The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

The Company groups assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 - Valuation is 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.

Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Assets Recorded at Fair Value on a Recurring Basis. The table below presents the recorded amount of assets measured at fair value on a recurring basis as of December 31, 2023 and 2022, all of which consisted of investment securities available-for-sale:


	Level 1		Level 2		Level 3		Total
December 31, 2023:
US treasuries	$	—	$	9,533,835	$	—	$	9,533,835
Mortgage-backed securities		—		9,412,836		—		9,412,836
Collateralized mortgage obligations		—		13,953,851		—		13,953,851
Municipal bonds		—		7,465,893				7,465,893
Corporate obligations		—		2,598,080		—		2,598,080
Investment securities available-for-sale	$	—	$	42,964,495	$	—	$	42,964,495
December 31, 2022:
US treasuries	$	—	$	9,324,532	$	—	$	9,324,532
Mortgage-backed securities		—		8,732,033		—		8,732,033
Collateralized mortgage obligations		—		14,844,030		—		14,844,030
Municipal bonds				7,028,911		—		7,028,911
Corporate obligations		—		3,167,046		—		3,167,046
Investment securities available-for-sale	$	—	$	43,096,552	$	—	$	43,096,552

Assets Recorded at Fair Value on a Nonrecurring Basis. The Bank may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of December 31, 2023 and 2022:


	Level 1		Level 2		Level 3		Total
December 31, 2023:
Other real estate owned	$	—	$	—	$	—	$	—
Individually evaluated loans		—		—		623,301		623,301
	$	—	$	—	$	623,301	$	623,301
December 31, 2022:
Other real estate owned	$	—	$	—	$	683,800	$	683,800
Impaired loans		—		—		—		—
	$	—	$	—	$	683,800	$	683,800

The following tables show significant unobservable inputs used in the fair value measurement of Level 3 assets:


	Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average Discount
December 31, 2023:
Other real estate owned	$	—	Third party appraisals and sales contracts	Collateral values, market discounts and estimated costs to sell		—
Individually evaluated loans	$	623,301	Third party appraisals and discounted cash flows	Collateral values, market discounts and estimated costs to sell		11	%

December 31, 2022:
Other real estate owned	$	683,800	Third party appraisals and sales contracts	Collateral values, market discounts and estimated costs to sell		52	%
Impaired loans	$	—	Third party appraisals and discounted cash flows	Collateral values, market discounts and estimated costs to sell		—

The following methods and assumptions were used to estimate the fair value of each class of assets and liabilities either recorded or disclosed at fair value.

Cash and Cash Equivalents. The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Certificates of deposit with other banks. The carrying value of certificates of deposit with other banks is a reasonable estimate of fair value.

Investment Securities Available-for-Sale. Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Level 2 securities include mortgage-backed securities and collateralized mortgage obligations issued by government sponsored enterprises and state, county and municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Other Investments. Other investments consist of FHLB and FRB stock whose carrying value approximates its fair value.

Mortgage Loans Held for Sale. The estimated fair value of mortgage loans held for sale, classified within Level 2, is approximated by the carrying value, given the short-term nature of the loans and similarly to what secondary markets are currently offering for portfolios of loans with similar characteristics.

Loans. The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and a specific allocation is established within the allowance for credit losses. Loans for which it is probable that payment of interest and/or principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of three methods, including collateral value, market value of similar debt, and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Impaired loans in which an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price, the Bank records the impaired loan as nonrecurring Level 2. When an appraised value is utilized or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the impaired loan as nonrecurring Level 3.

Other Real Estate Owned. Other real estate owned properties are adjusted to fair value less estimated selling costs upon transfer of the loans to other real estate owned. Subsequently, other real estate owned assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value is based on an observable market price, the Bank records the other real estate owned as nonrecurring Level 2. When the fair value is based on an appraised value, or when an appraised value is not available, the Bank records the other real estate owned asset as nonrecurring Level 3.

Bank Owned Life Insurance. The carrying value of Bank Owned Life Insurance approximates fair value.

Commitments to Extend Credit. Commitments to extend credit are short-term and, therefore, the carrying value and the fair value are considered immaterial for disclosure.

Deposits. The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of savings accounts approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected maturities of time deposits.

Federal Home Loan Bank Advances. Federal Home Loan Bank advances are carried at cost and the fair value is obtained from the Federal Home Loan Bank of Atlanta.

The carrying amounts and estimated fair values of the Bank’s financial instruments as of December 31, 2023 and 2022 are as follows:


			Fair Value Measurements at December 31, 2023
	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	25,039,214	$	25,039,214	$	25,039,214	$	—	$	—
Certificates of deposit with other banks		—		—		—		—		—
Investment securities available-for-sale		42,964,495		42,964,495		—		42,964,495		—
Other investments		1,629,150		1,629,150		—		1,629,150		—
Mortgage loans held for sale		289,111		289,111		—		289,111		—
Loans, net of deferred fees		376,899,968		366,563,968		—		—		366,563,968
Bank owned life insurance		11,729,019		11,729,019		11,729,019		—		—
Financial liabilities:
Deposits		369,868,794		369,191,794		258,915,942		—		110,275,852
FHLB advances		11,000,000		11,068,109		—		—		11,068,109


			Fair Value Measurements at December 31, 2022
	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	25,545,872	$	25,545,872	$	25,545,872	$	—	$	—
Certificates of deposit with other banks		1,739,000		1,739,000		1,739,000		—		—
Investment securities available-for-sale		43,096,552		43,096,552		—		43,096,552		—
Other investments		1,377,500		1,377,500		—		1,377,500		—
Mortgage loans held for sale		2,085,099		2,085,099		—		2,085,099		—
Loans, net of deferred fees		338,501,049		318,195,000		—		—		318,195,000
Bank owned life insurance		11,442,653		11,442,653		11,442,653		—		—
Financial liabilities:
Deposits		329,128,253		327,436,855		239,622,855		—		87,814,000
FHLB advances		11,000,000		10,953,000		—		—		10,953,000

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.