Item 1 Description of Business Here and after BOL Bancshares, Inc. shall be referred to as the Company and subsidiary Bank of Louisiana shall be referred to as the Bank.
History and General Business 	The Company was organized as a Louisiana corporation on May 7, 1981, for the purpose of becoming a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The Company remained inactive until April 29, 1988, when it acquired the Bank in a three-bank merger of the Bank of Louisiana in New Orleans (the "Old Bank"), Bank of the South ("South Bank"), and Fidelity Bank & Trust Company, all Louisiana state- chartered banks. The Old Bank was the surviving bank in the merger and subsequently changed its name to the Bank's current name. The merger was originally accounted for as a "purchase", but after discussions with the Securities and Exchange Commission, the accounting treatment of the merger was changed to a manner similar to a "pooling of interests". [Since the change in accounting treatment, the Company has recast its financial statements, to reflect "pooling" accounting.] In addition, at the time of the bank's merger, the Company merged with BOS Bancshares, Inc., a Louisiana corporation, and the registered bank holding company for South Bank. The Company was the surviving entity in that merger. The Company is the sole shareholder and registered bank holding company of the Bank. 	Other than owning and operating the Bank, the Company may also engage, directly or through subsidiary corporations, in those activities closely related to banking that are specifically permitted under the BHC Act. See "Supervision and Regulation Enforcement Action". The Company, after acquiring the requisite approval of the Board of Governors of the Federal Reserve System (the "FRB") and any other appropriate regulatory agency, may seek to engage de novo in such activities or to acquire companies already engaged in such activities. The Bank has formed BOL Assets, LLC to engage in the permissible activity of holding real estate from loans which were in default and held past the FDIC's time limits. There can be no assurance, however, that the Company will not form or acquire any other entity in the future. 	If the Company attempts to form or acquire other entities and engage in activities closely related to banking, the Company will be competing with other bank holding companies and companies currently engaged in the line of business or permissible activity in which the Company might engage, many of which have far greater assets and financial resources than the Company and a greater capacity to raise additional debt and equity capital. See "Territory Served and Competition".
Forward-Looking Statements are Subject to Change 	We make certain statements in this document as to what we expect may happen in the future. These statements usually contain the words "believe", "estimate", "project", "expect", "anticipate", "intend" or similar expressions. Because these statements look to the future, they are based on our current expectations and beliefs. Actual results or events may differ materially from those reflected in the forward-looking statements. You should be aware that our current expectations and beliefs as to future events are subject to change at any time, and we can give no assurances that the future events will actually occur.
Critical Accounting Policies 	In reviewing and understanding financial information of the Company, you are encouraged to read and understand the significant accounting policies used in preparing our consolidated financial statements. These policies are described in Note A of the notes to our consolidated financial statements included in this Form 10-K. Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the periods presented. The following policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.
Allowance for Loan Losses. We have identified the evaluation of the allowance for loan losses as a critical accounting policy where amounts are sensitive to material variation. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that management believes will cover known and inherent losses in the loan portfolio, based on evaluations of the collectability of loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, value of collateral, estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible to significant change.
Banking Industry 	The Company derives its revenues largely from dividends from the Bank when the Bank upstreams dividends. As is the case with any financial institution, the profitability of the Bank is subject, among other things, to fluctuating availability of money, loan demand, changes in interest rates, actions of fiscal and monetary authorities, and economic conditions in general. See "Banking Products and Services", "Supervision and Regulation Enforcement Action", and "Management's Discussion and Analysis".
Banking Products and Services 	The Bank is a full service commercial bank that provides a wide range of banking services for its customers. Some of the major services that it offers include checking accounts, negotiable order of withdrawal ("NOW") accounts, individual retirement accounts ("IRAs"), savings and other time deposits of various types, and business, real-estate, personal use, home improvement, automobile, and a variety of other loans, as discussed more fully below. Other services include letters of credit, safe deposit boxes, traveler's checks, credit cards, wire transfer, e-banking, night deposit, and drive-in facilities. Prices and rates charged for services offered are competitive with the area's existing financial institutions in the Bank's primary market area. 	The Bank offers a wide variety of fixed and variable rate loans to qualified borrowers. With regard to interest rates, the Bank continues to meet legal standards while remaining competitive with the existing financial institutions in its market area. The specific types of loans that the Bank offers include the following:
	Consumer Loans. The Bank's consumer loans consist of automobile, mobile home, recreational vehicle, and boat loans; home improvement and second- mortgage loans; secured and unsecured personal expense loans; and educational loans. 	Real Estate Loans. The Bank's real estate loans consist of residential first and second mortgage loans on one-to-four family homes; construction and development loans; multiple dwelling unit loans; housing rehabilitation loans; loans to purchase developed real property; and commercial real estate loans.
	Commercial Loans (Secured and Unsecured). The Bank's commercial loans consist of working capital loans, secured and unsecured lines of credit, and small equipment loans. 	Credit Cards. The Bank offers a variety of nationally recognized credit cards, in addition to its own Mr. Bol credit card, and private label credit cards for use at retail establishments nationwide. As of December 31, 2008 the Bank held $7,591,000 in credit card debt. 	The Bank has a number of proprietary accounts it services which is included above. These accounts consist largely of small to medium sized merchants who have issued their own private-label credit cards. The Bank acquires these credit card accounts, typically with reserves posted, and requires the merchant to repurchase accounts 180 days or more past due. As of December 31, 2008 the Bank held $575,000 in proprietary accounts.
Territory Served and Competition 	Market Area. The market area for the Bank is defined in the Bank's Community Reinvestment Act Statement as the greater New Orleans metropolitan area. This area includes all of the City of New Orleans and surrounding Parishes. The Bank has branch offices in Orleans, Jefferson, and St. Tammany Parishes. 	Population. The U.S. Census Bureau's latest estimates on the population of New Orleans ranks the parish the third fastest-growing county in the nation at 311,000. According to those numbers, New Orleans grew by 8.2 percent in one year. Metro wide, New Orleans gained more than 24,500 residents, boosting the metro population to more that 1.13 millon people. The growth made metro New Orleans the 36th fastest-growing metropolitan area in the nation, at a rate of 2.2 percent. Competition. The Bank competes with other commercial banks, savings and loan associations, credit unions, and other types of financial services providers in the New Orleans metropolitan area. The Bank is one of the smallest commercial banks in New Orleans in terms of assets and deposits. 	Economy. While there is still a long way to go, considerable measurable progress is being made toward the New Orleans region's gradual economic recovery in the aftermath of the widespread devastation wreaked by Hurricanes Katrina (August 29, 2005) and Rita (September 24, 2005).
A spokesperson of the Federal Reserve Bank of Atlanta stated that tourism, which survived last year because of international visitors coming to the Southeast to take advantage of the weak dollar, is unlikely to pull off the same coup this year because of global economic doldrums and stronger U.S. currency erasing the bargain for foreign travelers. New Orleans convention and leisure travel business will surely be affected as consumers pull back on spending this year. The longer the U.S. recession goes on, the more vulnerable the New Orleans area economy becomes.
Governmental agencies and coalitions have crafted and embraced comprehensive plans for rebuilding New Orleans and its surrounding parishes for the near, medium and long term. Our communities and citizens are working hard to make a solid come-back. Our vision is one of a more livable, sustainable and safer future for New Orleans, which will include all the rich cultural and architectural heritage that has made the region so beloved to natives and visitors alike.
Construction, not surprisingly, was the strength of New Orleans' job market, growing 6.2 percent over the year while the rest of the country saw a 5.9 percent decline in the sector. New Orleans added 2,000 construction jobs in 2008; 1,500 in the hotel industry; 1,500 in food and beverage services; 1,100 in state government jobs, including public hospital workers and teachers; 800 in the professional/technical sector; and 800 in private hospitals.
Employees 	As of December 31, 2008, the Bank had 75 full-time and approximately 2 part-time employees, including executive officers, loan and other banking
officers, branch personnel, operations personnel and other support personnel. The Bank considers its relationship with its employees to be very good. The employee benefit programs provided by the Bank include group life and health insurance, paid vacations, sick leave, and a Section 401(k) savings plan. The Company has no employees who are not employees of the Bank. See "Executive Compensation".
Item 2
Item 2 Description of Property 	In addition to its main office, the Bank has five branch locations and an operations center. Set forth below is a description of the offices of the Bank. 	Main Office. The main office of the Company is located at 300 St. Charles Avenue in the central business district of New Orleans, Louisiana. The building consists of approximately 13,100 square feet of office space, and parking is provided on the streets and commercial lots nearby. The Bank occupies the ground floor and the fourth floor. The second and third floors are leased. Rental income received is $2,543 per month. The lease commenced December 15, 2003 and terminates on December 15, 2018. The Bank owns the building. 	Severn Branch. The Severn Branch of the Bank is located in the central business district of Metairie at 3340 Severn Avenue, Metairie, Louisiana. The premises consist of approximately 4,600 total square feet of office space on the first floor of a four-story office building, and parking is provided for approximately 100 cars. On August 20, 2007 for a price of $4,650,000 the Bank purchased the land and improvements from Severn South Partnership which the Bank was paying rent to. The property consists of a four story building with offices that are leased to other businesses. The purchase was approved by FDIC (Federal Deposit Insurance Corp) and OFI (Office of Financial Institutions, State of Louisiana) on August 6, 2007 with the stipulation that the investment in fixed assets not exceed 50 percent of its equity capital and reserves by December 31, 2008. The percentage as of December 31, 2008 was 48.24%. The Bank leased office space from Severn South Partnership. The general partner of Severn South Partnership is a majority shareholder in BOL BANCSHARES, INC. Rent paid to Severn South Partnership for the years ended December 31, 2007 (prior to the purchase described above), and 2006 totaled $247,407, and $381,386 respectively. Rental income received during 2008 was $249,664. Oakwood Branch. The Oakwood Branch of the Bank is located in the Oakwood Shopping Center at 197 Westbank Expressway, Gretna, Louisiana. The premise consists of approximately 3,730 total square feet of office space, which includes 1,560 square feet designated for its drive-in facility. The Bank leases the lobby and drive-in facility from Oakwood Shopping Center, Ltd. There was heavy storm damage to this shopping center and the Bank has relocated its branch to another location within the shopping center and reopened during the 4th quarter of 2007. The lease will expire November 14, 2016 with a monthly lease amount of $13,066 per month. 	Lapalco Branch. The Lapalco Branch of the Bank is located in the Belle Meade Plaza Shopping Center at 605 Lapalco Boulevard, Gretna, Louisiana. The premises consist of approximately 2,500 square feet of office space in a one- story building, and parking is provided by the shopping center. The lease will expire March, 2017 with a monthly lease amount of $6,384 per month. 	Gause Branch. The Gause Branch of the Bank is located in the central business district of Slidell at 636 Gause Boulevard, Slidell, Louisiana. The building consists of approximately 13,800 total square feet of office space in a three-story office building, and parking is provided for approximately 50 cars. The Bank owns the building and underlying land upon which it is situated. The Bank occupies approximately 3,300 square feet in this building and leases the remaining space to various tenants for varying rental rates and terms. Rental income received during 2008 totaled $111,407. Tammany Mall Branch. The Tammany Mall Branch of the Bank is located at 3180 Pontchartrain, Slidell, Louisiana. The premises consist of approximately 4,000 total square feet of office space, and parking is provided for approximately 40 cars. The Bank owns the building. 	Operations Center. The Bank's operations center, which houses its accounting, audit, data processing, credit card, bookkeeping, and marketing departments, is located at 3340 Severn Avenue, Metairie, Louisiana. The
building consists of approximately 44,500 total square feet of space in a four-story office building, and parking is provided for approximately 200 cars. See "Severn Branch" above for information on the building purchase.
Item 3
Item 3 Legal Proceedings Because of the nature of the banking industry in general, the Company and the Bank are each party from time to time to litigation and other proceedings in the ordinary course of business, none of which (other than those described below), either individually or in the aggregate, have a material effect on the Company's and/or the Bank's financial condition. Reserves for such litigation, if the Company deems such litigation to have sufficient merit or which may subject the Company to significant exposure, have been posted and are reflected in the Company's consolidated financial statements. 	The following actions, however, have been brought against the Bank and, if the claimants were wholly successful on the merits, could result in significant exposure to the Bank: 	1. The Bank has a suit in the United States District Court which began in 2002 against an insurance company arising from the insurance company drafting the Bank for $273,000 in payments under a previously-existing employee's health plan. The Bank has amended its complaint to seek penalties and damages in excess of the $273,000. The matter was submitted to the district judge on cross motions for summary judgment and the court ruled against the Bank, dismissing all claims. The case is on appeal. A loss of $272,000 was charged to operations during 2004. 2. The Bank is a defendant in a lawsuit filed by one of its customers for the unauthorized transfer of funds via telephone. The matter was tried with a verdict of $11,000 against the Bank. The matter is on appeal. 3. The Bank is a defendant in a lawsuit pending in the 22nd Judicial District Court in St. Tammany Parish. The issues involved the clearing of a safety deposit box at the Gause branch by a notary with authority from the court to do so in the succession of the owner of the box. The causes of action against the Bank are unclear and the case is in the discovery stages. It is doubtful that the Bank has any exposure. 4. The Bank entered into an agreement with a company for disaster protection. The company had a contract to provide technical and physical backup in the event the Bank's data systems were impaired by a natural disaster. When Katrina hit, however, the company woefully failed to provide the services agreed and the Bank has made demand for payment of $901,992.50. The Bank filed suit and the court ruled against the Bank. The Court of Appeals affirmed. 5. The Bank has sued the owner of a branch office that is leased for a dispute in the lease agreement subsequent to Hurricane Katrina. The case is in the preliminary stages and some discovery has taken place. 6. The Bank has sued its insurance carriers over Hurricane Katrina damages in order to interrupt prescription. Negotiations have resulted in settlement of the majority of the claims and it is unlikely that litigation will continue.
Item 4
Item 4 Submission of Matters to a Vote of Security Holders There were no matters submitted, during the fourth quarter of fiscal year 2008 to a vote of security holders, through the solicitation of proxies.
Item 5
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters There is no established trading market in the shares of Bank Stock, as the Company owns 100% of the issued and outstanding shares of Bank Stock. There is no established trading market in the shares of Company Common Stock. The Company Common Stock is not listed or quoted on any stock exchange or automated quotation system. Management is aware, however, that Dorsey & Company, New Orleans, Louisiana does make a market in the Company Common Stock. The following table sets forth the range of high and low sales prices of Company Common Stock since 2007, as determined by the Company based on trading records of Dorsey & Company. The following table does not purport to be a listing of all trades in Company Common Stock during the time periods
indicated, but only those trades of which Dorsey and Company has informed the Company. The prices indicated below do not reflect mark-ups, mark-downs, or commissions, but do represent actual transactions. Finally, the prices listed below are not necessarily indicative of the prices at which shares of Company Stock would trade. As of December 31, 2008, the Company had approximately 609 shareholders of record. There were no dividends declared on the Company common stock for the years ended 2008 or 2007.
2008 2007
	 High Low High Low First Quarter - - 31.00 29.75 Second Quarter - - - - Third Quarter 36.60 33.00 - - Fourth Quarter - - - -
	No dividends were paid on shares of Company Common stock in 2008 or 2007.
Annual Shareholders Meeting 	The Annual Meeting of the shareholders of Registrant will be held at 300 St. Charles Avenue, 4th Floor, New Orleans, Louisiana, on Tuesday April 14, 2009 at 3:30 p.m.
Independent Auditors LaPorte, Sehrt, Romig & Hand, 110 Veterans Memorial Blvd., Suite 200, Metairie, LA 70005-4958.
Item 6
Item 6 MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition and results of operations of BOL Bancshares, Inc. (the "Company") and its bank subsidiary, (the "Bank") for the years ending December 31, 2008, 2007, and 2006. This discussion and analysis should be read in conjunction with the consolidated financial statements, related notes, and selected financial data appearing elsewhere in this report. 	This discussion may contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated. Readers are cautioned not to place undue reliance on these forward-looking statements. 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. As a rule 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. While the Company has assembled an experienced management team, and has management development plans in place, the unexpected loss of key employees could have a material adverse effect on the Company's business and may result in lower revenues.
Hurricane Katrina Disclosure Insurance proceeds received for storm damages caused by Hurricane Katrina has covered the damages sustained to the Bank's branches. Ample proceeds remain in the contingency account to cover the small percentage of repairs remaining. Of the 7 branch locations that were affected by Hurricane Katrina, only the Carrollton branch was not reopened. The Company's management team and employees have and are continuing to work diligently to control operating expenses and costs while restoring normal business operations.
Overview 	The Company provides a full range of quality financial services in selected market areas. As of December 31, 2008, the Company's total assets were $95,506,000 as compared to $105,270,000 at December 31, 2007. This is due to deposits shrinking back to their pre-Katrina levels absent of FEMA and insurance proceeds. 	Loans comprise the largest single component of the Bank's interest- earning assets and provide a far more favorable return than other categories of earnings assets. The Bank's loans totaled $55,608,000, and $55,820,000 net of unearned discount and Allowance for Loan Losses at December 31, 2008, and 2007. The Bank's net interest margin was 6.77% for the year ended December 31, 2008 as compared to 8.04% for the year ended December 31, 2007. 	Historically, credit card loans have been an important part of the Bank's total loan portfolio. However, the Bank has been diversifying its earning assets into commercial and installment loans. At December 31, 2008, credit card loans were $7,591,000 and represented 13.65% of the Bank's loan portfolio of $55,608,000. At December 31, 2007, credit card loans were $9,064,000 and represented 16.24% of the Bank's loan portfolio of $55,820,000. 	The Bank's current strategy is to continue to grow its traditional banking operations primarily in the metropolitan New Orleans area and to expand its proprietary accounts, so long as it can maintain the minimum required Tier 1 leverage ratio required. The Bank focuses on providing its customers with the financial sophistication and breadth of products of a regional bank while successfully retaining the local appeal and level of service of a community bank.
Results of Operations
Net Income - December 31, 2008 Compared to December 31, 2007
The Company's net income for the year 2008 was $724,000 or $4.04 per share, a decrease of $752,000 or a decrease of $4.20 per share from the Company's net income of $1,476,000 in 2007.
Net interest income which is total interest income (including fees) less total interest expense was $6,358,000 in 2008 compared to $7,804,000 in 2007. Interest on earning assets decreased $1,401,000 from $8,617,000 in 2007 to $7,216,000 in 2008. Interest income on federal funds sold decreased $660,000 due to a decrease in the average interest rate from 4.99% in 2007 to an average interest rate of 2.00% in 2008. The average balance of Federal Funds sold increased $6,249,000 from $26,199,000 in 2007 to $32,448,000 in 2008. Interest income on investment securities decreased $335,000 from $443,000 earning 3.58% in 2007 to $108,000 earning 2.72% in 2008 due to average investment securities decrease of $8,413,000 from $12,370,000 in 2007 to $3,957,000 in 2008. Taxable-equivalent income on loans decreased $406,000 or 5.91% from $6,866,000 in 2007 to $6,460,000 in 2008. This decrease primarily resulted from a decrease of $1,046,000 in the average balance of loans from $58,502,000 in 2007 to $57,456,000 in 2008 and the average interest rate decreased from 11.74% in 2007 to 11.24% in 2008. 	Interest on deposits increased $45,000 from $700,000 in 2007 to $745,000 in 2008. This increase resulted primarily from an increase in the average balance of interest bearing deposits from $46,173,000 in 2007 to $49,356,000 in 2008. The average interest rate paid on deposits was 1.52% in 2007 as compared to 1.51% in 2008. The provision for loan losses decreased $20,000 from $277,000 in 2007 to $257,000 in 2008. Net charge-offs were $277,000 in 2007 compared to $257,000 in 2008. Non-interest income increased $289,000. This increase was due mainly to the sale of Visa stock for a gain of $578,000. This was offset by a decrease in deposit related fees of $106,000 of which $47,000 was due to a decrease of fees collected on overdrawn accounts and a decrease of $38,000 in the service charge collected on commercial accounts. Cardholder and other credit card fees decreased $50,000. Other real estate income decreased $88,000 due to the gain of an OREO sale of $88,000 in 2007, as compared to $0 in 2008. Miscellaneous income decreased $58,000 due mainly to the settlement of a lawsuit $50,000 against another bank and $7,000 as a gain on the sale of MasterCard stock, both of which occurred in 2007. Non-interest expense decreased $102,000. The major components of this decrease were a decrease of $52,000 in Salaries and Employee Benefits, and a decrease of $52,000 in ORE expenses. Income tax expense decreased $284,000 in 2008 compared to the same period last year from $721,000 in 2007 to $437,000 in 2008 due to the decrease in pretax net income of $1,036,000 from 2007 to 2008.
Net Income - December 31, 2007 Compared to December 31, 2006
The Company's net income for the year 2007 was $1,476,000 or $8.24 per share, a decrease of $654,000 from the Company's net income of $2,130,000 in 2006. Net interest income which is total interest income (including fees) less total interest expense was $7,804,000 in 2007 compared to $8,424,000 in 2006. Interest on earning assets decreased $420,000 from $9,037,000 in 2006 to $8,617,000 in 2007. Interest income on federal funds sold decreased $467,000 due to a decrease in the average balance of $10,161,000 from $36,360,000 in 2006 as compared to $26,199,000 in 2007. This decrease was due primarily to the decrease in the average balance of deposits which decreased $17,131,000 from $109,103,000 in 2006 to $91,972,000 in 2007. The customers who had received insurance proceeds and road home money have used these funds to repair or replace property damaged by Hurricane Katrina. Interest income on investment securities decreased $88,000 from $531,000 earning 2.96% in 2006 to $443,000 earning 3.58% in 2007 due to $6,000,000 in called or matured securities resulting in a decrease of average balances from $17,939,000 in
2006 to $12,370,000 in 2007. Taxable-equivalent income on loans increased $135,000 or 2.01%, from $6,731,000 in 2006 to $6,866,000 in 2007. This increase primarily resulted from an increase of $784,000 in the average balance of loans from $57,718,000 in 2006 to $58,502,000 in 2007. 	Interest on deposits increased $225,000 from $475,000 in 2006 to $700,000 in 2007. This increase resulted primarily from an increase in the rates paid from .88% in 2006 to 1.52% in 2007. The provision for loan losses decreased $287,000 from $564,000 in 2006 to $277,000 in 2007. Net charge-offs were $677,000 in 2006 compared to $277,000 in 2007. 	The most significant contributing factor within the non-interest income and expense category for 2007 is a decrease of $514,000 in non-interest income. This decrease was due mainly to a gain on insurance settlement. In 2006, $600,000 in insurance proceeds was received on an OREO property that the Bank had no plans to repair. The Bank had a purchase offer and the property was sold in July, 2006. This was offset by an increase of $87,000 from the gain of an OREO sale of $88,000 in 2007, as compared to a minimal gain of $1,000 on sold OREO in 2006. Non-interest expense increased $24,000. The major component of this increase was the recovery of $202,000 during 2006 due to insurance recovery of damages sustained during Hurricane Katrina in 2005 as compared to the recovery of $1,200 during 2007. This was offset by a decrease in Other Real Estate write-downs of $241,000. During 2007, the write-down on Other Real Estate parcels was $24,000 compared to a write-down of $265,000 in 2006. Income tax expense decreased $217,000 in 2007 compared to the same period last year from $938,000 in 2006 to $721,000 in 2007 due to the decrease in pretax net income of $870,000 from 2006 to 2007.
The following table shows interest income on earning assets and related average yields, as well as interest expense on interest bearing liabilities and related average rates paid for the years 2008, 2007 and 2006.
TABLE 1 Average Balances, Interests and Yields
2008 2007 2006
Average Yield/ Average Yield/ Average Yield/ (Dollars in Thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
ASSETS INTEREST-EARNING ASSETS: Loans, net of Unearned income (1)(2) 57,456 6,460 11.24% 58,502 6,866 11.74% 57,718 6,731 11.66% Investment securities 3,957 108 2.72% 12,370 443 3.58% 17,939 531 2.96% Federal funds sold 32,448 648 2.00% 26,199 1,308 4.99% 36,360 1,775 4.88% Total Interest-Earning Assets 93,861 7,216 7.69% 97,071 8,617 8.88% 112,017 9,037 8.07% Cash and due from banks 3,431 3,946 6,084 Allowance for loan Losses (1,813) (1,803) (1,804)
Premises and equipment 6,811 4,001 2,334 Other Real Estate 1,077 1,105 894 Other assets 1,311 1,284 1,517 TOTAL ASSETS 104,678 105,604 121,042
LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST-BEARING LIABILITIES: Deposits: Demand Deposits 15,802 150 0.95% 15,487 214 1.38% 18,313 158 0.86% Savings deposits 22,918 215 0.94% 24,505 271 1.11% 30,273 177 0.58% Time deposits 10,636 380 3.57% 6,181 215 3.48% 5,576 140 2.51% Total Int-Bearing Deposits 49,356 745 1.51% 46,173 700 1.52% 54,162 475 0.88% Long-Term debt 1,543 113 7.30% 1,544 113 7.32% 1,843 138 7.48% Total Interest-Bearing Liabilities 50,899 858 1.68% 47,717 813 1.70% 56,005 613 1.09% Non-interest-bearing deposits 40,168 45,799 54,941 Other liabilities 2,185 2,199 1,783 Shareholders' equity 11,426 9,889 8,313 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 104,678 105,604 121,042 Net Interest Income 6,358 7,804 8,424 Net Interest Spread 6.00% 7.17% 6.97% Net Interest Margin 6.77% 8.04% 7.52% (1) Fee income relating to loans of $513,000 in 2008, $452,000 in 2007 and $586,000 in 2006 is included in interest income. (2) Non-accrual loans are included in average balances and income on such loans, if recognized, is recognized on the cash basis.
The below table presents changes in interest income and interest expense, and distinguishes between the changes related to increases or decreases in average outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes related to increases or decreases in average interest rates on such assets and liabilities (rate)for the years ended December 31.
Table 2 Rate/Volume Analyses (1
2008 vs 2007 Increase(Decrease) 2007 vs 2006 Increase(Decrease)
Due to Change in: Due to Change in: (Dollars in Thousands) Rate Volume Total Rate Volume Total
Net Loans (283) (123) (406) 44 91 135 Investment Securities (34) (301) (335) 77 (165) (88) Federal Funds Sold (972) 312 (660) 28 (495) (467) Total Interest Income (1,289) (112) (1,401) 149 (569) (420)
Deposits: Demand Deposits (68) 4 (64) 80 (24) 56 Savings Deposits (38) (18) (56) 128 (34) 94 Time Deposits 10 155 165 60 15 75 Total Int-Bearing Dep (96) 141 45 268 (43) 225 Long-Term Debt (0) (0) (0) (3) (22) (25) Total Interest Expense (96) 141 45 265 (65) 200 Change in net interest Income (1193) (253) (1446) (116) (504) (620)
Interest Sensitivity Gap Analysis 	The major elements management utilizes monthly to manage interest rate risk include the mix of fixed and variable rate assets and liabilities and the maturity pattern of assets and liabilities. It is the Bank's policy not to invest in derivatives in the ordinary course of business. The Bank performs a quarterly review of assets and liabilities that reprice and the time bands within which the repricing occurs. Balances are reported in the time band that corresponds to the instruments next repricing date or contractual maturity, whichever occurs first. Through such analysis, the Bank monitors and manages its interest sensitivity gap to minimize the effects of changing interest rates. 	The interest rate sensitivity structure within the Company's balance sheet at December 31, 2008, has a net interest sensitive asset gap of 31.32% when projecting out one year. In the near term, defined as 90 days, the Company currently has a net interest sensitive liability gap of 1.50%. The information represents a general indication of repricing characteristics over time; however, the sensitivity of certain deposit products may vary during extreme swings in the interest rate cycle. Since all interest rates and yields do not adjust at the same velocity, the interest rate sensitivity gap is only a general indicator of the potential effects of interest rate changes on net interest income. 	The following table illustrates the Company's interest rate sensitivity analysis at December 31, 2008, as well as the cumulative position at December 31, 2008:
TABLE 3 Asset/Liability and Gap Analysis
December 31, 2008 1-30 31-60 61-90 91-365 1 Year- Over Days Days Days Days 5 Years 5 Years Total (Dollars in Thousands)
Earning Assets Securities-HTM - - 2,001 - - - 2,001 Securities - AFS - - - - 823 - 823 Loans 9,482 2,731 2,303 32,095 8,528 469 55,608 Federal Funds sold 25,375 - - - - - 25,375
Total Earning Assets 34,857 2,731 4,304 32,095 9,351 469 83,807
Non Earning Assets - - - - - 11,699 11,699
TOTAL ASSETS 34,857 2,731 4,304 32,095 9,351 12,168 95,506
Interest-Bearing Liabilities
Savings & Now accounts 33,483 - - - - - 33,483 Money market 3,667 - - - - - 3,667 CD's < $100,000 1,832 669 309 2,661 1,547 - 7,018 CD's > $100,000 201 303 - 945 431 - 1,880 Notes payable - - - - - - -
Total Interest- Bearing Liabilities 39,183 972 309 3,606 1,978 - 46,048 Non Costing Liabilities 724 - - - - 48,734 49,458
TOTAL LIABILITIES 39,907 972 309 3,606 1,978 48,734 95,506
Interest Sensitivity Gap (4,326) 1,759 3,995 28,489 7,373 469 37,759 Cumulative Gap (4,326) (2,567) 1,428 29,917 37,290 37,759 Cumulative Gap/ Total Assets -4.53% -2.69% 1.50% 31.32% 39.04% 39.54%
Provision for Loan Losses 	Management's policy is to maintain the allowance for possible loan losses at a level sufficient to absorb estimated losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and decreased by charge-offs, net of recoveries. Management's evaluation process to determine potential losses includes consideration of the industry, specific conditions of individual borrowers, historical loan loss experience, and the general economic environment. As these factors change, the level of loan loss provision changes. At December 31, 2008 and December 31, 2007 the allowance for possible loan losses was $1,800,000. In 2008, the provision for loan losses was $257,000 compared to $277,000 in 2007. Net charge-offs were $257,000 in 2008
compared to $277,000 in 2007. Based on the volume of credit card charges and payments, the credit card portfolio turns over every eight to nine months, requiring a provision to loan loss allowance less than annual charge-offs due to recoveries being contemporaneously made.
TABLE 4 Allowance for Loan Losses
December 31, 2008 2007 (Dollars in Thousands)
Balance at beginning of period $1,800 $1,800 Charge-Offs: Commercial 0 32 Real estate 0 11 Consumer 4 15 Credit Cards 448 424
Total Charge-offs 452 482 Recoveries: Commercial 20 3 Real estate 0 0 Consumer 7 7 Credit Cards 168 195 Total Recoveries 195 205 Net charge-offs 257 277 Provision for loan losses 257 277
Balance at end of period $1,800 $1,800 Ratio of net charge-offs during period to average loans outstanding 0.45% 0.47% Allowance for possible loan losses as a percentage of loans 3.14% 3.12%
Non-interest Income 	An important source of the Company's revenue is derived from non- interest income. 	For the year 2008 non-interest income increased $289,000. This increase was due mainly to the sale of Visa stock for a gain of $578,000. This was offset by a decrease in deposit related fees of $106,000 of which $47,000 was due to a decrease of fees collected on overdrawn accounts and a decrease of $38,000 in the service charge collected on commercial accounts. Cardholder and other credit card fees decreased $50,000. Other real estate income decreased $88,000 due to the gain of an OREO sale of $88,000 in 2007, as compared to $0 in 2008. Miscellaneous income decreased $58,000 due mainly to the settlement of a lawsuit $50,000 against another bank and $7,000 as a gain on the sale of MasterCard stock, both of which occurred in 2007. For the year 2007 non-interest income decreased $514,000. This decrease was due mainly to a gain on insurance settlement. In 2006, $600,000 in insurance proceeds was received on an OREO property that the Bank had no plans to repair. The Bank had a purchase offer and the property was sold in July, 2006. This was offset by an increase of $87,000 from the gain of an OREO sale of $88,000 in 2007, as compared to a minimal gain of $1,000 on sold OREO in 2006. The following table sets forth the major components of non-interest income for the last two years.
TABLE 5 Non-interest Income
December 31, 2008 2007 $ Change (Dollars in Thousands)
Service Charges 237 277 (40) NSF Charges 268 315 (47) Gain on Sale of Securities 0 0 0 Cardholder & Other Cr Card Inc 498 543 (45) Other Comm. & Fees 73 65 8 ORE Income 0 0 0
Gain on Sale of ORE 0 88 (88) Gain on Insurance Settlement 0 0 0 Other Income 640 139 501
Total Non-interest Income $1,716 $1,427 $289
	The major categories of non-interest expense include salaries and employee benefits, occupancy and equipment expenses and other operating costs associated with the day-to-day operations of the Company. For the year 2008 non-interest expense decreased $102,000. The major components of this decrease were a decrease of $52,000 in Salaries and Employee Benefits, and a decrease of $52,000 in ORE expenses. 	For the year 2007 non-interest expense increased $24,000. The major component of this increase was the recovery of $202,000 during 2006 due to insurance recovery of damages sustained during Hurricane Katrina in 2005 as compared to the recovery of $1,200 during 2007. This was offset by a decrease in Other Real Estate write-downs of $241,000. During 2007, the write-down on Other Real Estate parcels was $24,000 compared to a write-down of $265,000 in 2006. The following table sets forth the major components of non-interest expense for the last two years:
TABLE 6 Non-interest Expenses
December 31, 2008 2007 $ Change (Dollars in Thousands)
Salaries & Benefits 2,697 2,749 	 (52) Occupancy Expense 1,144 1,058 86 Estimated Loss (Recovery) Contingency 0 (1) 1 Loan & Credit Card Expense 121 125 (4) Communications 231 222 9 Outsourcing Fees 1,468 1,432 36 Stationery, Forms & Supply 96 111 (15) Professional Fees 252 305 (53) Insurance & Assessments 93 77 16 Advertising Expense 7 9 (2) Misc. Losses (1) 5 (6) Promotional Expenses 50 74 (24) ORE Expenses 35 87 (52) Other Operating Expense 463 505 (42) Total Non-interest Expense $6,656 $6,758 ($102)
Provision for Income Taxes 	Income tax expense for 2008 was $437,000 compared to $721,000 in 2007, and an income tax expense of $938,000 in 2006. The income tax paid was for federal income taxes only, as Louisiana does not have an income tax for banks. The Company's effective tax rate approximated statutory rates.
Financial Condition 	The Bank manages its assets and liabilities to maximize long-term earnings opportunities while maintaining the integrity of its financial position and the quality of earnings. To accomplish this objective, management strives to effect efficient management of interest rate risk and liquidity needs. The primary objectives of interest-sensitivity management are to minimize the effect of interest rate changes on the net interest margin and to manage the exposure to risk while maintaining net interest income at acceptable levels. Liquidity is provided by carefully structuring the balance sheet. The Bank's asset liability committee meets regularly to review both the interest rate sensitivity position and liquidity.
Liquidity The purpose of liquidity management is to ensure that there is sufficient cash flow to satisfy demands for credit, deposit withdrawals, and other corporate needs. Traditional sources of liquidity include asset maturities and growth in core deposits. These are sources of liquidity that the Bank has not fully utilized. The Bank, nevertheless, has maintained adequate liquidity through the sale of federal funds. Traditionally, liquidity sources for the Bank are generated from operating activities and financing activities. 	Net cash from operating activities primarily results from net income adjusted for the following non-cash items: the provision for loan losses; depreciation and amortization; fair value adjustments on foreclosed property; and deferred income taxes or benefits. 	Significant financing activities generally include core deposits, securities sold under agreements to repurchase, and long-term debt. The Bank anticipates capital needs will be met from the growth in retained earnings.
	Financing activity cash flows from deposits, which decreased 9.67% to $80,977,000 in 2008 from $89,666,000 in 2007, or $8,689,000, was the primary reason for the decrease in liquidity. As customers utilize their insurance proceeds for purchasing new homes or making repairs for the damages caused by Katrina, they are withdrawing the funds in their accounts. Management anticipated this fact and therefore has invested the funds in readily available Federal Funds Sold to correspondent banks. The Bank had unused sources of liquidity in the form of unused federal funds lines of $4,400,000 from a correspondent bank, and borrowing availability from the FRB discount window equal to the Bank's principal amount of unpledged investment securities. The Bank manages asset and liability growth through pricing strategies within regulatory capital constraints. Management believes that its core deposit strength minimizes the risk of deposit runoff.
Loans 	The loan portfolio is the largest category of the Bank's earning assets. The following table summarizes the composition of the loan portfolio for the last two years:
TABLE 7 Loans Net by Category
December 31, 2008 2007
(Dollars in Thousands)
Real estate-mortgage 45,693 43,513 Commercial, financial, & Agricultural 2,170 2,754 Consumer 1,848 2,175 Credit cards 7,591 9,064 Overdrafts 106 114
Loans 57,408 57,620
Less: Allowance for possible loan losses 1,800 1,800 Loans, net $55,608 $55,820
At December 31, 2008 total loans outstanding were $55,608,000 and $55,820,000 at December 31, 2007. Average total loans during 2008 decreased $1,046,000 or 1.79%, to $57,456,000 from $58,502,000 at December 31, 2007. The Bank experienced an increase of $2,180,000 in real estate loans from $43,513,000 in 2007 to $45,693,000 in 2008, which was offset by a decrease in credit card loans of $1,473,000, a decrease in commercial loans of $584,000, and a decrease in personal loans of $327,000.
The following table shows the maturity distribution and interest rate sensitivity of the Bank's loan portfolio at December 31, 2008:
TABLE 8 Loan Maturity and Interest Rate Sensitivity
December 31, 2008 Maturing Within One To Over One Year 5 Years 5 Years Total 			(Dollars in Thousands) Loan Maturity by Type Real estate construction, land & land dev. 40,012 4,910 771 45,693 Commercial, financial & Agricultural 1,981 189 0 2,170 All other loans 1,810 7,735 0 9,545 Total $43,803 $12,834 $771 $57,408
Rate Sensitivity of Loans Loans: Fixed rate loans 41,091 12,834 771 54,696 Variable rate loans 1,463 0 0 1,463 Non-Accrual Loans 1,249 0 0 1,249 Total $43,803 $12,834 $771 $57,408
	As of December 31, 2008 and 2007, the Bank's recorded investment in loans that are considered impaired under SFAS 114 totaled $1,249,000 and $417,000, respectively.
Non-performing Assets Non-performing assets consist of non-accrual and restructured loans and other real estate owned. Non-accrual loans are loans on which the interest accruals have been discontinued when it appears that future collection of principal or interest according to the contractual terms may be doubtful. Interest on these loans is reported on the cash basis as received when the full recovery of principal is anticipated or after full principal has been recovered when collection of interest is in question. Restructured loans are those loans whose terms have been modified, because of economic or legal reasons related to the debtors' financial difficulties, to provide for a reduction in principal, change in terms, or fixing of interest rates at below market levels. Other real estate owned is real property acquired by foreclosure or deed taken in lieu of foreclosure. 	Non-performing assets at December 31, 2008 were $2,402,000 and $1,453,000 at December 31, 2007. During 2008, non-accrual loans increased by $832,000 and other real estate owned increased $117,000. At December 31, 2008, and 2007, there were no restructured loans. 	Since December 31, 2007, the ratio of past due loans to total loans has increased from .85% to .86% at December 31, 2008. During that time, the Bank increased its ratio of non-performing assets to loans and other real estate owned from a low of 2.48% at December 31, 2007, to a high of 4.10% at December 31, 2008. The allowance for possible loan losses as a percent of net period- end loans increased to 3.14% at December 31, 2008, compared to 3.12% at December 31, 2007. Management believes the allowance for possible loan losses is adequate to provide for losses inherent in the loan portfolio. 	When a loan is classified as non-accrual, previously accrued interest is reversed and interest income is decreased to the extent of all interest accrued in the current year. If any portion of the accrued interest had been accrued in the previous years, accrued interest is decreased and a charge for that amount is made to the allowance for possible loan losses. The gross amount of interest income that would have been recorded on non-accrual loans,
if all such loans had been accruing interest at the original contract rate, at December 31, 2008 was $76,000 compared to December 31, 2007 was $31,000.
TABLE 9 Non-performing Assets
December 31, 2008 2007 (Dollars in Thousands)
Non-accrual Loans 1,249 417 Restructured Loans 0 0 Other Real Estate Owned 1,153 1,036 Total Non-performing Assets $2,402 $1,453 Loans past due 90 days or more 491 488 Ratio of past due loans to loans 0.86% 0.85% Ratio of non-performing assets to loans and other real estate owned 4.10% 2.48%
	Management is aware of and working with customers who experienced damage due to the hurricanes.
Allocation of Allowance for Possible Loan Losses 	Allocation of the allowance for loan losses is based primarily on previous credit loss experience, adjusted for changes in the risk characteristics of each category. Additional amounts are allocated based on the evaluation of the loss potential of individual troubled loans and the anticipated effect of economic conditions on both individual loans and loan categories. Since the allocation is based on estimates and subjective judgment, it is not necessarily indicative of the specific amounts of loan categories in which losses may ultimately occur. 	Approved credit card accounts are reviewed on a monthly basis to assure compliance with the Bank's credit policy. Review procedures include determination that the appropriate verification process has been completed, recalculation of the borrower's debt ratio, and analyses of the borrower's credit history to determine if it meets established Bank criteria. Policy exceptions are carefully analyzed monthly. Delinquent accounts are monitored daily and charged off before 180 days, which is the industry standard. Prior to charge-off, interest on credit card loans continue to accrue. A monthly provision for credit card losses is included in the Bank's overall provision for loan losses.
Table 10 Allocation of Allowance for Possible Loan Losses
December 31, 2008 December 31, 2007 Allowance % * Allowance % * (Dollars in Thousands) Non-accrual loans 168 2.18% 163 0.72% Substandard/Impaired/Doubtful 769 21.37% 591 14.17% Construction loans 76 8.23% 201 12.62% Commercial, financial and agricultural 163 47.33% 287 49.74% Consumer loans 60 7.49% 48 6.82% Credit Cards 564 13.22% 501 15.73% Overdrafts - 0.18% 9 0.20% Total 1,800 1,800
* Percentage of respective loan type to total loans.
Investment Securities 	The Company's investment portfolio policy is to maximize income consistent with liquidity, asset quality, regulatory constraints, and asset/liability objectives. The Bank's Board of Directors reviews such policy not less than annually. The levels of taxable and tax-exempt securities and short-term investments reflect the Company's strategy of maximizing portfolio yields while providing for liquidity needs. The investment securities totaled $2,824,000 at December 31, 2008, and $8,740,000 at December 31, 2007. The majority of the holdings are backed by U.S. Government or federal agency guarantees limiting the credit risks associated with these securities. Although credit risks are minimal, interest rates and their respective interest income is subject to risk due to fluctuating interest rates. The average maturity of the securities portfolio was one year or less at December 31, 2008. At year-end 2008, $823,000 of the Company's investment securities were classified as available-for-sale, compared to $740,000 at December 31, 2007. The gross unrealized holding gains on these securities at December 31, 2008 were $521,000 and $437,000 at December 31, 2007. 	There were no investments and no obligations of any one state or municipality at December 31, 2008, or 2007. 	At December 31, 2008, and 2007 the Bank had no U.S. Treasury securities or obligations of U. S. government corporations or federal agencies, as available for sale. 	The following table sets forth the carrying and approximate market values of investment securities for the last two years:
TABLE 11 Investment Securities
December 31, 2008 2007 Amortized Fair Amortized Fair Cost Value Cost Value 			 (Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies 2,001 2,026 8,000 7,997 Other investments 302 823 302 740 Total $2,303 $2,849 $8,302 $8,737
TABLE 12 Securities Maturities and Yields
December 31, 2008 Amortized Fair Average Cost Value Yield (2) (Dollars in Thousands)
Available-for-Sale U.S. Treasury securities and obligations of U.S. government corporations and agencies Due in 1 year or less - - Due 1-5 years - - Total - - -
Held-to-Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies Due in 1 year or less 2,001 2,026 2.40% Due 1-5 years Total $2,001 $2,026 2.40%
(1) This table excludes equity investments, which have no maturity date. (2) Weighted average yields are calculated on the basis of the carrying value of the security. The weighted average yields on tax-exempt obligations are compounded on a fully taxable-equivalent basis assuming a federal tax rate of 34%. Below is a table of equity securities at fair value that are included in Investment Securities at December 31, 2008 (dollars in thousands):
TABLE 13 Other Securities
Mississippi River Bank 710 Liberty Financial Services, Inc. 82 Business Resource Capital 20 MasterCard International 11 Total Other Securities $823
Deposits 	Total deposits at December 31, 2008 were $80,977,000 which represented a decrease of $8,689,000 or 9.69% from $89,666,000 at December 31, 2007. During 2008, interest bearing deposits decreased by $2,211,000. Core deposits, the Bank's largest source of funding, consist of all interest bearing and non- interest bearing deposits except certificates of deposits over $100,000. Core deposits are obtained from a broad range of customers. Average core deposits decreased $4,042,000 or 4.45% to $86,826,000 from $90,868,000 in 2007. Average market rate core deposits, primarily CD's of less than $100,000 and money market accounts, increased $3,397,000 from $8,836,000 in 2007 to $12,233,000 in 2008. 	Non-interest bearing deposits are comprised of business accounts, including correspondent bank accounts, escrow deposits, as well as individual accounts. Average non-interest bearing demand deposits represented 46.26% of average core deposits in 2008 compared to 50.40% in 2007. 	The average amount of, and average rate paid on deposits by category for the period shown are presented below:
TABLE 14 Selected Statistical Information
December 31, 2008 2007 Average Average Amount Rate Amount Rate (Dollars in Thousands)
Non-interest-bearing Deposits $40,168 N/A $45,799 N/A Interest-bearing Demand Deposits 15,802 0.95% 15,487 1.38% Savings Deposits 22,918 0.94% 24,505 1.11% Time Deposits 10,636 3.57% 6,181 3.48% Total Average Deposits $89,524 $91,972
	The composition of average deposits for the last two years is presented below:
TABLE 15 Deposit Composition
December 31, 2008 2007 (Dollars in Thousands)
Average % Of Average % Of Balances Deposits Balances Deposits Demand, non-interest-bearing 40,168 44.87% 45,799 49.80% NOW accounts 11,506 12.85% 11,728 12.75% Money market deposit accounts 4,296 4.80% 3,759 4.09% Savings accounts 22,918 25.60% 24,505 26.64% Other time deposits 7,938 8.87% 5,077 5.52% Total core deposits 86,826 96.99% 90,868 98.80% Certificates of deposit of $100,000 or more 2,698 3.01% 1,104 1.20% Total deposits $89,524 100.00% $91,972 100.00%
The following table sets forth maturity distribution of Time Deposits of $100,000 or more for the past two years:
TABLE 16 Maturity Distribution of Time Deposits $100,000 or More
December 31, 2008 2007 (Dollars in Thousands)
Three months or less 504 1,000 After three months through one year 945 1,025 Over one year through three years 431 235 Total $1,880 $2,260
Other Assets and Other Liabilities 	Other assets decreased $46,000. Other liabilities decreased $1,673,000 mainly due to insurance proceeds that were used to complete the repairs on property damaged by Hurricane Katrina.
	The following are summaries of other assets and other liabilities for the last two years:
TABLE 17 Other Assets & Other Liabilities
Other Assets December 31, 2008 2007 (Dollars in Thousands)
Interest Receivable 263 285 Prepaid Expenses 338 361 Accounts Receivable 84 69 Cash Surrender Value 193 209 Other Assets 0 0 Total Other Assets $878 $924
Other Liabilities December 31, 2008 2007 (Dollars in Thousands)
Accrued Expenses Payable 268 225 Deferred Membership Fees 17 17 Blanket Bond Fund 50 50 Other Liabilities 861 2,577 Total Other Liabilities 1,196 $2,869
Borrowings 	The Company's long-term debt is comprised primarily of debentures which will be due July 5, 2009 totaling $1,399,000. Each $500 debenture is secured by a pledge of 51.07 shares of the Bank's stock. The Bank has no long-term debt. It is the Bank's policy to manage its liquidity so that there is no need to make unplanned sales of assets or to borrow funds under emergency conditions. The Bank maintains a Federal Funds line of credit in the amount of $4,400,000 with a correspondent bank. The Bank can borrow the amount of unpledged securities at the discount window at the Federal Reserve Bank by pledging those securities.
Shareholders' Equity 	Shareholders' equity at December 31, 2008 was $11,452,000, an increase of $712,000 or 6.63% from $10,740,000 at December 31, 2007, and amounted to 11.99% of total assets. Realized shareholders' equity, which includes preferred and common stock, capital in excess of par, and retained earnings, increased $657,000 or 6.37% to $10,975,000 at December 31, 2008, from $10,318,000 at December 31, 2007. During 2008, the increase in shareholder's equity was primarily attributable to net income of $724,000, a decrease in Preferred Stock of $84,000, and an increase in capital in excess of par-retired Preferred Stock of $17,000. In addition, there was a increase in accumulated other comprehensive income, which is used to refer to revenues, expenses, gains, and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income, in the amount of $55,000. 	No dividends were paid on shares of Company Common Stock in 2008 or 2007. Shareholders' equity at December 31, 2007, was $10,740,000, an increase of $1,617,000 or 17.72% from $9,123,000 at December 31, 2006, and amounted to 10.20% of total assets. Realized shareholders' equity, which includes preferred and common stock, capital in excess of par, and retained earnings,
increased $1,472,000 or 16.64% to $10,318,000 at December 31, 2007, from $8,846,000 at December 31, 2006. During 2007, the increase in shareholder's equity was primarily attributable to net income of $1,476,000, a decrease in Preferred Stock of $7,000, and an increase in capital in excess of par-retired Preferred Stock of $3,000. In addition, there was an increase in accumulated other comprehensive income, which is used to refer to revenues, expenses, gains, and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income, in the amount of $145,000. 	No dividends were paid on shares of Company Common Stock in 2007 or 20065. 	The Company maintains an adequate capital position that exceeds all minimum regulatory capital requirements. The Company's internal capital growth rate (net income less dividends declared as a percentage of average shareholders' equity) for 2008 was 6.34% compared to 14.93% in 2007. The ratio of average shareholders' equity to average assets was 10.92% and 9.36% in 2008 and 2007, respectively. 	At December 31, 2008, the Company's primary capital ratio as defined by the FRB was 12.97%, compared to 11.19% in 2007. The total capital ratio was 12.97% at December 31, 2008, and 11.19% in 2007, compared to the guidelines, which mandate a minimum primary capital ratio of 5.50% and total capital ratio of 6.00% for bank holding companies and banks. 	The Bank's leverage ratio (Tier 1 capital to total assets) at December 31, 2008, was 11.78% compared to 10.31% at December 31, 2007, which are compared to the minimum capital requirement of 4.00% for well-managed Banking organizations.
The Company's ratios are in excess of the FRB's requirements, as indicated in the Capital Adequacy schedule below:
Table 18 Capital Adequacy
December 31, 2008 2007 Amount Percent Amount Percent (Dollars in Thousands)
Tier I capital Actual 11,452 18.20% 10,740 15.84% Minimum 2,520 4.00% 2,715 4.00% Excess 8,932 14.20% 8,025 11.84% Total risk-based capital Actual 12,251 19.47% 11,599 17.11% Minimum 5,035 8.00% 5,425 8.00% Excess 7,216 11.47% 6,174 9.11% Tier I capital leverage ratio Actual 11,452 10.95% 10,740 10.17% Minimum 4,180 4.00% 4,220 4.00% Excess 7,272 6.95% 6,520 6.17%
Dividends that may be paid by the Bank to the Company are subject to certain regulatory limitations. Under Louisiana banking law, the approval of the OFI will be required if the total of all dividends declared in any calendar year by the Bank exceed the Bank's net profits to date and retained net profits for the year in which such dividend is declared and the immediately preceding year, subject to maintenance of minimum required regulatory capital.
Supervision and Regulation Enforcement Action
Bank Holding Company Regulation
Federal 	The Company is a bank holding company within the meaning of the BHC Act, and is registered with the FRB. It is required to file annual reports with the FRB and such additional information as the FRB may require pursuant to the BHC Act. The FRB may also perform periodic examinations of the Company and its subsidiaries. The following summary of the BHC Act and of the other acts described herein is qualified in its entirety by express reference to each of the particular acts. The BHC Act requires every bank holding company to obtain the prior approval of the FRB before acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank which is already not majority owned by the Company. The BHC Act prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any company which is not a bank and from engaging in any business other than banking or furnishing services to or performing services for its subsidiaries. The 5% limitation is not applicable to ownership of shares in any company the activities of which the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. As set forth below, however, the Gramm-Leach-Bliley Financial Modernization Act of 1999, enacted on November 12, 1999, broadens the ability of a bank holding company to own or control companies other than banks. Effective September 29, 1995, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act") allows the FRB to approve an application of an adequately capitalized and adequately managed bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than such holding company's home state, without regard to whether the transaction is prohibited by the laws of any state. The FRB may not approve the acquisition of a bank that has not been in existence for the minimum time period (not exceeding five years) specified by the statutory law of the target bank's state. The Riegle- Neal Act also prohibits the FRB from approving an application if the applicant (and its depository institution affiliates) controls or would control more than 10% of the insured deposits in the United States or 30% or more of the deposits in the target bank's home state or in any state in which the target bank maintains a branch. The Riegle-Neal Act does not affect the authority of states to limit the percentage of total insured deposits in the state which may be held or controlled by a bank or bank holding company to the extent such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30% statewide concentration limit contained in the Riegle-Neal Act. 	Additionally, the federal banking agencies are authorized to approve interstate merger transactions without regard to whether such transaction is prohibited by the law of any state, unless the home state of one of the banks has opted out of the Riegle-Neal Act by adopting a law after the date of enactment of the Riegle-Neal Act and prior to June 1, 1997, which applies equally to all out-of-state banks and expressly prohibits merger transactions involving out-of-state banks. Interstate acquisitions of branches are permitted only if the law of the state in which the branch is located permits such acquisitions. Interstate mergers and branch acquisitions are also subject to the nationwide and statewide insured deposit concentration amounts described above. 	The Riegle-Neal Act authorizes the FDIC to approve interstate branching de novo by national and state banks, respectively, only in states that specifically allow for such branching. The Riegle-Neal Act also requires the appropriate federal banking agencies to prescribe regulations that prohibit any out-of-state bank from using the interstate branching authority primarily for the purpose of deposit production. 	The Bank is an "affiliate" of the Company within the meaning of the Federal Reserve Act. This act places restrictions on a bank's loans or extensions of credit to purchases of or investments in the securities of, and purchases of assets from an affiliate, a bank's loans or extensions of credit to third parties collateralized by the securities or obligations of an
affiliate, the issuance of guarantees, acceptances, and letters of credit on behalf of an affiliate, and certain bank transactions with an affiliate, or with respect to which an affiliate acts as agent, participates, or has a financial interest. Furthermore, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishings of services. 	Under FRB policy, the Company is expected to act as a source of financial strength to its subsidiary bank and to commit resources to support its subsidiary. This support may be required at times when, absent such FRB policy, the Company may not be inclined to provide it. Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989 in connection with (a) the default of a commonly controlled FDIC- insured depository institution or (b) any assistance provided by the FDIC to any commonly controlled FDIC-insured depository institution "in danger of default." "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. Under FDICIA (see discussion below) a bank holding company may be required to guarantee the capital plan of an undercapitalized depository institution. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.
Louisiana 	Under the Louisiana Bank Holding Company Act of 1962, as amended (the "Louisiana BHC Act"), bank holding companies are authorized to operate in Louisiana provided the activities of the non bank subsidiaries thereof are limited to the ownership of real estate and improvements, computer services, equipment leasing, and other directly related banking activities. In addition, a bank holding company and its subsidiaries may not engage in any insurance activity in which a bank may not engage. The Commissioner of the OFI is authorized to administer the Louisiana BHC Act by the issuance of orders and regulations. At present, prior approval of the Commissioner would not be required for the formation and operation of a nonblank subsidiary of the Company if its activities meet the requirements of the Louisiana BHC Act.
Bank Regulation 	The Bank is subject to examination and regulation by the FDIC. The Bank is chartered under the banking laws of the State of Louisiana and is subject to the supervision of, and regular examination by, the OFI. As an affiliate of the Bank, the Company is also subject to examination by the OFI. In addition, the deposits of the Bank are insured by the Deposit Insurance Fund ("DIF") thereby rendering the Bank subject to the provisions of the Federal Deposit Insurance Act ("FDIA") and, as a state nonmember bank, to supervision and examination by the FDIC. The FDIA requires the FDIC approval of any merger and/or consolidation by or with an insured bank, as well as the establishment or relocation of any bank or branch office. The FDIC also supervises compliance with the provisions of federal law and regulations that place restrictions on loans by FDIC-insured banks to their directors, executive officers, and other controlling persons. 	In December 1991, a major banking bill entitled the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was enacted, which substantially revises the bank regulatory and funding provisions of the FDIA and makes revisions to several other federal banking statues. Among other things, the FDICIA requires the federal banking regulators to take "prompt corrective action" in respect of depository institutions that do not meet minimum capital requirements. The Bank has capital levels above the minimum requirements. In addition, an institution that is not well capitalized is generally prohibited form accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market and also may not be able to "pass through" insurance coverage for certain employee benefit accounts. The FDICIA also requires the holding company of any undercapitalized depository institution to guarantee, in part, certain aspects of such depository institution's capital plan for such plan to be acceptable. The FDICIA contains numerous other provisions, including new account, audit and reporting requirements, termination of the "too big to fail" doctrine except in special cases, limitations on the FDIC's payment of deposits at foreign branches, new regulatory standards in such areas as asset quality, earnings and compensation and revised regulatory standards for, among other things, powers of state banks, real estate lending and capital adequacy. The FDICIA also required that a depository institution provide 90 days prior notice of the closing of any branches. 	Furthermore, all banks are affected by the credit policies of other monetary authorities, including the FRB, which regulate the national supply of bank credit. Such regulation influences overall growth of bank loans, investments, and deposits and may also affect interest rates charged on loans and paid on deposits. The FRB's monetary policies have had a significant effect on the operating results of commercial banks in the past, and the Company expects this trend to continue in the future.
Dividends 	The FRB has issued a policy statement on the payment of cash dividends by bank holding companies. In the policy statement, the FRB expressed its view that a bank holding company experiencing earnings weaknesses should not pay cash dividends exceeding its net income or which could only be funded in ways that weaken the bank holding company's financial health, such as by borrowing. Additionally, the FRB possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statues and regulations. Among these powers is the ability to prohibit or limit the payment of dividends by banks and bank holding companies. 	In addition to the restrictions on dividends imposed by the FRB, Louisiana law also places limitations on the Company's ability to pay dividends. For example, the Company may not pay dividends to its shareholders if, after giving effect to the dividend, the Company would not be able to pay its debts as they become due. Because a major source of the Company's revenue is dividends that it receives and expects to receive from the Bank, the Company's ability to pay dividends to its shareholders will depend on the amount of dividends paid by the Bank to the Company. The Company cannot be sure that the Bank will, in any circumstances, pay such dividends to the Company, as Louisiana banking law provides that a Louisiana bank may not pay dividends if it does not have, or will not have after the payment of such dividend, unimpaired surplus equal to 50% of the outstanding capital stock of the bank. In addition, OFI approval is required to declare or pay any dividend that would bring the total of all dividends paid in any one calendar year to an amount greater than the total of such bank's net profits for such year combined with the net profits of the immediately preceding year.
Effect of Governmental Policies 	The Company and the Bank are affected by the policies of regulatory authorities, including the FRB. An important function of the Federal Reserve System is to regulate the national money supply. Among the instruments of monetary policy used by the Federal Reserve are: purchases and sales of U.S. Government securities in the marketplace; changes in the discount rate, which is the rate any depository institution must pay to borrow from the Federal Reserve; and changes in the reserve requirements of depository institutions. These instruments are effective in influencing economic and monetary growth, interest rate levels, and inflation. 	The monetary policies of the Federal Reserve and other governmental policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing conditions in the national economy and in the financial markets, as well as the result of actions by monetary and fiscal authorities, it is not possible to predict with certainty future changes in interest rates,
deposit levels, loan demand or the business and earnings of the Company or whether the changing economic conditions will have a positive or negative effect on operations and earnings.
Code of Ethics 	The Company has adopted a code of ethics that applies to all directors, officers and employees that is designed to deter wrongdoing and promote the following:
1.)	Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2.)	Full, fair, accurate, timely and understandable disclosure in reports and documents; 3.)	Compliance with applicable governmental laws, rules and regulations; 4.)	The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and 5.)	Accountability for adherence to the code.
	A copy of the Bank's code of ethics may be obtained by writing to:
			Bank of Louisiana 			Accounting Department 			300 St. Charles Avenue 			New Orleans, LA 70130-3104
Community Reinvestment Act (CRA) In connection with its lending activities, the Bank is subject to a variety of federal laws designed to protect borrowers and promote lending to various sectors of the economy and populations. The CRA requires FDIC insured banks to define the assessment areas that they serve, identify the credit needs of those assessment areas and take actions that respond to the credit needs of the community. The FDIC must conduct regular CRA examinations of the Bank and assign it a CRA rating of "outstanding," "satisfactory," "needs improvement" or "unsatisfactory." The Bank has received a "satisfactory" rating from the FDIC.
Indemnification of Directors and Officers 	The Board of Directors of the Bank of Louisiana, on June 8, 1988, adopted a resolution to amend the Articles of Incorporation of the Bank by adding a new Article VII as follows: 	No director or officer of the corporation shall be personally liable to the corporation or its shareholder for monetary damages for breach of fiduciary duty as a director or officer, except for liability (i) for breach of the director's or officer's duty of loyalty to the corporation or its shareholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any unlawful dividend or any other unlawful distribution, payment or return of assets made to shareholders, or (iv) for any transaction from which the director or officer derived an improper personal benefit.
Sarbanes-Oxley Act of 2002 	The following is a brief summary of some of the provision of the Sarbanes-Oxley Act of 2002 ("SOX") that affect the Company and the Bank. It is not intended as an exhaustive description of SOX or its impact on us. 	SOX instituted or increased various requirements for corporate governance, board of director and audit committee composition and membership, board duties, auditing standards, external audit firm standards, additional disclosure requirements, including CEO and CFO certification of financial statements and related controls, and other new requirements. 	Board of directors are now required to have a majority of independent directors, and audit committees are required to be wholly independent, with
greater financial expertise. Such independent directors are not allowed to receive compensation from the company on whose board they serve except for directors' fees. Additionally, requirements for auditing standards and independence of external auditors were increased and included independent audit partner review, audit partner rotation, and limitations over non-audit services. Penalties for non-compliance with existing and new requirements were established or increased. 	In addition, Section 404 of SOX currently requires that by the end of 2006, our management perform a detailed assessment of internal controls and report thereon as follows:
1.	We must state that we accept the responsibility for maintaining an adequate internal control structure and procedures for financial reporting 2.	We must present an assessment, as of the end of the December 31, 2008 fiscal year, of the effectiveness of the internal control structure and procedure for our financial reporting, and 3.	We must have our auditors attest to, and report on, as of the end of the December 31, 2008 fiscal year, the assessment made by management. The attestation must be made in accordance with standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board.
We have taken steps with respect to achieving compliance.
Financial Modernization Act 	The Gramm-Leach-Bliley Act, ("GLB") of 1999 permits bank holding companies meeting certain management, capital, and community reinvestment act standards to engage in a substantially broader range of non-banking activities than permitted previously, including insurance underwriting and merchant banking activities. This act repeals the provision of the Glass Steagall Act, thus permitting affiliations of banks with securities firms and registered investment companies. The act authorizes financial holding companies, which permits banks to be owned by or to own securities firms, insurance companies, and merchant banking companies. The act gives the FRB authority to regulate financial holding companies, but provides for functional regulation of subsidiary activities. 	In addition, the GLB Act also provided significant new protections for the privacy of customer information that are applicable to the Company. Accordingly, we must (1) adopt and disclose a privacy policy; (2) give customers the right to prevent us from making disclosure of non-public financial information, subject to specified exceptions; and (3) follow regulatory standards to protect the security and confidentiality of customer information.
Temporary Liquidity Guarantee Program ("TLGP") 	On October 13, 2008, the FDIC announced the TLGP to strengthen confidence and encourage liquidity in the banking system. The TLGP consists of two components: a temporary guarantee of newly-issued senior unsecured debt (the Debt Guarantee Program) and a temporary unlimited guarantee of funds in non-interest-bearing transaction and regular checking accounts at FDIC-insured institutions (the Transaction Account Guarantee Program). The Bank chose not to participate in the program.
Troubled Asset Relief Program ("TARP") 	On October 14, 2008, the U.S. Department of Treasury announced the TARP Capital Purchase Program. The TARP Capital Purchase Program contemplates the U.S. Treasury purchasing senior preferred shares in qualified U.S. financial institutions. The program is intended to encourage participating financial institutions to build capital in order to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. Companies participating in the program must accept standardized terms as outlined by the U.S. Treasury and must adopt the Treasury Department's standards for executive compensation and corporate governance. Additionally, participants must agree
to accept future program requirements as may be promulgated by the U.S. Congress and regulatory authorities. The Bank chose not to participate in TARP.
Emergency Economic Stabilization of 2008 ("EESA") 	On October 3, 2008, the United States government passed the EESA, which provides the United States Department of the Treasury with broad authority to implement certain actions intended to help restore stability and liquidity to the U.S. financial markets.
Deposit Insurance 	As part of the EESA, the basic limit on federal deposit insurance coverage was temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009 by the FIDC. Deposit insurance coverage for retirement accounts was not changed and remains at $250,000. 	The FDIC imposed an additional assessment against institutions for deposit insurance. This assessment is based on the risk category of the institution and ranges from 5 to 43 basis points of the institution's deposits. In December, 2008, the FDIC adopted a rule that raises the current deposit insurance assessment rates uniformly for all institutions by 7 basis points (to a range from 12 to 50 basis points) for the first quarter of 2009. The rule also gives the FDIC the authority to alter the way it calculates federal deposit insurance assessment rates to adjust for an institution' risk beginning in the second quarter of 2009 and thereafter, and as necessary to implement emergency special assessments to maintain the deposit insurance fund.
Item 7
Item 7 Financial Statements
Laport, Sehrt, Romig & Hand Certified Public Accountants
To the Board of Directors BOL Bancshares, Inc. & Subsidiary
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of BOL BANCSHARES, INC. (the Company) and its wholly-owned subsidiary, Bank of Louisiana, as of December 31, 2008 and 2007, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years ended December 31, 2008, 2007 and 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
	In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BOL BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana, as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years ended December 31, 2008, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.
	We were not engaged to examine management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, included in the Form 10-K and, accordingly, we do not express an opinion thereon.
A Professional Accounting Corporation
/s/ Laport, Sehrt, Romig & Hand Metairie, Louisiana February 19, 2009
110 Veterans Memorial Boulevard, Suite 200, Metairie, LA 70005-4958 504-835-5522 Fax 504-835-5535 5100 Village Walk, Suite 202, Covington, La 70433-4012 985-892-5850 Fax 985-892-5956 5153 Bluebonnet Boulevard, Suite B, Baton Rouge, La 70809-3076 225-296-5150 Fax 225-296-5151 WWW. LAPORTE.COM RSM McGladrey Network An Independently Owned Member
BOL BANCSHARES, INC. & SUBSIDIARY CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2008		2007
Cash and Cash Equivalents Non-Interest Bearing Balances and Cash $3,103,598 $4,161,408 Federal Funds Sold 25,375,000 27,490,000
		Total Cash and Cash Equivalents 28,478,598 31,651,408
Investment Securities Securities Held-to-Maturity (Fair Value of $2,025,724 in 2008 and $7,997,180 in 2007) 2,001,349 8,000,000 Securities Available-for-Sale, at Fair Value 822,977 739,676 Loans - Less Allowance for Loan Losses of $1,800,000 in 2008 and 2007 55,608,039 55,819,935 Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 6,516,361 6,923,048 Other Real Estate	 1,152,924 1,035,924 Other Assets 877,558 924,281 Deferred Taxes - 80,645 Letters of Credit 48,620 94,934
Total Assets $95,506,426 $105,269,851
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 2008 2007
LIABILITIES 	Deposits Non-Interest Bearing $34,929,523 $41,407,597 Interest Bearing 46,047,786 48,258,817 Notes Payable 1,543,201 1,543,201 Other Liabilities 1,195,504 2,869,250
Deferred Taxes 127,612 - Letters of Credit Outstanding 48,620 94,934 Accrued Interest 162,431 355,775
				Total Liabilities 84,054,677 94,529,574
STOCKHOLDERS' EQUITY Preferred Stock - Par Value $1 1,997,360 Shares Issued and Outstanding in 2008 2,081,857 Shares Issued and Outstanding in 2007 1,997,360 2,081,857 Common Stock - Par Value $1 179,145 Shares Issued and Outstanding in 2008 and 2007 179,145 179,145 Accumulated Other Comprehensive Income 476,917 421,934 Capital in Excess of Par - Retired Stock 157,792 140,892 Retained Earnings 8,640,535 7,916,449
Total Stockholders' Equity 11,451,749 10,740,277
Total Liabilities and Stockholders' Equity $95,506,426 $105,269,851
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
2008 2007 2006
INTEREST INCOME $7,215,507 $8,617,125 $9,036,957
INTEREST EXPENSE 857,525 812,904 612,641
Net Interest Income 6,357,982 7,804,221 8,424,316
PROVISION FOR LOAN LOSSES 256,622 276,704 563,587
Net Interest Income After Provision for Loan Losses 6,101,360 7,527,517 7,860,729
OTHER INCOME Service Charges on Deposit Accounts 505,009 610,691 607,063 Gain on Insurance Settlement - - 600,000 Other Non-Interest Income 1,211,079 816,557 733,917
Total Other Income 1,716,088 1,427,248 1,940,980
OTHER EXPENSES Salaries and Employee Benefits 2,696,966 2,749,357 2,688,824 Occupancy Expense 1,143,742 1,058,482 1,080,441 Estimated Recovery Contingency - (1,200) (202,442) Other Non-Interest Expense 2,815,263 2,950,938 3,167,473
Total Other Expenses 6,655,971 6,757,577 6,734,296
INCOME BEFORE INCOME TAX EXPENSE 1,161,477 2,197,188 3,067,413
INCOME TAX EXPENSE 437,391 720,722 937,807
NET INCOME $724,086 $1,476,466 $2,129,606
EARNINGS PER SHARE OF COMMON STOCK $4.04 $8.24 $11.89
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY 			CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended
December 31,
2008 2007 2006
NET INCOME $724,086 $1,476,466 $2,129,606
OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized Holding Gains (Losses) on 	Investment Securities Available-for- Sale, Arising During the Period 54,983 144,975 (54,740)
OTHER COMPREHENSIVE INCOME (LOSS) 54,983 144,975 (54,740)
COMPREHENSIVE INCOME $779,069 $1,621,441 $2,074,866
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY 	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated Capital In Other Excess of Preferred Common Comprehensive Par Retained Stock Stock Income	Retired Stock Earnings Total
BALANCE - December 31, 2005 $2,117,244 $179,145 $331,699 $126,228 $4,310,377 $7,064,693
Preferred Stock Retired	27,910) - - 11,673 - (16,237)
Other Comprehensive Loss, Net of Applicable Deferred Income Taxes - - (54,740) - - (54,740)
Net Income for the Year 2006 - - - - 2,129,606 2,129,606
BALANCE - December 31, 2006 2,089,334 179,145 276,959 137,901 6,439,983 9,123,322
Preferred Stock Retired(7,477) - - 2,991 -	 (4,486)
Other Comprehensive Income, Net of Applicable Deferred Income Taxes - - 144,975 - - 144,975
Net Income for the Year 2007- - - - 1,476,466 1,476,466
BALANCE - December 31, 2007 2,081,857 179,145 421,934 140,892 7,916,449 10,740,277
Preferred Stock Retired	84,497) - - 16,900 - (67,597)
Other Comprehensive Income, Net of Applicable Deferred Income Taxes - - 54,983 - - 54,983
Net Income for the Year 2008 - - - - 724,086 724,086
BALANCE - December 31, 2008 $1,997,360 $179,145 $476,917 $157,792 $8,640,535 11,451,749
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY 		 CONSOLIDATED STATEMENTS OF CASH FLOWS
			 For the Years Ended December 31, 2008 2007 2006
OPERATING ACTIVITIES Net Income $724,086 $1,476,466 $2,129,606 Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities: Provision for Loan Losses 256,622 276,704 563,587
Write Down of Other Real Estate - 24,493 265,000 Depreciation and Amortization Expense 425,495 351,653 296,109 Decrease (Increase) in Deferred Income Taxes 179,939 (66,800) (24,584) Gain on Sale or Disposal of Property and Equipment - - (99,451) Gain on Sale of Other Real Estate - (88,341) (683) Decrease (Increase) in Other Assets 46,723 173,193 (56,655) (Decrease) Increase in Other Liabilities And Accrued Interest Payable (1,867,090) 2,352,412 (386,609)
	Net Cash (Used in) Provided by Operating Activities	 (234,225) 4,499,780 2,686,320
INVESTING ACTIVITIES
Proceeds from Held-to-Maturity Investment Securities Released at Maturity 5,998,651 6,000,000 5,000,000 	Proceeds from Sale of Available- for-Sale Investment Securities - 15,500 - 	Proceeds from Sale or Disposal of Property and Equipment - - 152,400 Purchases of Property and Equipment (18,808) (4,989,287) (403,618) Proceeds from Sale of Other Real Estate - 300,000 380,000 Purchases of Loans - - (109,624) Net (Increase) Decrease in Loans (161,726) 1,131,075 (1,671,256)
Net Cash Provided by Investing Activities 5,818,117 2,457,288 3,347,902
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended December 31, 2008 2007 2006
FINANCING ACTIVITIES Net Decrease in Non-Interest Bearing and Interest Bearing Deposits (8,689,105) (3,864,952) (21,883,923) Preferred Stock Retired (67,597) (4,486) (16,237) Proceeds from Issuance of Long-Term Debt - - 1,400,000 Principal Payments on Long-Term Debt - (1,000) (2,001,206)
Net Cash Used in Financing Activities (8,756,702) (3,870,438) (22,501,366)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,172,810) 3,086,630 (16,467,144)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 31,651,408 28,564,778 45,031,922
CASH AND CASH EQUIVALENTS - END OF YEAR $28,478,598 $31,651,408 $28,564,778
SUPPLEMENTAL DISCLOSURES: Additions to Other Real Estate Through Foreclosure $117,000 $106,836 $1,151,659
Cash Paid During the Year for Interest $1,050,869 $768,588 $909,350
Cash Paid During the Year for Income Taxes $425,000 $783,704 $952,000
Market Value Adjustment for Unrealized Gain on Securities Available-for-Sale $83,308 $219,659 $(82,939)
Accounting Policies Note:
Cash Equivalents Include Amounts Due from Banks and Federal Funds Sold. Generally, Federal Funds are Purchased and Sold for One Day Periods.
The accompanying notes are an integral part of these consolidated financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	BUSINESS OF THE COMPANY 		BOL BANCSHARES, INC. (the Company) was organized as a Louisiana corporation on May 7, 1981, for the purpose of becoming a registered bank holding company under the Bank Holding Company Act. The Company was inactive until April 29, 1988, when it acquired Bank of Louisiana, BOS Bancshares, Inc. and its wholly-owned subsidiary, Bank of the South, and Fidelity Bank and Trust Company of Slidell, Inc., and its wholly-owned subsidiary, Fidelity Land Co. in a business reorganization of entities under common control in a manner similar to a pooling of interest. The acquired companies are engaged in the banking industry.
	PRINCIPLES OF CONSOLIDATION 		The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bank of Louisiana (the Bank) and its wholly-owned subsidiary, BOL Assets, LLC. In consolidation, significant inter-company accounts, transactions, and profits have been eliminated.
	INVESTMENT SECURITIES 		Debt securities that management has the ability and intent to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for amortization of premium and accretion of discounts using methods approximating the interest method. Other marketable securities are classified as available-for-sale and are carried at fair value. Realized gains and losses on securities are included in net income. Unrealized gains and losses on securities available-for-sale are recognized as direct increases or decreases in stockholders' equity. Cost of securities sold is recognized using the specific identification method.
	LOANS AND UNEARNED INCOME 		Loans are stated at the amount of unpaid principal, reduced by unearned discount and an allowance for loan losses. Unearned discounts on loans are recognized as income over the term of the loans on the interest method. Interest on other loans is calculated and credited to operations on a simple interest basis. Loans are charged against the allowance for loan losses when management believes that collectibility of the principal is unlikely. Loan origination fees and certain direct origination costs, when material, are capitalized and recognized as an adjustment of the yield on the related loan.
	ALLOWANCE FOR LOAN LOSSES 		The allowance for loan losses is established through a provision for loan losses charged to expenses. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible, based on evaluation of the collectibility of loans and prior loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. Accrual of interest is discontinued and accrued interest is charged off on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrowers' financial condition is such that collection of interest is doubtful.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
	PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS 		Buildings, office equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization computed principally on the straight-line and modified accelerated cost recovery methods over the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.
	INCOME TAXES 		The Company and its consolidated subsidiary file a consolidated Federal income tax return. Federal income taxes are allocated between the companies, in accordance with a written agreement. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations.
	MEMBERSHIP FEES 		Membership fees are collected in the anniversary month of the cardholder and are amortized over a twelve-month period using the straight-line method.
	CASH AND DUE FROM BANKS 		The Bank considers all amounts Due from Banks and Federal Funds Sold, to be cash equivalents.
		The Bank is required to maintain non-interest bearing reserve balances to fulfill its reserve requirements. The average amount of the required reserve balance was approximately $1,924,192 and $2,168,500 for the years ended December 31, 2008 and 2007, respectively.
	NON-DIRECT RESPONSE ADVERTISING 		The Bank expenses advertising costs as incurred.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES 		The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and deferred tax assets.
	SIGNIFICANT CONCENTRATIONS OF CREDIT RISK 		Most of the Bank's activities are with customers located within the New Orleans area, except for credit card lending, which is nationwide. Note C discusses the types of lending that the Bank engages in and Note E discusses the type of securities that the Company invests in. The Bank does not have any significant concentrations in any one industry or customer.
	NEW ACCOUNTING STANDARDS In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. During 2008, FASB deferred the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within the fiscal year. Adoption of this pronouncement did not have a monetary effect on the financial position and results of operations of the Company, but resulted in expanded disclosures (Note Z).
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities which included an amendment of FASB No. 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company did not make an early adoption election nor has it chosen to measure the financial instruments identified under SFAS No. 159 at fair value.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS 160 amends Accounting Research Bulletin 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. Management believes the adoption of this pronouncement will not have a material impact on the financial statements.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
NEW ACCOUNTING STANDARDS (Continued) In December 2007, the FASB revised SFAS No. 141(R) Business Combinations to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer: 1) Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; 2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and 3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This standard will change the accounting treatment for business combinations on a prospective basis.
In May 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company does not expect that the adoption of SFAS No. 161 will have a material impact on its consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the accounting principles to be used in the preparation of financial statements prepared in conformity with generally accepted accounting principles (GAAP) in the United States. The statement is effective November 15, 2008, and is not expected to result in changes to current practices nor have a material effect on the Company.
In September 2008, FASB issued FASB Staff Position (FSP) FAS 133-1 and FASB Interpretation Number (FIN) 45-4, Disclosures about Credit Derivatives and Financial Guarantees. The FSP requires companies that sell credit derivatives to disclose information that will enable financial statement users to assess the potential effect of the credit derivatives on the seller's financial position, financial performance, and cash flows. FSP FAS 133-1 and FIN 45-4 is effective for interim and annual periods ending after November 15, 2008. This pronouncement is not expected to have an effect on the financial position and results of operations of the Company.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A 	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
NEW ACCOUNTING STANDARDS (Continued) In February 2008, FASB issued FSP FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, which provides guidance on accounting for a transfer of a financial asset and a repurchase financing. The FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement under FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. However, if certain criteria are met, the initial transfer and repurchase shall not be evaluated as a linked transaction and therefore evaluated separately under FASB 140. The FSP is effective for repurchase financing in which the initial transfer is entered in fiscal years beginning after November 15, 2008. The Company does not anticipate a material impact on its consolidated financial statements as a result of this statement.
In April 2008, FASB issued FSP 142-3 which amends the list of factors an entity should consider in developing renewal of extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, Goodwill and Other Intangibles. The new guidance applies to intangible assets that are acquired individually or with a group of other assets and to intangible assets acquired in both business combinations and asset acquisitions. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The guidance must be applied prospectively only to intangible assets acquired after the FSP's effective date.
NOTE B 	OTHER REAL ESTATE 		The Bank has acquired various parcels of real estate in connection with the default and foreclosure on certain loans. These properties, which are held for sale, are recorded on the Bank's records at the lower of the loan balance or net realizable value. Any difference is charged to the allowance for loan losses in the year of foreclosure.
		The net income (expense) from Other Real Estate totaled ($34,500) in 2008, $1,014 in 2007, and ($387,931) in 2006, respectively. During the year ended December 31, 2007, the bank wrote down Other Real Estate to appraised value, less cost to sell. As such, $24,493 and $265,000 was charged to operations in 2007 and 2006, respectively. In addition, during the year ended December 31, 2006 the Bank received insurance proceeds, for damages incurred on Other Real Estate, in excess of repairs made, resulting in a $600,000 gain included in Other Income on the Statement of Income.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C 	LOANS Major classification of loans is as follows:
December 31, 2008 2007
	Real Estate Mortgages: 		Residential 1-4 Family $12,011,976 $6,964,793 		Commercial 22,082,814 23,032,682 		Construction 8,322,770 9,789,755 		Second Mortgages 1,300,210 1,623,948 		Other 1,975,493 2,101,669
45,693,263 43,512,847
	Commercial 2,169,871 2,754,150 	Personal 1,847,729 2,175,194 	Credit Cards 7,590,676 9,063,742 	Overdrafts 106,500 114,002
57,408,039 57,619,935
Allowance for Loan Losses 1,800,000 1,800,000
$55,608,039 $55,819,935
		The following is a classification of loans by rate and maturity: (Dollar amounts in thousands)
December 31, 2008 2007 	Fixed Rate Loans: 	 Maturing in 3 Months or Less $9,307 $11,644 	 Maturing Between 3 and 12 Months 31,784 26,570 	 Maturing Between 1 and 5 Years 12,834 14,978 	 Maturing After 5 Years 771 611
54,696 53,803
	Variable Rate Loans: 	 Maturing Quarterly or More Frequently 1,463 3,400 	 Maturing Between 3 and 12 Months - - 	 Non-Accrual Loans 1,249 417
57,408 57,620
Less: Allowance for Loan Losses 1,800 1,800
Net Loans $55,608 $55,820
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C 	LOANS (Continued) 	As of December 31, 2008 and 2007, the Bank's recorded investment in loans that are considered impaired under SFAS No. 114 totaled $1,249,309 and $417,382, respectively. Specific allowances pertaining to impaired loans totaled $168,403 and $162,607 at December 31, 2008 and 2007, respectively.
	The Bank purchases credit card portfolios occasionally, resulting in premiums or discounts. Premiums and discounts are being amortized as an adjustment to interest income over a three year period following the purchase date. Unamortized premiums at December 31, 2008 and 2007, totaled $-0-.
NOTE D 	NON-PERFORMING ASSETS 		Non-performing assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure. These assets are included on the accompanying consolidated balance sheets under the account caption, "Other Real Estate," and amount to $1,152,924 at December 31, 2008, and $1,035,924 at December 31, 2007.
		Loans are placed on non-accrual status when, in management's opinion, the collection of additional interest is questionable. Thereafter, no interest is taken into income unless received in cash or until such time as the borrower demonstrates the ability to pay principal and interest.
At December 31, 2008, $1,249,309 of loans were in non-accrual status and $76,421 of interest was foregone in the year then ended. At December 31, 2007, $417,386 of loans were in non-accrual status and $30,587 of interest was foregone in the year then ended. Interest income recognized on non-accrual loans totaled $-0- during the years ended December 31, 2008, 2007 and 2006.
NOTE E 	INVESTMENT SECURITIES 		Carrying amounts and approximate market values of investment securities are summarized as follows:
		Securities held-to-maturity consisted of the following at December 31, 2008:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value
		U.S. Agency Securities $2,001,349 $24,375 $- $2,025,724
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E 	INVESTMENT SECURITIES (Continued)
		Securities available-for-sale consisted of the following at December 31, 2008: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value
		Equity Securities $302,180 $520,797 $- $822,977
		Securities held-to-maturity consisted of the following at December 31, 2007:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value
		U.S. Agency Securities $8,000,000 $- $2,820 $7,997,180
	At December 31, 2007, the Company's investment in U.S. Agency Securities had been in a continuous unrealized loss position in excess of twelve months. The Company purchased these investments at a discount relative to their face amount, and the contractual cash flows of these investments are guaranteed by agencies of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because of the Company's ability and intent to hold these investments until maturity, the Company did not consider these investments to be other-than-temporarily impaired at December 31, 2007.
		Securities available-for-sale consisted of the following at December 31, 2007:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value
		Equity Securities $302,180 $437,496 $- $739,676
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E 	INVESTMENT SECURITIES (Continued) 		The maturities of debt securities at December 31, 2008, are as follows:
Securities Held-to-Maturity Amortized Market Cost Value 	Amounts Maturing in: One Year or Less $2,001,349 $2,025,724 		After One Year 			Through Five Years - -
$2,001,349 $2,025,724
	A summary of the Bank's pledged securities as of December 31, are as follows:
2008 2007
Pledged to secure public funds $500,000 $500,000 Pledged to secure treasury tax and loan accounts 500,000 500,000 Pledged to secure VISA USA - 500,000
NOTE F 	INCOME TAXES
		The components of the provision for income tax expense (benefit) are:
2008 2007 2006 Current $257,189 $787,522 $962,391 Deferred 180,202 (66,800) (24,584)
Total Provision for Income Tax $437,391 $720,722 $937,807
		A reconciliation of income tax at the statutory rate to income tax expense at the Company's effective rate is as follows:
2008 2007 2006 Computed Tax Expense (Benefit) at the Expected Statutory Rate $394,902 $747,044 $1,042,920 Katrina Tax Credits (63,060) (58,105) (70,569) Other Adjustments 105,549 31,783 (34,544) Income Tax Expense for Operations $437,391 $720,722 $937,807
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F 	INCOME TAXES (Continued) Certain income and expense items are accounted for differently for financial reporting purposes than for income tax purposes. Provisions for deferred taxes are made in recognition of these temporary differences and are measured using the income tax rates applicable to the period when the differences are expected to be realized or settled.
There was a net deferred tax (liability) asset of $(127,612) and $80,645 as of December 31, 2008 and 2007, respectively. The major temporary differences, which created deferred tax assets and liabilities, are as follows:
2008 2007 	Deferred Tax Assets: Other Real Estate $235,711 $235,711 Allowance for Loan Loss 195,757 276,996 Total Deferred Tax Assets 431,468 512,707 Deferred Tax Liabilities: Section 481A Adjustment - Prepaid Expenses (84,961) (102,568) Unrealized Gain on Securities (226,767) (198,447) Fixed Assets (247,352) (131,047) Total Deferred Tax Liabilities (559,080) (432,062)
Net Deferred Tax (Liability) Asset $(127,612) $80,645
The Bank had no amount of interest and penalties recognized in the consolidated statements of operations for the years ended December 31, 2008 and 2007, respectively, nor any amount of interest and penalties recognized in the consolidated balance sheets as of December 31, 2008 and 2007, respectively.
As of December 31, 2008, the tax years that remain open for examination by tax jurisdictions include 2005, 2006, and 2007.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G 	PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
December 31, 2008 2007 Furniture and Equipment $2,659,986 $2,610,160 Bank Owned Vehicles 62,491 42,354 Leasehold Improvements 439,689 490,843 Land 1,092,425 1,092,425 Buildings 5,859,133 5,859,133 10,113,724 10,094,915 	Less: Accumulated Depreciation and Amortization 3,597,363 3,171,867
	Total Property, Equipment and Leasehold Improvements, Net $6,516,361 $6,923,048
		Depreciation and amortization expense aggregated $425,495 in 2008, $351,653 in 2007, and $296,109 in 2006.
NOTE H 	ALLOWANCE FOR LOAN LOSSES 		Changes in the allowance for loan losses were as follows:
For the Years Ended December 31, 2008 2007
Balance - January 1 $1,800,000 $1,800,000 Provision Charged to Operations 256,622 276,704 Loans Charged Off (452,034) (482,510) Recoveries 195,412 205,806
Balance - December 31 $1,800,000 $1,800,000
NOTE I 	STOCKHOLDERS' EQUITY
	PREFERRED STOCK 		8%, non-cumulative, non-participating, non-convertible, par value $1; 3,000,000 shares authorized, 1,997,360 shares issued and outstanding in 2008, and 3,000,000 shares authorized, 2,081,857 shares issued and outstanding in 2007. Preferred stock ranks prior to common stock as to dividends and liquidation.
	COMMON STOCK 		Par value $1; 1,000,000 shares authorized, 179,145 shares issued and outstanding in 2008 and 2007.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I 	STOCKHOLDERS' EQUITY (Continued) 	On August 10, 1999, the Company declared a dividend distribution of one purchase right for each outstanding share of common stock. Each right entitles the holder, at any time following the "Distribution Date" to purchase one share of common stock of the Company at an exercise price of $7.50 per share. A "Distribution Date" occurs either ten days following certain actions designed to acquire 20% or more of the Company's voting securities or ten days following a determination by the Board of Directors that a person having beneficial ownership of at least 10%, is an adverse person. The rights will expire on August 9, 2009.
NOTE J 	EARNINGS PER COMMON SHARE 	Earnings per share are computed using the weighted average number of shares outstanding, which were 179,145 in 2008, 2007 and 2006. There was no provision for dividends for the years ended December 31, 2008, 2007 or 2006.
NOTE K 	CONTINGENT LIABILITIES AND COMMITMENTS 		The Bank's financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit. A summary of the Bank's commitments and contingent liabilities are as follows:
2008 2007
Credit Card Arrangements $28,599,000 $44,190,000 Commitments to Extend Credit 3,763,000 3,448,000
		Commitments to extend credit, credit card arrangements and standby letters of credit all include exposure to some credit loss in the event of nonperformance of the customer. The Bank's credit policies and procedures for credit commitments and financial guarantees are the same as those for extension of credit that are recorded on the consolidated balance sheets. Because these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity risk to the Bank.
The Bank in the course of conducting its business, becomes involved as a defendant or plaintiff in various lawsuits. The Bank is a plaintiff in a suit against its former health insurer for reimbursement of claims paid on behalf of the Bank's employee health plan. The Bank has amended its complaint to seek penalties and damages in excess of $273,000. This matter was submitted to the district judge in 2008 and all claims were dismissed. This case is currently on appeal.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K 	CONTINGENT LIABILITIES AND COMMITMENTS (Continued) 		The Bank is a defendant in a lawsuit filed by one of its customers for the unauthorized transfer of funds via telephone. The matter has been tried before a judge and a verdict of $11,000 was issued against the Bank. This matter is currently on appeal.
		Several of the Bank's branches sustained damage as a result of Hurricane Katrina. In addition, due to concessions made to customers to facilitate the timely processing of transactions, the Bank has estimated that it has sustained some losses. Based on management's evaluation, $150,000 in building and equipment losses and $80,000 in transaction losses were accrued during 2005. During 2008, 2007 and 2006, the Bank recognized a recovery from this contingency of $-0-, $1,200 and $202,442, respectively.
NOTE L 	RELATED PARTY TRANSACTIONS 		In the ordinary course of business, the Bank makes loans to its directors, officers and principal holders of equity securities. These loans are made on substantially the same terms including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. An analysis of loans made to directors, officers and principal holders of equity securities, including companies in which they have a significant ownership interest, is as follows:
2008 2007 Balance - January 1 $484,196 $367,315 New Loans Made 614,776 448,973 Repayments (26,521) (332,092)
Balance - December 31 $1,072,451 $484,196
		In 2007, the Bank leased office space from Severn South Partnership. The general partners of this Partnership are majority shareholders in BOL BANCSHARES, INC. During 2007, the Bank purchased the building from Severn South Partnership. Rent paid to Severn South Partnership, prior to the purchase, for the years ended December 31, 2007 and 2006, totaled $247,407 and $381,386, respectively.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L 	RELATED PARTY TRANSACTIONS (Continued) 	During the years ended December 31, 2008, 2007, and 2006, legal fees paid to a director totaled $55,754, $34,407 and $54,216, respectively.
At December 31, 2008 and 2007, amounts due to Directors of the Company, including accrued interest, totaled $158,661 and $367,483, respectively. These amounts, which are included in Notes Payable and Accrued Interest Payable in the accompanying consolidated balance sheets, are payable on demand and bear interest at 10% per annum. Of the debentures payable at December 31, 2008 and 2007, $38,500 were to Directors of the Company (see Note S).
NOTE M 	LEASES 		The Bank leases office space under agreements expiring in various years through December 31, 2016. In addition, the Bank rents office space on a month-to-month basis from non-related groups.
		The total minimum rental commitment at December 31, 2008, under the leases is due as follows:
December 31, 2009 $173,821 2010 175,686 2011 177,551 2012 179,416 2013 181,281 Thereafter 527,292 $1,415,047
	For the years ended December 31, 2008, 2007 and 2006, $233,635, $374,970 and $428,186 was charged to rent expense, respectively.
		The Bank is the lessor of office space under operating leases expiring in various years through 2018.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M 	LEASES (Continued) 		Minimum future rentals to be received on non-cancelable leases as of December 31, 2008, are:
December 31,
2009 $176,848 2010 119,899 2011 47,670 2012 43,383 2013 30,522 Thereafter 151,337
$569,659
NOTE N 	LETTERS OF CREDIT 		Standby Letters of Credit obligate the Bank to meet certain financial obligations of its clients, if, under the contractual terms of the agreement, the clients are unable to do so. These instruments are primarily issued to support public and private financial commitments, including commercial paper, bond financing, initial margin requirements on futures exchanges and similar transactions. Outstanding letters of credit were $48,620 and $94,934 as of December 31, 2008 and 2007, respectively. Of the $48,620 in letters of credit at December 31, 2008, $17,420 was secured by real property, and $31,200 was unsecured. All of the letters of credit are scheduled to mature in 2009.
NOTE O 	INTEREST BEARING DEPOSITS 		Major classifications of interest bearing deposits are as follows:
December 31, 2008 2007
NOW Accounts $10,765,565 $12,143,180 Money Market Accounts 3,666,985 4,247,728 Savings Accounts 22,717,473 23,789,080 Certificates of Deposit Greater Than $100,000 1,880,127 2,259,884 Other Certificates of Deposit 7,017,636 5,818,945
$46,047,786 $48,258,817
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O 	INTEREST BEARING DEPOSITS (Continued) 		The maturities of Certificates of Deposit Greater than $100,000 at December 31, 2008 follows: (Dollar amounts in thousands)
Three Months or Less $504 After Three Months Through One Year 945 Over One Year Through Three Years 431
$1,880
NOTE P 	FUNDS AVAILABLE FOR DIVIDENDS 		The Bank is restricted under applicable laws and regulatory authority in the payment of cash dividends. Such laws generally restrict cash dividends to the extent of the Bank's earnings.
		During the year ended December 31, 2008 and 2007, the Bank paid BOL Bancshares, Inc. dividends totaling $-0- and $643,500, respectively.
NOTE Q 	CONCENTRATIONS OF CREDIT 		All of the Bank's loans, commitments, and commercial and standby letters of credit have been granted to customers in the Bank's market area. All such customers are depositors of the Bank. The concentrations of credit by type of loan are set forth in Note C. Commercial letters of credit were granted primarily to commercial borrowers.
NOTE R 	EMPLOYEE BENEFITS 	Effective January 1, 2001, the Bank adopted a Section 401(k) savings plan. The Plan covers substantially all employees who are at least eighteen years old and have completed six months of continuous service. The Bank may make discretionary contributions and is not required to match employee contributions under the plan. The Bank made no contributions to the plan during the years ended December 31, 2008, 2007 or 2006.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE S 	NOTES PAYABLE 		The following is a summary of notes payable at December 31, 2008 and 2007:
December 31, 2008 2007
	Notes payable to a current Director of the 		Company, payable on demand, interest at 10%. $144,201 $144,201
	Debentures payable, due July 2009, interest at 		7%, callable at 103%, 102% and 101% of 		face value during the first, second, and third 		years, respectively, following the closing date, 		interest payable semi-annually, each $500 		debenture secured by 51.07 shares of the Bank's stock. 1,399,000 1,399,000
$1,543,201 $1,543,201
		Following are maturities of long-term debt:
		December 31,
2009 $1,543,201
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE T INTEREST INCOME AND INTEREST EXPENSE 	Major categories of interest income and interest expense are as follows:
December 31, 2008 2007 2006
INTEREST INCOME 	Interest and Fees on Loans: Real Estate Loans $3,584,393 $3,678,857 $3,105,702 Installment Loans 135,124 149,420 164,472 Credit Cards and Related Plans 2,490,538 2,744,183 3,017,998 		Commercial and All Other Loans 249,774 293,519 442,563 	Interest on Investment Securities - 		U.S. Treasury and Other Securities 107,507 443,302 531,038 Interest on Federal Funds Sold 648,171 1,307,844 1,775,184
$7,215,507 $8,617,125 $9,036,957
INTEREST EXPENSE 	Interest on Time Deposits of $100,000 or More $101,709 $49,009 $10,710 Interest on Other Deposits 643,158 651,236 464,101 Interest on Notes Payable 112,658 112,659 137,830
$857,525 $812,904 $612,641
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE U 	NON-INTEREST INCOME AND NON-INTEREST EXPENSES 		Major categories of other non-interest income and non-interest expenses are as follows:
December 31, 2008 2007 2006
OTHER NON-INTEREST INCOME 	Cardholder and Other Charge Card Income $498,265 $547,641 $607,878 Other Commission and Fees 72,342 62,253 59,864 Other Real Estate Income 300 88,491 683 Other Income 640,172 118,172 65,492
$1,211,079 $816,557 $733,917
OTHER NON-INTEREST EXPENSES Loan and Charge Card Expenses $120,575 $125,011 $132,441 Communications 230,858 221,459 237,171 Outsourcing Fees 1,468,480 1,431,830 1,406,282 Stationery, Forms and Supplies 96,491 110,869 142,522 Professional Fees 251,802 304,946 291,550 Insurance and Assessments 93,346 76,404 83,027 Advertising 6,670 9,090 5,110 Miscellaneous Losses (546) 4,477 4,538 Promotional Expenses 50,010 73,911 68,283 Other Real Estate Expenses 34,800 87,477 388,614 Other Expenses 462,777 505,464 407,935
$2,815,263 $2,950,938 $3,167,473
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE V 	CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
BOL BANCSHARES, INC. CONDENSED BALANCE SHEETS
December 31, 2008 2007
ASSETS Due from Banks $766,141 $1,054,614 Securities Available-for-Sale, at Fair Value 792,197 708,896 Other Assets 367 1,104 Due from Subsidiary Bank 27,654 56,653 Investment in Bank of Louisiana 11,709,783 10,943,907
$13,296,142 $12,765,174
LIABILITIES AND STOCKHOLDERS' EQUITY Notes Payable $1,543,201 $1,543,201 Deferred Taxes 177,071 148,749 Accrued Interest 55,510 264,332 Shareholders' Equity 11,520,360 10,808,892
$13,296,142 $12,765,174
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE V 	CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
BOL BANCSHARES, INC. STATEMENTS OF INCOME
December 31, 2008 2007 2006
INCOME Dividend Income - Bank of Louisiana $- $643,500 $1,001,000 Interest Income 7,828 5,544 2,329 Miscellaneous Income 41,003 40,323 38,278
48,831 689,367 1,041,607
EXPENSES Interest 112,658 112,659 137,830 Other Expenses 5,617 5,226 4,325
118,275 117,885 142,155
(LOSS) INCOME BEFORE EQUITY 	IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY (69,444) 571,482 899,452
	Equity in Undistributed Earnings of Subsidiary 765,876 872,032 1,176,974
INCOME BEFORE INCOME TAX BENEFIT 696,432 1,443,514 2,076,426
INCOME TAX BENEFIT 27,654 32,952 53,180
NET INCOME $724,086 $1,476,466 $2,129,606
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE V 	CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued) BOL BANCSHARES, INC. 				 STATEMENTS OF CASH FLOWS
December 31, 	 2008 2007 2006
OPERATING ACTIVITIES Net Income $724,086 $1,476,466 $2,129,606 	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Equity in Undistributed Earnings of Subsidiary (765,876) (872,032) (1,176,974) Net Decrease in Other Assets 737 24,438 17,365 Net (Decrease) Increase in Other Liabilities (208,822) 7,678 (303,012)
Net Cash (Used in) Provided by Operating Activities (249,875) 636,550 666,985
FINANCING ACTIVITIES Preferred Stock Retired (67,597) (4,486) (16,237) Decrease in Due to/from Subsidiary 28,999 6,918 33,367 Proceeds from Issuance of Long-Term Debt - - 1,400,000 Repayment of Long-Term Debt - (1,000) (2,001,206)
Net Cash (Used in) Provided by Financing Activities (38,598) 1,432 (584,076)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (288,473) 637,982 82,909
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,054,614 416,632 333,723
CASH AND CASH EQUIVALENTS - END OF YEAR $766,141 $1,054,614 $416,632
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE W 	COMPREHENSIVE INCOME 		Comprehensive income was comprised of changes in the Company's unrealized holding gains or losses on securities available-for-sale during 2008, 2007 and 2006. The following represents the tax effects associated with the components of comprehensive income:
December 31,
2008 2007 2006 Gross Unrealized Holding Gains (Losses) Arising During the Period $83,308 $219,659 $(82,939) Tax (Expense) Benefit (28,325) (74,684) 28,199 54,983 144,975 (54,740)
Reclassification Adjustment for Gains Included in Net Income - - - Tax Benefit - - - - - -
Net Unrealized Holding Gains (Losses) Arising During the Period $54,983 $144,975 $(54,740)
NOTE X 	REGULATORY MATTERS 		As of December 31, 2008, the most recent notification from the FDIC categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized "well capitalized" the Bank must maintain minimum leverage capital ratios and minimum amounts of capital to total "risk weighted" assets, as set forth in the table. Management philosophy and plans are directed to enhancing the financial stability of the Bank to ensure the continuity of operations.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE X 	REGULATORY MATTERS (Continued) 		The Bank's actual capital amounts and ratios are also presented in the table. (Dollars in thousands.)
December 31, 2008 							 Required 							 to be Well Required Capitalized Under for Capital Prompt Corrective Actual Adequacy Purposes Action Provisions 	 Amount Ratio Amount Ratio Amount Ratio
Tier I Capital (to Average Assets) $11,710 11.78% $3,975 4.00% $4,969 5.00% Tier I Capital (to Risk- Weighted Assets) $11,710 18.53% $2,528 4.00% $3,792 6.00% Total Capital (to Risk-Weighted Assets) $12,512 19.80% $5,055 8.00% $6,319 10.00%
December 31, 2007 							 Required 							 to be Well Required Capitalized Under for Capital Prompt Corrective Actual Adequacy Purposes Action Provisions 	 Amount Ratio Amount Ratio Amount Ratio
Tier I Capital (to Average Assets) $10,944 10.31% $4,246 4.00% $5,307 5.00% Tier I Capital (to Risk- Weighted Assets) $10,944 16.08% $2,720 4.00% $4,081 6.00% Total Capital (to Risk-Weighted Assets) $11,807 17.34% $5,441 8.00% $6,801 10.00%
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Y 	DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value:
CASH AND SHORT-TERM INVESTMENTS 		For cash, the carrying amount approximates fair value. For short- term investments, fair values are calculated based upon general investment market interest rates for similar maturity investments.
	INVESTMENT SECURITIES 		For securities and marketable equity securities held-for-investment purposes, fair values are based on quoted market prices.
	LOAN RECEIVABLES 		For certain homogeneous categories of loans, such as residential mortgages, credit card receivables and other consumer loans, fair value is estimated using the current U.S. treasury interest rate curve, a factor for cost of processing and a factor for historical credit risk to determine the discount rate. 	DEPOSIT LIABILITIES 		The fair value of demand deposits, savings deposits and certain money market deposits are calculated based upon general investment market interest rates for investments with similar maturities. The value of fixed maturity certificates of deposit is estimated using the U.S. treasury interest rate curve currently offered for deposits of similar remaining maturities.
	COMMITMENTS TO EXTEND CREDIT 		The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit-worthiness of the counterparties.
		The estimated fair values of the Company's financial instruments are as follows:
December 31, 2008 Carrying Fair Amount Value 		Financial Assets: Cash and Short-Term Investments $3,103,598 $3,103,598 Investment Securities 2,824,326 2,848,701 Loans 57,408,039 57,540,095 Less: Allowance for Loan Losses (1,800,000) (1,800,000) $61,535,963 $61,692,394 		Financial Liabilities: Deposits $80,977,309 $81,132,605
Unrecognized Financial Instruments: Commitments to Extend Credit $3,763,000 $3,763,000 Credit Card Arrangements 28,599,000 28,599,000 $32,362,000 $32,362,000
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Y 	DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
December 31, 2007 Carrying Fair Amount Value
		Financial Assets: Cash and Short-Term Investments $4,161,408 $4,161,408 Investment Securities 8,739,676 8,736,856 Loans 57,619,935 57,814,110 Less: Allowance for Loan Losses (1,800,000) (1,800,000) $68,721,019 $68,912,374
		Financial Liabilities: Deposits $89,666,414 $89,713,840 		Unrecognized Financial Instruments: Commitments to Extend Credit $3,448,000 $3,448,000 Credit Card Arrangements 44,190,000 44,190,000 $47,638,000 $47,638,000
NOTE Z 	FINANCIAL INSTRUMENTS The Company adopted SFAS No. 157 on January 1, 2008 for 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). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
SFAS No. 157 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.
BOL BANCSHARES, INC. & SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Z FINANCIAL INSTRUMENTS (Continued) In addition to defining fair value, SFAS No. 157 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 December 31, 2008:
Level 1 Level 2 Level 3 Net Balance
Assets Equity Securities $- $822,977 $- $822,977
Total $- $822,977 $- $822,977
Laport, Sehrt, Romig & Hand Certified Public Accountants
To the Board of Directors BOL Bancshares, Inc. & Subsidiary
Report of Independent Registered Public Accounting Firm on Supplementary Information
	Our report on our audits of the basic financial statements of BOL BANCSHARES, INC. and its wholly-owned subsidiary, Bank of Louisiana, for the years ended December 31, 2008 and 2007, appears on page 1. These audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information contained in Schedules I, II and III is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
A Professional Accounting Corporation
/s/ Laport, Sehrt, Romig & Hand Metairie, Louisiana February 19, 2009
110 Veterans Memorial Boulevard, Suite 200, Metairie, LA 70005-4958 504-835-5522 Fax 504-835-5535 5100 Village Walk, Suite 202, Covington, La 70433-4012 985-892-5850 Fax 985-892-5956 5153 Bluebonnet Boulevard, Suite B, Baton Rouge, La 70809-3076 225-296-5150 Fax 225-296-5151 WWW. LAPORTE.COM RSM McGladrey Network An Independently Owned Member
BANK OF LOUISIANA SUPPLEMENTARY INFORMATION
SCHEDULE I BALANCE SHEETS UNCONSOLIDATED
ASSETS
December 31, 2008 2007 Cash and Due from Banks Non-Interest Bearing Balances and Cash $3,103,598 $4,161,408 Federal Funds Sold 25,375,000 27,490,000 Investment Securities 	Securities Held-to-Maturity (Fair Value of $2,025,724 in 2008 and $7,997,180 in 2007) 2,001,349 8,000,000 Securities Available-for-Sale, at Fair Value 30,780 30,780 Loans: Less Allowance for Loan Losses of $1,800,000 in 2008 and 2007 55,608,039 55,819,935 Property, Equipment and Leasehold Improvements (Net of Depreciation and Amortization) 6,516,361 6,923,048 Other Real Estate 1,152,924 1,035,924 Other Assets 878,503 928,536 Deferred Taxes 118,071 298,006 Letters of Credit 48,620 94,934
		Total Assets $94,833,245 $104,782,571
		LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES 	Deposits Non-Interest Bearing $34,936,718 $41,408,938 Interest Bearing 46,813,791 49,313,135 Other Liabilities 1,219,114 2,925,903 Letters of Credit Outstanding 48,620 94,934 Accrued Interest 106,921 91,443
		Total Liabilities 83,125,164 93,834,353
STOCKHOLDERS' EQUITY 	Common Stock - 143,000 Shares Issued and Outstanding 1,430,000 1,430,000 Surplus 4,616,796 4,616,796 Retained Earnings 5,661,285 4,901,422
Total Stockholders' Equity 11,708,081 10,948,218
Total Liabilities and Stockholders' Equity $94,833,245 $104,782,571
See independent registered public accounting firm report on supplementary information.
BANK OF LOUISIANA 			 SUPPLEMENTARY INFORMATION
SCHEDULE II 		 STATEMENTS OF INCOME 			 UNCONSOLIDATED
For the Years Ended December 31, 2008 2007 2006
INTEREST INCOME $7,215,507 $8,617,125 $9,036,957 INTEREST EXPENSE 752,695 705,790 477,140
Net Interest Income 6,462,812 7,911,335 8,559,817
PROVISION FOR LOAN LOSSES 256,622 276,704 563,587
Net Interest Income After Provision for Loan Losses 6,206,190 7,634,631 7,996,230
OTHER INCOME Service Charges on Deposit Accounts 505,009 610,691 607,063 Other Non-Interest Income 1,163,169 776,234 1,295,637
1,668,178 1,386,925 1,902,700
OTHER EXPENSES Salaries and Employee Benefits 2,696,966 2,749,357 2,688,824 Occupancy Expense 1,143,742 1,058,482 1,080,441 Estimated Loss Contingency - (1,200) (202,442) Other Non-Interest Expense 2,808,752 2,943,116 3,160,969
6,649,460 6,749,755 6,727,792
INCOME BEFORE INCOME TAX EXPENSE 1,224,908 2,271,801 3,171,138
INCOME TAX EXPENSE 465,045 753,674 990,987
NET INCOME $759,863 $1,518,127 $2,180,151
See independent registered public accounting firm report on supplementary information.
BANK OF LOUISIANA SUPPLEMENTARY INFORMATION
SCHEDULE III 		 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 			 UNCONSOLIDATED
Common Retained Stock Surplus Earnings Total
BALANCE - December 31, 2005 $1,430,000 $4,616,796 $2,847,644 $8,894,440
Dividends Paid - - (1,001,000) (1,001,000)
Net Income for the Year 2006 - - 2,180,151 2,180,151
BALANCE - December 31, 2006 1,430,000 4,616,796 4,026,795 10,073,591
Dividends Paid - - (643,500) (643,500)
Net Income for the Year 2007 - - 1,518,127 1,518,127
BALANCE - December 31, 2007 1,430,000 4,616,796 4,901,422 10,948,218
Dividends Paid - - - -
Net Income for the Year 2008 - - 759,863 759,863
BALANCE - December 31, 2008 $1,430,000 $4,616,796 $5,661,285 $11,708,081
See independent registered public accounting firm report on supplementary information.
Item 8
Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None
Item 8A(T) Controls and Procedures 	Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures 	We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives. 	With the participation of management, the certifying officers of the Company have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of a date within 90 days of the filing date of this report and have concluded that such controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
Management's Annual Report on Internal Control over Financial Reporting 	Our management is responsible for establishing and maintaining adequate internal control over financial report for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material affect on our financial statements would have been prevented or detected on a timely basis. Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 	Management, with the participation of the certifying officers of the Company, assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on this assessment, management, with the participation of the certifying officers of the Company, believes that, as of December 31, 2008, the Company's internal control over financial reporting is effective based on those criteria. 	This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Item 8B Other Information 	None
Item 9
Item 9 Directors and Executive Officers of the Company Directors and executive officers of the Company each serve for a term of one year.
Position with the Company and Bank of Director Name Age Louisiana (the "Bank") and Principal Occupation Since
G. Harrison Scott 85 Director; Chairman of the Board of 1981 the Company and the Bank, and President of the Company and the Bank.
Franck F. LaBiche 63 Director of the Company and the Bank. 2004 President, Executone Systems Co. of La. Inc.
Henry L. Klein 64 Director of the Company and the Bank, 2004 and Secretary of the Company. Attorney at Law
Johnny C. Crow 58 Director of the Company and the Bank. 2005 Insurance Agent, New York Life Ins. Co.
Sharry R. Scott 38 Director of the Company and the Bank. 2005 Assistant Attorney General, Louisiana Department of Justice
A. Earle Cefalu, Jr. 71 Director of the Company and the Bank. 2009 General Manager, Hood Automotive
Non-Director Executive Officer
Position with the Company and the Name Age Bank and Principal Occupation Peggy L. Schaefer 57 Ms. Schaefer has served as Treasurer of the Company since 1988 and Senior Vice President and Chief Financial Officer of the Bank since 1996.
No family relationships exist among the executive officers of the Company or the Bank. There is one family relationship that exists among the current directors, that of Mr. G. Harrison Scott and his daughter Sharry R. Scott. Except for service as a director of the Company, no director of the Company is a director of any other company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(b) of that act or any company registered as an investment company under the Investment Company Act of 1940.
Item 10
Item 10 Executive Compensation The Company pays no salaries or other compensation to its directors and executive officers. The Bank paid each director, other than Mr. Scott, a fee for attending each meeting of the Board of Directors, and each meeting of the Bank's Audit and Finance Committee and Executive Committee, in the amount of 400, $300, and $300, respectively. From October 1, 1990, through June 30, 1992, the director-recipients loaned these fees to the Company. During the year 2006, the Company paid off the loans to the former directors for a total of $563,091, including principal and interest. During the year 2008, the Company paid one current director $223,282. As of December 31, 2008, the balance due was $158,661, including accrued and unpaid interest at the rate of 10% per annum. At this time, there is no maturity date on these loans. The following table sets forth compensation for the Bank's executive officer for the calendar years 2008, 2007, and 2006. No other executive officer received total compensation in excess of $100,000 during 2008.
Annual Compensation Long Term Compensation Awards Payouts Other Annual Restricted Stock Options/ LTIP All Other Name and Principal Year Salary Bonus Compensation Award(s)SARs Payouts Compensation Position ($) ($) ($) ($) (#) ($) ($)
G. Harrison Scott, 2008 91,978 0 82,000 0 0 0 18,000 Chairman of the 2007 89,800 0 82,000 0 0 0 - Board & President 2006 89,800 0 82,000 0 0 0 12,837 of the Bank
	In addition to the cash compensation shown in the foregoing table, the Bank provided an automobile to Mr. Scott. Annual compensation does not include amounts attributable to miscellaneous benefits received by Mr. Scott. The cost to the Bank of providing such benefits did not exceed 10% of the total annual salary and bonus paid to Mr. Scott.
Committees of the Board of Directors of the Company and the Bank The Company does not have standing audit, or compensation committees of the Board of Directors, or committees performing similar functions. In lieu thereof, the Board of Directors as a group performs the foregoing functions. During fiscal year 2008, the Board of Directors of the Company held a total of 4 meetings. Each director attended at least 75% of the aggregate of the meetings of the Board of Directors. The Bank does not have standing nominating, or compensation committees of the Board of Directors, or committees performing similar functions. In lieu thereof, the Board of Directors as a group performs the foregoing functions. During fiscal year 2008, the Board of Directors of the Bank held a total of 14 meetings. Each director attended at least 75% of the aggregate of the meetings of the Board of Directors and of the committees on which such director served. The Board of Directors of the Bank has an Executive Committee consisting of five permanent members. The permanent members of the Executive Committee in 2008 were Messrs. Scott (chairman), Crow, Klein, LaBiche, and Ms. S. Scott. The Executive Committee formulates policy matters for determination by the Board of Directors and reviews financial reports, loan reports, new business, and other real estate owned information. The Executive Committee met 29 times in 2008. The Board of Directors of the Bank does have an Audit and Finance Committee and does not have a charter. This committee meets monthly on the first Tuesday of the month. By Bank policy, the Audit and Finance Committee reviews information from management; reviews financial and delinquency reports; reviews the work performed by the Bank's internal auditor and by the independent certified public accountant firm. In addition this committee also reviews capital expenditures in excess of $5,000; analyzes the Loan Loss
Reserve adequacy; and approves charged off loans. The Audit and Finance Committee met 10 times in 2008.
The Audit and Finance Committee discloses the following: 1.	They have reviewed and discussed the audited financial statements with management, and with the independent auditors. 2.	They have received a letter and written disclosure from the independent auditors, and have discussed the independence of the auditors. 3.	They have recommended to the Board of Directors that the financial statements as issued by the independent auditors be included in the Annual Report.
The permanent members of the Audit and Finance Committee were Messrs. LaBiche (chairman), Klein, and Crow, and the rotating member was Ms. S. Scott.
Item 11
Item 11 Security Ownership of Certain Beneficial Owners and Management 	The following table sets forth as of December 31, 2008, certain information as to the Company Stock beneficially owned by (i) each person or entity, including any "group" as that term is used in Section 13(d) (3) of the Exchange Act, who or which was known to the Company to be the beneficial owner of more that 5% of the issued and outstanding Stock, (ii) the directors of the Company, (iii) all directors and executive officers of the Company and the Bank as a group.
Company Stock Beneficially Owned as of December 31, 2008 (1)
Common Preferred Name of Beneficial Owner Number Percent Number Percent
Directors: G. Harrison Scott (Direct) 43,709 24.40% 157,673 7.89% G. Harrison Scott (Beneficial owner of Scott Family, LLP) 55,992 31.26% - - Franck F. LaBiche 500 - (*) - - Henry L. Klein 500 - (*) - - Johnny C. Crow 1,502 - (*) - - Sharry R. Scott - - (2) - -
All Directors & Executive Officers 102,473 57.20% 160,445 8.03% of the Company and the Bank as a group (6 persons)
(*) Represents less than 1% of the shares outstanding. (1) Based upon information furnished by the respective persons. Pursuant to rules promulgated under the 1934 Act, a person is deemed to beneficially own shares of stock if he or she directly or indirectly has or shares (a) voting power, which includes the power to vote or to direct the voting of the shares; or (b) investment power, which includes the power to dispose or direct the disposition of the shares. Unless otherwise indicated, the named beneficial owner has sole voting power and sole investment power with respect to the indicated shares. (2) Sharry R. Scott, through ownership of an interest in Scott Family LLP, owns 7,151 shares of common stock.
Item 12
Item 12 Certain Relationships and Related Transactions
The Bank makes loans in the ordinary course of business to its directors and executive officers, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and do not involve more than the normal risk of collectability or present other unfavorable features. At December 31, 2008, two directors had aggregate loan balances in excess of $60,000, which amounted to approximately $793,000 in the aggregate. 	On August 20, 2007 for a price of $4,650,000 the Bank purchased the land and improvements from Severn South Partnership to which the Bank was paying rent. The property consists of a four story building with offices that are leased to other businesses. The purchase was approved by FDIC (Federal Deposit Insurance Corp) and OFI (Office of Financial Institutions, State of Louisiana) on August 6, 2007 with the stipulation that the investment in fixed assets not exceed 50 percent of its equity capital and reserves by December 31, 2008. The percentage as of December 31, 2008 was 48.24%. 	The Bank leased office space from Severn South Partnership. The general partner of Severn South Partnership is a majority shareholder in BOL Bancshares, Inc. Rent paid to Severn South Partnership for the years ended December 31, 2007 (prior to the purchase described above), and 2006 totaled $247,407, and $381,386 respectively.
Item 13
Item 13 Exhibits and Reports on Form 8-K Exhibits
	31.1 Section 302 Principal Executive Officer Certification 	31.2 Section 302 Principal Financial Officer Certification 	32.1 Section 1350 Certification 	32.2 Section 1350 Certification
Reports on Form 8-K NONE
Item 14
Item 14 Principal Accountant Fees and Services
AUDIT FEES 	The aggregate fees billed by LaPorte, Sehrt, Romig and Hand for its audit of the Company's annual financial statements for 2008 and for its reviews of the Company's unaudited interim financial statements included in Form 10-Q filed by the Company and other related audit fees during 2008 was $81,745. The fees billed for 2007 were $79,803.
Tax Fees 	The aggregate fees billed by LaPorte, Sehrt, Romig and Hand for tax compliance, tax preparation, and tax review for 2008 were $34,530. The fees billed for 2007 were $27,241.
All Other Fees 	The aggregate fees billed by LaPorte, Sehrt, Romig & Hand for other accounting services for 2008 were $3,944. The fees billed for 2007 were $3,185.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
						BOL BANCSHARES, INC.
						/s/ G. Harrison Scott March 24, 2009 				G. Harrison Scott Date						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)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 24, 2009.
/s/ G. Harrison Scott /s/ Johnny C. Crow G. Harrison Scott - Director Johnny C. Crow - Director
/s/ Franck F. LaBiche /s/ Sharry R. Scott Franck F. LaBiche - Director Sharry R. Scott - Director
/s/ Henry L. Klein /s/ A. Earle Cefalu, Jr. Henry L. Klein - Director A. Earle Cefalu, Jr. - Director