FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands) Effective December 5, 2003, the Corporation acquired  100% of the outstanding shares of Pittsburgh Financial  Corp. (“PFC”), a financial holding company, which was  headquartered in Wexford, Pennsylvania. PFC was the parent  company of Pittsburgh Savings Bank (d/b/a BankPittsburgh).  As a result of the merger, PFC merged into First  Commonwealth Financial Corporation and BankPittsburgh  merged into First Commonwealth Bank. each a Pennsylvania corporation headquartered in Allison  Park, Pennsylvania. As a registered investment advisor,  SCC provided financial planning, asset management and  consulting services to individuals, businesses, retirement  plans, trusts and estates. SFA offered investment and  insurance products as well as employee benefit services. Each  of the outstanding shares of SCC and SFA were exchanged  for shares of the Corporation’s common stock. In addition,  the shareholders of SCC and SFA are entitled to receive  additional shares of the Corporation’s common stock for each  of the years 2002 through 2005 based on a formula defined  in the merger agreement which takes into consideration the  financial performance of SCC and SFA after the merger date.  The merger was accounted for as a purchase transaction  whereby the identifiable tangible and intangible assets  and liabilities of SCC and SFA have been recorded at their  fair values at the acquisition date. Goodwill in the amount  of $1,656 was recorded as a result of the transaction. As  prescribed under the purchase method of accounting, the  results of operations of SCC and SFA from the date of  acquisition are included in the Corporation’s financial  statements for 2002. The acquisition of PFC is a significant step for the Corporation to implement its strategy for expansion into  the Pittsburgh, Pennsylvania market. The acquisition of  BankPittsburgh adds a new customer base, which presents  the opportunity for First Commonwealth Bank to offer  insurance, trust and financial planning services to a larger  base of customers. Shareholders of PFC elected to receive $20.00 in cash or  an equivalent of First Commonwealth common stock for  each PFC share owned. The aggregate purchase price of the  transaction was $28,589, which included $11,587 in cash and  common stock valued at $17,002. The value of the 1,179,037  issued shares of First Commonwealth common stock was based  on the average market price of First Commonwealth’s common  stock over the ten-day period ending three trading days prior  to consummation of the acquisition. As of December 31, 2003,  the Corporation had recorded a liability for the cash settlement  of the transaction in the amount of $11,587. In October 2002, SFA was merged into SCC and the name  was changed to First Commonwealth Financial Advisors, Inc.  This acquisition should expand the Corporation’s product  offerings and positively impact fee based revenue, which is a  continuing priority. The merger was accounted for as a purchase transaction  whereby the identifiable tangible and intangible assets and  liabilities of PFC have been recorded at their fair values  as of the acquisition date. Purchase accounting valuation  adjustments, which represent the difference between the  carrying value and the fair value of identifiable tangible  and intangible assets and liabilities were recorded in the  Consolidated Balance Sheet as of December 31, 2003.  Preliminary goodwill in the amount of $21,723 was  recorded as a result of the transaction. As prescribed under  the purchase method of accounting, the results of PFC’s  operations have been included in the consolidated financial  statements since the acquisition date. Regulations of the Board of Governors of the Federal  Reserve System impose uniform reserve requirements on all  depository institutions with transaction accounts (checking  accounts, NOW accounts, etc.). Reserves are maintained  in the form of vault cash or a noninterest-bearing balance  held with the Federal Reserve Bank. The subsidiary bank  maintained with the Federal Reserve Bank average balances  of $844 during 2003 and $1,896 during 2002. During the third quarter of 2003 the Corporation entered  into an interest rate swap with a notional amount of $25,000  which was initiated to hedge exposure to the variability in  the future cash flows derived from adjustable rate loans.  The interest rate swap will convert the interest receivables  generated by the first $25,000 of principal outstandings of  three month LIBOR based adjustable commercial loans from  an adjustable rate to a fixed rate. The swap is a traditional  pay-floating and receive-fixed interest rate swap with a  three year term. The transaction is classified as a cash  flow hedge whereby the fair value of the swap is recorded  as an asset or liability and changes in the fair value are  recorded as “Other Comprehensive Income” a component of  shareholders’ equity. During 2003, the hedge transaction had  no ineffectiveness. The customer deposit base of $3,270 was the only amortizing  intangible that was recorded with the transaction. An average  annual amorization expense in the amount of $289.5 will  be recorded in the Consolidated Income Statement over the  average useful life. The weighted-average useful life of the  customer deposit base intangible is 12 years. The goodwill  that was recorded with the transaction is not deductible for  tax purposes. Effective March 1, 2002, the Corporation acquired all of  the outstanding shares of Strategic Capital Concepts, Inc.  (“SCC”) and Strategic Financial Advisors, Inc. (“SFA”),  26 NOTE 5— Business Combination NOTE 6— Cash and Due From Banks on Demand NOTE 7— Derivative Instruments