UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

 

FORM 10-Q

 

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2012

 

☐

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 ☒ No ☐

 

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 ☐	Accelerated filer ☐
	Non-accelerated filer ☐	Smaller reporting company ☒

 

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

 

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 April 15, 2012.

 

 

 

BOL BANCSHARES, INC. & SUBSIDIARY

INDEX

 

 

			Page No.
PART I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Statements of Condition	3
		Consolidated Statements of Income	4
		Consolidated Statements of Comprehensive Income	5
		Consolidated Statements of Cash Flow	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis	19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk, Catastrophic Events and Future Growth	21
	Item 4T.	Controls and Procedures	22
PART II.	Other Information
	Item 6.	Exhibits	23
Signatures			24

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONDITION

 

		March 31,				December 31,
(Amounts in Thousands)		2012				2011
		(Unaudited)				(Audited)
ASSETS
Cash and Due from Banks
Non-Interest Bearing Balances and Cash		$	2,928			$	3,506
Federal Funds Sold			17,450				16,150
Certificates of Deposit			5,710				5,458
Investment Securities
Securities Held to Maturity			-				-
Securities Available for Sale			144				1,037
Loans-Less Allowance for Loan Losses of $1,800 in 2012 and in 2011			53,876				54,381
Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization)			5,585				5,654
Other Real Estate			4,604				4,597
Other Assets			883				934
TOTAL ASSETS		$	91,180			$	91,717
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-Interest Bearing			30,697				30,726
NOW Accounts			10,978				10,897
Money Market Accounts			3,468				3,697
Savings Accounts			20,090				19,842
Time Deposits, $100,000 and over			2,147				4,908
Other Time Deposits			9,618				7,610
TOTAL DEPOSITS			76,998				77,680
Notes Payable			1,144				1,144
Other Liabilities			864				952
TOTAL LIABILITIES			79,006				79,776
SHAREHOLDERS' EQUITY
Preferred Stock - Par Value $1
1,796,624 Shares Issued and Outstanding at March 31, 2012
1,796,624 Shares Issued and Outstanding at December 31, 2011			1,797				1,797
Common Stock - Par Value $1
179,145 Shares Issued and Outstanding in 2012 and 2011			179				179
Accumulated Other Comprehensive Income			75				618
Capital in Excess of Par - Retired Stock			198				198
Undivided Profits			9,149				9,075
Current Earnings			776				74
TOTAL SHAREHOLDERS' EQUITY			12,174				11,941
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	91,180			$	91,717

 

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

 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

		Three months ended
		March 31,				March 31,
(Amounts in Thousands)		2012				2011
INTEREST INCOME
Interest and Fees on Loans		$	1,289			$	1,478
Interest on Investment Securities			2				2
Interest on Federal Funds Sold			5				6
Interest on Certificates of Deposit			9				9
Total Interest Income			1,305				1,495
INTEREST EXPENSE
Interest on Deposits			80				88
Interest Expense on Notes Payable and Debentures			19				18
Total Interest Expense			99				106
NET INTEREST INCOME			1,206				1,389
Provision for Loan Losses			52				20
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			1,154				1,369
NON-INTEREST INCOME
Service Charges on Deposit Accounts			115				109
Gain on Sale of Securities			1,079				-
Cardholder & Other Credit Card Income			95				101
Other Operating Income			43				39
Total Non-interest Income			1,332				249
NON-INTEREST EXPENSE
Salaries and Employee Benefits			545				600
Occupancy Expense			218				224
Communications			58				57
Outsourcing Fees			263				346
Loan & Credit Card Expense			27				28
Professional Fees			61				82
ORE Expense			53				43
Other Operating Expense			155				156
Total Non-interest Expense			1,380				1,536
Income Before Tax Provision			1,106				82
Provision for Income Taxes			330				32
NET INCOME		$	776			$	50
Earnings Per Share of Common Stock		$	4.34			$	0.28

 

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

 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) 

 

		Three Months Ended
		March 31,				March 31,
(Amounts in thousands)		2012				2011
NET INCOME		$	776			$	50
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized Holding Gains (Losses) on
Investment Securities Available-for-Sale,
Arising During the Period			(543	)			-
TOTAL OTHER COMPREHENSIVE LOSS			(543	)			-
COMPREHENSIVE INCOME		$	233			$	50

 

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

 

BOL BANCSHARES, INC. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three Months Ended
		March 31,				March 31,
(Amounts in thousands)		2012				2011
OPERATING ACTIVITIES
Net Income		$	776			$	50
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses			52				20
Depreciation and Amortization Expense			69				79
Decrease in Deferred Income Taxes			(64	)			(122	)
Gain on Sale of Available for Sale Investments			(1,079	)			-
Decrease in Deferred Loan Fees			(15	)			-
Decrease in Other Assets			32				268
Increase in Other Liabilities and Accrued Interest			275				175
Net Cash Provided by Operating Activities			46				470
INVESTING ACTIVITIES
Proceeds from Sale of AFS Securities			1,148				-
Purchases of Property and Equipment			-				(5	)
Capitalized Construction Costs for ORE			(7	)			(258	)
(Increase) Decrease in Certificate of Deposit with other Banks			(252	)			250
Net Decrease in Loans			469				1,946
Net Cash Provided by Investing Activities			1,358				1,933
FINANCING ACTIVITIES
Net Decrease in Non-Interest Bearing and Interest Bearing Deposits			(682	)			(1,648	)
Preferred Stock Retired			-				(1	)
Net Cash Used in Financing Activities			(682	)			(1,649	)
Net Increase in Cash and Cash Equivalents			722				754
Cash and Cash Equivalents - Beginning of Year			19,656				18,784
Cash and Cash Equivalents - End of Period		$	20,378			$	19,538
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Year for Interest		$	92			$	80
Cash Paid (Received) During the Year for Income Taxes		$	67			$	-
Market Value Adjustment for Unrealized Gain on Securities Available-for-Sale		$	-			$	-
Additions to Other Real Estate Thru Foreclosure		$	-			$	-

 

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

 

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.

 

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 March 31, 2012 and December 31, 2011, are as follows (amounts in thousands):

 

		March 31, 2012
`		Carrying				Fair
		Amount				Value
		(In Thousands)
Financial Assets:
Cash and Short-Term Investments		$	2,928			$	2,928
Certificates of Deposit			5,710				5,710
Investment Securities			144				144
Loans			55,701				55,641
Less:  Allowance for Loan Losses			(1,800	)			NA
Less:  Deferred Loan Fees			(25	)			NA
		$	62,658			$	64,423
Financial Liabilities:
Deposits		$	76,998			$	77,052
Unrecognized Financial Instruments:
Commitments to Extend Credit		$	1,149			$	1,149
Credit Card Arrangements			12,348				12,348
		$	13,497			$	13,497

 

 

		December 31, 2011
		Carrying				Fair
		Amount				Value
		(In Thousands)
Financial Assets:
Cash and Short-Term Investments		$	3,506			$	3,506
Certificates of Deposit			5,458				5,458
Investment Securities			1,037				1,037
Loans			56,221				56,071
Less:  Allowance for Loan Losses			(1,800	)			NA
		$	64,422			$	66,072
Financial Liabilities:
Deposits		$	77,680			$	77,726
Unrecognized Financial Instruments:
Commitments to Extend Credit		$	2,079			$	2,079
Credit Card Arrangements			12,373				12,373
		$	14,452			$	14,452

 

Note C Loans and Allowance for Loans Losses

 

Major classifications of loans as of March 31, 2012 and December 31, 2011 are as follows:

 

		March 31,				December 31,
		2012				2011
			(In Thousands)
Real Estate Mortgages:
Residential 1-4 Family		$	21,316			$	21,157
Commercial			15,467				15,787
Construction			6,260				6,399
Second Mortgages			806				820
Other			1,579				1,611
			45,428				45,774
Commercial			3,127				2,702
Personal			1,407				1,496
Credit Cards			5,634				6,039
Overdrafts			105				210
			55,701				56,221
Allowance for Loan Losses			(1,800	)			(1,800	)
Deferred Loan Fees			(25	)			(40	)
Net Loans		$	53,876			$	54,381

 

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

 

		March 31,				December 31,
		2012				2011
		(In Thousands)
Fixed Rate Loans:
Maturing in 3 Months or Less		$	16,200			$	13,495
Maturing Between 3 and 12 Months			23,284				25,114
Maturing Between 1 and 5 Years			12,308				15,024
Maturing After 5 Years			556				572
Total Fixed Rate			52,348				54,205
Variable Rate Loans:
Maturing Quarterly or More Frequently			674				721
Maturing Between 3 and 12 Months			-				-
Maturing Between 1 and 5 Years			-				-
Non accrual Loans			2,679				1,295
Total Variable Rate			3,353				2,016
Total Loans		$	55,701			$	56,221

 

Loans are considered past due if the required principal and interest payments have not been received as of the date when 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:

 

		March 31,				December 31,
		2012				2011
		(in thousands)
Real Estate Mortgages
Residential 1-4 Family		$	1,064			$	619
Commercial			130				130
Construction			486				471
Second Mortgages			-				-
Other			-				-
Commercial			987				63
Personal			12				12
Credit Cards			-				-
Overdrafts			-				-
Total		$	2,679			$	1,295

 

An aging analysis of past due loans, segregated by class of loans, as of March 31, 2012 and December 31, 2011, is as follows:

 

An aging analysis of past due loans, segregated by class of loans, as of March 31, 2012.

 

																						ACCRUING
(Amounts in Thousands)		30-89				90-MORE				TOTAL				CURRENT				TOTAL				90-MORE
March 31, 2012		DAYS				DAYS				PAST DUE				LOANS				LOANS				PAST DUE
Real Estate
1-4 Family Res.		$	2,718			$	2,672			$	5,390			$	15,926			$	21,316			$	1,608
Commercial			733				299				1,032				14,434				15,466				169
Construction			676				732				1,408				4,852				6,260				245
Second Mortgages			1				-				1				805				806				-
Other			-				-				-				1,579				1,579				-
Commercial			112				1,002				1,114				2,012				3,127				15
Personal			85				60				145				1,263				1,407				48
Credit Cards			113				41				154				5,480				5,634				41
Overdrafts			30				8				38				67				105				8
Total		$	4,468			$	4,814			$	9,282			$	46,418			$	55,701			$	2,134

 

An aging analysis of past due loans, segregated by class of loans, as of December 31, 2011.

 

																						ACCRUING
(Amounts in Thousands)		30-89				90-MORE				TOTAL				CURRENT				TOTAL				90-MORE
December 31, 2011		DAYS				DAYS				PAST DUE				LOANS				LOANS				PAST DUE
Real Estate
1-4 Family Res.		$	2,212			$	1,635			$	3,847			$	17,310			$	21,157			$	1,015
Commercial			-				299				299				15,488				15,787				169
Construction			214				853				1,067				5,332				6,399				382
Second Mortgages			12				-				12				808				820				-
Other			-				-				-				1,611				1,611				-
Commercial			27				1,077				1,104				1,598				2,702				1,014
Personal			70				54				124				1,372				1,496				43
Credit Cards			127				68				195				5,844				6,039				68
Overdrafts			98				8				106				104				210				8
Total		$	2,760			$	3,994			$	6,754			$	49,467			$	56,221			$	2,699

 

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.

 

Impaired loans as of March 31, 2012 are set forth in the following table:

 

		Unpaid				Recorded				Recorded
		Contractual				Investment				Investment				Total
		Principal				with No				with				Recorded				Related
		Balance				Allowance				Allowance				Investment				Allowance
Real Estate
Residential 1-4 Family		$	5,328,677			$	844,219			$	4,484,458			$	5,328,677			$	668,012
Commercial			1,643,203				419,990				1,223,213				1,643,203				252,839
Construction			931,588				240,871				690,717				931,588				126,510
Second Mortgages			-				-				-				-				-
Other			272,710				-				272,710				272,710				30,598
Commercial			448,309				2,371				445,938				448,309				91,957
Personal			69,996				11,442				58,554				69,996				29,070
Credit Cards			-				-				-				-				-
Overdrafts			-				-				-				-				-
Total		$	8,694,483			$	1,518,893			$	7,175,590			$	8,694,483			$	1,198,986

 

Impaired loans as of December 31, 2011 are set forth in the following table:

 

		Unpaid				Recorded				Recorded
		Contractual				Investment				Investment				Total
		Principal				with No				with				Recorded				Related
		Balance				Allowance				Allowance				Investment				Allowance
Real Estate
Residential 1-4 Family		$	3,006,778			$	524,480			$	2,482,298			$	3,006,778			$	501,655
Commercial			130,392				-				130,392				130,392				26,530
Construction			670,591				-				670,591				670,591				198,617
Second Mortgages			-				-				-				-				-
Other			-				-				-				-				-
Commercial			363,973				-				363,973				363,973				81,625
Personal			11,793				-				11,793				11,793				6,323
Credit Cards			-				-				-				-				-
Overdrafts			-				-				-				-				-
Total		$	4,183,527			$	524,480			$	3,659,047			$	4,183,527			$	814,750

 

 

Changes in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012 are as follows:

 

		Real Estate				Commercial				Personal				Credit  Cards				Overdrafts				Unallocated				Total
Balance at January 1, 2012		$	945,351			$	232,497			$	42,216			$	352,282			$	11,020			$	216,634			$	1,800,000
Provision for Possible
Loan Losses			135,922				(32,050	)			1,523				(12,551	)			(9,044	)			(32,170	)			51,630
Charge-Offs			(9,331	)			(38,195	)			-				(48,968	)			-				-				(96,494	)
Recoveries			6,017				-				680				37,778				389				-				44,864
Net Charge-Offs			(3,314	)			(38,195	)			680				(11,190	)			389				-				(51,630	)
Balance March 31, 2012		$	1,077,959			$	162,252			$	44,419			$	328,541			$	2,365			$	184,464			$	1,800,000
Period-End Amount Allocated To:
Loans Individually Evaluated
for Impairment		$	998,597			$	158,739			$	41,650			$	-			$	-			$	-			$	1,198,986
Loans Collectively Evaluated
for Impairment			79,362				3,513				2,769				328,541				2,365				184,464				601,014
Balance March 31, 2012		$	1,077,959			$	162,252			$	44,419			$	328,541			$	2,365			$	184,464			$	1,800,000

 

Changes in the allowance for loan losses by portfolio segment for the year ended December 31, 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			(64,307	)			203,169				27,180				79,683				(14,637	)			(151,220	)			79,868
Charge-Offs			(19,153	)			(15,959	)			(6,376	)			(222,520	)			(6,500	)			(25	)			(270,533	)
Recoveries			58,359				-				3,649				127,575				986				96				190,665
Net Charge-Offs			39,206				(15,959	)			(2,727	)			(94,945	)			(5,514	)			71				(79,868	)
Balance December 31, 2011		$	945,351			$	232,497			$	42,216			$	352,282			$	11,020			$	216,634			$	1,800,000
Period-End Amount Allocated To:
Loans Individually Evaluated
for Impairment		$	726,802			$	81,625			$	6,323			$	-			$	-			$	-			$	814,750
Loans Collectively Evaluated
for Impairment			218,549				150,872				35,893				352,282				11,020				216,634				985,250
Balance December 31, 2011		$	945,351			$	232,497			$	42,216			$	352,282			$	11,020			$	216,634			$	1,800,000

 

From a credit risk standpoint, the Company classifies it loans in one of 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).

 

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 March 31, 2012, the following table summarizes the Company’s internal ratings of its loans:

 

			Real												Credit
			Estate				Commercial				Personal				Cards				Overdrafts				Total
Pass			$	38,175,870			$	1,754,402			$	1,337,482			$	5,634,158			$	102,536			$	47,004,448
Watch				1,505,080				2,371								-								1,507,451
Substandard				4,807,504				434,633				69,996				-								5,312,133
Doubtful				1,863,594				11,305								-				2,361				1,877,260
	Totals		$	46,352,048			$	2,202,711			$	1,407,478			$	5,634,158			$	104,897			$	55,701,292

 

At December 31, 2011, the following table summarizes the Company’s internal ratings of its loans:

 

			Real												Credit
			Estate				Commercial				Personal				Cards				Overdrafts				Total
Pass			$	39,964,153			$	1,324,958			$	1,429,987			$	6,038,528			$	129,572			$	48,887,198
Watch				970,861				2,423				-				-				-				973,284
Substandard				3,627,554				1,363,746				66,032				-				80,408				5,137,740
Doubtful				1,211,115				11,305				-				-				-				1,222,420
	Totals		$	45,773,683			$	2,702,432			$	1,496,019			$	6,038,528			$	209,980			$	56,220,642

 

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:

 

•

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 March 31, 2012 and December 31, 2011.

 

(Amounts in Thousands)
		Fair Value Measurements
														Net
March 31, 2012			Level 1				Level 2				Level 3				Balance
Assets:
Equity Securities			-			$	144				-			$	144
Total			-			$	144				-			$	144

 

(Amounts in Thousands)
		Fair Value Measurements
														Net
December 31, 2011			Level 1				Level 2				Level 3				Balance
Assets:
Equity Securities			-			$	1,037				-			$	1,037
Total			-			$	1,037				-			$	1,037

 

The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis at March 31, 2012 and December 31, 2011.

 

(Amounts in Thousands)
		Fair Value Measurements
														Net
March 31, 2012			Level 1				Level 2				Level 3				Balance
Assets:
Impaired Loans			-				-			$	8,694			$	8,694
Other Real Estate Owned			-				4,604				-				4,604
Total			-			$	4,604			$	8,694			$	13,298

 

(Amounts in Thousands)
		Fair Value Measurements
														Net
December 31, 2011			Level 1				Level 2				Level 3				Balance
Assets:
Impaired Loans			-				-			$	4,184			$	4,184
Other Real Estate Owned			-				4,597				-				4,597
Total			-			$	4,597			$	4,184			$	8,781

 

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 March 31, 2012. In preparing these financial statements, the Company evaluated the events and transactions that occurred from March 31, 2012 through the date these financial statements were issued.

 

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 specific time periods:

 

•

The Bank shall reduce its level of adversely classified assets.

 

Action taken: In the Report of Examination, 26 loans are classified adversely. Of these, nine had balances aggregating $250,000 or more, for a total of $3,702,000. Of the $3,702,000 in loans, $2,662,000 have been restructured and the remaining $1,040,000 either have or are going through the foreclosure process.

 

•

The Bank shall reduce its level of past due loans.

 

Action taken: The areas of responsibility for implementing and monitoring the Bank’s collection policy as well as specific collection procedures have been addressed. The Loan Committee will review all past due loans weekly and the Executive Committee will review them monthly. It is anticipated that a substantial improvement will begin to show starting in the fourth quarter.

 

•

The Bank shall eliminate the extension of credit until all appropriate underwriting documentation is obtained.

 

Action taken: The Loan policy procedure has been addressed as follows: Installment loans are to be reviewed for complete documentation on all loans made the previous week and presented to the Management Committee monthly with summarizing reviews and actions. Commercial Loans will be reviewed for complete documentation on all loans with maturity dates for the upcoming week. Monthly reports will be made to the Audit and Finance Committee summarizing reviews and actions.

 

•

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”.

 

Action taken: The Bank will not extend credit to charge-off borrowers, the Bank will not extend credit to a “substandard” borrower unless adequately documented and the Bank acknowledges.

 

•

The Bank shall maintain an appropriate Allowance for Loan and Lease Losses.

 

Action taken: It is Bank policy to maintain a loan loss reserve that is appropriate when compared to the quality of our loan portfolio and sufficient to meet the losses inherent in the portfolio. The adequacy of the loan loss reserve is determined on a quarterly basis by the Audit and Finance Committee. Any deficit is replenished from current earnings monthly.

 

•

The Bank shall maintain a Tier 1 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%.

 

Action taken: The Bank maintains these goals. At March 31, 2012 our Tier 1 leverage capital ratio is 13.77%, Tier 1 Risk Based Capital ratio is 20.62% and Total Risk Based Capital Ration is 21.89%.

 

•

The Bank shall not declare or pay any cash dividend without regulatory approval.

 

Action taken: Dividends have not been declared, and will not be declared or approved for payment without prior consent of the Regional Director and the Commissioner.

 

•

The Bank shall review and amend its interest rate risk policy and procedures.

 

Action taken: The Bank’s portfolio has always been shocked downwards by one & two percent. In addition our policy now includes 3 & 4 percent downward. This was implemented as of December 31, 2010. Policy and procedures were already in place to monitor risk, the downward shock of 3% and 4% was included. Reports are presented quarterly at the Audit and Finance Directors’ meeting. A program was purchased to facilitate generating the economic value of equity. Risk is monitored monthly by the ALCO committee which meets monthly in conjunction with the Management Committee.

 

Bank shall provide for an independent evaluation of its management and information systems.

 

Action taken: The Board approved Chaffe & Associates on June 6, 2011. The results of the study were presented to the Board members on 8-23-11 and forwarded to the FDIC & OFI on September 26, 2011. The results were accompanied by G. Harrison Scott’s 9-23-11 memorandum to the Board of Directors addressing the Chaffe Report.

 

•

The Bank shall review and update the Bank’s written strategic plan and profit plan.

 

Action taken: The Bank’s strategic Plan was revised on 1-21-11, to include the services of BankSmart, an outside consulting firm, contracted to review the Bank’s contracts and earnings. The Strategic Plan was presented to the Management Committee on 6-30-11 and the Audit & Finance Committee on 7-5-11.

 

 

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 will 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 specified time periods.

 

 

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS

 

MARCH 31, 2012 COMPARED WITH DECEMBER 31, 2011

 

BALANCE SHEET

 

Total assets at March 31, 2012 were $91,180,000 compared to $91,717,000 at December 31, 2011, for a decrease of $537,000, or 0.59%. Federal Funds Sold increased $1,300,000 from $16,150,000 at December 31, 2011 to $17,450,000 at March 31, 2012. Certificates of Deposit increased $252,000 from $5,458,000 at December 31, 2011 to $5,710,000 at March 31, 2012. Both the increase in Federal Funds Sold and the increase in Certificates of Deposit are due to normal fluctuations. Investment securities decreased $893,000 due to the sale of the Mississippi River Bank Stock. Total loans decreased $505,000, or 0.93%, to $53,876,000 at March 31, 2012 from $54,381,000 at December 31, 2011. The decrease in the loan portfolio is due primarily to a decrease in commercial real estate loans of $321,000, a decrease in construction loans of $139,000, a decrease in second mortgages loans of $14,000, a decrease in other real estate loans of $32,000, a decrease in personal loans of $89,000, a decrease in credit card loans of $405,000 and a decrease in overdrafts of $105,000. These decreases were offset by an increase in 1-4 residential loans of $159,000, an increase in commercial loans of $425,000 plus a decrease in deferred loan fees of $15,000. 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 $682,000, or 0.88%, to $76,998,000 at March 31, 2012 from $77,680,000 at December 31, 2011. Total non-interest bearing deposits decreased $28,000 and interest-bearing accounts decreased $654,000. The decrease of interest earning deposits was mainly attributable to a decrease in money market accounts of $229,000 and a decrease of $754,000 in time deposits, offset by increases in NOW accounts of $81,000 and savings accounts of $248,000.

 

Other liabilities decreased $88,000 from $952,000 at December 31, 2011 to $864,000 at March 31, 2012. This decrease is due mainly to a decrease of $9,000 in accrued interest and a decrease in other liabilities of $79,000.

 

Shareholder’s Equity increased $233,000 from $11,941,000 at December 31, 2011 to $12,174,000 at March 31, 2012. This increase is due mainly to net income for the three months ended March 31, 2012 of $850,000, offset by a decrease in accumulated other comprehensive income of $543,000.

 

THREE MONTHS ENDED MARCH 31, 2012 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2011

 

The Company’s net income for the three months ended March 31, 2012 was $776,000, or $4.34 per share, an increase of $726,000 from the Company’s total net income of $50,000, or $0.28 per share, for the same period last year.

 

Total interest income decreased $190,000 for the three months ended March 31, 2012 over the same period last year. Interest on federal funds sold decreased $1,000 primarily due to a decrease in the average balance of $384,000 and a decrease in the average interest rate of 0.02%. Interest in the loan portfolio decreased $189,000 due mainly to a decrease in the average interest rate of 10.03% at March 31, 2011 to 9.53% at March 31, 2012 and a decrease of $4,784,000 in the average balance. Interest on Investment Securities and Certificates of Deposit purchased remained the same.

 

 

Total interest expense decreased $7,000 for the three months ended March 31, 2012 over the same period last year. This was caused primarily by a decrease in the average interest rate paid on interest-bearing deposits from .73% at March 31, 2011 to .70% as of March 31, 2012 along with a decrease in the average balance of interest bearing deposits from $48,252,000 at March 31, 2011 to $45,612,000 at March 31, 2012. The average interest rate on interest-bearing liabilities decreased from .86% at March 31, 2011 to .84% at March 31, 2012.

 

Net interest income decreased $183,000 for the three months ended March 31, 2012 compared to the same period last year. Our interest rate spread decreased from 6.65% at March 31, 2011 to 6.06% at March 31, 2012. The decrease in the rate spread was due to a decrease of .60% on the yield on interest-earning assets from 7.51% for the three months ended March 31, 2011 to 6.91% for the three months ended March 31, 2012, and a decrease of .02% on the average rate paid out on interest bearing liabilities from .86% paid for the three months ended March 31, 2011 as compared to .84% paid during the three months ended March 31, 2012.

 

Non-interest income increased $1,083,000 between the three month periods from $249,000 at March 31, 2011 to $1,332,000 at March 31, 2012. This increase is due primarily to the Gain on Sale of Securities derived from the sale of the Mississippi River Bank Stock totaling $1,079,000. The other increases on non-interest income were in Service Charges on deposit accounts with an increase of $6,000 and Other Operating Income with an increase of $4,000. These increases were partially offset by a decrease in Cardholder Other Credit Card income of $6,000.

 

Non-interest expense decreased $156,000 for the three month period of 2012 as compared to the same period last year. Salaries and Employee Benefits decreased $55,000 from $600,000 at March 31, 2011 to $545,000 at March 31, 2012. This decrease was due mainly to a reduction in the number of employees and benefits. Total Occupancy Expense decreased by $6,000 due to a decrease in occupancy rentals, and a decrease in depreciation expense. Communications increased by $1,000, Outsourcing fees decreased by $83,000 due mainly to a decrease in Credit Card transactions, Loan and Credit Card expense decreased by $1,000, Professional fees decreased $21,000 primarily due to a decrease in Consulting Fees, ORE expenses increased $10,000 due to an increase in Other Real Estate Owned, and Other Operating expenses decreased $2,000.

 

The provision for income taxes increased $330,000 compared to the same period last year. This increase in income taxes is primarily due to the sale of Investment Securities.

 

 

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.

 

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 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.

 

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

 

 

 

 

 

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.
May 15, 2012	/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)