NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (table dollar amounts in thousands, except share data) NOTE 5 LOANS AND ALLOWANCE continued Nonaccruing loans are loans which are reclassified to a nonaccruing status when in management’s judgment the collateral value and financial condition of the borrower do not justify accruing interest. Interest previously recorded, but not deemed collectible, is reversed and charged against current income. Interest income on these loans is then recognized when collected. Restructured loans are loans for which the contractual interest rate has been reduced or other concessions are granted to the borrower, because of a deterioration in the financial condition of the borrower resulting in the inability of the borrower to meet the original contractual terms of the loans. Information on impaired loans is summarized below: 2003 2002 2001 ===================================================================================================================== As of, and for the year ending December 31: Impaired loans with an allowance .......................... $12,725 $16,901 $10,381 Impaired loans for which the discounted cash flows or collateral value exceeds the carrying value of the loan ............................ 32,047 27,450 10,780 ------- ------- ------- Total impaired loans ............................... $44,772 $44,351 $21,161 ======= ======= ======= Total impaired loans as a percent of total loans ........................................ 1.90% 2.19% 1.56% Allowance for impaired loans (included in the Corporation's allowance for loan losses) .............. $ 5,728 $ 7,299 $ 3,251 Average balance of impaired loans ......................... 50,245 49,663 22,327 Interest income recognized on impaired loans .............. 3,259 3,656 1,538 Cash basis interest included above ........................ 2,714 2,344 1,555 2003 2002 ================================================================================ Cost at December 31: Land .......................................... $ 7,463 $ 6,473 Buildings and leasehold improvements .......... 40,308 39,768 Equipment ..................................... 38,777 34,898 -------- -------- Total cost ................................ 86,548 81,139 Accumulated depreciation and amortization ..... (46,909) (42,494) -------- -------- Net ....................................... $ 39,639 $ 38,645 ======== ======== ==================================================== 2004 ................................ $1,563 2005 ................................ 1,447 2006 ................................ 1,327 2007 ................................ 1,112 2008 ................................ 916 After 2008 ........................... 3,255 ------ Total future minimum obligations $9,620 ====== 39 The Corporation is committed under various noncancelable lease contracts for certain subsidiary office facilities. Total lease expense for 2003, 2002 and 2001 was $1,629,000, $1,027,000, and $771,000, respectively. The future minimum rental commitments required under the operating leases in effect at December 31, 2003, expiring at various dates through the year 2013 are as follows for the years ending December 31: NOTE 6 PREMISES AND EQUIPMENT