UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission file Number 01-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
Louisiana 72-1121561
(State of incorporation) (IRS Employer 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
State of aggregate market value of the voting stock held by non affiliates
of the Registrant as of February 28, 1997.
Approximately $396,054 (a)
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of the latest practical date.
Common Stock: $1.00 par value; 179,145 shares outstanding as of February
28, 1997.
(a) For the purposes of this computation, shares owned by directors and
executive officers have been excluded.
<PAGE>
Cross Reference Index Page
Part I
Item 1: Business 3
Item 2: Properties 7
Item 3: Legal Proceedings 8
Item 4: Submission of Matters to a Vote of Security Holders 8
Part II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters 9
Item 6: Selected Financial Data 9
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operation 11
Item 8: Financial Statements and Supplementary Data 38
Item 9: Changes in and Disagreements with Accountants and Financial
Disclosure 32
Part III
Item 10: Directors and Executive Officers of the Registrant 32
Item 11: Executive Compensation 33
Item 12: Security Ownership of Certain Beneficial Owners and
Management 34
Item 13: Certain Relationships and Related Transactions 34
Part IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8K
(a)Financial Statements
Independent Auditor's Report Consolidated Balance Sheets 38
Consolidated Statements of Income 40
Consolidated Statements of Changes in Stockholder's Equity41
Consolidated Statements of Cash Flow 42
Notes to Consolidated Financial Statements 44
Independent Auditor's Report on Supplementary Information
Schedules I, II, III 62
(b) Reports on Form 8-K NONE
(c) Schedules and Exhibits
Article 9 68
<PAGE>
Item 1
Business of the Company and the Bank
Here and after BOL Bancshares, Inc. shall be referred to as the Company
and subsidiary Bank of Louisiana shall be referred to as the Bank.
History and General Business
The Company was organized as a Louisiana corporation on May 7, 1981,
for the purpose of becoming a registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). The Company
remained inactive until April 29, 1988, when it acquired the Bank in a
three-bank merger of the Bank of Louisiana in New Orleans (the "Old Bank"),
Bank of the South ("South Bank"), and Fidelity Bank & Trust Company, all
Louisiana state-chartered banks. The Old Bank was the surviving bank in
the merger and subsequently changed its name to the Bank's current name.
The merger was originally accounted for as a "purchase", but after
discussions with the Securities and Exchange Commission, the accounting
treatment of the merger was changed to a manner similar to a "pooling of
interests". [Since the change in accounting treatment, the Company has
recast its financial statements, to reflect "pooling" accounting.] In
addition, at the time of the bank's merger, the Company merged with BOS
Bancshares, Inc., a Louisiana corporation and the registered bank holding
company for South Bank. The Company was the surviving entity in that
merger. The Company is the sole shareholder and registered bank holding
company of the Bank.
Other than owning and operating the Bank, the Company may also
engage, directly or through subsidiary corporations, in those activities
closely related to banking that are specifically permitted under the BHC
Act. See "Supervision and Regulation". The Company, after acquiring the
requisite approval of the Board of Governors of the Federal Reserve System
(the "FRB") and any other appropriate regulatory agency, may seek to engage
de novo in such activities or to acquire companies already engaged in such
activities. The Company has not conducted, and has no present intent to
conduct, negotiations for the acquisition or formation of any entities to
engage in other permissible activities. There can be no assurance,
however, that the Company will not form or acquire any other entity.
If the Company attempts to form or acquire other entities and
engage in activities closely related to banking, the Company will be
competing with other bank holding companies and companies currently engaged
in the line of business or permissible activity in which the Company might
engage, many of which have far greater assets and financial resources than
the Company and a greater capacity to raise additional debt and equity
capital. See "Business of the Company and the Bank Territory Served and
Competition".
Banking Industry
The Company derives its revenues largely from dividends from the
Bank. As is the case with any financial institution, the profitability of
the Bank is subject, among other things, to fluctuating availability of
money, loan demand, changes in interest rates, actions of fiscal and
monetary authorities, and economic conditions in general. See "Business of
the Company and the Bank", "Supervision and Regulation", and "Management's
Discussion and Analysis of the Financial Condition and Results of
Operations of the Company and the Bank".
Banking Products and Services
The Bank is a full service commercial bank that provides a wide range
of banking services for its customers. Some of the major services that it
offers include checking accounts, negotiable order of withdrawal ("NOW")
accounts, individual retirement accounts ("IRAs"), savings and other time
deposits of various types, and business, realestate, personal use, home
improvement, automobile, and a variety of other loans, as discussed more
fully below. Other services include letters of credit, safe deposit boxes,
money orders, traveler's checks, credit cards, wire transfer, electronic
banking, night deposit, and drive-in facilities. Prices and rates charged
for services offered are competitive with the area's existing financial
institutions.
The Company offers a wide variety of fixed and variable rate loans to
qualified borrowers. With regard to interest rates, the Bank continues to
meet legal standards while remaining competitive with the existing
financial institutions in its market area.
The specific types of loans that the Bank offers include the following:
Consumer Loans. The Company's consumer loans consist of automobile,
mobile home, recreational vehicle, and boat loans; home improvement and
second-mortgage loans; secured and unsecured personal expense loans; and
educational and government-sponsored student loans.
<PAGE>
Real Estate Loans. The Company's real estate loans consist of
residential first and second mortgage loans on one-to-four family homes;
construction and development loans; multiple dwelling unit
loans; housing rehabilitation loans; loans to purchase developed real
property; and commercial real estate loans.
Commercial Loans (Secured and Unsecured). The Company's commercial
loans consist of working capital loans, accounts receivable loans, and
inventory loans to small businesses.
Credit Cards. The Company offers a variety of nationally recognized
credits cards, in addition to its own Mr. Bol credit card, and private
label credit cards for use at retail establishments nationwide. As of
December 31, 1996, the Company held $25,264,799 in credit card receivables.
Proprietary Accounts. The Company has a number of proprietary
accounts it services. The Company's proprietary accounts consist largely of
small to medium sized merchants who have issued their own privatelabel
credit cards. The Company acquires these credit card accounts at a
discount, typically with reserves posted, and requires the merchant to
repurchase accounts 180 days or more past due. As of December 31, 1996,
the Company held $11,343,765 in proprietary accounts.
Mortgage Lending. The Company offers 15- and 30-year fixed and
adjustable rate conventional and jumbo home mortgages. The Company sells
all mortgage loans in the secondary market and does not retain the
servicing rights thereon.
Lending Policy of The Company
Lending authority is delegated by the Board of Directors of the
Company to loan officers, each of whom is limited as to the amount of
secured and unsecured loans that he or she can make to a single borrower or
related group of borrowers. The Company provides written guidelines for
lending activities. Secured loans are made to persons who are well
established and have net worth, collateral, and cash flow to support the
loan. Real estate loans usually are made only when such loans are secured
by real property located in the Company's primary market area. Unsecured
loans, except credit card loans and proprietary accounts, are normally made
by the Company only to persons who maintain depository relationships with
the Company.
Under certain circumstances the Company takes investment securities as
collateral for loans. If the purpose of the loan is to purchase or carry
margin stock, the Company will not advance loan proceeds of more that 10%
of the market value of the stock serving as collateral; provided that the
stock is considered "Blue Chip". To the extent the issuing company is not
considered "Blue Chip", the percentage of loan to value decreases. If the
loan proceeds will be used for purposes other than purchasing or carrying
margin stock, the Company generally will lend up to 70% of the current
market value of the stock serving as collateral.
Making loans to businesses for working capital is a traditional
function of commercial banks. Such loans are expected to be repaid out of
the current earnings of the commercial entity, and the ability of the
borrower to service its debt is dependent upon the success of the
commercial enterprise. It is the Company's policy to secure these loans.
The Company does not generally make commercial loans secured by inventory,
furniture, fixtures, equipment, or accounts receivable.
The great majority of the Company's commercial loans are secured by real
estate (and thus are categorized as real estate mortgage loans), because
such collateral may be superior to other types of collateral owned by small
businesses. Loans secured by commercial real estate, however, are subject
to certain inherent risks. Commercial real estate may be substantially
illiquid, and commercial values are difficult to ascertain and are subject
to wide fluctuations depending upon economic conditions. The Company
requires that qualified outside appraisers determine the value of any real
estate taken as collateral, and the Company will generally lend 75% of the
appraised value or the purchase price of the real estate, whichever is less.
The Company originates short-term residential construction loans for
detached housing and a limited number of residential acquisition and
development loans in the primary market area. Residential construction
loans are made pursuant to Loan Policy guidelines, which are approved by
the Company's Loan Committee. Specific maximum loan commitment and numbers
of unsold houses allowed are clearly identified for each of the
approximately five builders in the Loan Policy guidelines. Each loan is
individually reviewed and approved by the loan officer and is subject to a
third-party appraisal, and a maximum 100% of the builder's cost, but in no
event to exceed 80% of the appraised value loan-to-value ratio.
These guidelines are approved for established builders with track
records and adequate financial strength to support the credit being requested.
Loans may be for speculative starts or for pre-sold residential property to
specific purchasers. As of December 31, 1996, approximately
<PAGE>
$345,000 (0.50% of net loans) was outstanding on total residential
construction loans, of which none was for acquisition and development loans.
The Company does not have a rollover policy. Any loan renewal
request is reviewed in the same manner as an application for a new loan.
Inter-agency guidelines adopted by federal bank regulators including
the FDIC went into effect, mandating that financial institutions establish
real estate lending policies. The guidelines also established certain
maximum allowable real estate loan-to-value standards. The Company has
adopted the federal standards as its maximum allowable standards, but has
had in the past and now has in place loan policies which are, in some
cases, more conservative than the FDIC guidelines. The FDIC standards
require maximum allowable loanto-value ratios for various types of real
estate loans as set forth below:
<TABLE>
<CAPTION>
Maximum Allowable
Loan Category Loan-to-Value Percent
<S> <C>
Land 65%
Land development 75%
Construction:
Commercial, multifamily (1) and other nonresidential 80%
One-to-four family residential 85%
Improved property 85%
Owner-occupied-one-to-four family and home equity (2) N/A
_____________
</TABLE>
(1) Multifamily construction includes condominiums and cooperatives.
(2) A loan-to-value limit has not been established for permanent mortgage or
home equity loans or owner-occupied, one-to-four family residential
property. However, for any such loan with a loan-to-value ratio that
equals or exceeds 90% at origination, appropriate credit enhancement in the
form of either mortgage insurance or readily marketable collateral should
be required.
Potential specific risk elements associated with each of the
Company's lending categories are as follows:
Credit cards Employment status, changes in local economy, unsecured
credit risks
Installment
loans to
individuals Employment status, changes in local economy, difficulty in
monitoring collateral (vehicle, boats, mobile homes) and
limited personal contact as a result of indirect lending
through dealers
Commercial,
financial and
agricultural Industry concentrations, difficulty in monitoring the
valuation of collateral (inventory, accounts receivable
and vehicles), borrower management expertise, increased
competition, and specialized or obsolete equipment as
collateral
Real Estate-
construction Inadequate collateral and long-term financing agreements
Real Estate-
residential Changes in local economy and caps on variable rate loans
Management believes that the outstanding loans included in each of
these categories do not represent more than the normal risks associated
with these categories, as described above. The Company's underwriting and
asset quality monitoring systems focus on minimizing the risks outlined
above.
Loan Review and Nonperforming Assets
The Company's Loan Committee reviews its loan portfolio to determine
deficiencies and corrective action to be taken. The Loan Committee
attempts to review 100% of its loan portfolio annually, excluding credit
cards and consumer installment loans. The results of the reviews are
presented to the Company's Board of Directors on a monthly basis. Loan
reviews are performed on credits that are selected according to their risk.
Past due loans are reviewed weekly by each lending officer and by the Loan
Committee. A summary report is reviewed monthly by the Company's Executive
Committee of the Board of Directors.
In late 1994, and early 1995, the Company undertook a mass
solicitation to generate new credit card accounts at which time the
approval criteria for issuing a credit card was obviated by the credit card
<PAGE>
department. Once this inadequacy was discovered in late 1995, and early
1996, senior executive management immediately took steps to remedy the
situation by reinforcing the credit card approval criteria and forming a
credit card committee comprised of various officers who meet weekly and
report directly to the management committee of the Company consisting of
Messrs. Scott and Comiskey and certain other executive officers.
New credit card accounts are now reviewed on a daily basis for
compliance with Company credit policy. Review procedures include a
determination of whether the appropriate review of employment, residence,
and other information has been completed, calculation of the borrower's
debt coverage ratio, and analysis of the borrower's credit history to
determine if it meets established Company criteria. Policy exceptions are
analyzed daily. Delinquencies are monitored daily. Credit card accounts
and proprietary accounts without reserves are charged off after 180 days
past due in accordance with industry norms and FDIC regulations.
Proprietary accounts with reserves are charged back against the proprietor
after seven consecutive no payments, although this policy will change to
six consecutive no payments beginning January 1, 1997.
A provision for loan losses and a corresponding increase in the
allowance for possible loan losses are recorded monthly, taking into
consideration the historical charge-off experience, delinquency, and
current economic conditions.
Asset/Liability Management
The Company's Asset/Liability Committee is composed of officers of the
Company who are charged with managing the assets and liabilities of the
Company. The Committee attempts to manage asset growth, liquidity, and
capital in order to maximize income and reduce interest rate risk. The
Committee directs the Company's overall acquisition and allocation of
funds. At its monthly meetings, the Committee reviews and discusses the
monthly asset and liability funds budget in relation to the actual flow of
funds. The Committee also reviews and discusses peer group comparisons,
the ratio of the amount of rate sensitive assets to the amount of rate
sensitive liabilities, the ratio of allowance for loan losses to
outstanding and nonperforming loans, and other variables, such as expected
loan demand, investment opportunities, core deposit growth within specific
categories, regulatory changes, monetary policy adjustments, and the
overall state of the economy.
Investment Policy
The Company's investment portfolio policy is to maximize income
consistent with liquidity, asset quality, regulatory constraints, and
asset/liability objectives. The policy is reviewed at least annually by
the Company's Board of Directors. The Board of Directors of the Company is
provided information monthly concerning sales, purchases, resulting gains
or losses, average maturity, federal taxable equivalent yields and
appreciation or depreciation by investment categories.
Territory Served and Competition
Market Area. The market area for the Company is defined in the
Company's Community Reinvestment Act Statement as the greater New Orleans
metropolitan area. This area includes all of the City of New Orleans and
surrounding Parishes. The Company has branch offices in Orleans, Jefferson
and St. Tammany Parishes.
Population. From 1980 to 1996, the population of New Orleans remained
constant with approximately 500,000 persons. The population of Jefferson
and St. Tammany Parishes were approximately 650,000 as of December 31,
1996.
Competition. The Company competes with other commercial banks in New
Orleans and with savings and loan associations, credit unions, and other
types of financial services providers. The Company is one of the smallest
commercial banks in New Orleans in terms of assets and deposits.
Economy. The economy of New Orleans is supported by the tourism,
shipping and energy industries. The Company has no material concentration
of deposits from any single customer or group of customers, nor is a
significant portion of its loans concentrated in a single industry or group
of related industries. There are no material seasonal factors that have
any adverse effect on the Company. The Company does not rely on foreign
sources of funds or income, and the Company does not expend any material
percentage of its income in complying with applicable environmental laws.
Employees
As of December 31, 1996, the Company had approximately 173 fulltime
and approximately 14 part-time employees. The Company considers its
relationship with its employees to be very good. The employee benefit
programs provided by the Company include group life and health insurance,
<PAGE>
paid vacations, and sick leave. The Company has no employees who are not
employees of the Company. See "Item 11, Executive Compensation".
Item 2
Property
In addition to its main office, the Company has six branch locations
and an operations center. Set forth below is a description of the offices
of the Company.
Main Office. The main office of the Company is located at 300 St.
Charles Avenue in the central business district of New Orleans, Louisiana.
On September 30, 1991, the Company purchased a four-story building located
at 300 St. Charles Avenue from the Resolution Trust Corporation (the "RTC")
for the price of $402,500. The purchase was financed by a loan from
director Edward J. Soniat to the Company. As of December 31, 1996, there is
a balance of $84,233 in principal and accrued but unpaid interest
outstanding on the loan from Mr. Soniat to the Company. See
"Management Certain Transactions". The building consists of approximately
13,100 square feet of office space, and parking is provided on the streets
and commercial lots nearby. The Company occupies the ground floor and the
fourth floor. The second and third floors are leased to the LeMoyne
Bienville Club. Rental income received from the club is $2,165 per month.
The initial term of the club's lease is for 25 years, expiring on December
15, 2003.
Carrollton Branch. The Carrollton Branch of the Company is located in
the Carrollton Shopping Center at 3846 Dublin Street, New Orleans,
Louisiana. The premises consist of approximately 4,700 total square feet
of office space, and parking is provided by the shopping center. The
Company leases the office space on a month-to-month basis from Carrollton
Central Plaza. The Company pays $2,866 per month in lease payments. The
Company is planning to close this branch and relocate to 3401 South
Carrollton Avenue, New Orleans, Louisiana. In mid 1995, the Company applied
for building and zoning permits with the city of New Orleans, which are
currently pending approval. If such permits are not attained the Company
will remain at the Dublin Street location. This branch will be a full service
branch office of the Company. The new branch will be leased for $1,400 per
month which is set through the year 2000, with an increase to $1,500 per
month from
the year 2001 through 2003. Adjoining this branch location is a vacant
lot, under long-term lease to the Company, that will be used as a parking
lot. Both properties are leased from Nelly Romero. Management anticipates
expending approximately $185,000 for renovations at this location, if the
appropriate permits are obtained.
Severn Branch. The Severn Branch of the Company is located in the
central business district of Metairie at 3340 Severn Avenue, Metairie,
Louisiana. The premises consist of approximately 4,600 total square feet
of office space on the first floor of a four-story office building, and
parking is provided for approximately 100 cars. The Company leases the
office space from Severn South Partnership, an affiliate of the Company.
See "Certain Relationships and Related Transactions." Pursuant to an
Amendment to Lease dated August 14, 1992, the lease commenced on May 1,
1991, and terminates on May 31, 1999. The lease payments are $12,386, plus
a percentage of operating costs, per month.
Oakwood Branch. The Oakwood Branch of the Company is located in the
Oakwood Shopping Center at 197 Westbank Expressway, Gretna, Louisiana. The
premises consist of approximately 4,160 total square feet of office space
which includes 1,560 square feet of drive-in facility and parking is
provided by the shopping center. The Company leases the building from
Oakwood Shopping Center, Ltd. The lease commenced on June 1, 1991, and
terminates on May 31, 2001. The lease payments are $9,343 per month.
Lapalco Branch. The Lapalco Branch of the Company is located in the
Belle Meade Plaza Shopping Center at 605 Lapalco Boulevard, Gretna,
Louisiana. The premises consist of approximately 2,500 square feet of
office space in a one-story building, and parking is provided by the
shopping center. The Company leases the building from Belle Meade
Developers. The lease commenced on January 1, 1996, and terminates on
January 1, 2001. The lease payments are $5,508 per month.
Gause Branch. The Gause Branch of the Company is located in the
central business district of Slidell at 636 Gause Boulevard, Slidell,
Louisiana. The premises consist of approximately 13,800 total square feet
of office space in a three-story office building, and parking is provided
for approximately 50 cars. The Company owns the building and underlying
land upon which this branch is situated. The Company occupies
approximately 3,300 square feet in this building and leases the remaining
space to various tenants for varying rental rates and terms. Rental income
received during 1996 totaled $79,843.
Tammany Mall Branch. The Tammany Mall Branch of the Company is
located at 3180 Pontchartrain, Slidell, Louisiana. The premises consist of
approximately 4,000 total square feet of office space, and parking is
provided for approximately 40 cars. The Company leases the building on a
month-to-month basis from Tammany Mall Partnership, an affiliate of the
<PAGE>
Company. See Item 13, Certain Relationships and Related Transactions. The
lease payments are $6,200 per month.
Operations Center. The Company's operations center, housing its data
processing, credit card, bookkeeping, and marketing departments, is located
at 3340 Severn Avenue, Metairie, Louisiana. The building consists of
approximately 44,500 total square feet of space in a four story office
building, and parking is provided for approximately 200 cars. The Company
leases 20,770 square feet from Severn South Partnership, an affiliate of the
Company, under two separate leases. See "Certain Relationships and Related
Transactions." Pursuant to an Amendment to Lease dated June 1, 1995,
amending both leases, the leases commenced on May 1, 1991, and will terminate
on May 31, 1999. The lease payments total $27,421, plus a percentage of
operating costs, per month.
Item 3
Legal Proceedings
Because of the nature of the banking industry in general, the Company
and the Bank are each parties from time to time to litigation and other
proceedings in the ordinary course of business, none of which (other than
those described below), either individually or in the aggregate, have a
material effect on the Company's and/or the Bank's financial condition.
Other than the lawsuits described below, the Company has either (i)
posted reserves adequate to pay any judgments that may be rendered against
the Company and such posting is reflected in the Company's consolidated
financial statements for the period ending December 31, 1996, or (ii)
believes the lawsuit is without sufficient merit or monetary exposure to
require the posting of a reserve. The Company has not provided a judicial
interest that may be awarded on a judgement pending the conclusion of the
appeals procedure. Indeed, should the Company be successful in any of
those lawsuits in which it has posted reserves, recoveries would be
realized and the Company's consolidated net income would be positively
impacted.
The following actions, however, have been brought against the
Company and, if the claimants were wholly successful on the merits, could
result in significant exposure to the Bank:
1. The Company is a defendant in a lawsuit filed by a proprietary
merchant alleging that the Company mishandled the Plaintiff's proprietary
credit card portfolio. The Plaintiff seeks to recover in excess of
$1,800,000. The Bankruptcy Court has established an escrow account, in
which $270,404 was on deposit as of October 31, 1996, for the protection of
the Company. This amount would significantly reduce any losses incurred by
the Company in the event the Plaintiff is wholly successful on the merits.
The trial is scheduled for March 17, 1997. The Company intends to continue
to defend vigorously the claims asserted in the suit.
Expected Results: Outside counsel advises that the Plaintiff will
not prevail at all against the Company and that the Company will be able to
fully recover all of its losses in this matter.
2. The Company is a defendant in a lawsuit filed by another bank
alleging the Company improperly dishonored checks totaling $979,000. The
Company claims that such checks were properly returned "nonsufficient
funds". When these checks were returned to the Plaintiff, of the $979,000,
one check for $110,000 was misplaced by the FRB and therefore returned late
to the Plaintiff. The Company was forced to cover the amount of the check.
The Company filed a countersuit against the Plaintiffs for contribution on
the $110,000 loss and for tortious interference. The Plaintiff filed
exceptions to the countersuit. These exceptions were heard in the district
court and the Company's right to contribution was maintained, however the
Company's suit for tortious interference was dismissed. On appeal, the
appellate court sustained the Company's right to contribution and overruled
the lower court's decision on tortious interference, finding that the Company
could maintain such a cause of action. The Louisiana Supreme Court denied
writs filed by the Plaintiff. The case is currently awaiting trial. The
Company is vigorously defending all claims asserted in this suit.
Expected Results: Outside counsel advises that the Company will not
pay any damages in this matter and the likelihood is reasonably high that
the Company will obtain some recovery from the Plaintiff.
Item 4 Submission of Matters to a Vote of Security Holders
There were no matters submitted, during the fourth quarter of fiscal
year 1996, to a vote of security holders, through the solicitation of
proxies.
<PAGE>
Item 5
Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market in the shares of Bank Stock as
the Company owns 100% of the issued and outstanding shares of Bank Stock.
There is no established trading market in the shares of Company Common
Stock. The Company Common Stock is not listed or quoted on any stock
exchange or automated quotation system. Management is aware, however, that
Dorsey & Company, New Orleans, Louisiana does make a market in the Company
Common Stock. The following table sets forth the range of high and low
sales prices of Company Common Stock since 1995, as determined by the
Company based on trading records of Dorsey & Company. The following table
does not purport to be a listing of all trades in Company Common Stock
during the time periods indicated, but only those trades of which Dorsey
and Company has informed the Company. The prices indicated below do not
reflect mark-ups, mark-downs, or commissions, but do represent actual
transactions. Finally, the prices listed below are not necessarily
indicative of the prices at which shares of Bank Stock would trade. As of
December 31, 1996, the Company had approximately 700 shareholders of
record.
<TABLE>
<CAPTION>
1996
High Low
<S> <C> <C>
First Quarter $ 7.00 $5.00
Second Quarter 7.00 5.00
Third Quarter 7.00 5.00
Fourth Quarter 7.00 5.00
1995
First Quarter 7.00 5.00
Second Quarter 7.00 5.00
Third Quarter 7.00 5.00
Fourth Quarter 7.00 5.00
</TABLE>
Principal Shareholders
Other than directors, officers, and directors and officers as a group
identified in the table in Directors and Executive Officers of the Company,
there were no persons who, to the knowledge of management of the Company,
beneficially owned 5% or more of the Company Common Stock as of December
31, 1996.
<PAGE>
Item 6
Selected Consolidated Financial Data of the Company
The following selected financial data should be read in conjunction with
Management's Discussions and Analysis of Financial Condition and Results of
Operations of the Company which follows and the
Company's financial statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
For The Years Ended December 31,
1996 1995 1994 1993 1992
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operations:
Net Interest Income $10,133 $9,061 $8,190 $9,668 $9,835
Provision for Loan Losses 2,040 1,749 805 1,212 421
Non-Interest Income 2,440 2,669 3,513 3,340 3,161
Non-Interest Expense 10,647 9,695 10,045 10,386 10,815
Income Tax Expense (20) 141 205 436 683
Net Income(Loss) (94) 145 648 974 1,077
Per Share:
Common Shares Outstanding
179,145 179,145 179,258 179,599 180,617
Net Income (Loss) (0.52) 0.80 3.62 5.41 5.95
Cash Dividends - Common 0.00 0.00 0.00 0.00 0.00
Book Value at End of 40.48 41.16 40.54 37.49 31.93
Period
Preferred Shares
Outstanding 2,302,811 2,302,811 2,309,103 2,324,737 2,326,123
Cash Dividends - Preferred 0.00 0.00 0.08 0.00 0.00
Stock
Balances at End of Period:
Investment Securities 9,060 11,136 15,188 7,078 3,131
Fed Funds Sold 14,400 10,725 6,075 20,000 5,425
Loans, Net of Unearned 69,298 74,943 67,802 65,066 80,839
Interest
Allowance for Loan Losses 1,500 1,500 935 934 934
Other Real Estate Owned 1,723 1,994 2,771 3,616 4,081
Total Assets 106,091 108,589 103,102 105,867 103,565
Total Deposits 95,141 97,386 91,764 95,488 93,818
Shareholders' Equity 7,251 7,368 7,257 6,749 5,780
Ratios:
Return on Average Assets -0.09% 0.14% 0.61% 0.94% 1.06%
Return on Average Equity -1.27% 1.87% 9.34% 15.37% 20.69%
Primary Capital to Total
Assets and
Allowance for Possible 6.93% 6.68% 6.93% 6.32% 5.53%
Loan Losses
Allowance for Possible Loan
Losses
as a Percentage of Loans, -2.16% 2.00% 1.38% 1.44% 1.16%
Net
Non-Performing Loans as a
Percentage of Loans, Net (1) 0.47% 0.32% 0.36% 1.04% 0.60%
Non-Performing Loans as a
Percentage of Total Assets 1.92% 2.05% 2.92% 4.04% 4.40%
(2)
Capital Ratios: Bank
Tier 1 - Risk Weighted 12.32% 11.46% 11.87% 11.25% 8.93%
Tier 2 - Risk Weighted 13.58% 12.72% 13.12% 12.50% 10.02%
Leverage Ratio 8.60% 8.54% 9.43% 8.68% 8.30%
</TABLE>
(1) Non-performing loans are comprised of non-accrual loans and restructured
loans. As of dates reported, the Company did not have any restructured
loans.
(2) Non-performing assets are comprised of non-performing loans, ORE and
other repossessed assets.
<PAGE>
Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY
The following discussion and analysis presents the more significant
factors affecting the financial condition and results of operations for the
years ending December 31, 1996, 1995 and 1994. The consolidated financial
statements and related notes should be read in conjunction with this
review.
Overview
The Company's growth in total assets has been relatively stable
during the past five years as a result of a $17,867,000 decrease in
proprietary accounts and a corresponding increase Federal Funds Sold. The
Company had total assets of $106,091,000 at December 31, 1996, and
$103,565,000 at December 31, 1992. The Company currently operates through
five locations,
in the metropolitan New Orleans area and two locations in St. Tammany Parish.
Loans comprise the largest single component of the Company's
interest earning assets and provide a far more favorable return than other
categories of earning assets. The Company's net loans totaled $69,299,000
at December 31, 1996. At December 31, 1996, credit card loans make up
52.83% of the Company's loan portfolio and have been the primary reason for
the Company's higher than peer group net interest margin. At December 31,
1996, the Company's net interest margin was 10.81% compared to 9.68% for
the year ended December 31, 1995. The Company's peer group had a net
interest margin of 4.54% at June 30, 1996, the last date the Company has
this information. The decrease in net interest margin is a result of a
reduction in investment securities portfolio and reinvestment primarily in
Federal Funds Sold. The Company did not reinvest in investment securities
due to the lack of short-term maturity investment alternatives. Otherwise,
the Company would be required to invest in securities with maturities of
over five years which would prevent the Company from having readily
available funds in anticipation of new proprietary accounts and credit card
business. Historically, credit card loans have been an important part of
the Company's total loan portfolio. At December 31, 1992, credit card loans
were $49,691,000 which was 61.47% of the Company's loan portfolio of
$80,839,000. At December 31, 1996, credit card loans totaled $36,609,000, or
52.83% of the Company's total loans. The decrease in the Company's
credit card loans is largely attributable to competition from other banks
and nontraditional credit card issuers (e.g. AT&T and GMAC).
The Company's current strategy is to continue to grow its traditional
banking operations primarily in the metropolitan New Orleans area and to
expand its credit card lending and proprietary accounts. The Company
focuses on providing its customers with the financial sophistication and
breadth of products of a regional bank while successfully retaining the
local appeal and level of service of a community bank.
Results of Operations
Net Income
The Company's net loss was $94,000, or $(0.52) per share in 1996,
compared to net income of $144,000 or $.80 per share in 1995, a significant
decrease. This $238,000 decrease was primarily due to the increase in
losses suffered by the Company from its credit card portfolio. Net
chargeoffs totaled $2,040,000 in 1996 as compared to $1,749,000 in 1995.
This $291,000 increase in net charge-offs occurred mainly in the Company's
credit card portfolio and is a result of the economy and overburdened
credit card debt of consumers. These losses are, however, consistent with
the experience of many banks nationwide with respect to their credit card
portfolios.
The Company's net income decreased $503,000 or 77.62% in 1995 to
$145,000 or $.80 per share from $648,000 or $3.62 per share in 1994.
Increases in net interest income were offset by a decrease in non interest
income and increases in loan loss provisions. Net income for 1994, was
impaired by the loss of four large proprietary accounts due to the
bankruptcies of those four proprietors. The reserve for loan losses
increased 60.44% due to an addition of $566,000 in order to comply with
FDIC regulations with respect to charge-offs on credit cards. Delinquent
credit card loans are charged off monthly once an account has reached six
cumulative no payments in accordance with FDIC regulations as opposed to
the Company's previous method of charge-offs after six consecutive no
payments.
The Company's net income decreased $326,000 or 33.47% in 1994 to
$648,000 or $3.62 per share from $974,000 or $5.41 per share in 1993.
Decreases in net interest income were offset by an increase in non interest
income and decreases in loan loss provisions and non-interest expenses.
<PAGE>
Net Interest Income Margin
Interest income increased $837,000 or 7.28% to $12,327,000 in 1996
from $11,490,000 in 1995. This increase is mainly due to a 56.24% increase
in interest income on proprietary credit card loans and the continued
growth in the credit card portfolio.
Total interest expense decreased $236,000 or 9.72% to $2,193,000 in
1996, from $2,429,000 in 1995. This decrease is mainly due to a 17.10%
decrease in interest paid on deposits due to an average interest rate paid
of 3.27% in 1996 as compared to 3.60% in 1995.
Interest income increased $1,236,000 or 12.05% to $11,490,000 in 1995
from $10,254,000 in 1994. This increase is mainly due to a 15.95% increase
in interest income on credit card loans and the continued growth in the
credit card portfolio.
Total interest expense increased $364,000 or 17.63% to $2,429,000 in
1995, from $2,065,000 in 1994. This increase is mainly due to a 22.07%
increase in interest paid on deposits due to a shift of funds from non
interest bearing deposits to interest bearing deposits and from lower rate
interest bearing deposits to higher rate interest bearing deposits.
Interest income decreased $1,961,000 or 16.05% to $10,254,000 in 1994,
from $12,215,000 in 1993. This decrease is mainly due to a 28.54% decrease
in interest income earned on credit card loans to $5,976,000 in 1994, from
$8,362,000 in 1993. This reduction resulted from the
loss of four large proprietary accounts (the proprietors filed for
bankruptcy) and the corresponding decrease of the Company's proprietary
accounts average balance of $11,163,000 on December 31, 1994 from
$21,120,000 on December 31, 1993. Other associated interest income
accounts, such as merchant discount, late fees, and over limit fees, were
also affected in 1994, due to this drop in the outstanding proprietary
balances. The average rates charged on these proprietary accounts were
17.21% on December 31, 1994, and 18.04% on December 31, 1993.
Total interest expense decreased $482,000 or 18.92% to $2,065,000 in
1994, from $2,547,000 in 1993. This decrease is attributable to a
20.75% decrease in interest paid on deposits. The average rate paid in
1994 of 3.04% was down from 3.72% in 1993, because of a conscious effort on
the part of the Company to reduce the amounts of deposits due to the loss
of the four large proprietary accounts and the lack of viable alternatives
to invest such funds. This reduction of rates resulted in a decrease of
interest paid on interest bearing demand accounts of $123,000 from 1993 to
1994. The savings accounts interest paid were reduced by $274,000 from
1993 to 1994.
Commercial loans average balance increased $2,262,000 or 8.42% to
$29,121,000 on December 31, 1996, from $26,859,000 on December 31, 1995 due
to the Company's continued positive experiences in generating new
commercial loans. Interest income on commercial loans increased $212,000 to
$2,807,000 in 1996, from $2,595,000 in 1995. The average interest rate
charged on commercial loans in 1996, was 9.64% as opposed to 9.66% in 1995.
Interest earned on Federal Funds Sold increased 1.96% in 1996, to $581,000
from $570,000 in 1995, due to an average interest rate earned of 5.29% as
compared to 5.80% in 1995. The average Federal Funds Sold for 1996, was
$10,997,000 and $9,830,000 in 1995. Interest earned on investment
securities decreased 26.84% due to a decrease in the average balance to
$9,353,000 in 1996, from $13,336,000 in 1995, with an average rate earned
of 5.62% in 1996, and 5.39% in 1995.
Commercial loans average balance increased $3,497,000 or 14.97% to
$26,859,000 on December 31, 1995, from $23,362,000 on December 31, 1994
due to the Company's positive experiences in generating new commercial
loans. Interest income on commercial loans increased correspondingly by
$324,000 or 14.27% to $2,595,000 in 1995, from
$2,271,000 in 1994. The average
interest rate charged on commercial loans in 1995, was 9.66% as opposed to
9.72% in 1994. Interest earned on Federal Funds Sold increased 10.38% in
1995, due to an average rate earned of 5.80% in 1995 as compared to 4.00%
in 1994. The average Federal Funds Sold for 1995, was $9,830,000 in 1995
and $15,893,000 in 1994. Interest earned on investment securities
decreased 5.15% due to a decrease in the average balance to $13,336,000 in
1995, from $16,472,000 in 1994, with an average rate earned of 5.39% in
1995, and 4.60% in 1994.
Commercial loans average balance decreased $1,050,000 or 4.30% to
$23,362,000 on December 31, 1994, from $24,412,000 on December 31, 1993.
Interest income on commercial loans decreased 3.20% to $2,271,000 in 1994,
from $2,346,000 in 1993. The average interest rate charged on commercial
loans in 1994, was 9.72% as opposed to 9.61% in 1993. Management has
implemented several new programs to increase the volume of each of the
Company's various loan portfolios, including the addition of one sales
person for the solicitation of proprietary accounts. Interest earned on
Federal Funds Sold increased 59.80% in 1994, due to an average rate earned
of 4.00% in 1994 as compared to 3.00% in 1993. The average Federal Funds
Sold for 1994, was $15,893,000 and $13,267,000 in 1993. Interest earned on
investment securities increased 156.95% due to an increase in the average
<PAGE>
balance to $16,472,000 in 1994, from $7,287,000 in 1993, with an average
rate earned of 4.60% in 1994, and 4.16% in 1993. Investment securities
increased due to the loss of the aforementioned proprietary accounts.
<TABLE>
<CAPTION>
Average Balances, Interests and Yields
1996 1995
Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned income(1)(2)
Taxable 73,593 11,233 15.26% 70,318 10,197 14.50%
Tax-exempt -
Investment securities
Taxable 9,353 526 5.62% 13,336 719 5.39%
Tax-exempt - - -
Interest-bearing deposits - - 0.00% 75 4 5.33%
Federal funds sold 10,997 581 5.29% 9,830 570 5.80%
Total Interest-Earning 93,943 12,340 13.14% 93,559 11,490 12.28%
Assets
Cash and due from banks 5,826 5,832
Allowance for loan Losses (1,411) (975)
Premises and equipment 2,659 2,270
Other Real Estate 1,827 2,451
Other assets 1,952 1,860
TOTAL ASSETS 104,795 104,997
LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 19,578 442 2.26% 19,203 528 2.75%
Savings deposits 25,317 768 3.03% 25,160 740 2.94%
Time deposits 15,204 754 4.96% 16,692 932 5.58%
Total Interest-Bearing 60,099 1,964 3.27% 61,055 2,200 3.60%
Deposits
Federal Funds Purchased
Securities sold under
agreements to repurchase
Other Short-term
borrowings - -
Long-Term debt 2,386 224 9.37% 2,394 229 9.57%
Total Int-Bearing 62,485 2,187 3.50% 63,449 2,429 3.83%
Liabilities
Noninterest-bearing deposits 33,385 32,350
Other liabilities 1,529 1,515
Shareholders' equity 7,396 7,683
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 104,795 104,997
Net Interest income/spread 9.64% 8.45%
Net Interest Margin 10.81% 9.68%
</TABLE>
(1) Fee income relating to loans of $368,000 in 1996, $256,000 in 1995 and
$349,000 in 1994 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 for the three years ended December 31, 1996, 1995, and 1994
using a federal tax rate of 34%.
<PAGE>
<TABLE>
<CAPTION>
Average Balances, Interests and Yields
1995 1994
Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned income(1)(2)
Taxable 70,318 10,197 14.50% 60,351 8,860 14.68%
Tax-exempt
Investment securities
Taxable 13,336 719 5.39% 16,472 758 4.60%
Tax-exempt - - 0.00% - -
Interest-bearing deposits 75 4 5.33% - - 0.00%
Federal funds sold 9,830 570 5.80% 15,893 636 4.00%
Total Interest-Earning 93,559 11,490 12.28% 92,716 10,254 11.06%
Assets
Cash and due from banks 5,832 5,501
Allowance for loan Losses (975) (957)
Premises and equipment 2,270 1,945
Other Real Estate 2,451 3,269
Other assets 1,860 3,191
TOTAL ASSETS 104,997 105,665
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Demand Deposits 19,203 528 2.75% 19,527 406 2.08%
Savings deposits 25,160 740 2.94% 28,069 516 1.84%
Time deposits 16,692 932 5.58% 17,883 880 4.92%
Total Interest-Bearing 61,055 2,200 3.60% 65,479 1,802 2.75%
Deposits
Federal Funds Purchased
Securities sold under
agreements to repurchase
Other Short-term borrowings - -
Long-Term debt 2,394 229 9.57% 2,489 262 10.53%
Total Int-Bearing 63,449 2,429 3.83% 67,968 2,064 3.04%
Liabilities
Noninterest-bearing 32,350 29,309
deposits
Other liabilities 1,515 1,448
Shareholders' equity 7,683 6,940
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 104,997 105,665
Net Interest income/spread 8.45% 8.02%
Net Interest Margin 9.68% 8.83%
</TABLE>
(1) Fee income relating to loans of $368,000 in 1996, $256,000 in 1995 and
$349,000 in 1994 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 for the three years ended December 31, 1996, 1995,
and 1994 using a federal tax rate of 34%.
<PAGE>
<TABLE>
<CAPTION>
Rate/Volume Analysis
1996 Compared to 1995 1995 Compared to 1994
Variance Attributed to Variance Attributed to
(1) (1)
Net Net
(Dollars in Thousands) Volume Rate Change Volume Rate Change
<S> <C> <C> <C> <C> <C> <C>
Net Loans:
Taxable 3,275 0.76% 1,036 9,967 -0.18% 1,337
Tax-exempt(2) - 0.00% - - 0.00% -
Investment Securities
Taxable (3,983) 0.09% (207) (3,136) 0.79% (39)
Tax-exempt(2) - 0.00% - - 0.00% - - - -
Interest-bearing deposits (75) -5.33% (4) 75 5.33% 4
Federal funds sold 1,167 -0.51% 11 (6,063) 1.80% (66)
Total Interest-Earning
Assets 384 0.84% 837 843 1.22% 1,236
Deposits:
Demand Deposits 375 -0.49% (86) (324) 0.67% 122
Savings deposits 157 0.09% 28 (2,909) 1.10% 224
Time deposits (1,488) -0.62% (178) (1,191) 0.66% 52
Total interest-bearing (956) -0.34% (236) (4,424) 0.85% 398
deposits
Federal Funds Purchased - 0.00% - - 0.00% -
Securities sold under - 0.00% - - 0.00% 0
agreements to repurchase
Other Short-term - 0.00% - - 0.00% -
borrowings
Long-Term debt (8) -0.20% (5) (95) -0.96% (33)
Total Interest-Bearing
Liabilities (964) -0.33% (242) (4,519) 0.79% 365
</TABLE>
(1) The change in interest due to both rate and volume has been allocated
to the components in proportion to the relationship of the dollar amounts of
the change in each.
(2) Reflects fully taxable equivalent adjustments using a federal tax rate
of 34%.
Net Interest Income
Net interest income, the difference between interest income and
interest expense, is a significant component of the performance of a
banking organization. Data used in the analysis of net interest income are
derived from the daily average levels of earnings assets and interest
bearing deposits as well as from the related income and expense. Net
interest income is not developed on a taxable equivalent basis because the
level of tax exempt income is not material. The primary factors that
affect net interest income are the changes in volume and mix of earning
assets and interest-bearing liabilities, along with the change in market
rates.
Net interest income for 1996 was $10,147,000 compared to $9,061,000 in
1995. Net interest income for 1994 was $8,190,000 compared to $9,668,000
in 1993.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Management's policy is to maintain the
allowance for possible loan losses at a level sufficient to absorb losses
inherent in the loan portfolio. The allowance is increased by the
provision for loan losses and decreased by charge-
offs, net of recoveries. Management's evaluation process to determine
potential losses includes consideration of the industry, specific
conditions of individual borrowers, historical loan loss experience and the
general economic environment. As these factors change, the level of loan
loss provision changes. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. Accrual of interest is discontinued and accrued interest is
charged off on a loan when management believes, after considering economic
and business conditions and collection efforts, that the borrower's
<PAGE>
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.
Provisions for loan losses increased 16.64% to $2,040,000 in 1996, from
$1,749,000 in 1995. The provisions for loan losses increased due an
increase in the amount of the Company's charge-offs to $2,822,000 in 1996,
from $1,621,000 in 1995. The higher level of charge-offs in the Company's
credit card portfolio compared to other loans is consistent with industry
norms and is reflective of the higher credit risk associated with such
loans. Based on the volume of credit card charges and payments, the credit
card portfolio turns over every eight to nine months, requiring an
allowance less that annual charge-offs.
The provisions for loan losses increased 117.27% to $1,749,000 in 1995
from $805,000 in 1994. The provisions for loan losses increased due to:
(i) the change in methodology of credit card charge-offs from six
consecutive no payments to six cumulative no payments; (ii) an increase in
the amount of the Company's charge-offs to $1,621,000 in 1995, from
$1,218,000 in 1994; and (iii) an FDIC requirement that the Company charge
off an additional $566,000 to operations to bring the allowance for loan
losses up to $1,500,000.
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.
The provision for loan losses totaled $805,000 in 1994 compared to
$1,212,000 in 1993. The allowance for loan losses as a percentage of loans
was 1.38% in 1994, and 1.44% in 1993. The decrease of 33.58% in provisions
for loan losses in 1994 was because of the decrease in proprietary account
losses as a result of the Company's loss of the four large proprietary
accounts.
<TABLE>
<CAPTION>
Summary of Loan Loss Experience
December 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period 1,500 935 934 934 934
Charge-Offs:
Commercial 51 31 10 51 93
Real estate - 3 14 9 42
Installment 43 34 47 40 41
Credit Cards 2,728 1,553 1,147 1,323 779
Total Charge-offs 2,822 1,621 1,218 1,423 955
Recoveries:
Commercial 135 5 80 11 99
Real estate 6 45 6 43 148
Installment 27 23 29 28 25
Credit Cards 615 365 298 129 262
Total Recoveries 782 438 413 211 534
Net charge-offs 2,040 1,183 805 1,212 421
Provision for loan losses 2,040 1,749 805 1,212 421
Balance 1,500 1,501 934 934 934
Additional Reserve from
Proprietor - (1) 1 - -
Balance at end of period 1,500 1,500 935 934 934
Ratio of net charge-offs
during period to average loans
outstanding 2.77% 1.68% 1.33% 1.73% 0.59%
Allowance for possible loan
losses as a
percentage of loans 2.16% 2.00% 1.38% 1.44% 1.16%
</TABLE>
<PAGE>
Noninterest Income and Expense
The amount of noninterest income and noninterest expenses of a banking
organization relate closely to the size of the total assets and deposits
and the number of deposit accounts. The amount of noninterest expense
represents the cost of operating the banking organization.
The major components of noninterest income are service charges
related to deposit accounts, cardholder and other credit card fees, Ore
income, gain on sale of ORE and other noninterest income as reflected in
the below
table.
Total noninterest income decreased to $2,426,000 in 1996 from
$2,669,000 in 1995 or a 9.10% decrease. Earnings of Unconsolidated
Subsidiary totaled $0 in 1996 as opposed to ($35,000) in 1995. Ore income
decreased to $24,000 in 1996 from $45,000 in 1995. The gain on sale of
ORE
income decreased to $7,000 in 1996 from $134,000 in 1995.
Total noninterest income decreased to $2,669,000 in 1995 from
$3,513,000 in 1994 or a 24.03% decrease. Earnings of Unconsolidated
Subsidiary totaled ($34,614) in 1995 as opposed to $131,437 in 1994. ORE
income decreased to $45,000 in 1995 from $89,000 in 1994 or 48.83%, and the
gain on sale of ORE income decreased to $134,000 in 1995 from $357,000 in
1994 or 62.42% due mainly from the sale of one ORE property for a gain of
$242,000 in 1994.
<TABLE>
<CAPTION>
Noninterest Income
December 31,
1996 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Service Charges 643 732 806
NSF Charges 783 790 810
Earnings in Equity Subsidiary - (35) 131
Gain on Sale of Securities - - 14
Cardholder & Other Credit Card Income 448 480 494
Membership Fees 218 243 284
Other Comm & Fees 112 88 166
ORE Income 24 45 89
Gain on Sale of ORE 7 134 357
Other Income 206 192 362
Total Non-Interest Income $2,440 $2,669 $3,513
</TABLE>
Noninterest Expense
The major components of this group represents the cost of operating
the banking organization as reflected in the below table.
Total noninterest expense increased 9.82% to $10,647,000 in 1996 from
$9,695,000 in 1995. Postage expense increased 73.10% to $627,000 in 1996
from $358,000 in 1995. Loan & credit card expenses increased 40.35% to
$1,214,000 in 1996 from $865,000 in 1995.
Total noninterest expense decreased 3.47% to $9,695,000 in 1995 from
$10,044,300 in 1994. ORE expenses increased 40.82% due mainly to a
writedown on one property in 1995 of $411,000 as opposed to a total
writedown in 1994 of $34,000. Due to a judgment rendered against the Bank
in 1994, $390,000 was charged to expenses.
<PAGE>
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Salaries & Benefits 4,199 3,834 4,018
Loss on Litigation - - 390
Occupancy Expense 1,839 1,758 1,816
Advertising Expense 306 348 352
Communications 376 272 292
Postage 627 358 321
Loan & Credit Card Expense 1,214 865 851
Professional Fees 349 267 272
Legal Fees 283 242 183
Insurance & Assessments 94 212 318
Stationery, Forms & Supply 447 389 293
ORE Expenses 266 621 441
Other Operating Expense 647 529 497
Total Non-Interest Expense $10,647 $9,695 $10,044
</TABLE>
Provision for Income Taxes
The income tax provision (benefit) for the Company and the Bank on a
consolidated basis, for the year 1996 was $(20,000) as compared to $141,000
in 1995 and $205,000 in 1994. The provision for income taxes consists of
provisions for federal taxes only. Louisiana does not have an income tax
for corporations.
Financial Condition
The Company manages its assets and liabilities to maximize longterm
earnings opportunities while maintaining the integrity of its financial
position and the quality of earnings. To accomplish this objective,
management strives to effect efficient management of interest rate risk and
liquidity needs. The primary objectives of
interest-sensitivity management are to minimize the effect of interest rate
changes on the net interest margin and to manage the exposure to risk while
maintaining net interest income at acceptable levels.
Liquidity is provided by carefully structuring the balance sheet. The
Company's asset liability committee meets regularly to review both the
interest rate sensitivity position and liquidity.
Interest Rate Sensitivity
The Bank has established, as bank policy, an asset/liability
management system that protects Bank profits from undue exposure to
interest rate risks. The major elements used to manage interest rate risk
include the mix of fixed and variable rate assets and liabilities and the
maturity pattern of assets and liabilities. It is the Company's policy not
to invest in derivatives in the ordinary course of business. The Company
performs a monthly review of assets and liabilities that reprice and the
time bands within which the repricing occurs. Balances are reported in the
time band that corresponds to the instrument's next repricing date or
contractual maturity, whichever occurs first. Through such analysis, the
Company monitors and manages its interest sensitivity gap to minimize the
effects of changing interest rates.
The interest rate sensitivity structure within the Company's balance
sheet at December 31, 1996, has a net interest sensitive asset gap of 7.40%
when projecting out one year. In the near term, defined as 90 days, the
Company currently has a net interest sensitive liability gap of 15.20%. The
information represents a general indication of repricing characteristics
over time; however, the sensitivity of certain deposit products may vary
during extreme swings in the interest rate cycle. Since all interest rates
and yields do not adjust at the same velocity, the interest rate
sensitivity gap is only a general indicator of the potential effects of
interest rate changes on net interest income.
<PAGE>
The following table illustrates the Company's interest rate
sensitivity at December 31, 1996.
<TABLE>
<CAPTION>
Interest Rate Sensitivity Analysis
December 31, 1996
Over
30 60 90 120 180 One One
Days Days Days Days Days Year Year
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total
Interest-Earning Assets
Investment - 2,998 - - 999 - 3,980
Securities-HTM
Investment - - - - - - 1,083
Securities - AFS
Loans 6,936 2,963 8,764 2,696 6,341 17,020 24,579
Loans held for - - - - - - -
sale
Federal funds 14,400 - - - - - -
sold
Total Interest 21,336 5,961 8,764 2,696 7,340 17,020 29,642
Earning Assets
Non Earning - - - - - - 13,332
Assets
TOTAL ASSETS 21,336 5,961 8,764 2,696 7,340 17,020 42,974
Interest- Bearing Liabilities
Savings & Now 12,150 182 25,040 - - - -
accounts
Demand & money 8,239 - - - - - 35,169
market
CD's >$100,000 2,733 674 25 1,655 1,383 555 6,017
CD's < $100,000 - - 710 - - 609 -
Federal Funds - - - - - - -
purchased
Repurchase - - - - - - -
agreements
Other short-term - - - - - - -
borrowings
Notes payable 411 - - - 1,889 - 84
Total Interest 2,533 856 25,775 1,655 3,272 1,164 41,270
Bearing Liabilities
Non Costing - - - - - - 8,566
Liabilities
TOTAL 23,533 856 25,775 1,655 3,272 1,164 49,836
LIABILITIES
Interest-
Sensitivity Gap (2,197) 5,105 (17,011) 1,041 4,068 15,856 (6,862)
Cumulative Gap (2,197) 2,908 (14,103) (13,062) (8,994) 6,862 0
Cumulative
Gap/Total Interest-
Earning Assets -2.37% 3.14% -15.20% -14.08% -9.70% 7.40% 0.00%
</TABLE>
GAP & Interest Margin Spread
By Bank policy we limit the Bank's earnings exposure due to
interest rate risk by setting limits on positive and negative gaps within
the next 12 months. These limits are set so that this year's
profits will not be unduly impacted no matter what happens to interest
rates during the year. In addition, we extend the scenarios out five years
to monitor the risks associated on a longer term.
<PAGE>
Liquidity
The purpose of liquidity management is to ensure that there is
sufficient cash flow to satisfy demands for credit, deposit withdrawals,
and other corporate needs. Traditional sources of liquidity include asset
maturities and growth in core deposits. The Company has maintained
adequate liquidity through cash flow from operating activities and
financing activities to fund loan growth, and anticipates that this will
continue even if the Company expands.
Liquidity and capital resources are discussed weekly by the management
committee, the assets and liability committee and at the monthly executive
committee meeting. Bank of Louisiana maintains adequate capital to meet
its needs in the foreseeable future. Measuring liquidity and capital on a
weekly basis enables management to constantly monitor loan growth, and
shifting customer preferences. The committee's in-depth reviews of current,
projected, and worse case scenarios through various reports ensures the
availability of funds and capital adequacy.
The Bank intends on increasing capital by implementing an extensive
marketing program and evaluating all pricing fees and investing in
proprietary accounts which will maximize the highest yield possible and
thereby improve earnings.
There are no known trends, events, regulatory authority
recommendations, or uncertainties that the Company is aware of that will
have or that are likely to have a material adverse effect on the Company's
liquidity, capital resources, or operations.
Capital Adequacy
The FDIC's regulations require that a state-chartered bank, such as the
Bank of Louisiana maintain a minimum Tier 1 ratio of 4% and a Total capital
ratio of 8%. The Bank, however, is required to maintain a Tier 1 leverage
capital ratio of 7.00% as part of a Memorandum of Understanding signed in
1996 which replaces the Memorandum of Understanding dated November 8, 1994.
See "Supervision and Regulation Enforcement Action". The Bank's "primary
capital ratio" is the sum of shareholders' equity divided by total assets.
The Bank's capital to asset ratio was 8.60% at December 31, 1996, 8.54% at
December 31, 1995, and 9.43% at December 31, 1994. The Bank's capital to
asset ratio
decreased in 1995 due to a change in the Bank's credit card charge off
method of recognizing cumulative no payment delinquencies as opposed to
consecutive no payment delinquencies. This change increased the Bank's
charge offs $404,000, from $1,217,989 in 1994 to $1,620,250 in 1995. Due to
this change, the Bank made a special addition to the reserve for possible
credit losses in the amount of $566,266. This brings the coverage of
possible losses up to $1,500,000. This means that $970,000 of the earnings
were used for the purpose of charge offs and possible future charge offs,
leaving the balance of net earnings for 1995.
The Bank intends on increasing capital by implementing an extensive
marketing program and to obtain additional proprietary accounts which will
maximize the highest yield possible and thereby improve earnings.
Investment Securities
The levels of taxable and tax-exempt securities and short-term
investments reflect the Company's strategy of maximizing portfolio yields
while providing for liquidity needs. Investment securities totaled
$9,000,000 at December 31, 1996, $11,000,000 at December 31, 1995, and
$15,000,000 at December 31, 1994. The majority of the holdings are backed
by U.S. Government or federal agency guarantees limiting the credit risks
associated with these securities. The average maturity of the Company's
securities portfolio was two years at December 31, 1996. At December 31,
1996 and 1995, securities classified as available-for sale
were $1,000,000. The net unrealized holding losses on these securities at
December 31, 1996 was $4,000 after taxes compared to net unrealized holding
gains of $19,000 after taxes at December 31, 1995.
At December 31, 1996, the Company classified all but $1,000,000 of
its U. S. Treasury securities and obligations of U.S. government
corporations and federal agencies as held-to-maturity. The Company
maintains a relatively low percentage of its investment portfolio as
available-forsale, but the Company maintains a large majority of its
heldtomaturity securities in one year or less maturities to fund possible
liquidity needs required by loan production and credit card activities.
<PAGE>
<TABLE>
<CAPTION>
Distribution of Investment Securities
December 31, 1996
1996 1995 1994
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of U.S.
government
corporations and 993 8,977 11,010 11,014 15,019 14,582
agencies
Other investments 90 90 97 124 90 169
Total 1,083 9,067 11,107 11,138 15,109 14,751
</TABLE>
<TABLE>
<CAPTION>
Maturity Distribution of Investment Securities and Average Yields (1)
December 31,1996 December 31,1995
Amortized Fair Average Amortized Fair Average
Cost Value Yield(2) Cost Value Yield(2)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Available-for-Sale
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies
Due in 1 year or less - - 996 998 4.60%
Due 1-5 years 1,000 993 5.02% - -
Total 1,000 993 5.02% 996 998 4.60%
Held-to-Maturity
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies
Due in 1 year or less 3,997 4,001 4.94% 7,515 7,533 5.90%
Due 1-5 years 3,980 4,006 6.21% 2,499 2,483 4.80%
Total 7,977 8,007 11.15% 10,014 10,016 10.70%
</TABLE>
(1) This table excludes equity investments which have no maturity date.
(2) Weighted average yields are calculated on the basis of the carrying
value of the security. The weighted average yields on tax-exempt obligations
are compounded on a fully taxable-equivalent basis assuming a federal tax
rate of
34%.
Included in Investment Securities are equity securities acquired
through foreclosure which have no maturity date. Below is a table of these
securities at December 31, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
Other Securities
<S> <C>
Regions Financial $ 285
Mississippi River Bank 69,600
New Orleans SBIDCO, Inc. 20,000
Liberty Financial Services, 1
Inc.
Total Other Securities $ 89,886
</TABLE>
<PAGE>
Loan Portfolio
Total loans, which includes loan loss reserves and unearned interest,
decreased $5,645,000 or 7.69% to $67,798,000 at December 31, 1996 from
$73,443,000 at December 31, 1995. This decrease was primarily attributable
to the decline in the Company's credit card portfolio by 9.78% to
$36,609,000 at December 31, 1996 from $40,579,000 at December 31, 1995.
In 1995, the Company experienced increases in every major category.
Total loans outstanding increased $6,576,000 or 9.83% to $73,443,000 at
December 31, 1995 from $66,867,000 at December 31, 1994. Average total
loans during 1995, increased $9,967,000 or 16.52% to $70,318,000. The most
significant increases in 1995, occurred in real estate loans which were up
$3,780,000 or 19.34% to $23,323,000; consumer installment loans up $816,000
or 14.47% to $6,457,00; and credit card loans up $3,197,000 or 8.55% to
$40,579,000.
Loans increased $2,734,000 or 4.25% to $66,867,000 at December 31,
1994, from $64,133,000 at December 31, 1993. This increase is due mainly
to increases in commercial and personal loans as well as small increases in
real estate loans and credit card loans.
<TABLE>
<CAPTION>
Loans, Net by Category
December 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial, &
agricultural 4,390 4,366 5,408 4,544 4,482
Real estate-mortgage 22,370 23,323 19,543 18,627 21,402
Mortgage Loan Held for
Resale - 256 - 1,234 557
Personal Loans 5,731 6,022 5,482 4,712 5,131
Credit cards-Visa,
MasterCard 25,265 28,199 27,999 20,066 20,480
Credit cards-Proprietary 11,344 12,380 9,383 16,212 29,211
Overdrafts 207 435 159 211 180
Loans 69,308 74,981 67,974 65,606 81,443
Less:
Unearned income 9 38 172 539 604
Deferred loan fees(costs),
net - - - - -
Allowance for possible
loan losses 1,500 1,500 935 934 934
Loans, net 67,798 73,443 66,867 64,133 79,905
</TABLE>
<TABLE>
<CAPTION>
The following table shows the maturity distribution and interest
rate sensitivity of the Company's loan portfolio at December 31, 1996:
Loan Maturity by Type
December 31, 1996
Maturing
Within One To Over
One Year 5 Years 5 Years Total
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural 11,517 3,829 139 15,484
Real estate
construction, land
and land development 7,166 1,790 1,070 10,025
All other loans 2,778 40,317 703 43,799
Total 21,461 45,936 1,911 69,308
</TABLE>
<PAGE>
Nonperforming Assets
Nonperforming assets consist of nonaccrual and restructured loans and
ORE. Nonaccrual loans are loans on which the interest accruals have been
discontinued when it appears that future collection of principal or
interest according to the contractual terms may be doubtful. Interest on
these loans is reported on the cash basis as received when the full
recovery of principal is anticipated or after full principal has been
recovered when collection of interest is in question. Restructured loans
are those loans whose terms have been modified, because of economic or
legal reasons related to the debtors' financial difficulties, to provide
for a reduction in principal, change in terms, or fixing of interest rates
at below market levels. ORE is real property acquired by foreclosure or
directly by title or deed transfer in settlement of debt.
Nonperforming assets decreased $190,000 at December 31, 1996, to
$2,039,000 from $2,229,000 at December 31, 1995. This 8.52% decrease in
nonperforming assets in 1996 was the result of the sale of ORE.
Nonperforming assets decreased $782,000 to $2,229,000 at December
31, 1995, from $3,011,000 at December 31, 1994. This 25.97% decrease in
nonperforming assets in 1995 was a result of the sale of ORE. During 1995,
the decrease in nonaccrual loans was negligible while ORE declined
$777,000. At December 31, 1996 and December 31, 1995, there were no
restructured loans.
Nonperforming assets decreased $1,270,000 or 29.67% to $3,011,000 at
December 31, 1994, from $4,281,000 at December 31, 1993, as a result of the
sale of ORE. Nonaccrual loans decreased to $240,000 or 63.91% at December
31, 1994, from $665,000 at December 31, 1993, because one large loan was
moved from nonaccrual to ORE and then sold in the same year. At December
31, 1994 and December 31, 1993, there were no restructured loans.
Since 1992, the ratio of past due loans to total loans has
increased from 1.39% to 3.31%. During that time, the Company
significantly reduced its ratio of nonperforming assets to loans and ORE
from a high of 5.37% of total loans at December 31, 1992, to a low of 2.87%
at December 31, 1996.
When a loan is classified as nonaccrual, previously accrued interest
is reversed and interest income is decreased to the extent of all interest
accrued in the current year. If any portion of the accrued interest had
been accrued in the previous years, accrued interest is decreased and a
charge for that amount is made to the allowance for possible loan losses.
For 1996, the gross amount of interest income that would have been recorded
on nonaccrual loans at December 31, 1996, if all such loans had been
accruing interest at the original contract rate, was $22,978.
<TABLE>
<CAPTION>
Nonperforming Assets
December 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans 316 235 240 665 476
Restructured Loans - - - - -
Other Real Estate Owned 1,723 1,994 2,771 3,616 4,081
Total Nonperforming
Assets 2,039 2,229 3,011 4,281 4,557
Loans past due 90 days or
more 2,295 1,062 2,020 2,679 1,123
Ratio of past due loans to 3.31% 1.42% 2.98% 4.12% 1.39%
loans
Ratio of nonperforming
assets to loans
and other real estate 2.87% 2.90% 4.27% 6.23% 5.37%
owned
</TABLE>
Management is not aware of any potential problem loans other than
those disclosed in the table above, which includes all loans recommended
for classification by regulators, which would have a material impact on
asset quality.
Other Real Estate
The Bank's ORE category has also been affected by the depressed
economic conditions in Louisiana. This was coupled with the adverse impact
the Bank encountered with the merger in 1988, whereby the Bank inherited
over $2,500,000 in ORE properties.
These properties, which are held for sale, are recorded on the Bank's
records, at cost, adjusted to the lower of current appraised value. Any
difference is charged to the allowance for loan losses in the year of
foreclosure. Any subsequent writedowns and income and expenses associated
<PAGE>
with ORE are included in the income and expense of the Bank.
ORE totaled $1,723,000 at December 31, 1996, $1,994,000 at December
31, 1995 and $2,771,000 at December 31, 1994. New parcels of $34,000 were
added in 1996 due to foreclosing on loans which had defaulted and were in
the non-accrual status.
During the fiscal year 1996 the Bank sold 4 parcels of ORE totaling
$295,000 as compared to 13 parcels sold in 1995 totaling $599,000 and 15
parcels totaling $1,569,000 in 1994. Historically the Bank has always sold
ORE parcels for a net gain, ($4,000) in 1996, $134,000 in 1995 and $350,000
in 1994. The costs associated with the sales of ORE are minimal as
compared to the gains, $2,000 in 1996, $3,000 in 1995, and $6,000 in 1994.
The Bank annually obtains a current appraisal from a qualified
appraiser as to the fair market value of all ORE properties and adjusts the
book value accordingly. Management voluntarily recognizes any writedown
due to reductions in the fair market value upon receipt of the appraisal.
Below is a schedule of all ORE parcels held as of December 31,
1996 which are in excess of $50,000.00.
<TABLE>
<CAPTION>
Date Book Appraisal Appraisal
Address Acquired Value Date Amount
(Dollars in Thousands)
<S> <C> <C> <C> <C>
123-125 Carondelet 01/17/91 $ 423 01/31/96 $450
190 E. Pearl River 04/29/88 282 05/25/96 283
617 N. Broad 09/24/91 591 10/20/96 593
27 Audubon Blvd 09/24/91 260 09/05/96 321
1716-18 Baronne 10/05/90 75 10/09/96 75
$1,631
</TABLE>
In addition, any expenditure such as maintenance and repairs,
etc. is recognized during the year in which it occurred. The net income
(cost) of operation of ORE totaled ($235,000) in 1996, ($442,000) in 1995,
and $5,000 in 1994. The following table reflects a breakdown of the
income and expense amounts related to ORE operations:
<TABLE>
<CAPTION>
1996 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C>
ORE Income
Rental Income 24 45 89
Gain on Sales 7 134 356
Total Income 31 179 445
ORE Expenses
Maintenance, Repairs, 38 60 113
Upkeep & Security
Real Estate Fees, 8 23 89
Advertising & Appraisals
Insurance 41 59 72
Sheriff Sale 11 1 14
Legal Fees 125 22 44
Taxes 23 34 68
Writedowns 10 422 34
Loss on Sale 10 0 6
Total Expenses 266 621 440
Net Gain or Loss (235) (442) 5
</TABLE>
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
<PAGE>
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 collectibility
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 that the recorded
investment in the loan, including accrued interest net deferred loan fees
or costs, and unamortized premium or discount, the Bank recognizes 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 December 31, 1996, the Bank did not have any impaired loans.
Watch List
The Bank's watch list includes loans which, for management
purposes, have been identified as requiring a higher level of monitoring
due to risk. The Bank's watch list includes both performing and
nonperforming loans. The majority of watch list loans are classified as
performing, because they do not have characteristics resulting in
uncertainty about the borrower's ability to repay principal and interest in
accordance with the original terms of the loans.
The watch list consists of classifications, identified as Type 1 through
Type 4. Types 1, 2 and 3 generally parallel the regulatory classifications
of loss, doubtful and substandard, respectively. Type 4 generally
parallels the regulatory classification of Other Assets Especially
Mentioned (OAEM). These loans require monitoring due to conditions which,
if not corrected, could increase credit risk. Total watch list loans
increased 155.56% to $4,503,000 at December 31, 1996 from $1,762,110 at
December 31, 1995.
During 1996 there was one loan added as a type 3 which is in excess of
$1,550,000 and three loans added as type 4 in excess of $800,000.
Deposits
Total deposits decreased $2,245,000 or 2.31% to $95,141,000 at
December 31, 1996, from $97,386,000 at December 31, 1995. During this
period, total liabilities decreased $2,381,000 or 2.35% to $98,840,000. The
decrease in deposits occurred principally in time deposits which decreased
$4,063,000 or 22.05%. Demand, money market, and savings deposits increased
$1,818,000 or 2.30 during the same period. Core deposits, the Company's
largest source of funding, consist of all interest-bearing and noninterest
bearing deposits except certificates of deposits over $100,000. Core
deposits are obtained from a broad range of customers. Average interest
bearing core deposits decreased 1.20% to $58,823,000 in 1996. Market rate
core deposits, primarily CD's of less of $100,000 and money market
accounts, decreased 4.72% in 1996.
Total deposits increased $5,622,000 or 6.13% to $97,386,000 at
December 31, 1995, from $91,764,000 at December 31, 1994. During 1995
all categories of deposits except savings reflected volume increases.
Average interest-bearing core deposits decreased 4.73% to $59,539,000 in
1995. Market rate core deposits, primarily CD's of less of $100,000 and money
market accounts, increased 10.50% in 1995.
Total deposits at December 31, 1994, were $91,764,000 a 3.90% decrease
from $95,488,000 at December 31, 1993. Average interestbearing core
deposits decreased 1.05% to $62,494,000 in 1994. Market rate core deposits
decreased 23.77% in 1994. The Company moved from a slightly above market
yield to a slightly below market yield in order to decrease the amounts of
deposits.
Noninterest bearing deposits are comprised of business accounts,
including correspondent bank accounts, escrow deposits, as well as
individual accounts. Average noninterest bearing demand deposits
<PAGE>
represented 36.21% of average core deposits in 1996, compared to 35.00% of
average core deposits in 1995.
The average amount of, and average rate paid on deposits by
category for the period shown are presented below:
<TABLE>
<CAPTION>
Selected Statistical Information for Deposits
December 31,
1996 1995 1994
Average Average Average
Amount Rate Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing 33,385 N/A 32,350 N/A 29,309 N/A
Interest-bearing Demand 19,578 2.26% 19,203 2.75% 19,527 2.08%
Deposits
Savings Deposits 25,317 3.03% 25,160 2.94% 28,069 1.84%
Time Deposits 15,204 4.96% 16,692 5.58% 17,883 4.92%
Total Average Deposits 93,484 93,405 94,788
</TABLE>
The maturities of Certificates of Deposits Greater than $100,000 at
December 31, 1996 are listed below:
<TABLE>
<CAPTION>
December 31, 1996
(Dollars in Thousands)
<S> <C>
Three months or less 710
Over three through 609
twelve months
Over twelve months 0
Total $ 1,319
</TABLE>
Other Liabilities
The following table summarizes Other Liabilities for the periods
ending December 31, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C>
Accrued Expenses Payable 173 150 103
Accounts Payable - 69 10
Deferred Membership Fees 69 74 83
Blanket Bond Fund 50 50 41
Other Liabilities 6 101 192
Total Other Liabilities $298 $444 $429
</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 $600,000 with a correspondent bank and also has a
commitment from an upstream correspondent which will increase our Federal
Funds line of credit over and above the normal amount by pledging unused
securities.
<PAGE>
Shareholders' Equity
Shareholders' equity decreased $117,000 or 1.59% to $7,251,000 at
December 31, 1996, from $7,368,000 at December 31, 1995, because of
fluctuations in shareholders' equity. Realized shareholder's equity
(shareholders' equity excluding net unrealized holdings gains or losses on
investment securities classified as available-for-sale) at December 31,
1996 was $7,256,000. The $117,000 decrease in shareholders' equity since
December 31, 1995, was attributable to $94,000 in losses and a $23,000
decline in net unrealized value of investment securities, net of tax,
classified as available-for-sale.
Shareholder's equity increased $111,000 or 1.53% to $7,368,000 at
December 31, 1995, from $7,257,000 at December 31, 1994. Realized
shareholders' equity increased $144,000 or 2.00% to $7,349,000 at December
31, 1995, from $7,205,000 at December 31, 1994. During 1995, the growth in
shareholders' equity was primarily attributable to a $144,000 increase in
retained earnings over 1994 being offset by a $33,000 decline in the net
unrealized value of investment securities, net of tax.
Shareholders' equity increased 7.53% to $6,749,000 during 1994 and at
year-end 1994 amounted to 7.04% of total assets. The growth in
shareholders equity was primarily attributable to a significant increase in
earnings over the prior year coupled with recognition of the unrealized
investment holding gains of %52,000, net of tax required by SFAS 115.
The Company maintains an adequate capital position which exceeds all
minimum regulatory capital requirements.
The leverage ratio (Tier 1 capital to total assets) at December
31, 1996, was 8.60% compared to 7.02% at December 31, 1995, which are
compared to the minimum capital requirement of 4.00%.
At December 31, 1996, based on the Federal Reserve Board's guidelines,
the Company's Tier 1 capital ratio was 12.32%, and the total risk-based
capital ratio was 13.58%.
The ratio of average shareholders' equity to average assets was
7.06% in 1996, 7.32% in 1995, and 6.57% in 1994.
During 1996, the Company's source of cash flow was interest earned on
its existing cash balances and tax benefit payments received from the Bank.
During 1996 there were no dividends received from the Bank. During 1995,
the Company received no dividends or tax benefit payments from the Bank.
Dividends that may be paid by the Bank to the Company are subject to
certain regulatory limitations. Under Louisiana banking law, the approval
of the OFI will be required if the total of all dividends declared in any
calendar year by the Bank exceeds the Bank's net profits to date and
retained net profits for the preceding two years, subject to
maintenance of minimum required regulatory capital.
Supervision and Regulation Enforcement Action
The Bank is currently subject to an enforcement action from its
primary regulator, the FDIC, in the form of a Memorandum of Understanding.
The revised order was entered into by the Bank and the FDIC on March 12,
1996, as a result of their examination of July 31, 1995 and replaces the
Memorandum of Understanding dated November 8, 1994.
The Memorandum of Understanding is an arrangement between the Bank
and FDIC in which the Bank agrees to perform, among other things, the
following within specified time periods:
a)The Bank shall maintain a Tier 1 leverage capital ratio equal to or
greater than seven percent, including restricting dividends to a maximum of
50% of the Bank's net income,
b)Eliminate from its books certain criticized assets and reduce
other criticized assets to specified levels,
c)Initiate and implement a marketing program to dispose of its
other real estate in a timely manner,
d)Formulate and implement a written Profit Plan.
e)Perform a quarterly review of the adequacy of the Bank's loan
valuation reserve. Increase the Bank's allowance for loan and lease losses
to at least $1,500,000 (Resulting in a charge to income in 1995 of an
additional provision of $566,166).
f)Revision of the Bank's loan policy for charging off delinquent
credit card loans.
Bank Management has taken action toward complying with the provisions
of the Memorandum of Understanding. Below is the February, 1996 report.
A.During the life of the Memorandum, the Bank shall maintain a Tier 1 capital
ratio, as defined in Part 325 of the FDIC Rules and Regulations, equal to
or greater than seven (7.0) percent.
<PAGE>
The bank is in compliance and the following reflects a monthly
breakdown:
<TABLE>
<CAPTION>
TOTAL CAPITAL/ASSET
MONTH AVERAGE TOTAL RATIO
ASSETS CAPITAL
<S> <C> <C> <C>
12-94 103,075,866 8,669,658 8.41%
01-95 101,404,565 8,810,885 8.69%
02-95 101,265,687 8,861,727 8.75%
03-95 101,128,196 8,972,989 8.87%
04-95 101,211,383 9,062,880 8.95%
05-95 101,186,108 9,180,194 9.07%
06-95 101,633,930 9,226,277 9.08%
07-95 102,585,018 9,312,802 9.08%
08-95 103,364,563 9,405,513 9.10%
09-95 103,829,789 9,482,853 9.13%
10-95 104,200,596 9,326,922 8.95%
11-95 104,553,817 9,213,842 8.81%
12-95 104,843,144 8,951,771 8.54%
1-96 105,679,014 9,025,961 8.54%
2-96 104,406,542 9,093,939 8.71%
3-96 104,484,982 9,187,425 8.79%
4-96 104,836,828 9,218,297 8.79%
5-96 105,026,617 9,257,071 8.81%
6-96 105,102,912 9,246,776 8.80%
7-96 103,344,801 9,017,156 8.73%
8-96 104,703,155 8,934,152 8.53%
9-96 104,555,669 9,117,351 8.72%
10-96 104,200,468 9,074,717 8.71%
11-96 104,595,993 9,007,118 8.61%
12-96 104,592,512 9,027,004 8.63%
1-97 102,469,480 8,953,740 8.74%
2-97 102,537,922 8,923,792 8.70%
</TABLE>
B. During the life of this Memorandum, the Bank shall not declare nor pay
any dividends on its common stock, when combined with all other cash
dividends paid during the current year, will exceed fifty percent of the
current year's net income or cause the capital maintenance level as
described in provision A to fall below the required 7.0 percent, without
prior written approval of the Regional Director and the Commissioner.
The bank is in compliance and the following reflects a monthly
breakdown:
<PAGE>
<TABLE>
MONTH DIVIDENDS NET EARNINGS PERCENT PAID
DECLARED
<S> <C> <C> <C>
12-94 424,484.62 848,969 50.00%
01-95 0.00 141,227 0.00%
02-95 0.00 192,069 0.00%
03-95 0.00 303,330 0.00%
04-95 0.00 393,221 0.00%
05-95 0.00 510,536 0.00%
06-95 0.00 556,619 0.00%
07-95 0.00 643,144 0.00%
08-95 0.00 735,855 0.00%
09-95 0.00 813,195 0.00%
10-95 0.00 624,662 0.00%
11-95 0.00 544,184 0.00%
12-95 0.00 282,113 0.00%
1-96 0.00 74,190 0.00%
2-96 0.00 142,168 0.00%
3-96 0.00 235,654 0.00%
4-96 0.00 266,525 0.00%
5-96 0.00 305,299 0.00%
6-96 0.00 295,005 0.00%
7-96 0.00 65,385 0.00%
8-96 0.00 (17,619) 0.00%
9-96 0.00 165,580 0.00%
10-96 0.00 122,946 0.00%
11-96 0.00 55,347 0.00%
12-96 0.00 75,233 0.00%
1-97 0.00 (44,791) 0.00%
2-97 0.00 (74,739) 0.00%
</TABLE>
C. Within 10 days from the date of this Memorandum, the Bank shall
eliminate from its books, by charge-off or collection, all assets
classified "Loss" as of July 31, 1995, that have not been previously
collected or charged off. Reduction of these assets through proceeds of
other loans made by the Bank is not considered collection for the purpose
of this paragraph. Reports of Condition and Income filed with the FDIC for
September 30, 1995 shall reflect elimination of all assets classified
"Loss" as required by this paragraph. If necessary to comply, amendments
shall be filed by the Bank.
Charge offs occurred during the months of October, November &
December, since the aforementioned was being appealed. The Call Report for
Sept. was amended.
D.(1) Within 60 days of the effective date of this Memorandum, the
Bank shall initiate and implement a marketing program to dispose of its
other real estate in a timely manner. At a minimum, the program shall
provide for:
(i) Establishing specific goals for reduction of other real estate;
Plan has been in place for several years and is reflected on each
year's annual budget. The plan in 1995 reflected sales of $550,000. The
bank exceeded this goal, proceeds from sales totaled $599,130. Please see
exhibit D 1(i). The bank's goal has been decreased in 1996 due to sales
anticipated on parcels which have book values less than $50m. In addition,
<PAGE>
the bank has reduced all action taken in writing.
(iii) Actively listing and advertising all parcels of real
estate at market value;
Some properties are listed with realtors, others don't qualify,
either because of activity or conditions of the property. The exceptions
shall be presented to the board.
(2) For the purposes of this Memorandum, the term "other real estate" means
all real estate, other than bank premises, actually owned by the Bank.
Procedures implemented as described above are in place for all
"other real estate" as defined in item 2.
E. Within 60 days from the date of this Memorandum, the Bank shall
formulate and implement a written Profit Plan for 1996. This plan shall be
forwarded to the Regional Director and to the Commissioner, for review and
comment, and shall address, at a minimum, the following: (See Budget
exhibit)
(a) Goals and strategies for improving and sustaining the earnings of the
Bank, including:
(i) An identification of the major areas in, and means by which, the
board will seek to improve the Bank's operating performance;
This plan is already in effect and has always been accomplished
through various reports submitted to the Audit & Finance Committee on a
monthly basis. (i)). Any variance in excess of $20m is scrutinized, and if
necessary a plan of action is taken.
ii) Realistic and comprehensive budgets, prepared on at least an
annual basis.
As noted in the Bank's Executive Policy Manual, realistic and
comprehensive budgets are prepared annually before December 31 of each
year. In addition, actual results are compared monthly through the
utilization of several reports as described in our Executive Policy Manual.
Special meetings will also be documented & forwarded with the quarterly
progress report.
(iii) A description of the operating assumptions that form the basis
for, and adequately support, the major projected income and expense
components.
The highlights of the budget specify the above each year. The 1996
budget & highlights were forwarded with February's mailing to the FDIC &
OFI.
(iv) Budget review process to monitor the income and expenses of the
Bank to compare actual figures with budgetary projections on at least a
quarterly basis and included in the minutes of the board of directors'
meeting; and
Plan already exists whereby actual performance versus budget is
reviewed and monitored by the Audit & Finance Committee on a monthly basis.
(v) Periodic compensation review, including amounts and costs of
life insurance coverage carried on senior officers.
The Salary Administration Committee meets quarterly to review
salaries, transfers, promotions, etc. Life insurance compensation will be
reviewed annually by the board.
(b) By December 31, 1996, a separate Profit Plan for 1997 shall be
completed which incorporates the minimum requirements set forth in
subparagraph (a) above.
The bank has always completed its fiscal budget plans, before year end
and intends to continue. The 1996 Budget was forwarded to the FDIC & OFI in
February 1996.
F. Effective with the date of this Memorandum, the Bank's board of
directors shall review, on at least a quarterly basis, the adequacy of the
Bank's loan valuation reserve and make such entries (charges to current
operating income) as are necessary to provide a loan valuation reserve that
is adequate in light of the condition of the loan and credit card
portfolios at that time.
<PAGE>
(a) In reviewing the adequacy of the loan valuation reserve,
consideration shall be given to the volume and severity of adverse loan and
credit card account classifications at the latest FDIC and State
examinations, the volume of delinquent loans and credit card accounts, the
results of the Bank's loan review function, any growth in the loan and
credit card portfolios, and any other factors appropriate in the
circumstances. The basis upon which the determination of adequacy and
adjustments to the reserve are made shall be
reduced to writing and made a part of the minutes of the board.
This is done on a quarterly basis and presented to the Audit &
Finance Committee.
b) Notwithstanding the provisions of the above paragraph, the Bank's
allowance for loan and lease losses shall be increased to at least
$1,500,000, subsequent to charge-offs required in Paragraph A, less any
amount collected on the loans and credit cards classified "Loss" in the
July 31, 1995, Reports of Examination. Reports of Condition and Income
filed with the FDIC for September 30, 1995, shall reflect an adequate
reserve for loan and lease losses as required by this paragraph. If
necessary to comply, amendments shall be filed by the Bank.
The Allowance for Loan Loss Reserves was increased to $1,500,000,
retroactive December 31, 1995 and the 12/31/95 Call Report was amended. G.
Within 60 days from the date of this MEMORANDUM, the bank shall revise its
loan policy as necessary to address the deficiencies discussed on pages 8.1
and 8.2 of the July 31, 1995, reports of examination. At a minimum,
revisions will include procedures for charging off delinquent credit cards
which conform with the Uniform Policy for classification of Consumer
Installment Credit Based on Delinquency Status and procedures to assure
that the Bank's assets and income are not materially overstated by accrued
interest on severely delinquent credit card accounts.
The policies have been revised and delinquencies are charged off
automatically via computer once past due.
H (a) On the tenth day of each calendar quarter, unless and until each and
every correction required by this Memorandum is accomplished, the Bank
shall furnish written progress reports to the Regional Director detailing
the form and manner of any actions taken to secure compliance with this
Memorandum and the results thereof. Such reports may be discontinued when
the corrections required by this Memorandum have been accomplished and the
Regional Director has, in writing, released the Bank from making future
reports.
The Bank will forward progress reports on a timely basis.
(b) The board minutes, for the month in which the reports are
submitted pursuant to the paragraph above, should reflect the review and
approval of said reports by the Bank's board of directors.
The reports shall be presented on a monthly basis at the Audit &
Finance Committee, with quarterly reports reviewed by the Board.
The Bank has been ordered by the FDIC to reimburse bank customers certain
cash advance fees and finance charges. The Bank's exposure for this
reimbursement is not expected to exceed $70,000.
Bank management philosophy and plans are directed to enhancing the
financial stability of the Bank to ensure the continuity of Operations.
The Bank is required to maintain minimum amounts of capital to total
"riskweighted" assets, as defined by banking regulators. At December 31,
1996, the Bank is required to have a minimum Tier 1 and Total capital
ratios of 4.00% and 8.00%, respectively. The Bank's actual ratios at that
date were 12.32% and 13.58%, respectively. Primary capital to assets ratios
for the Bank were 8.60% for 1996, 8.54% for 1995 and 9.43% for 1994. The Bank
is in compliance with the order.
<PAGE>
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
All audit services for the Company and the subsidiary are
performed by LaPorte, Sehrt, Romig and Hand, Certified Public Accountants.
The same firm will be retained to perform audit services in 1997.
Item 10
Directors and Executive Officers of the Company
<TABLE>
<CAPTION>
Position %
Number
Title Or With Other of of
Position/
Director since
Name (Age) Holding Co. Subsidiary Companies Shares Class
<S> <C> <C> <C> <C> <C>
G. Harrison Chairman - Chairman N/A Common 56,453 31.51%
Scott(73) 1988 and
Director- Director- Preferr 79,018 3.43%
1988 1958 ed
James A. President- President- N/A Common 34,990 19.53%
Comiskey(70) 1988 1978
Director- Director- Preferr 73,083 3.17%
1988 1958 ed
Douglas A. Director- Director- President, Common 215 0.12%
Schonacher(66) 1988 1988
V.I.P. Preferr 9,324 0.40%
Dist. ed
Gordon A. Director- Director- President, Common 1,015 0.57%
Burgess(63) 1988 1988
Tangipahoa Preferr 36,164 1.57%
ed
Parish Council
Lionel J. Favret, Director- Director- Retired Common 571 0.32%
Sr.(85) 1988 1963
Preferr 31,656 1.37%
ed
Louis G. Grush, Director- Director- Dentist; Common 1,987 1.11%
DDS(69) 1988 1988 Assoc
Professor-
LSU
School of Dentistry
Gerry E. Director- Director- Chiropracto Common 5,330 2.97%
Hinton(66) 1988 1988 r
Preferr 2,387 0.10%
ed
Leland L. Director- Director- President, Common 3,800 2.12%
Landry(70) 1988 1988
Landry Preferr 2,387 0.10%
Realty ed
Samuel A. Logan, Director- Director- Physician Common 626 0.35%
MD(74) 1988 1988
Preferr 20,039 0.88%
ed
Edward J. Secretary Director- President, Common 8,149 4.55%
Soniat(84) and 1963
Director- Blaise Preferr228,659 9.94%
1988 Parking ed
Enterprise
Corp.
Peggy L. Treasurer SR. V.P., N/A - -
Schaefer(45) Cashier
Officer of BOL & C.F.O.
since 1983
</TABLE>
Directors and executive officers of the Company each serve for a term
of one year.
Messrs. Scott, Comiskey, Favret, and Soniat have served as directors
since 1981. Messrs. Burgess, Grush, Hinton, Landry, Logan, and Schonacher
have served as directors since 1988. Mr. Scott has served as Chairman of
<PAGE>
the Board of the Company since 1981. Mr. Soniat has served in his capacity
as Secretary of the Company since 1988. Ms. Schaefer has served in her
capacity as Treasurer of the Company since 1988.
As of December 31, 1996, all directors, as a group, own directly or
indirectly 113,136 shares of Common Stock and 482,717 shares of Preferred
Stock, representing 63.15% and 20.96% respectively of outstanding shares.
No family relationships exist among the current directors or executive
officers of the Company or the Bank, and, except for service as directors
of the Company, no director of the Company is a director of any other
company with a class of securities registered pursuant to Section 12 of the
Exchange Act or subject to the requirements of Section 15(b) of that act or
any company registered as an investment company under the Investment
Company Act of 1940.
The Company does not have standing audit, nominating, or compensation
committees of the Board of Directors, or committees performing similar
functions. In lieu thereof, the Board of Directors as a group performs
the foregoing functions.
Item 11
Executive Compensation
The Company pays no salaries or other compensation to its directors and
executive officers. The Bank pays each director other than Messrs. Scott
and Comiskey an honorarium for attending each meeting of the Board of
Directors, and each meeting of the Bank's Audit and Finance Committee and
Executive Committee in the amount of $400, $300, and $300 respectively.
From October 1, 1990, through June 30, 1992, these honorariums
were loaned by the director-recipients to the Company. The total amount of
these loans to the Company as of December 31, 1996, was $651,835, including
accrued and unpaid interest at the rate of 10% per annum. At this time,
there is no maturity date on these loans.
The following table sets forth compensation for the Company's
executive officers for the years 1996, 1995, and 1994:
<TABLE>
<CAPTION>
Annual Compensation
Other
Annual All Other
Name and Principal Year Salary Compensation Compensation
Position ($) ($) ($)
<S> <C> <C> <C> <C>
G. Harrison Scott, 1996 89,800 41,000 19,494
Chairman of the 1995 89,800 41,000 19,000
Board 1994 89,800 41,000 19,000
James A. Comiskey, 1996 89,800 41,000 19,000
President 1995 89,800 41,000 19,000
1994 89,800 41,000 19,000
</TABLE>
In addition to the cash compensation shown in the foregoing table, the
Company provides an automobile and certain club memberships for Messrs.
Scott and Comiskey. The Company also provides life insurance policies for
Messrs. Scott and Comiskey. Upon the death of the insured, the Company is
entitled to receive all of the premiums it paid on behalf of Messrs. Scott
and Comiskey, but in no event more that $150,000 per man. The Company
provided Messrs. Scott and Comiskey with life insurance policies in which
Messrs. Scott and Comiskey name the beneficiary and own their respective
policies. The Company paid $19,494 for Mr. Scott's policy and $19,000 for
Mr. Comiskey's policy in 1996.
Committees of the Board of Directors of the Company and the Bank
During fiscal year 1996, the Board of Directors of the Company
held a total of 5 meetings, and the Board of Directors of the Bank held a
total of 14 meetings. Each director attended at least 75% of the aggregate
of the meetings of the Board of Directors and of the committees on which
such director served. Neither the Board of Directors of the Company nor
the Bank has a standing compensation committee or committee performing
<PAGE>
similar functions. In lieu thereof, the Board of Directors as a group
performs the foregoing function.
The Board of Directors of the Bank does have an Audit and Finance
Committee consisting of Messrs. Favret (chairman), Landry, and Soniat, and
two rotating members selected from Messrs. Burgess, Grush, Hinton, and
Schonacher. The Audit and Finance Committee receives information from
management, reviews financial reports and delinquency reports, and
coordinates and reviews the work performed by the Bank's internal auditor
and the Bank's certified public accountants. The Audit and Finance
Committee met 12 times in 1996.
The Bank also has an Executive Committee consisting of six permanent
members and two rotating members. The permanent members of the Executive
Committee in 1996 were Messrs., Scott (chairman), Comiskey, Favret, Soniat,
Hinton, and Burgess, and the rotating members were selected from Messrs.
Grush, Landry, and Schonacher. The Executive Committee formulates policy
matters for determination by the Board of Directors and reviews financial
reports, loan reports, new business, and other real estate owned
information. The Executive Committee met 28 times in 1996. Item 12
Security Ownership Of Certain Beneficial Owners and Management
No director of the Company holds a directorship in any company with
a class of securities registered under Section 12 of the Exchange Act or
subject to the requirements of Section 15(b) of the Exchange Act or in any
company registered as an investment company under the Investment Company
Act. No family relationships exist among the current directors or
executive officers of the Company.
As of December 31, 1996, the following persons were known to be the
beneficial owners of more than 5% of the Bank's stock.
<TABLE>
<CAPTION>
Name & Address Of Title Of Amount & Percent
Nature Of
Beneficial Owners Class Beneficial Of
Ownership Class
<S> <C> <C>
G. Harrison Scott Common 56,453 31.51%
55481 Highway 433 Preferred 79,018 3.43%
Slidell, LA 70461 Owned directly
James A. Comiskey Common 34,990 19.53%
1100 City Park Preferred 73,083 3.17%
Ave.
New Orleans, LA Owned directly
70119
Edward J. Soniat Common 8,149 4.55%
49 Oriole Street Preferred 228,659 9.94%
New Orleans, LA Owned directly
70124
</TABLE>
Item 13
Certain Relationships and Related Transactions
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with officers, directors
and principal shareholders and their associates, on substantially the same
term and conditions, including interest rates and collateral on loans, as
those prevailing at the same time for comparable transactions with others,
and that do not involve more than the normal risk of collectability or
presents other unfavorable features.
The aggregate amount borrowed by all officers, directors, and their
associates totaled $1,010,085 at December 31, 1996 and the highest
aggregate amount borrowed during the year totaled $1,263,547. These
aggregate amounts represented 11.23% and 14.05% respectively of the
total capital of the Bank. The following data is as of December 31, 1996.
The Bank has one outstanding loan to Mr. Gordon A. Burgess, director,
in the amount of $9,778 bearing an annual interest rate of 9%, with the
largest aggregate amount outstanding totaling $27,040. The loan is
scheduled to mature January 10, 1997, and is secured by signature only.
The Bank has one outstanding loan to Mr. Burgess' corporation, Mal,
Inc., in the amount of $383,960 bearing an annual interest rate of
9%, with the largest aggregate amount outstanding totaling $393,545. The
<PAGE>
loan is scheduled to mature January 25, 1997, and is secured by real estate.
The Bank has one outstanding loan to Mr. James A. Comiskey, director,
in the amount of $53,261 bearing an annual interest rate of 10%, with the
largest aggregate amount outstanding totaling $81,203. The loan is
scheduled to mature February 9, 1997, and is secured by real estate.
The Bank has one outstanding loan to Mr. Leland L. Landry, director,
in the amount of $124,996, bearing an annual interest rate of 9%, with the
largest aggregate amount outstanding totaling $154,665.
The loan is scheduled to mature January 22, 1997, and is secured by real
estate.
The Bank has two outstanding loans to Mr. Douglas A. Schonacher,
director, in the amount of $132,141, bearing an annual interest rate of 9%,
with the largest aggregate amount outstanding totaling $138,023. The
loan is scheduled to mature February 5, 1997, and each are secured by real
estate.
The Bank has one outstanding loan to Mr. Schonacher's corporation,
VIP, Inc. in the amount of $22,314, bearing an annual interest rate of 9%,
with the largest aggregate amount outstanding totaling $22,314. The loan is
scheduled to mature February 10, 1997, and is secured by real estate.
The Bank has one outstanding loan to an individual which is endorsed
by Mr. Edward J. Soniat, director, and secured by real estate, in the
amount of $20,936, bearing an annual interest rate of 10.75%, with the
largest aggregate amount outstanding totaling $21,642. The loan matured
October 16, 1996.
The Bank has one outstanding loan to Mr. Soniat's corporation, The Fisk
Corp. in the amount of $178,888, bearing an annual interest rate of 9%,
with the largest aggregate amount outstanding totaling $193,872. The loan
is scheduled to mature March 12, 1997, and is secured by real estate.
On September 30, 1991, the Bank purchased a four-story building
located at 300 St. Charles Avenue from the RTC for a price of $402,500. The
building serves as the Bank's main office. The purchase was financed by a
loan from Mr. Soniat to the Company. There is currently a balance of
$84,233 in principal and accrued but unpaid interest on the loan, which
bears interest at the rate of 13.50% per annum. The loan matured September
30, 1996. Mr. Soniat has agreed to renew this loan at the same interest
rate and repayment schedule, on a month-tomonth basis which, unless
changed, would fully amortize this loan on September 30, 2006.
The Bank leases space for its operations center under four separate
leases from Severn South Partnership, a limited partnership for which
Messrs. Scott and Comiskey are the only two general partners. There are 13
limited partners, of which three also serve as directors of the Bank,
namely Messrs. Scott, Comiskey, and Soniat. The Bank pays $27,921, plus a
percentage of operating costs, per month for the leased premises.
Management believes that the terms of the leases are no less favorable than
the terms that could be obtained from an unaffiliated party for similar
space. The Amendment to Lease dated June 1, 1995, with respect to this
office space expires on May 31, 1999.
The Bank leases the facilities for its Severn Branch from Severn South
Partnership. The Bank pays $12,456, plus a percentage of operating
expenses, per month. Management of the Company believes that the terms of
the lease are no less favorable than the terms that could be obtained from
an unaffiliated party for similar space. The Amendment to Lease dated June
1, 1995, with respect to this office space expires on May 31, 1999.
The Bank leases its Tammany Mall branch office on a month-to-month basis
from the Tammany Mall Partnership. This partnership is a limited
partnership consisting of Messrs. Scott and Comiskey as the only general
partners and of the 12 limited partners, five are currently directors of
the Bank, namely, Messrs. Scott, Comiskey, Hinton, Landry and Grush. The
Bank pay $6,200 per month for the leased premises. Management of the
Company believes that such lease payments are comparable to what would
have been paid to an unrelated party for similarly situated space at the
time the lease was executed.
Item 14
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<PAGE>
<AUDIT>
BOL BANCSHARES, INC.
& SUBSIDIARY
December 31, 1996
Audits of Financial Statements
December 31, 1996
and
December 31,1995
<PAGE>
To the Board of Directors
BOL Bancshares, Inc.
& Subsidiary
Independent Auditor's Report
We have audited the accompanying consolidated balance sheets of BOL
BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana, as of
December 31, 1996 and December 31, 1995, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for
the years ended December 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly in all material respects, the financial position of
BOL BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana as
of December 31, 1996 and December 31, 1995, and the results of their
operations and their cash flows for the years ended December 31, 1996, 1995
and 1994, in conformity with generally accepted accounting principles.
/s/ Laporte, Sehrt, Romig & Hand
A Professional Accounting Corporation
Metairie, LA
January 16, 1997
A Professional Accounting Corporation
800 Two Lakeway Center 3850 N. Causeway Blvd.
Metairie, LA 70002 (504)835-5522 FAX (504)835-5535
P.O. Box 27 Riverside Drive Covington, LA
70434 (504)892-5850 FAX (504)892-5956
Member of AICPA Division for CPA Firms-Private Companies Practice
Section and
SEC Practice Section
International Affiliation with Accounting Firms Associated, Inc.
<PAGE>
<TABLE>
<CAPTION>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1996 1995
<S> <C> <C>
Cash and Due from Banks
Non-Interest Bearing Balances and $7,902,872 $6,742,137
Cash
Federal Funds Sold 14,400,000 10,725,000
Investment Securities
Securities Held-to-Maturity (Fair
Value of $8,016,619 in 1996
and $10,015,625 in 1995) 7,977,101 10,014,191
Securities Available-for-Sale, at 1,083,011 1,122,145
Fair Value
Loans - Less Allowance for Loan
Losses of $1,500,000 in 1996
and 1995, and Unearned Discounts of
$9,318 in 1996 and $37,902 in 1995 67,798,187 73,443,457
Property, Equipment and Leasehold
Improvements (Net of
Depreciation and Amortization) 2,683,149 2,574,736
Other Real Estate 1,723,095 1,993,905
Other Assets 1,803,544 1,439,798
Deferred Taxes 326,689 370,037
Prepaid Income Taxes 247,030 18,100
Letters of Credit 146,332 145,632
$106,091,010 $108,589,138
The accompanying notes are an integral part of these financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS'
EQUITY
December 31,
1996 1995
LIABILITIES
Deposits
Non-Interest Bearing $35,767,855 $35,822,157
Interest Bearing 59,372,781 61,564,311
Notes Payable 2,384,488 2,388,403
Other Liabilities 298,492 444,489
Accrued Litigation Settlement 390,000 390,000
Letters of
Credit Outstanding 146,332 145,632
Accrued Interest 479,779 465,831
Total Liabilities 98,839,727 101,220,823
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and
Outstanding in 1996 and 1995 2,302,811 2,302,811
Common Stock - Par Value $1
179,145 Shares Issued and
Outstanding in 1996 and 1995 179,145 179,145
Unrealized Gain (Loss) on
Securities Available-for-Sale,
Net of Applicable Deferred Income
Taxes (4,407) 19,036
Capital in Excess of Par - Retired
Stock 14,888 14,888
Retained Earnings
4,758,846 4,852,435
Total Stockholders' Equity 7,251,283 7,368,315
$106,091,010 $108,589,138
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BOL BANCSHARES, INC. &
SUBSIDIARY
CONSOLIDATED STATEMENTS OF
INCOME
For the
Years
Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME $12,326,563 $11,489,756 $10,254,341
INTEREST EXPENSE 2,193,255 2,428,526 2,064,643
Net Interest Income 10,133,308 9,061,230 8,189,698
PROVISION FOR LOAN LOSSES 2,039,779 1,748,761 804,991
Net Interest Income After
Provision
for Loan Losses
8,093,529 7,312,469 7,384,707
OTHER INCOME
Service Charges on Deposit
Accounts 1,481,144 1,521,705 1,615,472
Other Non-Interest Income
958,796 1,181,643 1,752,317
Equity in
Earnings (Loss) of
Unconsolidated Subsidiary - (34,614) 131,437
Gain on Sale of Securities
- - 13,650
Total Other Income 2,439,940 2,668,734 3,512,876
OTHER EXPENSES
Salaries and Employee Benefits
4,189,606 3,833,797 4,017,854
Loss on
Litigation
- - 390,000
Occupancy Expense
1,848,469 1,757,796 1,816,077
Other Non-
Interest Expense
4,609,011 4,103,544 3,820,369
Total Other Expenses
10,647,086 9,695,137 10,044,300
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE (BENEFIT)
(113,617) 286,066 853,283
INCOME TAX EXPENSE (BENEFIT)
(20,028) 141,413 205,250
NET INCOME (LOSS) ($93,589) $144,653 $648,033
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK ($0.52) $0.81 $3.61
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BOL BANCSHARES, INC.
& SUBSIDIARY
CONSOLIDATED
STATEMENTS OF
CHANGES IN
STOCKHOLDERS' EQUITY
Unrealiz ed
Gain
(Loss)
on
Investment
Securities Capital
In
Preferred Common Available Excess Retained
of Par
for-Sale Retired Earnings Total
Stock Stock Stock
<S> <C> <C> <C> <C> <C> <C>
BALANCE - $2,324,737 $179,599 $0 $0 $4,244,489 $6,748,825
December 31, 1993
Stock Retired
(15,634) (341) - 8,810 (12) (7,177)
Cash Dividends
Preferred - $.08
per share - - - - (184,728) (184,728)
Unrealized Gain on
Securities
Available-for-Sale,
Net of Applicable
Deferred Income
Taxes - - 52,421 - - 52,421
Net Income for the
Year 1994 - - - - 648,033 648,033
BALANCE - December
31, 1994 2,309,10 179,258 52,421 8,810 4,707,782 7,257,374
Stock Retired
(6,292) (113) - 6,078 - (327)
Change in Unrealized
Gain on
Securities Available-
for-Sale, Net of
Applicable Deferred
Income Taxes - - (33,385) - - (33,385)
Net Income for the
Year 1995 - - - - 144,653 144,653
BALANCE - December
31, 1995 2,302,811 179,145 19,036 14,888 4,852,435 7,368,315
Change in Unrealized
Gain on Securities
Available-for-Sale,
Net of Applicable
Deferred Income
Taxes - - (23,443) - - (23,443)
Net (Loss) for the
Year 1996 - - - - (93,589) (93,589)
BALANCE - December $2,302,811 $179,145 ($4,407) $14,888 $4,758,846 $7,251,283
31, 1996
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The
Years
Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) ($93,589) $144,643 $648,033
Adjustments to Reconcile Net Income
(Loss) to Net
Cash Provided by Operating Activities:
Provision for Loan Losses
2,039,779 1,748,761 804,991 1
Depreciation and Amortization Expense
365,574 238,087 188,886
Amortization of Investment Security
Premiums 15,218 27,160 22,762
Accretion of Investment Security
Discounts (29,102) (41,077) (219,910)
Increase (Decrease) in Deferred Income
Taxes 55,425 (428,113) (32,420)
(Gain) Loss on Sale of Property and
Equipment 2,421 (521) 786
(Gain) Loss on Sale of Other Real Estate
2,690 (133,986) (351,114)
Decrease (Increase) in Other Assets and
Prepaid Taxes (592,676) 188,876 (482,698)
(Decrease) Increase in Other Liabilities
and Accrued Interest (132,050) (72,277) 446,500
Net Decrease (Increase) in Mortgage Loans
Held for Resale 255,750 (255,750) 1,233,828
Undistributed
Equity Method Income
- 34,614 (131,436)
Gain on Sale of Available-for-Sale
Securities - - (13,650)
Net Cash Provided by Operating
Activities 1,889,440 1,450,417 2,114,558
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale
Securities 7,226 - 63,650
Purchases of Available-for-Sale
Securities (999,687) (977,656) -
Proceeds from Available-for-Sale
Securities Released at Maturity 1,000,000 - -
Proceeds from Held-to-Maturity Investment
Securities Released at Maturity 7,500,000 5,000,000 10,000,000
Purchases of Held-to-Maturity Investment
Securities (5,452,950) - (17,883,155)
Proceeds from Sale of Property and
Equipment 3,545 7,389 15,998
Purchases of Property and Equipment
(479,953) (944,098) (85,778)
Proceeds From Liquidation of
Unconsolidated Subsidiary - 1,402,058 -
Proceeds from Sale of Other Real Estate
292,600 780,131 1,562,072
Net Decrease (Increase) in Loans 3,325,261 (7,945,484) (5,139,404)
Net Cash Provided by (Used in) Investing
Activities 5,196,042 (2,677,660) (11,466,617)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For The Years Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net (Decrease) Increase in Demand
Deposits, Interest
Bearing Deposits, Savings Accounts, ($2,245,832) $5,622,708) ($3,724,370)
and CD's
Proceeds from Issuance of Long-Term Debt
- - 1,918,500
Retirement of Stock
- (327) (7,177)
Dividends Paid
- - (184,728)
Principal Payments on Long-Term Debt
(3,915) (32,424) (1,880,494)
Net Cash Provided by (Used in) Financing
Activities (2,249,747) 5,589,957 (3,878,269)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
4,835,735 4,362,714 (13,230,328)
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR
17,467,137 13,104,423 26,334,751
CASH AND CASH EQUIVALENTS - $22,302,872 $17,467,137 $13,104,423
END OF YEAR
SUPPLEMENTAL DISCLOSURES:
Additions to Other Real Estate through $34,130 $290,724 $400,992
Foreclosure
Cash Paid During the Year for Interest $2,179,307 $2,516,414 $2,083,938
Cash Paid During the Year for Income $153,476 $524,271 $305,663
Taxes
Market Value Adjustment for Unrealized
Gain (Loss)
on Securities Available-for-Sale ($35,520) $28,843 $79,421
</TABLE>
Accounting Policies Note:
Cash Equivalents Include Amounts Due from Banks and Federal Funds Sold.
Generally, Federal Funds are Purchased and Sold for One Day Periods.
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS OF THE COMPANY
BOL BANCSHARES, INC. was organized as a Louisiana corporation on
May 7, 1981 for the purpose of becoming a registered bank holding
company under the Bank Holding Company Act. The Company was inactive
until April 29, 1988, when it acquired Bank of Louisiana, BOS
Bancshares, Inc. and its wholly-owned subsidiary, Bank of the South,
and Fidelity Bank and Trust Company of Slidell, Inc., and its wholly
owned subsidiary, Fidelity Land Co. in a business reorganization of
entities under common control in a manner similar to a pooling of
interest. The acquired companies are engaged in the banking industry.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Bank of
Louisiana. In consolidation, significant inter-company accounts,
transactions, and profits have been eliminated. INVESTMENT SECURITIES
Debt securities that management has the ability and intent to
hold to maturity are classified as held-to-maturity and carried at
cost, adjusted for amortization of premium and accretion of discounts
using methods approximating the interest method. Other marketable
securities are classified as available-
for-sale and are carried at fair value. Realized gains and losses on
securities are included in net income. Unrealized gains and losses on
securities available-for sale are recognized as direct increases or
decreases in stockholders' equity. Cost of securities sold is
recognized using the specific identification method.
LOANS AND UNEARNED INCOME
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. Unearned discount
on installment loans is recognized as income over the term of the loan
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
collectibility 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.
Mortgage loans of $255,750 held for resale in 1995 are stated at cost,
which is equivalent to market value.
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 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 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. 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 borrowers' financial
condition is such that collection of interest is doubtful.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Buildings, office equipment and leasehold improvements are
stated at cost, less accumulated depreciation and amortization
computed principally on the straight-line and modified accelerated
cost recovery methods over the estimated useful lives of the assets.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE A
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
INCOME TAXES
The Company and its consolidated subsidiary file a consolidated
Federal income tax return. Federal income taxes are allocated between
the companies, in accordance with a written agreement.
MEMBERSHIP FEES
Membership fees are collected in the month of May and amortized
over a twelve-month period using the straight-line method. CASH AND DUE
FROM BANKS
The Bank considers all amounts Due from Banks and Federal Funds
Sold to be cash equivalents.
The Subsidiary Bank is required to maintain non-interest bearing
reserve balances to fulfill its reserve requirements. The average
amount of the reserve balance was approximately $1,405,269 and
$1,380,423 for the years ended December 31, 1996 and 1995,
respectively.
NON-DIRECT RESPONSE ADVERTISING
The Bank expenses advertising costs as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE B
CHANGE IN ACCOUNTING PRINCIPLES
SFAS NO. 114-ACCOUNTING FOR IMPAIRED LOANS
On January 1, 1995, the Bank adopted SFAS 114, "Accounting by
Creditors for Impairment of a Loan", which was later amended by SFAS 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures". This statement establishes standards, including the use
of discounted cash flow techniques, for measuring the impairment of a
loan when it is probable that the contractual terms will not be met.
Adoption of this standard had no impact on the Bank's net income,
stockholders' equity or total assets. The remaining disclosure information
required by SFAS 114 is set forth in Note G.
SFAS NO. 107-ACCOUNTING FOR FINANCIAL INSTRUMENTS
On January 1, 1995, the Bank adopted SFAS 107, "Disclosures about
Fair Value of Financial Instruments," which requires the disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. Quoted market prices, when available, are used
as the measure of fair value. In cases where quoted market prices are
not available, fair values are based on present value estimates or
other valuation techniques. These derived fair values are
significantly affected by assumptions used, principally the timing of
future
cash flows and the discount rate. Because assumptions are
inherently subjective in nature, the estimated fair values cannot be
substantiated by comparison to independent market quotes and, in many
cases, the estimated fair values would not necessarily be realized in
an immediate sale or settlement of the instrument. The disclosure
requirements of SFAS 107 exclude certain financial instruments and all
nonfinancial instruments. Accordingly, the aggregate fair value
amounts presented do not represent management's estimation of the
underlying value of the Bank. The remaining disclosure information
required by SFAS 107 is set forth in Note Y.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE C
OTHER REAL ESTATE
The Subsidiary Bank has acquired various parcels of real estate
in connection with the default and foreclosure on certain loans.
These properties, which are held for sale, are recorded on the
Subsidiary Bank's records at the lower of the
loan balance or net realizable value. Any difference is charged to the
reserve in the year of foreclosure.
The net income (cost) of operation of Other Real Estate totaled
$(235,365) in 1996, $(441,803) in 1995 and $4,726 in 1994.
NOTE D
LOANS
Major classification of loans are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Real Estate Mortgages $22,370,113 $23,323,996
Commercial 4,390,270 4,365,657
Mortgage Loans Held for Resale - 255,750
Personal 5,731,437 6,022,017
Credit Cards 36,608,564 40,578,771
Overdrafts 207,121 435,168
69,307,505 74,981,359
Unearned Discounts 9,318 37,902
69,298,187 74,943,457
Allowance for Loan Losses 1,500,000 1,500,000
$67,798,187 $ 73,443,457
The following is a classification of loans by rate and maturity:
(Dollar amounts in thousands)
December 31,
1996 1995
Fixed Rate Loans:
Maturing in 3 Months or Less $ 6,309 $ 9,711
Maturing Between 3 and 12 Months 13,343 10,545
Maturing Between 1 and 5 Years 40,400 42,467
Maturing After 5 Years 1,913 1,488
61,965 64,211
Variable Rate Loans:
Maturing Quarterly or More Frequently7,026 10,535
Non-Accrual Loans 316 235
69,307 74,981
Less: Unearned Discount 9 38
Less: Allowance for Loan Losses 1,500 1,500
Net Loans $ 67,798 $ 73,443
</TABLE>
NOTE E
NON-PERFORMING ASSETS
Non-performing assets include real estate acquired through
foreclosure or deed taken in lieu of foreclosure. These assets are
included on the balance sheet under the account caption, "Other Real
Estate", and amount to $1,723,095 at December
31, 1996 and $1,993,905 at December 31, 1995. In addition, during
1996, the subsidiary bank purchased land underlying an "Other Real
Estate" property for $550,000. This investment, which is considered
temporary, is included in Other Assets.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E
NON-PERFORMING ASSETS (Continued)
Other nonperforming assets include repossessed vehicles also
acquired through foreclosure. Repossessions totaled $0 at December 31,
1996 and $5,345 at December 31, 1995.
Loans are placed on non-accrual status when, in management's
opinion, the collection of additional interest is questionable.
Thereafter no interest is taken into income unless received in cash or
until such time as the borrower demonstrates the ability to pay
principal and interest.
At December 31, 1996, $316,292 of loans were in the nonaccrual
status and $22,978 of interest was foregone
in the year then ended.
At December 31, 1995, $235,038 of loans were in the non-accrual status
and $22,065 of interest was foregone in the year then ended.
NOTE F
INCOME TAXES
The components of the provision for income tax expense (benefit)
are:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $(59,302) $586,719 $295,413
Reduction for Excess Provision
in Prior Year: (16,151) - (57,743)
Deferred 55,425 (445,306) (32,420)
Total Provision for
Income Tax $(20,028) $141,413 $ 205,250
A reconciliation of income tax at the statutory rate to income
tax expense at the Company's effective rate is as follows:
1996 1995 1994
Computed Tax at the Expected
Statutory Rate $(38,630) $ 97,263 $290,116
Earnings of Unconsolidated
Subsidiary - 11,769 (44,689)
Reduction for Excess Provision
in Prior Year (16,151) - (57,743)
Other Adjustments 34,753 32,381 17,566
Income Tax Expense (Benefit)
for Operations $(20,028) $141,413 $205,250
1996 1995 1994
Income Taxes Currently Payable:
Current Income Tax Expense
for Operations $(75,453) $586,719 $237,670
Other Adjustments 16,151 7,445 57,743
Prepaid Tax (187,728) (600,495) (427,630)
Tax Payable for Unconsolidated
Subsidiary - (11,769) 68,862
Income Tax (Receivable) $(247,030) $(18,100) $(63,355)
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE F
INCOME TAXES (Continued)
Certain income and expense items are accounted for differently
for financial reporting purposes than for income tax purposes.
Provisions for deferred taxes are made in recognition of these
temporary differences.
There were net deferred tax assets of $326,689 and $370,037 as of
December 31, 1996 and December 31, 1995, respectively. The major
temporary differences which created deferred
tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Unrealized Gain (Loss) on Securities
FASB 115 Adjustment $38,388 $51,773
Unrealized Loss on Securities (Section 481
Adjustment) (8,995) (11,251)
Allowance for Loan Loss 93,757 93,757
Accumulated Depreciation (104,962) (79,406)
Other Real Estate 175,901 182,564
Accrued Litigation Settlement 132,600 132,600
$326,689 $370,037
</TABLE>
NOTE G
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
For The Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance - January 1 $1,500,000 $934,947 $933,734
Provision Charged to:
Operations 2,039,779 1,748,761 804,991
Proprietor - (1,213) 1,213
Loans Charged Off (2,822,245) (1,620,250) (1,217,989)
Recoveries 782,466 437,755 412,998
Balance - December 31 $1,500,000 $1,500,000 $934,947
</TABLE>
NOTE H
STOCKHOLDERS' EQUITY
PREFERRED STOCK
8%, non-cumulative, non-participating, non-convertible, par value
$1; 3,000,000 shares authorized, 2,302,811 shares
issued and
outstanding in 1996 and 1995. Preferred stock ranks prior to
common stock as to dividends and liquidation.
COMMON STOCK
Par value $1; 1,000,000 shares authorized, 179,145 shares issued
and outstanding in 1996 and 1995.
NOTE I
EARNINGS PER COMMON SHARE
Earnings per share are computed using the weighted average number
of shares outstanding which was 179,145 in 1996, 179,202 in 1995 and
179,429 in 1994. Preferred stock dividends of $.08 per
share were paid on December 30, 1994 to stockholders of record as of
December 23, 1994. There was no provision for dividends for the
years ended December 31, 1996 and 1995.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J
CONTINGENT LIABILITIES AND COMMITMENTS
The Subsidiary Bank's financial statements do not reflect various
commitments and contingent liabilities which arise in the normal
course of business and which involve elements of credit risk, interest
rate risk and liquidity risk. These commitments and contingent
liabilities are commitments to extend credit. A summary of the Bank's
commitments and contingent liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Credit Card Arrangements $ 76,577,000 $72,851,202 $67,494,000
Commitments To Extend Credit 564,000 693,000 1,272,000
</TABLE>
Commitments to extend credit, credit card arrangements and
commercial letters of credit all include exposure to some credit loss
in the event of nonperformance of the customer. The Bank's credit
policies and procedures for credit
commitments and financial
guarantees are the same as those for extension of credit that are
recorded on the statements of condition. Because these instruments
have fixed maturity dates, and because many of them expire without
being drawn upon, they do not generally present any significant
liquidity risk to the Bank.
The Subsidiary Bank in the course of conducting its business,
becomes involved as a defendant or plaintiff in various lawsuits. In
one such case, the Subsidiary Bank is a defendant in a lawsuit filed
by another bank. Outside counsel for the Subsidiary Bank has advised
that at this stage in the proceedings he believes the probable outcome
to be favorable to Bank of Louisiana. The Subsidiary Bank believes
the suits are without merit and intends to vigorously defend its
position. As a result of their compliance exam with the FDIC, the
Subsidiary Bank was ordered to reimburse certain cash advance fees and
finance charges, which could aggregate up to $70,000.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
In another such case, 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. An unfavorable outcome was reached in
1994 and the plaintiffs were awarded a judgement value of $565,786,
which includes $390,000 in back rents with interest, plus $55,000 in
legal fees. The Bank has filed an appeal. Accordingly, a provision
for loss of $390,000 was charged to operations in the accompanying
financial statements for 1994.
NOTE K
RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Subsidiary Bank makes
loans to its directors, officers and principal holders of equity
securities. These loans are made on substantially the
same terms including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons. An analysis of loans made to directors, officers and
principal holders of equity securities, including companies in
which they have a significant ownership interest, is as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance - January 1 $999,319 $1,114,836
New Loans Made and Renewals 264,228 49,599
Repayments
and Maturities (253,462) (165,116)
Balance - December 31 $1,010,085 $999,319
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE K
RELATED PARTY TRANSACTIONS (Continued)
The Subsidiary Bank leases office space from Severn South
Partnership and Tammany Mall Partnership. The general partners of
these Partnerships are majority shareholders in BOL BANCSHARES, INC.
Rent paid to Severn South Partnership for the years ended December 31,
1996, 1995 and 1994 totaled $487,464, $484,524 and $493,088,
respectively. Rents paid to Tammany Mall
Partnership for the years
ended December 31, 1996, 1995 and 1994 were $74,400, $74,400,
and $74,400, respectively.
At December 31, 1996 and 1995 amounts due to Officers and
Directors of the Company, including accrued interest, totaled $651,835
and $611,217, respectively. These amounts which are included in Notes
Payable and Accrued Interest Payable in the accompanying balance
sheets, are payable on demand and bear interest at 10% per annum. Of
the debentures payable at December 31, 1996 and 1995, $153,000 and
$95,500, respectively, were to Officers and Directors of the Company
(see Note Q). Another note payable to Directors totaled $84,233 and
$88,149 at December 31, 1996 and 1995, respectively, and is also
disclosed in Note Q.
NOTE L
LEASES
The Subsidiary Bank leases office space under agreements expiring
in various years through December 31, 2003. Two of the leases are
with related parties, as discussed in Note K. In addition, the
Subsidiary Bank rents office space on a month-tomonth basis from
non-related groups. Various pieces of data processing equipment are
also leased.
The total minimum rental commitment at December 31, 1996, under
the leases is $2,027,177 which is due as follows:
<TABLE>
<CAPTION>
December 31,
<S> <C>
1997 $669,340
1998 671,320
1999 390,721
2000 190,836
2001 68,960
Subsequent to 2001 36,000
$2,027,177
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, $800,890,
$770,045 and $782,859 was charged to rent expense, respectively.
The Subsidiary Bank is the lessor of office space under
operating leases expiring in various years through 2003.
Minimum future rentals to be received on non-cancelable leases as
of December 31, 1996 for each of the next 5 years and in the aggregate
are:
<TABLE>
<CAPTION>
December 31,
<S> <C>
1997 $ 43,168
1998 43,168
1999 43,168
2000 43,168
2001 33,139
Subsequent to 2001 51,952
$257,763
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE M
INVESTMENT SECURITIES
Carrying amounts and approximate market values of
investment securities are summarized as follows:
<TABLE>
<CAPTION>
Securities held-to-maturity consisted of the following at
December 31, 1996:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury Securities $7,977,101 $39,518 $ - $ 8,016,619
Securities available-for-sale consisted of the following at
December 31, 1996:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity Securities $89,886 $- $- $ 89,886
U.S. Treasury Securities999,802 - 6,677 993,125
$1,089,688 $- $ 6,677 $1,083,011
Securities held-to-maturity consisted of the following at
December 31, 1995:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury Securities $10,014,191 $ 1,434 $- $ 10,015,625
Securities available-for-sale consisted of the following at
December 31, 1995:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity Securities $97,112 $26,596 $- $123,708
U.S. Treasury Securities 996,190 2,247 - 998,437
$1,093,302 $28,843 $- $1,122,145
The maturities of investment securities at December 31, 1996 are
as follows:
Securities Held-to-Maturity Securities Available for Sale
Amortized Market Amortized Market
Cost Value Cost Value
Amounts maturing in:
One year or less $3,997,364 $3,998,181 $ 89,886 89,886
After one year
through five years3,979,737 4,018,438 999,802 993,125
$7,977,101 $8,016,619 $1,089,688 $1,083,011
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M
INVESTMENT SECURITIES (Continued)
During 1996 and 1994, the Bank sold securities available-forsale
for total proceeds of $7,226 and $63,650, resulting in gross realized
gains of $0 and $13,650, respectively. There were no sales of
securities during 1995.
Securities of $975,000 at December 31, 1996 and $875,000 at
December 31, 1995 were pledged to secure public funds.
NOTE N
LETTERS OF CREDIT
Outstanding letters of credit were $146,332 and $145,632 as of
December 31, 1996 and 1995, respectively.
NOTE O
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Furniture and
Equipment $3,200,922 $2,786,968
Bank Owned Vehicles 78,691 77,273
Leasehold Improvements 312,491 268,971
Land 468,425 468,425
Buildings 1,334,075 1,334,075
5,394,604 4,935,712
Accumulated
Depreciation and Amortization 2,711,455 2,360,976
$2,683,149 $2,574,736
</TABLE>
Depreciation and amortization expense aggregated $365,574 in
1996, $238,087 in 1995, and $188,886 in 1994.
NOTE P
INTEREST BEARING DEPOSITS
Major classifications of interest bearing deposits are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
NOW Accounts $12,649,021 $11,809,863
Money Market Accounts 7,071,712 7,890,931
Savings Accounts 25,290,143 25,306,076
Certificates of Deposit Greater
Than $100,000 1,319,370 1,404,491
Other Certificates of Deposit 13,042,535 15,152,950
$59,372,781 $61,564,311
The maturities of Certificates of Deposit Greater than $100,000 at
December 31, 1996 are as follows:
Three months or less $ 710,037
After three months through one year 609,333
$1,319,370
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Q
NOTES PAYABLE
The following is a summary of notes payable at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Notes payable to Directors of the Company,
payable on demand, interest at 10%. $410,754 $410,754
Notes payable to Director, interest at
13.5%, maturing September 30, 2006,
monthly payments of $1,298. 84,234 88,149
Debentures payable, due July 1997,
interest at 9%, callable at 103% , 102%
and 101% of face value in 1995, 1996
and 1997, respectively, interest payable
semi-annually, each $500 debenture
secured by 23.83 shares of the
Subsidiary Bank's stock. 1,889,500 1,889,500
$2,384,488 $2,388,403
Following are maturities of long-term debt:
December 31,
1997 $2,305,084
1998 5,122
1999 5,858
2000 6,700
2001 7,663
Subsequent to 2001 54,061
$2,384,488
</TABLE
NOTE R
FUNDS AVAILABLE FOR DIVIDENDS
The Subsidiary Bank is restricted under applicable laws and
regulatory authority in the payment of cash dividends. Such laws
generally restrict cash dividends to the extent of the Subsidiary
Bank's earnings.
The Subsidiary Bank has been further restricted by
regulatory authorities from paying dividends in excess of 50% of the
Bank's net income. Refer to Note X.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE S
INTEREST INCOME AND INTEREST EXPENSE
Major categories of interest income and interest expense are as
follows:
</TABLE>
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans:
Real Estate Loans $2,279,618 $2,389,840 $1,869,599
Installment Loans
518,544 487,059 513,914
CreditCards and Related Plans
7,907,016 6,928,746 5,975,741
Commercial and all
Other Loans
527,692 390,363 500,810
Interest on Depository
- 4,488 186
Interest on Investment
Securities -
U.S. Treasury and Other
Securities 512,231 718,983 758,357
Interest on Federal Funds Sold
581,462 570,277 635,734
$12,326,563 $11,489,756 $10,254,341
INTEREST EXPENSE
Interest on Time Deposits of
$100,000 or more 55,212 63,000 91,530
Interest on Other Deposits 1,908,487 2,137,181 1,710,812
Interest on Other Borrowed Funds 6,041 3,997 2,678
Interest on Notes Payable 223,515 224,348 259,623
2,193,255 2,428,526 2,064,643
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE T
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
Major categories of other non-interest income and noninterest
expenses are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
<S> <C> <C> <C>
OTHER NON-INTEREST INCOME
Cardholder and Other Charge Card $664,919 $722,576 $777,619
Income
Data Processing and Items Processing
30,047 34,171 38,274
Other Commission and Fees
99,580 87,754 99,719
Other Real Estate Income
30,610 179,469 445,416
Other Income
133,640 157,673 391,289
$958,796 $1,181,643 $1,752,317
December 31,
1996 1995 1994
OTHER NON-INTEREST EXPENSE
Loan and Charge Card Expenses $1,213,951 $865,309 $851,138
Communications
1,002,981 629,191 612,470
Stationery, Forms and Supplies
447,213 389,452 292,645
Professional Fees
631,580 509,131 455,377
Insurance and Assessments
94,441 211,755 317,851
Advertising
306,031 348,263 352,258
Other Real Estate Expenses
265,975 621,271 440,690
Other Expenses
646,839 529,172 497,940
$4,609,011 $4,103,544 $3,820,369
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
BOL BANCSHARES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
ASSETS
Due from Banks $603,238 $805,318
Due from Subsidiary
74,677 191,725
Other Assets 276,096 60,634
Investment in
Bank of Louisiana 8,994,124 8,970,807
$9,948,135 $10,028,484
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes Payable $2,384,488 $2,388,403
Accrued Interest
312,364 271,747
Other Liabilities
- 19
Shareholders' Equity
7,251,283 7,368,315
$9,948,135 $10,028,484
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
BOL BANCSHARES, INC.
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
<S> <C> <C> <C>
INCOME
Dividend Income - Bank of $0 $0 $424,485
Louisiana
Interest Income 26,273 32,918 22,636
Miscellaneous Income 19 - -
26,292 32,918 447,121
EXPENSES
Interest 223,515 224,348 259,623
Other Expenses 15,427 16,842 73,237
238,942 241,190 332,860
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY (212,650) (208,272) 114,261
Equity in Undistributed Earnings
of Subsidiary 46,760 282,113 424,485
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (165,890) 73,841 538,746
INCOME TAX BENEFIT 72,301 70,812 109,287
NET INCOME (LOSS) ($93,589) $144,653 $648,033
</TABLE>
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
<TABLE>
<CAPTION>
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
December 31,
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) ($93,589) $144,653 $648,033
Adjustments to Reconcile Net Income
(Loss) to
Net Cash Provided by (Used in)
Operating Activities
Equity in Undistributed Income of
Subsidiaries
(46,760) (282,113) (424,485)
Net (Increase) Decrease in Other
Assets (215,461) 60,496 44,660
Net Increase in Other Liabilities 40,597 28,253 8,532
Net Cash Provided by (Used in)
Operating Activities (315,213) (48,711) 276,740
FINANCING ACTIVITIES
Dividends Paid - - (184,728)
Repayments of Advances to
Subsidiaries 130,047 8,076 44,934
Repayments of Advances from
Subsidiaries - (94,857) -
Advances to Subsidiaries (12,999) (121,125) -
Advances from Subsidiaries - - 94,857
Proceeds from Issuance of Long-Term
Debt - - 1,918,500
Repayment of Long-Term Debt (3,915) (32,424) (1,880,494)
Cancellation of Stock - (327) (7,177)
Net Cash Provided by (Used in)
Financing Activities 113,133 (240,657) (14,108)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (202,080) (289,368) 262,632
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 805,318 1,094,686 832,054
CASH AND CASH EQUIVALENTS -
END OF YEAR $603,238 $805,318 $1,094,686
</TABLE>
<PAGE>
NOTE V
CONCENTRATIONS OF CREDIT
All of the Bank's loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Bank's market
area. All such customers are depositors of the Bank.
The concentrations of credit by type of loan are set forth in Note D.
Commercial letters of credit were granted primarily to commercial
borrowers.
NOTE W
UNCONSOLIDATED SUBSIDIARY
An unconsolidated subsidiary ownership was acquired February 24,
1989 in a foreclosure proceeding.
Investments in unconsolidated subsidiaries were carried at cost,
adjusted for the Bank's proportionate share of their undistributed
earnings or losses. The subsidiary was
considered temporary at December 31, 1994, and therefore, was not
consolidated for financial statement purposes. Upon liquidation of
the subsidiary in 1995, a net loss of $34,614 was charged to
operations.
NOTE X
REGULATORY MATTERS
On March 12, 1996, the Bank consented to a revised Memorandum of
Understanding issued by the Federal Deposit Insurance Corporation
(FDIC).
The Memorandum was issued by the FDIC as a result of their
examination of the Bank as of July 31, 1995 and replaces the
Memorandum of Understanding dated November 8, 1994. The Memorandum of
Understanding is an arrangement between the Bank and the FDIC in which
the Bank agrees to perform, among other things, the following within
specified time periods:
a) The Bank shall maintain a Tier I leverage capital ratio
equal to or greater than seven percent, including
restricting dividends to a maximum of 50% of the Bank's
current year's net income,
b) Eliminate from its books certain criticized assets and
reduce other criticized assets to specified levels,
c) Initiate and implement a marketing program to dispose
of its other real estate in a timely manner,
d) Formulate and implement a written Profit Plan.,
e) Perform a quarterly review of the adequacy of the
Bank's loan valuation reserve. Increase the Bank's allowance
for loan and lease losses to at least $1,500,000 (Resulting
in a charge to income in 1995 of an additional provision of
$566,266),
f) Revision of the Bank's loan policy for charging off
delinquent credit card loans.
While no assurance can be given, Bank management believes it has
taken action toward complying with the provisions of the Memorandum of
Understanding. It is not presently determinable what actions, if any,
bank regulators might take if requirements of the Memorandum are not
complied with in the specified time periods.
Management philosophy and plans are directed to enhancing the
financial stability of the Subsidiary Bank to ensure the
continuity of operations.
The Subsidiary Bank is required to maintain minimum amounts of
capital to total "risk weighted" assets, as defined by banking
regulators. At December 31, 1996, the Bank is required to have a
minimum Tier 1 and Total capital ratios of 4.00% and
8.00%, respectively. The Bank's actual ratios at that date
were 12.32% and 13.58%, respectively. Primary capital to assets
ratios for the Subsidiary Bank were 8.60% for 1996 and 8.54% for
1995.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Y
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 heldfor
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
creditworthiness of the counterparties.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Y
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Bank's financial instruments are
as follows:
<TABLE>
<CAPTION>
December 31, 1996
Carrying Fair
Amount Value
<S> <C> <C>
Financial Assets:
Cash and Short-Term Investments $ 22,328,209 $22,328,209
Investment Securities 9,060,112 9,099,630
Loans 69,298,187 69,015,674
Less: Allowance for Loan Losses 1,500,000 1,500,000
$99,186,508 $98,943,513
Financial Liabilities:
Deposits $95,743,875 $95,787,855
Unrecognized Financial Instruments:
Commitments to Extend Credit $ 564,000 $ 564,000
Commercial Lines of Credit 146,332 146,332
Credit Card Arrangements 76,577,000 76,577,000
$77,287,332 $77,287,332
</TABLE>
<PAGE>
To the Board of Directors
BOL Bancshares, Inc.
& Subsidiary
Independent Auditor's Report on Supplementary
Information
Our report on our audit of the basic financial statements of BOL
BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana, for
the years ended December 31, 1996 and 1995 appears on page 1. That audit
was made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The supplementary
information contained in Schedules I, II and III is presented for the
purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been
subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the
basic financial
statements taken as a whole.
/s/ Laporte, Sehrt, Romig & Hand
A Professional Accounting Corporation
January 16, 1997
A Professional Accounting Corporation
800 Two Lakeway Center 3850 N. Causeway Blvd. Metairie,
LA 70002 (504)835-5522 FAX (504)835-5535
P.O. Box 27 Riverside Drive Covington, LA 70434
(504)8925850 FAX (504)892-5956
Member of AICPA Division for CPA Firms-Private Companies Practice
Section and
SEC Practice Section
International Affiliation with Accounting Firms Associated, Inc.
<PAGE>
BANK OF LOUISIANA
SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
SCHEDULE I
BALANCE SHEETS
UNCONSOLIDATED
ASSETS
December 31,
1996 1995
<S> <C> <C>
Cash and Due from Banks
Non Interest Bearing Balances and Cash $7,902,872 $6,742,137
Federal Funds Sold 14,400,000 10,725,000
Investment Securities
Securities Held-to-Maturity (Fair Value
of $8,016,619 in 1996
and $10,015,625 in 1995) 7,977,101 10,014,191
Securities Available-for-Sale, at Fair
Value 1,083,011 1,122,145
Loans: Less Allowance for Loan Losses of
$1,500,000 in 1996
and 1995 and Unearned Discount of $9,318
in 1996 and $37,902 in 1995 67,798,187 73,443,457
Property, Equipment and Leasehold
Improvements (Net
of Depreciation and Amortization) 2,683,149 2,574,736
Other Real Estate 1,723,095 1,993,905
Other Assets 1,774,478 1,397,264
Deferred Taxes 326,689 370,037
Letters of Credit 146,332 145,632
Total Assets $105,814,914 $108,528,504
</TABLE>
See independent auditor's report on supplementary information.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
LIABILITIES
Deposits
Non Interest Bearing $35,769,692 $35,825,654
Interest Bearing 59,974,183 62,366,131
Other Liabilities 298,492 444,470
Letters of Credit Outstanding 146,332 145,632
Due to Parent 12,999 121,125
Accrued Litigation Settlement 390,000 390,000
Notes Payable 61,678 70,600
Accrued Interest 167,414 194,085
Total Liabilities 96,820,790 99,557,697
STOCKHOLDERS' EQUITY
Common Stock - 143,000 Shares Issued and
Outstanding 1,430,000 1,430,000
Unrealized Gain (Loss) on Securities
Available-for-Sale,
Net of Applicable Deferred Income Taxes (4,407) 19,036
Surplus 4,616,796 4,616,796
Retained Earnings 2,951,735 2,904,975
Total Stockholders' Equity 8,994,124 8,970,807
Total Liabilities and Stockholders' $105,814,914 $108,528,504
Equity
</TABLE>
See independent auditor's report on supplementary information.
<PAGE>
BANK OF LOUISIANA
SUPPLEMENTARY INFORMATION
SCHEDULE II STATEMENTS OF INCOME
UNCONSOLIDATED
<TABLE>
CAPTION>
For The Years Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
INTEREST INCOME $12,326,563 $11,489,756 $10,254,341
INTEREST EXPENSE 1,996,013 2,237,096 1,827,656
Net Interest Income 10,330,550 9,252,660 8,426,685
PROVISION FOR LOAN LOSSES
2,039,779 1,748,761 804,991
Net Interest Income After
Provision for Loan Losses 8,290,771 7,503,899 7,621,694
OTHER INCOME
Service Charges on Deposit
Accounts 1,481,144 1,521,705 1,615,472
Other Non-Interest Income
958,777 1,181,643 1,752,317
Equity in Earnings (Loss) of
Unconsolidated Subsidiary - (34,614) 131,437
Gain on Sale of Securities
- - 13,650
Total Other Income
2,439,921 2,668,734 3,512,876
OTHER EXPENSES
Salaries and Employee Benefits
4,189,606 3,833,797 4,017,853
Occupancy Expense
1,848,469 1,757,796 1,816,072
Other Non-Interest Expense
4,593,584 4,086,702 3,747,136
Loss on Litigation
- - 390,000
Total Other Expenses
10,631,659 9,678,295 9,971,061
INCOME BEFORE PROVISION FOR
INCOME TAXES
99,033 494,338 1,163,509
PROVISION FOR INCOME TAXES
52,273 212,225 314,537
NET INCOME $46,760 $282,113 $848,972
EARNINGS PER SHARE OF
COMMON STOCK $0.33 $1.97 $5.94
</TABLE>
<PAGE>
BANK OF LOUISIANA
SUPPLEMENTARY INFORMATION
SCHEDULE III
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
UNCONSOLIDATED
<TABLE>
Unrealized
Gain on
Investment
Securities
Common Available- Retained
Stock for-Sale Surplus Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE - December
31, 1993 $1,430,000 $0 $4,616,796 $2,198,37 $8,245,171
Net Income for the Year
1994 - - - 848,972 848,972
Cash dividends declared
for the Year ($3.17 per
share) - - - (424,485) (424,485)
Unrealized Gain on
Securities
Available-for-Sale, net
of applicable Deferred
Income Taxes - 52,421 - - 52,421
BALANCE - December 31,
1994 1,430,000 52,421 4,616,796 2,622,862 8,722,079
Net Income for the Year
1995 - - - 282,113 282,113
Change in Unrealized
Gain on
Securities Available-
for-Sale,
net of Applicable
Deferred Income Taxes - (33,385) - - (33,385)
BALANCE - December 31,
1995 1,430,000 19,036 4,616,796 2,904,975 8,970,807
Net Income for the Year
1996 - - - 46,760 46,760
Change in Unrealized
Gain on
Securities Available-
for-Sale,
net of Applicable
Deferred Income Taxes - (23,443) - - (23,443)
BALANCE - December 31, $1,430,000 ($4,407) $4,616,796 $2,951,735 $8,994,124
1996
</TABLE>
See independent auditor's report on supplementary information. SIGNATURES
<PAGE>
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.
/S/Peggy L. Schaefer-Treasurer
3-24-97
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1997.
/S/Gordon A. Burgess-Director /S/Louis G. Grush-Director
/S/Leland L. Landry-Director /S/Edward J. Soniat-Director
/S/Douglas A. Schonacher-Director /S/Gerry E. Hinton-Director
<PAGE>
[ARTICLE] 9
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] 12-31-96
[PERIOD-END] 12-31-96
[CASH] 7903
[INT-BEARING-DEPOSITS] 0
[FED-FUNDS-SOLD] 14400
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 9060
<INVESTMENTS CARRYING> 9060
[INVESTMENTS-MARKET] 9100
[LOANS] 69298
[ALLOWANCE] 1500
[TOTAL-ASSETS] 106091
[DEPOSITS] 95141
[SHORT-TERM] 0
[LIABILITIES-OTHER] 1315
[LONG-TERM] 2384
[PREFERRED-MANDATORY] 0
[PREFERRED] 2303
[COMMON] 179
[OTHER-SE] 0
[TOTAL-LIABILITIES-AND-EQUITY] 106091
[INTEREST-LOAN] 11233
[INTEREST-INVEST] 512
[INTEREST-OTHER] 581
[INTEREST-TOTAL] 12327
[INTEREST-DEPOSIT] 1964
[INTEREST-EXPENSE] 230
[INTEREST-INCOME-NET] 10133
[LOAN-LOSSES] 2040
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 10647
[INCOME-PRETAX] (114)
[INCOME-PRE-EXTRAORDINARY] (114)
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (94)
[EPS-PRIMARY] (0.52)
[EPS-DILUTED] 0
[YIELD-ACTUAL] 9.64
[LOANS-NON] 2039
[LOANS-PAST] 2295
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 4503
[ALLOWANCE-OPEN] 1500
[CHARGE-OFFS] 2822
[RECOVERIES] 782
[ALLOWANCE-CLOSE] 1500
[ALLOWANCE-DOMESTIC] 1500
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
