-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ub0atrxJeNAH+QOicmVz1rF0FAxtGeahasSPn5WECilwLA0HQA7jrVuxqCmeCs7D AwLrwkon2o63SuKfh9pSvg== 0000908834-02-000049.txt : 20020415 0000908834-02-000049.hdr.sgml : 20020415 ACCESSION NUMBER: 0000908834-02-000049 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020306 FILED AS OF DATE: 20020306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGANSPORT FINANCIAL CORP CENTRAL INDEX KEY: 0000939928 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 351945736 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25910 FILM NUMBER: 02568452 BUSINESS ADDRESS: STREET 1: 723 E BROADWAY STREET 2: PO BOX 569 CITY: LOGANSPORT STATE: IN ZIP: 46947 BUSINESS PHONE: 2197223855 MAIL ADDRESS: STREET 1: 723 EAST BROADWAY STREET 2: P O BOX 569 CITY: LOGANSPORT STATE: IN ZIP: 46947 DEF 14A 1 log02_prox.txt DEF 14A SCHEDULE 14A Information Required in Proxy Statement SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant: Yes. Filed by a Party other than the Registrant: No. Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 LOGANSPORT FINANCIAL CORP. (Name Of Registrant As Specified In Its Charter) LOGANSPORT FINANCIAL CORP. (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 (1) Title of each class of securities to which transaction applies: N/A (2) Aggregate number of securities to which transaction applies: N/A (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): N/A (4) Proposed maximum aggregate value of transaction: N/A (5) Total fee paid: [ ] Fee paid previously with preliminary materials [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. N/A (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: LOGANSPORT FINANCIAL CORP. [LOGANSPORT LOGO 723 East Broadway OMITTED] Logansport, Indiana 46947 (574) 722-3855 ---------------------------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS ---------------------------------------- To Be Held On April 9, 2002 Notice is hereby given that the Annual Meeting of Shareholders of Logansport Financial Corp. (the "Holding Company") will be held at the Holding Company's office at 723 East Broadway, Logansport, Indiana, on Tuesday, April 9, 2002, at 2:00 p.m., Eastern Standard time. The Annual Meeting will be held for the following purposes: 1. Election of Directors. Election of three directors of the Holding Company to serve three-year terms expiring in 2005, one director of the Holding Company to serve for a two-year term expiring in 2004, and one director to serve for a one-year term expiring in 2003. 2. Other Business. Such other matters as may properly come before the meeting or any adjournment thereof. Shareholders of record at the close of business on February 8, 2002, are entitled to vote at the meeting or any adjournment thereof. We urge you to read the enclosed Proxy Statement carefully so that you may be informed about the business to come before the meeting, or any adjournment thereof. At your earliest convenience, please sign and return the accompanying proxy in the postage-paid envelope furnished for that purpose. A copy of our Annual Report for the fiscal year ended December 31, 2001, is enclosed. The Annual Report is not a part of the proxy soliciting material enclosed with this letter. By Order of the Board of Directors /s/ David G. Wihebrink David G. Wihebrink, President and Chief Executive Officer Logansport, Indiana March 6, 2002 IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. LOGANSPORT FINANCIAL CORP. 723 East Broadway Logansport, Indiana 46947 (574) 722-3855 --------------- PROXY STATEMENT --------------- FOR ANNUAL MEETING OF SHAREHOLDERS April 9, 2002 This Proxy Statement is being furnished to the holders of common stock, without par value (the "Common Stock"), of Logansport Financial Corp. (the "Holding Company"), an Indiana corporation, in connection with the solicitation of proxies by the Board of Directors of the Holding Company to be voted at the Annual Meeting of Shareholders to be held at 2:00 p.m., Eastern Standard time, on April 9, 2002, at the Holding Company's office at 723 East Broadway, Logansport, Indiana, and at any adjournment of such meeting. The principal asset of the Holding Company consists of 100% of the issued and outstanding shares of common stock, $.01 par value per share, of Logansport Savings Bank, FSB ("Logansport Savings"). This Proxy Statement is expected to be mailed to the shareholders on or about March 6, 2002. The proxy solicited hereby, if properly signed and returned to the Holding Company and not revoked prior to its use, will be voted in accordance with the instructions contained therein. If no contrary instructions are given, each proxy received will be voted for each of the matters described below and, upon the transaction of such other business as may properly come before the meeting, in accordance with the best judgment of the persons appointed as proxies. Any shareholder giving a proxy has the power to revoke it at any time before it is exercised by (i) filing with the Secretary of the Holding Company written notice thereof (Dottye Robeson, 723 East Broadway, Logansport, Indiana 46947), (ii) submitting a duly executed proxy bearing a later date, or (iii) by appearing at the Annual Meeting and giving the Secretary notice of his or her intention to vote in person. Proxies solicited hereby may be exercised only at the Annual Meeting and any adjournment thereof and will not be used for any other meeting. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF Only shareholders of record at the close of business on February 8, 2002 ("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the Voting Record Date, there were 1,000,145 shares of the Common Stock issued and outstanding, and the Holding Company had no other class of equity securities outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting on all matters properly presented at the Annual Meeting. The holders of over 50% of the outstanding shares of Common Stock as of the Voting Record Date must be present in person or by proxy at the Annual Meeting to constitute a quorum. In determining whether a quorum is present, shareholders who abstain, cast broker non-votes, or withhold authority to vote on one or more director nominees will be deemed present at the Annual Meeting. The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of February 8, 2002, by each person who is known by the Holding Company to own beneficially 5% or more of the Common Stock. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares.
Number of Shares of Name and Address of Common Stock Percent of Beneficial Owner (1) Beneficially Owned Class (2) - ------------------------------------------------------ ---------------------- ------------- The Roosevelt Group, L.L.C. (3) 37,900 3.8% 400 North Fifth Street, Suite 200 St. Charles, Missouri 63301 Pulaski Financial Corp. (3) 50,500 5.0% 12300 Olive Blvd. St. Louis, Missouri 63141 Bradshaw Capital Management, L.L.C. (3) 27,700 2.8% P.O. Box 1972 Village of Pinehurst, North Carolina 28370 Bay Pond Partners, L.P. (4) 106,700 10.7% Wellington Management Company, LLP Wellington Hedge Management LLC Wellington Hedge Management, Inc. 75 State Street Boston, Massachusetts 02109 Thomas G. Williams 63,725 (5) 6.2% 4 Golfview Drive Logansport, IN 46947 Charles J. Evans 4030 High Street Logansport, IN 46947 52,749 (6) 5.07%
- -------------------------- (1) The information in this chart is based on Schedule 13D and 13G Reports filed by the above-listed persons with the Securities and Exchange Commission (the "SEC") containing information concerning shares held by them, and information provided to the Holding Company after such filing was made. It does not reflect any changes in those shareholdings which may have occurred since the date of such information provided to the Holding Company. (2) Based upon 1,000,145 shares of Common Stock outstanding which does not include options for 100,127 shares of Common Stock held by certain directors, former directors, officers and employees of the Holding Company and Logansport Savings. (3) The Roosevelt Group, L.L.C., a Missouri limited liability company which invests in securities of financial institutions (the "Roosevelt Group"), and Bradshaw Capital Management, L.L.C., a North Carolina limited liability company which invests in securities of financial institutions and provides advisory services to financial institutions ("Bradshaw Capital"), filed a Schedule 13D indicating that they believed the Holding Company should more aggressively repurchase its outstanding shares in an effort to improve book value per share, earnings per share and return on equity. They also indicated they had begun conversations with regulatory counsel regarding preparation of an application to the Office of Thrift Supervision seeking permission to acquire more than 10% of the Holding Company's outstanding shares. In their Schedule 13D the Roosevelt Group and Bradshaw Capital disclosed that Pulaski Financial Corporation ("Pulaski") which is an advisory client of Bradshaw Capital, owned 50,500 shares of the Holding Company's Common Stock. While Bradshaw Capital disclaimed beneficial ownership of those shares, the Holding Company believes that Bradshaw Capital, the Roosevelt Group, and Pulaski would be deemed a group acting in concert under the Holding Company's Articles of Incorporation. As a result, consistent with those Articles of Incorporation, only 10% of the outstanding shares of the Holding Company's Common Stock (or 100,014 shares) held by this group will count as shares eligible to vote on matters submitted to shareholders at the Annual Meeting. (4) In Schedules 13G and 13D filed with the SEC, the entities listed above indicate they may be the beneficial owners of the foregoing shares and that 92,000 shares (over 5% of the Holding Company's outstanding shares) may be deemed to be beneficially owned by the Bay Pond Partners, L.P. ("Bay Pond"), a Delaware limited partnership. Any shares not beneficially owned by Bay Pond may be held by other clients of Wellington Management Company, LLP ("WMC"), a Massachusetts limited partnership and a registered investment adviser. WMC's clients share with WMC investment and voting power with respect to the shares held by those clients. Bay Pond also shares dispositive power with respect to certain shares with Wellington Hedge Management LLC ("WHM"), a Massachusetts limited liability company, which is the sole general partner of Bay Pond, and with Wellington Hedge Management, Inc., a Massachusetts corporation, which is the managing member of WHM. Consistent with the Holding Company's Articles of Incorporation, only 10% of the outstanding shares of the Holding Company's Common Stock (or 100,014 shares) held by this group will count as shares eligible to vote on matters submitted to shareholders at the Annual Meeting. (5) Includes 34,345 shares subject to a stock option granted under the Logansport Financial Corp. Stock Option Plan (the "Option Plan"). (6) Includes 12,725 shares held jointly by Mr. Evans and his spouse and 39,345 shares subject to a stock option granted under the Option Plan. PROPOSAL I -- ELECTION OF DIRECTORS The Board of Directors currently consists of eight members. The By-Laws provide that the Board of Directors is to be divided into three classes as nearly equal in number as possible. The members of each class are to be elected for a term of three years and until their successors are elected and qualified. One class of directors is to be elected annually. The nominees for election as a director this year are James P. Bauer, Charles J. Evans, Todd S. Weinstein, David G. Wihebrink, and Thomas G. Williams, each of whom currently serves as a director whose term will expire upon the completion of the election at the Annual Meeting. Mr. Weinstein and Mr. Bauer were appointed to the Board in May 2001. Mr. Bauer has been nominated for a one-year term ending in 2003. Mr. Williams has been nominated to serve for a two-year term ending in 2004. Messrs. Evans, Weinstein and Wihebrink have been nominated for three-year terms ending in 2005. Unless otherwise directed, each proxy executed and returned by a shareholder will be voted for the election of the nominees listed below. If any person named as a nominee should be unable or unwilling to stand for election at the time of the Annual Meeting, the proxy holders will nominate and vote for a replacement nominee recommended by the Board of Directors. At this time, the Board of Directors knows of no reason why the nominees listed below may not be able to serve as directors if elected. The following table sets forth certain information regarding the nominees for the position of director of the Holding Company and each director continuing in office after the Annual Meeting, including the number and percent of shares of Common Stock beneficially owned by such persons as of the Voting Record Date. Unless otherwise indicated, each director or nominee has sole investment and/or voting power with respect to the shares shown as beneficially owned by him. No nominee for director or director is related to any other nominee for director, director, or executive officer of the Holding Company by blood, marriage, or adoption, and there are no arrangements or understandings between any nominee and any other person pursuant to which such nominee was selected. The table also sets forth the number of shares of Holding Company Common Stock beneficially owned by all directors and executive officers of the Holding Company as a group.
Director Common Stock Director of of the Beneficially Expiration Logansport Holding Owned as of of Term as Savings Company February 8, Percentage Name Director Since Since 2002 (1) of Class - ----------------------------------- -------------- ------------- ------------ ------------- ------------- Director Nominees James P. Bauer 2003 2001 2001 1,200 .12% Charles J. Evans 2005 1997 1995 52,749 (2) 5.07% Todd S. Weinstein 2005 2001 2001 0 .00% David G. Wihebrink 2005 1991 1995 19,524 (3) 1.94% Thomas G. Williams 2004 1962 1995 63,725 (4) 6.16% Directors Continuing in Office Brian J. Morrill 2004 1998 1998 2,058 (5) .21% Susanne S. Ridlen, Ph.D. 2004 1982 1995 13,014 (6) 1.29% William Tincher, Jr. 2003 1994 1995 24,938 (7) 2.48% All directors and executive officers as a group (10 persons) 191,103 (8) 17.43%
- -------------------------- (1) Based upon information furnished by the respective directors or director nominees. Under applicable regulations, shares are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares the power to vote or dispose of the shares, whether or not he or she has any economic power with respect to the shares. Includes shares beneficially owned by members of the immediate families of the directors or director nominees residing in their homes. (2) Includes 12,725 shares held jointly by Mr. Evans and his spouse and 39,345 shares subject to a stock option granted under the Option Plan. (3) Of these shares, 2,993 are held by Mr. Wihebrink as custodian for his minor children and 6,296 shares are subject to a stock option granted under the Option Plan. (4) Includes 34,345 shares subject to a stock option granted under the Option Plan. (5) Includes 2,058 shares held jointly by Mr. Morrill and his spouse. (6) Includes 2,645 shares held jointly by Ms. Ridlen and her spouse and 7,869 shares subject to a stock option granted under the Option Plan. (7) Of these shares, 18,296 are held jointly by Mr. Tincher with his spouse and children and 6,296 shares are subject to a stock option granted under the Option Plan. (8) The total of such shares includes 96,246 shares subject to stock options granted under the Option Plan. Does not include stock options for 1,000 shares which are not exercisable within a period of 60 days following the Voting Record Date. Presented below is certain information concerning the director nominees of the Holding Company: James P. Bauer (age 56) has served as Vice-President-Finance and Treasurer of Materials Processing, Inc., a holding company for Small Parts, Inc. and ABC Metals, Inc. (Logansport, Indiana) since 1973. He serves on the Board of Directors of Logansport Economic Development, Inc. and the United Way of Cass County. Charles J. Evans (age 55) became Senior Vice President of Logansport Savings in January, 2000; theretofore he served as Vice President and Senior Loan Officer of Logansport Savings since 1980. He also has served as Vice President of the Holding Company since 1995. Brian J. Morrill (age 44) has served as President of Cass County Title Company, Inc., a title insurance company founded by him which is based in Logansport, Indiana, since 1994; prior thereto he served as Executive Director of Cass County Family YMCA in Logansport, Indiana. Susanne S. Ridlen, Ph.D. (age 61) is a faculty member and Director of Project Success Program for underprepared students at Indiana University Kokomo, where she has been a member of the faculty since 1969. She also serves on the Lilly Scholarship Committee for the Cass County Community Foundation in Logansport, Indiana. William Tincher, Jr. (age 62) has served as Plant Manager for the Modine Manufacturing Company ("Modine") since 1977. Modine is located in Logansport, Indiana, and manufactures automotive cooling systems. Todd S. Weinstein (age 40) has been a practicing surgeon in Logansport since 1991. He is currently Vice President of Logansport Surgical Associates, and a member of the Logansport Memorial Hospital surgical staff. David G. Wihebrink (age 54), became President and Chief Executive Officer of the Holding Company and Logansport Savings on April 12, 2000. Prior thereto, he served as Vice President and Chief Financial Officer of T.M. Morris Manufacturing Co., Inc. ("Morris") since 1988. Morris is located in Logansport, Indiana, and manufactures lead wire assemblies and wiring harnesses and stampings. Prior to his employment with Morris, Mr. Wihebrink was a member of the accounting firm Smith, Thompson, Wihebrink & Co., Inc. (Logansport) for 15 years. Mr. Wihebrink also currently serves as a member of the Board of Directors of the Neal Home retirement home in Logansport, Indiana, and the North Central Indiana Workforce Investment Board, and the Logansport Cass County Chamber of Commerce. Thomas G. Williams (age 68) retired from his positions as President and Chief Executive Officer of the Holding Company and of Logansport Savings on April 11, 2000. He had served as President of Logansport Savings since 1971 and President and Chief Executive Officer of the Holding Company since 1995. THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST AT THE ANNUAL SHAREHOLDERS MEETING. PLURALITY MEANS THAT INDIVIDUALS WHO RECEIVE THE LARGEST NUMBER OF VOTES CAST ARE ELECTED UP TO THE MAXIMUM NUMBER OF DIRECTORS TO BE CHOSEN AT THE MEETING. ABSTENTIONS, BROKER NON-VOTES, AND INSTRUCTIONS ON THE ACCOMPANYING PROXY TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES WILL RESULT IN THE RESPECTIVE NOMINEE RECEIVING FEWER VOTES. HOWEVER, THE NUMBER OF VOTES OTHERWISE RECEIVED BY THE NOMINEE WILL NOT BE REDUCED BY SUCH ACTION. The Board of Directors and its Committees During the fiscal year ended December 31, 2001, the Board of Directors of the Holding Company met or acted by written consent 12 times. No director attended fewer than 75% of the aggregate total number of meetings during the last fiscal year of the Board of Directors of the Holding Company held while he served as director and of meetings of committees which he served during that fiscal year. The Board of Directors of the Holding Company has an Audit Committee, a Stock Compensation Committee and a Nominating Committee, among its other Board Committees. All committee members are appointed by the Board of Directors. The Holding Company's Audit Committee recommends the appointment of the Holding Company's independent accountants, and meets with them to outline the scope and review the results of audits. The Audit Committee met three times during 2001. The members of that committee are Brian J. Morrill, Susanne S. Ridlen, William Tincher, Jr., and James P. Bauer. The Stock Compensation Committee administers the Option Plan, the Logansport Savings Bank, FSB Recognition and Retention Plan and Trust, and the Logansport Financial Corporation 1999 Stock Option Plan. The members of that Committee are Susanne S. Ridlen, William Tincher, Jr., and Brian J. Morrill. It did not meet during 2001. The Board of Directors nominated the slate of directors set forth in the Proxy Statement. Although the Board of Directors of the Holding Company will consider nominees recommended by shareholders, it has not actively solicited recommendations for nominees from shareholders nor has it established procedures for this purpose. Article III, Section 12 of the Holding Company's By-Laws provides that shareholders entitled to vote for the election of directors may name nominees for election to the Board of Directors but there are certain requirements that must be satisfied in order to do so. Among other things, written notice of a proposed nomination must be received by the Secretary of the Holding Company not less than 60 days prior to the Annual Meeting; provided, however, that in the event that less than 70 days' notice or public disclosure of the date of the meeting is given or made to shareholders (which notice or public disclosure includes the date of the Annual Meeting specified in the Holding Company's By-Laws if the Annual Meeting is held on such date), notice must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Management Remuneration and Related Transactions Remuneration of Named Executive Officers During the fiscal year ended December 31, 2001, no cash compensation was paid directly by the Holding Company to any of its executive officers. Each of such officers was compensated by Logansport Savings. The following table sets forth information as to annual, long-term and other compensation for services in all capacities to the Holding Company and its subsidiary for each of the two fiscal years ended December 31, 2001, of the person who served as chief executive officer of the Holding Company during the fiscal year ended December 31, 2001 (the "Named Executive Officer"). There were no other executive officers of the Holding Company who earned over $100,000 in salary and bonuses during that fiscal year.
Summary Compensation Table Long Term Compensation Annual Compensation Awards ----------------------------------------- ---------------------- Other All Annual Restricted Securities Other Name and Fiscal Compen- Stock Underlying Compen- Principal Position Year Salary ($)(2) Bonus ($) sation($)(5) Awards($) Options(#) sation ($) - ------------------------ ------ ------------- --------- ------------ --------- ----------- ---------- David G. Wihebrink 2001 $182,200 (3) $2,885 President, Chief 2000 $141,816 (4) --- --- --- --- --- Executive Officer and Director (1) - ------------------------------
(1) Mr. Wihebrink became President and Chief Executive Officer, following the retirement of Thomas G. Williams, on April 12, 2000. (2) Includes fees received for service on the Logansport Savings Board of Directors, including any fees deferred pursuant to deferred compensation agreements. (3) Includes $25,000 deferred by Mr. Wihebrink under a deferred compensation plan for his benefit. (4) Includes $25,000 deferred by Mr. Wihebrink under a deferred compensation plan for his benefit. (5) The Named Executive Officers of the Holding Company receive certain perquisites, but the incremental cost of providing such perquisites does not exceed the lesser of $50,000 or 10% of the officer's salary and bonus. Stock Options The following table includes the number of shares covered by stock options held by the Named Executive Officer as of December 31, 2001. Also reported are the values for "in-the-money" options (options whose exercise price is lower than the market value of the shares at fiscal year end) which represent the spread between the exercise price of any such existing stock options and the fiscal year-end market price of the stock. The Named Executive Officer did not receive or exercise any stock options during the fiscal year.
Outstanding Stock Option Grants and Value Realized As Of 12/31/01 ----------------------------------------------------------------- Number of Unexercised Value of Unexercised In-the-Money Options at Fiscal Year End Options at Fiscal Year End (1) -------------------------------------- --------------------------------------- Name Exercisable Unexercisable Exercisable Unexercisable - ------------------------- ----------- ------------- ----------- ------------- David G. Wihebrink 6,296 --- $28,647 ---
- ------------------------- (1) Amounts reflecting gains on outstanding options are based on the average between the high and low prices for the shares on January 2, 2002, which was $15.08 per share. Employment Contracts Logansport Savings is a party to three-year employment contracts with its four executive officers, including the Named Executive Officer (the "Employees"). The contracts extend annually for additional one-year terms to maintain their three-year terms if the Board of Directors of Logansport Savings determines to so extend them, unless notice not to extend is properly given by either party to the contract. The Employees receive an initial salary under the contract equal to their current salary, subject to increases approved by the Board of Directors. The contracts also provide, among other things, for participation in other fringe benefits and benefit plans available to Logansport Savings' employees. The Employees may terminate their employment upon sixty days' written notice to Logansport Savings. Logansport Savings may discharge the Employees for cause (as defined in the contract) or without cause. If Logansport Savings terminates the Employees' employment for other than cause or if the Employees terminate their own employment for cause (as defined in the contract), the Employees will receive their base compensation under the contract for an additional three years if the termination follows a change of control in the Holding Company (as defined below) or through the date of termination if the termination occurs prior to a change of control. In addition, during such period, the Employees will continue to participate in Logansport Savings' group insurance plans or receive comparable benefits. Moreover, within a period of three months after such termination following a change of control, the Employees will have the right to cause Logansport Savings to purchase any stock options they hold for a price equal to the fair market value (as defined in the contract) of the shares subject to such options minus their option price. If the payments provided for in the contract, together with any other payments made to the Employees by Logansport Savings, are deemed to be payments in violation of the "golden parachute" rules of the Code, such payments will be reduced to the largest amount which would not cause Logansport Savings to lose a tax deduction for such payments under those rules. As of the date hereof, the cash compensation which would be paid under the contract to the Employees if the contracts were terminated after a change of control of the Holding Company (without cause by Logansport Savings or for cause by the Employee) would be $487,800 in the case of the Named Executive Officer, or $1,284,150 for all four executive officers. For purposes of these employment contracts, a change of control of the Holding Company is generally an acquisition of control, as defined in regulations issued under the Change in Bank Control Act and the Savings and Loan Holding Company Act. The employment contracts provide Logansport Savings protection of its confidential business information and protection from competition by the Employees should they voluntarily terminate their employment without cause or be terminated by Logansport Savings for cause. Executive Supplemental Retirement Income Agreements. Logansport Savings has entered into supplemental retirement agreements with Messrs. Williams and Evans (each, an "Executive"). These agreements provide that upon retirement after attaining age 65, assuming continuous service to Logansport Savings until that date, the Executive is entitled to receive annual supplemental retirement benefits in an amount equal to 40% of the highest salary received by the Executive during any 12 month period during his term of service with Logansport Savings, subject to a maximum benefit of $42,000 annually in the case of Mr. Williams and $52,000 annually in the case of Mr. Evans (the "Annual Retirement Benefit"). These benefits are payable in equal monthly installments over a period of 180 months following retirement. Mr. Williams began receiving retirement benefits on May 1, 2000. Mr. Evans may elect to receive early retirement benefits upon attaining age 62, assuming continuous service to Logansport Savings until that date. Upon his election to receive such benefits, he is entitled to receive his Annual Retirement Benefit, reduced by 2% for each year or fraction thereof that his early retirement date precedes his normal retirement date. These early retirement benefit payments begin at the Executive's normal retirement date. However, earlier payment may be requested by the Executive, subject to Board approval. If early payment is approved by the Board of Directors, the Executive's benefit amount is reduced to the present value using a discount rate equal to Logansport Savings' average cost of deposits for the most recent 12 month period. If early payment is not approved by the Board, the Executive is entitled to receive that portion of his Annual Retirement Benefit which is required to be expensed and accrued under generally accepted accounting principles (the "Accrued Benefit") and is vested. Mr. Evans' benefits are fully vested. If Mr. Evans dies prior to retirement, his beneficiary will receive an annual survivor's benefit in an amount equal to 40% of the Executive's annual salary at death, subject to a maximum of $52,000. The survivor's benefit is payable in equal monthly installments over a period of 180 months. If the Executive dies after he has begun receiving retirement benefits under his agreement, his beneficiary will continue to receive the balance of the payments otherwise payable to the Executive under his agreement. Upon the Executive's death, his beneficiary also will receive a one-time lump sum death benefit in the amount of $12,500. If Mr. Evans becomes disabled prior to retirement, he is entitled to receive his Accrued Benefit payable in equal monthly installments over a period of 180 months. If the Executive dies while receiving disability benefit payments, his beneficiary is entitled to receive an annual survivor's benefit in an amount equal to $52,000 payable in equal monthly installments for the remainder of the Executive's 180 month disability benefit period. In addition, at the Executive's death, if the total disability benefit payments received, or to be received, are less than $250,000, the Executive's beneficiary is entitled to a lump sum payment in an amount sufficient to make the total benefits equal to $250,000. Payments of benefits under the agreements are conditioned upon (1) the Executive not becoming employed by a competitor of Logansport Savings or otherwise competing with Logansport Savings while receiving benefits under the agreements and (2) in the case of Mr. Williams, the Executive rendering reasonable business consulting advisory services to Logansport Savings for a period of five years following his retirement. Mr. Evans' agreement provides that if he is terminated for any reason other than cause, he is entitled to receive that portion of his Accrued Benefit which has vested. No benefits are provided if Mr. Evans voluntarily terminates his employment before he is otherwise entitled to benefits under the agreement. If Mr. Evans' employment is terminated for cause, all benefits under his agreement are forfeited and the agreement is rendered null and void. Logansport Savings expensed $18,883 in connection with these agreements for the year ended December 31, 2001. Logansport Savings has purchased paid-up life insurance on the lives of the Executives to fund the benefits payable under the supplemental retirement agreements. See "-- Insurance to Fund Certain Benefits." Compensation of Directors All directors of Logansport are entitled to receive a monthly director fee of $600. Directors emeritus receive $100 per Board meeting attended. Total fees paid to directors for the year ended December 31, 2001 were $56,772. Logansport Savings' directors may, pursuant to deferred compensation agreements, defer payment of some or all of the directors' fees until after they retire or otherwise no longer serve as directors. Upon their attainment of age 70, directors who participate in the deferred compensation plan receive fixed monthly payments for 180 months, but may also elect to receive their benefits in a lump sum. The amount of each director's monthly payments depends on the amount of fees deferred and the period over which the fees were deferred. The agreements also provide for the payment of disability benefits and death benefits. The beneficiary of a director participating in the deferred compensation plan also receives a $7,500 lump sum death benefit upon the director's death. Logansport Savings has purchased paid-up life insurance on the lives of directors participating in the deferred compensation plans to fund benefits payable thereunder. See "-- Insurance to Fund Certain Benefits." Logansport Savings expensed $18,880 in connection with these agreements for the year ended December 31, 2001. Advisory Director, Forrest H. Montgomery, receives a monthly advisory director fee of $331 pursuant to the terms of an amended death benefit agreement. See "-- Death Benefit Agreement with Advisory Director." Directors of the Holding Company are not currently paid directors' fees. The Holding Company may, if it believes it is necessary to attract qualified directors or otherwise beneficial to the Holding Company, adopt a policy of paying directors' fees. Death Benefit Agreement with Advisory Director Logansport Savings has entered into an amended death benefit agreement with Forrest H. Montgomery, an advisory director to Logansport. This agreement provides for the payment of a monthly benefit in the amount of $331 which commenced in April, 1992 upon Mr. Montgomery's retirement and continues for a 120-month period. If Mr. Montgomery dies while receiving monthly benefits under the Agreement, the unpaid balance of the monthly payments will be paid monthly to his designated beneficiary for the remainder of the period. The payment of these benefits is conditioned upon (i) Mr. Montgomery's continued service as an advisory director to Logansport and (ii) Mr. Montgomery not becoming employed by a competitor of Logansport Savings or otherwise competing with Logansport Savings while receiving benefits under the agreement and for a period of two (2) years thereafter. Logansport Savings has purchased paid-up life insurance on the life of Mr. Montgomery to fund the benefits payable under the amended death benefit agreement. See "-- Insurance to Fund Certain Benefits." Insurance to Fund Certain Benefits Logansport Savings has purchased paid-up life insurance on the lives of the Executives covered under the supplemental retirement income agreements with Mr. Williams and Mr. Evans, and on the lives of the directors and the advisory director covered under the deferred compensation agreements and the amended death benefit agreement to fund the obligations under these agreements. The insurance is provided by Transamerica Life Insurance Company and Northwestern Mutual Life Insurance Company. At December 31, 2001, the cash surrender value of the policies was carried on the books of Logansport at an amount equal to $1,290,937. Transactions With Certain Related Persons Logansport Savings has followed a policy of offering to its directors, officers, and employees real estate mortgage loans secured by their principal residence and other loans. As permitted by law, these loans are made at an interest rate that is .25% lower than the rate generally available to the public, but otherwise are offered with substantially the same collateral and underwriting criteria as those of comparable transactions prevailing at the time and do not involve more than the normal risk of collectibility or present other unfavorable features. Loans to directors and executive officers totaled approximately $1,075,422, or 6.18% of shareholders' equity on a consolidated basis at December 31, 2001. Logansport Savings currently utilizes Mr. Evans, who is a state licensed appraiser, as a staff appraiser for certain residential mortgage loans under $250,000. As part of closing costs, Logansport charges an appraisal fee of approximately $200 for residential mortgage loans. For the year ended December 31, 2001, Mr. Evans received $3,425 as compensation for his appraisal work. Logansport Savings currently utilizes Cass County Title Company, Inc. to provide title insurance or to perform real estate searches in connection with its mortgage lending. Brian J. Morrill, a director of the Holding Company and of Logansport Savings, is President and principal owner of Cass County Title Company, Inc. During 2001, that company received fees for such title insurance and real estate searches from Logansport Savings in the amount of approximately $38,946. Audit Committee Report, Charter, and Independence Audit Committee Report. The Audit Committee reports as follows with respect to the audit of the Holding Company's financial statements for the fiscal year ended December 31, 2001, included in the Holding Company's Shareholder Annual Report accompanying this Proxy Statement ("2001 Audited Financial Statements"): The Committee has reviewed and discussed the Holding Company's 2001 Audited Financial Statements with the Company's management. The Committee has discussed with its independent auditors (Grant Thornton LLP) the matters required to be discussed by Statement on Auditing Standards 61, which include, among other items, matters related to the conduct of the audit of the Holding Company's financial statements. Grant Thornton LLP did not use any employees other than its full-time permanent employees on its audit of the Holding Company's 2001 Audited Financial Statements. The Committee has received written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (which relates to the auditor's independence from the Holding Company and its related entities) and has discussed with the auditors the auditors' independence from the Holding Company. The Committee considered whether the provision of services by its independent auditors other than audit services and reviews of Forms 10-Q is compatible with maintaining the auditors' independence. Based on review and discussions of the Holding Company's 2001 Audited Financial Statements with management and discussions with the independent auditors, the Audit Committee recommended to the Board of Directors that the Holding Company's 2001 Audited Financial Statements be included in the Holding Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. This Report is respectfully submitted by the Audit Committee of the Holding Company's Board of Directors. Audit Committee Members ----------------------- James P. Bauer Brian J. Morrill Susanne S. Ridlen William Tincher, Jr. Audit Committee Charter. The Board of Directors has adopted a written charter for the Audit Committee. The Board of Directors reviews and approves changes to the Audit Committee Charter annually. Accountants' Fees Audit Fees. The aggregate fees billed by Grant Thornton LLP for services relating to the audit of the 2001 Audited Financial Statements and for reviews of the Holding Company's financial statements included in its Forms 10-Q filed during the year 2001 were $27,850. Financial Information Systems Design and Implementation Fees. Grant Thornton LLP did not bill the Holding Company for any information technology services rendered during 2001. All Other Fees. Grant Thornton LLP billed the Holding Company $7,400 for services other than those described above rendered during 2001. Independence of Audit Committee Members. The Holding Company's Audit Committee is comprised of James P. Bauer, Brian J. Morrill, Susanne S. Ridlen and William Tincher, Jr. Each of these members meets the requirements for independence set forth in the Listing Standards of the National Association of Securities Dealers. ACCOUNTANTS Grant Thornton LLP has served as auditors for the Holding Company since 1997. A representative of Grant Thornton LLP is expected to be present at the Annual Meeting with the opportunity to make a statement if he so desires. He will also be available to respond to any appropriate questions shareholders may have. Grant Thornton LLP has been selected as the independent public accounting firm to audit the Holding Company's books, records and accounts for the fiscal year ended December 31, 2002. SHAREHOLDER PROPOSALS Any proposal which a shareholder wishes to have presented at the next Annual Meeting of the Holding Company and included in the Holding Company's proxy statement and form of proxy relating to that meeting, must be received at the main office of the Holding Company no later than 120 days in advance of March 6, 2003. Any such proposal should be sent to the attention of the Secretary of the Holding Company at 723 East Broadway, Logansport, Indiana 46947. A shareholder proposal being submitted outside the processes of Rule 14a-8 promulgated under the 1934 Act will be considered untimely if it is received by the Holding Company later than 60 days in advance of the Annual Meeting. If the Holding Company receives notice of such proposal after such time, each proxy that the Holding Company receives will confer upon it the discretionary authority to vote on the proposal in the manner the proxies deem appropriate. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended ("1934 Act"), requires that the Holding Company's officers and directors and persons who own more than 10% of the Holding Company's Common Stock file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Holding Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms received by it, and/or written representations from certain reporting persons that no Forms 5 were required for those persons, the Holding Company believes that for the fiscal year ended December 31, 2001, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners with respect to Section 16(a) of the 1934 Act were satisfied in a timely manner. OTHER MATTERS Management is not aware of any business to come before the Annual Meeting other than those matters described in the Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that the proxies solicited hereby will be voted with respect to those other matters in accordance with the judgment of the persons voting the proxies. The cost of solicitation of proxies will be borne by the Holding Company. The Holding Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to the beneficial owners of the Common Stock. In addition to solicitation by mail, directors, officers, and employees of the Holding Company may solicit proxies personally or by telephone without additional compensation. Each shareholder is urged to complete, date and sign the proxy and return it promptly in the enclosed envelope. By Order of the Board of Directors /s/ David G. Wihebrink David G. Wihebrink, President and Chief Executive Officer March 6, 2002 REVOCABLE PROXY LOGANSPORT FINANCIAL CORP. Annual Meeting of Shareholders April 9, 2002 The undersigned hereby appoints Sheila Wildermuth and Dottye Robeson, with full powers of substitution, to act as attorneys and proxies for the undersigned to vote all shares of common stock of Logansport Financial Corp. which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held at the office of Logansport Financial Corp. at 723 East Broadway, Logansport, Indiana, on Tuesday, April 9, 2002, at 2:00 P.M., and at any and all adjournments thereof, as follows: 1. The election as directors of the nominees listed below, except as marked to the contrary |_| FOR |_| VOTE WITHHELD INSTRUCTIONS: To withhold authority to vote for the nominee, strike a line through the nominee's name on the list below:
James P. Bauer Thomas G. Williams Charles J. Evans Todd S. Weinstein David G. Wihebrink (for a one-year term) (for a two-year term) (for a three-year term) (for a three-year term) (for a three-year term)
In their discretion, the proxies are authorized to vote on any other business that may properly come before the Meeting or any adjournment thereof. The Board of Directors recommends a vote `FOR" the listed proposition. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS This Proxy may be revoked at any time prior to the voting thereof. The undersigned acknowledges receipt from Logansport Financial Corp., prior to the execution of this Proxy, of Notice of the Meeting, a Proxy Statement and an Annual Report to Shareholders. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE DIRECTOR NOMINEE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. ____________________, 2002 -------------------------------------------- Signature of Shareholder -------------------------------------------- Signature of Shareholder Please sign as your name appears on the envelope in which this card was mailed. When signing as attorney, executor, administrator, trustee or guardian, please give your full title. If shares are held jointly, each holder should sign. EX-13 3 ex_13.txt SHAREHOLDER ANNUAL REPORT EXHIBIT 13 ---------- TABLE OF CONTENTS Page Directors and Officers 2 President's Message to Shareholders 3 Selected Consolidated Financial Data 4 Management's Discussion and Analysis 6 Report of Independent Certified Public Accountants 19 Consolidated Statements of Financial Condition 20 Consolidated Statements of Earnings 21 Consolidated Statements of Comprehensive Income 22 Consolidated Statements of Changes in Shareholders' Equity 23 Consolidated Statements of Cash Flows 24 Notes to Consolidated Financial Statements 26 BUSINESS OF LOGANSPORT FINANCIAL CORP. Logansport Financial Corp. ("Logansport Financial" or the "Company"), an Indiana corporation, became a unitary savings and loan holding company upon the conversion of Logansport Savings Bank, FSB (the "Bank") from a federal mutual savings bank to a federal stock savings bank in June 1995. The Company and the Bank conduct business from a single office in Logansport, Cass County, Indiana. The Bank is and historically has been among the top real estate mortgage lenders in Cass County and is the oldest financial institution headquartered in Cass County. The Bank offers a variety of retail deposit and lending services. The Company has no business activity other than being the holding company for the Bank. The Company is the sole shareholder of the Bank. MISSION STATEMENT "The Board of Directors, management and staff of Logansport Savings Bank are dedicated to serving the needs of our customers, providing them with the best possible service in an efficient, friendly, caring atmosphere. As a vital part of this community, Logansport Savings Bank seeks to continue partnering with local business and individuals. The customers, employees, and shareholders are an integral part of Logansport Savings Bank and are best served if the Bank remains an independent, locally controlled and operated, profitable financial institution." Logansport Financial Corp. DIRECTORS AND OFFICERS DIRECTORS Charles J. Evans (age 55) has served as Senior Vice President of Logansport Savings Bank, FSB since January 2000. Prior to that he served as Vice President and Senior Loan Officer of Logansport Savings Bank, FSB since 1980. Brian J. Morrill (age 44) is the founder and President of Cass County Title Company, Inc. The firm provides title insurance policies and real estate searches for lenders, realtors, attorneys, and the general public. Prior to founding Cass County Title Company, Morrill served for ten years as the Executive Director of the Cass County Family YMCA in Logansport, Indiana. Morrill has served on several community boards and in 2000 served as Chairman of the Logansport/Cass County Chamber of Commerce. Susanne S. Ridlen, Ph.D. (age 61) is a faculty member and Director of the Project Success Program for under-prepared students at Indiana University Kokomo. Dr. Ridlen has taught at IUK since 1969. She also serves on the Lilly Scholarship Committee for the Cass County Community Foundation. William Tincher, Jr. (age 62) has served as Plant Manager for the Modine Manufacturing Company ("Modine") since 1977. Modine is located in Logansport, Indiana, and manufactures automotive cooling systems. David G. Wihebrink (age 54) has served as President of Logansport Financial Corp. and Logansport Savings Bank since April 2000. Prior to that, he had served as Vice President and Chief Financial Officer of TM Morris Manufacturing Co., Inc. since 1988. Prior to his employment with Morris, Mr. Wihebrink was a member of the accounting firm Smith, Thompson & Wihebrink (Logansport) for 15 years. Mr. Wihebrink also currently serves as a member of the Board of Directors of the Neal Home retirement home in Logansport, Indiana; as a member of the Board of Directors of the North Central Indiana Workforce Investment Board and as a member of the Board of Directors of the Logansport/Cass County Chamber of Commerce. Thomas G. Williams (age 68) served as President of Logansport Savings Bank, FSB from 1971 until his retirement in April 2000. Dr. Todd S. Weinstein (age 40) is a member of the surgical staff at Logansport Memorial Hospital and has been a member of Logansport Surgical Associates since 1991. He serves on the Board of Trustees of Logansport Memorial Hospital and the Board of Directors of the Cass County Family YMCA. James P. Bauer (age 56) is the Vice President of Finance and Treasurer of Material Processing, Inc., a holding company for Small Parts, Inc. and ABC Metals. He serves on the Board of Directors of the Logansport Economic Development Foundation, Inc. and the United Way of Cass County, Inc. LOGANSPORT FINANCIAL CORP. LOGANSPORT SAVINGS BANK, FSB Officers Officers DAVID G. WIHEBRINK DAVID G. WIHEBRINK - President President and Chief Executive Officer CHARLES J. EVANS - Senior Vice President CHARLES J. EVANS DOTTYE ROBESON - Chief Financial Officer/ Vice President Secretary/Treasurer DOTTYE ROBESON ALLEN SCHIEBER - Senior Vice President Secretary/Treasurer JEFFREY JONES - Vice President SHEILA WILDERMUTH - Vice President MARK DEBARGE - Assistant Vice President KAY GAPSKI - Assistant Vice President TO OUR SHAREHOLDERS: On behalf of our employees and Board of Directors, I take great pleasure in presenting to you the 2001 Annual Report to Shareholders for Logansport Financial Corp. By any measure, 2001 was an exceptional year. The financial services industry, along with our country as a whole, was confronted with challenges and changes to our businesses and personal lives that were unprecedented. During 2001 the stock market tested and confirmed the value of our Bank. Although we were faced with these challenges and changes, we never lost focus on our commitment to deliver the maximum value to our shareholders, build careers for our employees and serve our customers - that mission remained constant in 2001. Logansport Financial Corp. has a simple plan for its success that consists of three goals: o Maximize the return to our shareholders o Enhance our products and provide the very best service to our customers o Develop our talents to provide greater opportunities for our employees We intend to use the talents and abilities of our employees to create a positive impact in our community and our current and future markets. The Bank and its employees are committed to community banking and continuing our focus on customer service. Since becoming a public company in 1995, Logansport Financial Corp. has maintained a steady record of earnings growth and dividend payments. In the year 2001, we were again able to achieve record earnings with a 10.2% increase over the year 2000. Earnings per diluted share were $1.27, representing a 9.5% increase over 2000. During 2001, a 10% stock repurchase was announced and approximately 60% of the repurchase was completed by the end of the year. By January 31, 2002, the remaining portion of the repurchase had been completed. The results of our performance are detailed in the report pages that follow this letter. We are committed to consistently improving our financial performance even in the face of the many challenges that we know await us in the future. We remain confident we are doing the right things and that our motto of "Leading The Way" speaks of our commitment to our shareholders, community and our employees. We want to thank our valued shareholders, customers and employees for their support, confidence, loyalty and commitment as we pursue our mission of providing community banking. Sincerely, /s/ David G. Wihebrink David G. Wihebrink President Logansport Financial Corp. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The following tables set forth certain information concerning Logansport Financial's consolidated financial position, results of operations and other data at the dates and for the periods indicated.
At December 31, Statement of Financial Condition Data: 2001 2000 1999 1998 1997 (In thousands) Total assets $138,065 $132,612 $117,468 $96,085 $86,115 Loans receivable, net 111,696 102,418 90,900 73,073 63,635 Mortgage-backed securities 4,419 5,165 5,898 8,129 9,932 Cash and cash equivalents 8,816 9,210 5,146 4,328 2,269 Investment securities 5,788 8,322 8,539 5,033 5,750 Deposits 83,900 79,454 76,011 70,011 60,595 Borrowings 35,915 35,237 24,307 8,375 8,025 Shareholders' equity - net 17,402 17,013 16,146 16,488 16,542 Year ended December 31, Summary of Operating Results: 2001 2000 1999 1998 1997 (In thousands, except share data) Interest income $9,831 $9,524 $7,599 $6,579 $6,101 Interest expense 5,696 5,597 4,043 3,476 3,115 ----- ----- ----- ----- ----- Net interest income 4,135 3,927 3,556 3,103 2,986 Provision for losses on loans 392 332 162 63 26 ------ ------ ------ ------- ------- Net interest income after provision for losses on loans 3,743 3,595 3,394 3,040 2,960 Other income 222 122 175 285 170 General, administrative and other expense 2,046 1,937 1,667 1,322 1,170 ----- ----- ----- ----- ----- Earnings before income taxes 1,919 1,780 1,902 2,003 1,960 Income taxes 521 511 678 756 728 ------ ------ ------ ------ ------ Net earnings $1,398 $1,269 $1,224 $1,247 $1,232 ===== ===== ===== ===== ===== Basic earnings per share $1.29 $1.16 $1.03 $1.00 $.98 ==== ==== ==== ==== === Diluted earnings per share $1.27 $1.16 $1.02 $.97 $.95 ==== ==== ==== === === Cash dividends per share $.48 $.44 $.44 $.43 $.40 === === === === === Footnotes on following page. Logansport Financial Corp. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (CONTINUED) At or for the year ended December 31, Supplemental Data: 2001 2000 1999 1998 1997 Return on assets (1) 1.03% 1.00% 1.14% 1.37% 1.50% Return on equity (2) 7.82 7.76 7.33 7.44 7.69 Interest rate spread (3) 2.55 2.57 2.86 2.70 2.94 Net yield on interest-earning assets (4) 3.23 3.27 3.54 3.61 3.86 General, administrative and other expense to average assets 1.50 1.53 1.55 1.45 1.42 Net interest income to general, administrative and other expense 202.10 202.74 213.32 234.72 255.21 Equity-to-assets (5) 12.60 12.83 13.75 17.16 19.21 Average interest-earning assets to average interest-bearing liabilities 115.21 115.39 117.20 122.72 123.36 Non-performing assets to total assets 1.41 .25 .57 .33 .62 Non-performing loans to total loans 1.72 .32 .72 .42 .67 Loan loss allowance to total loans 1.00 .73 .47 .38 .38 Loan loss allowance to non-performing loans 58.11 226.19 66.07 90.48 56.84 Dividend payout ratio 37.21 37.93 42.72 43.00 40.82 Net charge-offs to average loans .02 * * .03 .03
* Less than .01% - ---------------------------------- (1) Net earnings divided by average total assets. (2) Net earnings divided by average total equity. (3) Interest rate spread is calculated by subtracting combined weighted-average interest rate cost from combined weighted-average interest rate earned for the period indicated. (4) Net interest income divided by average interest-earning assets. (5) Total equity divided by total assets. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company was formed as part of the conversion of the Bank from a federal mutual savings bank to a federal stock savings bank, which was completed June 13, 1995. The Company has no activity other than being the holding company for the Bank. The principal business of savings associations, including the Bank, has historically consisted of attracting deposits from the general public and making loans secured by residential and other real estate. The Bank and all other savings associations are significantly affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing and financial institutions. Deposit flows are influenced by a number of factors, including interest rates paid on competing investments, account maturities and levels of personal income and savings. In addition, deposit growth is affected by how customers perceive the stability of the financial services industry amid various current events such as regulatory changes, failures of other financial institutions and financing of the deposit insurance fund. Lending activities are influenced by the demand for and supply of housing lenders, the availability and cost of funds and various other items. Sources of funds for lending activities of the Bank include deposits, borrowings, payments on loans and income provided from operations. The Bank's earnings are primarily dependent upon its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Interest income is a function of the balances of loans and investments outstanding during a given period and the yield earned on such loans and investments. Interest expense is a function of the amount of deposits and borrowings outstanding during the same period and interest rates paid on such deposits and borrowings. The Bank's earnings are also affected by provisions for losses on loans, service charges, operating expenses and income taxes. Forward-Looking Statements In the following pages, management presents an analysis of the Company's financial condition as of December 31, 2001, and the results of operations for the year ended December 31, 2001, as compared to prior periods. In addition to this historical information, 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 in the Company's general market area. Without limiting the foregoing, some of the forward-looking statements include the following: 1. Management's establishment of an allowance for loan losses and its statements regarding the adequacy of such allowance for loan losses. 2. Management's opinion as to the financial statement effect of recent accounting pronouncements. 3. Management's opinion as to the effect of changes in interest rates on the Company's results of operations. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Changes in Financial Condition from December 31, 2000 to December 31, 2001 The Company's total assets were $138.1 million at December 31, 2001, an increase of $5.5 million, or 4.1%, over the $132.6 million total at December 31, 2000. The increase in assets was funded primarily through growth in deposits of $4.4 million and an increase in borrowings of $750,000. The percentage of interest-earning assets to total assets was 95.3% and 95.4% at December 31, 2001 and 2000, respectively. At December 31, 2001, investment and mortgage-backed securities totaled $10.2 million, compared to $13.5 million at December 31, 2000, a decrease of $3.3 million, or 24.3%. The decrease was due to maturities and principal repayments totaling $5.1 million, which were partially offset by purchases of $1.6 million. The primary investments added to the portfolio were Federal Home Loan Bank ("FHLB") and FNMA fixed rate notes and mortgage-backed securities. At December 31, 2001, the Company held $731,000 of corporate obligations, which consisted of debt of domestic corporations rated AA or better by Moody's Investors Service, Inc. Loans receivable totaled $111.7 million at December 31, 2001, an increase of $9.3 million, or 9.1%, over December 31, 2000. The increase in loans receivable was due primarily to loan disbursements totaling $61.1 million, which were partially offset by principal repayments of $51.4 million. Loan origination volume during 2001 exceeded that of 2000 by $9.4 million, or 18.2%. The increase occurred in loans secured by nonresidential real estate, commercial loans and loans secured by one- to four-family residential real estate. Loans secured by nonresidential real estate and commercial loans and leases increased by $9.4 million, or 41.6%, and one- to four-family mortgage loans increased by $1.6 million, or 2.5%. The increase in loans was funded primarily by the increase in deposits and advances and the use of excess cash. During 1997, the Company invested $1.5 million in a limited partnership, which constructs and manages residential real estate apartments for low and moderate-income residents. This investment reflects a 49.5% participation in the partnership. The affordable housing project generates tax credits for the Bank. This investment initially resulted in an increase to total assets of $1.5 million with a corresponding increase in notes payable. During the three years ended December 31, 2001, the Bank recorded pretax losses from the housing project of totaling $572,000, while realizing cumulative tax credits of $364,000. Deposits totaled $83.9 million at December 31, 2001, an increase of $4.4 million, or 5.6%, over December 31, 2000. Non-interest bearing deposits, NOW accounts, passbook savings and money market savings increased by $3.6 million, or 12.6%, while certificates of deposit increased by $847,000. At December 31, 2001, borrowings consisted of $34.8 million in FHLB advances compared to $34.0 million in FHLB advances at December 31, 2000, an increase of $750,000, or 2.2%. The increase in deposits and borrowings was used primarily to fund growth in loans during the year. Shareholders' equity totaled $17.4 million at December 31, 2001, an increase of $389,000, or 2.3%, over December 31, 2000. The increase was due primarily to net earnings for the year ended December 31, 2001, of $1.4 million, an increase in unrealized gains on available for sale securities of $180,000 and proceeds from the exercise of stock options of $163,000, which were partially offset by dividends totaling $516,000 and common stock repurchases totaling $921,000. Comparison of Results of Operations for the Years Ended December 31, 2001 and 2000 Net earnings totaled $1.4 million for the year ended December 31, 2001, a $129,000, or 10.2%, increase over the net earnings reported for 2000. The increase in net earnings resulted primarily from an increase of $208,000 in net interest income and an increase of $100,000 in other income, which were partially offset by an increase of $60,000 in the provision for losses on loans, an increase of $109,000 in general, administrative and other expense and an increase in the provision for income taxes of $10,000. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Results of Operations for the Years Ended December 31, 2001 and 2000 (continued) Interest Income The Company's total interest income was $9.8 million for the year ended December 31, 2001, compared to $9.5 million during 2000, an increase of $307,000, or 3.2%. The $8.3 million, or 6.8%, increase in average interest-earning assets, from $121.5 million in 2000 to $129.8 million in 2001, was offset by a 27 basis point decrease in the average yield on interest-earning assets, to 7.61% in 2001 compared to 7.88% in 2000. Interest income on loans increased by $680,000, or 8.5%, due primarily to a $10.8 million, or 10.9%, increase in the average balance of loans outstanding, which was partially offset by an 18 basis point decrease in the average yield year to year, to 8.00% in 2001. Interest income on investment and mortgage-backed securities and other interest-bearing deposits decreased by $373,000, or 25.2%, due primarily to a $2.5 million, or 10.7%, decrease in the average balance outstanding and a 96 basis point decline in the average yield, to 5.66% in 2001. Interest Expense Interest expense totaled $5.7 million for the year ended December 31, 2001, an increase of $99,000, or 1.8%, compared to 2000. This increase was the result of an increase in the average balance of interest-bearing liabilities of $7.4 million, or 7.0%, offset by a decrease in the average cost of these liabilities of 25 basis points, from 5.31% in 2000 to 5.06% in 2001. Interest expense on deposits decreased by $230,000, or 5.9%, due primarily to a 34 basis point decline in the average cost of deposits, to 4.69% in 2001, which was partially offset by a $683,000, or .9%, increase in the average balance of deposits outstanding year to year. Interest expense on borrowings increased by $329,000, or 19.5%, due primarily to a $6.7 million, or 24.2%, increase in the average balance outstanding, which was partially offset by a 23 basis point decrease in the average cost of borrowings year to year. The decreases in the level of yields on interest-earning assets and the cost of interest-bearing liabilities were due primarily to the overall decrease in interest rates in the economy during 2001. Net Interest Income Net interest income increased by $208,000, or 5.3%, to $4.1 million in 2001, compared to $3.9 million in 2000. The interest rate spread was 2.55% in 2001 compared to 2.57% in 2000, and the net yield on weighted-average interest-earning assets declined to 3.23% in 2001 from 3.27% in 2000. Provision for Losses on Loans 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 Company's provision for losses on loans was $392,000 and $332,000, for the years ended December 31, 2001 and 2000, respectively. The current period provision was predicated primarily upon the increase in the volume of loans secured by nonresidential and commercial real estate and the increase in nonperforming loans year to year. At December 31, 2001 and 2000, the allowance amounted to $1.1 million and $760,000, respectively, for a ratio to total loans of 1.00% in 2001 and .73% in 2000. Non-performing loans at December 31, 2001 and 2000 were $1.9 million and $336,000, respectively. The ratio of the allowance for loan losses to non-performing loans decreased from 226.2% at December 31, 2000 to 58.1% at December 31, 2001. Based on management's review of the loan portfolio during these years, the allowance for loan losses at December 31, 2001 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. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Results of Operations for the Years Ended December 31, 2001 and 2000 (continued) Other Income The Company's other income for the year ended December 31, 2001, excluding the loss on equity investments, was $429,000, compared to $366,000 in 2000. The increase was due primarily to a $78,000, or 48.8%, increase in service charges on deposit accounts. The $207,000 loss on equity investments recorded in 2001 had a positive after-tax effect of approximately $45,000 when considering the tax benefit and the available tax credits generated by the project. General, Administrative and Other Expense General, administrative and other expense totaled $2.0 million for the year ended December 31, 2001, compared to $1.9 million in 2000, an increase of $109,000, or 5.6%. Employee compensation and benefits decreased by $14,000, or 1.2%, due primarily to a $96,000 reduction in expense related to the stock-based RRP plan, which expired in April 2001. This decrease was partially offset by normal merit increases and an increase in officer and employee bonus expenses year to year. Occupancy and equipment expense increased by $34,000, or 17.3%, mainly because of an increase in property taxes and an increase in depreciation of new equipment required for the new building. Data processing fees increased by $20,000, or 12.3%, due primarily to increased account volume and additional commercial loan software maintenance costs. Various other operating expenses increased by $70,000, or 16.2%. The majority of the increase was related to additional operating costs associated with increased account volume, new services, consulting fees and office supplies, all of which were primarily related to the new building. Income Tax Expense Income tax expense totaled $521,000 and $511,000 for the years ended December 31, 2001 and 2000, respectively. Pretax income increased by $139,000, or 7.8%, in 2001 compared to 2000, while approximately $182,000 of tax credits were available in 2001, compared to $142,000 in tax credits recorded in 2000. The effective tax rates were 27.1% and 28.7% for the years ended December 31, 2001 and 2000, respectively. Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999 Net earnings totaled $1.3 million for the year ended December 31, 2000, a $45,000, or 3.7%, increase over the net earnings reported for 1999. The increase in net earnings resulted primarily from an increase of $371,000 in net interest income and a decrease of $167,000 in the provision for income taxes, which were partially offset by an increase of $170,000 in the provision for losses on loans, a decrease of $53,000 in other income and an increase of $270,000 in general, administrative and other expense. Interest Income The Company's total interest income was $9.5 million for the year ended December 31, 2000, compared to $7.6 million during 1999, an increase of $1.9 million, or 25.3%. The increase in average interest-earning assets from $101.4 million in 1999 to $121.5 million in 2000 helped contribute to the increase. In addition, increasing loan rates contributed to a 35 basis point increase in the average yield on interest-earning assets, to 7.88% in 2000 compared to 7.53% in 1999. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999 (continued) Interest Expense Interest expense increased by $1.6 million, or 38.4%, for the year ended December 31, 2000, compared to 1999. This increase was the result of an increase in the average balance of interest-bearing liabilities of $18.8 million, or 21.8%, and an increase in the average cost of these liabilities of 64 basis points, from 4.67% during 1999 to 5.31% in 2000. Local competition resulted in pressure to maintain competitive rates on deposits, while use of FHLB advances also increased the cost of interest-bearing liabilities. Net Interest Income Net interest income increased by $371,000, or 10.4%, to $3.9 million in 2000, compared to $3.6 million in 1999. The interest rate spread was 2.57% for 2000, compared to 2.86% for 1999. The net yield on weighted-average interest-earning assets declined in 2000 to 3.27%, from 3.54% in 1999. Provision for Losses on Loans 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 economic conditions in the Company's market area. The Company's provision for losses on loans was $332,000 and $162,000 for the years ended December 31, 2000 and 1999 respectively. A larger provision was recorded in 2000 due to the increase in the volume of loans secured by nonresidential and commercial real estate. At December 31, 2000 and 1999, the allowance amounted to $760,000 and $440,000, respectively, for a ratio to total loans of .73% in 2000 and .47% in 1999. Non-performing loans at these dates were $336,000 and $666,000, respectively. The ratio of allowance for loan losses to non-performing loans increased from 66.1% at December 31, 1999 to 226.2% at December 31, 2000. Based on management's review of the loan portfolio during these years, the allowance for loan losses at December 31, 2000 was considered adequate to cover potential losses inherent in the loan portfolio. Other Income The Company's other income for the year ended December 31, 2000, excluding the loss on equity investments, was $366,000, compared to $296,000 in 1999, an increase of $70,000, or 23.6%. The increase was due primarily to a $21,000, or 15.1%, increase in service charges on deposit accounts and a $66,000, or 42.0%, increase in other operating income. The $244,000 loss on equity investments recorded in 2000 had an after-tax loss effect of approximately $19,000 when considering the tax benefit and the available tax credits generated by the project. General, Administrative and Other Expense General, administrative and other expense totaled $1.9 million for the year ended December 31, 2000, compared to $1.7 million in 1999, an increase of $270,000, or 16.2%. Employee compensation and benefits increased by $203,000, or 21.9%, due primarily to additional personnel. Data processing fees increased by $16,000, or 10.9%, due primarily to increased account volume and additional commercial loan software maintenance costs. Various other operating expenses increased by $76,000, or 13.7%, which were partially offset by a $25,000, or 61.0%, decrease in federal deposit insurance premiums. The majority of the increase was related to additional operating costs associated with increased account volume, new services, consulting fees and office supplies, all of which were primarily related to the new building and additional personnel. The decrease in federal deposit insurance premiums was due to a reduction in premium rates year to year. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999 (continued) Income Tax Expense Income tax expense totaled $511,000 and $678,000 for the years ended December 31, 2000 and 1999, respectively, a decrease of $167,000, or 24.6%. Pretax income decreased by $122,000, or 6.4%, in 2000 compared to 1999, and approximately $142,000 of tax credits were available in 2000, which resulted in a corresponding decrease in income tax expense. The effective tax rates were 28.7% and 35.6% for the years ended December 31, 2000 and 1999, respectively. AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA The following table presents for the periods indicated the month-end average balances of each category of the Company's interest-earning assets and interest-bearing liabilities, and the average yields earned and interest rates paid on such balances. Such yields and costs are determined by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented.
Year ended December 31, 2001 2000 1999 Average Interest Average Interest Average Interest outstanding earned/ Yield/ outstanding earned/ Yield/ outstanding earned/ Yield/ balance paid rate balance paid rate balance paid rate (Dollars in thousands) Interest-earning assets: Interest-earning deposits $ 7,271 $ 261 3.59% $ 5,656 $ 301 5.32% $ 4,571 $ 205 4.48% Mortgage- and other asset- backed securities(1) 4,791 297 6.20 5,697 383 6.72 7,032 421 5.99 Other investment securities(1) 6,694 457 6.83 10,283 721 7.01 6,820 453 6.64 Loans receivable(2) 109,075 8,721 8.00 98,320 8,041 8.18 82,091 6,484 7.90 Stock in FHLB of Indianapolis 1,973 147 7.45 1,571 130 8.27 864 69 7.99 --------- ------ --------- ------ --------- ------- Total interest-earning assets 129,804 9,883 7.61 121,527 9,576 7.88 101,378 7,632 7.53 Non-interest-earning assets 6,306 5,442 6,446 --------- --------- -------- Total assets $136,110 $126,969 $107,824 ======= ======= ======= Interest-bearing liabilities: Savings accounts $ 3,993 100 2.50 $ 3,417 103 3.01 $ 3,260 98 3.01 NOW and money market accounts 23,023 718 3.12 23,814 886 3.72 25,735 930 3.61 Certificates of deposit 51,405 2,859 5.56 50,507 2,918 5.78 43,059 2,291 5.32 Borrowings 34,245 2,019 5.90 27,577 1,690 6.13 14,446 724 5.01 -------- ----- -------- ----- ------ ------ Total interest-bearing liabilities 112,666 5,696 5.06 105,315 5,597 5.31 86,500 4,043 4.67 ----- ------ ----- ------ ----- ------ Other liabilities 5,562 5,304 4,629 --------- --------- -------- Total liabilities 118,228 110,619 91,129 Shareholders' equity 17,882 16,350 16,695 -------- -------- ------- Total liabilities and shareholders' equity $136,110 $126,969 $107,824 ======= ======= ======= Net interest-earning assets $ 17,138 $ 16,212 $ 14,878 ======== ======== ======== Net interest income $4,187 $3,979 $3,589 ===== ===== ====== Interest rate spread (3) 2.55% 2.57% 2.86% ====== ====== ==== Net yield on weighted-average interest-earning assets (4) 3.23% 3.27% 3.54% ====== ====== ==== Average interest-earning assets to average interest-bearing liabilities 115.21% 115.39% 117.20% ====== ====== ====== Adjustment of interest on tax-exempt securities to a tax-equivalent basis $ 52 $ 52 $ 33 ======= ======= =====
- --------------------------- (1) Includes securities available for sale at amortized cost prior to SFAS No. 115 adjustments. (2) Comprised of total loans less undisbursed loans in process. (3) Interest rate spread is calculated by subtracting weighted-average interest rate cost from weighted-average interest rate yield for the period indicated. (4) The net yield on weighted-average interest-earning assets is calculated by dividing net interest income by weighted-average interest-earning assets for the period indicated. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Rate/Volume Table The table below describes the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected the Company's interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume) and (iii) total changes in rate and volume. The combined effects of changes in both volume and rate, which cannot be separately identified, have been allocated proportionately to the change due to volume and the change due to rate.
Year ended December 31, 2001 vs. 2000 2000 vs. 1999 Increase Increase (decrease) (decrease) due to due to Volume Rate Total Volume Rate Total (In thousands) Interest-earning assets: Interest-earning deposits $ 298 $ (338) $ (40) $ 54 $ 42 $ 96 Mortgage-backed securities (52) (34) (86) (86) 48 (38) Investment securities (260) (4) (264) 242 26 268 Loans receivable 864 (184) 680 1,320 237 1,557 Stock in FHLB of Indianapolis 28 (11) 17 58 3 61 ------- ------- ---- ------- ----- ------- Total interest-earning assets 878 (571) 307 1,588 356 1,944 Interest-bearing liabilities: Savings accounts 831 (834) (3) 5 - 5 NOW and money market accounts (31) (137) (168) (71) 27 (44) Certificates of deposit 54 (113) (59) 419 208 627 Borrowings 390 (61) 329 776 190 966 ------ ------- --- ------ --- ------ Total interest-bearing liabilities 1,244 (1,145) 99 1,129 425 1,554 ----- ----- ---- ----- --- ----- Change in net interest income (fully taxable equivalent basis) (367) 575 208 459 (69) 390 Tax equivalent adjustment - - - (18) (1) (19) ----- ----- ---- ------- ----- ------- Change in net interest income $ (367) $ 575 $208 $ 441 $ (70) $ 371 ====== ====== === ====== ==== ======
Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Rate/Volume Table (continued) The Company's results of operations have been determined primarily by net interest income and, to a lesser extent, fee income, miscellaneous income and general and administrative expenses. Net interest income is determined by the interest rate spread between the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities and by the relative amounts of interest-earning assets and interest-bearing liabilities. The following table sets forth the weighted-average effective interest rate earned by the Company on its loan and investment portfolio, the weighted-average effective costs of the Company's deposits and borrowings, the interest rate spread of the Company, and the net yield on weighted-average interest-earning assets for the periods and as of the date shown. Average balances are based on month-end average balances.
At December 31, Year Ended December 31, 2001 2001 2000 1999 Weighted-average interest rate earned on: Interest-earning deposits 1.35% 3.59% 5.32% 4.48% Mortgage-backed securities 5.92 6.20 6.72 5.99 Investment securities 6.60 6.83 7.01 6.64 Loans receivable 7.59 8.00 8.18 7.90 Stock in FHLB of Indianapolis 6.80 7.45 8.27 7.99 Total interest-earning assets 7.12 7.61 7.88 7.53 Weighted-average interest rate cost of: Savings accounts 2.43 2.50 3.01 3.01 NOW and money market accounts 2.15 3.12 3.72 3.61 Certificates of deposit 4.91 5.56 5.78 5.32 Borrowings 5.39 5.90 6.13 5.01 Total interest-bearing liabilities 4.37 5.06 5.31 4.67 Interest rate spread (1) 2.75 2.55 2.57 2.86 Net yield on weighted-average interest-earning assets (2) N/A 3.23 3.27 3.54
- ------------------------------ (1) Interest rate spread is calculated by subtracting weighted-average interest rate cost from weighted-average interest rate earned for the period indicated. Interest rate spread figures must be considered in light of the relationship between the amounts of interest-earning assets and interest-bearing liabilities. Since the Company's interest-earning assets exceeded its interest-bearing liabilities for each of the three years shown above, a positive interest rate spread resulted in net interest income. (2) The net yield on weighted-average interest-earning assets is calculated by dividing net interest income by weighted-average interest-earning assets for the period indicated. No net yield percentage is presented at December 31, 2001, because the computation of net yield is applicable only over a period rather than at a specific date. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Asset/Liability Management 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 September 30, 2001 (the latest available date) and December 31, 2000 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 decline due to the rate increases. The value of the Bank's deposits and borrowings change in approximately the same proportion in rising or falling rate scenarios.
September 30, 2001 Change in interest rate Net Portfolio Value NPV as % of PV of Assets (Basis Points) $ Amount $ Change % Change NPV Ratio Change (In thousands) +300 $13,376 $(4,215) (24)% 10.00% (241 bp) +200 15,087 (2,504) (14) 11.05 (136 bp) +100 16,546 (1,045) (6) 11.89 (52 bp) - 17,591 - - 12.41 - -100 17,774 183 1 12.36 (5 bp) -200 17,504 (87) - 12.02 (39 bp) -300 - - - - -
Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Asset and Liability Management (continued)
December 30, 2000 Change in interest rate Net Portfolio Value NPV as % of PV of Assets (Basis Points) $ Amount $ Change % Change NPV Ratio Change (In thousands) +300 $12,013 $(5,986) (33)% 9.49% (395 bp) +200 14,618 (3,381) (19) 11.27 (217 bp) +100 16,476 (1,523) (8) 12.49 (95 bp) - 17,999 - - 13.44 - -100 19,081 1,082 6 14.09 65 bp -200 20,210 2,211 12 14.75 131 bp -300 21,696 3,697 21 15.61 217 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 of 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 assets. Further, in the event of a change in interest rates, expected rates of prepayment on loans and early withdrawal from certificates could likely deviate significantly from those assumed in calculating the table. Liquidity and Capital Resources The Company's primary sources of funds are deposits and borrowings, proceeds from principal and interest payments on loans, and proceeds from maturing securities. While maturities and scheduled amortization of loans are a relatively predictable source of funds, deposit flows and mortgage prepayments are generally influenced by general interest rates, economic conditions and competition. The primary investing activity of the Company is the origination of mortgage loans and the purchase of investment securities. During the years ended December 31, 2001, 2000 and 1999, the Company originated mortgage loans and commercial loans in the amounts of $54.3 million, $43.2 million and $36.6 million, respectively. The Company originated consumer loans of $6.8 million, $8.5 million and $7.8 million, in 2001, 2000 and 1999, respectively. The Company purchased loans in the amount of $499,000 in 2001 and $981,000 in 1999. No loans were purchased in 2000. Loan repayments totaled $51.4 million, $39.8 million and $27.4 million for 2001, 2000 and 1999, respectively. During the years ended December 31, 2001, 2000 and 1999, the Company purchased investment securities in the amounts of $1.6 million, $4.1 million and $4.9 million, respectively. Sales or maturities of such securities held by the Company and payments on mortgage-backed or other asset-backed securities totaled $5.1 million, $5.6 million and $2.8 million for 2001, 2000 and 1999, respectively. Deposits grew by $4.4 million from December 31, 2000 to December 31, 2001, and by $3.4 million from December 31, 1999 to December 31, 2000. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (continued) Cash and cash equivalents decreased by $394,000 from December 31, 2000 to December 31, 2001, and increased by $4.1 million from December 31, 1999 to December 31, 2000. The Company had outstanding loan commitments, including undisbursed loans in process and standby letters of credit, totaling $13.9 million and $12.8 million, at December 31, 2001 and 2000, respectively. The Company anticipates that it will have sufficient funds available to meet its current loan commitments. Certificates of deposit that are scheduled to mature in one year or less from December 31, 2001 and 2000 totaled $31.6 million and $39.3 million, respectively. Based upon historical deposit flow data, the Company's competitive pricing in its market and management's experience, management believes that a significant portion of such deposits will remain with the Company. Liquidity management is both a daily and long-term function of the Company's management strategy. In the event that the Company should require funds beyond its ability to generate them internally, additional funds are available through the use of FHLB advances, and also may be available through sales of securities, although no sales of securities are planned. At December 31, 2001 and 2000, the Company had outstanding FHLB advances of $34.8 million and $34.0 million, respectively. Pursuant to OTS capital regulations, savings associations must currently meet a 1.5% tangible capital requirement, a 4.0% leverage ratio (or core capital) requirement, and a total risk-based capital to risk-weighted assets ratio of 8.0%. At December 31, 2001, the Bank's tangible capital and leverage ratios were both 11.7%, and its risk-based capital to risk-weighted assets ratio was 16.9%. Therefore, at December 31, 2001, 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 December 31, 2001.
OTS Requirement The Bank's Capital Level % of % of Amount Assets Amount Assets (1) Amount of excess (Dollars in thousands) Tangible capital 1.5% $2,066 11.7% $16,109 $14,043 Core capital (2) 4.0 5,508 11.7 16,109 10,601 Risk-based capital 8.0 8,166 16.9 17,241 (3) 9,075
- ---------------------------- (1) Tangible and core capital levels are shown as a percentage of total assets; risk-based capital levels are shown as a percentage of risk-weighted assets. (2) During 1999, the OTS adopted a core capital requirement for savings associations comparable to that recently adopted by the Comptroller of the Currency for national banks. The new regulation requires at least 3% of total adjusted assets for savings associations that received the highest supervisory rating for safety and soundness, and 4% for all other savings associations. (3) The Bank's risk-based capital includes $1.1 million of general valuation allowances. Logansport Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (continued) As of December 31, 2001, management is not aware of any current recommendations by regulatory authorities which, if they were to be implemented, would have, or are reasonably likely to have, a material adverse effect on the Bank's liquidity, capital resources or results of operations. Effects of Recent Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," which requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method. The pooling-of-interests method of accounting is prohibited except for combinations initiated before June 30, 2001. The remaining provisions of SFAS No. 141 relating to business combinations accounted for by the purchase method, including identification of intangible assets, accounting for negative goodwill, financial statement presentation and disclosure, are effective for combinations completed after June 30, 2001. Management adopted SFAS No. 141 effective July 1, 2001, as required, without material effect on the Company's financial position or results of operations. In June 2001, the FASB issued 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. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, and is not expected to have a material effect on the Company's financial position or results of operations. Report of Independent Certified Public Accountants Board of Directors Logansport Financial Corp. We have audited the accompanying consolidated statements of financial condition of Logansport Financial Corp. as of December 31, 2001 and 2000, and the related consolidated statements of earnings, shareholders' equity, comprehensive income and cash flows for each of the years in the three year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Logansport Financial Corp. as of December 31, 2001 and 2000, and the consolidated results of its operations, comprehensive income and cash flows for each of the years in the three year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ Grant Thornton LLP Cincinnati, Ohio February 19, 2002 Logansport Financial Corp. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, (In thousands, except share data)
ASSETS 2001 2000 Cash and due from banks $ 1,081 $ 576 Interest-bearing deposits in other financial institutions 7,735 8,634 --------- --------- Cash and cash equivalents 8,816 9,210 Investment securities designated as available for sale - at market 5,788 8,322 Mortgage-backed securities designated as available for sale - at market 4,419 5,165 Loans receivable - net 111,696 102,418 Office premises and equipment - at depreciated cost 1,803 1,843 Real estate acquired through foreclosure 65 - Federal Home Loan Bank stock - at cost 1,973 1,973 Investment in real estate partnership 1,109 1,284 Accrued interest receivable on loans 445 548 Accrued interest receivable on mortgage-backed securities 28 41 Accrued interest receivable on investments and interest-bearing deposits 92 107 Prepaid expenses and other assets 88 64 Cash surrender value of life insurance 1,291 1,234 Deferred income tax asset 452 403 ---------- ---------- Total assets $138,065 $132,612 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 83,900 $ 79,454 Advances from the Federal Home Loan Bank 34,750 34,000 Notes payable 1,165 1,237 Accrued interest and other liabilities 819 906 Accrued income taxes 29 2 ----------- ------------ Total liabilities 120,663 115,599 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; 1,034,545 and 1,083,510 shares at aggregate value issued and outstanding at December 31, 2001 and 2000, respectively 4,802 5,515 Retained earnings - restricted 12,408 11,526 Less shares acquired by stock benefit plan (63) (103) Accumulated comprehensive income, unrealized gains on securities designated as available for sale, net of related tax effects 255 75 ---------- ----------- Total shareholders' equity 17,402 17,013 -------- -------- Total liabilities and shareholders' equity $138,065 $132,612 ======= =======
The accompanying notes are an integral part of these statements. Logansport Financial Corp. CONSOLIDATED STATEMENTS OF EARNINGS For the year ended December 31, (In thousands, except share data)
2001 2000 1999 Interest income Loans $8,721 $8,041 $6,484 Investment securities 405 667 420 Mortgage-backed securities 297 383 421 Interest-bearing deposits and other 408 433 274 ------ ------ ------ Total interest income 9,831 9,524 7,599 Interest expense Deposits 3,677 3,907 3,319 Borrowings 2,019 1,690 724 ----- ----- ------ Total interest expense 5,696 5,597 4,043 ----- ----- ----- Net interest income 4,135 3,927 3,556 Provision for losses on loans 392 332 162 ------ ------ ------ Net interest income after provision for losses on loans 3,743 3,595 3,394 Other income Service charges on deposit accounts 238 160 139 Loss on sale of investment and mortgage-backed securities - (17) - Loss on investment in real estate partnership (207) (244) (121) Other operating 191 223 157 ------ ------ ------ Total other income 222 122 175 General, administrative and other expense Employee compensation and benefits 1,115 1,129 926 Occupancy and equipment 230 196 163 Federal deposit insurance premiums 15 16 41 Data processing 183 163 147 Other operating 503 433 390 ------ ------ ------ Total general, administrative and other expense 2,046 1,937 1,667 ----- ----- ----- Earnings before income taxes 1,919 1,780 1,902 Income taxes Current 662 649 706 Deferred (141) (138) (28) ------ ------ ------- Total income taxes 521 511 678 ------ ------ ------ NET EARNINGS $1,398 $1,269 $1,224 ===== ===== ===== EARNINGS PER SHARE Basic $1.29 $1.16 $1.03 ==== ==== ==== Diluted $1.27 $1.16 $1.02 ==== ==== ====
The accompanying notes are an integral part of these statements. Logansport Financial Corp. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the year ended December 31, (In thousands)
2001 2000 1999 Net earnings $1,398 $1,269 $1,224 Other comprehensive income (loss), net of tax: Unrealized holding gains (losses) on securities during the period, net of taxes (benefits) of $93, $202 and $(249) for the years ended December 31, 2001, 2000 and 1999, respectively 180 392 (483) Reclassification adjustment for realized losses included in earnings, net of tax benefit of $6 for the year ended December 31, 2000 - 11 - ----- ------- ----- Comprehensive income $1,578 $1,672 $ 741 ===== ===== ====== Accumulated comprehensive income (loss) $ 255 $ 75 $ (328) ====== ======= ======
The accompanying notes are an integral part of these statements. Logansport Financial Corp. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31, 2001, 2000 and 1999 (In thousands, except share data)
Unrealized Shares gains (losses) acquired on securities by stock designated as Common Retained benefit available stock earnings plan for sale Total Balance at January 1, 1999 $6,670 $10,031 $(368) $155 $16,488 Net earnings for the year ended December 31, 1999 - 1,224 - - 1,224 Purchase of shares (696) - - - (696) Issuance of shares under stock option plan 5 - - - 5 Unrealized losses on securities designated as available for sale, net of related tax effects - - - (483) (483) Amortization expense of stock benefit plan - - 129 - 129 Cash dividends of $.44 per share - (521) - - (521) ----- -------- --- --- ------- Balance at December 31, 1999 5,979 10,734 (239) (328) 16,146 Net earnings for the year ended December 31, 2000 - 1,269 - - 1,269 Purchase of shares (464) - - - (464) Unrealized gains on securities designated as available for sale, net of related tax effects - - - 403 403 Amortization expense of stock benefit plan - - 136 - 136 Cash dividends of $.44 per share - (477) - - (477) ----- -------- --- --- ------ Balance at December 31, 2000 5,515 11,526 (103) 75 17,013 Net earnings for the year ended December 31, 2001 - 1,398 - - 1,398 Purchase of shares (921) - - - (921) Issuance of shares under stock option plan 163 - - - 163 Unrealized gains on securities designated as available for sale, net of related tax effects - - - 180 180 Amortization expense of stock benefit plan 45 - 40 - 85 Cash dividends of $.48 per share - (516) - - (516) ----- -------- --- --- ------ Balance at December 31, 2001 $4,802 $12,408 $ (63) $255 $17,402 ===== ====== ===== === ======
The accompanying notes are an integral part of these statements. Logansport Financial Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, (In thousands)
2001 2000 1999 Cash flows from operating activities: Net earnings for the year $ 1,398 $ 1,269 $ 1,224 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 99 110 81 Amortization of premiums on investments and mortgage-backed securities 31 26 95 Amortization expense of stock benefit plan 85 136 129 Loss on sale of investment and mortgage-backed securities - 17 - Provision for losses on loans 392 332 162 Loss on investment in real estate partnership 207 244 121 Increase (decrease) in cash, due to changes in: Accrued interest receivable on loans 103 (132) (79) Accrued interest receivable on mortgage-backed securities 13 6 19 Accrued interest receivable on investments 15 8 (53) Prepaid expenses and other assets (24) (19) (9) Accrued interest and other liabilities (87) (98) (207) Federal income taxes Current 27 48 (17) Deferred (141) (138) (28) -------- -------- --------- Net cash provided by operating activities 2,118 1,809 1,438 Cash flows provided by (used in) investing activities: Proceeds from sale of investment securities designated as available for sale - 3,965 - Purchase of investment securities designated as available for sale (1,053) (4,082) (4,925) Maturities of investment securities designated as available for sale 3,775 800 875 Purchase of mortgage-backed securities designated as available for sale (514) - - Principal repayments on mortgage-backed securities designated as available for sale 1,313 834 1,948 Purchase of loans (499) - (981) Sales of loan participations 416 - - Loan disbursements (61,082) (51,693) (44,410) Principal repayments on loans 51,430 39,843 27,402 Investment in real estate partnership (104) (113) (108) Purchases of and additions to office premises and equipment (59) (51) (455) Purchase of Federal Home Loan Bank stock - (700) (705) Increase in cash surrender value of life insurance policy (57) (50) (49) --------- --------- --------- Net cash used in investing activities (6,434) (11,247) (21,408) ------- ------ ------ Net cash used in operating and investing activities (subtotal carried forward) (4,316) (9,438) (19,970) ------- ------- ------
Logansport Financial Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the year ended December 31, (In thousands)
2001 2000 1999 Net cash used in operating and investing activities (subtotal brought forward) $ (4,316) $ (9,438) $ (19,970) Cash flows provided by (used in) financing activities: Net increase in deposit accounts 4,446 3,443 6,000 Proceeds from Federal Home Loan Bank advances 12,750 33,000 31,000 Repayment of Federal Home Loan Bank advances (12,000) (22,000) (15,000) Proceeds from the exercise of stock options 163 - 5 Dividends on common stock (516) (477) (521) Purchase of shares (921) (464) (696) -------- -------- --------- Net cash provided by financing activities 3,922 13,502 20,788 ------- ------ ------- Net increase (decrease) in cash and cash equivalents (394) 4,064 818 Cash and cash equivalents at beginning of year 9,210 5,146 4,328 ------- ------- -------- Cash and cash equivalents at end of year $ 8,816 $ 9,210 $ 5,146 ======= ======= ======== Supplemental disclosure of cash flow information: Cash paid during the year for: Income taxes $ 590 $ 629 $ 724 ======= ======= ======== Interest on deposits and borrowings $ 5,719 $ 5,449 $ 4,054 ======= ======= ======== Supplemental disclosure of noncash investing and financing activities: Transfers from loans to real estate acquired through foreclosure $ 65 $ - $ - ======= ======= ======== Unrealized gains (losses) on securities designated as available for sale, net of related tax effects $ 180 $ 403 $ (483) ======= ======= ========
The accompanying notes are an integral part of these statements. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES Logansport Financial Corp. (the "Corporation") is a savings and loan holding company whose activities are primarily limited to holding the common stock of Logansport Savings Bank, FSB (the "Savings Bank"). The Savings Bank conducts a general banking business in north-central Indiana which consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and nonresidential purposes. The Savings Bank's profitability is significantly dependent on its net interest income, which is the difference between interest income generated from interest-earning assets (i.e. loans and investments) and the interest expense paid on interest-bearing liabilities (i.e. customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Savings Bank can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management's control. The financial information presented herein has been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and general accounting practices within the financial services industry. In preparing consolidated financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates. The following is a summary of the Corporation's significant accounting policies, which have been consistently applied in the preparation of the accompanying consolidated financial statements. 1. Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its subsidiary, the Savings Bank. All significant intercompany balances and transactions have been eliminated. 2. Investment and Mortgage-backed Securities The Corporation accounts for investments and mortgage-backed securities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires that investments be categorized as held-to-maturity, trading, or available for sale. Securities classified as held to maturity are carried at cost only if the Corporation has the positive intent and ability to hold these securities to maturity. Trading securities and securities available for sale are carried at fair value with resulting unrealized gains or losses recorded to operations or shareholders' equity, respectively. At December 31, 2001 and 2000, the Corporation had designated all investment and mortgage-backed securities as available for sale. Realized gains and losses on sales of securities are recognized using the specific identification method. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 3. Loans Receivable Loans receivable are stated at the principal amount outstanding, adjusted for the allowance for loan losses. Interest is accrued as earned, unless the collectibility of the loan is in doubt. Uncollectible interest on loans that are contractually past due is charged off, or an allowance is established based on management's periodic evaluation. The allowance is established by a charge to interest income equal to all interest previously accrued, and income is subsequently recognized only to the extent that cash payments are received until, in management's judgment, the borrower's ability to make periodic interest and principal payments has returned to normal, in which case the loan is returned to accrual status. If the ultimate collectibility of the loan is in doubt, in whole or in part, all payments received on nonaccrual loans are applied to reduce principal until such doubt is eliminated. 4. Loan Origination Fees The Savings Bank accounts for loan origination fees in accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases". Pursuant to the provisions of SFAS No. 91, origination fees received from loans, net of certain direct origination costs, are deferred and amortized to interest income using the interest method, giving effect to actual loan prepayments. Additionally, SFAS No. 91 generally limits the definition of loan origination costs to the direct costs attributable to originating a loan, i.e. principally actual personnel costs. Fees received for loan commitments that are expected to be drawn upon, based on the Savings Bank's experience with similar commitments, are deferred and amortized over the life of the loan using the level-yield method. Fees for other loan commitments are deferred and amortized over the loan commitment period on a straight-line basis. 5. Allowance for Loan Losses It is the Savings Bank's policy to provide valuation allowances for estimated losses on loans based on past loss experience, trends in the level of delinquent and problem loans, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral and current economic conditions in the primary lending area. When the collection of a loan becomes doubtful, or otherwise troubled, the Savings Bank records a loan loss provision equal to the difference between the fair value of the property securing the loan and the loan's carrying value. Major loans and major lending areas are reviewed periodically to determine potential problems at an early date. The allowance for loan losses is increased by charges to earnings and decreased by charge-offs (net of recoveries). The Savings Bank accounts for impaired loans in accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan". SFAS No. 114 requires that impaired loans be measured based upon the present value of expected future cash flows discounted at the loan's effective interest rate or, as an alternative, at the loan's observable market price or fair value of the collateral. The Savings Bank's current procedures for evaluating impaired loans result in carrying such loans at the lower of cost or fair value. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 5. Allowance for Loan Losses (continued) A loan is defined under SFAS No. 114 as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. In applying the provisions of SFAS No. 114, the Savings Bank considers its investment in one- to four-family residential loans and consumer installment loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. With respect to the Savings Bank's investment in nonresidential and multi-family residential real estate loans, and its evaluation of impairment thereof, such loans are generally collateral dependent and, as a result, are carried as a practical expedient at the lower of cost or fair value. Collateral dependent loans which are more than ninety days delinquent are considered to constitute more than a minimum delay in repayment and are evaluated for impairment under SFAS No. 114 at that time. The Savings Bank's impaired loan information is as follows at December 31: 2001 2000 (In thousands) Impaired loans with related allowance $1,460 $1,379 Impaired loans with no related allowance - - ---- ----- Total impaired loans $1,460 $1,379 ===== ===== 2001 2000 1999 (In thousands) Allowance on impaired loans Beginning balance $ 228 $ 48 $ - Provision 113 180 48 ----- --- ---- Ending balance $ 341 $ 228 $ 48 ===== === ==== Average balance of impaired loans $1,419 $ 632 $ 488 Interest income recognized on impaired loans $ 37 $ 59 $ 71 The allowance for impaired loans is included in the Savings Bank's overall allowance for credit losses. The provision necessary to increase this allowance is included in the Savings Bank's overall provision for losses on loans. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 6. Real Estate Acquired Through Foreclosure Real estate acquired through foreclosure is carried at the lower of the loan's unpaid principal balance (cost) or fair value less estimated selling expenses at the date of acquisition. Real estate loss provisions are recorded if the properties' fair value subsequently declines below the value determined at the recording date. In determining the lower of cost or fair value at acquisition, costs relating to development and improvement of property are capitalized. Costs relating to holding real estate acquired through foreclosure, net of rental income, are charged against earnings as incurred. 7. Office Premises and Equipment Office premises and equipment are carried at cost and include expenditures which extend the useful lives of existing assets. Maintenance, repairs and minor renewals are expensed as incurred. For financial reporting, depreciation and amortization are provided on the straight-line and accelerated methods over the useful lives of the assets, estimated to be thirty to forty years for buildings, five to twenty years for building improvements, five to fifteen years for furniture and equipment and five years for automobiles. An accelerated method is used for tax reporting purposes. 8. Investment in Real Estate Partnership During 1997, the Corporation invested $1.5 million in a real estate partnership for the purpose of constructing and managing residential real estate apartments for low and moderate income residents. The investment reflects a 49.5% participation in the partnership and is accounted for by the Savings Bank using the equity method. The Savings Bank realized after-tax losses from the investment of approximately $119,000, $140,000 and $70,000 during the years ended December 31, 2001, 2000 and 1999, respectively, as well as federal income tax credits of approximately $182,000, $142,000 and $40,000 in 2001, 2000 and 1999, respectively. This affordable housing project is expected to generate tax credits for the Savings Bank in future years. 9. Income Taxes The Corporation accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". In accordance with SFAS No. 109, a deferred tax liability or deferred tax asset is computed by applying the current statutory tax rates to net taxable or deductible temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements that will result in net taxable or deductible amounts in future periods. Deferred tax assets are recorded only to the extent that the amount of net deductible temporary differences or carryforward attributes may be utilized against current period earnings, carried back against prior years' earnings, offset against taxable temporary differences reversing in future periods, or utilized to the extent of management's estimate of future taxable income. A valuation allowance is provided for deferred tax assets to the extent that the value of net deductible temporary differences and carryforward attributes exceeds management's estimates of taxes payable on future taxable income. Deferred tax liabilities are provided on the total amount of net temporary differences taxable in the future. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 9. Income Taxes (continued) Deferral of income taxes results primarily from the different methods of accounting for certain benefit plans, the real estate partnership investment, general loan loss allowances and percentage of earnings bad debt deductions. Additional temporary differences result from depreciation computed using accelerated methods for tax purposes. 10. Benefit Plans Employees of the Savings Bank participate in a defined benefit pension plan (the "Plan") to which contributions are made for the benefit of the employees. Contributions are determined to cover the normal cost of pension benefits, the one-year cost of the pre-retirement death and disability benefits and the amortization of any unfunded accrued liabilities. The Plan sponsor has advised the Savings Bank that the pension plan meets the criteria of a multi-employer pension plan as defined in SFAS No. 87, "Employers' Accounting for Pensions". In accordance with SFAS No. 87, net pension cost is recognized for any required contribution for the period. A liability is recognized for any contributions due and unpaid. Due to a continuation of the Plan's overfunded status, no contributions were made to the pension plan during the years ended December 31, 2001, 2000 and 1999. The provision for pension expense was computed by the Plan's actuaries utilizing the projected unit credit cost method and assuming a 7.5% return on Plan assets. The Savings Bank has purchased life insurance policies on certain officers and directors. The insurance policies had an approximate cash surrender value of $1.3 million and $1.2 million at December 31, 2001 and 2000, respectively. The Savings Bank has approved compensation arrangements that provide retirement benefits to certain officers and deferral of fees for directors covered by the policies. The benefit arrangement for one individual requires that the individual provide consulting services to the Savings Bank during the five-year period following retirement. The benefits to be paid, excluding amounts attributable to consulting, are being accrued from the date of approval of the arrangements to the date that full eligibility is attained. Expense related to the above described plans totaled $63,000, $108,000 and $81,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The Savings Bank adopted the Logansport Savings Bank, FSB Employee Stock Ownership Plan and Trust Agreement ("ESOP") in 1995, for eligible employees of the Savings Bank. The ESOP will be funded by discretionary employer contributions made in cash, which will be invested in shares of the Corporation's common stock. No contributions were made to the ESOP during the years ended December 31, 2001, 2000 or 1999. In April 1996, the Corporation's shareholders approved the Logansport Savings Bank, FSB Recognition and Retention Plan and Trust ("RRP"), which provided for the acquisition of up to 52,900 shares of the Corporation's common stock for awards to management. Shares awarded to management under the RRP generally vest at a rate of 20% at the end of each full twelve months of service with the Savings Bank after the date of the award. During 1996, the Savings Bank contributed $615,000 to the RRP for the purchase of 46,675 shares of the Corporation's Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 10. Benefit Plans (continued) Common stock awarded to management and recorded the amount as unearned compensation. During 1998, the Savings Bank contributed $93,000 for the purchase of the 6,225 remaining allowable shares. Amortization expense under the RRP totaled $40,000, $136,000 and $129,000 for the years ended December 31, 2001, 2000 and 1999, respectively. In April 1999, the Savings Bank implemented a contributory 401(k) plan covering all employees who have attained the age of 21 and have completed one year of service. Contributions to the plan are voluntary and are subject to matching by the Savings Bank. The Savings Bank's expense related to the plan totaled approximately $19,000, $14,000 and $11,000 for the years ended December 31, 2001, 2000 and 1999, respectively. 11. Earnings Per Share Basic earnings per share is computed based upon 1,084,377, 1,090,800 and 1,194,070 weighted-average shares outstanding for the years ended December 31, 2001, 2000 and 1999, respectively. Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued under the Corporation's stock option plan. Weighted-average common shares deemed outstanding for purposes of computing diluted earnings per share totaled 1,104,323, 1,090,800 and 1,203,324 for the years ended December 31, 2001, 2000 and 1999, respectively. Incremental shares related to the assumed exercise of stock options included in the calculation of diluted earnings per share totaled 19,946 and 9,254 for the years ended December 31, 2001 and 1999, respectively. There were no incremental shares related to the assumed exercise of stock options included in the calculation of diluted earnings per share for the year ended December 31, 2000. Options to purchase 2,500, 125,915 and 2,500 shares of common stock with a respective weighted-average exercise price of $13.75, $10.59 and $13.75, were outstanding at December 31, 2001, 2000 and 1999, respectively, but were excluded from the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares. 12. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents includes cash and due from banks and interest-bearing deposits in other financial institutions with original maturities of less than 90 days. 13. Fair Value of Financial Instruments SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value of financial instruments, both assets and liabilities, whether or not recognized in the consolidated statement of financial condition, for which it is practicable to estimate that value. For financial instruments where quoted market prices are not available, fair values are based on estimates using present value and other valuation methods. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 13. Fair Value of Financial Instruments (continued) The methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments. The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments at December 31, 2001 and 2000: Cash and cash equivalents: The carrying amounts presented in the consolidated statements of financial condition for cash and cash equivalents are deemed to approximate fair value. Investment and mortgage-backed securities: For investment and mortgage-backed securities, fair value is deemed to equal the quoted market price. Loans receivable: The loan portfolio has been segregated into categories with similar characteristics, such as one- to four-family residential, multi-family residential, nonresidential real estate and consumer. These loan categories were further delineated into fixed-rate and adjustable-rate loans. The fair values for the resultant loan categories were computed via discounted cash flow analysis, using current interest rates offered for loans with similar terms to borrowers of similar credit quality. Federal Home Loan Bank stock: The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value. Deposits: The fair value of NOW accounts, passbook and club accounts, and money market deposits is deemed to approximate the amount payable on demand at December 31, 2001 and 2000. Fair values for fixed-rate certificates of deposit have been estimated using a discounted cash flow calculation using the interest rates currently offered for deposits of similar remaining maturities. Federal Home Loan Bank advances: The fair value of Federal Home Loan Bank advances has been estimated using discounted cash flow analysis, based on the interest rates currently offered for advances of similar remaining maturities. Notes Payable: The fair value of notes payable is deemed to approximate the carrying value. Commitments to extend credit: For fixed-rate and adjustable-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. At December 31, 2001 and 2000, the difference between the fair value and notional amount of loan commitments was not material. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) 13. Fair Value of Financial Instruments (continued) Based on the foregoing methods and assumptions, the carrying value and fair value of the Corporation's financial instruments are as follows at December 31:
2001 2000 Carrying Fair Carrying Fair value value value value (In thousands) Financial assets Cash and cash equivalents $ 8,816 $ 8,816 $ 9,210 $ 9,210 Investment securities 5,788 5,788 8,322 8,322 Mortgage-backed securities 4,419 4,419 5,165 5,165 Loans receivable 111,696 112,990 102,418 102,674 Federal Home Loan Bank stock 1,973 1,973 1,973 1,973 --------- ----------- --------- --------- $132,692 $133,986 $127,088 $127,344 ======= ======= ======= ======= Financial liabilities Deposits $ 83,900 $ 85,098 $ 79,454 $ 79,547 Advances from the Federal Home Loan Bank 34,750 34,777 34,000 33,943 Notes payable 1,165 1,165 1,237 1,237 --------- --------- --------- --------- $119,815 $121,040 $114,691 $114,727 ======= ======= ======= =======
14. Advertising Advertising costs are expensed when incurred. The Corporation's advertising expense totaled $56,000, $41,000 and $37,000 for the years ended December 31, 2001, 2000 and 1999, respectively. 15. Reclassifications Certain prior year amounts have been reclassified to conform to the 2001 consolidated financial statement presentation. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of investment securities designated as available for sale at December 31, 2001 and 2000, are as follows:
2001 Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value (In thousands) U.S. Government agency obligations $1,900 $ 13 $ 5 $1,908 State and municipal obligations 2,789 113 1 2,901 FHLMC stock 4 244 - 248 Corporate debt obligations 710 22 1 731 ------ ---- ----- ------ Total investment securities $5,403 $392 $ 7 $5,788 ===== === ===== ===== 2000 Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value (In thousands) U.S. Government agency obligations $4,746 $ 1 $122 $4,625 State and municipal obligations 2,800 99 - 2,899 FHLMC stock 4 255 - 259 Corporate debt obligations 560 - 21 539 ------ --- ---- ------ Total investment securities $8,110 $355 $143 $8,322 ===== === === ===== The amortized cost and estimated fair value of investment securities by term to maturity at December 31 are shown below. 2001 2000 Estimated Estimated Amortized fair Amortized fair cost value cost value (In thousands) Due in one year or less $ 25 $ 25 $ 125 $ 125 Due after one year through three years 1,004 1,035 550 547 Due after three years through five years 937 959 1,114 1,147 Due after five years through ten years 2,379 2,436 3,829 3,763 Due after ten years 1,054 1,085 2,488 2,481 ----- ----- ----- ----- 5,399 5,540 8,106 8,063 FHLMC stock 4 248 4 259 ----- ----- ----- ----- $5,403 $5,788 $8,110 $8,322 ===== ===== ===== =====
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued) Proceeds from sales and calls of investment securities available for sale during the year ended December 31, 2000, totaled $4.8 million, resulting in gross realized gains of $17,000 and gross realized losses of $34,000. The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of mortgage-backed securities at December 31, 2001 and 2000 are presented below.
2001 Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value (In thousands) Federal Home Loan Mortgage Corporation participation certificates $ 675 $ 7 $- $ 682 Government National Mortgage Association participation certificates 1,489 3 13 1,479 Federal National Mortgage Association participation certificates 1,210 14 1 1,223 Federal Housing Authority participation certificates 653 - 2 651 Small Business Administration participation certificates 391 - 7 384 ------ --- ----- ------ Total mortgage-backed securities $4,418 $ 24 $ 23 $4,419 ===== ==== ==== ===== 2000 Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value (In thousands) Federal Home Loan Mortgage Corporation participation certificates $ 766 $- $ 6 $ 760 Government National Mortgage Association participation certificates 2,134 - 61 2,073 Federal National Mortgage Association participation certificates 915 - 19 896 Federal Housing Authority participation certificates 851 5 6 850 Small Business Administration participation certificates 598 - 12 586 ------ --- ---- ------ Total mortgage-backed securities $5,264 $ 5 $104 $5,165 ===== ===== === =====
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued) The amortized cost and estimated fair value of mortgage-backed securities at December 31, 2001 and 2000, by contractual terms to maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may generally prepay obligations without prepayment penalties.
2001 2000 Estimated Estimated Amortized fair Amortized fair cost value cost value (In thousands) Due within one year $ 805 $ 805 $ 691 $ 677 Due after one year to three years 989 991 1,082 1,062 Due after three years to five years 531 531 721 707 Due after five years to ten years 786 785 1,159 1,133 Due after ten years 1,307 1,307 1,611 1,586 ----- ----- ----- ----- Total mortgage-backed securities $4,418 $4,419 $5,264 $5,165 ===== ===== ===== =====
NOTE C - LOANS RECEIVABLE The composition of the loan portfolio at December 31 is as follows: 2001 2000 (In thousands) Residential real estate One- to four-family residential $63,863 $ 62,277 Multi-family residential 1,816 2,050 Construction 2,278 2,814 Nonresidential real estate and land 18,435 13,230 Commercial 9,586 7,088 Commercial leases 3,914 2,228 Consumer and other 13,635 14,575 -------- -------- 113,527 104,262 Less: Undisbursed portion of loans in process 699 1,084 Allowance for loan losses 1,132 760 -------- ---------- $111,696 $102,418 ======= ======= Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE C - LOANS RECEIVABLE (continued) The Savings Bank's lending efforts have historically focused on one- to four-family residential and multi-family residential real estate loans, which comprised approximately $67.3 million, or 60%, of the total loan portfolio at December 31, 2001, and $66.1 million, or 64%, of the total loan portfolio at December 31, 2000. Approximately 66% of these loans have been underwritten on the basis of no more than an 80% loan-to-value ratio, which has historically provided the Savings Bank with adequate collateral coverage in the event of default. The remaining 34% of these loans have been underwritten with original loan-to-value ratios of greater than 80%. The Savings Bank, as with any lending institution, is subject to the risk that real estate values could deteriorate in its primary lending area of north-central Indiana, thereby impairing collateral values. However, management is of the belief that real estate values in the Savings Bank's primary lending area are presently stable. In the normal course of business, the Savings Bank has made loans to its directors, officers and their related business interests. In the opinion of management, such loans are consistent with sound lending practices and are within applicable regulatory lending limitations. Loans to officers and directors totaled approximately $1.1 million and $1.0 million at December 31, 2001 and 2000, respectively. NOTE D - ALLOWANCE FOR LOAN LOSSES The activity in the allowance for loan losses for the year ended December 31 is as follows: 2001 2000 1999 (In thousands) Beginning balance $ 760 $440 $285 Provision for losses on loans 392 332 162 Charge-offs of loans - net (20) (12) (7) ------- ---- ----- Ending balance $1,132 $760 $440 ===== === === At December 31, 2001, the Savings Bank's allowance for loan losses was comprised entirely of a general loan loss allowance, which is includible as a component of regulatory risk-based capital. At December 31, 2001, 2000 and 1999, the Savings Bank had loans of $1.9 million, $336,000 and $666,000, respectively, which had been placed on nonaccrual status due to concerns as to borrowers' ability to pay. At December 31, 2001, nonaccrual loans include certain loans that had been identified as impaired under SFAS No. 114. Interest income that would have been recognized had nonaccrual loans performed pursuant to contractual terms totaled approximately $41,000, $12,000 and $36,000 for the years ended December 31, 2001, 2000 and 1999, respectively. NOTE E - OFFICE PREMISES AND EQUIPMENT Office premises and equipment is comprised of the following at December 31: 2001 2000 (In thousands) Land $ 203 $ 203 Buildings and improvements 1,766 1,742 Furniture and equipment 435 473 ------ ------ 2,404 2,418 Less accumulated depreciation and amortization (601) (575) ------ ------ $1,803 $1,843 ====== ====== Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE F - DEPOSITS Deposits consist of the following major classifications at December 31:
Deposit type and weighted-average interest rate 2001 2000 (In thousands) NOW accounts December 31, 2001 - 1.58% $ 7,019 December 31, 2000 - 2.63% $ 6,080 Passbook and club accounts December 31, 2001 - 2.47% 4,136 December 31, 2000 - 3.57% 3,478 Money market deposit accounts December 31, 2001 - 2.48% 17,759 December 31, 2000 - 4.29% 15,823 Non-interest bearing accounts 3,343 3,277 ------- ------- Total demand, transaction and passbook deposits 32,257 28,658 Certificates of deposit Original maturities of: Less than 12 months December 31, 2001 - 3.08% 4,633 December 31, 2000 - 6.84% 8,607 12 months to 18 months December 31, 2001 - 4.80% 20,955 December 31, 2000 - 6.40% 21,093 24 months to 30 months December 31, 2001 - 5.32% 16,654 December 31, 2000 - 5.56% 12,680 More than 30 months December 31, 2001 - 5.63% 3,370 December 31, 2000 - 5.72% 3,226 Individual retirement accounts December 31, 2001 - 5.16% 6,031 December 31, 2000 - 5.90% 5,190 ------- ------- Total certificates of deposit 51,643 50,796 ------ ------ Total deposits $83,900 $79,454 ====== ======
At December 31, 2001 and 2000, the Savings Bank had certificate of deposit accounts with balances greater than $100,000 totaling $6.5 million and $6.1 million, respectively. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE F - DEPOSITS (continued) Interest expense on deposits for the year ended December 31 is summarized as follows:
2001 2000 1999 (In thousands) Passbook and money market deposit accounts $ 655 $ 856 $ 903 NOW accounts 104 133 125 Certificates of deposit 2,918 2,918 2,291 ----- ----- ----- $3,677 $3,907 $3,319 ===== ===== =====
Maturities of outstanding certificates of deposit at December 31 are summarized as follows: 2001 2000 (In thousands) Less than one year $31,551 $39,335 One year to three years 19,026 10,411 Over three years 1,066 1,050 ------- ------- $51,643 $50,796 ====== ====== NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK Advances from the Federal Home Loan Bank, collateralized at December 31, 2001 by a blanket pledge of residential mortgage loans totaling $58.2 million are summarized as follows:
Maturing year December 31, Interest rate ending December 31, 2001 2000 (Dollars in thousands) 6.46% - 6.71% 2001 $ - $10,000 2.76% - 4.06% 2002 6,000 - 5.94% 2004 3,000 3,000 5.10% - 6.75% 2005 4,200 4,000 5.04% - 5.30% 2006 1,500 - 5.31% - 5.72% 2007 1,050 - 5.60% - 5.99% 2010 17,000 17,000 4.75% 2011 2,000 - ------- ------- $34,750 $34,000 ====== ====== Weighted-average interest rate 5.39% 6.11% ==== ====
Advances totaling approximately $26.0 million are subject to interest rate increases at the discretion of the FHLB beginning in 2002. Such advances can be repaid by the Savings Bank upon the enactment of such interest rate adjustment. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE H - NOTES PAYABLE At December 31, 2001 and 2000, notes payable consisted of borrowings secured by the Savings Bank's investment in a real estate partnership which will mature in 2009. The interest rate on the variable-rate borrowing was 1.92% and 3.61% at December 31, 2001 and 2000, respectively. NOTE I - INCOME TAXES The provision for income taxes differs from that computed at the statutory corporate tax rate for the year ended December 31 as follows:
2001 2000 1999 (In thousands) Federal income taxes computed at the statutory rate $652 $605 $647 Increase (decrease) in taxes resulting from: Tax exempt interest (42) (37) (22) Increase in cash surrender value of life insurance (19) (17) (17) Real estate partnership tax credits (182) (142) (40) State income tax provision 113 103 111 Other (1) (1) (1) ----- ----- ----- Income tax provision per consolidated financial statements $521 $511 $678 === === === The composition of the Corporation's net deferred tax asset at December 31 is as follows: Taxes (payable) refundable on temporary 2001 2000 differences at statutory rate: (In thousands) Deferred tax assets: Other than temporary declines in investment securities $ 23 $ 23 Retirement expense 231 216 General loan loss allowance 481 323 Stock benefit plan expense 69 57 Other 33 14 ---- ---- Total deferred tax assets 837 633 Deferred tax liabilities: State income taxes (56) (35) Percentage of earnings bad debt deduction (24) (37) Unrealized gains on securities designated as available for sale (131) (38) Loss on investment in real estate partnership (136) (95) Book versus tax depreciation (38) (25) ---- ---- Total deferred tax liabilities (385) (230) --- --- Net deferred tax asset $452 $403 === ===
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE I - INCOME TAXES (continued) Prior to 1997, the Savings Bank was allowed a special bad debt deduction based on a percentage of earnings, generally limited to 8% of otherwise taxable income, or the amount of qualifying and nonqualifying loans outstanding and subject to certain limitations based on aggregate loans and savings account balances at the end of the year. This percentage of earnings bad debt deduction had accumulated to approximately $1.7 million as of December 31, 2001. If the amounts that qualified as deductions for federal income taxes are later used for purposes other than bad debt losses, including distributions in liquidation, such distributions will be subject to federal income taxes at the then current corporate income tax rate. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction is approximately $500,000 at December 31, 2001. The Savings Bank is required to recapture as taxable income approximately $220,000, representing its post-1987 percentage of earnings bad debt deductions. The Savings Bank has provided deferred taxes for this amount and is permitted by such legislation to recapture such income over a six-year period, which commenced in 1998. NOTE J - COMMITMENTS The Savings Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers, including commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated statement of financial condition. The contract or notional amounts of the commitments reflect the extent of the Savings Bank's involvement in such financial instruments. The Savings Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Savings Bank uses the same credit policies in making commitments and conditional obligations as those utilized for on-balance-sheet instruments. At December 31, 2001, the Savings Bank had outstanding commitments of approximately $762,000 to originate residential one- to four-family loans. The Savings Bank also had outstanding commitments of approximately $1.0 million to originate non-residential real estate loans and approximately $300,000 to originate other commercial loans at December 31, 2001. Additionally, the Savings Bank had unused lines of credit under home equity loans and commercial loans of approximately $977,000 and $7.5 million, respectively, at December 31, 2001. Finally, the Savings Bank had commitments under standby letters of credit totaling $2.7 million at December 31, 2001. Standby letters of credit are conditional commitments issued by the Savings Bank to guarantee the performance of a customer to a third party. In the opinion of management, all loan commitments equaled or exceeded prevalent market interest rates as of December 31, 2001, and will be funded from normal cash flow from operations. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE K - REGULATORY CAPITAL The Savings Bank is subject to minimum capital requirements promulgated by the Office of Thrift Supervision ("OTS"). Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Corporation's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Savings Bank must meet specific capital guidelines that involve quantitative measures of the Savings Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Savings Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Such minimum capital standards generally require the maintenance of regulatory capital sufficient to meet each of three tests, hereinafter described as the tangible capital requirement, the core capital requirement and the risk-based capital requirement. The tangible capital requirement provides for minimum tangible capital (defined as shareholders' equity less all intangible assets) equal to 1.5% of adjusted total assets. The core capital requirement provides for minimum core capital (tangible capital plus certain forms of supervisory goodwill and other qualifying intangible assets) generally equal to 4.0% of adjusted total assets, except for those associations with the highest examination rating and acceptable levels of risk. The risk-based capital requirement currently provides for the maintenance of core capital plus general loan loss allowances equal to 8.0% of risk-weighted assets. In computing risk-weighted assets, the Savings Bank multiplies the value of each asset on its statement of financial condition by a defined risk-weighting factor, e.g., one- to four-family residential loans carry a risk-weighted factor of 50%. During the calendar year, the OTS notified the Savings Bank that it was categorized as "well-capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well-capitalized", the Savings Bank must maintain minimum capital ratios as set forth in the following table. As of December 31, 2001 and 2000, management believes that the Savings Bank met all capital adequacy requirements to which it was subject.
2001: To be "well- capitalized" under For capital prompt corrective Actual adequacy purposes action provisions ---------------- ----------------- ----------------- Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) Tangible capital $16,109 11.7% =>$2,066 =>1.5% =>$ 6,885 => 5.0% Core capital $16,109 11.7% =>$5,508 =>4.0% =>$ 8,262 => 6.0% Risk-based capital $17,241 16.9% =>$8,166 =>8.0% =>$10,207 =>10.0%
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE K - REGULATORY CAPITAL (continued)
2000: To be "well- capitalized" under For capital prompt corrective Actual adequacy purposes action provisions ---------------- ----------------- ----------------- Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) Tangible capital $16,587 12.5% =>$1,988 =>1.5% =>$6,625 => 5.0% Core capital $16,587 12.5% =>$5,300 =>4.0% =>$7,950 => 6.0% Risk-based capital $17,347 20.7% =>$6,692 =>8.0% =>$8,365 =>10.0%
The Savings Bank's management believes that, under the current regulatory capital regulations, the Savings Bank will continue to meet its minimum capital requirements in the foreseeable future. However, events beyond the control of the Savings Bank, such as increased interest rates or a downturn in the economy in the primary market area, could adversely affect future earnings and, consequently, the ability to meet future minimum regulatory capital requirements. The Savings Bank is subject to regulations imposed by the OTS regarding the amount of capital distributions payable to the Corporation. Generally, the Savings Bank's payment of dividends is limited, without prior OTS approval, to net earnings for the current calendar year plus the two preceding calendar years, less capital distributions paid over the comparable time period. Insured institutions are required to file an application with the OTS for capital distributions in excess of this limitation. During October 1999, the Savings Bank received OTS approval to make up to $2.0 million in capital distributions to the Corporation. Of this amount, dividend payments of $300,000, $700,000 and $1.0 million were paid in 2001, 2000 and 1999, respectively. During 2001, the Savings Bank received an additional OTS approval to make up to $2.0 million in capital distributions to the Corporation. Of this amount, dividend payments of $1,050,000 were paid in 2001. At December 31, 2001, $950,000 was available to be paid in future years. NOTE L - STOCK OPTION PLANS During 1996, the Board of Directors adopted a Stock Option Plan that provided for the issuance of 132,250 authorized, but unissued 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 authorized, but unissued shares of common stock at the fair value at the date of grant. The Corporation 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. Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE L - STOCK OPTION PLANS (continued) The Corporation 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 Corporation'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 Corporation's net earnings and earnings per share. A summary of the status of the Corporation's stock option plans as of December 31, 2001, 2000 and 1999, and changes during the years ending on those dates is presented below:
2001 2000 1999 Weighted- Weighted- Weighted- average average average exercise exercise exercise Shares price Shares price Shares price Outstanding at beginning of year 125,915 $10.59 125,915 $10.59 126,415 $10.59 Granted - - - - - - Exercised (15,463) 10.53 - - (500) 10.53 Forfeited (3,656) 10.53 - - - - --------- ----- ------- ------ ------- ----- Outstanding at end of year 106,796 $10.61 125,915 $10.59 125,915 $10.59 ======= ===== ======= ===== ======= ===== Options exercisable at year-end 105,796 $10.58 98,547 $10.56 72,179 $10.55 ======= ===== ====== ===== ====== ===== The following information applies to options outstanding at December 31, 2001: Number outstanding 106,796 Range of exercise prices $10.53 - $13.75 Weighted-average exercise price $10.61 Weighted-average remaining contractual life 4.3 years
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE M - CONDENSED FINANCIAL STATEMENTS OF LOGANSPORT FINANCIAL CORP. The following condensed financial statements summarize the financial position of Logansport Financial Corp. as of December 31, 2001 and 2000, and the results of its operations and cash flows for the years ended December 31, 2001, 2000 and 1999.
Logansport Financial Corp. STATEMENTS OF FINANCIAL CONDITION December 31, (In thousands) ASSETS 2001 2000 Cash and cash equivalents $ 121 $ 103 Investment in subsidiary 16,363 16,662 Dividend receivable from subsidiary 950 300 Prepaid expenses and other 94 69 --------- --------- Total assets $17,528 $17,134 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Accrued expenses and other liabilities $ 126 $ 121 Shareholders' equity Common stock 4,802 5,515 Retained earnings 12,408 11,526 Shares acquired by stock benefit plan (63) (103) Unrealized gains on securities designated as available for sale, net 255 75 ------- --------- Total shareholders' equity 17,402 17,013 ------ ------ Total liabilities and shareholders' equity $17,528 $17,134 ====== ======
Logansport Financial Corp. STATEMENTS OF EARNINGS Year ended December 31, (In thousands) 2001 2000 1999 Revenue Interest income $ 14 $ 6 $ 12 Equity in earnings of subsidiary 1,436 1,300 1,260 ----- ----- ----- Total revenue 1,450 1,306 1,272 General and administrative expenses 77 57 72 ------- ------- ------- Earnings before income tax credits 1,373 1,249 1,200 Income tax credits (25) (20) (24) ------- ------- ------ NET EARNINGS $1,398 $1,269 $1,224 ===== ===== =====
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE M - CONDENSED FINANCIAL STATEMENTS OF LOGANSPORT FINANCIAL CORP. (continued)
Logansport Financial Corp. STATEMENTS OF CASH FLOWS Year ended December 31, (In thousands) 2001 2000 1999 Cash flows provided by (used in) operating activities: Net earnings for the year $1,398 $1,269 $1,224 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Excess distributions from (undistributed earnings of) consolidated subsidiary (86) (598) 239 Increase (decrease) in cash due to changes in: Accrued expenses and other liabilities 5 (70) ( 6) Other (25) 69 (23) ------- ------- ------- Net cash provided by operating activities 1,292 670 1,434 Cash flows provided by (used in) financing activities: Proceeds from exercise of stock options 163 - 5 Dividends on common stock (516) (477) (521) Purchase of shares (921) (464) (696) ------ ------ ------ Net cash used in financing activities (1,274) (941) (1,212) ----- ------ ----- Net increase (decrease) in cash and cash equivalents 18 (271) 222 Cash and cash equivalents at beginning of year 103 374 152 ------ ------ ------ Cash and cash equivalents at end of year $ 121 $ 103 $ 374 ====== ====== ======
Logansport Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2001, 2000 and 1999 NOTE N - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following table summarizes the Corporation's quarterly results for the years ended December 31, 2001 and 2000. Certain amounts, as previously reported, may have been reclassified to conform to the 2001 presentation.
Three Months Ended March 31, June 30, September 30, December 31, 2001: (In thousands, except per share data) Total interest income $2,501 $2,498 $2,462 $2,370 Total interest expense 1,529 1,470 1,376 1,321 ----- ----- ----- ----- Net interest income 972 1,028 1,086 1,049 Provision for losses on loans 86 85 86 135 Other income 52 45 47 78 General, administrative and other expense 535 513 476 522 ------ ------ ------ ------ Earnings before income taxes 403 475 571 470 Income taxes 102 129 167 123 ------ ------ ------ ------ Net earnings $ 301 $ 346 $ 404 $ 347 ====== ====== ====== ====== Earnings per share: Basic $.28 $.32 $.37 $.32 === === === === Diluted $.27 $.32 $.36 $.32 === === === === Three Months Ended March 31, June 30, September 30, December 31, 2000: (In thousands, except per share data) Total interest income $2,209 $2,343 $2,453 $2,519 Total interest expense 1,243 1,368 1,430 1,556 ----- ----- ----- ----- Net interest income 966 975 1,023 963 Provision for losses on loans 71 70 71 120 Other income (loss) 50 49 (8) 31 General, administrative and other expense 487 495 490 465 ------ ------ ------ ------ Earnings before income taxes 458 459 454 409 Income taxes 151 136 124 100 ------ ------ ------ ------ Net earnings $ 307 $ 323 $ 330 $ 309 ====== ====== ====== ====== Earnings per share: Basic $.28 $.29 $.30 $.29 === === === === Diluted $.28 $.29 $.30 $.29 === === === ===
MARKET PRICE OF LOGANSPORT FINANCIAL'S COMMON SHARES AND RELATED SECURITY HOLDER MATTERS The common stock of the Company is traded on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") Small Cap Market, under the symbol "LOGN." As of February 8, 2002, there were 775 shareholders of record of the Company's common stock. The table below presents the high and low trade prices for the common shares of the Company, together with dividends declared per share, for each quarter of the years ended December 31, 2001 and 2000. Such price information was obtained from Nasdaq. Per Share Year Ending December 31, High Low dividends 2001 Quarter ending March 31, 2001 $12.25 $11.25 $0.12 Quarter ending June 30, 2001 13.34 11.44 0.12 Quarter ending September 30, 2001 14.05 12.77 0.12 Quarter ending December 31, 2001 15.25 13.00 0.12 2000 Quarter ending March 31, 2000 $10.31 $9.06 $0.11 Quarter ending June 30, 2000 9.88 7.63 0.11 Quarter ending September 30, 2000 11.88 9.81 0.11 Quarter ending December 31, 2000 11.81 10.88 0.11 TRANSFER AGENT AND REGISTRAR. The Fifth Third Bank of Cincinnati, Ohio ("Fifth Third") is the Company's stock transfer agent and registrar. Fifth Third maintains the Company's shareholder records. Shareholders requiring a change of name, address or ownership of stock, as well as information about shareholder records, lost or stolen certificates, dividend checks, or dividend direct deposit should contact: Fifth Third Bank Corporate Trust Operations Mail Drop 10AT66 38 Fountain Square Cincinnati, Ohio 45263 (800) 837-2755 or 513-579-5320 GENERAL COUNSEL. INDEPENDENT AUDITORS. Barnes & Thornburg Grant Thornton LLP 11 South Meridian Street 625 Eden Park Drive, Suite 900 Indianapolis, Indiana 46204 Cincinnati, Ohio 45202 SHAREHOLDER & GENERAL INQUIRIES. The Company is required to file an Annual Report on Form 10-K for its year ended December 31, 2001 with the Securities and Exchange Commission. Copies of this annual report may be obtained without charge upon written request to: Dottye Robeson, Secretary/Treasurer Logansport Financial Corp. 723 East Broadway, Box 569 Logansport, Indiana 46947 (574) 722-3855 extension 313 OFFICE LOCATION. 723 East Broadway Logansport, Indiana 46947 (574) 722-3855 Fax - (574) 722-3857 Email - dottyer@logansportsavings.com -----END PRIVACY-ENHANCED MESSAGE-----