-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qa+nlb3xgyec9736w7V+dQ68PHJv40h7Huff2z7ZMWYS1pJZ67Fd8szggA74p2eu S+Ugnotv1BK3RPBKAa3PbQ== 0000832818-97-000004.txt : 19970512 0000832818-97-000004.hdr.sgml : 19970512 ACCESSION NUMBER: 0000832818-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOL BANCSHARES INC CENTRAL INDEX KEY: 0000832818 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 721121561 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16934 FILM NUMBER: 97598733 BUSINESS ADDRESS: STREET 1: 300 ST CHARLES AVE CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5048899400 MAIL ADDRESS: STREET 1: 300 ST CHARLES AVENUE CITY: NEW ORLEANS STATE: LA ZIP: 70130 10-Q 1 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 March 31, 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 April 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 22 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)
March 31, Dec. 31, March 31, (Amounts in thousands) 1997 1996 1996 ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash 7,001 7,903 6,994 Interest Bearing Balances - - - Investment Securities Securities Held to Maturity (Fair Values at 3/31/97, 12/31/96, & 3/31/96 respectively 9,464 7,977 7,989 were$9,440,000, $8,017,000, and $8,023,000) Securities Available for Sale 1,082 1,083 1,111 Federal Funds Sold 18,450 14,400 9,700 Loans, net of unearned income 64,444 69,298 75,733 Reserve for possible loan losses (1,500) (1,500) (1,505) Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 2,624 2,683 2,542 Other Real Estate 1,776 1,723 2,052 Deferred Taxes 327 327 375 Letters of Credit 146 146 146 Other Assets 2,037 2,051 1,236 TOTAL ASSETS $105,851 $106,091 $106,373 See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CONDITION (Continued)
March 31, Dec. 31, March 31, (Amounts in thousands) 1997 1996 1996 LIABILITIES Deposits: Non-Interest Bearing 35,840 35,768 33,537 Interest Bearing 59,689 59,373 61,508 TOTAL DEPOSITS 95,529 95,141 95,045 Deferred Taxes - - - Notes Payable 494 495 498 Senior Secured Debentures 1,888 1,890 1,890 Letters of Credit Outstanding 146 146 146 Accrued Litigation Settlement 390 390 390 Other Liabilities 655 778 863 TOTAL LIABILITIES 99,102 98,840 98,832 STOCKHOLDERS' EQUITY Preferred Stock - Par Value $1 2,302,811 Shares Issued and Outstanding at 3/31/97, 12/31/96, and 3/31/96 2,303 2,303 2,303 Common Stock - Par Value $1 179,145 Shares Issued and Outstanding at 3/31/97, 12/31/96, and 3/31/96 179 179 179 Unrealized Gain on Securities Available for Sale, net of applicable Deferred Income Taxes (5) (4) 9 Capital in Excess of Par - Retired Stock 15 15 15 Undivided Profits 4,758 4,852 4,852 Current Earnings (501) (94) 183 TOTAL STOCKHOLDERS' EQUITY 6,749 7,251 7,541 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,851 $106,091 $106,373 See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited)
March 31, March 31, (Amounts in thousands) 1997 1996 INTEREST INCOME Interest and fees on loans 2,414 2,854 Interest on time deposits - - Interest on securities held to maturity 115 122 Interest and dividends on securities 13 16 available for sale Interest on federal funds sold 210 130 Other interest income - - Total Interest Income 2,752 3,122 INTEREST EXPENSE Interest on deposits 471 490 Interest on federal funds purchased - - Other interest expense 10 2 Interest expense on notes payable 3 13 Interest expense on debentures 42 42 Total Interest Expense 526 547 NET INTEREST INCOME 2,226 2,575 Provision for loan losses 780 422 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,446 2,153 OTHER INCOME Service Charges on Deposit Accounts 328 362 Cardholder & other credit card income 144 138 ORE Income 39 5 Other Operating Income 115 110 Gain on Sale of Securities - - Total Other Income 626 615 OTHER EXPENSE Salaries and Employee Benefits 1,035 1,009 Occupancy Expense 450 447 Loan & Credit Card Expense 309 273 ORE Expense 81 38 Other Operating Expense 698 697 Total Other Expenses 2,573 2,464 Income Before Tax Provision (501) 304 Provision (Benefit) For Income Taxes - 121 NET INCOME ($501) $183 Earnings Per Share of Common Stock ($2.80) $1.02 See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
UNREALIZED (Amounts in thousands) GAIN(LOSS) CAPITAL IN 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 (10) (10) Net Income 183 183 Balance - March 31, 2,303 179 9 15 5,035 $7,541 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 (1) (1) Net Income (Loss) (501) (501) Balance - March 31, 2,303 179 (5) 15 4,257 $6,749 1997
BOL BANCSHARES, INC. STATEMENTS OF CASH FLOWS (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Amounts in thousands) 1997 1996 OPERATING ACTIVITIES Net Income (Loss) (501) 183 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Provision for Loan Losses 780 422 Depreciation and Amortization Expense 93 77 Amortization of Investment Security Premiums - 3 Accretion of Investment Security Discounts 18 (16) (Decrease)Increase in Deferred Income Taxes (0) 5 (Gain) Loss on Sale of Property and - - Equipment (Gain) Loss on Sale of Other Real Estate (35) - Decrease(Increase) in Other Assets & Prepaid 17 (228) Taxes (Decrease)Increase in Other Liabilities and (125) (56) Accrued Interest Net Decrease(Increase) in Mortgage Loans (105) (58) Held for Resale Net Cash Provided by (Used in) Operating 142 332 Activities 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 2,511 Purchases of Held-to-Maturity Investment (4,480) (478) Securities Proceeds from Sale of Property and Equipment 1 1 Purchases of Property and Equipment (34) (45) Proceeds from Sale of Other Real Estate 105 - Purchases of Other Real Estate (124) (3) Net Decrease (Increase) in Loans 4,178 (726) Net Cash Provided by (Used in) Investing 2,621 1,238 Activities FINANCING ACTIVITIES Net Increase (Decrease) in Demand Deposits, Interest Bearing Deposits, Savings Accounts, and CD's 389 (2,342) Proceeds from Issuance of Long-Term Debt - - Retirement of Stock - - Principal Payments on Long Term Debt (3) (1) Net Cash Provided by (Used in) Financing 386 (2,343) Activities Net Increase (Decrease) in Cash and Cash 3,149 (773) Equivalents Cash and Cash Equivalents at Beginning of 22,303 17,467 Year Cash and Cash Equivalents at End of Period 25,452 $16,694 See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 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 three-month period ended March 31, 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 March 31, 1997 and 1996 respectively. Note 3. 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. This offering closed on February 28, 1997. The offering was fully subscribed and will satisfy the Senior Secured Debentures which will be due July, 1997. The shortfall will be made up in cash. Note 4. 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 5. 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 shortterm 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:
MARCH 31, 1997 Carrying Fair (Amounts in thousands) Amount Value Financial Assets: Cash and Short-Term Investments $25,451 $25,451 Investment Securities 10,554 10,523 Loans 64,444 64,406 Less: Allowance for Loan Losses 1,500 1,500 $98,949 $98,880 Financial Liabilities: Deposits $96,025 $96,063 Unrecognized Financial Instruments: Commitments to Extend Credit $868 $868 Commercial Lines of Credit 146 146 Credit Card Arrangements 57,954 57,954 $58,968 $58,968
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
For Three Months Ended (Amounts in thousands, except March 31, Dec. 31, March 31, per share data) 1996 1996 1996 >C> Interest Income $2,752 $2,982 $3,122 Interest Expense 526 543 548 Net Interest Income 2,226 2,439 2,574 Provision for Loan Losses 780 581 421 Net Interest Income after 1,446 1,858 2,153 Provision Noninterest income: Noninterest income 626 637 615 Securities gains - - - Noninterest income 626 637 615 Noninterest expense 2,573 2,695 2,464 Income before taxes (501) (200) 304 Income tax expense (benefit) - (100) 121 Net Income (Loss) ($501) ($100) $183 Income per common share ($2.80) ($0.56) $1.02 Average common shares 179 179 179 outstanding Selected Quarter-End Balances Loans $64,444 $69,298 $75,733 Deposits 95,529 95,141 95,045 Long-Term debt 2,382 2,384 2,388 Stockholders' equity 6,749 7,251 7,542 Total assets 105,851 106,091 106,373 Selected Average Balances Loans $69,298 $70,319 $73,764 Deposits 95,247 94,412 93,317 Long-Term debt 1,889 2,388 2,389 Stockholders' equity 7,025 8,967 7,480 Total assets 106,100 104,702 104,562 Selected Ratios Return on average assets -0.47% -0.10% 0.18% Return on average equity -7.14% -1.12% 2.45% Tier 1 risk-based capital 12.16% 12.32% 11.75% Total risk-based capital 13.42% 13.58% 13.00% Leverage 8.32% 8.60% 8.79%
BOL BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 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 $92,094,000 in the first quarter of 1997, a $1,506,000 decrease from the first quarter of 1996 average of $93,600,000. Compared to the first quarter of 1996, average loans decreased $7,020,000 (9.52%) and investment securities decreased $888,000 (8.78%) while federal funds sold increased $6,403,000 (65.85%). Table 1 presents the Company's loan portfolio by major classifications. Total loans decreased $11,289,000 (14.91%)over the first quarter of 1996. This decrease is mainly attributable to the decline in the credit card portfolio. Visa / MasterCard loans decreased $3,149,000 (11.84%) and Proprietary loans decreased $7,524,000 (48.61%) due to the loss of several proprietary accounts. TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
March 31, 1997 Dec. 31, 1996 March 31, 1996 (Amounts in Loans % Loans % Loans % thousands) Commercial, 6,391 9.92% 4,390 6.33% 4,971 6.56% financial, & agricultural Real estate-mortgage 22,383 34.73% 22,370 32.28% 23,612 31.18% Mortgage Loan Held 105 0.16% - 0.00% 314 0.41% for Resale Personal Loans 4,037 6.26% 5,722 8.26% 4,579 6.05% Credit cards-Visa, 23,443 36.38% 25,265 36.46% 26,592 35.11% MasterCard Credit cards- 7,953 12.34% 11,344 16.37% 15,477 20.44% Proprietary Overdrafts 132 0.20% 207 0.30% 188 0.25% Loans 64,444 100.00% $69,298 100.00% $75,733 100.00%
Securities Held to Maturity. Average securities held to maturity decreased $850,000 (9.45%) from the first 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 $39,000 (3.48%) from the first quarter of 1996. Securities available for sale are carried at fair value. Short Term Investments. Average federal funds sold increased $6,403,000 (65.85%) up from the first 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 $2,089,000 at March 31, 1997 as compared to $2,191,000 at March 31, 1996. Other real estate totaled $1,776,000 at March 31, 1997 as compared to $2,052,000 at March 31, 1996. Table 2. NONPERFORMING ASSETS
(Amounts in 03/31/97 12/31/96 09/31/96 06/31/96 03/31/96 thousands) 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 March 31, 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 207.36% to $4,549,000 at March 31, 1997 from $1,480,000 at March 31, 1996. During this period there was one loan added as type 3 which is in excess of $1,550,000 and four loans added as type 4 in excess of $1,200,000. RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES Table 3 presents an analysis of the activity in the reserve for possible loan losses for the first quarter of 1997 and 1996. The reserve for loan losses as a percentage of loans increased from 1.99% at March 31, 1996 to 2.33% at March 31, 1997. The net charge-off (recoveries) as a percentage of average loans increased from 0.56% at March 31, 1996 to 1.17% at March 31, 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
For The Three Months Ended March 31, March 31, (Amounts in thousands) 1997 1996 Balance at beginning of period $1,500 $1,500 Loans charged off (914) (584) Recoveries 134 167 Net (charge-offs) recoveries (780) (417) Provision for loan losses 780 422 Balance at end of period $1,500 $1,505 Reserve for possible loan losses as a percentage of loans 2.33% 1.99% Net (charge-offs) recoveries as a percentage of average loans 1.17% 0.56%
FUNDING SOURCES: DEPOSITS Deposits. Average deposits totaled $92,738,000 in the first quarter of 1997, a decrease of $579,000 (0.62%) from $93,317,000 in the first quarter of 1996. Average core deposits were $91,299,000 for the first quarter of 1997 down from $92,173,000 in the first quarter of 1996. Table 4 presents the composition of average deposits for the three quarters ending March 31, 1997, December 31, 1996 and March 31, 1996. TABLE 4. DEPOSIT COMPOSITION
For The Three Months Ended Mar 31, 1997 Dec. 31, 1996 Mar 31, 1996 Average % of Average % of Average % of (Amounts in Balances Deposits Balances Deposits Balances Deposits thousands) Demand, noninterest- $33,550 36.18% $34,084 36.10% $32,578 34.91% bearing NOW accounts 11,466 12.36% 11,900 12.60% 11,724 12.56% Money market deposit 6,899 7.44% 8,225 8.71% 7,576 8.12% accounts Savings accounts 25,963 28.00% 25,453 26.96% 25,126 26.93% Other time deposits 13,421 14.47% 13,185 13.97% 15,169 16.26% Total core deposits 91,299 98.45% 92,847 98.34% 92,173 98.77% Certificates of deposit of $100,000 or more 1,439 1.55% 1,564 1.66% 1,144 1.23% Total deposits 92,738 100.00% $94,411 100.00% $93,317 100.00%
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 first quarter of 1997 decreased $348,000 over the same period last year, and decreased $213,000 from the fourth quarter of 1996. The net interest income margin decreased to 4.42% for the first quarter of 1997 from 2.74% for the first quarter of 1996. CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
FIRST QUARTER 1997 FIRST 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 66,743 2,414 3.62% 73,764 2,854 3.87% Tax-exempt - Investment securities Taxable 9,224 128 1.39% 10,112 138 1.36% Tax-exempt - - - Interest-bearing deposits - - 0.00% - - Federal funds sold 16,127 210 1.31% 9,724 130 1.34% Total Interest-Earning 92,094 2,752 2.99% 93,600 3,122 3.34% Assets Cash and due from banks 5,632 6,052 Allowance for loan Losses (1,500) (1,226) Premises and equipment 2,654 2,556 Other Real Estate 1,787 2,034 Other assets 2,438 1,546 TOTAL ASSETS $103,105 $104,562 LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST-BEARING LIABILITIES: Deposits: Demand Deposits 18,364 99 0.54% 19,301 109 0.56% Savings deposits 25,963 190 0.73% 25,126 186 0.74% Time deposits 14,861 182 1.22% 16,312 204 1.25% Total Interest-Bearing 59,188 471 0.80% 60,739 499 0.82% Deposits Federal Funds Purchased Securities sold under agreements to repurchase Other Short-Term borrowings - - Long-Term debt 2,383 55 2.31% 2,389 57 2.39% Total Int-Bearing 61,571 526 0.85% 63,128 556 0.88% Liabilities Noninterest-bearing 33,550 32,578 deposits Other liabilities 959 1,376 Shareholders' equity 7,025 7,480 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 103,105 $104,562 Net Interest income/spread 2.13% 2.45% Net Interest Margin 2.42% 2.74% (1) Fee income relating to loans of $62,000 at March 31, 1997, and $73,000 at March 31, 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
March, 1997 Compared to March, 1996 Variance Attributed to (1) Net (Amounts in thousands) Volume Rate Change Net Loans: Taxable (7,021) -0.25% (440) Tax-exempt(2) - 0.00% - Investment Securities - 0.00% - Taxable (888) 0.03% (10) Tax-exempt(2) - 0.00% - Interest-bearing deposits - 0.00% - Federal funds sold 6,403 -0.03% 80 Total Interest-Earning Assets ($1,506) -0.35% ($370) Deposits: Demand Deposits (937) -0.03% (10) Savings deposits 837 -0.01% 4 Time deposits (1,451) -0.03% (22) Total interest-bearing (1,551) -0.03% (28) deposits Federal Funds Purchased - 0.00% - Securities sold under - 0.00% - agreements to repurchase Other Short-Term borrowings - 0.00% - Long-Term debt (6) -0.07% (2) Total Interest-Bearing ($1,557) -0.03% ($30) 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 first quarter of 1997 increased $11,000 or 1.79% from the same period last year. Table 5 presents noninterest income for the three months ended March 31, 1997 and 1996. TABLE 5. NONINTEREST INCOME
For The Three Months Ended Percentage Mar 31, Mar 31, Increase (Amounts in thousands) 1997 1996 (Decrease) Service Charges $150 $156 ($6) NSF Charges 178 206 (28) Gain on Sale of Securities - - - Cardholder & Other Credit Card 89 100 (11) Income Membership Fees 55 56 (1) Other Comm & Fees 25 33 (8) ORE Income 3 5 (2) Gain on Sale of ORE 35 0 35 Other Income 91 59 32 Total Non-Interest Income $626 $615 $11
NONINTEREST EXPENSE The major components of noninterest expense represents the cost of operating the banking organization. Noninterest expense for the first quarter of 1997 increased $109,000 or 4.46% from the same period last year. Table 6 presents the activity for the three months ended March 31, 1997 and 1996. The increase from the same period last year is mainly due to loan & credit card expenses, legal fees and ORE expenses. TABLE 6. NONINTEREST EXPENSE
For The Three Months Ended Percentage Mar 31, Mar 31, Increase (Amounts in thousands) 1997 1996 (Decrease) Salaries & Benefits $1,035 $1,009 $26 Loss on Litigation - - - Occupancy Expense 450 447 3 Advertising Expense 39 83 (44) Communications 84 80 4 Postage 138 115 23 Loan & Credit Card Expense 309 273 36 Professional Fees 57 82 (25) Legal Fees 112 77 35 Insurance & Assessments 27 26 1 Stationery, Forms & Supply 114 117 (3) ORE Expenses 81 38 43 Other Operating Expense 127 117 10 Total Non-Interest Expense $2,573 $2,464 $109
INCOME TAXES The Company did not record a provision for income taxes for the first quarter of 1997. A provision of $121,000 was recorded for the first 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
March 31, Dec. 31, Sept. 30, June 30, March 31, 1997 1996 1996 1996 1996 Risk-based capital Tier 1 risk-based 12.16% 12.32% 12.07% 11.76% 11.75% capital ratio Total risk-based 13.42% 13.58% 13.33% 13.02% 13.00% capital ratio Leverage 8.32% 8.60% 8.82% 8.76% 8.79%
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 38.84% at March 31, 1997, 33.56% at December 31, 1996, and 27.94% at March 31, 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 May 9, 1997 Peggy L. Schaefer, Treasurer Date EX-27 2
9 1,000 3-MOS Dec-31-1997 Mar-31-1997 7,001 0 18,450 0 10,546 10,546 10,522 64,444 1,500 105,851 95,529 0 1,191 2,382 0 2,303 179 0 105,851 2,414 128 210 2,752 471 55 2,226 780 0 2,573 (501) (501) 0 0 (501) (2.80) 0 2.13 313 3,745 0 4,549 1,500 914 134 1,500 1,500 0 0
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