Financial Instruments

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Financial Instruments

NOTE Z   FINANCIAL INSTRUMENTS

The Company adopted ASC 820 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). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, ASC 820 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 preceding methods described may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used during the year ended December 31, 2011.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis.

December 31, 2011	Level 1		Level 2		Level 3		Net Balance
Assets
Equity Securities	$	—	$	1,037,475	$	—	$	1,037,475
Total	$	—	$	1,037,475	$	—	$	1,037,475
December 31, 2010		Level 1		Level 2		Level 3		Net Balance
Assets
Equity Securities	$	—	$	878,100	$	—	$	878,100
Total	$	—	$	878,100	$	—	$	878,100

The Company did not record any liabilities at fair market value for which measurement of the fair value was made on a recurring basis at December 31, 2011 or 2010.

The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis.

December 31, 2011	Level 1		Level 2		Level 3		Net Balance
Assets
Impaired Loans	$	—	$	4,183,527	$	—	$	4,183,527
Other Real Estate				4,597,336	$	—		4,597,336
Total	$	—	$	8,780,863	$	—	$	8,780,863

December 31, 2010	Level 1		Level 2		Level 3		Net Balance
Assets
Impaired Loans	$	—	$	5,072,134	$	—	$	5,072,134
Other Real Estate				3,137,074				3,137,074
Total	$	—	$	8,209,208	$	—	$	8,209,208