ITEM 1 - BUSINESS
LOGAN COUNTY BANCSHARES, INC.
Logan County Bancshares, Inc. is a bank holding company, which was organized under the laws of the State of West Virginia in 1985. On May 17, 1985, the Corporation acquired all the outstanding capital stock of Logan Bank & Trust Company (LB&T) and also all of the outstanding stock of Bank of Chapmanville (BC). Both of these subsidiaries are banking corporations organized under the laws of the State of West Virginia. On May 28, 1996, the subsidiary banks, Logan Bank & Trust Company and Bank of Chapmanville entered into a merger agreement whereby they would be merged into Logan Bank & Trust Company. The merger was completed after proper regulatory approval and was accounted for under the pooling of interest method of accounting.
Logan Bank & Trust Company was organized in 1963, and still operates at its original location at the corner of Washington and Main Streets in Logan, West Virginia. The Company also has a separate drive-up facility and mini-bank also located on Main Street in Logan, and in early February 1996, opened a new full-service branch in the Man area. In November 1996, the bank acquired a branch facility from another financial institution located at Harts, West Virginia. The facility at Route 10 North, Harts, is operated as a full service branch of the bank. Logan Bank & Trust Company is a member of the Federal Reserve System and deposits are insured pursuant to the Federal Deposit Insurance Act.
Logan Bank & Trust Company provides a complete range of retail banking services to individuals and small and medium size businesses. Their services include checking, savings, NOW, certificates of deposit and money market deposit accounts, business loans, individual loans, mortgage loans, home equity loans, consumer loans for various other purposes, other consumer-oriented financial services including safety deposit box accounts, IRA accounts and night depository. The company also operates several automatic teller machines at three strategic locations in Logan County, which provide 24-hour working services to customers of Logan Bank & trust Company. The Company is a member of the Cirrus ATM network which has over 100 locations in West Virginia and more than 10,000 locations in 47 states.
Logan Bank & Trust Company provides depository lending and related financial services to commercial, retail, industrial, financial and governmental customers. The lending function includes short and medium-term loans, letters of credit, inventory and accounts receivable financing and real estate construction lending. The Company also offers a discount investment brokerage service through a sub-contract arrangement with a larger financial institution.
The Chapmanville Bank of LB&T Bank has one location situated on Railroad Avenue in Chapmanville, West Virginia. This facility also provides a complete range of retail banking services to individuals and small and medium sized businesses. These services include checking, savings, NOW, certificates of deposit and money market account deposits, business loans, individual loans, mortgage loans, home equity loans, consumer loans for various other purposes are provided as well. In addition, the Bank offers consumer oriented financial services such as IRA accounts, night depository, safety deposit boxes and other banking related services.
The branch also provides depository, lending and related financial services to commercial, retail, industrial, financial and governmental customers. The lending function includes short and medium-term loans, letters of credit, inventory and accounts receivable financing, and real estate construction lending, as do all the branches of Logan Bank & Trust Company.
INVESTMENT CONSIDERATIONS
An investment in the shares offered hereby involves certain risks. A subscription for shares should be made only after careful considerations set forth below and elsewhere in this Offering Circular, and should be undertaken only by persons who can afford an investment involving such risks.
MARKET FOR THE COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The shares of Logan county BancShares, Inc. are infrequently traded in the over-the-counter market and are not listed on the National Association of Security Dealers Automated Quotation System (NASDAQ) or on any exchange. Management is not aware of any security dealer, which makes a market in the stock; therefore, no active trading market should be deemed to exist.
The sales price for Logan County BancShares, Inc. stock is determined by negotiations between individual buyers and sellers. Although company keeps no records of sale prices paid for Company stock and has no direct knowledge of such prices, for purposes of presentation, Corporation’s management estimates the approximate market value ranges for 2003 and 2002 to be as follows:
COMPETITION
Vigorous competition exists in the market area of Logan County Bancshares, Inc. In addition to the three other banks located within the market area, the location is in a relatively close proximity to two population centers of the State. There is also competition for deposits and related financial services from non-bank institutions such as savings and loans, insurance companies and brokerage firms, all of which are active in the area. Those institutions, in addition to the finance companies, provide loans. Since the Bank Holding Company Act, passed by the West Virginia Legislature in 1982, local banks have been joining bank holding companies around the State. Of the five banks located in Logan County, only one is a unit bank. The other four are members of various multi-bank holding companies. Logan County BancShares, Inc. has been able to compete effectively within the county by having one institution located in the county seat (Logan Bank & Trust Company), and Branches located in the high-growth area of the county. Also, to stimulate growth, Logan County BancShares, Inc. is the only bank holding company owned and controlled from within the county.
SUPERVISION AND REGULATION
The Corporation is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the Act) and is registered as such with the Board of Governors of the Federal Reserve System (the Reserve Board). As a bank holding company, the corporation is required to file with the Federal Reserve Board an annual report and such other information as may be required. The Federal Reserve Board may also make examinations of the corporation. In addition, the Federal Reserve Board has the authority (which it has not exercised) to regulate provisions of certain bank holding company debt.
The Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before acquiring substantially all the assets of or direct or indirect ownership or control of more than 5% of the voting shares of any bank, which is not already majority-owned. The Act also prohibits a bank holding company, with certain exceptions, from itself engaging in or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in non-banking activities. One of the principal exceptions to these prohibitions is for engaging or acquiring shares of a company engaged in activities found by the Federal Reserve Board by order or regulation to be so closely related to banking or managing banks as to be a proper incident thereto. The Act prohibits the acquisition by a bank holding company of more that 5% of the outstanding voting shares of a bank located outside the State in which the operations of its banking subsidiaries are principally conducted, unless such an acquisition is specifically authorized by statute of the State in which the bank acquired is located. The Act and regulations of the Federal Reserve Board also prohibit a bank holding company and its subsidiaries from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services.
Logan Bank & Trust Company is an insured bank, organized under the Banking Law of the State of West Virginia and is a member of the Federal Reserve System. Accordingly, their operations are subject to Federal and State laws applicable to commercial banks with trust powers and to regulation by the Commissioner of Banking and the West Virginia State Banking Commissioner, the Federal Reserve Board and the Federal Deposit Insurance Corporation. Among other restrictions, the West Virginia Banking laws state that banks organized hereunder may pay dividends only out of undivided profits. Under the Federal Reserve Act, the approval of the Federal Reserve Board is required for dividends declared by a state member bank which in any year exceeds the net profits of such bank for that year, as defined, combined with retained net profits for the two preceding years.
GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS
The earnings and growth of the banking industry and of Logan Bank & Trust Company is affected by the credit policies of monetary authorities including the Federal Reserve System. An important function of the Federal Reserve System is to regulate the national supply of bank credit in order to control recessionary and inflationary pressures. Among the instruments of monetary policy used by the Federal Reserve to implement these objectives are open market operations in the U. S. Government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid for deposits. The monetary policies of the Federal Reserve authorities have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have such an effect in the future.
In view of changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the Federal Reserve system, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand of their effect on the business and earnings of the Corporation, and Logan Bank & Trust Company.
FOREIGN OPERATIONS
The corporation and subsidiary have no foreign operations.
EXECUTIVE OFFICERS
For information concerning the Executive Officers of the Corporation, please see Item 10.
ITEM 2
ITEM 2 - PROPERTIES
The principal offices of the corporation are shared with those of Logan Bank & Trust Company and are situated in Logan, West Virginia. This building, a two-story bank and office building, is owned by Logan Bank & Trust Company, as is a mini-bank and drive-up facility which is located near-by. In addition, a one-story office and bank building is located on Railroad Avenue in Chapmanville, West Virginia. During 1996 the Bank opened two other branch facilities in West Virginia. Both are one-story office and bank buildings located at Rt. 10, South Man, West Virginia and Rt. 10 North at Harts, West Virginia.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
There are no legal actions or proceedings to which the Corporation, or its subsidiary is a party.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5
ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The shares of Logan County BancShares, Inc are infrequently traded in the over-the-counter market and are not listed on the National Association of Security Dealers Automated Quotation System (NASDAQ) or on any exchange. Management is not aware of any security dealer, which makes a market in the stock; therefore, no active trading market should be deemed to exist.
The sales price for Logan County BancShares, Inc. stock is determined by negotiations between individual buyers and sellers. Although company keeps no records of sales prices paid for Company stock and has no direct knowledge of such prices, for purposes of presentations, Corporation’s management estimates the approximate market value ranges for 2003 and 2002 to be as follows:
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
LOGAN BANCSHARES, INC. AND SUBSIDIARY
(In Thousands of Dollars)
Logan County BancShares, Inc. and Subsidiary
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
INTRODUCTION
The Management’s Discussion and Analysis reviews and discusses the financial condition of Logan County BancShares, Inc. and Subsidiary. Included are (a) the results of operations for 2003 and 2002 and (b) discussion of liquidity including an asset and liability sensitivity analysis, and (c) an analysis of earnings, dividends, and capital. The discussion and analysis discloses any material changes and any infrequent events and known trends as they relate to liquidity, capital resources and results of operations. The information presented reflects the activities of the holding company and the subsidiary bank, Logan Bank & Trust Company.
To assist in understanding and evaluating major changes in Logan County BancShares, Inc.’s financial position and results of operations, this discussion emphasizes a comparison of the years 2003 to 2002, 2002 to 2001 and 2001 to 2000, and also presents five year information in instances where appropriate. This discussion should be read concurrently with the audited financial statements including notes to those statements.
The following definitions apply to terms used in this report:
AVERAGE BALANCE: All balances have been computed on the basis of monthly averages.
NET INTEREST INCOME: Interest and related fee income on earning assets, reduced by total interest paid on interest bearing deposits and borrowed funds. This net amount, when divided by average earning asset balances becomes net interest margin.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided through short-term investments, payments on outstanding loans, and the ability to attract new deposits or borrow funds. At December 31, 2003 and 2002, the funds available within one year from investments and loans were $51,426,000. and 47,465,000.
Logan County BancShares, Inc.’s subsidiary bank deposit mix increased by $3,709,000. in 2003 after a small decrease in 2002. In the other years presented, deposits increased by $13,305,000 in 2001 and $11,104,000 in 2000. These increases in the deposit mix point out a marketing strategy that has attracted new customers to the Bank. Time deposits represented the major growth in the deposit mix. They decreased over the last two years after reasonable increases in the first three years. Demand deposits contributed to the growth in the deposit mix by increasing $2,015,000. in 2002, $6,164,000. in 2001 and $4,011,000. in 2000. Savings deposits showed increases of $5,060,000. in 2002, $7,517,000 in 2001, $1,263,000. in 2000 and remaining stable.
These changes are predominantly due to the fluctuating interest rates by the Federal Reserve and movement of savings to time deposits by the consumer in order to obtain a better interest rate. At December 31, 2003 and 2002, 34.61% and 31.19%, of the total deposits were in demand deposits while 28.03% and 29.82% were in savings and 37.36% and 38.98% were in time deposits, respectively. The stable growth in deposits gives the Bank a firm deposit base to meet the lending demand and market fluctuations.
At December 31, 2001 and 2000, 32.19% and 30.84% of the total deposits were in demand deposits, while 26.18% and 23.27% were in savings and 41.16% and 45.88% were in time deposits respectively. The stable growth in deposits gives the Bank a firm deposit base to meet the lending demand and market fluctuations.
ITEM 7
ITEM 7 - Management’s Discussion and Analysis
The Management’s Discussion and Analysis reviews and discusses the financial condition of Logan County BancShares, Inc. and Subsidiary. Included are (a) the results of operations for 2003 and 2002 and (b) discussion of liquidity including an asset and liability sensitivity analysis, and (c) an analysis of earnings, dividends, and capital. The discussion and analysis discloses any material changes and any infrequent events and known trends as they relate to liquidity, capital resources and results of operations. The information presented reflects the activities of the holding company and the subsidiary bank, Logan Bank & Trust Company.
To assist in understanding and evaluating major changes in Logan County BancShares, Inc.’s financial position and results of operations, this discussion emphasizes a comparison of the years 2003 to 2002, 2002 to 2001 and 2001 to 2000, and also presents five year information in instances where appropriate. This discussion should be read concurrently with the audited financial statements including notes to those statements.
The following definitions apply to terms used in this report:
AVERAGE BALANCE: All balances have been computed on the basis of monthly averages.
NET INTEREST INCOME: Interest and related fee income on earning assets, reduced by total interest paid on interest bearing deposits and borrowed funds. This net amount, when divided by average earning asset balances becomes net interest margin.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided through short-term investments, payments on outstanding loans, and the ability to attract new deposits or borrow funds. At December 31, 2003 and 2002, the funds available within one year from investments and loans were $51,426,000. and 47,465,000.
Logan County BancShares, Inc.’s subsidiary bank deposit mix increased by $3,709,000. in 2003 after a small decrease in 2002. In the other years presented, deposits increased by $13,305,000 in 2001 and $11,104,000 in 2000. These increases in the deposit mix point out a marketing strategy that has attracted new customers to the Bank. Time deposits represented the major growth in the deposit mix. They decreased over the last two years after reasonable increases in the first three years. Demand deposits contributed to the growth in the deposit mix by increasing $2,015,000. in 2002, $6,164,000. in 2001 and $4,011,000. in 2000. Savings deposits showed increases of $5,060,000. in 2002, $7,517,000 in 2001, $1,263,000. in 2000 and remaining stable.
These changes are predominantly due to the fluctuating interest rates by the Federal Reserve and movement of savings to time deposits by the consumer in order to obtain a better interest rate. At December 31, 2003 and 2002, 34.61% and 31.19%, of the total deposits were in demand deposits while 28.03% and 29.82% were in savings and 37.36% and 38.98% were in time deposits, respectively. The stable growth in deposits gives the Bank a firm deposit base to meet the lending demand and market fluctuations.
At December 31, 2001 and 2000, 32.19% and 30.84% of the total deposits were in demand deposits, while 26.18% and 23.27% were in savings and 41.16% and 45.88% were in time deposits respectively. The stable growth in deposits gives the Bank a firm deposit base to meet the lending demand and market fluctuations.
During 2003, 2002 and 2001, banks have been faced with a highly competitive atmosphere in the sense of maintaining a continuity of growth. Logan County BancShares, Inc. has maintained a community bank approach that enhanced its performance over those years. The merger of Bank of Chapmanville into Logan Bank & Trust Company enabled the Company to operate more efficiently and thereby capture a sizeable portion of the market for deposits in the fastest growing area of Logan County, West Virginia. See Table I. for a five-year summary of financial data.
Capital planning is essentially the management process that allocates capital resources in a manner which generates the highest income, while maintaining sufficient liquidity, at the lowest degree of risk attainable. Moreover, it is the philosophy of Logan County BancShares, Inc. to nurture that growth by planning for steady, long-range profits rather that the high-risk, high-exposure techniques. As noted in Table I. the ratio of net income to average assets was 1.08%, 1.06% and 1.03% for the years ended December 31, 2003, 2002 and 2001, respectively. Through the periods presented, management has allocated new funds into the higher-yielding loans when the loan demand has been sufficient. Although the improvement in the local economy had been at a slow pace through the periods presented, overall loan demand has been stable. Deposit growth show a marked increase due to marketing the community bank service approach.
Table I. represents a summary of financial data for the previous five years.
TABLE I. - SUMMARY OF FINANCIAL DATA FOR FIVE YEARS
(In thousands of dollars)
TABLE II - RATE ANALYSIS OF INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES
(In Thousands of Dollars)
TABLE III - VOLUME ANALYSIS OF CHANGE IN INTEREST INCOME AND INTEREST EXPENSE
(In Thousands of Dollars)
LOAN PORTFOLIO
The loan portfolio of Logan county BancShares, Inc. and Subsidiary continues to represent the largest component of earning assets. Loan activity has remained stable due to the Bank’s emphasis on lending; as shown on Table IV, the Bank has contributed substantially to liquidity by structuring the loan portfolio in such a manner as to have approximately 39.48% of the total loans due within one year.
TABLE IV - REMAINING MATURITIES OF LOANS AT DECEMBER 31, 2003
(In Thousands of dollars)
LOAN LOSSES AND CREDIT RISKS
The allowance for loan losses is established by charging expenses at an amount that will maintain the allowance for loan losses at a level sufficient to provide for potential loan losses. Loan losses are charged directly to the allowance when they occur and recoveries are credited to the allowance. The amount of the provision is based on pase loan loss experience, management’s evaluation of the loan portfolio under current economic conditions, and such other factors as in management’s best judgment deserve current recognition in estimating loan losses. Tables V and VI represent a summary of loan loss experience for the years 2003, 2002, 2001, 2000, and 1999.
TABLE V - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
TABLE VI - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
CONSOLIDATED SUMMARY OF LOANS AND NON-PERFORMING ASSETS
Non-performing assets consist of (a) loans not accruing interest any longer due to doubts about future collectibility, (b) loans more than ninety days past due for the last principal or interest payment, and (c) other real estate owned by the Bank taken originally as loan collateral. Table VII. provides a five-year summary of the components involved in non-performing assets as of year end.
Loans are determined to be non-accruing when it has been determined that the ability of the bank to collect the unpaid balance of such loans is highly unlikely due to the financial position of the borrower and general economic conditions. The determination of such classification is made by bank management on a case-by-case basis for problem loans. Generally, a review of each loan ninety days or more past due is made monthly and such loans deemed uncollectible become classified as non-accrual.
Loans are determined to be ninety days delinquent when such a period of time has elapsed since the last payment of principal or interest was made. At such a time, consideration as to whether to classify the loan as non-accruing is made. However, until such classification is made, interest will continue to be accrued.
Other real estate consists of real property that the Bank originally took as collateral for loans but has since acquired title to when the borrowers defaulted and the Bank bid on the property in question at public auction.
TABLE VII. - CONSOLIDATED SUMMARY OF LOANS AND NON-PERFORMING ASSETS
(In thousands of Dollars)
SECURITIES
The securities portfolio of Logan County BancShares, Inc. is the second largest area of resource allocation. Investments provide liquidity and serve as a hedge off-setting the increased sensitivity of deposits caused by deregulation. The Company has been shifting the concentration of the portfolio from held to maturity securities into more flexible, higher-yielding available for sale investments.
Securities include those classified as held to maturity and available for sale, in 2002 and 2001 these amounted to approximately 30% of the earning assets and represented allocation of funds due to lower loan demand.
All debt securities, that Logan County BancShares Subsidiary does not have the ability or management does not have the positive intent to hold to maturity, are classified as “securities available for sale” and are carried at market value.
TABLE VIII. - MATURITY DISTRIBUTION OF SECURITES AT DECEMBER 31, 2003
(In Thousands of Dollars)
** The weighted average yields are based on carrying value and effective yields are weighted for the scheduled maturity of each security.
OTHER INCOME
In 2003 and 2002, the bank adjusted to a slower growth pace and evaluated service fees on the various services rendered for customers. As a result, the service fees increased by $200,000 and other fees decreased by $20,000 in 2003 compared to 2002 and $29,000 and $75,000, respectively, in 2002 compared to 2001.
Table IX - OTHER INCOME
(In Thousands of Dollars)
TABLE X - OTHER EXPENSES
(In Thousands of Dollars)
OTHER EXPENSES
During 2003 the other expenses increased by $39,000 and only .82% of the increase was in salaries and benefits and reflected normal increases in compensation. Most other areas were relatively stable as management continued to control operational cost.
In 2002 the other expenses grew by $58,000 or only 1.25% over 2001. This small increase was primarily in salaries, benefits and taxes all relating to normal increases in these areas. These were affected by decreases in operating expenses and bank supplies.
Repairs and maintenance, directors’ fees, equipment rental, and Bank stationery expenses vary from year to year based on the Company’s demand. These types of expenses are not directly related to the income function and, therefore, increase or decrease sporadically.
EARNINGS AND DIVIDENDS
As demonstrated in Table XI., Logan County BancShares, Inc. strives to achieve a favorable dividend payout rate to the shareholders. In 2003 the trend of recent years continued. Net income per share grew by 5.08% and dividends to shareholders by 2.61%. The company maintained a strong capital position by increasing stockholders’ equity by 3.47% and assets grew by 3.51%. During 2002 the company increased stockholder’s equity by 2.340%, along with increases of 4.90% in net income and 2.00% increase in the dividend payout ratio. These positive indicators reflect the overall growth in size, service area and customer base.
TABLE XI. - THREE-YEAR SUMMARY OF EARNINGS AND DIVIDENDS
EARNING ASSETS
Table XII represents analysis of average earning assets and interest-bearing liabilities for the years ended December 31, 2003, 2002, and 2001.
In the period presented, average-earning assets grew by $1,841,000 in 2003, $4,722,000 in 2002 and $20,386,000 in 2001. This growth represented increases of 1.12% in 2003, 2.95% in 2002 and 14.62% in 2001. The loan portfolio is the major component of earning assets which declined by $6,551,000 in 2003, $2,865,000 in 2002 after growing by $4,494,000 or 4.13% in 2001. The company also allocated to the investment portfolio a portion of the growth to maintain liquidity and fund future loan requirements.
INTEREST BEARING LIABILITIES
Interest bearing liabilities include interest bearing demand deposits, savings accounts, time deposits and borrowed funds. These are the prime sources of funds for Logan County BancShares, Inc. subsidiary to support earning assets. Total average interest bearing liabilities decreased by $1,032,000 in 203 or 0.01% after increasing $4,799,000 or 3.86% in 2002 and $8,630,000 or 7.46$ in 2001. In all years the Company has maintained a stable net interest margin while experiencing growth in the underlying deposits. The Company has been able to match earning yields with costs of funds over the past three years to maintain a stable net interest margin.
TABLE XII - ANALYSIS OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
(In Thousands of Dollars)
TABLE XII - ANALYSIS OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
(In Thousands of Dollars)
INTEREST RATE SENSITIVITY ANALYSIS
Asset and liability management is responsible for the planning, implementation, and control process for determining asset mix and maturity features relative to liability maturities in such a way that net interest margin will be maximized. A major tool for such a process is gap management of the Bank’s interest sensitive assets to interest sensitive liabilities.
The negative gap position as presented in the following table for maturities of one year or less is offset by the substantial positive gap position for maturities greater that one year. The earnings of Logan County BancShares, Inc. are sufficient to withstand the short-term negative gap position. Should a large fluctuation occur, increasing the costs of funds, management would consider increasing service charges and non-interest fees which management determines the market would bear in order to negate increased rate costs. An additional response, at the option of management, would be liquidation of certain long-term investments, and conversion of those funds into short-term securities.
Bank management recognized the concentration of large certificates of deposit. The Bank’s policy of asset-liability management matches both rates and maturities so the Bank will not have a liquidity problem or allow income to be affected by a change in rates.
All demand and savings deposits are considered highly volatile, although experience has shown these accounts to be stable regardless of economic cycles. Interest on savings and other transactional accounts have generally remained constant over periods of interest rate changes. Therefore, deposits and savings are classified as “over one year” to represent a more realistic rate sensitive gap.
TABLE XIII - INTEREST RATE SENSITIVITY ANALYSIS
(In Thousands of dollars)
TABLE XIV - AVERAGE BALANCE SHEET
(In Thousands of Dollars)
To Our Shareholders, Customers and Friends:
We are proud to present the 2003 annual report of Logan County BancShares, Inc. and its Subsidiary, Logan Bank and Trust Company. 2003 saw the economy begin a slow upturn and we were positioned to show a continued earnings growth. Net income for 2003 was $1,901,023 compared to $1,841,832. for 2002. Earnings per common share totaled $2.62 in 2003 versus $2.57 in 2002. This growth was largely from cost containment and proper asset liability management. The return on average assets of 1.08% and return on equity of 10.24% are excellent returns of capital in today’s financial markets.
This year has been a year of celebration. This marks our 40TH continuous year of business in Logan; we are very proud of this achievement. In today’s market, it certainly is not unusual to drive down the highway and see names change on bank signs (and new, OUT OF TOWN owners), but ours stays the SAME. We had a vision 40 years ago, and by managing to achieve that goal we are still here for you. We knew we needed four basic components to be successful: 1) the best people, 2) the best facility, 3) state of the art technology and 4) leadership with commitment. We feel we have achieved these goals and are grateful the community has rewarded us with their continued support.
We started out with one facility and concentrated on becoming the kind of bank that would not only meet any of your banking or financial needs, but would be a part of your community. We focused on getting and keeping the best peopleyour neighborsnot someone from out of town who not only didn’t know you, but also didn’t know the area’s needs. As we fulfilled this commitment, we knew it was time to grow. We branched out into more communities and today we have five sites, each meeting the four basic goals with which we started.
By continuing to anticipate the fluctuations in today’s economy and moving ahead of the curve, we have managed, even with the continuing slow market, to provide dividends to shareholders, affordable homes to neighbors, innovative lending to business while meeting the general financial needs of all our customers. We specialize in giving all our customers that “hometown” treatment.
Our employees have been one of our biggest assets for the past forty years. They continue to be involved in local schools, churches and organizations. In today’s fast-paced world, it is comforting and inspiring to have people who are equally concerned with excelling in the business market and making our community a better place for us all.
We want to sincerely thank our directors for their vision, our shareholders for their support, our employees for their continued dedication and to our customers for their confidence. We pledge to continue to focus on the vision and meet all new challenges as only a locally owned bank can do. We will continue the tradition!
Respectively,
Harvey H. Oakley
Eddie Canterbury
Chairman/President
Executive Vice-President/CEO
[Mc NEAL. WILLIAMSON & CO. LETTER HEAD]
Donald M. McNecl. CPA
Daniel L. Williamson, CPA
Post Office Box 1839
525 Tiller St., Cherry Tree Addn.
Logan, West Virginia 2560;
Logan, West Virginia 2560;
Phone (304) 752-0461
Fax (304) 752-4660
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
of Logan County BancShares, Inc. and Subsidiary
We have audited the accompanying consolidated statements of condition of Logan County BancShares, Inc., and Subsidiary as of December 31, 2003, and 2002, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Logan County BancShares, Inc. and Subsidiary as of December 31, 2003, and 2002, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 2003 and 2002
ASSETS
The accompanying notes are an integral part of these consolidated financial statements
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Condition
December 31, 2003 and 2002
LIABILITIES AND STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Income
For the Years Ended December 31, 2003, 2002, and 2001
The accompanying notes are an integral part of these consolidated financial statements.
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Income
For the Years Ended December 31, 2003, 2002 and 2001
The accompanying notes are an integral part of these consolidated financial statements.
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Stockholders’ Equity
For the Years Ended December 31, 2003, 2002, and 2001
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Change in Cash Flows
For the Years Ended December 31, 2003, 2002 and 2001
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
The accompanying notes are an integral part of these financial statements.
Logan County BancShares, Inc. and Subsidiary
Consolidated Statement of Changes in Cash Flows
For the Years Ended December 31, 2003, 2002 and 2001
INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
The accompanying notes are an integral part of these financial statements.
Logan County BancShares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
1. Summary of Significant Accounting Policies:
A. Basis of Consolidation:
The Consolidated Financial Statements of Logan County BancShares, Inc. and its subsidiary include the accounts of Logan County BancShares, Inc. a bank holding company and its wholly owned subsidiary, Logan Bank & Trust Company. As further discussed in Note 13, the Company’s subsidiary was merged into Logan Bank & Trust Company on May 28, 1996. The merger was accounted for under the Pooling of Interest Method of accounting and no restatement was necessary. All material intercompany balances and transactions have been eliminated in consolidation.
B. Nature of Operations:
The Bank operates under Federal charter, and provides full banking services. As a Federal bank, the Bank is subject to regulation by the Federal Reserve System and the Federal Deposit Insurance Corporation.
C. Estimates in the Financial Statements:
The presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
D. Cash and Cash Equivalents:
For purposes of reporting cash flows, cash and due from banks includes cash on hand and amounts due from banks (including cash items in process of clearing). Cash flows from demand deposits, NOW accounts, money market demand accounts, savings accounts and Federal funds purchased and sold are reported net since their original maturities are less than three months. Cash flows from loans and certificates of deposits and other time deposits are reported net.
E. Investment Securities:
The Banks’ Investment Securities are classified in two categories and accounted for as follows:
Securities Available for Sale: Securities available for sale consist of bonds, notes, debentures, and certain equity securities not classified as securities held to maturity. These securities are carried at their fair value. Unrealized gains and (losses), net of tax, are reported as a net amount in a separate component of Shareholders’ Equity until realized.
Securities to be Held to Maturity: Bonds, notes and debentures for which the banks have the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts which are recognized in interest income, using the Constant Yield Method, over the period to maturity. Gains and losses on sale of securities available for sale are determined using the Specific-Indentification Method.
F. Loans and Reserve for Loan Losses:
Loans are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses. Interest income on loans is recognized on the accrual basis except for those loans in a non-accrual income status. The accrual of interest on impaired loans is discontinued when management believes, after consideration of economic and business conditions and collection efforts, that the Borrowers’ financial condition is such that collection of interest is doubtful. When interest accrual is discontinued, interest income is subsequently recognized only to the extent cash payments are received.
The reserve for loan losses is established through a provision for loan losses charged to expense. The reserve is an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible based on evaluations of the collectibility of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans and current economic conditions that may affect the borrowers’ ability to pay. Loans are charged against the allowance for loan losses when management believes the collection of the principal is unlikely.
A loan is considered to be impaired when it is probable all principal and interest amounts will not be collected according to the loan contract. Impaired loans, other than certain large groups of smaller-balance, homogeneous loans that are collectively evaluated for impairment, are to be reported at the present value of expected future cash flows discounted using the loan’s original effective interest rate or, alternatively, at the loan’s observable market price, or at the fair value of the loan’s collateral if the loan is collateral dependent. The method selected to measure impairment is made on a loan-by-loan basis, unless foreclosure is deemed to be probable, in which case the fair value of the collateral method is used.
Certain loan origination fees and direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan.
G. Bank Premises and Equipment:
Bank premises and equipment are stated at cost, less accumulated depreciation. Repairs and maintenance expenditures are charged to operating expenses as incurred. Major improvements and additions to premises and equipment are capitalized. Depreciation is provided over the estimated useful lives of the assets as follows:
H. Real Estate Acquired Through Foreclosure:
Real estate acquired through foreclosure is carried at the lower of the recorded investment in the property or its fair value. The value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged to operating expenses.
I. Income Taxes:
The Company and its subsidiary file a consolidated federal income tax return. The Subsidiary is charged or credited an amount equal to the income tax that would have been applicable on a separate return basis. The consolidated provision for income taxes includes Federal and State income taxes and is based on pretax income reported in the financial statements, adjusted by nontax items in computing income taxes payable.
The Company uses the liability method for computing deferred income taxes. Under the liability method, deferred income taxes are based on the change during the year in the deferred tax liability or asset established for the expected future tax consequences of differences in the financial reporting and tax bases of assets and liabilities. The differences relate principally to premises and equipment, unrealized gains and losses on investment securities available for sale, and the allowance for loan losses.
J. Per Share Information:
Primary earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding and the number of shares of common stock that would be assumed outstanding under the treasury-stock method.
K. Comprehensive Income:
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity. The accounting standard that requires reporting comprehensive income first applies for 2000, with prior information restated to be comparable.
2. Investment Securities:
The carrying amounts of investment in securities as shown in the consolidated balance sheets of the bank and their approximate full values at December 31 were as follows:
Federal Reserve Bank stock is an equity security that is included in securities available for sale in the accompanying consolidated financial statement. Such securities are carried at cost, since they may only be sold back to the issuer or another member at par value.
The proceeds from sales, calls and maturities of securities, and the related gross gain and losses realized are as follows:
The par value of securities pledged to secure public deposits and for other purposes amounted to $27,012,750 in 2003 and $26,056,196 in 2002.
The amortized cost and estimated market value of investment in debt securities at December 31, 2003, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call as prepayment penalties.
3. Restriction on Cash, Due from Banks and contingent Liabilities:
The Bank is required to maintain average balances with the Federal Reserve Bank. The average required reserve balances were $1,378,000 and $1,131,000 for 2003 and 2002 respectively. The Bank has various claims and actions pending at December 31, 2003 arising in the ordinary course of its business. It is the opinion of management and legal counsel that such litigation will not materially affect the Bank’s financial position or earnings.
4. Loans:
Major classifications of loans at December 31, 2003 and 2002 are as follows:
Loans on which accrual of interest has been discontinued or reduced, amounted to $992,428 and $1,705,845 at December 31, 2003 and 2002 respectively. Had the above loans not been placed on a non-accrual status, income for the Company would have increased approximately $49,621 and $89,407 for the two years.
The Company’s recorded investment in impaired loans was approximately $1,696,414 at December 31, 2003 and $1,058,478 at December 31, 2002. Of that amount in 2003, $944,421 represents loans for which an allowance for loan losses, amounting to $426,940, has been established under SFAS 114. The average recorded investment in impaired loans was approximately $1,377,446 for 2003 and $992,980 for 2002. Interest income recognized on impaired loans was approximately $44,693 for the year ended December 31, 2003.
Reserve for Loan Losses:
Transactions in the reserve for loan losses for the years were as follows:
The balance of the reserve for loan losses for income tax purposes was $281,723.at December 31, 2003 and 2002.
Certain directors and executive officers of the Bank and companies in which they have beneficial ownership, were loan customers of the Bank during 2003 and 2002. Such loans were made in the ordinary course of business at the Bank’s normal credit terms and interest rates. An analysis of the 2003 activity with respect to all director and executive officer loans is as follows:
5. Bank Premises and Equipment:
Bank premises and equipment are summarized as follows:
Depreciation expense amounted to $259,804, $273,928, and $269,956 in 2003, 2002 and 2001 respectively. Expenditures for maintenance and repairs are charged against operations as incurred.
6. Operating Lease Commitments:
The Company has entered into lease agreements for certain premises at three of its facility locations. Future minimum lease payments under the leases during the five years subsequent to December 31, 2003 are as follows:
7. Deposits:
The following is a summary of interest bearing deposits by type as of December 31, 2003 and 2002:
Time certificates of deposit in denominations of $100,000 or more totaled $16,787,499 and $16,886,987 at December 31, 2003 and 2002. Interest paid on all time certificates totaled $1,671,827, $2,024,089 and $3,662,286 for the years ended December 31, 2003, 2002 and 2001, respectively.
The following is a summary of the maturity distribution of certificates of deposit in amounts of $100,000 or more as of December 31, 2003:
At December 31, 2003, the scheduled maturities of time deposits are as follows:
8. Repurchased Agreements:
At December 31, the balance of securities sold under repurchase agreements amounted to $3,000,000. The following table summarizes the information on the repurchase agreements:
9. Federal Income Taxes:
The Provisions for Federal income taxes for the years ended December 31, 2003, 2002, and 2001 were less than the respective amounts that would result from applying the statutory Federal and State Income Tax rates, due primarily to the Banks’ investment income and expense accruals.
A reconciliation of the difference between the U.S. statutory income tax rate and the effective tax rates with resulting dollar amounts are shown in the following table:
The tax effect of significant temporary differences, which comprise non-current, deferred tax assets and liabilities as of December 31, 2003 and 2002 are as follows:
10. Employee Benefit Plans:
During 1997, the Company terminated the qualified defined benefit pension plan. The Company’s subsidiary adopted a qualified profit sharing and 401K employee benefit plan covering substantially all employees. The contributions to the plans are at the discretion of the plan’s advisory board and amounted to $124,470 in 2003 and $121,121 in 2002.
In November 2003 the company invested in bank owned life insurance (BOLI) policy that provides earnings to help cover the cost of employee benefit plans. BOLI involves the purchasing of life insurance by the Company on an executive. The company is the owner and beneficiary of the policy. Cash flow from this policy will occur over an extended period of time. The Company periodically reviews the creditworthiness of the insurance companies that have underwritten the policy. The insurance companies are all highly rated by A.M. Best, and the earnings accruing to the Company are derived from the general account investments of the insurance companies. The policy appears on the Company’s balance sheet and is subject to full regulatory capital requirements.
This policy is used to fund an executive supplemental retirement plan. Under the plan, benefits of $4,261 were accrued at December 31, 2003 and the related cash value of $2,015,532 was reported in other assets.
11. Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit Risk:
The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments, unused credit loan limits, and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for these commitments is represented by the contractual amount. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.
The total amounts of Off-Balance-Sheet financial instruments with credit risk are as follows:
The Bank subsidiary grants retail, commercial and commercial real estate loans to customers located throughout West Virginia and Eastern Kentucky.
The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-production commercial properties. Although the Bank has a diversified loan portfolio, a substantial portion of the debtors’ ability to honor their contracts is dependent upon the economic conditions in each loan’s respective location.
12. Regulatory Matters
The various regulatory agencies having supervisory authority over financial institutions have adopted risk-based capital guidelines, which define the adequacy of the capital levels of regulated institutions. These risk based capital guidelines require minimum levels of capital based upon the risk rating of assets and certain off-balance-sheet items. Assets and off-balance-sheet items are assigned regulatory risk-weights ranging from 0% to 100% depending on their level of credit risk. The guidelines classify capital in two tiers, Tier I and Tier II, the sum of which is total capital. Tier I capital is essentially common equity less intangible assets. Tier II capital is essentially qualifying long-term debt and a portion of the reserve for loan losses.
The Company’s and Bank’s actual capital amounts and ratios are presented below in thousands of dollars:
The Company’s principal source of funds for dividend payments is dividends received from the subsidiary Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, as defined, combined with the retained net profits of the preceding two years, subject to the capital requirements as defined above. During 2003, the Bank could, without prior approval, declare dividends of approximately $1,424,971 plus any 2003 net profits returned to the date of the dividend declaration. In 2003 the bank declared dividends of $2,726,471 to the holding company.
13. Disclosures about Fair Value of Financial Instruments
The following methods are assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value:
Cash and Cash Equivalents - For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment Securities - For investment securities, fair values are based on quoted market prices or dealer quotes.
Loans - Fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposit Liabilities - The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase - For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Federal Home Loan Bank Advances - Rates currently available to the Company for advances with similar terms and remaining maturities are used to estimate fair value of existing debt.
Note Payable -the carrying value of variable rate borrowed funds is a reasonable estimate of fair value.
Commitments to Extend Credit and Standby Letters of Credit - Commitments to extend credit and standby letters of credit represent agreements to lend to a customer at the market rate when the loan is extended, thus the commitments and letters of credit are not considered to have a fair value.
The fair values of the Company’s financial instruments at December 31, 2003 are as follows:
14. Stockholders’ Equity:
On June 16, 1999, the Board of Directors declared a stock dividend of three shares of common stock for each two shares of common stock outstanding. All related financial information including earnings per share gives retroactive effect to issurance of this stock dividend. This results in a total authorized common stock of 780,000 shares and 716,991 shares outstanding. In December 2002, the company purchased 13,000 shares of treasury stock. This resulted in 703,991 outstanding in 2003 and 2002 and 716,991 in 2001.
15. Parent Only Condensed Financial Information:
ITEM 9
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing on Page of the Corporation’s Proxy Statement, dated May 7, 2004, is incorporated herein by reference in response to this item.
EXECUTIVE OFFICERS OF THE REGISTRANT:
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
The information appearing in the Corporation’s Definitive Proxy Statement, dated May 7, 2004, is incorporated herein by reference in response to this item.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the Corporation’s Definitive Proxy Statement, dated May 7, 2004, is incorporated herein by reference in response to this item.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Corporation’s Definitive Proxy Statement, dated May 7, 2004, is incorporated herein by reference in response to this item.
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
None.
May 7, 2004
Dear Stockholder:
Your Board of Directors is pleased to invite you to attend the Annual Meeting of Stockholders of Logan County BancShares, Inc. on May 27, 2004, at 3:00 p.m. The Notice of Meeting and Proxy Statement are attached.
The meeting will be held at Logan Bank and Trust Company’s lobby, Washington and Main Street, Logan, West Virginia. The business of the meeting will be the election of the Directors and to transact such other business as may properly come before the meeting.
We hope that you can attend the meeting. In any event, please mark, date and sign the enclosed proxy and return it in the accompanying envelope.
LOGAN COUNTY BANCSHARES, INC.
Harvey Oakley
Eddie Canterbury
President/Chairman
Executive Vice President/CEO
LOGAN COUNTY BANCSHARES, INC.
P.O. BOX 597
LOGAN, WEST VIRGINIA 25601
MAY 7, 2004
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROCESS
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Logan County BancShares, Inc. (Corporation) of proxies for the Annual Meeting of Stockholders of the corporation to be held May 27, 2004, and any adjournment thereof. Shares represented by properly executed proxies which are received in time and not revoked will be voted at the meeting in the manner described in the proxies. Any proxy may be revoked at any time before it is exercised.
INFORMATION AS TO VOTING SECURITIES
The Board of Directors has fixed the close of business on April 25, 2004, as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting. At the record date, 703,991 shares of Common Stock of the Corporation were outstanding and entitled to be voted at the meeting. Each share of Common Stock is entitled to one vote.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation has, in accordance with the bylaws, fixed the number of Directors of the Corporation at not less than three. Accordingly, nine Directors are proposed to be elected to serve until the next Annual Meeting of Stockholders and until their respective successors are duly elected and have qualified. It is intended that shares represented by proxies solicited by the Board of Directors will, unless contrary instructions are given, be voted in favor of the election as Directors of the nominees listed below. If any nominee is unavailable for election, the shares may be voted for a substitute nominee. The following nominees have been proposed to serve as Directors of the Corporation. They are:
(A) Includes 6,982 shares jointly owned with spouse.
(B) Includes 18,000 shares owned by Earle B. Queen, Trust, 355 shares owned by Funeral Services, Inc. and 400 shares owned by Queen Brothers, Inc.
(C) Includes 1,428 shares jointly owned with sister, Erma Ray Butcher.
(D) Includes 654 shares jointly owned with spouse.
(E) Includes 357 shares owned in IRA, 50 shares custodian for Alexis Jo Canterbury, and 100 shares jointly owned with spouse.
(F) Includes 849 shares owned by Aracoma Drug Company.
(G) Includes 1,225 shares jointly owned with spouse; and 27,163 shares for which voting and investment powers are deemed; 20,625 shares owned by W.W. McDonald Land Company; 5,863 shares owned by Bruce McDonald Holding Company; 675 shares owned by Triadelphia Land Company.
(H) Includes 37,908 shares owned by Bodaco, Co.
EXECUTIVE COMPENSATION
All Executive Officers of Logan County BancShares, Inc. were compensated $7,400.00 in Director’s fees during 2003.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors was not aware of any matters not referred to in the form proxy that would be presented for action at the meeting. If any other business comes before the meeting, the persons named in the proxy will have discretionary authority to vote the shares represented by them in accordance with their best judgement.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
All proposals must be submitted to the Board of Directors 30 days prior to the Annual Meeting of Stockholders.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 2004
The Annual Meeting of Stockholders of Logan County BancShares, Inc. will be held at Logan Bank and Trust Company’s lobby at 3:00 p.m. on May 27, 2004, for the following purposes:
1. To elect Directors of the Corporation.
2. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 25, 2004, are entitled to notice of and to vote at the meeting.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on the dates indicated.