Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements. 23 (Dollars in thousands)  Year Ended December 31, _______________________________ 2010 2009 ___________ ___________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................................................................................. $ 5,179 $ 2,488 ___________ __________ Adjustments to reconcile net income to net cash provided by operating activities: Origination of loans for sale ................................................................................................ (34,846) (49,670) Sale of loans originated for sale............................................................................................ 36,303 49,449 Depreciation and amortization, net of accretion.................................................................. 2,034 1,457 Deferred tax benefit ............................................................................................................ (988) (454) Impairment of land held for future expansion ..................................................................... 190 – . Amortization of mortgage servicing rights ........................................................................... 113 144 Equity in loss on investment in limited partnership, net of interest received........................ 151 151. Stock-based compensation expense ..................................................................................... 36 40 Net gains on sales and calls of securities .............................................................................. (913) (736) Net gains on sale of loans .................................................................................................... (1,263) (1,139) Net losses due to other-than-temporary impairment of securities ........................................ 128 136 Net losses on foreclosed real estate ...................................................................................... 381 161 Provision for loan losses ...................................................................................................... 5,570 8,540 Net change in: Interest receivable............................................................................................................ 287 282 Other assets..................................................................................................................... 1,459 (4,485) Cash value of bank owned life insurance ......................................................................... (403) (407) Accrued expenses and other liabilities.............................................................................. 1,063 (4,710) ___________ __________ Total adjustments ........................................................................................................ 9,302 (1,241) ___________ __________ Net cash – operating activities ..................................................................................... 14,481 1,247 ___________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities and paydowns of securities available-for-sale.................................... 33,376 21,178 Proceeds from sales of securities available-for-sale.................................................................... 18,951 29,933 Purchase of securities available-for-sale.................................................................................... (69,832) (64,566) Purchase of securities held-to-maturity.................................................................................... – (3,860) Proceeds from maturities and paydowns of securities held-to-maturity.................................... 1,135 2,790 Proceeds from sale of loans transferred to held-for-sale............................................................ 5,356.. 10,651. ... Loan participations purchased................................................................................................. (967) – Net change in loans receivable................................................................................................. 29,368 8,744 . Proceeds from sale of Federal Home Loan Bank stock............................................................. 269 – .. Purchase of premises and equipment, net................................................................................ (1,702) (1,929) Proceeds from sale of foreclosed real estate, net ....................................................................... 3,990 390 ___________ __________ Net cash – investing activities ............................................................................................. 19,944 3,331 ___________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Change in deposits.................................................................................................................. (20,256) 12,379 Proceeds from FHLB advances................................................................................................ 13,000 8,000 Repayment of FHLB advances ................................................................................................ (22,000) (16,000) Change in other borrowed funds............................................................................................. (5,404) (3,773) Proceeds from issuance of common stock................................................................................ – 6 Proceeds from sale of treasury stock ........................................................................................ 151 141 Dividends paid........................................................................................................................ (2,200) (3,405) ___________ __________ Net cash – financing activities............................................................................................. (36,709) (2,652) ___________ __________ Net change in cash and cash equivalents ............................................................................. (2,284) 1,926 Cash and cash equivalents at beginning of period.................................................................... 13,222 11,296 ___________ __________ Cash and cash equivalents at end of period ............................................................................. $ 10,938 $ 13,222 ___________ __________ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest................................................................................................................................ $ 5,058 $ 8,947 Income taxes ....................................................................................................................... $ 1,753 $ 990 SUPPLEMENTAL NONCASH INFORMATION: Transfers from loans to foreclosed real estate........................................................................... $ 3,922 $ 3,763 Transfers from loans to loans held-for-sale .............................................................................. $ 5,126 $ 10,497 Transfers from premises and equipment to other assets ........................................................... $ 340 $ –