FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands, except per share data) During 2003, the parent company obtained a one-year line of  credit to be used for general operating cashflows. The line of  credit was with an unrelated financial institution for $15,000,  and as of December 31, 2003, had no amounts outstanding. Below are various estimated fair values at December 31,  2003 and 2002, as required by Statement of Financial  Accounting Standards No. 107 (“FAS No. 107”). Such  information, which pertains to the Corporation’s financial  instruments, is based on the requirements set forth in FAS  No. 107 and does not purport to represent the aggregate  net fair value of the Corporation. It is the Corporation’s  general practice and intent to hold its financial instruments  to maturity, except for certain securities designated as  securities available for sale, and not to engage in trading  activities. Many of the financial instruments lack an available  trading market, as characterized by a willing buyer and  seller engaging in an exchange transaction. Therefore, the  Corporation had to use significant estimations and present  value calculations to prepare this disclosure. Changes in the assumptions or methodologies used to  estimate fair values may materially affect the estimated  amounts. Also, management is concerned that there may not  be reasonable comparability between institutions due to the  wide range of permitted assumptions and the methodologies  in absence of active markets. This lack of uniformity gives  rise to a high degree of subjectivity in estimating financial  instrument fair values. The following methods and assumptions were used by the  Corporation in estimating financial instrument fair values: Cash and short-term instruments: The balance sheet carrying  amounts for cash and short-term instruments approximate  the estimated fair values of such assets. Securities: Fair values for securities held to maturity and  securities available for sale are based on quoted market  prices, if available. If quoted market prices are not available,  fair values are based on quoted market prices of comparable  instruments. The carrying value of nonmarketable equity  securities, such as Federal Home Loan Bank stock, is  considered a reasonable estimate of fair value. Cash dividends declared per common share were $0.625,  $0.605 and $0.585 for 2003, 2002 and 2001, respectively. Dividends from subsidiaries for 2003 included a special  dividend in the amount of $11,436 that was received from  First Commonwealth Bank, a wholly owned subsidiary.  After distribution of the special dividend, which was within  guidelines established by the banking regulators, First  Commonwealth Bank remains classified as a well-capitalized  institution. During 2003, the parent company also received  a dividend-in-kind from First Commonwealth Bank in the  amount of $8,797, which was received in the form of an  investment holding company subsidiary. The subsidiary,  known as FraMal Holdings Corporation, was acquired by  First Commonwealth Bank in the acquisition, which is  described in NOTE 5. Loans receivable: The estimated fair values of all loans  are estimated by discounting the future cash flows using  interest rates currently offered for loans with similar terms to  borrowers of similar credit quality.  Off-balance sheet instruments: Many of the Corporation’s  off-balance sheet instruments, primarily loan commitments  and standby letters of credit, are expected to expire without  being drawn upon, therefore, the commitment amounts do not  necessarily represent future cash requirements. Management  has determined that due to the uncertainties of cash flows and  39 Statements of Cash Flows NOTE 29— Fair Values of Financial Instruments Years Ended December 31, 2003 2002 2001 Operating Activities Net income $ 53,300 $ 43,526 $50,189 Adjustments to reconcile net  income to net cash provided  by operating activities:  Depreciation and amortization  835 537 1,140 Net gains on sale of assets  (739) -0- -0- Decrease (increase) in prepaid  income taxes  256  (397) 431 Undistributed equity  in subsidiaries  (4,482) (7,296) (16,951) Other—net  Other—net  (2,193) 1,270 (592) Stock option tax benefit  Stock option tax benefit  535  225 269 Net cash provided  by operating activities   47,512  37,865 34,486 Investing Activities Transactions with securities available for sale: Purchases of investment securities  (32,785) (943) (123) Sales of investment securities 1,766 -0- -0- Net change in loans to affiliated parties 59  42 (61) Purchases of premises and equipment (125) (33) (90) Changes in receivable from and net  investment in subsidiary  (28,918) 436 (792) Net cash used by  investing activities (60,003) (498) (1,066) Financing Activities Issuance of subordinated debentures  30,929  -0- -0- Discount on dividend reinvestment  plan purchases (706) (637) (612) Treasury stock acquired  -0- -0- -0- Treasury stock reissued 5,923  4,655 2,499 Cash dividends paid  (36,630) (35,208) (33,809) Net cash used by  financing activities   (484) (31,190) (31,922) Net increase (decrease) in cash (12,975) 6,177 1,498 Cash at beginning of year 13,844 7,667 6,169 Cash acquired with acquisition   507  -0- -0- Cash at end of year $ 1,376  $ 13,844 $ 7,667