NOTE 3 – INVESTMENT SECURITIES

The following summaries reflect the book value, unrealized gains and losses, approximate market value, and tax-equivalent yields of investment securities listed by type of issuer and maturity at September 30, 2011 and at December 31, 2010.

September 30, 2011

Book

Unrealized Holding

Fair

Value

Gains

Losses

Value

Yield(1)

AVAILABLE FOR SALE

  Government Sponsored Enterprises

    Within one year

$  38,233

$         92

$           -

$  38,325

.55%

    One to five years

186,265

1,122

48

187,339

1.01%

    Six to ten years

    28,964

         150

          37

    29,077

1.43%

  253,462

      1,364

          85

  254,741

  .99%

  Mortgage Backed Securities

    One to five years

96

7

-

103

5.86%

    Six to ten years

2,338

154

-

2,492

4.15%

    Over ten years

    20,631

         369

            -

    21,000

2.52%

    23,065

         530

            -

    23,595

2.70%

  State, county and municipal

    Within one year

265

2

-

267

5.47%

    One to five years

1,469

56

-

1,525

4.29%

    Six to ten years

17,557

1,285

4

18,838

5.18%

    Over ten years

      5,958

         252

             -

      6,210

4.79%

    25,249

      1,595

            4

    26,840

5.04%

  Other Investments

     CRA Qualified Investment Fund

1,071

41

-

1,112

-%

     Other

           36

             -

             -

           36

      -%

      1,107

             41

             -

      1,148

      -%

  Total available for sale

$302,883

$   3,530

$        89

$306,324

1.45%

HELD TO MATURITY

  State, county and municipal

    Within one year

$       529

$          9

$           -

$       538

     4.43%

    One to five years

    565

        36

           -

    601

5.04%

    Six to ten years

7,049

441

-

7,490

5.38%

    Over ten years

      2,876

        195

             -

      3,071

4.86%

    11,019

        681

             -

    11,700

5.18%

    Total held to maturity

$  11,019

$      681

$           -

$  11,700

5.18%

(1) Tax equivalent adjustment based on a 34% tax rate.

As of September 30, 2011, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders’ equity. The net unrealized holding gains on available for sale securities component of capital was $2,040, net of deferred income taxes, as of September 30, 2011.

	December 31, 2010
	Book	Unrealized Holding		Fair
	Value	Gains	Losses	Value	Yield(1)
AVAILABLE FOR SALE

Government Sponsored Enterprises
Within one year	$ 6,035	$ 21	$ 2	$ 6,054	.98%
One to five years	180,903	328	650	180,581	1.13%
Six to ten years	58,047	137	322	57,862	1.87%
	244,985	486	974	244,497	1.30%
Mortgage Backed Securities
Six to ten years	2,112	90	-	2,202	4.01%
Over ten years	8,090	102	86	8,106	3.31%
	10,202	192	86	10,308	3.46%
State, county and municipal
Within one year	950	4	-	954	6.26%
One to five years	1,395	40	-	1,435	6.28%
Six to ten years	12,531	332	82	12,781	5.41%
Over ten years	4,442	5	142	4,305	4.93%
	19,318	381	224	19,475	5.41%
Other Investments
CRA Qualified Investment Fund	1,065	-	-	1,065	-%
Other	36	-	-	36	-%
	1,101	-	-	1,101	-%

Total available for sale	$ 275,606	$ 1,059	$ 1,284	$ 275,381	1.67%


HELD TO MATURITY

Government Sponsored Enterprises
One to five years	10,000	25	4	10,021	1.33%

State, county and municipal
One to five years	$ 1,103	$ 46	$ -	$ 1,149	4.74%
Six to ten years	5,847	149	14	5,982	5.60%
Over ten years	3,728	-	96	3,632	4.85%
	10,678	195	110	10,763	5.25%

Total held to maturity	$ 20,678	$ 220	$ 114	$ 20,784	3.34%

(1) Tax equivalent adjustment on tax exempt obligations based on a 34% tax rate

As of the year ended December 31, 2010, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity.

The following table shows gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2011 and December 31, 2010:


	September 30, 2011
AVAILABLE FOR SALE Government Sponsored Enterprises State, county, and municipal Total	Less than twelve months		Twelve months or more		Total
	Fair value	Unrealized losses	Fair value	Unrealized losses	Fair value	Unrealized losses

	$ 31,723	$ 85	-	-	$ 31,723	$ 85
	259	4	-	-	259	4
	$ 31,982	$ 89	$ -	$ -	$ 31,982	$ 89

	December 31, 2010
	Less than twelve months		Twelve months or more		Total
AVAILABLE FOR SALE Government Sponsored Enterprises State, county, and municipal Mortgage backed securities Total	Fair value	Unrealized losses	Fair value	Unrealized losses	Fair value	Unrealized losses
	$ 132,747 5,882 5,005	$ 973 207 87	$ - 323 -	$ - 17 -	$ 132,747 6,205 5,005	$ 973 224 87
	$ 143,634	$ 1,267	$ 323	$ 17	$ 143,957	$ 1,284
HELD TO MATURITY Government Sponsored Enterprises State, county, and municipal	$ 1,996 4,534	$ 4 110	$ - -	$ - -	1,996 4,534	$ 4 110
Total	$ 6,530	$ 114	$ -	$ -	$ 6,530	$ 114

Securities classified as available for sale are recorded at fair market value. At September 30, 2011, there were no available for sale securities in a continuous loss position for twelve months or more. At December 31, 2010, the Company owned $323 of available for sale securities in a continuous loss position for twelve months or more with $17 of unrealized losses consisting of one municipal security.

Securities classified as held to maturity are recorded at cost. At September 30, 2011 there were no held to maturity securities in a continuous loss position for less than twelve months. At September 30, 2011, and December 31, 2010 there were no held to maturity securities in a continuous loss position for twelve months or more.

Investment securities with an aggregate par value of $179,284 ($183,599 fair value) at September 30, 2011 and $204,917 ($207,349 fair value) at December 31, 2010 were pledged to secure public deposits and for other purposes required by law.

For the nine-month period ended September 30, 2011 there were no sales of available for sale securities. For the nine-month period ended September 30, 2010, the Company sold $18,252 (book value) of available for sale securities for a gain of $1,004. During all of 2010 $20,758 of par value available for sale securities were sold for a gain of $993.

For the nine-month periods ended September 30, 2011 and 2010, there were no sales of held to maturity securities. During all of 2010, the Company sold $2,255 par value ($2,370 fair value) of held to maturity securities, consisting of four securities, for a net gain of $73. Two of these held to maturity securities, $770 par value ($785 fair value), were sold under exception “a.” of ASC 320-10-25-6 as a result of both securities losing their rating due to a downgrade of the insurer. Two of these held to maturity securities, $1,485 par value ($1,585 fair value), were sold under exception “d.” of ASC 320-10-25-6 because the primary regulator of the Company’s subsidiary bank has increased scrutiny of capital and its components and, consequently, due to continued uncertainty in the municipal bond markets, the amount of investment in individual municipal securities issuers. In response to these regulatory concerns related to capital and its components, the Company sold all of its municipal securities of individual issuers in excess of $600, including all municipal securities in this size category classified held to maturity as well as those classified available for sale. We believe that the sale of these held to maturity securities should not be considered inconsistent with the original classification and the remaining portfolio is not tainted.

Management reviews securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the fact that Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized cost.