Rate/Volume Analysis

The following schedule presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and that due to changes in interest rates. The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the later period. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.
Six Months Ended June 30,

2006 vs. 2005

Increase
(Decrease)
Due to

Volume Rate Total Increase
(Decrease)

(In thousands)
Interest-earning assets:
Loans receivable $ (1,526) $ 1,782 $ 256
Mortgage-backed securities 884 0 884
CMO's 934 174 1,108
Investment securities (142) 93 (49)
FHLB stock (13) 30 17
Interest earning deposit accounts 306 499 805
Other earning assets (98) 0 (98)
Total interest-earning assets $ 345 $ 2,578 2,923

Interest-bearing liabilities
Savings and money market $ (258) $ 2,324 2,066
Interest-bearing demand (17) 15 (2)
Time 841 751 1,592
Borrowings (136) (12) (148)
Total interest-bearing liabilities $ 430 $ 3,078 3,508
Net interest income $ (585)

The decrease in net interest income of $585,000, or 2.9%, for the current six-month period over the same period last year primarily resulted from a 2.6% increase in average total interest-earning assets to $1.4 million from $1.3 million for the comparable period in 2005. The net change in rate for average total interest-bearing liabilities was a greater increase than the change in rate for average total interest-earning assets. Average interest-bearing liabilities decreased 0.09% to $1.1 million in 2006 from $1.1 million for the same period last year. The yield on average interest-earning assets for the six-month period ended June 30, 2006 increased to 5.08% from 4.76% during the same period in 2005. The cost of average interest-bearing liabilities increased to 2.56% for the six-month period ended June 30, 2006 from 1.94% for the same six-month period in 2005. The net interest spread decreased to 2.52% for the six months ended June 30, 2006 from 2.82% from the same six month period in 2005.Because the Company's interest-bearing liabilities generally reprice or mature more quickly than its interest-earning assets, an increase in short term interest rates would initially result in a decrease in net interest income.