UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
Commission file Number 01-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
Louisiana 72-1121561
(State of incorporation) (I. R. S. Employee
Identification No.)
300 St. Charles Avenue, New Orleans, La. 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(504) 889-9400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $1 Par Value - 179,145 shares as of July 31, 1996.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
Page No.
PART 1. Financial Information
Item 1: Financial Statements
Consolidated Statement of Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in
Stockholder's Equity 5
Consolidated Statement of Cash Flow 6
Notes to Consolidated Financial Statements 7
Item 1: Management's Discussion and Analysis of
Financial Condition and Results of
Operation 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule 22
B. Reports on Form 8-K
No reports have been filed on Form 8-K
during this quarter.
<PAGE>
<TABLE>
Part I. - Financial Information
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION
(Unaudited)
(Amounts in thousands)
<CAPTION>
June 1996 December 1995 June 1995
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks
Non-Interest Bearing
Balances and Cash $ 5,744 $ 6,742 $ 7,545
Interest Bearing Balances 0 0 100
Investment Securities
Securities Held to Maturity
(Fair Values at 6/31/96,
12/31/96, and 6/31/95,
respectively were
$7,975,976, $10,015,625,
and $11,943,490) 7,989 10,014 12,025
Securities Available
for Sale 1,106 1,122 1,195
Federal Funds Sold 11,075 10,725 10,200
Loans, net of unearned income 75,750 74,943 70,822
Reserve for possible loan loss (1,502) (1,500) (940)
Property, Equipment, and Lease-
hold Improvements (Net of
Depreciation & Amortization) 2,701 2,575 2,339
Other Real Estate 1,699 1,994 2,570
Deferred Taxes 364 0 0
Investment in Subsidiary 0 0 0
Other Assets 1,516 1,974 1,613
TOTAL ASSETS $ 106,442 $108,589 $107,469
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C> <C>
Deposits:
Non-Interest Bearing 35,086 35,822 34,489
Interest Bearing 59,791 61,564 61,330
TOTAL DEPOSITS 94,877 97,386 95,819
Deferred Taxes 0 0 8
Notes Payable 497 499 501
Senior Secured Debentures 1,890 1,890 1,890
Accrued Litigation Settlement 390 390 390
Other Liabilities 1,208 1,056 1,082
TOTAL LIABILITIES $ 98,862 $101,221 $ 99,690
STOCKHOLDER'S EQUITY
Common Stock-Par Value $1,
Authorized-1,000,000,000 shares;
issued 179,145, 179,145, &
179,145 at 6/31/96, 12/31/95, &
6/31/95 179 179 179
Preferred Stock-Par Value
$1, Authorized 3,000,000,000
shares; issued 2,302,811,
2,302,811 & 2,302,811 at
6/31/96, 12/31/95, & 6/31/95 2,303 2,303 2,303
Undivided Profits 4,852 4,708 4,708
Capital in Excess of Par-
Retired Stock 15 15 15
Unrealized Gain on Securities
Available for Sale, net of
applicable Deferred Income
Taxes 6 18 86
Current Earnings 225 145 488
TOTAL STOCKHOLDERS' EQUITY 7,580 7,368 7,779
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 106,442 $ 108,589 $107,469
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Three months ended Six months ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,865 $2,500 $5,719 $4,870
Interest on time deposits 0 1 0 2
Interest on security-HTM 112 184 234 377
Interest & dividends on
security-AFS 13 24 29 32
Interest on federal funds sold 129 93 259 189
Other Interest Income 0 0 1 0
TOTAL INTEREST INCOME 3,119 , 2,802 6,242 5,470
INTEREST EXPENSE
Interest on deposits 502 535 992 1,013
Interest on federal funds
purchased 0 0 0 0
Other interest expense 1 1 4 2
Interest expense on notes
payable 13 19 26 27
Interest expense on debentures 44 42 86 85
TOTAL INTEREST EXPENSE 560 597 1,108 1,127
NET INTEREST INCOME 2,559 2,205 5,134 4,343
Provision for loan losses 410 131 832 331
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,149 2,074 4,302 4,012
OTHER INCOME
Service charge on deposit accts 364 362 726 728
Cardholder & other credit cd
income 198 204 336 360
ORE income 14 27 19 84
Other operating income 35 58 145 181
Equity in earnings of
unconsolidated subsidiary 0 0 0 (35)
Gain on sale of securities 0 0 0 0
TOTAL OTHER INCOME 611 651 1,226 1,318
OTHER EXPENSE
Salaries and employee benefits 1,057 943 2,066 1,882
Occupancy expense 422 420 869 835
Loan & credit card expense 322 213 595 422
ORE expense 97 60 135 107
Other operating expense 756 635 1,453 1,243
TOTAL OTHER EXPENSES 2,654 2,271 5,118 4,489
Income Before Tax Provision 106 454 410 841
Provision for taxes 64 216 185 353
NET INCOME $ 42 $ 238 $ 225 $ 488
Earnings Per Share of Common
Stock $.23 $1.33 $1.26 $2.73
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
(Amounts in thousands)
<CAPTION>
UNREALIZED
GAIN ON CAPITAL IN
INVESTMENT EXCESS OF
SECURITIES PAR RETIRED
COMMON PREFERRED AVAILABLE UNDIVIDED RETIRED
STOCK STOCK FOR SALE PROFITS STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE 12/31/95 $179 $2,303 $19 $4,852 $15 $7,368
Cancellation
of Stock 0
Capital in
Excess of Par
Retired 0
Change in
unrealized
gain on
securities AFS (13) (13)
Net Income 225 225
Balance 06/30/96 $179 $2,303 $6 $5,077 $15 $7,580
BALANCE 12/31/94 $179 $2,309 $52 $4,708 $9 $7,257
Cancellation
of stock (6) (6)
Capital in
Excess of Par
Retired 6 6
Change in
unrealized
gain on
securities AFS 34 34
Net Income 488 488
Balance 6/30/95 $179 $2,303 $86 $5,196 $15 $7,779
</TABLE>
<PAGE>
<TABLE>
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS(1)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(Amounts in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 225 $ 488
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
(Used in) Operating Activities:
Provision for Loan Losses 832 331
Depreciation & Amortization Expense 167 77
Amortization of Investment Security
Premiums 2 13
Accretion of Investment Security
Discounts 10 (3)
(Decrease)Increase in Deferred
Income Taxes (366) (40)
(Gain) Loss on Sale of Property &
Equipment 2 (5)
(Gain) Loss on Sale of Other Real
Estate 3 (60)
Decrease (Increase) in Other Assets
and Prepaid Taxes 255 1,437
(Decrease) Increase in Other
Liabilities & Accrued Interest (159) 100
Net Decrease (Increase) in Mortgage
Loans Held for Resale 161 (85)
Undistributed Equity Method Income 0 34
Gain on Sale of AFS Securities 0 0
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,132 2,287
INVESTING ACTIVITIES
Proceeds from Sale of AFS Securities 0 0
Proceeds from AFS Securities
Released at Maturity 978 0
Purchases of AFS Securities (1,000) (985)
Proceeds from HTM Investment
Securities Released at Maturity 2,510 2,970
Purchases of HTM Investment Security (478) 0
Proceeds from Sale of Property &
Equipment 2 5
Purchases of Property & Equipment (298) (546)
Proceeds from Sale of Other Real
Estate 293 261
Purchases of Other Real Estate (3) 0
Net Decrease (Increase) in Loans (1,231) (3,270)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 773 (1,565)
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand
Deposits, Interest Bearing Deposits
Savings Accounts, & CD's (2,495) 4,056
Proceeds from Issuance of Long-Term Debt 0 0
Retirement of Stock 0 (6)
Dividends Paid 0 0
Principal Payments on Long Term Debt (2) (31)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (2,497) 4,019
Net Increase (Decrease) in Cash &
Cash Equivalents (592) 4,741
Cash & Cash Equivalents at Beginning
of Year 17,411 13,104
CASH & CASH EQUIVALENTS AT END
OF PERIOD $ 16,819 $ 17,845
<FN>
(1) Prior periods have been conformed to current-period presentation.
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended June 30,
1996, are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. For further information, refer to the
audited consolidated financial statements and notes included in the
Registrant's annual report on Form 10-K for the year ended December 31, 1995.
Note 2. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The regular annual meeting of shareholders of BOL BANCSHARES, INC., was
held on April 9, 1996. All incumbent directors were re-elected. There were
no other matters voted upon at the meeting.
Below are the names of the nominees who were elected to continue their
term as directors and the number of shares cast. The total shares voting
were 128,430.
Number of Shares
Nominee For Against Abstain
Gordon A. Burgess 128,280 145 5
James A. Comiskey 128,280 145 5
Lionel J. Favret 128,280 145 5
Louis G. Grush 128,280 145 5
Gerry A. Hinton 128,255 170 5
Leland L. Landry 128,280 145 5
Samuel Logan 128,280 145 5
Douglas A. Schonacher 128,280 145 5
G. Harrison Scott 128,280 145 5
Edward J. Soniat 128,255 170 5
Note 3. MERGER AGREEMENTS
The pending merger with First American Bank of Tangipahoa which was
expected to be consummated in the second quarter of 1995 has been cancelled.
Note 4. PER SHARE DATA
Income per common share data are based on the weighted average number of
share outstanding of 179,145 and 179,145 at June 30, 1996 and 1995
respectively.
<PAGE>
Note 5. CONTINGENCIES
The Subsidiary Bank in the course of conducting its business, becomes
involved as a defendant or plaintiff in various lawsuits.
A) The Subsidiary Bank was a defendant in a lawsuit filed by a party
owning land that other real estate is built on, for back lease payments.
In a prior lawsuit, the appellate court held that the rights of the
landowner were subordinated to those of the Bank. Notwithstanding this prior
decree, the plaintiffs instituted a new proceeding for bank due rental and
judgement in the amount of $390,00 was rendered against the Subsidiary Bank
for which a separate contingency account was set up. The Subsidiary Bank has
appealed. The appellate court sustained the judgment of the district court
and the Subsidiary Bank appealed for a writ of review to the Louisiana
Supreme Court. The writ was granted.
EXPECTED RESULTS
Since the writ was granted, we believe the Subsidiary Bank has a better
than average opportunity to reverse the above judgement.
B) The Subsidiary Bank was a defendant in a lawsuit filed by a
proprietary merchant for breach of contract in that the Subsidiary Bank did
not diligently handle its accounts receivables. A hearing was held on July
10, 1996, at which time numerous exceptions were filed by the Subsidiary
Bank.
EXPECTED RESULTS
The Subsidiary Bank feels that the chances of defeating this claim are
better than average.
Note 6. IMPAIRED LOANS
The Financial Accounting Standards Board (FASB) issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" in May, 1993. In October,
1994, the FASB issued SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures" which amends SFAS No. 114.
These standards require the measurement of certain impaired loans based on
the present value of expected future cash flows discounted at the loan's
effective interest rates. Adoption of SFAS Nos. 114 and 118 is required for
fiscal years beginning after December 15, 1994. The Bank adopted these
statements beginning January 1, 1995; the adoption had no material impact on
the Company's consolidated financial statements.
A loan is considered potentially impaired if: a) it is probable that the
Bank will be unable to collect all amounts due (principal and interest)
according to the terms of the loan agreement; b) A loan's original
contractual terms have been modified because of the collect concerns.
Impairment assessment is based on the present value of expected future
cash flows related to the particular loan. The Bank discounts expected net
future cash flows or the underlying collateral of a loan to determine the
appropriate loss allowance for the loan.
For impaired loans that have risk characteristics in common with other
impaired loans, the Bank aggregates those loans and uses historical
statistics, such as average recovery period and average amount recovered,
along with a composite effective interest rate as a means of measuring the
impaired loans.
If the measure of the impaired loan is less than the recorded investment
in the loan, including accrued interest, net deferred loan fees or costs, and
unamortized premium or discount, the Bank recognized the impairment.
The term recorded investment in the loan is distinguished from net
carrying amount of the loan because the latter term is net of a valuation
allowance, while the former term is not. The recorded investment in the loan
does, however, reflect any direct write-down of the investment.
When the bank recognizes the impairment, we create a valuation allowance
with a corresponding charge to bad-debt expense or adjust an existing
valuation allowance for the impaired loan with a corresponding charge or
credit to bad debt expense.
As of June 30, 1996, the Bank did not have any impaired loans.
<PAGE>
Note 7. WATCH LIST
The Bank's watch list includes loans which, for management purposes,
have been identified as requiring a higher level of monitoring due to risk.
The Bank's watch list includes both performing and nonperforming loans. The
majority of watch list loans are classified as performing, because they do
not have characteristics resulting in uncertainty about the borrower's
ability to repay principal and interest in accordance with the original terms
of the loans.
The watch list consists of classifications, identified as Type 1 through
Type 4. Types 1, 2 and 3 generally parallel the regulatory classifications
of loss, doubtful and substandard, respectively. Type 4 generally parallels
the regulatory classification of Other Assets Especially Mentioned (OAEM).
These loans require monitoring due to conditions which, if not corrected,
could increase credit risk. Total watch list loans decreased 35.38% from
$2,377 thousand at June 30, 1995 to $1,536 thousand at June 30, 1996.
Note 8. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate the value:
CASH AND SHORT-TERM INVESTMENTS
For cash, the carrying amount approximates fair value. For short-term
investments, fair values are calculated based upon general investment market
interest rates for similar maturity investments.
INVESTMENT SECURITIES
For securities and marketable equity securities held-for-investment
purposes, fair values are based on quoted market prices.
LOAN RECEIVABLES
For certain homogeneous categories of loans, such as residential
mortgages, credit card receivables and other consumer loans, fair value is
estimated using the current U.S. Treasury interest rate curve, a factor for
cost of processing and a factor for historical credit risk to determine the
discount rate.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits and certain money
market deposits are calculated based upon general investment market interest
rates for investments with similar maturities. The value of fixed maturity
certificates deposit is estimated using the U.S. Treasury interest rate curve
currently offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the
counterparties.
<PAGE>
The estimated fair values of the Bank's financial instruments are as follows:
<TABLE>
(Amounts in thousands)
<CAPTION> June 30, 1996
Carrying Amount Fair Value
<S> <C> <C>
Financial Assets:
Cash and Short Term Investments $ 16,819 $ 16,819
Investment Securities 9,095 9,095
Loans 75,750 75,580
Less: Allowance for Loan Losses 1,502 1,502
$ 100,162 $ 99,992
Financial Liabilities:
Deposits $ 95,781 $ 95,868
Unrecognized Financial Instruments:
Commitments to Extend Credit $ 725 $ 725
Commercial Lines of Credit 146 146
Credit Card Arrangements 76,004 76,004
$ 76,875 $ 76,875
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1)
(Amounts in thousands)
<CAPTION>
Second Quarter 1996 First Quarter 1996
Interest Interest
Average Income/ Yield Average Income/ Yield
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $ 75,975 $ 2,865 3.77% $ 73,764 $2,854 3.87%
Securities (HTM) 7,988 112 1.40% 8,990 122 1.36%
Securities (AFS) 1,109 13 1.17% 1,122 16 1.43%
Interest Bearing Deposits 0 0 0 0
Federal Funds Sold 9,845 129 1.31% 9,724 130 1.34%
TOTAL INTEREST-EARNING ASSETS 94,917 3,119 3.29% 93,600 3,122 3.34%
Allowance for loan losses (1,526) (1,226)
Non interest-earning assets:
Cash and due from banks 5,978 6,052
Premises and equipment 2,652 2,556
Other real estate 1,851 2,034
Other assets 1,997 1,546
TOTAL NONINTEREST-EARNING
ASSETS 12,478 12,188
TOTAL ASSETS $ 105,869 $104,562
LIABILITIES AND STOCKHOLDERS EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $ 12,301 $ 68 .55% $ 11,725 $ 59 .50%
Money market deposit a/c 7,314 45 .62% 7,576 50 .66%
Savings and other consumer
time deposits 40,259 378 .94% 40,294 376 .93%
Certificates of deposits
of $100,00 or more 1,260 12 .95% 1,144 14 1.22%
TOTAL INTEREST-BEARING
DEPOSITS 61,134 503 .82 60,739 499 .82%
Long-term debt 2,388 57 2.39% 2,389 57 2.39%
TOTAL INTEREST-BEARING
LIABILITIES 63,522 560 .88% 63,128 556 .88%
Noninterest-bearing liabilities:
Demand deposits 33,244 32,578
Other liabilities 1,522 1,376
TOTAL NONINTEREST-BEARING
LIABILITIES 34,766 33,954
Total stockholders' equity 7,581 7,480
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 105,869 $104,562
SPREAD AND NET YIELD
Interest rate spread 2.40% 2.45%
Net interest income/margin $ 2,559 2.70% $2,566 2.74%
<FN>
(1) Prior periods have been conformed to current-period presentation
(2) Excludes unearned income. For purposed of yield computations, nonaccrual
loans are included in loans outstanding.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (1) (Continued)
<Amounts in thousands)
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
Interest Interest
Average Income/ Yield Average Income/ Yield
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $ 74,870 $ 5,719 7.64% $ 68,609 $4,870 7.10%
Securities (HTM) 8,489 234 2.76% 14,100 377 2.67%
Securities (AFS) 1,116 29 2.60% 914 32 3.50%
Interest Bearing Deposits 0 0 71 2 2.82%
Federal Funds Sold 9,784 259 2.65% 6,471 189 2.92%
TOTAL INTEREST-EARNING ASSETS 94,259 6,241 6.62% 90,165 5,470 6.07%
Allowance for loan losses (1,376) (987)
Non interest-earning assets:
Cash and due from banks 6,016 5,627
Premises and equipment 2,604 2,062
Other real estate 1,943 2,660
Other assets 1,748 1,958
TOTAL NONINTEREST-EARNING
ASSETS 12,311 12,307
TOTAL ASSETS $ 105,194 $101,485
LIABILITIES AND STOCKHOLDERS EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $ 12,013 $ 117 .97% $ 10,864 $ 125 1.15%
Money market deposit a/c 7,445 101 1.36% 8,724 101 1.16%
Savings and other consumer
time deposits 39,974 748 1.87% 37,973 754 1.99%
Certificates of deposits
of $100,00 or more 1,202 26 2.16% 1,821 35 1.92%
TOTAL INTEREST-BEARING
DEPOSITS 60,634 992 1.64 59,382 1,015 1.71%
Long-term debt 2,388 116 4.86% 2,399 112 4.67%
TOTAL INTEREST-BEARING
LIABILITIES 63,022 1,108 1.76% 61,781 1,127 1.82%
Noninterest-bearing liabilities:
Demand deposits 33,213 30,958
Other liabilities 1,427 1,270
TOTAL NONINTEREST-BEARING
LIABILITIES 34,640 32,228
Total stockholders' equity 7,532 7,476
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 105,194 $101,485
SPREAD AND NET YIELD
Interest rate spread 4.86% 4.24%
Net interest income/margin $ 5,133 5.45% $4,343 4.82%
<FN>
(1) Prior periods have been conformed to current-period presentation
(2) Excludes unearned income. For purposed of yield computations, nonaccrual
loans are included in loans outstanding.
</TABLE>
<PAGE>
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1996
Managements's Discussion presents a review of the major factors and
trends affecting the performance of BOL BANCSHARES, INC. (the "Company") and
its bank subsidiary (the Bank) and should be read in conjunction with the
accompanying consolidated financial statements, notes and tables.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $94,259 thousand in the second quarter
of 1996, a $4,094 thousand increase from the second quarter of 1995 average
of $90,165 thousand. Compared to the second quarter of 1995 average loans
increased $6,285 thousand (9.02%) and federal funds sold increased $3,618
thousand (58.10%) while investment securities decreased $5,758 thousand
(38.76%).
Table 1 presents the Company's loan portfolio by major classifications.
Total loans increased $4,928 thousand (6.96%) over the second quarter of
1995.
<TABLE>
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
(Amounts in thousands)
<CAPTION>
6/30/96 % of 3/31/96 % of 6/30/95 % of
Total Total Total
<S> <C> <C> <C> <C> <C> <C>
Real Estate Mortgages $23,588 31.14% $23,612 31.18% $21,746 30.71%
Commercial Loans 5,222 6.89% 4,971 6.56% 5,607 7.92%
Mortgage Loans Held
for Resale 95 .14% 314 .41% 85 .12%
Personal Loans 4,435 5.85% 4,579 6.05% 6,119 8.64%
Credit Cards 42,149 55.64% 42,069 55.55% 37,131 52.42%
Overdrafts 261 .34% 188 .25% 134 .19%
TOTAL LOANS $75,750 100.00% $75,733 100.00% $70,822 100.00%
</TABLE>
Securities Held to Maturity. Average securities held to maturity
decreased $5,681 thousand (41.56%) from the second quarter of 1995.
Securities held to maturity are carried as cost, adjusted for amortization of
premium and accretion of discounts using methods approximating the interest
method.
Securities Available for Sale. Average securities available for sale
decreased $77 thousand (06.49%) from the second quarter of 1995. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold increased $3,618
thousand (58.10%) up from the second quarter of 1995. This increase is
mainly due to the decrease in the investment security portfolio.
<PAGE>
ASSET QUALITY
Table 2 presents a summary of nonperforming assets for the past five
quarters.
Loans are placed on a nonaccrual status when there is uncertainty about
the timely payment of principal and interest. When a loan is on nonaccrual
status, interest income is no longer accrued and is only recognized when
received. The loan process ensures that all loans which meet the criteria
for nonaccrual status are placed on nonaccrual.
Nonperforming assets, which include nonaccrual loans and foreclosed
assets, totaled $1,987 thousand at June 30, 1996 as compared to $3,009
thousand at June 30, 1995. Other real estate totaled $1,699 thousand at June
30, 1996 as compared to $2,570 thousand at June 30, 1995.
<TABLE>
Table 2 - NONPERFORMING ASSETS
(Amounts in thousands)
<CAPTION>
06/96 03/96 12/95 09/95 06/95
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans $ 288 $ 139 $ 235 $ 630 $ 439
Other Real Estate 1,699 2,052 1,994 2,446 2,570
TOTAL NONPERFORMING 1,987 2,191 2,229 3,076 3,009
ASSETS
Accruing loans past due
90 days or more 4,289 2,074 1,062 1,715 1,707
Reserve for loan losses 1,502 1,505 1,500 958 940
Nonperforming assets as
a percentage of loans
plus foreclosed assets 2.57% 2.82% 2.90% 4.04% 4.10%
Reserve for loan losses
as a percentage of
nonperforming loans 75.59% 68.72% 67.30% 31.15% 31.24%
</TABLE>
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
Table 3 presents an analysis of the activity in the reserve for possible
loan losses for the second quarter and the first six months of 1996 and 1995.
The reserve for loan losses as a percentage of loans increased from 1.33% at
June 30, 1995 to 1.98% at June 30, 1996. The net charge-off (recoveries) as
a percentage of average loans increased from 0.20% at June 30, 1995 to 0.54%
at June 30, 1996.
<PAGE>
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal
is unlikely. The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluation of the collectibility of loans and prior
loss portfolio, overall portfolio quality, review of specific problem loans,
and current economic conditions that may affect the borrowers' ability to
pay. Accrual of interest is discontinued and accrued interest is charged off
on a loan when management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful. Ultimate losses may vary from
the current estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reflected in current operations.
Beginning December 1, 1994 a new proprietary merchant began submitting
credit card deposits and based upon their contract, the Bank began
withholding a percentage of their deposits to set aside for any possible
charge offs. This is a non recourse proprietor. This reserve amount is
reflected in the below schedule, listed as Additional Reserve from
proprietor. This amount has been excluded from the income statement as this
money has been received from the proprietor by deducting a certain percentage
from their daily sales. As of December 31, 1995, these amounts have been
reclassified and have been removed from this category.
TABLE 3 - RESERVE FOR POSSIBLE LOAN LOSSES
<TABLE>
(Amounts in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $1,505 $ 946 $1,500 $935
Loans charged off (563) (260) (1,147) (530)
Recoveries 150 121 317 199
Net (charge-offs) recoveries (413) (139) (830) (331)
Provision for loan losses 410 130 832 331
Additional Reserve from Proprietors 0 3 0 5
BALANCE AS END OF PERIOD 1,502 940 1,502 940
Reserve for possible loan losses
as a percentage of loans 1.98% 1.33% 1.98% 1.33%
Net (charge-offs) recoveries as a
percentage of average loans 0.54% 0.20% 1.09% 0.48%
</TABLE>
FUNDING SOURCES:
DEPOSITS
Deposits. Average deposits totaled $95,265 thousand in the second
quarter of 1996, an increase of $3,957 thousand (4.33%) from $91,308 thousand
in the second quarter of 1995. Average core deposits were $94,005 thousand
for the second quarter of 1996 up from $89,487 thousand in the second quarter
of 1995. Table 4 presents the composition of average deposits for the three
quarters ending June 30, 1996, March 31, 1996 and June 30, 1995.
<PAGE>
<TABLE>
TABLE 4 - DEPOSIT COMPOSITION
(Amounts in thousands)
<CAPTION>
For the Three Months Ended
06/96 03/96 06/95
Average % of Average % of Average % of
Balance Dep. Balance Dep. Balance Dep.
<S> <C> <C> <C> <C> <C> <C>
Demand, noninterest-
bearing $33,247 34.90% $32,578 34.90% $30,962 33.91%
NOW accounts 12,301 12.91% 11,725 12.56% 10,864 11.91%
Money Market deposit 8,198 8.61% 7,576 8.12% 8,724 9.55%
accounts
Savings accounts 25,933 27.22% 25,126 26.93% 25,776 28.23%
Other time deposits 14,326 15.04% 15,168 16.26% 13,161 14.41%
TOTAL CORE DEPOSITS 94,005 98.68% 92,173 98.77% 89,487 98.01%
Certificates of
deposit of $100,000
or more 1,260 1.32% 1,144 1.23% 1,821 1.99%
TOTAL DEPOSITS $95,265 100.00% $93,317 100.00% $91,308 100.00%
</TABLE>
BORROWINGS
The Company's long-term debt is comprised primarily of debentures which
are secured by 23.83 shares of the Subsidiary Bank's stock. The Bank has no
long-term debt. It is the Bank's policy to manage its liquidity so that
there is no need to make unplanned sales of assets or to borrow funds under
emergency conditions. The Bank maintains a Federal Funds line of credit in
the amount of $600 thousand with a correspondent bank and also has a
commitment from an upstream correspondent which will increase our Federal
Funds line of credit over and above the normal amount by pledging unused
securities.
INTEREST RATE SENSITIVITY
The Bank has established, as bank policy, an asset/liability management
system that protects Bank profits from undue exposure to interest rate risks.
This portion of our asset/liability management system is called gap
management. We also have established policies that are designed to protect
the Bank's interest margins from erosion. This portion of the system is
called spread management.
We define gap management as those actions taken first to measure and
then to match rate-sensitive assets to rate-sensitive liabilities. We define
a rate-sensitive asset as any earning asset that can be repriced to a market
rate in a given time frame. Similarly, a rate-sensitive liability is any
interest bearing liability that will have its interest rate changed to a
market rate during a specified time period. A negative gap is created when
rate-sensitive liabilities exceed rate-sensitive assets. Conversely, a
positive gap occurs when the Bank has more rate-sensitive assets than
liabilities. Again, a gap only has relevance with respect to a specific time
period.
By Bank policy we limit the Bank's earnings exposure due to interest
rate risk by setting limits on positive and negative gaps within the next 12
months. These limits are set so that this year's profits will not be unduly
impacted no matter what happens to interest rates during the year. In
addition, we extend the scenarios out five years to monitor the risks
associated on a longer term. The Bank manages its interest rate sensitivity
through several techniques which include changing the maturity and
distribution of assets and liabilities, repricing of the loan portfolio and
other methods.
RESULTS OF OPERATION
NET INTEREST INCOME
Net interest income, the difference between interest income and interest
expense, is a significant component of the performance of a banking
organization. Data used in the analysis of net interest income are derived
from the daily average levels of earnings assets and interest bearing
deposits as well as from the related income and expense. Net interest income
is not developed on a taxable equivalent basis because the level of tax
exempt income is not material.
Net interest income for the first six months of 1996 increased $354
thousand over the same period last year, and decreased $15 thousand from the
first quarter of 1996. The net interest income margin increased to 5.45% for
the second quarter of 1996 from 4.82% for the first quarter of 1995.
<TABLE>
<PAGE>
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1)
(Amounts in thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
6/96 3/96 6/95 6/96 6/95
<S> <C> <C> <C> <C> <C>
Interest Income $ 3,119 $ 3,122 $ 2,802 $ 6,242 $ 5,470
Interest Expense 560 548 597 1,108 1,127
Net Interest Income 2,559 2,574 2,205 5,134 4,343
Provision for Loan Loss 410 421 131 832 331
Net Interest Income
after Provision 2,149 2,153 2,074 4,302 4,012
Noninterest income:
Noninterest income 611 615 651 1,226 1,318
Securities gains 0 0 0 0 0
Noninterest income 611 615 651 1,226 1,318
Noninterest expense 2,654 2,464 2,271 5,118 4,489
Income before taxes 106 304 454 410 841
Income tax expense 64 121 216 185 353
NET INCOME (LOSS) 42 183 238 225 488
Income per common share $0.23 $1.02 $1.33 $1.26 $2.73
Average common shares
outstanding 179 179 179 179 179
Selected Quarter-End Balances
Loans $75,750 $75,733 $70,822
Deposits 94,877 95,045 95,819
Long-term debt 2,387 2,388 2,390
Stockholders' equity 7,580 7,542 7,778
Total assets 106,442 106,373 107,469
Selected Average Balances
Loans $75,975 $73,764 $69,690 $74,870 $68,609
Deposits 94,378 93,317 93,003 93,847 92,739
Long-term debt 2,388 2,389 2,391 2,388 2,399
Stockholders' equity 7,581 7,480 7,649 7,532 7,476
Total assets 105,869 104,562 101,929 105,194 101,485
Selected Ratios
Return on average assets 0.04% 0.18% 0.23% 0.21% 0.48%
Return on average equity 0.55% 2.45% 3.11% 2.99% 6.53%
Tier 1 risk-based capital 11.76% 11.75% 12.42%
Total risk-based capital 13.02% 13.00% 13.67%
Leverage ratio 8.76% 8.79% 9.06%
<FN>
(1) Prior periods have been conformed to current-period presentation.
</TABLE>
<PAGE>
NONINTEREST INCOME
Noninterest income for the second quarter of 1996 decreased $40 thousand
or 6.14% from the same period last year. For the first six months of 1996
compared to 1995 noninterest income decreased 6.98% from $1,318 thousand to
$1,226 thousand. The major categories of noninterest income for the three
months ended June 30, 1996 and 1995 and the six months ended June 30, 1996
and 1995 are presented in Table 5.
<TABLE>
TABLE 5 - NONINTEREST INCOME (1)
(Amounts in thousands)
<CAPTION>
Three Months Ended Six Months Ended
Percent Percent
6/96 6/95 Increase 6/96 6/95 Increase
Decrease Decrease
<S> <C> <C> <C> <C> <C> <C>
Service Charges $ 163 $ 176 (7.39%) $ 319 $ 347 (8.07%)
NSF Charges 198 189 4.76% 404 381 6.04%
Earnings in Equity
Subsidiary 0 0 N/M 0 (35) (100%)
Gain on Sale of
Securities 0 0 N/M 0 0 N/M
Cardholder & Other
Cr Cd Income 100 136 (26.47%) 221 229 (3.49%)
Membership Fees 59 68 (13.24%) 115 131 (12.21%)
Data Processing &
Items Processing 6 7 (14.29%) 13 15 (13.33%)
Other Comm & Fees 67 20 235.00% 94 96 (2.08%)
ORE Income 7 11 (36.36%) 12 24 (50.00%)
Gain on Sale of
ORE 7 17 (58.82%) 7 60 (88.33%)
Other Income 4 27 (85.19%) 41 70 (41.43%)
TOTAL NONINTEREST
INCOME $ 611 $ 651 (6.14%) $1,226 $1,318 (6.98%)
<FN>
N/M = Not meaningful
(1) Prior periods have been conformed to current-period presentation.
</TABLE>
<PAGE>
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1996 increased $387
thousand or 16.86% from the same period last year. The major categories of
noninterest expense for the six months ended June 30, 1996 and 1995 are
presented in Table 6. The increase from the same period last year is mainly
due to postage, professional fees and ORE expenses.
<TABLE>
TABLE 6 - NONINTEREST EXPENSE (1)
(Amounts in thousands)
<CAPTION>
Three Months Ended Six Months Ended
Percent Percent
6/96 6/95 Increase 6/96 6/95 Increase
Decrease Decrease
<S> <C> <C> <C> <C> <C> <C>
Salaries & Benefits $1,057 $ 943 12.09% $2,066 $1,882 9.78%
Loss on Litigation 0 0 N/M 0 0 N/M
Occupancy Expense 422 420 0.48% 869 835 4.07%
Advertising Expense 76 79 (3.80%) 159 161 (.63%)
Communications 98 62 58.06% 178 123 44.72%
Postage 167 78 114.10% 282 128 120.31%
Loan & Credit Card
Expense 322 213 51.17% 595 422 41.00%
Professional Fees 97 58 67.24% 179 111 61.26%
Legal Fees 48 47 2.13% 125 105 19.05%
Insurance & Assessments 26 76 (65.79%) 50 163 (69.33%)
Stationery, Forms &
Supply 111 120 (7.50%) 228 191 19.37%
Federal Reserve Charges 24 22 9.09% 46 46 N/M
ORE Expenses 97 60 61.67% 135 107 26.17%
Other Operating Expense 113 93 17.20% 206 215 (4.63%)
TOTAL NONINTEREST
EXPENSE $2,658 $2,271 16.86% $5,118 $4,489 14.01%
<FN>
N/M = Not meaningful
(1) Prior periods have been conformed to current-period presentation.
</TABLE>
<PAGE>
INCOME TAXES
The Company recorded a provision for income taxes of $185 thousand for
the second quarter of 1996 and $353 thousand for the second quarter of 1995.
CAPITAL
The Bank is required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by banking regulators. Table 7 presents
these ratios for the most recent five quarters.
<TABLE>
TABLE 7 - QUARTERLY SELECTED CAPITAL ADEQUACY RATIOS
6/96 3/96 12/95 9/95 6/95
<S> <C> <C> <C> <C> <C>
Risk-based capital
Tier 1 risk-based
capital ratio 11.76% 11.75% 11.46% 12.19% 12.42%
Total risk-based
capital ratio 13.02% 13.00% 12.72% 13.42% 13.67%
Leverage ratio 8.76% 8.79% 8.54% 9.13% 9.06%
</TABLE>
LIQUIDITY
Liquidity and capital resources are discussed weekly by the management
committee, the assets and liability committee and at each executive committee
meeting of the Bank's officers. The Bank has no long term debt and maintains
adequate capital to meet its needs in the foreseeable future. The liquidity
ratio for the Bank was 27.81% at June 30, 1996, 27.94% at March 31, 1996, and
33.10% at June 30, 1995.
The Bank's policy is to manage its liquidity through normal operations,
so that there is no need to make unplanned sales of assets or to borrow funds
under adverse conditions. This policy not withstanding, the Bank has also
established other potential sources of funds. Management has no knowledge of
any trends, events or uncertainties that would have a material effect on
liquidity.
<PAGE>
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.
<PAGE>
BOL BANCSHARES, INC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the registrant.
BOL BANCSHARES, INC.
(Registrant)
August 14, 1996 Peggy L. Schaefer
Date Peggy L. Schaefer
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 5744
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11075
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9095
<INVESTMENTS-CARRYING> 9095
<INVESTMENTS-MARKET> 9082
<LOANS> 75750
<ALLOWANCE> 1502
<TOTAL-ASSETS> 106442
<DEPOSITS> 94877
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1598
<LONG-TERM> 2388
0
2303
<COMMON> 179
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 106442
<INTEREST-LOAN> 5719
<INTEREST-INVEST> 263
<INTEREST-OTHER> 260
<INTEREST-TOTAL> 6242
<INTEREST-DEPOSIT> 992
<INTEREST-EXPENSE> 116
<INTEREST-INCOME-NET> 5134
<LOAN-LOSSES> 832
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5118
<INCOME-PRETAX> 410
<INCOME-PRE-EXTRAORDINARY> 410
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.82
<LOANS-NON> 1987
<LOANS-PAST> 4289
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1536
<ALLOWANCE-OPEN> 1500
<CHARGE-OFFS> 1147
<RECOVERIES> 317
<ALLOWANCE-CLOSE> 1502
<ALLOWANCE-DOMESTIC> 1502
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
