Provision for Loan Losses >. 0 32 First BanCorp.> 2001 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. 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: 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. Year ended December 31, 2001  2000 1999 1998 1997 (Dollars in thousands)  Allowance for loan losses, beginning of year $76,919 $71,784 $67,854 $57,712 $55,254 Provision for loan losses 61,030 45,719 47,960 76,000 55,675 Loans charged off: Residential real state (192 Commercial (9,523 (3,463 (825 (880 (881 Finance leases (2,316 (2,145 (793 (3,438 (1,399 Consumer (42,349 (46,223 (52,047 (67,906 (57,311 Recoveries 7,391 9,807 9,048 6,034 6,374 Net charge offs (46,989 (42,024 (44,617 (66,190 (53,217 Other adjustments 100 1,440 587 332 Allowance for loan losses, end of year $91,060 $76,919 $71,784 $67,854 $57,712 Allowance for loan losses to year end total loans and loans held for sale 2.11% 2.20% 2.61% 3.20% 2.95% Net charge offs to average loans  outstanding during the period  1.22% 1.36% 1.90% 3.31% 2.79% ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )