UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

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

For the calendar year ended:

December 31, 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) 752-2080
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act of 1934:

NONE
(Title of Class)

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. ý Yes o No.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý Yes o No.

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

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

The aggregate market value of the voting stock held by non-affiliates of registrant as of November 24, 2004, was $12,472,548, which was based on the last trade price of $44.00.

Documents Incorporated by Reference: None

LOGAN COUNTY BANCSHARES, INC.

Table of Contents

EXPLANATORY NOTE

PART I

ITEM 1.	BUSINESS

ITEM 2.	PROPERTIES

PART II

ITEM 6.	SELECTED FINANCIAL DATA

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9A.	CONTROLS AND PROCEDURES

PART III

ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A amends Items 1, 2, 6, 7, 8, 10, 11, 12, 13 and 14, and adds Item 7A, 9A and certain Exhibits. 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 amendments to Item 10 adding the disclosures relating to an audit committee financial expert and the adoption of a code of ethics applicable to the senior financial officers and the amendments to Item 14 relating to the adoption of pre-approval policies and procedures for audit and non-audit services are necessary in order for the Company to comply with Sarbanes-Oxley. In addition, the Company has made additional disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operation in Item 7 to bring the discussion into compliance with Sarbanes-Oxley and to conform the disclosures to the re-audit performed by S.R. Snodgrass, A.C. discussed below.

This Amendment No. 1 on Form 10-K/A also revises the consolidated financial statements as of December 31, 2003, and for the year then ended, including the notes thereto. 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 new 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, adjustments were made to the previously issued financial statements.

Significant adjustments or restatements are as follows:

• In the Consolidated Statement of Condition as of December 31, 2003 cash and due from banks was reduced by $1,897,531, non-interest bearing deposits were reduced by $376,292 and interest bearing deposits were reduced by $1,521,238 to eliminate intercompany account balances. Federal Reserve Bank Stock was reclassified from investment securities to other assets and deferred tax liabilities were netted against deferred tax assets, resulting in a reduction in investment securities of $81,000, a reduction in other assets of $77,502 and reduction in other liabilities of $158,502. The aggregate effect of the adjustments and reclassifications was to reduce total assets and total liabilities each in the amount of $2,056,033. In addition, federal funds sold have been included in the Company’s definition of cash and cash equivalents and have been reclassified as such, and bank owned life insurance in the amount of $2,011,532 has been separately stated.

• No adjustments or restatements have been made to previously reported net income or net income per share. The weighted-average shares outstanding for each of the three years 2003, 2002 and 2001 have been included on the consolidated statement of income.

• Comprehensive income for 2003, 2002 and 2001 has been more clearly reflected on the consolidated statement of stockholders’ equity by use of a separate column.

• The consolidated statement of cash flows for 2003, 2002 and 2001 has been restated to reflect federal funds sold as a cash equivalent and to account for the elimination of intercompany deposits. The 2003 consolidated statement of cash flows has also been restated to reflect the Company’s purchase of bank owned life insurance as an investing activity, rather than an operating activity

• Significant changes to the notes to the consolidated financial statements include the following:

• Note 11 - Disclosure of the current and deferred components of income tax expense; correction of the reconciliation of the reported amount of income tax expense and the amount computed at statutory rates for 2003, 2002 and 2001; and correction of the composition of deferred tax assets and deferred tax liabilities as of December 31, 2003 and 2002.

• Note 17 - Correction of the disclosure regarding the limitation on dividend payments bythe subsidiary bank.

• Note 18 - Correction of fair value information.

• Note 19 - Restatement of parent only statements of income for 2003, 2002 and 2001 to reflect the receipt of dividends from the subsidiary bank and to disclose income tax expense. Restatement of parent only statement of cash flows for 2003, 2002 and 2001 to properly reflect operating and financing activities and to reflect the purchase of treasury stock in 2002.

The adjustments and reclassifications discussed above are also reflected in the total assets and total deposits reported in Item 6 - Selected Financial Data. The shareholders’ equity percentage in the table has also been restated for the adjustment in total assets.

The amendments to Items 1, 2, 7A, 9A, 10 (with respect to information concerning the Company’s Directors, nominees for Director and Executive Officers), 11, 12, 13, and 14 include information that was required to be disclosed on Form 10-K, but was inadvertently not disclosed by the Company. There were no disclosures for Items 7A and 9A on Form 10-K. The information contained in the amendments to Items 1 and 2 supplements the prior disclosures made on Form 10-K, and the information contained in Items 10, 11, 12, 13, and 14 replaces the prior disclosures made on Form 10-K.

PART I

ITEM 1 – BUSINESS

Employees

As of December 31, 2003, the Company and its subsidiaries had approximately 64 full-time equivalent employees. None of these employees are represented by a collective bargaining unit and management considers employee relations to be excellent.

Financial Information

The Company’s revenue is derived from interest and fees on loans, interest on investment securities, interest on federal funds sold, service charges and other fees, gains on securities

and other sources of income. The breakdown of revenue is set forth in the Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing on pages 12 through 25 herein.

ITEM 2 – PROPERTIES

All of the office buildings and branches of the Company are owned by the Company. The land upon which the branch located at Route 10, South Man, West Virginia is situated, is leased.

PART II

ITEM 6 – SELECTED FINANCIAL DATA

LOGAN BANCSHARES, INC. AND SUBSIDIARY

(In Thousands of Dollars)

YEAR ENDED DECEMBER 31:	2003			2002			2001			2000			1999
Total Interest Revenue	$	8,766		$	10,088		$	12,090		$	11,508		$	10,753
Total Interest Expense	2,087			2,764			4,801			4,828			4,378

Net Interest Revenue	6,679			7,324			7,289			6,680			6,375
Provision for Possible Loan Losses	3			534			700			100			22

Net Interest Revenue After Provision for Possible Loan Losses	6,676			6,790			6,589			6,580			6,353
Other Operating Revenue	986			805			707			769			699
Other Operating Expense	(4,728		)	(4,689		)	(4,631		)	(4,185		)	(3,897		)

Income Before Income Taxes	2,934			2,906			2,665			3,164			3,155
Income Taxes	1,033			1,064			909			1,131			1,131

Net Income	$	1,901		$	1,842		$	1,756		$	2,033		$	2,024
Per Common Share:
Net Income	$	2.70		$	2.57		$	2.45		$	2.84		$	2.83
Cash Dividends Declared	$	1.57		$	1.53		$	1.50		$	1.44		$	1.34

At December 31:
Total Loans	$	101,615		$	107,933		$	116,907		$	113,641		$	109,571
Total Assets	173,603			169,329			171,599			157,480			152,746

Total Deposits	152,255			150,073			152,028			138,723			127,619
Short-Term Debt	3,000			1,000			2,000			2,000			9,840
Total Shareholders’ Equity	17,790			17,193			16,800			16,014			14,444
Selected Ratios:
Rate of Return on Average:
Total Assets	1.06		%	1.06		%	1.03		%	1.36		%	1.39		%
Shareholders’ Equity	10.24		%	10.15		%	10.36		%	13.35		%	13.84		%
Tier 1 Capital to Total Assets at Year End	10.11		%	9.58		%	10.31		%	10.25		%	9.92		%
Average Total Shareholders’ Equity to Average Total Assets	10.25		%	10.25		%	9.95		%	10.15		%	10.05		%
Common Dividend Payout Ratio	58.15		%	59.56		%	61.12		%	50.79		%	47.35		%
Nonaccrual and Restructured Business Loans as a Percentage of Total Loans	1.04		%	1.58		%	0.74		%	0.37		%	0.51		%

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

INTRODUCTION

The following discussion and analysis presents the significant changes in financial condition and the results of operations at Logan County Bancshares, Inc. and its subsidiary (the Company).

It should be read in conjunction with the audited consolidated financial statements and the accompanying notes, along with the selected financial data presented elsewhere in this report. 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.

FORWARD-LOOKING STATEMENTS

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 governmental actions and reforms; and rapidly changing technology and evolving financial industry standards.

CORPORATE STRUCTURE AND ACQUISITIONS

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 Company 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 were banking corporations organized under the laws of the State of West Virginia. The subsidiaries each had one business segment, community banking. On October 7, 1996, the subsidiary banks combined and Bank of Chapmanville merged into Logan Bank & Trust Company.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting and reporting policies are an integral part of the results reported. Accounting policies are described in detail in Note 1 to the Consolidated Financial Statements. The Company’s accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America, and they conform to general practices within the financial services industry. The Company’s most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate value obtained by the use of assumptions that involve significant uncertainty at the time of estimation. In some instances we use a discount factor to determine the present value of assets and liabilities. A change in the discount factor could increase or decrease the values of those assets and liabilities, resulting in either a beneficial or adverse impact to our financial results. The following is a brief description of the Company’s current accounting policies involving significant management valuation judgments.

ACCOUNTING, LEGISLATIVE AND REGULATORY MATTERS

Effective January 1, 2003, the Company adopted the provisions of FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others (an interpretation of FASB statements No.5, 57, and 107 and rescission of FASB Interpretation No. 34).” FIN 45 clarifies the requirements of FASB Statement No. 5 (FAS 5), “Accounting for Contingencies”, relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. For guarantees that fall within the scope of FIN 45, the Interpretation requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. The Company’s primary guarantee included within the scope of FIN 45 relates to financial standby letters of credit issued to commercial customers. FIN 45 requires the liability recognized in stand-alone arm’s-length transactions to be the premium received or receivable by the guarantor. FIN 45 requires disclosure of the nature of the guarantee, the maximum potential amount of future payments the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor’s obligations under the guarantee. Implementation of this interpretation did not have a material impact on the Company’s consolidated financial position or consolidated results of operations.

In January 2003 the Financial Accounting Standards Board issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities (an interpretation of RB No. 51). “FIN 46 addresses the consolidation by business enterprises of certain variable interest entities (VIEs). In December 2003, the FASB reissued FIN 46 with certain modifications and clarifications. Application of this guidance was effective for interests in certain VIEs commonly referred to as special-purpose entities (SPEs) as of December 31, 2003. Application for all other types of entities is required for periods ending after March 14, 2004, unless previously applied. Management does not anticipate the implementation of this interpretation to have a material impact on the Company’s consolidated financial position or consolidated results of operations.

In April 2003, FASB issued Statement of Financial Accounting Standards No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS 149). FASB Statements No. 133” Accounting for Derivative Instruments and Hedging Activities” and No 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, establish accounting and reporting standards for derivative instruments including derivatives embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. This SFAS 149 amends SFAS 133 for certain decisions made by the Board as part of the Derivatives Implementation Group (DIG) process. This Statement contains amendments relating to FASB Concepts Statement No. 7, “Using Cash Flow Information and Present Value in Accounting Measurements’, and FASB Statements No. 65, “Accounting for Certain Mortgage Banking Activities”, No. 91 “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases”, No.95, “Statement of Cash Flows”, and No. 126, “Exemption Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, No. 95, “Statement of Cash Flows”, and No. 126, “Exemption from Certain Required Disclosures about Financial Instruments for Certain Nonpublic Entities”. In general, SAFS 149 was effective for derivative transactions entered into or modified and for hedging relationships designated after June 30, 2003. Management does not believe that the Company has any derivative or hedging activities.

In May 2003, FASB issued Statement of Financial Accounting Standards No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS 150). This Statement established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Some of the provisions of this SFAS are consistent with the current definition of liabilities in FASB Concepts Statement No. 6, “Elements of Financial Statements”. The

remaining provisions of this SFAS are consistent with the Board’s proposal to revise that definition to encompass certain obligations that a reporting entity can or must settle by issuing its own equity shares, depending on the nature of the relationship established between the holder and the issuer. While the Board still plans to revise that definition through an amendment to Concepts Statement 6, the Board decided to defer issuing that amendment until it has concluded its deliberations on the next phase of this project. That next phase will deal with certain compound financial instruments including puttable shares, convertible bonds, and dual-indexed financial instruments. This Statement was effective for financial instruments entered into or modified after May 31, 2003, and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of non-public entities. Implementation of this statement did not have a material impact on the Company’s consolidated financial position or consolidated results of operations. In December 2003, the FASB deferred for an indefinite period the application of the guidance in SFAS 150 to noncontrolling interests that are classified as equity in the financial statements of a subsidiary, but would be classified as a liability in the parent’s financial statements under SAFS 150. The deferral is limited to mandatorily redeemable noncontrolling interests associated with finite-lived subsidiaries. Management does not believe that the Company has such applicable entities as of December 31, 2003.

In December 2003, the Financial Accounting Standards Board (“FASB”) revised Statement of Financial Accounting Standards (“FAS”) No. 132, Employers’ Disclosures about Pension and Other Postretirement Benefit. This statement retains the disclosures required by FAS No. 132, which standardized the disclosure requirements for pensions and other postretirement benefits to the extent practicable and requires additional information on changes in the benefit obligations and fair value of plan assets. Additional disclosures include information describing the types of plan assets, investment strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost recognized during interim periods. This statement retains reduced disclosure requirements for nonpublic entities from FAS No. 132, and it includes reduced disclosure for certain of the new requirements. This statement is effective for financial statements with fiscal years ending after December 15, 2003. The interim disclosures required by this statement are effective for interim periods beginning after December 15, 2003. The adoption of this statement did not have a material effect on the Company’s disclosure requirements.

During the first quarter of 2003, the Securities and Exchange Commission promulgated rules to implement several provisions of The Sarbanes-Oxley Act of 2002. These rules included conditions for using financial measures that exclude information that would be required under generally accepted accounting principles, (“non-GAAP financial measures”). Additionally, new rules expand the number of events that require current reporting on Form 8-K. Furthermore, new rules have been issued pertaining to an audit committee and its need for a financial expert and code of ethics requirements for senior management. Also, new rules were issued defining audit committee responsibility for external auditor retention and determination of external auditor independence. Management anticipates additional costs to implement the various provisions of this law; however, it is difficult to determine the full impact of implementation until such time as all rules have been promulgated.

On December 11, 2003, the SEC staff announced its intention to release a Staff Accounting Bulletin that would require all registrants to account for mortgage loan interest rate lock commitments related to loans held for sale as written options, effective no later than for commitments entered into after March 31, 2004. This guidance, if issued, would require the Company to recognize a liability on its balance sheet equal to the fair value of the commitment at the time the loan commitment is issued. As a result, this guidance would delay the recognition of any revenue related to these commitments until such time as the loan is sold, however, it would have no effect on the ultimate amount of revenue or cash flows recognized over time. Management does not anticipate this guidance to have a material impact on the Company’s consolidated financial position or consolidated results of operations.

INCOME STATEMENT ANALYSIS

EARNINGS OVERVIEW

Net income for 2003, was $1,901,000 or $2.70 per share, an increase of $59,000 or 3.2% from the $1,842,000 or $2.57 per share earned in 2002 and $86,000 more than the $1,756,000 or $2.45 per share earned in 2001. These earnings reflect a decrease in net interest income of $644,000 or 8.8%, due primarily to limitations in the opportunity to reduce interest expense on deposits in a historically low interest rate environment relative to the investment options for loans and investment securities. Management’s ongoing efforts to enhance asset quality and increase income from other sources partially offset the reduction in net interest income for the year ended December 31, 2003, through a decrease in the provision for loan losses of $531,000 and increase of other income of $181,000.

EARNINGS PER SHARE

The Earnings Per Share Table summarizes the principal sources of changes in earnings per share for 2003.

Net income per share – 2002	$	2.57
with 2003 shares	$	2.62

Increase (decrease) due to change in:
Net interest income	(0.91		)
Provision for loan losses	0.75
Other operating income	0.26
Operating expense	(0.06		)
Tax expense	0.04

Net income per share – 2003	$	2.70

CONDENSED STATEMENTS OF FINANCIAL CONDITION
Statistical Summary 2003 - 1999

	December 31,
	2003			%	2002			%	2001			%	2000			%	1999			%
Loans	$	101,615		58	$	107,933		63	$	116,907		69	$	113,641		72	$	109,571		72
Investments	$	47,892		28	41,224			25	36,355			21	29,318			19	30,028			19
Federal Funds Sold	13,385			8	11,370			7	7,150			4	4,280			3	—			0

Interest-Earning Assets	$	162,892		94	$	160,527		95	$	160,412		94	$	147,239		93	$	139,599		91

Cash and Due from Banks	5,342			3	5,597			3	7,072			4	4,687			3	7,184			5
Premises and Equipment	3,103			2	3,217			2	3,384			2	3,594			2	3,774			2
Other Assets	3,847			2	1,606			1	1,883			1	2,363			2	2,889			27
Reserve for Loan Losses	(1,581		)	-1	(1,619		)	-1	(1,153		)	-1	(702		)	0	(701		)	0
Total Assets	$	173,603		100	$	169,329		100	$	171,599		100	$	157,480		100	$	152,746		100

Savings & Interest DDA	$	64,939		38	$	66,716		39	$	61,174		36	$	51,723		33	$	50,023		33
Time Deposits	57,595			33	58,651			34	63,282			37	63,657			41	58,265			38
Short-Term Debt	3,000			2	1,000			1	2,000			1	2,000			1	9,840			6

Interest-Bearing Liabilities	125,534			73	127,367			74	126,456			74	117,380			75	118,128			77

Demand Deposits	29,721			17	24,706			15	27,571			16	23,343			15	19,332			13
Other Liabilities	558			0	1,063			1	772			0	743			0	842			0

Total Liabilities	155,813			90	152,136			90	154,799			90	141,466			90	138,302			90

Total Shareholders’ Equity	17,790			10	17,193			10	16,800			10	16,014			10	14,444			10

Total Liabilities & Equity	$	173,603		100	$	169,329		100	$	171,599		100	$	157,480		100	$	152,746		100

Total Deposits	$	152,255			$	150,073			$	152,027			$	138,723			$	127,620

Book Value per Share	$	25.27			$	24.42			$	23.86			$	22.75			$	20.52

SUMMARY OF OPERATIONS
Statistical Summary 2003 - 1999

	2003			2002			2001			2000			1999
Total Interest Revenue	$	8,766		$	10,088		$	12,090		$	11,508		$	10,753
Total Interest Expense	2,087			2,764			4,801			4,828			4,378

Net Interest Revenue	6,679			7,324			7,289			6,680			6,375
Provision for Possible Loan Losses	3			534			700			100			22

Net Interest Revenue After Provision for Possible Loan Losses	6,676			6,790			6,589			6,580			6,353
Other Operating Revenue	986			805			707			769			699
Other Operating Expense	(4,728		)	(4,689		)	(4,631		)	(4,185		)	(3,897		)

Income Before Income Taxes	2,934			2,906			2,665			3,164			3,155
Income Taxes	1,033			1,064			909			1,131			1,131

Net Income	$	1,901		$	1,842		$	1,756		$	2,033		$	2,024
Per Common Shares: Net Income	$	2.70		$	2.57		$	2.45		$	2.84		$	2.83
Cash Dividends Declared	$	1.57		$	1.53		$	1.50		$	1.44		$	1.34

Common Dividend Payout

BALANCE SHEET ANALYSIS

LOANS

The Company’s primary goal is to maximize the return to shareholders. An important factor in accomplishing this goal is meeting the credit needs of the retail and commercial customers in the Company’s primary markets of southern West Virginia. Total loans decreased approximately $6,318,000 or 5.9% in 2003, following a 7.7% decrease of $8,975.000 in 2002. Competition in the Company’s market is very aggressive for originating new loans. Loan demand was relatively strong during most of 2003, as interest rates remained at historically low levels. Management continued to adhere to its philosophy of not offering long-term fixed-rate loans in this low interest rate cycle. At December 31, 2003, the loan portfolio comprised 62.4% of total interest-earning assets as compared to 67.2% of total interest-earning assets at December 31, 2002, and contributed 86.5% of total interest income in 2003 and 84.4% in 2002 and 82.6% in 2001. See Note 4 to the Consolidated Financial Statement for additional information on loans.

During 2003, the Company’s strong emphasis continued to be on lending to local companies with known local management and excellent financial stability. Most of the commercial loans in the portfolio were made at variable rates of interest. Additionally, the Company continued to make loans available in an expanding retail marketplace. Consistent with management’s philosophy on relationship banking, most borrowers are also depositors and utilize other banking services. The average yield of the loan portfolio decreased to an average rate of 7.30% in 2003 compared to 7.71% in 2002. This reflected the historically low interest rate environment during 2003, and the continued repricing of loans at lower interest rates.

The commercial loan portfolio is generally diversified and geographically dispersed within the Company’s market. There are no concentrations, lines of business or industry that represent greater than 30% of the Company’s equity. Within each specific industry, borrowers are diversified as to specialty, service or other unique feature of the overall industry. A substantial portion of the customer’s ability to honor their contractual commitment is largely dependent upon the economic conditions of the borrowers’ respective industries and overall economic conditions of southern West Virginia, which is somewhat less volatile than many areas of the country.

The consumer portion of the loan portfolio consists of both secured and unsecured loans made to individuals and families for various reasons including the purchase of automobiles, home improvements, educational expenses and other purposes. The Company continues to carefully monitor the consumer sector during this period of economic weakness. As recessionary pressures result in higher levels of unemployment, the likelihood for increased volatility arises in the consumer sector.

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. See Note 14 to the Consolidated Financial Statements for additional information on Commitments and Contingencies. Commitments generally have fixed expiration dates or other termination clause and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total amount of commitments does not necessarily represent future cash requirements. Logan Bank and Trust Company had outstanding commitments to extend credit of approximately $12,696,000 at December 31, 2003, and $10,287,000 at December 31, 2002. These commitments included unfunded loan commitments and unused lines of credit totaling $11,669,000 at December 31, 2003 and $10,881,000 at December 31, 2002. Additionally, standby letters of credit totaled $1,027,000 at December 31, 2003 and $1,062,000 at December 31, 2002. Financial standby letters of credit are conditional commitments issued by Logan Bank & Trust Company to guarantee the financial performance of a customer to a third party. Those guarantees are primarily used to support public and private borrowing arrangements.

A table follows in this discussion and analysis which details the amount and expected maturities of significant commitments of as December 31, 2003.

Nonperforming assets, including nonaccrual loans, loans past-due 90 days or more, restructured loans and other real estate owned, decreased $1,109,000 or approximately 44%, from December 31, 2002 to December 31, 2003, following a decrease of $373,000, or approximately 13% in 2002. These decreases reflect management’s ongoing efforts to enhance the quality of the loan portfolio. This improvement was further enhanced by the Company’s adhering to a stricter set of criteria in the determination of granting renewals and extensions. The Company’s policy is to discontinue the accrual of interest on loans that are past due more than 90 days, unless such loans are well collateralized and in process of collection. Loans that are on a current payment status or past due less those 90 days may also be classified as nonaccrual if repayment of principal or interest is in doubt. The Company’s holdings of other real estate owned increased approximately 3%, or $6,000 in 2003, following a decrease of approximately $31,000 in 2002. See the following schedule in this discussion and analysis titled Nonperforming Assets and Loan Loss Analysis.

The Company maintains, through its provision, an allowance for loan losses believed by management to be adequate to absorb probable credit losses inherent in the portfolio. Management is committed to the early recognition of problem loans, and to an appropriate and adequate level of allowance. The allowance for loan losses was 1.50% of year-end loans at December 31, 2003 and December 31, 2002. The estimation of the adequacy of the allowance for loan losses is the most significant estimate determined by management. Different amounts could result under different conditions or assumptions. The allowance for loan losses is also reviewed by banking regulators and the Company’s independent auditors.

The Company uses an outsourcing arrangement for its loan review function with an independent third-party firm. This process includes a through evaluation of the credit administration systems and personnel. The objective is to have an effective loan review system that provides management with information that will produce a more focused and effective approach in managing credit risk inherent in the loan portfolio. As a part of this process, a system of loan grades is utilized to further support the adequacy of the loan loss allowance.

In addition to the review of credit quality through the credit review process, the Company constructs a comprehensive analysis of the allowance for loan losses for its loan portfolio at least quarterly. The procedures that are utilized entail preparation of a loan “watch” list and assigning each loan a classification. For those individually significant loans where it is determined that it is not probable that the borrower will make all payments in accordance with the original loan agreement, management performs an impairment analysis as required by SFAS Nos. 114 and 118. Specific reserves are recorded on impaired loans of $427,000 and $267,000 at December 31, 2003 and 2002, respectively. Other classified loans are categorized and allocated appropriate reserves. Other loans more than 90 days past due that have not been considered in the aforementioned procedures are assigned a classification of Substandard and are reserved for accordingly. The remaining portfolio is segregated into consumer, commercial, and residential real estate loans, and the historical net charge off percentage of each category is applied to the current amount outstanding in that category. Also, a review of concentrations of credit, classes of loans and pledged collateral is performed to determine the existence of any deterioration. In addition, volume and trends in delinquencies and nonaccural loans, off-balance sheet credit risks, the loan portfolio composition, loan volume and maturity of the portfolio, national and local economic conditions and the experience, ability and depth of lending management and staff are given consideration. See Notes 4, 5 and 15 to the Consolidated Financial Statements for additional information on loan quality, the allowance for loan losses and concentration of credit risk.

ALLOWANCE FOR LOAN LOSSES

The Company maintains, through its provision, an allowance for loan losses believed by management to be adequate to absorb probable credit losses inherent in the portfolio. Management continues to enhance the methodology and procedures for determining the adequacy of the allowance for loan losses. This allowance is also reviewed by banking regulators and the Company’s independent auditors. The procedures that are utilized entail preparation of a loan watch list and assigning each loan a classification. For those individually significant loans where it is determined that it is not probable that the borrower will make all payments in accordance with the original loan agreement, management performs an impairment analysis. The measurement of impaired loans is based on either the fair value of the underlying collateral, the present value of the future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, or the estimated market value of the collateral.

Other classified loans are categorized and allocated appropriate reserves. Loans are designated as nonaccrual when, in the opinion of management, the collection of principal or interest is doubtful. This generally occurs when a loan becomes 90 days past due as to principal or interest unless the loan is both well secured and in the process of collection. Other loans more that 90 days past due, which have not been considered in the aforementioned procedures, are reserved for accordingly. The remaining portfolio is segregated into consumer, commercial and residential real estate loans, and the historical net charge off percentage of each category is applied to the current amount outstanding in those categories. Additionally, concentrations of credit, collateral deficient loans, volume and trends in delinquencies, off-balance sheet credit risks, loan portfolio composition, loan volume and maturity of the portfolio, national and local economic conditions and the experience, ability and depth of lending management and staff are given consideration. (See Notes 4, 5 and 15 to the Consolidated Financial Statements for additional information on loan quality, the allowance for loan losses and concentration of credit risk.

NONPERFORMING ASSETS AND LOAN LOSS ANALYSIS

	Year Ended December 31
	2003			2002			2001			2000			1999
	(Dollars in Thousands)
Amount of Loans Outstanding at End of Period	$	100,033		$	106,314		$	115,754		$	112,938		$	108 870
Average Amount of Loans	$	103,873		$	110,174		$	110,289		$	109,447		$	101,197
Balance of Allowance for Possible Loan Losses:
Balance at Beginning of Year	$	1,619		$	1,153		$	702		$	700		$	701
Loans Charged Off:
Commercial	$	0		$	9		$	32		$	0		$	0
Real Estate	35			16			30			7			0
Consumer	49			73			205			99			29
Total Loans Charged Off	84			98			257			106			29
Recovers of Loans Previously Charged Off:
Commercial	0			1			1			0			1
Real Estate	5			1			1			3			0
Consumer	38			28			6			5			4
Total Recoveries	43			30			8			8			5
Net Loans Charged Off:	41			68			249			98			24
Provision for Loan Losses	3			534			700			100			23
Balance at End of Period	$	1,581		$	1,619		$	1,153		$	702		$	700
Ratio of net Charge-Offs to Average Loans	0.039		%	0.062		%	0.226		%	0.090		%	0.024		%
Allowance at year end as a % of Loans	1.580		%	1.523		%	0.996		%	0.622		%	0.643		%
Provisions for loan losses as a % of Loans	0.003		%	0.502		%	0.605		%	0.089		%	0.021		%
Nonperforming assets (at year end)
Nonaccrual	149			617			864			426			555
Past-due ninety days or more and still accruing	992			1,706			1,801			3,338			3,272
Troubled debt restructurings	0			0			0			0			0
Other real estate owned	202			196			227			200			358
Total Nonperforming Assets	1,410			2,519			2,892			3,964			4,185
Nonperforming assets/total loans	1.41		%	2.37		%	2.50		%	3.51		%	3.84		%
Nonperforming assets/total assets	0.81		%	1.49		%	1.69		%	2.53		%	2.75		%

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

	December 31, 2003				December 31, 2002				December 31, 2001				December 31, 2000
Types of Loans	Allowance		% Loan Class		Allowance		% Loan Class		Allowance		% Loan Class		Allowance		% Loan Class
Commercial	$	854	2.13	%	$	854	1.94	%	$	749	1.52	%	$	464	0.98	%
Real Estate	596		1.17	%	623		1.19	%	288		0.54	%	163		0.31	%
Consumer	132		1.26	%	142		1.24	%	116		0.83	%	75		5.50	%
Total	$	1,581	1.58	%	$	1,619	1.52	%	$	1,153	1.00	%	$	702	0.62	%

SECURITIES

Securities, the second largest asset of the Company, increased by $6,668,000 or 16.2% during 2003. This increase resulted from the decrease in the loan portfolio. At December 31, 2003, securities comprised 29.4% of total interest-earning assets compared to 25.7% of total interest-earning assets at December 31, 2002. The composition of the Company’s securities portfolio reflects management’s investment strategy of maximizing the appropriate level of asset liquidity and providing management a tool to assist in controlling and managing the Company’s interest rate risk while at the same time producing appropriate levels of interest income. Management of the maturity of the securities portfolio is necessary to ensure adequate liquidity and manage interest rate risk. During 2003, in order to maintain liquidity and flexibility, management continued categorizing all investments in the available for sale portfolio. Management believes that the potential for increased loan demand requires maintaining the liquidity of the securities portfolio. See the following schedules in this discussion and analysis for more information on the securities portfolio. In addition, see Note 2 to the Consolidated Financial Statements for additional information.

The following table shows the carrying values of securities at the respective periods, which is market value for available for sale securities. For additional information see Note 2 to the Consolidated Financial Statements. There are no securities held to maturity.

	December 31,
	2003		2002		2001
	(Dollar in Thousands)
Securities available for sale
U. S. Government securities	$	9,011	$	3,972	$	3,489
U. S. Government agency securities	38,510		36,532		32,366
Other securities	263		263		250

TOTAL SECURITIES AVAILABLE FOR SALE	$	47,784	$	40,767	$	36,105

The following table shows the maturity periods for Investment Securities as of December 31, 2003. There were no securities held to maturity.

December 31, 2003	One Year or Less			One Year Through Five Years			Years Through Ten Years		Over Ten Years			Total			Market Value
(Dollars in	(Dollars in Thousands)
thousands)	Amt.Yield			Amt.Yield			Amt.Yield		Amt.Yield			Amt.Yield			Amt.Yield
U. S. Government
Available for sale	$	9,001		$	0		$	0	$	0		$	9,001		$	9,030

U. S. Federal Agency/and Equities
Available for sale	17,783			20,737			0		263			38,783			38,862

Total Securities
Available for sale	26,784			20,737			0		263			47,784			47,892

TOTAL	$	26,784		$	20,737		$	0	$	263		$	47,784		$	47,892

Percent of Total	56.05		%	43.40		%			0.55		%	100.00		%	100.00		%

Weighted average yield
	2.09		%	1.92		%			3.95		%	2.02		%	2.02		%

NET INTEREST INCOME

The major portion of the Company’s earnings is derived from net interest income, which is the interest income on interest-earning assets less the interest expense on interest-bearing liabilities. During 2003 net interest income decreased $644,000 or 8.8%. This followed a .5% increase in 2002, and a 9.1% increase in 2001. For the year ended December 31, 2003, interest income decreased $1,322,000, or approximately 13.1%, compared to a decrease of $2,002,000 or 16.6% for 2002, and an increase of $582,000 or 5.1% for 2001. The net interest margin decreased from 4.45% in 2002 to 4.01% in 2003. This follows a decrease in 2002 from 4.56% in 2001. A detailed analysis of the net interest margin for each of these three years follows in this MD&A. Interest on loans, which decreased $939,000 or 11.0%, contributed to the decrease for 2003, along with interest on securities, which decreased $359,000 or 26.3%. The decrease in interest income was accompanied by a decrease in interest expense of $677,000 or 24.5% for 2003. This followed a decrease in interest expense of $2,037,000 or 42.4% for 2002, and a decrease of $27,000 or .5% for 2001.

Net interest income is affected by prevailing market interest rates. Two other important factors are the changes in the balances (volume) of the earnings assets and interest bearing liabilities and the spread between the various sources and uses of funds. The performance for 2003 is indicative of the historically low interest rate environment that followed the rapid decline in interest rates that prevailed throughout 2001 and early 2002. This is reflected in the following volume/rate analysis that shows how both interest rates and the volumes of interest earning assets and interest bearing liabilities combine to change the net interest income.

ANALYSIS OF NET INTEREST MARGIN FOR 2003:

	Year Ended 12/31/03
	Average Balance			Interest		Yield/Rate
ASSETS
INTEREST EARNING ASSETS:
LOANS:
Commercial	$	41,444		$	2,665	6.43	%
Real Estate	51,764			4,004		7.74	%
Consumer	10,665			910		8.53	%
Total Loans	$	103,873		$	7,579	7.30	%

INVESTMENT SECURITIES
Held to Maturity	0			0		0.00	%
Available for Sale	45,014			1,005		2.23	%
Total Securities	45,014			1,005		2.23	%
Federal Funds Sold	17,472			182		1.04	%

Total Interest Earnings Assets	$	166,359		$	8,766	5.27	%

Allowance for Loan Losses	(1,582		)
Cash and Due From Banks	5,339
Bank Premises	3,145
Other Assets	1,882

TOTAL ASSETS	$	175,143

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-Bearing Demand Deposits and Savings Deposits	$	67,047		$	315	0.47	%
Time Deposits	58,224			1,672		2.87	%
Repurchase Agreement	2,852			100		3.51	%

Total Interest-Bearing Liabilities	$	128,123		$	2,087	1.63	%

Demand Deposits	28,166
Accrued Expenses	899

TOTAL LIABILITIES	$	157,188

Stockholders’ Equity	17,955

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	175,143

Average rate paid to fund earnings assets						1.25	%
NET INTEREST MARGIN				$	6,679	4.01	%

For purposes of this schedule, interest on nonaccural loans have been included only to the extent reflected in the income statement. However, the nonaccrual loans balance is included in the average amount outstanding.

ANALYSIS OF NET INTEREST MARGIN FOR 2002:

	Year Ended 12/31/02
	Average Balance			Interest		Yield/Rate
ASSETS
INTEREST EARNING ASSETS:
LOANS:
Commercial	$	44,680		$	3,103	6.94	%
Real Estate	53,180			4,262		8.01	%
Consumer	12,564			1,154		9.18	%
Total Loans	$	110,424		$	8,519	7.71	%

INVESTMENT SECURITIES
Held to Maturity	0			0		0.00	%
Available for Sale	40,988			1,364		3.32	%
Total Securities	40,988			1,364		3.32	%
Federal Funds Sold	13,106			206		1.57	%

Total Interest Earnings Assets	$	164,518		$	10,089	6.13	%

Allowance for Loan Losses	(1,250		)
Cash and Due From Banks	5,187
Bank Premises	3,337
Other Assets	1,658
TOTAL ASSETS	$	173,450

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-Bearing Demand Deposits and Savings Deposits	$	65,384		$	584	0.89	%
Time Deposits	60,861			2,024		3.33	%
Repurchase Agreement	2,910			157		5.39	%

Total Interest-Bearing Liabilities	$	129,155		$	2,765	2.14	%

Demand Deposits	25,559
Accrued Expenses	966

TOTAL LIABILITIES	$	155,680

Stockholders’ Equity	17,770

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	173,450

Average rate paid to fund earnings assets						1.68	%
NET INTEREST MARGIN				$	7,324	4.45	%

ANALYSIS OF NET INTEREST MARGIN FOR 2001:

	Year Ended 12/31/01
	Average Balance			Interest		Yield/Rate
ASSETS
INTEREST EARNING ASSETS:
LOANS:
Commercial	$	46,696		$	4,209	9.01	%
Real Estate	52,514			4,376		8.33	%
Consumer	14,079			1,397		9.92	%
Total Loans	$	113,289		$	9,982	8.81	%

INVESTMENT SECURITIES
Held to Maturity	0			0		0.00	%
Available for Sale	25,967			1,354		5.21	%
Total Securities	25,967			1,354		5.21	%
Federal Funds Sold	20,540			754		3.67	%

Total Interest Earnings Assets	$	159,796		$	12,090	7.57	%

Allowance for Loan Losses	(788		)
Cash and Due From Banks	5,027
Bank Premises	3,561
Other Assets	2,785

TOTAL ASSETS	$	170,381

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-Bearing Demand Deposits and Savings Deposits	$	57,807		$	1,139	1.97	%
Time Deposits	64,549			3,522		5.46	%
Repurchase Agreement	2,000			140		7.00	%

Total Interest-Bearing Liabilities	$	124,356		$	4,801	3.86	%

Demand Deposits	28,052
Accrued Expenses	1,023

TOTAL LIABILITIES	$	153,431

Stockholders’ Equity	16,950

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	170,381

Average rate paid to fund earnings assets						3.00	%
NET INTEREST MARGIN				$	7,289	4.56	%

THE FOLLOWING TABLE IS AN ANALYSIS OF THE CHANGES IN INTEREST INCOME AND INTEREST EXPENSE FOR THE DATES SHOWN.

	2003 vs 2002
	Increase Due to Volume			(Decrease) Due to Change in Rate			Total
INTEREST INCOME ON LOANS:
Commercial	$	(312	)	$	(126	)	$	(438	)
Real Estate	(113		)	(145		)	(258		)
Consumer	(174		)	(70		)	(244		)

TOTAL LOANS	(599		)	(341		)	(940		)

SECURITIES

Available for Sale	134			(493		)	(359		)

TOTAL SECURITIES	134			(493		)	(359		)

FEDERAL FUNDS SOLD

Federal Funds Sold	69			(93		)	(24		)

TOTAL INTEREST INCOME	(396		)	(927		)	(1,323		)

INTEREST EXPENSE ON:
Savings & Interest Bearing Demand Deposits	148			(417		)	(269		)
Time Deposits	(88		)	(264		)	(352		)

Purchased Agreements	(3		)	(54		)	(57		)

TOTAL INTEREST EXPENSE	57			(735		)	(678		)

NET INTEREST INCOME	$	(453	)	$	(192	)	$	(645	)

Changes due to a combination of volume and rate have been proportionately allocated to volume and rate.

THE FOLLOWING TABLE IS AN ANALYSIS OF THE CHANGES IN INTEREST INCOME AND INTEREST EXPENSE FOR THE DATES SHOWN.

	2002 vs 2001
	Increase Due to Volume			(Decrease) Due to Change in Rate			Total
INTEREST INCOME ON LOANS:
Commercial	$	(140	)	$	(966	)	$	(1,106	)
Real Estate	54			(168		)	(114		)
Consumer	(139		)	(104		)	(243		)

TOTAL LOANS	(225		)	(1,238		)	(1,463		)

SECURITIES

Available for Sale	500			(490		)	10

TOTAL SECURITIES	500			(490		)	10

FEDERAL FUNDS SOLD

Federal Funds Sold	(117		)	(431		)	(548		)

TOTAL INTEREST INCOME	158			(2,159		)	(2,001		)

INTEREST EXPENSE ON:
Savings & Interest Bearing Demand Deposits	68			(623		)	(555		)
Time Deposits	(123		)	(1,375		)	(1,498		)

Purchased Agreements	49			(32		)	17

TOTAL INTEREST EXPENSE	(6		)	(2,030		)	(2,036		)

NET INTEREST INCOME	$	164		$	(129	)	$	35

Changes due to a combination of volume and rate have been allocated proportionately to volume and rate.

THE FOLLOWING TABLE IS AN ANALYSIS OF THE CHANGES IN INTEREST INCOME AND INTEREST EXPENSE FOR THE DATES SHOWN.

	2001 vs 2000
	Increase Due to Volume			(Decrease) Due to Change in Rate			Total
INTEREST INCOME ON LOANS:
Commercial	(140		)	(966		)	$	(1,106	)
Real Estate	54			(168		)	(114		)
Consumer	(139		)	(104		)	(243		)

TOTAL LOANS	(225		)	(1,238		)	(1,463		)

SECURITIES

Available for Sale	500			(490		)	10

TOTAL SECURITIES	500			(490		)	10

FEDERAL FUNDS SOLD

Federal Funds Sold	(117		)	(431		)	(548		)

TOTAL INTEREST INCOME	158			(2,159		)	(2,001		)

INTEREST EXPENSE ON:
Savings & Interest Bearing Demand Deposits	49			(32		)	17
Time Deposits	(6		)	(2, 030		)	(2,036		)

Purchased Agreements	$	164		$	(129	)	$	35

TOTAL INTEREST EXPENSE	57			(735		)	(678		)

NET INTEREST INCOME	$	(453	)	$	(192	)	$	(645	)

Changes due to a combination of volume and rate have been allocated proportionately to volume and rate.

PROVISIONS FOR LOAN LOSSES

The Company experienced a significant decrease in the provision for loan losses during 2003. The provision for loan losses was $3,000 for 2003, compared to $534,000 for 2002 and $700,000 for 2001. Factors contributing to the decreased provision in 2003 included decreased charge-offs in certain commercial mortgage loans, along with fewer charge-offs in the retail sector. In evaluating the loan portfolio at December 31, 2003, with the improved level of nonaccrual and past-due loans, it is anticipated that loan losses will remain stable in 2004.

NONINTEREST INCOME AND EXPENSE

Noninterest income increased $182,000 or 22.6% in 2003, following a $97,000 or 13.8% increase in 2002, and a $62,000 or 8.1% decrease in 2001. The largest component of non-interest income is service charges on deposit accounts. These fees increased approximately $201,000 or 30.6% in 2003, after an increase of approximately $28,000 or 4.5% in 2002, and a decrease of approximately $41,000 or 6.1% in 2001.

Noninterest expense increased .8% in 2003, following 1.3% increase in 2002 and a 10.6% increase in 2001. Personnel expense is the largest component of noninterest expense. Personnel expense increased 2.4% in 2003, following an increase of 4.7% in 2002, and 3.2% in 2001. In the years presented management has been able to control noninterest expense by utilizing new technology and reassignment of personnel.

DEPOSITS

Deposits, the Company’s major source of funds, increased approximately $2,181,000 or 1.45% in 2003, following an increase of $1,585,000 or .98% in 2002. These increases occurred primarily in demand deposits as management placed emphasis on attracting this type of account and providing superior service for these customers. The average rate paid on interest-bearing deposits in 2003 was 1.63% and 2.14% in 2002. Strong competition for deposits exists in the Company’s primary markets among commercial banks, savings banks, thrift institutions, credit unions, mutual funds, brokerage houses, insurance companies, and certain national retailers. Despite this intense competition, management continues to evaluate pricing strategies that will ensure the Company’s long-term goal of maintaining market share without sacrificing profitability.

AVERAGE DEPOSITS

The following table shows average deposits and rates paid for the years indicated:

	2003 Average				2002 Average				2001 Average
	Balance		Rates Paid		Balance		Rates Paid		Balance		Rates Paid

Non-interest bearing demand deposits	$	28,166	N/A		$	25,559	N/A		$	28,052	N/A
Interest bearing Demand & Savings	67,047		0.47	%	65,384		0.89	%	57,807		1.97	%
Time Deposits	58,224		2.87	%	60,861		3.33	%	64,549		5.46	%
Repurchased Agreements	2,852		3.51	%	2,910		5.39	%	2,000		7.00	%
TOTAL INTEREST-BEARING DEPOSITS	$	128,123	1.63	%	$	129,155	2.14	%	$	124,356	3.86	%

There are no foreign offices. Average balances are computed on daily balances.

MATURITIES OF TIME CERTIFCATES OF DEPOSITS OF $ 100,000 OR MORE

The following table shows the maturities of certificates of deposits of $100,000 or more at December 31, 2003

Under 3 months	$		2,804
3 to 6 months	1,991
6 to 12 months	3,270
Over 12 months	8,723

TOTAL CERTIFICATES OF DEPOSIT OF $ 100,000 OR MORE	$	16,788

SHORT-TERM BORROWED FUNDS

The following table shows the Company’s short-term borrowings for 2003, 2002 and 2001:

	December,31
	2003		2002		2001
	(Dollars in Thousands)

Securities sold under agreement to repurchase	$	3,000	$	1,000	$	2,000

TOTAL BORROWED FUNDS	$	3,000	$	1,000	$	2,000

The approximate average interest rates, average amounts outstanding, and maximum amounts outstanding at any month-end for securities sold under agreements to repurchase are as follows:

	2003			2002			2001
Average interest rates at December 31	4.00		%	6.00		%	7.00		%
Maximum amounts outstanding at any month-end	$	3,000		$	3,000		$	2,000
Average daily amount outstanding	$	2,852		$	2,910		$	2,000
Weighted average interest rates	3.51		%	5.39		%	7.00		%

INCOME TAXES

Applicable income taxes for 2003 decreased $30,000 or 2.9%. This followed a $154,000 or 17.0% increase for 2002, and a $222,000 or 19.6% decrease for 2001. Income taxes computed at the statutory rate do not differ materially from income tax expense reported on the Company’s financial statements. For a complete discussion of the Company’s tax position, refer to Note 11 of the Notes to Consolidated Financial Statements, presented elsewhere in this report.

RETURN ON EQUITY AND ASSETS

The following chart shows various percentages relating to equity and assets:

	December 31,
	2003		2002		2001

Percentage of net income to:
Average stockholders’ equity	10.59	%	10.37	%	10.36	%
Average total assets	1.09	%	1.06	%	1.03	%
Percentage of dividends declared per common share to net income per common share	58.15	%	59.56	%	61.12	%
Percentage of average stockholders’ equity to average total assets	10.25	%	10.24	%	9.95	%

CAPITAL RESOURCES

Cash dividends paid to stockholders during 2003 totaled $1,105,000, following $1,097,000 in 2002 and $1,075,000 for 2001. This represents a dividend pay-out ratio (dividends divided by net income) of 58% in 2003, 60% in 2002 and 61% in 2001. Cash dividends per share equaled $1.57 per share in 2003, $1. 53 per share in 2002 and $1.34 per share in 2001. The Company is dependent upon dividends paid by its subsidiary bank to fund dividends to the stockholders and to cover other Holding Company operating costs. The Company’s board of directors considers historical financial performance, future prospects, and anticipated needs for capital in formulating the dividend payment policy. Future dividends are dependent upon the Company’s financial results, future prospects, capital requirements and general economic conditions.

One of management’s primary objectives is to maintain a strong capital position. Stockholders’ equity increased $597,000 or 3.5% in 2003. This increase resulted primarily from a net increase in retained earnings of $796,000 offset by a decrease in accumulated other comprehensive income of $199,000.

The percentage of earnings reinvested in the Company (net income less dividends as a percentage of net income) for the years 2003, 2002 and 2001 was 42%, 40% and 39%, respectively. The internal capital formation rate (net income less dividends as a percentage of average stockholders’ equity) indicates the rate at which assets can grow while maintaining the current ratio of stockholders’ equity to assets. The internal capital information rate was 4.4% in 2003, 4.2% in 2002 and 4.0% in 2001.

REGULATORY CAPITAL

As of December 31, 2003, the Company and its subsidiary bank were considered well capitalized by the Federal Reserve. Management is not aware of any changes which would affect this classification. For more information, see Note 16 to the Consolidated Financial Statements.

Risk-based capital regulations require all banks and bank holding companies to have a minimum total risk-based capital ratio of 8% with half of the capital composed of core capital. Conceptually, risk-based capital requirements assess the risk of a financial institution’s balance sheet and off-balance sheet commitments in relation to its capital. Under the guidelines capital strength is measured in two tiers, which are used in conjunction with risk-adjusted assets in determining the risk-based capital ratios. The Company’s Tier I capital, which consists of stockholders’ equity, adjusted for certain intangible assets, amounted to $17,755,000 at December 31, 2003, or 18.8% of total risk-weighted assets, compared to $16,943,000 at December 31, 2002, or 17.4% of total risk-weighted assets. Tier II capital, or supplementary capital, includes capital components such as qualifying allowance for loan losses, and can equal up to 100% of an institution’s Tier I capital with certain limitations. The Company’s Tier II capital amounted to $1,187,000 at December 31, 2003, or 1.26% of total risk-weighted assets, compared to $5,000 at December 31, 2002, or .05% of total risk-weighted assets.

The Company’s total consolidated risk-based capital was $18,942,000 at December 31, 2003, or 10.75% of total risk-weighted assets, compared to $16,948,000, or 9.79% of total risk-weighted assets as of December 31, 2002. Additionally, risk-based capital guidelines require a minimum leverage ratio (Tier I capital divided by average adjusted total consolidated assets) of 4%, which may be increased for institutions with higher levels of risk or that are experiencing or anticipating significant growth. The Company has not been advised by any regulatory agency of a higher leverage ratio applicable to it. As of December 31, 2003 and 2002, the Company’s leverage ratio was 10.75% and 9.79% respectively; therefore, the Company exceeded all current minimum capital requirements.

COMMITMENTS

As of December 31, 2003, this table shows off-balance-sheet commitments classified by expiration date:

	1 Year		1 to 3		3 to 5		Over 5
	or Less		Years		Years		Years		Total
	(Dollars in Thousands)

Unused Lines of Credits
Home equity lines	$	279	$	—	$	—	$	—	$	279
Commercial and financial	1,250		—		—		—		1,250
Other unused commitments	10,140		—		—		—		10,140
Financial standby letters of credit	1,027		—		—		—		1,027

AMOUNT OF LOANS OUTSTANDING

The following table reflects a summary of loans outstanding by classification at December 31 for the years indicated:

	December 31,
	2003		2002		2001		2000		1999
	(Dollars in Thousands)
Commercial, Financial and Agricultural	$	40,125	$	43,980	$	39,706	$	36,582	$	32,936
Real Estate Mortgage	51,031		52,503		55,532		56,282		55,437
Installment loans to Individuals	10,458		11,450		21,669		20,776		21,198

TOTAL LOANS OUTSTANDING	$	101,614	$	107,933	$	116,907	$	113,640	$	109,571

The following is a summary of loans outstanding as a percent of total loans as of December 31:

	December 31,
	2003		2002		2001		2000		1999
Commercial, Financial and Agricultural	39.49	%	40.75	%	33.96	%	32.19	%	30.06	%
Real Estate Mortgage	50.22	%	48.64	%	47.50	%	49.53	%	50.59	%
Installment Loans to Individuals	10.29	%	10.61	%	18.54	%	18.28	%	19.35	%
	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

The following table shows the maturity of 1-4 family residential loans, commercial and all other loans outstanding as of December 31, 2003:

	Less Than One Year		One Year to Five Years		Greater Than Five Years		Total
One to Four Family Residential	$	4,212	$	13,381	$	32,406	$	49,999
Commercial and Other	19,330		17,468		13,758		50,556
Total	$	23,542	$	30,849	$	46,164	$	100,555

Note: Schedule does not include loans in nonaccrual status.

LIQUIDITY MANAGEMENT

Liquidity management involves the ability to meet the cash flow requirements of depositors wanting to withdraw funds and to have sufficient funds available to meet borrowers’ credit needs. In the opinion of management, the Company maintains sufficient liquidity to satisfy the needs of its customers. To ensure the Company is positioned to meet immediate and future cash demands, management relies on liquidity analysis, knowledge of business trends over past economic cycles and forecasts of future conditions.

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 $979,000 of liquidity for the year ended December 31, 2003, compared to providing $3,164,000 and $2,929,000 in 2002 and 2001, respectively. The principal elements of these operating flows are net income, increased for significant non-cash expenses for the provision for loan losses and depreciation and amortization. In 2003, 2002 and 2001, these funds were utilized primarily to fund increasing investments aggregating $62,262,000, $24,612,000 and $55,583,000, respectively.

A secondary source of liquidity for the Company comes from investing activities, principally the maturities of investment securities. During 2003, due to the continued low interest rate environment, maturities and calls of investment securities amounted to $55,832,000, compared to $19,925,000 in 2002 and $49,006,000 in 2001. As of December 31, 2003, the Company had approximately $47,530,000 of investment securities that mature within 36 months. It is anticipated that as interest rates begin to stabilize, the rapidity of calls in investment securities will decline. For the year ended December 31, 2003, $62,262,000 of cash was redeployed in investment securities.

THE EFFECTS OF INFLATION AND CHANGING PRICES

Inflation affects the Company in several ways, but not to the same extent that it does a company that makes large capital expenditures or has a large investment in inventory. The Company’s asset and liability structure is primarily monetary in nature and, therefore, its financial results are more affected by changes in interest rates than by inflation. However, the actions of the Federal Reserve Board indicate that interest rate management will continue to be the primary tool used to curtail inflationary pressures. Inflation does affect noninterest expense, such as personnel expense and the cost of services and supplies. To the extent these higher costs cannot be recovered by pricing of loans and deposits, these increases must be offset to the extent possible, by increases in noninterest income and by control of noninterest expense.

PER SHARE DATA BY QUARTER

The shares of Logan County BancShares, Inc. are infrequently traded in the local over-the counter market and are not listed on any exchange or national association. 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 the Company keeps no records of sale prices paid for the Company stock, and has no direct knowledge of such prices, for purposes of presentation and based on the information available, Company’s management estimates the approximate market value ranges for 2003 and 2003 to be as shown in the following table. The number of stockholders at December 31, 2003 was 401 and outstanding shares totaled 703,991, net of 26,000 treasury shares.

PER SHARE DATA BY QUARTER

					Estimated Sales Prices
	Dividends				2003				2002
	2003		2002		High		Low		High		Low
Quarter
First Quarter	$	0.35	$	0.34	$	42.00	$	42.00	$	42.00	$	42.00
Second Quarter	0.35		0.34		42.00		42.00		42.00		42.00
Third Quarter	0.35		0.34		42.00		42.00		42.00		42.00
Fourth Quarter	0.51		0.50		42.00		42.00		42.00		42.00
	$	1.57	$	1.53

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

The income stream of the Company is subject to risk resulting from interest rate fluctuations to the extent there is a difference between the amount earned on the Company’s interest-earning assets and the amount paid for interest-bearing liabilities. Another important factor is the timing of the maturity of these assets and liabilities including when they are prepaid, withdrawn, mature or reprice in specified periods. The goal of assets and liability management is to maintain high quality and consistent growth of net interest income with acceptable levels of risk to changes in market interest rates.

Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. The rates earned on overnight federal funds, on which rates change daily, and loans which are tied to a prime interest rate, differ considerably from long-term securities and fixed rate loans. Similarly, time deposits of $100,000 and over, NOW accounts and money market deposit accounts are much more interest sensitive than passbook savings accounts and other interest-bearing liabilities. The Company uses a number of tools to measure interest rate risk, including simulating net interest income under various rate scenarios, monitoring the change in present value of the asset and liability portfolios under the same rate scenarios and monitoring the difference or gap between rate sensitive assets and rate sensitive liabilities over various time periods.

Management continues its efforts to generate variable rate loans. However, with strong competition for loans, and in an historically low interest rate environment, customers are seeking more fixed rate loans. The results of management’s efforts to balance interest-earning assets against interest-bearing liabilities can be seen in the Analysis of Interest Rate Sensitivity table which follows this discussion.

Management continues to monitor the Company’s asset/liability gap positions, while incorporating more sophisticated risk measurement tools, including simulation modeling which calculates expected net interest income based on projected interest-earning assets, interest-bearing liabilities and interest rates. Utilizing simulation modeling allows the Company to evaluate earnings and capital risk due to significant changes in interest rates.

The following table presents the Company’s Interest Rate Sensitivity position at December 31, 2003:

INTEREST RATE SENSITIVE ANALYSIS TABLE

(In Thousands of Dollars)

As of December 31, 2003	0-90			91-180			181-365			Total One Year			Over One Year			Total
Earning Assets
Loans	$	17,606		$	2,572		$	3,364		$	23,542		$	78,073		$	101,615
Investments	13,591			6,607			6,607			26,805			21,087			47,892
Federal Funds Sold	13,385			0			0			13,385			0			13,385

Total Earning Assets	44,582			9,179			9,971			63,732			99,160			162,892

Interest Bearing Liabilities
Demand Deposits	21,735			0			0			21,735			0			21,735
Savings	12,185			9,689			21,330			43,204			0			43,204
CD’s of $100,000 and Over	2,804			1,991			3,270			8,065			14,348			22,413
Other Time	6,834			6,707			6,341			19,882			15,300			35,182
Repurchase Agreements	0			0			0			0			3,000			3,000

Total Interest Bearing Liability	43,558			18,387			30,941			92,886			32,648			125,534

Interest Sensitivity Gap	$	1,024		$	(9,208	)	$	(20,970	)	$	(29,154	)	$	66,512		$	27,358

Cumulative Gap	$	1,024		$	(8,184	)	$	(29,154	)	$	(29,154	)	$	37,358		$	37,358

Rate Sensitive Assets/Rate Sensitive Liabilities (Cumulative Percentage)	102.35		%	49.92		%	32.23		%	68.61		%	149.08		%	129.76		%

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Logan County BancShares, Inc.

We have audited the accompanying consolidated balance sheet of Logan County BancShares, Inc. and subsidiary as of December 31, 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated balance sheet as of December 31, 2002, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2002, were audited by other auditors whose report dated February 26, 2003, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we 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 consolidated 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Logan County BancShares, Inc. and subsidiary, as of December 31, 2003, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ S. R. SNODGRASS, A.C.

Wheeling, West Virginia
October 7, 2004

Logan County BancShares, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

	December 31,
	2003			2002

ASSETS
Cash and cash equivalents:
Cash and due from banks	$	5,342,353		$	5,597,679
Federal funds sold	13,385,000			11,370,000
Total cash and cash equivalents	18,727,353			16,967,679

Investment securities:
Available-for-sale (at fair value)	47,891,978			41,224,138

Loans
Mortgage loans	51,031,339			52,502,944
Installment Loans	10,457,792			11,449,826
Commercial and other loans	40,125,576			43,979,821
	101,614,707			107,932,591
Less allowance for loan losses	(1,581,414		)	(1,618,632		)
Net loans	100,033,293			106,313,959

Premises and equipment, net	3,103,002			3,217,324
Accrued income receivable	843,052			811,373
Bank owned life insurance	2,011,532			—
Other assets	992,800			794,556

Total assets	$	173,603,010		$	169,329,029

LIABILITIES

Noninterest bearing deposits:
Demand	$	29,721,377		$	24,706,436
Interest bearing deposits:
Demand	21,735,171			21,851,348
Savings	43,203,543			44,864,222
Time	57,594,652			58,651,287
Total deposits	152,254,743			150,073,293
Repurchase agreements	3,000,000			1,000,000
Other liabilities	558,685			1,063,135
Total liabilities	155,813,428			152,136,428

STOCKHOLDERS' EQUITY

LOGAN COUNTY BANCSHARES INC 10-K/A