-----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, BrTm30KHK3qkN1MR7JxvLbK8pc/+uEoinCjSpMwnpZmItfqBKDF+ElRyI1TMgJjp zecMFuk9d3LFWQZdshYmxQ== 0001046386-02-000093.txt : 20020814 0001046386-02-000093.hdr.sgml : 20020814 20020814110436 ACCESSION NUMBER: 0001046386-02-000093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 1934 Act SEC FILE NUMBER: 000-25910 FILM NUMBER: 02732416 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 lfc10q_63002.txt LOGANSPORT FINANCIAL CORPORATION 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________________. Commission file number: 0-25910 LOGANSPORT FINANCIAL CORP. (Exact name of registrant specified in its charter) Indiana 35-1945736 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 723 East Broadway P.O. Box 569 Logansport, Indiana 46947 (Address of principal executive offices including Zip Code) (574) 722-3855 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of the Registrant's common stock, without par value, as of August 1, 2002 was 912,663. -1- Logansport Financial Corp. Form 10-Q Index Page No. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition as of June 30, 2002 and December 31, 2001 3 Consolidated Statements of Earnings for the three and six months ended June 30, 2002 and 2001 4 Consolidated Statements of Shareholders' Equity for the six months ended June 30, 2002 and 2001 5 Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 6 Notes to Consolidated Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 CERTIFICATION -2- LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Financial Condition (In thousands, except share data) June 30, December 31, ASSETS 2002 2001 Cash and due from banks $ 585 $ 1,081 Interest-bearing deposits in other financial institutions 11,687 7,735 ------- ------- Cash and cash equivalents 12,272 8,816 Investment securities available for sale - at market 7,584 5,788 Mortgage-backed securities available for sale - at market 6,789 4,419 Loans receivable-net 113,549 111,696 Office premises and equipment - at depreciated cost 1,797 1,803 Real estate acquired through foreclosure - 65 Federal Home Loan Bank stock - at cost 2,003 1,973 Investment in real estate partnership 1,072 1,109 Accrued interest receivable on loans 478 445 Accrued interest receivable on mortgage-backed securities 35 28 Accrued interest receivable on investments 106 92 Prepaid expenses and other assets 82 88 Cash surrender value of life insurance 1,291 1,291 Deferred income tax asset 387 452 ------- ------- Total assets $147,445 $138,065 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 95,010 $ 83,900 Advances from the Federal Home Loan Bank 34,736 34,750 Notes payable 1,093 1,165 Accrued interest payable and other liabilities 912 819 Accrued income taxes 7 29 ------- ------- Total liabilities 131,758 120,663 Shareholders' equity Common stock 2,529 4,802 Retained earnings-restricted 12,860 12,408 Less shares acquired by stock benefit plan (55) (63) Accumulated comprehensive income, unrealized gains on securities designated as available for sale, net of related tax effects 353 255 ------- ------- Total shareholders' equity 15,687 17,402 ------- ------- Total liabilities and shareholders' equity $147,445 $138,065 ======= =======
-3- LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Earnings (In thousands, except share data) Three months ended Six months ended June 30, June 30, 2002 2001 2002 2001 Interest income Loans $2,110 $2,198 $4,185 $4,346 Mortgage-backed securities 82 78 154 161 Investment securities 97 103 189 228 Interest-bearing deposits and other 57 119 120 264 ----- ----- ----- ----- Total interest income 2,346 2,498 4,648 4,999 Interest expense Deposits 743 957 1,515 1,957 Borrowings 476 513 951 1,042 ----- ----- ----- ----- Total interest expense 1,219 1,470 2,466 2,999 ----- ----- ----- ----- Net interest income 1,127 1,028 2,182 2,000 Provision for losses on loans 90 85 180 171 ----- ----- ----- ----- Net interest income after provision for losses on loans 1,037 943 2,002 1,829 Other income Service charges on deposit accounts 56 62 111 123 Gain on sale of investment securities 17 - 17 - Loss on equity investment (20) (55) (56) (116) Other operating 29 38 61 90 ----- ----- ----- ----- Total other income 82 45 133 97 General, administrative and other expense Employee compensation and benefits 336 268 630 562 Occupancy and equipment 61 64 126 122 Federal deposit insurance premiums 3 3 7 7 Data processing 46 44 95 91 Other operating 157 134 320 266 ----- ----- ----- ----- Total general, administrative and other expense 603 513 1,178 1,048 ----- ----- ----- ----- Earnings before income taxes 516 475 957 878 Income tax expense 145 129 266 231 ----- ----- ----- ----- NET EARNINGS $ 371 $ 346 $ 691 $ 647 ===== ===== ===== ===== Other comprehensive income, net of tax: Unrealized gains on securities available for sale 151 13 98 150 ----- ----- ----- ----- COMPREHENSIVE INCOME $ 522 $ 359 $ 789 $ 797 ===== ===== ===== ===== EARNINGS PER SHARE Basic (based on net earnings) $.39 $.32 $.71 $.60 === === === ==== Diluted (based on net earnings) $.38 $.32 $.69 $.59 === === === ===
-4- LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Shareholders' Equity (In thousands, except share data) Six months ended June 30, 2002 2001 Balance at January 1 $17,402 $17,013 Purchase of shares (2,466) - Issuance of shares under stock option plan 193 107 Amortization of stock benefit plan 8 36 Cash dividends of $.25 per share in 2002 and $.24 in 2001 (239) (261) Unrealized gains on securities designated as available for sale, net of related tax effects 98 150 Net earnings 691 647 ------ ------ Balance at June 30 $15,687 $17,692 ====== ====== Accumulated other comprehensive income $ 353 $ 225 ====== ======
-5- LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows For the six months ended June 30, (In thousands) 2002 2001 Cash flows from operating activities: Net earnings for the period $ 691 $ 647 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 54 56 Amortization of premiums on investments and mortgage-backed securities 26 18 Gain on sale of investment securities (17) - Amortization expense of stock benefit plan 8 36 Provision for losses on loans 180 171 Loss on equity investment 56 116 Increase (decrease) in cash, due to changes in: Accrued interest receivable on loans (33) 17 Accrued interest receivable on mortgage-backed securities (7) 8 Accrued interest receivable on investments (14) 1 Prepaid expenses and other assets 6 (13) Accrued interest and other liabilities 93 99 Federal income taxes Current (22) (147) Deferred 15 17 ------ ------ Net cash provided by operating activities 1,036 1,026 Cash flows provided by (used in) investing activities: Proceeds from sale of investment securities 269 - Purchase of investment securities (3,463) (253) Maturities/calls of investment securities 1,485 1,875 Purchase of mortgage-backed securities (3,018) - Principal repayments on mortgage-backed securities 700 457 Purchase of Federal Home Loan Bank stock (30) - Loan disbursements (21,402) (29,941) Principal repayments on loans 19,369 23,396 Investment in real estate partnership (19) (24) Proceeds from sale of real estate acquired through foreclosure 65 - Purchases and additions to office premises and equipment (48) (26) Increase in cash surrender value of life insurance policy - (21) ------ ------ Net cash used in investing activities (6,092) (4,537) ------ ------ Net cash used in operating and investing activities (balance carried forward) (5,056) (3,511) ------ ------
-6- LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows (continued) For the six months ended June 30, (In thousands) 2002 2001 Net cash used in operating and investing activities (balance brought forward) $(5,056) $(3,511) Cash flows provided by (used in) financing activities: Net increase in deposit accounts 11,110 902 Proceeds from Federal Home Loan Bank advances 6,850 9,250 Repayment of Federal Home Loan Bank advances (6,864) (10,000) Repayment of note payable (72) (72) Purchase of shares (2,466) - Proceeds from the exercise of stock options 193 107 Dividends on common stock (239) (261) ------ ------ Net cash provided by (used in) financing activities 8,512 (74) ------ ------ Net increase (decrease) in cash and cash equivalents 3,456 (3,585) Cash and cash equivalents, beginning of period 8,816 9,210 ------ ------ Cash and cash equivalents, end of period $12,272 $ 5,625 ====== ====== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest on deposits and borrowings $ 2,461 $ 3,027 ====== ====== Income taxes $ 272 $ 360 ====== ====== Dividends payable at end of period $ 119 $ 131 ====== ====== Supplemental disclosure of noncash financing activities: Unrealized gains on securities designated as available for sale, net of related tax effects $ 98 $ 150 ====== ======
-7- Logansport Financial Corp. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS For the six and three month periods ended June 30, 2002 and 2001 NOTE A: Basis of Presentation The unaudited interim consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2001. In the opinion of management, the financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Logansport Financial Corp.'s (the "Company") financial position as of June 30, 2002, and its results of operations and cash flows for the three and six month periods ended June 30, 2002 and 2001. The results of operations for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results which may be expected for the entire year. NOTE B: Principles of Consolidation The unaudited interim consolidated condensed financial statements include the accounts of the Company and its subsidiary, Logansport Savings Bank, FSB (the "Bank"). All significant intercompany items have been eliminated. NOTE C: Earnings Per Share and Dividends Per Share Basic earnings per share is computed based upon the weighted-average shares outstanding during the period. Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares issued under the Company's stock option plan. The computations are as follows:
For the three months ended For the six months ended June 30, June 30, 2002 2001 2002 2001 Weighted-average common shares outstanding (basic) 937,216 1,087,982 974,986 1,085,758 Dilutive effect of assumed exercise of stock options 34,510 18,178 32,651 15,347 ------- --------- --------- --------- Weighted-average common shares outstanding (diluted) 971,726 1,106,160 1,007,637 1,101,105 ======= ========= ========= =========
A cash dividend of $.13 per common share was declared on June 5, 2002, payable on July 10, 2002, to stockholders of record as of June 18, 2002. -8- NOTE D: Recent Accounting Pronouncements In June 2001 the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Intangible Assets," which prescribes accounting for all purchased goodwill and intangible assets. Pursuant to SFAS No. 142, acquired goodwill is not amortized, but is tested for impairment at the reporting unit level annually and whenever an impairment indicator arises. Management adopted SFAS No. 142 effective January 1, 2002, as required, without material effect on the Company's financial position or results of operations. -9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation. Forward Looking Statements In addition to historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Economic circumstances, the Company's operations and the Company's actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein but also include changes in the economy and interest rates in the nation and the Company's market area generally. Some of the forward-looking statements included herein are the statements regarding management's determination of the amount and adequacy of the allowance for loan losses, management's assessment of the Company's interest rate risk and the effect of recent accounting pronouncements. Discussion of Financial Condition Changes from December 31, 2001 to June 30, 2002 The Company reported total assets of $147.4 million at June 30, 2002, an increase of $9.4 million, or 6.8%, compared to December 31, 2001. This increase was funded primarily by growth in deposits of $11.1 million, and undistributed earnings of $452,000, which were partially offset by share repurchases of $2.5 million. Cash and cash equivalents increased by $3.5 million, from $8.8 million at December 31, 2001, to $12.3 million at June 30, 2002. Investment and mortgage-backed securities totaled $14.4 million at June 30, 2002, an increase of $4.2 million, or 40.8%, over December 31, 2001, as purchases of securities totaling $6.5 million were partially offset by repayments, calls and maturities of $2.2 million and sales of $252,000. Net loans increased from $111.7 million at December 31, 2001 to $113.5 million at June 30, 2002. Loan originations amounted to $21.4 million for the six months ended June 30, 2002, while principal repayments amounted to $19.4 million. Loan originations during 2002 were comprised primarily of loans secured by nonresidential and commercial real estate, other commercial property and commercial leases. The commercial and nonresidential loan portfolios totaled $34.1 million at June 30, 2002, compared to $31.9 million at December 31, 2001. Loans secured by one- to four-family residential real estate totaled $63.9 million at December 31, 2001 and $65.1 million at June 30, 2002. Construction loans at June 30, 2002 totaled $700,000, compared to $2.3 million at December 31, 2001. Deposits totaled $95.0 million at June 30, 2002, an increase of $11.1 million, or 13.2%, over the balance at December 31, 2001. Borrowings decreased by $86,000 over the six month period and at June 30, 2002, were comprised of $34.7 million of FHLB advances and a $1.1 million note payable related to an equity investment in low income housing. Proceeds from deposit growth were generally used to fund the purchase of investments and mortgage-backed securities, new loan growth, and a 10% stock repurchase program. However, $6.2 million of the deposit increase was comprised of short-term local governmental deposits which are subject to bids every 60 to 90 days and, therefore, may or may not be retained. Shareholders' equity totaled $15.7 million at June 30, 2002, a decrease of $1.7 million or 9.9%, from the $17.4 million total at December 31, 2001. The decrease resulted from stock repurchases totaling $2.5 million and dividends paid of $239,000, which were partially offset by net earnings of $691,000, an increase of $98,000 in the unrealized gains on securities available for sale and proceeds from exercise of stock options totaling $193,000. -10- Results of Operations Comparison of the Six Months Ended June 30, 2002 and June 30, 2001 Net earnings for the six months ended June 30, 2002 totaled $691,000, compared with $647,000 for the six months ended June 30, 2001, an increase of $44,000, or 6.8%. Net interest income increased by $182,000, total other income increased by $36,000 and general, administrative and other expense increased by $130,000, while the provision for losses on loans increased by $9,000 and income taxes increased by $35,000. Interest income on loans decreased by $161,000, or 3.7%, for the six months ended June 30, 2002, compared to the same period in 2001, due primarily to a decrease in the yield on loans of 63 basis points, from 8.03% in the 2001 period to 7.40% in the 2002 period. Interest income on mortgage-backed securities, investments and other interest-earning assets totaled $463,000 for the six months ended June 30, 2002, a $190,000, or 29.1%, decrease from the 2001 period. The decrease was due primarily to a decrease in the average yield year to year. Interest expense on deposits decreased by $442,000, or 22.6%, as the average cost of deposits decreased by 143 basis points, from 4.59% for the six months ended June 30, 2001 to 3.16% for the six months ended June 30, 2002. Interest expense on borrowings decreased by $91,000, or 8.7%, due primarily to a decrease in the average cost of borrowings year to year, from 5.47% for the six months ended June 30, 2001 to 5.39% in the 2002 period. The decreases in the level of yields on interest-earning assets and the average cost of interest-bearing liabilities were due primarily to the overall decrease in interest rates in the economy during 2001. This low interest rate environment continued during the six month period ended June 30, 2002. As a result of the foregoing changes in interest income and interest expense, net interest income increased by $182,000, or 9.1%, to $2.2 million for the six months ended June 30, 2002, compared to $2.0 million for the same period in 2001. The interest rate spread was 3.47% in the 2002 period compared to 3.06% in the 2001 period. The Company maintains a general allowance for loan losses that reflects an estimate of inherent losses based upon the types and categories of outstanding loans, as well as problem loans and current economic conditions in the Company's market area. The provision for losses on loans totaled $180,000 for the six months ended June 30, 2002, compared to $171,000 for the six months ended June 30, 2001. The increase in the provision for losses on loans was primarily attributable to the increasing percentage of commercial loans in the portfolio and the increase in the level of nonperforming loans year to year. At June 30, 2002 and December 31, 2001, the allowance amounted to $1.3 million and $1.1 million, respectively, for a ratio to total loans of 1.12% at June 30, 2002 and 1.00% at December 31, 2001. Non-performing loans totaled $1.8 million and $1.9 million at June 30, 2002 and December 31, 2001, respectively. The ratio of the allowance for loan losses to non-performing loans amounted to 73.7% at June 30, 2002 and 58.1% at December 31, 2001. Based on management's review of the loan portfolio, the allowance for loan losses at June 30, 2002 is considered adequate to cover potential losses inherent in the loan portfolio. However, there can be no assurance that additions to the allowance will not be necessary in future periods, which could adversely affect the Company's results of operations. Total other income increased by $36,000, or 37.1%, for the six months ended June 30, 2002, compared to the same period in 2001, due primarily to a decrease in the pre-tax loss on the equity investment of $60,000 and a $17,000 gain on the sale of an investment security. Service charges on deposit accounts decreased by $12,000, or 9.8%. Other operating income decreased by $29,000, or 32.2%, due primarily to a decrease in the income on bank owned life insurance and a decline in insurance commissions. The Company has transferred the Bank owned life insurance to a new insurance company in order to obtain additional death benefits; however, it is anticipated that no income will be earned on the policies for a period of two years. -11- Comparison of the Six Months Ended June 30, 2002 and June 30, 2001 (continued) Total general, administrative and other expense amounted to $1.2 million for the six-month period ended June 30, 2002, an increase of $130,000, or 12.4%, compared to the six month period ended June 30, 2001. Employee compensation and benefits expense increased by $68,000, or 12.1%, mainly due to an increase in personnel and the increased cost of medical insurance, which has increased by $23,000 compared to the same period in 2001. In addition, the Company resumed an accrual of $5,000 per month in June for probable contributions to the defined benefit pension plan due to the recent decline in the equity markets. This plan has been fully funded for many years but the Company has been notified by the plan trustee that contributions may be required. The exact amount, if required, will not be available until the fourth quarter of 2002. If no contributions are required the accrual will be reversed in the fourth quarter. Other operating expenses increased by $54,000, or 20.3%, compared to the period ended June 30, 2001, due primarily to increases in advertising, professional fees and Nasdaq filing fees, year to year. The provision for income taxes totaled $266,000 for the six months ended June 30, 2002, an increase of $35,000, or 15.2%, over the same period in 2001. The increase was due to a $79,000, or 9.0%, increase in pre-tax earnings. The Company's effective tax rates for the six-month periods ended June 30, 2002 and 2001, were 27.8% and 26.3%, respectively. The effective tax rate remains low due to the tax credits available from the Company's investment in a low income housing partnership. Comparison of the Three Months Ended June 30, 2002 and June 30, 2001 Net earnings for the three months ended June 30, 2002 totaled $371,000, compared with $346,000 for the three months ended June 30, 2001, an increase of $25,000, or 7.2%. Net interest income increased by $99,000, total other income increased by $37,000 and general, administrative and other expense increased by $90,000, while the provision for losses on loans increased by $5,000 and income taxes increased by $16,000. Interest income on loans decreased by $88,000, or 4.0%, for the three months ended June 30, 2002, compared to the same quarter in 2001, due primarily to a decrease in the yield on loans. Interest income on mortgage-backed securities, investments and other interest-earning assets totaled $236,000 for the three months ended June 30, 2002, a $64,000, or 21.3%, decrease from the 2001 quarter. The decrease was due primarily to a decrease in the average yield year to year. Interest expense on deposits decreased by $214,000, or 22.4%, as the average cost of deposits decreased. Interest expense on borrowings decreased by $37,000, or 7.2%, due primarily to a decrease in the average cost of borrowings year to year. The decreases in the level of yields on interest-earning assets and the average cost of interest-bearing liabilities were due primarily to the overall decrease in interest rates in the economy during 2001. This low interest rate environment continued through the 2002 reporting period. As a result of the foregoing changes in interest income and interest expense, net interest income increased by $99,000, or 9.6%, to $1.1 million for the three months ended June 30, 2002, compared to $1.0 million for the same quarter in 2001. The Company maintains a general allowance for loan losses that reflects an estimate of inherent losses based upon the types and categories of outstanding loans, as well as problem loans and current economic conditions in the Company's market area. The provision for losses on loans totaled $90,000 for the six months ended June 30, 2002, compared to $85,000 for the six months ended June 30, 2001. The increase in the provision for losses on loans was primarily attributable to the increasing percentage of commercial loans in the portfolio and the increase in the level of nonperforming loans year to year. At June 30, 2002 and December 31, 2001, the allowance amounted to $1.3 million and $1.1 million, respectively, for a ratio to total loans of 1.12% at June 30, 2002 and 1.00% at December 31, 2001. Non-performing loans totaled $1.8 million and $1.9 million at June 30, 2002 and December 31, 2001, respectively. The ratio of the allowance for loan losses to non-performing loans amounted to -12- Comparison of the Three Months Ended June 30, 2002 and June 30, 2001 (continued) 73.7% at June 30, 2002 and 58.1% at December 31, 2001. Based on management's review of the loan portfolio, the allowance for loan losses at June 30, 2002 is considered adequate to cover potential losses inherent in the loan portfolio. However, there can be no assurance that additions to the allowance will not be necessary in future periods, which could adversely affect the Company's results of operations. Other income totaled $82,000 for the three months ended June 30, 2002, a $37,000, or 82.2%, increase over the 2001 quarter. The increase was due primarily to a decrease in the pre-tax loss on the equity investment of $35,000 and a $17,000 gain on the sale of investment securities. Service charges on deposit accounts decreased by $6,000, or 9.7%. Other operating income decreased by $9,000, or 23.7%, due primarily to a decrease in the income on bank owned life insurance and a decline in insurance commissions. The Company has transferred the Bank owned life insurance to a new insurance company in order to obtain additional death benefits; however, it is anticipated that no income will be earned on the policies for a period of two years. General, administrative and other expense totaled $603,000 for the three-month period ended June 30, 2002, an increase of $90,000, or 17.5%, compared to the three month period ended June 30, 2001. Employee compensation and benefits expense increased by $68,000, or 25.4%, due to increased personnel and increases in the cost of medical insurance, in addition to the resumption of the accrual for pension expense as discussed in the comparison of the six months ended June 30, 2002. Other operating expenses increased by $23,000, or 17.2%, compared to the quarter ended June 30, 2001, due primarily to increases in advertising and professional fees. The provision for income taxes totaled $145,000 for the three months ended June 30, 2002, an increase of $16,000, or 12.4%, over the same period in 2001. The increase was due to a $41,000, or 8.6%, increase in pre-tax earnings. The Company's effective tax rates for the three-month periods ended June 30, 2002 and 2001, were 28.1% and 27.2%, respectively. The effective tax rate remains low due to the tax credits available from the Company's investment in a low income housing partnership. Capital Resources Pursuant to Office of Thrift Supervision ("OTS") capital regulations, savings associations must currently meet a 1.5% tangible capital requirement, a 4% leverage ratio (or core capital) requirement, and total risk-based capital to risk-weighted assets ratio of 8%. At June 30, 2002, the Bank's tangible and leverage capital ratios were each 9.9%, and its risk-based capital to risk-weighted assets ratio was 15.1%. Therefore, the Bank's capital significantly exceeded all of the capital requirements currently in effect. The following table provides the minimum regulatory capital requirements and the Bank's capital levels as of June 30, 2002. Capital Standard Required Bank's Excess - ---------------- -------- ------ ------ (In thousands) Tangible (1.5%) $2,205 $14,597 $12,392 Core (4.0%) 5,881 14,597 8,716 Risk-based (8.0%) 8,396 15,886 7,490 -13- Item 3. Quantitative and Qualitative Disclosures About Market Risk The Bank, like other financial institutions, is subject to interest rate risk to the degree that its interest-bearing liabilities, primarily deposits with short and medium-term maturities, mature or reprice at different rates than its interest-earning assets. Management of the Bank believes it is critical to manage the relationship between interest rates and the effect on the Bank's net portfolio value ("NPV"). Generally, NPV is the discounted present value of the difference between incoming cash flows on interest-earning and other assets and outgoing cash flows on interest-bearing liabilities. Management of the Bank's assets and liabilities is done within the context of the marketplace, regulatory limitations and within limits established by the Board of Directors on the amount of change in NPV which is acceptable given certain interest rate changes. The OTS issued a regulation, effective January 1, 1994, which uses a net market value methodology to measure the interest rate risk exposure of thrift institutions. Under OTS regulations, an institution's "normal" level of interest rate risk, in the event of an assumed change in interest rates, is a decrease in the institution's NPV in an amount not exceeding 2% of the present value of its assets. Thrift institutions with over $300 million in assets or less than a 12% risk-based capital ratio are required to file OTS Schedule CMR. Data from schedule CMR is used by the OTS to calculate changes in NPV (and the related "normal" level of interest rate risk based upon certain interest rate changes (discussed below). Institutions which do not meet either of the filing requirements are not required to file OTS Schedule CMR, but may do so voluntarily. The Bank does not currently meet either of these requirements, but it does voluntarily file Schedule CMR. Presented below, as of March 31, 2002, the latest available date, is an analysis performed by the OTS of the Bank's interest rate risk as measured by changes in NPV for instantaneous and sustained parallel shifts in the yield curve, in 100 basis point increments, up and down 300 basis points and in accordance with OTS regulations. As illustrated in the table, the Bank's NPV is more sensitive to rising rates than declining rates. This occurs principally because, as rates rise, the market value of the Bank's investments, adjustable-rate mortgage loans (many of which have maximum per year adjustments of 1%), fixed-rate loans and mortgage-backed securities declines due to the rate increase. The value of the Bank's deposits and borrowings change in approximately the same proportion in rising and falling rate scenarios.
Change Net Portfolio Value NPV as % of PV of Assets In Rates $ Amount $ Change % Change NPV Ratio Change (Dollars in thousands) +300bp $13,408 $-4,521 -25% 9.60% -257bp +200bp 15,248 -2,681 -15% 10.72% -145bp +100bp 16,751 -1,178 -7% 11.57% -60bp - 17,929 12.17% - - 100bp 18,275 346 +2% 12.25% +8bp - - 200bp - - - - - - - 300bp - - - - -
Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock Pre-shock NPV Ratio: NPV as % of PV of Assets 12.17% Exposure Measure: Post-Shock NPV Ratio 10.72% Sensitivity Measure: Change in NPV Ratio 146 As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could likely deviate significantly from those assumed in calculating the table. -14- Part II. OTHER INFORMATION Item 1. Legal Proceedings Neither the Bank nor the Company were, during the six-month period ended June 30, 2002, or are as of the date hereof, involved in any legal proceeding of a material nature. From time to time, the Bank is a party to legal proceedings wherein it enforces its security interests in connection with its mortgage and other loans. Item 4. Submission of Matter to a Vote of Security Holders On April 9, 2002, the Company held its 2002 annual meeting of shareholders. A total of 887,524 shares or 88.77% of the Company's shares outstanding, were represented at the meeting either in person or by proxy. Five directors were nominated by the Company's Board of Directors to serve new three, two, and one year terms. The nominees, and the voting results are listed below. For Against Withheld David G. Wihebrink(3 year) 834,342 53,182 0 Todd S. Weinstein(3 year) 848,724 38,800 0 Charles J. Evans(3 year) 834,357 53,167 0 Thomas G. Williams(2 year) 849,174 38,350 0 James P. Bauer(1 year) 849,674 37,850 0 The other directors continuing in office are Brian J. Morrill, Susanne S. Ridlen and William Tincher, Jr. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are attached to this report on Form 10-Q: 3.1 Code of By-Laws adopted and effective as of May 14, 2002 (b) Reports on Form 8-K. The Registrant filed no reports on Form 8-K during the quarter. -15- Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on behalf of the undersigned thereto duly authorized. Logansport Financial Corp. Date: August 14, 2002 By:/s/ David G. Wihebrink --------------------------- -------------------------------- David G. Wihebrink, President and Chief Executive Officer Date: August 14, 2002 By:/s/ Dottye Robeson --------------------------- -------------------------------- Dottye Robeson, Secretary and Treasurer -16- CERTIFICATION By signing below, each of the undersigned officers hereby certifies pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge, (i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Logansport Financial Corp. Signed this 14th day of August, 2002. /s/Dottye Robeson /s/David G. Wihebrink - ----------------------------------- ------------------------------------ (Signature of Authorized Officer) (Signature of Authorized Officer) Dottye Robeson David G. Wihebrink - ----------------------------------- ------------------------------------ (Typed Name) (Typed Name) Treasurer President and Chief Executive Officer - ----------------------------------- ------------------------------------ (Title) (Title) EX-3.1 3 lfc10q_ex3163002.txt CODE OF BYLAWS EXHIBIT CODE OF BY-LAWS OF LOGANSPORT FINANCIAL CORP. ARTICLE I Offices Section 1. Principal Office. The principal office (the "Principal Office") of Logansport Financial Corp. (the "Corporation") shall be at 723 East Broadway, Logansport, Indiana 46947, or such other place as shall be determined by resolution of the Board of Directors of the Corporation (the "Board"). Section 2. Other Offices. The Corporation may have such other offices at such other places within or without the State of Indiana as the Board may from time to time designate, or as the business of the Corporation may require. ARTICLE II Seal Section 1. Corporate Seal. The corporate seal of the Corporation (the "Seal") shall be circular in form and shall have inscribed thereon the words "LOGANSPORT FINANCIAL CORP." and "INDIANA." In the center of the seal shall appear the word "Seal." Use of the Seal or an impression thereof shall not be required, and shall not affect the validity of any instrument whatsoever. ARTICLE III Shareholder Meetings Section 1. Place of Meeting. Every meeting of the shareholders of the Corporation (the "Shareholders") shall be held at the Principal Office, unless a different place is specified in the notice or waiver of notice of such meeting or by resolution of the Board or the Shareholders, in which event such meeting may be held at the place so specified, either within or without the State of Indiana. Section 2. Annual Meeting. The annual meeting of the Shareholders (the "Annual Meeting") shall be held each year at 3:00 o'clock P.M. on the second Tuesday in April (or, if such day is a legal holiday, on the next succeeding day not a legal holiday), for the purpose of electing directors of the Corporation ("Directors") and for the transaction of such other business as may legally come before the Annual Meeting. If for any reason the Annual Meeting shall not be held at the date and time herein provided, the same may be held at any time thereafter, or the business to be transacted at such Annual Meeting may be transacted at any special meeting of the Shareholders (a "Special Meeting") called for that purpose. Section 3. Notice of Annual Meeting. Written or printed notice of the Annual Meeting, stating the date, time and place thereof, shall be delivered or mailed by the Secretary or an Assistant Secretary to each Shareholder of record entitled to notice of such Meeting, at such address as appears on the records of the Corporation, at least ten and not more than sixty days before the date of such Meeting. Section 4. Special Meetings. Special Meetings, for any purpose or purposes (unless otherwise prescribed by law), may be called by only the Chairman of the Board of Directors (the "Chairman"), if any, or by the Board, pursuant to a resolution adopted by a majority of the total number of Directors of the Corporation, to vote on the business proposed to be transacted thereat. All requests for Special Meetings shall state the purpose or purposes thereof, and the business transacted at such Meeting shall be confined to the purposes stated in the call and matters germane thereto. Section 5. Notice of Special Meetings. Written or printed notice of all Special Meetings, stating the date, time, place and purpose or purposes thereof, shall be delivered or mailed by the Secretary or the President or any Vice President calling the Meeting to each Shareholder of record entitled to notice of such Meeting, at such address as appears on the records of the Corporation, at least ten and not more than sixty days before the date of such Meeting. Section 6. Waiver of Notice of Meetings. Notice of any Annual or Special Meeting (a "Meeting") may be waived in writing by any Shareholder, before or after the date and time of the Meeting specified in the notice thereof, by a written waiver delivered to the Corporation for inclusion in the minutes or filing with the corporate records. A Shareholder's attendance at any Meeting in person or by proxy shall constitute a waiver of (a) notice of such Meeting, unless the Shareholder at the beginning of the Meeting objects to the holding of or the transaction of business at the Meeting, and (b) consideration at such Meeting of any business that is not within the purpose or purposes described in the Meeting notice, unless the Shareholder objects to considering the matter when it is presented. Section 7. Quorum. At any Meeting, the holders of a majority of the voting power of all shares of the Corporation (the "Shares") issued and outstanding and entitled to vote at such Meeting (after giving effect to the provisions in Article 11 of the Articles of Incorporation of the Corporation, as the same may, from time to time, be amended (the "Articles")), represented in person or by proxy, shall constitute a quorum for the election of Directors or for the transaction of other business, unless otherwise provided by law, the Articles or this Code of By-Laws, as the same may, from time to time, be amended (these "By-Laws"). If, however, a quorum shall not be present or represented at any Meeting, the Shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the Meeting from time to time, without notice other than announcement at the Meeting of the date, time and place of the adjourned Meeting, unless the date of the adjourned Meeting requires that the Board fix a new record date (the "Record Date") therefor, in which case notice of the adjourned Meeting shall be given. At such adjourned Meeting, if a quorum shall be present or represented, any business may be transacted that might have been transacted at the Meeting as originally scheduled. Section 8. Voting. At each Meeting, every Shareholder entitled to vote shall have one vote for each Share standing in his name on the books of the Corporation as of the Record Date fixed by the Board for such Meeting, except as otherwise provided by law or the Articles, and except that no Share shall be voted at any Meeting upon which any installment is due and unpaid and no share which is not entitled to vote pursuant to Article 11 of the Articles shall be voted at any Meeting. Voting for Directors and, upon the demand of any Shareholder, voting upon any question properly before a Meeting, shall be by ballot. A plurality vote shall be necessary to elect any Director, and on all other matters, the action or a question shall be approved if the number of votes cast thereon in favor of the action or question exceeds the number of votes cast opposing the action or question, except as otherwise provided by law or the Articles. Section 9. Shareholder List. The Secretary shall prepare before each Meeting a complete list of the Shareholders entitled to notice of such Meeting, arranged in alphabetical order by class of Shares (and each series within a class), and showing the address of, and the number of Shares entitled to vote held by, each Shareholder (the "Shareholder List"). Beginning five business days before the Meeting and continuing throughout the Meeting, the Shareholder List shall be on file at the Principal Office or at a place identified in the Meeting notice in the city where the Meeting will be held, and shall be available for inspection by any Shareholder entitled to vote at the Meeting. On written demand, made in good faith and for a proper purpose and describing with reasonable particularity the Shareholder's purpose, and if the Shareholder List is directly connected with the Shareholder's purpose, a Shareholder (or such Shareholder's agent or attorney authorized in writing) shall be entitled to inspect and to copy the Shareholder List, during regular business hours and at the Shareholder's expense, during the period the Shareholder List is available 2 for inspection. The original stock register or transfer book (the "Stock Book"), or a duplicate thereof kept in the State of Indiana, shall be the only evidence as to who are the Shareholders entitled to examine the Shareholder List, or to notice of or to vote at any Meeting. Section 10. Proxies. A Shareholder may vote either in person or by proxy executed in writing by the Shareholder or a duly authorized attorney-in-fact. No proxy shall be valid after eleven months from the date of its execution, unless a shorter or longer time is expressly provided therein. Section 11. Notice of Shareholder Business. At an Annual Meeting of the Shareholders, only such business shall be conducted as shall have been properly brought before the Meeting. To be properly brought before an Annual Meeting, business must be (a) specified in the notice of Meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the Meeting by or at the direction of the Board, or (c) otherwise properly brought before the Meeting by a Shareholder. For business to be properly brought before an Annual Meeting by a Shareholder, the Shareholder must have the legal right and authority to make the Proposal for consideration at the Meeting and the Shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days prior to the Meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the Meeting is given or made to Shareholders (which notice or public disclosure shall include the date of the Annual Meeting specified in these By-Laws, if such By-Laws have been filed with the Securities and Exchange Commission and if the Annual Meeting is held on such date), notice by the Shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made. A Shareholder's notice to the Secretary shall set forth as to each matter the Shareholder proposes to bring before the Annual Meeting (a) a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (b) the name and record address of the Shareholders proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the Shareholder, and (d) any material interest of the Shareholder in such business. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at an Annual Meeting except in accordance with the procedures set forth in this Section 11. The Chairman of an Annual Meeting shall, if the facts warrant, determine and declare to the Meeting that business was not properly brought before the Meeting and in accordance with the provisions of this Section 11, and if he should so determine, he shall so declare to the Meeting and any such business not properly brought before the Meeting shall not be transacted. At any Special Meeting of the Shareholders, only such business shall be conducted as shall have been brought before the Meeting by or at the direction of the Board of Directors. Section 12. Notice of Shareholder Nominees. Only persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible for election as Directors. Nominations of persons for election to the Board may be made at a Meeting of Shareholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any Shareholder of the Corporation entitled to vote for the election of Directors at the Meeting who complies with the notice procedures set forth in this Section 12. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a Shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days prior to the Meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the Meeting is given or made to Shareholders (which notice or public disclosure shall include the date of the Annual Meeting specified in these By-Laws, if such By-Laws have been filed with the Securities and Exchange Commission and if the Annual Meeting is held on such date), notice by the Shareholders to be timely must be so received not later than the close of 3 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. Such Shareholder's notice shall set forth (a) as to each person whom the Shareholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the Shareholder giving the notice (i) the name and record address of such Shareholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such Shareholder. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. The Chairman of the Meeting shall, if the facts warrant, determine and declare to the Meeting that a nomination was not made in accordance with the procedures prescribed by these By-Laws, and if he should so determine, he shall so declare to the Meeting and the defective nomination shall be disregarded. Section 13. Disclosure Procedure. The President may, in the discretion of the President and from time to time, require such of the record holders of the Corporation's shares as the President shall determine, or any nominee that holds shares through such record holder, to disclose to the Corporation whether or not such record holder or nominee holds such shares for the account of another person or persons who is or are the beneficial owner(s) of such shares and, if so, the name(s) of such beneficial owner(s). If any such record holder or nominee shall, without legal justification, fail to disclose the information required by the preceding sentence to the Corporation (by depositing in United States mail, postage prepaid, a letter properly addressed to the Corporation at the designated address or otherwise) within 10 days of the date of mailing by the Corporation of the disclosure request (postage prepaid and properly addressed to the record holder or nominee at the address appearing in the Corporation's stock records) then, in the discretion of the President, the Corporation may (in addition to any other remedies that may then be available to it at law or in equity) (a) prohibit the voting of any or all shares held by such record shareholder or nominee at the next meeting of the shareholders; (b) for so long as the failure to disclose continues, withhold dividends with respect to the shares held by such record shareholder or nominee; (c) reacquire any or all shares registered in the name of such record shareholder or nominee (for the account of the Corporation or its assignee) at a price per share equal to the closing price of the shares on the trading day next preceding the date of the notice of reacquisition as reported by the principal national market on which the shares are then traded or quoted, or, if there are no sales reported on the trading day next preceding the date of the notice of reacquisition, at a price per share equal to the median price between the highest closing bid quotation and the lowest closing asked quotation with respect to such shares on the trading day next preceding the date of the notice of reacquisition as reported by such principal market, or, if no such quotations are available, at a price per share equal to the fair market value of such shares immediately prior to the date of the notice of reacquisition as determined by the Board in good faith by such other reasonable method as the Board shall, in its discretion, select and apply, by depositing in the United States mail (postage prepaid and properly addressed to such record holder or nominee at its address appearing in the Corporation's stock records) a notice of reacquisition, specifying (i) the number of shares to be so reacquired, (ii) the price at which such shares are to be reacquired as determined by this clause(c), (iii) the closing date of the reacquisition, which shall not be later than the fifth trading day following the date of the notice of reacquisition, and (iv) the procedures by which the record holder or nominee may surrender the certificates for the shares reacquired on or after the closing date in exchange for the reacquisition price; in which event the shares specified by the notice of reacquisition shall be deemed reacquired by the Corporation effective the date of the notice of reacquisition for all 4 purposes and the record holder's or nominee's rights with respect to such shares on and after such date shall be limited to the right to receive on or after the specified closing date (upon surrender of the certificate(s) for the reacquired shares, accompanied by such instruments of transfer and other assurances as the Corporation may reasonably request) the reacquisition price, without interest; or (d) deny voting rights, withhold dividends, and reacquire shares, or any combination thereof, as provided in clauses (a), (b), and (c). The Corporation may, but is not required to, accept a delinquent disclosure of the matters referred to in this procedure in satisfaction of an insufficient disclosure or a failure to timely disclose, or may proceed with its remedies (including its reacquisition of shares held by such record shareholder or nominee) notwithstanding any attempt to cure a prior insufficient disclosure or failure to disclose. If the Corporation (or any person acting on its behalf) shall employ counsel in connection with any legal proceeding to enforce or defend any action taken pursuant to this procedure, the Corporation (or other person) shall be entitled to recover from the record shareholder or nominee its reasonable attorneys' fees and expenses and other costs incurred in the enforcement or defense of such action, to the extent successful, in addition to all other appropriate relief. ARTICLE IV Board of Directors Section 1. Number. The business and affairs of the Corporation shall be managed by a Board of not less than five (5) nor more than fifteen (15) Directors, as may be specified from time to time by resolution adopted by a majority of the total number of the Corporation's Directors, divided into three classes as provided in the Articles. If and whenever the Board of Directors has not specified the number of Directors, the number shall be eight (8). Directors (a) must have their primary domicile in Cass County, Indiana, and (b) must have a loan or deposit relationship with Logansport Savings Bank, FSB, which they have maintained for at least a continuous period of nine (9) months immediately prior to their nomination to the Board (or in the case of directors of the Corporation on May 14, 2002, prior to such date). In addition, each Director who is not an employee of the Corporation or any of its subsidiaries must have served as a member of a recognized tax-exempt civic or community organization based in Cass County, Indiana, for at least a continuous period of twelve (12) months during the five (5) years prior to his or her nomination to the Board. The Board may waive one or more of the requirements set forth in the two previous sentences for one or more representatives it determines to appoint or nominate to the Board in connection with an acquisition of another financial institution by the Corporation or in connection with the acquisition or opening of a new branch by its subsidiary, Logansport Savings Bank, FSB. The Board may elect or appoint, from among its members, a Chairman of the Board (the "Chairman"), who need not be an officer (an "Officer") or employee of the Corporation. The Chairman, if elected or appointed, shall preside at all Shareholder Meetings and Board Meetings and shall have such other powers and perform such other duties as are incident to such position and as may be assigned by the Board. Section 2. Vacancies and Removal. Any vacancy occurring in the Board shall be filled as provided in the Articles. Shareholders shall be notified of any increase in the number of Directors and the name, principal occupation and other pertinent information about any Director elected by the Board to fill any vacancy. Any Director, or the entire Board, may be removed from office only as provided in the Articles. Section 3. Powers and Duties. In addition to the powers and duties expressly conferred upon it by law, the Articles or these By-Laws, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not inconsistent with the law, the Articles or these By-Laws. Section 4. Annual Board Meeting. Unless otherwise determined by the Board, the Board shall meet each year immediately after the Annual Meeting, at the place where such Meeting has been held, for the purpose of organization, election of Officers of the Corporation (the "Officers") and consideration of 5 any other business that may properly be brought before such annual meeting of the Board (the "Annual Board Meeting"). No notice shall be necessary for the holding of the Annual Board Meeting. If the Annual Board Meeting is not held as above provided, the election of Officers may be held at any subsequent duly constituted meeting of the Board (a "Board Meeting"). Section 5. Regular Board Meetings. Regular meetings of the Board ("Regular Board Meetings") may be held at stated times or from time to time, and at such place, either within or without the State of Indiana, as the Board may determine, without call and without notice. Section 6. Special Board Meetings. Special meetings of the Board ("Special Board Meetings") may be called at any time or from time to time, and shall be called on the written request of at least two Directors, by the Chairman or the President, by causing the Secretary or any Assistant Secretary to give to each Director, either personally or by mail, telephone, telegraph, teletype or other form of wire or wireless communication at least two days' notice of the date, time and place of such Meeting. Special Board Meetings shall be held at the Principal Office or at such other place, within or without the State of Indiana, as shall be specified in the respective notices or waivers of notice thereof. Section 7. Waiver of Notice and Assent. A Director may waive notice of any Board Meeting before or after the date and time of the Board Meeting stated in the notice by a written waiver signed by the Director and filed with the minutes or corporate records. A Director's attendance at or participation in a Board Meeting shall constitute a waiver of notice of such Meeting and assent to any corporate action taken at such Meeting, unless (a) the Director at the beginning of such Meeting (or promptly upon his arrival) objects to holding of or transacting business at the Meeting and does not thereafter vote for or assent to action taken at the Meeting; (b) the Director's dissent or abstention from the action taken is entered in the minutes of such Meeting; or (c) the Director delivers written notice of his dissent or abstention to the presiding Director at such Meeting before its adjournment, or to the Secretary immediately after its adjournment. The right of dissent or abstention is not available to a Director who votes in favor of the action taken. Section 8. Quorum. At all Board Meetings, a majority of the number of Directors designated for the full Board (the "Full Board") shall be necessary to constitute a quorum for the transaction of any business, except (a) that for the purpose of filling of vacancies a majority of Directors then in office shall constitute a quorum, and (b) that a lesser number may adjourn the Meeting from time to time until a quorum is present. The act of a majority of the Board present at a Meeting at which a quorum is present shall be the act of the Board, unless the act of a greater number is required by law, the Articles or these By-Laws. Section 9. Audit and Other Committees of the Board. The Board shall, by resolution adopted by a majority of the Full Board, designate an Audit Committee comprised of two or more Directors, which shall have such authority and exercise such duties as shall be provided by resolution of the Board. The Board may, by resolution adopted by such majority, also designate other regular or special committees of the Board ("Committees"), in each case comprised of two or more Directors and to have such powers and exercise such duties as shall be provided by resolution of the Board. Section 10. Resignations. Any Director may resign at any time by giving written notice to the Board, The Chairman, the President or the Secretary. Any such resignation shall take effect when delivered unless the notice specifies a later effective date. Unless otherwise specified in the notice, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Age Limitations. No person seventy (70) years of age or older shall be eligible for election, reelection, appointment, or reappointment to the Board. No Director shall serve as such beyond the Annual Meeting of the Corporation immediately following the Director becoming seventy (70) years of age, except that a director serving as a director of any of the Corporation's 6 subsidiaries on December 29, 1992 may complete the term as Director. A Director may be exempted from this provision, one term only, by a resolution passed by a two-thirds vote of the Board (amended May 13, 1997). ARTICLE V Officers Section 1. Officers. The Officers shall be the President, one or more Vice Presidents, the Secretary and the Treasurer, and may include one or more Assistant Secretaries, one or more Assistant Treasurers, a Comptroller and one or more Assistant Comptrollers. Any two or more offices may be held by the same person. The Board may from time to time elect or appoint such other Officers as it shall deem necessary, who shall exercise such powers and perform such duties as may be prescribed from time to time by these By-Laws or, in the absence of a provision in these By-Laws in respect thereto, as may be prescribed from time to time by the Board. Section 2. Election of Officers. The Officers shall be elected by the Board at the Annual Board Meeting and shall hold office for one year or until their respective successors shall have been duly elected and shall have qualified; provided, however, that the Board may at any time elect one or more persons to new or different offices and/or change the title, designation and duties and responsibilities of any of the Officers consistent with the law, the Articles and these By-Laws. Section 3. Vacancies; Removal. Any vacancy among the Officers may be filled for the unexpired term by the Board. Any Officer may be removed at any time by the affirmative vote of a majority of the Full Board. Section 4. Delegation of Duties. In the case of the absence, disability, death, resignation or removal from office of any Officer, or for any other reason that the Board shall deem sufficient, the Board may delegate, for the time being, any or all of the powers or duties of such Officer to any other Officer or to any Director. Section 5. President. The President shall be a Director and, subject to the control of the Board, shall have general charge of and supervision and authority over the business and affairs of the Corporation, and shall have such other powers and perform such other duties as are incident to this office and as may be assigned to him by the Board. In the case of the absence or disability of the Chairman or if no Chairman shall be elected or appointed by the Board, the President shall preside at all Shareholder Meetings and Board Meetings. Section 6. Vice Presidents. Each of the Vice Presidents shall have such powers and perform such duties as may be prescribed for him by the Board or delegated to him by the President. In the case of the absence, disability, death, resignation or removal from office of the President, the powers and duties of the President shall, for the time being, devolve upon and be exercised by the Executive Vice President, if there be one, and if not, then by such one of the Vice Presidents as the Board or the President may designate, or, if there be but one Vice President, then upon such Vice President; and he shall thereupon, during such period, exercise and perform all of the powers and duties of the President, except as may be otherwise provided by the Board. Section 7. Secretary. The Secretary shall have the custody and care of the Seal, records, minutes and the Stock Book of the Corporation; shall attend all Shareholder Meetings and Board Meetings, and duly record and keep the minutes of their proceedings in a book or books to be kept for that purpose; shall give or cause to be given notice of all Shareholder Meetings and Board Meetings when such notice shall be required; shall file and take charge of all papers and documents belonging to the Corporation; and shall have such other powers and perform such other duties as are incident to the office of secretary of a business corporation, subject at all times to the direction and control of the Board and the President. 7 Section 8. Assistant Secretaries. Each of the Assistant Secretaries shall assist the Secretary in his duties and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Secretary, his powers and duties shall, for the time being, devolve upon such one of the Assistant Secretaries as the Board, the President or the Secretary may designate, or, if there be but one Assistant Secretary, then upon such Assistant Secretary; and he shall thereupon, during such period, exercise and perform all of the powers and duties of the Secretary, except as may be otherwise provided by the Board. Section 9. Treasurer. The Treasurer shall have control over all records of the Corporation pertaining to moneys and securities belonging to the Corporation; shall have charge of, and be responsible for, the collection, receipt, custody and disbursements of funds of the Corporation; shall have the custody of all securities belonging to the Corporation; shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; and shall disburse the funds of the Corporation as may be ordered by the Board, taking proper receipts or making proper vouchers for such disbursements and preserving the same at all times during his term of office. When necessary or proper, he shall endorse on behalf of the Corporation all checks, notes or other obligations payable to the Corporation or coming into his possession for or on behalf of the Corporation, and shall deposit the funds arising therefrom, together with all other funds and valuable effects of the Corporation coming into his possession, in the name and the credit of the Corporation in such depositories as the Board from time to time shall direct, or in the absence of such action by the Board, as may be determined by the President or any Vice President. If the Board has not elected a Comptroller or an Assistant Comptroller, or in the absence or disability of the Comptroller and each Assistant Comptroller or if, for any reason, a vacancy shall occur in such offices, then during such period the Treasurer shall have, exercise and perform all of the powers and duties of the Comptroller. The Treasurer shall also have such other powers and perform such other duties as are incident to the office of treasurer of a business corporation, subject at all times to the direction and control of the Board and the President. If required by the Board, the Treasurer shall give the Corporation a bond, in such an amount and with such surety or sureties as may be ordered by the Board, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 10. Assistant Treasurers. Each of the Assistant Treasurers shall assist the Treasurer in his duties, and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Treasurer, his powers and duties shall, for the time being, devolve upon such one of the Assistant Treasurers as the Board, the President or the Treasurer may designate, or, if there be but one Assistant Treasurer, then upon such Assistant Treasurer; and he shall thereupon, during such period, exercise and perform all the powers and duties of the Treasurer except as may be otherwise provided by the Board. If required by the Board, each Assistant Treasurer shall likewise give the Corporation a bond, in such amount and with such surety or sureties as may be ordered by the Board, for the same purposes as the bond that may be required to be given by the Treasurer. Section 11. Comptroller. The Comptroller shall have direct control over all accounting records of the Corporation pertaining to moneys, properties, materials and supplies, including the bookkeeping and accounting departments; shall have direct supervision over the accounting records in all other departments pertaining to moneys, properties, materials and supplies; shall render to the President and the Board, at Regular Board Meetings or whenever the same shall be required, an account of all his transactions as Comptroller and of the financial condition of the Corporation; and shall have such other powers and 8 perform such other duties as are incident to the office of comptroller of a business corporation, subject at all times to the direction and control of the Board and the President. Section 12. Assistant Comptrollers. Each of the Assistant Comptrollers shall assist the Comptroller in his duties, and shall have such other powers and perform such other duties as may be prescribed for him by the Board or delegated to him by the President. In case of the absence, disability, death, resignation or removal from office of the Comptroller, his powers and duties shall, for the time being, devolve upon such one of the Assistant Comptrollers as the Board, the President or the Comptroller may designate, or, if there be but one Assistant Comptroller, then upon such Assistant Comptroller; and he shall thereupon, during such period, exercise and perform all the powers and duties of the Comptroller, except as may be otherwise provided by the Board. Section 13. Age Limitations. No person seventy (70) years of age or older shall be eligible for election, reelection, appointment, or reappointment as an Officer of the Corporation. No Officer shall serve beyond the Annual Meeting of the Corporation immediately following the Officer becoming seventy (70) years of age, except that an officer serving as an officer of any of the Corporation's subsidiary on December 29, 1992, shall not be affected by this limitation. However, an officer shall, at the option of the Board, retire at age 55 if the Officer has served in an executive or high policy-making post for at least two years immediately prior to retirement and is immediately entitled to non-forfeitable annual retirement benefits in accordance with the Employee Retirement Income Security Act of 1974, as amended. ARTICLE VI Certificates for Shares Section 1. Certificates. Certificates for Shares ("Certificates") shall be in such form, consistent with law and the Articles, as shall be approved by the Board. Certificates for each class, or series within a class, of Shares, shall be numbered consecutively as issued. Each Certificate shall state the name of the Corporation and that it is organized under the laws of the State of Indiana; the name of the registered holder; the number and class and the designation of the series, if any, of the Shares represented thereby; and a summary of the designations, relative rights, preferences and limitations applicable to such class and, if applicable, the variations in rights, preferences and limitations determined for each series and the authority of the Board to determine such variations for future series; provided, however, that such summary may be omitted if the Certificate states conspicuously on its front or back that the Corporation will furnish the Shareholder such information upon written request and without charge. Each Certificate shall be signed (either manually or in facsimile) by (i) the President or a Vice President and (ii) the Secretary or an Assistant Secretary, or by any two or more Officers that may be designated by the Board, and may have affixed thereto the Seal, which may be a facsimile, engraved or printed. Section 2. Record of Certificates. Shares shall be entered in the Stock Book as they are issued, and shall be transferable on the Stock Book by the holder thereof in person, or by his attorney duly authorized thereto in writing, upon the surrender of the outstanding Certificate therefor properly endorsed. Section 3. Lost or Destroyed Certificates. Any person claiming a Certificate to be lost or destroyed shall make affidavit or affirmation of that fact and, if the Board or the President shall so require, shall give the Corporation and/or the transfer agents and registrars, if they shall so require, a bond of indemnity, in form and with one or more sureties satisfactory to the Board or the President and/or the transfer agents and registrars, in such amount as the Board or the President may direct and/or the transfer agents and registrars may require, whereupon a new Certificate may be issued of the same tenor and for the same number of Shares as the one alleged to be lost or destroyed. 9 Section 4. Shareholder Addresses. Every Shareholder shall furnish the Secretary with an address to which notices of Meetings and all other notices may be served upon him or mailed to him, and in default thereof notices may be addressed to him at his last known address or at the Principal Office. ARTICLE VII Corporate Books and Records Section 1. Places of Keeping. Except as otherwise provided by law, the Articles or these By-Laws, the books and records of the Corporation (including the "Corporate Records," as defined in the Articles) may be kept at such place or places, within or without the State of Indiana, as the Board may from time to time by resolution determine or, in the absence of such determination by the Board, as shall be determined by the President. Section 2. Stock Book. The Corporation shall keep at the Principal Office the original Stock Book or a duplicate thereof, or, in case the Corporation employs a stock registrar or transfer agent within or without the State of Indiana, another record of the Shareholders in a form that permits preparation of a list of the names and addresses of all the Shareholders, in alphabetical order by class of Shares, stating the number and class of Shares held by each Shareholder (the "Record of Shareholders"). Section 3. Inspection of Corporate Records. Any Shareholder (or the Shareholder's agent or attorney authorized in writing) shall be entitled to inspect and copy at his expense, after giving the Corporation at least five business days' written notice of his demand to do so, the following Corporate Records: (1) the Articles; (2) these By-Laws; (3) minutes of all Shareholder Meetings and records of all actions taken by the Shareholders without a meeting (collectively, "Shareholders Minutes") for the prior three years; (4) all written communications by the Corporation to the Shareholders including the financial statements furnished by the Corporation to the Shareholders for the prior three years; (5) a list of the names and business addresses of the current Directors and the current Officers; and (6) the most recent Annual Report of the Corporation as filed with the Secretary of State of Indiana. Any Shareholder (or the Shareholder's agent or attorney authorized in writing) shall also be entitled to inspect and copy at his expense, after giving the Corporation at least five business days' written notice of his demand to do so, the following Corporate Records, if his demand is made in good faith and for a proper purpose and describes with reasonable particularity his purpose and the records he desires to inspect, and the records are directly connected with his purpose: (1) to the extent not subject to inspection under the previous sentence, Shareholders Minutes, excerpts from minutes of Board Meetings and of Committee meetings, and records of any actions taken by the Board or any Committee without a meeting; (2) appropriate accounting records of the Corporation; and (3) the Record of Shareholders. Section 4. Record Date. The Board may, in its discretion, fix in advance a Record Date not more than seventy days before the date (a) of any Shareholder Meeting, (b) for the payment of any dividend or the making of any other distribution, (c) for the allotment of rights, or (d) when any change or conversion or exchange of Shares shall go into effect. If the Board fixes a Record Date, then only Shareholders who are Shareholders of record on such Record Date shall be entitled (a) to notice of and/or to vote at any such Meeting, (b) to receive any such dividend or other distribution, (c) to receive any such allotment of rights, or (d) to exercise the rights in respect of any such change, conversion or exchange of Shares, as the case may be, notwithstanding any transfer of Shares on the Stock Book after such Record Date. Section 5. Transfer Agents; Registrars. The Board may appoint one or more transfer agents and registrars for its Shares and may require all Certificates to bear the signature either of a transfer agent or of a registrar, or both. 10 ARTICLE VIII Checks, Drafts, Deeds and Shares of Stock Section 1. Checks, Drafts, Notes, Etc. All checks, drafts, notes or orders for the payment of money of the Corporation shall, unless otherwise directed by the Board or otherwise required by law, be signed by one or more Officers as authorized in writing by the President. In addition, the President may authorize any one or more employees of the Corporation ("Employees") to sign checks, drafts and orders for the payment of money not to exceed specific maximum amounts as designated in writing by the President for any one check, draft or order. When so authorized by the President, the signature of any such Officer or Employee may be a facsimile signature. Section 2. Deeds, Notes, Bonds, Mortgages, Contracts, Etc. All deeds, notes, bonds and mortgages made by the Corporation, and all other written contracts and agreements, other than those executed in the ordinary course of corporate business, to which the Corporation shall be a party, shall be executed in its name by the President, a Vice President or any other Officer so authorized by the Board and, when necessary or required, the Secretary or an Assistant Secretary shall attest the execution thereof. All written contracts and agreements into which the Corporation enters in the ordinary course of corporate business shall be executed by any Officer or by any other Employee designated by the President or a Vice President to execute such contracts and agreements. Section 3. Sale or Transfer of Stock. Subject always to the further orders and directions of the Board, any share of stock issued by any corporation and owned by the Corporation (including reacquired Shares of the Corporation) may, for sale or transfer, be endorsed in the name of the Corporation by the President or a Vice President, and said endorsement shall be duly attested by the Secretary or an Assistant Secretary either with or without affixing thereto the Seal. Section 4. Voting of Stock of Other Corporations. Subject always to the further orders and directions of the Board, any share of stock issued by any other corporation and owned or controlled by the Corporation (an "Investment Share") may be voted at any shareholders' meeting of such other corporation by the President or by a Vice President. Whenever, in the judgment of the President, it is desirable for the Corporation to execute a proxy or give a shareholder's consent in respect of any Investment Share, such proxy or consent shall be executed in the name of the Corporation by the President or a Vice President, and, when necessary or required, shall be attested by the Secretary or an Assistant Secretary either with or without affixing thereto the Seal. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have full right, power and authority to vote an Investment Share the same as such Investment Share might be voted by the Corporation. ARTICLE IX Fiscal Year Section 1. Fiscal Year. The Corporation's fiscal year shall begin on January 1 of each year and end on December 31 of the same year. ARTICLE X Amendments Section 1. Amendments. These By-Laws may be altered, amended or repealed, in whole or in part, and new By-Laws may be adopted, at any Board Meeting by the affirmative vote of a majority of the Full Board. 11 -----END PRIVACY-ENHANCED MESSAGE-----