-----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, WRdOMpL0DYMs+7tOoRDSB/A8IHJ9vfnhrTWwtsMlgFDInKR8qXuDYsMDNF3aDj9x 3q4ovX+Xf83V7nOmRIb3/w== 0000832818-98-000003.txt : 19980507 0000832818-98-000003.hdr.sgml : 19980507 ACCESSION NUMBER: 0000832818-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980506 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: SEC FILE NUMBER: 000-16934 FILM NUMBER: 98611194 BUSINESS ADDRESS: STREET 1: 300 ST CHARLES AVE CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5048899400 MAIL ADDRESS: STREET 1: 300 ST CHARLES AVENUE CITY: NEW ORLEANS STATE: LA ZIP: 70130 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1998 Commission file Number 01-16934 BOL BANCSHARES, INC. (Exact name of registrant as specified in its charter.) Louisiana 72-1121561 (State of incorporation) (I. R. S. Employee Identification No.) 300 St. Charles Avenue, New Orleans, La. 70130 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (504) 889-9400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $1 Par Value - 179,145 shares as of April 30, 1998. BOL BANCSHARES, INC. & SUBSIDIARY INDEX Page No. PART I. Financial Information Item 1: Financial Statements Consolidated Statement of Condition 3 Consolidated Statements of Income 5 Consolidated Statements of Changes in Stockholder's Equity 6 Consolidated Statement of Cash Flow 7 Notes to Consolidated Financial Statements 8 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation 12 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K A. Exhibits Exhibit 27. Financial Data Schedule 22 B. Reports on Form 8-K No reports have been filed on Form 8-K during this quarter.
Part I. - Financial Information BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CONDITION (Unaudited) March 31, Dec. 31, March 31, (Amounts in thousands) 1998 1997 1997 ASSETS Cash and Due from Banks Non-Interest Bearing Balances and Cash 7,632 7,734 7,001 Interest Bearing Balances - - - Investment Securities Securities Held to Maturity (Fair Values at 3/31/98, 12/31/97, & 3/31/97 respectively 9,486 9,479 9,464 were $9,514,000, $9,510,000, and $9,440,000) Securities Available for Sale 90 1,089 1,082 Federal Funds Sold 21,245 21,150 18,450 Loans, net of Unearned Discount 59,129 57,619 64,444 Allowance for Loan Losses (1,800) (1,800) (1,500) Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 2,605 2,698 2,624 Other Real Estate 1,473 1,473 1,776 Deferred Taxes 618 619 327 Letters of Credit 113 114 146 Other Assets 1,767 2,534 2,037 TOTAL ASSETS $102,358 $102,709 $105,851 See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CONDITION (Continued) March 31, Dec. 31, March 31, (Amounts in thousands) 1998 1997 1997 LIABILITIES Deposits: Non-Interest Bearing 34,389 35,124 35,840 Interest Bearing 59,277 58,816 59,689 TOTAL DEPOSITS 93,666 93,940 95,529 Notes Payable 489 491 494 Senior Secured Debentures 1,793 1,793 1,888 Letters of Credit Outstanding 113 114 146 Accrued Litigation Settlement 150 150 390 Accrued Interest 498 528 466 Other Liabilities 290 413 189 TOTAL LIABILITIES 96,999 97,429 99,102 STOCKHOLDERS' EQUITY Preferred Stock - Par Value $1 2,302,811 Shares Issued and Outstanding at 3/31/98, 12/31/97, and 3/31/97 2,303 2,303 2,303 Common Stock - Par Value $1 179,145 Shares Issued and Outstanding at 3/31/98, 12/31/97, and 3/31/97 179 179 179 Unrealized Gain (Loss) on Securities Available for Sale, net of applicable Deferred Income Taxes - (1) (5) Capital in Excess of Par - Retired Stock 15 15 15 Undivided Profits 2,783 4,759 4,758 Current Earnings 79 (1,975) (501) TOTAL STOCKHOLDERS' EQUITY 5,359 5,280 6,749 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,358 $102,709 $105,851 See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) March 31, March 31, (Amounts in thousands) 1998 1997 INTEREST INCOME Interest and Fees on Loans 2,015 2,414 Interest on Time Deposits - - Interest on Securities Held to Maturity 140 115 Interest and Dividends on Securities 6 13 Available for Sale Interest on Federal Funds Sold 275 210 Other Interest Income - - Total Interest Income 2,436 2,752 INTEREST EXPENSE Interest on Deposits 458 471 Interest on Federal Funds Purchased - - Other Interest Expense 10 10 Interest Expense on Notes Payable 3 3 Interest Expense on Debentures 39 42 Total Interest Expense 510 526 NET INTEREST INCOME 1,926 2,226 Provision for Loan Losses 300 780 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,626 1,446 OTHER INCOME Service Charges on Deposit Accounts 331 328 Cardholder & other credit card income 149 144 ORE Income 3 39 Other Operating Income 92 115 Gain on Sale of Securities - - Total Other Income 575 626 OTHER EXPENSE Salaries and Employee Benefits 827 1,035 Occupancy Expense 480 450 Loan & Credit Card Expense 230 309 ORE Expense 41 81 Other Operating Expense 544 698 Total Other Expenses 2,122 2,573 Income Before Tax Provision 79 (501) Provision (Benefit) For Income Taxes - - NET INCOME $79 ($501) Earnings Per Share of Common Stock $0.44 ($2.80) See accompanying notes to Financial Statements
BOL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited) UNREALIZED (Amounts in GAIN(LOSS) CAPITAL IN thousands) ON INVESTMENT EXCESS OF SECURITIES PAR PREFERRED COMMON AVAILABLE RETIRED RETAINED STOCK STOCK FOR SALE STOCK EARNINGS TOTAL Balance December 31, 2,303 179 (4) 15 4,758 7,251 1996 Change in unrealized gain on securities AFS, net of applicable deferred income taxes (1) (1) Net Income (501) (501) Balance - March 31, 2,303 179 (5) 15 4,257 $6,749 1997 Balance December 31, 2,303 179 (1) 15 2,783 5,279 1997 Change in unrealized gain on securities AFS, net of applicable deferred income taxes 1 1 Net Income (Loss) 79 79 Balance - March 31, 2,303 179 - 15 2,862 $5,359 1998
BOL BANCSHARES, INC. STATEMENTS OF CASH FLOWS (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Amounts in thousands) 1998 1997 OPERATING ACTIVITIES Net Income (Loss) 79 (501) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Provision for Loan Losses 780 780 Depreciation and Amortization Expense 108 93 Amortization of Investment Security Premiums 0 - Accretion of Investment Security Discounts (4) 18 (Decrease)Increase in Deferred Income Taxes 0 (0) (Gain) Loss on Sale of Property and - - Equipment (Gain) Loss on Sale of Other Real Estate - (35) Decrease(Increase) in Other Assets & Prepaid 767 17 Taxes (Decrease)Increase in Other Liabilities and (152) (125) Accrued Interest Net Decrease(Increase) in Mortgage Loans - (105) Held for Resale Net Cash Provided by (Used in) Operating 1,578 142 Activities INVESTING ACTIVITIES Proceeds from Sale of Available-for-Sale - - Securities Purchases of Available-for-Sale Securities - - Proceeds from Available-for-Sale Securities Released at Maturity 1,000 - Proceeds from Held-to-Maturity Investment Securities Released at Maturity 498 2,975 Purchases of Held-to-Maturity Investment (501) (4,480) Securities Proceeds from Sale of Property and Equipment 0 1 Purchases of Property and Equipment (16) (34) Proceeds from Sale of Other Real Estate - 105 Purchases of Other Real Estate - (124) Net Decrease (Increase) in Loans (2,289) 4,178 Net Cash Provided by (Used in) Investing (1,308) 2,621 Activities FINANCING ACTIVITIES Net Increase (Decrease) in Non-Interest Bearing and Interest Bearing Deposits (276) 389 Proceeds from Issuance of Long-Term Debt - - Retirement of Stock - - Principal Payments on Long Term Debt (1) (3) Net Cash Provided by (Used in) Financing (277) 386 Activities Net Increase (Decrease) in Cash and Cash (7) 3,149 Equivalents Cash and Cash Equivalents - Beginning of Year 28,884 22,303 Cash and Cash Equivalents - End of Period 28,877 $25,452 See Accompanying Notes to Financial Statements
BOL BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 Note 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 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, 1997. Note 2. PER SHARE DATA Income per common share data are based on the weighted average number of shares outstanding of 179,145 and 179,145 at March 31, 1998 and 1997 respectively. Note 3. CONTINGENCIES Because of the nature of the banking industry in general, the Company and the Bank are each parties from time to time to litigation and other proceedings in the ordinary course of business, none of which (other than those described below), either individually or in the aggregate, have a material effect on the Company's and/or the Bank's financial condition. Other than the lawsuits described below, the Company has either (i) posted reserves adequate to pay any judgments that may be rendered against the Company and such posting is reflected in the Company's consolidated financial statements for the period ending December 31, 1996, or (ii) believes the lawsuit is without sufficient merit or monetary exposure to require the posting of a reserve. The Company has not provided a judicial interest that may be awarded on a judgment pending the conclusion of the appeals procedure. Indeed, should the Company be successful in any of those lawsuits in which it has posted reserves, recoveries would be realized and the Company's consolidated net income would be positively impacted. The following actions, however, have been brought against the Company and, if the claimants were wholly successful on the merits, could result in significant exposure to the Bank: 1. The Company is a defendant in a lawsuit filed by a proprietary merchant alleging that the Company mishandled the Plaintiff's proprietary credit card portfolio. The Plaintiff seeks to recover in excess of $1,800,000. The Bankruptcy Court has established an escrow account, in which $270,404 was on deposit as of October 31, 1996, for the protection of the Company. This amount would significantly reduce any losses incurred by the Company in the event the Plaintiff is wholly successful on the merits. During 1997, a judgment was rendered against the Bank, and accordingly, a provision for loss of $150,000 has been charged to operation. The Bank has countersued and is presently appealing the judgment. Expected Results: Outside counsel advises that the Plaintiff will not prevail at all against the Company and that the Company will be able to fully recover all of its losses in this matter. 2. The Company is a defendant in a lawsuit filed by another bank alleging the Company improperly dishonored checks totaling $979,000. The Company claims that such checks were properly returned nonsufficient funds. When these checks were returned to the Plaintiff, of the $979,000, one check for $110,000 was misplaced by the FRB and therefore returned late to the Plaintiff. The Company was forced to cover the amount of the check. The Company filed a countersuit against the Plaintiffs for contribution on the $110,000 loss and for tortious interference. The Plaintiff filed exceptions to the countersuit. These exceptions were heard in the district court and the Company's right to contribution was maintained, however the Company's suit for tortious interference was dismissed. On appeal, the appellate court sustained the Company's right to contribution and overruled the lower court's decision on tortious interference, finding that the Company could maintain such a cause of action. The Louisiana Supreme Court denied writs filed by the Plaintiff. The case is currently awaiting trial. The Company is vigorously defending all claims asserted in this suit. Expected Results: Outside counsel advises that the Company will not pay any damages in this matter and the likelihood is reasonably high that the Company will obtain some recovery from the Plaintiff. 3a. Another proprietor filed a separate lawsuit on the same day that the Company initiated proceedings against this proprietor in Louisiana. The proprietor's suit was filed in the Southern District of New York and alleges that the Company mismanaged the proprietary credit card portfolio. It is known that the principal of the proprietor mentioned in 1. above has assisted in the preparation of this lawsuit and this litigation parrots the lawsuit mentioned in 1. above. The Company has filed a motion to dismiss the suit on the grounds that the parties agreed to litigate in Louisiana and on the further grounds that the Company is not subject to that Court's jurisdiction. The Company also moved to have the matter transferred by the judicial panel on multidistrict litigation. These rights were granted and consolidated. 3b. The new owners of the company mentioned in 3a. above filed a lawsuit in New York, claiming that it had security interest which primed the Company. The present principals came into existence on July 31, 1996 for the sole purposes of taking over the failing company and managing the operations. The new owners filed UCC-1 Statement to protect a consignment agreement it had with the failing company in August, 1996. The Company, on the other hand, filed UCC-1 Statements to protect its credit card portfolio in November and December of 1995. Just prior to the new principals filing in New York, the Company filed suit for declaratory judgment regarding the ranking of the liens in the Eastern District of Louisiana. 3c. The Company's suit centers around the proprietor sequestering payments which they received from the Company's credit card holders, but never forwarded to the Company. That amount exceeds $462,000. On October 1, 1997 the matters were transferred by the judicial panel on multidistrict litigation to the Eastern District of Louisiana and consolidated with the other cases. Hence 3a, 3b, and 3c have become one case. The Company sought injunction relief, requiring the proprietor to disclose where the payments were held and to either pay the funds to the Company or deposit the money in the Registry of the Court. On October 2, 1997 in order to avoid a hearing on the preliminary injunction which would have required the proprietor to disclose the location of the sequestered funds, the proprietor agreed to post bond with the Louisiana Federal Court, while drafts were being prepared. On October 15, 1997 the proprietor filed for Chapter 11. The Company requested that the stay be lifted in order to allow its claim against the proprietor to be liquidated and to recoup all of its losses and damages suffered from the proprietor. Expected Results: The Company filed its UCC-1 Statements first. There is little doubt that the Company primes the proprietor. The Company anticipates a quick resolution of this issue by way of declaratory judgment. Note 4. 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:
MARCH 31, 1998 Carrying Fair (Amounts in thousands) Amount Value Financial Assets: Cash and Short-Term Investments $28,877 $28,877 Investment Securities 9,575 9,604 Loans 59,129 59,072 Less: Allowance for Loan Losses 1,800 1,800 $95,781 $95,753 Financial Liabilities: Deposits $93,666 $93,680 Unrecognized Financial Instruments: Commitments to Extend Credit $499 $499 Commercial Lines of Credit 113 113 Credit Card Arrangements 58,645 58,645 $59,257 $59,257
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA For Three Months Ended (Amounts in thousands, except March 31, Dec. 31, March 31, per share data) 1998 1997 1997 Interest Income $2,436 $2,398 $2,752 Interest Expense 510 521 526 Net Interest Income 1,926 1,877 2,226 Provision for Loan Losses 300 633 780 Net Interest Income after 1,626 1,244 1,446 Provision Noninterest Income: Noninterest Income 575 963 626 Securities Gains - - - Noninterest Income 575 963 626 Noninterest Expense 2,122 2,637 2,573 Income before Taxes 79 (430) (501) Income Tax Expense (Benefit) - (1,171) - Net Income (Loss) $79 $741 ($501) Income per Common Share $0.44 $4.14 ($2.80) Average Common Shares 179 179 179 Outstanding Selected Quarter-End Balances Loans $59,129 $57,619 $64,444 Deposits 93,666 93,941 95,529 Long-Term Debt 2,282 2,284 2,382 Shareholders' Equity 5,359 5,280 6,749 Total Assets 102,358 102,709 105,851 Selected Average Balances Loans $58,561 $62,249 $69,298 Deposits $91,281 91,727 95,247 Long-Term Debt 2,283 2,333 1,889 Shareholders' Equity 4,944 5,727 7,025 Total Assets 99,907 101,220 106,100 Selected Ratios Return on Average Assets 0.08% 0.73% -0.47% Return on Average Equity 1.59% 12.94% -7.14% Tier 1 Risk-Based Capital 10.99% 10.61% 12.16% Risk-Based Capital 12.26% 11.88% 13.42% Tier 1 Leverage 6.95% 6.84% 8.32%
BOL BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1998 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. ACCOUNTING FOR YEAR 2000 COSTS The Company's Board of Directors has formulated a policy and has dedicated sufficient funds for the modification and replacement of software and hardware to ensure Year 2000 compliance. The Company began its replacement and modification of its software and hardware in late 1995, to ensure that operations would not be impaired by the date change. The related costs are capitalized and depreciated over the useful life of the asset. Certification has been received from the Company's vendors to confirm compliance on the respective equipment and software. All critical applications have already been modified and replaced, with one application presently in the migration process. This final replacement will be implemented and fully tested by year end 1998. FINANCIAL CONDITION: EARNING ASSETS Interest earning assets averaged $88,744,000 in the first quarter of 1998, a $3,350,000 decrease from the first quarter of 1997 average of $92,094,000. Compared to the first quarter of 1997, average loans decreased $8,181,000 (12.26%) while investment securities increased $703,000 (7.62%) and federal funds sold increased $4,128,000 (25.60%). Table 1 presents the Company's loan portfolio by major classifications. Total loans decreased $5,315,000 (8.25%)over the first quarter of 1997. This decrease is mainly attributable to the decline in the credit card portfolio. Visa / MasterCard loans decreased $2,552,000 (10.89%) and Proprietary loans decreased $4,127,000 (51.89%) due to the loss of several proprietary accounts.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO March 31,1998 Dec. 31, 1997 March 31, 1997 (Amounts in Loans % Loans % Loans % Thousands) Commercial, 5,679 9.60% 4,281 7.43% 6,391 9.92% Financial, & Agricultural Real Estate Mortgage 25,109 42.47% 24,643 42.77% 22,383 34.73% Mortgage Loan Held - 0.00% - 0.00% 105 0.16% for Resale Personal Loans 3,454 5.84% 5,103 8.86% 4,037 6.26% Credit Cards-Visa, 20,891 35.33% 20,302 35.23% 23,443 36.38% MasterCard Credit Cards- 3,826 6.47% 2,931 5.09% 7,953 12.34% Proprietary Overdrafts 170 0.29% 359 0.62% 132 0.20% Loans 59,129 100.00% $57,619 100.00% $64,444 100.00%
Securities Held to Maturity. Average securities held to maturity increased $1,342,000 (16.49%) from the first quarter of 1997. 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 $728,000 (67.22%) from the first quarter of 1997. Securities available for sale are carried at fair value. Short Term Investments. Average federal funds sold increased $4,128,000 (25.60%) up from the first quarter of 1997. This increase is mainly due to the decrease in the aforementioned credit card portfolio. ASSET QUALITY Table 2 presents a summary of nonperforming assets for the past five quarters. Nonperforming assets consist of nonaccrual and restructured loans and ORE. Nonaccrual loans are loans on which the interest accruals have been discontinued when it appears that future collection of principal or interest according to the contractual terms may be doubtful. Interest on these loans is reported on the cash basis as received when the full recovery of principal is anticipated or after full principal has been recovered when collection of interest is in question. The loan process ensures that all loans which meet the criteria for nonaccrual status are placed on nonaccrual. Restructured loans are those loans whose terms have been modified, because of economic or legal reasons related to the debtors' financial difficulties, to provide for a reduction in principal, change in terms, or fixing of interest rates at below market levels. ORE is real property acquired by foreclosure or directly by title or deed transfer in settlement of debt. Nonperforming assets, totaled $1,560,000 at March 31, 1998 as compared to $2,089,000 at March 31, 1997. Other real estate totaled $1,473,000 at March 31, 1998 as compared to $1,776,000 at March 31, 1997. Table 2. NONPERFORMING ASSETS (Amounts in 03/31/98 12/31/97 09/31/97 06/31/97 03/31/97 Thousands) Nonaccrual Loans 87 83 210 425 313 Restructured Loans - - - - - Other Real Estate Owned 1,473 1,473 1,357 1,494 1,776 Total Nonperforming Assets $1,560 $1,556 $1,567 $1,919 $2,089 Loans Past Due 90 996 1,257 1,501 1,874 3,745 days or More Ratio of Past Due 1.68% 2.18% 2.50% 3.02% 5.81% Loans to Loans Ratio of Nonperforming Assets to Loans and Other Real 2.57% 2.63% 2.55% 3.02% 3.15% Estate Owned
IMPAIRED LOANS As of March 31, 1998, the recorded investment in loans that are considered impaired under SFAS 114 and 118 was $548,110. The related allowance for credit losses for the impaired loans is not specifically identified, but is included in the percentages allocated to the portfolio. 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 16.42% to $3,802,000 at March 31, 1998 from $4,549,000 at March 31, 1997. Management is not aware of any potential problem loans other than those disclosed above, which includes all loans recommended for classification by regulators, which would have a material impact on asset quality. ALLOWANCE AND PROVISION FOR LOAN LOSSES Table 3 presents an analysis of the activity in the allowance for loan losses for the first quarter of 1998 and 1997. The allowance for loan losses as a percentage of loans increased from 2.33% at March 31, 1997 to 3.04% at March 31, 1998. The net charge-off (recoveries) as a percentage of average loans decreased from 1.17% at March 31, 1997 to .51% at March 31, 1998. The allowance for loan losses is established through a provision for loan losses charged to expenses. Management's policy is to maintain the allowance for possible loan losses at a level sufficient to absorb losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and decreased by charge-offs, net of recoveries. Management's evaluation process to determine potential losses includes consideration of the industry, specific conditions of individual borrowers, historical loan loss experience and the general economic environment. As these factors change, the level of loan loss provision changes. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. Accrual of interest is discontinued and accrued interest is charged off on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Ultimate losses may vary from the current estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reflected in current operations.
TABLE 3. ALLOWANCE FOR LOAN LOSSES For The Three Months Ended March 31, March 31, (Amounts in Thousands) 1998 1997 Balance at Beginning of Period $1,800 $1,500 Loans Charged Off (580) (914) Recoveries 280 134 Net (Charge Offs) Recoveries (300) (780) Provision for Loan Losses 300 780 Balance at End of Period $1,800 $1,500 Allowance for Loan Losses as a Percentage of Loans 3.04% 2.33% Net (Charge Offs) Recoveries as a Percentage of Average Loans 0.51% 1.17%
FUNDING SOURCES: DEPOSITS Deposits. Average deposits totaled $91,280,000 in the first quarter of 1998, a decrease of $1,458,000 (1.57%) from $92,738,000 in the first quarter of 1997. Average core deposits were $89,957,000 for the first quarter of 1998 down from $91,299,000 in the first quarter of 1997. Table 4 presents the composition of average deposits for the three quarters ending March 31, 1998, December 31, 1997 and March 31, 1997.
TABLE 4. DEPOSIT COMPOSITION For The Three Months Ended Mar 31, Dec. 31, Mar 31, 1998 1997 1997 Average % of Average % of Average % of (Amounts in Balances Deposits Balances Deposits Balances Deposits thousands) Demand, Noninterest- $33,537 36.74% $33,316 36.32% $33,550 36.18% Bearing NOW Accounts 13,033 14.28% 13,253 14.45% 11,466 12.36% Money Market Deposit 5,297 5.80% 5,826 6.35% 6,899 7.44% Accounts Savings Accounts 26,653 29.20% 23,501 25.62% 25,963 28.00% Other Time Deposits 11,437 12.53% 14,447 15.75% 13,421 14.47% Total Core Deposits 89,957 98.55% 90,343 98.49% 91,299 98.45% Certificates of Deposit of $100,000 or more 1,324 1.45% 1,384 1.51% 1,439 1.55% Total Deposits 91,281 100.00% $91,727 100.00% $92,738 100.00%
BORROWINGS The Company's long-term debt is comprised primarily of debentures which are secured by 39.72 shares of the Subsidiary Bank's stock. The Bank has no long-term debt. It is the Bank's policy to manage its liquidity so that there is no need to make unplanned sales of assets or to borrow funds under emergency conditions. The Bank maintains a Federal Funds line of credit in the amount of $600,000 with a correspondent bank and also has a commitment from an upstream correspondent which will increase our Federal Funds line of credit over and above the normal amount by pledging unused securities. INTEREST RATE SENSITIVITY The Bank has established, as bank policy, an asset/liability management system that protects Bank profits from undue exposure to interest rate risks. The major elements used to manage interest rate risk include the mix of fixed and variable rate assets and liabilities and the maturity pattern of assets and liabilities. It is the Company's policy not to invest in derivatives in the ordinary course of business. The Company performs a monthly review of assets and liabilities that reprice and the time bands within which the repricing occurs. Balances are reported in the time band that corresponds to the instrument's next repricing date or contractual maturity, whichever occurs first. Through such analysis, the Company monitors and manages its interest sensitivity gap to minimize the effects of changing interest rates. GAP & INTEREST MARGIN SPREAD By Bank policy we limit the Bank's earnings exposure due to interest rate risk by setting limits on positive and negative gaps within the next 12 months. These limits are set so that this year's profits will not be unduly impacted no matter what happens to interest rates during the year. In addition, we extend the scenarios out five years to monitor the risks associated on a longer term. RESULTS OF OPERATIONS: NET INTEREST INCOME Net interest income, the difference between interest income and interest expense, is a significant component of the performance of a banking organization. Data used in the analysis of net interest income are derived from the daily average levels of earnings assets and interest bearing deposits as well as from the related income and expense. Net interest income is not developed on a taxable equivalent basis because the level of tax exempt income is not material. The primary factors that affect net interest income are the changes in volume and mix of earning assets and interest-bearing liabilities, along with the change in market rates. Net interest income for the first quarter of 1998 decreased $300,000 over the same period last year, and increased $49,000 from the fourth quarter of 1997. The net interest income margin decreased to 2.17% for the first quarter of 1998 from 2.42% for the first quarter of 1997.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES FIRST QUARTER 1998 FIRST QUARTER 1997 QUARTER 1998 Average Average (Amounts in thousands) Balance Interest Rate Balance Interest Rate ASSETS INTEREST-EARNING ASSETS: Loans, net of unearned income(1)(2) Taxable 58,562 2,015 3.44% 66,743 2,414 3.62% Tax-exempt - - Investment securities Taxable 9,927 146 1.47% 9,224 128 1.39% Tax-exempt - - Interest-bearing deposits - - 0.00% - - Federal funds sold 20,255 275 1.36% 16,127 210 1.30% Total Interest-Earning 88,744 2,436 2.74% 92,094 2,752 2.99% Assets Cash and due from banks 5,683 5,632 Allowance for loan Losses (1,814) (1,500) Premises and equipment 2,660 2,654 Other Real Estate 1,473 1,787 Other assets 3,161 2,438 TOTAL ASSETS $99,907 $103,105 LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST-BEARING LIABILITIES: Deposits: Demand Deposits 18,329 100 0.54% 18,364 99 0.54% Savings deposits 26,653 201 0.76% 25,963 190 0.73% Time deposits 12,761 157 1.23% 14,861 182 1.22% Total Interest-Bearing 57,743 458 0.79% 59,188 471 0.80% Deposits Federal Funds Purchased Securities sold under agreements to repurchase Other Short-Term borrowings - - Long-Term debt 2,283 52 2.26% 2,383 55 2.31% Total Int-Bearing 60,026 510 0.85% 61,571 526 0.85% Liabilities Noninterest-bearing 33,537 33,550 deposits Other liabilities 1,400 959 Shareholders' equity 4,944 7,025 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 99,907 $103,105 Net Interest income/spread 1.90% 2.13% Net Interest Margin 2.17% 2.42% (1) Fee income relating to loans of $67,756 at March 31, 1998, and $62,000 at March 31, 1997 is included in interest income. (2) Nonaccrual loans are included in average balances and income on such loans, if recognized, is recognized on the cash basis. (3) Interest income does not include the effects of taxable-equivalent adjustments using a federal tax rate of 34%.
Rate/Volume Analysis
March, 1998 Compared to March, 1997 Variance Attributed to (1) Net (Amounts in thousands) Volume Rate Change Net Loans: Taxable (8,181) -0.18% (399) Tax-exempt(2) - 0.00% - Investment Securities - 0.00% - Taxable 703 0.08% 18 Tax-exempt(2) - 0.00% - Interest-bearing deposits - 0.00% - Federal funds sold 4,128 0.06% 65 Total Interest-Earning Assets ($3,350) -0.24% ($316) Deposits: Demand Deposits (35) 0.01% 1 Savings deposits 690 0.02% 11 Time deposits (2,100) 0.01% (25) Total interest-bearing (1,445) 0.00% (13) deposits Federal Funds Purchased - 0.00% - Securities sold under - 0.00% - agreements to repurchase Other Short-Term borrowings - 0.00% - Long-Term debt (100) -0.05% (3) Total Interest-Bearing , ($1,545) 0.00% ($16) Liabilities (1) The change in interest due to both rate and volume has been allocated to the components in proportion to the relationship of the dollar amounts of the change in each. (2) Reflects fully taxable equivalent adjustments using a federal tax rate of 34%.
NON-INTEREST INCOME AND EXPENSE The amount of non-interest income and non-interest expenses of a banking organization relate closely to the size of the total assets and deposits and the number of deposit accounts. The amount of non-interest expense represents the cost of operating the banking organization. The major components of non-interest income are service charges related to deposit accounts, cardholder and other credit card fees, Ore income, gain on sale of ORE and other noninterest income. Non-interest income for the first quarter of 1998 decreased $51,000 or 8.15% from the same period last year. Table 5 presents non-interest income for the three months ended March 31, 1998 and 1997.
TABLE 5. NON-INTEREST INCOME For The Three Months Ended Percentage Mar 31, Mar 31, Increase (Amounts in thousands) 1998 1997 (Decrease) Service Charges $153 $150 2.19% NSF Charges 177 178 -0.44% Gain on Sale of Securities - - N/A Cardholder & Other Credit Card 87 89 -2.78% Income Membership Fees 63 55 13.81% Other Comm & Fees 22 25 -12.25% ORE Income 3 3 0.00% Gain on Sale of ORE - 35 -100.00% Other Income 70 91 -22.64% Total Non-Interest Income $575 $626 -8.15%
NON-INTEREST EXPENSE The major components of non-interest expense represents the cost of operating the banking organization. Non-interest expense for the first quarter of 1998 decreased $451,000 or 17.53% from the same period last year. Table 6 presents the activity for the three months ended March 31, 1998 and 1997. The decrease from the same period last year is mainly due to reduction of salaries & benefits and loan & credit card expenses.
TABLE 6. NON-INTEREST EXPENSE For The Three Months Ended Percentage Mar 31, Mar 31, Increase (Amounts in thousands) 1998 1997 (Decrease) Salaries & Benefits $827 $1,035 -20.11% Loss on Litigation - - N/A Occupancy Expense 480 450 6.65% Advertising Expense 31 39 -20.48% Communications 52 84 -38.39% Postage 86 138 -38.04% Loan & Credit Card Expense 230 309 -25.62% Professional Fees 49 57 -13.35% Legal Fees 114 112 1.35% Insurance & Assessments 23 27 -13.54% Stationery, Forms & Supply 74 114 -35.17% ORE Expenses 41 81 -49.36% Other Operating Expense 115 127 -9.35% Total Non-Interest Expense $2,122 $2,573 -17.52%
INCOME TAXES The Company did not record a provision for income taxes for the first quarter of 1998 or 1997. The provision for income taxes consists of provisions for federal taxes only. Louisiana does not have an income tax for corporations. CAPITAL The Bank is required to maintain minimum amounts of capital to total "risk weighted" assets, as defined by banking regulators. Table 7 presents these ratios for the most recent five quarters.
TABLE 7. QUARTERLY SELECTED CAPITAL RATIOS March 31, Dec. 31, Sept. 30, June 30, March 31, 1998 1997 1997 1997 1997 Risk-Based Capital Tier 1 Risk Based 10.99% 10.61% 10.44% 11.85% 12.16% Capital Ratio Risk Based Capital 12.26% 11.88% 11.71% 13.12% 13.42% Ratio Tier 1 Leverage Ratio 6.95% 6.84% 6.47% 7.56% 8.32%
LIQUIDITY The purpose of liquidity management is to ensure that there is sufficient cash flow to satisfy demands for credit, deposit withdrawals, and other corporate needs. Traditional sources of liquidity include asset maturities and growth in core deposits. The Company has maintained adequate liquidity through cash flow from operating activities and financing activities to fund loan growth, and anticipates that this will continue even if the Company expands. Liquidity and capital resources are discussed weekly by the management committee, the assets and liability committee and at the monthly executive committee meeting. Bank of Louisiana maintains adequate capital to meet its needs in the foreseeable future. The liquidity ratio for the Bank was 41.11% at March 31, 1998, 43.06% at December 31, 1997, and 38.84% at March 31, 1997. Measuring liquidity and capital on a weekly basis enables management to constantly monitor loan growth, and shifting customer preferences. The committee's in-depth reviews of current, projected, and worse case scenarios through various reports ensures the availability of funds and capital adequacy. The Bank intends on increasing capital by implementing an extensive marketing program and evaluating all pricing fees and investing in proprietary accounts which will maximize the highest yield possible and thereby improve earnings. There are no known trends, events, regulatory authority recommendations, or uncertainties that the Company is aware of that will have or that are likely to have a material adverse effect on the Company's liquidity, capital resources, or operations. PART II - OTHER INFORMATION Item #6 Exhibits and Reports on Form 8-K A. Exhibits Exhibit 27. Financial Data Schedule B. Reports on Form 8-K No reports have been filed on Form 8-K during this quarter. BOL BANCSHARES, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized to sign on behalf of the registrant. BOL BANCSHARES, INC. (Registrant) /s/ Peggy L. Schaefer May 5, 1998 Peggy L. Schaefer Date Treasurer EX-27 2
9 1,000 3-MOS Dec-31-1998 Mar-31-1998 7,632 0 21,245 0 9,576 9,576 9,604 59,129 1,800 102,358 93,666 0 1,051 2,282 0 2,303 179 0 102,358 2,015 146 275 2,436 458 52 1,926 300 0 2,122 79 79 0 0 79 0.44 0 1.90 87 996 0 3,802 1,800 580 280 1,800 1,800 0 0
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