routines accomplished during conversion of the Corporation’s deposit system during 2001 and added emphasis on collection of fees had positive effects on fee revenue for 2003 and 2002. Management strives to implement reasonable fees for services and closely monitors collection of those fees. 

The 2003 period included a $3.0 million gain which occurred when First Commonwealth Bank, a wholly-owned subsidiary of the registrant, sold two of its branch offices. The sale included $29.2 million in deposit liabilities and $4.4 million in loans associated with the two offices. The 2001 period included a $777 thousand gain on the sale of one branch. The sale included $10.4 million in deposit liabilities. 

Insurance commissions decreased $326 thousand for 2003 after increasing $439 thousand for 2002 from 2001 commissions of $3.2 million. Decreases in 2003 were primarily due to decreases in annuity commissions. Insurance commissions for 2002 included increases in personal lines, annuities and employee benefit plans compared to 2001. As part of the previously discussed TSFM process, the Corporation’s insurance subsidiary will continue to have expanded opportunities to meet the insurance needs of commercial clients. In addition, the Corporation has developed “FOCUS”, a financial planning tool designed to help clients prioritize and assess their financial needs. The “FOCUS” concept results in a systematic approach covering a wide range of personal financial goals including appropriate insurance coverage. This category should also be favorably impacted by the integration of First Commonwealth Financial Advisors into these advisory models. 

Income from bank owned life insurance was $4.3 million for 2003 compared to $4.7 million for 2002 and compared to $4.6 million for 2001. The 2002 period included an additional investment in bank owned life insurance of $5.0 million and the 2001 period included an additional investment of $15.0 million. 

Other income for 2003 was $10.2 million, representing a $1.2 million increase compared to 2002, which followed a $596 thousand decrease from the $9.6 million achieved in 2001. The increase in other income for 2003 over 2002 levels includes increases in STAR interchange fees and income from the increase in cash surrender value of split dollar life insurance of $629 thousand and $248 thousand, respectively. Other income for 2002 included an increase in interchange income of $164 thousand. The 2001 period included a gain related to the sale of a block of 30 year mortgages as well as a gain from the termination of a subsidiary’s defined benefit pension plan. 

## Noninterest Expense 

Total other expenses for 2003 decreased $13.6 million to $112.7 million compared to $126.3 million in 2002. The 2002 amount represented an increase of $20.4 million compared to $105.9 million reported in 2001. The decrease in other expenses for 2003 and the increase in other expenses for 2002 were primarily the result of nonrecurring charges that were 

incurred during 2002 for the previously described litigation settlement and corporate restructuring of $8.0 million and $6.1 million, respectively. These restructuring charges resulted from the merger of the Corporation’s banking subsidiaries, Southwest Bank and First Commonwealth Bank, which occurred in October 2002. Because of this merger, there was a consolidation of support functions with some staff positions being eliminated. The personnel within the branches and relationship managers in corporate services continued to serve in the same capacity in order to ensure a smooth transition. Also, related to the merger, the structures of all of the Boards of Directors and Board committees for the Corporation were realigned. As a result of these activities, restructuring charges of $6.1 million are reported on the income statement for the 2002 period. Ongoing savings from the restructuring were reflected in the 2003 period. Other charges incurred during 2002 as a part of the restructuring, related principally to writing off obsolete signs and supplies due to the name change under one charter and amounted to $420 thousand. Also impacting other operating expense for the period were $1.8 million of costs incurred principally in the fourth quarter of 2002 associated with development of the First Commonwealth brand. Total noninterest expense as a percent of average assets was 2.38% for 2003 compared to 2.76% for 2002 and 2.32% for 2001. 

Employee costs were $61.1 million in 2003, representing 1.29% of average assets compared to $58.1 million and 1.28% of average assets for 2002. Employee costs for 2001 were $54.5 million and 1.21% of average assets. Salary costs for the 2003 period increased $1.6 million compared to 2002, while salary costs for the 2002 period increased $2.2 million compared to 2001 levels. Employee benefit costs rose $1.4 million for 2003 compared to 2002 and also rose $1.4 million for 2002 compared to 2001. Hospitalization costs continue to reflect the largest increases in employee benefit costs with increases of $1.1 million or 23.1% in 2003 and $943 thousand or 24.7% in 2002. The Corporation strives to provide quality employee benefits while effectively managing costs. 

Net occupancy expense increased $706 thousand during 2003 compared to expenses of $6.8 million during 2002 and $6.5 million for 2001. The 2003 period included increases in building repairs and maintenance, net rental expense and utilities compared to 2002 costs. Much of these increases were due to increased utility costs and snow removal expenses resulting from the harsh winter. The 2003 period also included an increase in the amortization of the purchase accounting adjustments related to premises of $328 thousand over the 2002 period. An adjustment of $291 thousand was taken during the 2003 period for the write-off of the remaining purchase accounting adjustment for three branch offices that were closed during 2003. These branch offices were closed and their clients are served at nearby existing branch offices. The Corporation continues to actively evaluate its branch delivery network to optimize client service in existing branch offices and to 

