FIRST COMMONWEALTH FINANCIAL CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 27, 1998
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of
Shareholders of First Commonwealth Financial Corporation (the
"Corporation") will be held at the First Commonwealth Financial
Corporation Operations Center, 646 Philadelphia Street, Indiana,
Pennsylvania on Monday, April 27, 1998, at 3:00 p.m., local time,
for the following purposes:
1. To elect seven Directors to serve for terms expiring in
2001.
2. To act on such other matters as may properly come
before the meeting.
Only shareholders of record as of the close of business on
March 16, 1998 are entitled to notice of and to vote at the
Annual Meeting and any adjournments thereof. The Annual Report
to Shareholders for the year ended December 31, 1997, which
includes consolidated financial statements of the Corporation, is
enclosed.
YOU ARE URGED TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING IN PERSON. IF YOU ATTEND THE MEETING YOU MAY, IF YOU
WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/S/David R. Tomb, Jr.
Secretary
Indiana, Pennsylvania
March 25, 1998
FIRST COMMONWEALTH FINANCIAL CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 27, 1998
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of
Directors of First Commonwealth Financial Corporation (the
"Corporation" or "FCFC") in connection with its Annual Meeting of
Shareholders to be held on Monday, April 27, 1998, 3:00 p.m.,
local time, and any adjournments thereof.
If the accompanying proxy is duly executed and returned, the
shares of Common Stock, par value $1.00 per share (the "Common
Stock"), of the Corporation represented thereby will be voted
and, where a specification is made by the shareholder as provided
therein, will be voted in accordance with that specification. A
proxy may be revoked by the person executing it at any time
before it has been voted by notice of such revocation to David R.
Tomb, Jr., Secretary of the Corporation.
The three persons named in the enclosed proxy have been
selected by the Board of Directors and will vote shares
represented by valid proxies. They have indicated that, unless
otherwise specified in the proxy, they intend to vote to elect as
Directors the seven nominees listed on page 6.
The Board of Directors has no reason to believe that any of
the nominees will be unable to serve as Directors. In the event,
however, of the death or unavailability of any nominee or
nominees, the proxy to that extent will be voted for such other
person or persons as the Board of Directors may recommend.
The Corporation has no knowledge of any other matters to be
presented at the meeting. In the event other matters do properly
come before the meeting the persons named in the proxy will vote
in accordance with their judgment on such matters.
The approximate date on which this proxy statement is first
to be mailed to the shareholders of the Corporation is March 25,
1998. The cost of the solicitation of proxies will be paid by the
Corporation. In addition to the solicitation of proxies by the
use of the mails, management and regularly engaged employees of
the Corporation may, without additional compensation therefor,
solicit proxies on behalf of the Corporation by personal
interviews, telephone, telegraph or other means, as appropriate.
1
The Corporation will, upon request, reimburse brokers and others
who are only record holders of the Corporation's Common Stock for
their reasonable expenses in forwarding proxy material to, and
obtaining voting instructions from, the beneficial owners of such
stock.
As of the close of business on March 16, 1998, there were
22,436,628 shares of Common Stock issued and 22,094,885 shares
were outstanding. Three million (3,000,000) shares of Preferred
Stock have been authorized; however, none of the preferred shares
is outstanding. Only shareholders of record as of the close of
business on March 16, 1998 are entitled to receive notice of and
to vote at the Annual Meeting.
Shareholders are entitled to one vote for each share held on
all matters to be considered and acted upon at the Annual
Meeting. The Articles of Incorporation of the Corporation do not
permit cumulative voting. An affirmative vote of a majority of
the shares present and voting at the meeting is required for
approval of all items being submitted to the shareholders for
their consideration. Abstentions and broker non-votes are each
included in the determination of the number of shares present and
voting, but are not counted for purposes of determining whether a
proposal has been approved.
The Corporation conducts business through two banking
subsidiaries: (i) First Commonwealth Bank ("FCB") doing business
as NBOC Bank ("NBOC"), Deposit Bank ("Deposit"), Cenwest Bank
("Cenwest"), First Bank of Leechburg ("Leechburg"), Peoples Bank
("Peoples"), Central Bank ("Central"), Peoples Bank of Western
Pennsylvania ("Peoples of W. PA"), Unitas Bank ("Unitas"),
Reliable Bank ("Reliable"), and a wholly-owned insurance agency
subsidiary of FCB, First Commonwealth Insurance Agency ("FCIA");
(ii) and First Commonwealth Trust Company ("FCTC"); through
Commonwealth Systems Corporation ("CSC"), a data processing
subsidiary; and BSI Financial Services Inc. ("BSI"), a mortgage
and loan servicing company. The Corporation also jointly owns
Commonwealth Trust Credit Life Insurance Company ("CTCLIC"), a
reinsurer of credit life and accident and health insurance. FCB
and FCTC are herein collectively called the "Subsidiary Banks."
COMMON STOCK OWNERSHIP BY MANAGEMENT
The Corporation is not aware of any person who, as of
March 16, 1998, was the beneficial owner of more than 5% of the
Common Stock, except FCTC as more fully described below. The
following table sets forth information concerning beneficial
ownership by all directors and nominees, by each of the executive
officers named in the Summary Compensation Table on page 10 (the
"Summary Compensation Table") and by all directors and executive
officers as a group.
2
Amount and nature of Percent of
Name Beneficial Ownership(1) Class
E. H. Brubaker 10,468 (2) *
Sumner E. Brumbaugh 118,304 (2) (3) *
Edward T. Cote 101,400 (5) *
Thomas L. Delaney 30,040 *
Clayton C. Dovey, Jr. 23,134 *
Ronald C. Geiser 18,873 (3) *
Johnston A. Glass 24,016 (3) *
A. B. Hallstrom 8,882 (3) *
Thomas J. Hanford 24,129 *
H. H. Heilman, Jr. 22,000 *
David F. Irvin 63,598 *
William R. Jarrett 4,072 (3) *
David L. Johnson 12,692 (2) *
Robert F. Koslow 26,321 (2) (3) *
Dale P. Latimer 589,373 (3) (5) 2.67%
Joseph E. O'Dell 32,066 (2) (4) *
Joseph W. Proske 14,798 (2) (3) *
Charles J. Szewczyk 272,465 1.23%
Gerard M. Thomchick 27,160 (2) (3) (4) *
David R. Tomb, Jr. 316,762 (2) (3) (4) (5) (6) 1.43%
E. James Trimarchi 341,672 (2) (3) (4) (5) (6) (7) 1.55%
Robert C. Williams 16,483 (3) *
All directors and 1,606,052 7.27%
executive officers
as a group (25 persons)
*Less than 1%
(1) Under regulations of the Securities and Exchange
Commission,
a person who has or shares voting or investment power with
respect to a security is considered a beneficial owner of
3
the security. Voting power is the power to vote or direct
the voting of shares, and investment power is the power to
dispose of or direct the disposition of shares. Unless
otherwise indicated in the other footnotes below, each
director has sole voting power and sole investment power
over the shares indicated opposite his name in the table,
and each member of a group has sole voting power and sole
investment power over the shares indicated for the group.
(2) Does not include the following shares held by spouses,
either individually or jointly with other persons, as to
which voting and investment power is disclaimed by the
director or officer: Mr. Brubaker, 26,385; Mr. Brumbaugh,
132; Mr. Johnson, 948; Mr. Koslow, 2,109; Mr. O'Dell, 2,153;
Mr. Proske, 31,530; Mr. Thomchick, 3,222; Mr. Tomb, 264; Mr.
Trimarchi, 20,000; and all Directors and executive officers
as a group, 86,743.
(3) Includes the following shares held jointly with spouses, as
to which voting and investment power is shared with the
spouse: Mr. Brumbaugh, 15,400; Mr. Geiser, 14,364; Mr.
Glass, 12,304; Mr. Hallstrom, 6,237; Mr. Jarrett, 2,691; Mr.
Koslow, 10,166; Mr. Latimer, 21,361; Mr. Proske, 1,600; Mr.
Thomchick, 2,961; Mr. Tomb, 31,846; Mr. Trimarchi, 8,482;
Mr. Williams, 11,215, and all Directors and executive
officers as a group 138,627.
(4) Includes 17,336 shares held by Atlas Investment Company, of
which Messrs. O'Dell, Thomchick, Tomb and Trimarchi are each
25% owners and as to which they share voting and investment
power.
(5) Includes 101,000 shares owned by Berkshire Securities
Corporation. Berkshire is a Pennsylvania corporation
organized in 1976 for the purpose of acquiring and holding
the securities of Pennsylvania banks. The officers,
directors or stockholders of Berkshire include Messrs. Cote,
Latimer, Tomb and Trimarchi, each of whom is an officer or
director of the Corporation, among others. The shares were
acquired by Berkshire when its shares of Dale National Bank
(now Cenwest) were converted into shares of the Corporation
as a result of the Dale merger in 1985. Each of the
foregoing persons may be deemed to share voting and
investment power of these shares.
(6) Includes 159,438 shares held by County Wide Real Estate,
Inc., of which Messrs. Tomb and Trimarchi are each 50%
owners and as to which they share voting and investment
power.
(7) Includes 29,652 shares held by family interests of which Mr.
Trimarchi exercises sole voting and investment power.
4
As of February 28, 1998, FCTC, acting in a fiduciary
capacity for various trusts and estates, including the
Corporation Employee Stock Ownership Plan ("ESOP"), and the
Corporation 401(k) Retirement Savings and Investment Plan
("401(k) Plan") held an aggregate of 1,852,686 shares of Common
Stock (8.4% of the outstanding shares). Of these shares, FCTC
had sole voting power with respect to 479,019 shares, shared
voting power with respect to 1,373,667 shares, had sole
investment power with respect to 452,957 shares and shared
investment power with respect to 1,399,729 shares. FCTC votes
the shares over which it has voting power and, where voting power
is shared, shares are voted by FCTC in consultation with the
other persons having voting power.
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors and executive officers, and
persons who own more than ten percent of a registered class of
the Corporation's equity securities, to file with the Securities
and Exchange Commission (the "Commission") an initial report of
ownership and reports of changes in ownership of Common Stock and
other equity securities of the Corporation. Executive officers,
directors and greater than ten percent shareholders are required
by Commission regulation to furnish the Corporation with copies
of all Section 16(a) forms which they file. The Corporation is
aware of one late filing by Mr. Hallstrom in 1997. In making this
disclosure, the Corporation has relied solely on written and oral
representations of its directors, executive officers and greater
than ten percent shareholders and copies of the reports they have
filed with the Commission.
ELECTION OF DIRECTORS
Article 10 of the By-Laws of the Corporation provides that
the number of Directors shall be not less than 3 nor more than
25. The Board of Directors has, in accordance with the By-Laws,
fixed the number of directors at 21 (three classes of seven
directors each). A successor for the vacancy in the class of
directors whose terms expire in 2000 has not been named.
As of March 16, 1998, each director and nominee for election
as a director of the Corporation owned beneficially the number of
shares of Common Stock set forth in the preceding table. The
information in the table and the footnotes thereto are based upon
data furnished to the Corporation by, or on behalf of, the
persons named or referred to in the table.
Seven directors will be elected at the Annual Meeting to
serve for terms of three years expiring with the Annual Meeting
of Shareholders in 2001. Each Director elected will continue in
office until a successor has been elected. If any nominee is
unable to serve, which the Board of Directors has no reason to
expect, the persons named in the accompanying proxy intend to
vote for the balance of those named and, if they deem it
advisable, for a substitute nominee. The names of the nominees
for Directors and the names of Directors whose terms of office
will continue after the Annual Meeting are listed in the
following table.
5
Information about the nominees, each of whom is presently a
member of the Board of Directors, and about the other directors
whose terms of office will continue after the Annual Meeting, is
set forth in the table below. The nominees and other directors
have held the positions shown for more than five years unless
otherwise indicated.
Principal Occupation or
Director Employment; Other
Name Since Directorships; Age
Nominees for a Term Ending in 2001:
Thomas L. Delaney 1984 Private Investor;
Director of First United
Bancorp "BANCORP"; Age 67
Ronald C. Geiser 1985 Retired; formerly
President and Director of
Cenwest; Age 68
David F. Irvin 1984 Sole Owner, The
Irvin/McKelvy Company
(sales and engineering
for mining and industrial
services); Age 79
David L. Johnson 1984 Retired; formerly Vice
President and Corporate
Secretary, Pennsylvania
Manufacturers'
Corporation (insurance
holding company); Age 68
Robert F. Koslow 1993 Chairman of the Board of
Peoples of W. PA; Age 62
Joseph W. Proske 1984 Vice President-
Engineering, Kane
Magnetics International
(manufacturer of magnetic
components); Director of
CSC; Age 61
E. James Trimarchi 1982 Chairman of the Board of
the Corporation; Director
of FCB, FCTC, CSC,
CTCLIC, and New Mexico
Banquest Investors Corp.
"NMB"; Age 75
6
Continuing Directors Whose Terms End in 1999:
Sumner E. Brumbaugh 1992 Chairman of the Board of
Central; President,
Brumbaugh Insurance
Group; Age 69
Edward T. Cote 1984 Associate, The Wakefield
Group (Investment
Banking); and Director of
NMB; Age 61
Clayton C. Dovey, Jr. 1985 Retired; formerly
Chairman of the Board of
Cenwest; Age 73
Johnston A. Glass 1986 President and Chief
Executive Officer of FCB;
Formerly President of
NBOC; Director of FCB;
Age 48
Dale P. Latimer 1984 President, R & L
Development Company
(heavy construction);
Director of FCB; and NMB;
Age 67
Joseph E. O'Dell 1994 President and Chief
Executive Officer of the
Corporation; formerly
President and Chief
Executive Officer of FCB;
Director of FCB, FCTC,
CSC and BSI; Age 52
David R. Tomb, Jr. 1983 Partner, Tomb and Tomb
(attorneys-at-law);
Senior Vice President,
Secretary and Treasurer
of the Corporation;
Director of FCB, FCTC,
CSC, BSI and CTCLIC;
Age 66
7
Continuing Directors Whose Terms End in 2000:
E. H. Brubaker 1984 Retired; formerly
Chairman of the Board of
Deposit; Age 67
A. B. Hallstrom 1986 Chairman, Hallstrom
Construction Inc.; Age 69
Thomas J. Hanford 1984 Private Investor,
Director of BANCORP;
Age 59
H. H. Heilman, Jr. 1985 Partner, Heilman &
McClister (attorneys-
at-law); Age 81
Charles J. Szewczyk 1990 (pronounced and sometimes
known as Charles J.
Sheftic) Chairman of the
Board of Peoples;
Managing Partner of
County Amusement Co.
(real estate holdings);
Age 69
Robert C. Williams 1994 President of Unitas;
Age 54
Board Committees
During 1997 there were 6 meetings of the Board of Directors
of the Corporation. All directors attended at least 75% of the
total number of meetings of the Board of Directors of the
Corporation and all committees of which they were members except
for Mr. Hallstrom.
The Board of Directors of the Corporation has established
three standing committees: Executive, Audit, and Executive
Compensation. The Board has no standing Nominating Committee.
When the Board of Directors is not in session, the Executive
Committee, which is comprised of Messrs. Trimarchi (Chairman),
Tomb (Secretary), Brubaker, Brumbaugh, Delaney, Geiser, Glass,
Heilman, Latimer, O'Dell and Szewczyk possesses and exercises all
the powers of the Board, except for matters which are required by
law to be acted upon by the full Board. The Executive Committee
considers major policy matters and makes reports and recommenda-
tions to the Board. The Committee met 4 times in 1997.
8
The Audit Committee is comprised of Messrs. Latimer
(Chairman), Hallstrom, Irvin, Cote and Proske and reviews the
internal auditing procedures and controls of the Corporation and
its subsidiaries. The Audit Committee also reviews reports of
examinations of the Subsidiary Banks received from state and
federal regulators, as well as reports from internal and external
auditors. The Audit Committee formally reports to the full Board
of Directors its evaluations, conclusions and recommendations
with respect to the condition of the Corporation, the Subsidiary
Banks, CSC and BSI, and the effectiveness of their policies,
practices and controls. The Committee met 4 times in 1997.
The Executive Compensation Committee is comprised of Messrs.
Cote (Chairman), Johnson, Irvin and Latimer. The Committee met 5
times in 1997. (See Report of the Executive Compensation
Committee.)
The By-Laws of the Corporation require that any shareholder
who intends to nominate or cause to have nominated any candidate
for election to the Board of Directors (other than a candidate
proposed by the Corporation's then existing Board of Directors)
must notify the Secretary of the Corporation in writing not less
than 120 days in advance of the date the Corporation's proxy
statement is released to its shareholders in connection with the
previous year's annual meeting of shareholders called for the
election of directors (for the 1998 meeting of shareholders, such
notification must have been received by the Secretary on or
before November 25, 1997). Such notification must contain (to
the extent known by the notifying shareholder) the name, address,
age, principal occupation and number of shares of the Corporation
owned by each proposed nominee; the name, residence address and
number of shares of the Corporation owned by the notifying
shareholder; the total number of shares that, to the knowledge of
the notifying shareholder, will be voted for each proposed
nominee; a description of all arrangements or understandings
between the shareholder and each nominee and any other person or
persons pursuant to which the nomination or nominations are to be
made by the shareholder; such other information regarding each
nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had the nominee been
nominated by the Board of Directors; and the written consent of
each nominee, signed by such nominee, to serve as a director of
the Corporation if so elected. The Board of Directors as a whole
would consider nominations submitted by a shareholder if
submitted in accordance with the By-Laws and otherwise in time
for such consideration.
COMPENSATION OF DIRECTORS
Directors who currently serve in a management capacity at
FCFC or serve in an affiliate management capacity are compensated
at the rate of $1,000 per quarterly meeting attended. Other
Directors are compensated at the rate of $1,500 per quarterly
meeting attended as well as payment of an annual retainer of
$10,000. Committee members receive $300 per committee meeting
attended.
9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding
compensation received by the Chief Executive Officer and the
remaining four most highly compensated named executive officers
of the Corporation.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long-Term
Compensation:
Securities
Name and All Other Underlying
Principal Position Year Salary1 Bonus Compensation2 Options/SARs3
Joseph E. O'Dell 1997 $381,000 $ -0- $16,866 22,297
President and Chief 1996 343,200 20,000 20,091 20,306
Executive Officer of 1995 324,000 32,000 20,331 -0-
First Commonwealth
Financial Corporation
E. James Trimarchi 1997 $356,000 -0- $16,866 15,135
Chairman of the Board 1996 341,120 -0- 20,091 15,238
of First Commonwealth 1995 354,000 $ -0- 21,038 -0-
Financial Corporation
Johnston A. Glass 1997 $256,800 $ -0- $16,866 14,865
President and Chief 1996 195,480 11,243 20,091 8,302
Executive Officer 1995 184,488 33,941 21,038 -0-
of FCB
Gerard M. Thomchick 1997 $231,300 $ -0- $16,866 13,236
Sr. Executive Vice 1996 217,750 12,500 20,091 12,691
President and Chief 1995 205,000 20,000 21,038 -0-
Operating Officer of
First Commonwealth
Financial Corporation
William R. Jarrett 1997 $168,200 $ -0- $16,866 7,274
Sr. Vice President 1996 160,160 9,625 20,091 6,973
of First Commonwealth 1995 154,000 25,000 8,482 -0-
Financial Corporation
1 Includes compensation for services on boards and committees of the
Corporation.
2 Includes the matching and automatic contribution by the Corporation to
the individual's account in the Corporation's 401(k) Plan as well as
the allocation of shares to the individual's account in the ESOP.
3 Further information is provided on page 11 .
10
The following tables set forth certain information regarding stock
options granted in 1997 to the Chief Executive Officer and the remaining
four most highly compensated named executive officers of the Corporation.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
% OF EXERCISE POTENTIAL REALIZED VALUE
TOTAL OPTIONS OR AT ASSUMED ANNUAL RATES
OPTIONS GRANTED TO BASE PRICE EXPIRATION OF STOCK PRICE APPRECIATION
NAME GRANTED EMPLOYEES PER SHARE DATE FOR OPTION TERM
5% 10%
Joseph E. O'Dell 22,297 7.42% $18.50 Feb 25, 2007 $259,314 $657,316
E. James Trimarchi 15,135 5.03 18.50 Feb 25, 2007 176,020 446,180
Johnston A. Glass 14,865 4.94 18.50 Feb 25, 2007 172,880 438,220
Gerard M. Thomchick 13,236 4.40 18.50 Feb 25, 2007 153,935 390,197
William R. Jarrett 7,274 2.42 18.50 Feb 25, 2007 84,597 214,438
AGGREGATE STOCK OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF NUMBER OF
SECURITIES SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED UNEXERCISED &
UNEXERCISED UNEXERCISED & BUT EXERCISABLE UNEXERCISABLE
BUT EXERCISABLE UNEXERCISABLE IN-THE-MONEY IN-THE-MONEY
OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
NAME FISCAL YEAR END FISCAL YEAR END YEAR END YEAR END
Joseph E. O'Dell 22,297 20,306 $452,712 $414,825
E. James Trimarchi 15,135 15,238 307,297 311,293
Johnston A. Glass 14,865 8,302 301,815 169,599
Gerard M. Thomchick 13,236 12,691 268,740 259,261
William R. Jarrett 7,274 6,973 147,689 142,449
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933,
as amended, or the Securities and Exchange Act of 1934, as
amended, that might incorporate future filings, including this
Proxy Statement in whole or in part, the following report and the
Performance Graph on page 17 shall not be incorporated by
reference into any such filings.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
TO: Board of Directors
The following is a report by the Executive Compensation
Committee of the Board of Directors of First Commonwealth
Financial Corporation. The objectives of the report are to
provide shareholders with an explanation of the overall executive
compensation philosophy, strategies, and specific compensation
plans.
11
EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee is comprised of four
(4) non-employee and independent directors selected from the
Board of Directors of First Commonwealth Financial Corporation.
The Committee met 5 times in 1997.
The Committee's goal is to maximize shareholder value by
establishing an executive compensation program consisting of
sufficient base compensation to attract and retain the most
highly qualified persons for the executive officer positions and
to supplement that basic compensation with incentive compensation
that puts each executive officer at risk and that provides
financial rewards only where the performance level of the
Corporation justifies such rewards.
Throughout 1997, the Committee followed a formal Executive
Compensation Program which is illustrated, in part, by the
following performed tasks:
1. Researching peer group compensation activities to
ensure both consistency and competitiveness in the
composition of the Corporation's executive compensation
program.
2. Evaluating current and proposed components of the
Corporation's executive compensation program to ensure
consistency with its philosophy on executive
compensation.
3. Ensuring that all regulatory requirements pertaining to
executive compensation are met.
4. Refining the executive compensation program on an
ongoing basis as a result of the above as well as
documenting and administering the Corporation's
executive compensation program.
Executive officers of the Corporation may, at the request of
the Committee, be present at meetings of the Committee for input
and discussion purposes. However, the executive officers have no
direct involvement with the decisions of the Committee, nor do
they have a vote on any issues addressed by the Committee.
Consultants and other independent advisors may also be utilized
by the Committee from time to time in a similar manner.
Each meeting of the Committee is documented in the form of
minutes and submitted to the Board of Directors.
12
EXECUTIVE COMPENSATION PHILOSOPHY AND POLICY
The backbone of the Executive Compensation Program is the
Executive Compensation Statement of Principles which has been
adopted by the Board of Directors. This Statement of Principles
provides guidance to the deliberations of the Executive Compen-
sation Committee and is the basis for its decisions. The
Statement of Principles emphasizes the view of the Corporation
that base compensation should be established based upon relevant
peer group comparisons, that wherever possible tax leverage
should be achieved by using plans that are tax advantaged and
that compensation should be designed to maximize the incentive of
the executive officers to increase the Corporation's long-term
performance.
Consistent with this objective, the Executive Compensation
Program is structured to foster decisions and actions which will
have a strong positive impact on the Corporation's long-term
performance. For this reason, participation in the programs
administered by the Executive Compensation Committee is limited
to those executives who have the greatest opportunity to affect
the achievements of the Corporation's long-term strategic
objectives.
The Executive Compensation Committee has established the
following parameters for the pay philosophy under the 1997
program:
1. An overall program which is not overly complex and may
be readily communicated and easily understood by
participants and shareholders.
2. Base salary that is at the fiftieth to seventy-fifth
percentile of the competitive rate for the position as
defined by selected peer group information.
3. Base salary adjustments which maintain external equity.
4. An incentive-based compensation system, in which a cash
incentive bonus will be paid if justified on the basis
of the Corporation's financial performance for the
year.
5. Utilization of IRS "qualified" plans whenever they are
in the best interests of both the executive officer and
the Corporation.
6. Use of equity-based compensation through the
Corporation's 1995 Compensatory Stock Option Plan to
provide a long-term incentive for the executive
officers of the Corporation to maximize the
Corporation's stock price and increase shareholder
value.
13
The Executive Compensation Committee utilized several
factors to define an appropriate competitive peer group including
the type of company from which executive talent might be
recruited, a logical geographical region, organizational size and
structural complexity, organizational performance, and the
ability to identify and make relevant comparisons of executive
officer positions in terms of responsibilities and performance.
The 1997 peer group was structured utilizing this
methodology and philosophy and, in the opinion of the Committee,
represents a fair and reasonable standard against which executive
pay may be compared. The peer group included Pennsylvania and
adjacent states' commercial banks and bank holding companies of
asset sizes and characteristics similar to those of the
Corporation and its affiliates.
EXECUTIVE COMPENSATION PROGRAMS
The primary components of the Corporation's Executive
Compensation program are base salaries, benefits, participation
in the Corporation's Stock Option Plan and a cash performance-
based incentive plan. Under the latter program (which will first
pay bonuses in 1999 based upon 1998 performance) a cash incentive
bonus will be paid to the executive officers if the increase in
primary earnings per share as compared with the previous year is
at least eight percent (ten percent in the case of the four
highest paid executive officers). This move is consistent with
industry and peer group trends regarding greater emphasis being
placed on performance which is incentive based and which is at
risk for the executive. This provides an incentive to the
executives to increase the Corporation's financial performance
and enhances shareholder value.
Base salaries are assessed by taking into account the
position, responsibilities, and competitive salary data as
generally defined by comparable peer group information from
similarly sized bank and bank holding companies within
Pennsylvania and adjacent states. Executive officer compensation
was set to correspond within the overall range of the peer group
data. Program participants are also eligible to partake in the
normal benefit programs available to employees of the Corporation
and its affiliates.
Also, executive officers are included in the Compensatory
Stock Option Plan which was approved by the Board of Directors in
1995 and the shareholders in 1996. The Executive Compensation
Committee is authorized to grant incentive stock options and non-
qualified stock options to key employees of the Corporation and
its subsidiaries. These stock options enable the optionee to
purchase the Corporation's common stock at its market price on
the day of the grant of the option. Two separate grants have
been made, one each in 1996 and 1997. None of the options
granted in 1996 may be exercised prior to their vesting date of
June 3, 1999 (except in the limited circumstances of death,
disability or change-in-control), nor may they be exercised after
the expiration date of June 3, 2006. Additional options, which
14
were granted in 1997, vested on December 31, 1997 and may be
exercised at any time prior to the expiration date of February
25, 2007. The Committee plans to continue using the granting of
such options as a performance-based incentive program that
encourages the long-term increase of the Corporation's share
price and enhances shareholder value.
In addition, executive officers may also participate in the
Executive Officer Loan/Stock Purchase Plan which provides for
corporate sponsored loans at market rates primarily for the
purchase of the Corporation's common stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1997, Joseph E. O'Dell completed his third year as
President and Chief Executive Officer of the Corporation. He
received a base salary of $375,000, which was within the peer
group's range of compensation for this position.
The Corporation experienced another dynamic year under the
leadership of Mr. O'Dell in 1997. Shareholders enjoyed an 88%
increase in stock price, and with dividends had a total return of
more than 90%. This dramatic rise was driven by a number of
factors including two structural moves instituted by Mr. O'Dell.
Both structural changes involved the same theme, namely,
expansion of the traditional banking role so that all of the
customers' financial and risk needs may be met in one place.
Thus, the Corporation established First Commonwealth Insurance
Agency (FCIA) to help the bank's customers deal with their
insurance needs. FCIA's establishment of a joint venture with
the Kuzneski Agency will minimize the start-up costs and allow
almost immediate effect of this joint venture on the
Corporation's bottom line.
The second structural move dealt with discussions which
culminated in a strategic alliance between the Corporation and
Hefren-Tillotson, a leading full-service financial planning firm.
This alliance will expand the product mix available to the bank's
customers, especially those with a high net worth.
Other activities on the part of Mr. O'Dell which further
cultivated shareholder confidence in the Corporation and
contributed to the rise in share price included the institution
of a plan to purchase equities which led to more than a
$6,000,000 gain in 1997; the establishment of a risk management
group at the corporate level; the launching of an initiative to
consolidate and standardize various processing functions, such as
loan and deposit operations, in order to utilize fewer resources
and reduce expenses; and, the transitioning of the presidential
duties of First Commonwealth Bank from Mr. O'Dell to Mr. Johnston
Glass.
Also of significant importance is the Corporation's major
progress in its plan to have its computing applications certified
as being Year 2000 compliant. Mr. O'Dell's background as a
former leader in the Corporation's technology center has enabled
him to work closely with Ms. Rosemary Krolick, Chief Information
Officer on this project.
15
Under Mr. O'Dell's leadership, the Corporation has continued
to identify areas in which greater efficiencies may be achieved
through the optimum utilization of both staffing and
technological resources. These activities, as represented by the
ongoing consolidation of the loan and deposit operations areas,
will allow for a stronger and profitable organization in the
future.
In 1997 Mr. O'Dell was an eligible participant in the
Corporation's 401(k) Plan and ESOP. As such, he received
contributions from the Corporation to both plans in 1997.
1997 OTHER EXECUTIVE COMPENSATION ACTIONS
In addition to that described above, in 1997 the Executive
Compensation Committee made its second grant under the Stock
Option Incentive Plan. The executive officers and other key
members of management, including the affiliate and partner bank
presidents and their respective senior staffs, were awarded such
grants.
In addition, the Committee explored various plan designs for
enhancing shareholder value by increasing performance incentive
compensation.
Submitted by the Executive Compensation Committee:
Edward T. Cote, Chairman David F. Irvin
David L. Johnson Dale P. Latimer
16
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly
percentage change in the cumulative total shareholder return on
the Corporation's Common Stock against the cumulative total
return of the S&P 500 Index and an Index for Pennsylvania Bank
Holding Companies with assets between one and three billion
dollars, including F.N.B. Corporation, First Western Bancorp
Inc., Fulton Financial Corp., USBANCORP Inc., S&T Bancorp Inc.
and Susquehanna Bancshares Inc., for the five years commencing
January 1, 1993 and ending December 31, 1997.
Cumulative Five Year Total Return
First Commonwealth vs. S&P 500 and Peer Group
1992 1993 1994 1995 1996 1997
Peer Group Index 100.00 123.39 120.77 178.39 207.91 350.30
First Commonwealth
Financial Corporation 100.00 119.18 94.64 127.05 138.15 274.17
S&P 500 Index 100.00 110.02 111.51 153.26 188.36 251.12
Assumes that the value of the investment in FCFC Common Stock
and each index was $100 on January 1, 1993 and that all
dividends were reinvested.
17
EXECUTIVE COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee consists of Messrs. Cote,
Johnson, Latimer and Irvin. No member was an officer or employee of
the Corporation during 1997 nor has ever been an officer or employee
of the Corporation or a subsidiary. Further, during 1997, no
executive officer of the Corporation served on a compensation
committee (or other board committee performing equivalent functions)
or Board of Directors of any entity related to the above named
Committee members or of any entity whose executive officers served as
a director of the Corporation.
INTERESTS OF NOMINEES, DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
Mr. Brumbaugh serves as Chairman of the Board of Central Bank
pursuant to an employment agreement for a period of 7 years,
commencing May 1, 1992 and ending April 30, 1999. The agreement
provides that Mr. Brumbaugh shall serve in an executive capacity and
shall be the Chairman of the Board of Directors of Central and shall
also perform such services for FCFC as from time to time are
requested. As compensation to Mr. Brumbaugh for all services
rendered to Central and to FCFC as an officer, director or member of
any committee of Central or any of FCFC's subsidiaries or affiliates,
FCFC has agreed, in addition to director's fees and committee meeting
fees, to pay or cause Central to pay to Mr. Brumbaugh a salary at an
annual rate of $100,000, which sum shall be adjusted upward at the
annual rate of 5%. Should Mr. Brumbaugh retire, thereafter he shall
be paid a retirement compensation for the remaining term of the
agreement at an annual rate of $50,000, adjusted upwards annually for
cost of living at the rate of 5%. Should Mr. Brumbaugh die at any
time during the term of the agreement, in lieu of the foregoing
payments, FCFC shall pay his wife the sum of $25,000 per year if she
is living at the time each payment is made. As a part of the
agreement and for a period of ten years thereafter, Mr. Brumbaugh
will not engage in any competing business within 10 miles of any of
the banking facilities of the Corporation or solicit any of their
then-existing customers.
Mr. Koslow serves as Chairman of the Board of Peoples of
W. PA under an employment agreement with Peoples extending to July
19, 1998. The agreement provides that Mr. Koslow will serve in such
executive capacity as may be designated from time to time by the
Board of Directors. As compensation to Mr. Koslow, Peoples agrees to
pay him a minimum annual salary equal to the annual salary in effect
on July 20, 1988, such annual salary to be subject to annual review
for possible increase. If Mr. Koslow's employment is terminated
other than for cause, he is entitled to be paid for the greater of
two years or the remaining term of the agreement, the annual salary
and bonus paid to him for the full calendar year immediately
preceding the year in which such termination occurs, plus the
insurance premiums provided in a split dollar life insurance
agreement between Peoples of W. PA and Mr. Koslow.
18
In the event of a change in control such minimum annual salary shall
be increased on January 1 of each year thereafter by an amount equal
to the percentage increase in the Consumer Price Index for the
preceding calendar year. If there is a change of control of Peoples
of W. PA and thereafter Mr. Koslow's responsibilities are changed
without his consent, Mr. Koslow is entitled to resign within twelve
months of such change of control, in which case he is entitled to
receive for the greater of three years or the remaining term of the
agreement, but not beyond his age 65, the annual salary and bonus
paid to him for the full calendar year immediately preceding such
resignation, plus the split dollar life insurance premiums. As part
of the agreement, Mr. Koslow has agreed that during the term of his
employment and for a period of 10 years thereafter, he will not
engage in any business in competition with Peoples of W. PA or any of
its subsidiaries within 20 miles of any of their banking facilities
or solicit any of their then existing customers.
In November 1986, Unitas entered into a Supplemental Executive
Benefit Agreement with Robert C. Williams, President of Unitas, which
provides Mr. Williams with certain benefits in the event of a change
in control. Should Mr. Williams' employment with Unitas be
terminated pursuant to a change in control, Unitas shall make payment
to him for services in an amount equal to his last full regular
monthly compensation prior to the change in control for a period of
36 months following the change in control. A termination pursuant to
a change in control may occur with a merger, consolidation,
acquisition, reorganization, sale of assets or significant stock
acquisition of Unitas. The compensation payable upon a change in
control is unfunded and would be paid out of general assets of Unitas
or its successor if they became payable.
At the 1996 Annual Meeting, the shareholders approved and
ratified the Corporation's Change in Control Agreement Program for
the Corporation's executive officers and certain other key employees.
Except as described below, all of the agreements are identical in all
material respects.
If, within one year following the occurrence of a change in
control, the employer involuntarily terminates the employment of the
executive (other than for cause as defined below), substantially
reduces the executive's title, responsibilities, power or authority,
reduces the executive's base compensation, assigns duties which are
inconsistent with previous duties, or undertakes similar actions, a
severance benefit equal to one year's base compensation (payable in
twelve monthly installments) will thereupon be payable to the former
executive. Health insurance and other principal employee benefits
will be continued during that one year period. If the former
executive enters into competitive employment during the one year
period, severance payments will cease. Cause for termination shall
arise if the executive commits a felony resulting in, or intended to
result in, monetary harm to the Corporation, its customers, or
affiliates, or if the executive intentionally fails to perform his
duties for 30 consecutive days following written notice from the
Corporation that such duties are not being performed.
19
The agreement with Mr. O'Dell, the President and Chief Executive
Officer of the Corporation, provides for severance payments to be
made if the employer involuntarily terminates the employment of the
executive (other than for cause as defined above), or undertakes
similar action as described above, within three years of a change in
control (rather than one year as described above for other
agreements). Furthermore, Mr. O'Dell's agreement provides a
severance benefit equal to three year's compensation (payable in
thirty-six monthly installments) with continuation of health
insurance and other principal employee benefits during that period.
In addition, Mr. O'Dell may also trigger the payment of severance
benefits (in the same amount and under the same conditions described
above) by voluntarily terminating employment within one year
following a change in control. However, the voluntary termination
provision will no longer be available once Mr. O'Dell attains normal
retirement age under any of the Corporation's regular retirement
plans.
Separate agreements with Mr. Thomchick, Senior Executive Vice
President of the Corporation and Mr. Glass, President and CEO of FCB
are identical to Mr. O'Dell's agreement in all material respects
except that severance payments are triggered only if the involuntary
termination of employment or other triggering event occurs within two
years of the change in control and the total severance benefit in his
case is equal to two years compensation (payable in twenty-four
monthly installments).
During 1997, David R. Tomb, Jr., attorney-at-law, and the law
firm of Tomb and Tomb of which Mr. Tomb is a partner performed legal
services for the Corporation, FCB, FCTC, CSC, BSI and FCIA. Mr. Tomb
is a Director and executive officer of the Corporation. The fees
paid for services during 1997 were $70,362.
ACCOUNTANTS
Grant Thornton LLP ("Grant Thornton") was selected by the Board
of Directors to serve as the Corporation's independent certified
public accountant for its 1997 fiscal year. A decision to change
accountants was made by the Audit Committee of the Board of
Directors, and effective September 18, 1997, Grant Thornton was
dismissed by the Corporation. Grant Thornton's report on the
Corporation's consolidated financial statements during the two most
recent fiscal years contained no adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
During the last two fiscal years and the subsequent interim
periods to the date hereof, there were no disagreements between the
Corporation and Grant Thornton on any matters of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the
satisfaction of Grant Thornton, would have caused it to make a
reference to the subject matter of the disagreements in connection
with its report.
20
Effective September 25, 1997, the Corporation's Audit Committee
engaged Deloitte & Touche LLP ("Deloitte & Touche") as its
independent certified public accountant. The Board of Directors also
has selected Deloitte & Touche as the Corporation's independent
certified public accountant for the 1998 fiscal year. A
representative of Deloitte & Touche is expected to be present at the
Annual Meeting and will have an opportunity to make a statement, if
he desires to do so, and to respond to appropriate questions.
ANNUAL REPORT
A copy of the Corporation's Annual Report for the fiscal year
ended December 31, 1997 is enclosed with this Proxy Statement.
A COPY OF THE CORPORATION'S FORM 10-K ANNUAL REPORT FOR 1997 AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST TO: DAVID R. TOMB, JR.,
SECRETARY/TREASURER, BOX 400, INDIANA, PENNSYLVANIA 15701.
SHAREHOLDER PROPOSALS
Proposals of Corporation shareholders intended to be presented
at the 1999 Annual Meeting of Shareholders must be received by the
Secretary of the Corporation not later than November 26, 1998 in
order to be considered for inclusion in the Corporation's proxy
statement for that meeting.
21
APPENDIX
(LETTER TO SHAREHOLDERS ATTACHED TO PROXY CARD)
Dear Shareholder:
It is my pleasure to enclose our 1997 Annual Report which
provides you with information about the progress of your corporation.
Also enclosed is a Proxy Statement which details information relative
to our Annual Meeting.
Our Annual Shareholders Meeting will convene at 3:00 p.m. on
Monday, April 27, 1998, at the FCFC Operations Center located at 646
Philadelphia Street, Indiana, Pennsylvania. The Annual Meeting this
year will again be a very brief business meeting with the only known
order of business being the election of directors. Enclosed are two
documents relevant to the meeting.
* The Proxy Statement - detailing information pertinent to
the annual meeting.
* The Proxy Card - Please mark, sign, date and return this
card in the enclosed envelope. This card should be
returned to our transfer agent, The Bank of New York,
regardless of whether or not you plan to attend the
meeting. You may change your vote if you so desire at any
time up until the vote is taken at the meeting.
Thank you once again for your continued support and confidence
in First Commonwealth. Should you have any questions regarding the
enclosed material, please call Shareholder Relations at 1-800-331-
4107.
Sincerely,
/S/JOSEPH E. O'DELL
President and Chief Executive
Officer
Detach Proxy Card Here
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1. Election of the following FOR all nominees WITHHOLD AUTHORITY*EXCEPTIONS
nominees as Directors to listed below to vote for all
serve for terms ending in nominees listed
2001. below
Nominees: Thomas L. Delaney, Ronald C. Geiser, David F. Irvin, David L.
Johnson, Robert F. Koslow, Joseph W. Proske and E. James Trimarchi
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below.)
*Exceptions
Change of Address and
or Comments Mark Here
Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title
as such. For joint accounts each joint owner should sign. If a
corporation, please sign in full corporate name by President or other
authorized officer, giving your full title as such. If a partnership,
please sign in name by authorized person, giving your full title as such.
Date:________________________________________, 1998
_____________________________________________ (Seal)
Signature
_____________________________________________ (Seal)
Signature if held jointly
Please Sign, Date, and Return the Proxy Promptly Using the Enclosed
Envelope
Votes must be indicated x
(x) in Black or Blue ink.
FIRST COMMONWEALTH FINANCIAL CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 27, 1998
The Annual Meeting of Shareholders of First Commonwealth
Financial Corporation will be held at 646 Philadelphia Street,
Indiana, PA on Monday, April 27, 1998 at 3:00 p.m., local time,
for the following purposes:
1. To elect seven Directors to serve for terms expiring in
2001.
2. To act on such other matters as may properly come
before the Meeting.
Only holders of Common Stock of First Commonwealth Financial
Corporation of record at the close of business on March 16, 1998
will be entitled to vote at the meeting or any adjournment
thereof.
To be sure that your vote is counted, we urge you to complete and
sign the proxy/voting instruction card below, detach it from this
letter and return it in the postage paid envelope enclosed in
this package. The giving of such proxy does not affect your
right to vote in person if you attend the meeting.
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FIRST COMMONWEALTH FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 27, 1998
This Proxy is Solicited on Behalf of the Board of Directors of
First Commonwealth Financial Corporation
The undersigned shareholder of First Commonwealth Financial
Corporation ("the Corporation") hereby appoints Thaddeus J.
Clements, Dianne M. Crusan and Carl E. Erickson, and each of
them, as proxies of the undersigned to vote at the Annual Meeting
of Shareholders of the Corporation which the undersigned would be
entitled to vote if then personally present on the following
matters and such other matters as may properly come before the
meeting.
This proxy when properly executed will be voted in the
manner directed herein. If no direction is made, this proxy will
be voted FOR Proposal 1.
The undersigned hereby revokes all previous proxies for the
Annual Meeting of Shareholders, hereby acknowledges receipt of
the Notice of Annual Meeting and Proxy Statement furnished
therewith and hereby ratifies all that the said proxies may do by
virtue hereof.
(Continued, and to be signed and dated on the reverse side.)
FIRST COMMONWEALTH FINANCIAL CORPORATION
P.O. BOX 11003
NEW YORK, NY 10203-0003