I would like to welcome everyone to First Commonwealth Third Quarter Earnings Conference Call. Please note that this conference is being recorded. At this time, I will turn the call over to Rich Stimel, Communications Manager at First Commonwealth. Rich?

Thank you. As a reminder, a copy of today's earning release can be accessed by logging on to www.fcbanking.com and clicking on the investor relations link at the top of the page. Before we begin, I would like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its business, strategies and prospects. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. These risks and uncertainties include a variety of factor, some of which are beyond our control. These forward-looking statements speak as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after this call. Please refer to our SEC filing including our most recent annual report on Form 10-K for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the investor relations section of our Web site. Now, I'd like to introduce the President and CEO of First Commonwealth Financial Corporation, Mr. John Dolan.

Thanks, Rich. Good afternoon, everybody. And thanks for joining us. Our third quarter earnings show continuation of our progress. We're pleased with the results in our core business, particularly, given the current economic environment we think we're well-positioned to grow our business. We have stayed true to our strategic plan. We believe that we're filling a void in the marketplace. The bigger banks were distracted by their own issues and the smaller institutions were not prepared to step up. At the same time, we're building focus and accountability at all levels of our organization. Ed Lipkus and Mike Price are here with me to talk a little bit about our performance. We're going to keep it simple. We have been sticking with the basics. All three of our lines of businesses have achieved growth in income and households. That's our commercial, consumer and wealth management lines of business. Our employees are focusing on the appropriate solutions for our customers and delivering results. The financials speak to the fact that our efforts are working. Core net income increased over 24% to $15.2 million for the third quarter. This is $0.21 per share. While we were disappointed to have to record a non-cash adjustment of $5.6 million after tax, core earnings remain strong. The foundation has been set for sustainable growth. We're not chasing irrational CD pricing set by some of our competitors. We continue to gather and grow low cost deposits. We have grown in our loan portfolio, total loans increased more than 14% year-over-year. Commercial loans increased 29%. Our credit quality remains stable. Total non-performing loans in absolute terms and relative to the level of average loans improved in the third quarter of 2008, over to the third quarter of 2007, and the second quarter of 2008. I believe we're winning because we offer big bank capabilities with community bank service. We continue to build and maintain strong relationships with our customers, and we feel this is a strength and will develop into a sustainable competitive advantage. And Ed Lipkus, our Executive Vice President and CFO will discuss the third quarter financials. Ed?

Thank you, John. Good afternoon, everyone. I have to say overall I'm really pleased to report solid third quarter core earnings. Today, I would like to accomplish a couple of things. I would like to talk about some of the key drivers behind our quarterly results. I would like to talk about some of the improvements we're seeing in credit quality. And then I think I will follow up with a little color around our investment portfolio and the impairment charge that we had to take here in the third quarter. As John already indicated -- he has pretty much done my financial report, we had a good quarter and core net income increased over 24% compared to the same period last year. It increased 14.9% over the second quarter in 2008. We had improvement in our commercial loan growth, the margins improved, and we're certainly seeing a lot of progress along those three lines of business that John just mentioned. And Mike is going to give you some real nice color around some of the things that he is doing with those lines of business. Total loans for the third quarter increased $71 million over the second quarter, and basically were split up between C&I, construction and loans to individuals. We have 3% growth in commercial and industrial and that was pretty much across all sectors. We had a 10% growth in construction loans. That increase was mostly due to draws on existing lines that we already had on the books as projects continued through completion. And the growth -- let me just also point out that the residential construction percentage is only 3.2% of that portfolio. So it's 3.2% in residential construction projects. The increase in loans to individuals was mainly due to increased indirect automobile loan volume.…

Thanks, Ed. Good afternoon to those of you listening in. I have some brief comments on two fronts. First, the marketplace and second, some of the results and stride we're taking to improve the franchise through each line of business. First, some thoughts about the market and our positioning. Our size as a community bank plays in our favor. We can offer products and services that are competitive with those offered by large regional banks, but our community banking routes and DNA allow us to deliver more personalized service that has broad appeal to the consumers and businesses in our footprint. This advantage has become even stronger as the competitive environment has weakened within our markets. As large competitors have focused on capital preservation and the resolution of problem credits in the wake of deepening national economic and credit crisis we have been able to grow our core deposits and loans with both businesses and consumers. You might say once the larger competitors get their respective issues behind them the window of opportunity will invariably close. I don't think so. I think many of the brands have been done irreparable harm. I like our size and think we're well-positioned to take share from bigger banks. On the economic front here in Western Pennsylvania, housing prices have remained relatively flat and some markets are even growing. This helps insulate us from the brunt of the current economic decline. This was born out in a recent BusinessWeek article which lists Pittsburgh as the sixth best place to ride out a recession. I am not sure that's always worth celebrating. But this area has not been prone to the boom and bust characteristics that are affecting banks in other parts of the country. We believe we have a nice recipe for success, but…

Okay, everybody, that concludes our prepared remarks. If you would like to open it up for comments or questions I mean.

(Operator instructions). Our first question comes from Damon Delmonte from KBW. Please go ahead.

Hi, good morning, guys. How are you? Or good afternoon I should say.

Hi, Damon.

I was just wondering if you could provide a little bit more color on your indirect auto loan portfolio. Again, if you could just go over the size of that and the types of FICO scores.

Just briefly, I think the size of it and through some paper rustling it about $380 million and we have seen some nice increase in our spreads here over the course of the last few months. Some of the captives and some of our competitors are getting out of that business. And we just feel that that's a core business to really connect with a lot of local auto dealers. As far as FICO scores, I'm kind of groping for them, but I'm pretty sure FICO scores are stable to up, and I'm looking at -- okay, delinquency --

Damon, this is Ed Lipkus. I just want to support Mike what saying in that we saw some spread widening here. We generally don't want to throw out the spreads here, but they have widened, we've taken advantage of them and that's for us -- that was a key reason to grow this part of the portfolio when we see a lot of our competitors here exiting the business.

A little tick up in delinquency, not much. Still under a buck, just creeped up to about 76 basis points dollars past due in the portfolio.

I think, Damon, just to add something. This is John. We have been tweaking the rate up to reflect the value of our investment and they are still paying and they are still coming on board. So I think that we're remaining with good quality. In fact, improving somewhat in our credit quality there, but we're also still getting the volumes even despite moving our rates up significantly.

Okay, and on the FICO, is there an approximation? Are we talking -- like what percentage of it would be under say 660 or what percentage of it is 700 or 750?

I think the number has gone up from roughly 76%, 77% over 650. I think that number has climbed to almost 84%, 85%, if my memory serves [inaudible] that still right? Okay.

85% greater than 660.

Yes, 660.

Great. And then with regards to the -- everything going on with the government, TARP plan, wondering if you guys could share your views on the TARP, and potentially accessing that to add to your current capital level?

There is a lot of moving parts still and we're still looking at it, but it looks like it's not necessarily the most effective way to raise capital while it is one for some organizations and I have seen some indicate they are going to take advantage of it, we haven't made the determination.

Okay. Fair enough. And just lastly, Ed, maybe if you could comment a little bit on your outlook for the margin.

Yes, generally, it's probably the same comment you will get from me every quarter here and that is we're going to be cautiously optimistic that it should remain stable if not increase a little bit here. Maybe a couple of bits considering that we got a little bit of relief here from the Fed, decrease in rates and we see the pricing spreads widening overall. So, it will be about the same answer I will give you every quarter here.

Okay. At least you're consistent, that's good, right? Thank you very much.

We like consistency here.

That's right.

Our next question comes from Tom Alonso from Fox-Pitt, Kelton. Please go ahead.

Hi, guys.

Hi, Tom.

Just a couple of quick ones for you here. During the quarter, some of the improvement in the margin link quarter, do you guys allow some of that use some of your securities to fund the growth in loans, and fund loans, and is that something we should expect to see continue going forward?

I think that there is always going to be a component of that. That's what we have. We have our investment portfolio there for liquidity, but as we are able to shift it into loans, I think that's a good thing for us. We will continue that, but we're going to continue wisely pricing with better spreads, and to get better spreads for the loan volume we're getting. I think another component of that margin is being able to maintain the lower cost of funds, and that lower cost of funds comes as a couple of components. One is the borrowings, of course, have been reduced as the Fed and Fed funds rates have been starting to drop, but I think that our shift into the demand deposits, so we're able to get some growth in our demand deposits, both in corporate and consumer areas as well as we're getting still some growth in savings. Some of that's a flight to quality, but I think some of it's just a matter of us getting out there and executing and we're lowering our cost of our deposits.

Great. And then on the $31 million nonaccrual, you extended the forbearance until the end of this year, is that right? So then you expect it to be a work out in three to six months, a successful workout, you said. I was just curious what a successful workout would be if you want to comment on that?

No, we knew there would be a question. Success is in the eye of the beholder. We don't want to give any kind of guidance here, but we can say that we have a track record here of working out our problems as evidenced by the EFI work out. We are patient, we know when to hold them. So I can't comment anymore there, Tom, but we think we've positioned ourselves well and we will just see what the next three to six months bear out here.

Understandable. Okay. And then on the tax rate, any sort of color on what you're looking for going forward?

I would model your tax rate, take the year-to-date tax rate, and I would probably would pretty much use that rate, maybe add -- I mean even -- this doesn't sound very definitive, but I would add maybe a couple of bits to it.

Okay.

I would like to say that the second quarter was around 18%, and the third quarter, if you add back the other than temporary impairment charge at 35%, you're probably somewhere in the same ballpark.

Okay.

So, that 18% to 20% again.

Okay. Terrific. And then it was just the one truck that was other than temporary. Are there any deferrals in any of the other ones?

Ed, I'll let you talk about that.

I would say that there are some deferrals in the other pools, but there is adequate cushion and overcollateralization in those pools that do not give us any concern right now. In our tranche, I think that, that cushion in a different pools range from 5.5% to 46%, so we feel comfortable with where we're sitting right now in the current state of deferrals in the other pools.

Okay. Great. And then, just to make sure I heard you correctly. You sold about half the equity portfolios during the quarter?

Correct.

Okay. And you're left with about -- you said $9 million or $10 million?

Correct.

Okay. Terrific. Thanks, guys.

You're welcome.

Thank you.

Our next question will come from Rick Weiss from Janney Montgomery Scott. Please go ahead.

Hey, guys.

Hi, Rick.

Actually, most of my questions were answered. I just wonder if you could just talk a little bit about the economy, it's holding up for now, but kind of, what's your sense going forward? Do you see any problems among major employers in Western Pennsylvania for example?

I need a crystal ball for that, anything better than what I'm going to give you here, Rick, but I think that the economy in Western Pennsylvania seems to be stable. Employment levels are actually up despite the fact that unemployment is up a little bit. And I think that as Mike referred to it, real estate prices are stable to slightly up. So we're not seeing the pressures that we have in the rest of the country, although because of some of the organizations that are headquartered in Pittsburgh, they're going to get some of the impact from out of the area, and you will probably -- it's likely to see some impact in those employers. But the basic economy around here is still fairly stable, never was robust but still stable.

Okay, that good to hear right now and let me ask you on loan growth. This quarter looks like it was slower than the first two, but probably more in line with your historical standards. And why would -- did it slow down a little bit from the second quarter you just said?

I will start out with just indicating that we're getting tighter with our pricing. And I think that there is more -- it's not that there is more competition, I think that more people are just being cautious with their borrowing, but Mike, do you want to say anything?

No, nothing really to add to that. I just think we had, in the second quarter, there was just a lot of pent-up demand for some larger credits and it was kind of a perfect storm in a good way and on the commercial side with lots of larger opportunities, and although the third quarter was really strong and nice as well.

Okay. Are you seeing any kind of different sort of attitudes for lack of a better word among your regulators or examiners? Are they getting tougher in terms of like was there demanding of you for reserve requirements and things like that?

I think it's -- we have always had good relationship with the regulators, and we haven't seen any -- we haven't had any communication with them that indicates anything different, let's put it that way.

Okay. Actually that question was really meant in general, not just picking on First Commonwealth, but just in terms of like how the FDIC and the Fed look at all the community banks, not just you specifically.

I would have to say that just the folks in Washington they're continuing to try to figure out what's going on with the packages they're looking at. So we haven't seen much with them.

Okay. Great. Hey, thank you very much.

Great. Thanks, Rick.

(Operator instructions). Our next question will come from Mac Hodgson from SunTrust Robinson Humphrey. Please go ahead.

Hey, good afternoon.

Hi, Mac.

I had questions on the trust preferred -- again, I just want to be sure I understand, the $7.7 million OTTI charge taken on that $13 million obligation, was that $13 million included in that 98 or 99?

It's now 7 -- it's now 5.3 million, Mac. It's included in the 99 or 98.

Okay. And what was the that you said it's about $42.3 million unrealized loss there. What was the unrealized loss at the end of the second quarter?

About $26 million.

Okay. I am just kind of surprised there wasn't, given the variance there, and the fact that you took an OTTI charge, I am surprised the charge wouldn't have been bigger given the decline in value.

We hired an outside expert, knowing that we wanted to get a good value here. We applied the new accounting standards under 157.3 and went through a very rigorous methodology, and the end results, we -- it is where it is. I think you can look at the disclosures in the press release and you can see that we listed our ratings on each one of the pools. They are well-diversified and we think we have an adequate cushion, and the valuations are calling for a return of principle right now and they're rigorous valuations that were done by an independent third party. So I think we're very comfortable with what was presented to us and comfortable in presenting them in our financial statements.

Ed calls it rigorous, I called it exhausting so.

Okay, I understand. Understand. Mike, I had a question on the loan growth. I think you commented year-to-date you guys had about $550 million or so million. Half of that, I think you referred to as driven by the capital markets relationships. Just wanted to know if you could provide any more color on those relationships, and maybe how the opportunities originate, what the average loan size is. I think you referenced in a previous question that there was some larger borrowings come through there. So I'm kind of curious how large the loans are. Just those sort of details.

Just some, we've had some wonderful opportunities with some great names in Western Pennsylvania. And quite frankly, a few years ago we might not have gotten those types of opportunities and pieces of credits that range from $10 million to $20 million. And the great opportunity is, we're not only getting an entree to the credit, but it becomes a terrific opportunity to go and cross-sell cash management and retail product, and we really stuck close to home here in Western PA. As I said, probably 75% of the opportunities are either Western PA names or they're people that we know that we followed. We also have a gentleman that leads that team, came over from another large bank that had some great relationships and knows some CEOs from years past. So we're very comfortable with that and it's good business for us, and we feel like it's -- the credit quality is good. It's actually an aggregate taking the overall credit rating of the portfolio up. I don't know Ed or John, does that feel --

That's accurate that I would like to qualify how far up, but I don't want to do that. But it's favorable.

Yes.

Do you feel like there is still areas to grow there in that kind of as a participant in those transactions?

Yes, and we really have a wonderful relationship with a certain big bank that is doing very well in Pittsburgh, and they like having us involved in the transactions so.

What is the, relative to -- I mean how have the terms improved? How do you guys get comfortable with kind of making those leaps, I guess, or not necessarily leaps, but just making those commitments given the economy is weakening. Basically, what's changed from a structure pricing standpoint?

Yes. Mac, let me answer the question here. We go through the same rigorous underwriting procedure whether the credit is a regional credit, middle market credit to the larger ones, and it's an independent process. This group does not get incented [ph] on loan growth, and they're independent underwriters, and we think we have a process that served us well over the years. And as Mike indicated, we are getting looks now in this market space as I think some of our larger [inaudible] have had, have become hobbled and on the sidelines where we're in there able to take advantage of some great credit opportunities.

We probably -- I'd add to Ed's comments. This is Mike. We probably turn down as many as we approve, and then additionally, it's your basic cash flow collateral character and an industry analysis. And we have the same process through all credits over a certain dollar amount, over $5 million, and it's the same group of people who look at them.

Okay. I appreciate that detail. That's all. Thanks.

Our next question will come again with Damon Delmonte from KBW. Please go ahead.

Hi, just one more follow-up question regarding your outlook for charge-offs and provision levels, kind of how that ties into the reserves. The reserve this past quarter was 109 basis points and been steady for 2008, but it's been down from 2007. Are you guys comfortable with this level right now?

We are comfortable with the level of the reserve. We do have a rigorous process there. You're aware we have to have and I think that the charge-off levels in the third quarter did not seem to be out of line. They seem to be consistent with our -- what our expectations would have been.

Okay. Great. Thank you very much.

Alright. Thank you.

(Operator instructions). Again, we have a question from Tom Alonso from Fox-Pitt Kelton. Please go ahead.

Just I'm sorry. I got distracted for a second. On your participation, your piece is $10 million to $20 million or the total credit is $10 million to $20 million that you're participating in.

It depends. That I was referring to the average piece of the credit.

Okay. So your piece is between $10 million to $20 million. Okay, thanks.

At this time we show no further questions. I would like to turn the conference back over to Rich Stimel.

I would just kind of wrap it up here. This is John. And I just want to say a couple items here. Despite the environment, I believe we have strong performance. And while we're remaining mindful of the appropriate risk and the mitigants, Mike mentioned a couple of areas that we have for significant upside. And I think that's a positive for us because we're looking to gain some good traction in those areas, even though we've had some great performance. The third quarter reflects continuation of the improvements in our performance, and we believe that we're continuing to grow the base that's going to generate those earnings. So thank you all for participating.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.