FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands, except per share data) At December 31, 2002, the Corporation had a stock-based compensation plan, which is described below. The plan permits the Executive Compensation Committee to grant options for up to 4.5 million shares of the Corporation’s common stock through October 15, 2005. Although the vesting requirements and terms of future options granted are at the discretion of the Executive Compensation Committee, all options granted from 1997 through 2002 were exercisable by December 31 of the grant year respectively, and expire ten years from the grant date. Equity Compensation Plan Information as of December 31, 2002: A summary of the status of the Corporation’s outstanding stock options as of December 31, 2002, 2001, and 2000 and changes for the years ending on those dates is presented below: The following table summarizes information about the stock options outstanding at December 31, 2002: The Corporation has elected, as permitted by FAS No. 123, to apply APB Opinion 25 and related interpretations in accounting for its plan. Accordingly, no compensation cost has been recognized for its stock options outstanding. Had compensation cost for the Corporation’s stock option plan been determined based upon the fair value at the grant dates for awards under the plan consistent with the method of FAS No. 123, the Corporation’s net income and earnings per share would have been reduced to the pro forma amounts shown below: In May, 2002, the Corporation reached final settlement with the plaintiffs in a lender liability action filed in 1994 against one of its subsidiary banks relating to lending activities occurring prior to the Corporation’s acquisition of that subsidiary. The decision to settle followed an adverse pre- trial judgment by the trial judge on procedural grounds. Under the settlement agreement, the Corporation paid the plaintiffs $8,000 in cash. The settlement resulted in a one- time charge of $8,000 ($5,200, net of tax effect) or $0.09 per share, after tax to the company’s earnings for 2002. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes options pricing model with the following weighted average assumptions used: There are no other material proceedings to which the Corporation or its subsidiaries are a party, or of which their property is the subject, except proceedings which arise in the normal course of business and, in the opinion of management, will not have a material adverse effect on the consolidated operations or financial position of the Corporation and its subsidiaries. 33 NOTE 23— Commitments and Contingent Liabilities NOTE 22— Stock Option Plan 2002 2001 2000 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding at beginning of year 2,687,887 $ 11.13 2,210,651 $11.12 1,680,178 $11.07 Granted 820,775 $ 11.70  796,743 $10.75  705,429 $11.06 Exercised  (447,001) $ 10.51  (256,174) $ 9.76  (41,240) $ 7.93 Forfeited  (219,889) $ 11.90  (63,333) $11.89 (133,716) $11.63 Outstanding at end of year 2,841,772 $ 11.33 2,687,887 $11.13 2,210,651 $11.12 Exercisable at end of year 2,841,772 $ 11.33 2,687,887 $11.13 2,210,651 $11.12 Number of Weighted Average Shares Options Exercise Price of Available for Outstanding Options Outstanding Future Grant Equity compensation plans approved by security holders 2,841,772 $ 11.33 685,121 Equity compensation plans not approved by security holders -0- -0- -0- Total 2,841,772 $ 11.33 685,121 Options Outstanding Options Exercisable Weighted- Average Weighted- Weighted- Range of Number Remaining Average Number Average Exercise Outstanding Contract Exercise Exercisable Exercise Prices at 12/31/02 Life Price at 12/31/02 Price $9.19-$9.25 412,908 3.9 $ 9.23 412,908 $ 9.23 $ 10.75 569,115 8.1 $ 10.75 569,115 $10.75 $ 11.06 473,014 7.0 $ 11.06 473,014 $11.06 $ 11.56 408,966 6.0 $ 11.56 408,966 $11.56 $ 11.70 688,131 9.1 $ 11.70 688,131 $11.70 $ 14.69 289,638 5.2 $ 14.69 289,638 $14.69 Total  2,841,772 6.9 $ 11.33  2,841,772 $11.33 2002 2001 2000 As Pro As Pro As Pro Reported Forma Reported Forma Reported Forma Net income $ 43,526 $41,248 $ 50,189 $ 48,211 $47,246 $ 47,130 Basic earnings per share $ 0.75 $ 0.71 $ 0.87 $ 0.83 $ 0.82 $ 0.82 Diluted earnings per share $ 0.74 $ 0.70 $ 0.86 $ 0.83 $ 0.82 $ 0.82 2002 2001 2000 Dividend yield 5.13% per annum 5.59% per annum 5.65% per annum Expected volatility 54.0% 55.1% 61.7% Risk-free interest rate 5.0% 5.1% 5.3% Expected option life 7.0 years 10.0 years 9.1 years