<PAGE>
 
              __________________________________________________

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

(Mark One)

[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the quarterly period ended June 30, 1997

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from ____________ to ____________

Commission file number: 0-27064


                           FIRST COMMONWEALTH, INC.
            (Exact name of registrant as specified in its charter)

            DELAWARE                                75-2154228
(State or other jurisdiction of         (IRS employer identification number) 
incorporation or organization)
                                     

             444 NORTH WELLS STREET, SUITE 600, CHICAGO, IL  60610
                   (Address of principal executive offices)

                                (312) 644-1800
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  [x]    No [  ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

Common Stock, par value $.001 per share, outstanding as of July 25, 1997:
3,614,954 shares

              __________________________________________________
<PAGE>
 
                           FIRST COMMONWEALTH, INC.
                                   FORM 10-Q
                      FOR THE QUARTER ENDED JUNE 30, 1997

                                     INDEX

                       PART I.    FINANCIAL INFORMATION
                       --------------------------------

<TABLE>
<CAPTION>
                                                                           Page
                                                                           -----
<S>                                                                        <C>
Item 1.   Financial Statements
 
          Consolidated Balance Sheets as of June 30, 1997
           and December 31, 1996.........................................    3

          Consolidated Statements of Income for the three and
           six months ended June 30, 1997 and 1996.......................    5

          Consolidated Statements of Cash Flows for the six
           months ended June 30, 1997 and 1996...........................    6

          Reconciliations of Net Income to Net Cash Provided by
           Operating Activities for the six months ended June
           30, 1997 and 1996.............................................    7

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

Item 2.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations.....................................    10 

                         PART II.   OTHER INFORMATION
                         ----------------------------

Item 4.   Submission of Matters to a Vote of Security Holders                14

Item 6.   Exhibits and Reports on Form 8-K...............................    14
 
SIGNATURES...............................................................    15
</TABLE>

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

     Certain statements included or incorporated by reference in this Form 10-Q
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and elsewhere in this Form 10-Q constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, increased
competition in the markets in which the Company operates; changes in regulation
affecting the Company; changes in the utilization of services; changes in
arrangements relating to payments to providers; the level of the Company's
indemnity enrollment and the related indemnity risk of indemnity plans; the
ability to integrate and successfully operate acquired businesses and the risks
associated with such businesses; the possible need for, and ability to obtain if
needed, financing on acceptable terms to finance the Company's growth strategy;
the ability of the Company to operate within the limitations imposed by any such
financing arrangements; and other factors referenced or incorporated by
reference in this Form 10-Q.

                                       2
<PAGE>
 
                        PART I.   FINANCIAL INFORMATION
                        -------------------------------

ITEM 1.  FINANCIAL STATEMENTS

First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------
(Dollars in Thousands)

<TABLE> 
<CAPTION> 
 ASSETS                                                    JUNE 30, 1997   DECEMBER 31, 1996
 ------                                                    -------------   -----------------
                                                            (Unaudited)
<S>                                                        <C>             <C>
CURRENT ASSETS:
 
  Cash and cash equivalents                                      $ 8,246             $15,817
 
  Investments - Short Term                                           511                   0
 
  Accounts receivable, net of allowance
  of $367 at June 30, 1997 and $290 at
  December 31, 1996                                                3,789               3,011
 
  Other receivables                                                  304                 221
 
  Deposit under reinsurance agreement                                467                 697
 
  Prepaid expenses                                                 2,091                 408
 
  Prepaid income taxes                                               409                   0
 
  Deferred tax asset                                                 750                 869
                                                                 -------             -------
 
   Total current assets                                           16,567              21,023
                                                                 -------             -------
 
PROPERTY AND EQUIPMENT, at cost                                    3,761               3,348
 
  Less - Accumulated depreciation                                 (2,008)             (1,726)
                                                                 -------             -------
 
   Property and equipment, net                                     1,753               1,622
                                                                 -------             -------
 
OTHER ASSETS:
 
  Restricted cash equivalents and government securities
  on deposit, at cost which approximates market                      973               1,222
 
  Deposits and other                                                  96                 105
 
  Intangible assets, net                                          10,389              10,482
                                                                 -------             -------
 
   Total other assets                                             11,458              11,809
                                                                 -------             -------
 
   TOTAL ASSETS                                                  $29,778             $34,454
                                                                 =======             =======
</TABLE>

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

                                       3
<PAGE>
 
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - continued
------------------------------------------------------- 
(Dollars in Thousands)

<TABLE> 
<CAPTION> 
LIABILITIES AND STOCKHOLDERS' EQUITY            JUNE 30, 1997  DECEMBER 31, 1996
                                                -------------  -----------------
                                                  (Unaudited)
<S>                                             <C>            <C> 
CURRENT LIABILITIES:
 
 Accounts payable - trade                              $  213            $   338
 
 Accounts payable - dental service providers              291                348
 
 Claims liability                                       1,244              1,580
 
 Accrued payroll and related costs                        653                739
 
 Other accrued expenses                                   435                648
 
 Deferred subscriber revenue                            4,822              4,449
 
 Payable under reinsurance agreement                      393                628
 
 Income taxes payable                                       0                101
 
 Other current liabilities                                  0              5,500
                                                       ------            -------
 
  Total current liabilities                             8,051             14,331
 

DEFERRED TAX LIABILITY - long-term                        207                167
                                                       ------            -------

   Total liabilities                                    8,258             14,498
                                                       ------            -------
 
STOCKHOLDERS' EQUITY:
 
 Preferred stock ($.001 par value; 1,000,000
   shares authorized, none issued)                           0                 0
 
 Common stock ($.001 par value; 15,000,000 shares
   authorized, 3,614,454 shares at June 30, 1997
   and 3,600,996 shares at December 31, 1996 issued
   and outstanding)                                          4                 4
 
 Capital in excess of par value                         13,213            13,207
 
 Less 435 shares of common stock at June 30, 1997
   and 425 shares of common stock at December 31,
   1996 held in treasury, at cost                          (12)              (12)
 
 Retained earnings                                       8,315             6,757
                                                       -------           -------
 
   Total stockholders' equity                           21,520            19,956
                                                       -------           -------
 
   Total liabilities and stockholders' equity          $29,778           $34,454
                                                       =======           =======
</TABLE>

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

                                       4
<PAGE>
 
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------- 
(Dollars in Thousands, except per share data)(Unaudited)

<TABLE> 
<CAPTION> 
                                                       FOR THE THREE MONTHS ENDED:    FOR THE SIX MONTHS ENDED:
                                                       ---------------------------  ----------------------------
                                                      JUNE 30, 1997  JUNE 30, 1996  JUNE 30, 1997  JUNE 30, 1996
                                                      -------------  -------------  -------------  -------------
<S>                                                   <C>            <C>            <C>            <C>
SUBSCRIBER REVENUE

  Managed Care                                           $   10,777     $    7,313     $   21,306     $   14,410
  Indemnity/PPO                                               2,851          2,558          5,583          5,050
  Fee Income                                                    228            148            430            332
                                                         ----------     ----------     ----------     ----------

     Total Subscriber Revenue                                13,856         10,019         27,319         19,792
                                                         ----------     ----------     ----------     ----------


BENEFIT COVERAGE EXPENSES

  Managed Care                                                6,757          4,215         13,374          8,301
  Indemnity/PPO                                               2,366          2,005          4,511          3,945
  Fee Income                                                     --             --             --             --
                                                         ----------     ----------     ----------     ----------

     Total Benefit Coverage Expenses                          9,123          6,220         17,885         12,246
                                                         ----------     ----------     ----------     ----------

GROSS MARGIN

  Managed Care                                                4,020          3,098          7,932          6,109
  Indemnity/PPO                                                 485            553          1,072          1,105
  Fee Income                                                    228            148            430            332
                                                         ----------     ----------     ----------     ----------

     Total Gross Margin                                       4,733          3,799          9,434          7,546

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE                                        3,491          2,793          7,009          5,587
                                                         ----------     ----------     ----------     ----------

  Operating income                                            1,242          1,006          2,425          1,959

INTEREST INCOME, net                                            111            160            218            322
                                                         ----------     ----------     ----------     ----------

  Income before income taxes                                  1,353          1,166          2,643          2,281

PROVISION FOR INCOME TAXES                                      555            468          1,085            914
                                                         ----------     ----------     ----------     ----------

NET INCOME                                               $      798     $      698     $    1,558     $    1,367
                                                         ==========     ==========     ==========     ==========

WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING                             3,733,084      3,500,668      3,731,470      3,500,053

EARNINGS PER SHARE                                            $0.21          $0.20          $0.42          $0.39
</TABLE>

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

                                       5
<PAGE>
 
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------- 
(Dollars in Thousands)(Unaudited)

<TABLE> 
<CAPTION> 
                                                             FOR THE SIX MONTHS ENDED:
                                                      ------------------------------------------ 
                                                            JUNE 30, 1997         JUNE 30 , 1996
                                                            -------------         -------------- 
<S>                                                   <C>                         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 
     Cash received from subscribers                             $ 26,081                 $20,468
     Cash paid to providers of care                              (12,737)                 (7,780)
     Cash paid to employees, brokers and suppliers                (8,777)                 (6,487)
     Claims paid                                                  (4,830)                 (3,818)
     Interest paid                                                     0                      (1)
     Interest received                                               196                     274
     Income taxes paid                                            (1,335)                 (1,275)
     Cash transferred from (to) restricted funds                     255                    (279)
                                                                --------                 -------
                                                                                  
       Net cash provided by operating activities                  (1,147)                  1,102
                                                                --------                 -------
                                                                                  
CASH FLOWS FROM INVESTING ACTIVITIES:                                             
                                                                                  
     Purchase of property and equipment, net                        (413)                   (306)
     Purchase of short-term investments                             (517)                 (5,162)
     Proceeds from short-term investments                              0                   1,007
     Acquisition cost                                             (5,500)                      0
                                                                --------                 -------
                                                                                  
       Net cash used in investing activities                      (6,430)                 (4,461)
                                                                --------                 -------
 
CASH FLOWS FROM FINANCING ACTIVITIES:

     Issuance of common stock                                          7                       1 
     Principal payments on capital leases                              0                     (27)
     Purchase of treasury stock                                       (1)                    (10)
     Payments of preferred dividends                                   0                     (13)
                                                                --------                 ------- 
                                                                                                 
       Net cash used in financing activities                           6                     (49)
                                                                --------                 ------- 
                                                                                                 
       Net change in cash and cash equivalents                    (7,571)                 (3,408) 
 

CASH AND CASH EQUIVALENTS,
     beginning of period                                          15,817                  12,680 
                                                                --------                 ------- 
                                                                                                  
CASH AND CASH EQUIVALENTS,                                                                        
     end of period                                               $ 8,246                 $ 9,272  
                                                                ========                 =======   
</TABLE> 

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

                                       6
<PAGE>
 
First Commonwealth, Inc. and Subsidiaries
RECONCILIATIONS OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
--------------------------------------------------------------------------------
(Dollars in Thousands)(Unaudited)


<TABLE> 
<CAPTION> 
                                                                           FOR THE SIX MONTHS ENDED:
                                                                      ----------------------------------
                                                                      JUNE 30, 1997        JUNE 30, 1996 
                                                                      -------------        -------------  
<S>                                                                   <S>                  <C> 
Net income                                                                 $1,558              $1,367

Adjustments to reconcile net income to net cash provided
by operating activities:

     Depreciation and amortization                                            381                 276


     (Increase) decrease in assets:

       Accounts receivable, net                                              (778)                 38          
                                                                                                               
       Other receivables                                                      (83)                (46)         
                                                                                                               
       Deposit under reinsurance agreement                                    230                 (53)         
                                                                                                               
       Prepaid expenses                                                    (1,683)                (24)         
                                                                                                               
       Deferred tax asset                                                     119                  43          
                                                                                                               
       Prepaid income taxes                                                  (409)               (404)         
                                                                                                               
       Restricted cash equivalents and government                                                              
       securities                                                             249                (279)         
                                                                                                               
       Deposits and other                                                       9                 (47)         
                                                                                                               
     Increase (decrease) in current liabilities:                                                               
                                                                                                               
       Accounts payable - trade                                              (125)               (216)         
                                                                                                               
       Accounts payable - dental service providers                            (57)                  7          
                                                                                                               
       Claims liability                                                      (336)                137          
                                                                                                               
       Accrued payroll and related costs                                      (86)               (203)         
                                                                                                               
       Other accrued expenses                                                (213)               (120)         
                                                                                                               
       Deferred subscriber revenue                                            373                 578          
                                                                                                               
       Payable under reinsurance agreement                                   (235)                 48          
                                                                                                               
       Income taxes payable                                                  (101)                  0          
                                                                                                               
     Increase in long-term liabilities:                                                                        
                                                                                                               
       Long-term deferred tax liability                                        40                   0          
                                                                          -------              ------          
                                                                                                               
     Net cash provided by operating activities                            $(1,147)             $1,102          
                                                                          =======              ======           
</TABLE>

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

                                       7
<PAGE>
 
                           FIRST COMMONWEALTH, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                 JUNE 30, 1997


1.   Interim Financial Statements

     The accompanying consolidated financial statements include the accounts of
First Commonwealth, Inc., together with its subsidiaries and an affiliate
(collectively, the "Company").  All material intercompany transactions and
balances have been eliminated in consolidation.

     The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain notes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from the interim
financial statements presented in this quarterly report on Form 10-Q in
accordance with such rules and regulations.  In the opinion of the Company's
management, the accompanying consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to state
fairly the financial position of the Company as of June 30, 1997, and the
results of its operations and cash flows for the periods indicated.  The results
of operations for the three and six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year.  The
accompanying consolidated financial statements should be read in conjunction
with the Company's financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996.

2.   Earnings Per Share

     Earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period plus the
dilutive effect of stock options.

3.   Business Combination

     Effective July 18, 1996, the Company completed the acquisition of Smileage
Dental Services, Inc. ("Smileage"), a Wisconsin-based dental HMO administrator
which provides services to approximately 50,000 members and an associated
reinsurance transaction, for an aggregate purchase price (including transaction
costs) of $5.6 million.  The acquisition was financed through the issuance of
231,399 shares of the Company's common stock.  The acquisition resulted in the
excess of cost over fair value of net assets acquired of approximately $5.6
million.

     Effective December 31, 1996, the Company completed the acquisition of
Champion Dental Services, Inc. ("Champion"), a Missouri-based prepaid dental
plan, which provides services to approximately 60,000 members, for an aggregate
purchase price (including transaction costs) of $5.6 million.  The acquisition
was financed through proceeds from the Company's initial public offering and was
paid in cash on January 2, 1997.  The acquisition resulted in the excess of cost
over fair value of net assets acquired of approximately $4.9 million.

                                       8
<PAGE>
 
     The acquisitions of Smileage and Champion were accounted for using the
purchase method of accounting with the results of operations of the businesses
acquired included from the effective date of the acquisitions.  The results of
Smileage and Champion have been reflected in the results of operations of the
Company for the entire period ended June 30, 1997.

     Unaudited pro forma results of operations of the Company for the three and
six months ended June 30, 1996 are included below. Such pro forma presentation
has been prepared assuming the acquisition of Smileage and Champion had occurred
as of January 1, 1996.

<TABLE>
<CAPTION>
                                    Three Months Ended  Six Months Ended
                                      June 30, 1996       June 30,1996
                                      -------------       ------------
       <S>                          <C>                 <C>
       Revenues (in thousands)              $12,981            $24,845      
                                            =======            =======      
                                                                            
       Net Income (in thousands)            $   829            $ 1,503      
                                            =======            =======      
                                                                            
       Net Income per share                 $  0.22            $  0.40      
                                            =======            =======       
</TABLE>

     The pro forma results include the historical accounts of the Company and
historical accounts of the acquired businesses and pro forma adjustments
including the amortization of the excess purchase price over the fair value of
the net assets acquired, the reduction of salaries and expenses which will not
be incurred on an ongoing basis, and the applicable income tax effects of these
adjustments.  The pro forma results of operations are not necessarily indicative
of actual results which may have occurred had the operations of the acquired
companies been combined in prior periods.

                                       9
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
 OF OPERATIONS

RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto.

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996

     Total subscriber revenue increased by $3.9 million, or 39.0%, to $13.9
million in the three months ended June 30, 1997 from $10.0 million in the three
months ended June 30, 1996.  This increase is attributable to increased
enrollment in the Company's managed care plans as well as the effect of the
acquisitions which accounted for $3.0 million of the increase. Managed care
revenue increased by $3.5 million, or 47.9%, to $10.8 million in the three
months ended June 30, 1997 from $7.3 million in the same period in 1996,
primarily due to a 49.8% increase in new members.  The revenue increase was
mainly as a result of the acquisitions which accounted for $3.0 million of the
increase.   Indemnity/PPO revenue increased $293,000 to $2.9 million in 1997
from $2.6 million in 1996, primarily as a result of adding new indemnity/PPO
plan members.

     Total gross margin increased by $934,000, or 24.6%, to $4.7 million in the
three months ended June 30, 1997 from $3.8 million in the three months ended
June 30, 1996. Total gross margin as a percentage of revenue was 34.2% in 1997
as compared to 37.9% in 1996. This percentage decline was primarily the result
of an increasing percentage of revenue being generated by the Company's acquired
businesses which have a significantly lower gross margin percentage, at an
average of 27.3%, than the historical managed care business.  Managed care gross
margin as a percentage of revenue was 37.3% in 1997 as compared to 42.4% in
1996.  The indemnity/PPO gross margin as a percentage of indemnity/PPO revenue
decreased to 17.0% in 1997 from 21.6% in 1996. The change in indemnity/PPO gross
margin is the result of the following factors.  The Company has experienced an
increase in dental benefit expenses on its overall indemnity/PPO business
resulting in a gross margin percentage decline of approximately 1.0%-2.0%.  In
addition, two of the Company's largest indemnity/PPO clients, which account for
approximately 40% of indemnity/PPO enrollment, have experienced a substantially
higher increase in claim costs which accounts for the remaining decline in gross
margin percentage.  The increase in claims costs of these two clients is
attributable to both utilization increases as well as certain administrative
issues specific to these two groups. The Company expects the indemnity/PPO gross
margin percentage to remain lower than historical levels through the end of 1997
and intends to negotiate price increases with its clients in 1998.

     SG&A expenses increased by $698,000, or 24.9%, to $3.5 million for the
three months ended June 30, 1997 from $2.8 million for the three months ended
June 30, 1996.  The increase of expenses is primarily from establishing offices
and staffing in Milwaukee and St. Louis as a result of the acquisitions.  As a
percentage of revenue, SG&A expenses dropped to 25.2% for 1997 from 27.9% for
1996. The change is primarily the result of economies of scale in meeting the
administrative needs of increased enrollment due to the relatively fixed nature
of certain SG&A expenses as well as higher revenues relative to the SG&A
expenses associated with the managed care plans from the Wisconsin acquisition.

     Operating income increased by $236,000, or 23.6%, to $1.2 million for the
three months ended June 30, 1997 from $1.0 million for the three months ended
June 30, 1996. As a percentage of revenue, operating income was 9.0% in 1997 as
compared to 10.0% in 1996. The decline was due primarily to the lower gross
margin, partially offset by the lower SG&A as a percentage of revenue.

                                       10
<PAGE>
 
     Interest income decreased by $49,000 to $111,000 for the three months ended
June 30, 1997 from $160,000 for the three months ended June 30, 1996 primarily
as a result of the payment of the purchase price for Champion on January 2,
1997.

     The effective tax rate for the three months ended June 30, 1997 was 41.0%
versus 40.1% for the three months ended June 30, 1996.  The increase in the
effective tax rate was primarily the result of the non-deductibility of the
amortization of goodwill incurred in one of the Company's acquisitions.

     Net income increased by $100,000, or 14.3%, to $798,000 for the three
months ended June 30, 1997 from $698,000 for the three months ended June 30,
1996.  Earnings per share was $0.21 and $0.20 for the three months ended June
30, 1997 and 1996, respectively.

     See Note 3 to the Notes to Consolidated Financial Statements for
information relating to the pro forma effect of acquisitions.


SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

     Total subscriber revenue increased by $7.5 million, or 37.9%, to $27.3
million in the six months ended June 30, 1997 from $19.8 million in the six
months ended June 30, 1996.  This increase is attributable to increased
enrollment in the Company's managed care plans as well as the effect of the
acquisitions which accounted for $5.8 million of the increase. Managed care
revenue increased by $6.9 million, or 47.9%, to $21.3 million in the six months
ended June 30, 1997 from $14.4 million in the same period in 1996, primarily due
to a 49.8% increase in new members.  The revenue increase was mainly as a result
of the acquisitions which accounted for $5.8 million of the increase.
Indemnity/PPO revenue increased $533,000 to $5.6 million in 1997 from $5.1
million in 1996, primarily as a result of adding new indemnity/PPO plan members.

     Total gross margin increased by $1.9 million, or 25.3%, to $9.4 million in
the six months ended June 30, 1997 from $7.5 million in the six months ended
June 30, 1996. Total gross margin as a percentage of revenue was 34.5% in 1997
as compared to 38.1% in 1996. This percentage decline was primarily the result
of an increasing percentage of revenue being generated by the Company's acquired
businesses which have a significantly lower gross margin percentage, at an
average of 27.3%, than the historical managed care business.  Managed care gross
margin as a percentage of revenue was 37.2% in 1997 as compared to 42.4% in
1996.  The indemnity/PPO gross margin as a percentage of indemnity/PPO revenue
decreased to 19.2% in 1997 from 21.9% in 1996. The change in indemnity/PPO gross
margin is the result of the following factors. The Company has experienced an
increase in dental benefit expenses on its overall indemnity/PPO business
resulting in a gross margin percentage decline of approximately 1.0%-2.0%.  In
addition, two of the Company's largest indemnity/PPO clients, which account for
approximately 40% of indemnity/PPO enrollment, have experienced a substantially
higher increase in claim costs which accounts for the remaining decline in gross
margin percentage.  The increase in claims costs of these two clients is
attributable to both utilization increases as well as certain administrative
issues specific to these two groups. The Company expects the indemnity/PPO gross
margin percentage to remain lower than historical levels through the end of 1997
and intends to negotiate price increases with its clients in 1998.

                                       11
<PAGE>
 
     SG&A expenses increased by $1.4 million, or 25.0%, to $7.0 million for the
six months ended June 30, 1997 from $5.6 million for the six months ended June
30, 1996.  The increase of expenses is primarily from establishing offices and
staffing in Milwaukee and St. Louis as a result of the acquisitions.  As a
percentage of revenue, SG&A expenses dropped to 25.7% for 1997 from 28.2% for
1996. The change is primarily the result of economies of scale in meeting the
administrative needs of increased enrollment due to the relatively fixed nature
of certain SG&A expenses as well as higher revenues relative to the SG&A
expenses associated with the managed care plans from the Wisconsin acquisition.

     Operating income increased by $466,000, or 23.3%, to $2.4 million for the
six months ended June 30, 1997 from $2.0 million for the six months ended June
30, 1996. As a percentage of revenue, operating income was 8.9% in 1997 as
compared to 9.9% in 1996. The decline was due primarily to the lower gross
margin, partially offset by the lower SG&A as a percentage of revenue.

     Interest income decreased by $104,000 to $218,000 for the six months ended
June 30, 1997 from $322,000 for the six months ended June 30, 1996 primarily as
a result of the payment of the purchase price for Champion on January 2, 1997.

     The effective tax rate for the six months ended June 30, 1997 was 41.1%
versus 40.1% for the six months ended June 30, 1996.  The increase in the
effective tax rate was primarily the result of the non-deductibility of the
amortization of goodwill incurred in one of the Company's acquisitions.

     Net income increased by $191,000, or 13.6%, to $1.6 million for the six
months ended June 30, 1997 from $1.4 million for the six months ended June 30,
1996.  Earnings per share was $0.42 and $0.39 for the six months ended June 30,
1997 and 1996, respectively.

     See Note 3 to the Notes to Consolidated Financial Statements for the pro
forma effect of acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's operating cash requirements for the six months ended June 30,
1997 have been met principally through operating cash flows. The primary uses of
cash have been for the purchase of Champion, operating activities and capital
investments in the business. The Company believes that cash generated from
operations will be adequate to finance its anticipated operating needs for the
foreseeable future.

     Cash flows from operating activities were ($1.1 million) and $1.1 million
for the six months ended June 30, 1997, and 1996, respectively.  The decrease in
cash flows is mainly the result of the timing difference in prepaid expenses
which represented capitation that was prepaid as of June 30, 1997 but was not
prepaid at December 31, 1996.  The Company primarily receives premium payments
in advance of disbursing managed care dentist capitation payments and indemnity
claims payments. Cash balances in excess of current needs are invested in
interest-bearing accounts or cash equivalents. Cash flows from operations
consist primarily of subscriber premiums and investment income net of capitation
payments to network dentists, claims paid, brokers' commissions, general and
administrative expenses and income taxes.

                                       12
<PAGE>
 
     Cash used in investing activities was $6.4 million and $4.5 million for the
six months ended June 30, 1997 and 1996, respectively.  The primary use in 1997
was $5.5 million for the purchase of Champion paid on January 2, 1997.  In
addition, the first six months of 1997 and 1996 includes a net of $517,000 and
$5.2 million, respectively, used to purchase short term investment grade
securities (securities which mature between 3 months and 12 months).  Capital
expenditures were $413,000 for the six months ended June 30, 1997 and $306,000
for the six months ended June 30, 1996, respectively, for furniture, leasehold
improvements, and computer equipment as the Company has expanded its leased
office space.

     As of June 30, 1997, the Company had cash and cash equivalents of $8.2
million as well as short term investments of $511,000 and no long-term debt
outstanding. In addition, the Company had a $500,000 unsecured revolving line of
credit facility which expired June 30, 1997, which had not been drawn upon
during the past three years.

     Under applicable insurance laws of the states in which the Company conducts
business, the Company's subsidiaries operating in the particular state are
required to maintain a minimum level of net worth and reserves. The Company may
be required from time to time to invest funds in one or more of its subsidiaries
to meet regulatory requirements, or to expand its operations into new geographic
areas. In addition, applicable laws generally limit the ability of the Company's
subsidiaries to pay dividends to the extent that required regulatory capital or
surplus would be impaired.

IMPACT OF INFLATION

     The Company does not believe the impact of inflation has significantly
affected the Company's operations.

                                       13
<PAGE>
 
                         PART II.    OTHER INFORMATION
                         -----------------------------

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

          At the Annual Meeting of Shareholders of the Company, held on April
          30, 1997, the following numbers of votes were cast for the matters
          indicated:

          1.   Election of two Class II directors of the Company.


<TABLE> 
<CAPTION> 
               ---------------------------------------------------------------
                    Nominee                For     Withhold  Broker Non-Vote
               ---------------------------------------------------------------
               <S>                      <C>        <C>       <C>
                David W. Mulligan        2,832,153   3,200         - 0 -
               ---------------------------------------------------------------
               Jackson W. Smart, Jr.     2,832,153   3,200         - 0 -
               ---------------------------------------------------------------
</TABLE> 

          2.   Proposal to Approve the Amendment to the 1995 Long-Term Incentive
               Plan of the Company.

<TABLE> 
<CAPTION> 
               ---------------------------------------------------------------
                    For                 Against    Abstain   Broker Non-Vote
               ---------------------------------------------------------------
               <S>                      <C>        <C>       <C>
                2,801,068               27,485      6,800         - 0 -
               ---------------------------------------------------------------
</TABLE>

ITEM 6.   EXHIBITS AND REPORTS ON FORMS 8-K

     (a)  Exhibits:

          Exhibit No.         Description
          -----------         -----------

             11      Statement Regarding Computation of Net Earnings Per Share
                                                                              
             27      Financial Data Schedule                                  

       (b)   Reports on Form 8-K filed during the quarter ended June 30, 1997:

             None

                                       14
<PAGE>
 
                                  SIGNATURES


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

                           FIRST COMMONWEALTH, INC.                             
                                     (Registrant)                
                                                                  
                                                                  
Date:  August 14, 1997     By: /s/ Christopher C. Multhauf                      
                               -----------------------------------        
                               Christopher C. Multhauf                    
                               Chairman and Chief Executive Officer       
                                                                          
                                                                          
Date:  August 14, 1997     By: /s/ David W. Mulligan                      
                               -----------------------------------        
                               David W. Mulligan                          
                               President, Secretary and Chief Operating Officer

                                                                          
Date:  August 14, 1997     By: /s/ Scott B. Sanders                       
                               -----------------------------------        
                               Scott B. Sanders                           
                               Chief Financial Officer and Treasurer (Principal
                               Financial and Accounting Officer)              
 
  

                                       15
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------


Exhibit No.              Description
-----------              -----------

11                Statement Regarding Computation of Net Earnings Per Share

27                Financial Data Schedule