FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows the effect of changes in volumes and rates on interest income and interest expense: Analysis of Year-to-Year Changes in Net Interest Income (Dollar Amounts in Thousands) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances due to interest sensitivity of  consolidated assets and liabilities. The provision for credit losses is an amount added to the  allowance against which credit losses are charged. The amount  of the provision is determined by management based upon its  assessment of the size and quality of the loan portfolio and the  adequacy of the allowance in relation to the risks inherent  within the loan portfolio. The provision for credit losses was  $12.8 million in 2003 compared to $12.2 million in 2002 and  $11.5 million in 2001. The allowance for credit losses was  $37.4 million at December 31, 2003, which represents a ratio  of 1.42% of average loans outstanding, slightly up from the  1.33% reported at December 31, 2002.  were increases in net charge-offs in the following categories:  commercial loans not secured by real estate (up $579 thousand), loans secured by 1-4 family real estate (up $1.1  million) and construction loans (up $381 thousand). These  increases in net charge-offs were partially offset by decreases  in commercial real estate loans of $204 thousand, loans to  individuals of $683 thousand and lease financing receivables of  $103 thousand. Net charge-offs as a percent of average loans  outstanding at December 31, 2003 were 0.49% compared to  0.46% and 0.43% at December 31, 2002 and 2001, respec- tively. For an analysis of credit quality, see the “Credit Review”  section of this discussion. Net charge-offs for 2003 rose $1.1 million over 2002 levels.  The most significant components of this year-to-year change  The following table presents an analysis of the consolidated  allowance for credit losses for the five years ended December 31, 2003:  47 2003 Change from 2002 2002 Change from 2001 Total Change Due Change Due Total Change Due Change Due Change  to Volume  to Rate Change  to Volume  to Rate Interest-earning assets: Time deposits with banks  $  (18)  $  (9)  $  (9) $  (39)  $  (2)  $  (37) Securities  (16,315)  8,367  (24,682)  (10,526)   (1,950)  (8,576) Federal funds sold  (2)  -0-  (2) (486)  (473)  (13) Loans  (15,460)  3,070  (18,530)  (22,272)  3,995   (26,267) Total interest income  (31,795)  11,428  (43,223)  (33,323)  1,570   (34,893) Interest-bearing liabilities: Deposits  (18,472)  (1,622)  (16,850)  (39,593)   (5,925)   (33,668) Short-term borrowings  726  3,799  (3,073) (5,198)  1,486  (6,684) Long-term debt (4,686)  (4,310)  (376)  294  410  (116) Total interest expense  (22,432)  (2,133) (20,299)  (44,497)   (4,029)   (40,468) Net interest income  $  (9,363)  $ 13,561  $ (22,924) $ 11,174  $ 5,599  $ 5,575 Provision for Credit Losses