First BanCorp.> 2001 0 30 Total interest income includes tax equivalent adjustments of $27 million, $11 million and $14 million for 2001, 2000, and 1999, respectively. On a tax equivalent basis, net interest income increased to $263 million for 2001 from $201 million for 2000, and $200 million for 1999. The interest rate spread and net interest margin amounted to 3.64% and 4.08%, respective- ly, for 2001, as compared to 3.38% and 3.91%, respectively, for 2000 and to 4.29% and 4.85%, respectively, for 1999. On a tax equivalent basis interest income increased by $70 million for 2001 as compared to 2000. On a tax equivalent basis the yield on earning assets was 8.42% for 2001 as compared to 9.21% for 2000. The increase in inter- est income results from the growth in the average volume of interest earn- ing assets of $1,307 million in 2001, partially offset by a lower yield due to lower market rates. On a rate/volume basis, the increase of $62 million in net interest income (on a tax equivalent basis) is the result of a positive volume variance of $42 million, plus a positive rate variance of $20 million. During the year 2001 short term rates fell 475 basis points due to repeat- ed interest rate cuts by the Federal Reserve Bank. Long term rates fell by less than 50 basis points, increasing the spread between short and long yields and increasing the Corporation’s interest rate spread and net inter- est margin. For the loan portfolio, the growth in 2001 of $374 million in the average volume of commercial loans (including commercial real estate loans) rep- resented an increase of $31 million in interest income due to volume, and a decrease of $22 million in interest income due to rate. The average port- folio of construction loans increased by $51 million for 2001, representing a positive volume variance of $5 million and a negative rate variance of $6 million. The average portfolio of residential mortgage loans increased by $296 million for 2001, representing a positive volume variance of $24 mil- lion and a negative rate variance of $7 million. The average finance lease portfolio (mostly composed of consumer loans) increased by $25 million in 2001, representing a positive volume variance of $3 million. The increase of $11 million in the average volume of consumer loans in 2001, repre- sented a positive variance in interest income due to volume of $2 million 2001 compared to 2000 Part II 2001 compared to 2000 2000 compared to 1999 Increase (decrease) Increase (decrease) Due to: Due to: Volume Rate Total Volume Rate Total (In thousands) Earning assets: Money market instruments $ 1,646 $ (697 $ 949 $ (661 $ 738 $ 77 Government obligations 3,878 (3,966 (88 7,413 3,633 11,046 Mortgage backed securities 18,437 7,246 25,683 11,410 (3,152 8,258 Corporate bonds 16,803 61 16,864 2,742 26 2,768 FHLB stock 246 (206 40 128 20 148 Total investments 41,010 2,438 43,448 21,032 1,265 22,297 Consumer loans 1,505 (2,090 (585 1,678 827 2,505 Residential real estate loans 23,778 (7,397 16,381 22,085 (3,724 18,361 Construction loans  4,729 (5,657 (928 7,915 1,120 9,035 Commercial loans 30,796 (21,737 9,059 33,172 1,757 34,929 Finance leases 2,920 (758 2,162 4,380 (961 3,419 Total loans 63,728 (37,639 26,089 69,230 (981 68,249 Total interest income 104,738 (35,201 69,537 90,262 284 90,546 Interest bearing liabilities: Deposits 36,152 (28,677 7,475 44,546 18,248 62,794 Other borrowed funds 15,454 (24,726 (9,272 6,881 16,879 23,760 FHLB advances 11,476 (2,092 9,384 2,664 66 2,730 Total interest expense 63,082 (55,495 7,587 54,091 35,193 89,284 Change in net interest income $41,656 $20,294 $61,950 $36,171 $(34,909 $ 1,262 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )