FORM 10-Q

10-Q 1 fcfc10q_0605.htm FIRST COMMONWEALTH FINANCIAL CORPORATION FORM 10-Q FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q
(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2005
	or
( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

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 of	(I.R.S. Employer
incorporation or organization)	Identification No.)

22 North Sixth Street, Indiana, PA	15701
(Address of principal executive offices)	(Zip Code)

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

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate a check mark 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 reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No .

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No .
The number of shares outstanding of issuer's common stock, $1.00 Par Value as of July 31, 2005, was 70,066,709.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES

PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	PAGE

	Included in Part I of this report:

	First Commonwealth Financial Corporation and Subsidiaries
	Consolidated Balance Sheets.........................	3
	Consolidated Statements of Income...................	4
	Consolidated Statements of Changes in
	Shareholders' Equity..............................	5
	Consolidated Statements of Cash Flows...............	7

	Notes to Consolidated Financial Statements..........	8

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............	17

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................	42

ITEM 4.	CONTROLS AND PROCEDURES...............................	43

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS.......................................	44

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.................................	44

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.........................	44

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....	44

ITEM 5.	OTHER INFORMATION.......................................	44

ITEM 6.	EXHIBITS................................................	45

	Signatures..............................................	46

	Exhibits

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 1. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)

		June 30, 2005		December 31, 2004
ASSETS
Cash and due from banks	$	82,872	$	79,591
Interest-bearing bank deposits		1,188		2,403
Securities available for sale, at market		2,041,415		2,162,313
Securities held to maturity, at amortized cost, (Market value $91,141 in 2005 and $81,886 in 2004)		87,837		78,164

Loans:
Portfolio loans		3,597,521		3,512,774
Loans held for sale		3,956		2,311
Unearned income		(163)		(252)
Allowance for credit losses		(41,404)		(41,063)

Net loans		3,559,910		3,473,770

Premises and equipment		60,864		56,965
Other real estate owned		1,226		1,814
Goodwill		122,702		123,607
Amortizing intangibles, net		16,382		17,513
Other assets		207,353		202,338

Total assets	$	6,181,749	$	6,198,478

LIABILITIES
Deposits (all domestic):
Noninterest-bearing	$	502,107	$	480,843
Interest-bearing		3,549,867		3,363,632

Total deposits		4,051,974		3,844,475

Short-term borrowings		694,830		946,474
Other liabilities		35,709		35,977

Subordinated debentures		108,250		108,250
Other long-term debt		761,853		731,324

Total long-term debt		870,103		839,574

Total liabilities		5,652,616		5,666,500

SHAREHOLDERS' EQUITY
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued		-0-		-0-
Common stock $1 par value per share, 100,000,000 shares authorized; 71,978,568 shares issued at June 30, 2005 and December 31, 2004; 69,949,652 and 69,868,908 shares outstanding at June 30, 2005 and December 31, 2004, respectively		71,978		71,978
Additional paid-in capital		174,571		175,453
Retained earnings		317,342		307,363
Accumulated other comprehensive income		1,808		10,002
Treasury stock (2,028,916 shares at June 30, 2005 and 2,109,660 shares at December 31, 2004, at cost)		(25,623)		(26,643)
Unearned ESOP shares		(10,943)		(6,175)

Total shareholders' equity		529,133		531,978

Total liabilities and shareholders' equity	$	6,181,749	$	6,198,478

The accompanying notes are an integral part of these consolidated financial statements.

3

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 1. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)

		For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2005		2004		2005		2004

Interest Income
Interest and fees on loans	$	54,698	$	44,080	$	107,289	$	85,465
Interest and dividends on investments:
Taxable interest		19,076		18,305		38,349		35,834
Interest exempt from Federal income taxes		3,129		2,728		6,182		5,373
Dividends		510		377		1,219		781
Interest on Federal funds sold		120		1		124		2
Interest on bank deposits		7		7		14		15

Total interest income		77,540		65,498		153,177		127,470

Interest Expense
Interest on deposits		19,079		13,951		35,581		27,461
Interest on short-term borrowings		5,867		1,890		11,425		3,625

Interest on subordinated debentures		1,945		1,789		3,847		3,081
Interest on other long-term debt		7,009		9,433		13,752		18,061

Total interest on long-term debt		8,954		11,222		17,599		21,142

Total interest expense		33,900		27,063		64,605		52,228

Net Interest Income		43,640		38,435		88,572		75,242
Provision for credit losses		3,000		2,520		4,744		4,620

Net interest income after provision for credit losses		40,640		35,915		83,828		70,622

Other Income
Net securities gains		-0-		145		485		3,995
Trust income		1,456		1,442		2,781		2,710
Service charges on deposit accounts		4,009		3,760		7,549		6,960
Gain on sale of branch		3,090		-0-		3,090		-0-
Gain on sale of merchant services business		1,991		-0-		1,991		-0-
Insurance commissions		903		865		1,743		1,669
Income from bank owned life insurance		1,355		1,251		2,676		2,514
Merchant discount income		882		907		1,721		1,735
Card related interchange income		1,216		890		2,303		1,510
Other income		2,247		1,837		4,250		3,587

Total other income		17,149		11,097		28,589		24,680

Other Expenses
Salaries and employee benefits		17,864		17,141		36,162		33,844
Net occupancy expense		2,715		2,165		5,707		4,354
Furniture and equipment expense		2,759		2,705		5,629		5,226
Data processing expense		981		913		1,920		1,726
Pennsylvania shares tax expense		1,237		1,140		2,503		2,274
Intangible amortization		566		238		1,131		312
Merger and integration charges		-0-		873		-0-		2,164
Other operating expenses		8,950		8,369		17,413		15,361

Total other expenses		35,072		33,544		70,465		65,261

Income before income taxes		22,717		13,468		41,952		30,041
Applicable income taxes		4,879		1,908		8,895		5,158

Net income	$	17,838	$	11,560	$	33,057	$	24,883

Average Shares Outstanding	69,129,387		64,455,920		69,237,454		62,614,372
Average Shares Outstanding Assuming Dilution	69,693,693		64,947,209		69,858,133		63,118,440
Per Share Data:
Basic earnings per share	$	0.26	$	0.18	$	0.48	$	0.40
Diluted earnings per share	$	0.26	$	0.18	$	0.47	$	0.39
Cash dividends per share	$	0.165	$	0.160	$	0.330	$	0.320

The accompanying notes are an integral part of these consolidated financial statements.
4

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 1. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income(Loss)		Treasury Stock		Unearned ESOP Shares		Total Shareholders' Equity

Balance December 31, 2003	$	63,704	$	79,581	$	312,261	$	15,173	$	(37,779)	$	(1,994)	$	430,946

Comprehensive income
Net income		-0-		-0-		24,883		-0-		-0-		-0-		24,883
Other comprehensive income, net of tax:
Unrealized holding losses on securities arising during the period		-0-		-0-		-0-		(18,414)		-0-		-0-		(18,414)
Less: reclassification adjustment for gains on securities included in net income		-0-		-0-		-0-		(2,580)		-0-		-0-		(2,580)
Unrealized holding losses on derivatives used in cash flow hedging relationship arising during the period		-0-		-0-		-0-		(152)		-0-		-0-		(152)

Total other comprehensive income (loss)		-0-		-0-		-0-		(21,146)		-0-		-0-		(21,146)

Total comprehensive income		‑0-		-0-		24,883		(21,146)		-0-		-0-		3,737

Cash dividends declared		-0-		-0-		(20,891)		-0-		-0-		-0-		(20,891)

Decrease in unearned ESOP shares		-0-		-0-		-0-		-0-		-0-		429		429

Discount on dividend reinvestment plan purchases		-0-		(393)		-0-		-0-		-0-		-0-		(393)

Treasury stock acquired		-0-		-0-		-0-		-0-		(514)		-0-		(514)

Treasury stock reissued		-0-		(973)		-0-		-0-		6,311		-0-		5,338

Tax benefit of stock options		-0-		291		-0-		-0-		-0-		-0-		291

Stock issued for acquisition		8,274		96,956		-0-		-0-		-0-		-0-		105,230

Balance at June 30, 2004	$	71,978	$	175,462	$	316,253	$	(5,973)	$	(31,982)	$	(1,565)	$	524,173

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 1. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Unearned ESOP Shares		Total Shareholders' Equity

Balance December 31, 2004	$	71,978	$	175,453	$	307,363	$	10,002	$	(26,643)	$	(6,175)	$	531,978

Comprehensive income
Net income		-0-		-0-		33,057		-0-		-0-		-0-		33,057
Other comprehensive income, net of tax:
Unrealized holding losses on securities arising during the period		-0-		-0-		-0-		(7,479)		-0-		-0-		(7,479)
Less: reclassification adjustment for gains on securities included in net income		-0-		-0-		-0-		(305)		-0-		-0-		(305)
Unrealized holding losses on derivatives used in cash flow hedging relationship arising during the period		-0-		-0-		-0-		(410)		-0-		-0-		(410)

Total other comprehensive income (loss)		-0-		-0-		-0-		(8,194)		-0-		-0-		(8,194)

Total comprehensive income		‑0-		-0-		33,057		(8,194)		-0-		-0-		24,863

Cash dividends declared		-0-		-0-		(23,078)		-0-		-0-		-0-		(23,078)

Net increase in unearned ESOP shares		-0-		-0-		-0-		-0-		-0-		(4,768)		(4,768)

Discount on dividend reinvestment plan purchases		-0-		(447)		-0-		-0-		-0-		-0-		(447)

Treasury stock reissued		-0-		(400)		-0-		-0-		1020		-0-		620

Tax benefit of stock options		-0-		(35)		-0-		-0-		-0-		-0-		(35)

Balance at June 30, 2005	$	71,978	$	174,571	$	317,342	$	1,808	$	(25,623)	$	(10,943)	$	529,133

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 1. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

		For the Six Months Ended June 30,

		2005		2004

Operating Activities
Net income....................................................	$	33,057	$	24,883
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses ................................		4,744		4,620
Depreciation and amortization...............................		5,394		4,006
Net gains on sales of assets................................		(1,296)		(3,961)
Net gain on sale of branch..................................		(3,090)		-0-
Net gain on sale of merchant services business..............		(1,991)		-0-
Income from increase in cash surrender value of bank owned life insurance...............................		(2,676)		(2,514)
Stock option tax benefit......................................		(35)		291
Changes, net of acquisition:
Decrease in interest receivable............................		166		1,205
Increase in interest payable...............................		1,334		623
Increase (decrease) in income taxes payable................		5,499		(3,367)
Net increase in loans held for sale........................		(1,644)		(210)
Change in deferred taxes...................................		(2,068)		(294)
Other-net..................................................		(2,881)		(7,647)

Net cash provided by operating activities.................		34,513		17,635

Investing Activities
Transactions with securities held to maturity:
Proceeds from sales.........................................		-0-		-0-
Proceeds from maturities and redemptions....................		6,519		19,565
Purchases...................................................		(16,178)		-0-
Transactions with securities available for sale:
Proceeds from sales.........................................		59,862		98,507
Proceeds from maturities and redemptions....................		213,882		470,560
Purchases...................................................		(164,351)		(592,462)
Proceeds from sales of other assets...........................		5,829		5,414
Proceeds from sale of merchant services business..............		2,000		-0-
Acquisition of affiliate, net of cash received................		-0-		(70,639)
Net decrease in time deposits with banks......................		1,215		38
Net increase in loans.........................................		(93,598)		(122,168)
Purchases of premises and equipment...........................		(8,347)		(3,837)

Net cash provided (used) by investing activities............		6,833		(195,022)

Financing Activities
Repayments of other long-term debt............................		(12,042)		(8,952)
Proceeds from issuance of other long-term debt................		37,803		50,000
Repayments of subordinated debentures.........................		-0-		(8,292)
Proceeds from issuance of subordinated debentures.............		-0-		41,238
Discount on dividend reinvestment plan purchases..............		(447)		(393)
Dividends paid................................................		(23,064)		(19,493)
Net increase in Federal funds purchased.......................		88,475		60,900
Net decrease in other short-term borrowings...................		(342,181)		(20,925)
Sale of branch and deposits, net of cash received.............		(12,143)		-0-
Net increase in deposits......................................		225,117		76,608
Proceeds from sale of treasury stock..........................		417		5,135

Net cash (used) provided by financing activities............		(38,065)		175,826

Net increase (decrease) in cash and cash equivalents........		3,281		(1,561)

Cash and cash equivalents at January 1........................		79,591		82,510

Cash and cash equivalents at June 30..........................	$	82,872	$	80,949

The accompanying notes are an integral part of these consolidated financial statements.

7

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 1 Management Representation

The consolidated financial statements include the accounts of First Commonwealth Financial Corporation and its subsidiaries ("First Commonwealth"). All significant intercompany transactions and balances have been eliminated. The accounting and reporting policies of First Commonwealth conform with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual realized amounts could differ from those estimates. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of financial position as of June 30, 2005, and the results of operations for the three month and six month periods ended June 30, 2005 and 2004, and statements of cash flows and changes in shareholders' equity for the six month periods ended June 30, 2005 and 2004.

The results of operations for the three month and six month periods ended June 30, 2005 and 2004, are not necessarily indicative of the results that may be expected for the full year or any other interim period. These interim financial statements should be read in conjunction with First Commonwealth's 2004 Annual Report on Form 10-K which is available on the First Commonwealth's website at http://www.fcbanking.com. First Commonwealth's website also provides additional information of interest to investors and clients, including other regulatory filings made to the Securities and Exchange Commission, press releases, historical stock prices, dividend declarations and corporate governance, as well as information about products and services offered through First Commonwealth's banking, insurance, trust and financial management subsidiaries.

NOTE 2 Cash Flow Disclosures (Dollar amounts in thousands)

	2005		2004

Cash paid during the first six months of the year for:

Interest	$	63,271	$	51,604
Income Taxes	$	5,500	$	8,528

Noncash investing and financing activities:

ESOP loan reductions	$	429	$	429
ESOP borrowings	$	5,197	$	-0-
Loans transferred to other real estate owned and repossessed assets	$	2,432	$	2,215
Gross increase (decrease) in market value adjustment to securities available for sale	$	(11,975)	$	(32,298)
Gross increase (decrease) in market value adjustment of derivative instruments	$	(631)	$	(234)
Treasury stock reissued for business combination	$	203	$	203

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 3 Comprehensive Income Disclosures

The following table identifies the related tax effects allocated to each component of other comprehensive income in the Statements of Changes in Shareholders' Equity (Dollar amounts in thousands):

	June 30, 2005						June 30, 2004

	Pre-tax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pre-tax Amount		Tax (Expense) Benefit		Net of Tax Amount

Unrealized losses on securities:
Unrealized holding losses arising during the period	$	(11,506)	$	4,027	$	(7,479)	$	(28,329)	$	9,915	$	(18,414)
Less: reclassification adjustment for gains realized in net income		(469)		164		(305)		(3,969)		1,389		(2,580)

Unrealized losses on derivatives used in cash flow hedging relationships:
Unrealized holding losses arising during the period		(631)		221		(410)		(234)		82		(152)

Other comprehensive income (loss)	$	(12,606)	$	4,412	$	(8,194)	$	(32,532)	$	11,386	$	(21,146)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 4 Accounting for Stock Options Granted

Prior accounting guidelines permit two alternate methods of accounting for stock-based compensation, the intrinsic value method of APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," and the fair value method of FASB Statement No. 123 ("FAS No. 123"), "Accounting for Stock-Based Compensation." In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 148 ("FAS No. 148"), "Accounting for Stock-Based Compensation-Transition and Disclosure." FAS No. 148 did not amend FAS No. 123 to require companies to account for employee stock options using the fair value method but required all companies with stock-based compensation to provide additional disclosures, regardless of whether they account for that compensation using the fair value method of FAS No. 123 or the intrinsic value method of APB 25. As permitted under FAS No. 123, First Commonwealth had elected to use the intrinsic value method to measure stock-based compensation under APB 25 and to disclose in a footnote to the financial statements, net income and earnings per share determined as if the fair value methodology of FAS No. 123 had been implemented.

No stock-based employee compensation expense is reflected in First Commonwealth's net income as reported in the Consolidated Statements of Income because all stock options granted under First Commonwealth's plan had an exercise price equal to the market value of the underlying common stock on the date of the grant.

In December 2004, the FASB issued Statement of Financial Accounting Standards No.123 (Revised) ("FAS No. 123(R)"), "Share-Based Payment." FAS No. 123(R) replaces FAS No. 123 and supersedes APB 25. FAS No. 123(R) will require companies to measure compensation costs for all share-based payments including employee stock options using the fair value method. FAS No. 123(R) applies to new awards and to awards modified, repurchased or cancelled after the required effective date. Public companies that used the fair value method for either recognition or disclosure under FAS No. 123, will apply FAS No. 123(R) using a modified prospective application. Under the modified prospective application, compensation cost is recognized on or after the required effective date for the portion of the outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under FAS No. 123 for either recognition or pro forma disclosures. For periods before the required effective date, those companies may elect to apply a modified retrospective application. Under the modified retrospective application method, financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by FAS No. 123. According to FAS No. 123(R), the grant-date fair value of stock options will be recognized as compensation expense in the company's income statement over the requisite service period or the vesting period. FAS No. 123(R) will become effective at the beginning of the next fiscal year that begins after June 15, 2005, or beginning on January 1, 2006. The adoption of FAS No. 123(R) is not expected to have a material impact on First Commonwealth's financial condition or results of operations.

10

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 4 Accounting for Stock Options Granted (continued)

The following tables illustrates the effect on net income and earnings per share if First Commonwealth had applied the fair value recognition provisions of FAS No. 123 to stock-based employee compensation (Dollar amounts in thousands, except per share data):

		Three months ended June 30,

		2005		2004

Net Income, as reported	$	17,838	$	11,560
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		-0-		-0-

Pro forma net income	$	17,838	$	11,560

Earnings per share:
Basic - as reported	$	0.26	$	0.18
Basic - pro forma	$	0.26	$	0.18
Diluted - as reported	$	0.26	$	0.18
Diluted - pro forma	$	0.26	$	0.18

Average shares outstanding	69,129,387		64,455,920
Average shares outstanding assuming dilution	69,693,693		64,947,209

		Six months ended June 30,

		2005		2004

Net Income, as reported	$	33,057	$	24,883
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(43)		(38)

Pro forma net income	$	33,014	$	24,845

Earnings per share:
Basic - as reported	$	0.48	$	0.40
Basic - pro forma	$	0.48	$	0.40
Diluted - as reported	$	0.47	$	0.39
Diluted - pro forma	$	0.47	$	0.39

Average shares outstanding	69,237,454		62,614,372
Average shares outstanding assuming dilution	69,858,133		63,118,440

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 5 Merger and Integration Charges

In the first six months of 2004, First Commonwealth recorded merger and integration charges totaling $2,164 thousand ($1,407 thousand, net of taxes). The merger and integration charges related to the acquisition of Pittsburgh Financial Corp. ("PFC"). The charges included $485 thousand related to the write-off of the unamortized capitalized costs for the subordinated debentures that were previously issued by PFC to Pittsburgh Home Capital Trust I and were called and paid off in January of 2004. Also included in the merger and integration charges were $1,679 thousand in salary and benefit severance expenses that were accrued during the first six months of 2004. The severance costs were for 25 employees whose positions were eliminated as part of the acquisition.

NOTE 6 Variable Interest Entities

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," and in December 2003, issued FIN 46 (Revised 2003) ("FIN 46R"). FIN 46R clarified some of the provisions of FIN 46 and exempted certain entities from the original requirements of FIN 46. As defined by FIN 46, a variable interest entity ("VIE") is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. Under FIN 46R, an entity that holds a variable interest in a VIE is required to consolidate the VIE if the entity is subject to a majority of the risk of loss from the VIE's activities, is entitled to receive a majority of the entity's residual returns or both.

As part of its community reinvestment initiatives, First Commonwealth invests in qualified affordable housing projects as a limited partner. First Commonwealth receives federal affordable housing tax credits and rehabilitation tax credits for these limited partnership investments. First Commonwealth's maximum potential exposure to these partnerships is $5,440 thousand, which consists of the limited partnership investments as of June 30, 2005. Based on FIN 46R, First Commonwealth has determined that these investments will not be consolidated but continue to be accounted for under the equity method whereby First Commonwealth's portion of partnership losses are recognized as incurred.

NOTE 7 Guarantees

Standby letters of credit are conditional commitments issued by First Commonwealth to guarantee the performance of a customer to a third party. The contract or notional amount of these instruments reflects the maximum amount of future payments that could be lost under the guarantees if there were a total default by the guaranteed parties without consideration of possible recoveries under recourse provisions or from collateral held or pledged. In addition, many of these commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements.

12

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 7 Guarantees (continued)

The table below identifies the notional amounts of these guarantees at June 30, 2005 (Dollar amounts in thousands):

Financial standby letters of credit	$	17,232
Performance standby letters of credit	$	4,724

The current notional amounts outstanding above include financial standby letters of credit of $507 thousand and performance standby letters of credit of $1,377 thousand issued during the first six months of 2005. There is currently no liability recorded on First Commonwealth's balance sheet related to the above letters of credit.

NOTE 8 Branch Sale

In June 2005, First Commonwealth Bank, a wholly owned subsidiary of First Commonwealth Financial Corporation, sold a branch office located in State College, PA. Under the terms of the purchase and assumption agreement, Clearfield Bank and Trust Company assumed $17.6 million of deposit liabilities associated with the office. The transaction generated a pre-tax gain of approximately $3.1 million that included the premium on deposits and the gain on the sale of premises and equipment. The gain is included in First Commonwealth's consolidated income statement for the second quarter of 2005.

NOTE 9 Merchant Services Sale

In April 2005, First Commonwealth completed an asset sale and merchant processing alliance with First Data Corporation ("First Data"). Under the terms of the agreement, First Data acquired certain assets of First Commonwealth's merchant processing business and will provide merchant payment processing services on behalf of First Commonwealth Bank. First Commonwealth Bank will participate in future revenue related to both the existing book of merchant business as well as new business. The transaction generated a pre-tax gain of $2.0 million that is included in First Commonwealth's consolidated income statement for the second quarter of 2005.

NOTE 10 Subsequent Event

In July 2005, Johnston A. Glass, an Executive Officer of First Commonwealth, executed his rights under a previously disclosed employment contract. First Commonwealth is expected to accrue expenses of $700.3 thousand during the third quarter of 2005. In addition to payments to Mr. Glass, this amount includes First Commonwealth's portion of hospitalization costs and employer payroll taxes. Under terms of the agreement, payments will begin within 90 days and will follow First Commonwealth's normal payroll cycle for a period of 24 months.

13

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 11 Post Retirement Benefit Plan of Acquired Company

Employees of the former Southwest Bank and GA Financial, Inc. were covered by a post retirement benefit plan. The net periodic benefit cost of this plan for the quarter ended June 30 was as follows (Dollar amounts in thousands):

		2005		2004

Service cost	$	-0-	$	-0-
Interest cost on projected benefit obligation		55		70
Amortization of transition obligation		-0-		-0-
(Gain) Loss amortization		-0-		21

Net periodic benefit cost	$	55	$	91

The net periodic benefit cost of this plan for the six months ended June 30 was as follows (Dollar amounts in thousands):

		2005		2004

Service cost	$	-0-	$	-0-
Interest cost on projected benefit obligation		110		141
Amortization of transition obligation		1		1
(Gain) Loss amortization		(1)		42

Net periodic benefit cost	$	110	$	184

This is an unfunded post retirement plan. Future payments will only consist of benefit payments for life and health insurance premiums for plan participants.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") introduced a prescription drug benefit under Medicare Part D. The Act also introduced a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare Part D. The postretirement plans of First Commonwealth are provided through insurance coverage; therefore, First Commonwealth will not receive a direct federal subsidy. The preceding measure of the net periodic postretirement benefit cost assumes that the insurer will receive the subsidy and pass those savings onto First Commonwealth through reduced insurance premiums.

14

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 12 New Accounting Pronouncements

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on the remaining issues related to Emerging Issues Task Force Issue 03-1 ("EITF 03-1"), "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." This guidance is applicable to debt and equity securities that are within the scope of the FASB Statement of Financial Accounting Standards No. 115 ("FAS No. 115") and certain other investments. EITF 03-1 provides clarification guidance to determine when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. The guidance also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments.

In September 2004, the FASB issued FASB Staff Position No. EITF Issue 03-1-1 ("FSP EITF 03-1-1"), "Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments"." FSP EITF 03-1-1 delayed the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF 03-1 from reporting periods beginning after June 15, 2004, until implementation guidance is issued. This delay did not suspend the requirement to recognize other-than-temporary impairments as required by existing authoritative literature. Also in September 2004, the FASB issued the proposed FASB Staff Position No. EITF Issue 03-1-a ("FSP EITF 03-1-a"), "Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1." FSP EITF 03-1-a was intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. On June 29, 2005, FASB gave direction that the proposed FSP Issue 03-1-a be issued as final thus nullifying paragraphs 10-18 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect First Commonwealth.

In December 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-3 ("SOP 03-3"), "Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP 03-3 requires acquired loans, including debt securities, to be recorded at the amount of the purchaser's initial investment and prohibits carrying over valuation allowances from the seller for those individually-evaluated loans that have evidence of deterioration in credit quality since origination, where it is probable that all contractual cash flows on the loan will be unable to be collected. SOP 03-3 also requires the excess of all undiscounted cash flows expected to be collected at acquisition over the purchaser's initial investment to be recognized as interest income on a level-yield basis over the life of the loan. Subsequent increases in cash flows expected to be collected are recognized prospectively through an adjustment of the loan's yield over its remaining life, while subsequent decreases are recognized as impairment. Loans carried at fair value, mortgage loans held for sale, and loans to borrowers in good standing under revolving credit agreements are excluded from the scope of SOP 03-3. This guidance was effective for loans acquired in fiscal years beginning after December 15, 2004 and did not have a material impact on First Commonwealth's financial condition or results of operations.

15

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE 12 New Accounting Pronouncements (continued)

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 ("FAS No. 154"), "Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No.3." As it states in the title, FAS No. 154 replaces APB Opinion No. 20, "Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements." FAS No. 154 applies to all voluntary changes in accounting principle and changes the requirements for the accounting for and reporting of a change in accounting principle. Unlike APB Opinion No. 20, FAS No. 154 requires changes in accounting principle to have retrospective application to the financial statements from prior periods to which the change applies unless it is impracticable. FAS No. 154 will be effective for accounting changes and corrections of errors that will be made in fiscal years beginning after December 31, 2005. First Commonwealth does not expect the implementation of FAS No. 154 to have a material impact on its financial condition and results of operations.

16

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and results of operations of First Commonwealth Financial Corporation including its subsidiaries ("First Commonwealth"). In addition to historical information, this discussion and analysis, 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," and similar 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, First Commonwealth'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. First Commonwealth undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

First Six Months of 2005 as Compared to the First Six Months of 2004

Net income for the first six months of 2005 and 2004 was $33.1 million and $24.9 million, respectively. Basic and diluted earnings per share were $0.48 and $0.47, respectively, for the first six months of 2005 and $0.40 and $0.39, respectively, for the same period of 2004.

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

Net income per share, prior year	$	0.39

Increase (decrease) from changes in:
Net interest income		0.08
Provision for credit losses		0.01
Security transactions		(0.06)
Gain on sale of branch		0.04
Gain on sale of merchant services business		0.03
Card related interchange income		0.01
Salaries and employee benefits		0.02
Net occupancy expense		(0.01)
Intangible amortization		(0.01)
Merger and integration charges		0.03
Other operating expenses		(0.01)
Applicable income taxes		(0.05)

Net income per share	$	0.47

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

Return on average assets was 1.07% and return on average equity was 12.51% for the first six months of 2005 compared to 0.92% and 10.90%, respectively, for the first six months of 2004.

Net Interest Income

Net interest income, the most significant component of earnings, is the amount by which interest income generated from earning assets exceeds interest expense on liabilities. Net interest income increased $13.3 million for the first six months of 2005 compared to the first six months of 2004 as average interest-earning assets increased by $661.0 million or 13.0% compared to 2004 averages.

Net interest margin (net interest income, on a fully tax-equivalent basis, as a percentage of average earning assets) was 3.34% for the first six months of 2005 compared to 3.21% for the same period of 2004 as earning asset yields increased faster than funding costs. The yield on interest-earning assets (on a fully tax-equivalent basis) increased 34 basis points to 5.61%, while the cost of funds increased 18 basis points to 2.52%.

The following is an analysis of the average balance sheets and net interest income for the six months ended June 30 (Dollar amounts in thousands):

	Average Balance Sheets and Net Interest Analysis

	2005						2004

	Average Balance		Income/ Expense		Yield or Rate(a)		Average Balance		Income/ Expense		Yield or Rate(a)

Assets
Interest-earning assets:
Time deposits with banks	$	854	$	14		3.25%	$	4,530	$	15		0.68%
Tax free investment securities		274,188		6,182		7.00		233,591		5,373		7.12
Taxable investment securities		1,898,552		39,568		4.20		1,867,073		36,615		3.94
Federal funds sold		8,255		124		3.02		536		2		0.90
Loans, net of unearned income (b)(c)		3,568,436		107,289		6.25		2,983,534		85,465		5.96

Total interest-earning assets		5,750,285		153,177		5.61		5,089,264		127,470		5.27

Noninterest-earning assets:
Cash		80,050						69,614
Allowance for credit losses		(41,720)						(39,026)
Other assets		428,366						300,340

Total noninterest- earning assets		466,696						330,928

Total Assets	$	6,216,981					$	5,420,192

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

	2005						2004

	Average Balance		Income/ Expense		Yield or Rate(a)		Average Balance		Income/ Expense		Yield or Rate(a)

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	561,231	$	2,099		0.75%	$	515,461	$	821		0.32%
Savings deposits (d)		1,301,972		8,538		1.32		1,010,482		4,701		0.94
Time deposits		1,594,207		24,944		3.16		1,456,102		21,939		3.03
Short-term borrowings		868,478		11,425		2.65		656,971		3,625		1.11
Long-term debt		849,060		17,599		4.18		853,971		21,142		4.98

Total interest-bearing liabilities		5,174,948		64,605		2.52		4,492,987		52,228		2.34

Noninterest-bearing
liabilities and capital:
Noninterest-bearing demand deposits (d)		483,214						426,919
Other liabilities		26,017						41,004
Shareholders' equity		532,802						459,282

Total noninterest- bearing funding sources		1,042,033						927,205

Total Liabilities and Shareholders' Equity	$	6,216,981					$	5,420,192

Net Interest Income and Net Yield on Interest-Earning Assets			$	88,572		3.34%			$	75,242		3.21%

(a)	Yields on interest-earning assets have been computed on a tax equivalent basis using the 35% Federal income tax statutory rate.
(b)	Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets.
(c)	Loan income includes net loan fees.
(d)	Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits which were made for regulatory purposes.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

The following table shows the effect of changes in volumes and rates on interest income and interest expense (Dollar amounts in thousands):

	Analysis of Changes in Net Interest Income

	2005 Change From 2004

	Total Change		Change Due To Volume		Change Due To Rate (a)
Interest-earning assets:
Time deposits with banks	$	(1)	$	(12)	$	11
Tax free investment securities		809		1,437		(628)
Taxable investment securities		2,953		617		2,336
Federal funds sold		122		35		87
Loans		21,824		17,334		4,490

Total interest income		25,707		19,411		6,296

Interest-bearing liabilities:
NOW and super NOW accounts		1,278		73		1,205
Savings and MMDA accounts		3,837		1,356		2,481
Time deposits		3,005		2,081		924
Short-term borrowings		7,800		1,167		6,633
Long-term debt		(3,543)		(122)		(3,421)

Total interest expense		12,377		4,555		7,822

Net interest income	$	13,330	$	14,856	$	(1,526)

(a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances due to interest sensitivity of consolidated assets and liabilities.

Interest and fees on loans increased $21.8 million for the first six months of 2005 compared to 2004 levels as the average balance of loans increased by $584.9 million or 19.6%. This increase is due in large part to the inclusion of GA Financial, Inc. assets for the entire 2005 period. Loan yields increased 29 basis points (0.29%) for the first six months of 2005 compared to the same period of 2004. First Commonwealth has continued to capitalize on lending opportunities with small to mid-sized commercial borrowers, including loans generated through its preferred Small Business Administration ("SBA") lender status. First Commonwealth has consistently been one of the top small business lenders in Pennsylvania.

20

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

Interest income on investments increased $3.8 million for the first six months of 2005 compared to the same period of 2004. The increase was due to volume increases as well as increases in interest yields. Average investments increased $72.1 million for the first six months of 2005 compared to the same period of 2004. The overall increase was due to the acquisition of GA Financial, Inc. The most significant increase was in U.S. government agency securities, which increased $60.6 million, and state and municipal securities, which increased $38.6 million. These increases were slightly offset by decreases in corporate bonds and equity securities. The total yield on investments was 4.56% for the first six months of 2005 compared to 4.30% for the same period of 2004.

Interest expense on deposits increased $8.1 million for the first six months of 2005 compared to the same period of 2004. Deposit costs were 1.82% for the first six months of 2005 compared to 1.62% for the first six months of 2004, an increase of 20 basis points (0.20%). During its management of deposit levels and mix, First Commonwealth continues to evaluate the cost of time deposits compared to alternative funding sources as it balances its goals of providing clients with the competitive rates they are looking for while also minimizing First Commonwealth's cost of funds.

Interest expense on short-term borrowings increased $7.8 million for the first six months of 2005 compared to the same period of 2004 as a result of increases due to volume and increasing interest rates. The average balance of short-term borrowings for the first half of 2005 increased $211.5 million over averages for the prior year. The 2005 period includes an increase due to the inclusion of short-term borrowings that were acquired with the GA Financial, Inc. acquisition on May 24, 2004. The 2005 period also includes an increase in short-term borrowings which were used to replace a portion of the $440 million of long-term FHLB advances that were paid in the third quarter of 2004 prior to their maturity. The cost of short-term borrowings for the 2005 period increased by 154 basis points (1.54%) compared to 2004 costs of 1.11%. This rate increase accounted for $6.6 million of the total increase of $7.8 million in interest expense on short-term borrowings.

Interest expense on long-term debt decreased $3.5 million for the first half of 2005 compared to the corresponding period of 2004, primarily as a result of decreases in interest rates. The yields on long-term debt were favorably impacted by First Commonwealth's repositioning of borrowings after the prepayment of Federal Home Loan Bank advances during the third quarter of 2004. Yields on long-term debt for the first six months of 2005 decreased by 80 basis points (0.80%) compared to the first six months of 2004. First Commonwealth continues to analyze its exposure to any concentration of maturities of long-term debt in any one year and the associated risks.

21

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

Provision for Credit Losses

The provision for credit losses is an amount added to the allowance against which credit losses are charged. The amount of the provision is determined by management based upon its assessment of the size and quality of the loan portfolio and the adequacy of the allowance in relation to the risks inherent within the loan portfolio. The provision for credit losses was $4.7 million for the first six months of 2005 compared to $4.6 million for the same period of 2004. Although net charge-offs against the allowance for credit losses increased by $79 thousand for the first six months of 2005 compared to the same period of 2004, net charge-offs as a percentage of average loans (annualized) improved to 0.25% for the 2005 period from 0.29% for 2004. Increases in net charge-offs for commercial loans and residential real estate secured loans in the 2005 period were partially offset by decreases in loans to individuals and leases. The provision for credit losses as a percentage of net charge-offs was 107.74% at June 30, 2005, compared to 106.85% at June 30, 2004. See the "Credit Review" section for any analysis of the quality of the loan portfolio.

Below is an analysis of the consolidated allowance for credit losses for the six month periods ended June 30, 2005 and 2004 (Dollar amounts in thousands):

		2005		2004


Balance January 1,	$	41,063	$	37,385
Addition as result of acquisition		-0-		4,983
Loans charged off:
Commercial, financial and agricultural		2,232		2,343
Real estate-commercial		518		383
Real estate-residential		1,164		652
Loans to individuals		1,086		1,456
Lease financing receivables		40		141

Total loans charged off		5,040		4,975

Recoveries of previously charged off loans:
Commercial, financial and agricultural		301		432
Real estate-commercial		-0-		-0-
Real estate-residential		83		7
Loans to individuals		253		212
Lease financing receivables		-0-		-0-

Total recoveries		637		651

Net charge offs		4,403		4,324

Provision charged to operations		4,744		4,620

Balance June 30,	$	41,404	$	42,664

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

Noninterest Income

Net securities gains were $485 thousand during the first six months of 2005 compared to $4.0 million during the first six months of 2004, a decrease of $3.5 million between the two periods. Gains were largely due to sales of Pennsylvania bank stocks.

Service charges on deposits are First Commonwealth's most significant component of noninterest fee income and increased $589 thousand for the first half of 2005 compared to the corresponding period of 2004. Nonsufficient funds (or "NSF") fees continue to be the driver of the growth in service charges on deposits. NSF fees increased $706 thousand for the first half of 2005 as compared to the same period of 2004. The increase in NSF fees is due to the continuing growth of the High Performance Checking products for consumer and business clients as well as the inclusion of GA Financial, Inc. The increase in NSF fees was partially offset by decreases in account analysis and account maintenance fees. Management strives to implement reasonable fees for services and closely monitors collection of those fees.

The 2005 period included a $3.1 million pre-tax gain on the sale of a branch office ($2.0 million after tax). The gain occurred in the second quarter of 2005 as First Commonwealth Bank, a wholly-owned subsidiary of First Commonwealth, sold a branch located in State College, PA. The sale included $17.6 million in deposit liabilities associated with the office. The branch sale was part of First Commonwealth's continuing branch optimization initiative to increase penetration in the higher growth Pittsburgh regional markets. First Commonwealth opened two de novo branch offices in Washington County, one of the Pittsburgh region's fastest growing counties, late in the first quarter of 2005. First Commonwealth expects to construct or renovate a total of nine new branch offices in 2005, as compared to the four in 2004. These new branch offices include three relocations, two renovations and four de novo offices. First Commonwealth opened a new branch office in July 2005 at Pittsburgh Mills in Tarentum, western Pennsylvania's newest and largest commercial retail real estate development project.

The 2005 period also included a pre-tax gain of $2.0 million ($1.3 million after tax) on the sale of First Commonwealth's merchant services business to First Data Corporation ("First Data"). First Commonwealth recently entered into an asset sale and merchant processing alliance with First Data. Under the terms of the agreement, First Data acquired certain assets of First Commonwealth's merchant processing business and will provide merchant payment processing services on behalf of First Commonwealth Bank. First Commonwealth Bank will participate in future revenue related to both the existing book of merchant business as well as new business.

23

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

Card related interchange income increased during the first six months of 2005 compared to the same period of 2004. Card related interchange income includes income on debit, credit and ATM cards that are issued to consumers and/or businesses. The increase was due in part to the inclusion of GA Financial, Inc. The card related interchange income growth was favorably affected by additional volume related to card usage and the migration of business accounts from the consumer debit card product. The business debit card product pays a higher rate than the consumer debit card. Increases in other income were primarily related to gains on the sale of student loans and other real estate owned.

Noninterest Expense

Noninterest expense was $70.5 million for the first six months of 2005 reflecting an increase of $5.2 million from the 2004 level of $65.3 million. The most significant component of the increase during the 2005 period was salaries and employee benefit costs which increased $2.3 million or 6.8%. The increase was due in large part to an increase in the number of employees as a result of the acquisition of GA Financial, Inc. Full time equivalent employees were 1,621 as of the end of the first quarter of 2005 compared to 1,460 for the same time in 2004. This compares to full time equivalent employees of 1,652 and 1,661 at the end of the second quarter of 2005 and 2004, respectively. Salaries accounted for $2.0 million of the increase while employee benefit costs rose $355 thousand for the first half of 2005. First Commonwealth continues to evaluate its current menu of employee benefits to provide a competitive benefits package while also managing costs.

Net occupancy expense increased $1.4 million for the first six months of 2005 over 2004 levels. The increase is due in part to the inclusion of GA Financial, Inc. The most significant increases were in building repairs and maintenance and depreciation on leasehold improvements. During the first quarter of 2005, First Commonwealth Bank opened two new full-service community offices in Washington County. First Commonwealth continues to actively evaluate its branch delivery network to optimize client service in existing branches and to continue expansion into growth markets. The execution of these initiatives may impact occupancy and other expenses in future periods.

Increases in other noninterest expenses in the first half of 2005 were in large part due to the addition of GA Financial, Inc. Increases were recorded for intangible amortization ($819 thousand), furniture and equipment expense ($403 thousand), PA shares tax expense ($229 thousand) and data processing expense ($194 thousand).

24

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

First Six Months of 2005 as Compared to the First Six Months of 2004
(continued)

The merger and integration expenses that were incurred during the first six months of 2004 included $485 thousand related to the write-off of the unamortized capitalized costs for the subordinated debentures that were previously issued by PFC to Pittsburgh Home Capital Trust I and were called and paid off in January of 2004. In addition, the merger related expenses included $1.7 million of severance related salary and benefit expenses that were accrued during the first half of 2004 and were related to the integration of PFC into First Commonwealth.

Other operating expenses for the 2005 period were $17.4 million reflecting an increase of $2.1 million from the 2004 amount. The first half of 2005 included increases in advertising costs, other professional fees and telephone and data line expenses. The advertising expense increase was due in large part to new promotions for a variety of deposit and loan products as well as advertising related to branding efforts at the new and renovated offices. The increase in other professional services is due in part to the use of a consultant to provide targeted marketing services. The increase in telephone and data line charges was largely due to the acquisition of GA Financial, Inc.

Income tax expense increased $3.7 million for the first half of 2005 compared to the first half of 2004. First Commonwealth's effective tax rate was 21.2% for the first six months of 2005 compared to 17.2% for the corresponding period of 2004. Tax expense for the first half of 2004 was positively impacted by higher tax-exempt income and tax credits as a percent of pretax income as compared to the corresponding 2005 period.

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004

Net income for the second quarter of 2005 and 2004 was $17.8 million and $11.6 million, respectively. Basic and diluted earnings per share were $0.26 for the second quarter of 2005 and $0.18 for the same period of 2004.

Return on average assets was 1.15% and return on average equity was 13.55% for the second quarter of 2005 compared to 0.82% and 9.76%, respectively, for the second quarter of 2004.

25

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

Net Interest Income

Net interest income, the most significant component of earnings, is the amount by which interest income generated from earning assets exceeds interest expense on liabilities. Net interest income increased $5.2 million for the second quarter of 2005 compared to the second quarter of 2004 as average earning assets for the quarter increased by $469.8 million or 8.9% compared to 2004 averages.

Net interest margin (net interest income, on a fully tax-equivalent basis, as a percentage of average earning assets) was 3.28% for the second three months of 2005 compared to 3.15% for the same period of 2004 as earning asset yields increased faster than funding costs. The yield on interest-earning assets (on a fully tax-equivalent basis) increased 43 basis points to 5.64%, while the cost of funds increased 30 basis points to 2.62%.

The following is an analysis of the average balance sheets and net interest income for the three months ended June 30 (Dollar amounts in thousands):

	Average Balance Sheets and Net Interest Analysis

	2005						2004

	Average Balance		Income/ Expense		Yield or Rate(a)		Average Balance		Income/ Expense		Yield or Rate(a)

Assets
Interest-earning assets:
Time deposits with banks	$	746	$	7		3.46%	$	4,186	$	7		0.65%
Tax free investment securities		277,395		3,129		6.96		236,987		2,728		7.12
Taxable investment securities		1,873,475		19,586		4.19		1,926,412		18,682		3.90
Federal funds sold		15,768		120		3.04		799		1		0.90
Loans, net of unearned income (b)(c)		3,593,934		54,698		6.30		3,123,093		44,080		5.87

Total interest-earning assets		5,761,318		77,540		5.64		5,291,477		65,498		5.21

Noninterest-earning assets:
Cash		81,091						72,689
Allowance for credit losses		(41,419)						(40,158)
Other assets		433,934						343,857

Total noninterest- earning assets		473,606						376,388

Total Assets	$	6,234,924					$	5,667,865

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

	2005						2004

	Average Balance		Income/ Expense		Yield or Rate (a)		Average Balance		Income/ Expense		Yield or Rate (a)

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	560,321	$	1,150		0.82%	$	528,701	$	422		0.32%
Savings deposits (d)		1,341,923		4,892		1.46		1,091,098		2,606		0.96
Time deposits		1,607,808		13,037		3.25		1,469,796		10,923		2.99
Short-term borrowings		821,458		5,867		2.86		680,148		1,890		1.12
Long-term debt		859,624		8,954		4.18		917,027		11,222		4.92

Total interest-bearing liabilities		5,191,134		33,900		2.62		4,686,770		27,063		2.32

Noninterest-bearing
liabilities and capital:
Noninterest-bearing demand deposits (d)		487,724						447,765
Other liabilities		27,856						56,787
Shareholders' equity		528,210						476,543

Total noninterest- bearing funding sources		1,043,790						981,095

Total Liabilities and Shareholders' Equity	$	6,234,924					$	5,667,865

Net Interest Income and Net Yield on Interest-Earning Assets			$	43,640		3.28%			$	38,435		3.15%

(a)	Yields on interest-earning assets have been computed on a tax equivalent basis using the 35% Federal income tax statutory rate.
(b)	Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets.
(c)	Loan income includes net loan fees.
(d)	Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits which were made for regulatory purposes.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

The following table shows the effect of changes in volumes and rates on interest income and interest expense (Dollar amounts in thousands):

	Analysis of Changes in Net Interest Income

	2005 Change From 2004

	Total Change		Change Due To Volume		Change Due To Rate (a)
Interest-earning assets:
Time deposits with banks	$	-0-	$	(6)	$	6
Tax free investment securities		401		715		(314)
Taxable investment securities		904		(513)		1,417
Federal funds sold		119		33		86
Loans		10,618		6,873		3,745

Total interest income		12,042		7,102		4,940

Interest-bearing liabilities:
NOW and super NOW accounts		728		25		703
Savings and MMDA accounts		2,286		599		1,687
Time deposits		2,114		1,026		1,088
Short-term borrowings		3,977		393		3,584
Long-term debt		(2,268)		(703)		(1,565)

Total interest expense		6,837		1,340		5,497

Net interest income	$	5,205	$	5,762	$	(557)

(a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances due to interest sensitivity of consolidated assets and liabilities.

Interest and fees on loans increased $10.6 million for the second quarter of 2005 compared to 2004 levels as the quarter-to-date average balance of loans increased by $470.8 million or 15.1%. This increase is due in part to the inclusion of GA Financial, Inc. assets for the full quarter of 2005 compared to part of the quarter for 2004. Loan yields increased 43 basis points (0.43%) for the second quarter of 2005 compared to the same period of 2004.

Interest income on investments increased $1.3 million for the second quarter of 2005 compared to the same period of 2004. The increase was due in large part to increases in interest yields. The total yield on investments was 4.55% for the second quarter of 2005 compared to 4.25% for the same period of 2004, an increase of 30 basis points (0.30%).

28

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

Interest expense on deposits increased $5.1 million for the second quarter of 2005 compared to the same period of 2004. Deposit costs were 1.91% for the second quarter of 2005 compared to 1.59% for the second quarter of 2004, an increase of 32 basis points (0.32%). Increases in volume were recorded for all deposit categories for the second quarter of 2005 compared to the same period of 2004.

Interest expense on short-term borrowings increased $4.0 million for the second quarter of 2005 compared to the same period of 2004 as a result of increases due to volume and increasing interest rates. The average balance of short-term borrowings for the second quarter of 2005 increased $141.3 million over averages for the prior year. The 2005 period includes an increase due to the inclusion of short-term borrowings that were acquired with the GA Financial, Inc. acquisition on May 24, 2004. The 2005 period also includes an increase in short-term borrowings which were used to replace a portion of the $440 million of long-term FHLB advances that were paid in the third quarter of 2004 prior to their maturity. The cost of short-term borrowings for the 2005 period increased by 174 basis points (1.74%) compared to 2004 costs of 1.12%. This rate increase accounted for $3.6 million of the total increase of $4.0 million in interest expense on short-term borrowings.

Interest expense on long-term debt decreased $2.3 million for the second quarter of 2005 compared to the corresponding period of 2004, due in large part to decreases in interest rates. The yields on long-term debt were favorably impacted by First Commonwealth's repositioning of borrowings after the prepayment of Federal Home Loan Bank advances during the third quarter of 2004. Yields on long-term debt for the second quarter of 2005 decreased by 74 basis points (0.74%) compared to the second quarter of 2004. Average long-term debt for the second quarter of 2005 decreased by $57.4 million compared to 2004 averages.

Provision for Credit Losses

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

Noninterest Income

There were no securities gains or losses in the second quarter of 2005. The second quarter of 2004 included net securities gains of $145 thousand. Gains were largely due to sales of Pennsylvania bank stocks, but also included gains from the sale of tax-free municipal securities.

Service charges on deposits continue to be First Commonwealth's most significant component of noninterest fee income and increased $249 thousand for the second quarter of 2005 compared to the corresponding period of 2004. An increase of $383 thousand in nonsufficient funds (or "NSF") fees was recorded for the second quarter of 2005 as compared to the second quarter of 2004.

The second quarter of 2005 included a $3.1 million pre-tax gain on the sale of a branch office ($2.0 million after tax). The gain occurred when First Commonwealth Bank, a wholly-owned subsidiary of First Commonwealth, sold a branch located in State College, PA. The sale included $17.6 million in deposit liabilities associated with the office.

The second quarter of 2005 also included a pre-tax gain of $2.0 million ($1.3 million after tax) on the sale of First Commonwealth's merchant services business to First Data Corporation ("First Data"). First Commonwealth recently entered into an asset sale and merchant processing alliance with First Data. Under the terms of the agreement, First Data acquired certain assets of First Commonwealth's merchant processing business and will provide merchant payment processing services on behalf of First Commonwealth Bank. First Commonwealth Bank will participate in future revenue related to both the existing book of merchant business as well as new business.

Other changes in noninterest income during the second quarter of 2005 compared to the same period of 2004 include an increase in card related interchange income in the amount of $326 thousand, an increase in gains on the sale of student loans and an increase in the gain on the sale of other real estate owned. Card related interchange income includes income on debit, credit and ATM cards that are issued to consumers and/or businesses. The card related interchange income growth was favorably affected by additional volume related to card usage and the migration of business accounts from the consumer debit card product.

30

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (continued)

Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004 (continued)

Noninterest Expense

Total noninterest expense for the three months ended June 30, 2005 was $35.1 million reflecting an increase of $1.5 million from the same period of 2004. The most significant increase during the 2005 period was salaries and employee benefit costs which increased $723 thousand or 4.2%. Salaries accounted for $633 thousand of the increase while employee benefit costs rose $90 thousand.

Net occupancy expense increased $550 thousand for the second quarter of 2005 over 2004 levels. This increase was due in part to the inclusion of GA Financial, Inc. for all of the 2005 period. The most significant increase was recorded in building repairs and maintenance.

Increases in other noninterest expenses in the second quarter of 2005 compared to the same period for 2004 were primarily due to the addition of GA Financial, Inc. Increases were recorded for intangible amortization ($328 thousand), PA shares tax expense ($97 thousand), data processing expense ($68 thousand), and furniture and equipment expense ($54 thousand).

Merger and integration charges were $873 thousand for the second quarter of 2004 and included severance related salary and benefit expenses that were accrued during the second quarter of 2004 due to the integration of PFC into the Corporation.

Other operating expenses for the second quarter of 2005 were $9.0 million reflecting an increase of $581 thousand from the 2004 amount of $8.4 million. The second quarter of 2005 included increases in advertising costs and other professional fees in the amounts of $300 thousand and $242 thousand, respectively. Advertising expense increases are due in large part to new promotions for a variety of deposit and loan products as well as advertising related to branches that have been newly re-built, remodeled or acquired. The increase in other professional services is due in part to the use of a consultant to provide targeted marketing services.

Income tax expense increased $3.0 million for the second quarter of 2005 compared to the second quarter of 2004. First Commonwealth's effective tax rate was 21.5% for the second quarter of 2005 compared to 14.2% for the corresponding period of 2004. Tax expense for the second quarter of 2004 was positively impacted by an increase in tax-exempt income and tax credits.

31

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY

Liquidity is a measure of First Commonwealth's ability to efficiently meet normal cash flow requirements of both borrowers and depositors. In the ordinary course of business, funds are generated from the banking subsidiary's core deposit base and the maturity or repayment of earning assets, such as securities and loans. As an additional secondary source, short-term liquidity needs may be provided through the use of overnight Federal funds purchased, borrowings through the use of lines available for repurchase agreements and borrowings from the Federal Reserve Bank.

Additionally, First Commonwealth's banking subsidiary is a member of the Federal Home Loan Bank and may borrow under overnight and term borrowing arrangements. The sale of earning assets may also provide a source of liquidity, and First Commonwealth has the ability to access the capital markets.

Liquidity risk stems from the possibility that First Commonwealth may not be able to meet current or future financial obligations or may become overly reliant on alternative funding sources. First Commonwealth maintains a liquidity management policy to manage this risk. This policy identifies the primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity requirements based on board approved limits. The policy also includes a liquidity contingency plan to address funding needs to maintain liquidity under a variety of business conditions. First Commonwealth's liquidity position is monitored by the Asset/Liability Management Committee ("ALCO").

First Commonwealth's long-term liquidity source is a large core deposit base and a strong capital position. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. The following table shows a breakdown of the components of Fist Commonwealth's interest-bearing deposits as of June 30, 2005 and December 31, 2004:

		June 30, 2005		December 31, 2004

NOW and Super NOW accounts	$	96,868	$	92,168
Savings and MMDA accounts		1,835,734		1,703,258
Time deposits		1,617,265		1,568,206

Total interest-bearing deposits	$	3,549,867	$	3,363,632

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY (continued)

Total deposits increased $207.5 million for the first six months of 2005. Noninterest-bearing deposits increased $21.3 million, while interest-bearing deposits increased $186.2 million with the largest increases being recorded in the savings deposit category. Savings deposit increases were due in large part to a First Commonwealth promotion that ran from February through May of 2005 and offered clients a specially priced savings account. Although an increase was recorded in total time deposits, $25 million in Brokered CD's matured during March 2005 but were not renewed.

At June 30, 2005, total interest-earning assets were $5,731.8 million, compared to $5,757.7 million recorded at December 31, 2004. The following table shows a breakdown of loans by categories as of June 30, 2005 and December 31, 2004:

		June 30, 2005		December 31, 2004

Commercial, financial, agricultural and other	$	751,592	$	715,280
Real estate loans:
Construction and land development		75,629		71,351
1-4 family dwellings		1,188,996		1,164,707
Other real estate		986,507		988,611
Loans to individuals for household, family and other personal expenditures		590,983		562,321
Leases, net of unearned income		7,770		12,815

Subtotal		3,601,477		3,515,085
Unearned income		(163)		(252)

Totals loans and leases	$	3,601,314	$	3,514,833

First Commonwealth's auto lease portfolio continues to decline since the discontinuation of its automobile leasing activities during 2003.

Marketable securities that First Commonwealth holds in its investment portfolio are an additional source of liquidity. These securities are classified as "securities available for sale" and while First Commonwealth does not have specific intentions to sell these securities they have been designated as "available for sale" because they may be sold for the purpose of obtaining future liquidity, for management of interest rate risk or as part of the implementation of tax management strategies. As of June 30, 2005, securities available for sale had an amortized cost of $2,042.5 million and an approximate fair value of $2,041.4 million.

33

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Interest Sensitivity

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, currency exchange rates or equity prices. First Commonwealth's market risk is composed primarily of interest rate risk. Interest rate risk results principally from timing differences in the repricing of assets and liabilities, changes in the relationship of rate indices and the potential exercise of free standing or embedded options.

The objective of interest rate sensitivity management is to maintain an appropriate balance between the stable growth of income and the risks associated with maximizing income through interest sensitivity imbalances. While no single number can accurately describe the impact of changes in interest rates on net interest income, interest rate sensitivity positions, or "gaps," when measured over a variety of time periods, can be informative.

An asset or liability is considered to be interest-sensitive if the rate it yields or bears is subject to change within a predetermined time period. If interest-sensitive assets ("ISA") exceed interest-sensitive liabilities ("ISL") during the prescribed time period, a positive gap results. Conversely, when ISL exceed ISA during a time period, a negative gap results.

The cumulative gap at the 365 day repricing period was negative in the amount of $1,219.3 million or 19.72% of total assets at June 30, 2005. A positive gap tends to indicate that earnings will be impacted favorably if interest rates rise during the period and negatively when interest rates fall during the time period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. In other words, as interest rates fall, a negative gap should tend to produce a positive effect on earnings, and when interest rates rise, a negative gap should tend to affect earnings negatively.

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.

34

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Interest Sensitivity (continued)

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 June 30, 2005, and December 31, 2004 (Dollar amounts in thousands):

	June 30, 2005

	0-90 Days		91-180 Days		181-365 Days		Cumulative 0-365 Days

Loans	$	1,257,387	$	198,608	$	358,208	$	1,814,203
Investments		164,988		84,773		208,359		458,120
Other interest-earning assets		1,188		-0-		-0-		1,188

Total interest-sensitive assets		1,423,563		283,381		566,567		2,273,511

Certificates of deposit		241,054		129,138		394,291		764,483
Other deposits		1,932,602		-0-		-0-		1,932,602
Borrowings		780,945		6,176		8,574		795,695

Total interest-sensitive liabilities		2,954,601		135,314		402,865		3,492,780

Gap	$	(1,531,038)	$	148,067	$	163,702	$	(1,219,269)

ISA/ISL		0.48		2.09		1.41		0.65
Gap/Total assets		24.77%		2.40%		2.65%		19.72%



	December 31, 2004

	0-90 Days		91-180 Days		181-365 Days		Cumulative 0-365 Days

Loans	$	1,300,777	$	185,633	$	333,978	$	1,820,388
Investments		190,336		133,127		185,979		509,442
Other interest-earning assets		2,403		-0-		-0-		2,403

Total interest-sensitive assets		1,493,516		318,760		519,957		2,332,233

Certificates of deposit		346,191		205,507		237,318		789,016
Other deposits		1,795,426		-0-		-0-		1,795,426
Borrowings		985,049		5,497		15,513		1,006,059

Total interest-sensitive liabilities		3,126,666		211,004		252,831		3,590,501

Gap	$	(1,633,150)	$	107,756	$	267,126	$	(1,258,268)

ISA/ISL		0.48		1.51		2.06		0.65
Gap/Total assets		26.35%		1.74%		4.31%		20.30%

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Interest Sensitivity (continued)

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. Therefore, to more precisely measure the impact of interest rate changes on First Commonwealth's net interest income, management simulates the potential effects of changing interest rates through computer modeling. The income simulation model used by First Commonwealth 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. First Commonwealth 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.

First Commonwealth'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 gradual 200 basis point (2.00%) movement upward or downward over a 12 month time frame which cannot result in more than a 5.0% decline in net interest income when compared to the base case. The analysis at June 30, 2005, indicated that a 200 basis point (2.00%) increase in interest rates would increase net interest income 10 basis points (0.10%) above the base case scenario and a 200 basis point (2.00%) decrease in interest rates would decrease net interest income by 277 basis points (2.77%) below the base case scenario, over the next twelve months, both within policy limits.

First Commonwealth's "Asset/Liability Management Committee" ("ALCO") is responsible for the identification, assessment and management of interest rate risk exposure, liquidity, capital adequacy and investment portfolio position. The primary objective of the ALCO process is to ensure that First Commonwealth's balance sheet structure maintains prudent levels of risk within the context of currently known and forecasted economic conditions and to establish strategies which provide First Commonwealth with appropriate compensation for the assumption of those risks. The ALCO strategies are established by First Commonwealth's senior management.

36

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Interest Sensitivity (continued)

First Commonwealth entered into an interest rate swap transaction during the third quarter of 2003 and two additional interest rate swap transactions during the second quarter of 2004. Each of the swap transactions involved hedging adjustable LIBOR based commercial loans with a receive-fixed and pay-floating interest rate swap of $25 million notional amount, for a total of $75 million. The original maturities of the swap transactions ranged from 2.5 to 3 years. The purpose of the swaps was to reduce First Commonwealth's exposure to further declines in interest rates. The ALCO continues to evaluate the use of additional derivative instruments to protect against the risk of adverse price or interest rate movements on the value of certain assets and liabilities.

CREDIT REVIEW

The following table identifies amounts of loan losses and nonperforming loans. A loan is placed in nonaccrual status at the time when ultimate collectibility of principal or interest, wholly or partially, is in doubt. Past due loans are those which are contractually past due 90 days or more as to interest or principal payments but are well secured and in the process of collection. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower and are in compliance with the restructured terms.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CREDIT REVIEW (continued)

(Dollar amounts in thousands)	At June 30,

	2005		2004

Nonperforming Loans:

Loans on nonaccrual basis	$	11,149	$	13,285
Past due loans		15,258		11,085
Renegotiated loans		179		189

Total nonperforming loans	$	26,586	$	24,559

Other real estate owned	$	1,226	$	2,421

Loans outstanding at end of period	$	3,601,314	$	3,468,152

Average loans outstanding (year-to-date)	$	3,568,436	$	2,983,534

Nonperforming loans as a percentage of total loans		0.74%		0.71%

Provision for credit losses	$	4,744	$	4,620

Net charge-offs	$	4,403	$	4,324

Net charge-offs as a percentage of average loans outstanding (annualized)		0.25%		0.29%

Provision for credit losses as a percentage of net charge-offs		107.74%		106.85%

Allowance for credit losses as a percentage of average loans outstanding		1.16%		1.43%

Allowance for credit losses as a percentage of end-of-period loans outstanding		1.15%		1.23%

Allowance for credit losses as a percentage of nonperforming loans		155.74%		173.72%

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CREDIT REVIEW (continued)

First Commonwealth considers a loan to be impaired when, based on current information and events, it is probable that the bank will be unable to collect principal or interest due according to the contractual terms of the loan. Loan impairment is measured based on the present value of expected cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Payments received on impaired loans are applied against the recorded investment in the loan. For loans other than those that First Commonwealth expects repayment through liquidation of the collateral, when the remaining recorded investment in the impaired loan is less than or equal to the present value of the expected cash flows, income is recorded on a cash basis. Impaired loans include loans on a nonaccrual basis and renegotiated loans.

The following table identifies impaired loans, and information regarding the relationship of impaired loans to the reserve for credit losses at June 30, 2005, and June 30, 2004 (Dollar amounts in thousands):

	2005		2004


Recorded investment in impaired loans at end of period	$	11,328	$	13,474

Year to date average balance of impaired loans	$	11,717	$	13,522

Allowance for credit losses related to impaired loans	$	1,792	$	2,488

Impaired loans with an allocation of the allowance for credit losses	$	6,424	$	7,493

Impaired loans with no allocation of the allowance for credit losses	$	4,904	$	5,981

Year to date income recorded on impaired loans on a cash basis	$	334	$	144

Other than those described above, there are no material credits that management has serious doubts as to the borrower's ability to comply with the present loan repayment terms. Additionally, the portfolio is well diversified and as of June 30, 2005, there were no significant concentrations of credit.

Nonperforming loans at June 30, 2005, increased $2.0 million compared to 2004 levels and included increases in loans past due 90 days but still accruing of $4.2 million which were partially offset by decreases in nonaccrual loans of $2.1 million. Nonperforming loans as a percentage of total loans were 0.74% at June 30, 2005 compared to 0.71% at June 30, 2004. Past due loans for the 2005 period included increases in residential loans secured by real estate as well as increases in commercial loans.

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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CREDIT REVIEW (continued)

First Commonwealth's loan portfolio continues to be monitored by senior management to identify potential portfolio risks and detect potential credit deterioration in the early stages. This process includes close monitoring of watch list credits for workout progress or deterioration, as well as evaluating the status of significant nonperforming credits and loan loss adequacy. Credit risk is mitigated during the loan origination process through the use of sound underwriting policies and collateral requirements. Management also attempts to minimize loan losses by analyzing and modifying collection techniques on a periodic basis. Management believes that the allowance for credit losses and nonperforming loans remained safely within acceptable levels.

First Commonwealth maintains an allowance for credit losses at a level deemed sufficient to absorb losses which are inherent in the loan and lease portfolios at each balance sheet date. Management reviews the adequacy of the allowance on a quarterly basis to ensure that the provision for credit losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is appropriate based on management's assessment of probable estimated losses. First Commonwealth's methodology for assessing the appropriateness of the allowance for credit losses consists of several key elements. These elements include an assessment of individual problem loans, delinquency and loss experience trends, and other relevant factors. While allocations are made to specific loans and pools of loans, the total allowance is available for all loan losses.

While First Commonwealth consistently applies a comprehensive methodology and procedure, allowance for credit loss methodologies incorporate management's current judgments about the credit quality of the loan portfolio, as well as collection probabilities for problem credits. Although management considers the allowance for credit losses to be adequate based on information currently available, additional allowance for credit loss provisions may be necessary due to changes in management estimates and assumptions about asset impairment, information about borrowers that indicates changes in the expected future cash flows or changes in economic conditions. The allowance for credit losses and the provision for credit losses are significant elements of First Commonwealth's financial statements, therefore management periodically reviews the processes and procedures utilized in determining the allowance for credit losses to identify potential enhancements to these processes, including development of additional management information systems to ensure that all relevant factors are appropriately considered in the allowance analysis. In addition, First Commonwealth maintains a system of internal controls which are independently monitored and tested by internal audit and loan review staff to ensure that the loss estimation model is maintained in accordance with internal policies and procedures, as well as generally accepted accounting principles.

40

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CAPITAL RESOURCES

Equity capital stood at $529.1 million at June 30, 2005, a decrease of $2.8 million compared to December 31, 2004. Dividends declared reduced equity by $23.1 million during the first six months of 2005. The retained net income of $10.0 million remained in permanent capital to fund future growth and expansion. The change in the market value adjustment to securities available for sale decreased equity by $7.8 million. Additional advances by First Commonwealth's Employee Stock Ownership Plan ("ESOP") to fund the acquisition of First Commonwealth's common stock for future distribution as employee compensation, net of long-term debt payments, decreased equity by $4.8 million. Amounts paid to fund the discount on reinvested dividends reduced equity by $447 thousand during the first six months of 2005 while the market value adjustment on the interest rate swap decreased equity by $410 thousand for the same period. Proceeds from the reissuance of treasury shares to fund stock options exercised increased equity by $417 thousand during 2005. Equity capital was also impacted during 2005 by an increase of $203 thousand from the reissuance of treasury shares to fund contingent payments related to the acquisition of First Commonwealth Financial Advisors, which consummated in 2002. This payment of First Commonwealth's common stock was the third of four scheduled annual contingent payments.

A strong capital base provides First Commonwealth with a foundation to expand lending, to protect depositors and to provide for growth while protecting against future uncertainties. The evaluation of capital adequacy depends on a variety of factors, including asset quality, liquidity, earnings history and prospects, internal controls and management ability. In consideration of these factors, management's primary emphasis with respect to First Commonwealth's capital position is to maintain an adequate and stable ratio of equity to assets.

The Federal Reserve Board has issued risk-based capital adequacy guidelines which are designed principally as a measure of credit risk. These guidelines require: (1) at least 50% of a banking organization's total capital be common and other "core" equity capital ("Tier I Capital"); (2) assets and off-balance-sheet items be weighted according to risk; (3) the total capital to risk-weighted assets ratio be at least 8%; and (4) a minimum leverage ratio of Tier I capital to average total assets.

41

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CAPITAL RESOURCES (continued)

The minimum leverage ratio is not specifically defined, but is generally expected to be 3-5 percent for all but the most highly rated banks, as determined by a regulatory rating system.

The table below presents First Commonwealth's capital position at June 30, 2005:

	Amount (in thousands)	Percent of Adjusted Assets

Tier I Capital	$ 493,237	11.6%
Risk-Based Requirement	169,712	4.0

Total Capital	534,642	12.6
Risk-Based Requirement	339,425	8.0

Minimum Leverage Capital	493,237	8.1
Minimum Leverage Requirement	182,875	3.0

For an institution to qualify as well capitalized under regulatory guidelines, Tier I, Total and Leverage Capital ratios must be at least 6.0%, 10.0%, and 5.0%, respectively. At June 30, 2005, First Commonwealth's banking and trust subsidiaries exceeded those requirements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information appearing in ITEM 2 of this report under the caption "Interest Sensitivity" is incorporated herein by reference in response to this item.

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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES

ITEM 4. CONTROLS AND PROCEDURES

	First Commonwealth carried out an evaluation, under the supervision and with the participation of First Commonwealth's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of First Commonwealth's disclosure controls and procedures as of the end of the period covered by this report pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures are effective. In addition, First Commonwealth's management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of First Commonwealth's internal control over financial reporting to determine whether any changes occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, First Commonwealth's internal control over financial reporting. No such changes were identified in connection with this evaluation.

	Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by First Commonwealth in the reports that First Commonwealth files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by First Commonwealth in the reports that First Commonwealth files under the Exchange Act is accumulated and communicated to First Commonwealth's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS

	There were no material legal proceedings to which the Corporation or its subsidiaries are a party, or of which any of their property is the subject, except proceedings which arise in the normal course of business and, in the opinion of management, will not have a material adverse effect on the consolidated operations or financial position of the Corporation and its subsidiaries.

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities

2005 Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

April 1 - 30	-0-	n/a	-0-	$4,486,365
May 1 - 31	92,300	$12.97	92,300	$3,289,344
June 1 - 30	-0-	n/a	-0-	$3,289,344

Total	92,300	$12.97	92,300	$3,289,344

All shares were acquired by First Commonwealth's Employee Stock Ownership Plan ("ESOP") through a publicly announced plan. The plan for the ESOP to acquire shares was announced through a press release dated July 26, 2004, and a subsequent 8-K filing with the Securities and Exchange Commission on July 27, 2004. The plan authorizes the ESOP to acquire up to $14 million of First Commonwealth's common stock in the open market. The plan does not have an expiration date.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

	Not applicable

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	Not applicable

ITEM 5.	OTHER INFORMATION

	Not applicable

FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES


ITEM 6.	EXHIBITS

	Exhibit 31.1 Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2 Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST COMMONWEALTH FINANCIAL CORPORATION
(Registrant)

DATED: August 4, 2005	/s/Joseph E. O'Dell
	Joseph E. O'Dell, President and Chief Executive Officer



DATED: August 4, 2005	/s/John J. Dolan
	John J. Dolan, Executive Vice President and Chief Financial Officer