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 are  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.  While the allowance for credit losses as a percentage of  average total loans outstanding increased from 1.33% in 2002  to 1.44% in 2003, the allowance for credit losses as a  percentage of actual loans outstanding remained at 1.32% for  both periods. The allowance as a percentage of average total  loans outstanding for 2003 was impacted by the inclusion of  BankPittsburgh loans since the acquisition. 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  was outstanding at the end of December 31, 2002. Interest  income on nonaccrual loans increased for 2003 due to final  resolution of several large credits that included collection of  some interest income. 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 $430.9 million at December 31, 2003, a  $29.6 million rise compared to December 31, 2002. Dividends  declared reduced equity by $37.2 million during 2003 as  The decrease in past due loans for the 2003 period included  decreases in all major categories with the most significant  decreases in loans secured by residential real estate (down $2.5 million), loans secured by commercial real estate (down  $607 thousand) and other commercial loans (down $839  thousand). The decrease in past due loans was due to  successful collection strategies. The renegotiated loan  category at December 31, 2003, included the one credit that  Nonperforming loan levels at December 31, 2003 decreased  $15.2 million compared to 2002 levels as nonaccrual loans  and past due loans decreased by $11.0 million and $4.2  million, respectively. The decrease in nonaccrual loans was  due to eight commercial loans that paid in full or were  charged down and/or charged off. The largest improvement  was related to a credit with a balance of $6.2 million at  December 31, 2002 and bearing an 80% guaranty of a U.S.  government agency. The credit was resolved in the fourth  quarter of 2003 without any additional charge-off being  recorded. A second credit, which was $3.2 million at year-end  2002, continues to be resolved through the liquidation of  collateral and exercising other remedies. The balance  outstanding at December 31, 2003 for this credit was $1.8  million, a decrease of $1.4 million from the prior year. While  the final resolution of this credit is uncertain, management’s  estimate of the potential loss on this credit is reserved. The reduction of income due to renegotiated loans was less  than $50 thousand in any year presented. Capital Resources 2003 2002  2001  2000  1999 Loans on nonaccrual basis  $ 12,459 $ 23,450  $ 22,899  $ 10,698  $ 12,765 Past due loans  10,586  14,774   17,781   22,086   15,815 Renegotiated loans  195 207  832  2,263  62 Total nonperforming loans  $ 23,240 $ 38,431  $ 41,512  $ 35,047  $ 28,642 Nonperforming loans as a percentage of total loans  0.82% 1.47%  1.62%  1.41%  1.15% Allowance as percentage of nonperforming loans  160.86% 89.76%  82.28%  95.87%   117.10% Other real estate owned  $ 1,866 $ 1,651  $ 1,619  $ 1,661  $ 1,707 Gross income that would have been recorded at original rates  $ 1,962 $ 1,542  $ 1,422  $  750  $  724 Interest that was reflected in income  1,185 286  750  333  458 Net reduction to interest income due to nonaccrual  $  777 $ 1,256  $  672  $  417  $  266 57 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES Nonperforming and Impaired Assets and Effect on Interest Income Due to Nonaccrual (Dollar Amounts in Thousands)