In the table above, the Bancorp’s subordination for  each trust preferred security is calculated by taking the total performing collateral and subtracting the sum of the total collateral within the Bancorp’s class and the total collateral within all senior classes, and then stating this result as a percentage of the total performing collateral. This measure is an indicator of the level of collateral that can default before potential cash flow disruptions may occur. In addition, management calculates subordination assuming future collat- eral defaults by utilizing the default/deferral assumptions in the Bancorp’s other-than-temporary impairment analysis. Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral. At December 31, 2010, management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security; the potential for additional defaults and defer- rals within each security; the length of time that the security has been in “payment in kind” status; and the Bancorp’s class position within each security.  Management calculated the other-than-temporary impairment model assumptions based on the specific  collateral underlying each individual security. The following assumption methodology was applied consistently to each of the four pooled trust preferred securities: For collateral that has already defaulted, no recovery was assumed; no cash flows were assumed from collateral currently in deferral, with the exception of the recovery assumptions. The default and recovery assumptions were calculated based on the detailed collateral review. The discount rate assumption used in the calculation of the present value of cash flows is based on  the discount margin (i.e., credit spread) at the time each security was purchased using the original purchase price.  The discount margin is then added to the appropriate  3-month LIBOR forward rate obtained from the forward LIBOR curve. At December 31, 2010, three of the trust preferred  securities with a cost basis of $3,900,000 have been placed in “payment in kind” status. The Bancorp’s securities that are classified as “payment in kind” are a result of not receiving the scheduled quarterly interest payments. For the securities in “payment in kind” status, management anticipates to receive the unpaid contractual interest payments from the issuer, because of the self correcting cash flow waterfall provi- sions within the structure of the securities. When a tranche senior to the Bancorp’s position fails the coverage test, the Bancorp’s interest cash flows are paid to the senior tranche and recorded as a reduction of principal. The coverage test represents an over collateralization target by stating the balance of the performing collateral as a percentage of the balance of the Bancorp’s tranche, plus the balance of all senior tranches. The principal reduction in the senior tranche continues until the appropriate coverage test is passed. As a result of the principal reduction in the senior tranche, more cash is available for future payments to the Bancorp’s tranche. Consistent with the Investments – Debt and Equity Securities Topic, management considered the failure of the issuer of the security to make scheduled interest payments in determining whether a credit loss existed. Management will not capitalize the “payment in kind” interest payments to the book value of the securities and will keep these securities in non-accrual status until the quarterly interest payments resume.  Assets and liabilities measured at fair value on a recurring basis are summarized below: (Dollars in thousands) Estimated Fair Value Measurements at December 31, 2010 Using ___________________________________________ Quoted Prices in Significant Significant Active Markets for Other Unobservable December 31, Identical Assets Observable Inputs Inputs 2010 (Level 1) (Level 2) (Level 3)  __________ __________ __________ __________ Available-for-sale debt securities U.S. government sponsored entities ........... $ 4,169 $ – . $ 4,169 $ – . CMO and residential mortgage-backed securities 97,142 – . 97,142 – . Municipal securities......... 39,365 – . 39,365 – . Collateralized debt obligations 1,379 – . – . 1,379 __________ __________ __________ __________ Total available-for-sale debt securities................ $ 142,055 $ – . $ 140,676 $ 1,379 __________ __________ __________ __________ Estimated Fair Value Measurements at December 31, 2009 Using ___________________________________________ Quoted Prices in Significant Significant Active Markets for Other Unobserbable December 31, Identical Assets Observable Inputs Inputs 2009 (Level 1) (Level 2) (Level 3)  __________ __________ __________ __________ Available-for-sale debt securities U.S. government sponsored entities ........... $ 2,045 $ – . $ 2,045 $ – . CMO and residential mortgage-backed securities 85,808 – . 85,808 – . Municipal securities......... 35,573 – . 35,573 – . Collateralized debt obligations 1,350 – . – . 1,350 __________ __________ __________ __________ Total available-for-sale debt securities................ $ 124,776 $ – . $ 123,426 $ 1,350 __________ __________ __________ __________ (Dollars in thousands) Assets: Assets: Assets and Liabilities Measured on a Recurring Basis 40