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## NOTES TO FINANCIAL STATEMENTS 

## 3. INVESTMENT SECURITIES  (Continued) 

Available-for-Sale (Continued) 

At December 31, 2011, the Bank held 28 mortgage-backed securities, of which 10 were in a loss position at year end, all of which had been in a continuous loss position for less than twelve months. At December 31, 2010, the Bank held 1 U.S. Government agency security and 20 mortgage-backed securities, of which 2 were in a loss position at year end, all of which had been in a continuous loss position for less than twelve months 

Management believes that changes in the market value of its mortgage-backed securities are primarily attributable to changes in interest rates, underlying pool characteristics and relative illiquidity and not credit quality, and because the Bank has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Bank does not consider those investments to be other-than-temporarily impaired at December 31, 2011. 

At December 31, 2011, investment securities were comprised of U.S. Government agency collateralized mortgage-backed securities with no single maturity dates. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. 

At December 31, 2011, most investment securities were pledged to secure State Treasury funds on deposit and borrowing arrangements in place at the Federal Reserve Bank of San Francisco. (See Note 9) 

## 4. LOANS 

Outstanding loans are summarized below: 

<img src='content_image/184000.jpg'>

Salaries and employee benefits totaling $1,120,130 and $1,039,003 were deferred as loan origination costs for the years ended December 31, 2011 and 2010, respectively. 

Loans with carrying values totaling approximately $165,412,000 were pledged to secure borrowing arrangements at December 31, 2011 (see Note 9). 

