Financial Instruments

9 Months Ended

Sep. 30, 2011

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 September 30, 2011 and December 31, 2010 (amounts in thousands):

September 30, 2011
	Level 1		Level 2		Level 3		Net Balance

Assets
Equity Securities	$	—	$	878	$	—	$	878

Total	$	—	$	878	$	—	$	878

December 31, 2010
	Level 1		Level 2		Level 3		Net Balance

Assets
Equity Securities	$	—	$	878	$	—	$	878

Total	$	—	$	878	$	—	$	878

BOL BANCSHARES INC 10-Q