-----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, GjL/YT3o6LuEzYzmn1wtQ6SCcjzV9AB3R9uTITKDf+8Lzov+WH1MCbISg/DkNfWi O+39ri+x5fina9j6p0eldw== 0000832818-96-000008.txt : 19960816 0000832818-96-000008.hdr.sgml : 19960816 ACCESSION NUMBER: 0000832818-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96613158 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 June 30, 1996 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 July 31, 1996. BOL BANCSHARES, INC. & SUBSIDIARY INDEX Page No. PART 1. Financial Information Item 1: Financial Statements Consolidated Statement of Condition 3 Consolidated Statements of Income 4 Consolidated Statements of Changes in Stockholder's Equity 5 Consolidated Statement of Cash Flow 6 Notes to Consolidated Financial Statements 7 Item 1: Management's Discussion and Analysis of Financial Condition and Results of Operation 11 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) (Amounts in thousands)
June 1996 December 1995 June 1995 ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash $ 5,744 $ 6,742 $ 7,545 Interest Bearing Balances 0 0 100 Investment Securities Securities Held to Maturity (Fair Values at 6/31/96, 12/31/96, and 6/31/95, respectively were $7,975,976, $10,015,625, and $11,943,490) 7,989 10,014 12,025 Securities Available for Sale 1,106 1,122 1,195 Federal Funds Sold 11,075 10,725 10,200 Loans, net of unearned income 75,750 74,943 70,822 Reserve for possible loan loss (1,502) (1,500) (940) Property, Equipment, and Lease- hold Improvements (Net of Depreciation & Amortization) 2,701 2,575 2,339 Other Real Estate 1,699 1,994 2,570 Deferred Taxes 364 0 0 Investment in Subsidiary 0 0 0 Other Assets 1,516 1,974 1,613 TOTAL ASSETS $ 106,442 $108,589 $107,469
LIABILITIES Deposits: Non-Interest Bearing 35,086 35,822 34,489 Interest Bearing 59,791 61,564 61,330 TOTAL DEPOSITS 94,877 97,386 95,819 Deferred Taxes 0 0 8 Notes Payable 497 499 501 Senior Secured Debentures 1,890 1,890 1,890 Accrued Litigation Settlement 390 390 390 Other Liabilities 1,208 1,056 1,082 TOTAL LIABILITIES $ 98,862 $101,221 $ 99,690 STOCKHOLDER'S EQUITY Common Stock-Par Value $1, Authorized-1,000,000,000 shares; issued 179,145, 179,145, & 179,145 at 6/31/96, 12/31/95, & 6/31/95 179 179 179 Preferred Stock-Par Value $1, Authorized 3,000,000,000 shares; issued 2,302,811, 2,302,811 & 2,302,811 at 6/31/96, 12/31/95, & 6/31/95 2,303 2,303 2,303 Undivided Profits 4,852 4,708 4,708 Capital in Excess of Par- Retired Stock 15 15 15 Unrealized Gain on Securities Available for Sale, net of applicable Deferred Income Taxes 6 18 86 Current Earnings 225 145 488 TOTAL STOCKHOLDERS' EQUITY 7,580 7,368 7,779 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 106,442 $ 108,589 $107,469 See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (Amounts in thousands, except per share data)
Three months ended Six months ended June 30 June 30 1996 1995 1996 1995 INTEREST INCOME Interest and fees on loans $2,865 $2,500 $5,719 $4,870 Interest on time deposits 0 1 0 2 Interest on security-HTM 112 184 234 377 Interest & dividends on security-AFS 13 24 29 32 Interest on federal funds sold 129 93 259 189 Other Interest Income 0 0 1 0 TOTAL INTEREST INCOME 3,119 , 2,802 6,242 5,470 INTEREST EXPENSE Interest on deposits 502 535 992 1,013 Interest on federal funds purchased 0 0 0 0 Other interest expense 1 1 4 2 Interest expense on notes payable 13 19 26 27 Interest expense on debentures 44 42 86 85 TOTAL INTEREST EXPENSE 560 597 1,108 1,127 NET INTEREST INCOME 2,559 2,205 5,134 4,343 Provision for loan losses 410 131 832 331 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,149 2,074 4,302 4,012 OTHER INCOME Service charge on deposit accts 364 362 726 728 Cardholder & other credit cd income 198 204 336 360 ORE income 14 27 19 84 Other operating income 35 58 145 181 Equity in earnings of unconsolidated subsidiary 0 0 0 (35) Gain on sale of securities 0 0 0 0 TOTAL OTHER INCOME 611 651 1,226 1,318 OTHER EXPENSE Salaries and employee benefits 1,057 943 2,066 1,882 Occupancy expense 422 420 869 835 Loan & credit card expense 322 213 595 422 ORE expense 97 60 135 107 Other operating expense 756 635 1,453 1,243 TOTAL OTHER EXPENSES 2,654 2,271 5,118 4,489 Income Before Tax Provision 106 454 410 841 Provision for taxes 64 216 185 353 NET INCOME $ 42 $ 238 $ 225 $ 488 Earnings Per Share of Common Stock $.23 $1.33 $1.26 $2.73 See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited) (Amounts in thousands)
UNREALIZED GAIN ON CAPITAL IN INVESTMENT EXCESS OF SECURITIES PAR RETIRED COMMON PREFERRED AVAILABLE UNDIVIDED RETIRED STOCK STOCK FOR SALE PROFITS STOCK TOTAL BALANCE 12/31/95 $179 $2,303 $19 $4,852 $15 $7,368 Cancellation of Stock 0 Capital in Excess of Par Retired 0 Change in unrealized gain on securities AFS (13) (13) Net Income 225 225 Balance 06/30/96 $179 $2,303 $6 $5,077 $15 $7,580 BALANCE 12/31/94 $179 $2,309 $52 $4,708 $9 $7,257 Cancellation of stock (6) (6) Capital in Excess of Par Retired 6 6 Change in unrealized gain on securities AFS 34 34 Net Income 488 488 Balance 6/30/95 $179 $2,303 $86 $5,196 $15 $7,779
BOL BANCSHARES, INC. STATEMENTS OF CASH FLOWS(1) FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) (Amounts in thousands)
1996 1995 OPERATING ACTIVITIES Net Income (Loss) $ 225 $ 488 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Provision for Loan Losses 832 331 Depreciation & Amortization Expense 167 77 Amortization of Investment Security Premiums 2 13 Accretion of Investment Security Discounts 10 (3) (Decrease)Increase in Deferred Income Taxes (366) (40) (Gain) Loss on Sale of Property & Equipment 2 (5) (Gain) Loss on Sale of Other Real Estate 3 (60) Decrease (Increase) in Other Assets and Prepaid Taxes 255 1,437 (Decrease) Increase in Other Liabilities & Accrued Interest (159) 100 Net Decrease (Increase) in Mortgage Loans Held for Resale 161 (85) Undistributed Equity Method Income 0 34 Gain on Sale of AFS Securities 0 0 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,132 2,287 INVESTING ACTIVITIES Proceeds from Sale of AFS Securities 0 0 Proceeds from AFS Securities Released at Maturity 978 0 Purchases of AFS Securities (1,000) (985) Proceeds from HTM Investment Securities Released at Maturity 2,510 2,970 Purchases of HTM Investment Security (478) 0 Proceeds from Sale of Property & Equipment 2 5 Purchases of Property & Equipment (298) (546) Proceeds from Sale of Other Real Estate 293 261 Purchases of Other Real Estate (3) 0 Net Decrease (Increase) in Loans (1,231) (3,270) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 773 (1,565) FINANCING ACTIVITIES Net Increase (Decrease) in Demand Deposits, Interest Bearing Deposits Savings Accounts, & CD's (2,495) 4,056 Proceeds from Issuance of Long-Term Debt 0 0 Retirement of Stock 0 (6) Dividends Paid 0 0 Principal Payments on Long Term Debt (2) (31) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,497) 4,019 Net Increase (Decrease) in Cash & Cash Equivalents (592) 4,741 Cash & Cash Equivalents at Beginning of Year 17,411 13,104 CASH & CASH EQUIVALENTS AT END OF PERIOD $ 16,819 $ 17,845 (1) Prior periods have been conformed to current-period presentation. See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 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 June 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 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, 1995. Note 2. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The regular annual meeting of shareholders of BOL BANCSHARES, INC., was held on April 9, 1996. All incumbent directors were re-elected. There were no other matters voted upon at the meeting. Below are the names of the nominees who were elected to continue their term as directors and the number of shares cast. The total shares voting were 128,430. Number of Shares Nominee For Against Abstain Gordon A. Burgess 128,280 145 5 James A. Comiskey 128,280 145 5 Lionel J. Favret 128,280 145 5 Louis G. Grush 128,280 145 5 Gerry A. Hinton 128,255 170 5 Leland L. Landry 128,280 145 5 Samuel Logan 128,280 145 5 Douglas A. Schonacher 128,280 145 5 G. Harrison Scott 128,280 145 5 Edward J. Soniat 128,255 170 5 Note 3. MERGER AGREEMENTS The pending merger with First American Bank of Tangipahoa which was expected to be consummated in the second quarter of 1995 has been cancelled. Note 4. PER SHARE DATA Income per common share data are based on the weighted average number of share outstanding of 179,145 and 179,145 at June 30, 1996 and 1995 respectively. Note 5. CONTINGENCIES The Subsidiary Bank in the course of conducting its business, becomes involved as a defendant or plaintiff in various lawsuits. A) The Subsidiary Bank was a defendant in a lawsuit filed by a party owning land that other real estate is built on, for back lease payments. In a prior lawsuit, the appellate court held that the rights of the landowner were subordinated to those of the Bank. Notwithstanding this prior decree, the plaintiffs instituted a new proceeding for bank due rental and judgement in the amount of $390,00 was rendered against the Subsidiary Bank for which a separate contingency account was set up. The Subsidiary Bank has appealed. The appellate court sustained the judgment of the district court and the Subsidiary Bank appealed for a writ of review to the Louisiana Supreme Court. The writ was granted. EXPECTED RESULTS Since the writ was granted, we believe the Subsidiary Bank has a better than average opportunity to reverse the above judgement. B) The Subsidiary Bank was a defendant in a lawsuit filed by a proprietary merchant for breach of contract in that the Subsidiary Bank did not diligently handle its accounts receivables. A hearing was held on July 10, 1996, at which time numerous exceptions were filed by the Subsidiary Bank. EXPECTED RESULTS The Subsidiary Bank feels that the chances of defeating this claim are better than average. Note 6. 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 June 30, 1996, the Bank did not have any impaired loans. Note 7. 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 35.38% from $2,377 thousand at June 30, 1995 to $1,536 thousand at June 30, 1996. Note 8. 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: (Amounts in thousands)
June 30, 1996 Carrying Amount Fair Value Financial Assets: Cash and Short Term Investments $ 16,819 $ 16,819 Investment Securities 9,095 9,095 Loans 75,750 75,580 Less: Allowance for Loan Losses 1,502 1,502 $ 100,162 $ 99,992 Financial Liabilities: Deposits $ 95,781 $ 95,868 Unrecognized Financial Instruments: Commitments to Extend Credit $ 725 $ 725 Commercial Lines of Credit 146 146 Credit Card Arrangements 76,004 76,004 $ 76,875 $ 76,875
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1) (Amounts in thousands)
Second Quarter 1996 First Quarter 1996 Interest Interest Average Income/ Yield Average Income/ Yield Balance Expense Rate Balance Expense Rate ASSETS Interest-earning assets: Loans (2) $ 75,975 $ 2,865 3.77% $ 73,764 $2,854 3.87% Securities (HTM) 7,988 112 1.40% 8,990 122 1.36% Securities (AFS) 1,109 13 1.17% 1,122 16 1.43% Interest Bearing Deposits 0 0 0 0 Federal Funds Sold 9,845 129 1.31% 9,724 130 1.34% TOTAL INTEREST-EARNING ASSETS 94,917 3,119 3.29% 93,600 3,122 3.34% Allowance for loan losses (1,526) (1,226) Non interest-earning assets: Cash and due from banks 5,978 6,052 Premises and equipment 2,652 2,556 Other real estate 1,851 2,034 Other assets 1,997 1,546 TOTAL NONINTEREST-EARNING ASSETS 12,478 12,188 TOTAL ASSETS $ 105,869 $104,562 LIABILITIES AND STOCKHOLDERS EQUITY Interest-bearing liabilities: Interest-bearing deposits: NOW accounts $ 12,301 $ 68 .55% $ 11,725 $ 59 .50% Money market deposit a/c 7,314 45 .62% 7,576 50 .66% Savings and other consumer time deposits 40,259 378 .94% 40,294 376 .93% Certificates of deposits of $100,00 or more 1,260 12 .95% 1,144 14 1.22% TOTAL INTEREST-BEARING DEPOSITS 61,134 503 .82 60,739 499 .82% Long-term debt 2,388 57 2.39% 2,389 57 2.39% TOTAL INTEREST-BEARING LIABILITIES 63,522 560 .88% 63,128 556 .88% Noninterest-bearing liabilities: Demand deposits 33,244 32,578 Other liabilities 1,522 1,376 TOTAL NONINTEREST-BEARING LIABILITIES 34,766 33,954 Total stockholders' equity 7,581 7,480 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 105,869 $104,562 SPREAD AND NET YIELD Interest rate spread 2.40% 2.45% Net interest income/margin $ 2,559 2.70% $2,566 2.74% (1) Prior periods have been conformed to current-period presentation (2) Excludes unearned income. For purposed of yield computations, nonaccrual loans are included in loans outstanding.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1) (Continued) Six Months Ended Six Months Ended June 30, 1996 June 30, 1995 Interest Interest Average Income/ Yield Average Income/ Yield Balance Expense Rate Balance Expense Rate ASSETS Interest-earning assets: Loans (2) $ 74,870 $ 5,719 7.64% $ 68,609 $4,870 7.10% Securities (HTM) 8,489 234 2.76% 14,100 377 2.67% Securities (AFS) 1,116 29 2.60% 914 32 3.50% Interest Bearing Deposits 0 0 71 2 2.82% Federal Funds Sold 9,784 259 2.65% 6,471 189 2.92% TOTAL INTEREST-EARNING ASSETS 94,259 6,241 6.62% 90,165 5,470 6.07% Allowance for loan losses (1,376) (987) Non interest-earning assets: Cash and due from banks 6,016 5,627 Premises and equipment 2,604 2,062 Other real estate 1,943 2,660 Other assets 1,748 1,958 TOTAL NONINTEREST-EARNING ASSETS 12,311 12,307 TOTAL ASSETS $ 105,194 $101,485 LIABILITIES AND STOCKHOLDERS EQUITY Interest-bearing liabilities: Interest-bearing deposits: NOW accounts $ 12,013 $ 117 .97% $ 10,864 $ 125 1.15% Money market deposit a/c 7,445 101 1.36% 8,724 101 1.16% Savings and other consumer time deposits 39,974 748 1.87% 37,973 754 1.99% Certificates of deposits of $100,00 or more 1,202 26 2.16% 1,821 35 1.92% TOTAL INTEREST-BEARING DEPOSITS 60,634 992 1.64 59,382 1,015 1.71% Long-term debt 2,388 116 4.86% 2,399 112 4.67% TOTAL INTEREST-BEARING LIABILITIES 63,022 1,108 1.76% 61,781 1,127 1.82% Noninterest-bearing liabilities: Demand deposits 33,213 30,958 Other liabilities 1,427 1,270 TOTAL NONINTEREST-BEARING LIABILITIES 34,640 32,228 Total stockholders' equity 7,532 7,476 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 105,194 $101,485 SPREAD AND NET YIELD Interest rate spread 4.86% 4.24% Net interest income/margin $ 5,133 5.45% $4,343 4.82% (1) Prior periods have been conformed to current-period presentation (2) Excludes unearned income. For purposed of yield computations, nonaccrual loans are included in loans outstanding.
BOL BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS June 30, 1996 Managements'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 $94,259 thousand in the second quarter of 1996, a $4,094 thousand increase from the second quarter of 1995 average of $90,165 thousand. Compared to the second quarter of 1995 average loans increased $6,285 thousand (9.02%) and federal funds sold increased $3,618 thousand (58.10%) while investment securities decreased $5,758 thousand (38.76%). Table 1 presents the Company's loan portfolio by major classifications. Total loans increased $4,928 thousand (6.96%) over the second quarter of 1995. TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO (Amounts in thousands)
6/30/96 % of 3/31/96 % of 6/30/95 % of Total Total Total Real Estate Mortgages $23,588 31.14% $23,612 31.18% $21,746 30.71% Commercial Loans 5,222 6.89% 4,971 6.56% 5,607 7.92% Mortgage Loans Held for Resale 95 .14% 314 .41% 85 .12% Personal Loans 4,435 5.85% 4,579 6.05% 6,119 8.64% Credit Cards 42,149 55.64% 42,069 55.55% 37,131 52.42% Overdrafts 261 .34% 188 .25% 134 .19% TOTAL LOANS $75,750 100.00% $75,733 100.00% $70,822 100.00%
Securities Held to Maturity. Average securities held to maturity decreased $5,681 thousand (41.56%) from the second quarter of 1995. 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 $77 thousand (06.49%) from the second quarter of 1995. Securities available for sale are carried at fair value. Short Term Investments. Average federal funds sold increased $3,618 thousand (58.10%) up from the second quarter of 1995. This increase is mainly due to the decrease in the investment security portfolio. ASSET QUALITY Table 2 presents a summary of nonperforming assets for the past five quarters. Loans are placed on a nonaccrual status when there is uncertainty about the timely payment of principal and interest. When a loan is on nonaccrual status, interest income is no longer accrued and is only recognized when received. The loan process ensures that all loans which meet the criteria for nonaccrual status are placed on nonaccrual. Nonperforming assets, which include nonaccrual loans and foreclosed assets, totaled $1,987 thousand at June 30, 1996 as compared to $3,009 thousand at June 30, 1995. Other real estate totaled $1,699 thousand at June 30, 1996 as compared to $2,570 thousand at June 30, 1995. Table 2 - NONPERFORMING ASSETS (Amounts in thousands)
06/96 03/96 12/95 09/95 06/95 Nonaccrual Loans $ 288 $ 139 $ 235 $ 630 $ 439 Other Real Estate 1,699 2,052 1,994 2,446 2,570 TOTAL NONPERFORMING 1,987 2,191 2,229 3,076 3,009 ASSETS Accruing loans past due 90 days or more 4,289 2,074 1,062 1,715 1,707 Reserve for loan losses 1,502 1,505 1,500 958 940 Nonperforming assets as a percentage of loans plus foreclosed assets 2.57% 2.82% 2.90% 4.04% 4.10% Reserve for loan losses as a percentage of nonperforming loans 75.59% 68.72% 67.30% 31.15% 31.24%
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES Table 3 presents an analysis of the activity in the reserve for possible loan losses for the second quarter and the first six months of 1996 and 1995. The reserve for loan losses as a percentage of loans increased from 1.33% at June 30, 1995 to 1.98% at June 30, 1996. The net charge-off (recoveries) as a percentage of average loans increased from 0.20% at June 30, 1995 to 0.54% at June 30, 1996. The allowance for loan losses is established through a provision for loan losses charged to expenses. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible, based on evaluation of the collectibility of loans and prior loss portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. 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. Beginning December 1, 1994 a new proprietary merchant began submitting credit card deposits and based upon their contract, the Bank began withholding a percentage of their deposits to set aside for any possible charge offs. This is a non recourse proprietor. This reserve amount is reflected in the below schedule, listed as Additional Reserve from proprietor. This amount has been excluded from the income statement as this money has been received from the proprietor by deducting a certain percentage from their daily sales. As of December 31, 1995, these amounts have been reclassified and have been removed from this category. TABLE 3 - RESERVE FOR POSSIBLE LOAN LOSSES (Amounts in thousands)
Three Months Ended Six Months Ended June 30 June 30 1996 1995 1996 1995 Balance at beginning of period $1,505 $ 946 $1,500 $935 Loans charged off (563) (260) (1,147) (530) Recoveries 150 121 317 199 Net (charge-offs) recoveries (413) (139) (830) (331) Provision for loan losses 410 130 832 331 Additional Reserve from Proprietors 0 3 0 5 BALANCE AS END OF PERIOD 1,502 940 1,502 940 Reserve for possible loan losses as a percentage of loans 1.98% 1.33% 1.98% 1.33% Net (charge-offs) recoveries as a percentage of average loans 0.54% 0.20% 1.09% 0.48%
FUNDING SOURCES: DEPOSITS Deposits. Average deposits totaled $95,265 thousand in the second quarter of 1996, an increase of $3,957 thousand (4.33%) from $91,308 thousand in the second quarter of 1995. Average core deposits were $94,005 thousand for the second quarter of 1996 up from $89,487 thousand in the second quarter of 1995. Table 4 presents the composition of average deposits for the three quarters ending June 30, 1996, March 31, 1996 and June 30, 1995. TABLE 4 - DEPOSIT COMPOSITION (Amounts in thousands)
For the Three Months Ended 06/96 03/96 06/95 Average % of Average % of Average % of Balance Dep. Balance Dep. Balance Dep. Demand, noninterest- bearing $33,247 34.90% $32,578 34.90% $30,962 33.91% NOW accounts 12,301 12.91% 11,725 12.56% 10,864 11.91% Money Market deposit 8,198 8.61% 7,576 8.12% 8,724 9.55% accounts Savings accounts 25,933 27.22% 25,126 26.93% 25,776 28.23% Other time deposits 14,326 15.04% 15,168 16.26% 13,161 14.41% TOTAL CORE DEPOSITS 94,005 98.68% 92,173 98.77% 89,487 98.01% Certificates of deposit of $100,000 or more 1,260 1.32% 1,144 1.23% 1,821 1.99% TOTAL DEPOSITS $95,265 100.00% $93,317 100.00% $91,308 100.00%
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 thousand 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. This portion of our asset/liability management system is called gap management. We also have established policies that are designed to protect the Bank's interest margins from erosion. This portion of the system is called spread management. We define gap management as those actions taken first to measure and then to match rate-sensitive assets to rate-sensitive liabilities. We define a rate-sensitive asset as any earning asset that can be repriced to a market rate in a given time frame. Similarly, a rate-sensitive liability is any interest bearing liability that will have its interest rate changed to a market rate during a specified time period. A negative gap is created when rate-sensitive liabilities exceed rate-sensitive assets. Conversely, a positive gap occurs when the Bank has more rate-sensitive assets than liabilities. Again, a gap only has relevance with respect to a specific time period. 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. The Bank manages its interest rate sensitivity through several techniques which include changing the maturity and distribution of assets and liabilities, repricing of the loan portfolio and other methods. RESULTS OF OPERATION 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. Net interest income for the first six months of 1996 increased $354 thousand over the same period last year, and decreased $15 thousand from the first quarter of 1996. The net interest income margin increased to 5.45% for the second quarter of 1996 from 4.82% for the first quarter of 1995. QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1) (Amounts in thousands except per share data)
Three Months Ended Six Months Ended 6/96 3/96 6/95 6/96 6/95 Interest Income $ 3,119 $ 3,122 $ 2,802 $ 6,242 $ 5,470 Interest Expense 560 548 597 1,108 1,127 Net Interest Income 2,559 2,574 2,205 5,134 4,343 Provision for Loan Loss 410 421 131 832 331 Net Interest Income after Provision 2,149 2,153 2,074 4,302 4,012 Noninterest income: Noninterest income 611 615 651 1,226 1,318 Securities gains 0 0 0 0 0 Noninterest income 611 615 651 1,226 1,318 Noninterest expense 2,654 2,464 2,271 5,118 4,489 Income before taxes 106 304 454 410 841 Income tax expense 64 121 216 185 353 NET INCOME (LOSS) 42 183 238 225 488 Income per common share $0.23 $1.02 $1.33 $1.26 $2.73 Average common shares outstanding 179 179 179 179 179 Selected Quarter-End Balances Loans $75,750 $75,733 $70,822 Deposits 94,877 95,045 95,819 Long-term debt 2,387 2,388 2,390 Stockholders' equity 7,580 7,542 7,778 Total assets 106,442 106,373 107,469 Selected Average Balances Loans $75,975 $73,764 $69,690 $74,870 $68,609 Deposits 94,378 93,317 93,003 93,847 92,739 Long-term debt 2,388 2,389 2,391 2,388 2,399 Stockholders' equity 7,581 7,480 7,649 7,532 7,476 Total assets 105,869 104,562 101,929 105,194 101,485 Selected Ratios Return on average assets 0.04% 0.18% 0.23% 0.21% 0.48% Return on average equity 0.55% 2.45% 3.11% 2.99% 6.53% Tier 1 risk-based capital 11.76% 11.75% 12.42% Total risk-based capital 13.02% 13.00% 13.67% Leverage ratio 8.76% 8.79% 9.06% (1) Prior periods have been conformed to current-period presentation.
NONINTEREST INCOME Noninterest income for the second quarter of 1996 decreased $40 thousand or 6.14% from the same period last year. For the first six months of 1996 compared to 1995 noninterest income decreased 6.98% from $1,318 thousand to $1,226 thousand. The major categories of noninterest income for the three months ended June 30, 1996 and 1995 and the six months ended June 30, 1996 and 1995 are presented in Table 5. TABLE 5 - NONINTEREST INCOME (1) (Amounts in thousands)
Three Months Ended Six Months Ended Percent Percent 6/96 6/95 Increase 6/96 6/95 Increase Decrease Decrease Service Charges $ 163 $ 176 (7.39%) $ 319 $ 347 (8.07%) NSF Charges 198 189 4.76% 404 381 6.04% Earnings in Equity Subsidiary 0 0 N/M 0 (35) (100%) Gain on Sale of Securities 0 0 N/M 0 0 N/M Cardholder & Other Cr Cd Income 100 136 (26.47%) 221 229 (3.49%) Membership Fees 59 68 (13.24%) 115 131 (12.21%) Data Processing & Items Processing 6 7 (14.29%) 13 15 (13.33%) Other Comm & Fees 67 20 235.00% 94 96 (2.08%) ORE Income 7 11 (36.36%) 12 24 (50.00%) Gain on Sale of ORE 7 17 (58.82%) 7 60 (88.33%) Other Income 4 27 (85.19%) 41 70 (41.43%) TOTAL NONINTEREST INCOME $ 611 $ 651 (6.14%) $1,226 $1,318 (6.98%) N/M = Not meaningful (1) Prior periods have been conformed to current-period presentation.
NONINTEREST EXPENSE Noninterest expense for the second quarter of 1996 increased $387 thousand or 16.86% from the same period last year. The major categories of noninterest expense for the six months ended June 30, 1996 and 1995 are presented in Table 6. The increase from the same period last year is mainly due to postage, professional fees and ORE expenses. TABLE 6 - NONINTEREST EXPENSE (1) (Amounts in thousands)
Three Months Ended Six Months Ended Percent Percent 6/96 6/95 Increase 6/96 6/95 Increase Decrease Decrease Salaries & Benefits $1,057 $ 943 12.09% $2,066 $1,882 9.78% Loss on Litigation 0 0 N/M 0 0 N/M Occupancy Expense 422 420 0.48% 869 835 4.07% Advertising Expense 76 79 (3.80%) 159 161 (.63%) Communications 98 62 58.06% 178 123 44.72% Postage 167 78 114.10% 282 128 120.31% Loan & Credit Card Expense 322 213 51.17% 595 422 41.00% Professional Fees 97 58 67.24% 179 111 61.26% Legal Fees 48 47 2.13% 125 105 19.05% Insurance & Assessments 26 76 (65.79%) 50 163 (69.33%) Stationery, Forms & Supply 111 120 (7.50%) 228 191 19.37% Federal Reserve Charges 24 22 9.09% 46 46 N/M ORE Expenses 97 60 61.67% 135 107 26.17% Other Operating Expense 113 93 17.20% 206 215 (4.63%) TOTAL NONINTEREST EXPENSE $2,658 $2,271 16.86% $5,118 $4,489 14.01% N/M = Not meaningful (1) Prior periods have been conformed to current-period presentation.
INCOME TAXES The Company recorded a provision for income taxes of $185 thousand for the second quarter of 1996 and $353 thousand for the second quarter of 1995. 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 ADEQUACY RATIOS 6/96 3/96 12/95 9/95 6/95 Risk-based capital Tier 1 risk-based capital ratio 11.76% 11.75% 11.46% 12.19% 12.42% Total risk-based capital ratio 13.02% 13.00% 12.72% 13.42% 13.67% Leverage ratio 8.76% 8.79% 8.54% 9.13% 9.06%
LIQUIDITY Liquidity and capital resources are discussed weekly by the management committee, the assets and liability committee and at each executive committee meeting of the Bank's officers. The Bank has no long term debt and maintains adequate capital to meet its needs in the foreseeable future. The liquidity ratio for the Bank was 27.81% at June 30, 1996, 27.94% at March 31, 1996, and 33.10% at June 30, 1995. The Bank's policy is to manage its liquidity through normal operations, so that there is no need to make unplanned sales of assets or to borrow funds under adverse conditions. This policy not withstanding, the Bank has also established other potential sources of funds. Management has no knowledge of any trends, events or uncertainties that would have a material effect on liquidity. 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) August 14, 1996 Peggy L. Schaefer Date Peggy L. Schaefer Treasurer EX-27 2 ARTICLE 9 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
9 1,000 6-MOS Dec-31-1996 Jun-30-1996 5744 0 11075 0 9095 9095 9082 75750 1502 106442 94877 0 1598 2388 0 2303 179 0 106442 5719 263 260 6242 992 116 5134 832 0 5118 410 410 0 0 225 1.26 0 4.82 1987 4289 0 1536 1500 1147 317 1502 1502 0 0
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