FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The primary components of ISA include adjustable rate loans and investments, loan repayments, investment maturities and money market investments. The primary components of ISL include maturing certificates of deposit, money market deposits, savings deposits, NOW accounts and short-term borrowings. The following table lists the amounts and ratios of assets and liabilities with rates or yields subject to change within the periods indicated as of December 31, 2002 and 2001 (Dollar Amounts in Thousands): 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 deposits  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%) 2001 Cumulative 0-90 Days 91-180 Days 181-365 Days 0-365 Days Loans $ 839,279 $ 155,276 $ 276,760 $ 1,271,315 Investments  154,327 90,890 180,001 425,218 Other interest-earning assets 4,250 -0-  -0- 4,250 Total interest-sensitive assets 997,856 246,166 456,761 1,700,783 Certificates of deposits 329,825 284,518 407,188 1,021,531 Other deposits 1,090,160 -0- -0- 1,090,160 Borrowings 430,189 350 750 431,289 Total interest-sensitive liabilities  1,850,174 284,868 407,938 2,542,980 Gap $ (852,318) $ (38,702) $ 48,823 $ (842,197) ISA/ISL  0.54 0.86 1.12 0.67 Gap/Total assets (18.60%) (0.84%) 1.07% (18.37%) 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 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 300 basis point (3.00%) movement upward or a 100 basis point movement downward which cannot result in more than a 50