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 JUNE 30, 2002 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 [ ]
The number of shares outstanding of the Registrant's common stock, without par
value, as of August 1, 2002 was 912,663.
-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 June 30, 2002
and December 31, 2001 3
Consolidated Statements of Earnings
for the three and six months ended June 30,
2002 and 2001 4
Consolidated Statements of Shareholders'
Equity for the six months ended
June 30, 2002 and 2001 5
Consolidated Statements of Cash Flows
for the six months ended
June 30, 2002 and 2001 6
Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CERTIFICATION
-2-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Financial Condition
(In thousands, except share data)
June 30, December 31,
ASSETS 2002 2001
Cash and due from banks $ 585 $ 1,081
Interest-bearing deposits in other financial institutions 11,687 7,735
------- -------
Cash and cash equivalents 12,272 8,816
Investment securities available for sale - at market 7,584 5,788
Mortgage-backed securities available for sale - at market 6,789 4,419
Loans receivable-net 113,549 111,696
Office premises and equipment - at depreciated cost 1,797 1,803
Real estate acquired through foreclosure - 65
Federal Home Loan Bank stock - at cost 2,003 1,973
Investment in real estate partnership 1,072 1,109
Accrued interest receivable on loans 478 445
Accrued interest receivable on mortgage-backed securities 35 28
Accrued interest receivable on investments 106 92
Prepaid expenses and other assets 82 88
Cash surrender value of life insurance 1,291 1,291
Deferred income tax asset 387 452
------- -------
Total assets $147,445 $138,065
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 95,010 $ 83,900
Advances from the Federal Home Loan Bank 34,736 34,750
Notes payable 1,093 1,165
Accrued interest payable and other liabilities 912 819
Accrued income taxes 7 29
------- -------
Total liabilities 131,758 120,663
Shareholders' equity
Common stock 2,529 4,802
Retained earnings-restricted 12,860 12,408
Less shares acquired by stock benefit plan (55) (63)
Accumulated comprehensive income, unrealized gains on securities
designated as available for sale, net of related tax effects 353 255
------- -------
Total shareholders' equity 15,687 17,402
------- -------
Total liabilities and shareholders' equity $147,445 $138,065
======= =======
-3-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Earnings
(In thousands, except share data)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
Interest income
Loans $2,110 $2,198 $4,185 $4,346
Mortgage-backed securities 82 78 154 161
Investment securities 97 103 189 228
Interest-bearing deposits and other 57 119 120 264
----- ----- ----- -----
Total interest income 2,346 2,498 4,648 4,999
Interest expense
Deposits 743 957 1,515 1,957
Borrowings 476 513 951 1,042
----- ----- ----- -----
Total interest expense 1,219 1,470 2,466 2,999
----- ----- ----- -----
Net interest income 1,127 1,028 2,182 2,000
Provision for losses on loans 90 85 180 171
----- ----- ----- -----
Net interest income after provision for
losses on loans 1,037 943 2,002 1,829
Other income
Service charges on deposit accounts 56 62 111 123
Gain on sale of investment securities 17 - 17 -
Loss on equity investment (20) (55) (56) (116)
Other operating 29 38 61 90
----- ----- ----- -----
Total other income 82 45 133 97
General, administrative and other expense
Employee compensation and benefits 336 268 630 562
Occupancy and equipment 61 64 126 122
Federal deposit insurance premiums 3 3 7 7
Data processing 46 44 95 91
Other operating 157 134 320 266
----- ----- ----- -----
Total general, administrative and other expense 603 513 1,178 1,048
----- ----- ----- -----
Earnings before income taxes 516 475 957 878
Income tax expense 145 129 266 231
----- ----- ----- -----
NET EARNINGS $ 371 $ 346 $ 691 $ 647
===== ===== ===== =====
Other comprehensive income, net of tax:
Unrealized gains on securities available for sale 151 13 98 150
----- ----- ----- -----
COMPREHENSIVE INCOME $ 522 $ 359 $ 789 $ 797
===== ===== ===== =====
EARNINGS PER SHARE
Basic (based on net earnings) $.39 $.32 $.71 $.60
=== === === ====
Diluted (based on net earnings) $.38 $.32 $.69 $.59
=== === === ===
-4-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Shareholders' Equity
(In thousands, except share data)
Six months ended
June 30,
2002 2001
Balance at January 1 $17,402 $17,013
Purchase of shares (2,466) -
Issuance of shares under stock option plan 193 107
Amortization of stock benefit plan 8 36
Cash dividends of $.25 per share in 2002 and $.24 in 2001 (239) (261)
Unrealized gains on securities designated as
available for sale, net of related tax effects 98 150
Net earnings 691 647
------ ------
Balance at June 30 $15,687 $17,692
====== ======
Accumulated other comprehensive income $ 353 $ 225
====== ======
-5-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows
For the six months ended June 30,
(In thousands)
2002 2001
Cash flows from operating activities:
Net earnings for the period $ 691 $ 647
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 54 56
Amortization of premiums on investments and
mortgage-backed securities 26 18
Gain on sale of investment securities (17) -
Amortization expense of stock benefit plan 8 36
Provision for losses on loans 180 171
Loss on equity investment 56 116
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans (33) 17
Accrued interest receivable on mortgage-backed securities (7) 8
Accrued interest receivable on investments (14) 1
Prepaid expenses and other assets 6 (13)
Accrued interest and other liabilities 93 99
Federal income taxes
Current (22) (147)
Deferred 15 17
------ ------
Net cash provided by operating activities 1,036 1,026
Cash flows provided by (used in) investing activities:
Proceeds from sale of investment securities 269 -
Purchase of investment securities (3,463) (253)
Maturities/calls of investment securities 1,485 1,875
Purchase of mortgage-backed securities (3,018) -
Principal repayments on mortgage-backed securities 700 457
Purchase of Federal Home Loan Bank stock (30) -
Loan disbursements (21,402) (29,941)
Principal repayments on loans 19,369 23,396
Investment in real estate partnership (19) (24)
Proceeds from sale of real estate acquired through foreclosure 65 -
Purchases and additions to office premises and equipment (48) (26)
Increase in cash surrender value of life insurance policy - (21)
------ ------
Net cash used in investing activities (6,092) (4,537)
------ ------
Net cash used in operating and investing activities
(balance carried forward) (5,056) (3,511)
------ ------
-6-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows (continued)
For the six months ended June 30,
(In thousands)
2002 2001
Net cash used in operating and investing activities
(balance brought forward) $(5,056) $(3,511)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 11,110 902
Proceeds from Federal Home Loan Bank advances 6,850 9,250
Repayment of Federal Home Loan Bank advances (6,864) (10,000)
Repayment of note payable (72) (72)
Purchase of shares (2,466) -
Proceeds from the exercise of stock options 193 107
Dividends on common stock (239) (261)
------ ------
Net cash provided by (used in) financing activities 8,512 (74)
------ ------
Net increase (decrease) in cash and cash equivalents 3,456 (3,585)
Cash and cash equivalents, beginning of period 8,816 9,210
------ ------
Cash and cash equivalents, end of period $12,272 $ 5,625
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $ 2,461 $ 3,027
====== ======
Income taxes $ 272 $ 360
====== ======
Dividends payable at end of period $ 119 $ 131
====== ======
Supplemental disclosure of noncash financing activities:
Unrealized gains on securities designated as available for
sale, net of related tax effects $ 98 $ 150
====== ======
-7-
Logansport Financial Corp.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
For the six and three month periods ended June 30, 2002 and 2001
NOTE A: Basis of Presentation
The unaudited interim consolidated condensed 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, 2001.
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 June 30,
2002, and its results of operations and cash flows for the three and six month
periods ended June 30, 2002 and 2001. The results of operations for the three
and six month periods ended June 30, 2002 are not necessarily indicative of the
results which may be expected for the entire year.
NOTE B: Principles of Consolidation
The unaudited interim consolidated condensed 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 issued under the Company's stock option plan. The computations are as
follows:
For the three months ended For the six months ended
June 30, June 30,
2002 2001 2002 2001
Weighted-average common shares
outstanding (basic) 937,216 1,087,982 974,986 1,085,758
Dilutive effect of assumed exercise
of stock options 34,510 18,178 32,651 15,347
------- --------- --------- ---------
Weighted-average common shares
outstanding (diluted) 971,726 1,106,160 1,007,637 1,101,105
======= ========= ========= =========
A cash dividend of $.13 per common share was declared on June 5, 2002, payable
on July 10, 2002, to stockholders of record as of June 18, 2002.
-8-
NOTE D: Recent Accounting Pronouncements
In June 2001 the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and
Intangible Assets," which prescribes accounting for all purchased goodwill and
intangible assets. Pursuant to SFAS No. 142, acquired goodwill is not amortized,
but is tested for impairment at the reporting unit level annually and whenever
an impairment indicator arises.
Management adopted SFAS No. 142 effective January 1, 2002, as required, without
material effect on the Company's financial position or results of operations.
-9-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
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, 2001 to June 30,
2002
The Company reported total assets of $147.4 million at June 30, 2002, an
increase of $9.4 million, or 6.8%, compared to December 31, 2001. This increase
was funded primarily by growth in deposits of $11.1 million, and undistributed
earnings of $452,000, which were partially offset by share repurchases of $2.5
million. Cash and cash equivalents increased by $3.5 million, from $8.8 million
at December 31, 2001, to $12.3 million at June 30, 2002. Investment and
mortgage-backed securities totaled $14.4 million at June 30, 2002, an increase
of $4.2 million, or 40.8%, over December 31, 2001, as purchases of securities
totaling $6.5 million were partially offset by repayments, calls and maturities
of $2.2 million and sales of $252,000.
Net loans increased from $111.7 million at December 31, 2001 to $113.5 million
at June 30, 2002. Loan originations amounted to $21.4 million for the six months
ended June 30, 2002, while principal repayments amounted to $19.4 million. Loan
originations during 2002 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
$34.1 million at June 30, 2002, compared to $31.9 million at December 31, 2001.
Loans secured by one- to four-family residential real estate totaled $63.9
million at December 31, 2001 and $65.1 million at June 30, 2002. Construction
loans at June 30, 2002 totaled $700,000, compared to $2.3 million at December
31, 2001.
Deposits totaled $95.0 million at June 30, 2002, an increase of $11.1 million,
or 13.2%, over the balance at December 31, 2001. Borrowings decreased by $86,000
over the six month period and at June 30, 2002, were comprised of $34.7 million
of FHLB advances and a $1.1 million note payable related to an equity investment
in low income housing. Proceeds from deposit growth were generally used to fund
the purchase of investments and mortgage-backed securities, new loan growth, and
a 10% stock repurchase program. However, $6.2 million of the deposit increase
was comprised of short-term local governmental deposits which are subject to
bids every 60 to 90 days and, therefore, may or may not be retained.
Shareholders' equity totaled $15.7 million at June 30, 2002, a decrease of $1.7
million or 9.9%, from the $17.4 million total at December 31, 2001. The decrease
resulted from stock repurchases totaling $2.5 million and dividends paid of
$239,000, which were partially offset by net earnings of $691,000, an increase
of $98,000 in the unrealized gains on securities available for sale and proceeds
from exercise of stock options totaling $193,000.
-10-
Results of Operations
Comparison of the Six Months Ended June 30, 2002 and June 30, 2001
Net earnings for the six months ended June 30, 2002 totaled $691,000, compared
with $647,000 for the six months ended June 30, 2001, an increase of $44,000, or
6.8%. Net interest income increased by $182,000, total other income increased by
$36,000 and general, administrative and other expense increased by $130,000,
while the provision for losses on loans increased by $9,000 and income taxes
increased by $35,000.
Interest income on loans decreased by $161,000, or 3.7%, for the six months
ended June 30, 2002, compared to the same period in 2001, due primarily to a
decrease in the yield on loans of 63 basis points, from 8.03% in the 2001 period
to 7.40% in the 2002 period. Interest income on mortgage-backed securities,
investments and other interest-earning assets totaled $463,000 for the six
months ended June 30, 2002, a $190,000, or 29.1%, decrease from the 2001 period.
The decrease was due primarily to a decrease in the average yield year to year.
Interest expense on deposits decreased by $442,000, or 22.6%, as the average
cost of deposits decreased by 143 basis points, from 4.59% for the six months
ended June 30, 2001 to 3.16% for the six months ended June 30, 2002. Interest
expense on borrowings decreased by $91,000, or 8.7%, due primarily to a decrease
in the average cost of borrowings year to year, from 5.47% for the six months
ended June 30, 2001 to 5.39% in the 2002 period. 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 during 2001. This low interest rate environment continued during the six
month period ended June 30, 2002.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $182,000, or 9.1%, to $2.2 million for the six
months ended June 30, 2002, compared to $2.0 million for the same period in
2001. The interest rate spread was 3.47% in the 2002 period compared to 3.06% in
the 2001 period.
The Company maintains a general 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 $180,000 for the six
months ended June 30, 2002, compared to $171,000 for the six months ended June
30, 2001. The increase in the provision for losses on loans was primarily
attributable to the increasing percentage of commercial loans in the portfolio
and the increase in the level of nonperforming loans year to year. At June 30,
2002 and December 31, 2001, the allowance amounted to $1.3 million and $1.1
million, respectively, for a ratio to total loans of 1.12% at June 30, 2002 and
1.00% at December 31, 2001. Non-performing loans totaled $1.8 million and $1.9
million at June 30, 2002 and December 31, 2001, respectively. The ratio of the
allowance for loan losses to non-performing loans amounted to 73.7% at June 30,
2002 and 58.1% at December 31, 2001. Based on management's review of the loan
portfolio, the allowance for loan losses at June 30, 2002 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.
Total other income increased by $36,000, or 37.1%, for the six months ended June
30, 2002, compared to the same period in 2001, due primarily to a decrease in
the pre-tax loss on the equity investment of $60,000 and a $17,000 gain on the
sale of an investment security. Service charges on deposit accounts decreased by
$12,000, or 9.8%. Other operating income decreased by $29,000, or 32.2%, due
primarily to a decrease in the income on bank owned life insurance and a decline
in insurance commissions. The Company has transferred the Bank owned life
insurance to a new insurance company in order to obtain additional death
benefits; however, it is anticipated that no income will be earned on the
policies for a period of two years.
-11-
Comparison of the Six Months Ended June 30, 2002 and June 30, 2001 (continued)
Total general, administrative and other expense amounted to $1.2 million for the
six-month period ended June 30, 2002, an increase of $130,000, or 12.4%,
compared to the six month period ended June 30, 2001. Employee compensation and
benefits expense increased by $68,000, or 12.1%, mainly due to an increase in
personnel and the increased cost of medical insurance, which has increased by
$23,000 compared to the same period in 2001. In addition, the Company resumed an
accrual of $5,000 per month in June for probable contributions to the defined
benefit pension plan due to the recent decline in the equity markets. This plan
has been fully funded for many years but the Company has been notified by the
plan trustee that contributions may be required. The exact amount, if required,
will not be available until the fourth quarter of 2002. If no contributions are
required the accrual will be reversed in the fourth quarter. Other operating
expenses increased by $54,000, or 20.3%, compared to the period ended June 30,
2001, due primarily to increases in advertising, professional fees and Nasdaq
filing fees, year to year.
The provision for income taxes totaled $266,000 for the six months ended June
30, 2002, an increase of $35,000, or 15.2%, over the same period in 2001. The
increase was due to a $79,000, or 9.0%, increase in pre-tax earnings. The
Company's effective tax rates for the six-month periods ended June 30, 2002 and
2001, were 27.8% and 26.3%, respectively. The effective tax rate remains low due
to the tax credits available from the Company's investment in a low income
housing partnership.
Comparison of the Three Months Ended June 30, 2002 and June 30, 2001
Net earnings for the three months ended June 30, 2002 totaled $371,000, compared
with $346,000 for the three months ended June 30, 2001, an increase of $25,000,
or 7.2%. Net interest income increased by $99,000, total other income increased
by $37,000 and general, administrative and other expense increased by $90,000,
while the provision for losses on loans increased by $5,000 and income taxes
increased by $16,000.
Interest income on loans decreased by $88,000, or 4.0%, for the three months
ended June 30, 2002, compared to the same quarter in 2001, due primarily to a
decrease in the yield on loans. Interest income on mortgage-backed securities,
investments and other interest-earning assets totaled $236,000 for the three
months ended June 30, 2002, a $64,000, or 21.3%, decrease from the 2001 quarter.
The decrease was due primarily to a decrease in the average yield year to year.
Interest expense on deposits decreased by $214,000, or 22.4%, as the average
cost of deposits decreased. Interest expense on borrowings decreased by $37,000,
or 7.2%, due primarily to a decrease in the average cost of borrowings year to
year. 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 during 2001. This low interest rate
environment continued through the 2002 reporting period.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $99,000, or 9.6%, to $1.1 million for the three
months ended June 30, 2002, compared to $1.0 million for the same quarter in
2001.
The Company maintains a general 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 $90,000 for the six
months ended June 30, 2002, compared to $85,000 for the six months ended June
30, 2001. The increase in the provision for losses on loans was primarily
attributable to the increasing percentage of commercial loans in the portfolio
and the increase in the level of nonperforming loans year to year. At June 30,
2002 and December 31, 2001, the allowance amounted to $1.3 million and $1.1
million, respectively, for a ratio to total loans of 1.12% at June 30, 2002 and
1.00% at December 31, 2001. Non-performing loans totaled $1.8 million and $1.9
million at June 30, 2002 and December 31, 2001, respectively. The ratio of the
allowance for loan losses to non-performing loans amounted to
-12-
Comparison of the Three Months Ended June 30, 2002 and June 30, 2001 (continued)
73.7% at June 30, 2002 and 58.1% at December 31, 2001. Based on management's
review of the loan portfolio, the allowance for loan losses at June 30, 2002 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.
Other income totaled $82,000 for the three months ended June 30, 2002, a
$37,000, or 82.2%, increase over the 2001 quarter. The increase was due
primarily to a decrease in the pre-tax loss on the equity investment of $35,000
and a $17,000 gain on the sale of investment securities. Service charges on
deposit accounts decreased by $6,000, or 9.7%. Other operating income decreased
by $9,000, or 23.7%, due primarily to a decrease in the income on bank owned
life insurance and a decline in insurance commissions. The Company has
transferred the Bank owned life insurance to a new insurance company in order to
obtain additional death benefits; however, it is anticipated that no income will
be earned on the policies for a period of two years.
General, administrative and other expense totaled $603,000 for the three-month
period ended June 30, 2002, an increase of $90,000, or 17.5%, compared to the
three month period ended June 30, 2001. Employee compensation and benefits
expense increased by $68,000, or 25.4%, due to increased personnel and increases
in the cost of medical insurance, in addition to the resumption of the accrual
for pension expense as discussed in the comparison of the six months ended June
30, 2002. Other operating expenses increased by $23,000, or 17.2%, compared to
the quarter ended June 30, 2001, due primarily to increases in advertising and
professional fees.
The provision for income taxes totaled $145,000 for the three months ended June
30, 2002, an increase of $16,000, or 12.4%, over the same period in 2001. The
increase was due to a $41,000, or 8.6%, increase in pre-tax earnings. The
Company's effective tax rates for the three-month periods ended June 30, 2002
and 2001, were 28.1% and 27.2%, respectively. The effective tax rate remains low
due to the tax credits available from the Company's investment in a low income
housing partnership.
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 June 30, 2002, the Bank's tangible and
leverage capital ratios were each 9.9%, and its risk-based capital to
risk-weighted assets ratio was 15.1%. 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 June 30, 2002.
Capital Standard Required Bank's Excess
- ---------------- -------- ------ ------
(In thousands)
Tangible (1.5%) $2,205 $14,597 $12,392
Core (4.0%) 5,881 14,597 8,716
Risk-based (8.0%) 8,396 15,886 7,490
-13-
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. Management of the Bank believes it is critical to
manage the relationship between interest rates and the effect on the Bank's net
portfolio value ("NPV"). 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.
The OTS issued a regulation, effective January 1, 1994, which uses a net market
value methodology to measure the interest rate risk exposure of thrift
institutions. Under OTS regulations, an institution's "normal" level of interest
rate risk, in the event of an assumed change in interest rates, is a decrease in
the institution's NPV in an amount not exceeding 2% of the present value of its
assets. Thrift institutions with over $300 million in assets or less than a 12%
risk-based capital ratio are required to file OTS Schedule CMR. Data from
schedule CMR is used by the OTS to calculate changes in NPV (and the related
"normal" level of interest rate risk based upon certain interest rate changes
(discussed below). Institutions which do not meet either of the filing
requirements are not required to file OTS Schedule CMR, but may do so
voluntarily. The Bank does not currently meet either of these requirements, but
it does voluntarily file Schedule CMR. Presented below, as of March 31, 2002,
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, up and down
300 basis points and in accordance with OTS regulations. As illustrated in the
table, the Bank's NPV is more sensitive to rising rates than declining rates.
This occurs principally because, as rates rise, the market value of the Bank's
investments, adjustable-rate mortgage loans (many of which have maximum per year
adjustments of 1%), fixed-rate loans and mortgage-backed securities declines due
to the rate increase. The value of the Bank's deposits and borrowings change in
approximately the same proportion in rising and 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 $13,408 $-4,521 -25% 9.60% -257bp
+200bp 15,248 -2,681 -15% 10.72% -145bp
+100bp 16,751 -1,178 -7% 11.57% -60bp
- 17,929 12.17%
- - 100bp 18,275 346 +2% 12.25% +8bp
- - 200bp - - - - -
- - 300bp - - - - -
Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock
Pre-shock NPV Ratio: NPV as % of PV of Assets 12.17%
Exposure Measure: Post-Shock NPV Ratio 10.72%
Sensitivity Measure: Change in NPV Ratio 146
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.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Bank nor the Company were, during the six-month period ended June
30, 2002, 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 4. Submission of Matter to a Vote of Security Holders
On April 9, 2002, the Company held its 2002 annual meeting of shareholders. A
total of 887,524 shares or 88.77% of the Company's shares outstanding, were
represented at the meeting either in person or by proxy.
Five directors were nominated by the Company's Board of Directors to serve new
three, two, and one year terms. The nominees, and the voting results are listed
below.
For Against Withheld
David G. Wihebrink(3 year) 834,342 53,182 0
Todd S. Weinstein(3 year) 848,724 38,800 0
Charles J. Evans(3 year) 834,357 53,167 0
Thomas G. Williams(2 year) 849,174 38,350 0
James P. Bauer(1 year) 849,674 37,850 0
The other directors continuing in office are Brian J. Morrill, Susanne S. Ridlen
and William Tincher, Jr.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are attached to this report on Form 10-Q:
3.1 Code of By-Laws adopted and effective as of May 14, 2002
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter.
-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: August 14, 2002 By:/s/ David G. Wihebrink
--------------------------- --------------------------------
David G. Wihebrink, President and
Chief Executive Officer
Date: August 14, 2002 By:/s/ Dottye Robeson
--------------------------- --------------------------------
Dottye Robeson, Secretary and
Treasurer
-16-
CERTIFICATION
By signing below, each of the undersigned officers hereby certifies
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to his or her knowledge, (i) this report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and (ii) the information contained in this report fairly
presents, in all material respects, the financial condition and results of
operations of Logansport Financial Corp.
Signed this 14th day of August, 2002.
/s/Dottye Robeson /s/David G. Wihebrink
- ----------------------------------- ------------------------------------
(Signature of Authorized Officer) (Signature of Authorized Officer)
Dottye Robeson David G. Wihebrink
- ----------------------------------- ------------------------------------
(Typed Name) (Typed Name)
Treasurer President and Chief Executive Officer
- ----------------------------------- ------------------------------------
(Title) (Title)