Good afternoon and welcome to the First Commonwealth third quarter 2010 earnings conference call. All participants will be in a listen-only mode. (Operator Instructions) Please note this event is being recorded. At this time I would like to turn the conference over to Rich Stimel, Communications Manager at First Commonwealth. Please go ahead sir.

Thank you. As a reminder a copy of today’s earnings release can be accessed by logging on to fcbanking.com and selecting the Investor Relations link at the top of the page and then selecting News on the left side of the page. We’ve also included slide presentations on our Investor Relations page with supplemental financial information that we will reference throughout today’s call. With me in the room today are John Dolan, President and CEO of First Commonwealth Financial Corporation; Mike Price, President of First Commonwealth Bank; and Bob Rout, Executive Vice President and Chief Financial Officer. After brief comments from management, we’ll open the call for your questions. For that portion of the call we’ll be joined by Bob Emmerich, our Chief Credit officer and John Previte, our Senior Vice President of Investments. Before we begin, I’d like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its business, strategies and prospects. Please refer to our forward-looking statements disclaimer on page 2 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Now I would like to turn the call over to John Dolan.

Thank you and good afternoon everyone. Thanks for joining us on today’s call. This morning we released our financial results for the third quarter and we’re pleased to announce net income of $10.7 million compared to a loss of $5 million in the third quarter of 2009. The revenue growth we’ve generated year-to-date has been largely driven by a combination of fee income and net interest margin expansion. Net interest margin improved over both the last quarter and third quarter 2009. Our gains in net interest margin are products of more effective deposit mix and the deleveraging of our balance sheet. Market share we’re continuing to win in consumer and small business segments has enhanced our low cost deposit base. Looking at the year-over-year comparison, our low cost savings and DDA deposits increased 13%, on-time deposits decreased 8%. Throughout 2010 we’ve continued to execute on the strategy to reduce our balance sheet leverage. We sold three quarters of our Municipal Investment Portfolio and sold or participated in eight of our 62 credit commercial relationships that were loan commitments of $15 million or over. The common stock offering we completed in the third quarter helps us solidify our strong capital base. This will position us well as the economic recovery begins to gain traction and as we continue to build on the momentum of our organic growth. But all of this is taking place in an environment of tremendous economic and political uncertainty, which will require an ongoing focus on improving credit quality and prudent capital management. We’ll continue our strategic focus of reducing problem assets and mitigating our exposure to large credits but I’ll say we expect more favorable asset quality trends going forward. Mike Price will speak to the details around credit quality but overall our provision for credit…

Thank you John and good afternoon everyone. As John mentioned and as evidenced by our third quarter results, we continued good progress, getting the organization back on an improved performance track. The credit issues were fairly well contained this quarter. However these loans are large complex relationships, many times involving multiple participants and by their nature take a long time to work through. The economic conditions for distressed assets also complicates these efforts where Michael speaks to in his upcoming presentation, the progress is encouraging. Walking through the financials I want to start with the balance sheet. As you are aware, balance sheet restructuring and derisking has been a strategic focus over the last 18 months. During that time we have significantly improved our funding mix with more transactional accounts and corporate cash management. We reduced borrowings by almost $1 billion, diversified the loan portfolios with a better mix of small business consumer, corporate finance and middle market loans. Middle market lending is an area that we believe presents good opportunity particularly with the Marcellus Shale potential and we’re just now starting to scratch that surface. We aggressively addressed the credit issues in both the loan and the trust preferred portfolios. We reduced our exposure to municipal securities. And the last piece was shoring up our capital position, which we accomplished here in the third quarter with a common stock offering of net proceeds of $81 million. Certainly more work remains cleaning up some troubled credits that were primarily out of market and in many cases inappropriately sized. Despite that ongoing clean-up activity we believe the balance sheet is well positioned to move the organization forward. In the net interest income area, the net interest margin has been on a fairly steep trend currently at 3.9%. The change in the…

Thanks Bob. The economic environment is still challenging but we continue to make progress. Starting with credits, the provision expense for the third quarter was $4.5 million versus $4 million last quarter and $23 million at this time last year. Total nonperforming loans decreased 7% on a linked-quarter and now stand at $124 million or 2.9% of total loans. Of the $9 million decrease in non-performing loans this quarter, we reached a successful settlement with borrowers on a $12 million condo project in Missouri that resulted in the repayment of 82% of our principle which freed up about $9 million in specific reserves, also contributing to the reduction in nonperforming loan balances for a $3 million participation loan for a completed recreational project in Illinois and a $2 million loan located in Western PA for the purchase of a commercial building held as collateral. Both of those loans were transferred to OREO this quarter. As far as significant additions to nonperforming goes that included a $10 million Western Pennsylvania commercial real estate loan for tenant improvements on an office building located in downtown Pittsburg and this was due to increased vacancy rates. We took about a $1.4 million specific reserve on this credit. Some additional noise within our provision expenses quarter was the result of downgrades on a handful of performing credits both to conform to the results of the annual shared national credit exam and due to deterioration in some commercial real estate loans within our investment real estate market area. We have also adjusted some cap rates used for economic valuations of real estate credits. The aggregate impact of these adjustments was $8.1 million. Our three largest nonperforming loans are a $44 million line of credit to a Western Pennsylvania real estate developer that was placed on non-accrual…

Thank you. (Operator Instructions) Our first question will come from Andy Stapp from B. Riley & Company. Please go ahead. Andy Stapp – B. Riley & Company: Could you talk about the loan pipeline and the prospects for loan growths over next several quarters?

We have some head wins with the continued working down our exposures from 63 credits over $15 million down to $49 as we committed towards the end of the year. Nevertheless, on the consumer side I believe we have momentum with branch lending to slightly overcome the mortgage runoff that liquidating portfolio. On the commercial side we have good traction in small business. I think we’ll have opportunities with corporate finance and some select in market syndications. Our middle market business we’re really ramping that up and it’s a nice complement to what we’ve already established and begun to do in Pittsburg with our small business portfolio. And then selectively within market investment real estate, we will look at quality transactions. So I think the opportunity we’re going to kind of reach a trough and turn it around in 2011 probably in the first half of the year. Andy Stapp – B. Riley & Company: Okay that’s helpful. Do you plan to sell anymore municipal securities?

Yes, that’s on the table Andy, this is Bob Rout. Andy Stapp – B. Riley & Company: Okay, are you going to try to sell all of them?

That would be our intent. Andy Stapp – B. Riley & Company: That’s your plan okay. That factor, should we expect the securities portfolio to being fairly flat in this environment?

We’ll selectively add to that portfolio as opportunity – I don’t think you’ll see us stretching too far in duration at this point and it’s not going to be anything out of the ordinary – plain-vanilla agencies, treasuries, maybe some mortgage-backeds. Andy Stapp – B. Riley & Company: What is the life of your securities portfolio, your duration?

About four years. Andy Stapp – B. Riley & Company: Okay and happen to know what dollar paydowns in Q3 were on that portfolio?

Not an exact number, no. Andy Stapp – B. Riley & Company: I have some other questions but I’ll get back into the queue.

Thanks Andy. Andy Stapp – B. Riley & Company: Thank you.

Our next question will come from Mike Shafir from Stern, Agee. Mike Shafir – Stern, Agee: I was just wondering if you could just real quickly, at the beginning of the presentation you guys mentioned in terms of the resolution of some of these larger loans participating them out, could you just kind of go over some of that detail again.

Yes I mean I’ll just give you the high level and see if that’s what you’re looking for. We started out the year at 62, credits over 15 and we’re 15, I guess it was and then we’ve got that down to 54 credits.

Yes, Mike, some of that is just by encouraging the bank or the customer to seek to finance other places. Some of it is – and that’s not just the whole relationship but maybe the credits that are above our limits and this is not a number of accounts but I think it made great progress in the overall exposure bringing those down. Mike, did you want to add some color to that?

Just as important as the numbers the dollars of aggregate exposure that we’ve worked down since the beginning of the year is about $187 million and just $50 million in the third quarter alone. Does that help? Mike Shafir – Stern, Agee: Yes absolutely, thank you very much for that. The largest kind of nonperforming credits, the Missouri Loan is now off the books, right?

That’s correct. Mike Shafir – Stern, Agee: So now it’s the $5 million left of that construction loan to Florida to which you guys charged off a big chunk of the previous quarter. The $44 million C&I loan and then this new one is the $10 million commercial real estate project in Pittsburg?

That’s correct. Mike Shafir – Stern, Agee: So I believe that you mentioned another loan. I think there was four in total when you guys were –

Yes. If you want to go to page 8 of our slide deck, I referred to that, there was actually four – the $5 million Florida loan that you mentioned, the $44 million unsecured, again the Missouri one and the third largest one will be that commercial real estate that just non-performing this quarter. Mike Shafir – Stern, Agee: Right I’m sorry. I just thought there was four new ones versus the $30 million Missouri one because that’s gone now right? That’s the one that got mostly charged off this quarter?

It got paid off most of it.

Yes so there’s still only three there. Mike Shafir – Stern, Agee: So there’s still only three. Then just where do we stand on that C&I loan in terms of potential resolution and how is that working out?

This is Bob Emmerich. We’ve been negotiating on that loan for an extended period of time. There are three other banks involved. We are not a bank group but we all have the same terms, so we’ve been negotiating as a group. And we are very close, as Mike had mentioned we’ve reached the outline of terms for a restructuring and that’s in the process of being documented and part of that will include a paydown that will occur in the fourth quarter. Mike Shafir – Stern, Agee: Do you guys have any idea how much the pay down will be or could you guys maybe speak to that?

We know how much the pay down will be.

But we’re not prepared to disclose that at this point in time. Mike Shafir – Stern, Agee: Okay. Then just in your press release you guys mentioned a property that was meant for sale but then the sales agreement fell through. Can you just discuss where that stands?

That’s true. It’s a property we have in OREO, it’s a food processing plant and the terms called for us to deliver the plant by a certain date and we had trouble evicting the tenants so we couldn’t meet that date, so we are still working through that process. Mike Shafir – Stern, Agee: Then just one quick one. In terms of the margin, I mean it seems like the securities portfolio, you guys as you sold off your munies is that – that’s the main reason why the tax rate went up a significant amount this quarter?

No there’s a little more to it than that Mike. As you have losses in quarters like we had this first quarter, we go to a discrete method of calculating your income tax and then now that we’re back into a profitable mode, we go back to the effective tax rate. So that caused an adjustment here in the third quarter. And we think probably going forward an average or a normal run rate for us would be 23%, 25%. Fourth quarter can be lower as we continue to go through that adjustment period. Mike Shafir – Stern, Agee: I’m sorry you say fourth quarter, it was going to back to that 23% to 25% range?

No, probably 2011 we’re projecting a 23% to 25% range, fourth quarter probably will be around 7%. Mike Shafir – Stern, Agee: The tax rate?

Effective tax rate.

Our next question will come from Damon DelMonte from KBW. Damon DelMonte – KBW: Could you just give us a little more perspective on the margin kind of looking forward as you continue to try to derisk the balance sheet? Are we expecting to see much movement in the margin?

As you know that’s been our very, very steep upward trend. And again some of the derisking of our balance sheet is going to have some headwinds through that trend. In addition, the interest rate forecast as most banks are looking out for flattening of the yield curve, that is going to have some headwinds as well. Now, offsetting that has been our growth in our deposit mix and as well as – we still think we have some room in our liability pricing. So that’s a long winded answer to try not to give you an exact percentage but those are the factors we’re considering right now. Damon DelMonte – KBW: Okay. Going back to Mike’s question before about the effort to I guess divest some of those $15 million plus credits you’re down to 54 right now. What’s the aggregate amount of outstandings for those 54 credits?

The aggregate commitment amount is about $1.3 billion and the aggregate outstanding is about $740 million. Damon DelMonte – KBW: Yes I did, thank you. Is your goal to get off 54 of those below that $15 million – to get all 54 of those loans kind of out?

No, there will be some exceptions. And we’re really looking at this as the aggregate excess exposure, we’ve mentioned the numbers but rather than focusing on units I think we want to look at the aggregate exposure and work it down. We just had one of our credits that was renewed recently. We had a $35 million exposure in there and we dropped it down to $25 million. With that company I think we’re comfortable at that level. So we expected that there would be some exceptions to this for the major companies headquartered in Western Pennsylvania where we feel comfortable with the risk and for community institutions that we feel we should support.

As a point of reference, our lending limits in-house is $15 million per loan and $15 million per relationship. However, our legal lending limit is in excess of $90 million. This is a little perspective in what we’re trying to do here.

Actually for 42 of the 55 names, our exposure is under $30 million. Damon DelMonte – KBW: Okay, so definitely 12 of those are greater than $30 million?

That’ll be the math, yes. Damon DelMonte – KBW: Then I guess just lastly, how do you feel about your reserve level here kind of going forward. Can we expect the provisions to match charge offs or you think you’re at a point now where you have a strong enough handle on the risk in the portfolio and then you can start to release some of the reserve from here?

We just did here we adhere to the methodology that we’ve got. We’re comfortable with the reserve level that we’ve got and feel that the loans are adequately reserved right now and hopefully, we’re really not so much focused on the reserve but the resolution of the problems and moving down the non-accrual and moving out the problem loans and the reserve level sort of falls out where it falls out where it should be.

I should also mention that it probably wouldn’t be fair or accurate to equate provision expense to charge offs for next year considering some of the very heavy specific reserve we have on the couple of those credits. So we won’t necessarily replace that specific reserve in fact it does lead to charge offs. Damon DelMonte – KBW: Okay. Could you help us think about just from a provision perspective then? I mean the last two quarters were in the $4 million range and the four quarters before that were three or four times that size. So I mean are we kind of heading in the same direction that we’ve seen in the last couple of quarters?

What you have to keep in mind in both of those quarters were some unexpected release of reserve that were previously established. So no that’s not something you can count on every quarter going forward.

Our next question will come from Rick Weiss from Janney Montgomery Scott, please go ahead. Rick Weiss – Janney Montgomery Scott: I was wondering if you could talk a little bit about when would you expect to be comfortable enough to increase the dividend.

Yes, that’s a good question. I think that the components that have to be considered is the capital levels which I think we’ve taken care of capital levels and we continue to add to those capital levels as we continue adding earnings. But it’s going to be really boiling down to the other two components and that’s consistent earnings and having some stability in the economy and knowing that if you raise the dividend you’re never going to have to reduce it again. So, I can see that where I would expect if we get to that point sometime in the year 2011 but I’m not prepared to predict exactly when that is. Rick Weiss – Janney Montgomery Scott: If you were able to get say the crystal ball is working ahead say two more quarters like this one. Then would you be comfortable?

It depends on the outlook for the economy. If the economy is a little more certain I think that there’ll be a little more comfort level. Rick Weiss – Janney Montgomery Scott: Honestly, given your capital levels John, how are you looking at M&A these days?

I’d look at transactions within footprint at this point in time but I think that we’re focused on getting a few things nailed down; here at the home front, I would say probably in 2011 we could take a more look at that as well.

(Operator Instructions) We do have a question from Julienne Cassarino from Prospector Partners. Julienne Cassarino – Prospector Partners: Hi, did I hear you say you’re selling your entire muni portfolio, all your muni securities?

It’s something we’re considering yes. Julienne Cassarino – Prospector Partners: Can you talk about why are you doing that, what are you seeing in the muni world?

Two issues; one is our current tax position with deferred taxes and the second issue is comfort levels with some of the credit issues going on and liquidity issues with those particular investments. Julienne Cassarino – Prospector Partners: How are your munies priced? Are they level one, two or three securities?

Level one. Julienne Cassarino – Prospector Partners: So, these are getting priced every day? Are you using some kind of index to price them?

A service we use to do that for us. Julienne Cassarino – Prospector Partners: And they price for each individual muni or are they using an index as a benchmark?

No, individual instruments. Julienne Cassarino – Prospector Partners: Okay. So these are ones that trade every day or trade daily or trade regularly?

I think regularly we – an accurate assessment whether they trade daily or not I’m not sure. Julienne Cassarino – Prospector Partners: What are the ones? Can you just go into a little more detail about what you’re concerned about, the value like what kind of munies are we talking?

Why don’t I turn this discussion over to our Treasurer, who is little more knowledgeable on the details. This is John Previte.

Yes, as mentioned earlier the portfolio was actually over $200 million at the beginning of the year and we’ve disposed about three quarters of that. The remaining securities are very solid generally general obligation type issues. So the ones we have right now are we’re very comfortable with from a credit standpoint, but as Bob mentioned there are other tax issues that we’re also looking at relative to whether we continue to hold these or not.

I should also mention it wasn’t too long ago where that municipal market almost froze up on us and we see some liquidity risk in those portfolios as well.

The remaining securities actually are, from a pricing standpoint, have an unrealized gain of about $1.5 million at the end of that quarter. Julienne Cassarino – Prospector Partners: Yes, just curious you said you’re concerned about the market in general for munies?

Yes, if you look back historically there have been some freezing up of those markets, affecting the liquidity on them. Julienne Cassarino – Prospector Partners: Okay. How much of the munies of the original $200 million size portfolio were municipalities outside of Pennsylvania?

Don’t know right off hand. The majority of them were Pennsy issues but I can’t give you that exact figure.

The other issue is as we went through the reduction of that portfolio, we started with the ones that had the most credit concerns and got rid of them first. So the ones that we do have left are probably the stronger ones in that portfolio. So we’ll assess it as the market changes and as our own financial position changes and make a decision here over the next couple of quarters when they’re not to retain the rest of that portfolio. So we’re keeping ourselves flexible with it.

This does conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Okay thanks everyone for joining us on today’s call. I believe we’re making consistent progress and we appreciate your continued interest in First Commonwealth and look forward to speaking with you soon.

The conference has now concluded. Thank you for attending today presentation. You may now disconnect.

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