Management’s Discussion and Analysis Income Tax Expense  2011 vs. 2010 comparison 2010 vs. 2009 comparison BALANCE SHEET ANALYSIS  Securities  December 31, 2011 1 year  1 to 5 5 to 10  After 10 Total  (Dollars in thousands) or less years years years Fair Value Agency obligations $ — — 5,013 46,072 51,085 Agency RMBS 14,935 149,863 164,798 State and political subdivisions — 414 17,761 63,538 81,713 Trust preferred securities — — 1,986 1,986 Total available-for-sale $ — 414 37,709 261,459 299,582 Weighted average yield: Agency obligations — — 1.25% 2.22% 2.12% Agency RMBS 1.41% 2.56% 2.45% State and political subdivisions — 3.74% 4.05% 4.22% 4.18% Trust preferred securities — — 4.64% 4.64% Total available-for-sale — 3.74% 2.63% 2.91% 2.88% page 11 In 2011, the Company recorded income tax expense of $0.1 million, compared to $0.8 million in 2010. The effective  income tax rate was 1.02% in 2011, compared to 12.99% in 2010. The decrease in income tax expense and the effective tax  rate from 2010 to 2011 was primarily due to a decrease in the level of earnings before taxes and an increase in federal tax  credits related to the Company’s increased investments in affordable housing limited partnerships in 2011. In January of  2012, the Company sold its interests in three affordable housing partnership investments. Accordingly, the Company expects  that income tax expense will increase in 2012 when compared to 2011 since the Company currently does not expect to  receive any federal tax credits related to affordable housing partnership investments in 2012. In 2010, the Company recorded income tax expense of $0.8 million, compared to an income tax benefit of $0.3 million  in 2009. This change was primarily due to an increase in the level of earnings before taxes. The effective income tax rate was 12.99% in 2010, compared to an effective income tax benefit rate of 16.47% in 2009. The increase in the effective tax rate  from 2009 to 2010 was primarily due to a 198% increase in earnings before taxes. Also reflected in the Company’s effective  income tax benefit rate for 2009 was a change in valuation allowance of $0.5 million related to nondeductible capital losses  and an income tax benefit of $0.3 million related to the correction of an accounting error in prior periods. Information  concerning the correction of an accounting error is included in Note 1 to the Consolidated Financial Statements.  Securities available-for-sale were $299.6 million and $315.2 million as of December 31, 2011 and 2010, respectively.  The decrease from December 31, 2010 primarily reflects management’s decision to utilize a portion of the cash proceeds  from securities sold, called, and matured during 2011 to reduce the level of wholesale funding (such as brokered certificates of deposit and FHLB advances) on our balance sheet. Unrealized net gains on securities available-for-sale were $6.7 million  as of December 31, 2011 compared to unrealized net losses of $3.5 million as of December 31, 2010. The change in net  unrealized gains (losses) of $10.2 million from December 31, 2010 was primarily due to changes in interest rates and a  narrowing of credit spreads on securities of U.S. states and political subdivisions during 2011. The average tax-equivalent  yields earned on total securities were 3.65% in 2011 and 4.09% in 2010.  The following table shows the carrying value and weighted average yield of securities available-for-sale as of  December 31, 2011 according to contractual maturity. Actual maturities may differ from contractual maturities of mortgage- backed securities because the mortgages underlying the securities may be called or prepaid with or without penalty. 