UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from to
Commission file Number 00-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
| Louisiana | 72-1121561 | |
| (State of incorporation) | (I.R.S. Employer Identification No.) |
300 St. Charles Avenue, New Orleans, La. 70130
(Address of principal executive offices)
(504) 889-9400
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer |_| | Accelerated filer |_| | ||
| Non-accelerated filer |_| | Smaller reporting company |X| |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 179,145 shares as of November 15, 2011.
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
| Page No. | |||
| PART I. Financial Information | |||
| Item 1. | Financial Statements | ||
| Consolidated Statements of Condition | 3 | ||
| Consolidated Statements of Income (Loss) | 4 | ||
| Consolidated Statements of Comprehensive Income | 5 | ||
| Consolidated Statements of Cash Flow | 6 | ||
| Notes to Consolidated Financial Statements | 7 | ||
| Item 2. | Management's Discussion and Analysis | 19 | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events and Future Growth | 24 | |
| Item 4. | Submission of Matters to a Vote of Security Holders | 25 | |
| Item 4T. | Controls and Procedures | 26 | |
| PART II. Other Information | |||
| Item 6. | Exhibits | 26 | |
| Signatures | 27 | ||
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CONDITION
| Sept 30, | Dec. 31, | |||||||
| (Amounts in Thousands) | 2011 | 2010 | ||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Cash and Due from Banks | ||||||||
| Non-Interest Bearing Balances and Cash | $ | 3,213 | $ | 3,834 | ||||
| Federal Funds Sold | 13,800 | 14,950 | ||||||
| Certificates of Deposit | 5,208 | 4,203 | ||||||
| Investment Securities | ||||||||
| Securities Held to Maturity | — | — | ||||||
| Securities Available for Sale | 878 | 878 | ||||||
| Loans-Less Allowance for Loan Losses of $1,800 in 2011 and in 2010 | 56,775 | 60,236 | ||||||
| Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) | 5,727 | 5,856 | ||||||
| Other Real Estate | 4,182 | 3,137 | ||||||
| Other Assets | 744 | 1,282 | ||||||
| TOTAL ASSETS | $ | 90,527 | $ | 94,376 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Non-Interest Bearing | 30,001 | 31,867 | ||||||
| NOW Accounts | 10,704 | 11,184 | ||||||
| Money Market Accounts | 3,510 | 3,948 | ||||||
| Savings Accounts | 19,885 | 20,157 | ||||||
| Time Deposits, $100,000 and over | 2,445 | 5,248 | ||||||
| Other Time Deposits | 10,169 | 8,173 | ||||||
| TOTAL DEPOSITS | 76,714 | 80,577 | ||||||
| Notes Payable | 1,144 | 1,144 | ||||||
| Other Liabilities | 827 | 882 | ||||||
| TOTAL LIABILITIES | 78,685 | 82,603 | ||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Preferred Stock - Par Value $1 | ||||||||
| 1,803,617 Shares Issued and Outstanding at September 30, 2011 | ||||||||
| 1,810,296 Shares Issued and Outstanding at December 31, 2010 | 1,804 | 1,810 | ||||||
| Common Stock - Par Value $1 | ||||||||
| 179,145 Shares Issued and Outstanding in 2011 and 2010 | 179 | 179 | ||||||
| Accumulated Other Comprehensive Income | 513 | 513 | ||||||
| Capital in Excess of Par - Retired Stock | 197 | 195 | ||||||
| Undivided Profits | 9,075 | 8,777 | ||||||
| Current Earnings | 74 | 299 | ||||||
| TOTAL SHAREHOLDERS' EQUITY | 11,842 | 11,773 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 90,527 | $ | 94,376 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| Sept 30, | Sept 30, | |||||||||||||||
| (Amounts in Thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| INTEREST INCOME | ||||||||||||||||
| Interest and Fees on Loans | $ | 1,425 | $ | 1,463 | $ | 4,395 | $ | 4,504 | ||||||||
| Interest on Investment Securities | 2 | 5 | 5 | 14 | ||||||||||||
| Interest on Federal Funds Sold | 3 | 5 | 14 | 13 | ||||||||||||
| Interest on Certificates of Deposit | 7 | 13 | 25 | 44 | ||||||||||||
| Total Interest Income | 1,438 | 1,486 | 4,440 | 4,575 | ||||||||||||
| INTEREST EXPENSE | ||||||||||||||||
| Interest on Deposits | 88 | 91 | 265 | 270 | ||||||||||||
| Interest Expense on Notes Payable and Debentures | 19 | 19 | 56 | 56 | ||||||||||||
| Total Interest Expense | 107 | 110 | 320 | 326 | ||||||||||||
| NET INTEREST INCOME | 1,331 | 1,376 | 4,119 | 4,249 | ||||||||||||
| Provision for Loan Losses | 24 | 103 | 76 | 287 | ||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 1,307 | 1,273 | 4,044 | 3,962 | ||||||||||||
| NON-INTEREST INCOME | ||||||||||||||||
| Service Charges on Deposit Accounts | 111 | 124 | 328 | 350 | ||||||||||||
| Cardholder & Other Credit Card Income | 102 | 105 | 308 | 311 | ||||||||||||
| Other Operating Income | 38 | 11 | 97 | 535 | ||||||||||||
| Total Non-interest Income | 251 | 240 | 732 | 1,196 | ||||||||||||
| NON-INTEREST EXPENSE | ||||||||||||||||
| Salaries and Employee Benefits | 571 | 657 | 1,768 | 1,934 | ||||||||||||
| Occupancy Expense | 240 | 264 | 696 | 799 | ||||||||||||
| Communications | 57 | 56 | 171 | 162 | ||||||||||||
| Outsourcing Fees | 325 | 318 | 1,051 | 1,027 | ||||||||||||
| Loan & Credit Card Expense | 32 | 30 | 90 | 87 | ||||||||||||
| Professional Fees | 79 | 86 | 229 | 206 | ||||||||||||
| ORE Expense | 62 | 57 | 171 | 291 | ||||||||||||
| Other Operating Expense | 156 | 177 | 472 | 423 | ||||||||||||
| Total Non-interest Expense | 1,522 | 1,645 | 4,649 | 4,929 | ||||||||||||
| Income (Loss) Before Tax Provision | 35 | (132 | ) | 127 | 229 | |||||||||||
| Provision for (Benefit from) Income Taxes | 13 | (36 | ) | 52 | 15 | |||||||||||
| NET INCOME (LOSS) | $ | 22 | $ | (96 | ) | $ | 74 | $ | 214 | |||||||
| Earnings Per Share of Common Stock | $ | 0.12 | ($ | 0.53 | ) | $ | 0.42 | $ | 1.20 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Nine Months Ended | ||||||||
| Sept 30, | Sept 30, | |||||||
| (Amounts in thousands) | 2011 | 2010 | ||||||
| NET INCOME | $ | 74 | $ | 214 | ||||
| OTHER COMPREHENSIVE INCOME, NET OF TAX | ||||||||
| Unrealized Holding Losses on Investment | ||||||||
| Securities Available-for-Sale, Arising | ||||||||
| During the Period | — | 22 | ||||||
| COMPREHENSIVE INCOME | $ | 74 | $ | 236 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||
| Sept 30, | Sept 30, | |||||||
| (Amounts in thousands) | 2011 | 2010 | ||||||
| OPERATING ACTIVITIES | ||||||||
| Net Income | $ | 74 | $ | 214 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
| Provision for Loan Losses | 76 | 287 | ||||||
| Depreciation and Amortization Expense | 235 | 290 | ||||||
| Gain on Sale of Other Real Estate | (16 | ) | (395 | ) | ||||
| Decrease in Other Assets | 537 | 925 | ||||||
| Decrease in Other Liabilities and Accrued Interest | (56 | ) | (336 | ) | ||||
| Net Cash Provided by Operating Activities | 851 | 985 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Proceeds from Held-to-Maturity Investment Securities Released at Maturity | — | 4,000 | ||||||
| Purchases of Held-to-Maturity Investment Securities | — | (3,000 | ) | |||||
| Purchases of Property and Equipment | (106 | ) | (89 | ) | ||||
| Capitalized Construction Costs for ORE | (14 | ) | (486 | ) | ||||
| Proceeds from Sale of Other Real Estate | 59 | 395 | ||||||
| Increase in Certificate of Deposit with Other Banks | (1,005 | ) | 743 | |||||
| Net Decrease (Increase) in Loans | 2,311 | (2,219 | ) | |||||
| Net Cash Provided by (Used in) Investing Activities | 1,246 | (656 | ) | |||||
| FINANCING ACTIVITIES | ||||||||
| Net (Decrease) Increase in Non-Interest Bearing and Interest Bearing Deposits | (3,863 | ) | 358 | |||||
| Preferred Stock Retired | (5 | ) | (22 | ) | ||||
| Net Cash (Used in) Provided by Financing Activities | (3,869 | ) | 336 | |||||
| Net (Decrease) Increase in Cash and Cash Equivalents | (1,772 | ) | 665 | |||||
| Cash and Cash Equivalents - Beginning of Year | 18,784 | 17,591 | ||||||
| Cash and Cash Equivalents - End of Period | $ | 17,013 | $ | 18,256 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash Paid During the Year for Interest | $ | 341 | $ | 261 | ||||
| Cash Paid (Received) During the Year for Income Taxes | $ | 16 | $ | (225 | ) | |||
| Market Value Adjustment for Unrealized Gain on Securities Available-for-Sale | $ | — | $ | 33 | ||||
| Additions to Other Real Estate Thru Foreclosure | $ | 1,074 | $ | 601 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
BOL BANCSHARES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A Summary of Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bank of Louisiana (the Bank), and the Bank’s wholly owned subsidiary, BOL Assets, LLC. These consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X, and do not include information or footnotes for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included.
Use of Estimates
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses.
Cash and Cash Equivalents
Cash equivalents include amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.
Loans
Loans are stated at the amount of unpaid principal, reduced by unearned discount and an allowance for loan losses. Unearned discounts on loans are recognized as income over the term of the loans on the interest method. Interest on other loans is calculated and credited to operations on a simple-interest basis. Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely. Loan origination fees and certain direct origination costs, when material, are capitalized and recognized as an adjustment of the yield on the related loan.
Allowance for Loan Losses
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 the collectability of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb known and inherent losses on existing loans that may become uncollectible, based on evaluation of the collectability of loans and prior loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers’ ability to pay. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.
For loans individually evaluated for impairment, the estimated amount of loss is based on several factors, which include fair value of collateral and expected cash flows from the loan.
| 7 |
Note B 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 of 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 credit-worthiness of the counterparties.
The estimated fair values of the Company’s financial instruments at September 30, 2011 and December 31, 2010, are as follows (amounts in thousands):
| September 30, 2011 | ||||||||
| ` | Carrying | Fair | ||||||
| Amount | Value | |||||||
| (In Thousands) | ||||||||
| Financial Assets: | ||||||||
| Cash and Short-Term Investments | $ | 3,213 | $ | 3,213 | ||||
| Certificates of Deposit | 5,208 | 5,208 | ||||||
| Investment Securities | 878 | 878 | ||||||
| Loans | 58,575 | 58,423 | ||||||
| Less: Allowance for Loan Losses | (1,800 | ) | NA | |||||
| $ | 66,074 | $ | 67,722 | |||||
| Financial Liabilities: | ||||||||
| Deposits | $ | 76,714 | $ | 76,762 | ||||
| Unrecognized Financial Instruments: | ||||||||
| Commitments to Extend Credit | $ | 1,298 | $ | 1,298 | ||||
| Credit Card Arrangements | 13,020 | 13,020 | ||||||
| $ | 14,318 | $ | 14,318 | |||||
| 8 |
| December 31, 2010 | ||||||||
| Carrying | Fair | |||||||
| Amount | Value | |||||||
| (In Thousands) | ||||||||
| Financial Assets: | ||||||||
| Cash and Short-Term Investments | $ | 3,834 | $ | 3,834 | ||||
| Certificates of Deposit | 4,203 | 4,203 | ||||||
| Investment Securities | 878 | 878 | ||||||
| Loans | 62,036 | 62,054 | ||||||
| Less: Allowance for Loan Losses | (1,800 | ) | NA | |||||
| $ | 69,151 | $ | 70,969 | |||||
| Financial Liabilities: | ||||||||
| Deposits | $ | 80,577 | $ | 80,675 | ||||
| Unrecognized Financial Instruments: | ||||||||
| Commitments to Extend Credit | $ | 1,763 | $ | 1,763 | ||||
| Credit Card Arrangements | 14,626 | 14,626 | ||||||
| $ | 16,389 | $ | 16,389 | |||||
Note C Loans and Allowance for Loans Losses
Major classifications of loans as of September 30, 2011 and December 31, 2010 are as follows (in thousands):
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Real Estate Mortgages: | ||||||||
| Residential 1-4 Family | $ | 21,044 | $ | 19,541 | ||||
| Commercial | 18,258 | 20,282 | ||||||
| Construction | 6,386 | 9,023 | ||||||
| Second Mortgages | 880 | 949 | ||||||
| Other | 1,641 | 1,725 | ||||||
| 48,209 | 51,520 | |||||||
| Commercial | 2,719 | 2,714 | ||||||
| Personal | 1,642 | 1,203 | ||||||
| Credit Cards | 5,788 | 6,321 | ||||||
| Overdrafts | 217 | 277 | ||||||
| 58,575 | 62,036 | |||||||
| Allowance for Loan Losses | 1,800 | 1,800 | ||||||
| Net Loans | $ | 56,775 | $ | 60,236 | ||||
| 9 |
The following is a classification of loans by rate and maturity:
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (In Thousands) | ||||||||
| Fixed Rate Loans: | ||||||||
| Maturing in 3 Months or Less | $ | 15,734 | $ | 13,785 | ||||
| Maturing Between 3 and 12 Months | 25,642 | 29,769 | ||||||
| Maturing Between 1 and 5 Years | 14,867 | 14,154 | ||||||
| Maturing After 5 Years | 613 | 631 | ||||||
| Variable Rate Loans: | ||||||||
| Maturing Quarterly or More Frequently | 665 | 723 | ||||||
| Maturing Between 3 and 12 Months | — | 698 | ||||||
| Maturing Between 1 and 5 Years | — | — | ||||||
| Non accrual Loans | 1,054 | 2,276 | ||||||
| Less: Allowance for Loan Losses | (1,800 | ) | (1,800 | ) | ||||
| Net Loans | $ | 56,775 | $ | 60,236 | ||||
Non-accrual loans are those loans for which the payment of principal or interest is delinquent for 90 days, or earlier in some cases. All interest accrued but not collected for loans that are placed on non-accrual status is reversed against income. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet the payment obligations as they become due, as well as when required by regulatory provisions. Loans placed on non-accrual status cease to accrue interest.
Non-accruals loans, segregated by class of loan, are as follows:
| September 30 | December 31, | |||||||
| 2011 | 2010 | |||||||
| (In Thousands) | ||||||||
| Real Estate Mortgages | ||||||||
| Residential 1-4 Family | $ | 678 | $ | 793 | ||||
| Commercial | 130 | 101 | ||||||
| Construction | 222 | 1,371 | ||||||
| Second Mortgages | — | — | ||||||
| Other | — | — | ||||||
| Commercial | 11 | — | ||||||
| Personal | 12 | 12 | ||||||
| Credit Cards | — | — | ||||||
| Overdrafts | — | — | ||||||
| Total | $ | 1,054 | $ | 2,276 | ||||
| 10 |
An aging analysis of past due loans, segregated by class of loans, as of September 30, 2011 and December 31, 2010, is as follows (in thousands):
| ACCRUING | ||||||||||||||||||||||||
| 30-89 | 90-MORE | TOTAL | CURRENT | TOTAL | 90-MORE | |||||||||||||||||||
| September 30, 2011 | DAYS | DAYS | PAST DUE | LOANS | LOANS | PAST DUE | ||||||||||||||||||
| Real Estate | ||||||||||||||||||||||||
| 1-4 Family Res | $ | 1,129 | $ | 1,183 | $ | 2,312 | $ | 18,732 | $ | 21,044 | $ | 505 | ||||||||||||
| Commercial | 275 | 130 | 405 | 17,853 | 18,258 | — | ||||||||||||||||||
| Construction | 427 | 851 | 1,277 | 5,108 | 6,386 | 628 | ||||||||||||||||||
| Second Mortgages | — | — | — | 880 | 880 | — | ||||||||||||||||||
| Other | 199 | 130 | 329 | 1,312 | 1,641 | 130 | ||||||||||||||||||
| Commercial | 1,010 | 96 | 1,106 | 1,613 | 2,719 | 85 | ||||||||||||||||||
| Personal | 30 | 43 | 73 | 1,569 | 1,642 | 32 | ||||||||||||||||||
| Credit Cards | 152 | 41 | 192 | 5,596 | 5,788 | 41 | ||||||||||||||||||
| Overdrafts | 14 | 75 | 89 | 128 | 217 | 75 | ||||||||||||||||||
| Total | $ | 3,235 | $ | 2,550 | $ | 5,785 | $ | 52,790 | $ | 58,575 | $ | 1,496 | ||||||||||||
| ACCRUING | ||||||||||||||||||||||||
| 30-89 | 90-MORE | TOTAL | CURRENT | TOTAL | 90-MORE | |||||||||||||||||||
| December 31, 2010 | DAYS | DAYS | PAST DUE | LOANS | LOANS | PAST DUE | ||||||||||||||||||
| Real Estate | ||||||||||||||||||||||||
| 1-4 Family Res | $ | 1,467 | $ | 2,410 | $ | 3,877 | $ | 15,664 | $ | 19,541 | $ | 1,617 | ||||||||||||
| Commercial | 328 | 101 | 429 | 19,853 | 20,282 | — | ||||||||||||||||||
| Construction | 406 | 1,371 | 1,777 | 7,246 | 9,023 | — | ||||||||||||||||||
| Second Mortgages | 29 | — | 29 | 920 | 949 | — | ||||||||||||||||||
| Other | 279 | 279 | 1,446 | 1,725 | — | |||||||||||||||||||
| Commercial | 461 | 1 | 463 | 2,252 | 2,714 | 1 | ||||||||||||||||||
| Personal | 63 | 22 | 85 | 1,118 | 1,203 | 11 | ||||||||||||||||||
| Credit Cards | 129 | 56 | 185 | 6,137 | 6,321 | 56 | ||||||||||||||||||
| Overdrafts | 4 | 210 | 214 | 63 | 277 | 210 | ||||||||||||||||||
| Total | $ | 3,166 | $ | 4,171 | $ | 7,337 | $ | 54,699 | $ | 62,036 | $ | 1,895 | ||||||||||||
Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Although the loan may be currently performing under the contractual terms of the loan agreement, management may consider the loan impaired based on past history, changes in market condition, etc. On a loan-by-loan basis, management assesses whether the accrual of interest should be continued. Interest income for loans for which the interest rate has been modified continues to be accrued at the reduced rate as long as the borrower complies with the revised terms and conditions.
| 11 |
Impaired loans, including TDR’s, as of September 30, 2011 are set forth in the following table:
| Unpaid | Recorded | Recorded | ||||||||||||||||||
| Contractual | Investment | Investment | Total | |||||||||||||||||
| Principal | with No | with | Recorded | Related | ||||||||||||||||
| Balance | Allowance | Allowance | Investment | Allowance | ||||||||||||||||
| Real Estate | ||||||||||||||||||||
| Residential 1-4 Family | $ | 1,730,605 | $ | 859,574 | $ | 2,408,779 | $ | 3,268,353 | $ | 483,781 | ||||||||||
| Commercial | 130,392 | — | 130,392 | 130,392 | 14,630 | |||||||||||||||
| Construction | 574,387 | — | 574,387 | 574,387 | 81,707 | |||||||||||||||
| Second Mortgages | — | — | — | — | — | |||||||||||||||
| Other | — | — | — | — | — | |||||||||||||||
| Commercial | 309,188 | — | 309,188 | 309,188 | 73,004 | |||||||||||||||
| Personal | 11,793 | — | 11,793 | 11,793 | 4,000 | |||||||||||||||
| Credit Cards | — | — | — | — | — | |||||||||||||||
| Overdrafts | — | — | — | — | — | |||||||||||||||
| Total | $ | 2,756,365 | $ | 859,574 | $ | 3,434,539 | $ | 4,294,113 | $ | 657,122 | ||||||||||
Impaired loans as of December 31, 2010 are set forth in the following table:
| Unpaid | Recorded | Recorded | ||||||||||||||||||
| Contractual | Investment | Investment | Total | |||||||||||||||||
| Principal | with No | with | Recorded | Related | ||||||||||||||||
| Balance | Allowance | Allowance | Investment | Allowance | ||||||||||||||||
| Real Estate | ||||||||||||||||||||
| Residential 1-4 Family | $ | 3,061,009 | $ | — | $ | 3,061,009 | $ | 3,061,009 | $ | 532,438 | ||||||||||
| Commercial | — | — | — | — | — | |||||||||||||||
| Construction | 1,573,321 | — | 1,573,321 | 1,573,321 | 382,261 | |||||||||||||||
| Second Mortgages | — | — | — | — | — | |||||||||||||||
| Other | 115,856 | — | 115,856 | 115,856 | 11,284 | |||||||||||||||
| Commercial | 7,303 | — | 7,303 | 7,303 | 820 | |||||||||||||||
| Personal | 108,894 | — | 108,894 | 108,894 | 5,362 | |||||||||||||||
| Credit Cards | — | — | — | — | — | |||||||||||||||
| Overdrafts | 205,751 | — | 205,751 | 205,751 | 30,863 | |||||||||||||||
| Total | $ | 5,072,134 | $ | — | $ | 5,072,134 | $ | 5,072,134 | $ | 963,028 | ||||||||||
| 12 |
Provision for Loan Losses
The allowance for loan losses is established through a provision for loan losses. Management’s policy is to maintain the allowance at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the loan portfolio. Management reviews the allowance for loan losses on a periodic basis in order to identify those inherent losses and to assess the overall collection probability of the loan portfolio. The evaluation process includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of our loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience. From this analysis, a general, specific and unallocated reserve is established, which totals the allowance for loan losses at each reporting date.
For real estate, commercial and consumer loans, the Bank evaluates the average historical charge-off rate for the previous five years. However, charge-off trends occurring within the past 12 to 24 months are considered in determining the appropriate loss percentage to use in the Bank’s allowance estimate for these types of loans. For charge card loans, the Bank considers the past two years of historical charge-offs in order to develop an appropriate estimate for the provision for loan losses.
At September 30, 2011 and December 31, 2010 the allowance for loan losses was $1,800,000. The provision for loan losses for the nine months ended September 30, 2011 and September 30, 2010 totaled $75,679 and $304,688, respectively. The overall decrease in our provision for the two periods is due to an overall decrease in our total loan portfolio, as well an overall improvement in the performance in the Bank’s loan portfolio during the nine months ended September 30, 2011. We believe that the improvement in the overall credit quality of our Real Estate loans and Overdraft accounts indicates that a reduction in allowance pertaining to these segments are appropriate.
Changes in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2011 are as follows:
| Real Estate | Commercial | Personal | Credit Cards | Overdrafts | Unallocated | Total | ||||||||||||||||||||||
| Balance at January 1, 2011 | $ | 970,452 | $ | 45,287 | $ | 17,763 | $ | 367,544 | $ | 31,171 | $ | 367,783 | $ | 1,800,000 | ||||||||||||||
| Provision for Possible Loan Losses | (12,381 | ) | 85,094 | 22,335 | 54,014 | (17,434 | ) | (55,949 | ) | 75,679 | ||||||||||||||||||
| Charge-Offs | (19,153 | ) | (15,959 | ) | (6,376 | ) | (194,679 | ) | (3,628 | ) | (25 | ) | (239,820 | ) | ||||||||||||||
| Recoveries | 50,326 | — | 3,549 | 109,285 | 911 | 70 | 164,141 | |||||||||||||||||||||
| Net Charge-Offs | 31,173 | (15,959 | ) | (2,827 | ) | (85,394 | ) | (2,717 | ) | 45 | (75,679 | ) | ||||||||||||||||
| Ending Balance | $ | 989,244 | $ | 114,422 | $ | 37,271 | $ | 336,164 | $ | 11,020 | $ | 311,879 | $ | 1,800,000 | ||||||||||||||
| Period-End Amount Allocated To: | ||||||||||||||||||||||||||||
| Loans Individually Evaluated for Impairment | $ | 580,118 | $ | 73,004 | $ | 4,000 | $ | — | $ | — | $ | — | $ | 657,122 | ||||||||||||||
| Loans Collectively Evaluated for Impairment | 409,126 | 41,418 | 33,271 | 336,164 | 11,020 | 311,879 | 1,142,878 | |||||||||||||||||||||
| Ending Balance | $ | 989,244 | $ | 114,422 | $ | 37,271 | $ | 336,164 | $ | 11,020 | $ | 311,879 | $ | 1,800,000 | ||||||||||||||
| 13 |
Changes in the allowance for loan losses by portfolio segment for the year ended December 31, 2010 are as follows:
| Real Estate | Commercial | Personal | Credit Cards | Overdrafts | Unallocated | Total | ||||||||||||||||||||||
| Balance at January 1, 2010 | $ | 1,229,554 | $ | 125,487 | $ | 67,616 | $ | 360,976 | $ | 13,033 | $ | 3,334 | $ | 1,800,000 | ||||||||||||||
| Provision for Possible Loan Losses | (256,220 | ) | (105,250 | ) | (43,117 | ) | 312,444 | 32,382 | 364,449 | 304,688 | ||||||||||||||||||
| Charge-Offs | (4,371 | ) | — | (6,736 | ) | (476,737 | ) | (16,704 | ) | — | (504,548 | ) | ||||||||||||||||
| Recoveries | 1,489 | 25,050 | — | 170,861 | 2,460 | — | 199,860 | |||||||||||||||||||||
| Net Charge-Offs | (2,882 | ) | 25,050 | (6,736 | ) | (305,876 | ) | (14,244 | ) | — | (304,688 | ) | ||||||||||||||||
| Ending Balance | $ | 970,452 | $ | 45,287 | $ | 17,763 | $ | 367,544 | $ | 31,171 | $ | 367,783 | $ | 1,800,000 | ||||||||||||||
| Period-End Amount Allocated To: | ||||||||||||||||||||||||||||
| Loans Individually Evaluated for Impairment | $ | 925,985 | $ | 820 | $ | 5,363 | $ | — | $ | 30,862 | $ | — | $ | 963,030 | ||||||||||||||
| Loans Collectively Evaluated for Impairment | 44,467 | 44,467 | 12,400 | 367,544 | 309 | 367,783 | 836,970 | |||||||||||||||||||||
| Balance at December 31, 2010 | $ | 970,452 | $ | 45,287 | $ | 17,763 | $ | 367,544 | $ | 31,171 | $ | 367,783 | $ | 1,800,000 | ||||||||||||||
From a credit risk standpoint, the Company classifies it’s loans in four categories: (i) pass, (ii) watch, (iii) substandard or (iv) doubtful.
The classification of loans reflects a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each monthly reporting period. The methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).
Credits rated watch show clear signs of financial weakness or deterioration in credit worthiness; however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.
Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been jeopardized by reason of adverse trends or developments in financial, managerial, economic or political nature, or important weaknesses exist in collateral. Corrective action is required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits.
Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on nonaccrual.
| 14 |
At September 30, 2011, the following table summarizes the Company’s internal ratings of its loans:
| Real | Credit | |||||||||||||||||||||||
| Estate | Commercial | Personal | Cards | Overdrafts | Total | |||||||||||||||||||
| Pass | $ | 43,107,129 | $ | 2,344,357 | $ | 1,575,308 | $ | 5,787,977 | $ | 144,509 | $ | 52,959,280 | ||||||||||||
| Watch | 1,114,564 | 300,363 | — | 1,414,927 | ||||||||||||||||||||
| Substandard | 2,956,532 | 62,677 | 55,075 | — | 72,737 | 3,147,021 | ||||||||||||||||||
| Doubtful | 1,030,891 | 11,305 | 11,793 | — | — | 1,053,989 | ||||||||||||||||||
| Totals | $ | 48,209,116 | $ | 2,718,702 | $ | 1,642,176 | $ | 5,787,977 | $ | 217,246 | $ | 58,575,217 | ||||||||||||
At December 31, 2010, the following table summarizes the Company’s internal ratings of its loans:
| Real | Credit | |||||||||||||||||||||||
| Estate | Commercial | Personal | Cards | Overdrafts | Total | |||||||||||||||||||
| Pass | $ | 44,399,289 | $ | 1,546,798 | $ | 1,082,245 | $ | 6,321,359 | $ | — | $ | 53,349,691 | ||||||||||||
| Watch | 2,382,733 | 1,160,384 | — | — | 71,181 | 3,614,298 | ||||||||||||||||||
| Substandard | 2,473,968 | 7,303 | 108,894 | — | 205,751 | 2,795,916 | ||||||||||||||||||
| Doubtful | 2,264,423 | — | 11,793 | — | — | 2,276,216 | ||||||||||||||||||
| Totals | $ | 51,520,413 | $ | 2,714,485 | $ | 1,202,932 | $ | 6,321,359 | $ | 276,932 | $ | 62,036,121 | ||||||||||||
The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, or other actions.
When the Company modifies a loan, management evaluates any possible concession based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole source of repayment for the loan is the liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs. If management determines that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through an allowance estimate.
| 15 |
The following table summarizes the number and volume of TDRs the Company has recorded in its loan portfolio as of September 30, 2011 as well as the amount of specific reserves in the allowance for loan losses relating to the TDRs (in thousands):
| Loan Type | Number of Loans | Amount | Specific Reserves Allocated | |||||||||
| Real Estate: | ||||||||||||
| 1 - 4 Family Residential | 8 | $ | 2,397,322 | $ | 345,148 | |||||||
| Construction | 1 | 144,285 | 16,189 | |||||||||
| Commercial | 2 | 297,883 | 68,736 | |||||||||
| Total | 11 | $ | 2,839,490 | $ | 430,073 | |||||||
Note D Financial Instruments
On January 1, 2008, the Company adopted the FASB fair value guidance pertaining to all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This guidance defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
The fair value guidance defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the fair value guidance expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
| · | Level 1 - Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets |
| · | Level 2 - Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market date for substantially the full term of the assets or liabilities |
| · | Level 3 - Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. |
| 16 |
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2011 and December 31, 2010 (amounts in thousands):
| September 30, 2011 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Net Balance | |||||||||||||
| Assets | ||||||||||||||||
| Equity Securities | $ | — | $ | 878 | $ | — | $ | 878 | ||||||||
| Total | $ | — | $ | 878 | $ | — | $ | 878 | ||||||||
| December 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Net Balance | |||||||||||||
| Assets | ||||||||||||||||
| Equity Securities | $ | — | $ | 878 | $ | — | $ | 878 | ||||||||
| Total | $ | — | $ | 878 | $ | — | $ | 878 | ||||||||
Note E Subsequent Events
In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2011. In preparing these financial statements, the Company evaluated the events and transactions that occurred from September 30, 2011 through the date these financial statements were issued.
Note F Regulatory Matters
On April 19, 2011, the Bank consented to a Memorandum of Understanding (the “MOU”) issued by the Federal Deposit Insurance Corporation (FDIC) and the Office of Financial Institutions (OFI). The MOU provides for, among other things, the following items within specific time periods:
| · | The Bank shall reduce its level of adversely classified assets. |
Action taken: In the Report of Examination, 26 loans are classified adversely. Of these, nine had balances aggregating $250,000 or more, for a total of $3,702,000. Of the $3,702,000 in loans, $2,662,000 have been restructured and the remaining $1,040,000 either have or are going through the foreclosure process.
| · | The Bank shall reduce its level of past due loans. |
| 17 |
Action taken: The areas of responsibility for implementing and monitoring the Bank’s collection policy as well as specific collection procedures have been addressed. The Loan Committee will review all past due loans weekly and the Executive Committee will review them monthly. It is anticipated that a substantial improvement will begin to show starting in the fourth quarter.
| · | The Bank shall eliminate the extension of credit until all appropriate underwriting documentation is obtained. |
Action taken: The Loan policy procedure has been addressed as follows: Installment loans are to be reviewed for complete documentation and credit reviews for all loans made the previous week and presented to the Management Committee monthly, summarizing reviews. Commercial Loans will be reviewed for complete documentation and credit reviews for all loans with maturity dates of the upcoming week. Monthly reports will be made to the Audit and Finance Committee summarizing reviews and actions.
| · | The Bank shall eliminate the extension of credit to borrowers for whom the Bank holds an uncollected charged-off asset or for which their credit is classified as “Substandard”. |
Action taken: The Bank will not extend credit to charge-off borrowers, the Bank will not extend credit to a “substandard” borrower unless adequately documented and the Bank acknowledges.
| · | The Bank shall have an outside independent loan review program. |
Action taken: Waived and pending visitation.
| · | The Bank shall maintain an appropriate Allowance for Loan and Lease Losses. |
Action taken: It is Bank policy to maintain a loan loss reserve that is appropriate when compared to the quality of our loan portfolio and sufficient to meet the losses inherent in the portfolio. The adequacy of the loan loss reserve is determined on a quarterly basis by the Audit and Finance Committee. Any deficit is replenished from current earnings monthly.
| · | The Bank shall maintain a Tier 1 leverage capital ratio equal of at least 9%, a Tier 1 Risk Based Capital Ratio of 11% and a Total Risk Based Capital Ratio of 13%. |
Action taken: The Bank maintains these goals. At September 30, 2011 our Tier 1 leverage capital ratio is 13.23%, Tier 1 Risk Based Capital ratio is 20.33% and Total Risk Based Capital Ration is 21.60%.
| · | The Bank shall not declare or pay any cash dividend without regulatory approval. |
Action taken: Dividends have not been declared, and will not be declared or approved for payment without prior consent of the Regional Director and the Commissioner.
| · | The Bank shall review and amend its interest rate risk policy and procedures. |
Action taken: The Bank’s portfolio has always been shocked downwards by one & two percent. In addition our policy now includes 3 & 4 percent downward. This was implemented as of December 31, 2010. Policy and procedures were already in place to monitor risk, the downward shock of 3% and 4% was included. Reports are presented quarterly at the Audit and Finance Directors’ meeting. A program was purchased to facilitate generating the economic value of equity. Risk is monitored monthly by the ALCO committee which meets monthly in conjunction with the Management Committee.
| 18 |
| · | The Bank shall provide for an independent evaluation of its management and information systems. |
Action taken: The Board approved Chaffe & Associates on June 6, 2011. The results of the study were presented to the Board members on 8-23-11 and forwarded to the FDIC & OFI on September 26, 2011. The results were accompanied by G. Harrison Scott’s 9-23-11 memorandum to the Board of Directors addressing the Chaffe Report.
| · | The Bank shall review and update the Bank’s written strategic plan and profit plan. |
Action taken: The Bank’s strategic Plan was revised on 1-21-11, to include the services of BankSmart, an outside consulting firm, contracted to review the Bank’s contracts and earnings. The Strategic Plan was presented to the Management Committee on 6-30-11 and the Audit & Finance Committee on 7-5-11.
In addition, the Company entered into an agreement on August 9, 2011, with the Federal Reserve Bank (FRB) whereby the Company will not incur additional debt, declare or pay dividends without approval of the FRB, reduce its capital position by purchasing or redeeming treasury stock, make any distributions of interest or principal on subordinated debentures or trust preferred securities without prior written approval of the FRB and the Louisiana Office of Financial Institutions (OFI), provide the FRB and OFI with quarterly financial updates and provide written confirmation that the Company has complied will all resolutions on a quarterly basis.
While no assurance can be given, Bank management believes it has taken action toward complying with the provisions of the MOU. It is not presently determinable what actions, if any, bank regulators might take if requirements of the Memorandum are not complied with in specified time periods.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
SEPTEMBER 30, 2011 COMPARED WITH DECEMBER 31, 2010
BALANCE SHEET
Total assets at September 30, 2011 were $90,527,000 compared to $94,376,000 at December 31, 2010, for a decrease of $3,849,000, or 4.08%. Federal Funds Sold decreased $1,150,000 from $14,950,000 at December 31, 2010 to $13,800,000 at September 30, 2011. Certificates of Deposit increased $1,005,000 from $4,203,000 at December 31, 2010 to $5,208,000 at September 30, 2011. Both the decrease in Federal Funds Sold and the increase in Certificates of Deposit are due to normal fluctuations. Investment securities remained the same. Total loans decreased $3,461,000, or 5.75%, to $56,775,000 at September 30, 2011 from $60,236,000 at December 31, 2010. The decrease in the loan portfolio is due to a decrease in commercial real estate loans of $2,024,007, a decrease in construction loans of $2,637,838, a decrease in second mortgage loans of $68,403, a decrease in other real estate loans of $84,045, a decrease in commercial loans of $7,576, a decrease in credit card loans of $533,382 and a decrease in overdrafts of $59,686. These decreases were offset by an increase in 1-4 residential loans of $1,502,996 and an increase in personal loans of $451,037. The credit card portfolio decrease was largely attributable to tightening of the Bank’s underwriting standards, normal attrition, and the cyclical nature of the business.
| 19 |
Total deposits decreased $3,863,000, or 04.79%, to $76,714,000 at September 30, 2011 from $80,577,000 at December 31, 2010. Total non-interest bearing deposits decreased $1,866,000 and interest-bearing accounts decreased $1,997,000. The decrease of interest earning deposits was attributable to a decrease in NOW accounts of $480,000, a decrease in money market accounts of $438,000, a decrease in savings accounts of $272,000 and a decrease of $807,000 in time deposits.
Other liabilities decreased $55,000 from $882,000 at December 31, 2010 to $827,000 at September 30, 2011. This decrease is due mainly to a decrease of $381,000 in deferred taxes and $20,000 in accrued interest offset by an increase in other liabilities of $346,000.
Shareholder’s Equity increased $69,000 from $11,773,000 at December 31, 2010 to $11,842,000 at September 30, 2011. This increase is due mainly to net income for the nine months ended September 30, 2011 of $74,000 and partially offset by a decrease in Preferred Stock of $6,000.
NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2010
The Company’s net income for the nine months ended September 30, 2011 was $74,000, or $0.42 per share, a decrease of $140,000 from the Company’s total net income of $214,000, or $1.20 per share, for the same period last year.
Interest income for the three months ended September 30, 2011 decreased $135,000 for the nine months ended September 30, 2011 over the same period last year. Interest on federal funds sold increased $1,000 primarily due to an increase in the average balance of $3,640,000. Interest on investment securities decreased $9,000 due mainly to a decrease in the average balance from $2,437,000 at September 30, 2010 to $878,000 at September 30, 2011. Interest in the loan portfolio decreased $109,000 due mainly to a decrease in the average interest rate of 10.17% at September 30, 2010 to 10.12% at September 30, 2011 and a decrease in the average balance of $108,000. Interest on Certificates of Deposit purchased decreased $19,000 due to a decrease in the average balance of $4,131,000 with an average rate of 0.81% for 2011 as compared to an average balance of $4,785,000 with an average rate of 1.23% in 2010.
Interest expense decreased $6,000 for the nine months ended September 30, 2011 over the same period last year. This was caused primarily by a decrease in the average interest rate paid on interest-bearing deposits from .77% at September 30, 2010 to .74% as of September 30, 2011. The impact of the decrease in the average interest rate paid on interest-bearing deposits was partially offset by an increase in the average balance of interest bearing deposits from $46,475,000 at September 30, 2010 to $48,057,000 at September 30, 2011. The average interest rate on interest-bearing liabilities decreased from .91% at September 30, 2010 to .87% at September 30, 2011.
Net interest income decreased $130,000 for the nine months ended September 30, 2011 compared to the same period last year. Our interest rate spread decreased from 6.78% at September 30, 2010 to 6.57% at September 30, 2011. The decrease in the rate spread was due to an decrease of .25% on the yield on interest-earning assets from 7.69% for the nine months ended September 30, 2010 to 7.44% for the nine months ended September 30, 2011, and a decrease of .04% on the average rate paid out on interest bearing liabilities from .91% paid for the nine months ended September 30, 2010 as compared to .87% paid during the nine months ended September 30, 2011.
| 20 |
Non-interest income decreased $464,000 between the nine month periods from $1,196,000 at September 30, 2010 to $732,000 at September 30, 2011. Income from Service Charges on deposit accounts decreased $22,000, Cardholder and Other Credit Card income decreased $3,000 and Other Operating income decreased $438,000. The decrease in Other Operating income is primarily due to the 2010 gain on the sale of ORE property of $395,000, and $78,000 of Dividend income received during the nine months ended September 30, 2010, partially offset by the gain on the sale of ORE property of $16,000 and rental income from ORE property of $5,000 during the nine months ended September 30, 2011.
Non-interest expense decreased $280,000 for the nine month period of 2011 as compared to the same period last year. Salaries and Employee Benefits decreased $166,000 from $1,934,000 at September 30, 2010 to $1,768,000 at September 30, 2011. This decrease was due mainly to a reduction in the number of employees. Occupancy expense decreased by $103,000 due to lower building repairs and depreciation expenses. Communications increased by $9,000, Outsourcing fees increased by $24,000, Loan and Credit Card expense increased by $3,000, Professional fees increased $23,000 primarily due to an increase in Consulting Fees, ORE expenses decreased $120,000 due to a reduction in repairs expense incurred during the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010, and Other Operating expenses increased $49,000 due primarily to increases in our FDIC assessment and Telephone/Communications expense.
THREE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2010
Net income for the third quarter of 2011 was $22,000, or $.12 per share, compared to ($96,000), or ($.53) per share, for the same period last year for a increase of $118,000.
Interest income decreased $48,000 over the same period last year. Interest on the loan portfolio decreased $38,000 from $1,463,000 at September 30, 2010 to $1,425,000 at September 30, 2011. This was caused mainly by a decrease in the average balance of loans from $60,237,000 at September 30, 2010 to $57,159,000 at September 30, 2011. Interest on investment securities decreased $3,000 due mainly to a decrease in the average balance of investments from $2,455,000 at September 30, 2010 to $878,000 at September 30, 2011. Interest on certificates of deposit decreased $6,000 due mainly to a decrease in the interest rate of 1.10% in 2010 to 0.63% in 2011 and a decrease in the average balance from $4,746,000 to $4,453,000. Interest on federal funds sold decreased $2,000 due mainly to a decrease in the interest rate of 0.16% in 2010 to 0.08% in 2011 and offset by an increase in the average balance from $12,171,000 to $15,928,000.
Interest expense decreased $3,000 for the three months ended September 30, 2011 over the same period last year. This was caused by an increase in the average balance of interest bearing deposits from $46,577,000 in 2010 to $47,487,000 in 2011 and was partially offset by a decrease in the interest rate from 0.78% to 0.74%.
Net interest income decreased $45,000 due primarily to a decrease in interest rate on earning assets of 0.13% and a decrease in interest bearing liabilities of 0.04%.
Non-interest income increased $11,000 for the three-month period ended September 30, 2011 compared to the prior year period. Service Charges on Deposit accounts decreased $13,000 due mainly to service charges, Cardholder and Other Credit Card income decreased $3,000 and Other operating income increased by $27,000 due mainly to an increase in ORE and Other commission & fees recognized during the three months ended September 2011.
| 21 |
Non-interest expense decreased $123,000 for the three-month period ended September 30, 2011 compared to the prior year period. Salaries and Employee benefits decreased $86,000 due to a reduction in number of employees. Occupancy expense decreased $24,000 due primarily to lower depreciation expenses along with lower building and maintenance repairs and Professional fees decreased $7,000 due primarily to consultant fees. In addition Other Operating Expenses decreased $21,000 due to lower losses in credit card fraud and lower courier service expense. This decrease was offset by increases in Communications of $1,000, Outsourcing Fees of $7,000 due to an overall increase in Credit Card sales, Loan & Credit Card expense of $2,000, and ORE expense of $5,000 due to increased insurance expense.
The provision for income taxes for the three months ended September 30, 2011 was $13,000, an increase of $49,000 compared to the same period last year. For the three months ended September 30, 2010, the Company recognized a benefit $36,000 due primarily to its pre-tax book loss.
The following table shows interest income on earning assets and related average yields, as well as interest expense on inter-bearing liabilities and related average rates paid for nine months ended September 30, 2011 and September 30, 2010.
Average Balances, Interests and Yields
| Nine Months Ended | ||||||||||||||||||||||||
| September 30, 2011 | September 30, 2010 | |||||||||||||||||||||||
| Average | Average | |||||||||||||||||||||||
| (Dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| INTEREST-EARNING ASSETS: | ||||||||||||||||||||||||
| Loans, net of unearned income(1)(2) | ||||||||||||||||||||||||
| Taxable | 57,937 | 4,396 | 10.12 | % | 59,045 | 4,504 | 10.17 | % | ||||||||||||||||
| Tax-exempt | — | — | ||||||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||
| Taxable | 878 | 5 | 0.76 | % | 2,437 | 14 | 0.77 | % | ||||||||||||||||
| Tax-exempt | — | — | ||||||||||||||||||||||
| Certificates of Deposit | 4,131 | 25 | 0.81 | % | 4,785 | 44 | 1.23 | % | ||||||||||||||||
| Federal funds sold | 16,651 | 14 | 0.11 | % | 13,011 | 13 | 0.13 | % | ||||||||||||||||
| Total Interest-Earning Assets | 79,597 | 4,440 | 7.44 | % | 79,278 | 4,575 | 7.69 | % | ||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||
| INTEREST-BEARING LIABILITIES: | ||||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||
| Demand Deposits | 15,084 | 43 | 0.38 | % | 15,485 | 66 | 0.57 | % | ||||||||||||||||
| Savings deposits | 19,924 | 52 | 0.35 | % | 20,759 | 56 | 0.36 | % | ||||||||||||||||
| Time deposits | 13,049 | 170 | 1.74 | % | 10,231 | 148 | 1.93 | % | ||||||||||||||||
| Total Interest-Bearing Deposits | 48,057 | 265 | 0.74 | % | 46,475 | 270 | 0.77 | % | ||||||||||||||||
| Federal Funds Purchased | ||||||||||||||||||||||||
| Securities sold under agreements to repurchase | ||||||||||||||||||||||||
| Other Short-Term borrowings | — | — | ||||||||||||||||||||||
| Long-Term debt | 1,144 | 56 | 6.53 | % | 1,144 | 56 | 6.53 | % | ||||||||||||||||
| Total Int-Bearing Liabilities | 49,201 | 321 | 0.87 | % | 47,619 | 326 | 0.91 | % | ||||||||||||||||
| Net Interest Income | 4,119 | 4,249 | ||||||||||||||||||||||
| Net Interest Spread | 6.57 | % | 6.78 | % | ||||||||||||||||||||
| Net Interest Margin | 5.17 | % | 5.36 | % | ||||||||||||||||||||
| (1) Fee income relating to loans 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%. | ||||||
| 22 |
Average Balances, Interests and Yields
| Three Months Ended | ||||||||||||||||||||||||
| September 30, 2011 | September 30, 2010 | |||||||||||||||||||||||
| Average | Average | |||||||||||||||||||||||
| (Dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| INTEREST-EARNING ASSETS: | ||||||||||||||||||||||||
| Loans, net of unearned income(1)(2) | ||||||||||||||||||||||||
| Taxable | $ | 57,159 | 1,426 | 9.98 | % | $ | 60,237 | 1,463 | 9.71 | % | ||||||||||||||
| Tax-exempt | — | — | ||||||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||
| Taxable | 878 | 2 | 0.91 | % | 2,455 | 5 | 0.81 | % | ||||||||||||||||
| Tax-exempt | — | — | ||||||||||||||||||||||
| Certificates of Deposit | 4,453 | 7 | 0.63 | % | 4,746 | 13 | 1.10 | % | ||||||||||||||||
| Federal funds sold | 15,928 | 3 | 0.08 | % | 12,171 | 5 | 0.16 | % | ||||||||||||||||
| Total Interest-Earning Assets | 78,418 | 1,438 | 7.34 | % | 79,609 | 1,486 | 7.47 | % | ||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||
| INTEREST-BEARING LIABILITIES: | ||||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||
| Demand Deposits | 14,724 | 17 | 0.46 | % | 15,310 | 26 | 0.68 | % | ||||||||||||||||
| Savings deposits | 19,946 | 18 | 0.36 | % | 20,868 | 19 | 0.36 | % | ||||||||||||||||
| Time deposits | 12,817 | 53 | 1.65 | % | 10,399 | 46 | 1.77 | % | ||||||||||||||||
| Total Interest-Bearing Deposits | 47,487 | 88 | 0.74 | % | 46,577 | 91 | 0.78 | % | ||||||||||||||||
| Federal Funds Purchased | ||||||||||||||||||||||||
| Securities sold under agreements to repurchase | ||||||||||||||||||||||||
| Other Short-Term borrowings | — | — | ||||||||||||||||||||||
| Long-Term debt | 1,144 | 19 | 6.64 | % | 1,144 | 19 | 6.64 | % | ||||||||||||||||
| Total Int-Bearing Liabilities | 48,631 | 107 | 0.88 | % | 47,721 | 110 | 0.92 | % | ||||||||||||||||
| Net Interest Income | 1,331 | 1,376 | ||||||||||||||||||||||
| Net Interest Spread | 6.45 | % | 6.54 | % | ||||||||||||||||||||
| Net Interest Margin | 1.70 | % | 1.73 | % | ||||||||||||||||||||
| (1) Fee income relating to loans 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%. | ||||||
| 23 |
| ANALYSES OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE | ||||||||||||
| For the Nine Months Ended | ||||||||||||
| September 30, 2011 Compared to September 30, 2010 | ||||||||||||
| Change in Interest Due to | ||||||||||||
| Total | ||||||||||||
| (Dollars in thousands) | Rate | Volume | Change | |||||||||
| Net Loans: | ||||||||||||
| Taxable | (23 | ) | (85 | ) | (108 | ) | ||||||
| Investment Securities | ||||||||||||
| Taxable | (0 | ) | (9 | ) | (9 | ) | ||||||
| Interest-Bearing Deposits | (13 | ) | (6 | ) | (19 | ) | ||||||
| Federal Funds Sold | (3 | ) | 4 | 1 | ||||||||
| Total Interest Income | $ | (39 | ) | $ | (96 | ) | $ | (135 | ) | |||
| Deposits: | ||||||||||||
| Demand Deposits | (21 | ) | (2 | ) | (23 | ) | ||||||
| Savings Deposits | (2 | ) | (2 | ) | (4 | ) | ||||||
| Time Deposits | (19 | ) | 41 | 22 | ||||||||
| Total Interest-Bearing Deposits | (42 | ) | 37 | (5 | ) | |||||||
| Total Interest Expense | $ | (42 | ) | $ | 37 | $ | (5 | ) | ||||
| ANALYSES OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE | ||||||||||||
| For the Three Months Ended | ||||||||||||
| September 30, 2011 Compared to September 30, 2010 | ||||||||||||
| Change in Interest Due to | ||||||||||||
| Total | ||||||||||||
| (Dollars in thousands) | Rate | Volume | Change | |||||||||
| Net Loans: | ||||||||||||
| Taxable | 38 | (75 | ) | (37 | ) | |||||||
| Investment Securities | ||||||||||||
| Taxable | 0 | (3 | ) | (3 | ) | |||||||
| Interest-Bearing Deposits | (5 | ) | (1 | ) | (6 | ) | ||||||
| Federal Funds Sold | (4 | ) | 2 | (2 | ) | |||||||
| Total Interest Income | $ | 29 | $ | (77 | ) | $ | (48 | ) | ||||
| Deposits: | ||||||||||||
| Demand Deposits | (8 | ) | (1 | ) | (9 | ) | ||||||
| Savings Deposits | (0 | ) | (1 | ) | (1 | ) | ||||||
| Time Deposits | (4 | ) | 11 | 7 | ||||||||
| Total Interest-Bearing Deposits | (12 | ) | 9 | (3 | ) | |||||||
| Total Interest Expense | $ | (12 | ) | $ | 9 | $ | (3 | ) | ||||
Item 3 Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events, and Future Growth
Management considers interest rate risk to be a market risk that could have a significant effect on the financial condition of the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. Difficult conditions in the financial services markets may materially and adversely affect the business and results of operations of the Bank and the Company.
| 24 |
Dramatic declines in the housing market during the past year, along with falling home prices and increasing foreclosures and unemployment, have resulted in significant write downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities by spreading to credit default swaps and other derivative securities, have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions, and, in some cases, to fail. Many lenders and institutional investors have reduced, and in some cases, ceased to provide funding to borrowers, including other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and widespread reduction of business activity generally, which could have a material adverse effect on our business and operations. A worsening of these conditions would likely exacerbate any adverse effects of these difficult market conditions on us and others in the financial institutions industry.
However, the majority of small community banks, such as Bank of Louisiana, have strong reserve positions and are well capitalized.
The occurrence of catastrophic events such as hurricanes, tropical storms, earthquakes, windstorms, floods, severe winter weather, fires and other catastrophes could adversely affect our consolidated financial condition or results of operations. Unpredictable natural and other disasters could have an adverse effect on us in that such events could materially disrupt our operations or the ability or willingness of our customers to access financial services offered by us. The incidence and severity of catastrophic events could nevertheless reduce our earnings and cause volatility in our financial results for any fiscal quarter or year and have a material adverse effect on our financial condition or results of operation.
The Company is a customer-focused organization. Future growth is expected to be driven in a large part by the relationships maintained with customers. The Company has assembled an experienced management team, and has management development plans in place.
Item 4 Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of BOL BANCSHARES, INC. was held on April 12, 2011. Five nominees were elected to serve one year terms as directors. Laporte, Sehrt, Romig and Hand was approved as the independent auditors. There were no other matters voted upon at the meeting.
Below are the names of the nominees who were elected as directors and the number of shares cast for each. The total shares voting were 123,919.
| Number of Shares | ||||||||||||
| Nominee | For | Against | Abstain | |||||||||
| G. Harrison Scott | 123,644 | 99 | 176 | |||||||||
| Johny C. Crow | 123,644 | 99 | 176 | |||||||||
| Franck F. LaBiche | 123,644 | 99 | 176 | |||||||||
| Sharry R. Scott | 123,644 | 99 | 176 | |||||||||
| A. Earle Cefalu, Jr. | 123,644 | 99 | 176 | |||||||||
| 25 |
Item 4T Controls and Procedures
Under the supervision and with the participation of our management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the certifying officers of the Company have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934, is recorded, processed, summarized and reported within the applicable time periods specified by the Securities and Exchange Commission’s rules and forms. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 6 Exhibits
| Exhibits | ||
| 1.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | |
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | |
| 32 | Certification Pursuant to 18 U.S.C. Section 1350 |
| 26 |
BOL BANCSHARES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BOL BANCSHARES, INC. | ||
| November 21, 2011 | ||
| Date | G. Harrison Scott | |
| Chairman | ||
| (in his capacity as a duly authorized | ||
| officer of the Registrant) | ||
| Peggy L. Schaefer | ||
| Treasurer | ||
| (in her capacity as Chief Accounting | ||
| Officer of the Registrant) |
| 27 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, G. Harrison Scott, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of BOL Bancshares, Inc; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. |
| 5. | The registrant’s other certifying officer(s), and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2011
/s/ G. Harrison Scott
G. Harrison Scott
Chairman
Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peggy L. Schaefer, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of BOL Bancshares, Inc; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s), and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2011
/s/ Peggy L. Schaefer
Peggy L. Schaefer
Treasurer
Exhibit 32
BOL BANCSHARES, INC.
CERTIFICATION OF PERIODIC FINANCIAL REPORT
Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of BOL Bancshares, Inc. (“Company”) certifies that the quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2011 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: November 21, 2011 | /s/ G. Harrison Scott |
| G. Harrison Scott | |
| Chairman | |
| Date: November 21, 2011 | /s/ Peggy L. Schaefer |
| Peggy L. Schaefer | |
| Treasurer | |
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