UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2001
Commission file Number 01-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
Louisiana 72-1121561
(State of incorporation) (I. R. S. Employee Identification No.)
300 St. Charles Avenue, New Orleans, La. 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 889-9400
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 reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 2001.
Common Stock, $1 Par Value - 179,145 shares.
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
Page No.
PART 1. Financial Information
Item 1: Financial Statements
Consolidated Statement of Condition 3
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income (Loss) 6
Consolidated Statements of Changes in
Stockholder's Equity 7
Consolidated Statement of Cash Flow 8
Notes to Consolidated Financial Statements 9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operation 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None
B. Reports on Form 8-K
No reports have been filed on Form 8-K
during this quarter.
<CAPTI0N>
Part I. - Financial Information
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION
(Unaudited)
June 30 Dec. 31 June 30
(Amounts in Thousands) 2001 2000 2000
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash $7,312 $4,909 $7,256
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
6/30/01, 12/31/00, & 6/30/00 respectively were 6,495 2,982 2,975
$6,516,000, $2,984,000, and $2,975,000)
Securities Available for Sale 388 388 338
Federal Funds Sold 24,420 25,905 30,690
Loans, net of Unearned Discount 58,745 57,727 55,418
Allowance for Loan Losses (1,800) (1,800) (1,800)
Property, Equipment and Leasehold Improvements
(Net of Depreciation and Amortization) 1,972 2,131 2,301
Other Real Estate 651 1,074 1,105
Deferred Taxes - 211 296
Letters of Credit 60 54 89
Other Assets 973 1,126 1,128
TOTAL ASSETS $99,216 $94,707 $99,796
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
June 30 Dec. 31 June 30
(Amounts in Thousands) 2001 2000 2000
LIABILITIES
Deposits:
Non-Interest Bearing $34,081 $34,031 $35,910
Interest Bearing 55,647 51,133 54,322
TOTAL DEPOSITS 89,728 85,164 90,232
Notes Payable 2,222 2,226 2,229
Letters of Credit Outstanding 60 54 89
Deferred Taxes 72 - -
Accrued Interest 551 524 497
Other Liabilities 306 1,017 1,086
TOTAL LIABILITIES 92,939 88,985 94,133
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and Outstanding at
6/30/01, 12/31/00, & 6/30/00 2,303 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
6/30/01, 12/31/00, & 6/30/00 179 179 179
Accumulated Other Comprehensive Income 197 197 214
Capital in Excess of Par - Retired Stock 15 15 15
Undivided Profits 3,028 2,649 2,649
Current Earnings 555 379 303
TOTAL STOCKHOLDERS' EQUITY 6,277 5,722 5,663
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,216 $94,707 $99,796
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended Six months ended
June 30 June 30
(Amounts in Thousands) 2001 2000 2001 2000
INTEREST INCOME
Interest and Fees on Loans $1,895 $1,816 $3,913 $3,682
Interest on Time Deposits - - - -
Interest on Securities Held to Maturity 31 42 65 80
Interest & Dividends on Securities Available for Sale - - - -
Interest on Federal Funds Sold 301 491 657 894
Other Interest Income - - - -
Total Interest Income 2,227 2,349 4,635 4,656
INTEREST EXPENSE
Interest on Deposits 390 351 765 705
Interest on Federal Funds Purchased - - - -
Other Interest Expense 10 10 20 20
Interest Expense on Notes Payable 2 2 4 5
Interest Expense on Debentures 40 39 79 78
Total Interest Expense 442 402 868 808
NET INTEREST INCOME 1,785 1,947 3,767 3,848
Provision for Loan Losses 165 108 262 28
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,620 1,839 3,505 3,820
NONINTEREST INCOME
Service Charges on Deposit Accounts 266 270 526 536
Cardholder & Other Credit Card Income 177 164 335 316
ORE Income 451 3 1,137 4
Other Operating Income 28 37 142 122
Gain on Sale of Securities - - - -
Total Noninterest Income 922 474 2,140 978
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,103 1,117 2,150 2,154
Occupancy Expense 541 415 933 903
Loan & Credit Card Expense 256 223 494 459
ORE Expense 8 12 443 38
Other Operating Expense 313 507 779 782
Total Noninterest Expense 2,221 2,274 4,799 4,336
Income Before Tax Provision 321 39 846 462
Provision (Benefit) For Income Taxes 104 13 291 159
NET INCOME $217 $26 $555 $303
Earnings Per Share of Common Stock $1.21 $0.14 $3.10 $1.69
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
June 30 June 30
(Amounts in thousands) 2001 2000
NET INCOME (LOSS) $555 $303
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gains (Losses) on
Investment Securities Available-for-Sale,
Arising During the Period - 31
Less: Reclassification Adjustment for Gains
Included in Net Income
OTHER COMPREHENSIVE INCOME - 31
COMPREHENSIVE INCOME (LOSS) $555 $334
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
(Amounts in Thousands) ACCUMULATED CAPITAL IN
OTHER EXCESS OF
COMPREHEN- PAR
PREFERRED COMMON SIVE RETIRED RETAINED
STOCK STOCK INCOME STOCK EARNINGS TOTAL
Balance December 31, 1999 2,303 179 183 15 2,649 5,329
Other Comprehensive
Income, net of
applicable deferred income
taxes 31 31
Net Income (Loss) 303 303
Balance - June 30, 2000 2,303 179 214 15 2,952 $5,663
Balance December 31, 2000 2,303 179 197 15 3,028 5,722
Other Comprehensive
Income, net of
applicable deferred income
taxes -
Net Income (Loss) 555 555
Balance - June 30, 2001 2,303 179 197 15 3,583 $6,277
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Six Months Ended June 30
(Amounts in Thousands) 2001 2000
OPERATING ACTIVITIES
Net Income (Loss) 555 303
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for (Recovery of) Loan Losses 262 28
Depreciation and Amortization Expense 182 271
Amortization of Investment Security Premiums - 4
Accretion of Investment Security Discounts (5) (57)
(Increase)Decrease in Deferred Income Taxes 283 87
(Gain) Loss on Sale of Property and Equipment - -
(Gain) Loss on Sale of Other Real Estate (450) (2)
(Increase)Decrease in Other Assets 576 1,081
(Decrease)Increase in Other Liabilities,
Accrued Interest and Accrued Loss Contingency (685) (289)
Net Decrease(Increase) in Mortgage Loans Held for Resale - -
Net Cash Provided by (Used in) Operating Activities 718 1,426
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale Securities - -
Purchases of Available-for-Sale Securities - -
Proceeds from Available-for-Sale Securities
Released at Maturity - -
Proceeds from Held-to-Maturity Investment Securities
Released at Maturity 1,489 3,000
Purchases of Held-to-Maturity Investment Securities (4,997) (2,918)
Proceeds from Sale of Property and Equipment - 0
Purchases of Property and Equipment (22) (31)
Proceeds from Sale of Other Real Estate 450 3
Purchases of Other Real Estate - (31)
Net (Increase)Decrease in Loans (1,280) 3,335
Net Cash Provided by (Used in) Investing Activities (4,360) 3,358
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-Interest Bearing
and Interest Bearing Deposits 4,564 (324)
Proceeds from Issuance of Long-Term Debt - -
Retirement of Stock - -
Principal Payments on Long Term Debt (4) (3)
Net Cash Provided by (Used in) Financing Activities 4,560 (327)
Net Increase (Decrease) in Cash and Cash Equivalents 918 4,457
Cash and Cash Equivalents - Beginning of Year 30,814 33,489
Cash and Cash Equivalents - End of Period $31,732 $37,946
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the audited consolidated
financial statements and notes included in the Registrant's annual report on
Form 10-K for the year ended December 31, 2000.
Note 2. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The regular annual meeting of shareholders of BOL BANCSHARES, INC., was held
on April 10, 2001. All incumbent directors were re-elected. There were no
other matters voted upon at the meeting.
Below are the names of the nominees who were elected to continue their term as
directors and the number of shares cast. The total shares voting were 112,448.
Number of Shares
Nominee For Against Abstain
Gordon A. Burgess 112,300 123 25
James A. Comiskey 112,283 140 25
Lionel J. Favret 112,300 123 25
Leland L. Landry 112,300 123 25
Douglas A. Schonacher 112,300 123 25
G. Harrison Scott 112,283 140 25
Edward J. Soniat 112,300 123 25
Note 3. PER SHARE DATA
Income per common share data are based on the weighted average number of
shares outstanding of 179,145 at June 30, 2001 and 2000 respectively.
Note 4. CONTINGENCIES
Because of the nature of the banking industry in general, the Company and the
Bank are each parties from time to time to litigation and other proceedings in
the ordinary course of business, none of which (other than those described
below), either individually or in the aggregate, have a material effect on the
Company's and/or the Bank's financial condition.
Other than the lawsuits described below, the Company has either (i) posted
reserves adequate to pay any judgments that may be rendered against the
Company and such posting is reflected in the Company's consolidated financial
statements for the period ending June 30, 2001, or (ii) believes the lawsuit
is without sufficient merit or monetary exposure to require the posting of a
reserve. The Company has not provided a judicial interest that may be awarded
on a judgment pending the conclusion of the appeals procedure. Indeed, should
the Company be successful in any of those lawsuits in which it has posted
reserves, recoveries would be realized and the Company's consolidated net
income would be positively impacted.
The following actions, however, have been brought against the Company and, if
the claimants were wholly successful on the merits, could result in significant
exposure to the Bank:
1. The Company is a defendant in a lawsuit filed by another bank alleging the
Company improperly dishonored checks totaling $979,000. The Company claims
that such checks were properly returned "nonsufficient funds". When these
checks were returned to the Plaintiff, of the $979,000, one check for $110,000
was misplaced by the FRB and therefore returned late to the Plaintiff. The
Company was forced to cover the amount of the check. The Company filed a
counter suit against the Plaintiffs for contribution on the $110,000 loss and
for tortuous interference. The Plaintiff filed exceptions to the counter suit.
These exceptions were heard in the district court and the Company's right to
contribution was maintained, however the Company's suit for tortuous
interference was dismissed. On appeal, the appellate court sustained the
Company's right to contribution and overruled the lower court's decision on
tortuous interference, finding that the Company could maintain such a cause of
action. The Louisiana Supreme Court denied writs filed by the Plaintiff. The
case is currently awaiting trial. The Company is vigorously defending all
claims asserted in this suit.
Expected Results: Outside counsel advises that the Company will not pay any
damages in this matter and the likelihood is reasonably high that the Company
will obtain some recovery from the Plaintiff.
2. The Company is a defendant in a lawsuit filed by a proprietary merchant
alleging that the Company mishandled the Plaintiff's proprietary credit card
portfolio. The Plaintiff seeks to recover in excess of $1,800,000. The
Bankruptcy Court has established an escrow account, in which $270,404 was on
deposit as of October 31, 1996, for the protection of the Company. This
amount would significantly reduce any losses incurred by the Company in the
event the Plaintiff is wholly successful on the merits. During 1997, a
judgment was rendered against the Bank, and accordingly, a provision for loss
of $150,000 has been charged to operation. The Bank has counter sued and in
March 2000, a decision was rendered in favor of the Bank and accordingly, the
$150,000 was reversed and is reflected in operations. In February 2001 the
$243,000 deposit for bond together with interest has been returned to the Bank.
Expected Results: Outside counsel advises that the Plaintiff will not
prevail at all against the Company and that the Company will be able to fully
recover all of its losses in this matter.
Note 5. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
the value:
CASH AND SHORT-TERM INVESTMENTS
For cash, the carrying amount approximates fair value. For short-term
investments, fair values are calculated based upon general investment market
interest rates for similar maturity investments.
INVESTMENT SECURITIES
For securities and marketable equity securities held-for-investment purposes,
fair values are based on quoted market prices.
LOAN RECEIVABLES
For certain homogeneous categories of loans, such as residential mortgages,
credit card receivables and other consumer loans, fair value is estimated using
the current U.S. Treasury interest rate curve, a factor for cost of processing
and a factor for historical credit risk to determine the discount rate.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits and certain money market
deposits are calculated based upon general investment market interest rates for
investments with similar maturities. The value of fixed maturity certificates
deposit is estimated using the U.S. Treasury interest rate curve currently
offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties.
The estimated fair values of the Bank's financial instruments are as follows:
June 30, 2001
Carrying Fair
(Amounts in Thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $31,732 $31,732
Investment Securities 6,883 6,904
Loans 58,745 58,626
Less: Allowance for Loan Losses 1,800 1,800
$95,560 $95,462
Financial Liabilities:
Deposits $89,728 $89,736
Unrecognized Financial Instruments:
Commitments to Extend Credit $1,660 $1,660
Commercial Lines of Credit 60 60
Credit Card Arrangements 66,162 66,162
$67,882 $67,882
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
Three Months Ended Six Months Ended
(Amounts in Thousands, Except June 30 Mar 31 June 30 June 30 June 30
Per Share Data) 2001 2001 2000 2001 2000
Interest Income $2,227 $2,408 $2,349 $4,635 $4,656
Interest Expense 442 426 402 868 808
Net Interest Income 1,785 1,982 1,947 3,767 3,848
Provision for Loan Losses 165 97 108 262 28
Net Interest Income after Provision 1,620 1,885 1,839 3,505 3,820
Noninterest Income:
Noninterest Income 922 1,218 474 2,140 978
Securities Gains - - - - -
Noninterest Income 922 1,218 474 2,140 978
Noninterest Expense 2,221 2,578 2,274 4,799 4,336
Income before Taxes 321 525 39 846 462
Income Tax Expense (Benefit) 104 187 13 291 159
Net Income (Loss) $217 $338 $26 $555 $303
Income per Common Share $1.21 $1.89 $0.14 $3.10 $1.69
Average Common Shares Outstanding 179 179 179 179 179
Selected Quarter-End Balances
Loans $58,745 $60,977 $55,418
Deposits 89,728 88,031 90,232
Long-Term Debt 2,222 2,224 2,229
Stockholders' Equity 6,277 6,060 5,663
Total Assets 99,216 97,102 99,796
Selected Average Balances
Loans $59,098 $57,946 $55,512 $58,525 $56,223
Deposits 87,749 84,665 89,841 86,216 89,439
Long-Term Debt 2,223 2,225 2,230 2,224 2,231
Stockholders' Equity 6,262 6,138 5,676 6,200 5,661
Total Assets 97,222 94,076 99,474 95,657 99,122
Selected Ratios
Return on Average Assets 0.22% 0.36% 0.03% 0.58% 0.31%
Return on Average Equity 3.46% 5.51% 0.45% 8.95% 5.35%
Tier 1 Risk-Based Capital 13.43% 12.78% 12.24%
Risk-Based Capital 14.70% 14.05% 13.51%
Tier 1 Leverage 8.54% 8.55% 7.47%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 2001
Management's Discussion presents a review of the major factors and trends
affecting the performance of BOL BANCSHARES, INC. (the "Company") and its bank
subsidiary (the Bank) and should be read in conjunction with the accompanying
consolidated financial statements, notes and tables.
This discussion may contain certain forward-looking statements, which
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those stated. Readers are cautioned not to place undue reliance on these
forward-looking statements.
SECOND QUARTER 2001 HIGHLIGHTS
BOL BANCSHARES' second quarter 2001 results showed improvement in earnings
over the second quarter of 2000 and the first six months of 2000.
Net income for the second quarter of 2001 totaled $217,000 ($1.21 per share),
up 734.62% compared to a net profit of $26,000 ($0.14 per common share) for the
second quarter of 2000. Net income for the first six months of 2001 totaled
$555,000 ($3.10 per common share) up 83.17% compared to a net profit of
$303,000 ($1.69 per common share) for the first six months of 2000.
Pre-tax, pre-provision earnings were $486,000, an increase from the second
quarter 2000 profit of $147,000. Pre-tax, pre-provision earnings were
$1,108,000, an increase from the first six months of 2000 profit of $490,000.
The second quarter and first six months of 2001 included provisions for loan
losses totaling $165,000 and $262,000, respectively, compared to $108,000 and
$28,000 for the same period of 2000.
Total assets declined $580,000 (.58%) to $99,216,000 at June 30, 2001
Compared to June 30, 2000. Shareholders' equity increased $614,000 (10.84%)to
$6,277,000 at June 30, 2001 compared to June 30, 2001.
Total loans increased $3,327,000 (6.00%) from June 30, 2000 to $58,745,000
at June 30, 2001. Real Estate Mortgage loans grew $3,399,000 (11.31%) to
$33,446,000, while credit card loans declined $1,093,000 (5.98%) to
$17,178,000.
Deposits declined $504,000 (.56%) to $89,728,000 at June 30, 2001 compared to
June 30, 2000.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $89,691,000 in the second quarter of 2001, a
$709,000 decrease from the second quarter of 2000 average of $90,400,000.
Compared to the second quarter of 2000, average loans increased $3,586,000
(6.46%) while average investment securities decreased $818,000 (24.74%), and
average federal funds sold decreased $3,477,000 (11.01%).
Table 1 presents the Company's loan portfolio by major classifications.
Total loans increased $3,327,000 (6.00%)over the second quarter of 2000.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
June 30, 2001 Mar 31, 2001 June 30, 2000
(Amounts in Thousands) Loans % Loans % Loans %
Commercial, Financial, $3,619 6.16% $3,716 6.09% $3,722 6.72%
& Agricultural
Real Estate Mortgage 33,446 56.93% 34,762 57.01% 30,047 54.22%
Mortgage Loan Held for Resale - 0.00% - 0.00% - 0.00%
Personal Loans 4,335 7.38% 4,655 7.63% 3,235 5.84%
Credit Cards-Visa, 15,781 26.86% 16,184 26.54% 16,542 29.85%
MasterCard
Credit Cards-Proprietary 1,397 2.38% 1,419 2.33% 1,729 3.12%
Overdrafts 167 0.28% 241 0.40% 143 0.26%
Loans $58,745 100.00% $60,977 100.00% $55,418 100.00%
Securities Held to Maturity. Average securities held to maturity decreased
$849,000 (28.79%) from the second quarter of 2000. Securities held to maturity
are carried as cost, adjusted for amortization of premium and accretion of
discounts using methods approximating the interest method.
Securities Available for Sale. Average securities available for sale
increased $31,000 (8.68%) from the second quarter of 2000. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold decreased $3,477,000
(11.01%) down from the second quarter of 2000. This decrease is mainly due to
the increase in the loan portfolio.
ASSET QUALITY
Table 2 presents a summary of nonperforming assets for the past five quarters.
Nonperforming assets consist of nonaccrual and restructured loans and ORE.
Nonaccrual loans are loans on which the interest accruals have been
discontinued when it appears that future collection of principal or interest
according to the contractual terms may be doubtful. Interest on these loans is
reported on the cash basis as received when the full recovery of principal is
anticipated or after full principal has been recovered when collection of
interest is in question. The loan process ensures that all loans which meet
the criteria for nonaccrual status are placed on nonaccrual. Restructured
loans are those loans whose terms have been modified, because of economic or
legal reasons related to the debtors' financial difficulties, to provide for a
reduction in principal, change in terms, or fixing of interest rates at below
market levels. ORE is real property acquired by foreclosure or directly by
title or deed transfer in settlement of debt.
Nonperforming assets totaled $696,000 at June 30, 2001 as compared to
$1,158,000 at June 30, 2000. Other real estate totaled $651,000 at
June 30, 2001 as compared to $1,105,000 at June 30, 2000.
Table 2. NONPERFORMING ASSETS
(Amounts in Thousands) 06/30/01 03/31/01 12/31/00 09/30/00 06/30/00
Nonaccrual Loans $45 $49 $49 $53 $53
Restructured Loans - - - - -
Other Real Estate Owned 651 651 1,074 1,074 1,105
Total Nonperforming Assets $696 $700 $1,123 $1,127 $1,158
Loans Past Due 90 Days or More $358 $439 $367 $393 $354
Ratio of Past Due Loans to Loans 0.61% 0.72% 0.66% 0.66% 0.64%
Ratio of Nonperforming Assets to Loans
and Other Real Estate Owned 1.17% 1.14% 1.97% 1.87% 2.05%
IMPAIRED LOANS
As of June 30, 2001, the recorded investment in loans that are considered
impaired under SFAS 114 and 118 was $0. The related allowance for credit
losses for the impaired loans is not specifically identified, but is included
in the percentages allocated to the portfolio.
WATCH LIST
The Bank's watch list includes loans which, for management purposes, have
been identified as requiring a higher level of monitoring due to risk. The
Bank's watch list includes both performing and nonperforming loans. The
majority of watch list loans are classified as performing, because they do not
have characteristics resulting in uncertainty about the borrower's ability to
repay principal and interest in accordance with the original terms of the
loans.
The watch list consists of classifications, identified as Type 1 through
Type 4. Types 1, 2 and 3 generally parallel the regulatory classifications of
loss, doubtful and substandard, respectively. Type 4 generally parallels the
regulatory classification of Other Assets Especially Mentioned (OAEM). These
loans require monitoring due to conditions which, if not corrected, could
increase credit risk. Total watch list loans increased 1.49% to $3,278,000 at
June 30, 2001 from $3,230,000 at June 30, 2000.
Management is not aware of any potential problem loans other than those
disclosed above, which includes all loans recommended for classification by
regulators, which would have a material impact on asset quality.
ALLOWANCE AND PROVISION FOR POSSIBLE LOAN LOSSES
Table 3 presents an analysis of the activity in the allowance for loan
losses for the three month and six month period ending June 30, 2001 and 2000.
The allowance for loan losses as a percentage of loans decreased from 3.25% at
June 30, 2000 to 3.06% at June 30, 2001. The net charge-off (recoveries) as a
percentage of average loans increased from .05% at June 30, 2000 to .45% at
June 30, 2001.
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Management's policy is to maintain the
allowance for possible loan losses at a level sufficient to absorb losses
inherent in the loan portfolio. The allowance is increased by the provision
for loan losses and decreased by charge-offs, net of recoveries. Management's
evaluation process to determine potential losses includes consideration of the
industry, specific conditions of individual borrowers, historical loan loss
experience and the general economic environment. As these factors change, the
level of loan loss provision changes. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. Accrual of interest is discontinued and accrued
interest is charged off on a loan when management believes, after considering
economic and business conditions and collection efforts, that the borrower's
financial condition is such that collection of interest is doubtful. Ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reflected in
current operations.
TABLE 3 - RESERVE FOR LOAN LOSSES ACTIVITY
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
(Amounts in Thousands) 2001 2000 2001 2000
Balance at Beginning of Period $1,800 $1,800 $1,800 $1,800
Loans Charged Off (284) (305) (526) (595)
Recoveries 119 197 264 567
Net (Charge Offs) Recoveries (165) (108) (262) (28)
Provision for Loan Losses 165 108 262 28
Balance at End of Period $1,800 $1,800 $1,800 $1,800
Allowance for Loan Losses as a
Percentage of Loans 3.06% 3.25% 3.06% 3.25%
Net (Charge Offs) Recoveries as a Percentage
of Average Loans 0.28% 0.20% 0.45% 0.05%
FUNDING SOURCES:
DEPOSITS
Average deposits totaled $87,749,000 in the second quarter of 2001, a
decrease of $2,092,000 (2.33%) from $89,841,000 in the second quarter of 2000.
Average core deposits were $86,525,000 for the second quarter of 2001 down from
$88,154,000 in the second quarter of 2000. Table 4 presents the composition
of average deposits for the three quarters ending June 30, 2001, March 31, 2001,
and June 30, 2000.
TABLE 4. DEPOSIT COMPOSITION
For The Three Months Ended
June 30 Mar 31 June 30
2001 2001 2000
Average % of Average % of Average % of
(Amounts in Thousands) Balances Deposits Balances Deposits Balances Deposits
Demand, Noninterest-Bearing $33,585 38.27% $33,358 39.40% $35,206 39.19%
NOW Accounts 13,487 15.37% 12,416 14.66% 13,197 14.69%
Money Market Deposit Accts 4,715 5.37% 5,110 6.04% 5,097 5.67%
Savings Accounts 25,664 29.25% 24,978 29.50% 26,121 29.07%
Other Time Deposits 9,074 10.34% 7,529 8.89% 8,533 9.50%
Total Core Deposits 86,525 98.61% 83,391 98.50% 88,154 98.12%
Certificates of Deposit of
$100,000 or more 1,224 1.39% 1,274 1.50% 1,687 .88%
Total Deposits $87,749 100.00% $84,665 100.00% $89,841 100.00%
BORROWINGS
The Company's long-term debt is comprised primarily of debentures which
are secured by 40.79 shares of the Subsidiary Bank's stock. The Bank has no
long-term debt. It is the Bank's policy to manage its liquidity so that there
is no need to make unplanned sales of assets or to borrow funds under emergency
conditions. The Bank maintains a Federal Funds line of credit in the amount of
$1,000,000 with a correspondent bank. The Bank can borrow the amount of
unpledged securities at the discount window at the Federal Reserve Bank by
pledging those securities.
INTEREST RATE SENSITIVITY
The Bank has established, as bank policy, an asset/liability management
system that protects Bank profits from undue exposure to interest rate risks.
The major elements used to manage interest rate risk include the mix of fixed
and variable rate assets and liabilities and the maturity pattern of assets and
liabilities. It is the Company's policy not to invest in derivatives in the
ordinary course of business. The Company performs a monthly review of assets
and liabilities that reprice and the time bands within which the repricing
occurs. Balances are reported in the time band that corresponds to the
instrument's next repricing date or contractual maturity, whichever occurs
first. Through such analysis, the Company monitors and manages its interest
sensitivity gap to minimize the effects of changing interest rates.
GAP & INTEREST MARGIN SPREAD
By Bank policy we limit the Bank's earnings exposure due to interest
rate risk by setting limits on positive and negative gaps within the next 12
months. These limits are set so that this year's profits will not be unduly
impacted no matter what happens to interest rates during the year. In
addition, we extend the scenarios out five years to monitor the risks
associated on a longer term.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Net interest income, the difference between interest income and interest
expense, is a significant component of the performance of a banking
organization. Data used in the analysis of net interest income are derived
from the daily average levels of earnings assets and interest bearing deposits
as well as from the related income and expense. Net interest income is not
developed on a taxable equivalent basis because the level of tax exempt income
is not material. The primary factors that affect net interest income are the
changes in volume and mix of earning assets and interest-bearing liabilities,
along with the change in market rates.
Net interest income for the second quarter of 2001 decreased $162,000
over the same period last year, and decreased $81,000 from the first six months
of 2000. The net interest margin decreased to 1.99% for the second quarter of
2001 from 2.15% for the second quarter of 2000.
The Company's average balances, interest income and expense and rates
earned or paid for major categories are set forth in the following tables:
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST, RATE
AND NEW YIELDS
SECOND QUARTER 2001 SECOND QUARTER 2000
Average Average
(Amounts in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, Net of Unearned Income(1)(2)
Taxable $59,098 1,894 3.20% $55,512 1,816 3.27%
Tax-Exempt - -
Investment Securities
Taxable 2,488 31 1.25% 3,306 42 1.27%
Tax-Exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 28,105 302 1.07% 31,582 491 1.55%
Total Interest-Earning Assets 89,691 2,227 2.48% 90,400 2,349 2.60%
Cash and Due from Banks 5,381 5,580
Allowance for Loan Losses (1,800) (1,810)
Premises and Equipment 2,020 2,367
Other Real Estate 651 1,224
Other Assets 1,279 1,713
TOTAL ASSETS $97,222 $99,474
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 18,202 73 0.40% 18,294 61 0.33%
Savings Deposits 25,664 196 0.76% 26,121 187 0.72%
Time Deposits 10,298 121 1.18% 10,220 103 1.01%
Total Interest-Bearing Deposits 54,164 390 0.72% 54,635 351 0.64%
Federal Funds Purchased
Securities sold under Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,223 52 2.32% 2,230 51 2.29%
Total Int-Bearing Liabilities 56,387 442 0.78% 56,865 402 0.71%
Noninterest-Bearing Deposits 33,585 35,206
Other Liabilities 988 1,727
Shareholders' Equity 6,262 5,676
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $97,222 $99,474
Net Interest Income 1,785 1,947
Net Interest Spread 1.70% 1.89%
Net Interest Margin 1.99% 2.15%
(1) Fee income relating to loans of $154,000 at June 30, 2001, and $183,000 at
June 30, 2000 is included in interest income.
(2) Nonaccrual loans are included in average balances and income on such loans,
If recognized, is recognized on the cash basis.
(3) Interest income does not include the effects of taxable-equivalent
adjustments using a federal tax rate of 34%.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST, RATE
AND NEW YIELDS
Six Months Ended 6/01 Six Months Ended 6/00
Average Average
(Amounts in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, Net of Unearned Income(1)(2)
Taxable $58,525 3,913 6.69% $56,222 3,682 6.55%
Tax-Exempt - -
Investment Securities
Taxable 2,558 65 2.55% 3,323 80 2.41%
Tax-Exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 26,872 657 2.44% 30,066 894 2.97%
Total Interest-Earning Assets 87,955 4,635 5.27% 89,611 4,656 5.20%
Cash and Due from Banks 5,339 4,063
Allowance for Loan Losses (1,802) (1,809)
Premises and Equipment 2,058 2,428
Other Real Estate 716 1,253
Other Assets 1,391 3,576
TOTAL ASSETS $95,657 $99,122
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 17,866 155 0.87% 18,486 123 0.67%
Savings Deposits 25,323 391 1.55% 25,934 373 1.44%
Time Deposits 9,555 219 2.29% 10,280 209 2.03%
Total Interest-Bearing Deposits 52,744 765 1.45% 54,700 705 1.29%
Federal Funds Purchased
Securities sold under Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,224 103 4.64% 2,231 103 4.62%
Total Int-Bearing Liabilities 54,968 868 1.58% 56,931 808 1.42%
Noninterest-Bearing Deposits 33,472 34,739
Other Liabilities 1,017 1,791
Shareholders' Equity 6,200 5,661
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $95,657 $99,122
Net Interest Income 3,767 3,848
Net Interest Spread 3.69% 3.78%
Net Interest Margin 4.28% 4.29%
(1) Fee income relating to loans of $310,000 at June 30, 2001, and $350,000 at
June 30, 2000 is included in interest income.
(2) Nonaccrual loans are included in average balances and income on such loans,
If recognized, is recognized on the cash basis.
(3) Interest income does not include the effects of taxable-equivalent
adjustments using a federal tax rate of 34%.
ANALYSES OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE (1)
June, 2001 Compared to June, 2000
Change in
Interest Due to Total
(Amounts in Thousands) Volume Rate Change
Net Loans:
Taxable 80 151 231
Tax-Exempt(2) - - -
Investment Securities - - -
Taxable 4 (18) (14)
Tax-Exempt(2) - - -
Interest-Bearing Deposits - - -
Federal Funds Sold (142) (95) (237)
Total Interest Income (58) 38 (20)
Deposits:
Demand Deposits 36 (4) 32
Savings Deposits 27 (9) 18
Time Deposits 25 (15) 10
Total Interest-Bearing Deposits 88 (28) 60
Federal Funds Purchased - - -
Securities Sold under Agreements to Repurchase - - -
Other Short-Term Borrowings - - -
Long-Term Debt 0 (0) 0
Total Interest Expense $88 ($28) $60
(1) The change in interest due to both rate and volume has been allocated to
the components in proportion to the relationship of the dollar amounts of the
change in each.
(2) Reflects fully taxable equivalent adjustments using a federal tax rate of
34%.
NONINTEREST INCOME
An important source of the Company's revenue is derived from noninterest
income.
Noninterest income for the second quarter of 2001 increased $448,000 or
94.51% from the same period last year. Table 5 presents noninterest income for
the three months and six months ended June 30, 2001 and 2000.
TABLE 5. NONINTEREST INCOME
Three Months Ended Six Months Ended
June 30 June 30 Increase June 30 June 30 Increase
(Amounts in Thousands) 2001 2000(Decrease) 2001 2000 (Decrease)
Service Charges $122 $127 ($5) $243 $253 ($10)
NSF Charges 144 144 0 283 283 (0)
Gain on Sale of Securities - - - - - -
Cardholder & Other Credit 150 125 25 282 236 46
Card Income
Membership Fees 27 39 (12) 53 79 (26)
Other Comm & Fees 20 58 (38) 40 82 (42)
ORE Income 1 1 (0) 1 2 (1)
Gain on Sale of ORE 450 2 448 1,137 2 1,135
Other Income 8 (22) 30 101 41 60
Total Noninterest Income $922 $474 $448 $2,140 $978 $1,162
NONINTEREST EXPENSE
The major categories of noninterest expenses include salaries and employee
benefits, occupancy and equipment expenses and other operating costs associated
with the day-to-day operations of the Company.
Noninterest expense for the second quarter of 2001 decreased $53,000 or
2.33% from the same period last year. Table 6 presents the activity for the
three months and six months ended June 30, 2001 and 2000.
TABLE 6. NONINTEREST EXPENSE
Three Months Ended Six Months Ended
June 30 June 30 Increase June 30 June 30 Increase
(Amounts in Thousands) 2001 2000(Decrease) 2001 2000(Decrease)
Salaries & Benefits $1,103 $1,117 ($14) $2,150 $2,154 ($4)
Loss on Litigation - - - - (150) 150
Occupancy Expense 541 415 126 933 903 30
Advertising Expense 8 20 (12) 22 47 (25)
Communications 45 47 (2) 86 95 (9)
Postage 58 66 (8) 119 133 (14)
Loan & Credit Card Expense 256 223 33 494 459 35
Professional Fees 45 51 (6) 78 114 (36)
Legal Fees 38 40 (2) 106 72 34
Insurance & Assessments 22 23 (1) 47 48 (1)
Stationery, Forms & Supply 55 62 (7) 116 119 (3)
ORE Expenses 8 12 (4) 443 38 405
Other Operating Expense 42 198 (156) 205 304 (99)
Total Noninterest Expense $2,221 $2,274 ($53) $4,799 $4,336 $466
INCOME TAXES
The Company recorded a provision for income taxes of $104,000 for the
second quarter of 2001 and $13,000 for the same period in 2000. The provision
for income taxes consists of provisions for federal taxes only. Louisiana
does not have an income tax for banks.
CAPITAL
The Bank is required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by banking regulators. Table 7 presents
these ratios for the most recent five quarters.
TABLE 7. QUARTERLY SELECTED CAPITAL RATIOS
June 30 March 31 Dec. 31 Sept. 30 June 30
2001 2001 2000 2000 2000
Risk-Based Capital
Tier 1 Risk Based Capital Ratio 13.43% 12.78% 12.27% 12.13% 12.24%
Risk Based Capital Ratio 14.70% 14.05% 13.54% 13.40% 13.51%
Tier 1 Leverage Ratio 8.54% 8.55% 7.81% 7.82% 7.47%
LIQUIDITY
The purpose of liquidity management is to ensure that there is sufficient
cash flow to satisfy demands for credit, deposit withdrawals, and other
corporate needs. Traditional sources of liquidity include asset maturities and
growth in core deposits. The Company has maintained adequate liquidity through
cash flow from operating activities and financing activities to fund loan
growth, and anticipates that this will continue even if the Company expands.
Liquidity and capital resources are discussed weekly by the management
committee, the assets and liability committee and at the monthly executive
committee meeting. Bank of Louisiana maintains adequate capital to meet its
needs in the foreseeable future. The liquidity ratio for the Bank was 41.69%
at June 30, 2001, 37.19% at March 30, 2001, and 44.38% at June 30, 2000.
Measuring liquidity and capital on a weekly basis enables management to
constantly monitor loan growth, and shifting customer preferences. The
committee's in-depth reviews of current, projected, and worse case scenarios
through various reports ensures the availability of funds and capital adequacy.
The Bank intends on increasing capital by implementing an extensive
marketing program and evaluating all pricing fees and investing in proprietary
accounts which will maximize the highest yield possible and thereby improve
earnings.
There are no known trends, events, regulatory authority recommendations,
or uncertainties that the Company is aware of that will have or that are likely
to have a material adverse effect on the Company's liquidity, capital
resources, or operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management considers interest rate risk to be a market risk that could
have a significant effect on the financial condition of the Company. There
have been no material changes in reported market risks faced by the Company
since the end of the most recent year.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
Exhibits
None
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
BOL BANCSHARES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the registrant.
BOL BANCSHARES, INC.
(Registrant)
/s/ G. Harrison Scott
August 9, 2001 G. Harrison Scott
Date Chairman
(in his capacity as a duly
authorized officer of the
Registrant)
/s/ Peggy L. Schaefer
Peggy L. Schaefer
Treasurer
(in her capacity as Chief
Accounting Officer of the
Registrant)