UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the quarterly period ended:

September 30, 2003

Commission File Number: 2-95114

LOGAN COUNTY BANCSHARES, INC.

(Exact name of Registrant as specified in its Charter)

West Virginia		55-0660015
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

P. O. Box 597, Logan, West Virginia		25601
(Address of principal executive offices)		(Zip Code)

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

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

Class Outstanding at November 24, 2004

Common Stock ($1.67 Par Value)

703,991 Shares

LOGAN COUNTY BANCSHARES, INC.

Table of Contents

EXPLANATORY NOTE

PART 1 – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS:

	Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002

	Consolidated Statements of Income For the Nine-Month Periods Ended September 30, 2003 and 2002 (unaudited)

	Consolidated Statements of Income For the Three-Month Periods Ended September 30, 2003 and 2002 (unaudited)

	Consolidated Statement of Changes in Stockholders’ Equity for the Nine-Month Period Ended September 30, 2003 (unaudited)

	Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2003 and 2002

	Notes to Consolidated Financial Statements

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.	CONTROLS AND PROCEDURES

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5.	OTHER INFORMATION

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

	EXHIBITS

	Exhibit 31.1	Sarbanes-Oxley Act, Section 302 Certification of Chief Executive Officer

	Exhibit 31.2	Sarbanes-Oxley Act, Section 302 Certification of Chief Financial Officer

	Exhibit 32.1	Sarbanes-Oxley Act, Section 906 Certification of Chief Executive Officer

	Exhibit 32.2	Sarbanes-Oxley Act, Section 906 Certification of Chief Financial Officer

	Reports on Form 8-K

	Signatures

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A amends the Company’s 10-Q for the period ending September 30, 2003, by adding Items 3 and 4, which were not previously addressed in the Company’s 10-Q for the period ending September 30, 2003, and making additional disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operation in Item 2.

As disclosed on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on July 23, 2004, Logan BancShares, Inc. (the “Company”), working with its outside auditors and specially retained securities counsel, learned that it was subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). The addition of Items 3 and 4 and the additional disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operation in Item 2 were made to bring the 10-Q into compliance with Sarbanes-Oxley.

This Amendment No. 1 on Form 10-Q/A also revises the consolidated balance sheet to eliminate intercompany balances, restates the consolidated statement of cash flows to reflect federal funds sold as cash equivalents and makes other revisions in format to conform to standard financial institution presentation. As disclosed on Form 8-K filed with the Commission on August 4, 2004, the Company was informed by its independent auditor, McNeal, Williamson & Co. (“McNeal Williamson”) that McNeal Williamson was no longer permitted to issue audit reports for the Company and was no longer permitted to perform interim reviews in accordance with SAS 100 for the Company as a result of McNeal Williamson’s failure to register with the Public Company Accounting Oversight Board (“PCAOB”). McNeal Williamson advised the Company that it should obtain independent accountants. Accordingly, the Company retained S. R. Snodgrass, A.C. on August 10, 2004, to: (i) review all interim periods that were reviewed by McNeal Williamson after the adoption of Sarbanes-Oxley; (ii) re-audit the audit report for the period ended December 31, 2003; and (iii) review the audit report for the period ended December 31, 2002. As a result of S. R. Snodgrass, A.C.’s re-audit of 2003 certain adjustments to 2002 financial information were made as discussed in Note 3 to the unaudited financial statements herein. McNeal Williamson concurred with the adjustments.

PART 1

ITEM 1 – FINANCIAL INFORMATION

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Thousands)

	September 30, 2003			December 31, 2002
	(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	5,930		$	5,598
Federal funds sold	15,670			11,370
Total cash and cash equivalents	21,600			16,968

Investment securities:
Available-for-sale (at fair value)	51,788			41,305

Loans	102,018			107,933
Less allowance for possible loan losses	(1,567		)	(1,619		)
Net loans	100,451			106,314

Premises and equipment, net	3,069			3,217
Accrued interest and other assets	1,841			1,526

Total assets	$	178,749		$	169,330

LIABILITIES
Noninterest bearing deposits:
Demand	$	29,961		$	24,707
Interest bearing deposits:
Demand	25,672			21,851
Savings	43,417			44,864
Time	58,341			58,652
Total deposits	157,391			150,074
Repurchase agreements	3,000			1,000
Accrued and deferred income taxes	197			17
Accrued interest and other liabilities	397			1,046
Total liabilities	160,985			152,137

STOCKHOLDERS’ EQUITY

Common stock - 780,000 shares authorized at $1.67 par value:
703,991 shares issued	1,300			1,300
Treasury Stock - 76,000 shares at cost	(1,406		)	(1,406		)
Surplus	2,408			2,408
Retained earnings	15,398			14,631
Accumulated other comprehensive income	64			260
Total stockholders’ equity	17,764			17,193

Total liabilities and stockholders’ equity	$	178,749		$	169,330

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In Thousands)

	NIne Months Ended September 30,
	2003		2002
INTEREST AND DIVIDEND INCOME
Interest and fees on loans
Taxable	$	5,725	$	6,491
Investment securities:
Available-for-sale	741		1,039
Interest on federal funds sold	150		153
Total interest income	6,616		7,683

INTEREST EXPENSE
Deposits	1,529		2,013
Other borrowings	73		120
Total interest expense	1,602		2,133

Net interest income	5,014		5,550

PROVISION FOR POSSIBLE LOAN LOSSES	3		180

Net interest income after provision for possible loan losses	5,011		5,370

NONINTEREST INCOME
Service charges and other fees	661		486
Other operating income	106		84
Total noninterest income	767		570

NONINTEREST EXPENSE
Salary and employee benefits	1,721		1,696
Occupancy and equipment expense	465		440
Other operating expenses	1,215		1,220
Total noninterest expense	3,401		3,356

Income before income taxes	2,377		2,584

INCOME TAXES	864		981

Net income	$	1,513	$	1,603

WEIGHTED AVERAGE SHARES OUTSTANDING	703,991		703,991

EARNINGS PER COMMON SHARE	$	2.15	$	2.24

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended September 30,
	2003		2002
INTEREST AND DIVIDEND INCOME
Interest and fees on loans
Taxable	$	1,888	$	2,124
Investment securities:
Available-for-sale	237		343
Interest on federal funds sold	42		53
Total interest income	2,167		2,520

INTEREST EXPENSE
Deposits	492		634
Other borrowings	27		41
Total interest expense	519		675

Net interest income	1,648		1,845

PROVISION FOR POSSIBLE LOAN LOSSES	—		60

Net interest income after provision for possible loan losses	1,648		1,785

NONINTEREST INCOME
Service charges and other fees	231		174
Other operating income	21		18
Total noninterest income	252		192

NONINTEREST EXPENSE
Salary and employee benefits	561		561
Occupancy and equipment expense	155		150
Other operating expenses	371		397
Total noninterest expense	1,087		1,108

Income before income taxes	813		869

INCOME TAXES	329		327

Net income	$	484	$	542

WEIGHTED AVERAGE SHARES OUTSTANDING	703,991		703,991

EARNINGS PER COMMON SHARE	$	0.69	$	0.76

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(In Thousands)

	Common Stock					Retained			Treasury			Accumulated Other Compre- hensive Income			Compre- hensive
	Shares	Stock		Surplus		Earnings			Stock			(Loss)			Income			Total

BALANCE DECEMBER 31, 2002	703,991	$	1,300	$	2,408	$	14,631		$	(1,406	)	$	260					$	17,193

Comprehensive income:
Net income for the the nine months ended September 31, 2003	—	—		—		1,513			—			—			$	1,513		1,513
Other comprehensive income, net of tax

Unrealized loss on securities available-for-sale	—	—		—		—			—			(196		)	(196		)	(196		)

Comprehensive income															$	1,317

Cash dividend ($1.06 per share)	—	—		—		(746		)	—			—						(746		)

BALANCE, SEPTEMBER 30, 2003	703,991	$	1,300	$	2,408	$	15,398		$	(1,406	)	$	64					$	17,764

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Thousands)

	Nine Months Ended September 30,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,513		$	1,603
Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for loan losses	3			180
Depreciation and amortization	198			201
Amortization/accretion on securities	189			(3		)
(Increase) decrease in interest receivable and other assets	(315		)	(859		)
(Increase) decrease in interest payable and other liabilities	(469		)	127
Other, net	(16		)	—
Net cash provided by operating activities	1,103			1,249

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from calls of securities available-for-sale	45,332			20,820
Proceeds from maturities of securities available-for-sale	—			4,487
Purchases of securities available-for-sale	(56,239		)	(33,935		)
Net decrease in loans	5,915			8,336
Purchase of bank premises and equipment	(50		)	(48		)
Net cash used in investing activities	(5,042		)	(340		)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits	9,075			532
Net increase (decrease) in savings deposits	(1,447		)	2,982
Net decrease in time deposits	(311		)	(3,148		)
Net increase in repurchase agreements	2,000			1,000
Dividends paid	(746		)	(752		)
Net cash provided by financing activities	8,571			614

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	4,632			1,523

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	16,968			14,222

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	21,600		$	15,745

Supplemental Disclosures:
Cash paid for interest	$	1,536		$	2,140
Cash paid for income taxes	$	878		$	995

The accompanying notes are an integral part of the unaudited consolidated financial statements.

LOGAN COUNTY BANCSHARES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1 - CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of Logan County BancShares, Inc. and subsidiary ( the “Company”) and its subsidiary were prepared in accordance with accounting principles generally accepted in the United States of America, (“US GAAP”) and to general practices within the financial services industry. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management has identified the accounting policies described below as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s consolidated financial statements and management’s discussion and analysis.

The consolidated financial statements of the Company include its wholly-owned subsidiary, Logan Bank and Trust (the “Bank”). All significant intercompany balances and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation X and, therefore, do not necessarily include all information that would be included in audited financial statements required by US GAAP. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the fiscal year ended December 31, 2003.

These statements should be read in conjunction with the consolidated statements as of and for the fiscal year ended December 31, 2002, and related notes which are included in the Company’s Annual Report on Form 10-K (file no.2-95114).

Income Recognition

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

In the event management believes collection of all or a portion of contractual interest on a loan has become doubtful, which generally occurs after the loan is 90 days past due, the accrual of interest is discontinued. In addition, previously accrued interest deemed uncollectible that was recognized in income is reversed. Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured. A nonaccrual loan is restored to accrual status when it is brought current or has performed in accordance with contractual terms for a reasonable period of time, and the collectibility of the total contractual principal and interest is no longer doubtful.

Allowance for Loan Losses

In general, determining the amount of the allowance for loan losses requires significant judgment and the use of estimates by management. The Company maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio. This formal analysis determines

an appropriate level and allocation of the allowance for loan losses among loan types and resulting provision for loan losses by considering factors affecting loan losses, including specific losses, levels and trends in impaired and nonperforming loans, historical loan loss experience, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. Management continually monitors the loan portfolio through reviews of past due loans and all significant loans which are considered to be potential problem loans on a monthly basis. The internal loan review function provides for an independent review to evaluate the adequacy of the allowance. The provision could increase or decrease each quarter based upon the results of management’s formal analysis.

The amount of the allowance for loan losses for the various loan types represents management’s estimate of expected losses from existing loans based upon specific allocations for individual lending relationships and historical loss experience for each category of homogeneous loans. Impaired loans are commercial and commercial real estate loans for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate these loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectibility while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral. While allocations are made to specific loans and pools of loans, the allowance is available for all loan losses.

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $1,567,000 at September 30, 2003, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectibility of a substantial portion of the loan portfolio and the need for future additions to the allowance will be based on changes in economic conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both

commercial and individual borrowers, which would likely cause the Company to experience increases in problem assets, delinquencies, and losses on loans.

Investment Securities

Investment securities are classified at the time of purchase, based on management’s intention and ability, as securities available-for-sale or held-to-maturity. All debt and equity securities have been classified as available-for-sale to serve principally as a source of liquidity. Until realized, unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders’ equity, net of tax. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

While temporary changes in the market value of available-for-sale securities are not recognized in earnings, a decline in fair value below amortized cost deemed to be other-than-temporary results in an adjustment to the cost basis of the investment, with a corresponding loss charged against earnings. Management evaluates the investment securities for other-than-temporary declines in estimated fair value on a quarterly basis. This analysis requires management to consider various factors in order to determine if a decline in estimated fair value is temporary or other-than-temporary. These factors include duration and magnitude of the decline in value, expectations about market interest rates, the financial condition of the issuer, and the company’s ability and intent to continue holding the investment for a period of time sufficient to allow for any anticipated recovery in market value. At September 30, 2004, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods unless the investments are held to maturity.

Income Taxes

The Company and its subsidiary file consolidated federal and state income tax returns. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period. The provision for income taxes during the current period is at a rate which management believes will approximate the effective rate for the year.

Cash Flows

Cash and cash equivalents consist of cash and due from banks and federal funds sold.

Earnings Per Share

The Company currently maintains a simple capital structure; thus, there are no dilutive effects on earnings per share. Earnings per share are calculated by dividing net income by the weighted-average number of shares outstanding for the periods.

NOTE 2 - RECENT ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) issued Statement on Financial Accounting Standard (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. This statement nullifies Emerging Issues Task Force Issue No. 94-3, which required the recognition of a liability for an exit cost at the date of an

entity’s commitment to an exit plan. The effective date of this statement is for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of this Statement did not have a material impact on the Company.

On December 31, 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure,” which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of SFAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a “ramp-up” effect on stock-based compensation expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported results. To address that concern, SFAS No. 148 provides two additional methods of transition that reflect an entity’s full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. SFAS No. 148 also improves the clarity and prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for all companies—regardless of the accounting method used—by requiring that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, the statement improves the timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of SFAS No. 148 did not have a material impact on the Company.

On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities.” The statement amends and clarifies accounting for derivative instruments embedded in other contracts and for hedging activities under Statement No. 133. The amendments improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. The statement also clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. The statement is generally effective for contracts entered into or modified after June 30, 2003. Adoption of SFAS No. 149 did not have a material impact on the Company.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The statement improves the accounting for certain financial instruments that, under previous guidance, could be accounted for as equity and requires that those instruments be classified as liabilities. This statement affects accounting for three types of freestanding financial instruments. One type is mandatorily redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type, which includes put options and forward purchase contracts, involves instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets. The third type, are instruments whose obligations can be settled with shares, the monetary value is fixed, tied solely or predominately to a variable such as a market index, or varies inversely with the value of the issuers’ shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the guidance is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on the Company.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation clarifies that a guarantor is required to disclose (a) the nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability, if any, for the guarantor’s obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. This interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year end. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. Adoption did not have a material impact on the Company.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” in an effort to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities, and activities of another entity. The objective of this interpretation is not to restrict the use of variable interest entities, but to improve financial reporting by companies involved with variable interest entities. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. This interpretation changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. In October 2003, the FASB decided to defer to the fourth quarter from the third quarter the implementation date for Interpretation No. 46. This deferral only applies to variable interest entities that existed prior to February 1, 2003. The adoption of this interpretation has not and is not expected to have a material effect on the Company’s financial position or results of operations.

NOTE 3 - RESTATEMENT OF PREVIOUSLY REPORTED FINANCIAL INFORMATION

As disclosed on Form 8-K filed with the Commission on August 4, 2004, the Company was informed by its independent auditor, McNeal, Williamson & Co. (“McNeal Williamson”) that McNeal Williamson was no longer permitted to issue audit reports for the Company and was no longer permitted to perform interim reviews in accordance with SAS 100 for the Company as a result of McNeal Williamson’s failure to register with the Public Company Accounting Oversight Board (“PCAOB”). McNeal Williamson advised the Company that it should obtain independent accountants. Accordingly, the Company retained S. R. Snodgrass, A.C. on August 10, 2004, to: (i) review all interim periods that were reviewed by McNeal Williamson after the adoption of Sarbanes-Oxley; (ii) re-audit the audit report for the period ended December 31, 2003; and (iii) review the audit report for the period ended December 31, 2002. As a result of S. R. Snodgrass, A.C.’s re-audit of the 2003 financial statements it was discovered that intercompany account balances had not been eliminated as of December 31, 2002. With the concurrence

of McNeal Williamson the following adjustments were made to previously reported financial information as of December 31, 2002:

Cash was and non-interest bearing demand deposits were decreased by $369,000 as the result of the elimination of intercompany account balances as of December 31, 2003. Total assets and total liabilities each decreased by $369,000 as the result of these eliminations. Previously reported net income and net income per share remained unchanged.

The consolidated statement of cash flows has been restated to include federal funds sold as cash and cash equivalents.

LOGAN COUNTY BANCSHARES, INC.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This narrative will assist readers in their analysis of the accompanying consolidated financial statements. It should be read in conjunction with the unaudited consolidated financial statements and the notes. Management is not aware of any market or institutional trends, events or uncertainties that will have or are reasonably likely to have a material effect on the liquidity, capital resources or operations of the Company, except as discussed herein. Management is also not aware of any current recommendations by any regulatory authorities, which would have such a material effect if implemented.

Comparison of the Results of Operations for the Three Months ended September 30, 2003 and 2002

Net income decreased by $58,000, or 11%, from net income of $542,000 for the three months ended September 30, 2002, to net income for the three months ended September 30, 2003, of $484,000.

Interest and dividend income decreased $353,000, or 14%, from $2,520,000 at September 30, 2002, to $2,167,000 at September 30, 2003. The decrease is attributed to the decrease in interest on loans of $236,000, or 11%, and the decrease in interest and dividends on investments of $106,000, or 31%. The decrease in interest on loans was due to the combination of the decrease in the average balance of loans of $6,289,000 and the decrease of 44 basis points in the average yield on loans. Interest on available-for-sale securities declined due to interest rates earned in spite of an increase of $5,237,000 in the average balance invested. The yield on investment securities dropped by 125 basis points due to the general decrease in rates from 2002 and management’s decision to invest in securities with shorter maturities.

Interest expense on deposits decreased by $156,000, or 23%, from $675,000 for the three months ended September 30, 2002, to $519,000 for the three months ended September 30, 2003. The decrease in interest expense on deposits was the direct result of the 45 basis point decrease in the cost of funds from 1.98% for the three months ended September 30, 2002, to 1.54% for the same period in 2003.

Management regularly performs an analysis to identify the inherent risk of loss in its loan portfolio. This analysis includes evaluation of concentrations of credit, past loss experience, current economic conditions, amount and composition of the loan portfolio (including loans being specifically monitored by management), estimated fair value of underlying collateral, loan commitments outstanding, delinquencies, and other factors. Based on this analysis, management established an allowance for loan losses. The allowance for loan losses is adjusted periodically by a provision for loan losses, which is charged to operations based on management’s evaluation of the probable losses that may be incurred in the Bank’s portfolio. The provision for loan losses decreased by $60,000 for the three months ended September 30, 2003, as compared to the same three months ended September 30, 2002, as a result of such an analysis by management.

The Bank will continue to monitor its allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic conditions dictate. Although the Bank maintains its allowance for loan losses at a level that it considers to be adequate to provide for the inherent risk of loss in its loan portfolio, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods. In addition, the Bank’s determination as to the amount of its allowance for loan losses is subject to review by regulators, as part of their examination process, which may result in the establishment of an additional allowance based on the judgment of the regulators after a review of the information available at the time

of their examination. In addition, the Company’s independent accountants reviewed the allowance as part of their audit.

Noninterest income increased by $60,000, or 31%, to $252,000 for the three-month period ended September 30, 2003, from $192,000 for the same period in 2002 due to an increase in service charge income and other operating income. The increase in service charge income was the direct result of a fee increase instituted in 2003.

Noninterest expense decreased by $21,000, or 2%, from $1,108,000 for the three months ended September 30, 2002, to $1,087,000 in September 30, 2003. Compensation and employee benefits, the largest component of non-interest expense, remained the same for the three months ended September 30, 2003, compared to the same three months ended September 30, 2002.

Income tax expense increased by $2,000, or 1%, from $327,000 for the three months ended September 30, 2002, to $329,000 for the three months ended September 30, 2003.

Comparison of Results of Operations for the Nine Months ended September 30, 2003 and 2002

The Company reported net income of $1,513,000 for the nine months ended September 30, 2003, compared to $1,603,000 for the nine months ended September 30, 2002, representing a 5.6% decrease or $90,000. The primary component, net interest income, for the nine-month period ended September 30, 2003, was $5,014,000, a decrease of $536,000, or 9.6%, as compared to $5,550,000 for the third quarter of 2002. The decrease points out the decline in interest rates over the two periods. Management continues to actively monitor interest rate risk using asset and liability management techniques. Net interest margins for the three months ended September 30, 2003 and 2002 were 3.04% and 3.42%, respectively.

Interest income amounted to $6,616,000 at September 30, 2003, a decrease of $1,067,000, from $7,683,000 for the same nine-month period of 2002. Interest income reflected a weighted-average yield of 5.34% for the quarter ended September 30, 2003, compared to 6.32% for the same nine-month period in 2002. Average interest earning assets were $165,042,000 and $162,109,000 during the three months ended September 30, 2003 and 2002, respectively.

Interest expense decreased to $1,602,000 for the quarter ended September 30, 2003, or $531,000, from $2,133,000 for the nine-month period ended September 30, 2002. This reflected an average cost of funds of 1.25% and 1.68% respectively, for the nine-month periods ended September 30, 2003 and 2002. Average interest bearing liabilities were $126,399,000 and $124,457,000 during the nine months ended September 30, 2003 and 2002, respectively.

The provisions for loan losses amounted to $3,000 and $180,000 for the nine-month periods ended September 30, 2003 and 2002, respectively. The decreased provision resulted primarily from successful collection activity and slower loan growth.

Earnings per weighted-average common share, for the nine-month periods ended September 30, 2003 and 2002, were $2.15 and $2.24, respectively. Earnings through September 30, 2003, reflect an annualized return on average assets (ROAA) of 1.16% compared to 1.24% for the period ended September 30, 2002. Also, these earnings reflect an annualized return on average equity (ROAE) of 11.54% and 12.29%, respectively, for the periods ending September 30, 2003 and 2002. Dividends for the nine months ended September 30, 2003, increased to $1.06 per share, or 2.9%, from $1.03 per share paid for the same period in 2002.

FINANCIAL CONDITION AND ASSET QUALITY

Total assets at September 30, 2003, were approximately $178,749,000 as compared to approximately $169,330,000 at December 31, 2002, or an increase of $9,419,000, or 5.6%. The loan portfolio decreased by $5,915,000 at September 30, 2003, or 5.5%, during this nine-month period, from $107,933,000 at December 31, 2002. As the economy began to show signs of improvement during the first quarter, loan demand began to improve. However, management continues to adhere to its policy of not extending long-term fixed rate financing in this low interest rate environment. By investing short-term, management believes it is better positioned to manage the interest margin as interest rates are beginning to increase. The investment portfolio increased by $10,483,000, or 25.38% during this same period; at the same time, federal funds sold increased $4,300,000. Total deposits increased by $7,317,000 to $157,391,000 at September 30, 2003, from $150,074,000 at December 31, 2002. Although deposits increased by nearly 5%, pricing for deposits is very competitive in the Company’s primary trade areas among banks and other nontraditional financial service providers, indicating future pressure on the Company’s net interest income. Management believes that the deposit growth is attributable to the Bank’s service delivery as its deposit rates are in line with those of competing institutions.

The continuing stagnation in the local and national economies places ongoing emphasis on the Company’s methodology in determining the adequacy of the allowance for loan losses. The Company periodically evaluates the adequacy of the allowance for loan losses in order to maintain the allowance at a level that is sufficient to absorb probable credit losses. This evaluation is based on a review of the Company’s historical loss experience, known and inherent risks in the loan portfolio, including adverse circumstances that may affect the ability of the borrower to repay interest and/or principal, the estimated value of collateral, and an analysis of the levels and trends of delinquencies, charge-offs, and the risk ratings of the various loan categories. Such factors as the level and trend of interest rates and the condition of the national and local economies are also considered. As a result of management’s analysis of the allowance for loan losses, at September 30, 2003, and December 31, 2002, the allowance for loan losses was $1,567,000 and $1,619,000, respectively. This resulted in the ratio of the allowance for loan losses to total loans increased slightly from 1.50% at September 30, 2003, compared to 1.53% at September 30, 2003. Estimates may change at some point in the future.

Financial instruments include commitments to extend credit and standby letters of credit. These commitments include standby letters of credit of approximately $1,102,000 at September 30, 2003, and $802,000 at December 31, 2002. These instruments contain various elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Additionally, certain off-balance-sheet items of approximately $12,582,000 at September 30, 2003, and $11,061.00 at December 31, 2002, were comprised primarily of unfunded loan commitments.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity management involves the ability to meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Liquidity can best be demonstrated by an analysis of the Company’s cash flows. The primary source of cash flows for the Company is operating activities. Operating activities provided $1,537,000 of liquidity for the nine-month period ended September 30, 2003, compared to $1,249,000 for the same nine months in 2002. The principal elements of these operating flows are net income, increased for significant non-cash expenses and depreciation and amortization. A secondary source of liquidity for the Company comes from investing activities, principally the maturities of investment securities. For the nine-month periods ended September 30, 2003 and 2002, due to the low interest rate environment, maturities and calls of investment securities amounted to $45,332,000 and $20,820,000, respectively. As of September 30, 2003, the Company had approximately $18,149,000 of investment securities that mature within 12

months. Interest rates are beginning to stabilize and the rapidity of calls in investment securities is expected to decline. Relatively flat loan demand resulted in a net decrease in loans of $5,915,000 for the first nine months of 2003 following a decline of $4,188,000 for the same period in 2002. These decreases in loans are consistent with management’s strategy of investing short-term and not competing for fixed rate loans.

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

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 Company’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 than one year. The earnings of the Company 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.

The Company’s management recognized the concentration of large certificates of deposit. The Company’s policy of asset-liability management matches both rates and maturities so the Company 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.

Management believes there has been no material change to either the interest rate risk or material market risk since December 31, 2002.

INTEREST RATE SENSITIVE ANALYSIS TABLE

(In Thousands of Dollars)

As of December 31, 2002	0-90			91-180			181-365			Total One Year			Over One Year			Total
Earning Assets
Loans	$	6,557		$	5,576		$	21,299		$	33,432		$	74,501		$	107,933
Investments	4,003			2,021			8,009			14,033			26,734			40,767
Federal Funds Sold	11,370			0			0			11,370			0			11,370

Total Earning Assets	21,930			7,597			29,308			58,835			101,235			160,070

Interest Bearing Liabilities
Demand Deposits	21,851			0			0			21,851			0			21,851
Savings	12,653			10,062			22,149			44,864			0			44,864
CD’s of $100,000 and Over	2,730			2,604			4,251			9,585			7,282			16,867
Other Time	5,413			6,338			11,093			22,844			13,537			36,381

Total Interest Bearing Liability	42,647			19,004			37,493			99,144			20,819			119,963

Interest Sensitivity Gap	$	(20,717	)	$	(11,407	)	$	(8,185	)	$	(40,309	)	$	80,416		$	40,107

Cumulative Gap	$	(20,717	)	$	32,124		$	(40,309	)	$	(40,309	)	$	40,107		$	40,107

Rate Sensitive Assets/Rate Sensitive Liabilities (Cumulative Percentage)	51.14		%	47.89		%	59.34		%	59.34		%	133.43		%	133.43		%

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures:

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (i) enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in its Exchange Act reports, and (ii) are designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in internal controls:

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

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

Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

(32) Section 1350 Certifications

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

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

(b) Reports on Form 8-K

None

SIGNATURES

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

	LOGAN COUNTY BANCSHARES, INC.
	(Registrant)

Date: November 24, 2004	/s/ Eddie Canterbury
	Eddie Canterbury Chief Executive Officer

Date: November 24, 2004	/s/ Mark Mareske
	Mark Mareske Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description

31.1		Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

31.2		Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

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

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

LOGAN COUNTY BANCSHARES INC 10-Q/A