The Company reclassified, at fair value, approximately $16.4 million in available-for-sale mortgage-backed securities to the held-to-maturity category during the third quarter of 2012. No gains or losses were recognized at the time of reclassification. At September 30, 2012, mortgage-backed securities held-to-maturity, at amortized cost, were $15.8 million. Additionally, the Company purchased $9.8 million of tax-exempt municipal bonds, which are also classified as held-to-maturity. At September 30, 2012, total investment securities held-to-maturity were $25.6 million, compared to no investment securities held-to-maturity at September 30, 2011 and June 30, 2012.

Loans, excluding loans held-for-sale, totaled $799.4 million at September 30, 2012, an increase of 3% from $776.7 million at September 30, 2011, and remained relatively flat from $798.1 million at June 30, 2012. The loan portfolio remains well-diversified with commercial and industrial (“C&I”) loans accounting for 47% of the portfolio at September 30, 2012. Commercial and residential real estate loans accounted for 42% of the total loan portfolio, of which 52% were owner-occupied by businesses. Consumer and home equity loans accounted for 8% of total loans, and land and construction loans accounted for the remaining 3% of total loans at September 30, 2012.

The yield on the loan portfolio was 5.10% for the third quarter of 2012, compared to 5.29% for the same period in 2011, and 5.23% for the second quarter of 2012. The yield on the loan portfolio was 5.25% for the first nine months of 2012, compared to 5.30% for the same period in 2011. The decrease in the yield on the loan portfolio for the third quarter and first nine months of 2012, compared to prior periods, was primarily a result of lower rates on the loan renewals.

Nonperforming assets (“NPAs”) were $22.0 million, or 1.62% of total assets, at September 30, 2012, compared to $19.2 million, or 1.53% of total assets a year ago. At June 30, 2012, NPAs totaled $17.8 million or 1.35% of total assets. The increase in nonperforming loans and nonperforming assets at September 30, 2012 from comparable prior periods was primarily due to a commercial loan and two real estate loans advanced to one customer which were previously included in classified assets but have been moved to nonperforming assets. The current recorded investment of the loans is approximately $5.5 million. The following is a breakout of NPAs at September 30, 2012:
      Balance     % of Total
Commercial real estate loans $ 5,564 25 %
SBA loans 3,417 16 %
Commercial and industrial loans

24 %
Foreclosed assets 2,889 13 %
Land and construction loans 2,259 10 %
Restructured and loans over 90 days past due and accruing 1,722 8 %
Home equity and consumer loans   846 4 %

100 %

At September 30, 2012, the $22.0 million of NPAs included $1.2 million of loans guaranteed by the Small Business Administration (“SBA”) and $1.7 million of restructured loans still accruing interest income. Foreclosed assets were $2.9 million at September 30, 2012, compared to $1.2 million at September 30, 2011, and $3.1 million at June 30, 2012.

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