Management of the Company presently believes that its allowance for loan losses was adequate at December 31, 2002, based on facts and circumstances available, to cover any potential losses in the Company's loan portfolio. However, future adjustments to this allowance may be necessary, and the Company's results of operations could be adversely affected if circumstances differ substantially from the assumptions used by management in making its determinations in this regard. The following table presents the allocation of the allowance for loan losses to the total amount of loans in each category listed as of the dates indicated. TABLE 4 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES TABLE 5 - SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES December 31, (dollars in thousands) 2002  2001  2000  1999  1998  Commercial, financial  and agricultural $ 6,243 40% $ 5,066  36% $ 4,152  29% $3,484  29% $2,714  26% Real estate - mortgage 569  20  555  21  763  30  773  31  1,303  39  Real estate - construction 45  1 17  1  21  1  18  1  32  1  Loans to individuals 4,992  39  5,000  42  4,616  40  3,828  39  2,412  34  Unallocated 1,252 N/A 479  N/A 687  N/A 646  N/A 674  N/A Total allowance for loan losses  $13,101 100% $11,117  100% $10,239  100% $8,749  100% $7,135  100% Years Ended December 31, (dollars in thousands) 2002  2001  2000  1999  1998  Allowance at beginning of period $11,117  $10,239  $ 8,749  $7,135  $5,258  Allowance from acquisition – –  –  –  1,392  Provisions 6,197 5,046  3,861  2,836  903  Charge-offs: Commercial, financial and agricultural 1,331 1,861  1,174  140  43  Mortgage 60 15  37  71  2  Loans to individuals 3,391 2,797  1,654  1,460  818  Total charge-offs 4,782 4,673  2,865  1,671  863  Recoveries: Commercial, financial and agricultural 68 110  52  86  175  Mortgage 35 17  22  37  36  Loans to individuals 466 378  420  326  234  Total recoveries 569 505  494  449  445  Net charge-offs (4,213) (4,168)(2,371)(1,222) (418) Allowance at end of period $13,101  $11,117  $10,239  $8,749  $7,135  Allowance for loan losses to total loans at end of period 1.25% 1.16% 1.09% 1.04% 0.93% Net charge-offs to average loans 0.43% 0.44% 0.26% 0.15% 0.06% 23 The allowance for loan losses amounted to $13.1 million, or 1.25% and 301.6% of total loans and total nonperforming loans, respectively, at December 31, 2002 compared to 1.16% and 159.9%, respectively, at December 31, 2001. The allowance for loan losses increased $2.0 million, or 17.8%, from $11.1 million at December 31, 2001. The increase included a $6.2 million provision for loan losses. On a percentage basis, net charge-offs for 2002 were 0.43% of total average loans, down from 0.44% in 2001. The Company believes this level of net charge-offs was more favorable than that of peer institutions with assets in the $1 to $10 billion range based on data published by the FFIEC. The following table sets forth the activity in the Company’s allowance for loan losses during the periods indicated.