FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands) Note 26— Condensed Financial Information of First Commonwealth Financial Corporation (parent company only) (continued) Statements of Cash Flows Years Ended December 31, 2001 2000 1999 Operating Activities Net income $ 50,189 $47,246 $53,030 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,140 1,263 1,655 Net losses on sale of assets -0- -0- 144 Decrease (increase) in prepaid income taxes 431 212 (242) Undistributed equity in subsidiaries (16,951) 6,044 (25,116) Other —  net (592) 97 (803) Net cash provided by operating activities 34,217  54,862  28,668 Investing Activities Transactions with securities available for sale: Purchases of investment securities (123) -0- -0- Sales of investment securities -0- -0- 102 Net change in loans to affiliated parties (61) 1 17 Purchases of premises and equipment (90) (337) (1,491) Additional net investment in subsidiary (792) (3,861) (2,406) Sale of subsidiary -0- -0- 1,709 Net cash used by investing activities (1,066)  (4,197)  (2,069) Financing Activities Issuance of subordinated debentures -0- -0- 36,083 Issuance of other long-term debt -0- 4,000 16,000 Repayment of other long-term debt -0- (20,000) -0- Discount on dividend reinvestment plan purchases (612) (593) (358) Treasury stock acquired -0- (873) (51,331) Treasury stock reissued 2,499 326 1,453 Cash dividends paid (33,809) (32,553) (27,825) Stock option tax benefit  269 75 -0- Net cash used by financing activities (31,653)  (49,618)  (25,978) Net increase in cash 1,498 1,047 621 Cash at beginning of year 6,169 5,122 4,501 Cash at end of year $ 7,667 $ 6,169 $ 5,122 Proceeds from the issuance of subordinated debentures and other long-term debt during 1999 were used primarily to fund the purchase of 3,819,420 shares of the Corporation’ s common stock pursuant to a “ modified Dutch Auction” tender offer. NOTE 27— Fair Values of Financial Instruments Below are various estimated fair values at December 31, 2001 and 2000, 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 Deposit liabilities: For deposits which are payable on demand at the reporting date, representing all deposits other than time deposits, management estimates that the carrying value of such deposits is a reasonable estimate of fair value. 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 difficulty in predicting the timing of such cash flows, fair values were not estimated for these instruments. Loans receivable: Fair values of variable rate loans subject to frequent repricing and which entail no significant credit risk are based on the carrying values. The estimated fair values of other 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. The carrying amount of accrued interest is considered a reasonable estimate of fair value. 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 and short-term instruments: The balance sheet carrying amounts for cash and short-term instruments approximate the estimated fair values of such assets. The following methods and assumptions were used by the Corporation in estimating financial instrument fair values: 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. 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. Supplemental disclosures 36