FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands, except per share data) Earnings Per Common Share New Accounting Pronouncements Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders less unallocated ESOP shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For all periods presented the dilutive effect on average shares outstanding is the result of compensatory stock options outstanding. In September 2000, the FASB issued statement No. 140, “ Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities”  (“ FAS No. 140” ) which replaces FASB Statement No. 125 (“ FAS No. 125” ), issued in June 1996. FAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of the provisions of FAS No. 125. The statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. FAS No. 140 is effective for transfers occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for years ending after December 15, 2000. Implementation of FAS No. 140 did not have a material impact on the Corporation’ s financial condition or results of operations. In July 2001, the FASB issued statement No. 141, “ Business Combinations”  (“ FAS No. 141” ) which supersedes APB Opinion No. 16 “ Business Combinations”  (“ Opinion No. 16” ) but carries forward the guidance in Opinion No. 16 related to the application of the purchase method of accounting. FAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of interest method. FAS No. 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Intangible assets are recognized as assets apart from goodwill if the asset arises from contractual or other legal rights or the asset is capable of being separated from the acquired entity and sold or exchanged. In addition to the disclosure requirements in Opinion No. 16, FAS No. 141 requires disclosure of the primary reasons for the business combination and the allocation of the purchase price paid to the assets acquired and liabilities assumed by major balance sheet caption. After initial recognition, goodwill and other intangible assets acquired in a business combination are accounted for following the provisions of FASB statement No. 142 “ Goodwill and Other Intangible Assets.” Implementation of FAS No. 141 is not expected to have material impact on the Corporation’ s financial condition or results of operations. In July 2001, the FASB issued statement No. 142, “ Goodwill and Other Intangible Assets”  (“ FAS No. 142” ), which supersedes APB Opinion No. 17, “ Intangible Assets”  and is effective for fiscal years beginning after December 15, 2001. FAS No. 142 addresses how intangible assets acquired other than by business combination should be accounted for in financial statements upon their acquisition. This statement also addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition. Additional provisions of FAS No. 142 include the reclassification of certain existing recognized intangibles to goodwill and reclassification of certain intangibles out of previously reported goodwill upon adoption. FAS No. 142 requires that goodwill and other intangible assets with indefinite useful lives, including goodwill recorded in past business combinations, no longer be amortized, but instead be tested for impairment at least annually and written down and charged to results of operations only in the periods in which the recorded value is more than the estimated fair value. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. This statement also requires the Corporation to complete a transitional goodwill impairment test including the identification of reporting units for the purpose of assessing potential future impairments of goodwill. After identifying its reporting units, the Corporation must determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets to those reporting units and then determine the fair value of each reporting unit. If the carrying value of any reporting unit exceeds its fair value, then detailed fair values for each of the assigned assets (excluding goodwill) and liabilities will be determined to calculate the amount of goodwill impairment, if any. Any transitional impairment loss resulting from the adoption of FAS No. 142 will be recognized as the effect of a change in accounting principle in the Corporation’ s income statement. FAS No. 142 requires disclosure of information about goodwill and other intangible assets in years subsequent to their acquisition which was not previously required, including changes in the carrying amount of goodwill from period to period, the carrying amount of intangible assets and for assets subject to amortization, the estimated amortization expense for the next five years. As of December 31, 2001, the Corporation had goodwill, net of accumulated amortization, of approximately $5,800, which would be subject to the transitional assessment provisions of FAS No. 142. Goodwill amortization expense was $837 during fiscal 2001, or $0.014 per share. The elimination of goodwill amortization is expected to reduce other operating expenses in periods beginning after 23