content_image/54635.jpg
ing liabilities of $1,007 million for 2000 as compared to 1999 which gener- ated a volume variance of $54 million, together with an increase in the cost of interest bearing liabilities from 5.00% for 1999 to 5.83% for 2000 which caused a rate variance of $35 million for 2000 as compared to 1999. 

## Provision for Loan Losses >. 

During 2001, the Corporation provided $61 million for loan losses, as compared to $46 million in 2000 and $48 million in 1999. The increase in the provision for loan losses was due to the growth of the total loan port- folio, to the increase in net charge offs of $5 million, and to current eco- nomic conditions. Net charge offs for 2001 amounted to $47 million, as compared to net charge offs for 2000 of $42 million, and of $45 million for 1999. The absolute dollar increase is attributable to a commercial loan written off during the first quarter of 2001. Net charge offs to average loans outstanding has improved to 1.22% as compared to 1.36% and 1.90% for 2000 and 1999, respectively. 

The allowance activity for 2001, and previous four years was as follows: 

<img src='content_image/54635.jpg'>

The Corporation maintains the allowance for loan losses at a level that Management considers adequate to absorb losses inherent in the loan portfolio. The adequacy of the allowance for loan losses is reviewed on a quarterly basis as part of the continuing evaluation of the quality of the assets.This evaluation is based upon a number of factors, including the fol- lowing: historical loan loss experience, projected loan losses, loan portfolio composition, current economic conditions, fair value of the underlying col- lateral, financial condition of the borrowers, and, as such, includes amounts based on judgments and estimates made by Management. 

The allowance for loan losses on commercial and real estate loans over $1 million is determined based on the present value of expected future cash flows or the fair value of the collateral, if the loan is collateral depend- ent. 

