FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar Amounts in Thousands, except per share data) The following table identifies the related tax effects allocated to each component of other comprehensive income in the Statements of Changes in Shareholders’ Equity: expense by $920 in 2002. Goodwill amortization expense was $920 and $865 for 2001 and 2000, respectively. Goodwill represented basic and diluted earnings per share of $0.016 and $0.015 for 2001 and 2000, respectively. Upon implementation of the standard, the Corporation determined no impairment of its outstanding goodwill existed. Effective March 1, 2002, the Corporation acquired all of the outstanding shares of Strategic Capital Concepts, Inc. (“SCC”) and Strategic Financial Advisors, Inc. (“SFA”), each a Pennsylvania corporation headquartered in Allison Park, Pennsylvania. As a registered investment adviser, Strategic Capital Concepts provides financial planning, asset management and consulting services to individuals, businesses, retirement plans, trusts, and estates. Strategic Financial Advisors offers investment and insurance products as well as employee benefit services. Each of the outstanding shares of Strategic Capital Concepts, Inc. and Strategic Financial Advisors, Inc. 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. 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. As of January 1, 2002, the Corporation discontinued the amortization of goodwill which reduced other operating 24 On January 1, 2002, the Corporation adopted FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS No. 142”), which addresses the accounting and reporting for acquired goodwill and other intangible assets which supersedes APB Opinion No. 17, “Intangible Assets.” FAS No. 142 includes requirements to test goodwill and indefinite-lived intangible assets for impairment rather than amortize them. As of January 1, 2002, the Corporation had goodwill, net of accumulated amortization, of approximately $5,800 subject to the transitional testing provisions of FAS No. 142. Also, management reclassified an intangible asset previously recorded by an insurance subsidiary when acquiring the expiring list of policy holders from their joint-venture partner to goodwill with a net carrying amount of $718. NOTE 4— Goodwill and Other Intangible Assets NOTE 5— Business Combination NOTE 3— Supplemental Cash Flow Disclosures NOTE 2— Supplemental Comprehensive Income Disclosures December 31, 2002 December 31, 2001 December 31, 2000 Tax Net of Tax Net of Tax Net of Pre-tax (Expense) Tax Pre-tax (Expense) Tax Pre-tax (Expense) Tax Amount Benefit Amount Amount Benefit Amount Amount Benefit Amount Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the period $ 26,987 $ (9,445) $ 17,542 $ 28,676 $(10,037) $ 18,639 $ 51,739 $(18,109) $ 33,630 Less: reclassification adjustment for gains realized in net income (606) 212 (394) (3,274) 1,146 (2,128) (1,745) 611 (1,134) Net unrealized gains (losses)  26,381 (9,233) 17,148 25,402 (8,891) 16,511 49,994 (17,498) 32,496 Other comprehensive income $ 26,381 $ (9,233) $ 17,148 $ 25,402 $ (8,891) $ 16,511 $ 49,994 $(17,498) $ 32,496 2002 2001 2000 Cash paid during the year for: Interest $ 124,953 $ 186,558 $ 166,919 Income taxes $ 12,010 $ 11,890 $ 12,842 Noncash investing and financing activities: ESOP loan reductions $ 1,071 $ 1,161 $ 906 Loans transferred to other real estate owned and repossessed assets $ 5,029 $ 5,246 $ 6,405 Gross increase in market value adjustment to securities available for sale $ 26,381 $ 25,402 $ 49,994 Treasury stock reissued for insurance agency interest acquired $ -0- $ -0- $ 852 Treasury stock reissued for business combination $ 830 $ -0- $ -0-