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 September 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 October 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.
Part I. - Financial Information
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION
(Unaudited)
Sept 30 Dec. 31 Sept 30
(Amounts in Thousands) 2001 2000 2000
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash $5,093 $4,909 $6,713
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
9/30/01, 12/31/00, & 9/30/00 respectively were 10,517 2,982 2,957
$10,556,000, $2,984,000, and $2,956,000)
Securities Available for Sale 388 388 338
Federal Funds Sold 23,180 25,905 24,915
Loans, net of Unearned Discount 57,642 57,727 59,202
Allowance for Loan Losses (1,800) (1,800) (1,800)
Property, Equipment and Leasehold Improvements
(Net of Depreciation and Amortization) 1,903 2,131 2,212
Other Real Estate 0 1,074 1,074
Deferred Taxes 0 211 191
Letters of Credit 61 54 197
Other Assets 2,018 1,126 1,020
TOTAL ASSETS $99,002 $94,707 $97,019
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
Sept 30 Dec. 31 Sept 30
(Amounts in Thousands) 2001 2000 2000
LIABILITIES
Deposits:
Non-Interest Bearing $33,546 $34,031 $35,293
Interest Bearing 56,100 51,133 52,013
TOTAL DEPOSITS 89,646 85,164 87,306
Notes Payable 2,220 2,226 2,228
Letters of Credit Outstanding 61 54 197
Deferred Taxes 13 0 0
Accrued Interest 522 524 483
Other Liabilities 427 1,017 1,166
TOTAL LIABILITIES 92,889 88,985 91,380
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,300,871 Shares Issued and Outstanding at
9/30/01, 2,302,811 at 12/31/00, & 9/30/00 2,301 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
9/30/01, 12/31/00, & 9/30/00 179 179 179
Accumulated Other Comprehensive Income 197 197 164
Capital in Excess of Par - Retired Stock 17 15 15
Undivided Profits 3,028 2,649 2,649
Current Earnings 391 379 329
TOTAL STOCKHOLDERS' EQUITY 6,113 5,722 5,639
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,002 $94,707 $97,019
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended Nine months ended
Sept 30 Sept 30
(Amounts in Thousands) 2001 2000 2001 2000
INTEREST INCOME
Interest and Fees on Loans $1,849 $1,818 $5,762 $5,500
Interest on Time Deposits 0 0 0 0
Interest on Securities Held to Maturity 94 44 159 124
Interest & Dividends on Securities Available for Sale 0 0 0 0
Interest on Federal Funds Sold 224 477 881 1,370
Other Interest Income 0 0 0 0
Total Interest Income 2,167 2,339 6,802 6,994
INTEREST EXPENSE
Interest on Deposits 364 349 1,129 1,049
Interest on Federal Funds Purchased 0 0 0 0
Other Interest Expense 11 10 31 31
Interest Expense on Notes Payable 2 2 6 7
Interest Expense on Debentures 39 40 118 119
Total Interest Expense 416 401 1,284 1,206
NET INTEREST INCOME 1,751 1,938 5,518 5,788
Provision for Loan Losses 84 122 346 151
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,667 1,816 5,172 5,637
NONINTEREST INCOME
Service Charges on Deposit Accounts 276 285 802 820
Cardholder & Other Credit Card Income 176 157 511 473
ORE Income 59 11 1,196 15
Other Operating Income 32 29 174 152
Gain on Sale of Securities 0 0 0 0
Total Noninterest Income 543 482 2,683 1,460
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,091 1,111 3,241 3,265
Occupancy Expense 303 447 1,185 1,351
Loan & Credit Card Expense 221 208 715 667
ORE Expense 253 10 696 48
Other Operating Expense 564 455 1,394 1,236
Total Noninterest Expense 2,432 2,231 7,231 6,567
Income Before Tax Provision (222) 67 624 530
Provision (Benefit) For Income Taxes (58) 41 233 201
NET INCOME ($164) $26 $391 $329
Earnings Per Share of Common Stock ($0.92) $0.14 $2.18 $1.84
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Sept 30 Sept 30
(Amounts in thousands) 2001 2000
NET INCOME (LOSS) $391 $329
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gains (Losses) on
Investment Securities Available-for-Sale,
Arising During the Period 0 (19)
Less: Reclassification Adjustment for Gains
Included in Net Income
OTHER COMPREHENSIVE INCOME 0 (19)
COMPREHENSIVE INCOME (LOSS) $391 $310
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 (19) (19)
Net Income (Loss) 329 329
Balance - Sept 30, 2000 2,303 179 164 15 2,978 $5,639
Balance December 31, 2000 2,303 179 197 15 3,028 5,722
Preferred Stock (2) (2)
Capital in Excess of Par
Retired Stock 2 2
Other Comprehensive
Income, net of
applicable deferred income
taxes
Net Income (Loss) 391 391
Balance - Sept 30, 2001 2,301 179 197 17 3,419 $6,113
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended Sept 30
(Amounts in Thousands) 2001 2000
OPERATING ACTIVITIES
Net Income (Loss) $391 $329
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for (Recovery of) Loan Losses 346 151
Depreciation and Amortization Expense 269 389
Amortization of Investment Security Premiums 1 3
Accretion of Investment Security Discounts 4 (1)
(Increase)Decrease in Deferred Income Taxes 224 201
(Gain) Loss on Sale of Property and Equipment 0 0
(Gain) Loss on Sale of Other Real Estate (509) (13)
(Increase)Decrease in Other Assets (209) 948
(Decrease)Increase in Other Liabilities,
Accrued Interest and Accrued Loss Contingency (592) (238)
Net Decrease(Increase) in Mortgage Loans Held for Resale 0 0
Net Cash Provided by (Used in) Operating Activities (75) 1,769
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale Securities 0 0
Purchases of Available-for-Sale Securities 0 0
Proceeds from Available-for-Sale Securities
Released at Maturity 0 0
Proceeds from Held-to-Maturity Investment Securities
Released at Maturity 2,978 5,918
Purchases of Held-to-Maturity Investment Securities (10,517) (5,873)
Proceeds from Sale of Property and Equipment 0 0
Purchases of Property and Equipment (41) (61)
Proceeds from Sale of Other Real Estate 900 45
Purchases of Other Real Estate 0 (31)
Net (Increase)Decrease in Loans (261) (373)
Net Cash Provided by (Used in) Investing Activities (6,941) (375)
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-Interest Bearing
and Interest Bearing Deposits 4,482 (3,250)
Proceeds from Issuance of Long-Term Debt 0 0
Retirement of Stock (1) 0
Principal Payments on Long Term Debt (6) (5)
Net Cash Provided by (Used in) Financing Activities 4,475 (3,255)
Net Increase (Decrease) in Cash and Cash Equivalents (2,541) (1,861)
Cash and Cash Equivalents - Beginning of Year 30,814 33,489
Cash and Cash Equivalents - End of Period $28,273 $31,628
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine-month period ended September 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. PER SHARE DATA
Income per common share data are based on the weighted average number of
shares outstanding of 179,145 at September 30, 2001 and 2000 respectively.
Note 3. 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 September 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:
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.
Note 4. 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:
Sept 30, 2001
Carrying Fair
(Amounts in Thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $28,273 $28,273
Investment Securities 10,905 10,944
Loans 57,642 57,708
Less: Allowance for Loan Losses 1,800 1,800
95,020 95,125
Financial Liabilities:
Deposits 89,646 89,770
Unrecognized Financial Instruments:
Commitments to Extend Credit 2,791 2,791
Commercial Letters of Credit 61 61
Credit Card Arrangements 67,373 67,373
$70,225 $70,225
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
Three Months Ended Nine Months Ended
(Amounts in Thousands, Except Sept 30 June 30 Sept 30 Sept 30 Sept 30
Per Share Data) 2001 2001 2000 2001 2000
Interest Income $2,167 $2,227 $2,339 $6,802 $6,994
Interest Expense 416 442 401 1,284 1,206
Net Interest Income 1,751 1,785 1,938 5,518 5,788
Provision for Loan Losses 84 165 122 346 151
Net Interest Income after
Provision 1,667 1,620 1,816 5,172 5,637
Noninterest Income:
Noninterest Income 543 922 482 2,683 1,460
Securities Gains 0 0 0 0 0
Noninterest Income 543 922 482 2,683 1,460
Noninterest Expense 2,432 2,221 2,231 7,231 6,567
Income before Taxes (222) 321 67 624 530
Income Tax Expense (Benefit) (58) 104 41 233 201
Net Income (Loss) ($164) $217 $26 $391 $329
Income per Common Share ($0.92) $1.21 $0.14 $2.18 $1.84
Average Common Shares
Outstanding 179 179 179 179 179
Selected Quarter-End Balances
Loans $57,642 $58,745 $59,202
Deposits 89,646 89,728 87,306
Long-Term Debt 2,220 2,222 2,228
Stockholders' Equity 6,113 6,277 5,639
Total Assets 99,002 99,216 97,019
Selected Average Balances
Loans $57,643 $59,098 $55,845 $58,228 $56,095
Deposits 88,875 87,749 86,982 87,112 88,614
Long-Term Debt 2,221 2,223 2,228 2,223 2,230
Stockholders' Equity 6,308 6,262 5,709 6,236 5,677
Total Assets 98,474 97,222 96,786 96,606 98,337
Selected Ratios
Return on Average Assets -0.17% 0.22% 0.03% 0.40% 0.33%
Return on Average Equity -2.60% 3.46% 0.45% 6.27% 5.80%
Tier 1 Risk-Based Capital 13.28% 13.43% 12.13%
Risk-Based Capital 14.55% 14.70% 13.40%
Tier 1 Leverage 8.31% 8.54% 7.82%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 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.
THIRD QUARTER 2001 HIGHLIGHTS
BOL BANCSHARES' nine months 2001 results showed improvement in earnings
over the same period of 2000.
Net income for the first nine months of 2001 totaled $391,000 ($2.18 per
common share) up 18.84% compared to a net profit of $329,000 ($1.84 per common
share) for the first nine months of 2000. Net loss for the third quarter of
2001 totaled ($164,000)($.92 per share), down 730.77% compared to a net profit
of $26,000 ($0.14 per common share) for the third quarter of 2000.
Pre-tax, pre-provision losses were $138,000, a decrease from the third
quarter 2000 profit of $189,000. Pre-tax, pre-provision earnings were
$970,000, an increase from the first nine months of 2000 profit of $681,000.
The third quarter and first nine months of 2001 included provisions for loan
losses totaling $84,000 and $346,000, respectively, compared to $122,000 and
$151,000 for the same period of 2000.
Total assets increased $1,983,000 (2.04%) to $99,002,000 at September 30,
2001 compared to September 30, 2000. Shareholders' equity increased $474,000
(8.41%)to $6,113,000 at September 30, 2001 compared to September 30, 2000.
Total loans decreased $1,560,000 (2.64%) from September 30, 2000 to
$57,642,000 at September 30, 2001. Real Estate Mortgage loans declined
$493,000 (1.44%) to $33,709,000, and credit card loans declined $1,139,000
(6.44%) to $16,535,000.
Deposits increased $2,340,000 (2.68%) to $89,646,000 at September 30,
2001 compared to September 30, 2000.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $91,134,000 in the third quarter of
2001, a $2,886,000 increase from the third quarter of 2000 average of
$88,248,000. Compared to the third quarter of 2000, average loans increased
$1,798,000 (3.22%), average investment securities increased $4,725,000
(142.88%), while average federal funds sold decreased $3,637,000 (12.50%).
Table 1 presents the Company's loan portfolio by major classifications.
Total loans decreased $1,560,000 (2.64%)over the third quarter of 2000.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
Sept 30, 2001 June 30, 2001 Sept 30, 2000
(Amounts in Thousands) Loans % Loans % Loans %
Commercial, Financial, &
Agricultural $3,056 5.30% $3,619 6.16% $3,025 5.11%
Real Estate Mortgage 33,709 58.48% 33,446 56.93% 34,202 57.77%
Mortgage Loan Held for Resale 0 0.00% 0 0.00% 0 0.00%
Personal Loans 4,204 7.29% 4,335 7.38% 4,184 7.07%
Credit Cards-Visa,
MasterCard 15,253 26.46% 15,781 26.86% 16,091 27.18%
Credit Cards-Proprietary 1,282 2.22% 1,397 2.38% 1,583 2.67%
Overdrafts 138 0.24% 167 0.28% 117 0.20%
Loans $57,642 100.00% $58,745 100.00% $59,202 100.00%
Securities Held to Maturity. Average securities held to maturity
Increased $4,675,000 (157.46%) from the third 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 $50,000 (14.79%) from the third quarter of 2000. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold decreased $3,637,000
(12.50%) down from the third quarter of 2000. This decrease is mainly due to
the increase in the investment securities 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 $244,000 at September 30, 2001 as compared
to $1,127,000 at September 30, 2000. Other real estate totaled $0 at
September 30, 2001 as compared to $1,074,000 at September 30, 2000. The Bank
was required to write down 5 properties due to the 10 years limitation that the
Bank could hold properties. Of these 5 properties, the Bank sold one. The
Bank also sold another parcel that was held as ORE. Total write downs were
$683,000 and the gain on the two sales were $509,000.
Table 2. NONPERFORMING ASSETS
(Amounts in Thousands) 09/30/01 06/30/01 03/31/01 12/31/00 09/30/00
Nonaccrual Loans $244 $45 $49 $49 $53
Restructured Loans 0 0 0 0 0
Other Real Estate Owned 0 651 651 1,074 1,074
Total Nonperforming Assets $244 $696 $700 $1,123 $1,127
Loans Past Due 90 Days or More $417 $358 $439 $367 $393
Ratio of Past Due Loans to Loans 0.72% 0.61% 0.72% 0.66% 0.66%
Ratio of Nonperforming Assets to Loans
and Other Real Estate Owned 0.42% 1.17% 1.14% 1.97% 1.87%
IMPAIRED LOANS
As of September 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 8.30% to $3,524,000 at
September 30, 2001 from $3,254,000 at September 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 nine month period ending September 30, 2001 and
2000. The allowance for loan losses as a percentage of loans increased from
3.04% at September 30, 2000 to 3.12% at September 30, 2001. The net charge-off
(recoveries) as a percentage of average loans increased from .27% at
September 30, 2000 to .59% at September 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 collectability 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 Nine Months Ended
Sept 30 Sept 30 Sept 30 Sept 30
(Amounts in Thousands) 2001 2000 2001 2000
Balance at Beginning of Period $1,800 $1,800 $1,800 $1,800
Loans Charged Off (225) (241) (751) (837)
Recoveries 141 119 405 686
Net (Charge Offs) Recoveries (84) (122) (346) (151)
Provision for Loan Losses 84 122 346 151
Balance at End of Period $1,800 $1,800 $1,800 $1,800
Allowance for Loan Losses as a
Percentage of Loans 3.12% 3.04% 3.12% 3.04%
Net (Charge Offs) Recoveries as a Percentage
of Average Loans 0.15% 0.22% 0.59% 0.27%
FUNDING SOURCES:
DEPOSITS
Average deposits totaled $88,875,000 in the third quarter of 2001, an
increase of $1,893,000 (2.18%) from $86,982,000 in the third quarter of 2000.
Average core deposits were $87,698,000 for the third quarter of 2001 up from
$85,803,000 in the third quarter of 2000. Table 4 presents the composition of
average deposits for the three quarters ending September 30, 2001, June 30,
2001, and September 30, 2000.
TABLE 4. DEPOSIT COMPOSITION
For The Three Months Ended
Sept 30 June 30 Sept 30
2001 2001 2000
Average % of Average % of Average % of
(Amounts in Thousands) Balances Deposits Balances Deposits Balances Deposits
Demand, Noninterest-Bearing $32,921 37.04% $33,585 38.27% $34,151 39.26%
NOW Accounts 12,975 14.60% 13,487 15.37% 12,734 14.64%
Money Market Deposit Accounts 4,863 5.47% 4,715 5.37% 5,490 6.31%
Savings Accounts 27,470 30.91% 25,664 29.25% 25,082 28.84%
Other Time Deposits 9,469 10.65% 9,074 10.34% 8,346 9.60%
Total Core Deposits 87,698 98.68% 86,525 98.61% 85,803 98.64%
Certificates of Deposit of
$100,000 or more 1,177 1.32% 1,224 1.39% 1,179 1.36%
Total Deposits $88,875 100.00% $87,749 100.00% $86,982 100.00%
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 $1,800,000 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
instruments 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 third quarter of 2001 decreased $187,000 over
the same period last year, and decreased $270,000 from the first nine months of
2000. The net interest margin decreased to 1.92% for the third quarter of 2001
from 2.20% for the third 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
THIRD QUARTER 2001 THIRD 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 $57,643 $1,849 3.21% $55,845 $1,818 3.26%
Tax-Exempt - -
Investment Securities
Taxable 8,032 94 1.18% 3,307 44 1.33%
Tax-Exempt 0 0
Interest-Bearing Deposits 0 0
Federal Funds Sold 25,459 224 0.88% 29,096 477 1.64%
Total Interest-Earning Assets 91,134 2,167 2.38% 88,248 2,339 2.65%
Cash and Due from Banks 5,324 5,298
Allowance for Loan Losses (1,804) (1,805)
Premises and Equipment 1,947 2,253
Other Real Estate 487 1,082
Other Assets 1,386 1,710
TOTAL ASSETS $98,474 $96,786
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 17,838 56 0.31% 18,224 72 0.40%
Savings Deposits 27,470 192 0.70% 25,082 184 0.73%
Time Deposits 10,646 116 1.09% 9,525 93 0.98%
Total Interest-Bearing Deposits 55,954 364 0.65% 52,831 349 0.66%
Federal Funds Purchased
Securities sold under Agreements to Repurchase
Other Short-Term Borrowings 0 0
Long-Term Debt 2,221 52 2.34% 2,228 52 2.33%
Total Int-Bearing Liabilities 58,175 416 0.72% 55,059 401 0.73%
Noninterest-Bearing Deposits 32,921 34,151
Other Liabilities 1,070 1,867
Shareholders' Equity 6,308 5,709
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $98,474 $96,786
Net Interest Income $1,751 $1,938
Net Interest Spread 1.66% 1.92%
Net Interest Margin 1.92% 2.20%
(1)Fee income relating to loans of $154,000 at Sept 30, 2001, and $190,000 at Sept 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
Nine Months Ended 9/01 Nine Months Ended 9/00
Average Average
(Amounts in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, Net of Unearned Income(1)(2)
Taxable $58,228 $5,762 9.90% $56,095 $5,500 9.80%
Tax-Exempt - -
Investment Securities
Taxable 4,403 159 3.60% 3,317 124 3.74%
Tax-Exempt 0 0
Interest-Bearing Deposits 0 0
Federal Funds Sold 26,395 881 3.34% 29,741 1,370 4.61%
Total Interest-Earning Assets 89,026 6,802 7.64% 89,153 6,994 7.84%
Cash and Due from Banks 5,334 5,541
Allowance for Loan Losses (1,803) (1,808)
Premises and Equipment 2,020 2,369
Other Real Estate 639 1,196
Other Assets 1,390 1,886
TOTAL ASSETS $96,606 $98,337
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 17,856 211 1.18% 18,398 195 1.06%
Savings Deposits 26,047 583 2.24% 25,647 552 2.15%
Time Deposits 9,922 335 3.37% 10,027 302 3.01%
Total Interest-Bearing Deposits 53,825 1,129 2.10% 54,072 1,049 1.94%
Federal Funds Purchased
Securities sold under Agreements to Repurchase
Other Short-Term Borrowings 0 0
Long-Term Debt 2,223 155 6.98% 2,230 157 7.04%
Total Int-Bearing Liabilities 56,048 1,284 2.29% 56,302 1,206 2.14%
Noninterest-Bearing Deposits 33,287 34,542
Other Liabilities 1,035 1,816
Shareholders' Equity 6,236 5,677
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $96,606 $98,337
Net Interest Income $5,518 $5,788
Net Interest Spread 5.35% 5.70%
Net Interest Margin 6.20% 6.49%
(1) Fee income relating to loans of $464,000 at Sept 30, 2001, and $540,000 at Sept 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)
Sept, 2001 Compared to Sept, 2000
Change in
Interest Due to Total
(Amounts in Thousands) Volume Rate Change
Net Loans:
Taxable $53 $209 $262
Tax-Exempt(2) 0 0 0
Investment Securities 0 0 0
Taxable (6) 41 35
Tax-Exempt(2) 0 0 0
Interest-Bearing Deposits 0 0 0
Federal Funds Sold (335) (154) (489)
Total Interest Income (288) 96 (192)
Deposits:
Demand Deposits 22 (6) 16
Savings Deposits 22 9 31
Time Deposits 36 (3) 33
Total Interest-Bearing Deposits 80 (0) 80
Federal Funds Purchased 0 0 0
Securities Sold under Agreements to Repurchase 0 0 0
Other Short-Term Borrowings 0 0 0
Long-Term Debt (1) (1) (2)
Total Interest Expense $79 ($1) $78
(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 third quarter of 2001 increased $61,000 or 12.66%
from the same period last year. Table 5 presents noninterest income for the
three months and nine months ended September 30, 2001 and 2000.
TABLE 5. NONINTEREST INCOME
Three Months Ended Nine Months Ended
Sept 30 Sept 30 Increase Sept 30 Sept 30 Increase
(Amounts in Thousands) 2001 2000 (Decrease) 2001 2000 (Decrease)
Service Charges $123 $135 ($12) $367 $387 ($20)
NSF Charges 153 150 3 435 433 2
Gain on Sale of Securities 0 0 0 0 0 0
Cardholder & Other Credit
Card Income 151 125 26 434 361 73
Membership Fees 25 32 (7) 78 112 (34)
Other Comm & Fees 23 (6) 29 62 76 (14)
ORE Income 0 1 (1) 1 2 (1)
Gain on Sale of ORE 59 11 48 1,195 13 1,182
Other Income 9 34 (25) 111 76 35
Total Noninterest Income $543 $482 $61 $2,683 $1,460 $1,223
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 third quarter of 2001 increased $201,000 or
9.01% from the same period last year. Occupancy expense decreased $144,000 for
the quarter and $166,000 for the nine months due to the reclassification of the
stock tax to Other Operating expense. Reclass amounts were $25,000 for the
quarter and $75,000 for the nine months total. The increase in Ore expense is
due to Ore writedowns as discussed in Asset Quality - Nonperforming Assets.
Table 6 presents the activity for the three months and nine months ended
September 30, 2001 and 2000.
TABLE 6. NONINTEREST EXPENSE
Three Months Ended Nine Months Ended
Sept 30 Sept 30 Increase Sept 30 Sept 30 Increase
(Amounts in Thousands) 2001 2000 (Decrease) 2001 2000 (Decrease)
Salaries & Benefits $1,091 $1,111 ($20) $3,241 $3,265 ($24)
Loss on Litigation 0 0 0 0 (150) 150
Occupancy Expense 303 447 (144) 1,185 1,351 (166)
Advertising Expense 15 27 (12) 36 74 (38)
Communications 46 49 (3) 132 144 (12)
Postage 51 57 (6) 171 190 (19)
Loan & Credit Card Expense 221 208 13 715 667 48
Professional Fees 49 24 25 127 138 (11)
Legal Fees 51 60 (9) 157 132 25
Insurance & Assessments 25 24 1 71 72 (1)
Stationery, Forms & Supply 55 55 0 171 175 (4)
ORE Expenses 253 10 243 696 48 648
Other Operating Expense 272 159 113 529 461 68
Total Noninterest Expense $2,432 $2,231 $201 $7,231 $6,567 $664
INCOME TAXES
The Company recorded a benefit for income taxes of $58,000 for the third
quarter of 2001 and a provision of $41,000 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
Sept 30 June 30 March 31 Dec. 31 Sept. 30
2001 2001 2001 2000 2000
Risk-Based Capital
Tier 1 Risk Based Capital Ratio 13.28% 13.43% 12.78% 12.27% 12.13%
Risk Based Capital Ratio 14.55% 14.70% 14.05% 13.54% 13.40%
Tier 1 Leverage Ratio 8.31% 8.54% 8.55% 7.81% 7.82%
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 42.35%
at September 30, 2001, 41.69% at June 30, 2001, and 38.76% at September 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 ensure 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 that 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
A. 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
November 13, 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)