FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES services such as lockbox and cash management services, which are expected to increase deposit fees in future periods. Service charges on deposits decreased $83 thousand for 2000 compared to 1999 as the average balances of transaction accounts which generate fee revenue decreased compared to 1999 levels. the second quarter of 1999 which generated gains of $890 thousand and $4.0 million, respectively. Total other operating expenses increased $5.5 million to $105.0 million for 2001 compared to $99.5 million and $95.6 million for 2000 and 1999, respectively. Total noninterest expense as a percent of average assets was 2.32% for the 2001 period compared to 2.31% for 2000. Employee costs were $54.5 million in 2001, representing 1.21% of average assets compared to $52.5 million and 1.22% of average assets for 2000. Employee costs for 1999 were $49.8 million or 1.17% of average assets. Employee benefit costs increased $331 thousand for 2001 compared to the 2000 period and included increases in 401(k) plan expenses and employee stock ownership plan “ ESOP”  expenses which were partially offset by decreases in hospitalization costs. The 2000 period included decreases in employee benefit costs for pension and postretirement benefits totaling $504 thousand at Southwest as a result of plan curtailment. The Corporation continues to develop quality employee benefit plan enhancements while effectively managing costs. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Insurance commissions, which have continued to increase since First Commonwealth Insurance Agency’ s (“ FCIA” ) formation in 1998, increased $1.2 million for 2001 from 2000 commissions of $2.0 million and compared to $1.5 million for 1999. Insurance revenue for 2001 included increases in credit insurance, employee benefits and annuities compared to 2000 levels. As part of the previously discussed “ Total Solutions Financial Management”  process FCIA will continue to have expanded opportunities to meet the insurance needs of commercial customers. In addition, the Corporation has developed “ FOCUS” , a financial planning tool designed to help consumers prioritize and assess their financial needs. The “ FOCUS”  concept results in a systematic approach covering a wide range of personal financial goals, including personal budgeting, funding for an emergency, using credit wisely, building financial security and estate planning as well as protecting what is important through appropriate insurance coverage. Net occupancy expense has remained stable over several years at $6.5 million for 2001 and 1999 and $6.6 million for 2000 as increases in insurance and utility costs have been offset by decreases in building depreciation, repairs and maintenance. Furniture and equipment expenses of $9.1 million for 2001 reflected increases of $896 thousand over 2000 levels, primarily as a result of increases for depreciation on computer software and software maintenance. The 2000 period also reflected increases in computer software depreciation and maintenance, as well as increases in furniture and equipment depreciation and repairs compared to 1999. Computer software depreciation and maintenance cost increases were primarily related to the replacement of software utilized by Corporation’ s data processing subsidiary to process loan and deposit accounts. Software depreciation is also expected to increase for 2002 as a full year of depreciation is included for systems placed in service during the third and fourth quarters of 2001. The new application software will enable the subsidiary banks to provide customers with enhanced products and services, including internet banking. Technology continues to have a great impact on financial services companies and their ability to compete in the marketplace. The Corporation is committed to providing banking, trust and insurance services through traditional branch and telephone channels in the markets we serve, but is also committed to meeting the changing needs of our customers. Income from bank owned life insurance was $4.6 million for 2001 compared to $3.4 million for 2000 and $2.1 million for 1999. The 2001 period included an additional investment in bank owned life insurance of $15.0 million compared to 2000 levels. The 2000 period included an increase in income from bank owned life insurance of $1.3 million compared to 1999, resulting primarily from claim income and the impact of an additional $15.0 million investment during 2000. Other income for 2001 was $12.9 million, representing an increase of $2.4 million over 2000 income of $10.5 million and compared to $13.8 million for 1999. As a result of branch analysis including the evaluation of the potential sale or consolidation of branches competing in the same market area, the Corporation sold one of its branches during 2001. The premium on the sale of $10.4 million of deposits from the branch resulted in a gain of $767 thousand. Termination of the Southwest Bank pension plan during 2001 resulted in a gain of $277 thousand (net of applicable excise taxes), which is included in other income. Other income for the 2001 period also reflected increases in bank club income, debit card interchange and merchant discount of $207 thousand, $173 thousand and $222 thousand, respectively, compared to 2000 revenues. Mutual fund sales also resulted in an increase in other income for 2001 of $336 thousand. Other income for 1999 included gains on the sale of loans resulting primarily from the sale of $42.2 million of residential mortgage loans during the first quarter of 1999 and the sale of $20.4 million of retail credit card loans during Outside data processing expenses were $3.3 million for 2001 compared to $3.3 million for 2000 and $3.4 million for 1999. Outside data processing expenses are managed by the Corporation’ s data processing subsidiary along with management of internal data processing costs. Outsourced 45