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, 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 October 30, 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)
Sept 30 Dec. 31, Sept 30
(Amounts in thousands) 1997 1996 1996
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash 7,158 7,903 6,901
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
9/30/97, 12/31/96, & 9/30/96 respectively 9,475 7,977 7,968
were $9,540,000, $8,017,000, and $7,976,000)
Securities Available for Sale 1,088 1,083 1,077
Federal Funds Sold 17,875 14,400 11,450
Loans, Net of Unearned Income 60,158 69,298 72,280
Reserve for Possible Loan Losses (1,800) (1,500) (1,500)
Property, Equipment and Leasehold Improvements
(Net of Depreciation and Amortization) 2,738 2,683 2,756
Other Real Estate 1,357 1,723 1,699
Deferred Taxes 325 327 371
Letters of Credit 106 146 146
Other Assets 1,498 2,051 1,885
TOTAL ASSETS $99,978 $106,091 $105,033
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
Sept 30 Dec. 31, Sept 30
(Amounts in thousands) 1997 1996 1996
LIABILITIES
Deposits:
Non-Interest Bearing 32,853 35,768 33,982
Interest Bearing 58,900 59,373 59,857
TOTAL DEPOSITS 91,753 95,141 93,839
Deferred Taxes - - -
Notes Payable 492 495 497
Senior Secured Debentures 1,793 1,890 1,890
Letters of Credit Outstanding 106 146 146
Accrued Litigation Settlement 390 390 390
Other Liabilities 906 778 924
TOTAL LIABILITIES 95,440 98,840 97,686
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and Outstanding at
9/30/97, 12/31/96, and 9/30/96 2,303 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
9/30/97, 12/31/96, and 9/30/96 179 179 179
Unrealized Gain on Securities Available for
Sale, net of
applicable Deferred Income Taxes (1) (4) (8)
Capital in Excess of Par - Retired Stock 15 15 15
Undivided Profits 4,758 4,852 4,852
Current Earnings (2,716) (94) 6
TOTAL STOCKHOLDERS' EQUITY 4,538 7,251 7,347
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,978 $106,091 $105,033
<FN>
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) 1997 1996 1997 1996
INTEREST INCOME
Interest and Fees on Loans 2,118 2,848 6,740 8,567
Interest on Time Deposits - - - -
Interest on Security - HTM 143 111 399 347
Interest & Dividends on Security -AFS 13 13 38 42
Interest on Federal Funds Sold 252 130 723 389
Other Interest Income - - - -
Total Interest Income 2,526 3,104 7,900 9,345
INTEREST EXPENSE
Interest on Deposits 478 485 1,421 1,477
Interest on Federal Funds Purchased - - - -
Other Interest Expense 10 1 31 5
Interest Expense on Notes Payable 3 14 8 40
Interest Expense on Debentures 43 42 128 128
Total Interest Expense 534 542 1,588 1,650
NET INTEREST INCOME 1,992 2,562 6,312 7,695
Provision for Loan Losses 1,235 627 2,997 1,459
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 757 1,935 3,315 6,236
OTHER INCOME
Service Charges on Deposit Accounts 344 353 1,003 1,079
Cardholder & Other Credit Card Income 157 162 470 498
ORE Income 28 5 70 24
Other Operating Income 184 56 416 202
Gain on Sale of Securities 16 - 16 -
Total Other Income 729 576 1,975 1,803
OTHER EXPENSE
Salaries and Employee Benefits 982 1,065 3,031 3,131
Occupancy Expense 496 503 1,427 1,372
Loan & Credit Card Expense 232 298 841 893
ORE Expense 75 59 254 194
Other Operating Expense 1,029 909 2,453 2,362
Total Other Expenses 2,814 2,834 8,006 7,952
Income Before Tax Provision (1,328) (323) (2,716) 87
Provision (Benefit) For Income Taxes - (104) - 81
NET INCOME (1,328) (219) (2,716) 6
Earnings Per Share of Common Stock ($7.42) ($1.22) ($15.17) $0.03
<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 EARNINGS TOTAL
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 (27) (27)
Net Income 6 6
Balance - Sept 30, 2,303 179 (8) 15 4,858 $7,347
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 3 3
Net Income (Loss) (2,716) (2,716)
Balance - Sept 30, 2,303 179 (1) 15 2,042 $4,538
1997
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended Sept 30
(Amounts in thousands) 1997 1996
OPERATING ACTIVITIES
Net Income (Loss) (2,716) 6
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for Loan Losses 780 1,459
Depreciation and Amortization Expense 301 261
Amortization of Investment Security Premiums - (42)
Accretion of Investment Security Discounts 8 2
(Decrease)Increase in Deferred Income Taxes 2 (374)
(Gain) Loss on Sale of Property and Equipment - 2
(Gain) Loss on Sale of Other Real Estate (40) 3
Decrease(Increase) in Other Assets & Prepaid Taxes 551 (237)
(Decrease)Increase in Other Liabilities and 130 (310)
Accrued Interest
Net Decrease(Increase) in Mortgage Loans Held for (64) 159
Resale
Net Cash Provided by (Used in) Operating Activities (1,048) 929
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale 0 7
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 7,558
Purchases of Held-to-Maturity Investment (4,480) (5,453)
Securities
Proceeds from Sale of Property and Equipment 1 3
Purchases of Property and Equipment (357) (449)
Proceeds from Sale of Other Real Estate 528 293
Purchases of Other Real Estate (124) (3)
Net Decrease (Increase) in Loans 8,723 1,612
Net Cash Provided by (Used in) Investing Activities 7,266 3,546
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand Deposits,
Interest Bearing Deposits,
Savings Accounts, and CD's (3,388) (3,532)
Proceeds from Issuance of Long-Term Debt - -
Retirement of Stock - -
Principal Payments on Long Term Debt (100) (3)
Net Cash Provided by (Used in) Financing Activities (3,488) (3,535)
Net Increase (Decrease) in Cash and Cash 2,730 940
Equivalents
Cash and Cash Equivalents at Beginning of Year 22,303 17,411
Cash and Cash Equivalents at End of Period 25,033 $18,351
<FN>
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine-month period ended
September 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 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 September 30, 1997 and 1996
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 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 court has ruled in favor of the Plaintiff. The Company plans to
appeal.
Expected Results: Outside counsel advises the Company will be able to
fully recover all of its losses in this matter through the appeals process.
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 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, 1997
Carrying Fair
(Amounts in thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $25,033 $25,033
Investment Securities 10,563 10,628
Loans 60,158 60,107
Less: Allowance for Loan Losses 1,800 1,800
$93,954 $93,968
Financial Liabilities:
Deposits $92,336 $92,344
Unrecognized Financial Instruments:
Commitments to Extend Credit $606 $606
Commercial Lines of Credit 106 106
Credit Card Arrangements 59,103 59,103
$59,815 $59,815
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
Three Months Ended Nine Months Ended
(Amounts in thousands, Sept 30 June 30 Sept 30 Sept 30 Sept 30
except per share data) 1997 1997 1996 1997 1996
Interest Income 2,526 $2,621 $3,103 7,900 $9,345
Interest Expense 534 528 542 1,588 1,650
Net Interest Income 1,992 2,093 2,561 6,312 7,695
Provision for Loan 1,235 983 627 2,997 1,459
Losses
Net Interest Income 757 1,110 1,934 3,315 6,236
after Provision
Noninterest Income:
Noninterest Income 729 620 577 1,975 1,803
Securities Gains - - - - -
Noninterest Income 729 620 577 1,975 1,803
Noninterest Expense 2,814 2,617 2,834 8,006 7,952
Income before Taxes (1,328) (887) (323) (2,716) 87
Income Tax Expense - - (104) - 81
(Benefit)
Net Income (Loss) ($1,328) ($887) ($219) ($2,716) $6
Income per Common Share ($7.42) ($4.96) ($1.22) ($15.17) $0.03
Average Common Shares 179 179 179 179 179
Outstanding
Selected Quarter-End Balances
Loans $60,158 $62,070 $72,280
Deposits 91,753 91,985 93,839
Long-Term Debt 2,285 2,381 2,386
Stockholders' Equity 4,538 5,865 7,347
Total Assets 99,978 101,752 105,033
Selected Average Balances
Loans $61,150 $62,378 $73,346 $62,801 $74,358
Deposits 90,778 92,296 92,495 91,880 93,393
Long-Term Debt 2,285 2,381 2,387 2,350 2,388
Stockholders' Equity 4,934 6,137 7,276 6,032 7,444
Total Assets 99,482 102,257 103,760 101,658 104,727
Selected Ratios
Return on Average Assets -1.33% -0.87% -0.21% -2.67% 0.01%
Return on Average Equity -26.90% -14.45% -3.01% -45.02% 0.08%
Tier 1 Risk-Based 10.44% 11.85% 12.07%
Capital
Total Risk-Based Capital 11.71% 13.12% 13.33%
Leverage 6.47% 7.56% 8.82%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 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 $89,850,000 in the third quarter of
1997, a $3,808,000 decrease from the third quarter of 1996 average of
$93,658,000. Compared to the third quarter of 1996, average loans
decreased $13,208,000 (17.76%) while average investment securities
increased $1,104,000 (11.68%), and average federal funds sold increased
$8,296,000 (84.25%).
Table 1 presents the Company's loan portfolio by major
classifications. Total loans decreased $12,122,000 (16.77%)over the third
quarter of 1996. This decrease is mainly attributable to the decline in
the credit card portfolio. Visa / MasterCard loans decreased $4,035,000
(15.96%) and Proprietary loans decreased $10,249,000 (73.96%) due to the
loss of several proprietary accounts.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
Sept 30, June 30, 1997 Sept 30, 1996
1997
(Amounts in Loans % Loans % Loans %
thousands)
Commercial, 6,883 11.44% 6,044 9.74% 5,494 7.60%
Financial, &
Agricultural
Real Estate-Mortgage 24,357 40.49% 23,575 37.98% 23,065 31.91%
Mortgage Loan Held 63 0.10% - 0.00% 97 0.13%
for Resale
Personal Loans 3,807 6.33% 4,133 6.66% 4,332 5.99%
Credit Cards-Visa, 21,253 35.33% 22,767 36.68% 25,288 34.99%
MasterCard
Credit Cards- 3,609 6.00% 5,312 8.56% 13,858 19.17%
Proprietary
Overdrafts 186 0.31% 239 0.39% 146 0.20%
Loans 60,158 100.00% $62,070 100.00% $72,280 100.00%
Securities Held to Maturity. Average securities held to maturity
increased $1,126,000 (13.49%) from the third 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 $21,000 (1.93%) from the third quarter of 1996. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold increased
$8,296,000 (84.25%) up from the third 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 $1,567,000 at Sept. 30, 1997 as compared
to $2,015,000 at Sept. 30, 1996. Other real estate totaled $1,357,000 at
Sept. 30, 1997 as compared to $1,699,000 at Sept. 30, 1996.
Table 2. NONPERFORMING ASSETS
(Amounts in 09/30/97 06/30/97 03/31/97 12/31/96 09/31/96
thousands)
Nonaccrual Loans 210 425 313 316 316
Restructured Loans - - - - -
Other Real Estate Owned 1,357 1,494 1,776 1,723 1,699
Total Nonperforming Assets $1,567 $1,919 $2,089 $2,039 $2,015
Loans Past Due 90 1,501 1,874 3,745 2,295 1,754
days or more
Ratio of Past Due 2.50% 3.02% 5.81% 3.31% 2.43%
Loans to Loans
Ratio of Nonperforming Assets
to Loans and
Other Real 2.55% 3.02% 3.15% 2.87% 2.72%
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 September 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 decreased 1.72% to $4,188,000 at Sept. 30, 1997 from
$4,262,000 at Sept. 30, 1996.
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 nine month period ending Sept
30, 1997 and 1996. The reserve for loan losses as a percentage of loans
increased from 2.08% at Sept. 30, 1996 to 2.99% at
Sept. 30, 1997. The net charge-off (recoveries) as a percentage of average
loans increased from 1.92% at Sept. 30, 1996 to 4.29% at Sept. 30, 1997.
Total loans charged off at Sept. 30, 1997 of $3,320,000 increased
$1,268,000 from Sept. 30, 1996 of $2,052,000 due to an FDIC requirement to
charge off an additional $300,000 to operations to bring the allowance for
loan losses up to $1,800,000, the change in methodology of credit card
charge-offs from 240 days delinquent to 180 days delinquent, and the loss
of several proprietary reserve accounts which was used to offset the
proprietary charge-offs.
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 Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(Amounts in thousands) 1997 1996 1997 1996
Balance at beginning of 1,500 $1,502 1,500 $1,500
period
Loans charged off (1,131) (905) (3,320) (2,052)
Recoveries 196 276 623 593
Net (charge-offs) recoveries (935) (629) (2,697) (1,459)
Provision for loan losses 1,235 627 2,997 1,459
Balance at end of period $1,800 $1,500 $1,800 $1,500
Reserve for possible
loan losses as a
percentage of loans 2.99% 2.08% 2.99% 2.08%
Net (charge-offs)
recoveries as a percentage
of average loans 1.53% 0.83% 4.29% 1.92%
FUNDING SOURCES:
DEPOSITS
Deposits. Average deposits totaled $90,778,000 in the third quarter
of 1997, a decrease of $3,615,000 (2.80%) from $93,393,000 in the third
quarter of 1996. Average core deposits were $89,373,000 for the third
quarter of 1997 down from $92,213,000 in the third quarter of 1996. Table
4 presents the composition of average deposits for the three quarters
ending Sept. 30, 1997, June 30, 1997 and Sept. 30, 1996.
TABLE 4. DEPOSIT COMPOSITION
For The Three Months Ended
Sept 30, Jun 30, Sept 30,
1997 1997 1996
Average % of Average % of Average % of
(Amounts in Balances Deposits Balances Deposits Balances Deposits
thousands)
Demand, Noninterest- $32,708 36.03% $33,875 36.63% $33,106 35.45%
Bearing
NOW Accounts 11,899 13.11% 11,524 12.46% 12,187 13.05%
Money Market Deposit 6,149 6.77% 6,171 6.67% 7,435 7.96%
Accounts
Savings Accounts 26,586 29.29% 28,275 30.57% 25,317 27.11%
Other Time Deposits 12,031 13.25% 11,204 12.11% 14,168 15.17%
Total Core Deposits 89,373 98.45% 91,049 98.44% 92,213 98.74%
Certificates of Deposit of
$100,000 or more 1,405 1.55% 1,439 1.56% 1,180 1.26%
Total Deposits 90,778 100.00% $92,488 100.00% $93,393 100.00%
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 third quarter of 1997 decreased $1,384,000
over the same period last year, and decreased $570,000 from the first nine
months of 1996. The net interest income margin decreased to 2.22% for the
third quarter of 1997 from 2.77% for the third quarter of 1996. The net
interest income margin decreased to 6.96% for the nine months of 1997 from
8.22% for the same period last year. The decline of the net interest income
is attributable to the decline in the credit card portfolio.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
THIRD QUARTER 1997 THIRD QUARTER 1996
Average Average
(Amounts in thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of Unearned
Income(1)(2)
Taxable 61,150 2,118 3.46% 73,346 2,848 3.88%
Tax-exempt - -
Investment Securities
Taxable 10,558 155 1.47% 9,155 126 1.38%
Tax-exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 18,142 253 1.40% 9,969 130 1.30%
Total Interest-Earning 89,850 2,526 2.81% 92,470 3,104 3.36%
Assets
Cash and Due from Banks 5,047 5,657
Allowance for Loan Losses (1,649) (1,453)
Premises and Equipment 2,776 2,689
Other Real Estate 1,395 1,699
Other Assets 2,063 2,698
TOTAL ASSETS 99,482 $103,760
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 18,048 102 0.57% 19,952 117 0.59%
Savings Deposits 26,586 206 0.78% 25,495 187 0.73%
Time Deposits 13,436 170 1.26% 14,157 181 1.28%
Total Interest-Bearing 58,070 478 0.82% 59,604 485 0.81%
Deposits
Federal Funds Purchased
Securities Sold under
Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,285 56 2.44% 2,387 57 2.39%
Total Int-Bearing 60,355 534 0.88% 61,991 542 0.87%
Liabilities
Noninterest-Bearing 32,708 32,891
Deposits
Other Liabilities 1,485 1,602
Shareholders' Equity 4,934 7,276
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 99,482 $103,760
Net Interest Income/Spread 1.93% 2.48%
Net Interest Margin 2.22% 2.77%
<FN>
(1) Fee income relating to loans of $88,000 at Sept. 30, 1997, and $99,000 at
Sept. 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
Nine Months Ended 9/97 Nine Months Ended 9/96
Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of Unearned Income(1)(2)
Taxable 62,801 6,740 3.88% 74,358 8,567 11.52%
Tax-exempt - -
Investment Securities
Taxable 10,115 437 1.38% 9,454 389 4.11%
Tax-exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 17,745 723 1.30% 9,846 389 3.95%
Total Interest-Earning 90,661 7,900 8.71% 93,658 9,345 9.98%
Assets
Cash and Due from Banks 5,275 5,895
Allowance for Loan Losses (1,533) (1,402)
Premises and Equipment 2,693 2,632
Other Real Estate 1,565 1,861
Other Assets 2,997 2,083
TOTAL ASSETS 101,658 104,727
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 18,035 299 0.59% 19,622 330 1.68%
Savings Deposits 27,288 628 0.73% 25,705 575 2.24%
Time Deposits 13,182 494 1.28% 14,960 572 3.82%
Total Interest-Bearing 58,505 1,421 2.43% 60,287 1,477 2.45%
Deposits
Federal Funds Purchased
Securities Sold under
Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,350 167 2.39% 2,388 173 7.24%
Total Int-Bearing 60,855 1,588 2.61% 62,675 1,650 2.63%
Liabilities
Noninterest-Bearing 33,375 33,106
Deposits
Other Liabilities 1,396 1,502
Shareholders' Equity 6,032 7,444
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 101,658 104,727
Net Interest Income/Spread 6.10% 7.35%
Net Interest Margin 6.96% 8.22%
<FN>
(1) Fee income relating to loans of $198,000 at Sept. 30, 1997, and $231,000 at
Sept. 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
Sept 1997 Compared to Sept 1996
Variance Attributed to (1)
Net
(Amounts in thousands) Volume Rate Change
Net Loans:
Taxable (11,557) -7.64% (1,827)
Tax-exempt(2) - 0.00% -
Investment Securities - 0.00% -
Taxable 661 -2.74% 48
Tax-exempt(2) - 0.00% -
Interest-Bearing Deposits - 0.00% -
Federal Funds Sold 7,899 -2.65% 334
Total Interest-Earning Assets (2,997) -13.02% (1,445)
Deposits:
Demand Deposits (1,587) -1.10% (31)
Savings Deposits 1,583 -1.50% 53
Time Deposits (1,778) -2.55% (78)
Total Interest-Bearing (1,782) -0.02% (56)
Deposits
Federal Funds Purchased - 0.00% -
Securities Sold under - 0.00% -
Agreements to Repurchase
Other Short-Term Borrowings - 0.00% -
Long-Term Debt (38) -4.86% (6)
Total Interest-Bearing (1,820) -10.02% (118)
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 third quarter of 1997 increased $157,000 or
8.68% from the same period last year. Table 5 presents noninterest income
for the three months and nine months ended Sept. 30, 1997 and 1996.
TABLE 5. NONINTEREST INCOME
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Increase Sept 30, Sept 30, Increase
(Amounts in 1997 1996 (Decrease) 1997 1996 (Decrease)
thousands)
Service Charges $160 $162 ($2) $463 $485 ($22)
NSF Charges 185 191 (6) 540 594 (54)
Gain on Sale of - - - - - -
Securities
Cardholder & Other 95 107 (12) 287 327 (40)
Credit Card Income
Membership Fees 62 55 7 183 171 12
Other Comm & Fees 25 26 (1) 74 76 (2)
ORE Income 2 5 (3) 9 17 (8)
Gain on Sale of ORE 26 0 26 61 7 54
Other Income 158 30 128 343 126 217
Total Non-Interest $713 $576 $137 $1,960 $1,803 $157
Income
NONINTEREST EXPENSE
The major components of noninterest expense represents the cost of
operating the banking organization.
Noninterest expense for the third quarter of 1997 increased $54,000 or
.68% from the same period last year. Table 6 presents the activity for the
three months and nine months ended Sept. 30, 1997 and 1996.
TABLE 6. NONINTEREST EXPENSE
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Increase Sept 30, Sept 30, Increase
(Amounts in 1997 1996 (Decrease) 1997 1996 (Decrease)
thousands)
Salaries & Benefits $982 $1,065 ($83) $3,031 $3,131 ($100)
Loss on Litigation - - - - - -
Occupancy Expense 496 504 (8) 1,427 1,372 55
Advertising Expense 35 70 (35) 118 229 (111)
Communications 60 106 (46) 228 283 (55)
Postage 99 172 (73) 362 455 (93)
Loan & Credit Card 232 298 (66) 841 893 (52)
Expense
Professional Fees 75 85 (10) 194 263 (69)
Legal Fees 112 80 32 411 205 206
Insurance & 23 21 2 73 71 2
Assessments
Stationery, Forms & 92 119 (27) 295 348 (53)
Supply
ORE Expenses 75 60 15 254 194 60
Other Operating 533 248 285 771 508 263
Expense
Total Non-Interest $2,814 $2,828 ($14) $8,005 $7,952 $53
Expense
INCOME TAXES
The Company did not record a provision for income taxes for the third
quarter of 1997. A tax benefit of $104,000 was recorded for the third
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
Sept 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
Risk-Based Capital
Tier 1 Risk-Based 10.44% 11.85% 12.16% 12.32% 12.07%
Capital Ratio
Total Risk-Based 11.71% 13.12% 13.42% 13.58% 13.33%
Capital Ratio
Leverage 6.47% 7.56% 8.32% 8.60% 8.82%
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
39.95% at Sept. 30, 1997, 38.09% at June 30, 1997, and 30.07% at Sept. 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)
November 12, 1997 /s/ Peggy L. Schaefer
Date Peggy L. Schaefer, Treasurer