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, 1999
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 31, 1999.
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
Page No.
PART 1. Financial Information
Item 1: Financial Statements
Consolidated Statement of Condition 3
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income (Loss) 6
Consolidated Statements of Changes in
Stockholder's Equity 7
Consolidated Statement of Cash Flow 8
Notes to Consolidated Financial Statements 9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operation 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule 26
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)
[CAPTION]
Sept 30 Dec. 31, Sept 30
(Amounts in Thousands) 1999 1998 1998
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash $7,546 $6,693 $7,119
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
9/30/99, 12/31/98, & 9/30/98 respectively 3,009 4,498 4,996
were $3,004,000, $4,514,000, and $5,019,000)
Securities Available for Sale 374 291 90
Federal Funds Sold 29,926 26,950 18,725
Loans, net of Unearned Discount 57,505 61,757 59,243
Allowance for Loan Losses (1,800) (1,800) (1,800)
Property, Equipment and Leasehold Improvements
(Net of Depreciation and Amortization) 2,674 2,506 2,549
Other Real Estate 1,337 1,357 1,357
Deferred Taxes 260 287 618
Letters of Credit 76 84 84
Other Assets 966 1,312 2,298
TOTAL ASSETS $101,873 $103,935 $95,279
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
[CAPTION]
Sept 30 Dec. 31, Sept 30
(Amounts in Thousands) 1999 1998 1998
LIABILITIES
Deposits:
Non-Interest Bearing $34,459 $36,826 $32,383
Interest Bearing 58,795 57,757 54,097
TOTAL DEPOSITS 93,254 94,583 86,480
Notes Payable 2,234 2,272 2,274
Letters of Credit Outstanding 76 84 84
Accrued Litigation Settlement 150 200 150
Accrued Interest 463 526 492
Other Liabilities 336 350 428
TOTAL LIABILITIES 96,513 98,015 89,908
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and Outstanding at
9/30/99, 12/31/98, and 9/30/98 2,303 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
9/30/99, 12/31/98, and 9/30/98 179 179 179
Accumulated Other Comprehensive Income 188 133 -
Capital in Excess of Par - Retired Stock 15 15 15
Undivided Profits 3,290 2,784 2,783
Current Earnings (615) 506 91
TOTAL STOCKHOLDERS' EQUITY 5,360 5,920 5,371
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,873 $103,935 $95,279
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
[CAPTION]
Three months ended Nine months ended
Sept 30 Sept 30
(Amounts in Thousands) 1999 1998 1999 1998
INTEREST INCOME
Interest and Fees on Loans $2,035 $2,091 $5,878 $6,212
Interest on Time Deposits - - - -
Interest on Securities Held to 44 105 155 381
Maturity
Interest & Dividends on Securities - - 2 6
Available for Sale
Interest on Federal Funds Sold 420 275 1,143 846
Other Interest Income - - - -
Total Interest Income 2,499 2,471 7,178 7,445
INTEREST EXPENSE
Interest on Deposits 418 437 1,266 1,345
Interest on Federal Funds Purchased - - - -
Other Interest Expense 10 12 31 33
Interest Expense on Notes Payable 2 3 7 8
Interest Expense on Debentures 39 41 118 119
Total Interest Expense 469 493 1,422 1,505
NET INTEREST INCOME 2,030 1,978 5,756 5,940
Provision for Loan Losses 236 308 661 798
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,794 1,670 5,095 5,142
OTHER INCOME
Service Charges on Deposit Accounts 308 319 886 963
Cardholder & Other Credit Card Income 168 174 497 498
ORE Income 4 22 19 30
Other Operating Income 48 54 190 204
Gain on Sale of Securities - - - -
Total Other Income 528 569 1,592 1,695
OTHER EXPENSE
Salaries and Employee Benefits 959 941 2,952 2,708
Occupancy Expense 481 466 1,473 1,413
Loan & Credit Card Expense 231 241 761 728
ORE Expense 2 43 57 123
Other Operating Expense 741 616 2,059 1,774
Total Other Expenses 2,414 2,307 7,302 6,746
Income Before Tax Provision (92) (68) (615) 91
Provision (Benefit) For Income Taxes - - - -
NET INCOME ($92) ($68) ($615) $91
Earnings Per Share of Common Stock ($0.51) ($0.38) ($3.43) $0.51
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
[CAPTION]
Sept 30 Sept 30
(Amounts in thousands) 1999 1998
NET INCOME (LOSS) (615) 91
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized Holding Gains (Losses) on
Investment Securities Available-for-Sale,
Arising During the Period 55 1
Less: Reclassification Adjustment for Gains
Included in Net Income
OTHER COMPREHENSIVE INCOME
COMPREHENSIVE INCOME (LOSS) ($560) $92
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
Unaudited)
[CAPTION]
(Amounts in Thousands) ACCUMULATED CAPITAL IN
OTHER EXCESS OF
COMPREHEN- PAR
PREFERRED COMMON SIVE RETIRED RETAINED
STOCK STOCK INCOME STOCK EARNING TOTAL
Balance December 31, 2,303 179 (1) 15 2,783 5,279
1997
Other Comprehensive
Income, net of
applicable deferred
income taxes 1 1
Net Income (Loss) 91 91
Balance - Sept 30, 2,303 179 - 15 2,874 $5,371
1998
Balance December 31, 2,303 179 133 15 3,290 5,920
1998
Other Comprehensive
Income, net of
applicable deferred
income taxes 55 55
Net Income (Loss)
(615) (615)
Balance - Sept 30, 2,303 179 188 15 2,675 $5,360
1999
BOL BA NCSHARES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
For The Nine Months Ended Sept 30
(Amounts in Thousands) 1999 1998
OPERATING ACTIVITIES
Net Income (Loss) (615) 91
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Provision for Loan Losses 661 798
Depreciation and Amortization Expense 396 334
Amortization of Investment Security Premiums 13 2
Accretion of Investment Security Discounts (2) 10
Decrease(Increase)in Deferred Income Taxes 28 -
(Gain) Loss on Sale of Property and Equipment - -
(Gain) Loss on Sale of Other Real Estate (12) (20)
Decrease(Increase) in Other Assets & Prepaid Taxes 275 808
(Decrease)Increase in Other Liabilities, Accrued
Interest, and Accrued Loss Contingency (80) (21)
Net Decrease(Increase) in Mortgage Loans Held for - -
Resale
Net Cash Provided by (Used in) Operating Activities 664 2,002
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale Securities - -
Purchases of Available-for-Sale Securities - -
Proceeds from Available-for-Sale Securities
Released at Maturity - 1,000
Proceeds from Held-to-Maturity Investment Securities
Released at Maturity 4,500 4,972
Purchases of Held-to-Maturity Investment Securities (3,022) (501)
Proceeds from Sale of Property and Equipment 0 1
Purchases of Property and Equipment (564) (186)
Proceeds from Sale of Other Real Estate 90 136
Purchases of Other Real Estate (63) -
Net Decrease (Increase) in Loans 3,591 (2,423)
Net Cash Provided by (Used in) Investing Activities 4,532 2,999
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-Interest Bearing and
Interest Bearing Deposits (1,329) (8,030)
Proceeds from Issuance of Long-Term Debt - -
Retirement of Stock - -
Principal Payments on Long Term Debt (38) (10)
Net Cash Provided by (Used in) Financing Activities (1,367) (8,040)
Net Increase (Decrease) in Cash and Cash Equivalents 3,829 (3,039)
Cash and Cash Equivalents at Beginning of Year 33,643 28,884
Cash and Cash Equivalents at End of Period $37,472 $25,845
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
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, 1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998. 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, 1998.
Note 2. PER SHARE DATA
Income per common share data are based on the weighted average number
of shares outstanding of 179,145 at September 30, 1999 and 1998
respectively.
Note 3. CONTINGENCIES
Because of the nature of the banking industry in general, the Company
and the Bank are each parties from time to time to litigation and other
proceedings in the ordinary course of business, none of which (other than
those described below), either individually or in the aggregate, have a
material effect on the Company's and/or the Bank's financial condition.
Other than the lawsuits described below, the Company has either (i)
posted reserves adequate to pay any judgments that may be rendered against
the Company and such posting is reflected in the Company's consolidated
financial statements for the period ending September 30, 1999, 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.
During 1997, a judgment was rendered against the Bank, and accordingly, a
provision for loss of $150,000 has been charged to operation. The Bank has
countersued and is presently appealing the judgment. The appeal has been
pending since June, 1998.
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.
3a. Another proprietor filed a separate lawsuit on the same day that
the Company initiated proceedings against this proprietor in Louisiana.
The proprietor's suit was filed in the Southern District of New York and
alleges that the Company mismanaged the proprietary credit card portfolio.
It is known that the principal of the proprietor mentioned in 1. above has
assisted in the preparation of this lawsuit and this litigation parrots the
lawsuit mentioned in 1. above. The Company has filed a motion to dismiss
the suit on the grounds that the parties agreed to litigate in Louisiana
and on the further grounds that the Company is not subject to that Court's
jurisdiction. The Company also moved to have the matter transferred by the
judicial panel on multidistrict litigation.
These rights were granted and consolidated.
3b. The new owners of the company mentioned in 3a. above filed a
lawsuit in New York, claiming that it had security interest which primed
the Company. The present principals came into existence on July 31, 1996
for the sole purposes of taking over the failing company and managing the
operations. The new owners filed UCC-1 Statement to protect a consignment
agreement it had with the failing company in August, 1996. The Company, on
the other hand, filed UCC-1 Statements to protect its credit card portfolio
in November and December of 1995. Just prior to the new principals filing
in New York, the Company filed suit for declaratory judgment regarding the
ranking of the liens in the Eastern District of Louisiana.
3c. The Company's suit centers around the proprietor sequestering
payments which they received from the Company's credit card holders, but
never forwarded to the Company. That amount exceeds $423,000.
On October 1, 1997 the matters were transferred by the judicial panel
on multidistrict litigation to the Eastern District of Louisiana and
consolidated with the other cases. Hence 3a, 3b, and 3c have become one
case.
The Company sought injunction relief, requiring the proprietor to
disclose where the payments were held and to either pay the funds to the
Company or deposit the money in the Registry of the Court. On October 2,
1997 in order to avoid a hearing on the preliminary injunction which would
have required the proprietor to disclose the location of the sequestered
funds, the proprietor agreed to post bond with the Louisiana Federal Court,
while drafts were being prepared. On October 15, 1997 the proprietor filed
for Chapter 11. The Company requested that the stay be lifted in
order to allow its claim against the proprietor to be liquidated and to
recoup all of its losses and damages suffered from the proprietor. Trial
has been set for June, 1999.
Expected Results: The Company filed its UCC-1 Statements first.
There is little doubt that the Company primes the proprietor. The Company
anticipates significant recoveries.
4. The Bank is a defendant in a lawsuit filed by an individual for
damages because a settlement draft for $58,685 was forged by an attorney
who maintained his trust account with the Bank. The attorney has been
disbarred for prior defalcations and is judgment-proof. A provision for
loss of $50,000 was charged to operations in 1998. This matter was settled.
The Bank issued its check in the amount of $45,000 as payment in full.
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:
[CAPTION]
Sept 30, 1999
Carrying Fair
(Amounts in Thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $37,472 $37,472
Investment Securities 3,383 3,378
Loans 57,505 57,233
Less: Allowance for Loan Losses 1,800 1,800
$96,560 $96,283
Financial Liabilities:
Deposits $93,254 $93,340
Unrecognized Financial Instruments:
Commitments to Extend Credit $2,403 $2,403
Commercial Lines of Credit 76 76
Credit Card Arrangements 56,318 56,318
$58,797 $58,797
Note 5. REGISTRATION OF CERTAIN CLASSES OF SECURITIES
The title of class to be registered is Common Stock Purchase Rights.
On August 10, 1999, the Board of Directors of BOL Bancshares, Inc., a
Louisiana corporation, declared a dividend distribution of one purchase
right for each outstanding share of common stock, $1.00 par value, of the
Company to stockholders of record at the close of business on August 31,
1999. Refer to Form 8A12G relating to the registration of a class of
securities pursuant to Section 12(g) of the Exchange Act.
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
[CAPTION]
Three Nine Months Ended
Months
Ended
(Amounts in Thousands, Sept 30 June 30 Sept 30 Sept 30 Sept 30
Except Per Share Data) 1999 1999 1998 1999 1998
Interest Income $2,499 $2,336 $2,471 $7,178 $7,445
Interest Expense 469 483 493 1,422 1,505
Net Interest Income 2,030 1,853 1,978 5,756 5,940
Provision for Loan 236 327 308 661 798
Losses
Net Interest Income 1,794 1,526 1,670 5,095 5,142
after Provision
Noninterest Income:
Noninterest Income 528 530 569 1,592 1,695
Securities Gains - - - - -
Noninterest Income 528 530 569 1,592 1,695
Noninterest Expense 2,414 2,481 2,307 7,302 6,746
Income before Taxes (92) (425) (68) (615) 91
Income Tax Expense - - - - -
(Benefit)
Net Income (Loss) ($92) ($425) ($68) ($615) $91
Income per Common Share ($0.51) ($2.38) ($0.38) ($3.43) $0.51
Average Common Shares 179 179 179 179 179
Outstanding
Selected Quarter-End Balances
Loans $57,505 $56,763 $59,243
Deposits 93,254 95,880 86,480
Long-Term Debt 2,234 2,246 2,274
Stockholders' Equity 5,360 5,435 5,371
Total Assets 101,873 104,771 95,279
Selected Average Balances
Loans $56,128 $56,855 $59,732 $55,988 $58,899
Deposits 93,341 94,694 88,042 93,664 90,101
Long-Term Debt 2,235 2,255 2,277 2,254 2,282
Stockholders' Equity 5,389 5,531 5,378 5,623 5,161
Total Assets 102,146 103,591 96,968 102,657 98,907
Selected Ratios
Return on Average Assets -0.09% -0.41% -0.07% -0.60% 0.09%
Return on Average Equity -1.70% -7.68% -1.26% -10.94% 1.76%
Tier 1 Risk-Based 11.42% 11.41% 11.02%
Capital
Risk-Based Capital 12.69% 12.68% 12.29%
Tier 1 Leverage 7.03% 6.96% 7.21%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
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.
ACCOUNTING FOR YEAR 2000 COSTS
The Company's Board of Directors has formulated a policy and has
dedicated sufficient funds for the modification and replacement of software
and hardware to ensure Year 2000 compliance.
The Company began its replacement and modification of its software and
hardware in late 1995, to ensure that operations would not be impaired by
the date change. The related costs are capitalized and depreciated over
the useful life of the asset.
Certification has been received from the Company's vendors to confirm
compliance on the respective equipment and software. All critical
applications have already been modified and replaced, with one application
presently in the migration process. This final replacement will be
implemented in March, 1999 and will be fully tested by June, 1999.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $91,720,000 in the third quarter of
1999, a $3,445,000 increase from the third quarter of 1998 average of
$88,275,000. Compared to the third quarter of 1998, average loans
decreased $2,911,000 (4.94%) and average investment securities decreased
$4,509,000 (51.52%), while average federal funds sold increased $10,865,000
(52.68%).
Table 1 presents the Company's loan portfolio by major
classifications. Total loans decreased $1,738,000 (2.93%)over the third
quarter of 1998.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
[CAPTION]
Sept 30, 1999 June 30, 1999 Sept 30, 1998
(Amounts in Loans % Loans % Loans %
Thousands)
Commercial, $4,763 8.28% $4,073 7.18% $4,609 7.78%
Financial, &
Agricultural
Real Estate Mortgage 28,750 49.99% 27,720 48.83% 26,367 44.51%
Mortgage Loan Held - 0.00% - 0.00% - 0.00%
for Resale
Personal Loans 3,293 5.73% 3,179 5.60% 3,144 5.31%
Credit Cards-Visa, 18,713 32.54% 19,331 34.06% 21,518 36.32%
MasterCard
Credit Cards- 1,837 3.19% 2,363 4.16% 3,432 5.79%
Proprietary
Overdrafts 149 0.26% 97 0.17% 173 0.29%
Loans $57,505 100.00% $56,763 100.00% $59,243 100.00%
Securities Held to Maturity. Average securities held to maturity
decreased $4,594,000 (53.76%) from the third quarter of 1998. Securities
held to maturity are
carried as cost, adjusted for amortization of premium and accretion of
discounts using methods approximating the interest method.
Securities Available for Sale. Average securities available for sale
increased $84,000 (40.58%) from the third quarter of 1998. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold increased
$10,865,000 (52.68%) up from the third quarter of 1998. This increase is
mainly due to the decrease in the loan portfolio and the investment
securities.
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 $1,372,000 at September 30, 1999 as
compared to $1,843,000 at September 30, 1998. Other real estate totaled
$1,337,000 at September 30,1999 as compared to $1,357,000 at September 30,
1998.
Table 2. NONPERFORMING ASSETS
[CAPTION]
(Amounts in 09/30/99 06/30/99 03/31/99 12/31/98 09/30/98
Thousands)
Nonaccrual Loans $35 $835 $802 $81 $31
Restructured Loans - - - - 455
Other Real Estate 1,337 1,340 1,415 1,357 1,357
Owned
Total Nonperforming $1,372 $2,175 $2,217 $1,438 $1,843
Assets
Loans Past Due 90 $605 $539 $821 $852 $1,183
Days or More
Ratio of Past Due 1.05% 0.95% 1.43% 1.42% 2.00%
Loans to Loans
Ratio of Nonperforming Assets to Loans
and Other Real 2.33% 3.74% 3.78% 2.34% 3.04%
Estate Owned
IMPAIRED LOANS
As of September 30, 1999, the recorded investment in loans that are
considered impaired under SFAS 114 and 118 was $0. The related allowance
for credit losses for the impaired loans is not specifically identified,
but is included in the percentages allocated to the portfolio.
WATCH LIST
The Bank's watch list includes loans which, for management purposes,
have been identified as requiring a higher level of monitoring due to risk.
The Bank's watch list includes both performing and nonperforming loans.
The majority of watch list loans are classified as performing, because they
do not have characteristics resulting in uncertainty about the borrower's
ability to repay principal and interest in accordance with the original
terms of the loans.
The watch list consists of classifications, identified as Type 1
through Type 4. Types 1, 2 and 3 generally parallel the regulatory
classifications of loss, doubtful and
substandard, respectively. Type 4 generally parallels the regulatory
classification of Other Assets Especially Mentioned (OAEM). These loans
require monitoring due to conditions which, if not corrected, could
increase credit risk. Total watch list loans decreased 46.39% to
$2,116,000 at September 30, 1999 from $3,947,000 at September 30, 1998.
Management is not aware of any potential problem loans other than
those disclosed above, which includes all loans recommended for
classification by regulators, which would have a material impact on asset
quality.
ALLOWANCE AND PROVISION FOR POSSIBLE LOAN LOSSES
Table 3 presents an analysis of the activity in the allowance for loan
losses for the three month and nine month period ending September 30, 1999
and 1998. The allowance for loan losses as a percentage of loans increased
from 3.04% at September 30, 1998 to 3.13% at September 30, 1999. The net
charge-off (recoveries) as a percentage of average loans decreased from
1.35% at September 30, 1998 to .42% at September 30, 1999.
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 - ALLOWANCE FOR LOAN LOSSES
[CAPTION]
Three Nine Months Ended
Months
Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(Amounts in Thousands) 1999 1998 1999 1998
Balance at Beginning of $1,800 $1,800 $1,800 $1,800
Period
Loans Charged Off (381) (495) (1,160) (1,520)
Recoveries 145 187 499 722
Net (Charge Offs) (236) (308) (661) (798)
Recoveries
Provision for Loan 236 308 661 798
Losses
Balance at End of Period $1,800 $1,800 $1,800 $1,800
Allowance for Loan Losses as a
Percentage of Loans 3.13% 3.04% 3.13% 3.04%
Net (Charge Offs) Recoveries as a Percentage
of Average Loans 0.42% 0.32% 1.18% 1.35%
FUNDING SOURCES:
DEPOSITS
Deposits. Average deposits totaled $93,341,000 in the third quarter
of 1999, a increase of $5,299,000 (6.02%) from $88,042,000 in the third
quarter of 1998. Average core deposits were $91,407,000 for the third
quarter of 1999 up from $86,650,000 in the third quarter of 1998. Table 4
presents the composition of average deposits for the three quarters ending
September 30, 1999, June 30, 1999, and September 30, 1998.
TABLE 4. DEPOSIT COMPOSITION
[CAPTION]
For The Three Months Ended
Sept 30, Jun 30, Sept 30,
1999 1999 1998
Average % of Average % of Average % of
(Amounts in Balances Deposits Balances Deposits Balances Deposits
Thousands)
Demand, Noninterest- $33,649 36.05% $35,477 37.46% $32,790 37.24%
Bearing
NOW Accounts 14,175 15.19% 13,508 14.26% 11,916 13.53%
Money Market Deposit 6,658 7.13% 6,539 6.91% 5,773 6.56%
Accounts
Savings Accounts 26,661 28.56% 27,224 28.75% 26,064 29.60%
Other Time Deposits 10,264 11.00% 10,033 10.60% 10,107 11.48%
Total Core Deposits 91,407 97.93% 92,781 97.98% 86,650 98.42%
Certificates of Deposit of
$100,000 or more 1,934 2.07% 1,913 2.02% 1,392 1.58%
Total Deposits $93,341 100.00% $94,694 100.00% $88,042 100.00%
BORROWINGS
The Company's long-term debt is comprised primarily of debentures
which are secured by 39.72 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. In addition, the Bank also maintains a Federal Funds line of
credit in the amount of $1,000,000 with another correspondent bank. The
Bank can borrow $1,900,000 by pledging securities at the discount window at
the Federal Reserve Bank.
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 1999 increased $52,000
over the same period last year, and decreased $103,000 from the first nine
months of 1998. The net interest margin decreased to 2.19% for the third
quarter of 1999 from 2.28% for the third quarter of 1998.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
[CAPTION]
THIRD THIRD QUARTER 1998
QUARTER
1999
Average Average
(Amounts in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, Net of Unearned Income(1)(2)
Taxable $56,128 2,035 3.63% $59,732 2,091 3.50%
Tax-Exempt - -
Investment Securities
Taxable 3,804 44 1.15% 7,110 105 1.48%
Tax-Exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 32,817 420 1.28% 19,865 275 1.38%
Total Interest-Earning 92,749 2,499 2.69% 86,707 2,471 2.85%
Assets
Cash and Due from Banks 5,377 5,354
Allowance for Loan Losses (1,795) (1,792)
Premises and Equipment 2,740 2,558
Other Real Estate 1,337 1,428
Other Assets 1,738 2,713
TOTAL ASSETS $102,146 $96,968
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 20,833 84 0.40% 17,689 98 0.55%
Savings Deposits 26,661 194 0.73% 26,064 187 0.72%
Time Deposits 12,198 140 1.15% 11,499 152 1.32%
Total Interest-Bearing 59,692 418 0.70% 55,252 437 0.79%
Deposits
Federal Funds Purchased
Securities sold under
Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,235 51 2.29% 2,277 56 2.46%
Total Int-Bearing 61,927 469 0.76% 57,529 493 0.86%
Liabilities
Noninterest-Bearing 33,649 32,790
Deposits
Other Liabilities 1,181 1,271
Shareholders' Equity 5,389 5,378
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $102,146 $96,968
Net Interest Income/Spread 1.94% 1.99%
Net Interest Margin 2.19% 2.28%
(1) Fee income relating to loans of $167,000 at Sept 30, 1999, and $157,000 at
Sept 30, 1998 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
[CAPTION]
Nine Nine Months Ended 9/98
Months
Ended
9/99
Average Average
(Amounts in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST-EARNING ASSETS:
Loans, Net of Unearned Income(1)(2)
Taxable $55,988 5,878 10.50% $58,899 6,212 10.55%
Tax-Exempt - -
Investment Securities
Taxable 4,243 157 3.70% 8,752 388 4.43%
Tax-Exempt - -
Interest-Bearing Deposits - -
Federal Funds Sold 31,489 1,143 3.63% 20,624 845 4.10%
Total Interest-Earning 91,720 7,178 7.83% 88,275 7,445 8.43%
Assets
Cash and Due from Banks 5,693 5,541
Allowance for Loan Losses (1,791) (1,808)
Premises and Equipment 2,698 2,615
Other Real Estate 1,375 1,458
Other Assets 2,962 2,826
TOTAL ASSETS $102,657 $98,907
LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 20,107 266 1.32% 17,956 295 1.64%
Savings Deposits 26,957 601 2.23% 26,415 606 2.29%
Time Deposits 11,717 399 3.40% 12,234 444 3.63%
Total Interest-Bearing 58,781 1,266 2.15% 56,605 1,345 2.38%
Deposits
Federal Funds Purchased
Securities sold under
Agreements to Repurchase
Other Short-Term Borrowings - -
Long-Term Debt 2,254 156 6.94% 2,282 160 7.01%
Total Int-Bearing 61,035 1,422 2.33% 58,887 1,505 2.56%
Liabilities
Noninterest-Bearing 34,883 33,497
Deposits
Other Liabilities 1,116 1,362
Shareholders' Equity 5,623 5,161
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $102,657 $98,907
Net Interest Income/Spread 5.50% 5.88%
Net Interest Margin 6.28% 6.73%
(1) Fee income relating to loans of $466,000 at Sept 30, 1999, and $372,000 at
Sept 30, 1998 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
[CAPTION]
Sept, 1999 Compared to Sept, 1998
Variance Attributed to (1)
Net
(Amounts in Thousands) Volume Rate Change
Net Loans:
Taxable (2,911) -0.05% (334)
Tax-Exempt(2) - 0.00% -
Investment Securities - 0.00% -
Taxable (4,509) -0.73% (231)
Tax-Exempt(2) - 0.00% -
Interest-Bearing Deposits - 0.00% -
Federal Funds Sold 10,865 -0.47% 298
Total Interest-Earning Assets $3,445 -1.24% (267)
Deposits:
Demand Deposits 2,151 -0.32% (29)
Savings Deposits 542 -0.07% (5)
Time Deposits (517) -0.22% (45)
Total Interest-Bearing 2,176 -0.22% (79)
Deposits
Federal Funds Purchased - 0.00% -
Securities Sold under - 0.00% -
Agreements to Repurchase
Other Short-Term Borrowings - 0.00% -
Long-Term Debt (28) -0.07% (4)
Total Interest-Bearing $4,324 -0.91% (162)
Liabilities
(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 1999 decreased $103,000 or
6.08% from the same period last year. Table 5 presents noninterest income
for the three months and nine months ended September 30, 1999 and 1998.
TABLE 5. NONINTEREST INCOME
[CAPTION]
Three Nine Months Ended
Months
Ended
Sept 30, Sept 30, Increase Sept 30, Sept 30, Increase
(Amounts in 1999 1998 (Decrease) 1999 1998 (Decrease)
Thousands)
Service Charges $137 $148 ($11) $411 $453 ($42)
NSF Charges 171 171 (0) 475 510 (35)
Gain on Sale of - - - - - -
Securities
Cardholder & Other 127 124 3 362 323 39
Credit Card Income
Membership Fees 41 50 (9) 135 175 (40)
Other Comm & Fees 27 23 4 74 71 3
ORE Income 2 3 (1) 7 10 (3)
Gain on Sale of ORE 2 20 (18) 12 20 (8)
Other Income 21 30 (9) 116 133 (17)
Total Non-Interest $528 $569 ($41) $1,592 $1,695 ($103)
Income
NONINTEREST EXPENSE
The major components of noninterest expense represents the cost of
operating the banking organization.
Noninterest expense for the third quarter of 1999 increased $556,000
or 8.24% from the same period last year. Table 6 presents the activity for
the three months and nine months ended September 30, 1999 and 1998.
TABLE 6. NONINTEREST EXPENSE
[CAPTION]
Three Nine Months Ended
Months
Ended
Sept 30, Sept 30, Increase Sept 30, Sept 30, Increase
(Amounts in Thousands) 1999 1998 (Decrease) 1999 1998 (Decrease)
Salaries & Benefits $959 $941 $18 $2,952 $2,708 $244
Loss on Litigation - - - - - -
Occupancy Expense 481 466 15 1,473 1,413 60
Advertising Expense 17 22 (5) 81 78 3
Communications 51 46 5 152 153 (1)
Postage 71 84 (13) 233 271 (38)
Loan & Credit Card 231 241 (10) 761 728 33
Expense
Professional Fees 81 44 37 284 140 144
Legal Fees 118 131 (13) 429 384 45
Insurance & Assessments 21 23 (2) 76 68 8
Stationery, Forms & 77 80 (3) 249 221 28
Supply
ORE Expenses 2 43 (41) 57 123 (66)
Other Operating Expense 305 186 119 555 459 96
Total Non-Interest $2,414 $2,307 $107 $7,302 $6,746 $556
Expense
INCOME TAXES
The Company did not record a provision for income taxes for the third
quarter of 1999 or 1998. The provision for income taxes consists of
provisions for federal taxes only. Louisiana does not have an income tax
for corporations.
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
[CAPTION]
Sept 30, June 30, March 31, Dec. 31, Sept. 30,
1999 1999 1999 1998 1998
Risk-Based Capital
Tier 1 Risk Based 11.42% 11.41% 11.93% 11.36% 11.02%
Capital Ratio
Risk Based Capital 12.69% 12.68% 13.20% 12.63% 12.29%
Ratio
Tier 1 Leverage Ratio 7.03% 6.96% 7.42% 7.63% 7.21%
LIQUIDITY
The purpose of liquidity management is to ensure that there is
sufficient cash flow to satisfy demands for credit, deposit withdrawals,
and other corporate needs. Traditional sources of liquidity include asset
maturities and growth in core deposits. The Company has maintained
adequate liquidity through cash flow from operating activities and
financing activities to fund loan growth, and anticipates that this will
continue even if the Company expands.
Liquidity and capital resources are discussed weekly by the management
committee, the assets and liability committee and at the monthly executive
committee meeting. Bank of Louisiana maintains adequate capital to meet
its needs in the foreseeable future. The liquidity ratio for the Bank was
41.68% at September 30, 1999, 44.97% at June 30, 1999, and 35.73% at
September 30, 1998.
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
November 12, 1999 Peggy L. Schaefer
Date Treasurer