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, 1999
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 the aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 29, 2000.
Common Stock, $1.00 par value, $463,200(a)
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of February 29, 2000.
Common Stock, $1.00 par value, 179,145 shares.
(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 5
Item 3: Legal Proceedings 6
Item 4: Submission of Matters to a Vote of Security Holders 7
Part II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters 7
Item 6: Selected Financial Data 8
Item 7: Management's Discussion and Analysis of Financial Condition and
Results
Of Operation 9
Item 8: Financial Statements and Supplementary Data 34
Item 9: Changes in and Disagreements with Accountants and Financial
Disclosure 28
Part III
Item 10: Directors and Executive Officers of the Registrant 29
Item 11: Executive Compensation 30
Item 12: Security Ownership of Certain Beneficial Owners and Management
31
Item 13: Certain Relationships and Related Transactions
32
Part IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements
Independent Auditor's Report Consolidated Balance Sheets
36
Consolidated Statements of Income (Loss) 38
Consolidated Statements of Comprehensive Income (Loss) 39
Consolidated Statements of Changes in Stockholder's Equity
40
Consolidated Statements of Cash Flow 41
Notes to Consolidated Financial Statements 43
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 67
<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, real-estate, 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.
<PAGE>
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.
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, 1999, the Company held $19,355,056 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 private-label
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, 1999,
the Company held $2,426,761 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.
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 1990, 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,
1990.
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, 1999, the Company had approximately 149 full-time
and approximately 13 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,
paid vacations, and sick leave. The Company has no employees who are not
employees of the Company. See "Item 11, Executive Compensation".
<PAGE>
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, 1999, there is
a balance of $68,774 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.
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 May 1, 1999, the lease commenced on June 1, 1999, and terminates on
May 31, 2003. The lease payments are $12,456, 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 Mall. The lease commenced on June 1, 1991, and terminates on May
31, 2001. The lease payments are $11,547 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 $5,673 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 1999 totaled $108,507.
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
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
<PAGE>
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 May 1,
1999, the leases commenced on June 1, 1999, and will terminate on May 31,
2003. The lease payments total $27,921, 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, 1999, or (ii)
believes the lawsuit is without sufficient merit or monetary exposure to
require the posting of a reserve. 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
counter sued 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 counter suit against the Plaintiffs for contribution on
the $110,000 loss and for tortuous interference. The Plaintiff filed
exceptions to the counter suit. These exceptions were heard in the
district court and the Company's right to contribution was maintained,
however the Company's suit for tortuous interference was dismissed. On
appeal, the appellate court sustained the Company's right to contribution
and overruled the lower court's decision on tortuous 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.
<PAGE>
Item 4
Submission of Matters to a Vote of Security Holders
There were no matters submitted, during the fourth quarter of fiscal
year 1999, to a vote of security holders, through the solicitation of
proxies.
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 1996, 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, 1999, the Company had approximately 666 shareholders of
record.
[CAPTION]
<TABLE>
1999
<S> <C> <C>
High Low
First Quarter $ $
7.00 5.00
Second Quarter
7.00 5.00
Third Quarter
7.00 5.00
Fourth Quarter
7.00 5.00
1998
High Low
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>
On August 10, 1999, the Board of Directors of BOL Bancshares, Inc., a
Louisiana corporation, declared a dividend distribution of one purchase
right for each outstanding share of common stock, $1.00 par value, of the
Company to stockholders of record at the close of business on August 31,
1999. Refer to Form 8A12G relating to the registration of a class of
securities pursuant to Section 12(g) of the Exchange Act.
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, 1999. See "Item 12 - Security Ownership of certain Beneficial Owners
and Management".
<PAGE>
Item 6
Selected Consolidated Financial Data of the Company
[CAPTION]
<TABLE>
For The Years Ended
December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
(dollars in thousands, except per share data)
Operations:
Net Interest Income $7,502 $7,827 $8,189 $10,133 $9,061
Prov for(Recovery Of)Loan
Losses (154) 1,085 3,630 2,040 1,749
Non-Interest Income 2,134 2,249 2,938 2,440 2,703
Non-Interest Expense 9,650 9,123 10,643 10,647 9,729
Income Tax Expense
(Benefit) 46 96 (1,171) (20) 141
Net Income(Loss) 94 (228) (1,975) (94) 145
Per Share:
Common Shares Outstanding
179,145 179,145 179,145 179,145 179,145
Net Income (Loss) 0.53 (1.27) (11.03) (0.52) 0.81
Cash Dividends - Common 0.00 0.00 0.00 0.00 0.00
Book Value at End of 16.89 16.47 16.62 27.64 28.30
Period
Preferred Shares
Outstanding 2,302,811 2,302,811 2,302,811 2,302,811 2,302,811
Cash Dividends - Preferred 0.00 0.00 0.00 0.00 0.00
Stock
Balances at End of Period:
Investment Securities 3,370 4,789 10,567 9,060 11,136
Fed Funds Sold 24,785 26,950 21,150 14,400 10,725
Loans, Net of Unearned
Interest 58,781 61,542 57,619 69,298 74,943
Allowance for Loan Losses 1,800 1,800 1,800 1,500 1,500
Other Real Estate Owned 1,274 1,357 1,473 2,273 1,994
Total Assets 100,109 103,886 102,709 106,091 108,589
Total Deposits 90,555 94,583 93,941 95,141 97,386
Shareholders' Equity 5,329 5,185 5,280 7,251 7,368
Ratios:
Return on Average Assets 0.09% -0.23% -1.95% -0.09% 0.14%
Return on Average Equity 1.93% -4.18% -34.49% -1.27% 1.87%
Primary Capital to Total Assets and
Allowance for Possible 5.42% 5.12% 5.23% 6.93% 6.68%
Loan Loss
Allowance for Possible Loan
Loss
as a Percentage of Loans, 3.06% 2.92% 3.12% 2.61% 2.00%
Net
Non-Performing Loans as a
Percentage of Loans, Net 0.07% 0.13% 0.15% 0.47% 0.32%
(1)
Non-Performing Loans as a
Percentage of Total Assets 1.31% 1.38% 1.51% 2.44% 2.05%
(2)
Capital Ratios: Bank
Tier 1 Risk Based Capital 10.50% 10.27% 10.61% 12.32% 11.46%
Ratio
Risk Based Capital Ratio 11.77% 11.54% 11.88% 13.58% 12.72%
Tier 1 Leverage Ratio 6.80% 6.89% 6.84% 8.60% 8.54%
(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.
</TABLE>
<PAGE>
Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE COMPANY
The following discussion and analysis is intended to provide a better
understanding of the consolidated financial condition and results of
operations of BOL Bancshares Inc. (the "Company") and its wholly-owned
subsidiary, Bank of Louisiana for the years ending December 31, 1999, 1998
and 1997. This discussion and analysis should be read in conjunction with
the consolidated financial statements, related notes and selected financial
data appearing elsewhere in this report.
The preceding chart reflects the most recent five years of the
Company's operations.
Results of Operations
On December 6, 1999, the Company settled a lawsuit against a
proprietor. The settlement was reached on the basis that an insurance
company would pay $650,000, the release of a bond for $448,000 would be
paid to the Company and $202,000 would be paid by the owner. Since the
Company felt comfortable with collecting the money from the insurance
company and that the bond would be received, the Company took as income in
1999 $1,099,000 that is reflected in operations. The Company considered
the collection of the $202,000 to be paid by the owner problematic in light
of the past dealings with the owner and did not take the $202,000 into
earnings until the payment was received in 2000.
The Company earned $94,000, or $.53 per share in 1999. In 1998 the net
loss was $228,000 or $(1.27) per share and in 1997 the net loss was
$1,975,000, or $(11.03) per share.
In 1999, the $322,000 increase in income from the 1998 loss was
primarily due to the Company recovering $1,100,000 in the settlement of a
lawsuit against a proprietor and the decrease in interest expense of
$140,000. Interest income decreased $466,000, non-interest income decreased
$115,000 while non-interest expense increased $527,000 from the year 1998.
In 1998, the $1,747,000 decrease in net loss over the loss in 1997 was
primarily due to the provision for loan losses of $1,086,000 compared to a
provision of $3,630,000 in 1997 along with a decrease in interest income of
$484,000, and a decrease in non-interest expense of $689,000. Interest
expense decreased $122,000 and non-interest expense decreased $1,520,000.
The decrease in non-interest expense was primarily due to the above
mentioned proprietor who accepted credit card payments totaling $422,000
but did not remit the money to the Company along with a decrease of $304,00
in salaries and benefits.
Overview
The Company had total assets of $100,109,000 at December 31, 1999, and
$108,589,000 at December 31, 1995. The Company currently operates through
five locations in the metropolitan New Orleans area and two locations in
St. Tammany Parish.
Historically, credit card loans have been an important part of the
Company's total loan portfolio. At December 31, 1995, credit card loans
were $40,579,000, which was 54.15% of the Company's loan portfolio of
$74,943,000. At December 31, 1999, credit card loans totaled $18,585,000,
or 31.62% 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), and the loss
of proprietary business.
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. This will be
accomplished through an aggressive Marketing campaign and the acquisition
of several Visa & MasterCard portfolios. During 1999 the Company purchased
credit card portfolios totaling $764,000, at book value. The Company
<PAGE>
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.
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.
The Company's average balances, interest income and expense and rates
earned or paid for major balance sheet categories are set forth in the
following tables:
<PAGE>
[CAPTION]
<TABLE>
TABLE 1 Distribution of Assets, Liabilities and Shareholders' Equity
Interest, Rate and Net Yields
1999 1998
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 57,397 7,638 13.31% 59,335 8,214 13.84%
Tax-exempt - -
Investment securities
Taxable 4,011 191 4.77% 7,768 456 5.87%
Tax-exempt - -
Interest-bearing deposits - - - - - -
Federal funds sold 30,645 1,519 4.96% 21,566 1,145 5.31%
Total Earning Assets 92,052 9,348 10.16% 88,669 9,815 11.07%
Cash and due from banks 5,739 5,617
Allowance for loan Losses (1,792) (1,806)
Premises and equipment 2,678 2,592
Other Real Estate 1,350 1,432
Other assets 1,130 2,634
TOTAL ASSETS 101,158 99,138
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING DEPOSITS:
Deposits:
Demand Deposits 19,873 332 1.67% 18,109 399 2.20%
Savings deposits 26,704 784 2.94% 26,381 806 3.06%
Time deposits 11,583 520 4.49% 11,879 569 4.79%
Total Interest-Bearing
Deposits 58,160 1,636 2.81% 56,369 1,774 3.15%
Federal Funds Purchased
Securities sold under agreements to repurchase
Other Short-term
borrowings - -
Long-Term debt 2,249 210 9.33% 2,278 214 9.39%
Total Int-Bearing
Liabilities 60,407 1,846 3.06% 58,647 1,988 3.39%
Noninterest-bearing
deposits 34,670 33,729
Other liabilities 1,212 1,302
Shareholders' equity 4,869 5,460
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 101,158 99,138
Net Interest Income 7,502 7,827
Net Interest spread 7.10% 7.68%
Net Interest Margin 8.15% 8.83%
(1) Includes fees on loans of $669,000 in 1999, $569,000 in 1998 and $231,000 in
1997.
(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, 1999, 1998, and 1997 using a
federal tax rate of 34%.
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
1998 1997
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 59,335 8,214 13.84% 62,249 8,702 13.98%
Tax-exempt
Investment securities
Taxable 7,768 456 5.87% 10,232 591 5.78%
Tax-exempt - - 0.00% - - 0.00%
Interest-bearing deposits - - - - - 0.00%
Federal funds sold 21,566 1,145 5.31% 18,372 1,004 5.46%
Total Earning Assets 88,669 9,815 11.07% 90,853 10,297 11..33%
Cash and due from banks 5,617 5,314
Allowance for loan Losses (1,806) (1,599)
Premises and equipment 2,592 2,703
Other Real Estate 1,432 1,516
Other assets 2,634 2,433
TOTAL ASSETS 99,138 101,220
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING DEPOSITS:
Deposits:
Demand Deposits 18,109 399 2.20% 18,185 396 2.18%
Savings deposits 26,381 806 3.06% 26,980 829 3.07%
Time deposits 11,879 569 4.79% 13,174 664 5.04%
Total Interest-Bearing
Deposits 56,369 1,774 3.15% 58,339 1,889 3.24%
Federal Funds Purchased
Securities sold under agreements to repurchase
Other Short-term
borrowings - -
Long-Term debt 2,278 214 9.39% 2,333 219 9.39%
Total Int-Bearing
Liabilities 58,647 1,988 3.39% 60,672 2,108 3.47%
Noninterest-bearing
deposits 33,729 33,389
Other liabilities 1,302 1,432
Shareholders' equity 5,460 5,727
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 99,138 101,220
Net Interest Income 7,827 8,189
Net Interest spread 7.68% 7.86%
Net Interest Margin 8.83% 9.01%
(1) Includes fees on loans of $669,000 in 1999, $569,000 in 1998 and $231,000
in 1997.
(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, 1999, 1998, and 1997 using a
federal tax rate of 34%.
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
TABLE 2 Analyses of Changes in Interest Income and Interest Expense
1999 Compared to 1998 1998 Compared to 1997
Variance Attributed to (1) Variance Attributed to(1)
Net Net
(Dollars in Thousands) Volume Rate Change Volume Rate Change
<S> <C> <C> <C> <C> <C> <C>
Net Loans:
Taxable (1,938) -0.54% (576) (2,914) -0.14% (488)
Tax-exempt(2) - 0.00% - - 0.00% -
Investment Securities - 0.00% - - 0.00% -
Taxable (3,757) -1.10% (265) (2,464) 0.09% (135)
Tax-exempt(2) - 0.00% - - 0.00% -
Interest-bearing deposits - 0.00% - - 0.00% -
Federal funds sold 9,079 -0.35% 374 3,194 -0.16% 141
Total Interest-Earning
Assets 3,383 -0.91% (467) (2,184) -0.26% (482)
Deposits:
Demand Deposits 1,764 -0.53% (67) (76) 0.03% 3
Savings deposits 323 -0.12% (22) (599) -0.02% (23)
Time deposits (296) -03.30% (49) (1,295) -0.25% (95)
Total interest-bearing
deposits 1,791 -0.33% (138) (1,970) -0.09% (115)
Federal Funds Purchased - 0.00% - - 0.00% -
Securities sold under
agreements to repurchase - 0.00% - - 0.00% 0
Other Short-term
borrowings - 0.00% - - 0.00% -
Long-Term debt (29) -0.06% (4) (55) 0.01% (5)
Total Interest-Bearing
Liabilities 1,760 -0.33% (142) (2,025) -0.08% (120)
(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%.
</TABLE>
Net interest income for 1999 was $7,502,000 compared to $7,827,000 in
1998 and compared to $8,189,000 in 1997.
Interest income decreased $466,000 or 4.74% to $9,348,000 in 1999 from
$9,814,000 in 1998. This decrease is mainly due to a 10.50% decrease in
interest income on credit card loans. Total interest expense decreased
$140,000 or 7.06% to $1,846,000 in 1999 from $1,987,000 in 1998. Interest
earned on Federal Funds Sold increased 32.57% in 1999 to $1,519,000 from
$1,145,000 in 1998. The average Federal Funds Sold for 1999 was $30,645,000
and $21,566,000 in 1998. The average interest rate earned on Federal Funds
Sold in 1998 was 4.96% as compared to 5.31% in 1998. Interest earned on
investment securities decreased 58.02% due to a decrease in the average
balance to $3,370,000 in 1999 from $4,789,000 in 1998 with an average rate
earned of 4.77% in 1999 and 5.86% in 1998.
Interest income decreased $484,000 or 4.70% to $9,814,000 in 1998 from
$10,298,000 in 1997. This decrease is mainly due to a 31.30% decrease in
interest income on proprietary credit card loans. Total interest expense
decreased $121,000 or 5.78% to $1,987,000 in 1998 from $2,108,000 in 1997.
Interest earned on Federal Funds Sold increased 14.04% in 1998 to
$1,145,000 from $1,004,000 in 1997. The average Federal Funds Sold for 1998
was $21,566,000 and $18,372,000 in 1997. The average interest rate earned
on Federal Funds Sold in 1998 was 5.31% as compared to 5.46% in 1997.
Interest earned on investment securities decreased 22.98% due to a decrease
in the average balance to $4,789,000 in 1998 from $10,567,000 in 1997 with
an average rate earned of 5.86% in 1998 and 5.78% in 1997.
<PAGE>
Provision for Loan Losses
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.
The provision for (recovery of) loan losses in 1999 was $(154,000)
compared to $1,086,000 in 1998 and $3,630,000 in 1997. The decrease in
provisions for 1999 primarily resulted from the recovery of $1,100,000 from
the settlement of a lawsuit against a proprietor, which was previously
charged off.
Other Income
An important source of the Company's revenue is derived from other
income. The following table sets forth the major components of other income
for the last three years.
[CAPTION]
<TABLE>
Table 3 Other Income
$ Change From
December 31, Prior Year
1999 1998 1997 1999 1998
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Service Charges 545 653 618 (108) 35
NSF Charges 628 666 725 (38) (59)
Gain on Sale of Securities - - 16 - (16)
Cardholder & Other Credit
Card Income 497 456 388 41 68
Membership Fees 176 224 245 (48) (21)
Other Comm & Fees 97 34 101 63 (67)
ORE Income 9 13 11 (4) 2
Gain on Sale of ORE 27 20 61 7 (41)
Reversal of Litigation
Settlement - - 390 - (390)
Other Income 153 183 383 (30) (200)
Total Other Income $2,133 $2,249 $2,938 ($116) ($689)
</TABLE>
Total other income decreased to $2,133,000 in 1999 from $2,249,000 in
1998 or a 5.11% decrease.
Total other income decreased to $2,249,000 in 1998 from $2,938,000 in
1997 or a 23.45% decrease. This decrease was mainly due to the reversal of
a judgment for $390,000 that was rendered against the Bank in 1994.
Other Expense
The major categories of other expense include salaries and employee
benefits, occupancy and equipment expenses and other operating associated
with the day-to-day operations of the Company.
The following table sets forth the major components of other expense
for the last three years:
<PAGE>
[CAPTION]
<TABLE>
Table 4 Other Expense
$ Change From
December 31, Prior Year
1999 1998 1997 1999 1998
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Salaries & Benefits 4,158 3,670 3,974 488 (304)
Occupancy Expense 1,969 1,956 1,937 13 19
Advertising Expense 103 117 153 (14) (36)
Communications 199 208 307 (9) (99)
Postage 301 357 472 (56) (115)
Loan & Credit Card Expense 1,031 1,005 1,112 26 (107)
Professional Fees 330 218 266 112 (48)
Legal Fees 591 524 558 67 (34)
Insurance & Assessments 99 92 94 7 (2)
Stationery, Forms & Supply 317 303 375 14 (72)
ORE Expenses 68 133 337 (65) (204)
Loss on Litigation - 50 150 (50) (100)
Other Operating Expense 484 490 908 (6) (418)
Total Other Expense $9,650 $9,123 $10,643 $527 ($1,520)
</TABLE>
Total other expense increased 5.77% to $9,650,000 in 1999 from
$9,124,000 in 1998.
Total other expense decreased 14.28% to $9,124,000 in 1998 from
$10,643,000 in 1997. Other operating expenses decreased 45.93% due mainly
to the Bank processing payments in the amount of $422,000 that were
accepted by a proprietary merchant, but were not remitted to the Bank in
1997.
Income Taxes
The income tax provision (benefit) for the Company and the Bank on a
consolidated basis, for the year 1999 was $46,000 as compared to $96,000 in
1998 and $(1,171,000) in 1997. The provision for income taxes consists of
provisions for federal taxes only. Louisiana does not have an income tax
for corporations.
Analysis of Balance Sheets
Loans
The loan portfolio is the largest category of the Company's earning
assets. The following table summarizes the composition of the loan
portfolio for the last five years:
<PAGE>
[CAPTION]
<TABLE>
TABLE 5 Composition of Loans
December 31,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial, &
agricultural 4,095 4,441 4,281 4,390 4,366
Real estate-mortgage 30,976 28,861 24,643 22,370 23,323
Mortgage Loan Held for
Resale - - - - 256
Personal Loans 2,845 3,006 5,106 5,731 6,022
Credit cards-Visa,
MasterCard 18,585 21,785 20,302 25,265 28,199
Credit cards-Proprietary 2,428 3,510 2,931 11,344 12,380
Overdrafts 128 154 359 207 435
Loans 59,057 61,757 57,622 69,307 74,981
Less:
Unearned income 277 215 2 9 38
Deferred loan fees(costs),
net - - - - -
Allowance for possible
loan losses 1,800 1,800 1,800 1,500 1,500
Loans, net 56,981 59,742 55,820 67,798 73,443
</TABLE>
Total loans, which include loan loss reserves and unearned interest,
decreased $2,761,000 or 4.62% to $56,981,000 at December 31, 1999 from
$59,742,000 at December 31, 1998. This decrease was primarily attributable
to the decrease in the credit card portfolio of $4,282,000 or 16.93%, which
was offset by an increase in real estate loans of $2,114,000 or 7.33%.
At December 31, 1998 total loans increased $3,923,000 or 7.03% to
$59,742,000 from $55,820,000 at December 31, 1997. This increase was
primarily attributable to the increase in the Company's real estate loans
of $4,218,000 or 17.12%.
The following tables reflect the maturity distribution and interest
rate sensitivity of the Company's loan portfolio:
<PAGE>
[CAPTION]
<TABLE>
TABLE 6 Loan Maturity Distributions and Interest Rate Sensitivity
December 31, 1999
Maturing
Within One To Over
One Year 5 Years 5 Years Total
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural 2,855 1,569 4 4,428
Real estate construction, land
and land development 16,289 10,684 2,665 29,638
All other loans 22,124 2,824 44 24,992
Total 41,267 15,077 2,713 59,057
Fixed rate loans 40,425 15,077 2,713 58,215
Variable rate loans 802 802
Non-Accrual Loans 40 40
Total 41,267 15,077 2,713 59,057
</TABLE>
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 $123,000 or 8.55% at December 31, 1999,
to $1,315,000 from $1,143,000 December 31, 1998. At December 31, 1999 there
were no restructured loans.
Nonperforming assets decreased $118,000 or 7.58% at December 31, 1998,
to $1,438,000 from $1,556,000 December 31, 1997. At December 31, 1998 there
were no restructured loans.
Since 1995, the ratio of past due loans to total loans has decreased
from 1.42% to 0.93%. During that time, the Company significantly reduced
its ratio of nonperforming assets to loans and ORE from a high of 2.90% of
total loans at December 31, 1995, to a low of 2.26% at December 31, 1999.
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 1999, the gross amount of interest income that would have been recorded
on nonaccrual loans at December 31, 1999, if all such loans had been
accruing interest at the original contract rate, was $1,909.
<PAGE>
[CAPTION]
<TABLE>
TABLE 7 Nonperforming Assets
December 31,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans 40 81 83 316 235
Restructured Loans - - - - -
Other Real Estate Owned 1,274 1,357 1,473 1,723 1,994
Total Nonperforming
Assets 1,315 1,438 1,556 2,039 2,229
Loans past due 90 days or
more 528 852 1,257 2,295 1,062
Ratio of past due loans to 0.93% 1.42% 2.18% 3.31% 1.42%
loans
Ratio of nonperforming assets to loans
and other real estate 2.26% 2.34% 2.63% 2.87% 2.90%
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.
Impaired Loans
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, 1999 and 1998, the recorded investment in loans
that are considered impaired were $0. Interest income on impaired loans,
recognized on the accrual method, of $0 was recognized in 1999 and 1998.
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,
and 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
<PAGE>
Especially Mentioned (OAEM). These loans require monitoring due to
conditions which, if not corrected, could increase credit risk. Total
watch list loans decreased 15.55% to $3,525,000 at December 31, 1999 from
$4,174,000 at December 31, 1998.
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 write-downs and income and expenses associated
with ORE are included in the income and expense of the Bank.
ORE totaled $1,274,000 at December 31, 1999, $1,357,000 at December
31, 1998, and $1,473,000 at December 31, 1997. There was one new parcel
added in 1999.
During the fiscal year 1999 the Bank sold 3 parcels of ORE totaling
$168,000 as compared to 2 parcels sold in 1998 totaling $116,000 and 7
parcels totaling $488,000 in 1997. Historically the Bank has always sold
ORE parcels for a net gain, $27,000 in 1999, $20,000 in 1998, and $61,000
in 1997. The costs associated with the sales of ORE are minimal as
compared to the gains, $3,000 in 1999, $1,000 in 1998, and $5,000 in 1997.
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 write down
due to reductions in the fair market value upon receipt of the appraisal.
The following table reflects all ORE parcels held as of December 31,
1999, which are in excess of $50,000.00.
[CAPTION]
<TABLE>
TABLE 8 Other Real Estate Properties
Date Book Appraisal Appraisal
Address Acquired Value Date Amount
(Dollars in Thousands)
<S> <C> <C> <C> <C>
123-125 Carondelet 01/17/91 423 02/04/99 450
617 N. Broad 09/24/91 591 10/01/99 605
27 Audubon Blvd 09/24/91 260 10/20/99 490
$1,274
</TABLE>
In addition, any expenditure such as maintenance and repairs, etc. is
recognized during the year in which it occurred. The net gain (cost) of
operation of ORE totaled ($32,000) in 1999, ($100,000) in 1998, ($266,000)
in 1998. The following table reflects a breakdown of the income and
expense amounts related to ORE operations:
<PAGE>
[CAPTION]
<TABLE>
TABLE 9 Other Real Estate Income/Expense
1999 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C>
ORE Income
Rental Income 9 13 11
Gain on Sales 27 20 61
Total Income 36 33 72
ORE Expenses
Maintenance, Repairs, Upkeep & Security 20 40 80
Real Estate Fees, Advertising & Appraisals 7 6 9
Insurance 18 49 60
Sheriff Sale - 0 5
Legal Fees 4 20 135
Taxes 13 18 24
Writedowns 6 0 3
Loss on Sale - 0 22
Total Expenses 68 133 338
Net Gain or Loss $(32) $(100) $(266)
</TABLE>
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 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.
Provision for (recovery of) loan losses decreased 114.18% to
($154,000) in 1999, from $1,086,000 in 1998. The provision for loan losses
decreased due to the recovery of $1,100,000 from the settlement of a
lawsuit against a proprietor, of which &1,504,000 was charged off in 1997.
Provision for loan losses decreased 70.08% to $1,086,000 in 1998, from
$3,630,000 in 1997. The provision for loan losses decreased due a decrease
in the amount of the Company's charge-offs to $1,950,000 in 1998, from
$4,132,000 in 1997. In 1997 the FDIC required that the Company charge-off
an additional $300,000 to operations to bring the provision for loan losses
up to $1,800,000. Additionally, one proprietary merchant was accepting
payments but not remitting them to the Bank, which resulted in a total
charge-off for this proprietor in the amount of $1,504,000 in 1997. 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.
<PAGE>
The following table summarized the allowance for loan losses for the
last five years.
[CAPTION]
<TABLE>
TABLE 10 Allowance for Loan Losses
December 31,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period 1,800 1,800 1,500 1,500 935
Charge-Offs:
Commercial 49 24 22 51 31
Real estate 0 6 20 - 3
Installment 41 43 94 43 34
Credit Cards 1,490 1,877 3,996 2,728 1,553
Total Charge-offs 1,582 1,950 4,132 2,822 1,621
Recoveries:
Commercial 11 13 100 135 5
Real estate 2 30 14 6 45
Installment 17 23 24 27 23
Credit Cards 1,705 798 664 614 365
Total Recoveries 1,736 864 802 782 438
Net charge-offs (154) 1,086 3,330 2,040 1,183
Provision for loan losses (154) 1,086 3,630 2,040 1,749
Balance 1,800 1,800 1,800 1,500 1,501
Additional Reserve from
Proprietor - - - - (1)
Balance at end of period 1,800 1,800 1,800 1,500 1,500
Ratio of net charge-offs during period
to average loans -0.27% 1.83% 5.35% 2.77% 1.68%
outstanding
Allowance for possible loan losses as a
percentage of loans 3.16% 3.00% 3.12% 2.16% 2.00%
</TABLE>
Investment Securities
The Company's investment portfolio policy is to maximize income
consistent with liquidity, asset quality, regulatory constraints, and
asset/liability objectives. The Company's Board of Directors reviews the
policy at least annually. 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.
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
$3,400,000 at December 31, 1998, $4,800,000 at December 31, 1998, and
$10,500,000 at December 31, 1997. 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 one year or less at December 31, 1999. At
December 31, 1999 securities classified as available-for-sale were $367,000
and $291,000 at December 31, 1998. The net unrealized holding gain on
these securities at December 31, 1999 was $16,000 after taxes compared to
net unrealized holding gain of $202,000 after taxes at December 31, 1998.
<PAGE>
At December 31, 1999, the Company classified all of its U. S. Treasury
securities and obligations of U.S. government corporations and federal
agencies as held-to-maturity.
The following table sets forth the carrying and approximate market
values of investment securities for the last three years:
[CAPTION]
<TABLE>
TABLE 11 Investment Securities
December 31,
1999 1998 1997
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 3,004 4,514 4,498 4,514 10,479 10,505
agencies
Other investments 90 367 90 291 90 90
Total 3,094 4,881 4,588 4,805 10,569 10,595
</TABLE>
[CAPTION]
<TABLE>
TABLE 12 Securities Maturities and Yields
December 31, 1999
Amortized Fair Average
Cost Value Yield(2)
(Dollars in Thousands)
<S> <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 - -
Due 1-5 years - -
Total - - -
Held-to-Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies
Due in 1 year or less 3,004 2,999 4.75%
Due 1-5 years - - 0.00%
Total 3,004 2,999 4.75%
(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%.
</TABLE>
Included in Investment Securities are equity securities acquired
through foreclosure, which have no maturity date. The following is a table
of these securities at December 31,1999 (dollars in thousands):
<PAGE>
[CAPTION]
<TABLE>
TABLE 13 Other Securities
<S> <C>
Mississippi River Bank $280,720
New Orleans SBIDCO, Inc. 20,000
Liberty Financial Services, 65,825
Inc.
Total Other Securities $366,545
</TABLE>
Deposits
Total deposits decreased $4,028,000 or 4.26% to $90,555,000 at
December 31, 1999 from $94,583,000 at December 31, 1998. 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 increased 2.48% in 1999. Market
rate core deposits, primarily CD's of less of $100,000 and money market
accounts, increased 1.62% in 1999.
Total deposits increased $642,000 or .68% to $94,583,000 at December
31, 1998 from $93,941,000 at December 31, 1997. 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 2.93% in 1998. Market rate core
deposits, primarily CD's of less of $100,000 and money market accounts,
decreased 15.37% in 1998.
Noninterest bearing deposits are comprised of business accounts,
including correspondent bank accounts, escrow deposits, as well as
individual accounts. Average noninterest bearing demand deposits
represented 38.10% of average core deposits in 1999 compared to 38.03% of
average core deposits in 1998.
The average amount of, and average rate paid on deposits by category
for the last three years are presented below:
[CAPTION]
<TABLE>
TABLE 14 Selected Statistical Information
December 31,
1999 1998 1997
Average Average Average
Amount Rate Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
Deposits $34,670 N/A $33,729 N/A $33,389 N/A
Interest-bearing Demand
Deposits 19,873 1.67% 18,109 2.20% 18,185 2.18%
Savings Deposits 26,704 2.94% 26,381 3.06% 26,980 3.07%
Time Deposits 11,583 4.49% 11,879 4.79% 13,174 5.04%
Total Average Deposits $92,829 $90,098 $91,728
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
The composition of average deposits for the last three years are
presented below:
TABLE 15 Deposit Composition
December 31,
1999 1998 1997
Average % of Average % of Average % of
(Amounts in Thousands) Balances Deposits Balances Deposits Balances Deposits
<S> <C> <C> <C> <C> <C> <C>
Demand, Noninterest- $34,670 37.35% $33,729 37.44% $33,388 36.40
Bearing
NOW Accounts 14,091 15.18% 13,295 14.76% 11,920 12.99%
Money Market Deposit
Accounts 5,782 6.23% 4,814 5.34% 6,266 6.83%
Savings Accounts 26,704 28.77% 26,381 29.28% 26,980 29.41%
Other Time Deposits 9,760 10.51% 10,481 11.63% 11,805 12.87%
Total Core Deposits 91,007 98.04% 88,700 98.45% 90,359 98.51%
Certificates of Deposit
of $100,000 or more 1,823 1.96% 1,398 1.55% 1,369 1.49%
Total Deposits $92,831 100.0% $90,098 100.0% $91,728 100.0%
</TABLE>
The following table sets forth the maturity distribution of Time
Deposits of $100,000 or more for the past three years:
[CAPTION]
<TABLE>
TABLE 16 Maturity Distribution of Time Deposits over $100,000
December 31,
1999 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C>
Three months or less $ 633 $ 614 $ 728
After three months through one year 851 830 609
After one year through three years 200 200 0
Total $1,684 $ 1,644 $ 1,337
</TABLE>
<PAGE>
Other Assets and Other Liabilities
The following are summaries of other assets and other liabilities for
the last three years:
[CAPTION]
<TABLE>
December 31,
1999 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Receivable 108 213 318
Prepaid Expenses 314 296 276
Accounts Receivable 1,122 364 90
Cash Surrender Value 394 393 377
Other Assets 31 45 597
Total Other Assets $1,969 $1,311 $1,658
</TABLE>
<TABLE>
December 31,
1999 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C>
Accrued Expenses Payable 228 150 145
Accounts Payable - - -
Deferred Membership Fees 53 64 83
Blanket Bond Fund 50 50 50
Other Liabilities 920 85 135
Total Other Liabilities $1,252 $349 $413
</TABLE>
Borrowings
The Company's long-term debt is comprised primarily of debentures.
Each $500 debenture is 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 $1,000,000 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. The Bank can borrow the amount of unpledged
securities at the discount window at the Federal Reserve Bank by pledging
those 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 instruments 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, 1999, has a net interest sensitive asset gap of
22.31% when projecting out one year. In the near term, defined as 90 days,
the Company currently has a net interest sensitive liability gap of 7.73%.
The information represents a general indication of repricing
<PAGE>
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.
The following table sets forth the Company's interest rate sensitivity
analysis at December 31, 1999.
[CAPTION]
<TABLE>
TABLE 17 Gap Table
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
Earning Assets
Securities-HTM 0 3,004 0 0 0 0 0
Securities - AFS 0 0 0 0 0 0 20
Loans 7,556 2,928 2,988 7,055 13,887 12,551 11,814
Loans held for 0 0 0 0 0 0 0
sale
Federal funds 24,785 0 0 0 0 0 0
sold
Total Earning 32,341 5,932 2,988 7,055 13,887 12,551 11,834
Assets
Non Earning 0 0 0 0 0 0 13,521
Assets
TOTAL ASSETS 32,341 5,932 2,988 7,055 13,887 12,551 25,355
Interest-Bearing Liabilities
Savings & Now 37,748 0 0 0 0 0 0
accounts
Money market 5,882 0 0 0 0 0 0
CD's < $100,000 2,989 652 52 3,090 1,758 32 1,786
CD's > $100,000 0 0 633 0 0 851 200
Federal Funds 0 0 0 0 0 0 0
purchased
Repurchase 0 0 0 0 0 0 0
agreements
Other short-term 0 0 0 0 0 0 0
borrowings
Notes payable 0 0 0 0 1,753 0 480
Total Interest- 46,619 652 685 3,090 3,511 883 2,466
Bearing
Liabilities
Non Costing 0 0 0 0 0 0 42,203
Liabilities
TOTAL 46,619 652 685 3,090 3,511 883 44,669
LIABILITIES
Interest- (14,278) 5,280 2,303 3,965 10,376 11,668 (19,314)
Sensitivity Gap
Cumulative Gap (14,278) (8,998) (6,695) (2,730) 7,646 19,314 0
Cumulative Gap/Total Interest-
Earning Assets -16.49% -10.39% -7.73% -3.15% 8.83% 22.31% 0.00%
</TABLE>
<PAGE>
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.
Financial Condition
The Company manages its assets and liabilities to maximize long-term
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.
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 ensure 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
The FDIC's regulations require that a state-chartered bank, such as
the Bank of Louisiana maintain a minimum Tier 1 risk based capital ratio of
4% and a risk based capital ratio of 8%. The Bank, however, is required to
maintain a Tier 1 leverage ratio of 7.00% as part of a Memorandum of
Understanding signed in 1999 which replaces the Memorandum of Understanding
dated March 12, 1996. 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 6.80% at
December 31, 1999, 6.89% at December 31, 1998, and 6.84% at December 31,
1997.
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.
<PAGE>
Shareholders' Equity
Shareholders' equity increased $144,000 or 2.77% to $5,329,000 at
December 31, 1999 from $5,185,000 at December 31, 1998. This increase in
shareholders' equity since December 31, 1998, was attributable to $94,000
in net income and an increase in accumulated other comprehensive income of
$50,000.
Shareholders' equity decreased $95,000 or 1.80% to $5,185,000 at
December 31, 1998 from $5,280,000 at December 31, 1997. This decrease in
shareholders' equity since December 31, 1997, was attributable to $228,000
in net loss and an increase in accumulated other comprehensive income of
$134,000.
The leverage ratio (Tier 1 capital to total assets) at December 31,
1999, was 6.80% compared to 6.89% at December 31, 1998, which are compared
to the minimum capital requirement of 4.00%.
The leverage ratio (Tier 1 capital to total assets) at December 31,
1998, was 6.89% compared to 6.84% at December 31, 1997, which are compared
to the minimum capital requirement of 4.00%.
At December 31, 1999, based on the Federal Reserve Board's guidelines,
the Company's Tier 1 risk based capital ratio was 11.50, and the risk based
capital ratio was 11.77%.
At December 31, 1998, based on the Federal Reserve Board's guidelines,
the Company's Tier 1 risk based capital ratio was 10.27, and the risk based
capital ratio was 11.54%.
The ratio of average shareholders' equity to average assets was 4.81%
in 1999, 5.51% in 1998, and 5.66% in 1997.
Supervision and Regulation Enforcement Action
The Bank is currently subject to an enforcement action from its
regulators, the Federal Deposit Insurance Corporation (FDIC) and the Office
of Financial Institutions (OFI), in the form of a Memorandum of
Understanding. See Note X "Regulatory Matters."
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
LaPorte, Sehrt, Romig and Hand, Certified Public Accountants perform
all audit services for the Company and the subsidiary. The same firm will
be retained to perform audit services in 2000.
<PAGE>
[CAPTION]
<TABLE>
Item 10
Directors and Executive Officers of the Company
Principal
Occupation
For Last
Five
Company Stock Beneficially Owned Years If
Common Preferred Not With
Name (Age) Position Number Percent Number Percent the Company
Held
<S> <C> <C> <C> <C> <C> <C>
G. Harrison Scott Director; 57,787 32.26% 97,981 4.26% N/A
(76) Chairman of the
Board of the
Company and the Bank
James A. Comiskey Director; 35,467 19.80% (1) 94,706 4.11% N/A
(73) President of the
Company and the Bank
Douglas A. Director of 2,740 0.15% (2) 18,537 0.80% President,
Schonacher the
(69) Company and the Bank V.I.P.
Dist.
Gordon A. Burgess Director of 1,015 0.57% 36,164 1.57% President,
the
(66) Company and the Bank Tangipahoa
Parish
Council
Lionel J. Favret, Director of 571 0.32% 31,656 1.38% Retired
Sr. the
(88) Company and the Bank
Gerry E. Hinton Director of 5,330 2.97% (3) 2,387 0.10% Retired
the
(69) Company and the Bank
Leland L. Landry Director of 3,800 2.12% 2,387 0.10% President,
the
(73) Company and the Bank Landry
Realty
Edward J. Soniat Director of 8,404 4.69% 242,634 10.54% President,
the
(87) Company and the Bank Blaise
and Secretary of the Parking
Company Enterprise
Corp.
Non-Director Executive
Officers
Peggy L. Schaefer Treasurer of - - - - N/A
(48) the Company and Senior
Vice President, and Chief
Financial Officer of the
Bank
All Directors & Executive 115,117 62.88% 526,452 22.86%
Officers
as a group (9 persons)
<PAGE>
(1) Includes 47 common shares and 2,661 preferred shares owned by Director
Comiskey's spouse.
(2) Includes 2,525 common shares and 9,213 preferred shares owned by
Director Schonacher's spouse.
(3) Includes 5,132 common shares and 2,387 preferred shares owned by the
Hinton Living Trust, and 198 common shares owned by Director Hinton's two
children.
</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, Hinton, Landry, and Schonacher have served as
directors since 1988. Mr. Scott has served as Chairman of 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 and as a Bank officer since 1983.
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, 1999, was $710,415, including
accrued and unpaid interest at the rate of 10% per annum. At this time,
there is no maturity date on these loans.
The following table sets forth compensation for the Company's
executive officers for the years 1999, 1998, and 1997:
[CAPTION]
<TABLE>
Annual Compensation
Other
Annual All Other
Name and Principal Year Salary Compensation Compensation
Position ($) ($) ($)
<S> <C> <C> <C> <C>
G. Harrison Scott, 1999 93,254 41,000 19,494
Chairman of the 1998 89,800 20,500 19,494
Board 1997 89,800 29,042 19,494
James A. Comiskey, 1999 93,254 41,000 19,000
President 1998 89,800 20,500 19,000
1997 89,800 29,042 19,000
</TABLE>
<PAGE>
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 1999.
Committees of the Board of Directors of the Company and the Bank
During fiscal year 1999, 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
13 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 similar
functions. In lieu thereof, the Board of Directors as a group performs the
foregoing function.
The Board of Directors of the Bank has an Audit and Finance Committee
consisting of Messrs. Favret (chairman), Landry, and Soniat, and two
rotating members selected from Messrs. Burgess, 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 11 times
in 1999.
The Bank also has an Executive Committee consisting of six permanent
members and two rotating members. The permanent members of the Executive
Committee in 1999 were Messrs. Scott (chairman), Comiskey, Favret, Soniat,
Hinton, and Burgess, and the rotating members were selected from Messrs.
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 26 times in 1999.
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.
<PAGE>
As of December 31, 1999, the following persons were known to be the
beneficial owners of more than 5% of the Bank's stock.
[CAPTION]
<TABLE>
Security Ownership Of Certain Beneficial
Owners and Management
Name & Address Of Title Of Amount Beneficially Percent
Beneficial Owners Class Owned Of Class
<S> <C> <C> <C>
G. Harrison Scott Common 57,787 32.26%
55481 Hwy. 433 Preferred 97,981 4.26%
Slidell, LA 70461
James A. Comiskey Common 35,467 (1) 19.80%
1100 City Park Preferred 94,706 4.11%
Ave.
New Orleans, LA
70119
Edward J. Soniat Common 8,404 4.69%
49 Oriole Street Preferred 242,634 10.54%
New Orleans, LA 70124
(1) Includes 47 common shares and 2,661 preferred shares owned by
Director Comiskey's spouse.
</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 $986,593 at December 31, 1999 and the highest aggregate
amount borrowed during the year totaled $1,115,348. These aggregate
amounts represented 13.84% and 15.65% respectively of the total capital of
the Bank. The following data is as of December 31, 1999.
The Bank has one outstanding loan to Mr. Gordon A. Burgess, director,
in the amount of $10,226 bearing an annual interest rate of 9%, with the
largest aggregate amount outstanding totaling $10,226. The loan is
scheduled to mature February 9, 2001, and is secured by signature only.
The Bank has one outstanding loan to Mr. Burgess' corporation, Mal,
Inc., in the amount of $360,913 bearing an annual interest rate of 9%, with
the largest aggregate amount outstanding totaling $360,913. The loan is
scheduled to mature January 25, 2001, and is secured by real estate.
The Bank has one outstanding loan to Mr. Leland L. Landry, director,
in the amount of $116,496 bearing an annual interest rate of 9%, with the
largest aggregate amount outstanding totaling $116,496. The loan is
scheduled to mature January 22, 2001, and is secured by real estate.
The Bank has two outstanding loans to Mr. Douglas A. Schonacher,
director, in the amount of $113,024, bearing an annual interest rate of
8.5%, with the largest aggregate amount outstanding totaling $113,024. The
loans are scheduled to mature February 5, 2001, and is secured by real
estate.
The Bank has three outstanding loans to Mr. Schonacher's corporation,
VIP, Inc. in the amount of $104,138, bearing an annual interest rate of
8.5%, with the largest aggregate amount outstanding totaling $104,138. The
<PAGE>
loans are scheduled to mature February 9, 2001, and are secured by real
estate.
The Bank has one outstanding loan to Mr. Soniat's corporation, The
Fisk Corp. in the amount of $147,264, bearing an annual interest rate of
9%, with the largest aggregate amount outstanding totaling $147,264. The
loan is scheduled to mature March 12, 2000, 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
$68,774 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-to-month 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 May 1, 1999, with respect to this
office space expires on May 31, 2003.
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 May
1, 1999, with respect to this office space expires on May 31, 2003.
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 pays $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>
BOL BANCSHARES, INC.
& SUBSIDIARY
December 31, 1999
Audits of Financial Statements
December 31, 1999
and
December 31, 1998
<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, 1999 and 1998, and the related consolidated statements of
income (loss), comprehensive income (loss), changes in stockholders'
equity, and cash flows for the years ended December 31, 1999, 1998 and
1997. 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.
As described in Note B to the financial statements, during 1999, the
banks' regulators advised that the Company incorrectly applied the full
accrual method of accounting for the sale of Other Real Estate in 1998.
Accordingly, the accompanying consolidated financial statements have been
restated from those originally reported to reflect the change to the cost
recovery method.
The Company has excluded from income in the accompanying consolidated
income statement an amount received from litigation settlement, that in our
opinion, should be included to conform with generally accepted accounting
principles. If the settlement was accounted for properly, other
liabilities would be decreased by $201,292, deferred tax assets would be
decreased by $68,440, retained earnings would be increased by $132,852 as
of December 31, 1999, and net income would be increased by $132,852 ($.75
per share), for the year then ended.
In our opinion, except for the effects of not including the amount
received from litigation settlement, as discussed in the preceding
paragraph, 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,
1999 and 1998, and the results of their operations and their cash flows for
the years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.
/s/ Laporte, Sehrt, Romig & Hand
A Professional Accounting Corporation
Metairie, LA
January 17, 2000
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
E-Mail Address: [email protected] InternetAddress:http://www.laporte.com/
Member of AICPA Division for CPA Firms-Private Companies Practice Section and
SEC Practice Section
International Affiliation with Accounting Firms Associated, Inc.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[CAPTION]
<TABLE>
ASSETS
December 31,
1999 1998
<S> <C> <C>
Cash and Due from Banks
Non-Interest Bearing Balances and Cash $8,703,964 $6,692,995
Federal Funds Sold 24,785,000 26,950,000
Investment Securities
Securities Held-to-Maturity (Fair Value of
$2,999,061
in 1999 and $4,514,374 in 1998) 3,003,546 4,497,942
Securities Available-for-Sale, at Fair Value 366,545 291,400
Loans - Less Allowance for Loan Losses of
$1,800,000
in 1999 and 1998, and Unearned Discounts
of $276,804 in 1999 and $215,256 in 1998 56,980,651 59,741,831
Property, Equipment and Leasehold Improvements
(Net
of Depreciation and Amortization) 2,540,585 2,505,740
Other Real Estate 1,274,013 1,356,893
Other Assets 1,968,500 1,311,319
Deferred Taxes 382,308 454,129
Letters of Credit 103,888 84,052
$100,109,000 $103,886,301
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
[CAPTION]
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1999 1998
<S> <C> <C>
LIABILITIES
Deposits
Non-Interest Bearing $35,305,878 $36,826,094
Interest Bearing 55,249,817 57,757,018
Notes Payable 2,232,528 2,272,387
Other Liabilities 1,251,449 1,035,457
Accrued Litigation Settlement 150,000 200,000
Letters of Credit Outstanding 103,888 84,052
Accrued Interest 486,363 525,969
Total Liabilities 94,779,923 98,700,977
STOCKHOLDERS' EQUITY
Preferred Stock - Par Value $1
2,302,811 Shares Issued and
Outstanding in 1999 and 1998 2,302,811 2,302,811
Common Stock - Par Value $1
179,145 Shares Issued and
Outstanding in 1999 and 1998 179,145 179,145
Accumulated Other Comprehensive Income 182,783 133,187
Capital in Excess of Par - Retired Stock 14,888 14,888
Retained Earnings 2,649,450 2,555,293
Total Stockholders' Equity 5,329,077 5,185,324
$100,109,000 $103,886,301
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
[CAPTION]
<TABLE>
For the Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
INTEREST INCOME $9,348,210 $9,813,783 $10,297,883
INTEREST EXPENSE 1,846,456 1,986,681 2,108,592
Net Interest Income 7,501,754 7,827,102 8,189,291
PROVISION FOR (RECOVERY OF)
LOAN LOSSES (154,231) 1,085,625 3,630,273
Net Interest Income
After Provision
for Loan Losses 7,655,985 6,741,477 4,559,018
OTHER INCOME
Service Charges on 1,228,330 1,318,419 1,398,552
Deposit Accounts
Other Non-Interest Income 906,224 930,992 1,133,436
Reversal of Litigation 0 0 390,000
Settlement
Gain on Sale of 0 0 15,860
Securities
Total Other 2,134,554 2,249,411 2,937,848
Income
OTHER EXPENSES
Salaries and Employee 4,148,212 3,669,949 3,974,048
Benefits
Occupancy Expense 1,978,669 1,956,172 1,937,416
Loss on Litigation 0 50,000 150,000
Other Non-Interest 3,523,229 3,447,384 4,581,491
Expense
Total Other 9,650,110 9,123,505 10,642,955
Expenses
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE 140,429 (132,617) (3,146,089)
(BENEFIT)
INCOME TAX EXPENSE 46,272 95,650 (1,170,803)
(BENEFIT)
NET INCOME (LOSS) $94,157 ($228,267) ($1,975,286)
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK $0.53 ($1.27) ($11.03)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
[CAPTION]
<TABLE>
For the Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
NET INCOME (LOSS) $94,157 ($228,267) ($1,975,286)
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
Unrealized Holding Gains
(Losses) on
Investment Securities
Available-for-
Sale, Arising During the 49,596 133,806 3,919
Period
Less: Reclassification
Adjustment for
Gains Included in Net 0 (50) (81)
Income
OTHER COMPREHENSIVE INCOME 49,596 133,756 3,838
COMPREHENSIVE INCOME (LOSS) $143,753 ($94,511) ($1,971,448)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[CAPTION]
<TABLE>
Accumulated Capital In
Other Excess of
Preferred Common Comprehen- Par Retained
sive
Stock Stock Income Retired Earnings Total
Stock
<S> <C> <C> <C> <C> <C> <C>
BALANCE - December $2,302,811 $179,145 ($4,407) $14,888 $4,758,846 $7,251,283
31, 1996
Other Comprehensive Income,
Net of Applicable Deferred
Income Taxes 0 0 3,838 0 0 3,838
Net (Loss) for the 0 0 0 0(1,975,286)(1,975,286)
Year 1997
BALANCE - December 2,302,811 179,145 (569) 14,888 2,783,560 5,279,835
31, 1997
Other Comprehensive Income,
Net of Applicable
Deferred
Income Taxes 0 0 133,756 0 0 133,756
Net (Loss) for the 0 0 0 0 (228,267) (228,267)
Year 1998
BALANCE - December 2,302,811 179,145 133,187 14,888 2,555,293 5,185,324
31, 1998
Other Comprehensive Income,
Net of Applicable
Deferred
Income Taxes 0 0 49,596 0 0 49,596
Net Income for the 0 0 0 0 94,157 94,157
Year 1999
BALANCE - December $2,302,811 $179,145 $182,783 $14,888 2,649,450 $5,329,077
31, 1999
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
<TABLE>
For The Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $94,157 ($228,267) ($1,975,286)
Adjustments to Reconcile Net Income
(Loss) to Net
Cash Provided by (Used in) Operating
Activities:
Provision for (Recovery of) Loan Losses (154,231) 1,085,625 3,630,273
Depreciation and Amortization Expense 540,745 454,298 422,750
Amortization of Investment Security 18,220 2,170 280
Premiums
Accretion of Investment Security (2,263) (20,221) (23,660)
Discounts
(Increase) Decrease in Deferred Income 46,272 95,651 (293,968)
Taxes
Loss on Sale of Property and Equipment 0 0 3,083
Gain on Sale of Other Real Estate (27,206) (19,733) (39,508)
(Increase) Decrease in Other Assets and
Prepaid Taxes (657,181) 1,223,789 (484,534)
Increase (Decrease) in Other
Liabilities, Accrued
Interest and Accrued Loss 126,387 670,271 (77,116)
Contingency
Gain on Available-for-Sale Securities 0 0 (15,860)
Net Cash Provided
by (Used in)
Operating (15,100) 3,263,583 1,146,454
Activities
INVESTING ACTIVITIES
Proceeds from Sale of Available-for-Sale 0 0 16,145
Securities
Proceeds from Available-for-Sale
Securities
Released at Maturity 0 1,000,000 0
Proceeds from Held-to-Maturity
Investment Securities
Released at Maturity 4,500,000 5,500,000 4,000,000
Purchases of Held-to-Maturity Invest- (3,021,562) (501,250) (5,478,359)
ment Securities
Proceeds from Sale of Property and 410 858 1,987
Equipment
Purchases of Property and Equipment (576,000) (263,313) (442,258)
Proceeds from Sale of Other Real Estate 168,000 136,000 527,605
Purchases of Loans (764,353) (4,792,309) 0
Net (Increase) Decrease in Loans 3,621,850 (216,033) 8,110,638
Net Cash Provided by 3,928,345 863,953 6,735,758
Investing Activities
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
[CAPTION]
<TABLE>
For The Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-
Interest Bearing
and Interest Bearing Deposits ($4,027,417) $642,575 ($1,200,099)
Proceeds from Issuance of Long-Term 0 0 1,793,000
Debt
Principal Payments on Long-Term Debt (39,859) (11,121) (1,893,980)
Net Cash Provided by (Used in)
Financing
Activities (4,067,276) 631,454 (1,301,079)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (154,031) 4,758,990 6,581,133
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 33,642,995 28,884,005 22,302,872
CASH AND CASH EQUIVALENTS -
END OF YEAR $33,488,964 $33,642,995 $28,884,005
SUPPLEMENTAL DISCLOSURES:
Additions to Other Real Estate $62,663 $0 $240,716
through Foreclosure
Cash Paid During the Year for $1,886,062 $1,988,981 $2,060,102
Interest
Cash Received During the Year for $0 $876,831 $247,031
Income Taxes
Market Value Adjustment for
Unrealized Gain (Loss)
on Securities Available-for-Sale $75,145 $202,660 $5,815
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.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
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
discounts on loans are recognized as income over the term of the loans
on the interest method. Interest on other loans is calculated and
credited to operations on a simple interest basis. Loans are charged
against the allowance for loan losses when management believes that
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.
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.
Maintenance and repairs are expensed as incurred while major additions
and improvements are capitalized. Gains and losses on dispositions
are included in current operations.
<PAGE>
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 required reserve balance was approximately $1,595,000
and $1,240,000 for the years ended December 31, 1999 and 1998,
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 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.
ACCOUNTING STANDARDS NOT YET ADOPTED
Statement of Financial Accounting Standards No. 137 (SFAS 137),
"Accounting for Derivative Instruments and Hedging Activities", an
amendment extending the effective date of SFAS 133, is effective for
the quarter beginning after June 15, 2000. This statement will
require all derivatives to be recognized at fair value as either
assets or liabilities in the consolidated balance sheets. Changes in
the fair value of derivatives not designated as hedging instruments
are to be recognized currently in earnings. Gains or losses on
derivatives designated as hedging instruments are either to be
recognized currently in earnings or are to be recognized as a
component of other comprehensive income, depending on the intended use
of the derivatives and the resulting designation. The Company
currently has no derivatives; therefore, adoption of this
pronouncement is not expected to have an effect on the financial
position and results of operations of the Company.
NOTE B
RESTATEMENT OF PRIOR PERIOD
During 1999, the Banks' regulators advised that the Company
incorrectly applied the full accrual method of accounting for the sale
of Other Real Estate in 1998. Accordingly, the accompanying
consolidated financial statements have been restated from those
originally reported to reflect the change to the cost recovery method.
The effect of the restatement for 1998 was a decrease in income before
income tax expense of $901,282 ($5.03 per share), a decrease in income
tax expense of $166,852 ($.93 per share), for an overall decrease in
net income of $734,430 ($4.10 per share).
Under the cost recovery method, the bank does not recognize the gain
on the sale of this piece of other real estate or interest income on the
loan made to the
<PAGE>
NOTE B
RESTATEMENT OF PRIOR PERIOD (Continued)
purchasers, until the total payments made by the purchaser reach
certain levels. If all scheduled payments are made in accordance with
the loan agreement, the transaction will revert to the full accrual
method on January 25, 2001, resulting in recognition of a $686,026
gain and approximately $145,000 in interest income.
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 allowance for loan
losses in the year of foreclosure.
The net income (expense) from Other Real Estate totaled ($31,640)
in 1999, ($100,058) in 1998 and ($264,432) in 1997.
NOTE D
LOANS
[CAPTION]
<TABLE>
Major classification of loans are as follows:
December 31,
1999 1998
<S> <C> <C>
Real Estate Mortgages $30,960,725 $28,861,280
Commercial 1,830,551 4,441,110
Personal 5,125,223 3,006,321
Credit Cards 21,012,608 25,294,875
Overdrafts 128,348 153,501
59,057,455 61,757,087
Unearned Discounts 276,804 215,256
58,780,651 61,541,831
Allowance for Loan Losses 1,800,000 1,800,000
$56,980,651 $59,741,831
</TABLE>
<PAGE>
NOTE D LOANS (Continued)
[CAPTION]
<TABLE>
The following is a classification of loans by rate and maturity:
(Dollar amounts in thousands)
December 31,
1999 1998
<S> <C> <C>
Fixed Rate Loans:
Maturing in 3 Months or Less $ 6,800 $ 5,077
Maturing Between 3 and 12 Months 12,612 16,504
Maturing Between 1 and 5 Years 33,502 33,837
Maturing After 5 Years 2,713 1,770
55,627 57,188
Variable Rate Loans:
Maturing Quarterly or More
Frequently 3,391 4,229
Maturing Between 3 and 12 Months - 259
Non-Accrual Loans 40 81
59,058 61,757
Less: Unearned Discount 277 215
Less: Allowance for Loan Losses 1,800 1,800
Net Loans $ 56,981 $ 59,742
</TABLE>
As of December 31, 1999 and 1998, there was no recorded
investment in loans that are considered impaired under SFAS 114 and
118.
During 1999, the Bank purchased credit card portfolios totaling
$764,353, at book value. During 1998, the Bank purchased credit card
portfolios totaling $4,792,309, at a premium of $672,514. The premium
is being amortized as an adjustment to interest income over three
years. Unamortized premiums at December 31, 1999 and 1998 totaled
$290,207 and $514,378, respectively.
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 accompanying consolidated balance sheets under the
account caption, "Other Real Estate", and amount to $1,274,013 at
December 31, 1999 and $1,356,893 at December 31, 1998.
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, 1999, $39,698 of loans were in the non-accrual status
and $1,909 of interest was foregone in the year then ended. At December
31, 1998, $80,572 of loans were in the non-accrual status and $1,847 of
interest was foregone in the year then ended.
<PAGE>
NOTE F
INVESTMENT SECURITIES
Carrying amounts and approximate market values of investment
securities are summarized as follows:
[CAPTION]
<TABLE>
Securities held-to-maturity consisted of the following at
December 31, 1999:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury Securities $3,003,546 $ - $ 4,485 $2,999,061
Securities available-for-sale consisted of the following at
December 31, 1999:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity Securities $89,601 $276,944 $- $366,545
Securities held-to-maturity consisted of the following at
December 31, 1998:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury Securities $4,497,942 $16,432 $ - $4,514,374
Securities available-for-sale consisted of the following at
December 31, 1998:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity Securities $89,601 $201,799 $- $291,400
The maturities of investment securities at December 31, 1999 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 $3,003,546 $2,999,061 $89,601 $366,545
</TABLE>
Securities of $1,101,300 at December 31, 1999 and $1,099,921 at
December 31, 1998 were pledged to secure public funds.
<PAGE>
NOTE G
INCOME TAXES
[CAPTION]
The components of the provision for income tax expense (benefit)
are:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Current $- $ - $(876,831)
Reduction for Excess Provision
in Prior Year: - - (11,060)
Deferred 46,272 95,650 (282,912)
Total Provision for
Income Tax $46,272 $ 95,650 $(1,170,803)
A reconciliation of income tax at the statutory rate to income
tax expense at the Company's effective rate is as follows:
1999 1998 1997
Computed Tax at the Expected
Statutory Rate $47,746 $(45,090) $(1,069,670)
Reduction for Excess Provision
in Prior Year - - (11,060)
Tax Exempt Income - 139,584 (98,835)
Other Adjustments (1,474) 1,156 8,762
Income Tax Expense (Benefit)
for Operations $46,272 $ 95,650 $(1,170,803)
1999 1998 1997
Income Taxes Currently Receivable:
Current Income Tax Expense
(Benefit) from Operations $ - $ - $(876,831)
Other Adjustments - - -
Prepaid Tax - - -
Income Tax Receivable $- $ - $(876,831)
</TABLE>
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 and are measured using the income tax rates
applicable to the period when the differences are expected to be
realized or settled.
<PAGE>
NOTE G
INCOME TAXES (Continued)
There were net deferred tax assets of $382,308 and $454,129
as of December 31, 1999 and 1998, respectively. The major temporary
differences, which created deferred tax assets and liabilities, are as
follows:
<TABLE>
1999 1998
<S> <C> <C>
Unrealized Gain on Securities
FASB 115 Adjustment $(76,772) $(44,110)
Allowance for Loan Loss (32,865) 19,573
Accumulated Depreciation (106,418) (114,456)
Other Real Estate 28,880 30,034
Deferred Gain on Sale of
Other Real Estate 166,852 166,852
Accruals not Deductible Until Paid 24,025 53,086
Net Operating Loss and Tax
Credit Carryforward 310,713 262,145
Contributions Carryforward 16,893 13,005
Accrued Litigation Settlement 51,000 68,000
$382,308 $ 454,129
</TABLE>
The net operating loss carryforwards totaling $793,809 expire in
the years 2012 through 2014.
NOTE H
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Furniture and Equipment $4,393,886 $3,835,320
Bank Owned Vehicles 77,357 78,691
Leasehold Improvements 383,110 375,817
Land 468,425 468,425
Buildings 1,334,075 1,334,075
6,656,853 6,092,328
Less: Accumulated Depreciation and
Amortization 4,116,268 3,586,588
$2,540,585 $2,505,740
</TABLE>
Depreciation and amortization expense aggregated $540,745 in 1999,
$454,298 in 1998 and $422,750 in 1997.
<PAGE>
NOTE I
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
<TABLE>
For The Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
Balance - January 1 $1,800,000 $1,800,000 $1,500,000
Provision Charged to:
Operations (154,231) 1,085,625 3,630,273
Loans Charged Off (1,581,595) (1,950,067) (4,132,454)
Recoveries 1,735,826 864,442 802,181
Balance - December 31 $1,800,000 $1,800,000 $1,800,000
</TABLE>
NOTE J
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 1999 and 1998. 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 1999 and 1998.
On August 10, 1999, the Company declared a dividend distribution
of one purchase right for each outstanding share of common stock.
Each right entitles the holder, at any time following the
"Distribution Date" to purchase one share of common stock of the
Company at an exercise price of $7.50 per share. A "Distribution
Date" occurs ten days following certain actions designed to acquire
20% or more of the Company's voting securities. The rights will
expire on August 9, 2009.
NOTE K
EARNINGS PER COMMON SHARE
Earnings per share are computed using the weighted average number
of shares outstanding, which were 179,145 in 1999, 1998 and 1997.
There was no provision for dividends for the years ended December 31,
1999, 1998 or 1997.
NOTE L
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>
1999 1998 1997
<S> <C> <C> <C>
Credit Card Arrangements $52,025,000 $54,089,000 $53,467,000
Commitments To Extend Credit 2,017,293 557,000 611,000
</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
<PAGE>
NOTE L
CONTINGENT LIABILITIES AND COMMITMENTS (Continued)
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 defend vigorously its
position.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The subsidiary bank is a defendant in a lawsuit filed by one of
its proprietary customers for alleged breach of contract. A judgment
was rendered against the bank, and accordingly, a provision for loss
of $150,000 has been charged to operations in the accompanying
consolidated financial statements for 1997. The bank has counter sued
and is presently appealing the judgement.
NOTE M
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>
1999 1998
<S> <C> <C>
Balance - January 1 $1,053,824 $1,083,723
New Loans Made and Renewals 61,524 1,128,335
Reclassifications (16,697) -
Repayments and Maturities (112,068) (1,158,234)
Balance - December 31 $986,583 $1,053,824
</TABLE>
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,
1999, 1998 and 1997 totaled $490,244, $479,388 and $492,459,
respectively. An annual rent of $74,400 was paid to Tammany Mall
Partnership for the years ended December 31, 1999, 1998 and 1997.
At December 31, 1999 and 1998 amounts due to Officers and
Directors of the Company, including accrued interest, totaled $649,781
and $733,986, respectively. These amounts which are included in Notes
Payable and Accrued Interest Payable in the accompanying consolidated
balance sheets, are payable on demand and bear interest at 10% per
annum. Of the debentures payable at December 31, 1999 and 1998,
$196,000 were to Officers and Directors of the Company (see Note R).
Another note payable to Director totaled $68,774 and $74,633 at
December 31, 1999 and 1998, respectively, and is also disclosed in
Note R.
<PAGE>
NOTE N
LEASES
The Subsidiary Bank leases office space under agreements expiring
in various years through December 31, 2001. Two of the leases are
with related parties, as discussed in Note M. In addition, the
Subsidiary Bank rents office space on a month-to-month basis from
non-related groups. Various pieces of data processing equipment are
also leased.
The total minimum rental commitment at December 31, 1999, under
the leases is $1,880,453 which is due as follows:
<TABLE>
December 31,
<S> <C>
2000 $658,560
2001 535,484
2002 484,524
2003 201,885
$1,880,453
</TABLE>
For the years ended December 31, 1999, 1998 and 1997, $792,323,
$805,605 and $813,003 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, 1999 are:
<TABLE>
December 31,
<S> <C>
2000 $115,435
2001 88,624
2002 39,256
2003 25,976
$269,291
NOTE O
LETTERS OF CREDIT
Outstanding letters of credit were $103,888 and $84,052 as
of December 31, 1999 and 1998, respectively.
<PAGE>
NOTE P
INTEREST BEARING DEPOSITS
Major classifications of interest bearing deposits are as
follows:
</TABLE>
<TABLE>
December 31,
1999 1998
<S> <C> <C>
NOW Accounts $13,654,393 $13,340,333
Money Market Accounts 5,458,005 6,750,080
Savings Accounts 25,816,343 27,061,209
Certificates of Deposit Greater
Than $100,000 1,684,337 1,643,514
Other Certificates of Deposit 8,636,739 8,961,882
$55,249,817 $57,757,018
</TABLE>
[CAPTION]
<TABLE>
The maturities of Certificates of Deposit Greater than $100,000
at December 31, 1999 are as follows: (Dollar amounts in thousands)
<S> <C>
Three Months or Less $ 633
After Three Months Through One Year 851
After One Year Through Three Years 200
$ 1,684
</TABLE>
NOTE Q
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 without prior regulatory approval.
Refer to Note X.
NOTE R
NOTES PAYABLE
The following is a summary of notes payable at December 31, 1999
and 1998:
<TABLE>
December 31,
1999 1998
<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. 68,774 74,633
Debentures payable, due July 2000, interest at
9%, callable at 103%, 102% and 101% of
face value during the first, second, and third
years, respectively, following the closing date,
interest payable semi-annually, each $500
debenture secured by 39.72 shares of the
Subsidiary Bank's stock. 1,753,000 1,787,000
$2,232,528 $2,272,387
</TABLE>
<PAGE>
NOTE R
NOTES PAYABLE (Continued)
Following are maturities of long-term debt:
<TABLE>
December 31,
<S> <C>
2000 $2,170,454
2001 7,663
2002 8,763
2003 10,023
2004 11,462
Subsequent to 2004 24,163
$2,232,528
</TABLE>
NOTE S
INTEREST INCOME AND INTEREST EXPENSE
Major categories of interest income and interest expense are as
follows:
<TABLE>
December 31,
1999 1998 1997
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on
Loans:
Real Estate Loans $2,451,875 $2,423,299 $2,213,306
Installment Loans 358,530 390,419 464,362
Credit Cards and 4,382,728 4,896,216 5,404,070
Related Plans
Commercial and all
Other Loans 445,326 502,902 620,352
Interest on Investment
Securities -
U.S. Treasury and
Other
Securities 191,231 455,529 591,415
Interest on Federal 1,518,520 1,145,418 1,004,378
Funds Sold
$9,348,210 $9,813,783 $10,297,883
INTEREST EXPENSE
Interest on Time Deposits
of $100,000 or More $78,057 $61,204 $59,565
Interest on Other 1,558,521 1,711,816 1,829,451
Deposits
Interest on Other Borrowed Funds 0 1,824 220
Interest on Notes 209,878 211,837 219,356
Payable
$1,846,456 $1,986,681 $2,108,592
</TABLE>
<PAGE>
NOTE T
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
Major categories of other non-interest income and non-interest
expenses are as follows:
<TABLE>
December 31,
1999 1998 1997
<S> <C> <C> <C>
OTHER NON-INTEREST INCOME
Cardholder and Other
Charge Card
Income $672,941 $679,405 $632,747
Data Processing and Items
Processing 75 175 850
Other Commission and Fees 92,282 87,634 91,921
Other Real Estate Income 36,036 32,905 72,620
Other Income 104,890 130,873 335,298
$906,224 $930,992 $1,133,436
OTHER NON-INTEREST EXPENSE
Loan and Charge Card $1,031,232 $1,005,179 $1,111,666
Expenses
Communications 500,349 565,470 779,843
Stationery, Forms and
Supplies 317,017 302,858 374,799
Professional Fees 921,007 741,324 823,220
Insurance and Assessments 98,717 92,049 93,869
Advertising 102,935 116,638 153,145
Miscellaneous Losses 52,977 53,461 492,512
Promotional Expenses 178,902 154,636 146,253
Other Real Estate Expenses 67,677 132,962 337,052
Other Expenses 252,416 282,807 269,132
$3,523,229 $3,447,384 $4,581,491
</TABLE>
<PAGE>
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
BOL BANCSHARES, INC.
CONDENSED BALANCE SHEETS
[CAPTION]
<TABLE>
December 31,
1999 1998
<S> <C> <C>
ASSETS
Due from Banks $ 427,889 $599,241
Due from Subsidiary 99,636 118,738
Securities Available-for-Sale, at Fair 346,545 271,400
Value
Other Assets 19,312 31,959
Investment in Bank of Louisiana 7,128,177 6,905,656
$8,021,559 $7,926,994
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes Payable $2,232,528 $2,272,386
Accrued Expenses 0 10,000
Deferred Taxes 25,549 0
Accrued Interest 365,794 390,673
Shareholders' Equity 5,397,688 5,253,935
$8,021,559 $7,926,994
</TABLE>
<PAGE>
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
BOL BANCSHARES, INC.
STATEMENTS OF INCOME (LOSS)
[CAPTION]
<TABLE>
December 31,
1999 1998 1997
<S> <C> <C> <C>
INCOME
Dividend Income - Bank of $0 $ 387,500 $0
Louisiana
Interest Income 13,595 18,223 19,753
Miscellaneous Income 12,760 0 3,327
26,355 405,723 23,080
EXPENSES
Interest 209,878 211,837 219,357
Other Expenses 15,570 35,218 23,951
225,448 247,055 243,308
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
(LOSS) OF SUBSIDIARY (199,093) 158,668 (220,228)
Equity in Undistributed
Earnings (Loss) of Subsidiary 222,521 (262,939) (1,829,936)
INCOME (LOSS) BEFORE
INCOME TAX BENEFIT 23,428 (104,271) (2,050,164)
INCOME TAX BENEFIT 70,728 77,803 74,878
NET INCOME (LOSS) $94,156 ($26,468) ($1,975,286)
</TABLE>
<PAGE>
NOTE U
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
BOL BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
[CAPTION]
<TABLE>
December 31,
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $94,156 ($26,468) ($1,975,286)
Adjustments to Reconcile Net Income
(Loss) to
Net Cash Provided by (Used in)
Operating Activities
Equity in Undistributed (Earnings)
Loss of Subsidiary (222,521) 262,939 1,829,936
Net Decrease in Other Assets 12,648 889,478 156,612
Net Increase (Decrease) in Other (34,879) 38,060 50,249
Liabilities
Net Cash Provided by (Used in)
Operating Activities (150,596) 1,164,009 61,511
INVESTING ACTIVITIES
Investment in Available-for-Sale 0 (271,400) 0
Securities
Net Cash Used in Investing Activities 0 (271,400) 0
FINANCING ACTIVITIES
Repayments of Advances to 0 0 22,853
Subsidiaries
Repayments of Advances from (791,065) 0
Subsidiaries
(Increase) Decrease in Due From 19,102 (77,803) 0
Subsidiary
Proceeds from Issuance of Long-Term 0 0 1,793,000
Debt
Repayment of Long-Term Debt (39,858) (11,122) (1,893,980)
Net Cash Used in Financing Activities (20,756) (879,990) (78,127)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (171,352) 12,619 (16,616)
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 599,241 586,622 603,238
CASH AND CASH EQUIVALENTS -
END OF YEAR $427,889 $599,241 $586,622
</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
COMPREHENSIVE INCOME
Comprehensive income was comprised of changes in the Company's
unrealized holding gains or losses on securities available-for-sale during
1999, 1998 and 1997. The following represents the tax effects associated
with the components of comprehensive income:
<TABLE>
December 31,
1999 1998 1997
<S> <C> <C> <C>
Gross Unrealized Holding
Gains
Arising During the Period $75,145 $202,736 $5,938
Tax (Expense) (25,549) (68,930) (2,019)
49,596 133,806 3,919
Reclassification Adjustment
for
Gains Included in Net 0 (76) (122)
Income
Tax Benefit 0 26 41
0 (50) (81)
Net Unrealized Holding
Gains
Arising During the Period $49,596 $133,756 $3,838
</TABLE>
NOTE X
REGULATORY MATTERS
On December 14, 1999, the Bank consented to a revised Memorandum
of Understanding issued by the Federal Deposit Insurance Corporation
(FDIC) and the Office of Financial Institutions (OFI). The Memorandum
was issued by the FDIC and OFI as a result of their examination of the
Bank as of August 9, 1999 and replaces the Memorandum of Understanding
dated March 12, 1996. The Memorandum of Understanding is an
arrangement between the Bank and the FDIC and OFI 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, pending regulatory approval,
b) Eliminate from its books certain criticized assets and reduce
other criticized assets to specified levels,
<PAGE>
NOTE X
REGULATORY MATTERS (Continued)
c) Initiate and implement a marketing program to dispose of its
other real estate in a timely manner,
d) Formulate and implement a written strategic plan, management
plan, management succession plan, and profit plan,
e) Perform a quarterly review of the adequacy of the Bank's
loan valuation reserve,
f) Revision of the Bank's loan policy and loan review program,
g) Restatement of 1998 income for accounting for a gain recognized
on the sale of other real estate.
While no assurance can be given, Bank management believes it has
taken action toward complying with the provisions of the Memorandum of
Understanding, although at December 31, 1999 and 1998 their Tier I
leverage capital ratio fell below the seven percent threshold to 6.80%
and 6.89%, respectively. 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.
As of December 31, 1999, the most recent notification from the
FDIC categorized the Bank as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized "well
capitalized" the Bank must maintain minimum leverage capital ratios
and minimum amounts of capital to total "risk weighted" assets, as
defined by banking regulators. Management philosophy and plans are
directed to enhancing the financial stability of the Subsidiary Bank
to ensure the continuity of operations.
At December 31, 1999, the Bank is required to have a minimum Tier
I leverage capital and minimum Tier I and Total capital risk based
ratio of 4.00%, 4.00% and 8.00%, respectively. The Bank's actual risk
based ratios at that date were 10.50% and 11.77%, respectively. Tier
I leverage capital ratios for the Subsidiary Bank were 6.80% for 1999
and 6.89% for 1998.
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 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
<PAGE>
NOTE Y
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
current U.S. treasury interest rate curve, a factor for cost of
processing and a factor for historical credit risk to determine the
discount rate.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits and certain
money market deposits are calculated based upon general investment
market interest rates for investments with similar maturities. The
value of fixed maturity certificates of deposit is estimated using the
U.S. treasury interest rate curve currently offered for deposits of
similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present credit-
worthiness of the counterparties.
The estimated fair values of the Company's financial instruments
are as follows:
[CAPTION]
<TABLE>
December 31, 1999
Carrying Fair
Amount Value
<S> <C> <C>
Financial Assets:
Cash and Short-Term Investments $33,488,964 $33,488,964
Investment Securities 3,370,091 3,365,606
Loans 58,780,651 58,527,842
Less: Allowance for Loan Losses 1,800,000 1,800,000
$93,839,706 $93,582,412
Financial Liabilities:
Deposits $90,555,695 $90,606,530
Unrecognized Financial Instruments:
Commitments to Extend Credit $1,913,405 $1,913,405
Commercial Letters of Credit 103,888 103,888
Credit Card Arrangements 52,025,000 52,025,000
$54,042,293 $54,042,293
</TABLE>
<PAGE>
To the Board of Directors
BOL Bancshares, Inc.
& Subsidiary
Independent Auditor's Report
on Supplementary Information
Our report on our audits of the basic financial statements of BOL
BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana, for
the years ended December 31, 1999 and 1998 appears on page 1. These audits
were 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 17, 2000
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
E-Mail Address: [email protected]
InternetAddress:http://www.laporte.com/
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
[CAPTION]
SCHEDULE I
BALANCE SHEETS
UNCONSOLIDATED
<TABLE>
ASSETS
December 31,
1999 1998
<S> <C> <C>
Cash and Due from Banks
Non Interest Bearing Balances and Cash $8,703,964 $ 6,692,995
Federal Funds Sold 24,785,000 26,950,000
Investment Securities
Securities Held-to-Maturity (Fair Value of
$2,999,061 in 1999
and $4,514,374 in 1998) 3,003,546 4,497,942
Securities Available-for-Sale, at Fair Value 20,000 20,000
Loans: Less Allowance for Loan Losses of
$1,800,000
in 1999 and 1998 and Unearned Discount of
$276,804 in 1999 and $215,256 in 1998 56,980,651 59,741,831
Property, Equipment and Leasehold
Improvements (Net
of Depreciation and Amortization) 2,540,585 2,505,740
Other Real Estate 1,274,013 1,356,893
Other Assets 1,949,188 1,279,358
Deferred Taxes 476,469 522,741
Letters of Credit 103,888 84,052
Total Assets $99,837,304 $103,651,552
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-Interest Bearing $35,309,757 $36,943,605
Interest Bearing 55,673,827 58,238,748
Other Liabilities 1,251,450 1,025,457
Letters of Credit Outstanding 103,888 84,052
Due to Parent 99,636 118,738
Accrued Litigation Settlement 150,000 200,000
Accrued Interest 120,569 135,296
Total Liabilities 92,709,127 96,745,896
STOCKHOLDERS' EQUITY
Common Stock - 143,000 Shares Issued and 1,430,000 1,430,000
Outstanding
Surplus 4,616,796 4,616,796
Retained Earnings 1,081,381 858,860
Total Stockholders' Equity 7,128,177 6,905,656
Total Liabilities and Stockholders' Equity $99,837,304 $103,651,552
</TABLE>
See independent auditor's report on supplementary information.
<PAGE>
BANK OF LOUISIANA
SUPPLEMENTARY INFORMATION
[CAPTION]
SCHEDULE II
STATEMENTS OF INCOME (LOSS)
UNCONSOLIDATED
<TABLE>
For The Years Ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
INTEREST INCOME $9,348,210 $9,813,783 $10,297,883
INTEREST EXPENSE 1,650,173 1,793,067 1,908,988
Net Interest Income 7,698,037 8,020,716 8,388,895
PROVISION FOR (RECOVERY OF) LOAN (154,231) 1,085,625 3,630,273
LOSSES
Net Interest Income After
Provision
For Loan Losses 7,852,268 6,935,091 4,758,622
OTHER INCOME
Service Charges on Deposit 1,228,330 1,318,419 1,398,552
Accounts
Other Non-Interest Income 893,464 930,992 1,130,109
Reversal of Litigation Settlement 0 0 390,000
Gain on Securities 0 201,799 15,860
2,121,794 2,451,210 2,934,521
OTHER EXPENSES
Salaries and Employee Benefits 4,148,212 3,669,949 3,974,048
Occupancy Expense 1,978,669 1,956,172 1,937,416
Loss on Litigation 0 50,000 150,000
Other Non-Interest Expense 3,507,660 3,412,166 4,557,540
9,634,541 9,088,287 10,619,004
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE (BENEFIT) 339,521 298,014 (2,925,861)
INCOME TAX EXPENSE (BENEFIT) 117,000 173,453 (1,095,925)
NET INCOME (LOSS) $222,521 $124,561 ($1,829,936)
EARNINGS (LOSS) PER SHARE
OF COMMON STOCK $1.56 $0.87 ($12.80)
</TABLE>
See independent auditor's report on supplementary information.
<PAGE>
BANK OF LOUISIANA
SUPPLEMENTARY INFORMATION
[CAPTION]
SCHEDULE III
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
UNCONSOLIDATED
<TABLE>
Accumulated
Other
Common Comprehensive Retained
Stock Income Surplus Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE - December $1,430,000 ($4,407) $4,616,796 $2,951,735 $8,994,124
31, 1996
Net Loss for the 0 0 0 (1,829,936) (1,829,936)
Year 1997
Other Comprehensive
Income,
Net of Applicable
Deferred
Income Taxes 0 3,838 0 0 3,838
BALANCE - December 1,430,000 (569) 4,616,796 1,121,799 7,168,026
31, 1997
Net Income for the 0 0 0 124,561 124,561
Year 1998
Cash dividends
declared for
the Year ($2.71 per 0 0 0 (387,500) (387,500)
share)
Other Comprehensive
Income,
Net of Applicable
Deferred
Income Taxes 0 569 0 0 569
BALANCE - December 1,430,000 0 4,616,796 858,860 6,905,656
31, 1998
Net Income for the 0 0 0 222,521 222,521
Year 1999
BALANCE - December $1,430,000 $0 $4,616,796 $1,081,381 $7,128,177
31, 1999
</TABLE>
See independent auditor's report on supplementary information.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BOL BANCSHARES, INC.
/s/ Perggy L. Schaefer
____________________________________________
Peggy L. Schaefer
Treasurer
March 28, 2000
___________________________
Date
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 28, 2000.
/s/ G. Harrison Scott /s/ James A Comiskey
___________________________________ ____________________________________
G. Harrison Scott - Director James A. Comiskey - Director
/s/ Gerry E. Hinton /s/ Lionel J. Favret, Sr.
___________________________________ ____________________________________
Gerry E. Hinton - Director Lionel J. Favret, Sr. -Director
/s/ Edward J. Soniat /s/ Leland L. Landry
___________________________________ ____________________________________
Edward J. Soniat - Director Leland L. Landry - Director
<PAGE>
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