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 SEPTEMBER 30, 2001 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
November 1, 2001 was 1,091,849.
-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 September 30, 2001
and December 31, 2000 3
Consolidated Statements of Earnings
for the three and nine months ended September 30,
2001 and 2000 4
Consolidated Statements of Shareholders'
Equity for the three and nine months ended
September 30, 2001 and 2000 5
Consolidated Statements of Cash Flows
for the three and nine months ended
September 30, 2001 and 2000 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 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
-2-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Financial Condition
(In thousands, except share data)
September 30, December 31,
ASSETS 2001 2000
Cash and due from banks $ 664 $ 576
Interest-bearing deposits in other financial institutions 6,715 8,634
------- -------
Cash and cash equivalents 7,379 9,210
Investment securities available for sale - at market 6,539 8,322
Mortgage-backed securities available for sale - at market 4,559 5,165
Loans receivable-net 111,993 102,418
Office premises and equipment - at depreciated cost 1,814 1,843
Federal Home Loan Bank stock - at cost 1,973 1,973
Investment in real estate partnership 1,143 1,284
Accrued interest receivable on loans 541 548
Accrued interest receivable on mortgage-backed securities 32 41
Accrued interest receivable on investments 98 107
Prepaid expenses and other assets 59 64
Cash surrender value of life insurance 1,265 1,234
Prepaid income taxes 76 -
Deferred income tax asset 250 403
------- -------
Total assets $137,721 $132,612
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 82,875 $ 79,454
Advances from the Federal Home Loan Bank 34,750 34,000
Notes payable 1,165 1,237
Accrued interest payable and other liabilities 905 906
Accrued income taxes - 2
------- -------
Total liabilities 119,695 115,599
Shareholders' equity
Common stock 5,584 5,515
Retained earnings-restricted 12,184 11,526
Less shares acquired by stock benefit plan (65) (103)
Accumulated comprehensive income,
unrealized gains on securities designated
as available for sale, net of related tax effects 323 75
------- -------
Total shareholders' equity 18,026 17,013
------- -------
Total liabilities and shareholders' equity $137,721 $132,612
======= =======
-3-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Earnings
(In thousands, except share data)
Three months ended Nine months ended
September 30, September 30,
2001 2000 2001 2000
Interest income
Loans $2,219 $2,075 $6,565 $5,894
Mortgage-backed securities 70 95 231 289
Investment securities 95 165 323 515
Interest-bearing deposits and other 78 118 342 307
----- ----- ----- -----
Total interest income 2,462 2,453 7,461 7,005
Interest expense
Deposits 894 984 2,851 2,903
Borrowings 482 446 1,524 1,138
----- ----- ----- -----
Total interest expense 1,376 1,430 4,375 4,041
----- ----- ----- -----
Net interest income 1,086 1,023 3,086 2,964
Provision for losses on loans 86 71 257 212
------ ----- ----- -----
Net interest income after provision for
losses on loans 1,000 952 2,829 2,752
Other income (loss)
Service charges on deposit accounts 56 43 179 117
Loss on sale of investment and mortgage-backed securities - (16) - (16)
Loss on equity investment (54) (85) (170) (171)
Other operating 45 50 135 161
----- ----- ----- -----
Total other income (loss) 47 (8) 144 91
General, administrative and other expense
Employee compensation and benefits 261 289 823 881
Occupancy and equipment 56 53 178 143
Federal deposit insurance premiums 4 4 11 12
Data processing 47 44 138 121
Other operating 108 100 374 315
----- ----- ----- -----
Total general, administrative and other expense 476 490 1,524 1,472
----- ----- ----- -----
Earnings before income taxes 571 454 1,449 1,371
Income tax expense 167 124 398 411
----- ----- ----- -----
NET EARNINGS $ 404 $ 330 $1,051 $ 960
===== ===== ===== =====
Other comprehensive income, net of tax:
Unrealized gains on securities, net of tax $ 98 $ 185 $ 248 $ 123
Reclassification adjustment for realized gains included in
earnings, net of tax of $5 - (11) - (11)
----- ----- ----- -----
COMPREHENSIVE INCOME $ 502 $ 504 $1,299 $1,072
===== ===== ===== =====
EARNINGS PER SHARE
Basic (based on net earnings) $.37 $.30 $.97 $.88
=== === === ===
Diluted (based on net earnings) $.36 $.30 $.95 $.88
=== === === ===
-4-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Shareholders' Equity
(In thousands, except share data)
Nine months ended
September 30,
2001 2000
Balance at January 1 $17,013 $16,146
Issuance of shares under stock option plan 141 -
Amortization of stock benefit plan 38 102
Purchase of shares (72) (464)
Cash dividends of $.36 in 2001 and $.33 in 2000 (393) (357)
Unrealized gains on securities designated as 248 112
available for sale, net of related tax effects
Net earnings 1,051 960
------ ------
Balance at September 30 $18,026 $16,499
====== ======
Accumulated other comprehensive income (loss) $ 323 $ (216)
====== =======
-5-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended
September 30,
2001 2000
Cash flows from operating activities:
Net earnings for the period $ 1,051 $ 960
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 78 80
Amortization of premiums on investments and
mortgage-backed securities 28 21
Amortization expense of stock benefit plan 38 102
Loss on sale of investments and mortgage-backed securities - 16
Provision for losses on loans 257 212
Loss on equity investment 170 171
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans 7 (127)
Accrued interest receivable on mortgage-backed securities 9 4
Accrued interest receivable on investments 9 (51)
Prepaid expenses and other assets 5 (15)
Accrued interest and other liabilities (1) (300)
Federal income taxes
Current (78) (138)
Deferred 25 25
------ ------
Net cash provided by operating activities 1,598 960
Cash flows provided by (used in) investing activities:
Proceeds from sale of investment securities designated as available for sale - 1,914
Purchase of investment securities (253) (3,970)
Maturities/calls of investment securities 2,275 800
Purchase of Federal Home Loan Bank stock - (500)
Principal repayments on mortgage-backed securities 715 651
Loan disbursements (43,693) (39,009)
Investment in real estate partnership (29) (36)
Principal repayments on loans 33,861 28,849
Purchases and additions to office premises and equipment (49) (38)
Increase in cash surrender value of life insurance policy (31) (32)
------ ------
Net cash used in investing activities (7,204) (11,371)
------ ------
Net cash used in operating and investing activities
(balance carried forward) (5,606) (10,411)
------ ------
-6-
LOGANSPORT FINANCIAL CORP.
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended
September 30,
2001 2000
Net cash used in operating and investing activities
(balance brought forward) $(5,606) $(10,411)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 3,421 1,043
Proceeds from Federal Home Loan Bank advances 10,750 24,000
Repayment of Federal Home Loan Bank advances (10,000) (14,000)
Repayment of note payable (72) (70)
Proceeds from the exercise of stock options 141 -
Purchase of shares (72) (464)
Dividends on common stock (393) (357)
------ -------
Net cash provided by financing activities 3,775 10,152
------ -------
Net decrease in cash and cash equivalents (1,831) (259)
Cash and cash equivalents, beginning of period 9,210 5,146
------ -------
Cash and cash equivalents, end of period $ 7,379 $ 4,887
====== =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 4,405 $ 4,021
====== =======
Income taxes $ 450 $ 526
====== =======
Dividends payable at end of period $ 132 $ 119
====== =======
-7-
Logansport Financial Corp.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
For the nine and three month periods ended September 30, 2001 and 2000
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, 2000.
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 September
30, 2001, results of operations and cash flows for the three and nine month
periods ended September 30, 2001 and 2000. The results of operations for the
nine and three month periods ended September 30, 2001 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 Logansport Financial Corp. (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. Weighted-average common shares outstanding
totaled 1,089,000 and 1,093,247 for the nine month periods ended September 30,
2001 and 2000, respectively, and 1,095,378 and 1,083,510 for the three month
periods ended September 30, 2001 and 2000, 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 1,106,952 and 1,093,247 for the
nine months ended September 30, 2001 and 2000, respectively, and 1,118,855 and
1,087,538 for the three months ended September 30, 2001 and 2000, respectively.
Incremental shares related to the assumed exercise of stock options included in
the computation of diluted earnings per share totaled 17,952 for the nine month
period ended September 30, 2001, and 23,477 and 4,028 for the three month
periods ended September 30, 2001 and 2000, respectively. Options to purchase
125,915 shares of common stock with a weighted-average exercise price of $10.59
were outstanding at September 30, 2000, but were excluded from the computation
of common share equivalents because their exercise prices were greater than the
average market price of the common shares.
A cash dividend of $.12 per common share was declared on March 1, 2001, payable
on October 10, 2001, to stockholders of record as of September 14, 2001.
-8-
NOTE D: Recent Accounting Pronouncements
In September 2000, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which revises the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain disclosures,
but carries over most of the provisions of SFAS No. 125 without reconsideration.
SFAS No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The Statement is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000. Management adopted SFAS No. 140 effective April 1,
2001, as required, without material effect on the Company's financial position
or results of operations.
In June 2001, the FASB issued SFAS No. 141 "Business Combinations," which
requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method. The pooling-of-interests method of
accounting is prohibited except for combinations initiated before June 30, 2001.
The remaining provisions of SFAS No. 141 relating to business combinations
accounted for by the purchase method, including identification of intangible
assets, accounting for negative goodwill, financial statement presentation and
disclosure, are effective for combinations completed after June 30, 2001.
Management adopted SFAS No. 141 effective July 1, 2001, as required, without
material effect on the Company's financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142 "Goodwill and Intangible Assets,"
which prescribes accounting for all purchased goodwill and intangible assets.
Pursuant to SFAS No. 142, acquired goodwill is not amortized, but is tested for
impairment at the reporting unit level annually and whenever an impairment
indicator arises. All goodwill should be assigned to reporting units that are
expected to benefit from the goodwill. When an entity reorganizes its reporting
structure, goodwill should be reallocated to reporting units based on the
relative fair values of the units. Goodwill impairment should be tested with a
two-step approach. First, the fair value of the reporting unit should be
compared to its carrying value, including goodwill. If the reporting unit's
carrying value exceeds its fair value, then any goodwill impairment should be
measured as the excess of goodwill's carrying value over its implied fair value.
The implied fair value of goodwill should be calculated in the same manner as
goodwill is calculated for a business combination, using the reporting units'
fair value as the "purchase price." Therefore, goodwill's implied fair value
will be the excess of the "purchase price" over the amounts allocated to assets,
including unrecognized intangible assets, and liabilities of the reporting unit.
Goodwill impairment losses should be reported in the income statement as a
separate line item within operations, except for such losses included in the
calculation of a gain or loss from discontinued operations.
An acquired intangible asset, other than goodwill, should be amortized over its
useful economic life. The useful life of an intangible asset is indefinite if it
extends beyond the foreseeable horizon. If an asset's life is indefinite, the
asset should not be amortized until the life is determined to be finite.
Intangible assets being amortized should be tested for impairment in accordance
with SFAS No. 121. Intangible assets not being amortized should be tested for
impairment, annually and whenever there are indicators of impairment, by
comparing the asset's fair value to its carrying amount.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.
Early adoption is permitted for companies with fiscal years beginning after
March 15, 2001, but only if the first quarter financial statements have not
previously been issued. Calendar year end companies may not adopt early. Until
adoption of SFAS No. 142, existing goodwill continues to be amortized and tested
for impairment under previously existing standards. SFAS No. 142 is not expected
to have a material effect on the Company's financial position or results of
operations.
The foregoing discussion of the effects of recent accounting pronouncements
contains forward-looking statements that involve risks and uncertainties.
Changes in economic circumstances or interest rates could cause the effects of
the accounting pronouncements to differ from management's foregoing assessment.
-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, 2000 to September
30, 2001
The Company reported total assets of $137.7 million at September 30, 2001,
compared to $132.6 million at December 31, 2000, an increase of $5.1 million, or
3.9%. This increase was funded primarily by growth in deposits of $3.4 million,
an increase in advances from the Federal Home Loan Bank ("FHLB") of $750,000 and
undistributed earnings of $658,000. Cash and cash equivalents decreased by
approximately $1.8 million from $9.2 million at December 31, 2000, to $7.4
million at September 30, 2001. Investment and mortgage-backed securities totaled
$11.1 million at September 30, 2001, a decrease of $2.4 million, or 17.7%, from
December 31, 2000, due primarily to maturities and calls of securities. Proceeds
from the decline in securities and excess liquidity were generally used to fund
new loan originations during the period.
Net loans increased by $9.6 million, or 9.3%, from $102.4 million at December
31, 2000 to $112.0 million at September 30, 2001. Loan originations amounted to
$43.7 million for the nine months ended September 30, 2001, while principal
repayments amounted to $33.9 million. During the nine months ended September 30,
2001, loan origination volume exceeded that of the comparable period in 2000 by
$4.7 million, or 12.0%. Loan originations during 2001 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 $30.3 million at September 30, 2001, compared to $22.5
million at December 31, 2000. The one- to four-family residential loans totaled
$62.3 million at December 31, 2000 and $64.5 million at September 30, 2001.
Deposits totaled $82.9 million at September 30, 2001, an increase of $3.4
million, or 4.3%, in the first nine months of 2001. Borrowings consisted of
$34.8 million of FHLB advances and a $1.2 million note payable related to an
equity investment in low income housing. Proceeds from deposit growth were
generally used to fund new loan originations during the period.
Shareholders' equity totaled $18.0 million at September 30, 2001 and $17.0
million at December 31, 2000. The payment of dividends decreased equity, while
an increase in the unrealized gains on securities available for sale, net
earnings, proceeds from exercise of stock options and the effects of
amortization of the stock benefit plan increased equity.
-10-
Results of Operations
Comparison of the Nine Months Ended September 30, 2001 and September 30, 2000
Net earnings for the nine months ended September 30, 2001 totaled $1,051,000,
compared with $960,000 for the nine months ended September 30, 2000, an increase
of $91,000, or 9.5%. Net interest income increased by $122,000, other income
increased by $53,000 and income taxes decreased by $13,000, while general,
administrative and other expense increased by $52,000 and the provision for
losses on loans increased by $45,000.
The major contributor to the increase in net interest income was the growth in
the loan portfolio the past calendar year. Interest income on loans increased by
$671,000, or 11.4%, for the nine months ended September 30, 2001, compared to
the same period in 2000. This increase was due primarily to an $11.6 million, or
11.4%, increase in the average balance of loans outstanding, which was partially
offset by a decrease in the average yield year to year of 50 basis points.
Interest income on investments, mortgage-backed securities and other
interest-earning assets totaled $896,000 for the nine months ended September 30,
2001, a decrease of $215,000, or 19.4%, from the same period in 2000. The
decrease was due primarily to a decrease in the average balance outstanding and
a decrease in the average yield year to year. Interest expense on deposits
decreased by $52,000, or 1.8%. Interest expense on borrowings increased by
$386,000, or 33.9%, due primarily to an increase in the average balance of
borrowings outstanding year to year, however, the average cost of such
borrowings has declined by 68 basis points year to year. The interest rate
spread amounted to 3.19% and 2.89% at September 30, 2001 and 2000, respectively.
The provision for losses on loans totaled $257,000 for the nine months ended
September 30, 2001 and $212,000 for the nine months ended September 30, 2000. No
properties were in real estate owned for the periods ended September 30, 2001
and 2000. Nonperforming loans amounted to $1.9 million, or 1.65% of total loans
at September 30, 2001, compared to $336,000, or .32% of total loans at December
31, 2000. At September 30, 2001, nonperforming loans were comprised of
commercial loans totaling $868,000, loans secured by one- to four-family and
nonresidential real estate of $286,000 and $623,000, respectively, and consumer
and other loans totaling $83,000. Loan loss reserves amounted to $1.0 million or
.90% of total loans at September 30, 2001, compared to $760,000, or .73% of
total loans at December 31, 2000. The increase in the provision for losses on
loans was primarily attributable to the growth in the loan portfolio, the
increasing percentage of commercial loans in the portfolio and the increase in
the level of nonperforming loans. Although management believes that its
allowance for loan losses at September 30, 2001, was adequate based upon the
available facts and circumstances, there can be no assurance that the Company's
allowance for loan losses will be adequate to cover losses on nonperforming
assets in the future.
Total other income amounted to $144,000 for the nine months ended September 30,
2001, a $53,000, or 58.2%, increase over the same period in 2000. The increase
was due primarily to an increase in service charges on deposit accounts of
$62,000, or 53.0%, which was partially offset by a decrease in other operating
income of $26,000, or 16.1%, as loan service charges and fees decreased by
$14,000 and insurance commissions decreased by $7,000.
Total general, administrative and other expense increased by $52,000, or 3.5%,
for the nine-month period ended September 30, 2001, compared to the same period
ended September 30, 2000. Employee compensation and benefits decreased by
$58,000, or 6.6%, compared to the 2000 nine-month period, primarily due to the
completion of a majority of the amortization for the RRP Plan in April of 2001.
Data processing fees increased by $17,000, or 14.0%, due to costs associated
with loan and deposit growth. Other operating expenses increased by $59,000, or
18.7%, due to pro-rata increases in operating costs related to the Company's
overall growth year to year.
-11-
Results of Operations
Comparison of the Nine Months Ended September 30, 2001 and September 30, 2000
(continued)
The provision for income taxes totaled $398,000 for the nine months ended
September 30, 2001, a decrease of $13,000, or 3.2%, from the same period in
2000. The decrease was due to an increase in tax credits. The Company's
effective tax rates for the nine-month periods ended September 30, 2001 and
2000, were 27.5% and 30.0%, respectively. The decrease in the effective tax rate
was primarily attributable to tax credits available from the Company's
investment in a low income housing partnership.
Comparison of the Three Months Ended September 30, 2001 and September 30, 2000
Net earnings for the three months ended September 30, 2001 totaled $404,000,
compared with $330,000 for the three months ended September 30, 2000, an
increase of $74,000, or 22.4%. Net interest income increased by $63,000, other
income increased by $55,000 and general, administrative and other expense
decreased by $14,000, while the provision for losses on loans increased by
$15,000 and income taxes increased by $43,000.
Interest income on loans increased by $144,000, or 6.9%, for the three months
ended September 30, 2001, compared to the same quarter in 2000, due primarily to
an increase in the balance of loans outstanding year to year. Interest income on
mortgage-backed securities, investments and other interest-earning assets
totaled $243,000 for the three months ended September 30, 2001, a $135,000, or
35.7%, decrease from the 2000 quarter. The decrease was due primarily to a
decrease in the average balance outstanding and a decrease in the average yield
year to year. Interest expense on deposits decreased by $90,000, or 9.1%, as the
average costs of deposits decreased by 76 basis points, from 4.88% at September
30, 2000 to 4.12% at September 30, 2001. Interest expense on borrowings
increased by $36,000, or 8.1%, due primarily to a $10.3 million, or 43.5%,
increase in the average balance of borrowings outstanding year to year.
The provision for losses on loans totaled $86,000 for the three months ended
September 30, 2001 and $71,000 for the three months ended September 30, 2000. No
properties were in real estate owned for the quarter ended September 30, 2001 or
September 30, 2000. The increase in the provision for losses on loans was
primarily attributable to the growth in the loan portfolio, the increasing
percentage of commercial loans in the portfolio and the increase in the level of
nonperforming loans year to year. There can be no assurance that the Company's
allowance for loan losses will be adequate to cover losses on nonperforming
assets in the future.
Service charges on deposit accounts increased by $13,000, or 30.2%, and other
operating income decreased by $5,000, or 10.0%, for the three month period ended
September 30, 2001, compared to the 2000 quarter. However, a decrease in the
pre-tax loss on the equity investment of $31,000 resulted in an overall increase
of $55,000 in the other income category.
-12-
Results of Operations
Comparison of the Three Months Ended September 30, 2001 and September 30, 2000
(continued)
Total general, administrative and other expense decreased by $14,000, or 2.9%,
for the three-month period ended September 30, 2001, compared to the same period
ended September 30, 2000. Employee compensation and benefits decreased by
$28,000, or 9.7%, compared to the 2000 quarter, primarily due to the completion
of a majority of the amortization for the RRP Plan in April of 2001. Data
processing fees increased by $3,000, or 6.8%, due to costs associated with loan
and deposit growth. Other operating expenses increased by $8,000 or 8.0%,
compared to the quarter ended September 30, 2000, due primarily to the Company's
overall growth year to year.
The provision for income taxes totaled $167,000 for the three months ended
September 30, 2001, an increase of $43,000, or 34.7%, over the same period in
2000. The increase was due to a $117,000, or 25.8%, increase in pre-tax
earnings. The Company's effective tax rates for the three-month periods ended
September 30, 2001 and 2000, were 29.2% and 27.3%, respectively. The effective
tax rate remains low due to the tax credits available from the Company's
investment in a low income housing partnership.
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 September 30, 2001, the Bank's tangible and
leverage capital ratios were each 11.5%, and its risk-based capital to
risk-weighted assets ratio was 16.6%. 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 September 30, 2001.
Capital Standard Required Bank's Excess
- ---------------- -------- ------ ------
(In thousands)
Tangible (1.5%) $2,043 $15,703 $13,660
Core (4.0%) 5,448 15,703 10,255
Risk-based (8.0%) 8,070 16,716 8,646
-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 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 June 30, 2001, 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 $12,658 $-5,239 -29% 9.85% -332bp
+200bp 14,822 -3,075 -17% 11.31% -186bp
+100bp 16,531 -1,366 -8% 12.39% -78bp
- 17,897 13.17%
- - 100bp 18,666 769 4% 13.53% 36bp
- - 200bp 18,718 821 5% 13.39% 22bp
- - 300bp 18,437 540 3% 13.02% -15bp
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Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock
Pre-shock NPV Ratio: NPV as % of PV of Assets 13.17%
Exposure Measure: Post-Shock NPV Ratio 11.31%
Sensitivity Measure: Change in NPV Ratio 186
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable-rate loans, have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. Further, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the table.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Bank nor the Company were, during the three-month period ended
September 30, 2001, 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 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 September 30, 1997, filed with the
Commission on August 13, 1997.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter.
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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: November 12, 2001 By: /s/ David G. Wihebrink
-------------------------- ---------------------------------
David G. Wihebrink, President and
Chief Executive Officer
Date: November 12, 2001 By: /s/ Dottye Robeson
-------------------------- ---------------------------------
Dottye Robeson, Secretary and
Treasurer
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