FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES Introduction Results of Operations Net interest income, the most significant component of earnings, is the amount by which interest generated from earning assets exceeds interest expense on liabilities. Net interest income was $141.7 million in 2001 compared to $137.3 million in 2000 and $143.4 million in 1999. The following is an analysis of the average balance sheets and net interest income for each of the three years in the period ended December 31, 2001. Net income for 2001 was $50.2 million, reflecting an Financial statement amounts in prior periods have been reclassified to conform to the presentation format used in 2001. The reclassifications had no effect on the Corporation’ s financial condition or results of operations. On October 19, 1999, the Corporation’ s Board of Directors approved a 2-for-1 stock split effected in the form of a 100% stock dividend. Shareholders of record at the close of business November 4, 1999 received one additional share for each share held. Share data for all periods presented has been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented. The Corporation acquired Southwest National Corporation and its subsidiary (“ Southwest” ) effective December 31, 1998. The merger was accounted for as a pooling of interests and accordingly, all financial statements have been restated as though the merger had occurred at the beginning of the earliest period presented. During the fourth quarter of 1997 the Corporation formed First Commonwealth Insurance Agency (“ FCIA” ) as a subsidiary of First Commonwealth Bank (“ FCB” ), a commercial banking subsidiary of the Corporation. FCIA began marketing a wide range of insurance and annuity products to the Corporation’ s retail and commercial customers beginning January 1, 1998. In addition to historical information, this discussion and analysis contains forward-looking statements. The forward- looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Important factors that might cause such a difference include, but are not limited to, those discussed in this “ Management’ s Discussion and Analysis of Financial Condition and Results of Operations.”Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’ s analysis only as of the date hereof. The Corporation undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof. Basic earnings per share was $0.87 for 2001 compared to $0.82 for 2000, while diluted earnings per share was $0.86 for 2001 compared to $0.82 for 2000. Basic earnings per share and diluted earnings per share were $0.88 for 1999. Basic earnings per share, excluding gains on sale of assets, was $0.82 for 2001 compared to $0.79 for 2000 representing an increase of 3.8%. Return on average assets was 1.11% and return on average equity was 13.85% during 2001 compared to 1.10% and 15.65%, respectively for 2000. Return on average assets was 1.25% during 1999 while return on average equity was 15.44%. The following is an analysis of the impact of changes in net income on basic earnings per share: The increase in net income for 2001 resulted primarily from increases in net interest income, gains on sale of assets and insurance commissions of $4.4 million, $1.8 million and $1.2 million, respectively compared to 2000 levels. Gains on the sale of assets includes securities gains of $3.3 million and $1.7 million in 2001 and 2000, respectively as well as $999 thousand gain on the sale of a branch and a block of mortgages in 2001. The decrease in net income for 2000 was primarily the result of gains on sale of loans which were realized during 1999. 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, 2001, 2000 and 1999 and are intended to supplement, and should be read in conjunction with, the consolidated financial statements and related footnotes. increase of $3.0 million from 2000 results of $47.2 million and compared to $53.0 million reported in 1999. 2001 2000 vs. vs. 2000 1999 Net income per share, prior year $ 0.82 $ 0.88 Increase (decrease) from changes in: Net interest income 0.06 0.01 Provision for credit losses (0.02) (0.02) Security transactions 0.03 0.02 Insurance commissions 0.02 0.01 Income from bank owned life insurance 0.02 0.02 Other income 0.04 (0.04) Salaries and employee benefits (0.03) (0.09) Occupancy and equipment costs (0.01) (0.02) Other expenses (0.04) (0.03) Provision for income taxes (0.02) 0.08 Net income per share $ 0.87 $ 0.82 40 MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS