UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
Commission file Number 01-16934
BOL BANCSHARES, INC.
(Exact name of registrant as specified in its charter.)
Louisiana 72-1121561
(State of incorporation) (I. R. S. Employee Identification
No.)
300 St. Charles Avenue, New Orleans, La. 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 889-9400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $1 Par Value - 179,145 shares as of April 30, 1999.
BOL BANCSHARES, INC. & SUBSIDIARY
INDEX
Page No.
PART 1. Financial Information
Item 1: Financial Statements
Consolidated Statement of Condition
3
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income (Loss)
6
Consolidated Statements of Changes in
Stockholder's Equity 7
Consolidated Statement of Cash Flow
8
Notes to Consolidated Financial Statements
9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operation 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
23
B. Reports on Form 8-K
No reports have been filed on Form 8-K
during this quarter.
Part I. - Financial Information
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION
(Unaudited)
March 31, Dec. 31, March 31,
(Amounts in thousands) 1999 1998 1998
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash 7,489 6,693 7,632
Interest Bearing Balances - - -
Investment Securities
Securities Held to Maturity (Fair Values at
3/31/99, 12/31/98, & 3/31/98 respectively 4,019 4,498 9,486
were
$4,021,000, $4,514,000, and $9,514,000)
Securities Available for Sale 291 291 90
Federal Funds Sold 32,325 26,950 21,245
Loans, net of Unearned Discount 57,237 61,757 59,129
Allowance for Loan Losses (1,800) (1,800) (1,800)
Property, Equipment and Leasehold
Improvements
(Net of Depreciation and Amortization) 2,641 2,506 2,605
Other Real Estate 1,415 1,357 1,473
Deferred Taxes 288 287 618
Letters of Credit 84 84 113
Other Assets 1,164 1,312 1,767
TOTAL ASSETS $105,153 $103,935 $102,358
See accompanying notes to Financial
Statements
BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CONDITION (Continued)
March 31, Dec. 31, March 31,
(Amounts in thousands) 1999 1998 1998
LIABILITIES
Deposits:
Non-Interest Bearing 36,659 36,826 34,389
Interest Bearing 59,014 57,757 59,277
TOTAL DEPOSITS 95,673 94,583 93,666
Notes Payable 2,271 2,272 2,282
Letters of Credit Outstanding 84 84 113
Accrued Litigation Settlement 200 200 150
Accrued Interest 446 526 498
Other Liabilities 657 350 290
TOTAL LIABILITIES 99,331 98,015 96,999
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and Outstanding at
3/31/99, 12/31/98, and 3/31/98 2,303 2,303 2,303
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding at
3/31/99, 12/31/98, and 3/31/98 179 179 179
Accumulated Other Comprehensive Income 133 133 -
Capital in Excess of Par - Retired Stock 15 15 15
Undivided Profits 3,290 2,784 2,783
Current Earnings (98) 506 79
TOTAL STOCKHOLDERS' EQUITY 5,822 5,920 5,359
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,153 $103,935 $102,358
See accompanying notes to Financial
Statements
BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
March 31, March 31,
(Amounts in thousands) 1999 1998
INTEREST INCOME
Interest and Fees on Loans 1,941 2,015
Interest on Time Deposits - -
Interest on Securities Held to Maturity 60 140
Interest and Dividends on Securities 2 6
Available for Sale
Interest on Federal Funds Sold 340 275
Other Interest Income - -
Total Interest Income 2,343 2,436
INTEREST EXPENSE
Interest on Deposits 418 458
Interest on Federal Funds Purchased - -
Other Interest Expense 9 10
Interest Expense on Notes Payable 3 3
Interest Expense on Debentures 40 39
Total Interest Expense 470 510
NET INTEREST INCOME 1,873 1,926
Provision for Loan Losses 98 300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,775 1,626
OTHER INCOME
Service Charges on Deposit Accounts 283 331
Cardholder & other credit card income 155 149
ORE Income 2 3
Other Operating Income 94 92
Gain on Sale of Securities - -
Total Other Income 534 575
OTHER EXPENSE
Salaries and Employee Benefits 995 827
Occupancy Expense 485 480
Loan & Credit Card Expense 253 230
ORE Expense 33 41
Other Operating Expense 641 544
Total Other Expenses 2,407 2,122
Income Before Tax Provision (98) 79
Provision (Benefit) For Income Taxes - -
NET INCOME ($98) $79
Earnings Per Share of Common Stock ($0.55) $0.44
See accompanying notes to Financial
Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
March March
31, 31,
(Amounts in thousands) 1999 1998
NET INCOME (LOSS) ($98) $79
OTHER COMPREHENSIVE INCOME, NET OF
TAX
Unrealized Holding Gains (Losses) on
Investment Securities Available-for-
Sale,
Arising During the Period
1
Less: Reclassification Adjustment
for Gains
Included in Net Income
OTHER COMPREHENSIVE INCOME
COMPREHENSIVE INCOME (LOSS) ($98) $80
See accompanying notes to Financial
Statements
BOL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
(Amounts in ACCUMULATE CAPITAL IN
thousands) D
OTHER EXCESS OF
COMPREHEN- PAR
PREFERR COMMON SIVE RETIRED RETAINE
ED D
STOCK STOCK INCOME STOCK EARNING TOTAL
S
Balance December 31, 2,303 179 (1) 15 2,783 5,279
1997
Other Comprehensive
Income, net of
applicable deferred
income
taxes 1 1
Net Income 79 79
Balance - March 31, 2,303 179 - 15 2,862 $5,359
1998
Balance December 31, 2,303 179 133 15 3,290 5,920
1998
Other Comprehensive
Income, net of
applicable deferred
income
taxes -
Net Income (Loss) (98) (98)
Balance - March 31, 2,303 179 133 15 3,192 $5,822
1999
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Amounts in thousands) 1999 1998
OPERATING ACTIVITIES
Net Income (Loss) (98)
79
Adjustments to Reconcile Net Income (Loss) to Net
Cash
Provided by (Used in) Operating Activities:
Provision for Loan Losses 98
780
Depreciation and Amortization Expense 120
108
Amortization of Investment Security Premiums 2
0
Accretion of Investment Security Discounts (2)
(4)
(Increase)Decrease in Deferred Income Taxes (0)
0
(Gain) Loss on Sale of Property and Equipment -
-
(Gain) Loss on Sale of Other Real Estate -
-
(Increase)Decrease in Other Assets & Prepaid 151
Taxes 767
(Decrease)Increase in Other Liabilities,
Accrued Interest and Accrued Loss Contingency 227
(152)
Net Decrease(Increase) in Mortgage Loans Held -
for Resale -
Net Cash Provided by (Used in) Operating 498
Activities 1,578
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale -
Securities -
Purchases of Available-for-Sale Securities -
-
Proceeds from Available-for-Sale Securities
Released at Maturity -
1,000
Proceeds from Held-to-Maturity Investment
Securities
Released at Maturity 3,500
498
Purchases of Held-to-Maturity Investment (3,022)
Securities (501)
Proceeds from Sale of Property and Equipment 0
0
Purchases of Property and Equipment (255)
(16)
Proceeds from Sale of Other Real Estate -
-
Purchases of Other Real Estate (63)
-
Net (Increase)Decrease in Loans 4,423
(2,289)
Net Cash Provided by (Used in) Investing 4,583
Activities (1,308)
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-Interest Bearing
and Interest Bearing Deposits 1,090
(276)
Proceeds from Issuance of Long-Term Debt -
-
Retirement of Stock -
-
Principal Payments on Long Term Debt (1)
(1)
Net Cash Provided by (Used in) Financing 1,089
Activities (277)
Net Increase (Decrease) in Cash and Cash 6,170
Equivalents (7)
Cash and Cash Equivalents - Beginning of Year 33,643
28,884
Cash and Cash Equivalents - End of Period $39,813 $28,877
See accompanying notes to Financial Statements
BOL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period ended
March 31, 1999, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information,
refer to the audited consolidated financial statements and notes included
in the Registrant's annual report on Form 10-K for the year ended December
31, 1998.
Note 2. PER SHARE DATA
Income per common share data are based on the weighted average number
of shares outstanding of 179,145 and 179,145 at March 31, 1999 and 1998
respectively.
Note 3. CONTINGENCIES
Because of the nature of the banking industry in general, the Company
and the Bank are each parties from time to time to litigation and other
proceedings in the ordinary course of business, none of which (other than
those described below), either individually or in the aggregate, have a
material effect on the Company's and/or the Bank's financial condition.
Other than the lawsuits described below, the Company has either (i)
posted reserves adequate to pay any judgments that may be rendered against
the Company and such posting is reflected in the Company's consolidated
financial statements for the period ending March 31, 1999, or (ii) believes
the lawsuit is without sufficient merit or monetary exposure to require the
posting of a reserve. The Company has not provided a judicial interest
that may be awarded on a judgment pending the conclusion of the appeals
procedure. Indeed, should the Company be successful in any of those
lawsuits in which it has posted reserves, recoveries would be realized and
the Company's consolidated net income would be positively impacted.
The following actions, however, have been brought against the Company
and, if the claimants were wholly successful on the merits, could result in
significant exposure to the Bank:
1. The Company is a defendant in a lawsuit filed by a proprietary
merchant alleging that the Company mishandled the Plaintiff's proprietary
credit card portfolio. The Plaintiff seeks to recover in excess of
$1,800,000. The Bankruptcy Court has established an escrow account, in
which $270,404 was on deposit as of October 31, 1996, for the protection of
the Company. This amount would significantly reduce any losses incurred by
the Company in the event the Plaintiff is wholly successful on the merits.
During 1997, a judgment was rendered against the Bank, and accordingly, a
provision for loss of $150,000 has been charged to operation. The Bank has
countersued and is presently appealing the judgment. The appeal has been
pending since June, 1998.
Expected Results: Outside counsel advises that the Plaintiff will not
prevail at all against the Company and that the Company will be able to
fully recover all of its losses in this matter.
2. The Company is a defendant in a lawsuit filed by another bank
alleging the Company improperly dishonored checks totaling $979,000. The
Company claims that such checks were properly returned "nonsufficient
funds". When these checks were returned to the Plaintiff, of the $979,000,
one check for $110,000 was misplaced by the FRB and therefore returned late
to the Plaintiff. The Company was forced to cover the amount of the check.
The Company filed a countersuit against the Plaintiffs for contribution on
the $110,000 loss and for tortious interference. The Plaintiff filed
exceptions to the countersuit. These exceptions were heard in the district
court and the Company's right to contribution was maintained, however the
Company's suit for tortious interference was dismissed. On appeal, the
appellate court sustained the Company's right to contribution and overruled
the lower court's decision on tortious interference, finding that the
Company could maintain such a cause of action. The Louisiana Supreme Court
denied writs filed by the Plaintiff. The case is currently awaiting trial.
The Company is vigorously defending all claims asserted in this suit.
Expected Results: Outside counsel advises that the Company will not
pay any damages in this matter and the likelihood is reasonably high that
the Company will obtain some recovery from the Plaintiff.
3a. Another proprietor filed a separate lawsuit on the same day that
the Company initiated proceedings against this proprietor in Louisiana.
The proprietor's suit was filed in the Southern District of New York and
alleges that the Company mismanaged the proprietary credit card portfolio.
It is known that the principal of the proprietor mentioned in 1. above has
assisted in the preparation of this lawsuit and this litigation parrots the
lawsuit mentioned in 1. above. The Company has filed a motion to dismiss
the suit on the grounds that the parties agreed to litigate in Louisiana
and on the further grounds that the Company is not subject to that Court's
jurisdiction. The Company also moved to have the matter transferred by the
judicial panel on multidistrict litigation.
These rights were granted and consolidated.
3b. The new owners of the company mentioned in 3a. above filed a
lawsuit in New York, claiming that it had security interest which primed
the Company. The present principals came into existence on July 31, 1996
for the sole purposes of taking over the failing company and managing the
operations. The new owners filed UCC-1 Statement to protect a consignment
agreement it had with the failing company in August, 1996. The Company, on
the other hand, filed UCC-1 Statements to protect its credit card portfolio
in November and December of 1995. Just prior to the new principals filing
in New York, the Company filed suit for declaratory judgment regarding the
ranking of the liens in the Eastern District of Louisiana.
3c. The Company's suit centers around the proprietor sequestering
payments which they received from the Company's credit card holders, but
never forwarded to the Company. That amount exceeds $423,000.
On October 1, 1997 the matters were transferred by the judicial panel
on multidistrict litigation to the Eastern District of Louisiana and
consolidated with the other cases. Hence 3a, 3b, and 3c have become one
case.
The Company sought injunction relief, requiring the proprietor to
disclose where the payments were held and to either pay the funds to the
Company or deposit the money in the Registry of the Court. On October 2,
1997 in order to avoid a hearing on the preliminary injunction which would
have required the proprietor to disclose the location of the sequestered
funds, the proprietor agreed to post bond with the Louisiana Federal Court,
while drafts were being prepared. On October 15, 1997 the proprietor filed
for Chapter 11. The Company requested that the stay be lifted in order to
allow its claim against the proprietor to be liquidated and to recoup all
of its losses and damages suffered from the proprietor. Trial has been set
for June, 1999.
Expected Results: The Company filed its UCC-1 Statements first.
There is little doubt that the Company primes the proprietor. The Company
anticipates significant recoveries.
4. The Bank is a defendant in a lawsuit filed by an individual for
damages because a settlement draft for $58,685 was forged by an attorney
who maintained his trust account with the Bank. The attorney has been
disbarred for prior defalcations and is judgment-proof. A provision for
loss of $50,000 was charged to operations in 1998. This matter is still
pending.
Expected Results: Since the Bank has a provision for this lawsuit,
any further losses would be minimal.
Note 4. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate the value:
CASH AND SHORT-TERM INVESTMENTS
For cash, the carrying amount approximates fair value. For short-term
investments, fair values are calculated based upon general investment
market interest rates for similar maturity investments.
INVESTMENT SECURITIES
For securities and marketable equity securities held-for-investment
purposes, fair values are based on quoted market prices.
LOAN RECEIVABLES
For certain homogeneous categories of loans, such as residential
mortgages, credit card receivables and other consumer loans, fair value is
estimated using the current U.S. Treasury interest rate curve, a factor for
cost of processing and a factor for historical credit risk to determine the
discount rate.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits and certain money
market deposits are calculated based upon general investment market
interest rates for investments with similar maturities. The value of fixed
maturity certificates deposit is estimated using the U.S. Treasury interest
rate curve currently offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the
counterparties.
The estimated fair values of the Bank's
financial instruments are as follows:
MARCH 31,
1999
Carrying Fair
(Amounts in thousands) Amount Value
Financial Assets:
Cash and Short-Term Investments $39,814 $39,814
Investment Securities 4,311 4,313
Loans 57,237 57,229
Less: Allowance for Loan Losses 1,800 1,800
$99,562 $99,556
Financial Liabilities:
Deposits $95,673 $95,761
Unrecognized Financial Instruments:
Commitments to Extend Credit $1,222 $1,222
Commercial Lines of Credit 84 84
Credit Card Arrangements 55,625 55,625
$56,931 $56,931
QUARTERLY CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA
For Three Months Ended
(Amounts in thousands, except March 31, Dec. 31, March 31,
per share data) 1999 1998 1998
Interest Income $2,343 $2,370 $2,436
Interest Expense 470 482 510
Net Interest Income 1,873 1,888 1,926
Provision for Loan Losses 98 288 300
Net Interest Income after 1,775 1,600 1,626
Provision
Noninterest Income:
Noninterest Income 534 1,454 575
Securities Gains - - -
Noninterest Income 534 1,454 575
Noninterest Expense 2,407 2,376 2,122
Income before Taxes (98) 678 79
Income Tax Expense (Benefit) - 263 -
Net Income (Loss) ($98) $415 $79
Income per Common Share ($0.55) $2.32 $0.44
Average Common Shares 179 179 179
Outstanding
Selected Quarter-End Balances
Loans $57,237 $61,757 $59,129
Deposits 95,673 94,583 93,666
Long-Term Debt 2,271 2,272 2,282
Shareholders' Equity 5,822 5,920 5,359
Total Assets 105,153 103,935 102,358
Selected Average Balances
Loans $58,592 $60,630 $58,561
Deposits $92,366 90,039 91,281
Long-Term Debt 2,271 2,273 2,283
Shareholders' Equity 5,965 6,146 4,944
Total Assets 102,249 99,610 99,907
Selected Ratios
Return on Average Assets -0.10% 0.42% 0.08%
Return on Average Equity -1.64% 6.75% 1.59%
Tier 1 Risk-Based Capital 11.93% 11.36% 10.99%
Risk-Based Capital 13.20% 12.63% 12.26%
Tier 1 Leverage 7.42% 7.63% 6.95%
BOL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1999
Management's Discussion presents a review of the major factors and
trends affecting the performance of BOL BANCSHARES, INC. (the "Company")
and its bank subsidiary (the Bank) and should be read in conjunction with
the accompanying consolidated financial statements, notes and tables.
ACCOUNTING FOR YEAR 2000 COSTS
The Company's Board of Directors has formulated a policy and has
dedicated sufficient funds for the modification and replacement of software
and hardware to ensure Year 2000 compliance.
The Company began its replacement and modification of its software and
hardware in late 1995, to ensure that operations would not be impaired by
the date change. The related costs are capitalized and depreciated over
the useful life of the asset.
Certification has been received from the Company's vendors to confirm
compliance on the respective equipment and software. All critical
applications have already been modified and replaced, with one application
presently in the migration process. This final replacement was implemented
in March, 1999 and will be fully tested by June, 1999.
FINANCIAL CONDITION:
EARNING ASSETS
Interest earning assets averaged $92,485,000 in the first quarter of
1999, a $3,741,000 increase from the first quarter of 1998 average of
$88,744,000. Compared to the first quarter of 1998, average loans
decreased $31,000 (.05%) while investment securities decreased $4,946,000
(49.82%) and federal funds sold increased $8,656,000 (42.74%).
Table 1 presents the Company's loan portfolio by major
classifications. Total loans decreased $1,892,000 (3.20%)over the first
quarter of 1998. This decrease is mainly attributable to the decline in
the credit card portfolio. Visa / MasterCard loans decreased $613,000
(2.93%) and Proprietary loans decreased $1,234,000 (32.25%) due to the loss
of several proprietary accounts.
TABLE 1. MAJOR CLASSIFICATION OF LOAN PORTFOLIO
March Dec. 31, 1998 March 31, 1998
31, 1999
(Amounts in Loans % Loans % Loans %
Thousands)
Commercial, 4,834 8.45% 4,441 7.19% 5,679 9.60%
Financial, &
Agricultural
Real Estate Mortgage 26,494 46.29% 28,861 46.73% 25,109 42.47%
Mortgage Loan Held - 0.00% - 0.00% - 0.00%
for Resale
Personal Loans 2,904 5.07% 3,006 4.87% 3,454 5.84%
Credit Cards-Visa, 20,278 35.43% 21,785 35.28% 20,891 35.33%
Mastercard
Credit Cards- 2,592 4.53% 3,510 5.68% 3,826 6.47%
Proprietary
Overdrafts 135 0.24% 154 0.25% 170 0.29%
Loans $57,237 100.00% $61,757 100.00% $59,129 100.00%
Securities Held to Maturity. Average securities held to maturity
decreased $5,148,000 (54.29%) from the first quarter of 1998. Securities
held to maturity are carried as cost, adjusted for amortization of premium
and accretion of discounts using methods approximating the interest method.
Securities Available for Sale. Average securities available for sale
decreased $63,000 (17.92%) from the first quarter of 1998. Securities
available for sale are carried at fair value.
Short Term Investments. Average federal funds sold increased
$8,656,000 (42.74%) up from the first quarter of 1998. This increase is
mainly due to the decrease in the aforementioned credit card portfolio.
ASSET QUALITY
Table 2 presents a summary of nonperforming assets for the past five
quarters.
Nonperforming assets consist of nonaccrual and restructured loans and
ORE. Nonaccrual loans are loans on which the interest accruals have been
discontinued when it appears that future collection of principal or
interest according to the contractual terms may be doubtful. Interest on
these loans is reported on the cash basis as received when the full
recovery of principal is anticipated or after full principal has been
recovered when collection of interest is in question. The loan process
ensures that all loans which meet the criteria for nonaccrual status are
placed on nonaccrual. Restructured loans are those loans whose terms have
been modified, because of economic or legal reasons related to the debtors'
financial difficulties, to provide for a reduction in principal, change in
terms, or fixing of interest rates at below market levels. ORE is real
property acquired by foreclosure or directly by title or deed transfer in
settlement of debt.
Nonperforming assets, totaled $2,217,000 at March 31, 1999 as compared
to $1,560,000 at March 31, 1998. Other real estate totaled $1,415,000 at
March 31, 1999 as compared to $1,473,000 at March 31, 1998.
Table 2. NONPERFORMING ASSETS
(Amounts in 03/31/99 12/31/98 09/31/98 06/31/98 03/31/98
Thousands)
Nonaccrual Loans 802 81 31 94 87
Restructured Loans - - 455 565 -
Other Real Estate 1,415 1,357 1,357 1,473 1,473
Owned
Total Nonperforming $2,217 $1,438 $1,843 $2,132 $1,560
Assets
Loans Past Due 90 821 852 1,183 1,039 996
days or More
Ratio of Past Due 1.43% 1.42% 2.00% 1.75% 1.68%
Loans to Loans
Ratio of
Nonperforming Assets
to Loans
and Other Real 3.78% 2.34% 3.04% 3.50% 2.57%
Estate Owned
IMPAIRED LOANS
As of March 31, 1999, the recorded investment in loans that are
considered impaired under SFAS 114 and 118 was $0. The related allowance
for credit losses for the impaired loans is not specifically identified,
but is included in the percentages allocated to the portfolio.
WATCH LIST
The Bank's watch list includes loans which, for management purposes,
have been identified as requiring a higher level of monitoring due to risk.
The Bank's watch list includes both performing and nonperforming loans.
The majority of watch list loans are classified as performing, because they
do not have characteristics resulting in uncertainty about the borrower's
ability to repay principal and interest in accordance with the original
terms of the loans.
The watch list consists of classifications, identified as Type 1
through Type 4. Types 1, 2 and 3 generally parallel the regulatory
classifications of loss, doubtful and substandard, respectively. Type 4
generally parallels the regulatory classification of Other Assets
Especially Mentioned (OAEM). These loans require monitoring due to
conditions which, if not corrected, could increase credit risk. Total
watch list loans decreased 43.82% to $2,136,000 at March 31, 1999 from
$3,802,000 at March 31, 1998.
Management is not aware of any potential problem loans other than
those disclosed above, which includes all loans recommended for
classification by regulators, which would have a material impact on asset
quality.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Table 3 presents an analysis of the activity in the allowance for loan
losses for the first quarter of 1999 and 1998. The allowance for loan
losses as a percentage of loans increased from 3.04% at March 31, 1998 to
3.14% at March 31, 1999. The net charge-off (recoveries) as a percentage
of average loans decreased from .51% at March 31, 1998 to .17% at March 31,
1999.
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Management's policy is to maintain the
allowance for possible loan losses at a level sufficient to absorb losses
inherent in the loan portfolio. The allowance is increased by the
provision for loan losses and decreased by charge-offs, net of recoveries.
Management's evaluation process to determine potential losses includes
consideration of the industry, specific conditions of individual borrowers,
historical loan loss experience and the general economic environment. As
these factors change, the level of loan loss provision changes. Loans are
charged against the allowance for loan losses when management believes that
the collectibility of the principal is unlikely. Accrual of interest is
discontinued and accrued interest is charged off on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that collection of
interest is doubtful. Ultimate losses may vary from the current estimates.
These estimates are reviewed periodically and, as adjustments become
necessary, they are reflected in current operations.
TABLE 3. ALLOWANCE FOR LOAN LOSSES
For The
Three
Months
Ended
March 31, March 31,
(Amounts in Thousands) 1999 1998
Balance at Beginning of Period $1,800 $1,800
Loans Charged Off (296) (580)
Recoveries 198 280
Net (Charge Offs) Recoveries (98) (300)
Provision for Loan Losses 98 300
Balance at End of Period $1,800 $1,800
Allowance for Loan Losses as a
Percentage of Loans 3.14% 3.04%
Net (Charge Offs) Recoveries as
a Percentage
of Average Loans 0.17% 0.51%
FUNDING SOURCES:
DEPOSITS
Deposits. Average deposits totaled $92,366,000 in the first quarter
of 1999, a increase of $1,086,000 (1.19%) from $91,280,000 in the first
quarter of 1998. Average core deposits were $90,704,000 for the first
quarter of 1999 up from $89,957,000 in the first quarter of 1998. Table 4
presents the composition of average deposits for the three quarters ending
March 31, 1999, December 31, 1998 and March 31, 1998.
TABLE 4. DEPOSIT COMPOSITION
For
The
Three
Months
Ended
March Dec. 31, March 31,
31,
1999 1998 1998
Average % of Average % of Average % of
(Amounts in Balances Deposits Balances Deposits Balances Deposits
thousands)
Demand, Noninterest- $35,543 38.48% $34,423 38.23% $33,537 36.74%
Bearing
NOW Accounts 12,905 13.97% 13,585 15.09% 13,033 14.28%
Money Market Deposit 5,815 6.30% 4,925 5.47% 5,297 5.80%
Accounts
Savings Accounts 26,990 29.22% 26,285 29.19% 26,653 29.20%
Other Time Deposits 9,451 10.23% 9,306 10.34% 11,437 12.53%
Total Core Deposits 90,704 98.20% 88,524 98.32% 89,957 98.55%
Certificates of
Deposit of
$100,000 or more 1,662 1.80% 1,515 1.68% 1,324 1.45%
Total Deposits 92,366 100.00% $90,039 100.00% $91,281 100.00%
BORROWINGS
The Company's long-term debt is comprised primarily of debentures
which are secured by 39.72 shares of the Subsidiary Bank's stock. The Bank
has no long-term debt. It is the Bank's policy to manage its liquidity so
that there is no need to make unplanned sales of assets or to borrow funds
under emergency conditions. The Bank maintains a Federal Funds line of
credit in the amount of $600,000 with a correspondent bank and also has a
commitment from an upstream correspondent which will increase our Federal
Funds line of credit over and above the normal amount by pledging unused
securities.
INTEREST RATE SENSITIVITY
The Bank has established, as bank policy, an asset/liability
management system that protects Bank profits from undue exposure to
interest rate risks. The major elements used to manage interest rate risk
include the mix of fixed and variable rate assets and liabilities and the
maturity pattern of assets and liabilities. It is the Company's policy not
to invest in derivatives in the ordinary course of business. The Company
performs a monthly review of assets and liabilities that reprice and the
time bands within which the repricing occurs. Balances are reported in the
time band that corresponds to the instrument's next repricing date or
contractual maturity, whichever occurs first. Through such analysis, the
Company monitors and manages its interest sensitivity gap to minimize the
effects of changing interest rates.
GAP & INTEREST MARGIN SPREAD
By Bank policy we limit the Bank's earnings exposure due to interest
rate risk by setting limits on positive and negative gaps within the next
12 months. These limits are set so that this year's profits will not be
unduly impacted no matter what happens to interest rates during the year.
In addition, we extend the scenarios out five years to monitor the risks
associated on a longer term.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Net interest income, the difference between interest income and
interest expense, is a significant component of the performance of a
banking organization. Data used in the analysis of net interest income are
derived from the daily average levels of earnings assets and interest
bearing deposits as well as from the related income and expense. Net
interest income is not developed on a taxable equivalent basis because the
level of tax exempt income is not material. The primary factors that
affect net interest income are the changes in volume and mix of earning
assets and interest-bearing liabilities, along with the change in market
rates.
Net interest income for the first quarter of 1999 decreased $53,000
over the same period last year, and decreased $15,000 from the fourth
quarter of 1998. The net interest income margin decreased to 2.03% for the
first quarter of 1999 from 2.17% for the first quarter of 1998.
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
FIRST FIRST QUARTER 1998
QUARTER
1999
Average Average
(Amounts in thousands) Balance Interes Rate Balance Interes Rate
t t
ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned
income(1)(2)
Taxable 58,593 1,941 3.31% 58,562 2,015 3.44%
Tax-exempt - -
Investment securities
Taxable 4,981 62 1.25% 9,927 146 1.47%
Tax-exempt - -
Interest-bearing deposits - - - -
Federal funds sold 28,911 340 1.17% 20,255 275 1.36%
Total Interest-Earning 92,485 2,343 2.53% 88,744 2,436 2.74%
Assets
Cash and due from banks 6,075 5,683
Allowance for loan Losses (1,802) (1,814)
Premises and equipment 2,602 2,660
Other Real Estate 1,380 1,473
Other assets 1,509 3,161
TOTAL ASSETS $102,249 $99,907
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING
LIABILITIES:
Deposits:
Demand Deposits 18,720 91 0.49% 18,329 100 0.54%
Savings deposits 26,990 201 0.74% 26,653 201 0.76%
Time deposits 11,113 126 1.13% 12,761 157 1.23%
Total Interest-Bearing 56,823 418 0.74% 57,743 458 0.79%
Deposits
Federal Funds Purchased
Securities sold under
agreements to repurchase
Other Short-Term borrowings - -
Long-Term debt 2,271 52 2.30% 2,283 52 2.28%
Total Int-Bearing 59,094 470 0.80% 60,026 510 0.85%
Liabilities
Noninterest-bearing 35,543 33,537
deposits
Other liabilities 1,647 1,400
Shareholders' equity 5,965 4,944
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $102,249 $99,907
Net Interest income/spread 1.74% 1.89%
Net Interest Margin 2.03% 2.17%
(1) Fee income relating to
loans of $139,000 at March
31, 1999, and $68,000 at
March 31,
1998 is included in
interest income.
(2) Nonaccrual loans are
included in average
balances and income on such
loans, if
recognized, is recognized
on the cash basis.
(3) Interest income does
not include the effects of
taxable-equivalent
adjustments using
a federal tax rate of 34%.
Rate/Volume Analysis
March,
1999
Compared
to March,
1998
Variance
Attributed
to (1)
Net
(Amounts in thousands) Volume Rate Change
Net Loans:
Taxable 31 -0.13% (74)
Tax-exempt(2) - 0.00% -
Investment Securities - 0.00% -
Taxable (4,946) -0.22% (84)
Tax-exempt(2) - 0.00% -
Interest-bearing deposits - 0.00% -
Federal funds sold 8,656 -0.18% 64
Total Interest-Earning Assets 3,741 -0.21% (93)
Deposits:
Demand Deposits 391 -0.06% (9)
Savings deposits 337 -0.01% (0)
Time deposits (1,648) -0.10% (31)
Total interest-bearing deposits (920) -0.06% (41)
Federal Funds Purchased - 0.00% -
Securities sold under agreements to - 0.00% -
repurchase
Other Short-Term borrowings - 0.00% -
Long-Term debt (12) 0.02% 0
Total Interest-Bearing Liabilities ($932) -0.05% ($40)
(1) The change in interest due to
both rate and volume has been
allocated to the
components in proportion to the
relationship of the dollar amounts of
the change in each.
(2) Reflects fully taxable equivalent
adjustments using a federal tax rate
of 34%.
NON-INTEREST INCOME AND EXPENSE
The amount of non-interest income and non-interest expenses of a
banking organization relate closely to the size of the total assets and
deposits and the number of deposit accounts. The amount of non-interest
expense represents the cost of operating the banking organization.
The major components of non-interest income are service charges
related to deposit accounts, cardholder and other credit card fees, Ore
income, gain on sale of ORE and other noninterest income.
Non-interest income for the first quarter of 1999 decreased $41,000 or
7.13% from the same period last year. Table 5 presents non-interest income
for the three months ended March 31, 1999 and 1998.
TABLE 5. NON-INTEREST INCOME
For The
Three
Months
Ended
March 31, March 31, Increase
(Amounts in thousands) 1999 1998 (Decrease)
Service Charges $135 $153 ($18)
NSF Charges 146 177 (31)
Gain on Sale of Securities - - -
Cardholder & Other Credit Card 107 87 21
Income
Membership Fees 48 63 (15)
Other Comm & Fees 23 22 1
ORE Income 2 3 (1)
Gain on Sale of ORE - - -
Other Income 73 70 3
Total Non-Interest Income $534 $575 (41)
NON-INTEREST EXPENSE
The major components of non-interest expense represents the cost of
operating the banking organization.
Non-interest expense for the first quarter of 1999 increased $285,000
or 13.43% from the same period last year. Table 6 presents the activity
for the three months ended March 31, 1999 and 1998. The increase from the
same period last year is mainly due to the increase in salaries & benefits,
and loan & credit card expenses and legal fees.
TABLE 6. NON-INTEREST EXPENSE
For The
Three
Months
Ended
March 31, March 31, Increase
(Amounts in thousands) 1999 1998 (Decrease)
Salaries & Benefits $995 $827 168
Loss on Litigation - - -
Occupancy Expense 485 480 6
Advertising Expense 35 31 4
Communications 46 52 (6)
Postage 80 86 (5)
Loan & Credit Card Expense 253 230 23
Professional Fees 85 49 36
Legal Fees 179 114 65
Insurance & Assessments 29 23 6
Stationery, Forms & Supply 82 74 8
ORE Expenses 33 41 (8)
Other Operating Expense 105 115 (10)
Total Non-Interest Expense $2,407 $2,122 285
INCOME TAXES
The Company did not record a provision for income taxes for the first
quarter of 1999 or 1998. The provision for income taxes consists of
provisions for federal taxes only. Louisiana does not have an income tax
for corporations.
CAPITAL
The Bank is required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by banking regulators. Table 7 presents
these ratios for the most recent five quarters.
TABLE 7. QUARTERLY SELECTED CAPITAL RATIOS
March Dec. 31, Sept. 30, June 30, March
31, 31,
1999 1998 1998 1998 1998
Risk-Based Capital
Tier 1 Risk Based 11.93% 11.36% 11.02% 11.18% 10.99%
Capital Ratio
Risk Based Capital 13.20% 12.63% 12.29% 12.46% 12.26%
Ratio
Tier 1 Leverage Ratio 7.42% 7.63% 7.21% 7.06% 6.95%
LIQUIDITY
The purpose of liquidity management is to ensure that there is
sufficient cash flow to satisfy demands for credit, deposit withdrawals,
and other corporate needs. Traditional sources of liquidity include asset
maturities and growth in core deposits. The Company has maintained
adequate liquidity through cash flow from operating activities and
financing activities to fund loan growth, and anticipates that this will
continue even if the Company expands.
Liquidity and capital resources are discussed weekly by the management
committee, the assets and liability committee and at the monthly executive
committee meeting. Bank of Louisiana maintains adequate capital to meet
its needs in the foreseeable future. The liquidity ratio for the Bank was
44.83% at March 31, 1999, 39.75% at December 31, 1998, and 41.11% at March
31, 1998.
Measuring liquidity and capital on a weekly basis enables management
to constantly monitor loan growth, and shifting customer preferences. The
committee's in-depth reviews of current, projected, and worse case
scenarios through various reports ensures the availability of funds and
capital adequacy.
The Bank intends on increasing capital by implementing an extensive
marketing program and evaluating all pricing fees and investing in
proprietary accounts which will maximize the highest yield possible and
thereby improve earnings.
There are no known trends, events, regulatory authority
recommendations, or uncertainties that the Company is aware of that will
have or that are likely to have a material adverse effect on the Company's
liquidity, capital resources, or operations.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
BOL BANCSHARES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized to sign on behalf of the
registrant.
BOL BANCSHARES, INC.
(Registrant)
May 13, 1999 Peggy L. Schaefer
Date Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 7,489
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 32,325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,310
<INVESTMENTS-CARRYING> 4,310
<INVESTMENTS-MARKET> 4,312
<LOANS> 57,237
<ALLOWANCE> 1,800
<TOTAL-ASSETS> 105,153
<DEPOSITS> 95,673
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,387
<LONG-TERM> 2,271
0
2,303
<COMMON> 179
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 105,153
<INTEREST-LOAN> 1,941
<INTEREST-INVEST> 62
<INTEREST-OTHER> 340
<INTEREST-TOTAL> 2,343
<INTEREST-DEPOSIT> 418
<INTEREST-EXPENSE> 52
<INTEREST-INCOME-NET> 1,873
<LOAN-LOSSES> 98
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,407
<INCOME-PRETAX> (98)
<INCOME-PRE-EXTRAORDINARY> (98)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 1.74
<LOANS-NON> 802
<LOANS-PAST> 821
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,136
<ALLOWANCE-OPEN> 1,800
<CHARGE-OFFS> 296
<RECOVERIES> 198
<ALLOWANCE-CLOSE> 1,800
<ALLOWANCE-DOMESTIC> 1,800
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
