-----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, U/7z8YgqZF81aDEK3yqB1IDRs6sD4IzgIe8UxnVVE9yfbuOpFrW0rmahymPZfmBZ u5WBFqKK3TVWavL/oZVUfA== 0000832818-96-000009.txt : 19961113 0000832818-96-000009.hdr.sgml : 19961113 ACCESSION NUMBER: 0000832818-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658142 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 September 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 Sept 30, 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)
Sept 1996 December 1995 Sept 1995 ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash $ 6,901 $ 6,742 $ 6,405 Interest Bearing Balances 0 0 100 Investment Securities Securities Held to Maturity (Fair Values at 9/30/96, 12/31/96, and 9/30/95, respectively were $7,975,976, $10,015,625, and $9,993,437) 7,968 10,014 10,021 Securities Available for Sale 1,077 1,122 1,119 Federal Funds Sold 11,450 10,725 11,075 Loans, net of unearned income 72,280 74,943 73,674 Reserve for possible loan loss (1,500) (1,500) (958) Property, Equipment, and Lease- hold Improvements (Net of Depreciation & Amortization) 2,756 2,575 2,508 Other Real Estate 1,699 1,994 2,446 Deferred Taxes 371 0 8 Investment in Subsidiary 0 0 0 Other Assets 2,031 1,974 1,518 TOTAL ASSETS $ 105,033 $108,589 $107,916
LIABILITIES Deposits: Non-Interest Bearing 33,982 35,822 32,412 Interest Bearing 59,857 61,564 63,580 TOTAL DEPOSITS 93,839 97,386 95,992 Deferred Taxes 0 0 0 Notes Payable 496 499 500 Senior Secured Debentures 1,890 1,890 1,890 Accrued Litigation Settlement 390 390 390 Other Liabilities 1,071 1,056 1,208 TOTAL LIABILITIES $ 97,686 $101,221 $ 99,980 STOCKHOLDER'S EQUITY Common Stock-Par Value $1, Authorized-1,000,000,000 shares; issued 179,145, 179,145, & 179,145 at 9/30/96, 12/31/95, & 9/30/95 179 179 179 Preferred Stock-Par Value $1, Authorized 3,000,000,000 shares; issued 2,302,811, 2,302,811 & 2,302,811 at 9/30/96, 12/31/95, & 9/30/95 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 (8) 18 20 Current Earnings 6 145 711 TOTAL STOCKHOLDERS' EQUITY 7,347 7,368 7,936 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 105,033 $ 108,589 $107,916 See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (Amounts in thousands, except per share data)
Three months ended Nine months ended Sept 30 Sept 30 1996 1995 1996 1995 INTEREST INCOME Interest and fees on loans $2,848 $2,540 $8,567 $7,410 Interest on time deposits 0 2 0 4 Interest on security-HTM 113 149 347 526 Interest & dividends on security-AFS 13 18 42 50 Interest on federal funds sold 130 205 389 394 Other Interest Income 0 1 0 1 TOTAL INTEREST INCOME 3,104 , 2,915 9,345 8,385 INTEREST EXPENSE Interest on deposits 485 580 1,477 1,593 Interest on federal funds purchased 0 0 0 0 Other interest expense 1 1 5 3 Interest expense on notes payable 14 13 40 40 Interest expense on debentures 42 43 128 128 TOTAL INTEREST EXPENSE 542 637 1,650 1,764 NET INTEREST INCOME 2,562 2,278 7,695 6,621 Provision for loan losses 627 288 1,459 619 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,935 1,990 6,236 6,002 OTHER INCOME Service charge on deposit accts 353 368 1,079 1,096 Cardholder & other credit cd income 162 158 498 518 ORE income 5 36 24 120 Other operating income 56 65 202 246 Equity in earnings of unconsolidated subsidiary 0 0 0 (35) Gain on sale of securities 0 0 0 0 TOTAL OTHER INCOME 576 627 1,803 1,945 OTHER EXPENSE Salaries and employee benefits 1,065 951 3,131 2,833 Occupancy expense 503 437 1,372 1,272 Loan & credit card expense 298 198 893 620 ORE expense 59 38 194 145 Other operating expense 909 602 2,362 1,845 TOTAL OTHER EXPENSES 2,834 2,226 7,952 6,715 Income Before Tax Provision (323) 391 87 1,232 Provision for taxes (104) 168 81 521 NET INCOME $ (219) $ 223 $ 6 $ 711 Earnings Per Share of Common Stock ($1.22) $1.25 $0.03 $3.97 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 (27) (27) Net Income 6 6 Balance 09/30/96 $179 $2,303 $(8) $4,858 $15 $7,347 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 (32) (32) Net Income 711 711 Balance 9/30/95 $179 $2,303 $20 $5,419 $15 $7,936
BOL BANCSHARES, INC. STATEMENTS OF CASH FLOWS(1) FOR THE NINE MONTHS ENDED SEPT 30, 1996 AND 1995 (Unaudited) (Amounts in thousands)
1996 1995 OPERATING ACTIVITIES Net Income (Loss) $ 6 $ 711 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Provision for Loan Losses 1,459 619 Depreciation & Amortization Expense 261 141 Amortization of Investment Security Premiums (42) 20 Accretion of Investment Security Discounts 2 (35) (Decrease)Increase in Deferred Income Taxes (374) (53) (Gain) Loss on Sale of Property & Equipment 2 (22) (Gain) Loss on Sale of Other Real Estate 3 (80) Decrease (Increase) in Other Assets and Prepaid Taxes (237) 1,689 (Decrease) Increase in Other Liabilities & Accrued Interest (310) 58 Net Decrease (Increase) in Mortgage Loans Held for Resale 159 (0) Undistributed Equity Method Income 0 34 Gain on Sale of AFS Securities 0 0 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 929 3,082 INVESTING ACTIVITIES Proceeds from Sale of AFS Securities 7 0 Proceeds from AFS Securities Released at Maturity 978 0 Purchases of AFS Securities (1,000) (984) Proceeds from HTM Investment Securities Released at Maturity 7,558 5,000 Purchases of HTM Investment Security (5,453) 0 Proceeds from Sale of Property & Equipment 3 28 Purchases of Property & Equipment (449) (780) Proceeds from Sale of Other Real Estate 293 405 Purchases of Other Real Estate (3) 0 Net Decrease (Increase) in Loans 1,612 (6,466) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,546 (2,797) FINANCING ACTIVITIES Net Increase (Decrease) in Demand Deposits, Interest Bearing Deposits Savings Accounts, & CD's (3,532) 4,229 Proceeds from Issuance of Long-Term Debt 0 0 Retirement of Stock 0 (6) Dividends Paid 0 0 Principal Payments on Long Term Debt (3) (32) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,535) 4,191 Net Increase (Decrease) in Cash & Cash Equivalents 940 4,476 Cash & Cash Equivalents at Beginning of Year 17,411 13,104 CASH & CASH EQUIVALENTS AT END OF PERIOD $ 18,351 $ 17,580 (1) Prior periods have been conformed to current-period presentation. See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sept 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 nine-month period ended Sept 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. 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 Sept 30, 1996 and 1995 respectively. Note 3. 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 4. 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 Sept 30, 1996, the Bank did not have any impaired loans. Note 5. 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 115.25% from $1,980 thousand at Sept 30, 1995 to $4,262 thousand at Sept 30, 1996. Note 6. 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)
Sept 30, 1996 Carrying Amount Fair Value Financial Assets: Cash and Short Term Investments $ 18,351 $ 18,351 Investment Securities 9,045 9,053 Loans 72,280 72,132 Less: Allowance for Loan Losses 1,500 1,500 $ 98,176 $ 98,036 Financial Liabilities: Deposits $ 94,438 $ 94,487 Unrecognized Financial Instruments: Commitments to Extend Credit $ 279 $ 279 Commercial Lines of Credit 146 146 Credit Card Arrangements 76,592 76,592 $ 77,017 $ 77,017
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1) (Amounts in thousands)
Third Quarter 1996 Second Quarter 1996 Interest Interest Average Income/ Yield Average Income/ Yield Balance Expense Rate Balance Expense Rate ASSETS Interest-earning assets: Loans (2) $ 73,346 $ 2,848 3.88% $ 75,975 $2,865 3.77% Securities (HTM) 8,062 113 1.40% 7,988 112 1.40% Securities (AFS) 1,093 13 1.19% 1,109 13 1.17% Interest Bearing Deposits 0 0 0 0 Federal Funds Sold 9,969 130 1.30% 9,845 129 1.31% TOTAL INTEREST-EARNING ASSETS 92,470 3,104 3.36% 94,917 3,119 3.29% Allowance for loan losses (1,453) (1,526) Non interest-earning assets: Cash and due from banks 5,657 5,978 Premises and equipment 2,689 2,652 Other real estate 1,699 1,851 Other assets 2,698 1,997 TOTAL NONINTEREST-EARNING ASSETS 12,743 12,478 TOTAL ASSETS $ 103,760 $105,869 LIABILITIES AND STOCKHOLDERS EQUITY Interest-bearing liabilities: Interest-bearing deposits: NOW accounts $ 12,535 $ 77 .61% $ 12,301 $ 68 .55% Money market deposit a/c 7,417 51 .69% 7,314 45 .62% Savings and other consumer time deposits 38,516 344 .89% 40,259 378 .94% Certificates of deposits of $100,00 or more 1,136 13 1.14% 1,260 12 .95% TOTAL INTEREST-BEARING DEPOSITS 59,604 485 .81% 61,134 503 .82% Long-term debt 2,387 57 2.39% 2,388 57 2.39% TOTAL INTEREST-BEARING LIABILITIES 61,991 542 .87% 63,522 560 .88% Noninterest-bearing liabilities: Demand deposits 32,891 33,244 Other liabilities 1,602 1,522 TOTAL NONINTEREST-BEARING LIABILITIES 34,493 34,766 Total stockholders' equity 7,276 7,581 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 103,760 $105,869 SPREAD AND NET YIELD Interest rate spread 2.48% 2.40% Net interest income/margin $ 2,562 2.77% $2,559 2.70% (1) Prior periods have been conformed to current-period presentation (2) Excludes unearned income. For purposes of yield computations, nonaccrual loans are included in loans outstanding.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1) (Continued) Nine Months Ended Nine Months Ended Sept 30, 1996 Sept 30, 1995 Interest Interest Average Income/ Yield Average Income/ Yield Balance Expense Rate Balance Expense Rate ASSETS Interest-earning assets: Loans (2) $ 74,358 $ 8,567 11.52% $ 69,227 $7,411 10.70% Securities (HTM) 8,346 347 4.16% 13,067 526 4.03% Securities (AFS) 1,108 42 3.79% 920 50 5.43% Interest Bearing Deposits 0 0 81 4 5.54% Federal Funds Sold 9,846 389 3.95% 9,003 394 4.38% TOTAL INTEREST-EARNING ASSETS 93,658 9,345 9.98% 92,298 8,385 9.08% Allowance for loan losses (1,402) (980) Non interest-earning assets: Cash and due from banks 5,895 5,761 Premises and equipment 2,632 2,172 Other real estate 1,861 2,594 Other assets 2,083 2,224 TOTAL NONINTEREST-EARNING ASSETS 12,471 12,751 TOTAL ASSETS $ 104,727 $104,069 LIABILITIES AND STOCKHOLDERS EQUITY Interest-bearing liabilities: Interest-bearing deposits: NOW accounts $ 12,187 $ 194 1.59% $ 11,536 $ 203 1.76% Money market deposit a/c 7,435 152 2.04% 7,938 170 2.14% Savings and other consumer time deposits 39,485 1,092 2.77% 39,567 1,174 2.97% Certificates of deposits of $100,00 or more 1,180 39 3.31% 1,627 49 3.01% TOTAL INTEREST-BEARING DEPOSITS 60,287 1,477 2.45 60,668 1,596 2.63% Long-term debt 2,388 173 7.24% 2,397 168 7.01% TOTAL INTEREST-BEARING LIABILITIES 62,675 1,650 2.63% 63,065 1,764 2.80% Noninterest-bearing liabilities: Demand deposits 33,106 31,747 Other liabilities 1,502 1,570 TOTAL NONINTEREST-BEARING LIABILITIES 34,608 33,317 Total stockholders' equity 7,444 7,687 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 104,727 $104,069 SPREAD AND NET YIELD Interest rate spread 7.35% 6.29% Net interest income/margin $ 7,695 8.22% $6,621 7.17% (1) Prior periods have been conformed to current-period presentation (2) Excludes unearned income. For purposes 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 Sept 30, 1996 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 $93,658 thousand in the third quarter of 1996, a $1,360 thousand increase from the third quarter of 1995 average of $92,298 thousand. Compared to the third quarter of 1995 average loans decreased $5,131 thousand (7.41%) and federal funds sold increased $843 thousand (9.36%) while investment securities decreased $4,533 thousand (32.41%). Table 1 presents the Company's loan portfolio by major classifications. Total loans decreased $1,394 thousand (1.89%) over the third quarter of 1995. TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO (Amounts in thousands)
9/30/96 % of 6/30/96 % of 9/30/95 % of Total Total Total Real Estate Mortgages $23,065 31.91% $23,588 31.14% $21,832 29.63% Commercial Loans 5,494 7.60% 5,222 6.89% 5,732 7.78% Mortgage Loans Held for Resale 97 .13% 95 .14% 0 .00% Personal Loans 4,332 5.99% 4,435 5.85% 6,454 8.76% Credit Cards 39,146 54.17% 42,149 55.64% 39,226 53.25% Overdrafts 146 .20% 261 .34% 430 .58% TOTAL LOANS $72,280 100.00% $75,750 100.00% $73,674 100.00%
Securities Held to Maturity. Average securities held to maturity decreased $4,721 thousand (36.13%) from the third 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 increased $188 thousand 20.43% from the third quarter of 1995. Securities available for sale are carried at fair value. Short Term Investments. Average federal funds sold increased $843 thousand 9.36% up from the third 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 $2,015 thousand at Sept 30, 1996 as compared to $3,076 thousand at Sept 30, 1995. Other real estate totaled $1,699 thousand at Sept 30, 1996 as compared to $2,446 thousand at Sept 30, 1995. Table 2 - NONPERFORMING ASSETS (Amounts in thousands)
09/96 06/96 03/96 12/95 09/95 Nonaccrual Loans $ 316 $ 288 $ 139 $ 235 $ 630 Other Real Estate 1,699 1,699 2,052 1,994 2,446 TOTAL NONPERFORMING 2,015 1,987 2,191 2,229 3,076 ASSETS Accruing loans past due 90 days or more 1,754 4,289 2,074 1,062 1,715 Reserve for loan losses 1,500 1,502 1,505 1,500 958 Nonperforming assets as a percentage of loans plus foreclosed assets 2.72% 2.57% 2.82% 2.90% 4.20% Reserve for loan losses as a percentage of nonperforming loans 74.44% 75.59% 68.72% 67.30% 31.15%
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES Table 3 presents an analysis of the activity in the reserve for possible loan losses for the third quarter and the first nine months of 1996 and 1995. The reserve for loan losses as a percentage of loans increased from 1.35% at Sept 30, 1995 to 2.08% at Sept 30, 1996. The net charge-off (recoveries) as a percentage of average loans decreased from 0.88% at Sept 30, 1995 to 0.83% at Sept 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 Nine Months Ended Sept 30 Sept 30 1996 1995 1996 1995 Balance at beginning of period $1,502 $ 940 $1,500 $935 Loans charged off (905) (370) (2,052) (900) Recoveries 276 95 593 294 Net (charge-offs) recoveries (629) (275) (1,459) (606) Provision for loan losses 627 288 1,459 619 Additional Reserve from Proprietors 0 5 0 10 BALANCE AS END OF PERIOD 1,500 958 1,500 958 Reserve for possible loan losses as a percentage of loans 2.08% 1.35% 2.08% 1.35% Net (charge-offs) recoveries as a percentage of average loans 0.83% 0.40% 1.92% 0.88%
FUNDING SOURCES: DEPOSITS Deposits. Average deposits totaled $93,393 thousand in the third quarter of 1996, an increase of $978 thousand (1.06%) from $92,415 thousand in the third quarter of 1995. Average core deposits were $92,213 thousand for the third quarter of 1996 down from $93,942 thousand in the third quarter of 1995. Table 4 presents the composition of average deposits for the three quarters ending Sept 30, 1996, June 30, 1996 and Sept 30, 1995. TABLE 4 - DEPOSIT COMPOSITION (Amounts in thousands)
09/96 06/96 09/95 Average % of Average % of Average % of Balance Dep. Balance Dep. Balance Dep. Demand, noninterest- bearing $33,106 35.45% $33,247 34.90% $31,672 33.27% NOW accounts 12,187 13.05% 12,301 12.91% 12,863 13.51% Money Market deposit 7,435 7.96% 8,198 8.61% 7,995 8.40% accounts Savings accounts 25,317 27.11% 25,933 27.22% 27,286 28.67% Other time deposits 14,168 15.17% 14,326 15.04% 14,126 14.84% TOTAL CORE DEPOSITS 92,213 98.74% 94,005 98.68% 93,942 98.69% Certificates of deposit of $100,000 or more 1,180 1.26% 1,260 1.32% 1,246 1.31% TOTAL DEPOSITS $93,393 100.00% $95,265 100.00% $95,188 100.00%
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 nine months of 1996 increased $1,074 thousand over the same period last year, and increased $2 thousand from the second quarter of 1996. The net interest income margin increased to 8.22% for the third quarter of 1996 from 7.17% for the third quarter of 1995. QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1) (Amounts in thousands except per share data)
Three Months Ended Nine Months Ended 9/96 6/96 9/95 9/96 9/95 Interest Income $ 3,103 $ 3,119 $ 2,915 $ 9,345 $ 8,385 Interest Expense 542 560 637 1,650 1,764 Net Interest Income 2,561 2,559 2,278 7,695 6,621 Provision for Loan Loss 627 410 288 1,459 619 Net Interest Income after Provision 1,934 2,149 1,990 6,236 6,002 Noninterest income: Noninterest income 577 611 627 1,803 1,945 Securities gains 0 0 0 0 0 Noninterest income 577 611 627 1,803 1,945 Noninterest expense 2,834 2,654 2,226 7,952 6,715 Income before taxes (323) 106 391 87 1,232 Income tax expense (104) 64 168 81 521 NET INCOME (LOSS) (219) 42 223 6 711 Income per common share ($1.22) $0.23 $1.25 $0.03 $3.97 Average common shares outstanding 179 179 179 179 179 Selected Quarter-End Balances Loans $72,280 $75,750 $73,674 Deposits 93,839 94,877 95,992 Long-term debt 2,386 2,387 2,389 Stockholders' equity 7,347 7,580 7,936 Total assets 105,033 106,442 107,916 Selected Average Balances Loans $73,346 $75,975 $70,276 $74,358 $69,227 Deposits 92,495 94,378 95,188 93,393 92,415 Long-term debt 2,387 2,388 2,390 2,388 2,397 Stockholders' equity 7,276 7,581 7,918 7,444 7,687 Total assets 103,760 105,869 107,970 104,727 104,069 Selected Ratios Return on average assets (0.21%) 0.04% 0.21% 0.01% 0.68% Return on average equity (3.01%) 0.55% 2.82% 0.08% 9.25% Tier 1 risk-based capital 12.07% 11.76% 12.19% Total risk-based capital 13.33% 13.02% 13.42% Leverage ratio 8.82% 8.76% 9.13% (1) Prior periods have been conformed to current-period presentation.
NONINTEREST INCOME Noninterest income for the third quarter of 1996 decreased $51 thousand or 8.13% from the same period last year. For the first nine months of 1996 compared to 1995 noninterest income decreased 7.30% from $1,945 thousand to $1,803 thousand. The major categories of noninterest income for the three months ended Sept 30, 1996 and 1995 and the nine months ended Sept 30, 1996 and 1995 are presented in Table 5. TABLE 5 - NONINTEREST INCOME (1) (Amounts in thousands)
Three Months Ended Nine Months Ended Percent Percent 9/96 9/95 Increase 9/96 9/95 Increase Decrease Decrease Service Charges $ 162 $ 173 (6.36%) $ 485 $ 520 (6.73%) NSF Charges 191 195 (2.05%) 594 576 3.13% 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 107 102 4.90% 327 331 (1.21%) Membership Fees 55 56 (1.79%) 171 187 (8.56%) Data Processing & Items Processing 7 7 0.00% 20 22 (9.09%) Other Comm & Fees 26 24 8.33% 76 120 (36.67%) ORE Income 5 16 (68.75%) 17 40 (57.50%) Gain on Sale of ORE 0 20 (100.00%) 7 80 (91.25%) Other Income 23 34 (32.35%) 106 104 1.92% TOTAL NONINTEREST INCOME $ 576 $ 627 (8.13%) $1,803 $1,945 (7.30%) N/M = Not meaningful (1) Prior periods have been conformed to current-period presentation.
NONINTEREST EXPENSE Noninterest expense for the third quarter of 1996 increased $1,237 thousand or 18.42% from the same period last year. The major categories of noninterest expense for the nine months ended Sept 30, 1996 and 1995 are presented in Table 6. The increase from the same period last year is mainly due to communications, postage and loan & credit card expenses. TABLE 6 - NONINTEREST EXPENSE (1) (Amounts in thousands)
Three Months Ended Nine Months Ended Percent Percent 9/96 9/95 Increase 9/96 9/95 Increase Decrease Decrease Salaries & Benefits $1,065 $ 951 11.99% $3,131 $2,833 10.52% Loss on Litigation 0 0 N/M 0 0 N/M Occupancy Expense 504 437 15.33% 1,372 1,272 7.86% Advertising Expense 70 94 (25.53%) 229 254 (9.84%) Communications 106 66 60.61% 283 189 49.74% Postage 172 84 104.76% 455 212 114.62% Loan & Credit Card Expense 298 198 50.51% 893 620 44.03% Professional Fees 85 77 10.39% 263 188 39.89% Legal Fees 80 57 40.35% 205 161 27.33% Insurance & Assessments 21 16 31.25% 71 179 (60.34%) Stationery, Forms & Supply 119 84 41.67% 348 276 26.09% Federal Reserve Charges 24 24 N/M 70 70 N/M ORE Expenses 60 38 57.89% 194 145 33.79% Other Operating Expense 224 100 124.00% 438 316 38.61% TOTAL NONINTEREST EXPENSE $2,828 $2,226 27.04% $7,952 $6,715 18.42% 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 $81 thousand for the third quarter of 1996 and $521 thousand for the third 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 9/96 6/96 3/96 12/95 9/95 Risk-based capital Tier 1 risk-based capital ratio 12.07% 11.76% 11.75% 11.46% 12.19% Total risk-based capital ratio 13.33% 13.02% 13.00% 12.72% 13.42% Leverage ratio 8.82% 8.76% 8.79% 8.54% 9.13%
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 30.07% at Sept 30, 1996, 27.81% at June 30, 1996, and 30.15% at Sept 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) October 23, 1996 Peggy L. Schaefer Date Peggy L. Schaefer Treasurer EX-27 2 ARTICLE 9 FIN. DATA SCHEDULE FOR 3RD QTR 10-Q
9 1,000 9-MOS Dec-31-1996 Sep-30-1996 6901 0 11450 0 9045 9045 9053 72280 1500 105033 93839 0 1461 2386 0 2303 179 0 105033 8567 389 389 9345 1477 173 7695 1459 0 7952 87 87 0 0 6 0.03 0 7.35 2015 1754 0 4262 1500 2052 593 1500 1500 0 0
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