FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands) NOTE 11— Loans (all domestic) Relationship to impaired loans: Loans at year end were divided among these general  categories: 2003 2002 2001 Recorded investment in  impaired loans at end  of period $ 12,654 $ 23,657 $ 23,731 Average balance of impaired  loans for the year $ 19,866 $ 24,740 $ 16,133 Allowance for credit losses  related to impaired loans $ 2,048 $ 5,204 $ 3,835 Impaired loans with an  allocation of the allowance  for credit losses $ 6,327 $ 15,065 $ 16,266 Impaired loans with no  allocation of the allowance  for credit losses $ 6,327 $ 8,592 $ 7,465 Income recorded on impaired  loans on a cash basis $ 1,185 $ 286 $ 750 December 31, 2003 2002 Commercial, financial,  agricultural and other $ 655,740  $ 633,955 Real estate loans: Construction and land development 27,063  20,998 1-4 family dwellings 821,159  739,018 Other real estate loans 771,861  663,220 Loans to individuals for household,  family and other personal expenditures 521,481 505,139 Leases, net of unearned income 28,033 47,110 Subtotal 2,825,337  2,609,440 Unearned income  (455) (806) Total loans and leases $ 2,824,882  $ 2,608,634 NOTE 13— Financial Guarantees Most of the Corporation’s business activity was with  customers located within Pennsylvania. The portfolio is well  diversified, and as of December 31, 2003 and 2002, there  were no significant concentrations of credit. The following table identifies the amount of nonperforming  loans as of December 31: The Corporation is a party to financial instruments with  off-balance sheet risk in the normal course of business to  meet the financial needs of its customers. These financial  instruments include commitments to extend credit, standby  letters of credit and commercial letters of credit. Those  instruments involve, to varying degrees, elements of credit  and interest rate risk in excess of the amount recognized  in the balance sheet. The contract or notional amount of  those instruments reflects the extent of involvement the  Corporation has in particular classes of financial instruments. As of December 31, 2003 and 2002, the Corporation did  not own or trade other financial instruments with significant  off-balance sheet risk including derivatives such as futures,  forwards, option contracts and the like, although such  instruments may be appropriate to use in the future to manage  interest rate risk. See NOTE 7 for a description of interest  rate swaps. The Corporation’s exposure to credit loss in the event of  nonperformance by the other party of the financial instrument  for commitments to extend credit, standby letters of credit  and commercial letters of credit written is represented  by the contract or notional amount of those instruments.  The Corporation uses the same credit policies in making  commitments and conditional obligations as it does for on- balance sheet instruments. The following table identifies the  notional amount of those instruments at December 31, 2003  and 2002: Description of changes: NOTE 12— Allowance for Credit Losses 2003 2002 Loans on nonaccrual basis $ 12,459 $ 23,450 Past due loans 10,586 14,774 Renegotiated loans 195 207 Total nonperforming loans $ 23,240 $ 38,431 2003 2002 2001 Allowance at January 1 $ 34,496 $ 34,157 $ 33,601 Additions: Recoveries of previously  charged off loans  1,705 2,048 1,281 Provisions charged to  operating expense  12,770 12,223 11,495 From acquisition  3,109 -0- -0- Deductions: Loans charged off 14,695 13,932 12,220 Allowance at December 31 $ 37,385 $ 34,496 $ 34,157 2003 2002 Financial instruments whose contract  amounts represent credit risk: Commitments to extend credit $ 620,403 $ 535,692 Standby letters of credit 28,836 32,301 Commercial letters of credit $ 328 $ 385 Commitments to extend credit are agreements to lend to a  customer as long as there is no violation of any condition  29