content_image/44589.jpg content_image/44598.jpg content_image/44599.jpg content_image/44588.jpg content_image/44600.jpg
## NOTE 11— Loans (all domestic) 

Loans at year end were divided among these general categories: 

<img src='content_image/44589.jpg'>

Most of the Corporation’s business activity was with customers located within Pennsylvania. The portfolio is well diversified, and as of December 31, 2003 and 2002, there were no significant concentrations of credit. 

The following table identifies the amount of nonperforming loans as of December 31: 

<img src='content_image/44598.jpg'>

## NOTE 12— Allowance for Credit Losses 

Description of changes: 

<img src='content_image/44599.jpg'>

## NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 

Relationship to impaired loans: 

<img src='content_image/44588.jpg'>

## NOTE 13— Financial Guarantees 

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amount of those instruments reflects the extent of involvement the Corporation has in particular classes of financial instruments. 

As of December 31, 2003 and 2002, the Corporation did not own or trade other financial instruments with significant off-balance sheet risk including derivatives such as futures, forwards, option contracts and the like, although such instruments may be appropriate to use in the future to manage interest rate risk. See NOTE 7 for a description of interest rate swaps. 

The Corporation’s exposure to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit, standby letters of credit and commercial letters of credit written is represented by the contract or notional amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on- balance sheet instruments. The following table identifies the notional amount of those instruments at December 31, 2003 and 2002: 

<img src='content_image/44600.jpg'>

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition 

## (Dollar Amounts in Thousands) 

