FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (the “Corporation”) for the years ended December 31, 2002, 2001 and 2000 and are intended to supplement, and should be read in conjunction with, the consolidated financial statements and related footnotes. The Corporation acquired all of the outstanding shares of Strategic Capital Concepts, Inc. (“SCC”) and Strategic Financial Advisors, Inc. (“SFA”), effective March 1, 2002. As required under the purchase method of accounting, the results of SCC and SFA from the date of acquisition were included in the Corporation’s financial statements for 2002. As a registered investment advisor, Strategic Capital Financial statement amounts in prior periods have been reclassified to conform to the presentation format used in 2002. The reclassifications had no effect on the Corporation’s financial condition or results of operations. Net income was $43.5 million in 2002, a decline of $6.7 million from 2001 results of $50.2 million and compared to $47.2 million registered in 2000. Results of Operations Concepts provided financial planning, asset management and consulting services to individuals, businesses, retirement plans, trusts and estates. Strategic Financial Advisors offered investment and insurance products as well as employee benefit services. In October 2002, SFA was merged into SCC and the name was changed to First Commonwealth Financial Advisors, Inc., which also offers insurance products through First Commonwealth Insurance Agency, an affiliate. This acquisition will expand the Corporation’s product offerings and positively impact fee based revenue, which continues to be a priority. Net income for 2002 was negatively impacted by the effects of $6.1 million of restructuring costs and an $8.0 million litigation settlement. The restructuring charges consisted principally of severance amounts paid to employees as part of the plan to consolidate the multiple bank charters and develop the First Commonwealth brand and identity for all of the financial services subsidiaries. Payments to retiring directors as part of the realignment for the Corporation’s new vision on corporate governance also were included in restructuring charges. The litigation settlement related to a lender liability action filed in 1994 against one of the Corporation’s subsidiary banks and followed an adverse pre- trial judgment by the trial judge on procedural grounds. Net of tax, these nonrecurring charges reduced net income by $9.2 million in 2002. Also impacting 2002 results were expenses of $1.8 million ($1.2 million after tax) related to development of the First Commonwealth brand. The merger of banking operations as well as the establishment of the First Commonwealth branding will help provide our clients with greater flexibility, efficiency and seamless service throughout our market footprint. 40 Introduction