The Corporation holds a $2.0 million subordinated corporate bond issued by Lehman Brothers Holdings ("Lehman"). On September 15, 2008, Lehman declared bankruptcy resulting in a significant decline in the market value of the Lehman bond below cost. Management of the Corporation has deemed the decline to be other-than-temporary and, accordingly, expects to recognize a non-cash other-than-temporary impairment charge to earnings. The amount of the impairment charge will not be determined until the end of the third quarter. As of September 22, 2008, this charge would have been approximately $1.3 million, net of tax.   

The additional charges relate to the Corporation's holdings of preferred stock issuances of the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). On September 7, 2008, the U.S. Treasury Department and the Federal Housing Finance Agency announced a plan to place Fannie Mae and Freddie Mac under conservatorship.

The Corporation currently holds 38,734 shares of Series F preferred stock issued by Fannie Mae and 30,000 shares of Series Q preferred stock issued by Freddie Mac. On January 1, 2008, the Corporation adopted Financial Accounting Standards Board Statement No. 159 in relation to these securities as well as its investments in other equity securities which are traded on a national stock exchange. As a result, the Corporation marks these equity securities to fair value on a quarterly basis with corresponding gains or losses running through earnings. As of June 30, 2008, the Corporation's current holdings in Fannie Mae and Freddie Mac had a combined fair market value of approximately $1.9 million. Due to the significant decline in the fair value of these securities since June 30, 2008, the Corporation expects to take a non-cash charge of approximately $1.1 million, net of tax, for the quarter ended September 30, 2008.