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, 1998 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)
(219) 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 of the Registrant's common stock, without par value, as of
August 1, 1998 was 1,261,800.
<PAGE>
Logansport Financial Corp.
Form 10-Q
Index
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Statements of Financial
Condition as of June 30, 1998
(Unaudited) and December 31, 1997
Consolidated Statements of Earnings for
the three and six months ended June 30,
1998 and 1997 (Unaudited )
Consolidated Statements of Shareholders'
Equity for the six months ended
June 30, 1998 and 1997 (Unaudited)
Consolidated Statements of Cash Flows
for the six months ended
June 30, 1998 and 1997 (Unaudited)
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports of Form 8-K 19
SIGNATURES
2
<PAGE>
<TABLE>
LOGANSPORT FINANCIAL CORP.
<CAPTION>
Consolidated Statements of Financial Condition
(Unaudited)
(In thousands, except share data)
June 30, December 31,
1998 1997
ASSETS
<S> <C> <C>
Cash and due from banks $ 508 $ 589
Interest-bearing deposits in other financial institutions 4,346 1,680
------ ------
Cash and cash equivalents 4,854 2,269
Certificates of deposit in other financial institutions - 100
Investment securities available for sale-at market 4,823 5,750
Mortgage-backed securities available for sale-at market 9,113 9,932
Loans receivable-net 67,050 63,635
Real estate acquired through foreclosure-net - 106
Office premises and equipment-at depreciated cost 472 465
Federal Home Loan Bank stock- at cost 568 494
Investment in real estate partnership 1,554 1,540
Accrued interest receivable on loans 315 299
Accrued interest receivable on mortgage-backed securities 69 83
Accrued interest receivable on investments 95 121
Prepaid expenses and other assets 40 33
Cash surrender value of life insurance 1,106 1,085
Deferred income tax asset 205 203
------ ------
Total assets $90,264 $86,115
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $64,415 $60,595
Advances from the Federal Home Loan Bank 6,500 6,500
Notes payable 1,450 1,525
Accrued interest and other liabilities 886 861
Accrued income taxes 26 92
------ ------
Total liabilities 73,277 69,573
Shareholders' equity
Common stock 7,573 7,566
Retained earnings-restricted 9,680 9,316
Less shares acquired by stock benefit plan (338) (400)
Unrealized gains on securities designated as
available for sale, net of related tax effects 72 60
------ ------
Total shareholders' equity 16,987 16,542
------ ------
Total liabilities and shareholders' equity $90,264 $86,115
====== ======
</TABLE>
3
<PAGE>
<TABLE>
LOGANSPORT FINANCIAL CORP.
<CAPTION>
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except share data)
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Loans $1,385 $1,207 $2,701 $2,369
Mortgage-backed securities 130 136 282 260
Investment securities 61 103 136 203
Interest-bearing deposits and other 63 54 108 107
----- ----- ----- -----
Total interest income 1,639 1,500 3,227 2,939
Interest expense
Deposits 762 708 1,494 1,392
Borrowings 95 54 189 98
----- ----- ----- -----
Total interest expense 857 762 1,683 1,490
----- ----- ----- -----
Net interest income 782 738 1,544 1,449
Provision for losses on loans 9 5 18 8
----- ----- ----- -----
Net interest income after provision for
losses on loans 773 733 1,526 1,441
Other income
Service charges on deposit accounts 24 19 43 37
Gain (loss) on sale of investment and mortgage-backed
securities 3 - 3 (32)
Gain on sale of real estate acquired through foreclosure 6 - 6 1
Other operating 37 24 70 56
----- ----- ----- -----
Total other income 70 43 122 62
General, administrative and other expense
Employee compensation and benefits 184 169 359 333
Occupancy and equipment 17 16 36 38
Federal deposit insurance premiums 9 9 19 18
Data processing 25 22 51 45
Other operating 85 78 172 157
----- ----- ----- -----
Total general, administrative and other expense 320 294 637 591
----- ----- ----- -----
Earnings before income taxes 523 482 1,011 912
Income tax expense 198 179 382 337
----- ----- ----- -----
NET EARNINGS $ 325 $ 303 $ 629 $ 575
====== ====== ====== ======
Other comprehensive income, net of tax
Unrealized gains (losses) on securities (19) 125 12 106
------ ------ ------ ------
COMPREHENSIVE INCOME $ 306 $ 428 $ 641 $ 681
====== ====== ====== ======
EARNINGS PER SHARE
Basic (based on net earnings) $.26 $.24 $.50 $.46
==== ==== ==== ====
Diluted (based on net earnings) $.25 $.24 $.48 $.45
==== ==== === ====
</TABLE>
4
<PAGE>
<TABLE>
LOGANSPORT FINANCIAL CORP.
<CAPTION>
Consolidated Statements of Shareholders' Equity
(Unaudited)
(In thousands, except share data)
Six months ended
June 30,
1998 1997
---- ----
<S> <C> <C>
Balance at January 1 $16,542 $15,427
Issuance of shares under stock option plan 7 42
Amortization of stock benefit plan 62 61
Cash dividends of $.21 per share in 1998 and $.20 in 1997 (265) (251)
Comprehensive income on securities available for
sale, net of related tax effects 12 106
Net earnings 629 575
------ ------
Balance at June 30 $16,987 $15,960
====== ======
Accumulated other comprehensive income (loss) $ 72 $ (51)
====== ======
</TABLE>
5
<PAGE>
<TABLE>
LOGANSPORT FINANCIAL CORP.
<CAPTION>
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six months ended
June 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 629 $ 575
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 18 19
Amortization of premiums on investments and mortgage-backed securities 99 43
Amortization expense of stock benefit plan 62 61
(Gain) loss on sale of investment and mortgage-backed securities (3) 32
Provision for losses on loans 18 8
Gain on sale of real estate acquired through foreclosure (6) (1)
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans (16) (5)
Accrued interest receivable on mortgage-backed securities 14 (16)
Accrued interest receivable on investments 26 11
Prepaid expenses and other assets (7) 21
Accrued interest and other liabilities 25 (43)
Federal income taxes
Current (66) (18)
Deferred (2) 69
------- -----
Net cash provided by operating activities 791 756
Cash flows provided by (used in) investing activities:
Proceeds from certificate of deposits in other institutions 100 -
Proceeds from sale of investment securities - 1,068
Purchase of investment securities (400) (401)
Maturities/calls of investment securities 1,355 400
Purchase of Federal Home Loan Bank stock (74) (107)
Proceeds from sale of mortgage-backed securities 802 -
Purchase of mortgage-backed securities (1,948) (2,893)
Principal repayments on mortgage-backed securities 1,857 607
Loan disbursements (11,857) (8,579)
Investment in real estate partnership (14) -
Principal repayments on loans 8,528 5,862
Purchases and additions to office premises and equipment (25) (6)
Proceeds from sale of real estate acquired through foreclosure 4 14
Increase in cash surrender value of life insurance policy (21) (18)
------- ------
Net cash used in investing activities (1,693) (4,053)
</TABLE>
6
<PAGE>
<TABLE>
LOGANSPORT FINANCIAL CORP.
<CAPTION>
Consolidated Statements of Cash Flows (continued)
(Unaudited)
(In thousands)
Six months ended
June 30,
1998 1997
<S> <C> <C>
Cash provided by (used in) financing activities:
Net increase in deposit accounts $3,820 $3,003
Proceeds from Federal Home Loan Bank advances 5,500 8,500
Proceeds from note payable - 100
Repayment of Federal Home Loan Bank advances (5,500) (6,000)
Repayment of note payable (75) (1,500)
Proceeds from the exercise of stock options 7 42
Dividends on common stock (265) (251)
------ ------
Net cash provided by financing activities 3,487 3,894
----- -----
Net increase in cash and cash equivalents 2,585 597
Cash and cash equivalents, beginning of period 2,269 3,759
----- -----
Cash and cash equivalents, end of period $4,854 $4,356
===== ======
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest on deposits and borrowings $1,679 $1,496
====== ======
Income taxes $ 449 $ 355
====== ======
Dividends payable at end of period $ 139 $ 126
====== ======
Foreclosed mortgage loans transferred to
real estate acquired through foreclosure $ 54 $ 30
====== ======
Loan originated through sales of real estate owned $ 148 $ 14
====== ======
</TABLE>
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Basis of Presentation
The unaudited interim consolidated financial statements include the accounts of
Logansport Financial Corp. (the "Company") and its subsidiary, Logansport
Savings Bank, FSB, (the "Bank").
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 generally accepted accounting principles
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, 1997. In the opinion of management, the financial statements
reflect all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the Company's financial position as of June 30, 1998, results
of operations for the three and six month periods ended June 30, 1998 and 1997
and cash flows for the six month periods ended June 30, 1998 and 1997.
NOTE B: Earnings Per Share and Dividends Per Share
Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period. Weighted-average common shares outstanding
totaled 1,261,293 and 1,257,577 for the six month periods ended June 30, 1998
and 1997, respectively, and 1,261,511 and 1,258,767 for the three month periods
ended June 30, 1998 and 1997, respectively. Diluted earnings per share is
computed taking into consideration common shares outstanding and dilutive
potential common shares to be issued under the Company's stock option plan.
Weighted-average common shares deemed outstanding for purposes of computing
diluted earnings per share totaled 1,310,512 and 1,282,238 for the six months
ended June 30, 1998 and 1997, respectively, and 1,312,978 and 1,285,607 for the
three months ended June 30, 1998 and 1997, respectively.
A cash dividend of $.10 per common share was declared on June 9, 1998, payable
on July 10, 1998, to stockholders of record as of June 22, 1998.
NOTE C: Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of Liabilities",
that provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method, the
financial components approach, provides that the carrying amount of the
8
<PAGE>
NOTE C: Recent Accounting Pronouncements (continued)
financial assets transferred be allocated to components of the transaction based
on their relative fair value. SFAS No. 125 provides criteria for determining
whether control of assets has been relinquished and whether a sale has occurred.
If the transfer does not qualify as a sale, it is accounted for as a secured
borrowing. Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitization of financial
assets, loan participations, factoring arrangements, and transfers of
receivables with recourse.
An entity that undertakes an obligation to service financial assets recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets, and all the securitized assets are retained and
classified as held to maturity). A servicing asset or liability that is
purchased or assumed is initially recognized at its fair value. Servicing assets
and liabilities are amortized in proportion to and over the period of estimated
net servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor either pays the creditor and is relieved of its obligations for the
liability or is legally released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management adopted SFAS No. 125 effective January 1, 1998, as required, without
material effect on the Company's consolidated financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a special
format for that financial statement but requires that an enterprise display an
amount representing total comprehensive income for the period in that financial
statement.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. Management adopted SFAS No. 130
effective January 1, 1998, as required, without material impact on the Company's
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 significantly changes the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about reportable segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information
9
<PAGE>
NOTE C: Recent Accounting Pronouncements (continued)
about the way management organizes the segments within the enterprise for making
the operating decisions and assessing performance. For many enterprises, the
management approach will likely result in more segments being reported. In
addition, SFAS No. 131 requires significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements and also requires that selected information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. Management adopted SFAS No. 131 effective January 1, 1998,
without material impact on the Company's financial statements.
Note D: Other Matters
As with all providers of financial services, the Company's operations are
heavily dependent on information technology systems. The Bank is addressing the
potential problems associated with the possibility that the computers that
control or operate the Bank's information technology systems and infrastructure
may not be programmed to read four-digit date codes and, upon arrival of the
year 2000, may recognize the two-digit code "00" as the year 1900, causing
systems to fail to function or to generate erroneous data. The Bank is working
with the companies that supply or service its information technology systems to
identify and remedy and year 2000 related problems.
As of June 30, 1998, management has developed an estimate of expenses that are
reasonably likely to be incurred by the Bank in connection with this issue;
however, the Company does not expect to incur significant expenses to implement
the necessary corrective measures. No assurance can be given, however, that
significant expense will not be incurred in future periods. In the event that
the Bank is ultimately required to purchase replacement computer systems,
programs, and/or equipment, or incur substantial expense to make the Bank's
systems, programs, and/or equipment year 2000 compliant, the Bank's net earnings
and financial condition could be adversely affected.
In addition to possible expense related to its own systems, the Bank could incur
losses if loan payments are delayed due to year 2000 problems affecting any
major borrowers in the Bank's primary market area. Because the Bank's loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses, and the Bank's primary market areas are not significantly dependent
upon any one employer or industry, the Bank does not expect any significant or
prolonged difficulties that will affect net earnings or cash flow.
10
<PAGE>
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 losses on loans, the effect of the year 2000 on information technology
systems and the effect of certain recent accounting pronouncements.
Financial Condition
Total assets were $90.3 million at June 30, 1998 compared to $86.1 million at
December 31, 1997, an increase of $4.2 million or 4.8%. This increase was funded
primarily from a growth in deposits. Cash and cash equivalents increased
approximately $2.6 million, from $2.3 million at December 31, 1997 to $4.9
million at June 30, 1998. Efforts to reinvest the growth of deposits in new
loans and investments are on-going; however, the interest rate environment
contributed to the time required to obtain quality investments and resulted in
the increase in cash equivalents. Securities decreased from $15.7 million at
December 31, 1997 to $13.9 million at June 30, 1998. Mortgage-backed securities
experienced accelerated paybacks which resulted in a decrease in the yield in
the investment portfolio and $1.4 million of investment securities either
matured or were called during the six months ended June 30, 1998.
Net loans increased $3.4 million, or 5.4%, from $63.6 million at December 31,
1997 to $67.0 million at June 30, 1998. Loan originations amounted to $11.9
million for the six months ended June 30, 1998, with payoffs equaling $8.5
million. Loan demand in the first six months of 1998 was very strong compared to
the first six months of 1997 in which loans grew by $2.7 million.
Deposits were $64.4 million at June 30, 1998 compared to $60.6 million at
December 31, 1997, an increase of $3.8 million in the first six months of 1998.
Borrowings consisted of $6.5 million of FHLB advances and a $1.5 million note
payable related to an equity investment in low income housing.
Shareholders' equity was $17.0 million at June 30, 1998 and $16.5 million at
December 31, 1997. The payment of dividends, an increase in the unrealized gain
on securities available for sale, the amortization of the stock benefit plan and
net earnings for the six months ended June 30, 1998 combined to result in an
increase of $445,000 for the period.
11
<PAGE>
Results of Operations
Comparison of the Three Months Ended June 30, 1998 and June 30, 1997
- ---------------------------------------------------------------------
Net earnings for the Company for the three months ended June 30, 1998 were
$325,000 compared with $303,000 for three months ended June 30, 1997, an
increase of $22,000 or 7.3%. Net interest income increased $44,000 while
general, administrative and other expenses increased $26,000 and taxes increased
$19,000. The major contributor to the increase in net interest income was the
growth in the loan portfolio the past calendar year. Loans were $67.0 million at
June 30, 1998 compared to $59.5 million at June 30, 1997.
The provision for loan losses was $9,000 for the three months ended June 30,
1998 and $5,000 for the three months ended June 30, 1997. All three properties
in real estate owned at the end of the quarter ending March 31, 1998 were sold
during April 1998 resulting in a small gain for the Company. No property was in
real estate owned on June 30, 1998. One property, which was valued at $8,000,
was in real estate owned on June 30, 1997. Non-performing loans decreased to
$232,000, or 0.34% of loans at June 30, 1998 from $431,000, or 0.67% of loans at
December 31, 1997. Loan loss reserves amounted to $240,000 or .36% of total
loans at June 30, 1998 compared to $245,000, or 0.38% at December 31, 1997.
Total other income increased by $27,000, or 62.8%, during the three months ended
June 30, 1998, because of a $3,000 gain on the sale of securities and a $6,000
gain on the sale of real estate owned. In addition, service charges on deposit
accounts increased $5,000 and other operating income increased $13,000. Other
operating income includes various loan fees and a one time fee of $4,300 which
represented a prepayment penalty on a participation loan.
Total general, administrative and other expenses increased $26,000 or 8.8% in
the three months ended June 30, 1998 compared to June 30, 1997. Employee
compensation and benefits increased $15,000 or 8.9%. This increase was a result
of salary increases and additional personnel compared to a year ago and an
increase in medical insurance costs. Data processing fees increased $3,000 and
other operating expenses increased $7,000, mainly in the area of bank service
fees. Bank service fees have increased due to changes in handling our daily
deposit but are offset by an increase in interest income due to better cash
availability.
The Company's effective tax rate for the three months ended June 30, 1998 was
37.9% and was 37.1% for the three months ended June 30, 1997.
Comparison of the Six Months Ended June 30,1998 and June 30, 1997
Net earnings for the Company for the six months ended June 30, 1998 was $629,000
compared with $575,000 for the six months ended June 30, 1997, an increase of
$54,000 or 9.4%. Interest income increased $288,000 as a result of the increase
in the loan portfolio. Interest expense increased $193,000 resulting in an
improvement in net interest income of $95,000 or 6.6% when comparing the six
months ended June 30, 1998 to the six months ended June 30, 1997.
12
<PAGE>
Comparison of the Six Months Ended June 30,1998 and June 30, 1997 (continued)
The provision for loan losses was $18,000 for the six months ended June 30, 1998
and $8,000 for the six months ended June 30, 1997. There were two properties
taken into real estate owned in the six months ended June 30, 1998. One property
was written down from $37,000 to a net realizable value of $23,000 during the
first quarter. During the second quarter, two consumer loans were written off
for $9,000, resulting in a total of $23,000 being written off against the
allowance in the first six months of 1998. Two properties were taken into real
estate owned during the six months ended June 30, 1997 and loan chargeoffs
totaled $16,000 for the first six months of 1997.
Total other income increased by $60,000 or 96.8%, during the six months ended
June 30, 1998, compared to the six months ended June 30, 1997, primarily because
of the $32,000 loss on the sale of available for sale securities during the six
months ended June 30, 1997. Service charges on deposit accounts increased $6,000
or 16.2%. This increase is a result of an increase in the volume of transaction
accounts. There was a nonrecurring recovery on securities previously written off
of $13,083 which is reflected in other operating income for the six months ended
June 30, 1997.
Total general, administrative and other expenses increased $46,000 or 7.8% for
the six months ended June 30, 1998 compared to the six months ended June 30,
1997. Employee compensation and benefits increased $26,000 or 7.8%. Data
processing costs increased $6,000 as a result of an increase in the volume of
accounts and price increases. Other operating expenses increased $15,000 mainly
as a result of an increase in bank service fees incurred in processing our cash
deposit. This is offset by an increase in interest income due to improved cash
availability.
The Company's effective tax rate for the six months ended June 30,1998 was 37.8%
compared to 37.0% for the six months ended June 30, 1997.
Capital Resources
Pursuant to 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, 1998, the Bank's tangible capital ratio was 18.51%, its leverage
ratio was 18.51%, and its risk-based capital to risk-weighted assets ratio was
34.26%. 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 ratios as of June 30,
1998.
Capital Standard Required Bank's Excess
- ---------------- -------- ------ ------
Tangible (1.5%) $1,347,000 $16,621,000 $15,274,000
Core (4.0%) 3,592,000 16,621,000 13,029,000
Risk-based (8.0%) 3,937,000 16,861,000 12,924,000
Liquidity
The standard measure of liquidity for savings associations is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings
account and borrowings due within one year. The minimum required ratio is
currently set by the Office of Thrift Supervision at 4%. At June 30, 1998 the
Bank's regulatory liquidity ratio was 35.5%.
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Bank, like other savings associations, 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 Office of Thrift Supervision ("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, 1998, 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 400 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)
+400bp 12,335 -5,942 -33 % 14.83 % -540bp
+300bp 14,154 -4,123 -23 % 16.60 % -363bp
+200bp 15,847 -2,431 -13 % 18.16 % -207bp
+100bp 17,261 -1,016 - 6 % 19.39 % - 84bp
0bp 18,277 20.23 %
- -100bp 18,940 662 +4 % 20.73 % + 50bp
- -200bp 19,473 1,195 +7 % 21.10 % + 87bp
- -300bp 20,275 1,997 +11 % 21.68 % +145bp
- -400bp 21,384 3,107 +17 % 22.51 % +227bp
14
<PAGE>
Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock
Pre-shock NPV Ratio: NPV as % of PV of Assets 20.23 %
Exposure Measure: Post-Shock NPV Ratio 18.16 %
Sensitivity Measure: Change in NPV Ratio (207 bp)
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.
15
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Bank nor the Company were, during the three-month period ended June
30, 1998, 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 Matters to a Vote of Security Holders
On April 14, 1998, the Company held it 1997 annual meeting of shareholders. A
total of 1,004,016 shares, or 79.61% of the Company's shares outstanding, were
represented at the meeting either in person or by proxy.
Two directors were nominated by the Company's Board of Directors to serve new
three year terms. This was the only item of business at the meeting. These
nominees, and the voting results for each are listed below.
For Withheld Abstentions Broker Nonvotes
Donald G. Pollitt 999,135 4,881 0 0
Susanne S. Ridlen 999,685 4,331 0 0
The continuing directors and the remaining amount of their terms are listed
below.
Norbert E. Adrian (two year term)
William Tincher Jr. (two year term)
Charles J. Evans (one year term)
David G. Wihebrink (one year term)
Thomas G. Williams (one year term)
16
<PAGE>
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 The Articles of Incorporation of the Registrant are
incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (Registration No.
33-89788).
3.2 The Code of By-Laws of the Registrant is incorporated
by reference to Exhibit 3.2 to the Form 10-Q for the
period ended June 30, 1997, filed with the Commission
on August 13, 1997.
27.1 Financial Data Schedule for the six month period
ended June 30, 1998.
27.2 Restated Financial Data Schedule for the six month
period ended June 30, 1997.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the fiscal quarter
ended June 30, 1998.
17
<PAGE>
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 12, 1998 By:
Thomas G. Williams, President and
Chief Executive Officer
Date: August 12, 1998 By:
Dottye Robeson, Secretary and
Treasurer
18
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