-----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, ErB5pbHRkmNziIF1WugTDpsxm4QKU0ItR8CI2HitbWZYLCh9cKXhS+IOesxEpoSS ZDT/iDBiIgZciIr7biLopw== 0001046386-98-000116.txt : 19980817 0001046386-98-000116.hdr.sgml : 19980817 ACCESSION NUMBER: 0001046386-98-000116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-25910 FILM NUMBER: 98688651 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 10-Q 1 LOGANSPORT FINANCIAL QUARTERLY FINANCIALS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________________. Commission file number: 0-25910 LOGANSPORT FINANCIAL CORP. (Exact name of registrant specified in its charter) Indiana 35-1945736 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 723 East Broadway P.O. Box 569 Logansport, Indiana 46947 (Address of principal executive offices including Zip Code) (219) 722-3855 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the Registrant's common stock, without par value, as of August 1, 1998 was 1,261,800. Logansport Financial Corp. Form 10-Q Index Page No. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Statements of Financial Condition as of June 30, 1998 (Unaudited) and December 31, 1997 Consolidated Statements of Earnings for the three and six months ended June 30, 1998 and 1997 (Unaudited ) Consolidated Statements of Shareholders' Equity for the six months ended June 30, 1998 and 1997 (Unaudited) Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 (Unaudited) Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports of Form 8-K 19 SIGNATURES 2 LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Financial Condition (Unaudited) (In thousands, except share data) June 30, December 31, 1998 1997 ASSETS Cash and due from banks $ 508 $ 589 Interest-bearing deposits in other financial institutions 4,346 1,680 ------ ------ Cash and cash equivalents 4,854 2,269 Certificates of deposit in other financial institutions - 100 Investment securities available for sale-at market 4,823 5,750 Mortgage-backed securities available for sale-at market 9,113 9,932 Loans receivable-net 67,050 63,635 Real estate acquired through foreclosure-net - 106 Office premises and equipment-at depreciated cost 472 465 Federal Home Loan Bank stock- at cost 568 494 Investment in real estate partnership 1,554 1,540 Accrued interest receivable on loans 315 299 Accrued interest receivable on mortgage-backed securities 69 83 Accrued interest receivable on investments 95 121 Prepaid expenses and other assets 40 33 Cash surrender value of life insurance 1,106 1,085 Deferred income tax asset 205 203 ------ ------ Total assets $90,264 $86,115 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $64,415 $60,595 Advances from the Federal Home Loan Bank 6,500 6,500 Notes payable 1,450 1,525 Accrued interest and other liabilities 886 861 Accrued income taxes 26 92 ------ ------ Total liabilities 73,277 69,573 Shareholders' equity Common stock 7,573 7,566 Retained earnings-restricted 9,680 9,316 Less shares acquired by stock benefit plan (338) (400) Unrealized gains on securities designated as available for sale, net of related tax effects 72 60 ------ ------ Total shareholders' equity 16,987 16,542 ------ ------ Total liabilities and shareholders' equity $90,264 $86,115 ====== ======
3 LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Earnings (Unaudited) (In thousands, except share data) Three months ended Six months ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Interest income Loans $1,385 $1,207 $2,701 $2,369 Mortgage-backed securities 130 136 282 260 Investment securities 61 103 136 203 Interest-bearing deposits and other 63 54 108 107 ----- ----- ----- ----- Total interest income 1,639 1,500 3,227 2,939 Interest expense Deposits 762 708 1,494 1,392 Borrowings 95 54 189 98 ----- ----- ----- ----- Total interest expense 857 762 1,683 1,490 ----- ----- ----- ----- Net interest income 782 738 1,544 1,449 Provision for losses on loans 9 5 18 8 ----- ----- ----- ----- Net interest income after provision for losses on loans 773 733 1,526 1,441 Other income Service charges on deposit accounts 24 19 43 37 Gain (loss) on sale of investment and mortgage-backed securities 3 - 3 (32) Gain on sale of real estate acquired through foreclosure 6 - 6 1 Other operating 37 24 70 56 ----- ----- ----- ----- Total other income 70 43 122 62 General, administrative and other expense Employee compensation and benefits 184 169 359 333 Occupancy and equipment 17 16 36 38 Federal deposit insurance premiums 9 9 19 18 Data processing 25 22 51 45 Other operating 85 78 172 157 ----- ----- ----- ----- Total general, administrative and other expense 320 294 637 591 ----- ----- ----- ----- Earnings before income taxes 523 482 1,011 912 Income tax expense 198 179 382 337 ----- ----- ----- ----- NET EARNINGS $ 325 $ 303 $ 629 $ 575 ====== ====== ====== ====== Other comprehensive income, net of tax Unrealized gains (losses) on securities (19) 125 12 106 ------ ------ ------ ------ COMPREHENSIVE INCOME $ 306 $ 428 $ 641 $ 681 ====== ====== ====== ====== EARNINGS PER SHARE Basic (based on net earnings) $.26 $.24 $.50 $.46 ==== ==== ==== ==== Diluted (based on net earnings) $.25 $.24 $.48 $.45 ==== ==== === ====
4 LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Shareholders' Equity (Unaudited) (In thousands, except share data) Six months ended June 30, 1998 1997 ---- ---- Balance at January 1 $16,542 $15,427 Issuance of shares under stock option plan 7 42 Amortization of stock benefit plan 62 61 Cash dividends of $.21 per share in 1998 and $.20 in 1997 (265) (251) Comprehensive income on securities available for sale, net of related tax effects 12 106 Net earnings 629 575 ------ ------ Balance at June 30 $16,987 $15,960 ====== ====== Accumulated other comprehensive income (loss) $ 72 $ (51) ====== ======
5 LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six months ended June 30, 1998 1997 Cash flows from operating activities: Net earnings for the period $ 629 $ 575 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 18 19 Amortization of premiums on investments and mortgage-backed securities 99 43 Amortization expense of stock benefit plan 62 61 (Gain) loss on sale of investment and mortgage-backed securities (3) 32 Provision for losses on loans 18 8 Gain on sale of real estate acquired through foreclosure (6) (1) Increase (decrease) in cash, due to changes in: Accrued interest receivable on loans (16) (5) Accrued interest receivable on mortgage-backed securities 14 (16) Accrued interest receivable on investments 26 11 Prepaid expenses and other assets (7) 21 Accrued interest and other liabilities 25 (43) Federal income taxes Current (66) (18) Deferred (2) 69 ------- ----- Net cash provided by operating activities 791 756 Cash flows provided by (used in) investing activities: Proceeds from certificate of deposits in other institutions 100 - Proceeds from sale of investment securities - 1,068 Purchase of investment securities (400) (401) Maturities/calls of investment securities 1,355 400 Purchase of Federal Home Loan Bank stock (74) (107) Proceeds from sale of mortgage-backed securities 802 - Purchase of mortgage-backed securities (1,948) (2,893) Principal repayments on mortgage-backed securities 1,857 607 Loan disbursements (11,857) (8,579) Investment in real estate partnership (14) - Principal repayments on loans 8,528 5,862 Purchases and additions to office premises and equipment (25) (6) Proceeds from sale of real estate acquired through foreclosure 4 14 Increase in cash surrender value of life insurance policy (21) (18) ------- ------ Net cash used in investing activities (1,693) (4,053)
6 LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows (continued) (Unaudited) (In thousands) Six months ended June 30, 1998 1997 Cash provided by (used in) financing activities: Net increase in deposit accounts $3,820 $3,003 Proceeds from Federal Home Loan Bank advances 5,500 8,500 Proceeds from note payable - 100 Repayment of Federal Home Loan Bank advances (5,500) (6,000) Repayment of note payable (75) (1,500) Proceeds from the exercise of stock options 7 42 Dividends on common stock (265) (251) ------ ------ Net cash provided by financing activities 3,487 3,894 ----- ----- Net increase in cash and cash equivalents 2,585 597 Cash and cash equivalents, beginning of period 2,269 3,759 ----- ----- Cash and cash equivalents, end of period $4,854 $4,356 ===== ====== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest on deposits and borrowings $1,679 $1,496 ====== ====== Income taxes $ 449 $ 355 ====== ====== Dividends payable at end of period $ 139 $ 126 ====== ====== Foreclosed mortgage loans transferred to real estate acquired through foreclosure $ 54 $ 30 ====== ====== Loan originated through sales of real estate owned $ 148 $ 14 ====== ======
7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Presentation The unaudited interim consolidated financial statements include the accounts of Logansport Financial Corp. (the "Company") and its subsidiary, Logansport Savings Bank, FSB, (the "Bank"). The unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and disclosures required by generally accepted accounting principles for complete financial statements. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion of management, the financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of June 30, 1998, results of operations for the three and six month periods ended June 30, 1998 and 1997 and cash flows for the six month periods ended June 30, 1998 and 1997. NOTE B: Earnings Per Share and Dividends Per Share Basic earnings per share is computed based upon the weighted-average shares outstanding during the period. Weighted-average common shares outstanding totaled 1,261,293 and 1,257,577 for the six month periods ended June 30, 1998 and 1997, respectively, and 1,261,511 and 1,258,767 for the three month periods ended June 30, 1998 and 1997, respectively. Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued under the Company's stock option plan. Weighted-average common shares deemed outstanding for purposes of computing diluted earnings per share totaled 1,310,512 and 1,282,238 for the six months ended June 30, 1998 and 1997, respectively, and 1,312,978 and 1,285,607 for the three months ended June 30, 1998 and 1997, respectively. A cash dividend of $.10 per common share was declared on June 9, 1998, payable on July 10, 1998, to stockholders of record as of June 22, 1998. NOTE C: Recent Accounting Pronouncements In June 1996, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities", that provides accounting guidance on transfers of financial assets, servicing of financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an approach to accounting for transfers of financial assets that provides a means of dealing with more complex transactions in which the seller disposes of only a partial interest in the assets, retains rights or obligations, makes use of special purpose entities in the transaction, or otherwise has continuing involvement with the transferred assets. The new accounting method, the financial components approach, provides that the carrying amount of the 8 NOTE C: Recent Accounting Pronouncements (continued) financial assets transferred be allocated to components of the transaction based on their relative fair value. SFAS No. 125 provides criteria for determining whether control of assets has been relinquished and whether a sale has occurred. If the transfer does not qualify as a sale, it is accounted for as a secured borrowing. Transactions subject to the provisions of SFAS No. 125 include, among others, transfers involving repurchase agreements, securitization of financial assets, loan participations, factoring arrangements, and transfers of receivables with recourse. An entity that undertakes an obligation to service financial assets recognizes either a servicing asset or liability for the servicing contract (unless related to a securitization of assets, and all the securitized assets are retained and classified as held to maturity). A servicing asset or liability that is purchased or assumed is initially recognized at its fair value. Servicing assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss and are subject to subsequent assessments for impairment based on fair value. SFAS No. 125 provides that a liability is removed from the balance sheet only if the debtor either pays the creditor and is relieved of its obligations for the liability or is legally released from being the primary obligor. SFAS No. 125 is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after December 31, 1997, and is to be applied prospectively. Earlier or retroactive application is not permitted. Management adopted SFAS No. 125 effective January 1, 1998, as required, without material effect on the Company's consolidated financial position or results of operations. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. SFAS No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. It does not require a special format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Management adopted SFAS No. 130 effective January 1, 1998, as required, without material impact on the Company's financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 significantly changes the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about reportable segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 131 uses a "management approach" to disclose financial and descriptive information 9 NOTE C: Recent Accounting Pronouncements (continued) about the way management organizes the segments within the enterprise for making the operating decisions and assessing performance. For many enterprises, the management approach will likely result in more segments being reported. In addition, SFAS No. 131 requires significantly more information to be disclosed for each reportable segment than is presently being reported in annual financial statements and also requires that selected information be reported in interim financial statements. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. Management adopted SFAS No. 131 effective January 1, 1998, without material impact on the Company's financial statements. Note D: Other Matters As with all providers of financial services, the Company's operations are heavily dependent on information technology systems. The Bank is addressing the potential problems associated with the possibility that the computers that control or operate the Bank's information technology systems and infrastructure may not be programmed to read four-digit date codes and, upon arrival of the year 2000, may recognize the two-digit code "00" as the year 1900, causing systems to fail to function or to generate erroneous data. The Bank is working with the companies that supply or service its information technology systems to identify and remedy and year 2000 related problems. As of June 30, 1998, management has developed an estimate of expenses that are reasonably likely to be incurred by the Bank in connection with this issue; however, the Company does not expect to incur significant expenses to implement the necessary corrective measures. No assurance can be given, however, that significant expense will not be incurred in future periods. In the event that the Bank is ultimately required to purchase replacement computer systems, programs, and/or equipment, or incur substantial expense to make the Bank's systems, programs, and/or equipment year 2000 compliant, the Bank's net earnings and financial condition could be adversely affected. In addition to possible expense related to its own systems, the Bank could incur losses if loan payments are delayed due to year 2000 problems affecting any major borrowers in the Bank's primary market area. Because the Bank's loan portfolio is highly diversified with regard to individual borrowers and types of businesses, and the Bank's primary market areas are not significantly dependent upon any one employer or industry, the Bank does not expect any significant or prolonged difficulties that will affect net earnings or cash flow. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation. Forward Looking Statements In addition to historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Economic circumstances, the Company's operations and the Company's actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein but also include changes in the economy and interest rates in the nation and the Company's market area generally. Some of the forward-looking statements included herein are the statements regarding management's determination of the amount and adequacy of the allowance for losses on loans, the effect of the year 2000 on information technology systems and the effect of certain recent accounting pronouncements. Financial Condition Total assets were $90.3 million at June 30, 1998 compared to $86.1 million at December 31, 1997, an increase of $4.2 million or 4.8%. This increase was funded primarily from a growth in deposits. Cash and cash equivalents increased approximately $2.6 million, from $2.3 million at December 31, 1997 to $4.9 million at June 30, 1998. Efforts to reinvest the growth of deposits in new loans and investments are on-going; however, the interest rate environment contributed to the time required to obtain quality investments and resulted in the increase in cash equivalents. Securities decreased from $15.7 million at December 31, 1997 to $13.9 million at June 30, 1998. Mortgage-backed securities experienced accelerated paybacks which resulted in a decrease in the yield in the investment portfolio and $1.4 million of investment securities either matured or were called during the six months ended June 30, 1998. Net loans increased $3.4 million, or 5.4%, from $63.6 million at December 31, 1997 to $67.0 million at June 30, 1998. Loan originations amounted to $11.9 million for the six months ended June 30, 1998, with payoffs equaling $8.5 million. Loan demand in the first six months of 1998 was very strong compared to the first six months of 1997 in which loans grew by $2.7 million. Deposits were $64.4 million at June 30, 1998 compared to $60.6 million at December 31, 1997, an increase of $3.8 million in the first six months of 1998. Borrowings consisted of $6.5 million of FHLB advances and a $1.5 million note payable related to an equity investment in low income housing. Shareholders' equity was $17.0 million at June 30, 1998 and $16.5 million at December 31, 1997. The payment of dividends, an increase in the unrealized gain on securities available for sale, the amortization of the stock benefit plan and net earnings for the six months ended June 30, 1998 combined to result in an increase of $445,000 for the period. 11 Results of Operations Comparison of the Three Months Ended June 30, 1998 and June 30, 1997 - --------------------------------------------------------------------- Net earnings for the Company for the three months ended June 30, 1998 were $325,000 compared with $303,000 for three months ended June 30, 1997, an increase of $22,000 or 7.3%. Net interest income increased $44,000 while general, administrative and other expenses increased $26,000 and taxes increased $19,000. The major contributor to the increase in net interest income was the growth in the loan portfolio the past calendar year. Loans were $67.0 million at June 30, 1998 compared to $59.5 million at June 30, 1997. The provision for loan losses was $9,000 for the three months ended June 30, 1998 and $5,000 for the three months ended June 30, 1997. All three properties in real estate owned at the end of the quarter ending March 31, 1998 were sold during April 1998 resulting in a small gain for the Company. No property was in real estate owned on June 30, 1998. One property, which was valued at $8,000, was in real estate owned on June 30, 1997. Non-performing loans decreased to $232,000, or 0.34% of loans at June 30, 1998 from $431,000, or 0.67% of loans at December 31, 1997. Loan loss reserves amounted to $240,000 or .36% of total loans at June 30, 1998 compared to $245,000, or 0.38% at December 31, 1997. Total other income increased by $27,000, or 62.8%, during the three months ended June 30, 1998, because of a $3,000 gain on the sale of securities and a $6,000 gain on the sale of real estate owned. In addition, service charges on deposit accounts increased $5,000 and other operating income increased $13,000. Other operating income includes various loan fees and a one time fee of $4,300 which represented a prepayment penalty on a participation loan. Total general, administrative and other expenses increased $26,000 or 8.8% in the three months ended June 30, 1998 compared to June 30, 1997. Employee compensation and benefits increased $15,000 or 8.9%. This increase was a result of salary increases and additional personnel compared to a year ago and an increase in medical insurance costs. Data processing fees increased $3,000 and other operating expenses increased $7,000, mainly in the area of bank service fees. Bank service fees have increased due to changes in handling our daily deposit but are offset by an increase in interest income due to better cash availability. The Company's effective tax rate for the three months ended June 30, 1998 was 37.9% and was 37.1% for the three months ended June 30, 1997. Comparison of the Six Months Ended June 30,1998 and June 30, 1997 Net earnings for the Company for the six months ended June 30, 1998 was $629,000 compared with $575,000 for the six months ended June 30, 1997, an increase of $54,000 or 9.4%. Interest income increased $288,000 as a result of the increase in the loan portfolio. Interest expense increased $193,000 resulting in an improvement in net interest income of $95,000 or 6.6% when comparing the six months ended June 30, 1998 to the six months ended June 30, 1997. 12 Comparison of the Six Months Ended June 30,1998 and June 30, 1997 (continued) The provision for loan losses was $18,000 for the six months ended June 30, 1998 and $8,000 for the six months ended June 30, 1997. There were two properties taken into real estate owned in the six months ended June 30, 1998. One property was written down from $37,000 to a net realizable value of $23,000 during the first quarter. During the second quarter, two consumer loans were written off for $9,000, resulting in a total of $23,000 being written off against the allowance in the first six months of 1998. Two properties were taken into real estate owned during the six months ended June 30, 1997 and loan chargeoffs totaled $16,000 for the first six months of 1997. Total other income increased by $60,000 or 96.8%, during the six months ended June 30, 1998, compared to the six months ended June 30, 1997, primarily because of the $32,000 loss on the sale of available for sale securities during the six months ended June 30, 1997. Service charges on deposit accounts increased $6,000 or 16.2%. This increase is a result of an increase in the volume of transaction accounts. There was a nonrecurring recovery on securities previously written off of $13,083 which is reflected in other operating income for the six months ended June 30, 1997. Total general, administrative and other expenses increased $46,000 or 7.8% for the six months ended June 30, 1998 compared to the six months ended June 30, 1997. Employee compensation and benefits increased $26,000 or 7.8%. Data processing costs increased $6,000 as a result of an increase in the volume of accounts and price increases. Other operating expenses increased $15,000 mainly as a result of an increase in bank service fees incurred in processing our cash deposit. This is offset by an increase in interest income due to improved cash availability. The Company's effective tax rate for the six months ended June 30,1998 was 37.8% compared to 37.0% for the six months ended June 30, 1997. Capital Resources Pursuant to OTS capital regulations, savings associations must currently meet a 1.5% tangible capital requirement, a 4% leverage ratio (or core capital) requirement, and total risk-based capital to risk-weighted assets ratio of 8%. At June 30, 1998, the Bank's tangible capital ratio was 18.51%, its leverage ratio was 18.51%, and its risk-based capital to risk-weighted assets ratio was 34.26%. Therefore, the Bank's capital significantly exceeded all of the capital requirements currently in effect. The following table provides the minimum regulatory capital requirements and the Bank's capital ratios as of June 30, 1998. Capital Standard Required Bank's Excess - ---------------- -------- ------ ------ Tangible (1.5%) $1,347,000 $16,621,000 $15,274,000 Core (4.0%) 3,592,000 16,621,000 13,029,000 Risk-based (8.0%) 3,937,000 16,861,000 12,924,000 Liquidity The standard measure of liquidity for savings associations is the ratio of cash and eligible investments to a certain percentage of net withdrawable savings account and borrowings due within one year. The minimum required ratio is currently set by the Office of Thrift Supervision at 4%. At June 30, 1998 the Bank's regulatory liquidity ratio was 35.5%. 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Bank, like other savings associations, is subject to interest rate risk to the degree that its interest-bearing liabilities, primarily deposits with short and medium-term maturities, mature or reprice at different rates than its interest-earning assets. Management of the Bank believes it is critical to manage the relationship between interest rates and the effect on the Bank's net portfolio value ("NPV"). Generally, NPV is the discounted present value of the difference between incoming cash flows on interest-earning and other assets and outgoing cash flows on interest-bearing liabilities. Management of the Bank's assets and liabilities is done within the context of the marketplace, regulatory limitations and within limits established by the Board of Directors on the amount of change in NPV which is acceptable given certain interest rate changes. The Office of Thrift Supervision ("OTS") issued a regulation, effective January 1, 1994, which uses a net market value methodology to measure the interest rate risk exposure of thrift institutions. Under OTS regulations, an institution's "normal" level of interest rate risk in the event of an assumed change in interest rates, is a decrease in the institution's NPV in an amount not exceeding 2% of the present value of its assets. Thrift institutions with over $300 million in assets or less than a 12% risk-based capital ratio are required to file OTS Schedule CMR. Data from schedule CMR is used by the OTS to calculate changes in NPV (and the related "normal" level of interest rate risk based upon certain interest rate changes (discussed below). Institutions which do not meet either of the filing requirements are not required to file OTS Schedule CMR, but may do so voluntarily. The Bank does not currently meet either of these requirements, but it does voluntarily file Schedule CMR. Presented below, as of March 31, 1998, the latest available date, is an analysis performed by the OTS of the Bank's interest rate risk as measured by changes in NPV for instantaneous and sustained parallel shifts in the yield curve, in 100 basis point increments, up and down 400 basis points and in accordance with OTS regulations. As illustrated in the table, The Bank's NPV is more sensitive to rising rates than declining rates. This occurs principally because, as rates rise, the market value of the Bank's investments, adjustable-rate mortgage loans (many of which have maximum per year adjustments of 1%), fixed-rate loans and mortgage-backed securities declines due to the rate increase. The value of the Bank's deposits and borrowings change in approximately the same proportion in rising and falling rate scenarios. Change Net Portfolio Value NPV as % of PV of Assets In Rates $ Amount $ Change % Change NPV Ratio Change - -------- -------- -------- -------- --------- ------ (Dollars in thousands) +400bp 12,335 -5,942 -33 % 14.83 % -540bp +300bp 14,154 -4,123 -23 % 16.60 % -363bp +200bp 15,847 -2,431 -13 % 18.16 % -207bp +100bp 17,261 -1,016 - 6 % 19.39 % - 84bp 0bp 18,277 20.23 % - -100bp 18,940 662 +4 % 20.73 % + 50bp - -200bp 19,473 1,195 +7 % 21.10 % + 87bp - -300bp 20,275 1,997 +11 % 21.68 % +145bp - -400bp 21,384 3,107 +17 % 22.51 % +227bp 14 Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock Pre-shock NPV Ratio: NPV as % of PV of Assets 20.23 % Exposure Measure: Post-Shock NPV Ratio 18.16 % Sensitivity Measure: Change in NPV Ratio (207 bp) As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could likely deviate significantly from those assumed in calculating the table. 15 Part II. OTHER INFORMATION Item 1. Legal Proceedings Neither the Bank nor the Company were, during the three-month period ended June 30, 1998, or are as of the date hereof involved in any legal proceeding of a material nature. From time to time, the Bank is a party to legal proceedings wherein it enforces its security interests in connection with its mortgage and other loans. Item 4. Submission of Matters to a Vote of Security Holders On April 14, 1998, the Company held it 1997 annual meeting of shareholders. A total of 1,004,016 shares, or 79.61% of the Company's shares outstanding, were represented at the meeting either in person or by proxy. Two directors were nominated by the Company's Board of Directors to serve new three year terms. This was the only item of business at the meeting. These nominees, and the voting results for each are listed below. For Withheld Abstentions Broker Nonvotes Donald G. Pollitt 999,135 4,881 0 0 Susanne S. Ridlen 999,685 4,331 0 0 The continuing directors and the remaining amount of their terms are listed below. Norbert E. Adrian (two year term) William Tincher Jr. (two year term) Charles J. Evans (one year term) David G. Wihebrink (one year term) Thomas G. Williams (one year term) 16 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are attached to this report on Form 10-Q: 3.1 The Articles of Incorporation of the Registrant are incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (Registration No. 33-89788). 3.2 The Code of By-Laws of the Registrant is incorporated by reference to Exhibit 3.2 to the Form 10-Q for the period ended June 30, 1997, filed with the Commission on August 13, 1997. 27.1 Financial Data Schedule for the six month period ended June 30, 1998. 27.2 Restated Financial Data Schedule for the six month period ended June 30, 1997. (b) Reports on Form 8-K. The Registrant filed no reports on Form 8-K during the fiscal quarter ended June 30, 1998. 17 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on behalf of the undersigned thereto duly authorized. Logansport Financial Corp. Date: August 12, 1998 By: Thomas G. Williams, President and Chief Executive Officer Date: August 12, 1998 By: Dottye Robeson, Secretary and Treasurer 18 EX-27.1 2 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 508 4,346 0 0 13,936 0 0 67,290 (240) 90,264 64,415 6,500 912 1,450 0 0 7,573 9,414 90,264 2,701 418 108 3,227 1,494 1,683 1,544 18 3 637 1,011 629 0 0 629 .50 .48 3.65 232 232 0 0 245 (23) 0 240 0 0 240
EX-27.2 3 RESTATED FINANCIAL DATA SCHEDULE
9 1,000 6-mos DEC-31-1997 JAN-01-1997 JUN-30-1997 4,356 100 0 0 14,921 14,921 14,921 59,718 (228) 83,152 60,400 4,500 2,292 0 0 0 7,560 8,399 83,152 2,369 463 107 2,939 1,392 1,490 1,449 8 (32) 591 912 575 0 0 575 .46 .45 4.00 500 500 0 0 236 17 1 228 0 0 228
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