Strength and Stability - SNL Financial

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Financial Condition (Continued)
Non-Performing Loans (Continued)
the weakened financial condition of the borrower. 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.
Non-performing loans are closely monitored on an ongoing basis as part of our loan review and work-out process.
The potential risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any
underlying collateral or the present value of projected future cash flows. Losses are recognized where appropriate.
Following is a summary of non-performing loans at December 31:
2008 2007
(dollars in thousands)
Nonaccrual loans .................................................. $55,922 $54,119
Troubled debt restructured loans ...................................... 132 147
Total non-performing loans ...................................... $56,054 $54,266
Loans past due in excess of 90 days and still accruing ..................... $16,189 $12,853
Non-performing loans increased $1.8 million, or 3.3%, to $56.1 million at December 31, 2008 compared to $54.3
million at December 31, 2007. Included in nonaccrual loans is a $31.2 million commercial credit relationship that
has been monitored since the second quarter of 2006 and was placed on nonaccrual during the second quarter of
2007. This credit is collateralized by real estate and equipment and a reserve has been allocated, primarily during
2006, to cover the expected losses. The payment of principal and interest on this credit was deferred pursuant to
two loan forbearance agreements, with the most recent agreement expiring December 31, 2008. Since the
expiration of the forbearance agreement we have not received any interest or principal payments. Management
continues to monitor the borrower closely and is presently evaluating options with respect to the collection or
resolution of this credit.
The following is a comparison of non-performing and impaired assets and the effects on interest due to
nonaccrual loans at December 31:
Non-performing and Impaired Assets and Effects
on Interest Income Due to Nonaccrual
(dollars in thousands)
2008 2007 2006 2005 2004
Nonaccrual loans .................................. $55,922 $54,119 $12,043 $11,391 $10,732
Troubled debt restructured loans ...................... 132 147 160 173 183
Total non-performing loans .......................... $56,054 $54,266 $12,203 $11,564 $10,915
Non-performing loans as a percentage of total loans ....... 1.27% 1.47% 0.32% 0.32% 0.31%
Allowance as a percentage of non-performing loans ....... 94.12% 78.13% 349.49% 341.51% 376.21%
Other real estate owned ............................. $ 3,262 $ 2,172 $ 1,507 $ 1,655 $ 1,814
Gross income that would have been recorded at original
rates .......................................... $ 6,265 $ 4,124 $ 3,246 $ 2,344 $ 1,757
Interest that was reflected in income ................... 550 381 706 506 307
Net reduction to interest income due to nonaccrual ........ $ 5,715 $ 3,743 $ 2,540 $ 1,838 $ 1,450
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