10-Q 1 rsec3-09.txt REPORT 10Q 3-09 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2009 / / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from to Commission file Number 00-16934 BOL BANCSHARES, INC. (Exact name of registrant as specified in its charter.) Louisiana 72-1121561 (State of incorporation) (I.R.S. Employer Identification No.) 300 St. Charles Avenue, New Orleans, La. 70130 (Address of principal executive offices) (504) 889-9400 (Registrant's telephone number) Indicate by check mark whether the registrant (1) 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 by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer __ Accelerated filer __ Non-accelerated filer __ Smaller reporting company X Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 179,145 SHARES AS OF April 30, 2009. 1 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 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk Catastrophic Events and Future Growth 9 Item 4T. Controls and Procedures 9 PART II. Other Information Item 6. Exhibits 10 Signatures 11 2 Part I. - Financial Information BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CONDITION March 31, Dec. 31, (Amounts in thousands) 2009 2008 Unaudited Audited ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash $2,990 $3,104 Federal Funds Sold 17,750 25,375 Certificates of Deposit 3,875 0 Investment Securities Securities Held to Maturity 2,001 2,001 Securities Available for Sale 814 823 Loans-Less Allowance for Loan Losses of $1,800,000 in 2009 and 2008 56,751 55,608 Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 6,415 6,516 Other Real Estate 1,214 1,153 Other Assets 802 926 TOTAL ASSETS $92,612 $95,506 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Non-Interest Bearing $34,938 $34,930 NOW Accounts 10,306 10,766 Money Market Accounts 3,647 3,667 Savings Accounts 21,903 22,717 Time Deposits, $100,000 and over 1,985 1,880 Other Time Deposits 5,580 7,018 TOTAL DEPOSITS 78,359 80,978 Notes Payable 1,543 1,543 Other Liabilities 1,181 1,533 TOTAL LIABILITIES 81,083 84,054 SHAREHOLDERS' EQUITY Preferred Stock - Par Value $1 1,952,329 Shares Issued and Outstanding in 2009 1,997,360 Shares Issued and Outstanding in 2008 1,952 1,997 Common Stock - Par Value $1 179,145 Shares Issued and Outstanding in 2009 and 2008 179 179 Accumulated Other Comprehensive Income 471 477 Capital in Excess of Par - Retired Stock 167 158 Undivided Profits 8,641 7,917 Current Earnings 119 724 TOTAL SHAREHOLDERS' EQUITY 11,529 11,452 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $92,612 $95,506 The accompanying notes are an integral part of these financial statements. 3 BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, March 31, (Amounts in thousands) 2009 2008 INTEREST INCOME Interest and Fees on Loans $1,526 $1,726 Interest on Investment Securities 14 72 Interest on Federal Funds Sold 10 243 Interest on Certificates of Deposit 8 0 Total Interest Income 1,558 2,041 INTEREST EXPENSE Interest on Deposits 93 219 Other Interest Expense 4 4 Interest Expense on Notes Payable and Debentures 24 24 Total Interest Expense 121 247 NET INTEREST INCOME 1,437 1,794 Provision for Loan Losses 95 62 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,342 1,732 NON-INTEREST INCOME Service Charges on Deposit Accounts 94 122 Cardholder & Other Credit Card Income 102 119 Other Operating Income 236 623 Total Non-Interest Income 432 864 NON-INTEREST EXPENSE Salaries and Employee Benefits 693 601 Occupancy Expense 269 243 Communications 53 55 Outsourcing Fees 359 387 Loan & Credit Card Expense 27 28 Professional Fees 53 44 ORE Expense 13 8 Other Operating Expense 186 174 Total Non-Interest Expense 1,653 1,540 Income Before Tax Provision 121 1,056 Provision For Income Taxes 2 359 NET INCOME $119 $697 Earnings Per Share of Common Stock $0.67 $3.89 The accompanying notes are an integral part of these financial statements. 4 BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, March 31, (Amounts in thousands) 2009 2008 NET INCOME $119 $697 OTHER COMPREHENSIVE INCOME, NET OF TAX Unrealized Holding Gains on Investment Securities Available-for-Sale, Arising During the Period (6) - COMPREHENSIVE INCOME $113 $697 The accompanying notes are an integral part of these financial statements. 5 BOL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, (Amounts in thousands) 2009 2008 OPERATING ACTIVITIES Net Income $119 $697 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Loan Losses 95 62 Depreciation and Amortization Expense 101 106 Amortization of Investment Security Premiums 0 (3) Decrease in Deferred Income Taxes (21) 0 Decrease in Other Assets 148 57 (Decrease) in Other Liabilities and Accrued Interest (352) (876) Net Cash Provided by Operating Activities 90 43 INVESTING ACTIVITIES Proceeds from Held-to-Maturity Investment Securities Released at Maturity 0 8,000 Purchases of Held-to-Maturity Investment Securities 0 (2,000) Increase in Certificate of Deposit with Other Banks (3,875) 0 Purchases of Property and Equipment 0 (75) Net (Increase) Decrease in Loans (1,299) 1,166 Net Cash (Used in) Provided by Investing Activities (5,174) 7,091 FINANCING ACTIVITIES Net (Decrease) Increase in Non-Interest Bearing and Interest Bearing Deposits (2,619) 863 Preferred Stock Retired (36) (28) Net Cash (Used in) Provided by Financing Activities (2,655) 835 Net (Decrease) Increase in Cash and Cash Equivalents (7,739) 7,969 Cash and Cash Equivalents - Beginning of Year 28,479 31,651 Cash and Cash Equivalents - End of Period $20,740 $39,620 SUPPLEMENTAL DISCLOSURES: 2009 2008 Cash Paid During the Year for Interest $192 $226 Cash Paid During the Year for Income Taxes $0 $4 Market Value Adjustment for Unrealized Gain (Loss) on Securities Available-for-Sale ($9) $0 Additions to Other Real Estate Thru Foreclosure $61 $0 The accompanying notes are an integral part of these financial statements. 6 BOL BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A Summary of Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bank of Louisiana (the Bank), and the Bank's wholly owned subsidiary, BOL Assets, LLC. These consolidated financial statements were prepared in accordance with instructions for Form 10- Q and Regulation S-X, and do not include information or footnotes for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. Use of Estimates In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses. Cash and Cash Equivalents 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 Hurricane Katrina Disclosure Insurance proceeds received for storm damages caused by Hurricane Katrina has covered the damages sustained to the Bank's branches. Ample proceeds remain in the contingency account to cover the small percentage of repairs remaining. Of the 7 branch locations that were affected by Hurricane Katrina, only the Carrollton branch was not reopened. The Company's management team and employees have and are continuing to work diligently to control operating expenses and costs while restoring normal business operations. MARCH 31, 2009 COMPARED WITH DECEMBER 31, 2008 BALANCE SHEET Total Assets at March 31, 2009 were $92,612,000 compared to $95,506,000 at December 31, 2008 a decrease of $2,894,000 or 3.03%. Federal Funds Sold decreased $7,625,000 to $17,750,000 at March 31, 2009 from $25,375,000 at December 31, 2008. This decrease was mainly attributable to the purchase of Certificates of Deposit for a total of $3,875,000 with other banks during the first quarter of 2009 at a higher interest rate then Federal Funds are paying. The remainder is due to having less available to sell due to the balance sheet shrinking back to pre-Katrina levels. Total loans increased $1,143,000 or 2.06% to $56,751,000 at March 31, 2009 from $55,608,000 at December 31, 2008. This increase in the loan portfolio from December 31, 2008 to March 31, 2009 is due mainly to an increase in 1-4 family loans of $936,000, an increase in non farm- 7 non residential loans of $454,000, an increase in construction loans of $209,000 and an increase of $200,000 in commercial loans which was offset by a decrease in personal loans of $70,000. Also there was a decrease in the credit card portfolio of $568,000 which 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. Total deposits decreased $2,619,000 or 3.23% to $78,359,000 at March 31, 2009 from $80,978,000 at December 31, 2008. Total interest bearing deposits decreased $2,627,000, due to a special promotion of time deposits that matured in the amount of $1,333,000, a decrease in savings of $814,000 and a decrease in NOW accounts of $460,000. Non interest bearing accounts increased $8,000. Shareholder's Equity increased $77,000 due mainly to net income of $119,000 at March 31, 2009, and a decrease in Preferred Stock of $45,000. THREE MONTHS ENDED MARCH 31, 2009 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2008 INCOME The Company's net income for the three months ended March 31, 2009 was $119,000 or $.67 per share for a decrease of $578,000 from the Company's net income of $697,000 or $3.89 per share for the same period last year. Interest income decreased $483,000 for the three months ended March 31, 2009 over the same period last year. This was caused by a decrease of $233,000 in interest received on Federal Funds sold. This decrease was due mainly to a decrease in the interest rate paid on Federal Funds sold from 3.15% at March 31, 2008 to .20% at March 31, 2009. The average balance of Federal Funds sold decreased from $30,844,000 at March 31, 2008 to $21,189,000 at March 31, 2009. Loan interest income decreased due mainly to a decrease in the average rate from 12.34% at March 31, 2008 to $10.84% at March 31, 2009. Investment securities interest decreased $58,000 due mainly to a decrease in the average balance of investment securities from $7,598,000 at March 31, 2008 to $2,821,000 at March 31, 2009. This was due mainly to investment securities of $8,000,000 that were called and $2,000,000 purchased in the first quarter of 2008. The average balance of Certificates of Deposits purchased was $2,547,000 at an average interest rate of 1.29% for 2009 as compared to $0 for 2008. Interest expense decreased $126,000 for the three months ended March 31, 2009 over the same period last year. This was due to a decrease in the average interest rate on interest bearing deposits from a rate of 1.75% at March 31, 2008 to a rate of .84% at March 31, 2009. Additionally there was a decrease in the average balance of interest bearing deposits from $50,025,000 at March 31, 2008 to $44,192,000 at March 31, 2009. Net interest income decreased $357,000. Interest rate spreads decreased from 6.73% at March 31, 2008 to 6.46% at March 31, 2009. Non-interest income decreased $432,000 for the three months ended March 31, 2009 as compared to the same period last year. This decrease is due mainly to the sale of Visa stock for a gain of $578,000 in the first quarter of 2008. In the first quarter of 2009 there was a decrease in deposit related fees of $28,000 of which $23,000 was due to a decrease in fees collected on overdrawn accounts. Cardholder and other credit card fees decreased $17,000. This was offset by an increase in miscellaneous income of $150,000 in the first quarter of 2009 from the insurance proceeds from Hurricane Katrina that was not needed for repairs. Non-interest expense increased $113,000 for the three months ended March 31, 2009 as compared to the same period last year. Salaries and Employee Benefits increased $92,000 in the first quarter of 2009, which was due mainly to payroll expenses of $84,000 for 2007 that was not paid until 2008 resulting in a credit of $84,000 in 2008 for 14 days payroll, compared to a credit of $17,000 for 4 days in 2009. Occupancy expense increased $26,000. Outsourcing fees decreased $28,000 due mainly to credit card interchange fees of $221,000 for the three months ended March 31, 2008 compared to $183,000 for the three months ended March 31, 2009. The provision for income taxes decreased $357,000 compared to the same 8 period last year from $359,000 at March 31, 2008 to $2,000 at March 31, 2009 due to a decrease in income before taxes from $1,056,000 at March 31, 2008 to $121,000 at March 31, 2009. Item 3. Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events, and Future Growth Management considers interest rate risk to be a market risk that could have a significant effect on the financial condition of the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. Difficult conditions in the financial services markets may materially and adversely affect the business and results of operations of the Bank and the Company. Dramatic declines in the housing market during the past year, along with falling home prices and increasing foreclosures and unemployment, have resulted in significant write downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities by spreading to credit default swaps and other derivative securities, have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions, and, in some cases, to fail. Many lenders and institutional investors have reduced, and in some cases, ceased to provide funding to borrowers, including other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and widespread reduction of business activity generally, which could have a material adverse effect on our business and operations. A worsening of these conditions would likely exacerbate any adverse effects of these difficult market conditions on us and others in the financial institutions industry. However, the majority of small community banks, such as Bank of Louisiana, have strong reserve positions and are well capitalized. The occurrence of catastrophic events such as hurricanes, tropical storms, earthquakes, windstorms, floods, severe winter weather, fires and other catastrophes could adversely affect our consolidated financial condition or results of operations. Unpredictable natural and other disasters could have an adverse effect on us in that such events could materially disrupt our operations or the ability or willingness of our customers to access financial services offered by us. The incidence and severity of catastrophic events could nevertheless reduce our earnings and cause volatility in our financial results for any fiscal quarter or year and have a material adverse effect on our financial condition or results of operation. The Company is a customer-focused organization. Future growth is expected to be driven in a large part by the relationships maintained with customers. While the Company has assembled an experienced management team, and has management development plans in place, the unexpected loss of key employees could have a material adverse effect on the Company's business and may result in lower revenues. Item 4T Controls and Procedures Under the supervision and with the participation of our management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the certifying officers of the Company have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934, is recorded, processed, summarized and reported within the applicable time periods specified by the Securities and Exchange Commission's rules and forms. There has been no change in the Company's internal control over financial reporting during the Company's 9 most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION Item 6 Exhibits Exhibits 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32 Certification Pursuant to 18 U.S.C. Section 1350 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. BOL BANCSHARES, INC. /s/ G. Harrison Scott May 7, 2009 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) 11