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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

 

FORM 10-Q

(Amendment No. 1)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended                    June 30, 2011

 

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT

 

For the transition period from            to

 

Commission file Number           00-16934

 

BOL BANCSHARES, INC.

(Exact name of registrant as specified in its charter.)

 

Louisiana 72-1121561
(State of incorporation) (I.R.S. Employer Identification No.)

 

300 St. Charles Avenue, New Orleans, La. 70130

(Address of principal executive offices)

 

(504) 889-9400

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

  Large accelerated filer o Accelerated filer o
  Non-accelerated filer o Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o  No x

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 179,145 shares as of August 15, 2011.

 

 
  
 

 

 

EXPLANATORY NOTE

 

The sole purpose of this Amendment No. 1 to BOL Bancshares, Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 19, 2011 (the Form 10-Q), is to 1) correct the heading of NOTE D SUBSEQUENT EVENTS to NOTE E SUBSEQUENT EVENTS, 2) furnish a futher disclosure in NOTE F REGULATORY MATTERS and 3) furnish Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

 

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the original Form 10-Q.

 

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

  
 

BOL BANCSHARES, INC. & SUBSIDIARY

INDEX

 

      Page No.
       
PART I.  Financial Information  
       
  Item 1. Financial Statements  
       
  Consolidated Statements of Condition 4
       
  Consolidated Statements of Income 5
       
  Consolidated Statements of Comprehensive Income 6
       
  Consolidated Statements of Cash Flow 7
       
  Notes to Consolidated Financial Statements 8
       
  Item 2. Management's Discussion and Analysis 18
       
  Item 3. Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events and Future Growth 20
       
  Item 4. Submission of Matters to a Vote of Security Holders 21
       
  Item 4T.  Controls and Procedures 21
       
PART II.  Other Information  
       
  Item 6. Exhibits 22
       
Signatures 23

 

  
 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF CONDITION

 

    June 30,     Dec. 31,  
(Amounts in Thousands)   2011     2010  
    (Unaudited)     (Audited)  
ASSETS            
Cash and Due from Banks            
Non-Interest Bearing Balances and Cash   $ 2,825     $ 3,834  
Federal Funds Sold     16,775       14,950  
Certificates of Deposit     3,953       4,203  
Investment Securities                
Securities Held to Maturity     0       0  
Securities Available for Sale     878       878  
Loans-Less Allowance for Loan Losses of $1,800 in 2011 and in 2010     57,141       60,236  
Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization)     5,755       5,856  
Other Real Estate     4,153       3,137  
Other Assets     813       1,282  
TOTAL ASSETS   $ 92,294     $ 94,376  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
                 
LIABILITIES                
Deposits:                
Non-Interest Bearing     30,562       31,867  
NOW Accounts     10,597       11,184  
Money Market Accounts     4,180       3,948  
Savings Accounts     20,065       20,157  
Time Deposits, $100,000 and over     2,835       5,248  
Other Time Deposits     10,325       8,173  
TOTAL DEPOSITS     78,563       80,577  
Notes Payable     1,144       1,144  
Other Liabilities     762       882  
TOTAL LIABILITIES     80,470       82,603  
                 
SHAREHOLDERS' EQUITY                
Preferred Stock - Par Value $1                
1,808,911 Shares Issued and Outstanding at June 30, 2011                
1,810,296 Shares Issued and Outstanding at December 31, 2010     1,809       1,810  
Common Stock - Par Value $1                
179,145 Shares Issued and Outstanding in 2011 and 2010     179       179  
Accumulated Other Comprehensive Income     513       513  
Capital in Excess of Par - Retired Stock     195       195  
Undivided Profits     9,075       8,777  
Current Earnings     53       299  
TOTAL SHAREHOLDERS' EQUITY     11,824       11,773  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 92,294     $ 94,376  

 

The accompanying notes are an integral part of these consolidated financial statements.

4
 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(Unaudited) 

 

    Three months ended     Six months ended  
    June 30,     June 30,  
(Amounts in Thousands)   2011     2010     2011     2010  
                         
INTEREST INCOME                        
Interest and Fees on Loans   $ 1,493     $ 1,554     $ 2,970     $ 3,041  
Interest on Investment Securities     2       6       4       9  
Interest on Federal Funds Sold     4       5       10       8  
Interest on Certificates of Deposit     9       14       18       31  
Total Interest Income     1,507       1,579       3,002       3,089  
INTEREST EXPENSE                                
Interest on Deposits     89       88       177       179  
Interest Expense on Notes Payable and Debentures     19       19       37       37  
Total Interest Expense     108       107       214       216  
NET INTEREST INCOME     1,399       1,472       2,788       2,873  
Provision for Loan Losses     32       109       51       184  
NET INTEREST INCOME AFTER PROVISION                                
FOR LOAN LOSSES     1,367       1,363       2,737       2,689  
NON-INTEREST INCOME                                
Service Charges on Deposit Accounts     108       114       217       226  
Cardholder & Other Credit Card Income     105       106       206       207  
Other Operating Income     19       210       59       525  
Total Non-interest Income     232       430       481       958  
NON-INTEREST EXPENSE                                
Salaries and Employee Benefits     597       653       1,197       1,277  
Occupancy Expense     233       267       457       535  
Communications     57       60       114       107  
Outsourcing Fees     380       390       726       709  
Loan & Credit Card Expense     30       31       58       57  
Professional Fees     68       66       150       120  
ORE Expense     65       123       109       234  
Other Operating Expense     158       233       316       246  
Total Non-interest Expense     1,589       1,823       3,126       3,285  
                                 
Income Before Tax Provision     10       (30 )     92       362  
                                 
Provision for (Benefit) Income Taxes     7       (85 )     39       51  
                                 
NET INCOME   $ 3     $ 55     $ 53     $ 310  
                                 
Earnings Per Share of Common Stock   $ 0.02     $ 0.31     $ 0.29     $ 1.73  

 

The accompanying notes are an integral part of these consolidated financial statements.

5
 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) 

 

    Six Months Ended  
    June 30,     June 30,  
(Amounts in thousands)   2011     2010  
             
NET INCOME   $ 53     $ 310  
                 
OTHER COMPREHENSIVE INCOME, NET OF TAX                
Unrealized Holding Losses on Investment Securities Available-for-Sale, Arising During the Period     -       -  
                 
COMPREHENSIVE INCOME   $ 53     $ 310  

 

The accompanying notes are an integral part of these consolidated financial statements.

6
 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) 

 

    Six Months Ended  
    June 30,     June 30,  
(Amounts in thousands)   2011     2010  
OPERATING ACTIVITIES            
Net Income   $ 53     $ 310  
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:                
Provision for Loan Losses     51       184  
Depreciation and Amortization Expense     157       194  
Gain on Sale of Other Real Estate     -       (395 )
Decrease in Other Assets     468       730  
Decrease in Other Liabilities and Accrued Interest     (120 )     (296 )
Net Cash Provided by Operating Activities     609       727  
                 
INVESTING ACTIVITIES                
Proceeds from Held-to-Maturity Investment Securities                
Released at Maturity     -       1,000  
Purchases of Held-to-Maturity Investment Securities     -       (3,000 )
Purchases of Property and Equipment     (56 )     (63 )
Capitalized Construction Costs for ORE     (17 )     (432 )
Increase in Certificate of Deposit with Other Banks     250       499  
Net Decrease (Increase) in Loans     2,045       (2,435 )
Net Cash Provided by (Used in) Investing Activities     2,222       (4,431 )
                 
FINANCING ACTIVITIES                
Net Decrease in Non-Interest Bearing and Interest Bearing Deposits     (2,014 )     (395 )
Preferred Stock Retired     (1 )     (22 )
Net Cash Used in Financing Activities     (2,015 )     (417 )
                 
Net (Decrease) in Cash and Cash Equivalents     816       (4,121 )
Cash and Cash Equivalents - Beginning of Year     18,784       17,591  
Cash and Cash Equivalents - End of Period   $ 19,600     $ 13,470  
                 
SUPPLEMENTAL DISCLOSURES:                
Cash Paid During the Year for Interest   $ 94     $ 257  
Cash (Received) Paid During the Year for Income Taxes   $ 11     $ (225 )
Market Value Adjustment for Unrealized Loss on Securities Available-for-Sale   $ -     $ -  
Additions to Other Real Estate Thru Foreclosure   $ 999     $ 601  

 

The accompanying notes are an integral part of these financial statements.

7
 

BOL BANCSHARES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note A Summary of Accounting Policies

 

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bank of Louisiana (the Bank), and the Bank’s wholly owned subsidiary, BOL Assets, LLC.  These consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X, and do not include information or footnotes for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America.  However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included.

 

Use of Estimates

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses.

 

Cash and Cash Equivalents

Cash equivalents include amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

 

Loans

Loans are stated at the amount of unpaid principal, reduced by unearned discount and an allowance for loan losses.  Unearned discounts on loans are recognized as income over the term of the loans on the interest method.  Interest on other loans is calculated and credited to operations on a simple-interest basis.  Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely.  Loan origination fees and certain direct origination costs, when material, are capitalized and recognized as an adjustment of the yield on the related loan.

 

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to expenses.  Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely.  The allowance is an amount that management believes will be adequate to absorb known and inherent losses on existing loans that may become uncollectible, based on evaluation of the collectability of loans and prior loss experience.  The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers’ ability to pay. The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired.

 

For loans individually evaluated for impairment, the estimated amount of loss is based on several factors, which include fair value of collateral and expected cash flows from the loan.

8
 

Note B Disclosure about Fair Value of Financial Instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value:

 

Cash and Short-Term Investments

For cash, the carrying amount approximates fair value.  For short-term investments, fair values are calculated based upon general investment market interest rates for similar maturity investments.

 

Investment Securities

For securities and marketable equity securities held-for-investment purposes, fair values are based on quoted market prices.

 

Loan Receivables

For certain homogeneous categories of loans, such as residential mortgages, credit card receivables and other consumer loans, fair value is estimated using the current U.S. treasury interest rate curve, a factor for cost of processing and a factor for historical credit risk to determine the discount rate.

 

Deposit Liabilities

The fair value of demand deposits, savings deposits and certain money market deposits are calculated based upon general investment market interest rates for investments with similar maturities.  The value of fixed maturity certificates of deposit is estimated using the U.S. treasury interest rate curve currently offered for deposits of similar remaining maturities.

 

Commitments to Extend Credit

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit-worthiness of the counterparties.

 

The estimated fair values of the Company’s financial instruments at June 30, 2011 and December 31, 2010, are as follows (amounts in thousands):

 

    June 30, 2011  
`   Carrying     Fair  
    Amount     Value  
    (In Thousands)  
Financial Assets:            
Cash and Short-Term Investments   $ 2,825     $ 2,838  
Certificates of Deposit     3,953       3,853  
Investment Securities     878       878  
Loans     58,941       58,698  
Less:   Allowance for Loan Losses     (1,800 )     (1,800 )
    $ 64,797     $ 64,467  
                 
                 
Financial Liabilities:                
Deposits   $ 78,563     $ 79,043  
                 
Unrecognized Financial Instruments:                
Commitments to Extend Credit   $ 974     $ 974  
Credit Card Arrangements     13,109       13,109  
    $ 14,083     $ 14,083  

 

9
 

 

    December 31, 2010  
    Carrying     Fair  
    Amount     Value  
    (In Thousands)  
Financial Assets:            
Cash and Short-Term Investments   $ 3,834     $ 3,834  
Certificates of Deposit     4,203       4,203  
Investment Securities     878       878  
Loans     62,036       62,054  
Less:   Allowance for Loan Losses     (1,800 )     (1,800 )
    $ 69,151     $ 69,169  
                 
                 
Financial Liabilities:                
Deposits   $ 80,577     $ 80,675  
                 
Unrecognized Financial Instruments:                
Commitments to Extend Credit   $ 1,763     $ 1,763  
Credit Card Arrangements     14,626       14,626  
    $ 16,389     $ 16,389  

 

Note C Loans and Allowance for Loans Losses

 

Major classifications of loans as of June 30, 2011 and December 31, 2010 are as follows:

 

    June 30,     December 31,  
    2011     2010  
Real Estate Mortgages:            
Residential 1-4 Family   $ 20,813,797     $ 19,541,387  
Commercial     18,595,350       20,281,907  
Construction     6,714,135       9,023,499  
Second Mortgages     893,398       948,686  
Other     1,668,276       1,724,934  
                 
      48,684,956       51,520,413  
                 
                 
Commercial     2,625,311       2,726,278  
Personal     1,540,159       1,191,139  
Credit Cards     5,941,645       6,321,359  
Overdrafts     148,452       276,932  
      58,940,523       62,036,121  
                 
Allowance for Loan Losses     1,800,000       1,800,000  
                 
Net Loans   $ 57,140,523     $ 60,236,121  

 

10
 

 

The following is a classification of loans by rate and maturity:

 

    June 30,     December 31,  
    2011     2010  
    (In Thousands)  
Fixed Rate Loans:            
Maturing in 3 Months or Less   $ 12,042     $ 13,785  
Maturing Between 3 and 12 Months     28,364       29,769  
Maturing Between 1 and 5 Years     15,616       14,154  
Maturing After 5 Years     596       631  
                 
Variable Rate Loans:                
Maturing Quarterly or More Frequently     1,352       723  
Maturing Between 3 and 12 Months     -       698  
Maturing Between 1 and 5 Years     -       -  
Non accrual Loans     971       2,276  
                 
Less: Allowance for Loan Losses     (1,800 )     (1,800 )
                 
Net Loans   $ 57,141     $ 60,236  

 

Loans are considered past due if the required principal and interest payments have not been received as of the date of such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet the payment obligations as they become due, as well as when required by regulatory provisions.  Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due.

 

Non-accruals loans, segregated by class of loan, are as follows:

 

    June 30,     December 31,  
    2011     2010  
    (in thousands)  
Real Estate Mortgages            
Residential 1-4 Family   $ 727,438     $ 793,000  
Commercial     -       100,567  
Construction     220,200       1,370,856  
Second Mortgages     -       -  
Other     -       -  
                 
Commercial     11,305       -  
Personal     11,793       11,793  
Credit Cards     -       -  
Overdrafts     -       -  
                 
Total   $ 970,736     $ 2,276,216  

 

11
 

An aging analysis of past due loans, segregated by class of loans, as of June 30, 2011 and December 31, 2010, is as follows:

 

                                  ACCRUING  
    30-89     90-MORE     TOTAL     CURRENT     TOTAL     90-MORE  
June 30, 2011   DAYS     DAYS     PAST DUE     LOANS     LOANS     PAST DUE  
                                       
Real Estate                                      
1-4 Family Res.   $ 1,500,249     $ 970,901     $ 2,471,150     $ 18,342,647     $ 20,813,797     $ 243,463  
Commercial     128,649       -       128,649       18,466,701       18,595,350       -  
Construction     622,371       492,286       1,114,657       5,599,478       6,714,135       272,086  
Second Mortgages     27,559       -       27,559       865,839       893,398       -  
Other     -       -       -       1,668,276       1,668,276       -  
                                                 
Commercial     25,938       16,049       41,987       2,583,324       2,625,311       4,744  
Personal     32,151       100,970       133,121       1,407,038       1,540,159       89,177  
Credit Cards     53,713       101,667       155,380       5,786,265       5,941,645       101,667  
Overdrafts     1,905       55,496       57,401       91,051       148,452       55,496  
                                                 
Total   $ 2,392,535     $ 1,737,369     $ 4,129,904     $ 54,810,619     $ 58,940,523     $ 766,633  

 

                                  ACCRUING  
    30-89     90-MORE     TOTAL     CURRENT     TOTAL     90-MORE  
December 31, 2010   DAYS     DAYS     PAST DUE     LOANS     LOANS     PAST DUE  
                                       
Real Estate                                      
1-4 Family Res.   $ 1,467,116     $ 2,410,231     $ 3,877,347     $ 15,664,040     $ 19,541,387     $ 1,617,230  
Commercial     327,960       100,567       428,527       19,853,380       20,281,907       -  
Construction     406,363       1,370,855       1,777,218       7,246,281       9,023,499       -  
Second Mortgages     28,730       -       28,730       919,956       948,686       -  
Other     278,725               278,725       1,446,209       1,724,934       -  
                                                 
Commercial     461,279       1,441       462,720       2,263,558       2,726,278       1,441  
Personal     62,838       22,493       85,331       1,105,808       1,191,139       10,700  
Credit Cards     129,317       55,518       184,835       6,136,524       6,321,359       55,518  
Overdrafts     3,800       210,101       213,901       63,031       276,932       210,101  
                                                 
Total   $ 3,166,128     $ 4,171,206     $ 7,337,334     $ 54,698,787     $ 62,036,121     $ 1,894,990  

 

Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments.  If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Impaired loans, or portions thereof, are charged off when deemed uncollectible.

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Impaired loans as of June 30, 2011 are set forth in the following table:

 

    Unpaid Contractual Principal Balance     Recorded Investment with No Allowance     Recorded Investment with Allowance     Total Recorded Investment     Related Allowance  
                               
Real Estate                              
Residential 1-4 Family   $ 3,725,308     $ -     $ 3,725,308     $ 3,725,308     $ 748,113  
Commercial     -       -       -       -       -  
Construction     574,171       -       574,171       574,171       91,128  
Second Mortgages     -       -       -       -       -  
Other     11,793       -       11,793       11,793       5,323  
Commercial     6,614       -       6,614       6,614       -  
Personal     82,088       -       82,088       82,088       7,845  
Credit Cards     -       -       -       -       -  
Overdrafts     46,718       -       46,718       46,718       7,008  
                                         
Total   $ 4,446,692     $ -     $ 4,446,692     $ 4,446,692     $ 859,417  

 

Impaired loans as of December 31, 2010 are set forth in the following table:

 

    Unpaid Contractual Principal Balance     Recorded Investment with No Allowance     Recorded Investment with Allowance     Total Recorded Investment     Related Allowance  
                               
Real Estate                              
Residential 1-4 Family   $ 3,061,009     $ -     $ 3,061,009     $ 3,061,009     $ 532,438  
Commercial     -       -       -       -       -  
Construction     1,573,321       -       1,573,321       1,573,321       382,261  
Second Mortgages     -       -       -       -       -  
Other     115,856       -       115,856       115,856       11,284  
Commercial     7,303       -       7,303       7,303       820  
Personal     108,894       -       108,894       108,894       5,362  
Credit Cards     -       -       -       -       -  
Overdrafts     205,751       -       205,751       205,751       30,863  
                                         
Total   $ 5,072,134     $ -     $ 5,072,134     $ 5,072,134     $ 963,028  

 

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Changes in the allowance for loan losses by portfolio segment for the six months ended June 30, 2011 are as follows:

 

    Real Estate     Commercial     Personal     Credit Cards     Overdrafts     Unallocated     Total  
                                           
Balance at January 1, 2011   $ 970,452     $ 45,287     $ 17,763     $ 367,544     $ 31,171     $ 367,783     $ 1,800,000  
                                                         
Provision for Possible Loan Losses     (108,888 )     11,883       7,830       32,466       (23,545 )     131,695       51,441  
                                                         
Charge-Offs     (19,153 )     (15,959 )     (6,060 )     (135,737 )     (1,242 )     (25 )     (178,176 )
Recoveries     43,364       -       2,930       79,747       694               126,735  
                                                         
Net Charge-Offs     24,211       (15,959 )     (3,130 )     (55,990 )     (548 )     -       (51,441 )
                                                         
Ending Balance   $ 885,775     $ 41,211     $ 22,463     $ 344,020     $ 7,078     $ 499,453     $ 1,800,000  
                                                         
Period-End Amount Allocated To:                                                        
Loans Individually Evaluated for Impairment   $ 844,564     $ -     $ 7,845     $ -     $ 7,008     $ -     $ 859,417  
Loans Collectively Evaluated for Impairment     41,211       41,211       14,618       344,020       70       499,453       940,583  
                                                         
Ending Balance   $ 885,775     $ 41,211     $ 22,463     $ 344,020     $ 7,078     $ 499,453     $ 1,800,000  

 

Changes in the allowance for loan losses by portfolio segment for the year ended December 31, 2010 are as follows:

 

    Real Estate     Commercial     Personal     Credit Cards     Overdrafts     Unallocated     Total  
                                           
Balance at January 1, 2010   $ 1,229,554     $ 125,487     $ 67,616     $ 360,976     $ 13,033     $ 3,334     $ 1,800,000  
                                                         
Provision for Possible Loan Losses     (256,220 )     (105,250 )     (43,117 )     312,444       32,382       364,449       304,688  
                                                         
Charge-Offs     (4,371 )     -       (6,736 )     (476,737 )     (16,704 )     -       (504,548 )
Recoveries     1,489       25,050       -       170,861       2,460       -       199,860  
                                                         
Net Charge-Offs     (2,882 )     25,050       (6,736 )     (305,876 )     (14,244 )     -       (304,688 )
                                                         
Ending Balance   $ 970,452     $ 45,287     $ 17,763     $ 367,544     $ 31,171     $ 367,783     $ 1,800,000  
                                                         
Period-End Amount Allocated To:                                                        
Loans Individually Evaluated for Impairment   $ 925,985     $ 820     $ 5,363     $ -     $ 30,862     $ -     $ 963,030  
Loans Collectively Evaluated for Impairment     44,467       44,467       12,400       367,544       309       367,783       836,970  
                                                         
Balance at December 31, 2010   $ 970,452     $ 45,287     $ 17,763     $ 367,544     $ 31,171     $ 367,783     $ 1,800,000  

 

From a credit risk standpoint, the Company classifies it loans in one four categories:  (i) pass, (ii) watch, (iii) substandard or (iv) doubtful.

 

The classification of loans reflect a judgment about the risks of default and loss associated with the loan.  The Company reviews the ratings on credits monthly.  Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each monthly reporting period.  The methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

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Credits rated watch show clear signs of financial weakness or deterioration in credit worthiness; however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.

 

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been jeopardized by reason of adverse trends or developments in financial, managerial, economic or political nature, or important weaknesses exist in collateral.  Corrective action is required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower.  Credit exposure becomes more likely in such credits.

 

Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt.  Based upon available information, positive action by the Company is required to avert or minimize loss.  Credits rated doubtful are generally also placed on nonaccrual.

 

At June 30, 2011, the following table summarizes the Company’s internal ratings of its loans:

 

    Real Estate     Commercial     Personal     Credit Cards     Overdrafts     Total  
                                     
Pass   $ 43,707,625     $ 908,134     $ 1,467,153     $ 5,941,645     $ -     $ 52,024,557  
Watch     653,893       1,710,563       3,084       -       101,734       2,469,274  
Substandard     4,323,438       6,614       69,922       -       46,718       4,446,692  
Doubtful     -       -       -       -       -       -  
                                                 
Totals   $ 48,684,956     $ 2,625,311     $ 1,540,159     $ 5,941,645     $ 148,452     $ 58,940,523  

 

At December 31, 2010, the following table summarizes the Company’s internal ratings of its loans:

 

    Real Estate     Commercial     Personal     Credit Cards     Overdrafts     Total  
                                     
Pass   $ 44,399,289     $ 1,546,798     $ 1,082,245     $ 6,321,359     $ -     $ 53,349,691  
Watch     2,382,733       1,160,384       -       -       71,181       3,614,298  
Substandard     2,473,968       7,303       108,894       -       205,751       2,795,916  
Doubtful     2,264,423       11,793       -       -       -       2,276,216  
                                                 
Totals   $ 51,520,413     $ 2,726,278     $ 1,191,139     $ 6,321,359     $ 276,932     $ 62,036,121  

 

Note D Financial Instruments

On January 1, 2008, the Company adopted the FASB fair value guidance  pertaining to all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  This guidance defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

The fair value guidance defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.  The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.  In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

 

In addition to defining fair value, the fair value guidance expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs.  The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.  Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:

15
 
  · Level 1 - Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets

 

  · Level 2 - Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market date for substantially the full term of the assets or liabilities

 

  · Level 3 - Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.  The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2011 and December 31, 2010 (amounts in thousands):

 

June 30, 2011                        
    Level 1     Level 2     Level 3     Net Balance  
                         
Assets                        
Equity Securities   $ -     $ 814     $ -     $ 814  
                                 
Total   $ -     $ 814     $ -     $ 814  

 

December 31, 2010                        
    Level 1     Level 2     Level 3     Net Balance  
                         
Assets                        
Equity Securities   $ -     $ 814     $ -     $ 814  
                                 
Total   $ -     $ 814     $ -     $ 814  

 

Note E Subsequent Events

In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements.  The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of June 30, 2011.  In preparing these financial statements, the Company evaluated the events and transactions that occurred from June 30, 2011 through the date these financial statements were issued.

 

 

16
 

 

Note F Regulatory Matters

On April 19, 2011, the Bank consented to a Memorandum of Understanding (the “MOU”) issued by the Federal Deposit Insurance Corporation (FDIC) and the Office of Financial Institutions (OFI). The MOU provides for, among other things, the following items within specified time periods:

 

· The Bank shall reduce its level of adversely classified assets. 
· The Bank shall reduce its level of past due loans. 
· The Bank shall eliminate the extension of credit until all appropriate underwriting documentation is obtained. 
· The Bank shall eliminate the extension of credit to borrowers for whom the Bank holds an uncollected charged-off asset or for which their credit is classified as “Substandard”. 
· The Bank shall strengthen its loan review program. 
· The Bank shall maintain an appropriate Allowance for Loan and Lease Losses. 
· The Bank shall maintain a Tier I leverage capital ratio equal of at least 9%, a Tier 1 Risk Based Capital Ratio of 11%, and a Total Risk Based Capital Ratio of 13% 
· The Bank shall not declare or pay any cash dividend without regulatory approval 
· The Bank shall review and amend its interest rate risk policy and procedures. 
· The Bank shall provide for an independent evaluation of its management and information systems. 
· The Bank shall review and update the Bank’s written strategic plan and profit plan. 

 

In addition, the Company entered into an agreement on August 9, 2011, with the Federal Reserve Bank (FRB) whereby the Company will not incur additional debt, declare or pay dividends without approval of the FRB, reduce its capital position by purchasing or redeeming treasury stock, make any distributions of interest or principal on subordinated debentures or trust preferred securities without prior written approval of the FRB and the Louisiana Office of Financial Institutions (OFI), provide the FRB and OFI with quarterly financial updates and provide written confirmation that the Company has complied with all resolutions on a quarterly basis.

 

While no assurance can be given, Bank management believes it has taken action toward complying with the provisions of the MOU. It is not presently determinable what actions, if any, bank regulators might take if requirements of the Memorandum are not complied with in the specified time periods.

 

17
 

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS

 

JUNE 30, 2011 COMPARED WITH DECEMBER 31, 2010

 

BALANCE SHEET

 

Total assets at June 30, 2011 were $92,294,000 compared to $94,376,000 at December 31, 2010, for a decrease of $2,082,000, or 2.21%.  Federal Funds Sold increased $1,825,000 from $14,950,000 at December 31, 2010 to $16,775,000 at June 30, 2011.  Certificates of Deposit decreased $250,000 from $4,203,000 at December 31, 2010 to $3,953,000 at June 30, 2011. Both the increase in Federal Funds Sold and the decrease in Certificates of Deposit are due to normal fluctuations. Investment securities remained the same. Total loans decreased $3,095,000, or 5.14%, to $57,141,000 at June 30, 2011 from $60,236,000 at December 31, 2010. The decrease in the loan portfolio is due primarily to a decrease in decrease in commercial real estate loans of $1,686,000, a decrease in construction loans of $2,309,000, a decrease in second mortgage loans of $55,000, a decrease in other real estate loans of $57,000, a decrease in commercial loans of $101,000, a decrease in credit card loans of $380,000, and a decrease in overdrafts of $128,000.  These decreases were offset by an increase in 1-4 residential loans of $1,272,000, and an increase in personal loans of $349,000.  The credit card portfolio decrease was largely attributable to tightening of the Bank’s underwriting standards, normal attrition, and the cyclical nature of the business.

 

Total deposits decreased $2,014,000, or 02.50%, to $78,563,000 at June 30, 2011 from $80,577,000 at December 31, 2010.  Total non-interest bearing deposits decreased $1,305,000 and interest-bearing accounts decreased $709,000. The decrease of interest earning deposits was mainly attributable to a decrease in NOW accounts of $587,000, an increase in money market accounts of $232,000, a decrease in savings accounts of $92,000 and a decrease of $262,000 in time deposits.

 

Other liabilities decreased $120,000 from $882,000 at December 31, 2010 to $762,000 at June 30, 2011.  This decrease is due mainly to a decrease of $230,000 in deferred taxes offset by an increase in other liabilities of $96,000 and $14,000 in accrued interest.

 

Shareholder’s Equity increased $51,000 from $11,773,000 at December 31, 2010 to $11,824,000 at June 30, 2011. This increase is due mainly to net income for the six months ended June 30, 2011 of $52,000 and partially offset by a decrease in Preferred Stock of $1,000.

 

SIX MONTHS ENDED JUNE 30, 2011 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2010

 

The Company’s net income for the six months ended June 30, 2011 was $53,000, or $0.29 per share, a decrease of $257,000 from the Company’s total net income of $310,000, or $1.73 per share, for the same period last year.

 

Interest income decreased $87,000 for the six months ended June 30, 2011 over the same period last year. Interest on federal funds sold increased $2,000 primarily due to an increase in the average balance of $3,581,000. Interest on investment securities decreased $5,000 due mainly to a decrease in the average balance from $2,428,000 at June 30, 2010 to $878,000 at June 30, 2011. Interest in the loan portfolio decreased $71,000 due mainly to a decrease in the average interest rate of 10.41% at June 30, 2010 to 10.18% at June 30, 2011 and a decrease in the average balance of $106,000. Interest on Certificates of Deposit purchased decreased $13,000 due to a decrease in the average balance of $3,967,000 with an average rate of 0.91% for 2011 as compared to an average balance of $4,805,000 with an average rate of 1.29% in 2010.

18
 

Interest expense decreased $2,000 for the six months ended June 30, 2011 over the same period last year.  This was caused primarily by a decrease in the average interest rate paid on interest-bearing deposits from .77% at June 30, 2010 to .73% as of June 30, 2011. The impact of the decrease in the average interest rate paid on interest-bearing deposits was partially offset by an increase in the average balance of interest bearing deposits from $46,424,000 at June 30, 2010 to $48,344,000 at June 30, 2011.  The average interest rate on interest-bearing liabilities decreased from .90% at June 30, 2010 to .86% at June 30, 2011.

 

Net interest income decreased $85,000 for the six months ended June 30, 2011 compared to the same period last year.  Our interest rate spread decreased from 6.91% at June 30, 2010 to 6.62% at June 30, 2011.  The decrease in the rate spread was due to an decrease of .32% on the yield on interest-earning assets from 7.81% for the six months ended June 30, 2010 to 7.49% for the six months ended June 30, 2011, and a decrease of .04% on the average rate paid out on interest bearing liabilities from .90% paid for the six months ended June 30, 2010 as compared to .86% paid during the six months ended June 30, 2011.

 

Non-interest income decreased $477,000 between the six month periods from $958,000 at June 30, 2010 to $481,000 at June 30, 2011. Income from Service Charges on deposit accounts decreased $9,000, Cardholder and Other Credit Card income decreased $1,000 and Other Operating income decreased $467,000. The decrease in Other Operating income is primarily due to the 2010 sale of ORE property for $395,000 and $78,000 of Dividend income received during the six months ended June 30, 2010.

 

Non-interest expense decreased $159,000 for the six month period of 2011 as compared to the same period last year.  Salaries and Employee Benefits decreased $80,000 from $1,277,000 at June 30, 2010 to $1,197,000 at June 30, 2011. This decrease was due mainly to a reduction in the number of employees. Occupancy expense decreased by $78,000 due to lower building repairs and depreciation expenses. Communications increased by $7,000, Outsourcing fees increased by $17,000, Loan and Credit Card expense increased by $1,000, Professional fees increased $30,000 primarily due to an increase in Consulting Fees, ORE expenses decreased $125,000 due to a reduction in repairs expense incurred during the six months ended June 30, 2011 as compared to the six months ended June 30, 2010, and Other Operating expenses increased $70,000 due primarily to increases in our FDIC assessment and Telephone/Communications expense.

 

THREE MONTHS ENDED JUNE 30, 2011 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2010

 

Net income for the second quarter of 2011 was $3,000, or $.02 per share, compared to $55,000, or $.31 per share, for the same period last year for a decrease of $52,000.

 

Interest income decreased $72,000 over the same period last year.  Interest on the loan portfolio decreased $61,000 from $1,554,000 at June 30, 2010 to $1,493,000 at June 30, 2011. This was caused mainly by a decrease in the average balance of loans from $58,587,000 at June 30, 2010 to $57,754,000 at June 30, 2011. Interest on investment securities decreased $4,000 due mainly to a decrease in the average balance of investments from $2,995,000 at June 30, 2010 to $878,000 at June 30, 2011.  Interest on certificates of deposit decreased $5,000 due mainly to a decrease in the interest rate of 1.20% in 2010 to 0.81% in 2011 and a decrease in the average balance from $4,683,000 to $3,953,000. Interest on federal funds sold decreased $1,000 due mainly to a decrease in the interest rate of 0.16% in 2010 to 0.09% in 2011 and offset by an increase in the average balance from $12,902,000 to $18,138,000.

19
 

Interest expense increased $1,000 for the three months ended June 30, 2010 over the same period last year.  This was caused by an increase in the average balance of interest bearing deposits from $46,418,000 in 2010 to $48,438,000 in 2011 and was partially offset by a decrease in the interest rate from 0.76% to 0.73%.

 

Net interest income decreased $73,000 due primarily to a decrease in interest rate on earning assets of 0.51% and a decrease in interest bearing liabilities of 0.03%.

 

Non-interest income decreased $198,000 for the three-month period ended June 30, 2011 compared to the prior year period.  Service Charges on Deposit accounts decreased $6,000 due mainly to NSF charges, Cardholder and Other Credit Card income decreased by $1,000 and Other operating income decreased by $191,000 due mainly to a gain on the sale of ORE recognized during the three months ended June 30, 2011.

 

Non-interest expense decreased $234,000 for the three-month period ended June 30, 2011 compared to the prior year period.  Salaries and Employee benefits decreased $56,000 due to a reduction in number of employees. Occupancy expense decreased $34,000 due primarily to lower depreciation expenses along with lower building and maintenance repairs. Communications decreased $3,000 and Outsourcing fees decreased $10,000 due mainly to lower credit card interchange fees. ORE expense decreased $58,000 primarily due to a reduction of repair costs for the Bank’s ORE properties, and Other Operating expense decreased $75,000 primarily due to the recognition during the three months ended June 30, 2010 of a loss on the sale of a repossessed RV. Professional fees increased $2,000 for legal fees on foreclosures which occurred during the three months ended June 30, 2011.

 

The provision for income taxes decreased $92,000 compared to the same period last year from a provision of a benefit $85,000 at June 30, 2010 to a liability of $7,000 at June 30, 2011.

 

Item 3 Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events, and Future Growth

 

Management considers interest rate risk to be a market risk that could have a significant effect on the financial condition of the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.  Difficult conditions in the financial services markets may materially and adversely affect the business and results of operations of the Bank and the Company.

 

Dramatic declines in the housing market during the past year, along with falling home prices and increasing foreclosures and unemployment, have resulted in significant write downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks.  These write-downs, initially of mortgage-backed securities by spreading to credit default swaps and other derivative securities, have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions, and, in some cases, to fail.  Many lenders and institutional investors have reduced, and in some cases, ceased to provide funding to borrowers, including other financial institutions.  This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and widespread reduction of business activity generally, which could have a material adverse effect on our business and operations.  A worsening of these conditions would likely exacerbate any adverse effects of these difficult market conditions on us and others in the financial institutions industry.

20
 

However, the majority of small community banks, such as Bank of Louisiana, have strong reserve positions and are well capitalized.

 

The occurrence of catastrophic events such as hurricanes, tropical storms, earthquakes, windstorms, floods, severe winter weather, fires and other catastrophes could adversely affect our consolidated financial condition or results of operations.  Unpredictable natural and other disasters could have an adverse effect on us in that such events could materially disrupt our operations or the ability or willingness of our customers to access financial services offered by us.  The incidence and severity of catastrophic events could nevertheless reduce our earnings and cause volatility in our financial results for any fiscal quarter or year and have a material adverse effect on our financial condition or results of operation.

 

The Company is a customer-focused organization.  Future growth is expected to be driven in a large part by the relationships maintained with customers.  The Company has assembled an experienced management team, and has management development plans in place.

 

Item 4 Submission of Matters to a Vote of Security Holders

 

The Annual Meeting of Shareholders of BOL BANCSHARES, INC. was held on April 12, 2011.  Five nominees were elected to serve one year terms as directors. Laporte, Sehrt, Romig and Hand was approved as the independent auditors.  There were no other matters voted upon at the meeting.

 

Below are the names of the nominees who were elected as directors and the number of shares cast for each.  The total shares voting were 123,919.

 

    Number of Shares  
Nominee   For     Against     Abstain  
G. Harrison Scott     123,644       99       176  
Johny C. Crow     123,644       99       176  
Franck F. LaBiche     123,644       99       176  
Sharry r. Scott     123,644       99       176  
A. Earle Cefalu, Jr.     123,644       99       176  
                         

 

Item 4T Controls and Procedures

 

Under the supervision and with the participation of our management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this report.  Based upon that evaluation, the certifying officers of the Company have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934, is recorded, processed, summarized and reported within the applicable time periods specified by the Securities and Exchange Commission’s rules and forms.  There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

 

Item 6 Exhibits

 

Exhibits  
   
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
   
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial  Officer
   
32 Certification Pursuant to 18 U.S.C. Section 1350
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 

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BOL BANCSHARES, INC.

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  BOL BANCSHARES, INC.
     
August 30, 2011 /s/ G. Harrison Scott  
Date G. Harrison Scott
  Chairman
  (in his capacity as a duly authorized officer of the Registrant)
     
  /s/ Peggy L. Schaefer  
  Peggy L. Schaefer
  Treasurer
  (in her capacity as Chief Accounting Officer of the Registrant)

 

 

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