The following table describes the allocation of the allowance for loan losses among various categories of loans and certain other information for the dates indicated. Portions of the allowance for loan losses are allocated to cover the estimated losses inherent in particular risk categories of loans. The allocation of the allowance for loan losses is based upon the Company’s loss experience over a period of years and is adjusted for subjective factors such as economic trends, performance trends, portfolio age and concentrations of credit. Prior year allocations have been restated to conform to this methodology. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future loan losses may occur. The total allowance is available to absorb losses from any segment of loans.

Nonperforming Assets and Impaired Loans

The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory. All loans past due 90 days are placed on nonaccrual status, unless the loan is both well collateralized and in the process of collection. Cash payments received while a loan is classified as nonaccrual are recorded as a reduction of principal as long as doubt exists as to collection. The Company is sometimes required to revise a loan ’ interest rate or repayment terms in a troubled debt restructuring.

Nonperforming assets were $9.9 million at December 31, 2000, compared with $6.2 million at December 31, 1999 and $5.1 million at December 31, 1998. This resulted in a ratio of nonperforming assets to loans plus other real estate of 0.41% , 0.31% , and 0.31% for the years ended 2000, 1999, and 1998, respectively. Nonaccrual loans, the largest component of nonperforming assets, were $8.3 million at December 31, 2000, an increase of $5.8 million from $2.5 million at December 31, 1999. This increase is primarily due to the addition of two loans—$5.1 million secured relationship which is expected to be a long term workout and a $1.1 million loan secured by three houses which are expected to be sold in the near term.