The CompanyGLYPH<213>s lending activities are conducted in eastern, central, western, southern and mid-coast Maine. The Company makes single family and multi-family residential loans, commercial real estate loans, business loans and a variety of consumer loans. In addition, the Company makes loans for the construction of residential homes, multi-family properties and commercial real estate properties. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the geographic area and the general economy. The Company sold fixed-rate residential mortgage loans on the secondary market, which resulted in net gains on the sale of loans  of $97,000, $78,000, and $48,000 for the years ended December 31, 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, nonaccrual loans were $8,300,000 and $7,022,000, respectively. Interest foregone was approximately $546,000, $505,000 and $528,000 for 2002, 2001 and 2000, respectively. Changes in the allowance for loan losses were as follows: As part of a balance sheet management program, the Company securitized with Freddie Mac $16.7 million and $57.0 million of residential mortgage loans during 2002 and 2001, respectively. These transactions resulted in the Company’s loan balances decreasing, as those assets shifted to investment securities. The Company will receive annual servicing fees as compensation for servicing the outstanding balances. The Company has no retained interests in the securitized residential mortgage loans. In addition, $208,960 and $677,300 of mortgage servicing rights associated with the transactions were recognized in income during 2002 and 2001, respectively. The Company did not securitize any loans during 2000. Residential real estate mortgages are originated by the Company both for portfolio and for sale into the secondary market. The sale of loans is to institutional investors such as Freddie Mac. Under loan sale and servicing agreements with the investor, the Company generally continues to service the residential real estate mortgages. The Company pays the investor an agreed-upon rate on the loan, which is less than the interest rate the Company receives from the borrower. The Company retains the difference as a fee for servicing the residential real estate mortgages. As required by SFAS No. 140, the Company capitalizes mortgage servicing rights at 9. SECURITIZATION OF MORTGAGE LOANS 10. MORTGAGE SERVICING 8. ALLOWANCE FOR LOAN LOSSES 52 Camden National Corporation and Subsidiaries 13. DEPOSITS 12. OTHER REAL ESTATE OWNED 11. PREMISES AND EQUIPMENT their fair value upon sale of the related loans. Capitalized servicing rights totaled $643,000, $829,000 and $107,000 during 2002, 2001 and 2000, respectively. Amortization expense totaled $523,000, $217,000 and $32,000 for 2002, 2001 and 2000, respectively.  Mortgage loans serviced for others are not included in the accompanying Consolidated Statements of Condition of the Company. The unpaid principal balance of mortgage loans serviced for others was $154,084,000, $147,232,000 and $111,002,000 at December 31, 2002, 2001 and 2000, respectively. Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits, were $347,000 and $341,000 at December 31, 2002 and 2001, respectively. Details of premises and equipment, at cost, at December 31 were as follows: Depreciation expense was $1,684,000, $1,719,000 and $1,529,000 for 2002, 2001 and 2000, respectively. The aggregate amount of certificates of deposit, each with a minimum denomination of $100,000, was approximately $80,311,000 and $63,451,000 at December 31, 2002 and 2001, respectively. Certificates of deposit included brokered deposits in the amount of $56,754,000 and $46,196,000 at December 31, 2002 and 2001, respectively. At December 31, 2002, the scheduled maturities of certificates of deposit were as follows: Information regarding impaired loans is as follows: DECEMBER 31, 2002 2001 2000 Beginning balance $13,514 $10,801 $ 9,390 Provision for loan losses 3,080 3,681 2,930 Recoveries 738 581 626 Loans charged off (2,090)  (1,549)  (2,145) Net charge offs (1,352) (968)  (1,519) Ending balance $15,242 $13,514 $10,801 DECEMBER 31, 2002 2001 2000 Average investment in impaired loans $7,698 $6,030 $5,871 Interest income recognized on impaired loans, all on cash basis 341 330 241 Balance of impaired loans 8,300 7,022 4,644 Portion of impaired loan balance for which an allowance for credit losses is allocated 8,300 7,022 4,644 Portion of allowance for loan losses allocated to the impaired loan balance 1,824 1,862 860 2003 $173,951 2004 97,870 2005 55,068 2006 7,491 2007 17,713 Thereafter  17,913 $370,006 Camden National Corporation and Subsidiaries 53 The transactions in other real estate owned for the years ended December 31 were as follows: 2002 2001 2000 Beginning balance $195 $380 $1,405 Additions 492 371 302 Properties sold 104 554 1,180 Writedowns 93 2 147 Ending balance $490 $195 $ 380 2002 2001 Land and buildings $15,352 $15,857 Furniture, fixtures and equipment 15,951 15,151 Leasehold improvements 1,260 1,222 32,563 32,230  Less: Accumulated depreciation and amortization  15,853  14,793 $16,710 $17,437