MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES (Dollar Amounts in Thousands) 2003 Cumulative 0-90 Days  91-180 Days  181-365 Days  0-365 Days Loans  $ 1,057,021  $ 178,006  $ 291,352  $ 1,526,379 Investments  241,163   116,979   189,610  547,752 Other interest-earning assets  5,362  -0-  -0-  5,362 Total interest-sensitive assets  1,303,546   294,985   480,962   2,079,493 Certificates of deposit  325,957   242,706   249,361  818,024 Other deposits  1,413,069  -0-  -0-   1,413,069 Borrowings  634,878  1,407  21,290  657,575 Total interest-sensitive liabilities  2,373,904   244,113   270,651   2,888,668 Gap  $ (1,070,358)  $ 50,872  $ 210,311  $ (809,175) ISA/ISL  0.55  1.21  1.78  0.72 Gap/Total assets  20.63%  0.98%  4.05%  15.59% 2002 Cumulative 0-90 Days  91-180 Days  181-365 Days  0-365 Days Loans  $  962,398  $ 157,172  $ 295,273  $ 1,414,843 Investments  292,206   162,578   262,287  717,071 Other interest-earning assets  1,973  -0-  -0-  1,973 Total interest-sensitive assets  1,256,577   319,750   557,560   2,133,887 Certificates of deposit  354,625   170,687   263,882  789,194 Other deposits  1,172,538  -0-  -0-   1,172,538 Borrowings  469,735  905  1,483  472,123 Total interest-sensitive liabilities  1,996,898   171,592   265,365   2,433,855 Gap  $ (740,321)  $ 148,158  $ 292,195  $ (299,968) ISA/ISL  0.63  1.86  2.10  0.88 Gap/Total assets  16.36%  3.27%  6.46%  6.63% reduction or lag in a deposit rate increase. The repricing  strategies for loans would be inversely related. The Corporation’s asset/liability management policy guidelines  limit interest rate risk exposure for the succeeding twelve- month period. Simulations are prepared under the base case  where interest rates remain flat, and most likely case where  interest rates are defined using projections of economic factors.  Additional simulations are produced estimating the impact on  net interest income of a 200 basis point (2.00%) movement  upward or downward which cannot result in more than a 5.0%  decline in net interest income when compared to the base case.  The analysis at December 31, 2003, indicated that a 200 basis  point (2.00%) increase in interest rates would increase net  interest income by 56 basis points (0.56%) above the base case  scenario and a 200 basis point (2.00%) decrease in interest  rates would decrease net interest income by 671 basis points  (6.71%) below the base case scenario over the next twelve  months. While the 200 basis points (2.00%) declining rate  scenario currently exceeds the -5.00% policy limit by 171 basis  points (1.71%), it is recognized by the Corporation that this  declining rate scenario is unrealistic in the current rate  environment with the Federal funds rate at only 1.00%. Although the periodic gap analysis provides management with  a method of measuring current interest rate risk, it only  measures rate sensitivity at a specific point in time, and as a  result may not accurately predict the impact of changes in  general levels of interest rates or net interest income. This is  exemplified as the gap analysis shows the Corporation’s  earnings to be negatively impacted by rising rates, but  computer modeling indicates that rising rates would have a  favorable impact on earnings. Therefore, to more precisely  measure the impact of interest rate changes on the  Corporation’s net interest income, management simulates the  potential effects of changing interest rates through computer  modeling. The income simulation model used by the  Corporation captures all assets, liabilities, and off-balance sheet  financial instruments, accounting for significant variables that  are believed to be affected by interest rates. These variables  include prepayment speeds on mortgage loans and mortgage  backed securities, cash flows from loans, deposits and  investments and balance sheet growth assumptions. The model  also captures embedded options, such as interest rate caps/ floors or call options, and accounts for changes in rate  relationships as various rate indices lead or lag changes in  market rates. The Corporation is then better able to implement  strategies which would include an acceleration of a deposit rate  54