SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_____________________.
Commission file number: 0-25910
LOGANSPORT FINANCIAL CORP.
(Exact name of registrant specified in its charter)
Indiana 35-1945736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
723 East Broadway
P.O. Box 569
Logansport, Indiana 46947
(Address of principal executive offices
including Zip Code)
(574) 722-3855
(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 report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of shares outstanding of the Registrant's common stock as of May 10,
2004 was 876,193 common shares without par value.
1
Logansport Financial Corp.
Form 10-Q
Index
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial
Condition as of March 31, 2004
and December 31, 2003 3
Consolidated Statements of Earnings
for the three months ended March 31,
2004 and 2003 4
Consolidated Statements of Shareholders'
Equity for the three months ended
March 31, 2004 and 2003 5
Consolidated Statements of Cash Flows
for the three months ended
March 31, 2004 and 2003 6
Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Financial Condition
(In thousands, except share data)
March 31, December 31,
ASSETS 2004 2003
(unaudited)
Cash and due from banks $ 989 $ 707
Interest-bearing deposits in other financial institutions 12,592 13,696
-------- --------
Cash and cash equivalents 13,581 14,403
Investment securities designated as available for sale - at market 15,080 12,242
Mortgage-backed securities designated as available for sale - at market 14,659 20,307
Loans receivable - net 103,079 102,353
Office premises and equipment - at depreciated cost 1,677 1,694
Real estate acquired through foreclosure 34 -
Federal Home Loan Bank stock - at cost 2,139 2,080
Investment in real estate limited partnership 938 950
Accrued interest receivable on loans 458 409
Accrued interest receivable on mortgage-backed securities 51 70
Accrued interest receivable on investments and interest-bearing deposits 156 166
Prepaid expenses and other assets 122 164
Cash surrender value of life insurance 1,343 1,343
Deferred income tax asset 551 619
Prepaid income taxes - 24
-------- --------
Total assets $153,868 $156,824
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 98,440 $103,757
Advances from the Federal Home Loan Bank 36,027 34,027
Notes payable 1,928 1,919
Accrued interest and other liabilities 787 765
Accrued income taxes 52 -
-------- --------
Total liabilities 137,234 140,468
Commitments - -
Shareholders' equity
Preferred stock - no par value, 2,000,000 shares authorized; none issued - -
Common stock - no par value, 5,000,000 shares authorized; 876,193
and 877,444 shares at aggregate value issued and outstanding at
March 31, 2004 and December 31, 2003, respectively 1,816 1,824
Retained earnings - restricted 14,585 14,445
Less shares acquired by stock benefit plan - (23)
Accumulated comprehensive income, unrealized gains on securities
designated as available for sale, net of related tax effects 233 110
-------- --------
Total shareholders' equity 16,634 16,356
-------- --------
Total liabilities and shareholders' equity $153,868 $156,824
======== ========
3
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Earnings
(In thousands, except share data)
Three months ended
March 31,
2004 2003
Interest income
Loans $1,692 $1,921
Mortgage-backed securities 166 131
Investment securities 120 96
Interest-bearing deposits and other 44 47
------ ------
Total interest income 2,022 2,195
Interest expense
Deposits 591 640
Borrowings 494 477
------ ------
Total interest expense 1,085 1,117
------ ------
Net interest income 937 1,078
Provision for losses on loans 60 90
------ ------
Net interest income after provision for
losses on loans 877 988
Other income
Service charges on deposit accounts 55 54
Gain on sale of investments and mortgage-backed securities 39 81
Gain on sale of loans 10 5
Loss on equity investment (23) (24)
Other operating 42 25
------ ------
Total other income 123 141
General, administrative and other expense
Employee compensation and benefits 367 353
Occupancy and equipment 52 61
Data processing 83 49
Other operating 154 157
------ ------
Total general, administrative and other expense 656 620
------ ------
Earnings before income taxes 344 509
Income tax expense 81 145
------ ------
NET EARNINGS $ 263 $ 364
====== ======
Other comprehensive income (loss), net of tax effects - unrealized gains
(losses) on securities 123 (43)
------ ------
COMPREHENSIVE INCOME $ 386 $ 321
====== ======
EARNINGS PER SHARE
Basic (based on net earnings) $ 0.30 $ 0.43
====== ======
Diluted (based on net earnings) $ 0.29 $ 0.41
====== ======
4
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Shareholders' Equity
(In thousands, except share data)
Three months ended
March 31,
2004 2003
Balance at January 1, $16,356 $15,373
Issuance of shares under stock option plan - 29
Amortization expense of stock benefit plan 4 6
Proceeds from termination of stock benefit plan 19 -
Retirement of stock in stock benefit plan (8) -
Cash dividends of $.14 per share in both 2004 and 2003 (123) (120)
Unrealized gains ( losses) on securities designated as available for sale,
net of related tax effects 123 (43)
Net earnings 263 364
------- -------
Balance at March 31, $16,634 $15,609
======= =======
Accumulated other comprehensive income $ 233 $ 484
======= =======
5
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows
(In thousands)
Three months ended
March 31,
2004 2003
Cash flows from operating activities:
Net earnings for the period $ 263 $ 364
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 27 27
Amortization of premiums on investments and
mortgage-backed securities 39 7
Amortization expense of stock benefit plan 4 6
Federal Home Loan Bank stock dividends (59) -
Gain on sale of investments and mortgage-backed securities (39) (81)
Loans originated for sale in the secondary market (483) (190)
Proceeds from sale of loans in the secondary market 489 193
Gain on sale of loans (6) (3)
Provision for losses on loans 60 90
Loss on equity investment 23 24
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans (49) (33)
Accrued interest receivable on mortgage-backed securities 19 7
Accrued interest receivable on investments 10 (2)
Prepaid expenses and other assets 42 1
Accrued interest and other liabilities 22 78
Federal income taxes
Current 76 138
Deferred 5 7
------- -------
Net cash provided by operating activities 443 633
Cash flows provided by (used in) investing activities:
Purchase of investment securities (5,171) (2,159)
Maturities/calls of investment securities 2,414 825
Proceeds from sale of investment securities 72 -
Purchases of mortgage-backed securities - (5,073)
Proceeds from sale of mortgage-backed securities 4,592 5,025
Principal repayments on mortgage-backed securities 1,088 1,012
Loan disbursements (10,284) (11,459)
Purchase of loans (185) -
Principal repayments on loans 9,650 12,016
Investment in real estate partnership (11) (13)
Purchases and additions to office premises and equipment (10) (2)
------- -------
Net cash provided by investing activities 2,155 172
------- -------
Net cash provided by operating and investing activities
(subtotal carried forward) 2,598 805
------- -------
6
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows (Continued)
(In thousands)
Three months ended
March 31,
2004 2003
Net cash provided by operating and investing activities
(subtotal brought forward) $ 2,598 $ 805
Cash flows provided by (used in) financing activities:
Net decrease in deposit accounts (5,317) (4,635)
Proceeds from Federal Home Loan Bank advances 2,000 3,000
Repayment of Federal Home Loan Bank advances - (3,000)
Proceeds from note payable 85 125
Repayment of note payable (76) (75)
Proceeds from exercise of stock options - 29
Retirement of stock in RRP plan (8) -
Proceeds from termination of RRP plan 19 -
Dividends on common stock (123) (120)
------- -------
Net cash used in financing activities (3,420) (4,676)
------- -------
Net decrease in cash and cash equivalents (822) (3,871)
Cash and cash equivalents, beginning of period 14,403 13,517
------- -------
Cash and cash equivalents, end of period $13,581 $ 9,646
======= =======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest on deposits and borrowings $ 1,085 $ 1,110
======= =======
Supplemental disclosure of noncash investing activities:
Recognition of mortgage servicing rights
in accordance with SFAS No. 140 $ 4 $ 2
======= =======
Transfers from loans to real estate acquired through
foreclosure $ 34 $ 153
======= =======
Supplemental disclosure of noncash financing activities:
Dividends payable at end of period $ 123 $ 120
======= =======
Unrealized gains (losses) on securities designated as
available for sale, net of related tax effects $ 123 $ (43)
======= =======
7
Logansport Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2004 and 2003
NOTE A: Basis of Presentation
The unaudited interim consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and disclosures required by accounting principles generally accepted
in the United States of America for complete financial statements. Accordingly,
these financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2003. In the opinion of management, the
financial statements reflect all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Logansport Financial Corp.'s
(the "Company") financial position as of March 31, 2004, and its results of
operations and cash flows for the three month periods ended March 31, 2004 and
2003. The results of operations for the three month period ended March 31, 2004,
are not necessarily indicative of the results which may be expected for the
entire year.
NOTE B: Principles of Consolidation
The unaudited interim consolidated financial statements include the accounts of
the Company and its subsidiary, Logansport Savings Bank, FSB (the "Bank"). All
significant intercompany items have been eliminated.
NOTE C: Earnings Per Share and Dividends Per Share
Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period. Diluted earnings per share is computed taking
into consideration common shares outstanding and dilutive potential common
shares issuable under the Company's stock option plan. The computations are as
follows:
For the three months ended
March 31,
2004 2003
Weighted-average common shares
outstanding (basic) 876,537 850,333
Dilutive effect of assumed exercise
of stock options 25,349 27,723
------- -------
Weighted-average common shares
outstanding (diluted) 901,886 878,056
======= =======
A cash dividend of $.14 per common share was declared on March 1, 2004, payable
on April 12, 2004, to stockholders of record as of March 12, 2004.
8
NOTE D: Critical Accounting Policies
Certain of the Company's accounting policies are important to the portrayal of
the Company's financial condition, since they require management to make
difficult, complex or subjective judgments, some of which may relate to matters
that are inherently uncertain. Estimates associated with these policies are
susceptible to material changes as a result of changes in facts and
circumstances. Facts and circumstances which could affect these judgments
include, but without limitation, changes in interest rates, changes in the
performance of the economy or changes in the financial condition of borrowers.
Management believes that its critical accounting policies include determining
the allowance for loan losses and determining the carrying value of mortgage
servicing rights. The Company's critical accounting policies are discussed in
detail in its Shareholder Annual Report for the year ended December 31, 2003
(incorporated by reference into the Company's 10K filing) in Note A of the Notes
to the Consolidated Financial Statements under "Allowance for Loan Losses." If
management were to underestimate the allowance for loan losses, earnings could
be reduced in the future as a result of greater than expected net loan losses.
Overestimations of the required allowance could result in future increases in
income, as loan loss recoveries increase or provisions for losses on loans
decrease. Mortgage servicing rights are accounted for pursuant to the provisions
of SFAS No. 140. "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which requires that the Company recognize as
separate assets, rights to service mortgage loans for others, regardless of how
those servicing rights are acquired. An institution that acquires mortgage
servicing rights through either the purchase or origination of mortgage loans
and sells those loans with servicing rights retained must allocate some of the
cost of the loans to the mortgage servicing rights.
SFAS No. 140 requires that capitalized mortgage servicing rights and capitalized
excess servicing receivables be assessed for impairment. Impairment is measured
based on fair value. The mortgage servicing rights recorded by the Company,
calculated in accordance with the provisions of SFAS No. 140, were segregated
into pools for valuation purposes, using as pooling criteria the loan term and
coupon rate. Once pooled, each grouping of loans was evaluated on a discounted
earnings basis to determine the present value of future earnings that a
purchaser could expect to realize from each portfolio. Earnings were projected
from a variety of sources including loan servicing fees, interest earned on
float, net interest earned on escrows, miscellaneous income, and costs to
service the loans. The present value of future earnings is the "economic" value
of the pool, i.e., the net realizable present value to an acquiror of the
acquired servicing. Fluctuations in the fair value of mortgage servicing rights
may affect net earnings, as this asset is carried at the lower of amortized cost
or fair value.
NOTE E: Stock Option Plans
In 1996, the Board of Directors adopted a Stock Option Plan that provided for
the issuance of 132,250 shares of common stock at the fair value at the date of
grant. During 1999, the Board of Directors adopted a second Stock Option Plan
that provided for the issuance of 115,000 shares of common stock at the fair
value at the date of grant.
The Company accounts for its stock option plans in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation," which contains a fair value-based
method for valuing stock-based compensation that entities may use, which
measures compensation cost at the grant date based on the fair value of the
award. Compensation is then recognized over the service period, which is usually
the vesting period. Alternatively, SFAS No. 123 permits entities to continue to
account for stock options and similar equity instruments under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities that continue to account for stock options using APB
Opinion No. 25 are required to make pro forma disclosures of net earnings and
earnings per share, as if the fair value-based method of accounting defined in
SFAS No. 123 had been applied.
The Company applies APB Opinion No. 25 and related Interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized for the plans. Had compensation cost for the Company's stock option
plans been determined based on the fair value at the grant dates for awards
under the plans consistent with the accounting method utilized in SFAS No. 123,
there would have been no material effect on the Company's net earnings and
earnings per share for the three month periods ended March 31, 2004 and 2003.
9
NOTE E: Stock Option Plans (continued)
A summary of the status of the Company's stock option plans as of March 31, 2004
and December 31, 2003 and 2002, and changes during the periods ending on those
dates is presented below:
March 31, December 31,
2004 2003 2002
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
Outstanding at beginning of period 50,650 $10.56 79,136 $10.63 106,796 $10.61
Granted - - - - - -
Exercised - - (28,486) 10.76 (27,660) 10.53
Forfeited - - - - - -
------ ------ ------ ------ -------- ------
Outstanding at end of period 50,650 $10.56 50,650 $10.56 79,136 $10.63
====== ====== ====== ====== ======== ======
Options exercisable at period-end 50,650 $10.56 50,650 $10.56 78,636 $10.61
====== ====== ====== ====== ======== ======
The following information applies to options outstanding at March 31, 2004:
Number outstanding 50,650
Range of exercise prices $10.53- $13.75
Weighted-average exercise price $10.56
Weighted-average remaining contractual life 2.1 years
NOTE F: Benefit Plans
Employees of the Savings Bank participate in a defined benefit pension plan to
which contributions are made for the benefit of the employees. Estimated
contributions are determined yearly based on the actual valuation of the plan at
June 30th each year. For the quarter ended March 31, 2004 and 2003, $34,000 and
$21,000 were expensed related to the service costs of this plan.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward Looking Statements
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, the Company's operations and the Company's actual
results could differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein but also include changes in the economy and
interest rates in the nation and the Company's market area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount and adequacy of the allowance
for loan losses, management's assessment of the Company's interest rate risk and
the effect of recent accounting pronouncements.
Discussion of Financial Condition Changes from December 31, 2003 to March 31,
2004
The Company reported total assets of $153.9 million at March 31, 2004, a
decrease of $3.0 million, or 1.9%, compared to December 31, 2003. Cash and cash
equivalents decreased by $822,000, from $14.4 million at December 31, 2003, to
$13.6 million at March 31, 2004. Investment and mortgage-backed securities
totaled $29.7 million at March 31, 2004, a decrease of $2.8 million, or 8.6%,
over the December 31, 2003 total. Purchases of securities totaling $5.2 million
were offset by repayments, calls and maturities of $3.5 million and sales of
$4.7 million.
Net loans increased from $102.4 million at December 31, 2003 to $103.1 million
at March 31, 2004. Loan originations and purchases, including loans originated
for sale, amounted to $11.0 million for the three months ended March 31, 2004,
while principal repayments amounted to $9.7 million. Loan originations during
2004 were comprised primarily of loans secured by nonresidential and commercial
real estate, other commercial property and commercial leases. The commercial and
nonresidential loan portfolios totaled $41.1 million at March 31, 2004, compared
to $39.8 million at December 31, 2003. Loans secured by one- to four-family
residential real estate totaled $50.4 million at March 31, 2004, compared to
$51.2 million at December 31, 2003. The Company is currently servicing a
portfolio of $6.5 million one-to-four family residential real estate loans.
Deposits totaled $98.4 million at March 31, 2004, a decrease of $5.3 million or
5.1%, from the balance at December 31, 2003. Borrowings at March 31, 2004, were
comprised of $36.0 million of FHLB advances, a $943,000 note payable related to
an equity investment in low income housing, and a $985,000 line of credit.
Shareholders' equity totaled $16.6 million at March 31, 2004, an increase of
$278,000, or 1.7%, over the $16.4 million total at December 31, 2003. The
increase resulted from net earnings of $263,000 and an increase of $123,000 in
the unrealized gains on securities available for sale, which were partially
offset by dividends paid of $123,000.
Results of Operations
Comparison of the Three Months Ended March 31, 2004 and March 31, 2003
Net earnings for the three months ended March 31, 2004 totaled $263,000,
compared with $364,000 for the three months ended March 31, 2003, a decrease of
$101,000, or 27.7%. Net interest income decreased by $141,000, total other
income decreased by $18,000 and general, administrative and other expense
increased by $36,000, while the provision for losses on loans decreased by
$30,000 and income taxes decreased by $64,000.
11
Comparison of the Three Months Ended March 31, 2004 and March 31, 2003
(continued)
Interest income on loans decreased by $229,000, or 11.9%, for the three months
ended March 31, 2004, compared to the same quarter in 2003, due primarily to a
decrease in the yield on loans and a decline in the outstanding balance.
Interest income on mortgage-backed securities, investments and other
interest-earning assets totaled $330,000 for the three months ended March 31,
2004, a $56,000, or 20.4%, increase over the 2003 quarter. The increase was due
primarily to an increase in the average balance outstanding year to year.
Interest expense on deposits decreased by $49,000, or 7.7%, as the average cost
of deposits decreased. Interest expense on borrowings increased by $17,000, or
3.6%, due primarily to the additional draws on a line of credit and additional
FHLB advances. The decreases in the level of yields on interest-earning assets
and the average cost of interest-bearing liabilities were due primarily to the
overall decrease in interest rates in the economy. As a result of the foregoing
changes in interest income and interest expense, net interest income decreased
by $141,000, or 13.1%.
The Company maintains an allowance for loan losses that reflects an estimate of
inherent losses based upon the types and categories of outstanding loans, as
well as problem loans and current economic conditions in the Company's market
area. The provision for losses on loans totaled $60,000 for the three month
period ended March 31, 2004 and $90,000 for the three month period ended March
31, 2003. The Company's loss allowance to total gross loans and nonperforming
loans was 1.7% and 133.8%, respectively, compared to 1.7% and 115.6% at December
31, 2003. The provision for losses on loans was primarily attributable to the
increasing percentage of commercial loans in the portfolio. Based on
management's review of the loan portfolio, the allowance for loan losses at
March 31, 2004 is considered adequate to cover potential losses inherent in the
loan portfolio. However, there can be no assurance that additions to the
allowance will not be necessary in future periods, which could adversely affect
the Company's results of operations. During the three month period ended March
31, 2004, one single family dwelling was acquired via foreclosure.
Other income totaled $123,000 for the three months ended March 31, 2004, a
$18,000, or 12.8%, decrease over the 2003 quarter. This consisted of a $10,000
gain on the sale of loans and a $39,000 gain on the sale of securities. Service
charges on deposit accounts contributed $55,000.
General, administrative and other expense totaled $656,000 for the three-month
period ended March 31, 2004, an increase of $36,000, or 5.8%, compared to the
three month period ended March 31, 2003. Occupancy and equipment expenses
declined by $9,000, or 14.8%, primarily as a result of reduced property tax
expense. Employee compensation and benefits increased by $14,000, primarily due
to increased contributions to the defined benefit retirement plan. Data
processing expenses increased $34,000 due to costs associated with converting
the Company's data processing system to a new provider.
Logansport Financial Corp. is investigating the possibility of de-listing its
stock and de-registering with the Securities and Exchange Commission ("SEC").
This strategy would reduce future expenses associated with SEC reporting
requirements, as well as NASDAQ filing fees, but would also result in the
Company's common stock no longer being quoted on the NASDAQ Small Cap Market. In
order to de-register, the Company must first have fewer than 300 shareholders.
The Company's shares trade infrequently and residents of Indiana hold many
shares. Therefore, it is management's belief that any negative impact on the
liquidity of the shares as a result of a de-registration and de-listing would be
minimal.
The provision for income taxes totaled $81,000 for the three months ended March
31, 2004, a decrease of $64,000, or 44.1%, compared to the same period in 2003.
The decrease was due to a $165,000, or 32.4%, decrease in pre-tax earnings. The
Company's effective tax rates for the three-month periods ended March 31, 2004
and 2003, were 23.5% and 28.5%, respectively. The effective tax rate remains low
due to the tax credits available from the Company's investment in a low income
housing partnership.
12
Capital Resources
Pursuant to Office of Thrift Supervision ("OTS") capital regulations, savings
associations must currently meet a 1.5% tangible capital requirement, a 4%
leverage ratio (or core capital) requirement, and total risk-based capital to
risk-weighted assets ratio of 8%. At March 31, 2004, the Bank's tangible and
leverage capital ratios were each 11.3%, and its risk-based capital to
risk-weighted assets ratio was 19.5%. Therefore, the Bank's capital
significantly exceeded all of the capital requirements currently in effect. The
following table provides the minimum regulatory capital requirements and the
Bank's capital levels as of March 31, 2004.
Capital Standard Required Bank Excess
- ---------------- -------- ---- ------
(In thousands)
Tangible (1.5%) $2,302 $17,351 $15,049
Core (4.0%) 6,140 17,351 11,211
Risk-based (8.0%) 7,608 18,545 10,937
Off-balance Sheet Arrangements
As of the date of this report, the Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the Company's financial condition, change in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. The term "off-balance sheet
arrangement" generally means any transaction, agreement, or other contractual
arrangement to which an entity unconsolidated with the Company is a party under
which the Company has (i) any obligation arising under a guarantee contract,
derivative instrument or variable interest; or (ii) a retained or contingent
interest in assets transferred to such entity or similar arrangement that serves
as credit, liquidity or market risk support for such assets.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Bank, like other financial institutions, is subject to interest rate risk to
the degree that its interest-bearing liabilities, primarily deposits with short
and medium-term maturities, mature or reprice at different rates than its
interest-earning assets. The Office of Thrift Supervision ("OTS") uses a net
market value methodology to measure the interest rate risk exposure of thrift
institutions. As a part of its efforts to monitor its interest rate risk, the
Bank utilizes the "net portfolio value" ("NPV") methodology to assess its
exposure to interest rate risk. Generally, NPV is the discounted present value
of the difference between incoming cash flows on interest-earning and other
assets and outgoing cash flows on interest-bearing liabilities. Management of
the Bank's assets and liabilities is done within the context of the marketplace,
regulatory limitations and within limits established by the Board of Directors
on the amount of change in NPV which is acceptable given certain interest rate
changes.
Presented below, as of December 31 2003 (the latest available date) is an
analysis performed by the OTS of the Bank's interest rate risk as measured by
changes in NPV for instantaneous and sustained parallel shifts in the yield
curve, in 100 basis point increments in accordance with OTS regulations. As
illustrated in the table, the Bank's NPV is more sensitive to declining rates
than rising rates. This occurs principally because, as rates rise, the market
value of the Bank's investments, adjustable-rate mortgage loans and
mortgage-backed securities increase due to the rate increases. Conversely, as
interest rates decline, the market value of these adjustable-rate assets will
decrease. The value of the Bank's deposits and borrowings change in
approximately the same proportion in rising or falling rate scenarios.
Change Net Portfolio Value NPV as % of PV of Assets
In Rates $ Amount $ Change % Change NPV Ratio Change
(Dollars in thousands)
+300bp $18,484 $ (781) (4)% 11.74% (5)bp
+200bp 19,410 145 1 12.14 35 bp
+100bp 19,642 377 2 12.14 35 bp
- 19,265 - - 11.79
-100bp 18,169 (1,096) (6) 11.05 (74)bp
13
Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)
Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock
Pre-shock NPV Ratio: NPV as % of PV of Assets 11.79%
Exposure Measure: Post-Shock NPV Ratio 11.05%
Sensitivity Measure: Change in NPV Ratio 74bp
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable-rate loans, have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. Further, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the table.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company's Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Company's disclosure controls and procedures (as
defined in Sections 13a-15(e) and 15d-15(e) of the Securities Exchange
Act of 1934, as amended), as of the end of the most recent fiscal
quarter covered by this quarterly report (the "Evaluation Date"), have
concluded that as of the Evaluation Date, the Company's disclosure
controls and procedures were adequate and are designed to ensure that
material information relating to the Company would be made known to
such officers by others within the Company on a timely basis.
(b) Changes in internal controls. There were no significant changes in the
Company's internal control over financial reporting identified in
connection with the Company's evaluation of controls that occurred
during the Company's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Bank nor the Company were, during the three-month period ended March
31, 2004, or are as of the date hereof, involved in any legal proceeding of a
material nature. From time to time, the Bank is a party to legal proceedings
wherein it enforces its security interests in connection with its mortgage and
other loans.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
On March 1, 2004, the Company cancelled and reclassified as authorized and
unissued 1,251 shares that had been returned to it as a result of the
termination of the Logansport Savings Bank, FSB Recognition and Retention Plan
and Trust. The Company paid no consideration for the shares.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are attached to this report on Form 10-Q:
31(1) Certification required by 17 C.F.R. Section 240.13a-14(a)
31(2) Certification required by 17 C.F.R. Section 240.13a-14(a)
32 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
The Registrant filed one report on Form 8-K filed during the quarter ended
March 31, 2004.
Date of Report: February 3, 2004
Items Reported: Press release dated February 3, 2004 announcing
results of operations for the year ended December 31,
2003.
15
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on behalf
of the undersigned thereto duly authorized.
Logansport Financial Corp.
Date: May 10, 2004 By: /s/ David G. Wihebrink
--------------------- -------------------------------------
David G. Wihebrink, President and
Chief Executive Officer
Date: May 10, 2004 By: /s/ Dottye Robeson
--------------------- -------------------------------------
Dottye Robeson, Secretary and
Treasurer
16