FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands) New Accounting Pronouncements 23 Although net income has not changed as a result of the  deconsolidation of the Trust, “Other Revenue” has increased  by the income generated by the Trust, which represents the  difference between the Trust’s interest income from the  subordinated debentures and the Trust’s interest expense  from the capital securities. The Consolidated Statement of  Income also reflects an increase in “Interest Expense on  Long-term Debt” of approximately $103 as a result of the  The Trust used the proceeds from the sale of the capital  securities to buy junior subordinated debentures from the  Corporation with the same economic terms as the capital  securities. The Trust distributes the cash payments it receives  from the Corporation on the debentures to the holders of the  capital securities and the common securities. The Trust will  redeem all of the outstanding capital securities when the  debentures are paid at maturity on September 1, 2029. The  deconsolidation of the Trust resulted in an increase in long- term debt during the fourth quarter of 2003 of approximately  $1,083 as a result of the subordinated debentures no longer  being eliminated in consolidation and the capital securities  no longer being included in the Consolidated Balance Sheet  at December 31, 2003. The Consolidated Balance Sheet also  reflects an increase in “Other Assets” in the same amount,  which represents the Corporation’s investment in the Trust.  FIN 45 clarifies the requirements of FASB Statement No.  5 (“FAS No. 5”) “Accounting for Contingencies,” relating  to guarantees. In general, FIN 45 applies to contracts or  indemnification agreements that contingently require the  guarantor to make payments to the guaranteed party based  on changes in an underlying that is related to an asset,  liability, or equity security of the guaranteed party. Certain  guarantee contracts are excluded from both the disclosure and  recognition requirements of this interpretation, including, but  not limited to, guarantees related to employee compensation,  residual value guarantees under capital lease arrangements,  commercial letters of credit, loan commitments, subordinated  interests in Special Purpose Entities and guarantees of a  company’s own future performance. Other guarantees are  subject to the disclosure requirements of FIN 45 but not  the recognition provisions and include, among others, a  guarantee accounted for as a derivative instrument under  FAS No. 133, a parent’s guarantee of debt owed to a third  party by its subsidiary or vice versa and a guarantee which is  In November, 2002, the FASB issued FASB Interpretation  No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure  Requirements for Guarantees of Indebtedness of Others.”  The disclosure requirements of FIN 45 are effective for  financial statements of interim or annual periods ending after  December 15, 2002, and require disclosure of the nature of  the guarantee, the maximum potential of future payments the  guarantor could be required to make under the guarantee and  the current amount of the liability, if any, for the guarantor’s  obligation under the guarantee. The recognition requirements  of FIN 45 are to be applied prospectively to guarantees issued  or modified after December 31, 2002. This interpretation  expands the disclosures to be made by a guarantor in its  financial statements about its obligations under certain  guarantees and requires the guarantor to recognize a liability  for the fair value of an obligation assumed under a guarantee.  Based on the criteria established in FIN 46 as interpreted by  the Securities and Exchange Commission, the Corporation  deconsolidated its investment in First Commonwealth Capital  Trust I, a Delaware business trust (the “Trust”) during the  fourth quarter of 2003. The Trust was established in 1999 to  issue capital securities through a private offering to qualified  investors and to issue common securities to the Corporation.  In January 2003, the FASB issued FASB Interpretation  No. 46 (“FIN 46”), “Consolidation of Variable Interest  Entities.” As defined by FIN 46 a variable interest entity  (“VIE”) is a corporation, partnership, trust or any other legal  structure used for business purposes that either (a) does not  have equity investors with voting rights or (b) has equity  investors that do not provide sufficient financial resources  for the entity to support its activities. This interpretation also  defines when the assets, liabilities, noncontrolling interest  and results of operations of a VIE should be included in a  company’s consolidated financial statements. Companies that  hold variable interests in an entity will need to consolidate  that entity if the company’s interest in the VIE is such  that the company will obtain a majority of the entity’s  expected residual returns, should such occur. FIN 46 applied  immediately to variable interest entities created after  January 31, 2003. The effective date of FIN 46 for pre- existing variable interest entities that are not special purpose  entities has been deferred until the first quarter of 2004. Effective January 1, 2003, the Corporation adopted FASB  Statement No. 146 “Accounting for Costs Associated with  Exit or Disposal Activities” (“FAS No. 146”). FAS No.  146 replaced EITF Issue No. 94-3, “Liability Recognition  for Certain Employee Termination Benefits and Other  Costs to Exit an Activity (including Certain Costs Incurred  In a Restructuring).” The standard requires companies to  recognize costs associated with exit or disposal activities  when they are incurred rather than at the date of a  commitment to an exit or disposal plan. Statement No. 146  is applicable to exit or disposal activities initiated after  December 31, 2002. Adoption of FAS No. 146 did not have  a material impact on the Corporation’s financial condition or  results of operations. 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. based on performance not price. Guarantees that have been  entered into by the Corporation are disclosed in NOTE 13.  The adoption of FIN 45 did not have a material impact on the  Corporation’s financial condition or results of operations.