six Month Periods Ended June 30, 2003 and 2002

(In Thousands)

 
|                                                 |   | **2003** |   | **2002** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   |     |   |     |   |
| INTEREST INCOME:                                     |   |     |   |     |   |
| INTEREST ON LOANS                                    |   | $        | 3,837  |     | $      | 4,367 |   |
| INTEREST ON INVESTMENTS                              |   | 504      |   | 696      |   |
| INTEREST ON FEDERAL  FUNDS SOLD                      |   | 108      |   | 100      |   |
|                                                 |   | 4,449    |   | 5,163    |   |
|                                                 |   |     |   |     |   |
| INTEREST EXPENSE:                                    |   |     |   |     |   |
| INTEREST ON DEPOSITS                                 |   | 1,037    |   | 1,379    |   |
| INTEREST OTHER                                       |   | 46       |   | 79       |   |
| NET INTEREST INCOME                                  |   | 3,366    |   | 3,705    |   |
|                                                 |   |     |   |     |   |
| PROVISION FOR LOAN  LOSSES                           |   | 3        |   | 120      |   |
| NET INTEREST INCOME  AFTER PROVISION FOR LOAN LOSSES |   | 3,363    |   | 3,585    |   |
|                                                 |   |     |   |     |   |
| OTHER INCOME:                                        |   |     |   |     |   |
| SERVICE FEES                                         |   | 430      |   | 312      |   |
| OTHER OPERATING INCOME                               |   | 85       |   | 66       |   |
| TOTAL OTHER INCOME                                   |   | 515      |   | 378      |   |
|                                                 |   |     |   |     |   |
| OTHER EXPENSES:                                      |   |     |   |     |   |
| SALARIES AND BENEFITS                                |   | 1,160    |   | 1,135    |   |
| EXPENSE OF BANK  PREMISES AND EQUIPMENT              |   | 310      |   | 290      |   |
| OTHER OPERATING  EXPENSES                            |   | 844      |   | 823      |   |
| TOTAL OTHER EXPENSES                                 |   | 2,314    |   | 2,248    |   |
|                                                 |   |     |   |     |   |
| INCOME BEFORE INCOME  TAXES                          |   | 1,564    |   | 1,715    |   |
|                                                 |   |     |   |     |   |
| INCOME TAXES                                         |   | 535      |   | 654      |   |
| NET INCOME                                           |   | $        | 1,029  |     | $      | 1,061 |   |
|                                                 |   |     |   |     |   |
| PER SHARE OF COMMON  STOCK NET INCOME                |   | $        | 1.46   |     | $      | 1.48 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

4

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIES

Consolidated Statement of Income

For the Three Month Periods EndedJune 30, 2003 and 2002

(In Thousands)

 
|                                                 |   | **2003** |   | **2002** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   |     |   |     |   |
| INTEREST INCOME:                                     |   |     |   |     |   |
| INTEREST ON LOANS                                    |   | $        | 1,910  |     | $      | 2,149 |   |
| INTEREST ON INVESTMENTS                              |   | 231      |   | 361      |   |
| INTEREST ON FEDERAL  FUNDS SOLD                      |   | 59       |   | 49       |   |
|                                                 |   | 2,200    |   | 2,559    |   |
|                                                 |   |     |   |     |   |
| INTEREST EXPENSE:                                    |   |     |   |     |   |
| INTEREST ON DEPOSITS                                 |   | 506      |   | 654      |   |
| INTEREST OTHER                                       |   | 27       |   | 40       |   |
| NET INTEREST INCOME                                  |   | 1,667    |   | 1,865    |   |
|                                                 |   |     |   |     |   |
| PROVISION FOR LOAN  LOSSES                           |   | 1        |   | 60       |   |
| NET INTEREST INCOME  AFTER PROVISION FOR LOAN LOSSES |   | 1,666    |   | 1,805    |   |
|                                                 |   |     |   |     |   |
| OTHER INCOME:                                        |   |     |   |     |   |
| SERVICE FEES                                         |   | 236      |   | 159      |   |
| OTHER OPERATING INCOME                               |   | 26       |   | 23       |   |
| TOTAL OTHER INCOME                                   |   | 262      |   | 182      |   |
|                                                 |   |     |   |     |   |
| OTHER EXPENSES:                                      |   |     |   |     |   |
| SALARIES AND BENEFITS                                |   | 576      |   | 563      |   |
| EXPENSE OF BANK  PREMISES AND EQUIPMENT              |   | 161      |   | 151      |   |
| OTHER OPERATING  EXPENSES                            |   | 459      |   | 420      |   |
| TOTAL OTHER EXPENSES                                 |   | 1,196    |   | 1,134    |   |
|                                                 |   |     |   |     |   |
| INCOME BEFORE INCOME  TAXES                          |   | 732      |   | 853      |   |
|                                                 |   |     |   |     |   |
| INCOME TAXES                                         |   | 234      |   | 329      |   |
| NET INCOME                                           |   | $        | 498    |     | $      | 524 |   |
|                                                 |   |     |   |     |   |
| PER SHARE OF COMMON  STOCK NET INCOME                |   | $        | 0.71   |     | $      | 0.73 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

5

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LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIESConsolidated Statement in Changes inStockholders’ EquityForthe Six Month Periods Ended June 30, 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 SIX  MONTHS ENDED JUNE 30, 2003                           |   | 0                 |   | 0           |       | 1,029                  |       | 0                                                  |       | 0                   |       | 1,029     |       |
| NET UNREALIZED GAINS  (LOSSES) ON AVAILABLE FOR-SALE SECURITIES                   |   | 0                 |   | 0           |       | 0                      |       | (122                                               | )          | 0                   |       | (122      | )          |
| TOTAL COMPREHENSIVE  INCOME                                                       |   | 0                 |   | 0           |       | 1,029                  |       | (122                                               | )          | 0                   |       | 907       |       |
| DIVIDENDS ON 703,991  SHARES COMMON STOCK @ $.70                                  |   |              |   |        |       | (493                   | )          |                                               |       |                |       | (493      | )          |
|                                                                              |   | $                 | 1,300  |        | $          | 2,408                  |       | $                                                  | 15,167     |                | $          | 138       |       | $ | (1,406 | ) | $ | 17,607 |   |
|                                                                              |   |              |   |        |       |                   |       |                                               |       |                |       |      |       |
| BALANCE -  DECEMBER 31 2001                                                  |   | $                 | 1,300  |        | $          | 2,408                  |       | $                                                  | 13,917     |                | $          | 35        |       | $ | (860 | ) | $ | 16,800 |   |
| COMPREHENSIVE INCOME                                                              |   |              |   |        |       |                   |       |                                               |       |                |       |      |       |
| NET INCOME FOR THE SIX  MONTHS ENDED JUNE 30, 2002                           |   | 0                 |   | 0           |       | 1,061                  |       | 0                                                  |       | 0                   |       | 1,061     |       |
| CHANGE IN NET  UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE FOR-SALE SECURITIES |   | 0                 |   | 0           |       | 0                      |       | 72                                                 |       | 0                   |       | 72        |       |
| OTHER ADJUSTMENTS                                                                 |   |              |   |        |       | (31                    | )          |                                               |       |                |       | (31       | )          |
| TOTAL COMPREHENSIVE  INCOME                                                       |   | 0                 |   | 0           |       | 1,030                  |       | 72                                                 |       | 0                   |       | 1,102     |       |
| DIVIDENDS ON 716,991  SHARES COMMON STOCK @ $0.68                                 |   |              |   |        |       | (488                   | )          |                                               |       |                |       | (488      | )          |
|                                                                              |   | $                 | 1,300  |        | $          | 2,408                  |       | $                                                  | 14,459     |                | $          | 107       |       | $ | (860 | ) | $ | 17,414 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

6

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LOGANCOUNTY BANCSHARES, INC. AND SUBSIDIARIESConsolidated Statement of Cash FlowsForthe Six Month Periods Ended June 30, 2003 and 2002

 
|                                                                               |   | **2003** |   | **2002** |   |
|------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                              |   |     |   |     |   |
| NET INCOME                                                                         |   | $        | 1,029  |     | $      | 1,061 |   |
| ADJUSTMENTS TO  RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |   |     |   |     |   |
| DEPRECIATION                                                                       |   | 132      |   | 134      |   |
| SECURITY AMORTIZATION  AND ACCREATION                                              |   | 55       |   | 51       |   |
| MARKET VALUE  AMORTIZATION                                                         |   | 0        |   | (2       | )      |
| PROVISION FOR LOAN  LOSSES                                                         |   | 3        |   | 120      |   |
| (INCREASE) DECREASE IN  OTHER ASSETS                                               |   | (436     | )      | 215      |   |
| INCREASE (DECREASE) IN  OTHER LIABILITIES                                          |   | (607     | )      | (148     | )      |
| NET CASH PROVIDED BY  OPERATING ACTIVITIES                                         |   | 176      |   | 1,431    |   |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |   |     |   |     |   |
| PROCEEDS FROM SALE OF  SECURITIES AVAILABLE FOR SALE                               |   | 31,977   |   | 15,500   |   |
| PROCEEDS FROM  MATURITIES OF SECURITIES AVAILABLE FOR SALE                         |   | 0        |   | 4,487    |   |
| PURCHASE OF SECURITIES  AVAILABLE FOR SALE                                         |   | (37,255  | )      | (26,427  | )      |
| NET (INCREASE) DECREASE  IN FEDERAL FUNDS SOLD                                     |   | (820     | )      | 650      |   |
| NET (INCREASE) DECREASE  IN LOANS                                                  |   | 3,969    |   | 5,990    |   |
| PURCHASE OF BANK  PREMISES AND EQUIPMENT                                           |   | (45      | )      | (15      | )      |
| NET CASH PROVIDED BY  INVESTING ACTIVITIES                                         |   | (2,174   | )      | 185      |   |
|                                                                               |   |     |   |     |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN DEMAND DEPOSITS                                        |   | 3,848    |   | (3,138   | )      |
| NET INCREASE (DECREASE)  IN SAVINGS DEPOSITS                                       |   | (1,837   | )      | 3,827    |   |
| NET INCREASE (DECREASE)  IN TIME DEPOSITS                                          |   | (526     | )      | (4,097   | )      |
| NET INCREASE (DECREASE)  IN FEDERAL FUNDS PURCHASED/REPURCHASED                    |   | 2,000    |   | 1,000    |   |
| DIVIDENDS PAID                                                                     |   | (493     | )      | (488     | )      |
| NET CASH PROVIDED BY  FINANCING ACTIVITIES                                         |   | 2,992    |   | (2,896   | )      |
|                                                                               |   |     |   |     |   |
| NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                              |   | 994      |   | (1,280   | )      |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT  BEGINNING OF PERIOD                                  |   | 5,967    |   | 7,072    |   |
|                                                                               |   |     |   |     |   |
| CASH AND CASH  EQUIVALENT AT  END OF PERIOD                                        |   | $        | 6,961  |     | $      | 5,792 |   |
|                                                                               |   |     |   |     |   |
| Supplemental  Disclosures of Cash Flow Information                                 |   |     |   |     |   |
| Cash Paid For:                                                                     |   |     |   |     |   |
| Interest                                                                           |   | $        | 1,088  |     | $      | 1,458 |   |
| Income Taxes                                                                       |   | $        | 506    |     | $      | 615 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

7

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LOGAN COUNTY BANCSHARES, INC. ANDSUBSIDIARIESConsolidatedStatement of IncomeForthe Three Month Periods Ended March 31, 2003 and 2002(InThousands)

 
|                                  |   | **2003** |       | **2002** |   |
|---------------------------------------|--------|----------|------------|----------|--------|
|                                  |   |     | ** ** |     |   | **JUNE****3MTH** |   |   |   |   |   | **JUNE****3MTH** |   |
| INTEREST INCOME:                      |   |     |       |     |   |   |   |   |   |   |   |   |   |
| INTEREST ON LOANS                     |   | $        | 3,837      |     | $      | 1,927 |   | $ | 1,910 |   | $ | 4,367 |   | $ | 2,218 |   | $ | 2,149 |   |
| INTEREST ON INVESTMENTS               |   | 504      |       | 273      |   | $ | 231 |   | 696 |   | 335 |   | $ | 361 |   |
| INTEREST ON FEDERAL  FUNDS SOLD       |   | 108      |       | 49       |   | $ | 59 |   | 100 |   | 51 |   | $ | 49 |   |
|                                  |   | 4,449    |       | 2,249    |   | $ | 2,200 |   | 5,163 |   | 2,604 |   | $ | 2,559 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| INTEREST EXPENSE:                     |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| INTEREST ON DEPOSITS                  |   | 1,037    |       | 531      |   | $ | 506 |   | 1,379 |   | 725 |   | $ | 654 |   |
| INTEREST OTHER                        |   | 46       |       | 19       |   | $ | 27 |   | 79 |   | 39 |   | $ | 40 |   |
| NET INTEREST INCOME                   |   | 3,366    |       | 1,699    |   | $ | 1,667 |   | 3,705 |   | 1,840 |   | $ | 1,865 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| PROVISION FOR LOAN  LOSSES            |   | 3        |       | 2        |   | $ | 1 |   | 120 |   | 60 |   | $ | 60 |   |
| NET INTEREST INCOME  AFTER            |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| PROVISION FOR LOAN  LOSSES            |   | 3,363    |       | 1,697    |   | $ | 1,666 |   | 3,585 |   | 1,780 |   | $ | 1,805 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| OTHER INCOME:                         |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| SERVICE FEES                          |   | 430      |       | 194      |   | $ | 236 |   | 312 |   | 153 |   | $ | 159 |   |
| OTHER OPERATING INCOME                |   | 85       |       | 59       |   | $ | 26 |   | 66 |   | 43 |   | $ | 23 |   |
| TOTAL OTHER INCOME                    |   | 515      |       | 253      |   | $ | 262 |   | 378 |   | 196 |   | $ | 182 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| OTHER EXPENSES:                       |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| SALARIES AND BENEFITS                 |   | 1,160    |       | 584      |   | $ | 576 |   | 1,135 |   | 572 |   | $ | 563 |   |
| EXPENSE OF BANK  PREMISES AND         |   |     |       |     |   |   |   |   |   |   |   |   |   |
| EQUIPMENT                             |   | 310      |       | 149      |   | $ | 161 |   | 290 |   | 139 |   | $ | 151 |   |
| OTHER OPERATING  EXPENSES             |   | 844      |       | 385      |   | $ | 459 |   | 823 |   | 403 |   | $ | 420 |   |
| TOTAL OTHER EXPENSES                  |   | 2,314    |       | 1,118    |   | $ | 1,196 |   | 2,248 |   | 1,114 |   | $ | 1,134 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| INCOME BEFORE INCOME TAXES            |   | 1,564    |       | 832      |   | $ | 732 |   | 1,715 |   | 862 |   | $ | 853 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| INCOME TAXES                          |   | 535      |       | 301      |   | $ | 234 |   | 654 |   | 325 |   | $ | 329 |   |
| NET INCOME                            |   | $        | 1,029      |     | $      | 531 |   | $ | 498 |   | $ | 1,061 |   | $ | 537 |   | $ | 524 |   |
|                                  |   |     |       |     |   | $ | — |   |   |   |   |   | $ | — |   |
| PER SHARE OF COMMON  STOCK NET INCOME |   | $        | 1.46       |     | $      | 0.75 |   | $ | 1 |   | $ | 1.48 |   | $ | 0.76 |   | $ | 1 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIALSTATEMENTS.

 

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June 30, 2003

 

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIESNotes to Consolidated FinancialStatements

 

1.  Financial Statements:

 

The foregoingstatements are unaudited; however, in the opinion of the Management, alladjustments (comprising of only normal recurring accruals) necessary for a fairpresentation of the financial statements have been included.

 

2.  Basis of Consolidation:

 

TheConsolidated Statement of Condition and Consolidated Statement of Income ofLogan County Bancshares, Inc. include the activity of Logan Bank and TrustCompany, a wholly owned subsidiary.

 

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MANAGEMENT’SDISCUSSION AND ANALYSIS OF

FINANCIAL 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 Company reported net incomeof $1,029,000. for the six months ended June 30, 2003 compared to $1,061,000.for the six months ended June 30, 2002, representing a 3.01% decrease.  This decrease was primarily the result ofthe decrease in net interest income of $339,000., partially offset by anincrease in other income of $137,000. and a decrease in income taxes of$119,000.

 

Earnings per common share were $1.46 for the six months ended June 30,2003 compared with $1.48 for the same period of 2002.

 

Logan County Bancshares’ annualized return on assets (ROA) for the sixmonth period ended June 30, 2003 was 1.20% compared to 1.21% for the six monthperiod ended June 30, 2002. Annualized return on shareholders’ equity (ROE) was11.83% and 12.55% at June 30, 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 $4,449,000. atJune 30, 2003, a decrease of $714,000. from June 30, 2002.  Interest expense also decreased $375,000.,resulting in an overall decrease of $339,000. or 9.15% in net interest incomebetween June 30, 2003 and June 30, 2002.

 

PROVISION FORLOAN LOSSES AND ASSET QUALITY

 

The provision for loan  losses represents charges to earningsnecessary to maintain an adequate allowance for potential future loanlosses.  Management’s determination ofthe appropriate level of the allowance is based on an ongoing analysis ofcredit quality and loss potential in the loan portfolio, actual loan lossexperience relative to the size and characteristics of the loan portfolio, change in the composition andrisk characteristics of the loan portfolio and the anticipated influence ofnational and local economic conditions. The adequacy of the allowance for loan losses is reviewed quarterly andadjustments are made as considered necessary.

 

For the six month period ended June 30, 2003and 2002, the provision for loan losses was $3,000. and $120,000. respectively.

 

The reserve for loan losses was $1,571,000.at June 30, 2003 compared to $1,261,000. at June 30, 2002. Expressed as apercentage of loans (net of unearned income), the reserve for loan losses was1.51% at June 30, 2003 and 1.14% at June 30, 2002.

 

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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)

 
|                                                   |   | **June 30** |   |
|--------------------------------------------------------|--------|-------------|--------|
|                                                   |   | **2003**    |   | **2002** |   |
|                                                   |   |        |   |   |   |
| Loans past due 90 or more days still accruing interest |   | $           | 858    |   | $ | 1,297 |   |
|                                                   |   |        |   |   |   |
| Non-performing assets:                                 |   |        |   |   |   |
| Non-accruing loans                                     |   | 1,765       |   | 1,202 |   |
| Other real estate owned                                |   | 199         |   | 14 |   |
|                                                   |   | $           | 1,964  |   | $ | 1,216 |   |

 

NONINTERESTINCOME

 

Non-interest income includes revenues fromall sources other than interest income. For the three month period ended June30, 2003, non-interest income  totaled$515,000., representing a  increase of$137,000., or 36.24% from the $378,000. recorded during the same period of2002. This increase was primarily due to increases in other income of $19,000.and increased fees of $118,000.

 

NONINTERESTEXPENSE

 

Non-interest expense comprises overhead costswhich are not related to interest expense or to losses from loans orsecurities.  As of June 30, 2003,  the Company’s non-interest expense  totaled $2,314,000., increasing $66,000.over the $2,248,000. of non-interest expense for the three months ended June30, 2002. Expressed as a percentage of assets, annualized non-interest expensewas 2.67% at June 30, 2003, compared to 2.53% at June 30, 2002.

 

Salaries and employee benefits are LoganCounty Bancshares’ largest non-interest cost, representing approximately 50% oftotal non-interest expense at June 30, 2003 and 2002. Salaries and employeebenefits increased $25,000., or 2.20% at June 30, 2003 compared to June 30,2002. This increase is primarily due to normal personnel increases and timingof personnel benefit accruals.

 

INCOME TAXES

 

Logan County Bancshares’ income tax expense,for the six month period ended June 30, 2003, reflected a $119,000. decreasewhen compared to the same period of 2002. Income tax expense equaled 34.20% and38.00% of income before taxes at June 30, 2003 and 2002, respectively. Forfinancial reporting purposes, income tax expense does not equal the statutoryincome tax rate of 43% when applied to pretax income, primarily because oftiming differences in expense items for tax purposes..

 

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Balance SheetData:

 

Total assets increased by $3,542,000. betweenyear end and June 30, 2003 to a balance of $173,241,000. The major component ofthis change was an increase in Investment Securities of $5,351,000. The primarysource of funds for this change was an increase in deposits of $1,485,000.,Federal Funds purchased/repurchase agreements of $2,000,000., and net income of$1,029,000.

 

Liquidity:

 

Managing Logan’s liquidity requirementsprimarily involves meeting the loan demand, deposit withdrawal and the cashflow requirements. Logan’s primary sources of liquid assets are federal fundssold and investment securities maturing in less than one year. These items canbe converted into funds in a short period of time. At June 30, 2003, FederalFunds Sold amounted to $12,190,000. and securities maturing within one yearamounted to $28,749,000. These are compared to the balances at June 30, 2002 of$19,110,000. in Federal Funds Sold and maturing Investment Securities of$2,998,000. due within one year.

 

Traditionally, banks have been able to manageliquidity based on a relatively stable group of core deposits.  The deposits, demand and consumer depositsunder $l00,000. are considered the most stable and least expensive source offunds. During 2003 and 2002, banks continue to be faced with volatile interestsensitive funds and have had to match their funding requirements by usingassets and liability management techniques.

 

CapitalResources:

 

Logan’s capital position is based on itsstockholders’ equity and the primary source of such equity has been retainedearnings. Since Logan’s formation, it has accumulated Retained Earnings of$15,305,000. and has a total Stockholders’ Equity of $17,607,000. as of June30, 2003; as compared to $14,566,000. of Retained Earnings and totalStockholders’ equity of $17,414,000. at June 30, 2003.

 

The equity capital was 8.43% and 10.26% oftotal assets at June 30, 2003 and 2002 respectively. Logan County Bancsharesexceeds all regulatory capital guide lines and has not been advised by anyregulatory agency of any minimum capital requirement.

 

Effects of Inflation:

 

The impact of inflation on a financialinstitution differs significantly from that exerted on an industrial concern,primarily because a financial institution’s assets and liabilities consistalmost entirely of monetary items. The low proportion of the Bank’s net fixedassets to total assets reduces both the potential of inflated earningsresulting from understated depreciation charges and the potential significantunderstatement of asset values. However, inflation does have a considerableindirect impact on banks, including increased loan demand, as it becomesnecessary for producers and consumers to acquire additional funds to maintainthe same levels of consumption, inventories, and new investments. Inflation,also frequently results in higher interest rates which can affect both yieldson earning assets and rates paid on deposits and other interest-bearingliabilities.

 

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PART II. - OTHER INFORMATION

 

NONE.

 

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 11,  2003                          |   | /s/Harvey  Oakley |   |
|   | Harvey  Oakley Chairman                   |
|   | (Signature)                               |
|   |                                      |
|   |                                      |
| Date   | August 11,  2003                          |   | /s/Eddie D.  Canterbury |   |
|   | Eddie D.  Canterbury President & CEO. |
|   | (Signature)                               |
|        |                                           |        |  |  |  |

 

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