content_image/170509.jpg content_image/170510.jpg content_image/170511.jpg content_image/170512.jpg content_image/170515.jpg content_image/170514.jpg content_image/170513.jpg
## NOTE 4 - Loan Servicing 

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans at year end are as follows: 

<img src='content_image/170509.jpg'>

Custodial escrow balances maintained in connection with the foregoing loan servicing were approximately $601,000 and $596,000 at December 31, 2010 and 2009, respectively. 

Activity for capitalized mortgage servicing rights, was as follows: 

<img src='content_image/170510.jpg'>

At December 31, 2010 and 2009, there was no valuation allowance required. The fair value of mortgage servicing rights at December 31, 2010 and 2009 was $434,000 and $398,000, respectively. 

## NOTE 5 - Premises and Equipment, Net 

At year end, premises and equipment are summarized below: (Dollars in thousands) 

<img src='content_image/170511.jpg'>

Depreciation expense was $1,469,000 and $1,422,000 for 2010 and 2009. 

## NOTE 6 - Foreclosed Real Estate 

At year end, foreclosed real estate is summarized below: 

<img src='content_image/170512.jpg'>

## NOTE 7 - Income Taxes 

Components of the income tax expense (benefit) consist of the following: (Dollars in thousands) 

<img src='content_image/170515.jpg'>

Effective tax rates differ from the federal statutory rate of 34% applied to income before income taxes due to the following: (Dollars in thousands) 

<img src='content_image/170514.jpg'>

The components of the net deferred tax asset recorded in the consolidated balance sheets are as follows: 

<img src='content_image/170513.jpg'>

