FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES Other than those described below, there are no material credits that management has serious doubts as to the borrower’s ability to comply with the present loan repayment terms. The following table identifies nonperforming loans at December 31. A loan is placed in a nonaccrual status at the time when ultimate collectibility of principal or interest, wholly or partially, is in doubt. Past due loans are those loans which were contractually past due 90 days or more as to interest or principal payments but are well secured and in the process of collection. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower. Nonperforming and Impaired Assets and Effect on Interest Income Due to Nonaccrual (Dollar Amounts in Thousands) 2002  2001 2000 1999 1998 Loans on nonaccrual basis $23,450 $22,899 $10,698 $12,765 $ 9,677 Past due loans  14,774  17,781  22,086  15,815  15,780 Renegotiated loans 207 832 2,263 62 64 Total nonperforming loans $38,431 $41,512 $35,047 $28,642 $ 25,521 Nonperforming loans as a percentage of total loans 1.47% 1.62% 1.41% 1.15% 1.07% Allowance as percentage of nonperforming loans  89.76%  82.28%  95.87% 117.10% 126.58% Other real estate owned $ 1,651 $ 1,619 $ 1,661 $ 1,707 $ 2,370 Gross income that would have been recorded at original rates $ 1,542 $ 1,422 $ 750 $ 724 $ 961 Interest that was reflected in income 286 750 333 458  286 Net reduction to interest income due to nonaccrual $ 1,256 $ 672 $ 417 $  266 $  675 The reduction of income due to renegotiated loans was less than $50 thousand in any year presented. down from the 1.62% reported at December 31, 2001. Nonperforming loan levels at December 31, 2002 decreased $3.1 million compared to 2001 levels as decreases in past due loans and renegotiated loans were slightly offset by an increase in nonaccrual loans. Nonaccrual loans include two significant credits in both periods. The largest credit ($6.2 million) carries an 80% guaranty of U.S. government agency. While approximately $2.9 million is expected to be collected in the second quarter of 2003 as a sale of the underlying assets is pending, the remaining balance should be resolved early in the third quarter of 2003. The second credit, which was $5.9 million at year-end 2001, continues to be resolved through the liquidation of collateral and exercising other remedies. The balance outstanding at December 31, 2002 for this credit was $3.2 million. While the final resolution of this credit is uncertain, management’s estimate of the potential loss on this credit is reserved. Past due loans for the 2002 period decreased $3.0 million compared to the corresponding period of 2001 and included decreases in all major categories including loans secured by residential real estate (down $814 thousand), commercial real estate (down $999 thousand) and other loans (down $865 thousand). Renegotiated loans also fell, decreasing by $625 thousand for the 2002 period. Nonperforming loans as a percentage of total loans was 1.47% at December 31, 2002, The Corporation’s loan portfolio continues to be monitored by senior management to identify potential portfolio risks and detect potential credit deterioration in the early stages. The Corporation has a “Watchlist Committee” which includes credit workout officers of the bank and meets bi- weekly to review watchlist credits for workout progress or deterioration. Loan loss adequacy and the status of significant nonperforming credits are monitored on a quarterly basis by a committee made up of senior officers of the bank and parent company. These committees were established to provide additional internal monitoring and analysis in addition to that provided by the Credit Committees of the bank and parent company. Credit risk is mitigated during the loan origination process through the use of sound underwriting policies and collateral requirements and its previously described committee structure. Management also attempts to minimize loan losses by analyzing and modifying collection techniques on a periodic basis. Management believes that the allowance for credit losses and nonperforming loans remained safely within acceptable levels. Equity capital stood at $401.4 million at December 31, 2002, a $31.3 million rise compared to December 31, 2001. Dividends declared reduced equity by $35.6 million during Capital Resources 53 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS