Another approach used by management to analyze interest rate risk is to periodically evaluate the “shock” to the base 12 month projected net interest income of an assumed instantaneous decrease and increase in rates of 1% and 2% using computer simulation. Table 15 shows this analysis at December 31, 2005 and December 31, 2004. The computer simulation model used to do the interest rate shocks and calculate the effect on projected net interest income takes into consideration maturity and repricing schedules of the various assets and liabilities as well as call provisions on the Company’s securities. Current policy set by the Board of Directors limits exposure to net interest income from interest rate shocks of plus or minus 2% to plus or minus 10% of the base projected 12 month net interest income.

At December 31, 2005 the forecasted 2006 net interest

Several ways the Company can manage interest rate risk include: selling existing assets or repaying certain liabilities and matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or securities. At present, the maturity terms of securities can only be shortened by selling the securities at a loss. In 2007 a majority of the Company’s investment securities portfolio matures and the Company has the opportunity at that time to restructure its securities portfolio to decrease the negative gap position it currently possesses. Financial institutions are also subject to prepayment risk in a falling rate environment. For example, a debtor may prepay financial assets so that the debtor may refinance obligations at new, lower rates. Prepayments of assets carrying higher rates reduce the Company’s interest income and overall asset yields.