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, 1997
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 the latest practical date:
Common Stock, $1 Par Value - 179,145 shares as of July 31, 1997.
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 Changes in
Stockholder's Equity 6
Consolidated Statement of Cash Flow 7
Notes to Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operation 12
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule 23
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)
June 30 Dec. 31, June 30
(Amounts in thousands) 1997 1996 1996
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash 7,055 7,903 5,744
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
6/30/97, 12/31/96, & 6/30/96 respectively 9,469 7,977 7,989
were $9,483,000, $8,017,000, and $7,976,000)
Securities Available for Sale 1,086 1,083 1,106
Federal Funds Sold 16,750 14,400 11,075
Loans, net of unearned income 62,070 69,298 75,750
Reserve for possible loan losses (1,500) (1,500) (1,502)
Property, Equipment and Leasehold
Improvements
(Net of Depreciation and Amortization) 2,749 2,683 2,701
Other Real Estate 1,494 1,723 1,699
Deferred Taxes 326 327 364
Letters of Credit 146 146 146
Other Assets 2,107 2,051 1,370
TOTAL ASSETS $101,752 $106,091 $106,442
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
June 30 Dec. 31, June 30
(Amounts in thousands) 1997 1996 1996
LIABILITIES
Deposits:
Non-Interest Bearing 33,968 35,768 35,086
Interest Bearing 58,017 59,373 59,791
TOTAL DEPOSITS 91,985 95,141 94,877
Deferred Taxes - - -
Notes Payable 493 495 497
Senior Secured Debentures 1,888 1,890 1,890
Letters of Credit Outstanding 146 146 146
Accrued Litigation Settlement 390 390 390
Other Liabilities 985 778 1,062
TOTAL LIABILITIES 95,887 98,840 98,862
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and Outstanding at
6/30/97, 12/31/96, and 6/30/96 2,303 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
6/30/97, 12/31/96, and 6/30/96 179 179 179
Unrealized Gain on Securities Available for
Sale, net of
applicable Deferred Income Taxes (2) (4) 6
Capital in Excess of Par - Retired Stock 15 15 15
Undivided Profits 4,758 4,852 4,852
Current Earnings (1,388) (94) 225
TOTAL STOCKHOLDERS' EQUITY 5,865 7,251 7,580
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,752 $106,091 $106,442
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Six months ended
months
ended
June 30 June 30
(Amounts in thousands) 1997 1996 1997 1996
INTEREST INCOME
Interest and fees on loans 2,207 2865 4,622 5,719
Interest on time deposits - - - -
Interest on security - HTM 141 112 256 234
Interest & dividends on security - 13 13 25 29
Interest on federal funds sold 260 129 471 259
Other interest income - - - 1
-
Total Interest Income 2,621 3,119 5,374 6,242
INTEREST EXPENSE
Interest on deposits 473 502 943 992
Interest on federal funds purchased - - - -
Other interest expense 10 1 21 4
Interest expense on notes payable 3 13 6 26
Interest expense on debentures 42 44 84 86
Total Interest Expense 528 560 1,054 1,108
NET INTEREST INCOME 2,093 2,559 4,320 5,134
Provision for loan losses 983 410 1,762 832
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,110 2,149 2,558 4,302
OTHER INCOME
Service Charges on Deposit Accounts 331 364 659 726
Cardholder & other credit card income 168 198 312 336
ORE Income 3 14 42 19
Other Operating Income 118 35 233 145
Gain on Sale of Securities - - - -
Total Other Income 620 611 1,246 1,226
OTHER EXPENSE
Salaries and Employee Benefits 1,014 1,057 2,049 2,066
Occupancy Expense 481 422 931 869
Loan & Credit Card Expense 300 322 609 595
ORE Expense 98 97 179 135
Other Operating Expense 724 756 1,424 1,453
Total Other Expenses 2,617 2,654 5,192 5,118
Income Before Tax Provision (887) 106 (1,388) 410
Provision (Benefit) For Income Taxes - 64 - 185
NET INCOME (887) 42 (1,388) 225
Earnings Per Share of Common Stock ($4.95) $0.23 ($7.75) $1.26
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
UNREALIZED
(Amounts in GAIN(LOSS) CAPITAL IN
thousands) ON
INVESTMENT EXCESS OF
SECURITIES PAR
PREFERRED COMMON AVAILABLE RETIRED RETAINED
STOCK STOCK FOR SALE STOCK EARNING TOTAL
S
Balance December 31, 2,303 179 19 15 4,852 7,368
1995
Change in unrealized gain on
securities AFS, net of
applicable deferred income
taxes (13) (13)
Net Income 225 225
Balance - June 30, 2,303 179 6 15 5,077 $7,580
1996
Balance December 31, 2,303 179 (4) 15 4,758 7,251
1996
Change in unrealized gain on
securities AFS, net of
applicable deferred income
taxes 2 2
Net Income (Loss)
(1,388) (1,388)
Balance - June 30, 2,303 179 (2) 15 3,370 $5,865
1997
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Six Months Ended June 30
(Amounts in thousands) 1997 1996
OPERATING ACTIVITIES
Net Income (Loss) (1,388) 225
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for Loan Losses 780 832
Depreciation and Amortization Expense 188 167
Amortization of Investment Security Premiums - 2
Accretion of Investment Security Discounts 13 10
(Decrease)Increase in Deferred Income Taxes 1 (366)
(Gain) Loss on Sale of Property and Equipment - 2
(Gain) Loss on Sale of Other Real Estate (14) 3
Decrease(Increase) in Other Assets & Prepaid Taxes (56) 255
(Decrease)Increase in Other Liabilities and 208 (159)
Accrued Interest
Net Decrease(Increase) in Mortgage Loans Held for - 161
Resale
Net Cash Provided by (Used in) Operating Activities (268) 1,132
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale - -
Securities
Purchases of Available-for-Sale Securities - (1,000)
Proceeds from Available-for-Sale Securities
Released at Maturity - 978
Proceeds from Held-to-Maturity Investment Securities
Released at Maturity 2,975 2,510
Purchases of Held-to-Maturity Investment (4,480) (478)
Securities
Proceeds from Sale of Property and Equipment 1 2
Purchases of Property and Equipment (255) (298)
Proceeds from Sale of Other Real Estate 365 293
Purchases of Other Real Estate (124) (3)
Net Decrease (Increase) in Loans 6,449 (1,231)
Net Cash Provided by (Used in) Investing Activities 4,931 773
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand Deposits,
Interest Bearing Deposits,
Savings Accounts, and CD's (3,156) (2,495)
Proceeds from Issuance of Long-Term Debt - -
Retirement of Stock - -
Principal Payments on Long Term Debt (4) (2)
Net Cash Provided by (Used in) Financing Activities (3,160) (2,497)
Net Increase (Decrease) in Cash and Cash 1,503 (592)
Equivalents
Cash and Cash Equivalents at Beginning of Year 22,303 17,411
Cash and Cash Equivalents at End of Period 23,806 $16,819
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
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
Rule 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, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
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 8, 1997. 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 132,521.
Number of
Shares
Nominee For Against Abstain
Gordon A. Burgess 132,090 156 275
James A. Comiskey 132,090 156 275
Lionel J. Favret 132,090 156 275
Louis G. Grush 132,090 156 275
Gerry E. Hinton 132,090 156 275
Leland L. Landry 132,090 156 275
Samuel Logan 132,090 156 275
Douglas A. Schonacher 132,090 156 275
G. Harrison Scott 132,090 156 275
Edward J. Soniat 132,090 156 275
Note 3 PER SHARE DATA
Income per common share data are based on the weighted average number
of shares outstanding of 179,145 and 179,145 at June 30, 1997 and 1996
respectively.
Note 4 SENIOR SECURED DEBENTURES
On December 27, 1996 the Company offered $1,800,000 in aggregate
principal amount of 9% Senior Secured Debentures due 2000, of BOL
Bancshares, Inc. The Debentures will bear interest at the rate of 9% per
annum payable semi-annually on each January 31 and July 31. Each $500.00
in principal amount of a Debenture will be secured by a pledge of 39.72
shares of common stock of the Bank. Total Senior Secured Debentures as of
July 5, 1997 totaled $1,793,000 and will be due July 5, 2000.
Note 5. 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 December 31, 1996, 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 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.
The trial was scheduled for March 17, 1997. The Company is awaiting the
court's decision.
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.
2. 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 countersuit against the Plaintiffs for contribution on
the $110,000 loss and for tortious interference. The Plaintiff filed
exceptions to the countersuit. These exceptions were heard in the district
court and the Company's right to contribution was maintained, however the
Company's suit for tortious interference was dismissed. On appeal, the
appellate court sustained the Company's right to contribution and overruled
the lower court's decision on tortious 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.
3. On February 10, 1997 a lawsuit was filed by a proprietary merchant
alleging that the Company wrongfully debited the Plaintiff's Reserve
account which is held for losses. The Plaintiff is seeking $2,000,000 in
damages. On February 10, 1997, the same day, the Bank filed suit, based on
the fact that the proprietor was withholding payments which belonged to the
Bank. The Company intends to continue to defend vigorously the claims
asserted in the suit.
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, including attorney fees in this matter.
Note 6. 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,
1997
Carrying Fair
(Amounts in thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $23,805 $23,805
Investment Securities 10,555 10,570
Loans 62,070 62,114
Less: Allowance for Loan Losses 1,500 1,500
$94,930 $94,989
Financial Liabilities:
Deposits $91,985 $92,016
Unrecognized Financial Instruments:
Commitments to Extend Credit $684 $684
Commercial Lines of Credit 146 146
Credit Card Arrangements 58,558 58,558
$59,388 $59,388
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
Three Months Ended Six Months Ended
(Amounts in thousands, June 30 March 31, June 30 June 30 June 30
except
per share data) 1997 1997 1996 1997 1996
Interest Income 2,621 $2,752 $3,119 5,374 $6,242
Interest Expense 528 526 560 1,054 1,108
Net Interest Income 2,093 2,226 2,559 4,320 5,134
Provision for Loan 983 780 410 1,762 832
Losses
Net Interest Income 1,110 1,446 2,149 2,558 4,302
after Provision
Noninterest income:
Noninterest income 620 626 611 1,246 1,226
Securities gains - - - - -
Noninterest income 620 626 611 1,246 1,226
Noninterest expense 2,617 2,573 2,654 5,192 5,118
Income before taxes (887) (501) 106 (1,388) 410
Income tax expense - - 64 - 185
(benefit)
Net Income (Loss) ($887) ($501) $42 ($1,388) $225
Income per common share ($4.95) ($2.80) $0.23 ($7.75) $1.26
Average common shares 179 179 179 179 179
outstanding
Selected Quarter-End Balances
Loans $62,070 $64,444 $75,750
Deposits 91,985 95,529 94,877
Long-Term debt 2,381 2,382 2,387
Stockholders' equity 5,865 6,749 7,580
Total assets 101,752 105,851 106,442
Selected Average Balances
Loans $62,378 $66,743 $75,975 $64,546 $74,870
Deposits 92,296 92,738 94,378 92,440 93,847
Long-Term debt 2,381 2,383 2,388 2,382 2,388
Stockholders' equity 6,137 7,025 7,581 6,581 7,532
Total assets 102,257 103,105 105,869 102,753 105,194
Selected Ratios
Return on average assets -0.87% -0.49% 0.04% -1.35% 0.21%
Return on average equity -14.45% -7.13% 0.55% -21.09% 2.99%
Tier 1 risk-based 11.85% 12.16% 11.76%
capital
Total risk-based capital 13.12% 13.42% 13.02%
Leverage 7.56% 8.32% 8.76%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1997
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.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $91,870,000 in the second quarter of
1997, a $3,046,000 decrease from the second quarter of 1996 average of
$94,917,000. Compared to the second quarter of 1996, average loans
decreased $13,597,000 (17.90%) while average investment securities
increased $1,452,000 (15.96%), and average federal funds sold increased
$9,098,000 (92.41%).
Table 1 presents the Company's loan portfolio by major
classifications. Total loans decreased $13,679,000 (18.42%)over the second
quarter of 1996. This decrease is mainly attributable to the decline in
the credit card portfolio. Visa / MasterCard loans decreased $4,089,000
(15.23%) and Proprietary loans decreased $9,981,000 (65.26%) due to the
loss of several proprietary accounts.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
June 30, 1997 March 31, 1997 June 30, 1996
(Amounts in Loans % Loans % Loans %
thousands)
Commercial, 6,044 9.74% 6,391 9.92% 5,222 6.89%
financial, &
agricultural
Real estate-mortgage 23,575 37.98% 22,383 34.73% 23,588 31.14%
Mortgage Loan Held - 0.00% 105 0.16% 95 0.13%
for Resale
Personal Loans 4,133 6.66% 4,037 6.26% 4,435 5.85%
Credit cards-Visa, 22,767 36.68% 23,443 36.38% 26,856 35.45%
MasterCard
Credit cards- 5,312 8.56% 7,953 12.34% 15,293 20.19%
Proprietary
Overdrafts 239 0.39% 132 0.20% 261 0.34%
Loans 62,070 100.00% $64,444 100.00% $75,750 100.00%
Securities Held to Maturity. Average securities held to maturity
increased $1,478,000 (18.50%) from the second quarter of 1996. 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
decreased $26,000 (2.33%) from the second quarter of 1996. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold increased
$9,098,000 (92.41%) up from the second quarter of 1996. This increase is
mainly due to the decrease in the aforementioned credit card 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 $1,919,000 at June 30, 1997 as compared
to $1,987,000 at June 30, 1996. Other real estate totaled $1,494,000 at
June 30, 1997 as compared to $1,699,000 at June 30, 1996.
Table 2. NONPERFORMING ASSETS
(Amounts in 06/30/97 03/31/97 12/31/96 09/31/96 06/31/96
thousands)
Nonaccrual Loans 425 313 316 316 288
Restructured Loans - - - - -
Other Real Estate 1,494 1,776 1,723 1,699 1,699
Owned
Total Nonperforming $1,919 $2,089 $2,039 $2,015 $1,987
Assets
Loans past due 90 1,874 3,745 2,295 1,754 4,289
days or more
Ratio of past due 3.02% 5.81% 3.31% 2.43% 5.66%
loans to loans
Ratio of
nonperforming assets
to loans
and other real 3.02% 3.15% 2.87% 2.72% 2.57%
estate owned
Management is not aware of any potential problem loans other than
those disclosed in the table above, which includes all loans recommended
for classification by regulators, which would have a material impact on
asset quality.
IMPAIRED LOANS
The Financial Accounting Standards Board (FASB) issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" in May, 1993. In
October, 1994, the FASB issued SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures" which amends SFAS
No. 114. These standards require the measurement of certain impaired loans
based on the present value of expected future cash flows discounted at the
loan's effective interest rates. Adoption of SFAS Nos. 114 and 118 is
required for fiscal years beginning after December 15, 1994. The Bank
adopted these statements beginning January 1, 1995; the adoption had no
material impact on the Company's consolidated financial statements.
A loan is considered potentially impaired if: a) it is probable that
the Bank will be unable to collect all amounts due (principal and interest)
according to the terms of the loan agreement; b) A loan's original
contractual terms have been modified because of the collect concerns.
Impairment assessment is based on the present value of expected future
cash flows related to the particular loan. The Bank discounts expected net
future cash flows or the underlying collateral of a loan to determine the
appropriate loss allowance for the loan.
For impaired loans that have risk characteristics in common with other
impaired loans, the Bank aggregates those loans and uses historical
statistics, such as average recovery period and average amount recovered,
along with a composite effective interest rate as a means of measuring the
impaired loans.
If the measure of the impaired loan is less than the recorded
investment in the loan, including accrued interest, net deferred loan fees
or costs, and unamortized premium or discount, the Bank recognized the
impairment.
The term recorded investment in the loan is distinguished from net
carrying amount of the loan because the latter term is net of a valuation
allowance, while the former term is not. The recorded investment in the
loan does, however, reflect any direct write-down of the investment.
When the bank recognizes the impairment, we create a valuation
allowance with a corresponding charge to bad-debt expense or adjust an
existing valuation allowance for the impaired loan with a corresponding
charge or credit to bad debt expense.
As of June 30, 1997, the Bank did not have any impaired loans.
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 98.76% to $3,053,000 at June 30, 1997 from
$1,536,000 at June 30, 1996. During this period there were four loans
added as type 4 in excess of $1,500,000.
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
Table 3 presents an analysis of the activity in the reserve for
possible loan losses for the three month and six month period ending June
30, 1997 and 1996. The reserve for loan losses as a percentage of loans
increased from 1.98% at June 30, 1996 to 2.42% at June 30, 1997. The net
charge-off (recoveries) as a percentage of average loans increased from
1.09% at June 30, 1996 to 1.58% at June 30, 1997.
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 POSSIBLE LOAN LOSSES ACTIVITY
Three Six Months Ended
Months
Ended
June 30, June 30, June 30, June 30,
(Amounts in thousands) 1997 1996 1997 1996
Balance at beginning of 1,500 $1,505 1,500 $1,500
period
Loans charged off (1,275) (563) (2,189) (1,147)
Recoveries 292 150 427 317
Net (charge-offs) (983) (413) (1,762) (830)
recoveries
Provision for loan 983 410 1,762 832
losses
Balance at end of period $1,500 $1,502 $1,500 $1,502
Reserve for possible
loan losses as a
percentage of loans 2.42% 1.98% 2.42% 1.98%
Net (charge-offs)
recoveries as a
percentage
of average loans 1.58% 0.54% 2.73% 1.09%
FUNDING SOURCES:
DEPOSITS
Deposits. Average deposits totaled $92,296,000 in the second quarter
of 1997, a decrease of $2,969,000 (3.12%) from $95,265,000 in the second
quarter of 1996. Average core deposits were $91,049,000 for the second
quarter of 1997 down from $94,005,000 in the second quarter of 1996. Table
4 presents the composition of average deposits for the three quarters
ending June 30, 1997, March 31, 1997 and June 30, 1996.
TABLE 4. DEPOSIT COMPOSITION
For The Three Months Ended
Jun 30, Mar 31, Jun 30,
1997 1997 1996
Average % of Average % of Average % of
(Amounts in Balances Deposits Balances Deposits Balances Deposits
thousands)
Demand, noninterest- $33,875 36.70% $33,550 36.18% $33,247 34.90%
bearing
NOW accounts 11,524 12.49% 11,466 12.36% 12,301 12.91%
Money market deposit 6,171 6.69% 6,899 7.44% 8,198 8.61%
accounts
Savings accounts 28,275 30.64% 25,963 28.00% 25,933 27.22%
Other time deposits 11,204 12.14% 13,421 14.47% 14,326 15.04%
Total core deposits 91,049 98.65% 91,299 98.45% 94,005 98.68%
Certificates of deposit of
$100,000 or more 1,247 1.35% 1,439 1.55% 1,260 1.32%
Total deposits 92,296 100.00% $92,738 100.00% $95,265 100.00%
BORROWINGS
The Company's long-term debt is comprised primarily of debentures
which are secured by 23.83 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 $600,000 with a correspondent bank and also has a
commitment from an upstream correspondent which will increase our Federal
Funds line of credit over and above the normal amount by pledging unused
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 1997 decreased $466,000
over the same period last year, and decreased $815,000 from the first six
months of 1996. The net interest income margin decreased to 2.28% for the
second quarter of 1997 from 2.70% for the second quarter of 1996. The
decline of the net interest income is attributable to the decline in the
credit card portfolio.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
SECOND SECOND QUARTER 1996
QUARTER
1997
Average Average
(Amounts in thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned
income(1)(2)
Taxable 62,378 2,207 3.54% 75,975 2,865 3.77%
Tax-exempt - -
Investment securities
Taxable 10,549 154 1.46% 9,097 125 1.37%
Tax-exempt - -
Interest-bearing deposits - -
Federal funds sold 18,943 260 1.37% 9,845 129 1.31%
Total Interest-Earning 91,870 2,621 2.85% 94,917 3,119 3.29%
Assets
Cash and due from banks 5,152 5,978
Allowance for loan Losses (1,500) (1,526)
Premises and equipment 2,646 2,652
Other Real Estate 1,518 1,851
Other assets 2,571 1,997
TOTAL ASSETS 102,257 $105,869
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 17,695 97 0.55% 20,008 114 0.57%
Savings deposits 28,275 231 0.82% 27,463 212 0.77%
Time deposits 12,451 144 1.15% 13,663 177 1.30%
Total Interest-Bearing 58,421 472 0.81% 61,134 503 0.82%
Deposits
Federal Funds Purchased
Securities sold under
agreements to repurchase
Other Short-Term borrowings - -
Long-Term debt 2,381 56 2.33% 2,388 57 2.39%
Total Int-Bearing 60,802 528 0.87% 63,522 560 0.88%
Liabilities
Noninterest-bearing 33,875 33,244
deposits
Other liabilities 1,443 1,522
Shareholders' equity 6,137 7,581
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 102,257 $105,869
Net Interest income/spread 1.98% 2.40%
Net Interest Margin 2.28% 2.70%
<FN>
(1) Fee income relating to loans of $52,000 at June 30, 1997, and $67,000 at
June 30, 1996 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%.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
Six Six Months Ended 6/96
Months
Ended
6/97
Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned
income(1)(2)
Taxable 64,546 4,622 3.77% 74,870 5,720 7.64%
Tax-exempt - -
Investment securities
Taxable 9,890 281 1.37% 9,605 263 2.74%
Tax-exempt - -
Interest-bearing deposits - -
Federal funds sold 17,543 471 1.31% 9,784 259 2.65%
Total Interest-Earning 91,979 5,374 5.84% 94,259 6,242 6.62%
Assets
Cash and due from banks 5,390 6,016
Allowance for loan Losses (1,500) (1,376)
Premises and equipment 2,650 2,604
Other Real Estate 1,652 1,943
Other assets 2,582 1,748
TOTAL ASSETS 102,753 105,194
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 18,028 196 0.57% 19,459 217 1.12%
Savings deposits 28,050 421 0.77% 27,132 403 1.49%
Time deposits 12,649 326 1.30% 14,043 372 2.65%
Total Interest-Bearing 58,727 943 1.61% 60,634 992 1.64%
Deposits
Federal Funds Purchased
Securities sold under
agreements to repurchase
Other Short-Term borrowings - -
Long-Term debt 2,382 111 2.39% 2,388 116 4.86%
Total Int-Bearing 61,109 1,054 1.72% 63,022 1,108 1.76%
Liabilities
Noninterest-bearing 33,714 33,213
deposits
Other liabilities 1,349 1,427
Shareholders' equity 6,581 7,532
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 102,753 105,194
Net Interest income/spread 4.12% 4.86%
Net Interest Margin 4.70% 5.45%
<FN>
(1) Fee income relating to loans of $109,000 at June 30, 1997, and $132,000
at June 30, 1996 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%.
Rate/Volume Analysis
June, 1997 Compared to June, 1996
Variance Attributed to (1)
Net
(Amounts in thousands) Volume Rate Change
Net Loans:
Taxable (10,324) -3.87% (1,098)
Tax-exempt(2) - 0.00% -
Investment Securities - 0.00% -
Taxable 285 -1.36% 18
Tax-exempt(2) - 0.00% -
Interest-bearing deposits - 0.00% -
Federal funds sold 7,759 -1.34% 212
Total Interest-Earning Assets (2,280) -6.57% (868)
Deposits:
Demand Deposits (1,431) -0.55% (21)
Savings deposits 918 -0.71% 18
Time deposits (1,394) -1.35% (46)
Total interest-bearing (1,907) -0.03% (49)
deposits
Federal Funds Purchased - 0.00% -
Securities sold under - 0.00% -
agreements to repurchase
Other Short-Term borrowings - 0.00% -
Long-Term debt (6) -2.47% (5)
Total Interest-Bearing (3,820) -5.11% (103)
Liabilities
<FN>
(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 AND EXPENSE
The amount of noninterest income and noninterest expenses of a banking
organization relate closely to the size of the total assets and deposits
and the number of deposit accounts. The amount of noninterest expense
represents the cost of operating the banking organization.
The major components of noninterest income are service charges related
to deposit accounts, cardholder and other credit card fees, Ore income,
gain on sale of ORE and other noninterest income.
Noninterest income for the second quarter of 1997 increased $20,000 or
1.63% from the same period last year. Table 5 presents noninterest income
for the three months and six months ended June 30, 1997 and 1996.
TABLE 5. NONINTEREST INCOME
Three Six Months Ended
Months
Ended
June 30, June 30, Increase June 30, June 30, Increase
(Amounts in 1997 1996 (Decrease) 1997 1996 (Decrease)
thousands)
Service Charges $153 $163 ($10) $303 $319 ($16)
NSF Charges 178 198 (20) 356 404 (48)
Gain on Sale of - - - - - -
Securities
Cardholder & Other 103 100 3 192 221 (29)
Credit Card Income
Membership Fees 66 59 7 121 115 6
Other Comm & Fees 25 67 (42) 50 94 (44)
ORE Income 3 7 (4) 7 12 (5)
Gain on Sale of ORE 0 7 (7) 35 7 28
Other Income 92 10 82 182 54 128
Total Non-Interest $620 $611 $9 $1,246 $1,226 $20
Income
NONINTEREST EXPENSE
The major components of noninterest expense represents the cost of
operating the banking organization.
Noninterest expense for the second quarter of 1997 increased $73,000
or 1.43% from the same period last year. Table 6 presents the activity for
the three months and six months ended June 30, 1997 and 1996.
TABLE 6. NONINTEREST EXPENSE
Three Six Months Ended
Months
Ended
June 30, June 30, Increase June 30, June 30, Increase
(Amounts in 1997 1996 (Decrease) 1997 1996 (Decrease)
thousands)
Salaries & Benefits $1,014 $1,057 ($43) $2,049 $2,066 ($17)
Loss on Litigation - - - - - -
Occupancy Expense 481 422 59 931 869 62
Advertising Expense 43 76 (33) 83 159 (76)
Communications 84 98 (14) 168 178 (10)
Postage 125 167 (42) 263 282 (19)
Loan & Credit Card 300 322 (22) 609 595 14
Expense
Professional Fees 62 97 (35) 119 179 (60)
Legal Fees 187 48 139 299 125 174
Insurance & 23 26 (3) 50 50 (0)
Assessments
Stationery, Forms & 89 111 (22) 203 228 (25)
Supply
ORE Expenses 98 97 1 179 135 44
Other Operating 111 133 (22) 239 252 (13)
Expense
Total Non-Interest $2,617 $2,654 ($37) $5,192 $5,118 $74
Expense
INCOME TAXES
The Company did not record a provision for income taxes for the second
quarter of 1997. A provision of $64,000 was recorded for the second quarter
of 1996.
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,
1997 1997 1996 1996 1996
Risk-based capital
Tier 1 risk-based 11.85% 12.16% 12.32% 12.07% 11.76%
capital ratio
Total risk-based 13.12% 13.42% 13.58% 13.33% 13.02%
capital ratio
Leverage 7.56% 8.32% 8.60% 8.82% 8.76%
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
38.09% at June 30, 1997, 38.84% at March 31, 1997, and 27.81% at June 30,
1996.
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.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
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/ Peggy L. Schaefer
August 12, 1997 Peggy L. Schaefer,
Date Treasurer