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## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

## Average Balance Sheets and Net Interest Analysis 

## (Dollar Amounts in Thousands) 

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(a) Yields on interest-earning assets have been computed on a tax equivalent basis using the 35% Federal income tax statutory rate. 

(b) Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets. 

(c) Loan income includes net loan fees. 

(d) Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits which were made for regulatory purposes. 

