UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2008
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from to
Commission file Number 00-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
Louisiana 72-1121561
(State of incorporation) (I.R.S. Employer Identification
No.)
300 St. Charles Avenue, New Orleans, La. 70130
(Address of principal executive offices)
(504) 889-9400
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) 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 by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large accelerated filer __ Accelerated filer __
Non-accelerated filer __ Smaller reporting company X_
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes __ No X_
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date: 179,145 SHARES AS OF
OCTOBER 31, 2008.
1
<Page>
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flow 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4T. Controls and Procedures 10
PART II. Other Information
Item 6. Exhibits 10
Signatures 12
2
<Page>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CONDITION
Sept 30 Dec. 31,
(Amounts in Thousands) 2008 2007
(Unaudited) (Audited)
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash $3,847 $4,161
Federal Funds Sold 28,965 27,490
Investment Securities
Securities Held to Maturity 2,002 8,000
Securities Available for Sale 814 740
Loans-Less Allowance for Loan Losses of $1,800
in 2008 and in 2007 56,488 55,820
Property, Equipment and Leasehold Improvements
(Net of Depreciation and Amortization) 6,732 6,923
Other Real Estate 1,153 1,036
Other Assets 1,013 1,100
TOTAL ASSETS $101,014 $105,270
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-Interest Bearing 37,178 41,408
NOW Accounts 11,047 12,143
Money Market Accounts 4,206 4,248
Savings Accounts 22,560 23,789
Time Deposits, $100,000 and over 2,890 2,260
Other Time Deposits 8,250 5,819
TOTAL DEPOSITS 86,132 89,667
Notes Payable 1,543 1,543
Other Liabilities 1,788 3,320
TOTAL LIABILITIES 89,463 94,530
SHAREHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,009,881 Shares Issued and Outstanding in 2008
2,081,857 Shares Issued and Outstanding in 2007 2,010 2,082
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding in 2008 and 2007
179 179
Accumulated Other Comprehensive Income 471 422
Capital in Excess of Par - Retired Stock 156 141
Undivided Profits 7,916 6,440
Current Earnings 819 1,476
TOTAL SHAREHOLDERS' EQUITY 11,551 10,740
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $101,014 $105,270
The accompanying notes are an integral part of these financial statements.
3
<Page>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
Sept 30 Sept 30
(Amounts in Thousands) 2008 2007 2008 2007
INTEREST INCOME
Interest and Fees on Loans $1,548 $1,718 $4,930 $5,164
Interest on Investment Securities 14 109 98 355
Interest on Federal Funds Sold 166 358 593 986
Total Interest Income 1,728 2,185 5,621 6,505
INTEREST EXPENSE
Interest on Deposits 183 180 590 500
Other Interest Expense 4 4 11 11
Interest Expense on Debentures 25 25 74 74
Total Interest Expense 211 209 674 585
NET INTEREST INCOME 1,517 1,976 4,947 5,920
Provision for Loan Losses 38 81 167 183
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,479 1,895 4,780 5,737
NON-INTEREST INCOME
Service Charges on Deposit Accounts 132 132 381 455
Cardholder & Other Credit Card Income 125 135 368 408
ORE Income 0 88 0 88
Other Operating Income 22 21 668 143
Total Non-interest Income 279 376 1,417 1,094
NON-INTEREST EXPENSE
Salaries and Employee Benefits 709 680 1,989 1,999
Occupancy Expense 316 281 854 873
Communications 56 59 172 163
Outsourcing Fees 346 342 1,131 1,074
Loan & Credit Card Expense 29 17 86 92
Professional Fees 63 75 181 238
ORE Expense 11 46 28 72
Other Operating Expense 164 206 513 596
Total Non-interest Expense 1,694 1,706 4,955 5,107
Income Before Tax Provision 63 565 1,242 1,724
Provision For Income Taxes 15 171 422 591
NET INCOME $48 $394 $819 $1,133
Earnings Per Share of Common Stock $0.27 $2.20 $4.57 $6.33
The accompanying notes are an integral part of these financial statements.
4
<Page>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Nine Months Ended
Sept 30 Sept 30
(Amounts in thousands) 2008 2007
NET INCOME $819 $1,133
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gains on Investment
Securities Available-for-Sale, Arising
During the Period 49 155
COMPREHENSIVE INCOME $868 $1,288
The accompanying notes are an integral part of these financial statements.
5
<Page>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(Amounts in thousands) 2008 2007
OPERATING ACTIVITIES
Net Income $819 $1,133
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses 167 183
Depreciation and Amortization Expense 319 242
Amortization of Investment Security Premiums (2) 0
(Gain) on Sale of Other Real Estate 0 (88)
Decrease in Other Assets 62 136
(Decrease) Increase in Other Liabilities
and Accrued Interest (1,532) 2,051
Net Cash (Used in) Provided by Operating Activities (167) 3,657
INVESTING ACTIVITIES
Proceeds from Held-to-Maturity Investment Securities
Released at Maturity 8,000 3,000
Purchases of Held-to-Maturity Investment Securities (2,000) 0
Purchases of Property and Equipment (128) (4,903)
Proceeds from Sale of Other Real Estate 0 300
Proceeds from Sale of Available-for Sale Securities 0 15
Net (Increase) in Loans (952) (289)
Net Cash Provided by Investing Activities 4,920 (1,877)
FINANCING ACTIVITIES
Net (Decrease) in Non-Interest Bearing
and Interest Bearing Deposits (3,534) (1,611)
Preferred Stock Retired (58) (3)
Principal Payments on Long Term Debt 0 (1)
Net Cash (Used in) Provided by Financing Activities (3,592) (1,615)
Net Increase in Cash and Cash Equivalents 1,161 165
Cash and Cash Equivalents - Beginning of Year 31,651 28,565
Cash and Cash Equivalents - End of Period $32,812 $28,730
The accompanying notes are an integral part of these financial statements.
6
<Page>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
SUPPLEMENTAL DISCLOSURES: 2008 2007
Cash Paid During the Year for Interest $877 $590
Cash Paid During the Year for Income Taxes $429 $596
Market Value Adjustment for Unrealized Gain on
Securities Available-for-Sale $74 $218
Additions to Other Real Estate Thru Foreclosure $117 $0
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A
Summary of Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, Bank of Louisiana (the Bank),
and the Bank's wholly owned subsidiary, BOL Assets, LLC. These consolidated
financial statements were prepared in accordance with instructions for Form 10-
Q and Regulation S-X, and do not include information or footnotes for a
complete presentation of financial condition, results of operations, and cash
flows in conformity with accounting principles generally accepted in the United
States of America. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial statements have been included.
Use of Estimates
In preparing consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the Consolidated
Statements of Financial Condition and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the allowance for loan losses.
Cash and Cash Equivalents
Cash equivalents include amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Internal Control and Assessment Disclosure
Hurricane Katrina Disclosure
Management expects insurance proceeds for storm damages caused by
7
<Page>
Hurricane Katrina to cover the majority of damages sustained to the Bank's
branches. Of the 7 branch locations that were affected by Hurricane Katrina,
only the Carrollton branch was not reopened. Repairs to several of the Bank's
buildings are ongoing. The Company's management team and employees have and
are continuing to work diligently to control operating expenses and costs while
restoring normal business operations.
SEPTEMBER 30, 2008 COMPARED WITH DECEMBER 31, 2007
BALANCE SHEET
Total Assets at September 30, 2008 were $101,014,000 compared to
$105,270,000 at December 31, 2007 for a decrease of $4,256,000 or 4.04%.
Federal Funds Sold increased $1,475,000 at September 30, 2008 from $27,490,000
at December 31, 2007 to $28,965,000 at September 30, 2008. Investment
securities decreased $5,924,000 to $2,816,000 at September 30, 2008 from
$8,740,000 at December 31, 2007. This was attributable to securities of
$8,000,000 that were called and the Bank purchased $2,000,000 during the first
quarter of 2008 for a net effect of a $6,000,000 decrease. Total loans
increased $668,000 or 1.20% to $56,488,000 at September 30, 2008 from
$55,820,000 at December 31, 2007. This increase in the loan portfolio is due
mainly to an increase of $1,950,000 in real estate loans. This was offset by a
decrease in the credit card portfolio of $1,297,000, and a decrease of $305,000
in personal and business loans. The credit card portfolio decrease was largely
attributable to (i) competition from other banks and non-traditional credit
card issuers; (ii) tightening of the Bank's underwriting standards; and (iii)
normal attrition, in addition to the cyclical nature of the business.
Total deposits decreased $3,535,000 or 3.94% to $86,132,000 at September
30, 2008 from $89,667,000 at December 31, 2007. Total non-interest bearing
deposits decreased $4,230,000 while interest-bearing accounts increased
$695,000. The increase of interest earning deposits was mainly attributable to
a promotion at the 2 branches that reopened in 2007 after Hurricane Katrina.
Time deposits increased $3,061,000 while Now accounts decreased $1,096,000
savings accounts decreased $1,229,000.
Other liabilities decreased $1,532,000 from $3,320,000 at December 31,
2007 to $1,788,000 at September 30, 2008. This decrease is due mainly to
insurance money that was received and held in contingency accounts and was
used in 2008 to repair the Bank's branches that were damaged by Hurricane
Katrina. This amount totaled $1,273,000.
Shareholder's Equity increased $811,000 from $10,740,000 at December 31,
2007 to $11,551,000 at September 30, 2008. This increase is due mainly to net
income for the nine months ended September 30, 2008 of $819,000, an increase
in capital in excess of par-retired Preferred Stock of $15,000 and a decrease
in Preferred Stock of $72,000.
NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2007
INCOME
The Company's net income for the nine months ended September 30, 2008 was
$819,000 or $4.57 per share, a decrease of $314,000 from the Company's total
net income of $1,133,000 for the same period last year.
Interest income decreased $884,000 for the nine months ended September
30, 2008 over the same period last year. Interest on federal funds sold
decreased $393,000 due to a decrease in the interest rate received from 5.16%
at September 30, 2007 to 2.35% at September 30, 2008. Interest on investment
securities decreased $257,000. During the 1st quarter of 2008, $8,000,000 in
securities were called and the Bank purchased $2,000,000, for a net effect of a
$6,000,000 decrease. Interest in the loan portfolio decreased $234,000 due
mainly to a decrease in the average balance of loans from $58,547,000 at
September 30, 2007 to $55,499,000 at September 30, 2008.
8
<Page>
Interest expense increased $89,000 for the nine months ended September
30, 2008 over the same period last year. This was caused by an increase in the
average balance of interest-bearing liabilities from $47,180,000 at September
30, 2007 to $51,440,000 as of September 30, 2008. The interest rate paid on
interest-bearing liabilities increased from 1.65% at September 30, 2007 to
1.75% as of September 30, 2008. This increase in rates was due to a promotion
at the 2 branches that reopened in 2007 after Hurricane Katrina. Net interest
income decreased $973,000. Interest rate spreads decreased from 7.24% at
September 30, 2007 to 6.27% at September 30, 2008.
Non-interest income increased $323,000 for the nine month period from
$1,094,000 at September 30, 2007 to $1,417,000 at September 30, 2008. Other
income increased $525,000 for the nine months ended September 30, 2008. This
increase is due mainly to the sale of Visa stock for a gain of $578,000 in the
1st quarter of 2008. This was offset by a decrease in deposit related fees of
$74,000 of which $44,000 was due to a decrease in the service charge collected
on commercial accounts and a decrease of $20,000 in fees collected on overdrawn
accounts. Cardholder and other credit card fees decreased $40,000.
Non-interest expense decreased $152,000 for the nine month period of 2008
as compared to the same period last year. In August, 2007 the Bank purchased
the building which houses the Severn Branch and Operations center with offices
that are leased to other tenants. The reduction in Occupancy expense of
$19,000 was due to the Bank no longer paying rent for the Severn Branch and the
Operations center in addition to rental income received from the other tenants.
Other taxes decreased $62,000 due mainly to bank stock taxes of $205,000 in
2007 compared to $143,000 in 2008. Professional fees decreased $57,000 and ORE
expenses decreased $44,000 over the same period last year. Outsourcing fees
increased $57,000 over the same period last year.
The provision for income taxes decreased $169,000 compared to the same
period last year from $591,000 at September 30, 2007 to $422,000 at September
30, 2008. This was due to a decrease in income before taxes.
THIRD QUARTER 2008 COMPARED WITH THIRD QUARTER 2007
INCOME
Net income for the third quarter of 2008 was $48,000 compared to $394,000
for the same period last year for a decrease of $346,000.
Interest income decreased $457,000 over the same period last year.
Interest on the loan portfolio decreased $170,000 from $1,718,000 at September
30, 2007 to $1,548,000 at September 30, 2008. This was caused mainly by a
decrease of $2,796,000 in the average outstanding loans from $58,391,000 at
September 30, 2007 to $55,595,000 at September 30, 2008 and a decrease in the
interest rate from 11.77% at September 30, 2007 to 11.14% at September 30,
2008. Interest on investment securities decreased $95,000 due mainly to a
decrease in the average outstanding from $11,669,000 at September 30, 2007 to
$2,767,000 at September 30, 2008. Interest on federal funds sold decreased
$192,000 due mainly to a decrease in the interest rate from 5.13% at September
30, 2007 to 1.97% at September 30, 2008.
Interest expense increased $2,000 for the three months ended September
30, 2008 over the same period last year. This was caused by an increase of
interest-bearing liabilities of $2,846,000 from $48,477,000 at September 30,
2007 to $51,323,000 at September 30, 2008 and a decrease in the interest rate
from 1.72% at September 30, 2007 to 1.64% as of September 30, 2008. Net
interest income decreased $459,000 due to the decrease in the rate on interest
earning assets from 8.92% at September 30, 2007 to 7.51% at September 30, 2008,
which was offset by the higher interest rates on interest bearing deposits from
1.53% at September 30, 2007 to 1.46% at September 30, 2008. The interest rate
spreads decreased from 7.20% at September 30, 2007 to 5.87% at September 30,
2008.
Non-interest income decreased $97,000 for the three-month period as
compared to the same period last year. This decrease was due mainly to the
gain of $88,000 on the sale of an ORE property in 2007. In addition there was a
9
<Page>
decrease of $10,000 in cardholder and other credit card fees.
Non-interest expense decreased $12,000 for the three-month period as
compared to the same period last year. Other taxes decreased $20,000 due mainly
to bank stock taxes of $68,000 in 2007 compared to $48,000 in 2008.
The provision for income taxes decreased $156,000 compared to the same
period last year from $171,000 at September 30, 2007 to $15,000 at September
30, 2008 due to a decrease in income before taxes.
Item 3. 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.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition, and/or operating results. Difficult conditions
in the financial services markets may materially and adversely affect the
business and results of operations of the Bank and the Company.
Dramatic declines in the housing market during the past year, along with
falling home prices and increasing foreclosures and unemployment, have resulted
in significant write downs of asset values by financial institutions, including
government-sponsored entities and major commercial and investment banks. These
write-downs, initially of mortgage-backed securities by spreading to credit
default swaps and other derivative securities, have caused many financial
institutions to seek additional capital, to merge with larger and stronger
institutions, and, in some cases, to fail. Many lenders and institutional
investors have reduced, and in some cases, ceased to provide funding to
borrowers, including other financial institutions. This market turmoil and
tightening of credit have led to an increased level of commercial and consumer
delinquencies, lack of consumer confidence, increased market volatility, and
widespread reduction of business activity generally, which could have a
material adverse effect on our business and operations. A worsening of these
conditions would likely exacerbate any adverse effects of these difficult
market conditions on us and others in the financial institutions industry. As
a rule however, the majority of small community banks, such as Bank of
Louisiana, have strong reserve positions and are well capitalized.
Item 4T. Controls and Procedures
Under the supervision and with the participation of our management, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934) as of the end of the period covered by
this report. Based upon that evaluation, the certifying officers of the
Company have concluded that, as of the end of the period covered by this
report, our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities and Exchange Act of 1934, is recorded, processed,
summarized and reported within the applicable time periods specified by the
Securities and Exchange Commission's rules and forms.
There has been no change in the Company's internal control over financial
reporting during the Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II - OTHER INFORMATION
Item 6. Exhibits.
Exhibits
10
<Page>
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial
Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350
32.2 Certification Pursuant to 18 U.S.C. Section 1350
11
<Page>
BOL BANCSHARES, INC.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BOL BANCSHARES, INC.
(Registrant)
November 13, 2008
Date
/s/ G. Harrison Scott
G. Harrison Scott
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)
12