Fair Value Accounting

9 Months Ended

Sep. 30, 2011

Fair Value Accounting [Abstract]

Fair Value Accounting

Note 6. Fair Value Accounting

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1-Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries and money market funds.

Level 2-Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities, and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts.

Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly-structured or long-term derivative contracts and impaired loans.

The estimated fair values of the Company's financial instruments were as follows:

		September 30, 2011				December 31, 2010
		Carrying	Fair		Carrying		Fair
		Amount	Value		Amount		Value
Financial Assets
	Cash and due from banks	$    8,378,374	$    8,378,374	$    7,043,911			$    7,043,911
	Federal funds sold	12,120,000	12,120,000	5,110,000			5,110,000
	Investment securities	27,026,768	27,026,768	24,655,686			24,655,686
	Loans, gross	98,449,890	99,640,527	119,914,200			120,947,231
Cash surrender value of life insurance policies		1,958,462	1,958,462	1,908,112			1,908,112
Financial Liabilities
	Deposits	138,656,618	137,506,701	140,646,392			139,176,006
	Customer sweep accounts	46,583	46,583	895,937			895,937
	Customer repurchase agreements	1,700,000	1,759,399	2,050,000			2,137,395
	Borrowings from FHLB	2,479,213	2,656,645	6,592,338			6,731,378
	Broker repurchase agreements	5,000,000	5,187,792	5,000,000			5,212,655

The table below presents the balances of assets measured at fair value on a recurring or nonrecurring basis by level within the hierarchy of inputs that may be used to measure fair value.

	September 30, 2011
	Total	Level 1	Level 2	Level 3
Investment securities, recurring	$ 27,026,768	$ 17,382,261	$  8,708,157	$      936,350
Other real estate owned, nonrecurring	$ 14,323,423	$                   -	$                 -	$ 14,323,423
Impaired loans, nonrecurring	$   8,904,524	$                   -	$                 -	$ 8,904,524
	December 31, 2010
Investment securities, recurring	$ 24,655,686	$ 15,369,729	$  8,222,607	$   1,063,350
Other real estate owned, nonrecurring	$ 10,278,599	$                   -	$                 -	$ 10,278,599
Impaired loans, nonrecurring	$ 10,639,189	$                   -	$                 -	$ 10,639,189

During the nine months ended September 30, 2011, there were no significant transfers of assets between categories.

The table below represents the activity in Level 3 assets that are measured at fair value on a recurring basis for the period January 1, 2011 to September 30, 2011.

	Other Investments
Beginning balance	$ 1,063,350
Total realized and unrealized gains or losses:
Included in earnings	-
Included in other comprehensive income	-
Purchases	17,900
Sales (redemption by FHLB Atlanta)	(144,900)
Principal reductions	-
Transfers in and/or out of Level 3	-
Ending balance	$    936,350