TABLE 8 - SUMMARY OF CHANGES IN NET INTEREST INCOME The following table analyzes the dollar amount of changes in interest income and interest expense for major components of earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by the prior period's volume), (ii) changes attributable to volume (changes in volume multiplied by the prior period's rate), (iii) mixed change (changes in rate multiplied by changes in volume) and (iv) total increase (decrease). The Federal Reserve Board reduced overnight rates by 50 basis points during 2002 and 475 basis points during 2001. The Company has not been significantly affected by changes in interest rates over an extended period of time. During the past year, the Company has shifted to a moderately liability sensitive position in the short-term. As a result, although rate reductions by the Federal Reserve Board did exert downward pressure on net interest income earlier in the year, this has moderated. The Company is most impacted at this time by the overall low level of rates and ability to reduce transaction and limited-transaction deposit account rates further. The Company is also experiencing a higher than anticipated level of premium amortization on mortgage related investment securities as a result of prepayment speeds associated with the current refinancing market. Downward repricing of the maturing certificate of deposit portfolio in the current low rate environment, which has allowed the Company to significantly reduce funding costs, offsets these factors. It is believed that any potential run off in this category as a result of lowered rates will not adversely impact funding needs of the Company. Additionally, the improved mix of earning assets and interest-bearing liabilities also serve to improve net interest income. PROVISION FOR LOAN LOSSES -  Provisions for loan losses are charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on various factors as they relate to the collectability of the Company’s loan portfolio. Management of the Company assesses the allowance for loan losses on a quarterly basis and will make provisions for loan losses as deemed appropriate in order to maintain the adequacy of the allowance for loan losses. Provisions for loan losses are charged against income. 2002 / 2001 2001 / 2000 Change Attributable To Change Attributable To Total Total Rate/ Increase Rate/ Increase (dollars in thousands) Volume Rate Volume (Decrease) Volume Rate Volume (Decrease) Earning assets: Loans: Mortgage loans $(4,358)$ (794)$ 174  $ (4,978) $(2,791)$ (5) $ 1  $(2,795) Commercial loans 6,376 (5,615)(1,495) (734) 3,516 (3,795)(539)(818) Consumer and other loans 377 (2,748)(29) (2,400) 3,166  302  30  3,498 Loans held for sale (225)(142) 47 (320) 692 (34)(143)515 Investment securities 2,105 (4,134)(488)(2,517) (4,586)(1,398) 272 (5,712) Other earning assets (1,205)(1,239) 577 (1,867) 4,016 (412)(1,890)1,714 Total net change in income on earning assets 3,070 (14,672)(1,214)(12,816) 4,013 (5,342)(2,269)(3,598) Interest-bearing liabilities: Deposits: NOW accounts 839 (1,013)(244) (418) 556 (551)(86)(81) Savings and money market accounts 742 (3,819)(364)(3,441) 1,381 (2,134)(332) (1,085) Certificates of deposit (4,018)(11,138) 1,450 (13,706) (184)(1,095) 6 (1,273) Borrowings 1,183 (1,287)(391) (495) (4,112)(325) 164 (4,273) Total net change in expense on interest-bearing liabilities (1,254)(17,257) 451 (18,060) (2,359)(4,105) (248)(6,712) Change in net interest income $ 4,324 $ 2,585 $(1,665)$ 5,244 $ 6,372 $(1,237)$(2,021)$ 3,114 28