10QSB 1 rsec9-05.txt REPORT 10QSB 9-30-05 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB /X/ QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005 / / TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from to Commission file Number 01-16934 BOL BANCSHARES, INC. (Exact name of small business issuer as specified in its charter.) Louisiana 72-1121561 (State of incorporation) (IRS Employer Identification No.) 300 St. Charles Avenue, New Orleans, La. 70130 (Address of principal executive offices) (504) 889-9400 (Issuer?s telephone number) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 / / State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: 179,145 SHARES AS OF October 31, 2005 Transitional Small Business Disclosure Format (Check one): Yes / / No /X/ BOL BANCSHARES, INC. & SUBSIDIARY INDEX Page No. PART I. Financial Information Item 1: Financial Statements Consolidated Statements of Condition 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Cash Flow 6 Item 2: Management's Discussion and Analysis 7 Item 3: Controls and Procedures 10 PART II. Other Information Item 6: Exhibits and Reports on Form 8-K 10 A. Exhibits 10 B. Reports on Form 8-K 10 Signatures 11 Part I. Financial Information BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CONDITION Sept 30 Dec. 31, (Amounts in Thousands) 2005 2004 (Unaudited) (Audited) ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash $12,173 $6,350 Federal Funds Sold 3,000 0 Investment Securities Securities Held to Maturity 19,000 19,000 Securities Available for Sale 586 534 Loans-Less Allowance for Loan Losses of $1,800,000 and Unearned Discount of $0 59,729 63,294 Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 2,034 2,151 Other Real Estate 658 729 Other Assets 1,456 1,169 TOTAL ASSETS $98,636 $93,227 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-Interest Bearing $41,471 $34,927 NOW Accounts 10,993 11,293 Money Market Accounts 4,037 3,830 Savings Accounts 25,002 27,431 Time Deposits, $100,000 and over 408 528 Other Time Deposits 5,946 5,080 TOTAL DEPOSITS 87,857 83,089 Notes Payable 2,149 2,188 Federal Funds Purchased 0 350 Other Liabilities 1,541 1,043 TOTAL LIABILITIES 91,547 86,670 STOCKHOLDERS' EQUITY Preferred Stock - Par Value $1 2,117,244 Shares Issued and Outstanding in 2005 2,117 2,158 2,157,853 Shares Issued and Outstanding in 2004 Common Stock - Par Value $1 179,145 Shares Issued and Outstanding 179 179 Accumulated Other Comprehensive Income 311 276 Capital in Excess of Par - Retired Stock 126 102 Undivided Profits 3,842 3,881 Current Earnings 514 (39) TOTAL STOCKHOLDERS' EQUITY 7,089 6,557 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $98,636 $93,227 BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Nine months ended Sept 30 Sept 30 (Amounts in Thousands) 2005 2004 2005 2004 INTEREST INCOME Interest and Fees on Loans $1,662 $1,726 $5,192 $5,496 Interest on Investment Securities 130 107 363 306 Interest on Federal Funds Sold 39 15 106 50 Total Interest Income $1,831 1,848 5,661 5,852 INTEREST EXPENSE Interest on Deposits 89 54 221 152 Other Interest Expense 10 11 30 31 Interest on Federal Funds Purchased 2 - 2 - Interest Expense on Notes Payable 1 1 2 3 Interest Expense on Debentures 30 31 91 93 Total Interest Expense 132 97 346 279 NET INTEREST INCOME 1,699 1,751 5,315 5,573 Provision for Loan Losses 99 193 384 490 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,600 1,558 4,931 5,083 NONINTEREST INCOME Service Charges on Deposit Accounts 205 288 684 830 Cardholder & Other Credit Card Income 162 168 488 519 ORE Income - - 238 88 Other Operating Income 17 69 259 161 Total Noninterest Income 384 525 1,669 1,598 NONINTEREST EXPENSE Salaries and Employee Benefits 837 1,030 2,499 3,028 Occupancy Expense 306 407 1,027 1,210 Communications 37 88 156 254 Outsourcing Fees 345 - 1,119 - Loan & Credit Card Expense 30 269 96 945 Professional Fees 33 104 174 310 ORE Expense 67 - 153 21 Other Operating Expense 155 489 596 949 Total Noninterest Expense 1,810 2,387 5,820 6,717 Income Before Tax Provision 174 (304) 780 (36) Provision For Income Taxes 59 (103) 266 (11) NET INCOME $115 ($201) $514 ($25) Earnings Per Share of Common Stock $0.64 ($1.12) $2.87 ($0.14) BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Amounts in thousands) 2005 2004 NET INCOME $514 ($25) OTHER COMPREHENSIVE INCOME, NET OF TAX Unrealized Holding Gains on Investment Securities Available-for-Sale, Arising During the Period 35 8 COMPREHENSIVE INCOME $549 ($17) BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended Sept 30 (Amounts in thousands) 2005 2004 OPERATING ACTIVITIES Net Income 514 (25) Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Provision for Loan Losses 384 490 Depreciation and Amortization Expense 172 158 Amortization of Investment Security Premiums - 19 Accretion of Investment Security Discounts - - Decrease (Increase) in Deferred Income Taxes 18 (19) (Gain) Loss on Sale of Property and Equipment - - (Gain) on Sale of Other Real Estate (235) (88) (Increase) Decrease in Other Assets (389) 365 Increase (Decrease) in Other Liabilities and Accrued Interest 215 (149) Net Cash Provided by (Used in) Operating Activities 678 751 INVESTING ACTIVITIES Proceeds from Held-to-Maturity Investment Securities Released at Maturity - 8,000 Purchases of Held-to-Maturity Investment Securities - (8,023) Proceeds from Sale of Property and Equipment 1 8 Purchases of Property and Equipment (56) (691) Proceeds from Sale of Other Real Estate 585 295 Net (Increase) Decrease in Loans 2,902 (4,231) Net Cash Provided by (Used in) Investing Activities 3,432 (4,642) FINANCING ACTIVITIES Net Increase (Decrease) in Non-Interest Bearing and Interest Bearing Deposits 4,768 (1,425) Proceeds from Issuance of Long-Term Debt - - Preferred Stock Retired (16) (1) Principal Payments on Long Term Debt (39) (8) Net Cash Provided by (Used in) Financing Activities 4,713 (1,434) Net Increase (Decrease)in Cash and Cash Equivalents 8,824 (5,325) Cash and Cash Equivalents - Beginning of Year 6,350 15,114 Cash and Cash Equivalents - End of Period $15,173 $9,789 BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) SUPPLEMENTAL DISCLOSURES: 2005 2004 Additions to Other Real Estate through Foreclosure 279 - Cash Paid for Interest 187 288 Cash (Paid) Received for Income Taxes (56) (85) Market Value Adjustment for Unrealized Gain on Securities Available-for-Sale 52 12 Accounting Policies Note: Cash Equivalents Include Amounts Due from Banks and Federal Funds Sold. Generally, Federal Funds are Purchased and Sold for One Day Periods. ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition of BOL Bancshares, Inc. and its bank subsidiary at September 30, 2005 compared to December 31, 2004 and the results of operations for the three and nine months periods ended September 30, 2005 with the same periods in 2004. This discussion and analysis should be read in conjunction with the interim consolidated financial statements and footnotes included herein. This discussion may contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated. Readers are cautioned not to place undue reliance on these forward-looking statements. During the third quarter of 2005, the area the Company operates in was impacted by Hurricane Katrina. At the current time, three of the Bank?s branches are being renovated from storm damage. Management feels the insurance coverage is adequate to cover damages that were sustained. Management is currently evaluating the loan portfolio in the heavily damaged areas to determine if an additional allowance is needed. SEPTEMBER 30, 2005 COMPARED WITH DECEMBER 31, 2004 BALANCE SHEET Total Assets at September 30, 2005 were $98,636,000 compared to $93,227,000 at December 31, 2004 an increase of $5,409,000 or 5.80%. Federal Funds Sold increased $3,000,000 at September 30, 2005 from $0 at December 31, 2004. Cash and due from banks increased $5,823,000 to $12,173,000 at September 30, 2005 from $6,350,000 at December 31, 2004. The increase in cash and due from banks was mainly attributable to an increase in the bank?s federal reserve bank account of $4,721,000, an increase of $1,572,000 in the bank?s other accounts and a decrease in cash and cash items of $470,000. The increase in the cash and due from banks was due mainly to the effects of Hurricane Katrina wherein the bank experienced a large volume of FEMA and insurance deposits from customers affected by Hurricane Katrina. Total loans decreased $3,565,000 or 5.63% to $59,729,000 at September 30, 2005 from $63,294,000 at December 31, 2004. This decrease in the loan portfolio is due mainly to a decrease in the credit card portfolio of $894,000, a decrease of $2,523,000 in the commercial loan portfolio, a decrease of $632,000 in the personal loan portfolio and an increase in overdrafts of $486,000. The increase in overdrafts was due to working with customers during the aftermath of Hurricane Katrina. The credit card portfolio decrease was largely attributable to (i) competition from other banks and non-traditional credit card issuers; (ii) tightening of the Bank?s underwriting standards; and (iii) normal attrition. The decrease in the commercial loan portfolio was primarily due to interim construction loans that matured and one commercial loan for $900,000 that matured. When a construction loan matures, it is taken by a permanent lender. The decrease in the personal loan portfolio was due mainly to normal attrition. Total deposits increased $4,768,000 or 5.74% to $87,857,000 at September 30, 2005 from $83,089,000 at December 31, 2004. Total non-interest bearing deposits increased $6,544,000 while interest-bearing accounts decreased $1,776,000. Federal Funds Purchased decreased $350,000 from $350,000 at December 31, 2004 to $0 at September 30, 2005. Shareholder?s Equity increased $532,000 due mainly to net income of $514,000 at September 30, 2005. NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2004 INCOME The Company?s net income for the nine months ended September 30, 2005 was $514,000 or $2.87 per share an increase of $539,000 from the Company?s total net loss of $25,000 for the same period last year. Interest income decreased $191,000 for the nine months ended September 30, 2005 over the same period last year. Interest on the loan portfolio decreased $304,000. This was caused by a decrease in the interest rate on loans from 8.71% at September 30, 2004 to a rate of 8.51% at September 30, 2005. Interest on the investment portfolio and federal funds sold increased $126,000 due to higher interest rates offset by a decrease in the average balance. The interest rate on the investment portfolio increased from 1.56% at September 30, 2004 to 1.86% at September 30, 2005. The interest rate on federal funds sold increased from .77% at September 30, 2004 to 2.17% at September 30, 2005. Interest expense increased $67,000 for the nine months ended September 30, 2005 over the same period last year. This was caused by an increase in the interest rate on interest-bearing liabilities from .53% at September 30, 2004 to .70% as of September 30, 2005. The Company?s net interest spread declined from 6.03% at September 30, 2004 to 5.93% at September 30, 2005. Noninterest income increased $71,000 for the nine months period from $1,598,000 at September 30, 2004 to $1,669,000 at September 30, 2005. This increase is due mainly to an increase of $147,000 from the sale of an ORE property during the first quarter of 2005 for a gain of $235,000 as compared to a gain of $88,000 on the sale of an ORE property during the first quarter of 2004. In addition the Bank also recognized $141,000 as beneficiary of two insurance policies on the life of the Bank?s president, Mr. James Comiskey, who passed on in February 2005. This was offset by a decrease in deposit related fees of $146,000 of which $107,000 was due to a decrease in fees collected on overdrawn accounts. Cardholder & other credit card income decreased $31,000. Noninterest expense decreased $897,000 for the nine months period as compared to the same period last year. Salaries and employee benefits decreased $529,000, occupancy expense decreased $183,000 and loan & credit card expenses decreased $849,000, postage expense decreased $90,000 while outsourcing fees increased $1,119,000 over the same period last year. These decreases and increases are directly attributable to the Bank outsourcing its credit card operations, thereby reducing staff and software expenses. In addition, rental expense was reduced because the Bank purchased a building which had been previously leased. Other losses decreased $262,000 due mainly to a loss of $271,000 in 2004 that was charged to operations in a case where the Bank was a plaintiff in a suit against its former health insurer. Professional fees decreased $136,000 due mainly to a decrease in legal fees of $91,000, and a decrease of $42,000 in stationery, forms and supply from last year. ORE expenses increased $132,000 due mainly to expenses incurred from the sale of the aforementioned ORE property, the day to day upkeep of the properties in OREO and property taxes paid in 2005 covering several years for a property acquired in 2004. The provision for income taxes increased $277,000 compared to the same period last year from a tax benefit of $11,000 at September 30, 2004 to a tax expense of $266,000 at September 30, 2005. THIRD QUARTER 2005 COMPARED WITH THIRD QUARTER 2004 INCOME Net income for the third quarter of 2005 was $115,000 compared to a net loss of $201,000 for the same period last year. Interest income decreased $17,000 over the same period last year. Interest on the loan portfolio decreased $64,000 from $1,726,000 at September 30, 2004 to $1,662,000 at September 30, 2005. This was caused by an increase in the interest rate on loans from 2.69% at September 30, 2004 to a rate of 2.77% at September 30, 2005 and a decrease in the average outstanding loans from $64,174,000 at September 30, 2004 to $59,971,000 at September 30, 2005. Interest on the investment portfolio and federal funds sold increased $47,000 due to higher interest rates. The interest rate on the investment portfolio increased from .55% at September 30, 2004 to .66% at September 30, 2005. The interest rate on federal funds sold increased from .33% at September 30, 2004 to .80% at September 30, 2005. Interest expense increased $35,000 for the three months ended September 30, 2005 over the same period last year. This was caused by an increase in the interest rate on interest-bearing liabilities from .19% at September 30, 2004 to .27% as of September 30, 2005. The Company?s net interest spread remained constant at 1.90% at September 30, 2004 and at September 30, 2005. Noninterest income decreased $141,000 for the three-month period as compared to the same period last year. Deposit related fees decreased $83,000, of which $63,000 was due to a decrease in fees collected on overdrawn accounts. Other income decreased $43,000 due mainly to an incentive received in 2004 from the company that the Bank outsourced the credit card operations to, and cardholder & other credit card income decreased $14,000 over the same period last year. Noninterest expense decreased $577,000 for the three-month period as compared to the same period last year. Salaries and employee benefits decreased $193,000, occupancy expense decreased $101,000 and loan & credit card expenses decreased $238,000 postage expense decreased $35,000 while outsourcing fees increased $345,000 over the same period last year. These decreases and increases are directly attributable to the Bank outsourcing its credit card operations, thereby reducing staff and software expenses. In addition, rental expense was reduced because the Bank purchased a building which had been previously leased. Other losses decreased $308,000 due mainly to a loss of $272,000 in 2004 that was charged to operations in a case where the Bank was a plaintiff in a suit against its former health insurer. Professional fees decreased $71,000 due mainly to a decrease in legal fees of $50,000, and a decrease of $21,000 in stationery, forms and supply from last year. ORE expenses increased $64,000 due mainly to property taxes paid in 2005 covering several years for a property acquired in 2004. The provision for income taxes increased $162,000 compared to the same period last year from a tax benefit of $103,000 at September 30, 2004 to a tax expense of $59,000 at September 30, 2005. Item 3 Controls and Procedures The certifying officers of the Company have evaluated the effectiveness of the Company?s disclosure controls and procedures. They have concluded after evaluating the effectiveness of the Company?s disclosure controls and procedures as of September 30, 2005, that as of such date, the Company?s disclosure controls and procedures were effective and designed to ensure that material information relating to the Company would be made known to them by others. There were no changes in the Company?s internal controls over financial reporting for the quarter ended September 30, 2005 that have materially affected, or are reasonably likely to materially affect, such controls. Item 6 Exhibits and Reports on Form 8-K A. Exhibits 31.1 Section 302 Principal Executive Officer Certification 31.2 Section 302 Principal Financial Officer Certification 32.1 Section 1350 Certification 32.2 Section 1350 Certification B. Reports on Form 8-K BOL BANCSHARES, INC. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOL BANCSHARES, INC. (Registrant) /s/ G. Harrison Scott November 22, 2005 G. Harrison Scott Date Chairman (in his capacity as a duly authorized officer of the Registrant) /s/ Peggy L. Schaefer Peggy L. Schaefer Treasurer (in her capacity as Chief Accounting Officer of the Registrant) Exhibit 31.1 I, G. Harrison Scott, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Bol Bancshares, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant?s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant?s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the ?Evaluation Date?); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant?s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant?s auditors and the audit committee of registrant?s board of directors (or persons performing the equivalent functions); a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant?s ability to record, process, summarize and report financial data and have identified for the registrant?s auditors any material weaknesses in internal control; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant?s internal controls; and 6. The registrant?s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 22, 2005 /s/ G. Harrison Scott Chairman (in his capacity as a duly authorized officer of the Registrant) Exhibit 31.2 I, Peggy L. Schaefer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Bol Bancshares, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant?s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have; a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant?s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the ?Evaluation Date?); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant?s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant?s auditors and the audit committee of registrant?s board of directors (or persons performing the equivalent functions); a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant?s ability to record, process, summarize and report financial data and have identified for the registrant?s auditors any material weaknesses in internal control; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant?s internal controls; and 6. The registrant?s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 22, 2005 /s/ Peggy L. Schaefer Treasurer (in her capacity as Chief Accounting Officer of the Registrant) Exhibit 32.1 CERTIFICATION OF PERIODIC REPORT Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350 The undersigned hereby certifies that (i) the foregoing Quarterly Report on Form 10-QSB filed by BOL Bancshares, Inc. (the ?Registrant?) for the quarter ended September 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ G. Harrison Scott November 22, 2005 G. Harrison Scott Date Chairman (in his capacity as duly authorized officer of the Registrant) Exhibit 32.2 CERTIFICATION OF PERIODIC REPORT Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350 The undersigned hereby certifies that (i) the foregoing Quarterly Report on Form 10-QSB filed by BOL Bancshares, Inc. (the ?Registrant?) for the quarter ended September 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Peggy L. Schaefer November 22, 2005 Peggy L. Schaefer Date Treasurer (in her capacity as Chief Accounting Officer of the Registrant)