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2001 and $71.9 million in 2000. These increases were primarily due to growth in the volume of earning assets, and
for 2002, an improved net interest margin.  Average earning assets were $1.748 billion in 2002, as compared to
$1.653 billion in 2001 and $1.538 billion in 2000.  The 2002 increase in average earning assets is attributable to
higher average investment securities we held, which increased $72.3 million, and higher average loans we made,
which increased $44.5 million.  These increases were partially offset by a $22.4 million decrease in the 2002
average of short-term investments, which consist of primarily Federal funds sold. The 2001 increase in average
earning assets was due primarily to an increase in average short-term investments, which increased $28.9 million,
and higher average loans, which increased $80.0 million. Table 1 allocates the increases in tax-equivalent net
interest income for 2002 and 2001 between the amount of increase attributable to volume and rate.
Table 1 — Changes in Interest Income and Interest Expense (in thousands):
2002 Compared to 2001 2001 Compared to 2000
Change Attributable to Change Attributable to
Volume Rate
Total
Change Volume Rate
Total
Change
Short-term investments............................ $ (905) $ (1,359) $ (2,264) $ 1,799 $ (1,736) $ 63
Taxable investment securities.................. 3,394 (3,300) 94 (233) (1,154) (1,387)
Tax-exempt investment securities (1) ..... 1,032 241 1,273 707 106 813
Loans (1)...................................................             3,720         (13,911)         (10,191)          7,404         (7,993)             (589)
Interest income .................................. 7,241 (18,329) (11,088) 9,678 (10,778) (1,100)
Interest-bearing deposits.......................... 1,169 (21,052) (19,883) 2,688 (6,455) (3,767)
Short-term borrowings.............................                 (26)               (545)               (571)             481            (709)             (228)
Interest expense.................................             1,143         (21,597)         (20,454)          3,169         (7,164)          (3,995)
Net interest income ........................... $          6,098 $          3,268 $          9,366 $       6,508 $      (3,613) $        2,895
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(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 35%.
The net interest margin, which measures tax-equivalent net interest income as a percentage of average earning
assets, is illustrated below in Table 2 for the years 2000 through 2002. As the prime rate declined from 9.50% to
4.75% in 2001, our earning assets re-priced in advance of interest bearing deposits, which resulted in a lower net
interest margin. As we re-priced our interest bearing deposits in 2002, the net interest margin improved to 4.82% as
compared to 4.52% for 2001.