NOTE 7 – LOAN SERVICING

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


	2012		2011
Mortgage loans serviced for Freddie Mac	$	10,433	$	13,086

Custodial escrow balances maintained in connection with serviced loans were $199 and $219 at year-end 2012 and 2011.

Activity for mortgage servicing rights and the related valuation allowance follows:


	2012			2011			2010
Servicing rights, net of valuation allowance:
Beginning of year	$	37		$	57		$	88
Additions		—			—			1
Amortized to expense		(9	)		(23	)		(31	)
Change in valuation allowance		1			3			(1	)

End of year		29			37			57

Valuation allowance:
Beginning of year	$	2		$	5		$	4
Additions expensed		—			—			1
Reductions credited to operations		(1	)		(3	)		—

End of year	$	1		$	2		$	5

The weighted average amortization period is 3.0 years.