Investment securities increased by an aggregate of $46.2 million, or 14.4%, to $368.1 million at December 31, 2002 compared to $321.9 million at December 31, 2001. This increase was the result of purchases of investment securities amounting to $283.2 million and a $1.8 million improvement in the market value of investment securities available for sale, both of which were partially offset by $210.2 million from scheduled principal payments and maturities, $26.3 million in sales of investment securities and $2.5 million from the amortization of premiums and accretion of discounts. Funds generated as a result of sales and prepayments were used to fund loan growth and purchase other securities. The Company continues to monitor market conditions and take advantage of market opportunities with appropriate rate and risk return elements. Note 3 to the Consolidated Financial Statements provides further information on the Company's investment securities. OTHER EARNING ASSETS –  Included in other earning assets are short-term investments resulting from excess funds that fluctuate daily depending on funding needs of the Company. These funds are invested overnight in an interest-bearing deposit account at the Federal Home Loan Bank (“FHLB”) of Dallas, the total balance of which earns interest at the ending FHLB discount rate. The balance in this account increased by $11.5 million, from $15.7 million at December 31, 2001 to $27.2 million at December 31, 2002. The average rate on these funds during 2002 was 1.59%. Also a component of other earning assets are loans held for sale, which decreased $7.2 million, or 45.3%, to $8.7 million at December 31, 2002 compared to $15.9 million at December 31, 2001. Loans held for sale have primarily been fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans in this category are sold within thirty days. During 2002, approximately 72% of total single-family mortgage originations of the Bank were sold in the secondary market as compared to 80% in 2001.  The Company’s principal source of funds for use in lending and other business purposes has traditionally come from deposits obtained from clients in its primary market areas. The Company attracts local deposit accounts by offering a wide variety of accounts, competitive interest rates and convenient branch office locations and service hours. Increasing core deposits through the development of client relationships is a continuing focus of the Company. Other funding sources include borrowings, subordinated debt and shareholders' equity. The following discussion highlights the major changes in the mix during 2002. DEPOSITS –  Deposits associated with the sale of a branch office during the second quarter of this year amounted to approximately $12.1 million. Excluding this transaction, deposits increased by $16.9 million, or 1.4%. The increase in deposits continues to reflect relatively balanced growth across all markets and deposit categories. The Company believes the increase to be the result of several factors including the development of customer relationships, opportunities in the public funds arena and clients shifting out of equity markets. Certificates of deposit $100,000 and over decreased $3.0 million, or 2.0%, from $153.9 million at December 31, 2001 to $150.9 million at December 31, 2002. At December 31, 2002, $159.0 million, or 12.8%, of the Company's total deposits were noninterest bearing, compared to $154.6 million, or 12.5%, at December 31, 2001. The following table shows large-denomination certificates of deposit by remaining maturities. Additional information regarding deposits is provided in Note 7 to the Consolidated Financial Statements. Funding Sources 24 INVESTMENT SECURITIES -  The Company's investment securities consist primarily of securities issued by the U.S. Government and federal agency obligations and mortgage-backed securities. As of December 31, 2002, the Company's investment securities available for sale amounted to $309.6 million, which includes a pre-tax net unrealized gain of $2.9 million, and its investment securities held to maturity amounted to $58.5 million with a pre-tax net unrealized gain of $2.1 million. At such date, investment securities available for sale consisted of $255.6 million of mortgage-backed securities, $25.9 million of obligations of state and political subdivisions, $5.2 million of U.S. Government and federal agency obligations, and $15.6 million of other debt securities. The remaining balance of $7.3 million was composed of marketable equity securities. At December 31, 2002, investment securities held to maturity consisted of $31.2 million of mortgage-backed securities, $17.3 million of obligations of state and political subdivisions and $10.0 million of U.S. Government and federal agency obligations. See Note 3 to the Consolidated Financial Statements.