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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002 commission file number 0-11242

FIRST COMMONWEALTH FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

         PENNSYLVANIA                                                          25-1428528
(State or other jurisdiction              (I.R.S. Employer
of incorporation or organization         Identification No.)


    22 NORTH SIXTH STREET INDIANA, PA           15701
(Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code: (724)349-7220

Securities registered pursuant to Section 12(b) of the Act:

   TITLE OF EACH CLASS                           NAME OF EACH EXCHANGE ON
                                      WHICH REGISTERED

COMMON STOCK, $1 PAR VALUE          NEW YORK STOCK EXCHANGE

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.  Yes XX No__.

Indicate the number of shares outstanding of each of the issuer's classes of common stock.

     TITLE OF CLASS                                         OUTSTANDING AT March 14, 2003
Common Stock, $1 Par Value                       58,986,772 Shares

The aggregate market value of the voting common stock, par value $1 per share, held by non-affiliates of the registrant (Based upon the closing sale price on March 14, 2003), was approximately $633,513,562.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement related to the annual meeting of security holders to be held April 21, 2003 are incorporated by reference into Part III.

FIRST COMMONWEALTH FINANCIAL CORPORATION

First Commonwealth Financial Corporation
FORM 10-K
INDEX

                                   


FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business

Description of Business

First Commonwealth Financial Corporation (the "Corporation") was incorporated as a Pennsylvania business corporation on November 15, 1982 and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.  The Corporation has one chartered bank affiliate which operates under the First Commonwealth Bank name.  Personal financial planning and other financial services and insurance products are also provided through First Commonwealth Trust Company and First Commonwealth Insurance Agency.  The Corporation enhanced its financial services and products during the first quarter of 2002 through the addition of First Commonwealth Financial Advisors.  The Corporation also operates through First Commonwealth Systems Corporation, a data processing subsidiary and First Commonwealth Professional Resources Inc., ("FCPRI") a subsidiary providing professional services to affiliated organizations.

In October 2002, the Corporation brought all 90 of our community bank offices and our other affiliates under a common brand, First Commonwealth.  We unveiled a new logo, colors, and signage through an aggressive marketing strategy to reintroduce ourselves to the marketplace.  A unified brand yields important benefits for our clients.  All of First Commonwealth Bank's community offices have the same identity, products, and professional service that provide a consistent experience throughout the office network.  The insurance, trust, and financial planning affiliates are now clearly linked with First Commonwealth Bank to provide integrated solutions to meet any client need.

First Commonwealth Bank ("FCB"), a Pennsylvania-chartered banking corporation headquartered in Indiana, Pennsylvania operated through divisions doing business under the following names:  NBOC Bank, Deposit Bank, Cenwest Bank, First Bank of Leechburg, Peoples Bank, Central Bank, Peoples Bank of Western Pennsylvania, Unitas Bank and Reliable Bank. 

In October 2002, these banking divisions as well as the Corporation's other chartered bank (Southwest Bank) were merged under the First Commonwealth name.  This enhancement will provide our clients with greater flexibility, efficiency and seamless service throughout our market footprint.

Through FCB, the Corporation traces its banking origins to 1866.  FCB conducts business through 89 community banking offices in the counties of Allegheny (4), Armstrong (3), Beaver (1), Bedford (4), Blair (8), Butler (1), Cambria (11), Centre (1), Clearfield (5), Elk (3), Franklin (2), Huntingdon (5), Indiana (9), Jefferson (4), Lawrence (5), Somerset (5), Washington (1), and Westmoreland (17).  FCB engages in general banking business and offers a full range of financial services including such general retail banking services as demand, savings and time deposits and mortgage, consumer installment and commercial loans.

FCB operates a network of 84 automated teller machines ("ATMs") which permit customers to conduct routine banking transactions 24 hours a day.  Of the ATMs, 62 are located on the premises of branch offices and 22 are in remote locations.  All the ATMS's are part of the STAR network which consists of over 180,000 ATMs owned by numerous banks, savings and loan associations and credit unions located throughout 31 states.  STAR serves more than 124 million ATM/debit cardholders and more than 6,500 financial


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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Description of Business (Continued)

institution members.  The ATMs operated by FCB are also part of the global MasterCard/Cirrus network which is comprised of more than 300,000 ATMs located in the United States, Canada and 58 other countries and territories, which services over 365 million card holders.  Such networks allow FCB clients to withdraw cash and in certain cases conduct other banking transactions from ATMs of all participating financial institutions.

In addition to funds access through the use of ATMs, the STAR debit card offered to FCB's deposit clients may be used at nearly 720,000 point-of-sale retail locations on the STAR system as well as being used on the global MasterCard system for the purchase of goods and services.  The STAR debit card provides clients with almost universal acceptability of a credit card combined with the convenience of direct debit to the clients' checking account.

First Commonwealth Systems Corporation ("FCSC") was incorporated as a Pennsylvania business corporation in 1984 by the Corporation to function as its data processing subsidiary and it has its principal place of business in Indiana, Pennsylvania.  Before August 1984, it had operated as the data processing department.  FCSC provides on-line general ledger accounting services and bookkeeping services for deposit and loan accounts to the Corporation, FCB and its other nonbank subsidiaries.  FCSC also acts as a centralized purchasing agent for the purchase of computer hardware and software products by the Corporation and subsidiaries as well as providing technical support for the installation and use of these products.  It competes, principally with data processing subsidiaries of other, mostly larger, banks, on the basis of the price and quality of its services and the speed with which such services are delivered.  In October 2002, the name was changed to First Commonwealth Systems Corporation from Commonwealth Systems Corporation.

First Commonwealth Trust Company ("FCTC") was incorporated on January 18, 1991 as a Pennsylvania chartered trust company to render general trust services.  The trust departments of the former subsidiary banks were combined to form FCTC, and the corporate headquarters are located in Indiana, Pennsylvania.  FCTC has seven branch offices in the service areas of FCB and offers personal and corporate trust services, including administration of estates and trusts, individual and corporate investment management and custody services and employee benefit trust services.

First Commonwealth Insurance Agency ("FCIA") was incorporated as a Pennsylvania business corporation with its principal place of business in Indiana, Pennsylvania.  FCIA began operations in January 1998 as a wholly-owned subsidiary of FCB and provides a full range of insurance and annuity products to retail and commercial clients.

The Corporation acquired all of the outstanding shares of Strategic Capital Concepts, Inc. ("SCC") and Strategic Financial Advisors, Inc. ("SFA"), effective March 1, 2002.  As a registered investment advisor, SCC provided financial planning, asset management and consulting services to individuals, businesses, retirement plans, trusts





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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Description of Business (Continued)

and estates.  SFA offered investment and insurance products as well as employee benefit services.  In October 2002, SFA was merged into SCC and the name was changed to First Commonwealth Financial Advisors, Inc. ("FCFA"), which also offers insurance products through FCIA, an affiliate.  This acquisition will expand the Corporation's product offerings and positively impact fee based revenue, which continues to be a priority.

On June 1, 1989, Commonwealth Trust Credit Life Insurance Company ("Commonwealth Trust") began operations.  The Corporation owns 50% of the voting common stock of Commonwealth Trust.  Commonwealth Trust provides
reinsurance for credit life and credit accident and health insurance sold by the subsidiaries of the two unrelated holding company owners under a joint venture arrangement whereby the net income derived from such reinsurance inures proportionally to the benefit of the holding company selling the underlying insurance to its banks' customers.

First Commonwealth Capital Trust I, a business trust created under the laws of the State of Delaware, is included in the consolidated financial statements of the Corporation.  The trust was formed during September 1999 for the exclusive purposes of issuing and selling trust preferred securities, using the proceeds from the sale of the trust preferred securities to acquire subordinated debentures issued by the Corporation and engaging in only those other activities necessary or incidental thereto.

The Corporation and its subsidiaries employed approximately 1,450 (full-time equivalents) at December 31, 2002.  The Corporation does not engage in any significant business activities other than holding the stock of its subsidiaries.  The Corporation does not at present have any plans to expand or modify its business or that of its subsidiaries, other than as described herein.  Nevertheless, it will be receptive to and may actively seek out mergers and acquisitions in the event opportunities which management considers advantageous to the development of the Corporation's business arise, and may otherwise expand or modify its business as management deems necessary to respond to changing market conditions or the laws and regulations affecting the business of banking.

Competition

FCB, FCTC, FCFA and FCIA face intense competition, both from within and out of their service areas, in all aspects of business.  FCB competes for deposits, in such forms as checking, savings and NOW (negotiable order of withdrawal) accounts, MMDA (money market deposit accounts) and certificates of deposit, and in making consumer loans and loans to smaller businesses, with numerous other commercial banks and savings banks doing business within its service area with respect to loans to larger businesses.  FCB also completes, primarily in making consumer loans and for deposits, with state and federally chartered savings and loan associations and with credit unions.  In recent years, FCB has encountered significant competition for deposits from money market funds, mutual funds and institutions that offer annuities located throughout the United States.  Money market funds pay dividends to their shareholders (which are the equivalent of the interest




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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Competition (Continued)

paid by banks on deposits) and they are able to offer services and conveniences similar to those offered by FCB.  Annuities accumulate interest on the amounts deposited over a predetermined time period.  The depositor is then entitled to withdraw their funds for a fixed period of time or until death.  The effect of such competition has been to increase the costs of the rest of deposits, which provide the funds with which loans are made.  In addition to savings and loan associations and credit unions, FCB also competes for consumer loans with local offices of national finance companies and finance subsidiaries of automobile manufacturers and with national credit card companies such as MasterCard and VISA, whose cards, issued through financial institutions, are held by consumers throughout its service area.  FCB believes that the principal means by which it may compete for deposits and consumer and smaller commercial loans are the number and desirability of the locations of its offices and ATMs, the sophistication and quality of its services and the prices (primarily interest rates) of its services.  Additionally, FCB intends to remain competitive by offering financial services that target specific client needs.  Development of an integrated advisory sales model to integrate products between our bank, insurance agency, trust company and financial advisory affiliates as well as utilization of an employee team to deliver products and services to our commercial clients through our "Total Solutions Financial Management" approach have been positively received by our customers.  Specific client needs are also met through an enhanced client delivery system that includes telephone banking, which provides convenient access to financial services and hours of operation that extend past those of the FCB branch offices.  The Corporation introduced "WebBank" early in 2002, providing clients with access to their bank account information via the internet 24 hours a day - 7 days a week.  Features of WebBank include the ability to monitor account balances, view account history, perform account balance transfers and issue stop payments.  A loan production office was opened in downtown Pittsburgh in 2002 with significant new client acquisitions.  

Supervision and Regulation

The Corporation is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended ("the Bank Holding Company Act") and is registered as such with the Federal Reserve Board.  As a registered bank holding company ("BHC"), it is required to file with the Federal Reserve Board an annual report and other information.  The Federal Reserve Board is also empowered to make examinations and inspections of the Corporation and its subsidiaries.

The Bank Holding Company Act and Regulation Y of the Federal Reserve Board require every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire direct or indirect ownership or control of more than 5% of the outstanding voting shares or substantially all of the assets of a bank or merge or consolidate with another bank holding company.  The Federal Reserve Board may not approve acquisitions by the Corporation of such percentage of voting shares or substantially all the assets of any bank located in any state other than Pennsylvania unless the laws of such state specifically authorize such an acquisition.



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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Supervision and Regulation (Continued)

The Bank Holding Company Act generally prohibits a bank holding company from engaging in a non-banking business or acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any non-banking corporation subject to certain exceptions, the principal exception being where the business activity in question is determined by the Federal Reserve Board to be closely related to banking or to managing or controlling banks to be a proper incident thereto.  The Bank Holding Company Act does not place territorial restrictions on the activities of such banking related subsidiaries of bank holding companies.

Under the Federal Reserve Act, subsidiary banks of a bank holding company are subject to certain restrictions on extensions of credit to the bank holding company or any of its subsidiaries, investments in the stock or other securities thereof, or acceptance of such stock or securities as collateral for loans to any one borrower.  Under the Pennsylvania Banking Code, there is no limit on the number of Pennsylvania banks that may be owned or controlled by a Pennsylvania bank holding company.

Sarbanes-Oxley Act of 2002

On July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley Act of 2002, which generally establishes a comprehensive framework to modernize and reform the oversight of public company auditing, improve the quality and transparency of financial reporting by those companies and strengthen the independence of auditors.  Certain of the new legislation's more significant reforms are noted below:

*    The new legislation creates a public company accounting oversight
     board which is empowered to set auditing, quality control and ethics
      standards, to inspect registered public accounting firms, to conduct
      investigations and to take disciplinary actions, subject to SEC
      oversight and review.  The new board will be funded by mandatory fees
     paid by all public companies.  The new legislation also improves the
      Financial Accounting Standards Board, giving it full financial
      independence from the accounting industry.

*    The new legislation strengthens auditor independence from corporate
      management by, among other things, limiting the scope of consulting
      services that auditors can offer their public company audit clients.

*    The new legislation heightens the responsibility of public company
      directors and senior managers for the quality of the financial
      reporting and disclosure made by their companies.   Among other
      things, the new legislation provides for a strong public company audit
      committee that will be directly responsible for the appointment,
      compensation and oversight of the work of the public company auditors.

*    The new legislation imposes a range of new corporate disclosure
      requirements.  Among other things, the new legislation requires public
      companies to report all off-balance-sheet transactions and conflicts,
     as well as to present any pro forma disclosures in a way that is not
      misleading and in accordance with requirements to be established by
     the SEC.


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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Supervision and Regulation (Continued)

Sarbanes-Oxley Act of 2002 (Continued)

*    The new legislation also accelerated the required reporting of
      insider transactions, which now generally must be reported by the end
     of the second business day following a covered transaction.

*    The new legislation requires the Corporation's Chief Executive Officer
     and Chief Financial Officer to each certify that the Corporation's
      Quarterly and Annual Reports do not contain any untrue statements of a
      material fact.  The rules contain several requirements, including
      having these officers certify that:  they are responsible for
      establishing, maintaining and regularly evaluating the effectiveness
     of the Corporation's internal controls; they have made certain
      disclosures to the Corporation's auditors and the Audit Committee of
     the Board of Directors about the Corporation's internal controls; and
     they have included information in the Corporation's Quarterly and
      Annual Reports about their evaluation and whether there have been
      significant changes in the Corporation's internal controls or in other
      factors that could significantly affect internal controls subsequent
     to the evaluation.

*    The new legislation imposes a range of new criminal penalties for
     fraud and other wrongful acts, as well as extends the period during
     which certain types of lawsuits can be brought against a company or
     its insiders.

The Corporation has adopted a series of actions to strengthen and improve its already strong corporate governance practices.  Included in those actions was the adoption of a new Code of Conduct and Ethics by the Corporation and formation of a Financial Disclosure Committee.  This committee includes as members the Chief Executive Officer, Chief Financial Officer and other key members of the Corporation's management team.  The Corporation also requires signed certifications from managers who are responsible for internal controls throughout the Company as to the integrity of the information they prepare.

The Gramm-Leach-Bliley Act ("GBLA") of 1999 revolutionizes the regulation of financial services companies.  GBLA amends the Bank Holding Company Act of 1956 to create a new type of bank holding company, a financial holding company ("FHC"), which is permitted to engage in all activities permitted by a bank holding company as well as securities, merchant banking and insurance activities that were prohibited to BHCs.  GLBA also repeals Section 20 and 32 of the Glass-Steagall Act, which prohibited affiliations between a member bank and a company principally engaged in securities activities.  The activities of a BHC that does not qualify to become a FHC will be limited to those the Federal Reserve Board had, prior to enactment of GBLA, deemed closely related to banking.  In order to qualify as a FHC, each depository institution subsidiary of a BHC must be well capitalized, well managed and if insured have a satisfactory or better rating under the Community Reinvestment Act of 1977 ("CRA") as of its most recent examination and the BHC must file an election with the Federal Reserve Board certifying that it meets the requirements of a FHC.  GBLA expands the range of business opportunities for commercial banking organizations and


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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Supervision and Regulation (Continued)

enables banking companies and other types of financial companies such as securities, insurance and financial technology companies to combine more readily.  A FHC does not need to obtain prior Federal Reserve Board approval in order to engage in, or acquire a nonbank company that engages in financial activities.  The FHC only needs to provide notice to the Federal Reserve Board, describing the activity commenced or conducted by the acquired company, within 30 days after commencing the activity or consummating the acquisition.

Subsidiary Bank

FCB is a Pennsylvania-chartered bank and is subject to the supervision of and regularly examined by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation ("FDIC"), and subject to certain regulations of the Federal Reserve Board.  The areas of operation subject to regulation by Federal and Pennsylvania laws, regulations and regulatory agencies include reserves against deposits, maximum interest rates for specific classes of loans, truth-in-lending disclosures, permissible types of loans and investments, trust operations, mergers and acquisitions, issuance of securities, payment of dividends, Community Reinvestment Act evaluations, mandatory external audits, establishment of branches and other aspects of operations.  Under the Pennsylvania Banking Code, a state bank located in Pennsylvania may establish branches anywhere in the state.

Reciprocal Regional Interstate Banking

As already noted, a bank holding company located in one state cannot acquire a bank or a bank holding company located in another state unless the law of such other state specifically permits such acquisitions.  On June 25, 1986, Pennsylvania passed a law (Act No. 1986-69) which provides that a bank holding company located in any state or the District of Columbia can acquire a Pennsylvania bank or bank holding company if the jurisdiction where the acquiring bank holding company is located has passed an enabling law that permits a Pennsylvania bank holding company to acquire
a bank or a bank holding company in such jurisdiction.  As of December 31, 2001, enabling laws have been passed so that the required reciprocity presently exits with approximately 34 states, including New York, New Jersey, Ohio, Delaware, Maryland and West Virginia.  A similar law is applicable to savings associations and savings and loan holding companies. 

It is difficult to determine the precise effects that reciprocal regional interstate banking will have on the Corporation in the future, but the law has increased, and as reciprocity becomes effective for additional states will increase further, the number of potential buyers for Pennsylvania banks and bank holding companies.  The law also permits Pennsylvania bank holding companies and Pennsylvania savings and loan holding companies that desire to expand outside Pennsylvania to acquire banks, savings institutions and bank holding companies located in jurisdictions with which Pennsylvania has reciprocity.





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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     Business (Continued)

Effects of Governmental Policies

The business and earnings of the Corporation are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States Government and its agencies, including the Federal Reserve Board.  An important function of the Federal Reserve Board is to regulate the national supply of bank credit.  Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are open market operations in United States government securities, changes in the discount rate on borrowings by member banks and savings institutions from the Federal Reserve System and changes in reserve requirements against bank and savings institution deposits.  These instruments, together with fiscal and economic policies of various governmental entities, influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans, received on investments or paid for deposits.

The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of bank holding companies and their subsidiary banks in the past and are expected to continue to do so in the future.  In view of changing conditions in the national and Pennsylvania economies and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the Federal Reserve Board, no prediction can be made as to possible future changes in interest rates, deposit levels and loan demand or the effect of such changes on the business and earnings of the Corporation or its subsidiaries.

Changes in Regulations

Proposals to change the laws and regulations governing the banking industry are frequently introduced in Congress, in the state legislatures and before the various bank regulatory agencies.  The likelihood and timing of any proposals or legislation and the impact they might have on the Corporation and its subsidiaries cannot be determined at this time.

ITEM 2.  Properties

The Corporation's principal office is located in the old Indiana County Courthouse complex.  This certified Pennsylvania and national historic landmark was built in 1870 and restored by the Corporation in the early 1970's.  The Corporation occupies this building, which provides 32,000 square feet of floor space, under a 25-year restoration lease agreement with Indiana County, which the Corporation entered into in 1973 and renewed during 1998 for an additional 25 years.  In order to support future expansion needs and centralization of various functional areas such as loan processing, marketing, and accounting, the Corporation also owns two additional structures.  FCB has 89 banking facilities of which 23 are leased and 66 are owned.  Management presently expects that such facilities will be adequate to meet the anticipated needs of the Corporation and its subsidiaries for the immediate future.

ITEM 3.  Legal Proceedings

Information appearing in Note 23 to the Consolidated Financial Statements on page 76 is incorporated herein by reference in response to this item.



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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 4.  Submission of Matters to Vote of Security Holders

There were no matters submitted to vote by security holders in the fourth quarter of 2002.

Part II

ITEM 5.  Market for Registrant's Common Stock and Related Security Holder
         Matters

First Commonwealth Financial Corporation (the "Corporation") is listed on the New York Stock Exchange under the symbol "FCF".  The approximate number of holders of record of the Corporation's common stock is 13,500.  The table below sets forth the high and low sales prices per share and cash dividends declared per share for common stock of the Corporation.

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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 6.  Selected Financial Data (Dollar Amounts in Thousands, except
         per share data)

The following selected financial data is not covered by the auditor's report and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, which follows, and with the consolidated financial statements and related notes.  All amounts have been restated to reflect the pooling of interests.  Financial statement amounts for prior periods have also been reclassified to conform to the presentation format used in 2002.  The reclassifications had no effect on the Corporation's financial condition or results of operations.

(a) Where applicable, per share amounts have been restated to reflect the two-for-one stock split effected in the form of a 100% stock dividend declared on October 19, 1999.
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

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, 2002, 2001 and 2000 and are intended to supplement, and should be read in conjunction with, the consolidated financial statements and related footnotes.

Sections of this financial review, as well as the notes to the consolidated financial statements, contain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995), which reflect management's beliefs and expectations based on information currently available and may contain the words "expect," "estimate," "project," "anticipate," "should," "intend," "probability," "risk," "target," "objective," and similar expressions or variations on such expressions.  These forward-looking statements are inherently subject to significant risks and uncertainties, including but not limited to:  changes in general economic and financial market conditions, the Corporation's ability to effectively carry out its business plans, changes in regulatory or legislative requirements, changes in competitive conditions and continuing consolidation of the financial services industry.  Although management believes the expectations reflected in such forward-looking statements are reasonable, actual results could differ materially.  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.

The Corporation acquired all of the outstanding shares of Strategic Capital Concepts, Inc. ("SCC") and Strategic Financial Advisors, Inc. ("SFA"), effective March 1, 2002.  As required under the purchase method of accounting, the results of SCC and SFA from the date of acquisition were included in the Corporation's financial statements for 2002.  As a registered investment advisor, Strategic Capital Concepts provided financial planning, asset management and consulting services to individuals, businesses, retirement plans, trusts and estates.  Strategic Financial Advisors offered investment and insurance products as well as employee benefit services.  In October 2002, SFA was merged into SCC and the name was changed to First Commonwealth Financial Advisors, Inc., which also offers insurance products through First Commonwealth Insurance Agency, an affiliate.  This acquisition will expand the Corporation's product offerings and positively impact fee based revenue, which continues to be a priority.

Financial statement amounts in prior periods have been reclassified to conform to the presentation format used in 2002.  The reclassifications had no effect on the Corporation's financial condition or results of operations.





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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations

Net income was $43.5 million in 2002, a decline of $6.7 million from 2001 results of $50.2 million and compared to $47.2 million registered in 2000.

Net income for 2002 was negatively impacted by the effects of $6.1 million of restructuring costs and an $8.0 million litigation settlement.  The restructuring charges consisted principally of severance amounts paid to employees as part of the plan to consolidate the multiple bank charters and develop the First Commonwealth brand and identity for all of the financial services subsidiaries.  Payments to retiring directors as part of the realignment for the Corporation's new vision on corporate governance also were included in restructuring charges.  The litigation settlement related to a lender liability action filed in 1994 against one of the Corporation's subsidiary banks and followed an adverse pre-trial judgment by the trial judge on procedural grounds.  Net of tax, these nonrecurring charges reduced net income by $9.2 million in 2002.  Also impacting 2002 results were expenses of $1.8 million ($1.2 million after tax) related to development of the First Commonwealth brand.  The merger of banking operations as well as the establishment of the First Commonwealth branding will help provide our clients with greater flexibility, efficiency and seamless service throughout our market footprint. 

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.  Gains on sale of assets included securities gains of $3.3 million and $1.7 million in 2001 and 2000, respectively as well as a $999 thousand gain on the sale of a branch and block of mortgages in 2001. 

Diluted earnings per share was $0.74 for 2002 compared to $0.86 and $0.82 for 2001 and 2000, respectively.  Return on average assets was 0.96% and return on equity was 11.09% during 2002 compared to 1.11% and 13.85%, respectively for 2001.  Return on average assets was 1.10% during 2000 as return on average equity reached 15.65%. 





















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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

The following is an analysis of the impact of changes in net income on diluted earnings per share:

  
Core net income excluding nonrecurring charges as well as securities gains and any nonrecurring gains for 2002 was $52.3 million, an increase of $4.9 million or 10.4% over core net income of $47.4 million for 2001. Core diluted earnings per share was $0.89 per share, a rise of $0.07 or 8.5% compared to the $0.82 achieved in 2001.  Core return on average assets for 2002 advanced to 1.15% compared to 1.05% for 2001 as core return on shareholders' equity for 2002 also improved on a year to year basis.

















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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

Net interest income, the engine that powers revenue growth for the Corporation, is defined as the difference between income on earning assets and the cost of funds supporting those assets.  Net interest income rose to $152.9 million in 2002 compared to $141.7 million in 2001 and $137.3 million in 2000.  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, 2002.



























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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations
          (Continued)

Results of Operations (Continued)