13 (Continued) 2011 2010 Cash flows from operating activities:  Net  Income  $  793,148 $  3,365,896 Adjustments to reconcile net income to net cash provided by operating activities: Provision  for  loan  losses  1,328,061 2,094,697 Deferred  tax  provision  440,021 143,241 Change in valuation allowance on deferred tax asset  - (3,439,718) Depreciation  129,072 144,933 Deferred loan origination costs, net  (79,648) (201,541) Change in amortization (accretion) of investment security  premiums  (discounts),  net  419,811 172,303 Share-based  compensation  expense  252,331 534,834 Increase in cash surrender value of life insurance  (81,234) (39,967) Change in amortization of discount on retained  portion of sold loans  2,613 (7,290) Gain on sale of investment securities, net  (124,100) (372,895) Decrease (increase) in loans held for sale  1,017,927 (481,100) Increase in accrued interest receivable and  other  assets  (168,688) 90,612 Increase in accrued interest payable  and  other  liabilities  913,157 385,695 Net cash provided by operating activities  4,842,471 2,389,700 Cash flows from investing activities: Purchase of available-for-sale investment securities  (24,612,086) (53,309,065) Proceeds from sales and maturities of available-for-sale  investment  securities  31,876,983 12,458,735 Proceeds from principal payments on available-for-sale  investment  securities  6,532,188 7,914,836 Net increase in loans  (34,749,589) (31,270,375) Purchases of premises and equipment  (173,478) (34,573) Purchase of bank-owned life insurance policies  (3,500,000)  - Purchase of Federal Home Loan Bank stock  (332,200)  (218,700) Net cash used in investing activities  (24,958,182)  (64,459,142) STATEMENT OF CASH FLOWS For the Years Ended December 31, 2011 and 2010 California Bank of Commerce